<PAGE>1


                       SETTLEMENT AGREEMENT, RESIGNATION,
                            AND FULL GENERAL RELEASE

     This Settlement Agreement,  Resignation,  and Release ("Agreement") is made
and  entered  into on  January 6, 1998 by and  between  PAYLESS  CASHWAYS,  INC.
("PAYLESS") and SUSAN M. STANTON (" STANTON").

     WHEREAS,  STANTON was  employed by PAYLESS on March 7, 1983 and is entitled
to the  benefits of an  Employment  Agreement  dated as of February 8, 1993,  as
amended  as of October  17,  1996,  June 30,  1997 and  August  20,  1997,  (the
"Employment Agreement") ; and

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

     WHEREAS,  PAYLESS AND STANTON  have agreed  that  STANTON  shall  resign as
President and Chief Operating  Officer and as a Director,  but that for purposes
of  her  severance  benefits  STANTON'S  termination  shall  be  regarded  as  a
termination of her 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 13, 1998 (the "Effective Date") and that STANTON will not be required to
perform services for PAYLESS after the Effective Date.

     2. SEVERANCE BENEFITS

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

          1. Lump Sum Payment.

               (1) PAYLESS  agrees to pay STANTON 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 1, such lump sum payment consists of
(A) the  amount  that  STANTON  would  have  received  as base  salary  from the
Effective Date through March 1, 1999 (the "Severance Period") (based on her base
salary in effect on January 5, 1998), (B) the remaining amount due STANTON under
the PAYLESS  Reorganization  Retention Plan, and (C) an amount


<PAGE>2


for unused earned vacation days through the Effective Date. In addition, PAYLESS
shall  pay  STANTON  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 matching contributions
to the Payless  Cashways,  Inc. Employee Savings Plan which would otherwise have
been made on  STANTON'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 STANTON with health,  life (including  supplemental death
benefits),  dental and disability (including  supplemental  disability) benefits
and other benefits substantially  equivalent to those that STANTON 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,  STANTON  shall be eligible for COBRA  continuation  coverage of health,
life (including  supplemental death benefits),  dental and disability (including
supplemental  disability)  benefits  for a period of 18 months or such period as
may then be provided  by law.  STANTON  shall not be  entitled  to receive  such
benefits to the extent that she obtains other employment prior to the end of the
Severance Period that provides  comparable  benefits,  provided,  however,  that
STANTON 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 STANTON under the Payless  Cashways,  Inc.
Amended Retirement Plan (the "Pension Plan") and STANTON's eligibility therefor,
STANTON's  date of separation  from PAYLESS shall be deemed to be March 1, 1999,
her age shall be deemed to be her 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 STANTON an
amount equal to the present  value of the  additional  retirement  benefits that
would have accrued had she 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 GATT rate
currently in effect under the Pension Plan.

          4.  Automobile.  PAYLESS  also  agrees  to a lump  sum  payment  (less
applicable payroll deductions) of $11,668.66 in lieu of car allowance to be paid
on the Effective  Date.  STANTON and PAYLESS agree that the lease of her company
car will be terminated.


<PAGE>3


     3. DEATH OF STANTON

     The death of STANTON  prior to the  expiration of this  Agreement  will not
void this Agreement,  but the terms thereof will survive her death. In the event
that STANTON 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 STANTON  otherwise due
under  this  Agreement  shall  become  due  and  payable  to  the  beneficiaries
hereinafter listed:  Principal Beneficiary:  Susan M. Stanton Living Trust dated
August, 1989.

     4. STOCK INCENTIVE

     The parties acknowledge that STANTON has no vested stock incentives.

     5. OUT PLACEMENT

     PAYLESS will provide STANTON at PAYLESS'  expense with telephone  answering
and e-mail services at Payless for a period of 60 days and  executive-level  out
placement  services at an out placement service of PAYLESS' choice in the Kansas
City  area,  including  an office and  telephone  transfer  services,  until she
obtains other employment, for a maximum of 18 months.

     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  STANTON   (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 STANTON
and her estate are  entitled to the benefit of such  Indemnification  Provisions
notwithstanding her termination of service and that such provisions apply to her
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  STANTON  against  any  and  all
expenses(including costs and attorneys' fees) which she 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  STANTON  may  become a party or witness by reason of the fact that she
served as a director  or officer of  PAYLESS,  except as may be  provided in the
Indemnification  Provisions.  PAYLESS  further  agrees that as to  STANTON,  any
amendments  or  changes  to the  Indemnification  Provisions  or  the  insurance
coverages  described in paragraph  A.7 below will not adversely  affect  STANTON
without STANTON's  written consent,  and that breach by STANTON of any provision
of this  AGREEMENT  will not  constitute  grounds  by  PAYLESS  to  change  such
coverages or to terminate its obligations under this


<PAGE>4


Agreement or otherwise with respect to the Indemnification  Provisions.  PAYLESS
and  STANTON  agree that said  Indemnification  Agreement  is hereby  amended to
delete section 9.6 thereof in its entirety.

     7. LIABILITY INSURANCE

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

2.  STANTON'S AGREEMENTS

     1. VOLUNTARY RESIGNATION

     STANTON  and  PAYLESS  acknowledge  that  STANTON  does and she hereby does
voluntarily  resign her employment as President and Chief Operating  Officer and
as a  Director,  effective  as  of  the  Effective  Date.  STANTON  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 STANTON 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 her  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  STANTON
performs  such  transitional  advisory


<PAGE>5


services  on any given day shall be  determined  by her,  although  she will use
reasonable  efforts to respond timely to accommodate the reasonable  requests of
PAYLESS' acting Chief Executive Officer for her services.

     2. RELEASE OF LIABILITY.

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

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

     4. ADEQUACY OF CONSIDERATION

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

     5. CONFIDENTIALITY AND NON-SOLICITATION

     STANTON agrees that  notwithstanding the provisions of this Agreement,  the
provisions of Section 4 of her  Employment  Agreement  will continue to apply in
accordance with their terms


<PAGE>6


after the Effective Date.

3. OTHER AGREEMENTS

     1. NON-DISPARAGEMENT

     STANTON  and PAYLESS  acknowledge  and agree that  disparaging  or critical
statements  made by STANTON  about  PAYLESS or its board  members,  officers and
employees of PAYLESS or disparaging  statements  made by board members or senior
officers of PAYLESS about STANTON would be uniquely detrimental to the interests
of  both  parties.  Therefore,  STANTON  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 STANTON.  All other provisions of this
Agreement  notwithstanding,  PAYLESS agrees that any statements  made by STANTON
during any  testimony  given by her as part of any  deposition,  court  hearing,
trial,  arbitration  hearing or similar  proceeding,  shall not be  considered a
disparaging or critical statement and STANTON 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

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

     3. VOLUNTARY NATURE OF AGREEMENT AND ADVICE OF COUNSEL

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


<PAGE>7


     4. CONSIDERATION PERIOD AND REVOCATION

     STANTON  received this Agreement on January 6, 1998.  STANTON  acknowledges
that she 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.
STANTON has twenty-one (21) calendar days,  after the date STANTON  received the
Agreement,  within which to consider the  Agreement,  although she may return it
sooner if she desires.  STANTON 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 STANTON signs the
Agreement.   The  provisions  of  this  Agreement  will  become   effective  and
enforceable  on the  Effective  Date,  which is the eighth  (8th)  calendar  day
following the date STANTON signs the Agreement.

     5. BINDING EFFECT

     This Agreement will be binding upon STANTON and her 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 STANTON and her heirs,  administrators,
representatives, executors, successors and assigns.

     6. NEWS RELEASES

     PAYLESS agrees that before it makes any public announcements concerning the
resignation of STANTON in any newspaper,  trade publication,  radio, television,
or  other  form  of  public  communication,  it  will  submit  such  a  prepared
announcement to STANTON for her review and approval.  No such  announcement will
be made without the prior approval of STANTON.  STANTON agrees that her 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  STANTON 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 STANTON 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.                    SUSAN M. STANTON

By:  /s/ Donald E. Roller                 /s/ Susan M. Stanton
   ----------------------                 ----------------------
Name:  Donald E. Roller                   Date:  January 6, 1998

Title:  Acting Chief Executive Officer

Date:  January 6, 1998


<PAGE>9


                Schedule I to Susan Stanton Settlement Agreement
                          Lump sum payment computation



Severance Period Base Salary -             $ 519,231.00
Unpaid Retention Bonus                        67,500.00
Unused Vacation Days
  Through Effective Date                      34,616.00
                                            -----------
         Total                             $ 621,347.00


<PAGE>10


                Schedule II to Susan Stanton Settlement Agreement
                              Benefit Continuation



Group Medical/Vision
Group Dental
Group Long/Term Disability and Supplemental Disability
Group    Life Insurance and  Supplemental  Death  Benefits  during the Severance
         Period, and a $450,000 life insurance policy thereafter
Annual Physical in early 1998
1997 Tax Preparation ($1,000 limit)


<PAGE>11


               Schedule III to Susan Stanton 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 Susan Stanton 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 Susan Stanton Settlement Agreement

                            INDEMNIFICATION AGREEMENT