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                             PAYLESS CASHWAYS, INC.
                           1998 OMNIBUS INCENTIVE PLAN

Section 1.   Purpose.

     The purposes of the 1998 Omnibus Incentive Plan of Payless  Cashways,  Inc.
(the "Plan") are to give the Company and its Affiliates a competitive  advantage
in attracting,  motivating and retaining  Employees and Outside Directors and to
more  closely  align  the   interests  of  the  Employees   with  the  Company's
stockholders  and to motivate  Employees to enhance the value of the Company for
the benefit of all stockholders.

Section 2.   Definitions.

     As used in the Plan, the following  terms shall have the meanings set forth
below:

     (1) "Affiliate" means (i) any Person that directly,  or through one or more
intermediaries,  controls, or is controlled by, or is under common control with,
the Company,  (ii) any entity in which the Company has an equity  interest of at
least 50%,  and (iii) any entity in which the Company has any other  significant
equity interest, as determined by the Committee.

     (2) "Award" means any Option, Limited Right, Performance Share, Performance
Unit,  Restricted  Stock,  Shares,  Dividend  Equivalent,  or any  other  right,
interest, or option relating to Shares granted pursuant to the provisions of the
Plan.

     (3) "Award  Agreement"  means any written  agreement or  contract,  setting
forth the terms and conditions of any Award granted hereunder.

     (4) "Board" means the Board of Directors of the Company.

     (5) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto. 

     (6)  "Committee"  means the  Compensation  Committee of the Board,  or such
other committee designated by the Board, authorized to administer the Plan under
Section 3 hereof.  The Committee  shall consist of not less than two  directors,
each of whom shall be a Non-Employee Person within the meaning of Rule 16b-3 and
an outside director within the meaning of Code Section 162(m).

     (7) "Company" means Payless Cashways, Inc., a Delaware corporation.

     (8)  "Disability"  means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.


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     (9) "Dividend  Equivalent"  means any right granted  pursuant to Section 11
hereof.

     (10) "Employee" means any employee  (including  officers) of the Company or
any Affiliates regularly employed for more than 20 hours per week.

     (11) "Exchange Act" means the Securities  Exchange Act of 1934, as amended,
and  any  successors  thereto,   and  the  rules  and  regulations   promulgated
thereunder, all as shall be amended from time to time.

     (12) "Fair Market  Value" means,  with respect to any property,  the market
value of such  property as  determined by such methods or procedures as shall be
established from time to time by the Committee.

     (13)  "Incentive  Stock  Option"  means an Option  granted  under Section 6
hereof  that is  intended to meet the  requirements  of Code  Section 422 or any
successor provision thereto.

     (14) "Limited  Right" means any right granted to a Participant  pursuant to
Section 7 hereof.

     (15)  "Non-Qualified  Stock Option" means an Option granted under Section 6
hereof  that is not  intended to be an  Incentive  Stock  Option,  and an Option
granted to an Outside Director pursuant to Section 10 hereof.

     (16)  "Option"  means an Incentive  Stock Option or a  Non-Qualified  Stock
Option.

     (17) "Outside  Director" means a member of the Board who is not an Employee
of the Company or an Affiliate.

     (18)  "Participant"  means an Employee or Outside  Director who receives an
Award under the Plan.

     (19)  "Performance   Award"  means  any  Award  of  Performance  Shares  or
Performance Units pursuant to Section 8 hereof.

     (20) "Performance  Goals" means  preestablished,  objectively  determinable
performance  goals, and a level or levels of performance with respect to each of
the goals,  adopted by the Committee  prior to the grant of Restricted  Stock or
Performance  Awards and that are based,  in whole or in part,  on one or more of
the following  performance-based criteria: (i) attainment during the Performance
Period of a  specified  price  per share of the  Company's  common  stock;  (ii)
attainment  during  the  Performance  Period  of a  specified  rate of growth or
increase in the amount of growth in the price per share of the Company's  common
stock;  (iii) attainment  during the Performance  Period of a specified level of
the Company's earnings or earnings per share of the Company's common stock; (iv)
attainment  during  the  Performance  Period  of a  specified  rate


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of growth or  increase  in the  amount of growth of the  Company's  earnings  or
earnings per share of the Company's  common  stock;  (v)  attainment  during the
Performance  Period of a specified level of the Company's cash flow or cash flow
per share of the Company's common stock;  (vi) attainment during the Performance
Period of a specified  rate of growth or increase in the amount of growth of the
Company's cash flow or cash flow per share of the Company's common stock;  (vii)
attainment  during the Performance  Period of a specified level of the Company's
return on equity; (viii) attainment during the Performance Period of a specified
rate of growth or  increase in the amount of growth of the  Company's  return on
equity;  (ix) attainment  during the Performance  Period of a specified level of
the  Company's  return on assets or return on net assets.  For purposes  hereof,
"earnings"  may,  but need not,  be  measured by  reference  to earnings  before
interest, taxes, depreciation and amortization.

     (21) "Performance Period" means that period established by the Committee at
the time any Performance Award is granted or at any time thereafter during which
any  performance  criteria,  including  any  Performance  Goal,  if  applicable,
specified by the Committee with respect to such Award are to be measured.

     (22) "Performance  Share" means any grant pursuant to Section 8 hereof of a
unit valued by reference to a designated number of Shares.

     (23) "Performance Unit" means any grant pursuant to Section 8 hereof of (i)
a bonus  consisting  of cash or other  property,  the  amount or value of which,
and/or the  entitlement  to which,  is  conditioned  upon the  attainment of any
performance criteria, including any Performance Goals, if applicable,  specified
by the Committee,  or (ii) a unit valued by reference to a designated  amount of
property other than Shares.

     (24) "Person" means any individual, corporation, limited liability company,
partnership,    association,    joint-stock   company,   trust,   unincorporated
organization, or government or political subdivision thereof.

     (25) "Restricted Stock" means any Share issued pursuant to Section 9 hereof
with the restriction that the holder may not sell,  transfer,  pledge, or assign
such  Share and with  such  other  restrictions  as the  Committee,  in its sole
discretion,  may impose (including,  without limitation,  any restriction on the
right to vote such Share,  and the right to receive any cash  dividends),  which
restrictions  may lapse separately or in combination upon such conditions and at
such time or times,  in  installments  or  otherwise,  as the Committee may deem
appropriate, and which restriction shall provide that the Shares subject to such
restriction  shall be forfeited if the restriction  does not lapse prior to such
date or such event as the Committee may deem appropriate.

     (26)  "Restricted  Stock Award" means an award of Restricted Stock pursuant
to Section 9 hereof. 


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     (27) "Rule  16b-3"  means  Rule l6b-3  promulgated  by the  Securities  and
Exchange  Commission under the Exchange Act, or any successor rule or regulation
thereto.

     (28)  "Shares"  means shares of the Common Stock of the Company,  par value
$.01 per share. 

     (29) "Termination of Employment" means the termination of the Participant's
employment  with the Company and any  Affiliate.  A  Participant  employed by an
Affiliate  shall  also be deemed to incur a  Termination  of  Employment  if the
Affiliate  ceases to be an Affiliate and the  Participant  does not  immediately
thereafter become an employee of the Company or another Affiliate.

Section 3.   Administration.

     (1) Committee. The Plan shall be administered by the Committee.

     (2) Committee  Authority.  Subject to the terms of the Plan and  applicable
law,  the  Committee  shall have full  power and  authority  to:  (i)  designate
Participants,  (ii)  determine the type or types of awards to be granted to each
Participant hereunder,  (iii) determine the number of Shares to be covered by or
with respect to which payments, rights, or other matters are to be calculated in
connection  with each Award,  (iv)  determine  the terms and  conditions  of any
Award,  (v)  determine  whether,  to what extent,  and under what  circumstances
Awards may be settled or  exercised in cash,  Shares,  other  securities,  other
Awards, or other property, or canceled,  forfeited, or suspended, and the method
or methods by which Awards may be settled,  exercised,  canceled,  forfeited, or
suspended,  (vi)  interpret  and  administer  the  Plan  and any  instrument  or
agreement  relating to, or Award made under, the Plan,  (vii) establish,  amend,
suspend or waive such rules and  regulations and appoint such agents as it deems
appropriate  for the proper  administration  of the Plan,  (viii) make any other
determination  and take any other action that the Committee  deems  necessary or
desirable for  administration of the Plan, and (ix) determine to what extent and
under what  circumstances  Shares and other  amounts  payable with respect to an
Award  shall  be  deferred  either  automatically  or at  the  election  of  the
Participant or the Committee.

     (3) Replacement Awards. Subject to the terms of the Plan (including without
limitation  Section 13 hereof),  the Committee  shall also have the authority to
grant Awards in replacement of Awards previously  granted under this Plan or any
other compensation plan of the Company or an Affiliate.

     (4)  Delegation.  The  Committee,  in  its  discretion,  may  delegate  its
authority  and duties  under the Plan to an officer  of the  Company  under such
conditions and/or limitations as the Committee may establish; provided, however,
that only the  Committee  may select and grant  Awards,  or  otherwise  take any
action with respect to Awards, to Participants who are (i) officers or directors
of the  Company  for  purposes  of  Section  16 of the  Exchange  Act,  or  (ii)
Participants who are "covered employees" under Code Section 162(m).


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     (5) Decisions of Committee and Its Delegates.  Unless  otherwise  expressly
provided in the Plan, all  determinations,  designations,  interpretations,  and
other  decisions of the  Committee,  or (unless the  Committee  has specified an
appeal  process to the contrary)  any other  Person(s) to whom the Committee has
delegated  authority,  shall be final,  conclusive and binding upon all Persons,
including the Company, any Participant,  any stockholder,  and any Employee. All
determinations of the Committee shall be made by a majority of its members.

     The  Committee  and each member  thereof shall be entitled to rely upon any
report or other information  furnished by any officer or employee of the Company
or any Affiliate,  or the Company's independent auditors,  and shall be entitled
to rely upon the advice of counsel,  who may be counsel to the Company.  Members
of the Committee  and any employee of the Company or an Affiliate  acting at the
direction or on behalf of the Committee  shall not be personally  liable for any
action or  determination  taken or made in good faith  with  respect to the Plan
upon such report, information or advice.

Section 4.   Shares Subject to the Plan.

     (1) Subject to  adjustment  as provided in Section 4(c) hereof,  a total of
Two Million Four Hundred Thousand  (2,400,000) Shares shall be available for the
grant of  Awards  under  the Plan;  provided,  however,  that not more than Four
Hundred Eighty  Thousand  (480,000) of such shares shall be issued as Restricted
Stock and that no more than Two Hundred Thousand  (200,000) shares of Restricted
Stock shall be issued in any one fiscal year.  Any Shares  issued  hereunder may
consist of  authorized  and unissued  shares or treasury  shares.  If any Shares
subject to any Award granted hereunder,  or to which such an Award relates,  are
forfeited or such Award otherwise terminates without the issuance of such Shares
or of other  consideration  in lieu of such Shares,  the Shares  subject to such
Award,  or to which such Award relates,  to the extent of any such forfeiture or
termination,  shall again be available for grant under the Plan. In addition, to
the extent  permitted by Code Section 422, any Shares  issued by, and any Awards
granted by or that become  obligations  of, the Company through or as the result
of the  assumption of  outstanding  grants or the  substitution  of Shares under
outstanding  grants of an acquired company shall not reduce the Shares available
for grants under the Plan.

     (2) For purposes of this Section 4,

          (1) If an Award (other than a Dividend  Equivalent)  is denominated in
Shares,  the  number of Shares  covered  by such  Award,  or to which such Award
relates,  shall  be  counted  on the date of grant  of such  Award  against  the
aggregate number of Shares available for granting Awards under the Plan;

          (2) Dividend Equivalents and Awards not denominated in Shares shall be
counted  against the aggregate  number of Shares  available for granting  Awards
under the Plan in


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such amount and at such time as the Committee shall  determine under  procedures
adopted by the Committee consistent with the purposes of the Plan; and

          (3) Awards that operate in tandem with (whether granted simultaneously
with or at a different time from), or that are substituted  for, other Awards or
awards under other Company plans may be counted or not counted under  procedures
adopted by the Committee in order to avoid double counting.

     (3) In the event that the Committee  shall  determine  that any dividend or
other distribution  (whether in the form of cash, Shares, or other securities or
property),   stock  split,   reverse   stock  split,   merger,   reorganization,
consolidation,  recapitalization,  split-up, spin-off,  repurchase,  exchange of
shares,  issuance  of  warrants  or other  rights  to  purchase  Shares or other
securities of the Company, or other transaction or event affects the Shares such
that an adjustment is determined by the Committee to be  appropriate in order to
prevent dilution or enlargement of the benefits or potential  benefits  intended
to be  made  available  under  the  Plan,  then  the  Committee  may:  (i)  make
adjustments in the aggregate number and class of shares or property which may be
delivered  under  the Plan and may  substitute  other  shares  or  property  for
delivery under the Plan,  including shares of another entity which is a party to
any such merger,  reorganization,  consolidation or exchange of shares; and (ii)
make  adjustments  in the number,  class and option  price of shares or property
subject  to  outstanding  Awards and  Options  granted  under the Plan,  and may
substitute  other shares or property for delivery under  outstanding  Awards and
Options, including shares of another entity which is a party to any such merger,
reorganization,  consolidation or exchange of shares, as may be determined to be
appropriate by the Committee in its sole discretion, provided that the number of
Shares  subject  to any Award or Option  shall  always  be a whole  number.  The
preceding  sentence  shall  not  limit  the  actions  which  may be taken by the
Committee under Section 12 of the Plan. No adjustment shall be made with respect
to Awards of Incentive  Stock  Options that would cause the Plan to violate Code
Section 422.

Section 5.   Eligibility.

     Any  Employee  or Outside  Director  shall be  eligible to be selected as a
Participant. Notwithstanding any other provision of the Plan to the contrary, no
Participant may be granted an Option, Limited Right,  Performance Shares, Shares
or Restricted  Stock with respect to a number of Shares in any one calendar year
which,  when added to the Shares  subject to any other  Option,  Limited  Right,
Performance  Shares,  Shares or Restricted  Stock granted to such Participant in
the same fiscal year, shall exceed One Million (1,000,000) Shares. If an Option,
Limited Right, or Performance  Share is canceled,  the canceled Option,  Limited
Right or  Performance  Share  continues to count  against the maximum  number of
Shares for which an Option, Limited Right or Performance Share may be granted to
a Participant in any fiscal year.  All Shares  specified in this Section 5 shall
be adjusted to the extent necessary to reflect adjustments to Shares required by
Section 4(c) hereof. No Participant may be granted  Performance Units in any one
fiscal  year  which when added to all other  Performance  Units  granted to such
Participant  in the same  fiscal  year shall  exceed  300% of the  Participant's
annual base salary as of the first day of


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such fiscal year (or, if later, as of the date on which the Participant  becomes
an Employee);  provided,  however,  that no more than  $1,200,000 of annual base
salary may be taken into account for purposes of determining  the maximum amount
of Performance Units which may be granted in any fiscal year to any Participant.

Section 6.   Stock Options.

     Options may be granted  under this  Section 6 to  Participants,  other than
Outside Directors, either alone or in addition to other Awards granted under the
Plan. Options may be Incentive Stock Options or Non-Qualified  Stock Options, or
a  combination  thereof.  The Committee may condition the grant of any Incentive
Stock Option upon approval of the Plan by the Company's stockholders. Any Option
granted to a  Participant  under this  Section 6 shall be  evidenced by an Award
Agreement in such form as the Committee may from time to time approve.  Any such
Option  shall be  subject  to the  following  terms and  conditions  and to such
additional  terms and conditions,  not  inconsistent  with the provisions of the
Plan, as the Committee shall determine:

     (1) Option Price. The purchase price per Share  purchasable under an Option
shall be determined by the Committee but shall not be less than 100% of the Fair
Market Value of the Share on the effective  date of the grant of the Option (or,
if the Committee so determines,  in the case of any Option retroactively granted
in tandem with or in  substitution  for another Award or any  outstanding  Award
granted under any other plan of the Company,  on the effective date of the grant
of such other Award or award under another Company plan).

     (2)  Option  Term.  The  term of each  Option  shall be  determined  by the
Committee, except as provided below for Incentive Stock Options.

     (3)  Exercisability.  Options shall be exercisable at such time or times as
determined  by the  Committee  at or  subsequent  to the granting of such either
automatically or at the election of the Participant or the Committee,  except as
otherwise provided in Section 12(a);  provided,  however, that the Committee may
condition  the exercise of any Option upon approval of the Plan by the Company's
stockholders.  In addition, the Committee may at any time accelerate the time at
which Options may be exercised and otherwise  modify the time of exercise of the
Options.

     (4) Method of Exercise. Subject to the other provisions of the Plan and any
applicable Award Agreement, the Participant may make payment of the option price
in such form or forms as the Committee shall  determine,  including,  payment by
delivery of cash, Shares,  Restricted Stock, or other consideration  (including,
where permitted by law and the Committee,  Awards) having a Fair Market Value on
the exercise  date equal to the total option  price,  or by any  combination  of
cash,  Shares,  Restricted  Stock and other  consideration  as the Committee may
specify in the applicable Award Agreement; provided, however, that if Restricted
Stock is surrendered  to pay the option price,  an equal number of Shares issued
as a result of the option  exercise  shall be subject to the same  restrictions.
The Committee may also specify in the applicable  Award Agreement the methods by
which the exercise  price may be paid or deemed to


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be paid and the methods by or forms in which  Shares will be delivered or deemed
to be delivered to Participants.

     (5)  Incentive  Stock  Options.  The terms of any  Incentive  Stock  Option
granted  hereunder  shall comply in all  respects  with the  provisions  of Code
Section  422,  or any  successor  provision,  and  any  regulations  promulgated
thereunder.   In  accordance  with  rules  and  procedures  established  by  the
Committee,  the aggregate Fair Market Value (determined as of the time of grant)
of the  Shares  with  respect  to  which  Incentive  Stock  Options  held by any
Participant are exercisable  for the first time by such  Participant  during any
calendar  year under the Plan (and under any other  benefit plans of the Company
or of any parent or  subsidiary  corporation  of the  Company as defined in Code
Section 424), shall not exceed One Hundred  Thousand  Dollars  ($100,000) or, if
different,  the  maximum  limitation  in effect at the time of grant  under Code
Section  422,  or any  successor  provision.  and  any  regulations  promulgated
thereunder.  The option price per Share  purchasable  under an  Incentive  Stock
Option  shall not be less than 100% of the Fair Market Value of the Share on the
date of grant of the Option.  Each Incentive Stock Option shall expire not later
than 10 years from its date of grant. No Incentive Stock Option shall be granted
to any  Participant if at the time the Option is granted such  Participant  owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company,  its parent or its  subsidiaries  unless (i) the option
price per Share is at least  110% of the Fair  Market  Value of the Share on the
date of grant,  and (ii) such Option by its terms is not  exercisable  after the
expiration of five years from the date such Option is granted.

     (6) Form of Settlement.  In its sole discretion,  the Committee may provide
at the time of grant  that the  Shares to be issued  upon an  Option's  exercise
shall be in the form of Shares  subject to  restrictions  as the  Committee  may
determine,  or other similar securities,  or may reserve the right to so provide
after the time of grant.

     (7) Reload Options.  If and to the extent the Committee expressly provides,
at the time of grant or  later,  that the  Participant  shall  have the right to
receive Reload Options (as defined  below) with respect to  Non-Qualified  Stock
Options,  the  Participant  shall receive Reload Options in accordance  with and
subject to the following terms and conditions:

          (1) Grant of the Reload Option;  Number of Shares;  Price.  Subject to
paragraph (ii) of this subsection  and,  except as provided in paragraph  (viii)
hereof,  to the  availability of Shares to be optioned to the Participant  under
the Plan  (including  the  limitations  set  forth in  Section 5  hereof),  if a
Participant  has an Option (the  "Original  Option") with reload rights and pays
for the exercise of the Original  Option by  surrendering  Shares or  Restricted
Stock (whether by means of delivering Shares or Restricted Stock previously held
by the  optionee or by  delivering  Shares or  Restricted  Stock  simultaneously
acquired on exercise of the Original  Option),  the Participant  shall receive a
new option  ("Reload  Option") for the number of Shares or Restricted  Shares so
surrendered  at an option  price per Share equal to the Fair  Market  Value of a
Share on the date of the exercise of the Original Option.


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          (2) Conditions to Grant of Reload Option.  A Reload Option will not be
granted if (A) the Fair  Market  Value of a Share on the date of exercise of the
Original Option is less than the exercise price of the Original  Option,  or (B)
the Participant is no longer an Employee of the Company or of an Affiliate.

          (3) Term of Reload Option.  The Reload Option shall expire on the same
date as the Original Option, or at such later date as the Committee may provide.

          (4) Type of Option.  The Reload Option shall be a Non-Qualified  Stock
Option. 

          (5) Additional  Reload  Options.  Except as expressly  provided by the
Committee  (at the time of the grant of the  Original  Option or later),  Reload
Options shall not include any right to subsequent Reload Options.

          (6) Date of Grant;  Vesting.  The date of grant of the  Reload  Option
shall be the date of the exercise of the Original  Option.  Reload Options shall
be exercisable  in full  beginning  from the date of grant,  except as otherwise
provided by the Committee.

          (7) Stock Withholding  Grants of Reload Options.  If and to the extent
expressly  permitted  by  the  Committee,  if the  other  requirements  of  this
subsection are satisfied,  and if Shares are withheld or Shares  surrendered for
tax  withholding  pursuant  to Section  16(f)  hereof,  a Reload  Option will be
granted for the number of Shares  surrendered as payment for the exercise of the
Original Option plus the number of Shares surrendered or withheld to satisfy tax
withholding.

          (8) Share  Limits.  Reload  Options  granted  with respect to Original
Options  paid for by  delivery  of Shares  or  Restricted  Stock  simultaneously
acquired  on  exercise of the  Original  Option  shall be counted or not counted
against or as a reduction  from the number of shares  available  for grant under
Section 4 hereof under  procedures  adopted by the Committee in order to prevent
dilution or  enlargement  of the benefits or potential  benefits  intended to be
made available under the Plan.

          (9) Other Terms and Conditions.  In connection with Reload Options for
officers who are subject to Section 16 of the Exchange Act, the Committee may at
any time impose any limitations  which, in the Committee's sole discretion,  are
necessary or desirable in order to comply with Section 16(b) of the Exchange Act
and the rules and  regulations  thereunder,  or in order to obtain any exemption
therefrom.

Section 7.   Limited Rights.

     Limited  Rights  may be  granted to  Participants  only with  respect to an
Option  granted under  Section 6 hereof or a stock option  granted under another
plan of the Company.  Any Limited Right shall be subject to the following  terms
and conditions and to such additional terms


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and  conditions,  not  inconsistent  with  the  Plan,  as  the  Committee  shall
determine.  Any Limited  Right  related to a  Non-Qualified  Stock Option may be
granted at the same time such Option is granted or at any time thereafter before
exercise or expiration of such Option. Any Limited Right related to an Incentive
Stock Option must be granted at the same time such Option is granted.  A Limited
Right shall terminate and no longer be exercisable  upon termination or exercise
of the related Option,  except that a Limited Right granted with respect to less
than the full number of Shares  covered by a related Option shall not be reduced
until the exercise or  termination  of the related  Option exceeds the number of
Shares not covered by the Limited Right. Any Option related to any Limited Right
shall no longer be exercisable to the extent the related  Limited Right has been
exercised. Any Limited Right shall be exercisable to the extent, and only to the
extent,  the related Option is  exercisable  and only during the ninety (90) day
period  immediately  following a Change in Control of the Company (as defined in
Section  12  hereof).   The  Committee  may  impose  such  other  conditions  or
restrictions  on the  exercise  of any  Limited  Right as it deems  appropriate.
Subject to the terms of the Plan and any applicable Award  Agreement,  a Limited
Right  granted  under the Plan  shall  confer on the  holder  thereof a right to
receive,  upon exercise  thereof,  an amount equal to the excess of (i) the Fair
Market  Value of one Share on the date of  exercise  or if greater and only with
respect to any  Limited  Right  related to a  Non-Qualified  Stock  Option,  the
highest  price per Share  paid in  connection  with any Change in Control of the
Company,  over (ii) the option price of the related  Option,  multiplied  by the
number of Shares as to which the holder is  exercising  the Limited  Right.  The
amount payable to the holder shall be paid by the Company in cash.

Section 8.   Performance Awards.

     (1) Administration. Performance Awards may be granted to Participants other
than Outside Directors in the form of Performance  Shares or Performance  Units,
either alone or in addition to other Awards granted under the Plan.  Performance
Shares or  Performance  Units  shall be payable  to, or be  exercisable  by, the
Participant  holding such Award, in whole or in part,  following  achievement of
one or more performance criteria during such Performance Period as determined by
the Committee. Except as provided in Section 12, Performance Awards will be paid
only after the end of the relevant Performance Period. Performance Awards may be
paid  in  cash,  Shares,  Restricted  Stock,  Options,  other  property  or  any
combination  thereof,  in the sole  discretion  of the  Committee at the time of
payment.  Performance  Awards  may  be  paid  in a lump  sum or in  installments
following the close of the Performance  Period or, in accordance with subsection
(c)  hereof,  on a  deferred  basis.  Notwithstanding  the  foregoing,  an Award
Agreement may  condition  the vesting or exercise of a Performance  Award on any
combination of the  achievement of one or more  performance  criteria and/or the
completion of a specified  period of service as the Committee shall determine at
the time of grant. If the Committee  determines that a Performance  Award should
qualify as  "performance-based  compensation" within the meaning of Code Section
162(m),   when  making  such  Performance   Award,  the  Committee  shall  adopt
Performance  Goals,  certify  completion of such goals and comply with any other
requirements   necessary  to  be  in  compliance   with  the   performance-based
compensation  requirements  of Code


<PAGE>11


Section 162(m). The Committee may make the payment of any Performance Award
granted prior to approval of the Plan by the Company's  stockholders  contingent
upon such approval.

     (2) Performance Period and Criteria.  The length of the Performance Period,
the performance  criteria levels to be achieved for each Performance Period, and
the amount of the Award to be distributed  shall be  conclusively  determined by
the Committee.

     (3) Deferral of Awards.  At the discretion of the  Committee,  payment of a
Performance  Award or any portion thereof may be deferred by a Participant until
such  time  as  the  Committee  may  establish.  All  such  deferrals  shall  be
accomplished  by the  delivery  on a form  provided by the Company of a written,
irrevocable  election  by the  Participant  prior  to such  time  payment  would
otherwise be made.  Further,  all  deferrals  shall be made in  accordance  with
administrative  guidelines  established  by the  Committee  to ensure  that such
deferrals  comply  with  all  applicable   requirements  of  the  Code  and  its
regulations.  Deferred payments shall be paid in a lump sum or installments,  as
determined by the  Committee.  The Committee may also credit  interest,  at such
rates to be determined by the Committee,  on cash payments that are deferred and
credit  Dividend  Equivalents  on deferred  payments  denominated in the form of
Shares.

Section 9.   Restricted Stock.

     (1) Administration.  Restricted Stock Awards may be granted to Participants
other than  Outside  Directors,  either  alone or in  addition  to other  Awards
granted under the Plan. The granting of Restricted Stock shall take place on the
date the Committee  decides to grant the Restricted  Stock, or if the Restricted
Stock Award provides that the grant of Restricted  Stock is conditioned upon the
achievement of performance  criteria specified in the Restricted Stock Award, on
a date  established by the Committee  following the achievement of such measures
of performance.

     A Restricted Stock Award may condition the grant of Restricted Stock and/or
the  lapse  of any  restriction  or  restrictions  on  Restricted  Stock  on any
combination of the  achievement of one or more  performance  criteria and/or the
completion of a specified  period of service as the Committee shall determine at
the time the Restricted Stock Award is made. If the Committee  determines that a
Restricted Stock Award should qualify as "performance-based compensation" within
the meaning of Code Section 162(m),  when making  Restricted  Stock Awards,  the
Committee shall adopt Performance  Goals,  certify  completion of such goals and
comply  with any  other  requirements  necessary  to be in  compliance  with the
performance-based   compensation   requirements  of  Code  Section  162(m).  The
Committee  may make the grant of any  Restricted  Stock Award  granted  prior to
approval  of the  Plan  by  the  Company's  stockholders  contingent  upon  such
approval.

     (2) Registration. Any Restricted Stock issued hereunder may be evidenced in
such  manner  as  the  Committee  in  its  sole  discretion  deems  appropriate,
including,  without limitation,  book-entry  registration or issuance of a stock
certificate  or  certificates.  In the event any stock


<PAGE>12


certificate is issued in respect of shares of Restricted Stock awarded under the
Plan, such certificate shall be registered in the name of the Participant, shall
be held in escrow by the Company, and shall bear an appropriate legend referring
to  the  terms,   conditions   and   restrictions   applicable  to  such  Award,
substantially in the following form:

          "The  transferability  of this certificate and shares represented
     hereby are restricted pursuant to the terms and conditions  (including
     forfeiture) of the 1998 Omnibus  Incentive  Plan of Payless  Cashways,
     Inc.  and a  Restricted  Stock  Agreement.  Copies  of such  Plan  and
     Agreement  are  on  file  at the  corporate  headquarters  of  Payless
     Cashways, Inc."

     (3) Transfer  Restrictions.  Subject to the  provisions of the Plan and the
Award  Agreement,  during the period,  if any, set by the Committee,  commencing
with the date of such Award for which such  Participant's  continued  service is
required (the "Restriction  Period"),  and until the later of (i) the expiration
of the  Restriction  Period or (ii) the date the  performance  criteria (if any)
including  Performance Goals if applicable are satisfied,  the Participant shall
not be permitted to sell, assign, transfer,  pledge or otherwise encumber shares
of  Restricted  Stock.  Within these  limits,  the Committee may provide for the
lapse of restrictions  based upon period of service in installments or otherwise
and may accelerate or waive, in whole or in part, restrictions based upon period
of  service  or  upon  performance;   provided,  however,  that  any  applicable
performance criteria,  including any Performance Goals if applicable,  have been
satisfied.

     (4) Rights of Restricted Stockholder.  Except as otherwise provided in this
Section 9 and the Award Agreement,  the Participant  shall have, with respect to
the  shares of  Restricted  Stock,  all of the  rights of a  stockholder  of the
Company holding Shares,  including the right to vote the shares and the right to
receive any dividends or other distributions.  If so determined by the Committee
in the applicable  Award  Agreement,  (i) cash dividends on shares of Restricted
Stock shall be  automatically  deferred and reinvested in additional  Restricted
Stock,  held subject to the vesting of the underlying  Restricted Stock, or held
subject  to  meeting  performance  criteria,   including  Performance  Goals  if
applicable,  and (ii)  dividends  payable in Shares shall be paid in the form of
Restricted  Stock,  held  subject to the  vesting of the  underlying  Restricted
Stock, or held subject to meeting performance  criteria,  including  Performance
Goals if applicable.

     (5) Lapse of  Restrictions.  As soon as practicable  following the lapse of
the restrictions on Restricted  Stock,  unrestricted  Shares,  evidenced in such
manner as the Committee deems appropriate, shall be issued to the grantee.

     (6) Forfeiture. Except as otherwise determined by the Committee at the time
of grant,  upon  Termination of Employment for any reason before the restriction
lapses,  all shares of Restricted  Stock still subject to  restriction  shall be
forfeited  by the  Participant  (who shall sign any  document and take any other
action  required  to assign  such shares  back to the  Company)  and  reacquired
without further consideration by the Company.


<PAGE>13


Section 10.   Outside Directors' Options.

     (1) Grant of Options. The Committee may grant Options under this Section 10
to Outside Directors, including members of the Committee. All such Options shall
be Non-Qualified Stock Options.  Any Option granted to an Outside Director shall
be evidenced by an Award  Agreement in such form as the  Committee may from time
to time  approve.  The price at which each Share  covered by such Options may be
purchased  shall  be 100% of the  Fair  Market  Value of a Share on the date the
Option is granted.

     (2) Exercise of Options.  Except as set forth in this  Section 10,  Options
shall be  exercisable at such time or times as determined by the Committee at or
subsequent  to the granting of such either  automatically  or at the election of
the Outside  Director or the  Committee.  In addition,  the Committee may at any
time accelerate the times at which Options may be exercised and otherwise modify
the time of exercise of the Options.  However,  no Option  shall be  exercisable
more than 10 years  after  the date of grant.  Options  may be  exercised  by an
Outside  Director:  (i) during the period  that the Outside  Director  remains a
member of the Board;  (ii) for a period of one year after ceasing to be a member
of the Board by reason of death or retirement (as defined below) from the Board;
or (v) for a period  of 90 days  after  ceasing  to be a member of the Board for
reasons other than retirement, death or disability,  however, only those Options
exercisable at the date the Outside  Director ceases to be a member of the Board
shall  remain  exercisable.  For  purposes  of  this  Section  10,  "retire"  or
"retirement"  shall mean  discontinuance  of  service  as a  director  after the
director  has  reached  age 60 and has at least five years or more of service on
the Board. All Options shall  immediately  become  exercisable in the event of a
Change in Control,  as  hereinafter  defined,  except that Options  shall not be
exercisable  earlier  than six  months  from  the  date of  grant to the  extent
required for exemption under Section 16 of the Exchange Act.

     In the  event  of the  death  of an  Outside  Director  or  former  Outside
Director,  his Options  shall be  exercisable  only to the extent that they were
exercisable  at his date of death and only by the executor or  administrator  of
the  Outside  Director's  estate,  by the person or persons to whom the  Outside
Director's rights under the Option shall pass under the Outside  Director's will
or the laws of descent  and  distribution,  or by a  beneficiary  designated  in
writing in accordance with Section 16(a) hereof.

     (3) Payment.  An Option granted to an Outside Director shall be exercisable
only upon payment to the Company of the full  purchase  price of the Shares with
respect to which the Option is being exercised.  Payment for the Shares shall be
in United States  dollars,  payable in cash or by check or by delivery of Shares
having a Fair Market Value on the exercise date equal to the total option price,
or by any combination of cash and Shares.

     (4)  Adjustment  of  Options.  In  the  event  there  shall  be  a  merger,
reorganization, consolidation,  recapitalization, stock dividend or other change
in corporate  structure  such that the


<PAGE>14


Shares of the Company are changed  into or become  exchangeable  for a larger or
smaller number of Shares, thereafter the number of Shares subject to outstanding
Options  and the  number of Shares  subject  to Options to be granted to Outside
Directors  pursuant to the  provisions  of this Section 10 shall be increased or
decreased,  as the case may be, in direct proportion to the increase or decrease
in the  number of Shares of the  Company by reason of such  change in  corporate
structure;  provided,  that the number of Shares shall always be a whole number,
and the purchase price per share of any  outstanding  Options shall, in the case
of an increase in the number of Shares, be proportionately  reduced,  and in the
case of a decrease in the number of Shares, shall be proportionately increased.

Section 11.   Dividend Equivalents.

     Subject  to the  provisions  of this  Plan  and any  Award  Agreement,  the
recipient of an Award (including,  without limitations any deferred Award), may,
if so determined  by the  Committee,  be entitled to receive,  currently or on a
deferred basis, interest or dividends, or interest or dividend equivalents, with
respect to the  number of Shares  covered by the  Award,  as  determined  by the
Committee,  in its sole  discretion,  and the  Committee  may provide  that such
amounts (if any) shall be deemed to have been reinvested in additional Shares or
otherwise reinvested.

Section 12.   Change in Control.

     (1) In the event of any Change in Control of the  Company,  as  hereinafter
defined,  the Committee,  as constituted before such Change in Control,  may, in
its  sole  discretion,  as to any  Award  either  at the  time an  Award is made
hereunder or any time thereafter, take any one or more of the following actions:
(i)  provide  for the  purchase  by the  Company  of any  such  Award,  upon the
Participant's request, for an amount of cash equal to the amount that could have
been  attained  upon  the  exercise  of  such  Award  or   realization   of  the
Participant's rights had such Award been currently  exercisable or payable; (ii)
make such  adjustment to any such Award then  outstanding as the Committee deems
appropriate  to reflect  such Change in  Control;  or (iii) cause any such Award
then  outstanding  to be assumed,  or new rights  substituted  therefor,  by the
acquiring or surviving corporation after such Change in Control. In the event of
a Change  of  Control,  there  shall be an  automatic  acceleration  of any time
periods  relating  to the  exercise  or  realization  of any such  Award and all
performance award standards shall be deemed satisfactorily completed without any
action required by the Committee so that such Award may be exercised or realized
in full on or before a date  fixed by the  Committee,  except no Award  shall be
exercisable  earlier  than six  months  after  the  date of grant to the  extent
required for exemption  under Section 16 of the Exchange Act. The Committee may,
in its  discretion,  include  such further  provisions  and  limitations  in any
agreement  documenting  such  Awards  as it may deem  equitable  and in the best
interests of the Company.

     For  purposes of this Plan,  a "Change in Control"  shall be deemed to have
occurred if:


<PAGE>15


          (i) any  person (as  defined in  Sections  13(d) and  14(d)(2)  of the
     Exchange  Act)  becomes  the  "beneficial  owner" (as defined in Rule 13d-3
     under the  Exchange  Act),  without  the prior  approval  of the  Incumbent
     Members (as defined  below),  directly or indirectly,  of securities of the
     Company having 25% or more of the voting power in the election of directors
     of the  Company,  excluding,  however,  any  person or an  "affiliate"  (as
     defined in the Exchange Act) of such person who is the beneficial  owner of
     any shares of any class  (preferred  or common)  of the  Company's  capital
     stock on the date hereof;

          (ii) the occurrence within any twelve-month  period of a change in the
     Board of  Directors  of the  Company  with the  result  that the  Incumbent
     Members (as defined  below) do not  constitute a majority of the  Company's
     Board of Directors.  The term "Incumbent Members" shall mean the members of
     the  Board on the  date  immediately  preceding  the  commencement  of such
     twelve-month  period,  provided that any person  becoming a director during
     such  twelve-month  period whose  election or  nomination  for election was
     approved by a majority the  directors  who, on the date of such election or
     nomination  for  election,   comprised  the  Incumbent   Members  shall  be
     considered  one of the  Incumbent  Members in respect of such  twelve-month
     period; or

          (iii) the  stockholders  of the Company  shall have approved a merger,
     consolidation or dissolution of the Company or a sale,  lease,  exchange or
     disposition of all or  substantially  all of the Company's  assets,  unless
     such  merger,   consolidation,   dissolution,   sale,  lease,  exchange  or
     disposition  shall  have  been  approved  by a  majority  of the  Incumbent
     Members.

Section 13.   Amendments.

     (1) The Plan.  The Board may amend,  suspend or terminate the Plan,  but no
amendment,   suspension  or  termination  shall,  without  the  consent  of  the
Participant,  alter or  impair  the  rights of the  Participant  under any award
theretofore  granted.  In addition,  no amendment shall be effective without the
approval of  stockholders  if required by Section 16 of the Exchange Act or Code
Section 162(m) or Section 422 as the case may be.

     (2)  Awards.  The  Committee  may amend the terms of any Award  theretofore
granted, prospectively or retroactively,  and may also substitute new Awards for
Awards previously  granted under this Plan or for awards granted under any other
compensation  plan of the Company or an  Affiliate  to  Participants,  including
without  limitation  previously granted Options having higher option prices, but
no such  amendment or  substitution  shall impair the rights of any  Participant
without his or her consent.  Except as may provided in an Award  Agreement,  the
Committee  may,  in  its  sole  discretion,  in  whole  or in  part,  waive  any
restrictions  or conditions  applicable  to, or  accelerate  the vesting of, any
Award.

     (3) Performance Award Criteria. The Committee shall be authorized,  without
the Participant's  consent, to make adjustments in Performance Award criteria or
in the terms and


<PAGE>16


conditions  of other Awards in  recognition  of events that it deems in its sole
discretion  to be  unusual  or  nonrecurring  that  affect  the  Company  or any
Affiliate or the  financial  statements of the Company or any  Affiliate,  or in
recognition of changes in applicable laws, regulations or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent the dilution or enlargement  of benefits or potential  benefits under
the Plan.

     (4) Curative Amendments.  The Committee may correct any defect,  supply any
omission or reconcile any  inconsistency  in the Plan or any Award in the manner
and to the extent it deems  desirable to carry it into effect.  In the event the
Company  shall  assume  outstanding  employee  benefit  awards  or the  right or
obligation  to make future such awards in  connection  with the  acquisition  of
another  corporation or business  entity,  the Committee may, in its discretion,
make  such  adjustments  in the  terms  of  awards  under  the  Plan as it deems
appropriate.

Section 14.   Termination of Employment and Non-Competition.

     The Committee shall have full power and authority to determine whether,  to
what  extent  and under  what  circumstances  any  Award  shall be  canceled  or
suspended  and shall  promulgate  rules and  regulations  to determine  (a) what
events constitute disability, retirement, termination for an approved reason and
termination  for  cause  for  purposes  of the Plan and (b) the  treatment  of a
Participant under the Plan in the event of his death, disability, retirement, or
termination for an approved reason.  In addition,  but without  limitation,  all
outstanding  Awards to any  Participant  shall be canceled or  forfeited  if the
Participant, without the consent of the Committee, while employed by the Company
or after termination of such employment,  becomes associated with,  employed by,
renders  services  to, or owns any  interest in (other than any  non-substantial
interest,  as determined by the Committee),  any business that is in competition
with the Company or any Affiliate,  or with any business in which the Company or
any Affiliate has a substantial  interest as determined by the Committee or such
officers or  committee  of senior  officers to whom the  authority  to make such
determination is delegated by the Committee.

Section 15.   Termination of Awards under Certain Circumstances.

     Unless  the  Participant's   Award  Agreement   provides   otherwise,   all
unexercised,  unearned,  and/or  unpaid  Awards,  including,  but  not by way of
limitation,  Awards earned,  but not yet paid, all unpaid dividends and Dividend
Equivalents,  and all  interest  accrued on the  foregoing  shall be canceled or
forfeited,  as the case may be,  if (a) the  Participant's  employment  with the
Company or an Affiliate is terminated for cause,  (b) the  Participant is not in
compliance  with  all  applicable  provisions  of this  Plan or with  any  Award
Agreement,  or (c) the  Participant,  whether  or not  employed  or serving as a
director, acts or otherwise conducts himself in a manner inimical or contrary to
the best interest of the Company or any Affiliate.


<PAGE>17


Section 16.   General Provisions.

     (1)  Non-Assignability.  No Award may be pledged or otherwise encumbered or
subject to any lien, obligation or liability of a Participant (other than to the
Company or an Affiliate), or, except for Non-Qualified Stock Options as provided
below,  assigned or  transferred by such  Participant  other than by will or the
laws or descent and distribution and shall be exercisable during the lifetime of
the  Participant,  only by the Participant or, if permissible  under  applicable
law,  by the  guardian or legal  representative  of the  Participant,  provided,
however,  that  the  Participant  may,  pursuant  to a  written  designation  of
beneficiary  filed  with and  approved  by the  Committee  prior  to his  death,
designate a beneficiary to exercise the rights of the  Participant  with respect
to any Award upon the death of the Participant. Any Award of Non-Qualified Stock
Options may be transferred  during the lifetime of the  Participant,  and may be
exercised by the transferee in accordance with the terms of the Award,  but only
if and to the extent such  transfers are permitted by the Committee  pursuant to
the express terms of an Award  Agreement and subject to any terms and conditions
which the Committee may impose on such transfers.

     (2)  Terms.  The term of each Award  shall be for such  period of months or
years  from  the  date  of its  grant  as may be  determined  by the  Committee;
provided, however, that in no event shall the term of any Incentive Stock Option
or Limited  Right  related to any  Incentive  Stock Option exceed a period of 10
years from the date of its grant.

     (3) Rights to Awards. No Employee,  Participant, or other Person shall have
any claim to be granted any Award,  and there is no obligation for uniformity of
treatment of Employees, Participants, or holders or beneficiaries of Awards.

     (4) No Cash  Consideration for Awards.  Awards shall be granted for no cash
consideration  or for such  minimal  cash  consideration  as may be  required by
applicable law.

     (5)  Restrictions.  All  certificates  for Shares  delivered under the Plan
pursuant to any Award shall be subject to such  stock-transfer  orders and other
restrictions as the Committee may deem advisable  under the rules,  regulations,
and other  requirements  of the  Securities and Exchange  Commission,  any stock
exchange or stock  quotation  system upon which the Shares are then listed,  and
any applicable  Federal or state  securities  law, and the Committee may cause a
legend or  legends  to be placed on any such  certificates  to make  appropriate
reference to such restrictions.


<PAGE>18


     (6) Withholding. The Company shall be authorized to withhold from any Award
granted,  payment due or Shares or other property  transferred under the Plan or
from any  compensation  or other amount owing to a Participant the amount of any
applicable  withholding  and other taxes due and payable in respect of an Award,
payment or shares or other property transferred hereunder and to take such other
action  as may be  necessary  in the  opinion  of the  Company  to  satisfy  all
obligations  for  the  payment  of such  taxes.  The  Company  may  require  the
Participant  to pay to it such tax prior to and as a condition  of the making of
such payment or transfer of Shares or property under the Plan. The Committee may
allow a  Participant  to pay the amount of taxes due or payable in respect of an
Award by  withholding  from any payment of Shares due as a result of such Award,
or by permitting the Participant to deliver to the Company, Shares having a fair
market value, as determined by the Committee, equal to the amount of such taxes.

     (7) No Limit on Other Compensation Arrangements.  Nothing contained in this
Plan  shall  prevent  the  Company  or any  Affiliate  from  adopting  other  or
additional compensation arrangements.

     (8) Governing Law. The validity,  construction,  and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Delaware and applicable Federal law.

     (9) Severability.  If any provision of this Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction,  as to
any Person or Award,  or would  disqualify  the Plan or any Award  under any law
deemed applicable by the Committee,  such provision shall be construed or deemed
amended to conform to  applicable  laws,  or if it cannot be construed or deemed
amended without, in the determination of the Committee,  materially altering the
intent  of the Plan or the  Award,  such  provision  shall be  stricken  and the
remainder of the Plan and any such Award shall remain in full force and effect.

     (10) No Right to  Employment.  The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any  Affiliate.  Further,  the Company or an Affiliate may at any time terminate
the employment of a Participant, free from any liability, or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award Agreement.

     (11) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded"  plan for incentive and deferred  compensation.  To the
extent than any person acquires a right to receive  payments from the Company or
any  Affiliate  pursuant to an Award,  such right  shall be no greater  than the
right  of any  unsecured  general  creditor  of the  Company  or any  Affiliate;
provided,  however,  that the Committee may authorize the creation of trusts and
deposit therein cash,  Shares or other property,  or make other  arrangements to
meet the Company's  obligations under the Plan, and provided that such trusts or
other arrangements are consistent with the "unfunded" status of the Plan.


<PAGE>19


     (12) No  Fractional  Shares.  No  fractional  Shares  shall  be  issued  or
delivered  pursuant to the Plan or any Award,  and the Committee shall determine
whether cash, other  securities,  or other property shall be paid or transferred
in lieu of any  fractional  Shares,  or whether  such  fractional  Shares or any
rights thereto shall be canceled, terminated, or otherwise eliminated.

     (13)  Headings.  Headings are given to the Sections and  subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or  interpretation of
the Plan or any provision thereof.

     (14) Rule 16b-3  Compliance.  With respect to persons subject to Section 16
of the Exchange  Act,  transactions  under this Plan are intended to comply with
all  applicable  conditions  of Rule 16b-3.  To the extent any provision of this
Plan or action by the  Committee  was not to so comply,  the Committee may deem,
for such persons, such provision or action null and void to the extent permitted
by law.

Section 17.   Effective Date of Plan.

     The Plan shall be effective as of January 15, 1998.

Section 18.   Term of Plan.

     No Award shall be granted  pursuant to the Plan after  January 15, 2008 but
any Award theretofore granted may extend beyond that date.