<PAGE>1


                     AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT

         THIS  AGREEMENT,  made and entered into as of August 20, 1997,  between
Payless  Cashways,  Inc., an Iowa corporation  (the  "Company"),  and Stephen A.
Lightstone (the "Executive").

          WHEREAS, the Company and the Executive have entered into an employment
agreement  dated February 8, 1993 (the  "Employment  Agreement"),  as amended by
Amendment No. 1 to Employment  Agreement dated October 17, 1996  ("Amendment No.
1"), and Amendment No. 2 to Employment Agreement dated June 30, 1997 ("Amendment
No. 2") (the Employment  Agreement,  as amended by Amendment No. 1 and Amendment
No. 2, is referred to herein as the "Amended Employment Agreement");

         NOW,  THEREFORE,  in consideration of these premises and other good and
valuable consideration, the parties agree as follows:

1. Term of Employment. Paragraph 2 of the Amended Employment Agreement is hereby
deleted in its entirety and the following is substituted in lieu thereof:

          "Term of Employment. Unless sooner terminated as hereinafter provided,
          the term of this Agreement shall commence on the date hereof and shall
          continue through March 1, 1999."

2.  Severance Benefits.

         (a)  Paragraph  6(e)  of the  Amended  Employment  Agreement,  and  all
references to Paragraph  6(e) in the Amended  Employment  Agreement,  are hereby
deleted in their entirety.

         (b) A new sentence is hereby inserted at the end of Paragraph 6(g)(iii)
of the Amended Employment Agreement as follows:

         "Notwithstanding the foregoing,  the Executive shall not be entitled to
         receive such  benefits to the extent that the  Executive  obtains other
         employment  that  provides  comparable  benefits  during  the 12 months
         following termination of employment."

         (c)  Paragraph  6(j) of the  Amended  Employment  Agreement  is  hereby
deleted in its entirety and the following is substituted in lieu thereof:

         "Definition of Severance Period. The term "Severance Period" shall mean
         the  period  from  the  date  of the  termination  of  the  Executive's
         employment continuing for the longer of one year after the date of such
         termination  or  until  March  1,  1999;  provided,  however,  that the
         Severance  Period shall continue  regardless of the death or disability
         of the Executive subsequent to the date of termination of employment."

         (d) A new Paragraph 6(k) is hereby  inserted in the Amended  Employment
Agreement as follows:

         "Participation  in Retention Plan. The Executive  shall  participate in
         the key employee retention plan adopted by the Company as of August 20,
         1997,  subject  to the terms and  conditions  of such  plan;  provided,
         however, that if the Executive is entitled to receive a retention bonus
         for a fiscal  year,  the  Executive  shall be  entitled  to receive any
         unpaid portion of the bonus regardless of any termination of


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          employment  by the Company  without Cause or by the Executive for Good
          Reason  prior to the date the  unpaid  portion  of the bonus  would be
          payable under the retention plan."

         (e) A new Paragraph 6(l) is hereby  inserted in the Amended  Employment
Agreement as follows:

          "Retention  Payments Excluded From Severance.  Any retention  payments
          paid  pursuant to  Paragraph  6(k) above  shall be  excluded  from the
          calculation of severance  payments  provided under other Paragraphs of
          this Agreement."

         (f) A new Paragraph 6(m) is hereby  inserted in the Amended  Employment
Agreement as follows:

          "Lump  Sum  Payment.  Notwithstanding  any  other  provision  of  this
          Agreement,  any Base  Salary,  Incentive  Compensation,  or  Retention
          Payment payable to the Executive upon  termination of employment shall
          be paid in a lump sum within  fifteen (15) days of the  termination of
          employment."

3.  Waiver of Claims.  A new  Paragraph  13 is hereby  inserted  in the  Amended
Employment Agreement as follows:

          "Waiver  of Claims.  The  Executive  shall  execute a waiver of claims
          under the Employment  Agreement,  as the Employment  Agreement existed
          prior to this Amendment No. 3, in the form attached  hereto as Exhibit
          A."

          IN WITNESS WHEREOF,  the parties have executed this Amendment No. 3 to
Employment Agreement as of the day and year written above.


PAYLESS CASHWAYS, INC.                                        EXECUTIVE

      /s/ David Stanley                             /s/ Stephen A. Lightstone
By:------------------------------------            -----------------------------
   Chairman and Chief Executive Office             Stephen A. Lightstone

Approval by the Compensation  Committee of the Board of Directors of the Company
is hereby confirmed.


   /s/ John H. Weitnauer, Jr.
--------------------------------


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                                WAIVER OF CLAIMS

         THIS WAIVER OF CLAIMS  ("Waiver") is made and entered into as of August
20, 1997,  between Payless Cashways,  Inc., an Iowa corporation (the "Company"),
and Stephen A. Lightstone (the "Executive").

     WHEREAS,  the Company and the  Executive  have entered  into an  employment
agreement  dated February 8, 1993 (the  "Employment  Agreement"),  as amended by
Amendment No. 1 to Employment  Agreement dated October 17, 1996  ("Amendment No.
1), and Amendment No. 2 dated June 30, 1997 "Amendment No. 2");

     WHEREAS,  the Company and the Executive have further amended the Employment
Agreement,  Amendment No. 1 and Amendment No. 2 by entering into Amendment No. 3
to  Employment  Agreement  dated as of August  20,  1997  ("Amendment  No.  3");

     WHEREAS,  one of the terms and  conditions  of Amendment  No. 3 is that the
Company and the Executive enter into this Waiver.

         NOW, THEREFORE, in consideration of these premises and in consideration
of the Company and the Executive  entering into  Amendment No. 3, and other good
and valuable consideration, the parties agree as follows:

         1. The  Executive,  and  anyone  claiming  through  or on behalf of the
Executive,  waives  any and all claims  the  Executive  may have or may have had
against the Company and the Company's affiliates,  their successors and assigns,
and the Company's past and present employees, officers, directors and agents, or
any of them,  under the  Employment  Agreement as amended by Amendment No. 1 and
Amendment No. 2, to the extent the Employment  Agreement as amended by Amendment
No. 1 and Amendment No. 2, is inconsistent with the terms of Amendment No. 3.

         2.  Nothing  under this  Agreement  is intended to waive,  terminate or
otherwise  affect the  Executive's  eligibility  for or receipt of any rights or
benefits the  Executive  may have under the  Employment  Agreement as amended by
Amendment No. 1 and Amendment No. 2, to the extent not  inconsistent  with terms
of Amendment No. 3.

         3. The Executive expressly  acknowledges that he was advised to consult
with his attorney before signing this Waiver and that he has had the opportunity
to be advised by independent legal counsel before signing. The Executive further
acknowledges that he has completely read and understands every provision of this
Waiver and of Amendment No. 3, and that he has executed this Waiver  voluntarily
and of his own free will.

         4. This Waiver shall be interpreted  and enforced under the laws of the
State of Missouri.


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


PAYLESS CASHWAYS, INC.                         EXECUTIVE

     /s/ David Stanley                            /s/ Stephen A. Lightstone
By:-------------------------------------       ---------------------------------
     Chairman and Chief Executive Officer      Stephen A. Lightstone

Approval by the Compensation  Committee of the Board of Directors of the Company
is hereby confirmed.


   /s/  John H. Weitnauer, Jr.
---------------------------------