Payless Cashways, Inc. and Its Subsidiaries - Page 7

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               In 1993, Payless agreed to an incorporated joint venture               
          with Grupo Industrial Alfa, S.A. de C.V. (Alfa), a Mexican                  
          company.  Alfa and Payless agreed to establish and operate stores           
          selling home improvement products in Mexico.  On October 18,                
          1993, Payless and Alfa executed a shareholders agreement that               
          initiated the Mexican business venture.  In the shareholders                
          agreement, Payless and Alfa agreed to capitalize Payless de                 
          Mexico, S.A. de C.V. (Payless de Mexico) to distribute and sell             
          building materials and home improvement products in Mexico.                 
          Payless held a 49-percent interest in Payless de Mexico.  Payless           
          de Mexico planned to build a chain of 25 stores in Mexico.  In a            
          supply agreement dated October 18, 1993, Payless agreed to supply           
          Payless de Mexico with merchandise and products from its                    
          distribution centers.  On December 12, 1994, Payless de Mexico              
          opened its first store in Monterey, Mexico.  In 1995, Payless               
          sold its interest in Payless de Mexico to Versax, S.A. de C.V., a           
          subsidiary of Alfa.                                                         
               Before 1986, taxpayers who acquired certain machinery and              
          equipment for use in a trade or business were allowed an                    
          investment tax credit (ITC) against income tax liability in an              
          amount equal to a percentage of the cost of the “qualified                  
          property”.  Secs. 38, 46, 48.  TRA section 211, 100 Stat. 2166,             
          generally repealed the investment tax credit for property placed            

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Last modified: May 25, 2011