<PAGE> 1

                              EMPLOYMENT AGREEMENT
                              --------------------


         THIS  AGREEMENT,  made and  entered  into as of August 2, 1996  between
PAYLESS CASHWAYS, INC., an Iowa corporation (the "Company"),  and WILLIAM PARKER
(the "Executive").

         WHEREAS,  the Company desires to employ the Executive and the Executive
desires to be employed by the Company on the terms and  conditions  set forth in
this Agreement;

         NOW, THEREFORE, in consideration of the mutual covenants of the parties
herein made, it is hereby agreed:

         1.  Employment  and  Duties.  The Company  hereby  agrees to employ the
             -----------------------
Executive,  and the Executive hereby accepts employment,  to perform such duties
and  responsibilities  of a senior  vice  president  as are,  from time to time,
assigned  to the  Executive  by the  Board of  Directors,  the  Company's  Chief
Executive  Officer  or the  Company's  President/Chief  Operating  Officer.  The
Executive  agrees to devote full  business  time and effort to the  diligent and
faithful  performance  of the  Executive's  duties  under the  direction  of the
President/Chief  Operating  Officer  of the  Company  or such  other  person  as
designated by the Company's  Board of Directors.  Such duties shall be performed
from the Company's principal executive offices in Kansas City, Missouri.

         2.       Compensation.
                  ------------

                  (a) Base Salary. As compensation for the Executive's services,
the Executive  shall be paid a base salary at a minimum  annual rate of $275,000
payable in equal bi-weekly installments,  which salary shall be reviewed and may
be adjusted from time to time at the  discretion of the Board of Directors  (the
"Base Salary");  provided that the Base Salary shall not be less than the amount
stated in this Paragraph 2(a).

                  (b) Incentive  Compensation.  The Executive shall, in addition
to the Base Salary, also be eligible to receive incentive compensation under the
Company's management and executive incentive  compensation program or such other
program or plan for  executive  officers  of the Company as from time to time in
effect and as determined by the Compensation Committee of the Board of Directors
(the "Incentive  Compensation").  Notwithstanding  the foregoing,  the Executive
will receive a special  incentive  award for the first twelve (12) months of his
employment equal to 33% of his Base Salary ("Special Incentive"),  which will be
allocated and paid in two (2) installments as follows: (i) the first installment
will be in an amount equal to the Special Incentive  multiplied by a


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number,  the  numerator  of which will be the number of days the  Executive  was
employed during the Company's 1996 fiscal year and the denominator of which will
be 365 days, said installment to be paid on or before January 31, 1997; (ii) the
second  installment will be in an amount equal to the Special Incentive less the
amount  previously  paid under the  immediately  preceding  subsection (i), said
installment to be paid on or before January 31, 1998; provided, however, that if
Incentive  Compensation is earned and payable for the Company's 1997 fiscal year
under the Company's  management and executive incentive  compensation program in
effect for executive officers of the Company for the Company's 1997 fiscal year,
then the  Executive  will  receive  said  Incentive  Compensation  or the second
installment of the Special Incentive above, whichever is greater but not both.

                  (c)  Other  Benefits.  The  Executive  shall  be  entitled  to
participate  in the  Company's  regular  health,  life,  pension,  vacation  and
disability  plans in accordance with their  respective  terms.  The Company will
also provide  employee  benefits to the Executive in respect of the  Executive's
employment as the Company customarily provides, from time to time, to its senior
officers,  including the Company's Supplemental Retirement Plan dated January 1,
1988, as amended (the  "Supplemental  Retirement  Plan") and other  benefits for
senior officers set forth in Exhibit A hereto. Nothing herein shall be construed
to limit the Company's  discretion to amend,  terminate or otherwise  modify any
such  plans or  benefits  subject  to the  Executive's  rights  under  Paragraph
5(c)(iii) below.

                  (d) Non-Qualified Stock Grant. The Executive is hereby granted
a  non-qualified  stock option on 40,000 shares of the Company's  Class A Common
Stock and 10,000 shares of the Company's  Restricted  Stock,  which stock option
and  restricted  stock will be governed  under the terms and  provisions  of the
stock  option  agreement  attached  hereto as  Exhibit  "B" (the  "Stock  Option
Agreement") and the restricted stock grant agreement  attached hereto as Exhibit
"C" (the  "Restricted  Stock  Grant  Agreement"),  respectively,  except  as may
otherwise be provided in this Agreement.

         3.       Confidentiality and Solicitation Provisions.
                  -------------------------------------------

                  (a) Confidentiality of Proprietary Information.  The Executive
agrees  that,  at all times,  both during the  Executive's  employment  with the
Company and after the  termination  thereof,  the Executive shall not divulge to
any other person, firm or corporation, or in any way use for the Executive's own
benefit,  except as  required  in the  conduct of the  Company's  business or as
authorized  in  writing  on  behalf  of  the  Company,   any  trade  secrets  or
confidential  information (the  "Proprietary  Information")  obtained during the
course  of  the  Executive's   employment  with  the  Company.  The  Proprietary
Information includes, but is not limited to, customer or client lists (including
the names and/or




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positions  of persons  employed by such  customers or clients who play a role in
the decisions of such  customers or clients  concerning  products or services of
the type provided by the Company),  financial matters,  inventory techniques and
programs, Company records of accounts, business projections,  Company contracts,
sales or marketing  plans and  strategies,  pricing  information  and  formulas,
matters contained in unpublished records and  correspondence,  planned expansion
programs (including areas of expansion and potential customer lists) and any and
all  information  concerning the business or affairs of the Company which is not
known by or generally  available to the public.  All papers and records of every
kind  relating to the  Proprietary  Information,  including  any such papers and
records which shall at any time come into the possession of the Executive, shall
be the sole and exclusive  property of the Company and shall be  surrendered  to
the Company upon  termination  of the  Executive's  employment for any reason or
upon request by the Company at any time either  during or after the  termination
of such  employment.  All  information  relating to or owned by customers of the
Company of which the Executive becomes aware or with which the Executive becomes
familiar  through the  Executive's  employment  with the  Company  shall be kept
confidential  and not disclosed to others or used by the  Executive  directly or
indirectly except in the course of the Company's business.

                  (b)   Solicitation   Prohibition.   During   the   Executive's
employment  with  the  Company  and for a  period  of one  (1)  year  after  the
termination of the Executive's  employment with the Company for any reason,  the
Executive  shall not directly or  indirectly,  whether as an individual  for the
Executive's   own  account  or  with  any  other  person,   firm,   corporation,
partnership,  joint venture or entity whatsoever,  solicit or endeavor to entice
away from the Company any employee who is or was employed by the Company  during
the period that the  Executive  is employed by the  Company.  Additionally,  the
Executive shall not, during the Executive's employment with the Company or for a
period of one (1) year after the termination of the Executive's  employment with
the Company for any reason directly or indirectly,  through any other individual
or entity  solicit,  entice,  persuade  or induce  any  individual  or entity to
terminate,  reduce or refrain from  renewing or  extending  its  contractual  or
prospective relationship or other relationship with the Company.

                  (c) Definition of "Company".  For the purposes of Paragraph 3,
the term  "Company"  shall mean the  Company  and any of its direct or  indirect
subsidiaries.

         4. Covenant Not to Compete.  During the Executive's employment with the
            -----------------------
Company  and for a  period  of one year  after  termination  of the  Executive's
employment  with the Company if such  termination  is as a result of a voluntary
termination  by the  Executive  under  Paragraph  5(d) or a  termination  by the
Company for Cause under Paragraph 5(b), the Executive agrees not




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to engage in or act as an officer or director,  or on an individual  basis as an
employee,   consultant  or  agent,  of  any  other  person,  firm,  corporation,
partnership,  joint  venture or other entity which is engaged in the business of
building materials retailing if the annual sales of such business (including any
related or commonly owned entity on a combined  basis) from the sale of building
materials and all related products and services for the most recently  completed
fiscal year exceeds  $500,000,000.  The foregoing  provisions shall not prohibit
the  Executive  from  investing  in  any  securities  of any  corporation  whose
securities,  or any of them,  are listed on a national  securities  exchange  or
traded in the over-the-counter market if the Executive shall own less than 1% of
the outstanding  voting stock of such  corporation.  The Executive agrees that a
breach  of the  covenants  contained  herein  will  result  in  irreparable  and
continuing  damage to the Company for which there will be no adequate  remedy at
law and in the  event of any  breach of such  agreement,  the  Company  shall be
entitled to injunctive and such other and further relief,  including damages, as
may be proper.

         5.       Termination.
                  -----------

                  (a) Death or Disability. In the event of the Executive's death
or disability as defined in the Company's  disability  plan then in effect,  the
Company's  obligation  to make  further  Base Salary  payments  hereunder  shall
thereupon  terminate.  Execute  shall  be  entitled  to  receive  any  Incentive
Compensation  which  the  Executive  has  earned,  prorated  to the  date of the
termination of the Executive's employment by reason of death or disability,  and
the Executive's  rights to other  compensation  and benefits shall be determined
under the Company's benefit plans and policies  applicable to Company executives
then in effect.

                  (b)  Termination  for Cause by the Company.  By following  the
procedure  set forth in  Paragraph  5(f),  the  Company  shall have the right to
terminate the  employment  of the Executive for "Cause" in the event  Executive:
(i) has committed a significant act of dishonesty, deceit or breach of fiduciary
duty in the performance of the Executive's duties as an employee of the Company;
(ii) grossly  neglected or willfully failed in any way to perform  substantially
the duties of the Executive's employment hereunder, including but not limited to
an act of  insubordination;  (iii)  acted or failed to act in any other way that
reflects materially and adversely upon the Company, including but not limited to
the  Executive's  conviction  of or plea of nolo  contendere  to (A) any  felony
(other than any felony arising out of negligence) or any  misdemeanor  involving
moral turpitude,  or (B) any crime or offense involving  dishonesty with respect
to the Company; or (iv) has knowingly and for the Executive's own benefit failed
to comply with the covenants  contained in Paragraphs 3 or 4 of this  Agreement.
If the employment of the Executive is terminated by the Company for Cause,  this
Agreement and the Company's obligation to make further Base




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Salary and Incentive  Compensation payments hereunder shall thereupon terminate.
The Executive's  rights to other  compensation  and benefits shall be determined
under the Company's benefit plans and policies  applicable to Company executives
then in effect.

                  (c) Termination for Good Reason by the Executive. By following
the procedure set forth in Paragraph 5(f), the Executive shall have the right to
terminate the  Executive's  employment with the Company for "Good Reason" in the
event (i) the Executive is not at all times a duly elected senior vice president
of the  Company;  (ii)  there  is any  material  reduction  in the  scope of the
Executive's authority and responsibility (provided, however, in the event of any
illness or injury which disables the Executive from  performing the  Executive's
duties,  the Company may  reassign the  Executive's  duties to one or more other
employees until the Executive is able to perform such duties);  (iii) there is a
reduction in the Executive's  Base Salary below the minimum amount  specified in
Paragraph  2(a) above, a reduction in the percentage of Base Salary which is the
Incentive  Compensation  opportunity of the Executive  under  Paragraph 2(b), an
amendment to the Supplemental Retirement Plan which is materially adverse to the
Executive or a material  reduction in the other  benefits to which the Executive
is  entitled  under  Paragraph  2(c)  above;   (iv)  the  Company  requires  the
Executive's  principal  place  of  employment  to be  anywhere  other  than  the
Company's principal executive offices, or there is a relocation of the Company's
principal executive offices outside of Kansas City, Missouri; or (v) the Company
otherwise  fails  to  perform  its  obligations  under  this  Agreement.  If the
employment of the Executive is terminated by the Executive for Good Reason,  the
Executive  shall be entitled to the  severance  benefits  set forth in Paragraph
5(g) below.

                  (d)  Termination  Without  Cause or Without Good  Reason.  The
Company may terminate the Executive's  employment without Cause at any time, and
in such event the  Executive  shall be entitled to the  severance  benefits  set
forth in Paragraph  5(g) below.  The  Executive  may  voluntarily  terminate the
Executive's  employment  without Good Reason at any time,  and in such event the
Executive's  rights to further Base Salary  payments and Incentive  Compensation
(except  Incentive  Compensation  prorated  to the  date of  termination)  shall
terminate on the effective date of such  resignation and the Executive's  rights
to other  compensation  and benefits  shall be  determined  under the  Company's
benefit plans and policies applicable to Company executives then in effect.

                  (e)  Termination  Upon  Change in  Control.  In the event of a
Change  of  Control  (as  defined  below),   the  Executive  may  terminate  the
Executive's  employment hereunder upon thirty (30) days' prior written notice to
the Company;  provided that (i) such notice of termination  under this Paragraph
5(e) must be given,  if at all,  during the sixty (60) day  period,  immediately



<PAGE> 6

following the first  anniversary of the date of the Change of Control,  and (ii)
until the termination of the Executive's  employment  pursuant to this Paragraph
5(e)  (subject to the continued  right of the Executive to terminate  employment
for Good Reason  pursuant to Paragraph 5(c) above) the Executive  shall continue
to perform the Executive's duties and responsibilities under this Agreement.  In
the event the Executive terminates the Executive's employment hereunder pursuant
to this  Paragraph  5(e),  the  Executive  shall be  entitled  to the  severance
benefits set forth in Paragraph 5(g) below; provided, however, in the event that
any payment or benefit received or to be received by the Executive in connection
with a termination of the Executive's employment pursuant to this Paragraph 5(e)
(collectively,  the  "Termination  Payments")  would (i) constitute a "parachute
payment"  within the meaning of Section  280G of the  Internal  Revenue  Code of
1986, as amended (the "Code"),  or any similar or successor provision to Section
280G (the "Termination  Parachute  Payments") and (ii) but for this proviso,  be
subject to the excise tax imposed by Section  4999 of the Code or any similar or
successor  provisions to Section 4999 (the "Excise Tax"),  then such Termination
Payments  shall be reduced  to the  largest  amount  which the  Company,  in the
Company's  reasonable  discretion,  determines would result in no portion of the
Termination Parachute Payments being subject to the Excise Tax. The term "Change
in Control" shall occur when and if:

                           (i) any person,  as defined in  Sections  3(a)(9) and
         13(d) of the  Securities  Exchange  Act of 1934 (the  "Exchange  Act"),
         becomes the  "beneficial  owner" (as defined in Rule 13d-3  promulgated
         pursuant to the Exchange Act), 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; or

                           (ii) the occurrence  within any  twelve-month  period
         while this Agreement is in effect 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 of 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.



<PAGE> 7

                  (f) Notice and Right to Cure. The party proposing to terminate
the  employment of the  Executive for Cause or Good Reason,  as the case may be,
under  Paragraph  5(b) or 5(c)  above  shall give  written  notice to the other,
specifying the reason therefor with particularity.  In the case of a termination
pursuant to  Paragraphs  5(b)(i),  (iii) or (iv), or 5(c)(i),  such  termination
shall be effective  immediately upon delivery of such notice. In the case of any
other  proposed  termination  for Cause or Good Reason,  as the case may be, the
notice shall be given with sufficient particularity so that the other party will
have  an  opportunity  to  correct  any  curable  situation  to  the  reasonable
satisfaction  of the party giving the notice within the period of time specified
in the notice which shall not be less than thirty (30) days. If such  correction
is not so made or the circumstances or situation is such that it is not curable,
the party giving such notice may,  within thirty (30) days after the  expiration
of the time so fixed within which to correct such situation, give written notice
to the other party that the employment is terminated effective forthwith.

                  (g) Severance Benefits. If the Executive's employment with the
Company is terminated by the Company  without  Cause,  by the Executive for Good
Reason  or by the  Executive  after a  Change  of  Control  in  accordance  with
Paragraph 5(e), then the Executive shall be entitled to the following benefits:

                           (i) Base Salary. The Company shall continue to pay to
         the Executive the Executive's  Base Salary when and as such Base Salary
         would  have been  paid for a period of one (1) year  after the date the
         Executive's  employment  with  the  Company  is  terminated,  as if the
         Executive continued to be employed during such period and regardless of
         the death or  disability  of the  Executive  subsequent  to the date of
         termination (the "Severance Period").

                           (ii) Incentive Compensation. If the effective date of
         such termination occurs before Incentive Compensation for any preceding
         fiscal year has been paid,  the Company  shall pay to the Executive the
         amount of the  Executive's  Incentive  Compensation  for the  preceding
         fiscal  year  when  and as it would  have  been  paid if the  Executive
         remained employed by the Company.

                           (iii)  Insurance   Coverage.   During  the  Severance
         Period,  the Company shall provide the Executive with health,  life and
         disability  insurance  substantially  similar  to the  coverage  of the
         benefits which the Executive was receiving or entitled to receive under
         Paragraph 2(c) immediately  prior to the date of termination,  the cost
         of which was paid by the  Company.  Such  insurance  coverage  shall be
         provided to the Executive  for the longer of (A)




<PAGE> 8

         the  Severance  Period,  or (B) the period  during which such  benefits
         would have been provided,  at the Company's  expense,  to the Executive
         under the applicable health, life and disability insurance plans of the
         Company in effect immediately prior to the date of termination.

                           (iv) Stock  Incentives.  All of the Executive's stock
         options and restricted stock grants shall continue to vest or be earned
         and be exercisable in accordance with their  respective terms as if the
         Executive  continued to be employed by the Company during the Severance
         Period  (regardless  of  the  death  or  disability  of  the  Executive
         subsequent to the date of termination of employment).

                           (v) Retirement Benefits.  To the extent that benefits
         under  each  of  the   Company's   pension   plans  and  the  Company's
         Supplemental  Retirement  Plan are  computed on the basis of either the
         salary and benefits paid while in the  Company's  employ or the term of
         the Executive's  employment with the Company,  the benefits payable and
         the Executive's  eligibility therefor shall be determined as though the
         Executive were employed by the Company during the Severance Period.

                           (vi)  Outplacement  Benefits.  The  Company,  at  its
         expense,  will provide to the Executive such  outplacement  benefits as
         would be appropriate  for a senior  officer of a company  substantially
         equivalent in size to the Company in terms of sales, profits, number of
         employees,   geographic  location  and  organizational   structure,  as
         determined  by a national  outplacement  service  provider  selected by
         Company.

                  (h)  Survival  of  Certain  Provisions.   Notwithstanding  any
termination of the Executive's employment with the Company under this Agreement,
the  provisions of  Paragraphs 3 and 4 shall,  to the extent  provided  therein,
survive any such  termination  shall be binding upon the Executive in accordance
with the provisions thereof.

         6.  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  arbitration,  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



<PAGE> 9

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 thereof shall be
in Kansas City, Missouri.

         7. Business  Expenses.  The Company  shall  reimburse the Executive for
entertainment  and  travel  expenses  related  to  the  Company's   business  in
accordance  with the  practices of the Company in effect on the date hereof with
respect  to the  Executive,  subject  to the right of the  Company to modify its
general policies  relating to expense  reimbursement for employees to the extent
such  modifications do not materially reduce the extent of reimbursement for the
Executive as in effect on the date hereof.

         8. Severability. If any one or more of the provisions of this Agreement
shall be held invalid or unenforceable,  the validity and  enforceability of all
other provisions of this agreement shall not be affected thereby.

         9. Binding  Effect.  This Agreement  shall be binding upon and inure to
the benefit of the personal representatives,  heirs and assigns of Executive and
any successors in interest and assigns of the Company.

        10. Notices.  All notices  required or permitted to be given  hereunder
shall be registered or certified  mail  addressed to the  respective  parties at
their addresses set forth below:

         To the Executive:              William H. Parker
                                        3760 Tyrconnel Trail
                                        West Bloomfield, MI 48323


         To the Company:                Payless Cashways, Inc.
                                        Two Pershing Square
                                        2300 Main, P. O. Box 419466
                                        Kansas City, MO 64141-0466
                                        Attn:  Senior Vice President, General
                                                Counsel and Secretary

or such other address as a party hereto may notify the other in writing.

        12. Applicable Law. This Agreement,  or any portion  thereof,  shall be
interpreted in accordance with the laws of the State of Missouri.

        13. Board of  Directors'  Approval.  This  Agreement  will  not  become
effective  until approved by the Company's  Board of Directors and then executed
by both of the parties hereto.



<PAGE> 10


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

WILLIAM PARKER                     PAYLESS CASHWAYS, INC.


/s/ William H. Parker              By   /s/ David Stanley
---------------------------             --------------------------------------
                                        David Stanley, Chairman and Chief
                                        Executive Officer


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



                                        /s/ Gary D. Rose
                                        --------------------------------------
                                        Gary D. Rose, Chairman