Document:

AFFORDABLE HOMES OF AMERICA, INC. 1998 INCENTIVE AND STOCK OPTION PLAN
AS AMENDED FEBRUARY 15, 2000

1.     THE PLAN.

       The purpose of the Affordable Homes of America, Inc. (the "Company")
1998 Incentive and Stock Option Plan (the "Plan") is to provide the
Company with a means of attracting and retaining the services of highly
motivated and qualified directors and key personnel.

       The Plan is intended to advance the interests of the Company and its
stockholders by affording to key employees, consultants and  non-employee
directors, upon whose skill, judgment, initiative and efforts the Company
is largely dependent for the successful conduct of its business, an
opportunity for investment in the Company and incentives inherent in stock
ownership in the Company.  The term Company shall include all subsidiaries
of the Company.

2.     LEGAL COMPLIANCE

       It is the intent of the Plan that it conform in all respects with
the requirements of Rule 16b-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934 ("Rule 16b-3") or, in connection
with Incentive Stock/Options (ISOs),as such term is defined in Section
422 (a) of the Internal Revenue of 1986  ("the Code") as amended from time
to time.  If any aspect of the Plan does not conform to Section 422 (a) of
the Code, as amended from time to time  such aspect shall be deemed to be
modified, deleted, or otherwise changed as necessary to insure continued
compliance with such provisions.

3.     ADMINISTRATION OF THE PLAN

a.     PLAN COMMITTEE.

       The Plan shall be administered by a committee (the "Committee").
The members of the Committee shall be appointed from time to time by the
Board of Directors of the Company (the "Board") and shall consist of not
less than three (3) nor more than five (5) persons.

4.     COMMITTEE PROCEDURES.

       The Committee from time to time may adopt such rules and
regulations for carrying out the purposes of the Plan as it may deem
proper and in the best interests of the Company.  The Committee shall
keep minutes of its meetings and records of its actions.  A majority of
the members of the Committee shall constitute a quorum for the transaction
of any business by the Committee.  The Committee may act at any time by an
affirmative vote of a majority of those members voting.  Such vote may be
taken at a meeting which may be conducted in person or telecommunication
or by written consent of Committee members without a meeting.

5.     FINALITY OF COMMITTEE ACTION

       The Committee's actions shall be final and conclusive and binding
on all persons, including, without limitations, the Company, its
stockholders, the Committee and each of the members of the Committee, and
the directors, officers, employees and consultants, of the Company, and
their respective successor and interest.

6.     NON-LIABILITY OF COMMITTEE MEMBERS.

       No Committee member shall be liable for any action or determination
made by him in good faith with respect to the Plan or any Options granted
or shares issued thereunder.

7.     NON-EXCLUSIVITY OF THE PLAN

       Nothing contained in the Plan is intended to amend, modify, or
rescind any previously approved compensation plans, programs or options
entered into by the Company.  This plan shall be construed to be in
addition to and independent of any and all such other arrangements.
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the Stockholders of the Company for approval shall be construed
as creating any limitations on the power or authority of the Board to
adopt, with or without stockholder approval, such additional or other
compensation arrangements as the Board may from time to time deem
desirable.

8.     GOVERNING LAW.

       The Plan and all rights and obligations under it shall be construed
and enforced in accordance with the laws of the State of Nevada.<PAGE>1
                                                                  Exhibit 4.1(a)

                 AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT

                  AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT ("Amendment No.
1"),  dated  as of  January  31,  2001,  by and  among  Payless  Cashways,  Inc.
("Borrower"),  Congress Financial Corporation (Central), an Illinois corporation
("Congress";  and  together  with any other  signatory  hereto  designated  as a
"Lender" or any  assignee  of any Lender,  each  individually,  a "Lender"  and,
collectively,  "Lenders"),  and Congress, as agent for Lenders (in such capacity
"Agent").  All  capitalized  terms used herein  (including the recitals  hereto)
shall have the respective meanings assigned thereto in the Loan Agreement unless
otherwise defined herein.

                              W I T N E S S E T H:

                  WHEREAS, Agent, Lenders and Borrower have entered into certain
financing arrangements pursuant to the Loan and Security Agreement ("Agreement")
dated November 17, 1999 by and among Lenders, Agent and Borrower (and as amended
hereby,  and as the same may have  heretofore  been or may  hereafter be further
amended, modified,  supplemented,  extended,  renewed, restated or replaced, the
"Loan Agreement"); and

                  WHEREAS,  Borrower has  requested  that (a)  Congress,  in its
capacity as a Lender, agree to make a certain Supplemental Loan to Borrower, and
(b) Agent and Lenders amend and modify certain  provisions set forth in the Loan
Agreement in addition to the Loans to which Borrower would otherwise be entitled
pursuant to the Loan Agreement; and

                  WHEREAS,  Agent  and  Lenders  are,  subject  to the terms and
conditions contained herein,  willing to agree to make such Supplemental Loan to
Borrower, and to effect such amendments; and

                  WHEREAS, by  this  Amendment No. 1, Agent and Required Lenders
desire and intend to evidence such amendments.

                  NOW,  THEREFORE,  in consideration  of the foregoing,  and the
respective  agreements,  warranties and covenants  contained herein, the parties
hereto agree, covenant and warrant as follows:

SECTION 1.        AMENDMENTS.  Subject  to  the  conditions to  effectiveness of
this Amendment No. 1 set forth in Section 3 hereof, the  parties hereto agree as
follows:

1.1      The  definition  of  "Loans" in   Section 1 of the Loan   Agreement  is
hereby amended to add the words "and the Supplemental  Loan"  immediately  after
the words "Revolving Loans" appearing at the end of such definition.

1.2      Section 1 of the Loan Agreement is hereby  amended to include  each  of
the following new definitions in alphabetical order:

<PAGE>2

(a)      "Amendment No. 1" shall mean Amendment No.1 to Loan and Security Agree-
ment, dated as of January 31, 2001, by and among Borrower, Agent and  Supplemen-
tal Loan Lender.

(b)      "Applicable Recovery Percentage" shall be equal to the  following  per-
centages during the following periods:
<TABLE>
<CAPTION>
                         Period                                       Percentage
                         ------                                       ----------
                           <S>                                            <C>
                           Supplemental Loan Effective
                           Date to March 10, 2001.....................    90.95%
                           March 11, 2001 to March 25, 2001...........    90.60%
                           March 26, 2001 to June 15, 2001............    90.00%
                           June 16, 2001 to June 29, 2001.............    89.30%
                           June 30, 2001 to July 13, 2001.............    88.30%
                           July 14, 2001 to July 31, 2001.............    87.30%
                           August 1, 2001 and thereafter..............    86.00%
</TABLE>

(c)      "Bankruptcy  Code" shall mean the United States  Bankruptcy Code, being
Title  11 of the  United  States  Code as  enacted  in  1978,  as the  same  has
heretofore been amended, recodified, modified or supplemented

(d)      "EBITDA"  shall mean, for any period, the net income (loss) of Borrower
and its  Subsidiaries  on a  consolidated  basis for such period  determined  in
accordance with GAAP, plus interest  expense,  income tax expense,  amortization
expense,  depreciation  expense and any non-cash  extraordinary losses and minus
any  extraordinary  gains,  in each case, of Borrower and its  Subsidiaries on a
consolidated  basis for such period  determined in  accordance  with GAAP to the
extent included in the determination of such net income (loss).

(e)      "Enforcement Action" shall mean the commencement by Agent, on behalf of
the Lenders,  of any action to  foreclose on the security  interests or liens of
Agent,  on  behalf  of  the  Lenders,  in all or  any  material  portion  of the
Collateral,  or the  commencement of any action to take possession of all or any
material portion of the Collateral or the commencement of any legal  proceedings
or actions against or with respect to all or any portion of the Collateral.

(f)      "Excluded  Portion" shall have the meaning set forth in Section 2A.3(c)
herein.

(g)      "Financing  Order" shall mean any financing order and such other orders
relating  thereto or authorizing  the granting of credit by Agent and Lenders to
Borrower,  as a  debtor  in  possession  or the  use of cash  collateral,  on an
emergency,  interim or final basis  pursuant  to Sections  363 and/or 364 of the

<PAGE>3

Bankruptcy  Code  as  may  be  issued  or  entered  by any  court  of  competent
jurisdiction in any Insolvency Case. with respect to the Borrower.

(h)      "Insolvency  Case" shall mean, as to any person,  any of the following:
(i) any case or proceeding with respect to such person under the U.S. Bankruptcy
Code,   or  any  other   Federal,   State  or  other   bankruptcy,   insolvency,
reorganization or other law affecting  creditors' rights or any other or similar
proceedings  seeking  any  stay,  reorganization,  arrangement,  composition  or
readjustment of all or substantially  all of the obligations and indebtedness of
such person or (ii) any  proceeding  seeking the  appointment  of any  receiver,
trustee, administrator,  liquidator, custodian or other insolvency official with
similar  powers with respect to such person or all or  substantially  all of its
assets or (iii) any proceeding for liquidation,  dissolution or other winding up
of the business of such person or (iv) any general assignment for the benefit of
creditors or any general marshaling of all or substantially all of the assets of
such person.

(i)      "Insolvency Event" shall mean the commencement of an Insolvency Case by
or against the Borrower.

(j)      "July 13th Mandatory  Prepayment" shall mean $2,000,000 if Supplemental
Loan Lender makes the First  Installment and $4,000,000 if the Supplemental Loan
Lender makes the First Installment and the Second Installment.

(k)      "June 15th Mandatory  Prepayment" shall mean $1,000,000 if Supplemental
Loan Lender makes the First  Installment and $2,000,000 if the Supplemental Loan
Lender makes the First Installment and the Second Installment.

(l)      "June 29th Mandatory  Prepayment" shall mean $1,500,000 if Supplemental
Loan Lender makes the First  Installment and $3,000,000 if the Supplemental Loan
Lender makes the First Installment and the Second Installment.

(m)      "Net  Availability"  shall mean the  amount,  as  determined  by Agent,
calculated at any time,  equal to: (i) an amount equal the  Revolving  Loans and
Letter of Credit  Accommodations  which would be available to the Borrower based
on the lending  formulas  (subject to the  deduction  from  availability  of any
Availability  Reserves  then in effect  as  determined  by  Agent)  set forth in
Section 2.1 of the Loan  Agreement as amended by Amendment  No. 1 minus (ii) the
sum of the amount of all then  outstanding and unpaid Revolving Loans and Letter
of Credit Accommodations.

(n)      "Net  Recovery  Value"  shall  mean the  appraised  value  of  Eligible
Inventory,  with such  appraised  value  determined on a "going out of business"
basis, net of liquidation expenses, by an appraiser acceptable to each of Agent,
Supplemental  Loan Lender and its financial  participant.  The  appraised  value
shall be based on the most recent such appraisal obtained by Agent, Supplemental
Loan Lender and/or its financial participant,  or by Borrower, at the request of
Agent or  Supplemental  Loan  Lender,  from time to time during the term of this
Agreement.

<PAGE>4

(o)      "Priority  Event"  shall  mean  (i)  prior  to  the  occurrence  of  an
Insolvency  Event,  the occurrence of any one or more of the  following:  (A) an
Event of Default and the acceleration by Agent, on behalf of the Lenders, of all
of the Obligations by demanding  payment therefor or (B) an Event of Default and
the  taking  of any  Enforcement  Action by  Agent,  on  behalf  of the  Lenders
(provided that any Priority Event occurring  prior to an Insolvency  Event shall
cease constituting a Priority Event as of the occurrence of any Insolvency Event
if any or all of Agent or the Lenders continue funding Loans or providing Letter
of Credit Accommodations or other financial  accommodations (whether pursuant to
the Financing  Agreements or otherwise) or consent to the use of cash collateral
after the occurrence of an Insolvency Event); or (ii) after the occurrence of an
Insolvency  Event,  the occurrence of any one or more of the following:  (A) the
failure of the Agent  and/or the Lenders to provide any Loans,  Letter of Credit
Accommodations or any other financial  accommodations to the Borrower after such
Insolvency Event,  whether pursuant to the Financing  Agreements or otherwise or
pursuant to a consensual cash collateral  arrangement with the Borrower, (B) the
termination or nonrenewal pursuant to a Financing Order of (1) any commitment of
the Agent and/or the Lenders to provide Loans,  Letter of Credit  Accommodations
or other financial  accommodations (whether pursuant to the Financing Agreements
or otherwise) or (2) any  consensual  cash  collateral  arrangement  between the
Borrower  and the  Lenders,  (C) the entry of an order of the  Bankruptcy  Court
pursuant to Section 363 of the Bankruptcy  Code  authorizing  the sale of all or
substantially  all of Borrower's  assets and properties,  or (D) the entry of an
order of the Bankruptcy  Court  pursuant to Section 362 of the  Bankruptcy  Code
vacating the automatic  stay and  authorizing  Agent to commence  foreclosure or
enforcement  proceedings  against  substantially  all of  Borrower's  assets and
properties.

(p)      "Second  Installment  Funding Date" shall have the meaning set forth in
Section 2A.1 herein.

(q)      "Supplemental  Loan" shall have the  meaning set forth in Section  2A.1
herein.

(r)      "Supplemental  Loan Effective Date" shall have the meaning set forth in
Section 3.1 herein.

(s)      "Supplemental  Loan Event of Default"  shall have the meaning set forth
in Section 2A.6 herein.

(t)      "Supplemental  Loan Lender" shall mean Congress  Financial  Corporation
(Central), as a Lender in its individual capacity,  together with its successors
and assigns.  "Supplemental Loan Lender" shall not include any Lender other than
Congress  Financial  Corporation  (Central).  Supplemental  Loan Lender shall be
deemed to be a Lender under the Loan Agreement but Supplemental  Loan Lender (i)
will have no commitments,  obligations,  interests or any rights whatsoever with
respect to any (A)  Revolving  Loans under  Section 2.1 herein or  otherwise  or
Letter of Credit  Accommodations  under  Section 2.2 herein or  otherwise or (B)
interest  or fees,  except for the  interest,  fees and other  amounts  owing to
Supplemental  Loan  Lender  under  any  circumstances  under  the  terms  of the
Supplemental  Loan  Letter  Agreement  and (ii)  will not be a Lender  under the

<PAGE>5

definitions of "Commitment Percentage",  "Pro-Rata Share", or "Required Lenders"
or under the provisions of Section 2.4 or Section 6.8 herein.

(u)      "Supplemental Loan Obligations" shall mean all Obligations with respect
to the  Supplemental  Loan,  whether  arising  under this  Agreement,  under the
Supplemental Loan Letter Agreement or any other Financing  Agreement relating to
the Supplemental Loan.

(v)      "Supplemental  Loan Rate"  shall  have the  meaning as set forth in the
Supplemental Loan Letter Agreement.

(w)      "Supplemental Loan Repayment Date" shall mean July 31, 2001.

(x)      "Supplemental   Loan  Letter   Agreement"   shall  mean  that   certain
Supplemental   Loan  Letter  Agreement  dated  as  of  January  31,  2001  among
Supplemental Loan Lender, Agent and Borrower.

1.3      Section  2.1(a)  of the Loan  Agreement  is hereby  amended  to add the
following  proviso  immediately  before the period  appearing at the end of such
section:

                  ;  provided,   however,   that  while  any  Supplemental  Loan
                  Obligations  shall  be  outstanding,  in no  event  shall  the
                  aggregate amount of outstanding  Revolving Loans and Letter of
                  Credit  Accommodations  when added to the aggregate  amount of
                  the  Supplemental  Loan then  outstanding  exceed at any given
                  time the lesser of (i) the difference of (A) 71.3% of the Cost
                  of Eligible Inventory minus (B) any Availability Reserves, and
                  (ii) the difference of (A) the Applicable  Recovery Percentage
                  of the Net Recovery Value of Eligible  Inventory minus (B) any
                  Availability Reserves.

1.4      The Loan Agreement is hereby amended by adding immediately  after  Sec-
tion 2 thereof, the following new Section 2A thereto:

                  SECTION 2A.  SUPPLEMENTAL LOAN.

                           2A.1  Supplemental  Loan.  Subject  to the  terms and
                  conditions  contained  herein,  in addition  to the  Revolving
                  Loans under Section 2.1 of the Loan  Agreement,  as a one time
                  financial accommodation to Borrower,  Supplemental Loan Lender
                  shall  make,  subject  to the terms and  conditions  contained
                  herein,  a  supplemental  loan to  Borrower  in the  principal
                  amount of $15,000,000 (the "Supplemental Loan"). At the option
                  of the Supplemental  Loan Lender,  the Supplemental Loan shall
                  be made in two (2)  installments  as follows:  the first (1st)
                  installment in the principal  amount of $7,500,000 (the "First
                  Installment") shall be made on the Supplemental Loan Effective
                  Date and the second (2nd)  installment in the principal amount
                  of $7,500,000 (the "Second  Installment")  shall be made on or
                  before  the date  which is seven (7)  Business  Days after the

<PAGE>6

                  Supplemental  Loan  Effective  Date (the  "Second  Installment
                  Funding Date").  Borrower shall have no right to receive,  and
                  Supplemental  Loan  Lender  shall have no  obligation  to make
                  whatsoever,  the  Second  Installment  if,  as of  the  Second
                  Installment  Funding  Date,  an Event of Default  exists.  The
                  Supplemental Loan shall constitute part of the Obligations and
                  shall be  secured  by all of the  Collateral.  Except  for the
                  making of the  Supplemental  Loan as set forth in this Section
                  2A.1, Borrower shall have no right to request and Supplemental
                  Loan Lender shall have no  obligation  to make any  additional
                  loans or advances to Borrower  under this Section 2A.1 and any
                  repayments  of the  Supplemental  Loan shall not be subject to
                  any readvance to or reborrowing by Borrower.  For the purposes
                  of Section 2.1 of the Loan Agreement,  the aggregate principal
                  amount  of the  Loans,  the  aggregate  outstanding  principal
                  amount  of the  Supplemental  Loan and the  Letter  of  Credit
                  Accommodations  outstanding  at any time  shall not exceed the
                  Maximum Credit.

                           2A.2  Interest.  The  Supplemental  Loan  shall  bear
                  interest at the Supplemental Loan Rate and shall be payable in
                  accordance  with the  terms of the  Supplemental  Loan  Letter
                  Agreement.

                           2A.3     Repayment.

(a)               Subject to the provisions of Section 2A.3 (b) below,  Borrower
                  shall repay the  principal  amount of the  Supplemental  Loan,
                  together with all accrued but unpaid interest,  fees and other
                  Supplemental  Loan   Obligations,   in  full,  in  immediately
                  available funds on the Supplemental Loan Repayment Date.

(b)               Notwithstanding anything to the contrary contained in  Section
                  2A.3 (a) above or any  other  section  of this Loan Agreement,
                  from and after the occurrence and during the continuance of a
                  Priority Event, Agent, for itself and the   other Lenders, and
                  the Supplemental Loan Lender hereby agree that the Obligations
                  shall be repaid as follows: first, all Obligations (other than
                  (i) the Supplemental Loan Obligations, (ii) any Excluded  Por-
                  tion and (iii) and any early termination fee payable in accor-
                  dance with Section 13.1  (c) of the Loan  Agreement) shall  be
                  repaid in full, in cash or other  immediately available funds,
                  in such order and manner as Agent shall  elect in  its discre-
                  tion (including cash collateral for Letter of  Credit Accommo-
                  dations in an  amount equal to one hundred five (105%) percent
                  of the aggregate  undrawn  face  amount thereof); second,  the
                  Supplemental Loan, together with all accrued and unpaid inter-
                  est, fees, charges, costs and expenses payable   hereunder and
                  under the Supplemental Loan Letter Agreement, shall be repaid;
                  and third, any Excluded Portion then outstanding and any early

<PAGE>7

                  termination fee payable in accordance with Section  13.1(c) of
                  the Loan Agreement shall be repaid.

(c)               Excluded  Portion.  During the period  while any  Supplemental
                  Loan Obligations remain  outstanding,  Agent will not, without
                  the prior  written  consent of each of the  Lenders,  make any
                  Loan,  Letter  of  Credit  Accommodation  or  other  financial
                  accommodation which would constitute an Excluded Portion.

                  As used this Section  2A.3,  the following  capitalized  terms
                  shall have the following meanings:

                  "Excluded  Portion"  shall mean at any time (i) the portion of
                  the Aggregate Revolving Debt Exposure in excess of the Maximum
                  Revolving    Availability    (such   excess,   the   "Excluded
                  Principal");  provided,  that,  the  amount  set forth in this
                  clause (i) shall not  include  that  portion of the  Aggregate
                  Revolving  Debt  Exposure  that exceeds the Maximum  Revolving
                  Availability  solely as a result of (A) a decline in the value
                  of any Collateral,  (B) any act or omission of the Borrower in
                  violation of any  Financing  Agreement,  (C) any other similar
                  circumstance  not  caused  by  Agent  or any  Lender,  (D) the
                  imposition of any  Availability  Reserve by Agent, and (E) the
                  charging to any loan account of Borrower  maintained  pursuant
                  to this  Agreement  of  regularly  scheduled  interest,  fees,
                  costs, expenses and other charges (provided that if any of the
                  events  described  in clauses (A) through (E) above  result in
                  negative Net  Availability,  any additional Loans or Letter of
                  Credit Accommodations  provided by Agent and/or Lenders during
                  such period  while Agent has actual  knowledge of negative Net
                  Availability shall not be deemed excluded from the calculation
                  of Excluded Principal); and (ii) any interest,  charges, fees,
                  costs,  indemnities  and expenses with respect to the Excluded
                  Principal described in clause (i) of this definition.

                  "Aggregate Revolving Debt Exposure" means, with respect to the
                  Obligations  owing to the Agent and  Lenders  (other  than the
                  Supplemental  Loan  Obligations),  the  sum of  the  aggregate
                  principal  amount of  Revolving  Loans  outstanding  under the
                  Financing  Agreements,  all  Letter of  Credit  Accommodations
                  (including  the face amount of all  undrawn  letters of credit
                  plus all unpaid reimbursement obligations) under the Financing
                  Agreements and all other  financial  accommodations  under the
                  Financing   Agreements   (other   than  in   respect   of  the
                  Supplemental Loan).

                  "Maximum Revolving  Availability"  means the lesser of (a) the
                  difference   of  (i)  the  Maximum   Credit   minus  (ii)  the
                  outstanding principal balance of the Supplemental Loan and (b)
                  an amount  equal  the  Revolving  Loans  and  Letter of Credit
                  Accommodations  which would be available to the Borrower based
<PAGE>8

                  on  the  lending  formulas  (subject  to  the  deduction  from
                  availability  of any  Availability  Reserves then in effect as
                  determined  by  Agent)  set forth in  Section  2.1 of the Loan
                  Agreement as amended by Amendment No. 1.

                           2A.4     Mandatory Prepayments;  Availability  Short-
                  falls; Excluded Portion.

                                    (a) Mandatory  Prepayments.  In addition to,
                  and not in limitation of,  anything to the contrary  contained
                  herein,  subject  to the  provisions  of  Section  2.3  below,
                  Borrower  shall make a mandatory  prepayment in respect of the
                  Supplemental  Loan on June 15,  2001 in the amount of the June
                  15th Mandatory  Prepayment,  on June 29, 2001 in the amount of
                  the June 29th  Mandatory  Prepayment,  and on July 13, 2001 in
                  the  amount  of July  13th  Mandatory  Prepayment  (each  such
                  payment  a  "Mandatory  Prepayment"  and  all  such  payments,
                  collectively, the "Mandatory Prepayments").

                                    (b) Availability Shortfalls. Notwithstanding
                  anything to the contrary  contained in Section  2A.4(a)  above
                  but without limiting any of the rights of Supplemental  Lender
                  under the Supplemental Loan Letter Agreement to charge default
                  rate  interest  arising  as a result of any  failure to timely
                  fund any Supplemental  Loan Obligation,  if as of the date any
                  Mandatory  Prepayment or other Supplemental Loan Obligation is
                  due and owing,  Borrower will not have Net  Availability of at
                  least  $1.00  after  giving   effect  to  such   payments  (an
                  "Availability  Shortfall"),  Borrower shall pay such Mandatory
                  Prepayment as follows: Borrower shall be required to fund that
                  portion of the Mandatory Prepayment or other Supplemental Loan
                  Obligation  in an  amount  equal  to the  lesser  of  (i)  the
                  Mandatory  Prepayment or other  Supplemental  Loan  Obligation
                  required  to be paid and (ii) the  amount of Net  Availability
                  determined  as of  the  date  that  the  applicable  Mandatory
                  Prepayment or other  Supplemental  Loan Obligation is due less
                  $1.00 (such  amount being  referred to as a "Partial  Required
                  Payment").   With  respect  to  the  difference   between  the
                  applicable  Mandatory  Prepayment or other  Supplemental  Loan
                  Obligation and the Partial Required Payment (such amount being
                  referred to as the "Unpaid Required Payment"),  Borrower shall
                  repay  the  Unpaid  Required  Payment  at any  time  that  the
                  Borrower has Net Availability of greater than $1.00 until such
                  Unpaid Required Payment has been paid in full.  Failure to pay
                  any Unpaid Required Payment in full within seven (7) days from
                  the   initial   due  date  shall   constitute   an   immediate
                  Supplemental Loan Event of Default.

                           2A.5  Supplemental  Loan  Availability  Reserves.  In
                  addition  to,  and not in  limitation  of,  Agent's  right  to
                  establish Availability Reserves under Section 2.3) of the Loan

<PAGE>9

                  Agreement,   Agent  shall  have  the  right  to  establish  an
                  Availability  Reserve in respect of the Supplemental Loan (the
                  "Supplemental  Loan Reserve") in an amount determined by Agent
                  and, to adjust such  Supplemental  Loan  Reserve  from time to
                  time, in Agent's  discretion  exercised on a basis  consistent
                  with the imposition  and adjustment of any other  Availability
                  Reserves.  Agent  agrees  to  provide  Borrower  with  one (1)
                  Business  Day's  notice  prior  to  the  establishment  of any
                  Supplemental   Loan   Reserve.   Once  so   established,   the
                  Supplemental  Loan  Reserve  shall  constitute  an  additional
                  Availability Reserve for all purposes under this Agreement.

                           2A.6 Supplemental Loan Event of Default.  In addition
                  to,  and not in  limitation  of,  the Events of Default as set
                  forth in Section 10.1 of this Agreement, Borrower acknowledges
                  and agrees that the occurrence of any "Supplemental Loan Event
                  of Default" under the Supplemental Loan Letter Agreement shall
                  constitute  an Event of Default  under this  Agreement for all
                  purposes  (each  such  event,  a  "Supplemental  Loan Event of
                  Default").

1.5      Section 9 of the Loan Agreements is hereby amended by adding at the end
thereof, the following new Section 9.20:

                  9.20 Fixed Charge Coverage Ratio. So long as the  Supplemental
                  Loan remains outstanding,  Borrower shall not permit the ratio
                  of (i) the sum of (a) EBITDA,  less (b) capital  expenditures,
                  less  (c) cash  taxes,  to (ii)  the sum of  payments  made or
                  required  to be made by  Borrower  during  such period for (a)
                  interest,  fees and scheduled principal  payments/availability
                  reductions  due  under  the Loan  Agreement,  (b) fees due and
                  payable  under the  Supplemental  Loan Letter  Agreement,  (c)
                  interest, fees and scheduled principal payments due on any and
                  all other  indebtedness  of the Borrower  (including,  without
                  limitation,  the  Fortress  Credit  Agreement  and CIBC Credit
                  Agreement and related agreements), and (d) regularly scheduled
                  payments  under  any  lease  agreement  which is or  should be
                  capitalized  in  accordance  with  GAAP,  to be less  than the
                  ratios  set  forth on the  attached  Schedule  3.1 on a fiscal
                  monthly basis for the fiscal monthly period then ended.

1.6      Section 10.1(m) of the Loan Agreement is hereby amended and restated in
its entirety to read as follows:

                  "(m)  any  Supplemental  Loan  Event  of  Default  shall  have
                  occurred  or there  shall have  occurred  any event of default
                  under any of the other Financing Agreements."

<PAGE>10

1.7      The Loan Agreement is hereby amended by adding Schedule 3.1 hereto as a
new Schedule 3.1 thereto.

1.8      The Loan  Agreement is  hereby   amended  by   inserting   Schedule 8.8
hereto in place of the existing Schedule 8.8 to the Loan Agreement.

1.9      Exhibit A {Information Certificate}  to Loan Agreement is hereby amend-
ed by deleting  Schedule  9  {Locations  of  Collateral}  thereto  and adding in
place thereof Schedule 9 {Locations of Collateral} attached hereto.

SECTION 2.        REPRESENTATIONS, WARRANTIES AND COVENANTS

                  Borrower hereby represents, warrants and covenants with and to
Agent and Lenders as follows:

2.1     Representations in Financing Agreements. Each of the representations and
warranties  made by or on behalf of  Borrower to Agent and Lenders in any of the
Financing Agreements was true and correct when made and in all material respects
is true and correct on and as of the date of this  Amendment No. 1 with the same
full force and effect as if each of such representations and warranties had been
made by Borrower on the date hereof and in this Amendment No. 1.

2.2      No Event of Default.  No Default or Event of Default exists on the date
of this Amendment No. 1 (after giving effect to the amendments to the Financing
Agreements made by this Amendment No. 1)

2.3      Binding Effect of Documents. This Amendment No. 1 and the other Financ-
ing Agreements have been duly executed and  delivered  to Agent and  Lenders  by
Borrower, and are in full force and effect, as  modified  hereby and  the agree-
ments and obligations of  the  Borrower  contained herein constitutes the legal,
valid and binding obligations of Borrower enforceable against Borrower in accor-
dance with their terms.

2.4      No Conflict, Etc.The execution, delivery and performance of this Amend-
ment No.1, the Supplemental Loan Letter Agreement and the other Financing Agree-
ments contemplated by this Amendment No. 1  by Borrower  will  not  violate  any
requirement  of law or contractual  obligation of Borrower,  and will not result
in, or require,  the creation or imposition of any lien or encumbrance on any of
Borrower's properties or revenues, except in favor of Agent and Lenders.

SECTION 3.        CONDITIONS TO  EFFECTIVENESS  OF  CERTAIN  PROVISIONS  OF THIS
AMENDMENT NO. 1

3.1      The effectiveness of Section 1 of this Amendment No. 1 shall be subject
to the satisfaction of the following  conditions and/or receipt by Agent of eac
of the following,  in form and substance satisfactory  to  Agent  (the date tha
Agent receives each of the foregoing  being  referred to herein as the  "Supple-
mental Loan Effective Date"):

<PAGE>11

(a)      an original of this Amendment No. 1, duly authorized, executed and  de-
livered by Borrower and Agent on behalf of itself and the Required Lenders;

(b)      an original Participation Agreement duly executed and delivered by Hil-
co Capital LP  in favor of the Supplemental Loan Lender and Agent;

(c)      an original Supplemental Loan Letter Agreement duly executed and deliv-
ered by Borrower, Agent, Supplemental Loan Lender and Hilco Capital LP;

(d)      an  opinion letter, in form and substance satisfactory to  Agent,  from
Blackwell  Sanders  Peper  Martin with respect to this  Amendment  No. 1 and the
transactions  contemplated  hereunder which shall expressly permit Hilco Capital
LP to rely on such opinion and the opinion issued by such counsel at the time of
the closing of the Loan Agreement;

(e)      a Secretary's Certificate of Borrower certifyin  and/or  attaching  (a)
articles of incorporation, (b) bylaws, (c) resolutions and (d) incumbency of of-
ficers;

(f)      no Overadvance (as defined in the Supplemental Loan  Letter  Agreement)
shall be outstanding on the date prior to the Supplemental Loan Effective Date;

(g)      the Agent, Supplemental Loan Lender and Hilco Capital LP shall have re-
ceived and found  acceptable,  in their sole  discretion, the results of a final
field examination of the Collateral; and

(h)      any and all such further instruments and documents as Agent may require
to obtain the full benefits of this Amendment No. 1 and to protect, preserve an
maintain Agent's and Lenders' rights in the Collateral.

SECTION 4.        PROVISIONS OF GENERAL APPLICATION

4.1      Effect of this Amendment No. 1.  Except as modified pursuant hereto, no
other changes or modifications to the Financing  Agreements  are intended or im-
plied and in all other respects the Financing Agreements are hereby specifically
ratified, restated and confirmed  by all parties hereto as of the effective date
hereof.  To the extent of conflict between the terms of this Amendment No. 1 and
the other Financing Agreements, the terms of this Amendment No. 1 shall control.
The Loan Agreement and this Amendment  No. 1  shall be read and construed as one
agreement.

4.2      Further Assurances.  The parties hereto shall execute and deliver such
additional documents and take such additional action as  may be necessary or de-
sirable to effectuate the provisions and purposes of this Amendment No. 1.

4.3      Binding Effect.  This Amendment No. 1 shall be binding  upon and  inure
to the benefit of each of the parties hereto and their respective successors and
assigns.

<PAGE>12

4.4      Survival of Representations and  Warranties.  All  representations  and
warranties made in this Amendment No. 1 or any  other document furnished in con-
nection with this Amendment No. 1 shall survive the  execution  and  delivery of
this Amendment No. 1 and the other documents, and no  investigation  by Agent or
any Lender or any closing shall affect the representations and warranties or the
right of Agent or Lenders to rely upon them.

4.5      Expenses. Borrower agrees to pay on demand  all out of pocket costs and
expenses of Agent and Lenders in connection with the preparation,  execution and
delivery  of this  Amendment  No.  1 and all  other  agreements,  documents  and
instruments  executed  and/or  delivered  in  connection  therewith  or  related
thereto,  including,  without limitation, the fees and out-of-pocket expenses of
counsel for Agent and Lenders with respect thereto.

4.6      Severability.  Any provision of this Amendment No. 1 held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or inval-
idate the remainder of this Amendment No. 1 and the effect thereof shall be con-
fined to the provision so held to be invalid or unenforceable.

4.7      Governing Law. This Amendment No. 1 shall be governed by, construed and
enforced in accordance with the laws of the State of New York, without regard to
conflicts of laws principles thereof.

4.8      Counterparts.  This Amendment No. 1 may be  executed in  any  number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement.  In making proof of  this  Amendment No.  1, it shall not be
necessary to produce or account for more than one.

                               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>13

                       [Signature Page to Amendment No. 1]

                  IN WITNESS WHEREOF, this Amendment No. 1 is  executed  and de-
livered as of the day and year first above written.

                                    PAYLESS CASHWAYS, INC.

                                    By:

                                    Title:

                                    CONGRESS FINANCIAL CORPORATION (CENTRAL),

                                         as Agent  on behalf   of  the  Required
                                         Lenders and as Supplemental Loan Lender

                                    By:

                                    Title:

<PAGE>14

          [Guarantor's Acknowledgement and Consent to Amendment No. 1]

                           Acknowledgment and Consent

                  The undersigned  hereby  acknowledges  receipt of the attached
Amendment No. 1 and consents to the execution and performance thereof by Payless
Cashways,  Inc. The undersigned hereby also reaffirms that the guarantee of such
undersigned in favor of Agent remains in full force and effect and  acknowledges
and agrees that there is no defense,  setoff or counterclaim of any kind, nature
or description to obligations arising under such guarantee.

                                                         LUMBERJACK STORES, INC.

                                                          By:
                                                           Name:
                                                           Title:

<PAGE>15

<TABLE>

                                   SCHEDULE 3.1

                           FIXED CHARGE COVERAGE RATIO
<CAPTION>

Fiscal Monthly Period Ended 1                     Ratio
<S>                                            <C>
February 24, 2001.....................         0.05 to 1.0
March 31, 2001........................          1.0 to 1.0
April 28, 2001........................          1.0 to 1.0
May 26, 2001..........................          0.7 to 1.0
</TABLE>
[FN]
1        The dates set forth on this Schedule 3.1 correspond to the last day of
         each fiscal monthly accounting period maintained by Borrower.
</FN>

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