<PAGE>1


                            INDEMNIFICATION AGREEMENT


This  Agreement  is between  Payless  Cashways,  Inc.  and  __________.  In this
Agreement,  "Payless," "we" or "us" refers to Payless  Cashways,  Inc. and "you"
refers to  _____________.  The glossary  attached as Exhibit "A" defines certain
other capitalized terms used in this Agreement.

         1.       Date.

         This date of this Agreement is February __, 1999.

         2. Purpose of the Agreement.

         We desire to attract and retain your services as a Payless  director or
officer.  We recognize,  however,  that you might be concerned because directors
and officers are  sometimes  named as parties in expensive  litigation.  To help
alleviate that concern and to induce you to serve, we agree to indemnify you for
certain expenses  potentially  resulting from such litigation.  We also agree to
use reasonable efforts to maintain  directors' and officers'  insurance for your
benefit.

         3.       Agreement to Serve.

         You  agree to serve or to  continue  to serve as  Payless'  ___________
until  you are no longer  duly  appointed,  elected  or  qualified  or until you
resign.

         4. Directors' and Officers' Insurance.

         We agree to use reasonable  efforts to maintain one or more enforceable
policies of directors' and officers'  insurance for your benefit.  The insurance
will provide  coverage in amounts which our Board of Directors  determines to be
reasonable.  Our  obligation to maintain  insurance  ends when you are no longer
serving Payless in your present capacity and there is no reasonable  possibility
that  someone  will sue you  based on your  prior  service  to  Payless  in that
capacity. Our obligation to maintain insurance will also cease if such insurance
is not  reasonably  available or if our Board of Directors  determines  that the
cost of providing the insurance exceeds its benefits.

         5.       Agreement to Indemnify.

         Subject to the limitations set forth in Section 7 of this Agreement, we
agree to indemnify you for your expenses resulting from a threatened, pending or
completed Proceeding, including any Proceeding by or in the right of Payless, if
you meet the following requirements:

         -    You are (or at the time in question were) serving as our Agent, or
              as the Agent of another entity at our request;

         -    You acted in good faith and in a manner you reasonably believed to
              be in (or not opposed to) our best interests;

<PAGE>2


         -    You had no  reason to  believe  your  conduct  was  unlawful  (if
              the Proceeding against you is criminal); and

         -    Delaware law does not prohibit us from indemnifying you.

         6.       Advancement of Expenses.

         Subject to the  limitations set forth in Section 7 of the Agreement and
subject to the following conditions,  we will advance all costs and expenses you
reasonably incur in connection with the  investigation,  defense,  settlement or
appeal of any Proceeding upon receipt from you of:

         -    Your written  affirmation  of your good faith belief that you have
              met the  standard of conduct  necessary  for  indemnification  set
              forth in Section 5 of this Agreement; and

         -    Your  undertaking  (or an undertaking on your behalf) to repay all
              amounts  so  advanced  if  a  court  having   final   jurisdiction
              determines that you are not entitled to  indemnification  for such
              expenses under this Agreement or otherwise.

         7.       Limitation of Indemnity.

         Notwithstanding  anything  to the  contrary  contained  in  Section  5,
Section 6 or any other section of this  Agreement,  we will not indemnify you or
advance  expenses in connection with a Proceeding which you initiated unless our
Board of Directors authorized the Proceeding (or any part thereof). We also will
not indemnify you:

         -    to the extent that  payment is made to you or on your behalf under
              a valid and collectible insurance policy;

         -    to the extent that you receive payment other than under this
              Agreement;

         -    with  respect  to  directors'  acts or  omissions  for  which  our
              Certificate  of  Incorporation   may  not  limit  liability  under
              Delaware law; or

         -    if a  court  having  final  jurisdiction  determines  in  a  final
              decision that such indemnification is not lawful.

         8.       Notification of Right to Indemnification.

         You agree to notify us  promptly  after your  receipt of notice  that a
Proceeding  has been brought (or is  threatened  to be brought)  against you. If
your failure to notify us promptly prejudices us in our defense of a Proceeding,
we will be  relieved  of  liability  under this  Agreement  to the extent of the
prejudice.

         9.       Notice to Insurer.

         If we have  directors' and officers'  liability  insurance in effect at
the time we receive notice of a Proceeding  from you, we will give prompt notice
to the insurer in accordance with the

<PAGE>3


requirements  of the insurance  policy.  We will take all necessary or desirable
action to cause  the  insurer  to pay all  amounts  owed  under the terms of the
policy.

         10.      Determination of Right to Indemnification.

         Subject to the limitations set forth in Section 7 of this Agreement, we
agree to indemnify  you if you meet the  requirements  for  indemnification  set
forth in Section 5 of this Agreement.  We will determine  whether you meet those
requirements using one of the following three methods:

         -    by a  majority  vote  of  directors  who are  not  parties  to the
              Proceeding  (regardless of whether there are enough such directors
              to constitute a quorum);

         -    by Independent Legal Counsel selected by directors who are not
              parties to the Proceeding; or

         -    by vote of our  stockholders,  if there are no directors who are
              not parties to the Proceeding.

If Independent  Legal Counsel  determines  your  entitlement to  indemnification
under this Section 10, we will pay all reasonable fees and expenses  incurred by
such counsel in connection with such determination.

          The persons  determining  your  entitlement  to  indemnification  will
presume  that  you are  entitled  to  indemnification.  The  termination  of any
Proceeding by judgment,  order, settlement or conviction, or upon a plea of nolo
contendere or the equivalent, will not create a presumption that you did not act
in good faith and in a manner you believed to be in (or not opposed to) our best
interests.  Such a termination  also will not create a presumption  that you had
reasonable cause to believe that your conduct was unlawful.

         Following our determination of your entitlement to indemnification, our
Secretary  or  another  corporate  officer  will  notify  you in writing of such
determination. If we determine that you are not entitled to indemnification, you
may pursue the remedies provided by Section 14 of this Agreement.

         11.      Payment of Indemnification.

         If we determine that you are entitled to  indemnification,  we will pay
all costs and expenses you reasonably incurred in connection with the Proceeding
in question.  In addition,  we will pay all expenses you reasonably  incurred in
cooperating  with  the  persons   responsible  for  determining  your  right  to
indemnification,  regardless  of whether we  determine  that you are entitled to
indemnification.

         Our  obligations  to make payments under this Agreement are not subject
to diminution by set off,  counterclaim,  abatement or otherwise.  However,  you
will not be  released  from any  liability  or  obligation  that you may owe us,
whether under this Agreement or otherwise.

         12.      Assumption of Defense.

<PAGE>4


         If we are required to pay the costs of any Proceeding  brought  against
you,  we shall have the right to assume the  defense  of such  Proceeding,  with
counsel  approved by you, upon delivery to you of written notice of our election
to assume the defense. Notwithstanding the foregoing, however, we shall not have
the right to assume your defense in any Proceeding brought by or in the right of
Payless or as to which you have reasonably concluded that there is a conflict of
interest between you and us in the conduct of the defense.

         After we have  delivered  notice to you that we  intend  to assume  the
defense of a Proceeding,  you will have the right to employ separate  counsel at
your expense.  We will not be liable to you under this Agreement for any fees of
counsel you subsequently incur with respect to the Proceeding, unless:

         -    We previously have authorized you to employ separate counsel at
              our expense;

         -    You reasonably have concluded that there is a conflict of interest
              between you and us in the conduct of your defense; or

         -    We have  failed to employ  counsel  to assume  your  defense  in
              such Proceeding.

         13.      Cooperation and Settlement of Claim.

         You  agree  to give  us  such  information  and  cooperation  as we may
reasonably request in defense of any claim or threat of a claim.

         You  agree  that we are not  obligated  to  indemnify  you  under  this
Agreement  for any  amounts  you pay to settle any action or claim  without  our
prior written consent.  We agree not to settle any action or claim in any manner
that will impose any penalty or  limitation  on you without  your prior  written
consent.

         Each  party  to this  Agreement  agrees  not to  unreasonably  withhold
consent  to any  proposed  settlement.  If either  party  refuses  to agree to a
proposed  settlement   acceptable  to  the  other  party,  Payless  will  retain
Independent  Legal  Counsel  reasonably  acceptable  to you for the  purpose  of
determining   whether  the  proposed   settlement   is   reasonable   under  the
circumstances.  Payless will pay all  reasonable  fees and expenses  incurred by
Independent Legal Counsel in connection with such determination.  If Independent
Legal Counsel  determines that the proposed  settlement is reasonable  under all
the  circumstances,  the party  advocating  the  settlement  may  consummate the
settlement without the consent of the other party.

         14.      Your Remedies.

         If we fail to honor our obligations  under Section 6 of this Agreement,
or if we  determine  that you are not  entitled  to  indemnification  under this
Agreement, you may seek (a) an adjudication in an appropriate court in the State
of Delaware or in any other court of competent jurisdiction,  or (b) an award in
arbitration  to be  conducted  by a single  arbitrator  under  the  rules of the
American Arbitration Association, for the purpose of enforcing your rights under
this  Agreement.  However,  you may not seek such an adjudication or arbitration
later  than 180 days  following  the  earlier  of (x) the  date of  notice  of a
determination that you are not entitled to  indemnification,  or (y) the date 60
days after we receive your request for indemnification.

<PAGE>5


         Any judicial proceeding or arbitration  commenced under this Section 14
shall be conducted de novo and without  presumption that you are not entitled to
indemnification.

         If the  court  or  arbitrator  determines  that  you  are  entitled  to
indemnification, we shall be bound by such determination, unless:

         -    You have  misstated  a material  fact or  omitted a material  fact
              necessary to make your  statements in connection  with the request
              for indemnification not misleading; or

         -    Applicable law prohibits us from indemnifying you.

In  addition,  we will pay your  reasonable  expenses  incurred in  successfully
establishing  your right to  indemnification  or  advancement of expenses in any
action (or settlement thereof) under this Section 14.

         We shall be precluded  from  asserting in any  judicial  proceeding  or
arbitration commenced under this Section 14 that the procedures and presumptions
set forth in this  Agreement are not  enforceable.  We agree to stipulate in any
such  court  or  before  any  such  arbitrator  that we are  bound by all of the
provisions of this Agreement.

         15.      Notice.

         All notices,  requests,  demands and other  communications  relating to
this  Agreement  shall be in writing and shall be deemed to be duly given if (a)
delivered  by hand  and  receipted  for by the  party  to  whom  the  notice  or
communication  was directed,  or (b) mailed by certified or registered mail with
postage  prepaid,  on the third  business  day after the date on which it was so
mailed:

         if to you, to:

         -------------------------
         -------------------------
         -------------------------

         or to such other address as you furnish us, and

         if to Payless, to:

         Payless Cashways, Inc.
         Two Pershing Square
         2300 Main
         Kansas City, MO 64108
         Attention: Secretary/Assistant Secretary

         With a copy to:

         Blackwell Sanders Peper Martin LLP
         2300 Main Street, Suite 1000

<PAGE>6


         Kansas City, MO 64108
         Attention: Gary D. Gilson

         or to such other address as we furnish you.

         16.      Severability.

         If a court of competent jurisdiction determines that any portion of the
Agreement  is  unenforceable,  we will  nevertheless  indemnify  you to the full
extent permitted by the enforceable portions of the Agreement. The invalidity or
unenforceability  of any  provision(s)  of this  Agreement  will not  affect the
enforceability of the Agreement's other provisions.

         17.      Modification and Waiver.

         Any  supplement,  modification  or amendment to this  Agreement will be
binding only if both parties have executed it.

         If either party waives any of the  provisions of this  Agreement,  such
waiver  will  be  effective  only  as to the  particular  provision  and  matter
expressly waived.

         18.      Continuation of Indemnity.

         Our  obligations  under this Agreement shall continue during the period
in which (a) you are (or have  consented to be) an Agent of Payless,  or (b) are
serving as an Agent of another corporation, partnership, joint venture, trust or
other enterprise at our request. Our obligations shall also continue for as long
as you are  subject to any  possible  claim or  threatened,  pending or competed
Proceeding by reason of your service in such capacity.

         19.      Binding Effect.

         This Agreement binds us and our successors and assigns.  This Agreement
inures  to  the   benefit  of  you  and  your  heirs,   assigns   and   personal
representatives.

         20.      Non-Exclusivity.

         The  indemnification  to which you are entitled under this Agreement is
not exclusive of any other indemnification to which you are or may be entitled.

         21.      Subrogation Rights.

         If we pay any amounts  under this  Agreement,  we will be subrogated to
the extent of such  payment to your  rights of  recovery  against  any person or
organization. You agree to execute all papers required and to do everything that
may be reasonably necessary to secure such rights for us.

         22.      Agreement to Supersede.

         This  Agreement  supersedes  any other  prior  written  indemnification
agreement between you and us.

<PAGE>7


         23.      Governing Law.

         This Agreement shall be construed,  enforced and governed in accordance
with the laws of the State of Delaware  applicable  to contracts  made and to be
performed in that state.

         24.      Counterparts.

         The parties may execute any number of  counterparts  of this Agreement,
each of which will be an original.

         25.      Headings.

         The headings of the  paragraphs in this  Agreement are for  convenience
only.  They  do not  constitute  part of the  Agreement  and do not  affect  the
construction of it.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
                             SIGNATURE PAGE FOLLOWS]

<PAGE>8


         IN WITNESS WHEREOF,  The parties have executed this Agreement as of the
day and year first above written.


                                                      PAYLESS CASHWAYS, INC.

         -----------------------------
         By:__________________________
                                                      Title:____________________


                                                      [INDIVIDUAL]

         ------------------------------


<PAGE>9


                                   Exhibit "A"

                                    Glossary

         "Agent"

         "Agent" means:

          -   any person who is or was a director, officer, employee, agent or
              fiduciary of Payless or a subsidiary of Payless; or
          -   any person who is or was serving as a director, officer, employee,
              agent or  fiduciary  of another  corporation,  partnership,  joint
              venture,  trust or other enterprise or entity  (including  service
              with respect to an employee  benefit plan),  if such service is or
              was at the request of, or for the  convenience of, or to represent
              the interests of, Payless or a subsidiary of Payless.

         "Expenses"

         "Expenses"  are all  direct  and  indirect  costs of any type or nature
which you actually and reasonably  incur in connection  with the  investigation,
defense  or appeal of a  Proceeding  or  establishing  or  enforcing  a right to
indemnification  under the  Agreement,  Delaware  corporation  law or otherwise.
"Expenses"  include,  without  limitation,   all  attorneys'  fees  and  related
disbursements,  other out-of-pocket  costs and reasonable  compensation for time
spent by you for  which  you are not  otherwise  compensated  by us or any third
party.  "Expenses" also include all judgments,  fines,  and Employee  Retirement
Income Security Act excise taxes or penalties.

         "Independent Legal Counsel"

         "Independent  Legal  Counsel" means a law firm, a member of a law firm,
or an independent practitioner that is experienced in matters of corporation law
and does  not  have a  conflict  of  interest  (under  applicable  standards  of
professional  conduct)  in  representing  either  Payless or you in an action to
determine your rights under this Agreement.

         "Proceeding"

         "Proceeding" means any threatened, pending or completed action, suit or
other proceeding, whether civil, criminal,  administrative,  investigative or of
another type to which you are a party or are  threatened to be made a party,  or
are otherwise involved, including involvement as a witness.