AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

     This  Amendment No. 2 to  Employment  Agreement is made and entered into on
the 25th day of March, 1999, among PAMIDA HOLDINGS CORPORATION  ("Holdings"),  a
Delaware corporation, PAMIDA, INC. ("Pamida"), a Delaware corporation, and FRANK
A. WASHBURN (the "Executive").  Holdings and Pamida collectively are referred to
in this Amendment No. 2 as the "Companies".


                                      * * *

     WHEREAS,  the  Companies  and the  Executive  are parties to an  Employment
Agreement dated March 6, 1997 (the "Employment Agreement"); and

     WHEREAS, the Companies and the Executive now desire to amend the Employment
Agreement as more particularly set forth below;

     NOW, THEREFORE, the Companies and the Executive agree as follows:

     1. Pursuant to Paragraph 6 of the Employment  Agreement,  the Companies and
the Executive agree that the Executive's  incentive bonus program for the fiscal
year of Holdings ending January 30, 2000 ("Fiscal 2000") shall be the following:

     (a)  If  (i)  the  consolidated  earnings  of  Holdings  and  its
          subsidiaries (on a first-in, first-out basis with respect to
          merchandise    inventories)    before    interest,    taxes,
          depreciation,  and  amortization  (the  "EBITDA") for Fiscal
          2000 (the "FY2000 EBITDA") are less than $48,500,000 or (ii)
          the  percentage  increase in the  comparable  store sales of
          Pamida for Fiscal 2000  compared  with the fiscal year ended
          January 31, 1999 (the "Comparable  Store Sales Increase") is
          less than 3%,  then the  Executive  shall not be entitled to
          any incentive bonus for Fiscal 2000.

     (b)  If the FY2000 EBITDA equals or exceeds  $48,500,000  and the
          Comparable  Store Sales Increase  equals or exceeds 3%, then
          the  Executive's  incentive  bonus for Fiscal  2000 shall be
          determined  as a percentage of the  Executive's  base salary
          from the matrix attached to this Amendment No. 2 taking into
          account (i) the FY2000 EBITDA and (ii) the Comparable  Store
          Sales Increase. The Comparable Store Sales Increase shall be
          determined in accordance with Pamida's historical practices.

     (c)  For  purposes  of such  matrix,  a  Comparable  Store  Sales
          Increase  of more than 9% shall be treated as an increase of
          9%,  and  FY2000  EBITDA of more than  $56,000,000  shall be
          treated as FY2000 EBITDA of $56,000,000.

     (d)  For purposes of applying such matrix,  the Executive's  base
          salary  shall be the  Executive's  base  salary in effect on
          January 30, 2000.

     (e)  The maximum  incentive  bonus that the Executive  shall have
          the  opportunity  to  earn  for  Fiscal  2000 is 115% of the
          Executive's applicable base salary.

     (f)  FY2000 EBITDA amounts  between whole millions of dollars and
          a Comparable Store Sales Increase between whole  percentages
          shall be interpolated on a straight-line  basis for purposes
          of applying such matrix.

     (g)  Solely by way of  illustration  of the  application  of such
          matrix,   if  the  FY2000  EBITDA  is  $50,500,000  and  the
          Comparable  Store  Sales  Increase  for Fiscal 2000 is 4.6%,
          then the  Executive's  incentive bonus for Fiscal 2000 would
          be 49.25% of the Executive's applicable base salary.

The  Executive's  incentive  bonus for Fiscal 2000 (if any) shall be paid to the
Executive  as soon as  practicable  after  Holdings has received the final audit
report with respect to Fiscal 2000 from its independent accountants.

     2. The  provisions  of Paragraph 1 of this  Amendment No. 2 are intended to
satisfy the  requirements  of Paragraph 6 of the  Employment  Agreement  for the
fiscal year of Holdings ending in 2000.

     3.  Paragraph  12 of the  Employment  Agreement  hereby is  amended  in its
entirety so as to read as follows:

          "12.   NOTICE  OF  NONRENEWAL.   If,  during  or  after  the
     expiration of the term of this agreement, the Companies determine
     not to continue the  employment of the Executive at a base salary
     at least  equal to the Base  Salary  which is in effect as of the
     last day of the term of this  agreement and with fringe  benefits
     and an incentive bonus program reasonably  comparable to those in
     effect as of the last day of the term of this agreement, then the
     Companies shall so notify the Executive in writing (the "Notice")
     promptly after such determination has been made. If the Executive
     receives  the  Notice  either at a time when  there are less than
     twelve (12) months  left in the term of this  agreement  or after
     the expiration of the term of this agreement  while the Executive
     is still in the employ of the Companies,  then  regardless of the
     expiration of the term of this  agreement the Executive  shall be
     entitled to receive the following  payments and benefits from the
     Companies:

          (a)  Continued  payment  of the  Executive's  Base
               Salary,  at the annual  rate in effect on the
               last day of the term of this agreement, until
               that date (the "Extended Payment Date") which
               is twelve (12) months after the date on which
               the Executive received the Notice;  provided,
               that such  payments  shall be  reduced by the
               aggregate amount of salary or consulting fees
               which the Executive  derives from  employment
               with another  employer  (for purposes of this
               Paragraph   12,  the   "Other   Employment"),
               whether as an  employee  or as a  consultant,
               during the period from the effective  date of
               the termination of the Executive's employment
               by  the  Companies  pursuant  to  the  Notice
               through  the   Extended   Payment  Date  (the
               "Extended  Payment  Period").  In  no  event,
               however,  shall the  Executive be required to
               repay to the  Companies  any  portion  of any
               payments  made to the  Executive  pursuant to
               this subparagraph 12(a) for any periods prior
               to the  periods  during  which the  Executive
               earned  such salary or  consulting  fees from
               the Other Employment.
 
          (b)  An incentive  bonus in an amount equal to (i)
               the average  amount of the incentive  bonuses
               received by the Executive  from the Companies
               for the three fiscal  years of the  Companies
               ended prior to March 5, 2000,  multiplied  by
               (ii) a fraction whose numerator is the number
               of days in the  Extended  Payment  Period and
               whose  denominator  is  365,  such  incentive
               bonus  to be  paid  on  the  last  day of the
               Extended Payment Period;  provided, that such
               incentive  bonus  shall  be  reduced  by  any
               bonuses   received  or   receivable   by  the
               Executive from the Other  Employment (if any)
               for  services  performed  by him  during  the
               Extended Payment Period.

          (c)  Continued   participation  in  the  following
               benefit  plans or programs  of the  Companies
               which may be in effect from time to time,  to
               the extent that  continued  participation  by
               the  Executive is  permitted  under the terms
               and  conditions  of such  plans  or  programs
               (unless  such  continued   participation   is
               restricted   or   prohibited   by  applicable
               governmental regulations governing such plans
               or programs), until the first to occur of the
               expiration of the Extended  Payment Period or
               (separately  with respect to the  termination
               of  each   benefit)   the   provision   of  a
               substantially   equivalent   benefit  to  the
               Executive   by   another   employer   of  the
               Executive:

               (1)     Group medical/hospital insurance,
               (2)     Group dental insurance,
               (3)     Group life insurance,
               (4)     Executive life insurance,
               (5)     Group     long-term     disability
                       insurance,
               (6)     Executive   long-term   disability
                       insurance,
               (7)     Exec-U-Care     medical    expense
                       reimbursement insurance,
               (8)     Professional  financial,  tax, and
                       estate planning services,
               (9)     Automobile allowance,
               (10)    Annual physical examination,
               (11)    Business club membership.

               If continued  participation  by the Executive
               in any  of the  foregoing  benefit  plans  or
               programs of the  Companies  is not  permitted
               under the terms and conditions of any of such
               plans or programs,  then in lieu of continued
               participation  in such  plan or  program  the
               Companies  shall pay to the Executive in cash
               an   amount   equal  to  the  cost  that  the
               Companies would have incurred with respect to
               the Executive if the Executive were permitted
               to continue as a participant  in such plan or
               program  during the  applicable  period.  The
               Companies agree not to unilaterally  take any
               action which would prevent the Executive from
               continuing  to  participate  in any  of  such
               plans  or   programs   unless   such   action
               similarly  affects all other  participants in
               such plans or programs.

     The  Executive   promptly  shall  notify  the  Companies  of  his
     acceptance  of  the  Other   Employment  and  of  the  amount  of
     compensation  and  benefits  which the  Executive  receives or is
     entitled to receive from the Other Employment during the Extended
     Payment Period.  In the event of the  Executive's  death prior to
     the end of the Extended Payment Period, the payments and benefits
     provided for in this Paragraph 12 shall cease and terminate as of
     the date of the Executive's  death,  except as otherwise required
     by applicable  law. The  provisions of this Paragraph 12, if they
     become applicable to the Executive,  shall survive the expiration
     of the  term of  this  agreement  unless,  by  written  agreement
     between  the  Executive  and the  Companies,  this  agreement  is
     terminated."

     4.   This  Amendment  No. 2 shall be  effective as of February 1, 1999.

     5.   As hereby amended, the Employment Agreement shall remain in full force
          and effect.

     IN WITNESS WHEREOF, the Companies and the Executive have executed
this Amendment No. 2 to Employment Agreement on the day and year first
above written.

                                        PAMIDA HOLDINGS CORPORATION,
                                        a Delaware corporation

                                        By: /s/Steven S. Fishman,
                                            ---------------------
                                            Steven S. Fishman, Chairman of the
                                            Board and Chief Executive Officer


                                        PAMIDA, INC., a Delaware corporation

                                        By: /s/Steven S. Fishman
                                            --------------------
                                            Steven S. Fishman, Chairman of the
                                            Board and Chief Executive Officer



                                            /s/Frank A. Washburn
                                            --------------------
                                            Frank A. Washburn