EAGLE HARDWARE & GARDEN INC/WA/, 10-Q, 1996-08-22

EAGLE HARDWARE & GARDEN INC/WA/
10-Q, 1996-08-22
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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED July 26, 1996

_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO ___________

COMMISSION FILE NUMBER 0-19830
-------

EAGLE HARDWARE & GARDEN, INC.
-----------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

WASHINGTON 91-1465348
---------- ----------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

981 POWELL AVE SW RENTON, WA 98055
-------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(206) 227-5740
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No

The registrant had 23,019,413 shares of common stock, without par value,
outstanding at July 26, 1996.

<PAGE>

EAGLE HARDWARE & GARDEN, INC.

INDEX TO FORM 10-Q

PAGE
----

PART I - FINANCIAL INFORMATION_________________________________________ 3

ITEM 1 - FINANCIAL STATEMENTS_____________________________________ 3

Consolidated Balance Sheets___________________________________ 10

Consolidated Statements of Operations_________________________ 11

Consolidated Statements of Cash Flows_________________________ 12

Notes to Unaudited Consolidated Financial Statements__________ 13

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS____________________________________________ 3

PART II - OTHER INFORMATION____________________________________________ 7

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS_________________________________________ 7

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K_________________________ 8

<PAGE>

PART I - FINANCIAL INFORMATION:

ITEM 1 - FINANCIAL STATEMENTS -

Eagle Hardware & Garden, Inc.'s ("the Company") unaudited consolidated
balance sheet as of July 26, 1996, audited consolidated balance sheet as of
January 26, 1996, unaudited statements of operations for the 13- and 26-week
periods ended July 26, 1996, and July 28, 1995, and unaudited consolidated
statements of cash flows for the 26-week periods then ended are attached. Notes
to the unaudited consolidated financial statements are also attached.

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -

It is suggested that this discussion be read in conjunction with the
"Management's Discussion and Analysis" included in the Company's 1995 Annual
Report to Shareholders, which has previously been filed with the Securities and
Exchange Commission.

The results of operations for the 13- and 26-week periods ended July 26,
1996, are not necessarily indicative of the results to be expected for the full
fiscal year. The Company expects that its gross margin percentage will
generally be lower in the second and third quarters of each fiscal year when
sales of lower margin products are greater. The Company also expects that, in
general, individual stores will experience lower net sales and operating income
and that cash flow from operations will be lower in the fourth quarter of the
fiscal year than in any of the other quarters, due primarily to the effect of
winter weather on home improvement projects and the lack of significant sales of
lawn and garden products during this period. In addition, unusual weather
conditions could have a material adverse effect on seasonal sales.

"Store Weeks in Period" represents the aggregate number of full weeks in
which stores were open during the reporting period. There were 312 store weeks
of operations during the second quarter of fiscal 1996, an increase of 14%
compared to the 274 store weeks during the comparable prior year period. For
the 26 weeks ended July 26, 1996, total store weeks increased 20% from 521 store
weeks in 1995 to 624 in 1996.

RESULTS OF OPERATIONS -

(a) COMPARISON OF THE 13 WEEKS ENDED JULY 26, 1996, AND JULY 28, 1995.

NET INCOME. Net income for the second quarter of fiscal 1996 increased 77%
to $8,065,000, or $0.32 per share, fully diluted, from $4,553,000, or $0.20 per
share, during the second quarter of fiscal 1995. The Company's 6.25%
convertible subordinated debentures were dilutive for the first time during the
second quarter of fiscal 1996 (see Exhibit 11.1). Had the debentures not
been dilutive, net income per share for the quarter ended July 26, 1996 would
have been $0.35 (primary net income per share). The 77% increase in net income
was due to the factors discussed below.

NET SALES. Net sales for the second quarter of fiscal 1995 were
$209,078,000, compared to net sales of $167,835,000 for the comparable prior
year period. This 25% increase in net sales over the prior period was due to a
14% increase in store weeks of operations during the quarter and a 12% increase
in same store sales for the period (for stores open one year or more). Same
store sales increased primarily as a result of an 8% increase in the number of
transactions and an

<PAGE>

increase in the average net sale per transaction for comparable stores from
$37.53 to $38.92. The increase of 12% in same store sales during the quarter
compares to a decrease of 9% for stores open one year or more during the
second quarter of fiscal 1995. Management attributes the increase in same
store sales to a number of factors, including continued increases in housing
turnover and favorable economic conditions in most of the Company's markets
and the declining performance of a primary competitor that filed for Chapter
11 bankruptcy protection in July 1996.

GROSS MARGIN. The Company's gross margin was $58,339,000 for the second
quarter of fiscal 1996. This represents an increase of $14,000,000, or 32%,
over the second quarter of fiscal 1995. As a percentage of net sales, gross
margin was 27.9% in the second quarter of fiscal 1996 versus 26.4% in the
comparable prior period. Management attributes the improvement in gross margin
as a percentage of net sales to a combination of factors, including volume-
related buying efficiencies, a reduction in realized inventory shrinkage
(attributed primarily to continuing loss prevention programs) and less
promotional pricing by competitors. In addition, the prior year gross margin
was lower due to the opening of three new stores during the quarter and related
grand opening promotional pricing.

OPERATING EXPENSES. Operating expenses as a percentage of net sales
decreased from 21.2% in the second quarter of fiscal 1995 to 20.8% in the second
quarter of 1996. Economies of scale generated by a larger store base and
addtional leverage of operating expenses attributable to the 12% increase in
same store sales were the primary factors leading to the decrease in operating
expenses as a percentage of sales. The dollar amount of operating expenses
increased by $7,963,000, or 22%, from the comparable prior year period,
primarily as a result of the 14% increase in store weeks of operations.
Operating expenses would have been lower as a percentage of sales had it not
been for the Company's decision to increase staffing on the sales floor.

PREOPENING EXPENSES. There were no preopening expenses in the second
quarter of fiscal 1996 because there were no store openings. In the comparable
prior year quarter, when the Company opened three stores, preopening expenses
were $1,668,000, or 1.0% of net sales.

OPERATING INCOME. For the reasons explained above, operating income
increased 108%, from $7,163,000 to $14,868,000, in the respective quarters.
Expressed as a percentage of net sales, operating income improved from 4.3% in
the second quarter of fiscal 1995 to 7.1% in the second quarter of 1996.

INTEREST EXPENSE. Net interest expense during the second quarter of fiscal
1996 was $2,192,000, compared to $1,581,000 during the comparable prior year
period. This increase was due primarily to additional long-term borrowings made
in the latter half of fiscal 1995 and to a higher average level of borrowings on
the Company's bank line of credit compared to the prior year. Interest on the
Company's convertible subordinated debentures, which represent the primary
source of interest expense, was comparable between the current and prior year.
During both quarters, interest incurred was partially offset by interest
capitalized on construction projects.

INCOME TAXES. The Company recorded a combined federal and state tax
provision of $4,627,000 for the second quarter of fiscal 1996, compared to a
provision of $2,448,000 during the comparable prior year period. The effective
tax rate for the second quarter of fiscal 1996 was 36.5% versus 35.0% in the
second quarter of fiscal 1995. The second quarter effective tax rate for 1995
was lower than the combined federal and state statutory tax rates due primarily
to the utilization of a portion of the Company's capital loss carryforward
incurred in the fourth quarter of fiscal 1994. The capital loss carryforward
was used to offset a capital gain realized on the sale of surplus land in Utah.

<PAGE>

(b) COMPARISON OF THE 26 WEEKS ENDED JULY 26, 1996, AND JULY 28, 1995.

NET INCOME. Net income for the first 26 weeks of fiscal 1996 increased
52% to $11,029,000, or $0.46 per share, fully diluted, from $7,233,000, or
$0.31 per share, during the first 26 weeks of fiscal 1995. The Company's
6.25% convertible subordinated debentures were dilutive for the first time
during the second quarter of fiscal 1996 (see Exhibit 11.1). Had the
debentures not been dilutive, net income per share for the 26 weeks ended
July 26, 1996 would have been $0.47 (primary net income per share). The 52%
increase in net income was due to the factors discussed below.

NET SALES. Net sales for the first 26 weeks of fiscal 1996 were
$370,184,000, compared to net sales of $297,981,000 for the comparable prior
year period. This 24% increase in net sales over the prior 26-week period
was due primarily to a 20% increase in store weeks of operations and a 7%
increase in same store sales for the period. Same store sales increased
primarily as a result of a 5% increase in the number of transactions and an
increase in the average net sale per transaction for comparable stores from
$37.45 to $38.20. The increase of 7% in same store sales during the 26-week
period compares to a decrease of 7% for stores open one year or more during
the first 26 weeks of fiscal 1995. Management attributes the increase in same
store sales to a number of factors, including continued increases in housing
turnover and favorable economic conditions in most of the Company's markets
and the declining performance of a primary competitor that filed for Chapter
11 bankruptcy protection in July 1996.

GROSS MARGIN. The Company's gross margin was $103,595,000 for the first 26
weeks of fiscal 1996. This represents an increase of $23,528,000, or 29%, over
the first 26 weeks of fiscal 1995. As a percentage of net sales, gross margin
was 28.0% in the first 26 weeks of fiscal 1996 versus 26.9% in the comparable
prior period. Management attributes the improvement in gross margin as a
percentage of net sales to a combination of factors, including volume-related
buying efficiencies, a reduction in realized inventory shrinkage (attributed
primarily to continuing loss prevention programs) and less promotional pricing
by competitors. In addition, the fiscal 1995 gross margin was lower due to the
opening of three new stores during the first half of the year and related grand
opening promotional pricing.

OPERATING EXPENSES. Operating expenses as a percentage of net sales
decreased from 22.4% in the first 26 weeks of fiscal 1995 to 22.1% in the first
26 weeks of fiscal 1996. Economies of scale generated by a larger store base
and additional leverage of operating expenses attributable to the 7% increase in
same store sales were the primary factors leading to the decrease in operating
expenses as a percentage of sales. The dollar amount of operating expenses
increased by $14,887,000, or 22%, from the comparable prior year period,
primarily as a result of the 20% increase in store weeks of operations.
Operating expenses would have been lower as a percentage of sales had it not
been for the Company's decision to increase staffing on the sales floor.

PREOPENING EXPENSES. There were no preopening expenses in the first 26
weeks of fiscal 1996 because there were no store openings. In the comparable
prior year period, when the Company opened three stores, preopening expenses
were $1,668,000, or 0.6% of net sales.

OPERATING INCOME. For the reasons explained above, operating income
increased 89%, from $11,521,000 to $21,830,000, in the respective 26-week
periods. Expressed as a percentage of net sales, operating income improved from
3.9% in the first 26 weeks of fiscal 1995 to 5.9% in the comparable current year
period.

INTEREST EXPENSE. Net interest expense during the first 26 weeks of fiscal
1996 was $4,615,000, compared to $2,881,000 during the comparable prior year
period. This increase was due primarily to interest on additional long-term
borrowings made during the latter half of 1995 and

<PAGE>

higher average borrowings on the Company's bank line of credit compared to the
prior year. Interest on the Company's convertible subordinated debentures,
which represent the primary source of interest expense, was comparable between
the current and prior year. During both periods, interest incurred was
partially offset by interest capitalized on construction projects.

INCOME TAXES. The Company recorded a combined federal and state tax
provision of $6,331,000 for the first 26 weeks of fiscal 1996, compared to a
provision of $3,435,000 during the comparable prior year period. The effective
tax rate for the first 26 weeks of fiscal 1996 was 36.5% versus 32.2% in the
first 26 weeks of fiscal 1995. The 1995 effective tax rate for the first 26
weeks was lower than the combined federal and state statutory tax rates due
primarily to the utilization of a portion of the Company's capital loss
carryforward incurred in the fourth quarter of fiscal 1994. The capital loss
carryforward was used to offset capital gains realized on the sale of surplus
land in Utah and the recovery of a previously reserved receivable relating to
the sale of land in Canada.

LIQUIDITY AND CAPITAL RESOURCES -

The Company did not open any stores during the second quarter of fiscal
1996. A store in Wenatchee, Washington, opened on August 22. This store is the
first Eagle store built in a new format designed for smaller population centers.
In addition to the Wenatchee store, the Company's fiscal 1996 expansion plans
include stores under construction in Pueblo and Louisville, Colorado, both of
which are scheduled to open during the fourth quarter. During the second
quarter, the Company began construction on its site in North Seattle after
reaching an agreement with the National Trailer Park Homeowners Association.
Including the North Seattle site, the Company has completed the purchase of two
sites and signed a purchase agreement for another site planned for opening in
fiscal 1997. The Company has also signed a lease for a fourth store currently
scheduled to open in fiscal 1997. The Company continues to review additional
sites for future expansion.

The Company's balance sheet at July 26, 1996, reflects a $43,377,000
(12%) increase in total assets since the fiscal year began on January 27.
The principal components of this change are a seasonal increase of
$13,202,000 (9%) in inventories and an increase of $31,205,000 (16%) in net
property and equipment, primarily related to the continuing store expansion
program. Financing for this expansion was provided by cash flow from
operations and additional borrowings. Net income adjusted for noncash items
provided $15,926,000 during the first 26 weeks of the year to support the
Company's expansion. The increase in total assets was also accompanied by
an increase of $16,192,000 in accounts payable and checks drawn in excess of
bank balances under the Company's integrated cash management program, and an
$8,210,000 increase in accrued liabilities and income taxes payable, all
primarily related to the continuing store expansion program. Additional
financing was provided by a $9,000,000 mortgage executed during the second
quarter and net borrowings of $2,400,000 on the Company's bank line of credit.

On May 28, 1996, the Company signed an amendment to its credit
agreement with U.S. Bank of Washington, N.A., extending the expiration date
applicable to the existing $75 million revolving working capital line of credit
to November 30, 1997. The May 28 amendment also reduced the rate of interest
applicable to IBOR borrowings from IBOR plus 2.00% to a range of IBOR plus 1.25%
to IBOR plus 2.00%, depending on the Company's capital ratio and level of
borrowings (if borrowings exceed $50 million, an additional 0.25% is added to
the rate applicable to all borrowings under the line). Borrowings are secured
by the Company's accounts receivable and inventory. Advances are limited to a
base of eligible accounts receivable and inventory plus $10 million.

<PAGE>

The Company's capital requirements are influenced by its expansion plans
and by factors such as real estate costs in the markets which the Company
enters, whether that real estate will be purchased or leased and the extent of
Company-financed remodeling required when existing buildings are acquired or
leased. The Company presently expects to finance its fiscal 1996 expansion
program through a combination of cash flow from operations, bank credit lines
and mortgages and/or sale-leasebacks of owned properties. The Company
intends to file a registration statement for the sale of 4,500,000 shares of
Common Stock immediately following the filing of this Form 10-Q.

The Company reports on a 52/53-week year. Fiscal 1996 is a 53-week year
and the fourth quarter will consist of 14 weeks. The fiscal year ends on the
last Friday in January.

FORWARD-LOOKING STATEMENTS -

Some of the information in this report constitutes forward-looking
statements. These statements are subject to a number of risks and uncertainties
that might cause actual results to differ materially from stated expectations.
These risks include, among others, the highly competitive environment in the
retail home improvement industry, the effect of general economic conditions and
weather in the Company's markets and the Company's ability to achieve its
expansion plans and successfully manage its growth. These risks are described
in detail in the Company's Annual Report on Form 10-K and other SEC filings.

PART II - OTHER INFORMATION:

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -

The Company's 1996 Annual Meeting of Shareholders was held on May 28, 1996.
Matters voted upon at the meeting and the results of those votes are set forth
in the following table.

VOTES BROKER
-----------------------------
MATTER FOR AGAINST WITHHELD ABSTENSIONS NON-VOTES
- ------------------------------------------------------------------------------
Election of
Directors:
Crockett 20,396,235 - 227,565 - -
Sarkowsky 20,396,932 - 226,868 - -

Amend the
Company's
Stock Option
Plans 18,735,316 1,730,540 - 142,944 15,000

Ratification
of Indepen-
dent Public
Accountants
(Ernst &
Young) 20,467,615 71,408 - 84,777 -

<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K -

(a) Exhibits filed with this Form 10-Q are as follows:

10.3C Third Amendment to Eagle Hardware & Garden Profit
Sharing/Retirement Savings Plan.
10.3D Fourth Amendment to Eagle Hardware & Garden Profit
Sharing/Retirement Savings Plan.
10.100 Memorandum of Understanding concerning Eagle Hardware Securities
Litigation dated May 23, 1995.
10.101 Agreement dated June 6, 1995, by and among David Heerensperger,
Richard Takata, Myron E. Kirkpatrick and Eagle Hardware & Garden,
Inc. and National Union Fire Insurance Company of Pittsburgh, PA.
10.102 Amended and Restated Credit Agreement dated as of May 28, 1996,
between the Lenders, U.S. Bank of Washington, N.A., as Agent and
Eagle Hardware & Garden, Inc.
10.103 Real Estate Purchase and Sale Agreement dated July 2, 1996, by
and between Terrace Point Partnership, Inc. and Eagle Hardware &
Garden, Inc.
10.104 Promissory Note dated July 18, 1996, by Eagle Hardware & Garden,
Inc. to The Northwestern Mutual Life Insurance Company in the
principal amount of $9,000,000.
10.105 Real Estate Purchase and Sale Agreements dated August 4, 1994 and
amended December 1, 1994, August 30, 1995 and February 23, 1996
between Atlantic Seaboard Realty and the following persons:
Ronald V. and Kathleen A. Gratias; Chlo Elaine Jackson and
Charles L. Betts; and Mary J. McColm.
10.106 Assignment of Rights Under Real Estate Purchase and Sale
Agreements dated August 4, 1994, as amended, by Atlantic Seaboard
Realty to Eagle Hardware & Garden, Inc.
10.107 Real Estate Purchase and Sale Agreement dated March 6, 1996 and
amended March 31, 1996, between Atlantic Seaboard Realty and the
Tacoma Alliance Church.
10.108 Assignment of Rights Under Real Estate Purchase and Sale
Agreement dated March 6, 1996, as amended, by Atlantic Seaboard
Realty to Eagle Hardware & Garden, Inc.
10.109 Real Estate Purchase and Sale Agreement dated April 1, 1996, by
and between Metropolitan Park District of Tacoma and Wahl &
Associates, Inc.
10.110 Assignment of Rights Under Real Estate Purchase and Sale
Agreement dated April 1, 1996, by Wahl & Associates, Inc. to
Eagle Hardware & Garden, Inc.
10.111 Employment and Severance Agreement between Eagle Hardware &
Garden, Inc. and Ronald P. Maccarone.
11.1 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule

(b) No reports on Form 8-K were filed during the second quarter of fiscal 1996.

<PAGE>

SIGNATURES:

Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

EAGLE HARDWARE & GARDEN, INC.
-----------------------------
Registrant

August 21, 1996 /s/ David J. Heerensperger
- --------------- --------------------------
Date David J. Heerensperger
Chairman and Chief Executive Officer
(Principal Executive Officer)

August 21, 1996 /s/ Richard T. Takata
- --------------- --------------------------
Date Richard T. Takata
President and Chief Operating Officer

August 21, 1996 /s/ Ronald P. Maccarone
- --------------- --------------------------
Date Ronald P. Maccarone
Executive Vice-President-Finance and Chief
Financial Officer (Principal Financial Officer)

August 21, 1996 /s/ Earl E. Robicheaux
- --------------- --------------------------
Date Earl E. Robicheaux
Vice President & Controller
(Principal Accounting Officer)

<PAGE>

EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED BALANCE SHEETS
[000]

(UNAUDITED)
JULY 26, JANUARY 26,
1996 1996
---------- ----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $5,942 $6,591
Trade and other accounts receivable, net 4,162 3,594
Merchandise inventories 156,296 143,094
Prepaid expenses 3,756 2,076
Deferred income taxes 2,880 1,571
---------- ----------
Total current assets 173,036 156,926
---------- ----------

PROPERTY AND EQUIPMENT, at cost:
Land and buildings 128,175 105,725
Furniture, fixtures and equipment 67,622 64,486
Leasehold improvements 45,184 45,035
Construction in progress 15,266 4,743
---------- ----------
256,247 219,989
Less accumulated depreciation and amortization 23,889 18,836
---------- ----------
Net property and equipment 232,358 201,153
---------- ----------
PREOPENING COSTS 540 7

OTHER ASSETS 4,010 8,481
---------- ----------
Total assets $409,944 $366,567
---------- ----------
---------- ----------

LIABILITIES & SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Checks drawn in excess of bank balances $11,248 $ 8,859
Accounts payable 46,030 32,226
Note payable to bank 36,900 34,500
Sales taxes payable 5,760 3,945
Accrued payroll and related expenses 10,239 8,648
Other current liabilities 11,940 7,159
Current portion of long-term debt 2,135 6,198
---------- ----------
Total current liabilities 124,252 101,535
---------- ----------

DEFERRED INCOME TAXES 5,838 5,042
OTHER LONG-TERM LIABILITIES 3,017 2,847
LONG-TERM DEBT 109,203 101,542
---------- ----------
Total liabilities 242,310 210,966
---------- ----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Common stock, without par value; 50,000 shares authorized;
23,019 and 22,900 shares issued and outstanding 136,725 135,721
Retained earnings 30,909 19,880
---------- ----------
Total shareholders' equity 167,634 155,601
---------- ----------
Total liabilities & shareholders' equity $409,944 $366,567
---------- ----------
---------- ----------

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
[000, EXCEPT STORE WEEK AND PER SHARE DATA]
[UNAUDITED]

13 WEEKS ENDED 26 WEEKS ENDED
------------------------- -------------------------
JULY 26, JULY 28, JULY 26, JULY 28,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
STORE WEEKS IN PERIOD [312] [274] [624] [521]

NET SALES $209,078 $167,835 $370,184 $297,981
COST OF SALES 150,739 123,496 266,589 217,914
---------- ---------- ---------- ----------
Gross margin 58,339 44,339 103,595 80,067

OPERATING EXPENSES 43,471 35,508 81,765 66,878
PREOPENING EXPENSES 0 1,668 0 1,668
---------- ---------- ---------- ----------
Operating income 14,868 7,163 21,830 11,521

OTHER INCOME (EXPENSE):
Net interest (expense) (2,192) (1,581) (4,615) (2,881)
Other income 16 1,419 145 2,028
---------- ---------- ---------- ----------
Income before tax 12,692 7,001 17,360 10,668

INCOME TAX PROVISION 4,627 2,448 6,331 3,435
---------- ---------- ---------- ----------
Net income $8,065 $4,553 $11,029 $7,233
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

NET INCOME PER SHARE (SEE
EXHIBIT 11.1 FOR DETAILED
COMPUTATIONS):

Net income per share, primary $0.35 $0.20 $0.47 $0.31

Net income per share, fully diluted $0.32 $0.20 $0.46 $0.31

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[000]
[UNAUDITED]

26 WEEKS ENDED
-------------------------
JULY 26, JULY 28,
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $11,029 $7,233
---------- ----------

Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 5,456 4,174
Gain on sale of assets, net (47) (818)
Deferred income taxes (512) 560
Changes in operating assets and liabilities:
Trade accounts receivable (569) 1,053
Merchandise inventories (13,202) (2,852)
Prepaid expenses (1,702) (917)
Other assets 785 (228)
Preopening costs (532) (711)
Accounts payable and checks drawn in excess of bank balances 16,192 5,538
Income taxes payable 1,893 2,793
Accrued liabilities 6,317 3,172
Other 169 1,286
---------- ----------
14,248 13,050
---------- ----------
Net cash provided by operating activities 25,277 20,283
---------- ----------

INVESTING ACTIVITIES:
Capital expenditures for property and equipment (37,197) (34,053)
Proceeds on sale of surplus land 3,686 3,718
Other 583 0
---------- ----------
Net cash used in investing activities (32,928) (30,335)
---------- ----------

FINANCING ACTIVITIES:
Advances on note payable to bank 222,700 164,700
Payments on note payable to bank (220,300) (147,600)
Proceeds (payments) on long-term borrowings, net 3,598 (5,421)
Other 1,004 88
---------- ----------
Net cash provided by financing activities 7,002 11,767
---------- ----------
Increase (decrease) in cash and cash equivalents (649) 1,715
Cash and cash equivalents at beginning of period 6,591 5,440
---------- ----------
Cash and cash equivalents at end of period $5,942 $7,155
---------- ----------
---------- ----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for -
Interest $5,057 $4,206
Income taxes $4,455 $145

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

EAGLE HARDWARE & GARDEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------

1. The accompanying unaudited consolidated financial statements do not purport
to be full presentations, and do not include all information and disclosures
required for fair presentation by generally accepted accounting principles.
However, in the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal recurring
accruals) considered necessary to present fairly the consolidated financial
position of the Company at July 26, 1996, the consolidated results of operations
for the 13-week and 26-week periods ended July 26, 1996, and July 28, 1995, and
consolidated cash flows for the 26-week periods then ended. These financial
statements should be read in conjunction with the financial statements included
in the Company's Annual Report on Form 10-K for the fiscal year ended January
26, 1996, filed with the Securities and Exchange Commission.

2. The results of operations for the 13- and 26-week periods ended July 26,
1996, are not necessarily indicative of the results to be expected for the full
fiscal year. The Company expects that its gross margin percentage will
generally be lower in the second and third quarters of each fiscal year when
sales of lower margin products are greater. The Company also expects that, in
general, individual stores will experience lower net sales and operating income
and that cash flow from operations will be lower in the fourth quarter of the
fiscal year than in any of the other quarters, due primarily to the effect of
winter weather on home improvement projects and the lack of significant sales of
lawn and garden products during this period. In addition, unusual weather
conditions could have a material adverse effect on seasonal sales.

"Store Weeks in Period" represents the aggregate number of full weeks in
which stores were open during the reporting period.

3. On May 28, 1996, the Company signed an amendment to its credit agreement
with U.S. Bank of Washington, N.A., extending the expiration date applicable to
the existing $75 million revolving working capital line of credit to November
30, 1997. The May 28 amendment also reduced the rate of interest applicable to
IBOR borrowings from IBOR plus 2.00% to a range of IBOR plus 1.25% to IBOR plus
2.00%, depending on the Company's capital ratio and level of borrowings (if
borrowings exceed $50 million, an additional 0.25% is added to the rate
applicable to all borrowings under the line). Borrowings are secured by the
Company's accounts receivable and inventory. Advances are limited to a base of
eligible accounts receivable and inventory plus $10 million.

4. The Company recorded an effective tax rate of 36.5% for the quarter, which
represents the Company's estimated effective tax rate for the year. In the
prior year second quarter, the Company recorded an effective tax rate of 35.0%.
The prior year second quarter effective tax rate was lower than the combined
federal and state statutory tax rates due primarily to the utilization of a
portion of the Company's capital loss carryforward incurred in the fourth
quarter of fiscal 1994. The capital loss carryforward was used to offset a
capital gain realized on the sale of surplus land in Utah. The event which
resulted in this capital gain caused a revision to the valuation allowance
previously established against the deferred tax benefit of the capital loss
carryforward. In accordance with Financial Accounting Standard No. 109, the
effect of this event was recognized entirely in the second quarter of fiscal
1995.

<PAGE>

5. As of August 21, 1996, the Company had completed the purchases of sites for
four future store locations (excluding the Wenatchee store which opened on
August 22) and had signed an agreement to purchase property for another site at
a cost of approximately $2,700,000. Purchase of the latter site will be
finalized upon successful resolution of various contingencies.

<PAGE>

EXHIBIT INDEX

<PAGE>

THIRD AMENDMENT
TO
EAGLE HARDWARE & GARDEN, INC.
RETIREMENT SAVINGS PLAN

Pursuant to Section 8.1 of the Eagle Hardware & Garden, Inc. Retirement
Savings Plan ("Plan"), Section 8.1 of such Plan is hereby amended by adding the
following additional paragraph:

Any amendment to (including a termination of) the Plan by the Employer
shall be made only pursuant to action of the Board of Directors of the
Employer ("Board") in accordance with the Board's normal procedures
and evidenced in writing. Upon such action by the Board and execution
of an instrument of amendment by the Employer, the Plan shall be
deemed amended as of the date specified as the effective date by such
Board action and as provided in the instrument of amendment. If no
effective date is specified, the amendment shall be effective as of
the date of the Board action. The effective date of any amendment may
be before, on, or after the date of such Board action.

Any amendment to the Plan by the Committee shall be made by written
instrument of amendment executed on behalf of the Committee, pursuant
to Committee action in accordance with Section 2.11. The Plan shall be
deemed amended as of the date specified as of the effective date in
the instrument of amendment.

EXECUTED this 7th day of June, 1994.

COMMITTEE

By: /s/ Myron Kirkpatrick
--------------------------
Myron Kirkpatrick

By: /s/ John Foucrier
---------------------------
John Foucrier

<PAGE>

EXECUTION COPY

FOURTH AMENDMENT TO THE
EAGLE HARDWARE & GARDEN, INC.
RETIREMENT SAVINGS PLAN

Pursuant to Section 8.1 of the Eagle Hardware & Garden, Inc. Retirement
Savings Plan ("Plan"), Section 8.1 of such Plan is hereby amended as set forth
below. All amendments are effective as of the establishment of the Plan, and
are required by the Internal Revenue Service as a condition of issuing a
favorable determination letter.

The reference in Section 1.12 to Regulation 1.401(k)-l(b)(3) is hereby
amended to refer to Regulation 1.401 (k)-1 (b) (5)

II.

The following clause is added to the end of the last sentence of Section
1.17:

, but only if such Excess Deferred
Compensation is not distributed in accordance
with Regulation 1.402(g)-l(e)(2) or (3).

III.

In the first sentence of Section 4.4(l), the reference to Code Section
410(b)(2)(A)(i) is deleted and the "or" moved between Code Sections 401(a)(26)
and 410(b)(1).

Executed this 17(th) day of [ILLEGIBLE], 1995.
------- -----------

COMMITTEE UNDER EAGLE HARDWARE &
GARDEN, INC. RETIREMENT SAVINGS
PLAN

/s/ [ILLEGIBLE]
-------------------------------------

<PAGE>

EAGLE HARDWARE SECURITIES LITIGATION
MEMORANDUM OF UNDERSTANDING

This Memorandum of Understanding ("MOU") contains the principal terms of
settlement (the "Settlement") between Eagle Hardware & Garden, Inc. (the
"Company"), David Heerensperger, ET UX, Richard Takata, ET UX, and Myron,
Kirkpatrick, ET UX (the "Individual Defendants") and plaintiffs in the EAGLE
HARDWARE SECURITIES LITIGATION pending in both the state and federal courts,
to wit: MARK OPPENHEIMER. ET AL. V. EAGLE HARDWARE & GARDEN, INC., ET AL.,
King County Superior Court Case NO. 93-2-29908-7, and IN RE EAGLE HARDWARE
SECURITIES LITIGATION, United States District Court, Western District of
Washington Case No. C92-1882C.

1. A settlement of all claims, including all appeals in connection
therewith, in both the state and federal courts, has been reached in the
amount of $1.5 million. On or before June 19, 1995, the Company will deposit
the sum of $1.5 million in an escrow account at Pacific First National Bank.
The essential terms of the escrow will be that, together with any interest,
shall be returned to the Company in the event the settlement is not approved
by both the King County Superior Court and the United States District Court
for the Western District of Washington at Seattle; in the event the
settlement is approved and judgments and orders of dismissal with prejudice
are entered in both cases, the funds will be distributed as directed by the
King County Superior Court. In addition, defendants agree to pay as incurred
reasonable costs of notice to the Class and administration of claims up to
but not in excess of $50,000.

2. The notice and claim form shall have a clause releasing defendants
from any and all claims that were or could have been asserted, whether known or
unknown, against defendants and each of them. In order to participate in the
settlement fund each Class Member will be required to submit an executed Proof
of Claim and Release. Only

<PAGE>
Class Members with recognized losses in excess of $5 shall participate in the
settlement fund. The Honorable Sharon Armstrong, Superior Court Judge for King
County, shall resolve all disputes relative to any notice, claim form, order,
settlement agreement, or the term and provisions of any other document, pleading
or paper required to consummate the settlement. All terms not resolved on or
before June 19, 1995, shall be presented to Judge Armstrong for resolution in
accordance with such schedule as the Court may establish.

3. Upon execution of this MOU, the parties will issue a joint press
release, Exhibit A attached hereto and incorporated herein, relating to the
settlement of this case. All parties are free to comment regarding the case
and the settlement. However, if plaintiffs believe that a published
statement of fact, by a defendant is materially false, plaintiffs may apply
to Judge Armstrong or, in her absence, Judge John Coughenour, for an order
exempting from the protective order one or more specified documents obtained
in discovery from defendants. The court may exempt the specified documents
if it finds that the published statement was materially misleading, and the
document or documents sought to be exempted contradicts the challenged
statement. This provision will be of no furth force or effect after the
protective order has concluded in accordance with its terms.

4. The settlement is contingent upon preliminary and final approval by
both the King County Superior Court and the United States District Court for
the Western District of Washington. The parties agree that they will
promptly seek provisional or preliminary approval by both Courts of this
settlement. The application for preliminary approval of this settlement and
of plaintiffs' petition for attorneys' fees and expenses shall be made before
notice of settlement is distributed to class members. Should either court
fail to provisionally or finally approve the settlement, then this agreement
shall be of no further force or effect and the $1.5 million, plus any
interest, shall be promptly returned

<PAGE>

by the escrow agent to defendants. Promptly upon execution of this MOU,
defendants will advise the Ninth Circuit Court of Appeals and the Washington
Court of Appeals of the pendency of the settlement. Upon final approval of
the settlement by both trial courts, defendants will dismiss all pending
appeals.

5. All opt-outs will be given an opportunity to submit claims, and such
claims shall be processed notwithstanding the claimants' prior opt-out.

6. Except as provided in paragraphs 1 and 4 above relating to return of
funds in escrow, defendants shall have no recapture rights in the settlement
fund.

7. This memorandum may be executed in separate counterparts.

AGREED TO ON THIS 23RD DAY OF MAY, 1995.

ATTORNEYS FOR THE CLASS ATTORNEYS FOR DEFENDANTS

/s/Steve W. Berman /s/Barnes H. Ellis
-------------------- --------------------
Steve W. Berman Barnes H. Ellis
Carl H. Hagens Lois 0. Rosenbaum
HAGENS & BERMAN STOEL RIVES BOLEY JONES & GREY

DATED: illegible DATED: May 24, 1995
------------- --------------

<PAGE>

EXHIBIT A

PRESS RELEASE
-------------

Eagle Hardware & Garden Inc. has reached agreement with the plaintiffs'
attorneys in pending shareholder litigation to settle all claims for $1.5
million dollars, plus up to $50,000 of costs of settlement administration.
The agreement is subject to approval by Judge Sharon Armstrong of the King
County Superior Court and Judge John C. Coughenour of the United States
District for the Western District of Washington as well as notice to the
Class and a hearing on final approval. Eagle's Chairman of the Board and
Chief Executive Officer David Heerensperger stated: "This litigation has been
hard fought in two courts for over two years. We believe it to be in the
best interests of our shareholders to agree to this settlement which will be
funded entirely by insurance and will avoid Eagle incurring any further
expense or diversion of management time. We stand by our position that Eagle
and its management acted properly at all times."

Steve Berman and Carl Hagens, lead attorneys for the plaintiffs stated:
"This was a complicated, costly and difficult litigation. We are pleased to
have achieved a fair settlement for the Class."

<PAGE>

AGREEMENT

This Agreement is entered into by and among David Heerensperger, Richard
Takata and Myron E. Kirkpatrick (collectively "the individual insureds"), Eagle
Hardware & Garden, Inc., a Washington corporation ("Eagle"), and National Union
Fire Insurance Company of Pittsburgh, PA, a New York corporation ("National
Union").

WHEREAS, National Union issued Directors and Officers Insurance and Company
Reimbursement Policy No. 440-06-85 ("the Policy") to Eagle, which policy
provided certain coverage with respect to claims made against officers and
directors of Eagle, including the individual insureds;

WHEREAS, certain actions were filed in the United States District Court for
the Western District of Washington, naming Eagle and the individual insureds as
defendants, and were consolidated under the style IN RE EAGLE HARDWARE
SECURITIES LITIGATION (collectively "the Federal Lawsuits");

WHEREAS, certain actions were filed in the Superior Court of Washington for
King County, naming Eagle and the individual insureds as defendants
(collectively "the State Lawsuits");

WHEREAS, the Board of Directors of Eagle adopted one or more resolutions
indemnifying the individual insureds against claims asserted in the Federal
Lawsuits and the State Lawsuits;

WHEREAS, Eagle and the individual insureds made written demands upon
National Union that it provide coverage under the Policy of claims asserted in
the Federal Lawsuits and the State Lawsuits, and National Union reserved all
rights under the

<PAGE>

Policy, and certain disputes arose between Eagle and the individual insureds, on
the one hand, and National Union, on the other, with respect to the nature and
extent of National Union's coverage obligations under the Policy; and

WHEREAS, it is the desire of all parties hereto to resolve all disputes
between them relating to the Policy and the Federal and State Lawsuits, and to
terminate all rights and obligations under the Policy;

NOW, THEREFORE, for and in consideration of the covenants, agreements and
releases contained herein, the parties hereto agree as follows:

1. On or before June 7, 1995, National Union shall pay to Eagle the
amount of two million, six hundred seventy-five thousand dollars ($2,675,000) by
check payable to Eagle.

2. Upon Eagle's receipt of the payment described in paragraph no. 1, the
individual insureds and Eagle, on its own behalf and on behalf of its
subsidiaries, parents, affiliates, shareholders, directors, officers, agents,
employees and successors (collectively "the Eagle Parties"), release and forever
discharge National Union, its parents, subsidiaries, affiliates, shareholders,
directors, officers, agents, employees, attorneys and successors (collectively
"the National Union Parties") from any and all claims, liabilities, actions or
causes of action which the Eagle Parties and/or the individual insureds have or
may have against the National Union Parties under or with respect to the Policy,
whether presently known or unknown, vested or contingent, suspected, accrued or
yet to accrue, including,

-2-

<PAGE>

without limitation, any and all claims arising from or relating to the Federal
Lawsuits and the State Lawsuits.

3. Eagle agrees to indemnify and hold the National Union Parties harmless
from and against any and all claims, liabilities, actions or causes of action by
or for any person or entity, under or with respect to the Policy, whether
presently known or unknown, vested or contingent, suspected, accrued or yet to
accrue, including, without limitation, any and all claims arising from or
relating to the Federal Lawsuits and the State Lawsuits.

4. The persons signing this Agreement represent and warrant that they are
duly authorized to execute and enter into this Agreement on behalf of the
parties in whose name they sign.

5. Eagle and the individual insureds represent and warrant that they have
not assigned, conveyed or in any way encumbered any of their rights, claims or
causes of action under or with respect to the Policy and that they have full
legal authority to enter into the release set forth in this Agreement.

6. This Agreement represents the entire agreement of the parties with
respect to the subject matter hereof and may not be amended, terminated or
modified except by writing, signed by all of the parties hereto.

DATE: 6/6/95 /s/ James F. [illegible]
---------- --------------------------------------
National Union Fire Insurance
Company of Pittsburgh, PA

DATE: /s/ Richard T. Takata
---------- --------------------------------------
Eagle Hardware & Garden, Inc.

DATE: /s/ David J. Heerensperger
---------- --------------------------------------
David Heerensperger

DATE: /s/ Richard T. Takata
---------- --------------------------------------
Richard Takata

DATE: 6/2/95 /s/ Myron E. Kirkpatrick
---------- --------------------------------------
Myron E. Kirkpatrick
-3-

<PAGE>

AMENDED AND RESTATED CREDIT AGREEMENT

Among

EAGLE HARDWARE & GARDEN, INC.,
AS BORROWER,

THE LENDERS LISTED HEREIN,
AS LENDERS,

AND

U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION,
AS AGENT

Dated as of May 28, 1996

<PAGE>

TABLE OF CONTENTS

ARTICLE I. DEFINITIONS, ETC................................................ 1
1.1 Terms Defined.................................................... 1
1.2 Accounting Terms................................................. 14
1.3 Rules of Construction............................................ 14
1.4 Incorporation of Recitals and Exhibits........................... 14

ARTICLE II. REVOLVING CREDIT FACILITY...................................... 15
2.1 Revolving Credit Commitments..................................... 15
2.2 Purposes of Revolving Credit Loans............................... 15
2.3 Revolving Credit Notes........................................... 15
2.4 Interest Rates................................................... 16
2.5 Payment of Interest.............................................. 16
2.6 Repayment of Principal and Termination of Revolving Credit
Commitments...................................................... 16
2.7 Revolving Credit Commitment Fee.................................. 16
2.8 The Letters of Credit............................................ 17
2.9 Issuance of Letters of Credit.................................... 17
2.10 Participating Interest in Letters of Credit...................... 17
2.11 Procedure for Opening Letters of Credit.......................... 17
2.12 Letter of Credit Payments........................................ 18
2.13 Letter of Credit Fees............................................ 19
2.14 Further Assurances............................................... 19
2.15 Obligations Absolute............................................. 19
2.16 Assignments...................................................... 20
2.17 Letter of Credit and Lender's Acceptance Reserves................ 20
2.18 Existing Letters of Credit....................................... 21
2.19 Borrowing Base................................................... 21
2.20 Borrowing Under the Revolving Credit Commitments; Borrowing
Notices.......................................................... 21

ARTICLE III. GENERAL PROVISIONS APPLICABLE TO THE LOANS.................... 22
3.1 Manner of Payment................................................ 22
3.2 Statements....................................................... 23
3.3 Computations of Interest and Fees................................ 23
3.4 Default Interest................................................. 23
3.5 Maximum Interest Rate............................................ 23
3.6 Late Charge...................................................... 24
3.7 Prepayments...................................................... 24
3.8 IBOR Rate Borrowing Provisions................................... 24
3.9 Quoted Rate Borrowing Provisions................................. 25

- i -

<PAGE>

3.10 Collateral....................................................... 26
3.11 Agent Fee........................................................ 26
3.12 Pro Rata Treatment and Payments.................................. 26

ARTICLE IV. CONDITIONS PRECEDENT .......................................... 27
4.1 Conditions Precedent for Initial Loans........................... 27
4.2 Conditions Precedent to All Loans, Etc........................... 29

ARTICLE V. AFFIRMATIVE COVENANTS........................................... 30
5.1 Financial Data................................................... 30
5.2 Licenses and Permits............................................. 32
5.3 Maintenance of Properties........................................ 32
5.4 Payment of Charges............................................... 32
5.5 Insurance........................................................ 33
5.6 Maintenance of Records........................................... 33
5.7 Inspection....................................................... 33
5.8 Hazardous Substances............................................. 33
5.9 Corporate Existence.............................................. 35
5.10 Notice of Disputes and Other Matters............................. 35
5.11 Exchange of Notes................................................ 35
5.12 Maintenance of Liens............................................. 35
5.13 Other Agreements................................................. 36
5.14 After-Acquired Collateral........................................ 36
5.15 Further Assurances............................................... 36
5.16 Maintenance of Bank Accounts..................................... 36
5.17 Guaranties and Security Agreements from Subsidiaries............. 36

ARTICLE VI. NEGATIVE COVENANTS............................................. 36
6.1 Dividends and Distributions...................................... 37
6.2 Transactions with Affiliates..................................... 37
6.3 Other Indebtedness............................................... 37
6.4 Liens............................................................ 37
6.5 Advances and Loans............................................... 38
6.6 Investments...................................................... 38
6.7 Liquidation and Sale of Assets................................... 38
6.8 Consolidation and Merger......................................... 38
6.9 Subsidiaries..................................................... 38
6.10 Type of Business................................................. 39
6.11 Change of Chief Executive Office or Name......................... 39
6.12 Change in Documents.............................................. 39
6.13 Control.......................................................... 39
6.14 Pension Plan..................................................... 39
6.15 Tangible Net Worth............................................... 39

- ii -

<PAGE>

6.16 Capital Ratio.................................................... 39
6.17 Fixed Charge Coverage Ratio...................................... 39
6.18 Debt Service Coverage Ratio...................................... 40
6.19 Current Ratio.................................................... 40
6.20 Working Capital.................................................. 40
6.21 Capital Expenditures............................................. 40

ARTICLE VII. REPRESENTATIONS AND WARRANTIES................................ 40
7.1 Corporate Status................................................. 40
7.2 Power and Authority.............................................. 40
7.3 No Violation of Agreements....................................... 41
7.4 Recording and Enforceability..................................... 41
7.5 Litigation....................................................... 41
7.6 Good Title to Properties......................................... 41
7.7 Licenses and Permits............................................. 42
7.8 No Burdensome Agreements......................................... 42
7.9 Properties in Good Condition..................................... 42
7.10 Financial Statements............................................. 42
7.11 Outstanding Indebtedness......................................... 42
7.12 Taxes............................................................ 43
7.13 License Fees..................................................... 43
7.14 Trademarks, Patents, Etc......................................... 43
7.15 Disclosure....................................................... 43
7.16 Regulations U and X.............................................. 43
7.17 Names............................................................ 43
7.18 Condition of Property............................................ 43
7.19 Pension Plans.................................................... 44

ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES.................................. 44
8.1 Events of Default................................................ 44
8.2 Acceleration; Remedies........................................... 46

ARTICLE IX. AGENCY PROVISIONS.............................................. 47
9.1 Authorization and Action......................................... 47
9.2 Duties and Obligations........................................... 48
9.3 Rights of Agent as Lender........................................ 49
9.4 Lenders' Credit Decision......................................... 49
9.5 Indemnification.................................................. 49
9.6 Successor Agent.................................................. 50
9.7 No Effect On Borrower............................................ 50

ARTICLE X. MISCELLANEOUS................................................... 50
10.1 Notices.......................................................... 50

- iii -

<PAGE>

10.2 Payment of Expenses and Taxes.................................... 50
10.3 Successors and Assigns; Participations; Purchasing Lenders....... 51
10.4 Adjustments; Setoff.............................................. 54
10.5 Setoff........................................................... 55
10.6 Waiver of Setoff................................................. 55
10.7 Fees and Commissions............................................. 55
10.8 Amendments and Waivers........................................... 55
10.9 Severability..................................................... 56
10.10 Descriptive Headings............................................. 56
10.11 Governing Law.................................................... 56
10.12 Consent to Jurisdiction, Service, and Venue...................... 56
10.13 Arbitration...................................................... 57
10.14 Counterparts..................................................... 57
10.15 Statutory Notice................................................. 57

- iv -

<PAGE>

EXHIBITS

Exhibit A -- Revolving Credit Note, Section 2.3

Exhibit B -- Letter of Credit Participation Certificate,
Section 2.12(b)

Exhibit C -- Borrowing Notice for IBOR Rate Borrowings,
Section 2.20(a)

Exhibit D -- Borrowing Notice for Quoted Rate Borrowings,
Section 2.20(a)

Exhibit E -- Amendment to Security Agreement, Section 4.1(b)

Exhibit F -- Amendment to Trademark Assignment, Section 4.1(c)

Exhibit G -- Opinion of Counsel, Section 4.1(e)

Exhibit H -- Board Resolution and Incumbency Certificate,
Section 4.1(h)(iii)

Exhibit I -- Amendment to Intercreditor Agreement, Section 4.1(p)

Exhibit J -- Borrowing Base Certificate, Section 5.1(i)

Exhibit K -- Commitment Transfer Supplement, Section 10.3(c)

- v -

<PAGE>

SCHEDULES

Schedule 1.1.1 -- Existing Letters of Credit

Schedule 1.1.2 -- Lenders' Commitments and Pro Rata Shares

Schedule 6.4 -- Schedule of Existing Liens

Schedule 7.5 -- Schedule of Litigation

Schedule 7.14 -- Schedule of Trademarks

- vi -

<PAGE>

AMENDED AND RESTATED CREDIT AGREEMENT

This amended and restated credit agreement is made and entered into as
of this 28th day May, 1996, by and among EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), THE FINANCIAL INSTITUTIONS LISTED ON THE
SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender" and
collectively as "Lenders"), and U. S. BANK OF WASHINGTON, NATIONAL ASSOCIATION,
a national banking association ("U. S. Bank"), as agent for Lenders (in such
capacity "Agent"). Capitalized terms have the meanings assigned in ARTICLE I
hereof.

R E C I T A L S :

A. On or about June 30, 1995, Agent, Lenders, and Borrower entered
into that certain credit agreement whereby Lenders agreed to make loans and
advances of credit to Borrower on the terms and conditions set forth therein.
Agent, Lenders, and Borrower have since entered into three amendments to credit
agreement, the first amendment to credit agreement dated August 25, 1995, the
second amendment to credit agreement dated October 23, 1995, and the third
amendment to credit agreement dated January 17, 1996. The credit agreement and
the first, second, and third amendments described in this Recital A shall
hereinafter be referred to as the "Original Credit Agreement."

B. Agent, Lenders, and Borrower desire to amend certain terms of the
Original Credit Agreement and to restate the Original Credit Agreement in its
entirety.

NOW, THEREFORE, in consideration of the mutual covenants and
conditions set forth herein, the parties hereto (a) agree that the Original
Credit Agreement is hereby amended and restated in its entirety as set forth
herein, (b) further agree that all Loan Documents executed in connection with
the Original Credit Agreement shall remain in full force and effect, except as
expressly modified herein, and (c) agree as follows:

ARTICLE I. DEFINITIONS, ETC.

1.1 TERMS DEFINED. As used herein, the following terms have the
meanings set forth below:

"Adjusted Cash Flow" means as of the end of each Fiscal Year,
Borrower's Cash Flow for such Fiscal Year less Capital Expenditures made during
such Fiscal Year.

- 1 -

<PAGE>

"Adjusted Cash Flow Carryforward" means (a) for Borrower's Fiscal Year
ending January 26, 1996, Capital Proceeds received by Borrower during such
Fiscal Year and (b) for each Fiscal Year after January 26, 1996, the positive
difference between (i) Adjusted Cash Flow for such Fiscal Year then ended and
(ii) the sum of (x) Interest Expense for such Fiscal Year and (y) the current
portion of Borrower's Consolidated long term Indebtedness as of the end of such
Fiscal Year.

"Affiliate" means a Person that now or hereafter, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Borrower. A Person shall be deemed to control a
corporation or partnership if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management of such corporation or
partnership, whether through the ownership of voting securities, by contract, or
otherwise.

"Agent" means U. S. Bank in its capacity as agent for Lenders, and any
successor agent designated pursuant to SECTION 9.6 herein.

"Aggregate Current Amount" means, at any particular time, the sum of
(a) the aggregate outstanding balance of principal and accrued interest on the
Revolving Credit Loans plus (b) aggregate undrawn amount of all Letters of
Credit then outstanding plus (c) the unreimbursed portion of any payment made by
Issuing Lender under any Letter of Credit.

"Agreement" means this amended and restated credit agreement and all
amendments and modifications thereto.

"Applicable Law" means all applicable provisions and requirements of
all (a) constitutions, statutes, ordinances, rules, regulations, standards,
orders, and directives of any Governmental Bodies, (b) Governmental Approvals,
and (c) orders, decisions, decrees, judgments, injunctions, and writs of all
courts and arbitrators, whether such Applicable Laws presently exist, or are
modified, promulgated, or implemented after the date hereof.

"Applicable Margin" shall be determined as of the end of each Fiscal
Quarter based on the Borrower's Capital Ratio for such Fiscal Quarter in
accordance with the table set forth below and shall be effective as of the first
day of the Fiscal Quarter following the Borrower's delivery of the financial
statements required under Section 5.1(c) herein:

CAPITAL RATIO APPLICABLE MARGIN

GREATER THAN 0.9:1.0 2% per annum
LESS THAN OR EQUAL TO 0.9:1.0
AND GREATER THAN OR EQUAL TO 0.8:1.0 1.75% per annum
LESS THAN 0.8:1.0
GREATER THAN OR EQUAL TO 0.5:1.0 1.5% per annum
LESS THAN 0.5:1.0 1.25% per annum

- 2 -

<PAGE>

where:

GREATER THAN means greater than
LESS THAN means less than
GREATER THAN OR EQUAL TO means greater than or equal to
LESS THAN OR EQUAL TO means lesser than or equal to

"Benefitted Lender" has the meaning set forth in SECTION 10.4(a)
herein.

"Borrowing Base" means an amount equal to the sum of (a) 80 percent of
Eligible Accounts Receivable, plus (b) 55 percent of the positive difference
between Eligible Inventory and Trade Payables, plus (c) $10,000,000.

"Borrowing Date" means any Business Day specified in a notice pursuant
to (a) SECTION 2.20 as a date on which Borrower requests Lenders to make Loans
hereunder or (b) SECTION 2.9 as a date on which Borrower has requested Issuing
Bank to issue a Letter of Credit hereunder.

"Borrowing Notice" has the meaning set forth in SECTION 2.20 herein.

"Business Day" means any day except a Saturday, Sunday, or other day
on which national banks in the state of Washington are authorized or required by
law to close.

"Capital Expenditures" means, for any period, the sum of (a) the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability) by Borrower and its Subsidiaries during that period
that, in conformity with GAAP, are included in "additions to property, plant, or
equipment" or comparable items reflected in the Consolidated statement of cash
flows of Borrower and its Subsidiaries, plus (b) to the extent not covered by
clause (a) of this definition, the portion of Capital Leases which is
capitalized on the Consolidated balance sheet of Borrower and its Subsidiaries,
plus (c) to the extent not covered by clauses (a) or (b) of this definition, the
aggregate of all expenditures by Borrower and its Subsidiaries during that
period to acquire (by purchase or otherwise) the business, property (except
inventory in the ordinary course of business) or fixed assets of, or stock or
other evidence of beneficial ownership of, any Person.

"Capital Lease" means, as applied to any Person, any lease of any
property (whether real, personal, or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.

"Capital Proceeds" means, for the applicable accounting period, the
sum of (a) the net proceeds of any equity or Subordinated Debt raised by
Borrower during such

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<PAGE>

period, plus (b) the net proceeds of any financing or sale of Borrower's owned
stores during such period, plus (c) new Capital Leases entered into during such
period.

"Capital Ratio" means, as of the end of any Fiscal Quarter, the ratio
of Borrower's Consolidated Indebtedness less Subordinated Debt, to Borrower's
Consolidated Tangible Net Worth plus Subordinated Debt as of the end of such
Fiscal Quarter.

"Cash Flow" means, for any period, Net Income for such period, subject
to the following adjustments:

(a) There shall be added to Net Income: (i) depreciation,
amortization, and other similar non-cash charges for such period, (ii) Interest
Expense for such period, (iii) Capital Proceeds received by Borrower during such
period;

(b) There shall be deducted from Net Income: (i) dividends and
distributions made to Borrower's shareholders during such period, and
(ii) reductions in the principal amount of Subordinated Debt made during such
period.

"Claims" has the meaning set forth in SECTION 10.13(a) herein.

"Closing Date" means the date of this Agreement.

"Collateral" means all the property, real or personal, tangible or
intangible, now owned or hereafter acquired, in which Agent has been or is to be
granted a security interest by Borrower or any other Person, to secure the
Obligations.

"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods, or services by Borrower in
the ordinary course of business of Borrower.

"Commitment Transfer Supplement" has the meaning set forth in
SECTION 10.3(C) hereof.

"Consolidated" means, as applied to any financial or accounting term
with respect to any Person, such term determined on a consolidated basis in
accordance with generally accepted accounting principles for the Person and all
consolidated Subsidiaries of such Person.

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<PAGE>

"Current Assets" means at any time Borrower's Consolidated assets
treated as current assets in accordance with GAAP; excluding, however, from the
determination of current assets, loans to officers or employees of Borrower or
any Affiliate of Borrower.

"Current Liabilities" means at any time all of Borrower's Consolidated
liabilities treated as current liabilities in accordance with GAAP; including
without limitation (a) all obligations payable on demand or within one year
after the date on which the determination is made, (b) final maturities and
sinking fund payments required to be made within one year after the date on
which the determination is made, and (c) the current liabilities of any Person
(other than Borrower) which are guaranteed by Borrower.

"Default" means any condition or event that constitutes an Event of
Default or with the giving of notice or lapse of time or both would, unless
cured or waived, become an Event of Default.

"Dollars" or "$" shall mean lawful money of the United States of
America.

"Eligible Accounts Receivable" means the accounts receivable of
Borrower excluding the following: (a) accounts receivable that have been
outstanding in excess of 90 days from the date of invoice, (b) accounts
receivable from any single customer of Borrower if 25 percent or more of such
customer's accounts owed to Borrower are ineligible for any reason, (c) accounts
receivable due from officers, employees, or Affiliates of Borrower, (d) accounts
receivable that are partially or wholly subject to the right of setoff,
(e) accounts receivable resulting from COD sales, finance charges, and
consignments, (f) accounts receivable due from Persons not residents of the
United States, (g) accounts receivable due from any Governmental Body,
(h) accounts receivable that constitute any retainage, (i) accounts receivable
that constitute dated billings or progress billings, and (j) accounts receivable
that are subject to any security interest other than the security interest
granted to Agent for the ratable benefit of lenders. In addition to and not in
limitation of the foregoing, "Eligible Accounts Receivable" shall not include
any accounts receivable unless and until Agent holds a first, valid, binding,
exclusive, and perfected security interest in any such accounts receivable.

"Eligible Inventory" means the inventory of finished goods of
Borrower, valued at the lower of cost or market. "Eligible Inventory" shall
exclude raw materials, work-in-process, inventory that is obsolete, consigned
inventory, inventory that is not in saleable condition, inventory that is
located outside the United States, and inventory in which any Person, other than
Agent, has a security interest. In addition to and not in limitation of the
foregoing, "Eligible Inventory" shall not include any inventory unless and until
Agent holds a first, valid, binding, exclusive, and perfected security interest
in that inventory.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

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<PAGE>

"ERISA Affiliate" means, as applied to any Person, (a) any
corporation, which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Internal Revenue Code
of which that Person is, or was at any time, a member; (b) any trade or business
(whether or not incorporated) which is, or was at any time, a member of a group
of trades or businesses under common control within the meaning of
Section 414(c) of the Internal Revenue Code for which that Person is, or was at
any time, a member; and (c) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (a) above or any trade or business
described in clause (b) above is, or was at any time, a member.

"Event of Default" has the meaning set forth in SECTION 8.1 herein.

"Existing Letters of Credit" means those certain letters of credit
listed on SCHEDULE 1.1.1 annexed hereto issued by U. S. Bank pursuant to that
certain credit agreement dated as of March 29, 1993, between Borrower and U. S.
Bank, as amended, which will, as of the Closing Date, be deemed outstanding as
Letters of Credit issued pursuant to SECTION 2.8 of this Agreement.

"Fee Letter" means the letter agreement between Borrower and Agent
dated May 28, 1996.

"Fiscal Calendar" means, for any Fiscal Year, a calendar for such
Fiscal Year designating Borrower's accounting periods.

"Fiscal Period" means the four or five week period designated as an
accounting period on Borrower's Fiscal Calendar.

"Fiscal Quarter" means the 13 or 14 week period designated as an
accounting quarter on Borrower's Fiscal Calendar.

"Fiscal Year" means the 52 or 53 week period commencing on the
Saturday after the last Friday of January and ending on the last Friday of the
next succeeding January.

"GAAP" means, subject to the limitations on the application thereof
set forth in SECTION 1.2, generally accepted accounting principles set forth in
opinions and pronouncements of the accounting principles board of the American
Institute of Certified Public Accountants in statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by significant segment of the accounting
profession, in each case as the same are applicable to the circumstances as of
the date of determination.

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<PAGE>

"Governmental Approval" means any authorization, consent, approval,
certificate of compliance, license, permit, or exemption from, contract with,
registration or filing with, or report or notice to, any Governmental Body
required or permitted by Applicable Law.

"Governmental Body" means the government of the United States, any
state, or any foreign country, or any governmental or regulatory official, body,
department, bureau, subdivision, agency, commission, court, arbitrator, or
authority, or any instrumentality thereof, whether federal, state, or local.

"Hazardous Materials" means oil or petrochemical products, PCB's,
asbestos, urea formaldehyde, flammable explosives, radioactive materials,
hazardous wastes, toxic substances, or related materials including but not
limited to substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," or "toxic substances"
under any Hazardous Materials Laws.

"Hazardous Materials Claims" means (a) enforcement, cleanup, removal,
or other regulatory actions instituted, completed, or threatened by any
Governmental Body pursuant to any applicable Hazardous Materials Laws; and
(b) claims made or threatened by any third party against Borrower, any
Subsidiary, or any of their property relating to damage, contribution, cost
recovery, compensation, loss, or injury resulting from Hazardous Materials.

"Hazardous Materials Laws" means all Applicable Laws pertaining to
Hazardous Materials.

"IBOR Borrowing Rate" means the IBOR Rate plus the Applicable Margin;
provided that at any time the Aggregate Current Amount exceeds $50,000,000, then
the IBOR Borrowing Rate means the IBOR Rate plus the Applicable Margin plus
0.25 percent per annum.

"IBOR Interest Period" means as to any IBOR Rate Borrowing, a period
of one, two, or three months commencing on the date the IBOR Borrowing Rate
becomes applicable thereto; PROVIDED however, that: (a) no IBOR Interest Period
shall be selected which would extend beyond the Revolving Credit Commitment
Period; (b) any IBOR Interest Period which would otherwise expire on a day which
is not a Business Day, shall be extended to the next succeeding Business Day,
unless the result of such extension would be to extend such IBOR Interest Period
into another calendar month, in which event the IBOR Interest Period shall end
on the immediately preceding Business Day; and (c) any IBOR Interest Period that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
IBOR Interest Period) shall end on the last Business Day of a calendar month.

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<PAGE>

"IBOR Rate" means for any IBOR Interest Period, the rate per annum
(computed on the basis of a 360-day year and the actual number of days elapsed)
equal to the arithmetic average (rounded upward to the nearest 1/16 of
1 percent) of the rates per annum determined by Agent as of the times specified
in SECTION 3.8(a) herein on the date two Business Days prior to the first day of
the applicable IBOR Interest Period as the rates offered to Agent by three
Eurodollar money market dealers in such Eurodollar market as may be selected by
Agent for U. S. dollar deposits to be delivered on the first day of such IBOR
Interest Period for the number of months therein; PROVIDED, however, that
Agent's IBOR Rate shall be adjusted to take into account the maximum reserves
required to be maintained for Eurocurrency liabilities by banks during each such
IBOR Interest Period as specified in Regulation D of the Board of Governors of
the Federal Reserve System or any successor regulation.

"IBOR Rate Borrowing" means any Revolving Credit Loan for which
Borrower has elected the IBOR Borrowing Rate to apply. The minimum amount of
each IBOR Rate Borrowing shall be $1,000,000 and integral multiples thereof.

"Indebtedness" means all items that in accordance with GAAP would be
included in determining total liabilities as shown on the liabilities side of
the Consolidated balance sheet as of the date that "Indebtedness" is to be
determined and in any event includes liabilities secured by any mortgage, deed
of trust, pledge, lien, or security interest on property owned or acquired,
whether or not such a liability has been assumed, and the guaranties,
endorsements (other than for collection in the ordinary course of business), and
other contingent obligations with regard to the obligations of other Persons.

"Indemnified Liabilities" has the meaning set forth in SECTION 10.2
herein.

"Indemnified Persons" has the meaning set forth in SECTION 10.2
herein.

"Interest Expense" means, for any period, the interest charges paid or
accrued during such period (including imputed interest on capital lease
obligations) on the Consolidated Indebtedness of Borrower.

"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.

"Issuing Lender" means U. S. Bank or any of its Affiliates which from
time to time may be designated by U. S. Bank in its sole discretion to issue
Letters of Credit.

"L/C Application" has the meaning set forth in SECTION 2.9.

"L/C Participating Interest" means an undivided participating interest
in each Letter of Credit and the related L/C Application.

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<PAGE>

"Lenders" means the Persons identified as "Lenders" and listed on the
signature page of this Agreement, together with their successors and permitted
assigns pursuant to SECTION 10.3 herein.

"Letters of Credit" means Commercial Letters of Credit and Standby
Letters of Credit issued or to be issued by Issuing Lender for the account of
Borrower pursuant to SECTION 2.8 and all Existing Letters of Credit.

"Letter of Credit Participation Certificate" has the meaning set forth
in SECTION 2.12(b).

"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge, or any encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) in any option, trust, or other
preferential arrangement having the practical effect of any of the foregoing.

"Loans" means the Revolving Credit Loans and includes all renewals and
modifications thereof.

"Loan Documents" means this Agreement, the Notes, together with all
other agreements, instruments, and documents arising out of or relating to this
Agreement, the Loans, or the Letters of Credit, as well as all renewals and
modifications thereof.

"Net Income" means, for the applicable accounting period, Borrower's
Consolidated Net Income determined in accordance with GAAP.

"Notes" means the Revolving Credit Notes and includes all renewals and
modifications thereof.

"Obligations" means all obligations of every nature of Borrower and
its Subsidiaries from time to time owed to Agent, Lenders, Issuing Lender, or
any of them under the Loan Documents, whether for principal, interest,
reimbursement of amounts drawn under Letters of Credit, fees, expenses,
indemnification, or otherwise.

"Participant" has the meaning set forth in SECTION 10.3(b) hereof.

"Participating Lender" means any Lender (other than Issuing Lender)
with respect to its L/C Participating Interest in Letters of Credit.

"Person" means any individual, partnership, joint venture, firm,
corporation, association, trust, or other enterprise or any Governmental Body.

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<PAGE>

"Plan" means an employee pension benefit plan that is covered by ERISA
or subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and is either (a) maintained by Borrower or any ERISA Affiliate for
employees of Borrower or any ERISA Affiliate or (b) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which Borrower or any ERISA Affiliate is
then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.

"Prime Borrowing Rate" means a per annum rate equal to the Prime Rate;
provided that at any time, the Aggregate Current Amount exceeds $50,000,000,
then the Prime Borrowing Rate means the Prime Rate plus 0.25 percent per annum.

"Prime Rate" means that rate of interest announced by Agent from time
to time as its prime rate. The Prime Rate is not the lowest rate of interest
charged by Agent to any classification of Agent customers. For purposes of this
Agreement, each time the Prime Rate changes, a contemporaneous change shall
occur in the interest rate charged to Borrower on any Prime Rate Borrowings,
effective upon the announcement or publication of any such change in rate.
Agent shall not be obligated to notify Borrower of any change in the Prime Rate;
however, the Prime Rate is available upon inquiry of Agent.

"Prime Rate Borrowing" means any Revolving Credit Loan pursuant to the
terms of this Agreement which bears interest at the Prime Borrowing Rate.
Computations of interest for any Prime Rate Borrowing shall be based upon a
360 day year, for the actual number of days elapsed.

"Pro Rata Share" means with respect to all payments, computation, and
other matters relating to the Revolving Credit Commitment or the Revolving
Credit Loans of any Lender or any Letters of Credit issued or participations
herein purchased by any Lender, the percentage obtained by dividing (a) the
Revolving Loan Exposure of that Lender by (b) the aggregate Revolving Loan
Exposure of all Lenders. The initial Pro Rata Share of each Lender for purposes
hereof is set forth opposite the name of that Lender in SCHEDULE 1.1.2 annexed
hereto.

"Purchasing Lender" has the meaning set forth in SECTION 10.3(c)
herein.

"Quoted Rate" means, for any Quoted Rate Interest Period, a fixed rate
of interest per annum based upon a 360-day year, for the actual number of days
elapsed, determined by Agent in its sole discretion, for borrowings under the
Revolving Credit Commitment.

"Quoted Rate Borrowing" means any Revolving Credit Loan that, pursuant
to the terms of this Agreement, bears interest at the Quoted Rate. The minimum
amount of each Quoted Rate Borrowing shall be $1,000,000 and integral multiples
thereof; provided

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that the aggregate amount of all Quoted Rate Borrowings at any one time
outstanding shall not exceed $15,000,000.

"Quoted Rate Interest Period" means as to any Quoted Rate Borrowing,
any period of one through 29 days commencing on the date the Quoted Rate becomes
applicable thereto; provided, however, that: (a) no Quoted Rate Interest Period
shall be selected which would extend beyond the Revolving Credit Commitment
Period; and (b) no Quoted Rate Interest Period shall be selected which would
expire on a day that is not a Business Day.

"Requisite Lenders" means at any time Lenders having or holding
50.1 percent or more of the Revolving Loan Exposure, except that for purposes of
SECTION 10.8(b), and for purposes of determining the Lenders entitled to declare
the Notes to be forthwith due and payable pursuant to ARTICLE VIII, "Requisite
Lenders" shall mean all Lenders.

"Register" has the meaning set forth in SECTION 10.3(d) herein.

"Revolving Credit Loan" has the meaning set forth in SECTION 2.1(a)
herein and includes all renewals and modifications of the Revolving Credit Loan.

"Revolving Credit Commitment" shall mean, with respect to each Lender,
the amount of such Lender's commitment as set forth in SCHEDULE 1.1.2 hereto, as
adjusted pursuant to a Commitment Transfer Supplement.

"Revolving Credit Commitment Period" means the period from and
including the Closing Date to, but not including, the Revolving Credit
Termination Date.

"Revolving Credit Notes" has the meaning set forth in SECTION 2.3
herein and includes all renewals and modifications of the Revolving Credit
Notes.

"Revolving Credit Termination Date" means November 30, 1997, or such
earlier date as the Revolving Credit Commitments terminate.

"Revolving Loan Exposure" means, with respect to any Lender as of any
date of determination (a) prior to the termination of the Revolving Credit
Commitments, that Lender's Revolving Credit Commitment and (b) after the
termination of the Revolving Credit Commitments, the sum of (i) the aggregate
outstanding principal amount of the Revolving Credit Loans of that Lender, plus
(ii) in the event that Lender is the Issuing Lender, the aggregate amount of all
drawings under Letters of Credit honored by that Lender and not theretofore
reimbursed by Borrower (net of any participations purchased by other Lenders in
the applicable Letters of Credit), plus (iii) the aggregate amount of all
participations purchased by that Lender in any drawings under Letters of Credit
honored by Issuing Lender and not theretofore reimbursed by Borrower.

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"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (a) Indebtedness of
Borrower in respect of industrial revenue or development bonds or financings
(b) workers compensation liabilities of Borrower, (c) the obligations of third
party insurers of Borrower arising by or virtue of the laws of any jurisdiction
requiring third party insurers, (d) obligations with respect to Capital Leases
of Borrower, and (d) performance, payment, deposit, or surety obligations of
Borrower in any case if required by law or governmental rule or regulation or in
accordance with custom and practice in the industry; provided that Standby
Letters of Credit may not be issued for the purpose of supporting (i) Trade
Payables or (ii) Indebtedness constituting "antecedent debt" (as that term is
used in Section 547 of the United States Bankruptcy Code).

"Subordinated Debt" means any unsecured Indebtedness of Borrower which
expressly contains in the instruments evidencing such Indebtedness or in the
indenture or other similar instrument under which such Indebtedness is issued
(which indenture or other similar instrument shall be binding on all holders of
such Indebtedness), subordination provisions in form and substance satisfactory
to Agent substantially to the effect that the holder agrees that the
Indebtedness evidenced by such instrument, and any renewals or extensions
thereof, shall at all times and in all respects be subordinate and junior in
right of payment to the Obligations. Without limiting the effect of the
foregoing, the term "subordinate" and "junior" as used herein, shall include
within the meanings of such terms the following:

(i) if a Default or an Event of Default has occurred and is
continuing, such holder shall not accelerate, demand, sue, or take or
receive payment upon all or any part of such Indebtedness or commence any
action or proceeding against Borrower under any applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership,
insolvency, reorganization or similar laws from time to time in effect
affecting the rights of creditors generally ("Debtor Laws") unless and
until the Obligations shall have been paid in full, and in the event a
Default or an Event of Default has occurred and is continuing and such
holder receives any payment upon such Indebtedness, such holder shall hold
such payment in trust for Lenders and, upon demand by Agent therefor, shall
pay such amount to Agent for the benefit of Lenders; and

(ii) in the event of any proceedings under any Debtor Laws relative to
Borrower or any of Borrower's property, Agent on behalf of Lenders shall be
entitled to receive payment in full of all of the Obligations (including,
without limitation, postpetition interest, regardless of whether such
interest is allowable under Section 506 of the United States Bankruptcy
Code) before such holders are entitled to receive any payment on account of
such Indebtedness, and to that end Agent on behalf of Lenders shall be
entitled to receive distributions of any kind or character, whether in cash
or property or

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securities, which may be payable or deliverable in any such proceeding in
respect of such Indebtedness; and in the event any payment, dividend, or
distribution of any kind or character, whether in cash, property, or
securities (other than in securities which are subordinate and junior in
right of payment to the payment of the Obligations which may at the time be
outstanding) is made upon or in respect of the Indebtedness, it shall be
paid over to Agent on behalf of Lenders for application in payment thereof
unless and until all of the Obligations shall have been paid and satisfied
in full.

"Subsidiary" means, with respect to any Person (herein referred to as
the "parent"), any corporation, association or other business entity of which
more than 50 percent of the securities or other ownership interests having
ordinary voting power is, at the time as of which any determination is being
made, owned or controlled directly or indirectly by the parent or one or more
Subsidiaries of the parent, or by the parent and one or more Subsidiaries of the
parent.

"Tangible Net Worth" means Borrower's Consolidated net worth
determined in accordance with GAAP including all prepaid rent with respect to
any of Borrower's store leases and deferred pre-opening costs, less (a) the
amount of all deferred charges except those deferred charges with respect to
pre-opening costs; (b) all intangible assets including but not limited to
goodwill, licenses, franchises, trademarks, trade names, service marks, patents,
and copyrights; (c) unamortized debt discount and expense; (d) the cost of
capital stock of a Subsidiary or an Affiliate; (e) any Indebtedness owing to
Borrower or any of its Subsidiaries by an Affiliate thereof, unless such
Indebtedness arose in connection with the sale or lease of goods or property in
the ordinary course of business or the performance of services in the ordinary
course of business and would otherwise constitute current assets in accordance
with GAAP; and (f) the amount of a write-up in book value of the assets of
Borrower or any of its Subsidiaries resulting from any revaluation of assets.

"Tax" means for any Person, any tax, assessment, duty, levy, or other
change imposed by any Governmental Body on such Person or on any property,
revenue, income, or franchise of such Person and any interest or penalty with
respect to any of the foregoing.

"Total Revolving Credit Commitment" means the sum of the Revolving
Credit Commitments of all Lenders, but in no event shall the Total Revolving
Credit Commitment exceed $75,000,000.

"Trade Payables" means amounts owing to suppliers and vendors by
Borrower for the acquisition of inventory in the ordinary course of Borrower's
business.

"Transferee" has the meaning set forth in SECTION 10.3(e) hereof.

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<PAGE>

"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500 and any amendments thereof.

"U. S. Bank" means U. S. Bank of Washington, National Association, a
national banking association, and its successors and assigns.

1.2 ACCOUNTING TERMS. Except as otherwise expressly provided in this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP. Financial statements and
other information required to be delivered by Borrower to Agent and or Lenders
pursuant to clauses (a) (b), and (c) of SECTION 5.1 shall be prepared in
accordance with GAAP (except, with respect to interim financial statements,
normal year-end audit adjustments in the absence of explanatory footnotes) as in
effect at the time of such preparation. Calculations in connection with the
definitions, covenants, and other provisions of this Agreement shall utilize
accounting principles and policies in conformance with those used to prepare the
financial statements referred to in SECTION 7.10.

1.3 RULES OF CONSTRUCTION. Unless the context otherwise requires,
the following rules of construction apply to the Loan Documents:

(a) Words in the singular include the plural and in the plural
include the singular.

(b) Provisions of the Loan Documents apply to successive events and
transactions.

(c) In the event of any inconsistency between the provisions of this
Agreement and the provisions of any of the other Loan Documents, the provisions
of this Agreement govern.

(d) References to "Sections" and "subsections" shall be to Sections
and subsections, respectively, of this Agreement unless otherwise specifically
provided.

1.4 INCORPORATION OF RECITALS AND EXHIBITS. The foregoing recitals
are incorporated into this Agreement by reference. All references to "Exhibits"
contained herein are references to exhibits attached hereto, the terms and
conditions of which are made a part hereof for all purposes.

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ARTICLE II. REVOLVING CREDIT FACILITY

2.1 REVOLVING CREDIT COMMITMENTS.

(a) Subject to and upon the terms and conditions set forth herein,
and in reliance upon the representations, warranties and covenants of Borrower
contained herein or made pursuant hereto, each Lender severally and not jointly
agrees to make loans (individually, a "Revolving Credit Loan"; collectively, the
"Revolving Credit Loans") to Borrower from time to time during the Revolving
Credit Commitment Period, provided that the aggregate principal amount of the
Revolving Credit Loans made by such Lender to Borrower at any one time
outstanding shall not exceed an amount equal to Lender's Revolving Credit
Commitment as set forth opposite such Lender's name on SCHEDULE 1.1.2, provided,
further, that the aggregate principal amount of all Revolving Credit Loans at
any one time outstanding to Borrower shall not exceed, in the aggregate, as to
all Lenders, the Total Revolving Credit Commitment less (i) the aggregate face
amount of Letters of Credit then outstanding, less (ii) all Unreimbursed L/C
Payments at such time.

(b) During the Revolving Credit Commitment Period Borrower may use
the Revolving Credit Commitments (i) by borrowing, prepaying the Revolving
Credit Loans in whole or in part, and reborrowing all in accordance to the terms
and conditions hereof, and/or (ii) by having Issuing Lender issue Letters of
Credit, having such Letters of Credit expire undrawn upon, or, if drawn upon,
reimbursing Issuing Lender for such drawing, and having Issuing Lender issue new
Letters of Credit, all in accordance with the terms and conditions hereof.

2.2 PURPOSES OF REVOLVING CREDIT LOANS. Borrower may use the
proceeds of the Revolving Credit Loans for providing short-term working capital
to Borrower and for the purpose of making payments to Issuing Lender to
reimburse Issuing Lender for drawings made under the Letters of Credit.

2.3 REVOLVING CREDIT NOTES. The Revolving Credit Loans to be made by
each Lender pursuant to its Revolving Loan Commitment shall be evidenced by and
repayable with interest in accordance with a promissory note in the form of
EXHIBIT A hereto, payable to the order of such Lender dated as of the date
hereof and in the principal amount of such Lender's Revolving Credit Commitment
(collectively for all Lenders, the "Revolving Credit Notes"). Each Lender, or
Agent on its behalf, shall, and is hereby authorized by Borrower to endorse on
the schedule, if any, attached to the Revolving Credit Note delivered to such
Lender (or on a continuation of such schedule attached to such Revolving Credit
Note and made a part thereof), or otherwise to record in such Lender's internal
records, an appropriate notation evidencing the date, interest rate option, and
amount of each Revolving Credit Loan from such Lender to Borrower, the date and
amount of each payment and prepayment with respect thereto and the date of each
interest rate conversion pursuant to SECTION 2.20 hereof and the principal
amount subject thereto, and any such recordation shall

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constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, that the failure of any Lender or Agent to make such a
notation or any error in such a notation shall not affect any obligation of
Borrower under such Revolving Credit Note. The Revolving Credit Notes shall be
in substitution for, but not in payment of, the revolving credit notes issued by
Borrower under the Original Credit Agreement.

2.4 INTEREST RATES. Each time Borrower requests a new Revolving
Credit Loan Borrower may, subject to SECTIONS 3.8 and 3.9, elect the Prime
Borrowing Rate, the Quoted Rate, or the IBOR Borrowing Rate to apply to such new
Revolving Credit Loan. At any time prior to the expiration of either an IBOR
Interest Period or Quoted Rate Interest Period, and at any other time with
respect to Prime Rate Borrowings, Borrower may, subject to SECTIONS 3.8 and 3.9,
elect the Prime Borrowing Rate, the IBOR Borrowing Rate, or the Quoted Rate to
apply to any existing (a) IBOR Rate Borrowing at the end of the IBOR Interest
Period, (b) Quoted Rate Borrowing at the end of the Quoted Rate Interest Period,
or (c) Prime Rate Borrowing. In the event Borrower does not specify an interest
rate election as provided herein for a new Revolving Credit Loan or prior to the
end of any IBOR Interest Period or Quoted Rate Interest Period with respect to
any existing IBOR Rate Borrowing or Quoted Rate Borrowing, then the new
Revolving Credit Loan or existing IBOR Rate Borrowing at the expiration of the
IBOR Interest Period or existing Quoted Rate Borrowing at the expiration of the
Quoted Rate Interest Period shall be deemed to constitute a Prime Rate
Borrowing.

2.5 PAYMENT OF INTEREST. Until the Revolving Credit Loans shall have
been paid in full, Borrower shall pay in arrears to Agent for the account of
each Lender an amount equal to all accrued interest on the Revolving Loans
(a) for IBOR Rate Borrowings, on the last day of each applicable IBOR Interest
Period, and (b) for Prime Rate Borrowings and Quoted Rate Borrowings, on the
last day of each month, commencing on the first such date following the making
of the Revolving Credit Loan, on the last day of each month thereafter, and on
the Revolving Credit Commitment Termination Date.

2.6 REPAYMENT OF PRINCIPAL AND TERMINATION OF REVOLVING CREDIT
COMMITMENTS. Borrower shall pay Agent for the account of each Lender all
outstanding principal, accrued interest, and other charges with respect to the
Revolving Credit Loans on the Revolving Credit Commitment Termination Date. The
Revolving Credit Commitments of Lenders shall automatically and permanently
terminate on the Revolving Credit Termination Date.

2.7 REVOLVING CREDIT COMMITMENT FEE. On January 1, April 1, July 1,
and October 1 of each year during the Revolving Credit Commitment Period,
Borrower shall pay Agent a nonrefundable loan fee for the Total Revolving Credit
Commitment, in an amount equal to 0.2 percent per annum of the Total Revolving
Credit Commitment at the time the fee is due; provided however that if the
Capital Ratio is less than or equal to 0.8:1.0 but greater than or equal to
0.5:1.0 at the time the fee is due, then the loan fee shall be an

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amount equal to 0.1875 percent per annum of the Total Revolving Credit
Commitment at the time the fee is due; and provided further that if the Capital
Ratio is less than 0.5:1.0 at the time the fee is due, then the loan fee shall
be in an amount equal to 0.125 percent per annum of the Total Revolving Credit
Commitment at the time the fee is due.

2.8 THE LETTERS OF CREDIT.

(a) Subject to and upon the terms and conditions set forth herein,
and in reliance upon the representations, warranties and covenants of Borrower
contained herein, or made pursuant hereto, Issuing Lender agrees from time to
time during the Revolving Credit Commitment Period to issue for the account of
Borrower Letters of Credit, provided that the aggregate face amount of Letters
of Credit at any time outstanding shall not exceed the lesser of (i) the
Revolving Credit Commitments less (1) the aggregate principal amount of all
Revolving Credit Loans then outstanding less (2) all Unreimbursed L/C Payments,
and (ii) $20,000,000.

(b) Each Letter of Credit shall be in the minimum face amount of
$1,000.

2.9 ISSUANCE OF LETTERS OF CREDIT.

(a) Borrower may request Issuing Lender to issue Letters of Credit by
delivering to Agent at its address specified in SECTION 10.1 hereof, a
commercial and/or standby letter of credit application and security agreement,
as the case may be, in Issuing Lender's then customary form (the "L/C
Application"), completed to the satisfaction of Issuing Lender, and such other
certificates, documents and other papers and information as Issuing Lender may
customarily request.

(b) Each Letter of Credit issued hereunder shall, among other things,
(i) provide for the payment of sight drafts presented for honor thereunder in
accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiration date occurring not later than one
year from its date of issuance. Each L/C Application and each Letter of Credit
shall be subject to the Uniform Customs and, to the extent not inconsistent
therewith, the laws of the State of Washington.

2.10 PARTICIPATING INTEREST IN LETTERS OF CREDIT. Effective in the
case of each Letter of Credit as of the date of the opening thereof, Issuing
Lender agrees to allot and does allot to each Participating Lender and such
Participating Lender severally and irrevocably agrees to take and does take in
such Letter of Credit and the related L/C Application a L/C Participating
Interest in a percentage equal to such Participating Lender's Pro Rata Share.

2.11 PROCEDURE FOR OPENING LETTERS OF CREDIT. Upon receipt of any
L/C Application from Borrower, Issuing Lender will process such L/C Application,
and the other certificates, documents, and other papers delivered to Issuing
Lender in connection therewith,

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in accordance with its customary procedures and shall promptly open such Letters
of Credit by issuing the original of such Letter of Credit to the beneficiary
thereof and by furnishing a copy thereof to Borrower. Issuing Lender will send
to each Participating Lender on a monthly basis a summary of all Letters of
Credit issued during such month. Issuing Lender's failure to send such monthly
summary shall not affect the obligations of each Participating Lender under
SECTION 2.12 hereof.

2.12 LETTER OF CREDIT PAYMENTS.

(a) Borrower agrees (i) to reimburse Issuing Lender, forthwith upon
its demand and otherwise in accordance with the terms of the L/C Application
relating thereto, for any payment made by Issuing Lender under any Letter of
Credit in accordance with its terms or at Borrower's request and (ii) to pay
interest on any Unreimbursed L/C Payment in respect of any Letter of Credit from
the date of such payment until reimbursement in full thereof at a rate per annum
equal to (1) prior to the date which is one Business Day after the date on which
Issuing Lender demands reimbursement from Borrower for such payment, the rate
which would then be payable on any outstanding Prime Rate Borrowings which are
not overdue, and (2) thereafter, the rate which would then be payable on any
outstanding Prime Rate Borrowings which are overdue.

(b) In the event that Issuing Lender makes a payment in respect of
any Letter of Credit and is not reimbursed in full therefor forthwith upon
demand of Issuing Lender, and otherwise in accordance with the terms of the
related L/C Application, Issuing Lender will promptly notify the Participating
Lenders. Forthwith upon its receipt of any such notice, each Participating
Lender will transfer to Issuing Lender in immediately available funds, an amount
equal to its Pro Rata Share of such Unreimbursed L/C Payment. Upon its receipt
from each Participating Lender of such amount, Issuing Lender will complete,
execute and deliver to such Participating Lender a letter of credit
participation certificate (a "Letter of Credit Participation Certificate"), in
the form attached hereto as EXHIBIT B dated the date of such receipt and in such
amount.

(c) Whenever, at any time after Issuing Lender has made a payment in
respect of any Letter of Credit, and has received a Participating Lender's Pro
Rata Share of such Unreimbursed L/C Payment, Issuing Lender receives any
reimbursement on account of such Unreimbursed L/C Payment or any payment of
interest on account thereof, Issuing Lender will distribute to such
Participating Lender its Pro Rata Share thereof; provided, however, that in the
event that the receipt by Issuing Lender of such reimbursement or such payment
of interest, as the case may be, is required to be returned, such Participating
Lender will return to Issuing Lender any portion thereof previously distributed
by Issuing Lender to it.

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2.13 LETTER OF CREDIT FEES.

(a) Borrower agrees to pay to Issuing Lender all of Issuing Lender's
customary out-of-pocket expenses relating to the opening, administration,
transfer, and documentation of Standby Letters of Credit contemporaneously with
the issuance of such Standby Letters of Credit. Borrower also agrees to pay to
Issuing Lender for the account of Issuing Lender and the Participating Lenders
Issuing Lender's standard fee which is currently 1.25 percent per annum of the
face amount of such Standby Letter of Credit payable at issuance of such Standby
Letter of Credit.

(b) Borrower agrees to pay to Issuing Lender all of Issuing Lender's
out-of-pocket expenses relating to the opening, administration, transfer, and
documentation of Commercial Letters of Credit. Borrower also agrees to pay to
Issuing Lender for the account of Issuing Lender and the Participating Lenders a
fee equal to 0.375 percent of the face amount of such Commercial Letter of
Credit payable at issuance of such Commercial Letter of Credit.

(c) Issuing Lender shall be entitled to receive and retain, as a fee
for its services for issuing Letters of Credit, all of its out-of-pocket
expenses relating to the opening, administration, transfer, and documentation of
Letters of Credit, together with a portion of the fees payable by Borrower under
subsections (a) or (b) above in respect of each Letter of Credit as follows:
(i) an amount equal to $300 for each Standby Letter of Credit and (ii) an amount
equal to $75 for each Commercial Letter of Credit. In conjunction with the
monthly statement to be sent by Issuing Lender to each Participating Lender
pursuant to SECTION 2.11 hereof, Issuing Lender will distribute to each
Participating Lender its Pro Rata Share of the remaining issuance fees for such
Letters of Credit. No payment shall be made to Participating Lenders with
respect to the Existing Letters of Credit.

2.14 FURTHER ASSURANCES. Borrower hereby agrees, from time to time,
to do and perform any and all acts and to execute any and all further
instruments reasonably requested by Agent and/or Issuing Lender more fully to
effect the purposes of this Agreement and to issue the Letters of Credit
hereunder.

2.15 OBLIGATIONS ABSOLUTE. The payment obligations of Borrower under
this Agreement shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:

(a) The existence of any claim, setoff, defense or other right which
Borrower may have at any time against any beneficiary, or any transferee of any
Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), Issuing Lender, Agent or any Lender, or any other
Person, whether in connection with this Agreement, the transactions contemplated
herein, or any unrelated transaction;

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(b) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or unenforceable in any respect
or any statement therein being untrue or inaccurate in any respect; or

(c) Payment by Issuing Lender at the request of Borrower under any
Letter of Credit against presentation of any draft or certificate which does not
comply with the terms of such Letter of Credit.

2.16 ASSIGNMENTS. No Participating Lender's participation in any
Letter of Credit, or any of its rights or duties hereunder shall be subdivided,
assigned or transferred without the prior written consent of Issuing Lender.
Such consent may be given or withheld without the consent or agreement of any
other Participating Lender.

2.17 LETTER OF CREDIT AND LENDER'S ACCEPTANCE RESERVES.

(a) If any future imposition of any Applicable Law or any change in
any Applicable Law or change in the interpretation or application of any
Applicable Law or compliance by Issuing Lender with any request or directive
(whether or not in the course of law) from any central bank or other
Governmental Body shall either (i) impose, modify, deem, or make applicable any
reserve, special deposit, assessment or similar requirement against Letters of
Credit issued by Issuing Lender or (ii) impose upon Issuing Lender any other
condition regarding this Agreement, any Letter of Credit, and the result of any
event referred to in clause (i) or (ii) above shall be to increase the cost to
Issuing Lender of issuing or maintaining any Letter of Credit (which increase in
costs shall be the result of Issuing Lender's reasonable allocation of the
aggregate of such costs increases resulting from such events), then upon demand
by Issuing Lender, Borrower shall immediately pay to Issuing Lender, from time
to time as specified by Issuing Lender, additional amounts which shall be
sufficient to compensate Issuing Lender for such increased costs, together with
interest on each such amount from the date demanded until payment in full
thereof at a rate per annum equal to the Prime Rate. A certificate as to such
increased costs incurred by Issuing Lender, submitted by Issuing Lender to
Borrower, shall be conclusive, absent manifest error, as to the amount thereof.
To the extent that Issuing Lender is unable to calculate any additional amount
it is entitled to claim pursuant to this SECTION 2.17 until after termination of
this Agreement and payment of the Notes, this covenant shall survive the
termination of this Agreement and payment of Notes.

(b) Borrower agrees that the provisions of the foregoing paragraph
(a), the provisions of each L/C Application providing for the reimbursement of
payment to Issuing Lender in the event of the imposition or implementation of,
or increase in, any reserve, special deposit or similar requirement in respect
of the Letter of Credit relating thereto shall apply equally to each
Participating Lender in respect of its L/C Participating Interest in such Letter
of Credit.

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2.18 EXISTING LETTERS OF CREDIT. Notwithstanding anything to the
contrary herein, as of the Closing Date, all the Existing Letters of Credit
shall be deemed to be Letters of Credit issued hereunder and shall be subject to
all of the terms and provisions of this Agreement, including all terms and
provisions applicable to Letters to Credit under this Agreement. Each Lender
agrees that its obligations with respect to Letters of Credit pursuant to
SECTIONS 2.8 through 2.13 shall, as of the Closing Date, include the Existing
Letters of Credit. With respect to each Existing Letter of Credit, for the
period commencing on the Closing Date to and including the expiration date of
any such Existing Letter of Credit, Borrower shall pay all fees and commissions
set forth in SECTION 2.13 (other than the issuance fees) at the times and in the
manner set forth therein.

2.19 BORROWING BASE. The Aggregate Current Amount shall at no time
exceed the Borrowing Base. If at any time the Aggregate Current Amount exceeds
the Borrowing Base, then Borrower shall immediately reduce the outstanding
balance of the Revolving Credit Loans in an amount equal to such excess and
until such time as Borrower is in compliance with the Borrowing Base
requirement, Lenders shall not be required to make any Revolving Credit Loans,
Issuing Lender shall not be required to issue any Letter of Credit.

2.20 BORROWING UNDER THE REVOLVING CREDIT COMMITMENTS; BORROWING
NOTICES.

(a) Borrower shall give Agent irrevocable notice (either in writing,
including facsimile, or orally) for each Prime Rate Borrowing. Borrower shall
give Agent irrevocable notice (either in writing, including facsimile, or orally
and promptly confirmed in writing) for each IBOR Rate Borrowing at least two
Business Days (between 8 a.m. and 12 noon Seattle, Washington, time) prior to
the date of the requested IBOR Rate Borrowing. Borrower shall give Agent
irrevocable notice (either in writing, including facsimile, or orally and
promptly confirmed in writing) for each Quoted Rate Borrowing at least one
Business Day (between 8 a.m. and 12 noon Seattle, Washington, time) prior to the
date of the requested Quoted Rate Borrowing. Each such written notice (a
"Borrowing Notice") shall be in form and substance acceptable to Agent and shall
be given by, and any written notice or confirmation of an oral notice shall be
signed by, the President, the chief financial officer, the corporate controller,
treasurer, or the assistant treasurer, each of whom is authorized to request
Revolving Credit Loans and direct disposition of any such Revolving Credit Loans
until written notice by Borrower of the revocation of such authority is received
by Agent. The Borrowing Notice shall specify (i) the amount of the requested
Revolving Credit Loan, (ii) the interest option chosen by Borrower in accordance
with SECTION 2.4 herein, (iii) for IBOR Rate Borrowings, the Borrowing Notice
shall be in the form attached hereto as EXHIBIT C, and (iv) for Quoted Rate
Borrowings, the Borrowing Notice shall be in form attached hereto as EXHIBIT D.
Each Borrowing Notice shall be effective upon receipt, except that notices
received by Agent after 12 noon, Seattle time, on a Business Day shall be deemed
to be received on the immediately succeeding Business Day. Each Borrowing
Notice

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and oral request for a Prime Rate Borrowing or Quoted Rate Borrowing shall be
irrevocable and shall be deemed to constitute a representation and warranty by
Borrower that, as of the date of the notice, (i) the statements set forth in
ARTICLE VII herein (except for SECTIONS 7.5, 7.11, and 7.14 herein) are true and
correct, (ii) no material adverse change in Borrower's financial condition has
occurred subsequent to the date of the financial statements of Borrower for the
most recent Fiscal Quarter then ended which have been delivered to Agent, and
(iii) no Event of Default has occurred and is continuing. On receipt of such
Borrowing Notice, Agent shall promptly notify each Lender by telephone
(confirmed promptly by facsimile) of the information set forth in the Borrowing
Notice. Each Lender shall before 12 noon (Seattle, Washington Time) on the
specified date of borrowing make available to Agent an amount in immediately
available funds equal to the amount of the Revolving Credit Loan to be made by
such Lender. Upon fulfillment to Agent's satisfaction of the applicable
conditions set forth in SECTIONS 4.1 and 4.2 herein, and after receipt by Agent
of such funds, Agent will make such funds available to Borrower by depositing
them to the ordinary checking account maintained by Borrower at Agent's main
office.

(b) Any Revolving Credit Loan made pursuant to subsection (a) above
shall be conclusively presumed to have been made to or for the benefit of
Borrower when made in accordance with such a request and direction for
disposition or when such Revolving Credit Loan is deposited to the credit of the
account of Borrower with Agent or is transmitted to any other bank with
directions to credit the same to the account of Borrower at such bank,
regardless of whether Persons other than those authorized hereunder to make
requests for Revolving Credit Loans have authority to draw against any such
account. Borrower acknowledges that Agent cannot effectively determine whether
a particular request for a Revolving Credit Loan is valid, authorized, or
authentic. It is nevertheless important to Borrower that it has the privilege
of making requests for Revolving Credit Loans in accordance with SECTION 2.20(a)
hereof. Therefore, to induce Agent to lend funds in response to such requests
and in consideration for Agent's agreement to receive and consider such
requests, Borrower assumes all risk of the validity, authenticity, and
authorization of such requests, whether or not the individual making such
requests has authority to request Revolving Credit Loans and whether or not the
aggregate sum owing exceeds the maximum principal amount referred to above.
Agent shall not be responsible under principles of contract, tort, or otherwise
for the amount of an unauthorized or invalid Revolving Credit Loan; rather,
Borrower agrees to repay any sums with interest as provided herein.

ARTICLE III. GENERAL PROVISIONS APPLICABLE TO THE LOANS

3.1 MANNER OF PAYMENT. All sums payable to Agent pursuant to this
Agreement shall be paid directly to Agent in immediately available United States
funds. Borrower authorizes Agent to debit Borrower's account No. 022-7328-846
maintained at U. S. Bank to make all payments due under this Agreement, the
Notes, and the other Loan Documents. Whenever any payment to be made hereunder
or on any of the Notes becomes

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due and payable on a day other than a Business Day, such payment may be made on
the next succeeding Business Day and such extension of time shall in such case
be included in computing interest on such payment.

3.2 STATEMENTS. Agent shall send Borrower statements of all amounts
due hereunder; the statements shall be considered correct and conclusively
binding, absent manifest error, on Borrower unless Borrower notifies Agent to
the contrary within 30 days of receipt of any statement that Borrower claims to
be incorrect. Borrower agrees that accounting entries made by Agent with
respect to Borrower's loan accounts shall constitute evidence of all
disbursements of Loan proceeds and payments made on the Loans. Without limiting
the methods by which Agent may otherwise be entitled by Applicable Law to make
demand for payment of the Loans upon Borrower, Borrower agrees that any
statement, invoice, or payment notice from Agent to Borrower with respect to any
principal or interest obligation of Borrower to Agent shall be deemed to be a
demand for payment in accordance with the terms of such statement, invoice, or
payment notice. Under no circumstances shall a demand by Agent for partial
payment of principal or interest or both be construed as a waiver by Agent of
its right thereafter to demand and receive payment (in part or in full) of any
remaining principal or interest obligation.

3.3 COMPUTATIONS OF INTEREST AND FEES. All computations of interest
and fees shall be based on a 360-day year for the actual number of days elapsed.
Agent shall as soon as practicable notify Borrower and Lenders of each
determination of an IBOR rate. A change in the interest rate on a Loan
resulting from a change of the Prime Rate shall become effective as of the
opening of business on the day on which such change in the Prime Rate becomes
effective. Agent shall as soon as practical notify Borrower and Lenders of the
effective date and the amount of each such change.

3.4 DEFAULT INTEREST. Upon the occurrence and during the continuance
of any Event of Default then (a) all IBOR Rate Borrowings and Quoted Rate
Borrowings shall be converted into Prime Rate Borrowings at the end of the
applicable IBOR Interest Periods and Quoted Rate Interest Periods for such IBOR
Rate Borrowings and Quoted Rate Borrowings (which conversion shall occur
automatically), and (b) the interest rate charged on all Prime Rate Borrowings,
IBOR Rate Borrowings and Quoted Rate Borrowings shall increase to a rate of
interest equal to 3 percent per annum in excess of the interest rate then
applicable to such Loan from the date of the occurrence of the Event of Default
until the Event of Default is cured or waived by Agent or until the Loans are
paid in full and the Revolving Credit Commitment has terminated.

3.5 MAXIMUM INTEREST RATE. Notwithstanding any provision contained
herein or in the Notes, the total liability of Borrower for payment of interest
pursuant hereto, including late charges, shall not exceed the maximum amount of
interest permitted by Applicable Law to be charged, collected, or received from
Borrower; and if any payments by Borrower include interest in excess of that
maximum amount, Lenders shall apply the excess

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first to reduce the unpaid balance of the Loans, then the excess, if any, shall
be returned to Borrower.

3.6 LATE CHARGE. If any payments of interest or principal required
under the Loans are not paid when due, Borrower shall pay to Agent a "late
charge" of five cents for each $1 overdue in order to reimburse Agent for the
extra expense involved in handling delinquent payments.

3.7 PREPAYMENTS. Borrower may prepay all or any portion of the Loans
without penalty or premium, except any IBOR Rate Borrowing and Quoted Rate
Borrowings. Borrower may not prepay all or any part of any IBOR Rate Borrowing
or Quoted Rate Borrowings. All prepayments shall be applied to the last
maturing principal payment due under the Loan being prepaid.

3.8 IBOR RATE BORROWING PROVISIONS.

(a) Borrower may obtain IBOR Borrowing Rate quotes from Agent between
8 a.m. and 12 noon (Seattle, Washington time) on any Business Day. Any IBOR
Borrowing Rate quoted (i) before 10 a.m. shall be based on the IBOR Rate
determined as of approximately 8 a.m. on such day, and Borrower may request an
advance at such rate only by giving Agent notice in accordance with SECTION 2.20
herein before 10 a.m. on such date; and (ii) between 10 a.m. and 12 noon shall
be based on the IBOR Rate determined as of approximately 10 a.m. on such day,
and Borrower may request an advance at such rate only by giving Agent notice in
accordance with SECTION 2.20 herein not later than 12 noon on such date.

(b) If at any time the IBOR Rate is unascertainable or unavailable to
any Lender or if IBOR Rate loans become unlawful, the option to select the IBOR
Borrowing Rate shall terminate immediately. If the IBOR Borrowing Rate then is
in effect, (i) it shall terminate automatically with respect to all IBOR Rate
Borrowings (1) on the last day of each then applicable IBOR Interest Period, if
Lenders may lawfully continue to maintain such loans, or (2) immediately if any
Lender may not lawfully continue to maintain such loans through such day, and
(ii) subject to SECTION 3.4 herein, the Prime Borrowing Rate automatically shall
become effective as to such amounts upon such termination.

(c) If at any time after the date hereof (i) any revision in or
adoption of any applicable law, rule, or regulation or in the interpretation or
administration thereof (1) shall subject any Lender or its Eurodollar lending
office to any tax, duty, or other charge, or change the basis of taxation of
payments to any Lender with respect to any loans bearing interest based on the
IBOR Rate, or (2) shall impose or modify any reserve, insurance, special
deposit, or similar requirements against assets of, deposits with or for the
account of, or credit extended by any Lender or its Eurodollar lending office,
or impose on any Lender or its Eurodollar lending office any other condition
affecting any such loans, and

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(ii) the result of any of the foregoing is (1) to increase the cost to any
Lender of making or maintaining any such loans or (2) to reduce the amount of
any sum receivable under this Agreement or the Notes by any Lender or its
Eurodollar lending office, Borrower shall pay Agent for the account of Lenders
within 15 days after demand by Agent such additional amount as will compensate
such Lenders for such increased cost or reduction. The determination hereunder
by Agent of such additional amount shall be conclusive in the absence of
manifest error. If any Lender or Agent demands compensation under this
SECTION 3.8(C), Borrower may upon three Business Days notice to Agent pay the
accrued interest on all IBOR Rate Borrowings, together with any additional
amounts payable under SECTION 3.8(C). Subject to SECTION 3.4 herein, upon
Borrower's paying such accrued interest and additional costs, the Prime
Borrowing Rate immediately shall be effective with respect to the unpaid
principal balance of such IBOR Rate Borrowings.

(d) Upon any termination of any IBOR Borrowing Rate (including but
not limited to conversion to another rate) or payment of all or any portion of
any IBOR Rate Borrowing on a date other than the last day of the then applicable
IBOR Interest Period, including without limitation (i) acceleration under
SECTION 8.2 herein or (ii) repayment in response to a notice under
SECTION 3.8(C) herein, Borrower shall pay to Agent on behalf of Lenders on
demand such amount as Agent reasonably determines (determined as though
100 percent of the applicable IBOR Rate Borrowing had been funded in the
applicable Eurodollar market) is equivalent to all direct or indirect losses,
expenses, liabilities, or reductions in yield to Lenders resulting therefrom,
whether incurred in connection with liquidation or reemployment of funds or
otherwise.

(e) If Borrower chooses the IBOR Borrowing Rate, Borrower shall pay
interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lenders may have obtained the funds loaned to Borrower
from sources other than the applicable Eurodollar market. Agent's determination
of the IBOR Borrowing Rate and any such taxes or charges shall be conclusive in
the absence of manifest error.

(f) Notwithstanding any other term of this Agreement, Borrower may
not select the IBOR Borrowing Rate if a Default or an Event of Default hereunder
has occurred and is continuing.

(g) Nothing contained in this Agreement, including without limitation
the determination of any IBOR Interest Period or Agent's quotation of any IBOR
Borrowing Rate, shall be construed to prejudice Lenders' right to decline to
make any requested Revolving Credit Loan.

3.9 QUOTED RATE BORROWING PROVISIONS.

(a) Borrower may obtain Quoted Rate quotes from Agent before 9 a.m.
(Seattle, Washington time) on any Business Day. Interest rate quotes for Quoted
Rate

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Borrowings shall be given by Agent within two hours of Borrower's request for
interest rate quotes. Promptly upon receipt by Agent of Borrower's request for
a Quoted Rate quote, Agent shall notify Lenders of the interest rate at which
Agent is going to make the proposed Loan. Within 30 minutes of Agent's
notification to Lender of Agent's proposed interest rate, Lender shall either
agree to the interest rate proposed by Agent or notify Agent of any higher
interest rate at which Lender is going to make the proposed Loan. Agent will
furnish Borrower a Quoted Rate for the proposed Loan that is the highest of all
of the rates quoted by Lenders. Borrower may request a Quoted Rate Borrowing at
such rate only by giving Agent notice in accordance with SECTION 2.20 herein
within 30 minutes after such quote is given by Agent.

(b) Notwithstanding any of the terms of this Agreement, Borrower may
not select the Quoted Rate if a Default or an Event of Default hereunder has
occurred and is continuing.

3.10 COLLATERAL. As security for repayment of all of the Loans,
reimbursement of all of draws under the Letters of Credit, and all other
Obligations, Borrower has granted and shall continue to grant to Agent for
itself and the ratable benefit of Lenders a first and exclusive security
interest in all of Borrower's accounts, general intangibles, chattel paper,
documents, inventory, now owned or hereafter acquired, and proceeds thereof.
Borrower hereby expressly (a) reaffirms the security agreement and trademark
assignment both dated as of June 30, 1995, and executed by Borrower for the
benefit of Agent, and (b) agrees that such Loan Documents remain in full force
and effect and secure all of Borrower's obligations under this Agreement, the
Notes and the other Loan Documents. Lenders shall share in all Collateral in
accordance with their respective Pro Rata Shares.

3.11 AGENT FEE. Borrower agrees to pay to Agent for its own account
a nonrefundable agency fee in an amount and on the dates set forth in the Fee
Letter.

3.12 PRO RATA TREATMENT AND PAYMENTS.

(a) Each Loan, each payment by Borrower on account of any fee
hereunder (other than as set forth in SECTIONS 2.13(c) and 3.11 hereof) and any
reduction of the Revolving Credit Commitments of Lenders hereunder shall be made
pro rata according to the respective Pro Rata Shares of Lenders. Each payment
(including each prepayment) by Borrower on account of principal of and interest
on the Loans shall be made pro rata according to the Pro Rata Share of each
Lender. Agent shall distribute such payments to Lenders promptly on receipt in
like funds as received. All payments made by Agent to a Lender shall be via
federal wire transfer.

(b) Unless Agent shall have been notified in writing by any Lender
prior to a Borrowing Date that such Lender will not make the amount which would
constitute its Pro

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Rata Share of the Loan on such date available to Agent, Agent may assume that
such Lender has made such amount available to Agent on such Borrowing Date and
Agent may, in reliance upon such assumption, make available to Borrower a
corresponding amount. If such amount is made available to Agent on a date after
such Borrowing Date, such Lender shall pay to Agent on demand an amount equal to
the product of (i) the daily average federal funds rate during such period as
quoted by Agent, times (ii) the amount of such Lender's Pro Rata Share of such
Loan, times (iii) a fraction the numerator of which is the number of days that
elapse from and including such Borrowing Date to the date on which such Lender's
Pro Rata Share of such Loan shall have become immediately available to Agent and
the denominator of which is 360. A certificate of Agent submitted to any Lender
with respect to any amount owing under this SECTION 3.12(b) shall be conclusive,
absent manifest error.

(c) All payments (other than prepayments) made by Borrower hereunder
shall be credited, to the extent of the amount thereof, in the following manner:
(i) first, against fees, expenses, and indemnities due hereunder; (ii) second,
against accrued interest on all amounts in default (including drawn amounts of
Letters of Credit); (iii) third, against accrued interest on Revolving Credit
Loans not in default; and (iv) fourth, against principal of Revolving Credit
Loans; provided, however, that if an Event of Default has occurred and is
continuing at the time of such payment, then Agent shall be entitled to apply
the payment in the manner it shall deem appropriate.

ARTICLE IV. CONDITIONS PRECEDENT

4.1 CONDITIONS PRECEDENT FOR INITIAL LOANS. The obligation of each
Lender to make a Loan hereunder on the Closing Date and the obligation of
Issuing Bank to issue any Letter of Credit are subject to the satisfaction, or
waiver by Agent, immediately prior to or concurrently with the making of such
Loan and the issuance of such Letter of Credit of the following conditions
precedent:

(a) Each Lender shall receive this Agreement, its Revolving Credit
Note, duly executed and delivered by the respective parties thereto.

(b) Agent shall have received, with a counterpart for each Lender,
duly executed and delivered by Borrower, an amendment to security agreement in
the form attached hereto as EXHIBIT E, amending the security agreement dated as
of June 30, 1995.

(c) Agent shall have received, with a counterpart for each Lender,
duly executed and delivered by Borrower, an amendment to trademark assignment in
the form attached hereto as EXHIBIT F, amending the trademark assignment dated
as of June 30, 1995.

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(d) Agent shall have received, duly executed and delivered by
Borrower, such financing statements and other documents deemed necessary by
Agent to perfect the security interests granted to Agent for its benefit and the
ratable benefit of Lenders.

(e) Agent shall have received from counsel for Borrower, with a
counterpart for each Lender, an opinion addressed to Agent and Lenders and dated
as of the Closing Date, in the form attached hereto as EXHIBIT G.

(f) No Default or Event of Default hereunder shall exist, and after
having given effect to the requested Loan or Letter of Credit, no Default or
Event of Default shall exist.

(g) All representations and warranties of Borrower contained herein
or otherwise made in writing in connection herewith shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the initial Loan or Letter of
Credit.

(h) All corporate proceedings of Borrower shall be satisfactory in
form and substance to Agent, and Agent shall have received all information and
copies of all documents, including records of all corporate proceedings, that
Agent has requested in connection therewith, such documents where appropriate to
be certified by proper corporate authorities or Governmental Bodies. Borrower
shall provide Agent with the following documents prior to or upon the execution
of this Agreement:

(i) Copies of the articles of incorporation of Borrower,
together with all amendments thereto, certified by Borrower to be true and
complete;

(ii) A certificate of authority for Borrower in the state of
Washington and in each state in which Borrower is doing business, dated
within 30 days of the date of the execution of this Agreement; and

(iii) A certified resolution of the directors of Borrower and
incumbency certificate in the form attached hereto as EXHIBIT H.

(i) Agent shall have received such evidence deemed necessary by
Agent that Agent's security interests in the Collateral constitute first
priority and exclusive security interests, except as otherwise provided herein.

(j) Agent shall have performed and approved of an audit of
Borrower's accounts receivable and inventory.

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(k) Agent shall have received a Borrowing Notice from Borrower for
the initial Revolving Credit Loan.

(l) Agent shall have received insurance certificates and lender loss
payable endorsements on casualty/property loss insurance in forms satisfactory
to Agent to the effect set forth in SECTION 5.5 hereof.

(m) There shall have been no material adverse change in the financial
condition of Borrower subsequent to March 22, 1996.

(n) Agent shall have received a statement describing all litigation
involving Borrower, certified as true by its president and legal counsel, in
form and substance satisfactory to Agent.

(o) Agent shall have received for its account the fees referred to in
SECTION 3.11 and shall have received for its account and the account of each
Lender, the fees referred to in SECTION 2.7.

(p) Agent shall have received, with a counterpart for each Lender,
duly executed and delivered by General Electric Company and Tungsram USA Ltd.,
an amendment to intercreditor agreement in the form attached hereto as
EXHIBIT I.

4.2 CONDITIONS PRECEDENT TO ALL LOANS, ETC. The obligation of each
Lender to make any Revolving Credit Loan and the obligation of Issuing Bank to
issue any Letter of Credit, is subject to the fulfillment, to the satisfaction
of Agent, of the following conditions precedent on the date such Loan is made or
such Letter of Credit is issued:

(a) The conditions set forth in SECTION 4.1 shall have been
previously satisfied, and Agent shall have received evidence satisfactory to
Agent of satisfaction thereof.

(b) Agent shall have received for each requested Revolving Credit
Loan, a Borrowing Notice, and for each requested Letter of Credit, an
application in form and substance satisfactory to Agent.

(c) There shall be executed and delivered to Agent such further
instruments, agreements, and documents, as may be reasonably necessary or proper
in the opinion of Agent to confirm the obligations of Borrower to Agent and
Lenders hereunder, the grant of security therefor, and the proper use of the
proceeds of all Revolving Credit Loans.

(d) The representations and warranties of Borrower in ARTICLE VII
herein (except for SECTIONS 7.5, 7.11, and 7.14 herein) shall be true on the
date of each Loan or

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issuance of each Letter of Credit with the same force and effect as if made on
and as of that date.

(e) No Default or Event of Default shall exist, and after having
given effect to the requested Loan or Letter of Credit, no Default or Event of
Default shall exist.

(f) To the extent not previously delivered, all other documents,
agreements, and instruments from or with respect to Borrower or any other Person
that may be called for hereunder shall be duly executed and delivered to Agent,
including but not limited to all documents, agreements, and instruments deemed
necessary by Agent to perfect its security interest in Collateral acquired after
the date of this Agreement. For the purposes of this Agreement, the waiver of
delivery of any document, agreement, or instrument from or with respect to
Borrower or any other Person does not constitute a continuing waiver with
respect to the obligation to fulfill the conditions precedent to the making or
renewal of each Loan and the issuance of each Letter of Credit hereunder.

(g) There shall have been no material adverse change in the financial
condition of Borrower subsequent to March 22, 1996.

ARTICLE V. AFFIRMATIVE COVENANTS

Borrower hereby covenants and agrees that so long as this Agreement is
in effect, any Note remains outstanding and unpaid, any amount remains available
to be drawn under any Letter of Credit, or any Obligation remains outstanding,
Borrower shall and shall cause each of its Subsidiaries to:

5.1 FINANCIAL DATA. Keep its books of account in accordance with
GAAP, consistently applied, and furnish to Agent and each Lender:

(a) As soon as practicable and in any event within 30 days after the
close of each Fiscal Period of Borrower (except for the last Fiscal Period of
the Fiscal Year), the following Consolidated unaudited financial statements of
Borrower for each such Fiscal Period, all in reasonable detail and certified by
Borrower to be true and correct: balance sheet and statement of income. There
shall be included in such financial statements a calculation of the financial
covenants provided for in SECTIONS 6.15, 6.16, 6.19, and 6.20 herein.

(b) As soon as practicable and in any event within 90 days after the
close of each Fiscal Year of Borrower, the following Consolidated and
consolidating financial statements of Borrower, setting forth the corresponding
figures for the previous Fiscal Year in comparative form where appropriate, all
in reasonable detail and audited (without any qualification or exception deemed
material by Agent) by Borrower's current independent

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certified public accountant or such other independent certified public
accountants selected by Borrower and satisfactory to Agent: balance sheet,
statement of income, and statement of cash flows. As soon as practicable and in
any event within 150 days after the close of each Fiscal Year, Borrower shall
provide Agent with a copy of its independent certified public accountants'
management letter or other similar report or correspondence to Borrower.

(c) As soon as practicable and in any event within 45 days after the
close of each Fiscal Quarter of Borrower, (i) Borrower's 10-Q reports filed with
the Securities and Exchange Commission, and (ii) the following Consolidated and
consolidating unaudited financial statements of Borrower for each such Fiscal
Quarter, all in reasonable detail and certified by Borrower to be true and
correct: balance sheet, statement of income, and statement of cash flows.

(d) Concurrently with (b) and (c), a certificate of the chief
financial officer (or in his absence the corporate controller, treasurer, or
assistant treasurer) of Borrower, (i) certifying that during such period (for
purposes of compliance with financial covenants, such certificate shall specify
that as of the date of such financial statements Borrower is not in Default with
respect to such financial covenants) no Default or Event of Default existed or
if any such Default or Event of Default existed, specifying the nature thereof,
the period of existence thereof, and what action Borrower proposes to take or
has taken with respect thereto; and (ii) demonstrating compliance (by providing
calculations or otherwise, in reasonable detail), as of the dates of the
financial statements being furnished at such time, with the covenants set forth
in SECTIONS 6.15, 6.16, 6.17 (only with the annual financial statements required
under subsection (b) above), 6.18, 6.19, 6.20, and 6.21 (only with the annual
financial statements required under subsection (b) above), herein.

(e) As soon as practicable and in any event 10 days prior to the end
of any Fiscal Year, a Fiscal Calendar for the next Fiscal Year identifying all
Fiscal Periods and Fiscal Quarters for such upcoming Fiscal Year.

(f) As soon as practicable and in any event within 30 days after the
close of each Fiscal Period of Borrower, inventory reports stating total book
inventory by store location of Borrower and each of its Subsidiaries for each
such Fiscal Period.

(g) Upon request by Agent, copies of all reports relative to the
operations of Borrower, its Subsidiaries and their Affiliates prepared for
Borrower's shareholders or filed with any Governmental Body, including without
limitation, the Securities and Exchange Commission.

(h) As soon as practicable and in any event within 10 days after the
beginning of each fiscal year, a statement projecting all capital expenditures
to be made or committed to during such fiscal year with respect to Borrower and
its Subsidiaries and setting forth the projected schedule for all new store
openings.

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(i) As soon as practicable, and in any event within 30 days after the
close of each Fiscal Period of Borrower, a borrowing base certificate signed by
the chief financial officer, corporate controller, treasurer, or assistant
treasurer of Borrower in substantially the form attached hereto as EXHIBIT J.

(j) Promptly upon the occurrence of any Default or Event of Default,
a certificate signed by Borrower, specifying the nature thereof, the period of
existence thereof, and what action Borrower proposes to take or has taken with
respect thereto.

(k) With reasonable promptness, such other information regarding the
business, operations, and financial condition of Borrower and its Subsidiaries
as Agent or any Lender may from time to time reasonably request; provided that
any information regarding the financial projections of Borrower shall be
prepared on a quarterly basis and shall pertain to Borrower's Consolidated
company totals.

5.2 LICENSES AND PERMITS. Maintain all Governmental Approvals and
all related or other material agreements necessary for it to operate its
business, and at all times comply with all Applicable Laws relating to the
operations, facilities, or activities of Borrower or its Subsidiaries.

5.3 MAINTENANCE OF PROPERTIES. Keep its properties in good repair
and in good working order and condition, in a manner consistent with past
practices and comparable to industry standards; from time to time make all
appropriate and proper repairs, renewals, replacements, additions, and
improvements thereto; and keep all equipment that may now or in the future be
subject to compliance with any Applicable Laws in full compliance with such
Applicable Laws.

5.4 PAYMENT OF CHARGES. Duly pay and discharge all material
(a) Taxes imposed on or against it or its property or assets, or upon any
property leased by it, prior to the date on which penalties attached thereto,
unless and to the extent only that such Taxes, after written notice thereof
having been given to Agent are being contested in good faith and by appropriate
proceedings; (b) claims allowed by Applicable Laws, whether for labor,
materials, rentals, or anything else, which could, if unpaid, become a Lien upon
its property or assets or its outstanding capital stock or adversely affect its
facilities or operations, (unless and to the extent only that the validity
thereof is being contested in good faith and by appropriate proceedings after
written notice thereof has been given to Agent); (c) trade bills in accordance
with the terms thereof or generally prevailing industry standards; and (d) other
Indebtedness heretofore or hereafter incurred or assumed by it, unless such
Indebtedness be renewed or extended. In the event any charge is being contested
by Borrower or its Subsidiaries as allowed above, Borrower shall establish
adequate reserves against possible liability therefor.

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5.5 INSURANCE.

(a) Maintain insurance upon its properties and business insuring
against such risks as Agent shall reasonably determine from time to time.
Borrower and its Subsidiaries shall cause each insurance policy issued in
connection therewith to provide and shall cause the insurer issuing such policy
to certify to Agent that (i) if such insurance is proposed to be canceled or
materially changed for any reason whatsoever, such insurer will promptly notify
Agent, and such cancellation or change shall not be effective as to Agent for
30 days after receipt by Agent of such notice, unless the effect of the change
is to extend or increase coverage under the policy; (ii) Agent will have the
right at its election to remedy any default in the payment of premiums within
30 days of notice from the insurer of the default; and (iii) loss payments from
casualty/property loss insurance with respect to the Collateral in excess of
$250,000 in each instance will be payable jointly to Borrower or its Subsidiary,
as the case may be, and Agent as secured party or otherwise as its interest may
appear.

(b) From time to time upon request by Agent, promptly furnish or
cause to be furnished to Agent evidence, in form and substance satisfactory to
Agent, of the maintenance of all insurance, indemnities, or bonds required by
this SECTION 5.5 or by any license, lease, or other agreement to be maintained,
including but not limited to such originals or copies as Agent may request of
policies, certificates of insurance, riders, assignments, and endorsements
relating to the insurance and proof of premium payments.

5.6 MAINTENANCE OF RECORDS. Keep at all times books of account and
other records in which full, true, and correct entries will be made of all
dealings or transactions in relation to its business and affairs.

5.7 INSPECTION. Allow any representative of Agent to visit and
inspect any of its properties, to examine its books of account and other records
and files, to make copies thereof and to discuss the affairs, business,
finances, and accounts of Borrower and its Subsidiaries with their officers,
employees, and accountants, all at such reasonable times and as often as Agent
may desire.

5.8 HAZARDOUS SUBSTANCES.

(a) Borrower hereby covenants and agrees that so long as any
Obligation is outstanding:

(i) Borrower will not permit its property, any property of any
of its Subsidiaries, or any portion thereof to be a site for the storage,
use, generation, manufacture, disposal or transportation of Hazardous
Materials, except for merchandise and cleaning supplies sold and used in
the ordinary

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course of Borrower's retail business as presently conducted and in compliance
with all Hazardous Materials laws;

(ii) Borrower will not permit any Hazardous Materials to be
disposed of off its property or any property of any of its Subsidiaries
other than in properly licensed disposal sites;

(iii) Borrower, at Borrower's sole cost and expense, will
keep and maintain its property, the property of its Subsidiaries, and each
portion thereof in compliance with and shall not cause or permit its
property, the property of its Subsidiaries, or any portion thereof to be in
violation of any Hazardous Materials Laws; and

(iv) Borrower will immediately advise Agent in writing of
any Hazardous Material Claim.

(b) Borrower agrees to indemnify Agent and Lenders and hold them
harmless from and against any and all claims, demands, damages, losses, liens,
liabilities, penalties, fines, lawsuits, and other proceedings and costs and
expenses (including attorney fees), arising directly or indirectly from or out
of or in any way connected with (i) the accuracy of the representations
contained in SECTION 7.18 herein; (ii) any activities on its property or the
property of its Subsidiaries during Borrower's or its Subsidiaries' ownership,
possession, or control of such property which directly or indirectly results in
such property or any other property becoming contaminated with Hazardous
Materials; (iii) the discovery of Hazardous Materials on its property or any of
its Subsidiaries' property; (iv) the cleanup of Hazardous Materials from its
property or any of its Subsidiaries' property; and (v) the discovery of
Hazardous Materials or the cleanup of Hazardous Materials from adjacent or other
property that has become contaminated as a result of any activity on Borrower's
property or the property of its Subsidiaries. As among Borrower, Agent, and
Lenders, Borrower acknowledges that it will be solely responsible for all costs
and expenses relating to the cleanup of Hazardous Materials from its property,
the property of its Subsidiaries, or any other properties that become
contaminated with Hazardous Materials as a result of activities on or the
contamination of its property or the property of its Subsidiaries.

(c) Borrower's obligations under this SECTION 5.8 are unconditional
and shall not be limited by any nonrecourse or other limitations of liability
provided for in the Loan Documents. The representations, warranties, and
covenants of Borrower set forth in this SECTION 5.8 and SECTION 7.18 herein
(including but not limited to the indemnity provided for in SECTION 5.8(B)
above) shall survive the closing and repayment of the Loans to Borrower; and, to
the extent permitted by Applicable Laws and Hazardous Materials Laws, shall
survive the transfer of its property by foreclosure proceedings (whether
judicial or nonjudicial), deed in lieu of foreclosure, or otherwise. Borrower
acknowledges and agrees

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that its covenants and obligations hereunder are separate and distinct from its
obligations under the Loans and the Loan Documents.

5.9 CORPORATE EXISTENCE. Maintain and preserve its corporate
existence.

5.10 NOTICE OF DISPUTES AND OTHER MATTERS. Promptly give written
notice to Agent of:

(a) Any citation, order to show cause, or other legal process or
order that could have a material adverse effect on it, directing it to become a
party to or to appear at any proceeding or hearing by or before any Governmental
Body that has granted to it any Governmental Approval, and include with such
notice a copy of any such citation, order to show cause, or other legal process
or order;

(b) Any (i) refusal, denial, threatened denial, or failure by any
Governmental Body to grant, issue, renew, or extend any material Governmental
Approval; (ii) proposed or actual revocation, termination, or modification
(whether favorable or adverse) of any Governmental Approval by any Governmental
Body; (iii) dispute or other action with regard to any Governmental Approval by
any Governmental Body; (iv) notice from any Governmental Body of the imposition
of any material fines or penalties or forfeitures; or (v) threats or notice with
respect to any of the foregoing or with respect to any proceeding or hearing
that might result in any of the foregoing;

(c) Any dispute concerning or any threatened nonrenewal or
modification of any material lease for real or personal property to which it is
a party;

(d) Any actions, proceedings, or claims of which it may have notice
that may be commenced or asserted against it in which the amount involved is
$100,000 or more and is not fully covered by insurance or which, if not solely a
claim for monetary damages, could, if adversely determined, have a material
adverse effect on Borrower and its Subsidiaries; or

(e) Any material change in the Senior Management of Borrower.

5.11 EXCHANGE OF NOTES. Upon receipt of a written notice of loss,
theft, destruction, or mutilation of any of the Notes, and upon surrendering
such Notes for cancellation if mutilated, execute and deliver a new Note or a
Note of like tenor in lieu of such lost, stolen, destroyed, or mutilated Note.
Any Notes issued pursuant to this SECTION 5.11 shall be dated so that neither
gain nor loss of interest shall result therefrom.

5.12 MAINTENANCE OF LIENS. At all times maintain the liens and
security interests provided under or pursuant to this Agreement as valid and
perfected first Liens on the property and assets intended to be covered thereby.
Except as contemplated under

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SECTION 6.4, Borrower shall take all action requested by Agent necessary to
assure that Agent for itself and Lenders has valid and exclusive Liens on all
Collateral.

5.13 OTHER AGREEMENTS. Comply with all covenants and agreements set
forth in or required pursuant to any of the other Loan Documents.

5.14 AFTER-ACQUIRED COLLATERAL. At the request of Agent, execute and
deliver to Agent appropriate instruments in order to effectuate the proper
granting and perfection of a first priority security interest in or assignment
of all accounts, inventory, general intangibles, chattel paper, documents and
similar property hereafter acquired by Borrower, concurrently with the
acquisition thereof.

5.15 FURTHER ASSURANCES. Within ten days of request by Agent, duly
execute and deliver or cause to be duly executed and delivered to Agent such
further instruments, agreements, and documents and do or cause to be done such
further acts as may be necessary or proper in the opinion of Agent to carry out
more effectively the provisions and purpose of this Agreement and the other Loan
Documents.

5.16 MAINTENANCE OF BANK ACCOUNTS. As security for repayment of the
Loans, maintain its principal United States cash concentration and disbursement
accounts with Agent. Borrower hereby grants to Agent for its benefit and the
ratable benefit of Lenders a security interest in all such accounts in order to
secure the repayment of the Obligations.

5.17 GUARANTIES AND SECURITY AGREEMENTS FROM SUBSIDIARIES. Subject
to SECTION 6.9 herein, as promptly as possible after any entity becomes a
Subsidiary of Borrower, such Subsidiary shall execute and deliver to Agent (a) a
guaranty unconditionally guaranteeing all of the Obligations, (b) a security
agreement granting Agent for its benefit and the ratable benefit of Lenders a
first priority and exclusive security interest in all accounts, inventory, and
general intangibles of such Subsidiary, if such Subsidiary's accounts and
inventory are to be included in the Borrowing Base (subject to such accounts and
inventory meeting the requirements set forth in the definitions of "Eligible
Accounts Receivable" or "Eligible Inventory", as the case may be, in SECTION 1.1
herein), and (c) such other documents and agreements as Agent may reasonably
request. All of the foregoing documents shall be in form and substance
satisfactory to Agent.

ARTICLE VI. NEGATIVE COVENANTS

Borrower covenants and agrees that so long as this Agreement is in
effect, the Notes remain outstanding or unpaid, any amount remains available to
be drawn under any Letter of Credit, or any Obligation remains outstanding,
Borrower shall not and shall not permit any of its Subsidiaries to, without the
prior written consent of Requisite Lenders,

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which consent shall not be unreasonably withheld with respect to SECTIONS 6.1
through 6.14 herein:

6.1 DIVIDENDS AND DISTRIBUTIONS. Declare or pay any cash
distributions or dividends or return any capital to any of its shareholders;
authorize or make any distribution, payment, or delivery of property or cash to
any of its shareholders; redeem, retire, purchase, or otherwise acquire,
directly or indirectly, for consideration, any of its shares or other interests
now or hereafter outstanding; or set aside any funds for any of the foregoing
purposes; provided, however, that nothing contained in this SECTION 6.1 shall
prohibit Borrower's Subsidiaries from making any distribution or dividend to
Borrower.

6.2 TRANSACTIONS WITH AFFILIATES. Except on arm's length terms:
(a) enter into any transaction in which an Affiliate shall have any interest;
(b) make any payment or agree to make any payment to any such Affiliate; or
(c) transfer or agree to transfer ownership or possession of any of its business
or assets, tangible or intangible, real, personal, or mixed, to any Affiliate.

6.3 OTHER INDEBTEDNESS. Create, incur, assume, or suffer to exist,
contingently or otherwise, any Indebtedness except (a) Indebtedness represented
by the Notes; (b) trade accounts and other current payables arising from the
ordinary course of business, and (c) additional Indebtedness outstanding or
committed to at any time (including without limitation, Indebtedness evidenced
by notes, bonds, debentures, leases, purchase agreements, and other contractual
obligations) incurred in the ordinary course of business of Borrower and its
Subsidiaries for the purchase, lease, or other acquisition of capital assets or
leasehold interests required for the operation of the retail stores, warehouses,
and other supporting facilities of Borrower and its Subsidiaries. Except as
allowed in SECTION 6.4 herein, none of the Indebtedness described in this
SECTION 6.3 shall be secured by any of the assets or rights of Borrower or its
Subsidiaries.

6.4 LIENS. Contract, create, incur, assume, or suffer to exist any
Lien upon or grant any interest in any of its property or assets whether now
owned or hereafter acquired, except (a) Liens granted pursuant to this
Agreement; (b) Liens in connection with worker's compensation, unemployment
insurance, or other social security obligations; (c) good faith deposits in
connection with bids, tenders, contracts, or leases or deposits to secure public
statutory obligations; (d) mechanic's, carrier's, repairmen's, or other like
Liens in the ordinary course of business with respect to obligations that are
not overdue or that are being contested in good faith and for which appropriate
reserves have been established or for which deposits to obtain the release of
such liens have been made; (e) Liens for Taxes imposed upon Borrower or any of
its Subsidiaries, or its property, operations, income, products, or profits that
are not at the time due or payable or for which, if the validity thereof is
being contested in good faith by legal or administrative proceedings,
appropriate reserves have been established; (f) encumbrances consisting of
zoning regulations, easements, rights-of-way, survey exceptions, and other
similar restrictions on the use of real property or

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minor irregularities in title thereto that do not materially impair the use of
such property in the operation of the business of Borrower or any of its
Subsidiaries; (g) Liens arising out of judgments or awards with regard to which
Borrower or any of its Subsidiaries, shall be prosecuting an appeal in good
faith and for which a stay of execution has been issued and appropriate reserves
established; (h) purchase money security interests incurred in connection with
the purchase of capital assets in accordance with SECTION 6.21; (i) the
currently existing liens listed on SCHEDULE 6.4 hereto; and (j) deeds of trust,
mortgages, or similar instruments encumbering the real property on which
Borrower's stores are located, except that at least two of Borrower's owned and
operated stores must be unencumbered at all times.

6.5 ADVANCES AND LOANS. Except by Borrower to or for the benefit of
its Subsidiaries: (a) lend money, make credit available (other than in the
ordinary course of business to customers), or lend property or the use thereof
to any Person; (b) purchase or repurchase the stock or Indebtedness or all or a
substantial part of the assets or properties of any Person; (c) guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly or
by any instrument having the effect of assuring any Person's payment,
performance, or capability) the Indebtedness, performance, obligations, stock,
or dividends of any Person; or (d) agree to do any of the foregoing.
Notwithstanding the foregoing, Borrower and its Subsidiaries may endorse
negotiable instruments for deposit or collection in the ordinary course of
business.

6.6 INVESTMENTS. Invest in (by capital contribution or otherwise),
acquire, purchase, or make any commitment to purchase the obligations, stock, or
equity of any Person except (a) direct obligations of the government of the
United States of America or any agency or instrumentality thereof,
(b) interest-bearing certificates of deposit or repurchase agreements issued by
any commercial banking institution satisfactory to Agent, (c) stock or
obligations issued in settlement of claims of Borrower or its Subsidiaries
against others by reason of bankruptcy or a composition or readjustment of debt
or reorganization of any debtor of Borrower or its Subsidiaries, or
(d) commercial paper and corporate and municipal bonds with a rating of BBB or
better.

6.7 LIQUIDATION AND SALE OF ASSETS. Wind up, liquidate, or dissolve
Borrower's or any of its Subsidiaries' affairs; convey, sell, lease, or
otherwise dispose of (or agree to do any of the foregoing at any time) any of
its material licenses, contracts, or permits; sell all or a substantial part of
its property or assets or sell any part of its property or assets necessary or
desirable for the conduct of its business as now generally conducted or as
proposed to be conducted, except for accounts receivable.

6.8 CONSOLIDATION AND MERGER. Enter into any transaction of merger
or consolidation with any Person or purchase, lease, or otherwise acquire all or
a substantial part of the property or assets of any other Person.

6.9 SUBSIDIARIES. Form or acquire any Person or any portion thereof.

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6.10 TYPE OF BUSINESS. Enter into any business which is
substantially different from or not connected with the business in which
Borrower is presently engaged or make any substantial change in the nature of
its business or operations.

6.11 CHANGE OF CHIEF EXECUTIVE OFFICE OR NAME. Change (a) the chief
executive office of Borrower, (b) Borrower's name, or (c) the location of any of
the Collateral (outside of the states of Washington, Alaska, Oregon, Montana,
Utah, Colorado, or Hawaii as long as giving effect to such transfer of
Collateral would not cause Borrower to be out of compliance with the Borrowing
Base requirement set forth in SECTION 2.19 herein); or adopt or use any trade
name without (x) prior written notice to Agent and (y) the execution, delivery,
and filing (and payment of filing fees and taxes) of all such documents as may
be necessary or advisable in the opinion of Agent to continue to perfect and
protect the liens and security interests in the Collateral.

6.12 CHANGE IN DOCUMENTS. Materially amend, supplement, terminate,
or otherwise modify in any material way Borrower's articles of incorporation,
contracts, or other documents delivered to Agent hereunder or executed in
connection herewith.

6.13 CONTROL. Enter into any agreement (other than employment
agreements) with any Person that confers upon such Person the right or authority
to control or direct a major portion of the business or assets of Borrower.

6.14 PENSION PLAN. Terminate or partially terminate any Plan now
existing or hereafter established for Borrower or ERISA Affiliates or withdraw
from participation therein under circumstances that result or could result in
liability to the Pension Benefit Guaranty Corporation, to the fund by which the
Plan is funded, or to the employees (or their beneficiaries) for whom the Plan
is or shall be maintained; or permit any other event or circumstance to occur
that results or could result in liability to the Pension Benefit Guaranty
Corporation or a violation of ERISA.

6.15 TANGIBLE NET WORTH. Permit Tangible Net Worth plus Subordinated
Debt at any time to fall below the sum of (a) $240,000,000 plus (b) 75 percent
of Borrower's Consolidated positive Net Income for each Fiscal Quarter
commencing with the Fiscal Quarter ending July 26, 1996, plus (c) 100 percent of
any equity plus Subordinated Debt raised by Borrower after April 26, 1996.

6.16 CAPITAL RATIO. Permit the Borrower's Capital Ratio to be
greater than 1.0:1.0 as of the end of any Fiscal Quarter, commencing with the
Fiscal Quarter ending April 26, 1996.

6.17 FIXED CHARGE COVERAGE RATIO. Permit the ratio of Adjusted Cash
Flow plus the Adjusted Cash Flow Carryforward to Interest Expense plus the
current portion of Borrower's Consolidated long term Indebtedness to be less
than 1.0:1.0 on the last day of

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each Fiscal Year, commencing with the Fiscal Year ending on January 31, 1997,
and each Fiscal Year thereafter.

6.18 DEBT SERVICE COVERAGE RATIO. Permit the ratio of Cash Flow
(excluding Capital Proceeds) plus Borrower's Consolidated rent expense to
Interest Expense plus Borrower's Consolidated rent expense plus the current
portion of Borrower's Consolidated long-term Indebtedness to be less than
1.25:1.0 at the end of any Fiscal Quarter, computed for the period of four
consecutive Fiscal Quarters ending on the close of such Fiscal Quarter,
commencing with the Fiscal Quarter ending April 26, 1996.

6.19 CURRENT RATIO. Permit the ratio of Current Assets to Current
Liabilities at the end of any Fiscal Quarter to be less than 1.35:1.0 commencing
with the Fiscal Quarter ending April 26, 1996.

6.20 WORKING CAPITAL. Permit the positive difference between
Current Assets and Current Liabilities at the end of any Fiscal Quarter to be
less than $47,000,000 commencing with the Fiscal Quarter ending April 26, 1996.

6.21 CAPITAL EXPENDITURES. Permit the aggregate amount of Borrower's
Consolidated Capital Expenditures (a) to exceed $60,000,000 for the Fiscal Year
ending January 31, 1997, and (b) to exceed $50,000,000 for each Fiscal Year
thereafter.

ARTICLE VII. REPRESENTATIONS AND WARRANTIES

In order to induce Agent and Lenders to enter into this Agreement, to
make the Loans, and to induce Issuing Lender to issue the Letters of Credit as
herein provided, Borrower hereby makes the following representations, covenants,
and warranties to Agent and each Lender, all of which shall survive the
execution and delivery of this Agreement and shall not be affected or waived by
any inspection or examination made by or on behalf of Agent:

7.1 CORPORATE STATUS. Borrower is a corporation organized and
validly existing under the laws of the state of Washington. Borrower has the
power and authority to own its property and assets and to transact the business
in which it is engaged or presently proposes to engage. Borrower is qualified
to do business in all states except where the failure to be qualified could not
have a material adverse effect on Borrower.

7.2 POWER AND AUTHORITY. Borrower has the power to execute, deliver,
and carry out the terms and provisions of this Agreement and each of the Loan
Documents and has taken all necessary action to authorize the execution,
delivery, and performance of this Agreement and the other Loan Documents, the
borrowings hereunder, and the making and delivery of the Notes and all Loan
Documents delivered hereunder. This Agreement

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constitutes and the Notes and other Loan Documents and instruments issued or to
be issued hereunder, when executed and delivered pursuant hereto, constitute or
will constitute the authorized, valid, and legally binding obligations of
Borrower enforceable in accordance with their respective terms.

7.3 NO VIOLATION OF AGREEMENTS. Borrower is not in default under any
material provision of any agreement to which it is a party or in violation of
any material provision of any Applicable Laws. The execution and delivery of
this Agreement, the Notes, the other Loan Documents, and the instruments
incidental hereto; the consummation of the transactions herein or therein
contemplated; and compliance with the terms and provisions hereof or thereof
(a) will not violate any material provision of any Applicable Law; (b) will not
conflict or be inconsistent with; result in any breach of any of the material
terms, covenants, conditions, or provisions of; constitute a default under; or
result in the creation or imposition of (or the obligation to impose) any lien,
charge, or encumbrance upon any of the property or assets of Borrower pursuant
to the terms of: any material Governmental Approval, mortgage, deed of trust,
lease, agreement, or other instrument to which Borrower is a party, by which
Borrower may be bound, or to which Borrower may be subject; and (c) will not
violate any of the provisions of the articles of incorporation of Borrower. No
Governmental Approval is necessary (x) for the execution of this Agreement, the
making of the Notes, or the assumption and performance of this Agreement or the
Notes by Borrower or (y) for the consummation by Borrower of the transactions
contemplated by this Agreement including but not limited to the grant of the
security interests to Agent.

7.4 RECORDING AND ENFORCEABILITY. Neither the articles of
incorporation, bylaws, or other applicable corporate documents of Borrower nor
other agreements require recording, filing, registration, notice, or other
similar action in order to insure the legality, validity, binding effect, or
enforceability against all Persons of this Agreement, the Notes, or other Loan
Documents executed or to be executed hereunder, other than filings or recordings
that may be required under the Uniform Commercial Code or in connection with the
perfection of the security interests of Agent in patents, trademarks, and
similar types of Collateral.

7.5 LITIGATION. Except as set forth on SCHEDULE 7.5 hereto, there
are no actions, suits, or proceedings pending or threatened against or affecting
Borrower before any Governmental Body that could have a material adverse effect
on Borrower or the Collateral. Borrower is not in default under any material
provision of any Applicable Law or Governmental Approval of any Governmental
Body which could have a material adverse effect on Borrower or on the
Collateral.

7.6 GOOD TITLE TO PROPERTIES. Borrower has good and marketable title
to, or a valid leasehold interest in, its property and assets, subject to no
Liens, except those permitted under the provisions of SECTION 6.4 of this
Agreement.

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7.7 LICENSES AND PERMITS. All Governmental Approvals with respect to
the business of Borrower were to Borrower's knowledge duly and validly issued by
the respective Governmental Bodies, are in full force and effect, and are to
Borrower's knowledge valid and enforceable in accordance with their terms. With
regard to such Governmental Approvals, no fact or circumstance exists that
constitutes or, with the passage of time or the giving of notice or both, would
constitute a material default under any thereof, or permit the grantor thereof
to cancel or terminate the rights thereunder, except upon the expiration of the
full term thereof. Borrower presently holds all material Governmental Approvals
as are necessary or advisable in connection with the conduct of its business as
now conducted and as presently proposed to be conducted.

7.8 NO BURDENSOME AGREEMENTS. Borrower is not a party to any
agreement or instrument or subject to any restrictions that now have or, as far
as can be foreseen, could have a material adverse effect on Borrower.

7.9 PROPERTIES IN GOOD CONDITION. All the material properties of
Borrower are, and all material properties to be added in connection with any
contemplated expansion will be in good repair and good working order and
condition in a manner consistent with past practices of Borrower, and comparable
to industry standards and are and will be in compliance with all Applicable
Laws.

7.10 FINANCIAL STATEMENTS. The (a) audited financial statements of
Borrower dated January 26, 1996, and all schedules and notes included in such
financial statements and (b) unaudited financial statements of Borrower that
have heretofore been delivered to Agent are true and correct in all material
respects and present fairly (i) the financial position of Borrower as of the
date of said statements and (ii) the results of operations of Borrower for the
periods covered thereby; and there are not any material liabilities that should
have been reflected in the financial statements or the notes thereto under GAAP,
contingent or otherwise, including liabilities for Taxes or any unusual forward
or long-term commitments, that are not disclosed or reserved against in the
statements referred to above or in the notes thereto or that are not disclosed
herein. All such financial statements have been prepared in accordance with
GAAP. There has been no material adverse change (including but not limited to
any such change occasioned by accident, act of God, war, fire, flood, explosion,
strike or other labor dispute, or orders or action by any Governmental Body or
public utility) in the operations, business, property, assets, or condition
(financial or otherwise) of Borrower since January 26, 1996, or Borrower's most
recent 10-K or 10-Q report filed with the Securities and Exchange Commission.

7.11 OUTSTANDING INDEBTEDNESS. Other than current trade payables
and other operating liabilities incurred in the ordinary course of business,
Borrower has no Indebtedness, including but not limited to Indebtedness to its
Affiliates, that is not listed on Borrower's unaudited financial statements
dated March 22, 1996.

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7.12 TAXES. Borrower has duly filed all tax returns and reports
required by Applicable Law to be filed; and all Taxes upon Borrower or upon its
assets that are due and payable have been paid (except as otherwise permitted in
this Agreement).

7.13 LICENSE FEES. Borrower has paid all fees and charges that have
become due for any Governmental Approval for its business or has made adequate
provisions for any such fees and charges that have accrued.

7.14 TRADEMARKS, PATENTS, ETC. Attached hereto as SCHEDULE 7.14 is
a schedule of all trademarks, trade names, service marks, patents, and
applications therefor currently held by Borrower or in which it has an interest,
e.g., a license. Borrower possesses all necessary trademarks, trade names,
service marks, copyrights, patents, patent rights, and licenses to conduct its
businesses as now and as proposed to be conducted, without conflict with the
rights or claimed rights of others, except as disclosed on SCHEDULE 7.14.

7.15 DISCLOSURE. To the best of Borrower's knowledge, the exhibits
hereto, the financial information and statements referred to in SECTION 7.10
herein, any certificate, statement, report or other document furnished to Agent
by Borrower or any other Person in connection herewith or in connection with any
transaction contemplated hereby, and this Agreement, do not contain any untrue
statements of material fact or omit to state any material fact necessary in
order to make the statements contained therein or herein not misleading.

7.16 REGULATIONS U AND X. Borrower does not own and no part of the
proceeds hereof will be used to purchase or carry any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System)
or to extend credit to others for the purpose of purchasing or carrying any
margin stock. Borrower is not engaged principally or as one of its important
activities in the business of extending credit for the purpose of purchasing or
carrying any margin stock. If requested by Agent, Borrower will furnish to
Agent a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in said Regulation. No part of the proceeds of the Loans
will be used for any purpose that violates or is inconsistent with the
provisions of Regulation X of said Board of Governors.

7.17 NAMES. Neither Borrower nor any of its predecessors operate or
do business or during the past five years have operated or done business under a
fictitious, trade, or assumed name.

7.18 CONDITION OF PROPERTY. Except as otherwise disclosed to Agent,
Borrower hereby represents and warrants to Agent that as of the date hereof and
continuing hereafter, Borrower's property (both owned and leased) and each
portion thereof (a) are not and to the best knowledge of Borrower after due
investigation have not been a site for the

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use, generation, manufacture, storage, disposal, or transportation of any
Hazardous Material; (b) are presently in compliance with or are being and
promptly shall be brought into compliance with all Hazardous Materials Laws; and
(c) are not being used and to the best knowledge of Borrower after due
investigation have not been used in any manner that has resulted in or will
result in Hazardous Materials being spilled or disposed of on any adjacent or
other property.

7.19 PENSION PLANS. No "reportable event" as defined in
Section 4043(b) of Title IV of ERISA has occurred and is continuing with respect
to any Plan. In addition, each of the Plans are in compliance with the
requirements of ERISA, including the minimum funding requirements.

ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES

8.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein,
means any one of the following events (whatever the reason for the Event of
Default, whether it shall relate to one or more of the parties hereto, and
whether it shall be voluntary or involuntary or be pursuant to or effected by
operation of Applicable Law):

(a) If Borrower shall fail to (i) pay any principal of the Notes when
due in accordance with the terms hereof or thereof or to reimburse Issuing Bank
in accordance with SECTION 2.12 herein, in respect of any Letter of Credit,
(ii) pay any interest on the Notes within five days after such interest becomes
due in accordance with the terms thereof or hereof, or (iii) pay any other
amount payable hereunder within ten days after Agent makes a demand for such
other amount; or

(b) If Borrower or any of its Subsidiaries shall (i) default in
payment of principal of or interest on any Indebtedness for money borrowed or
capital lease obligations (other than as set forth in SECTION 8.1(a) above), if
the outstanding principal (or capitalized) amount of such Indebtedness is
$100,000 or more, after any applicable grace period provided in the instrument
or agreement under which such Indebtedness was created; or (ii) default in the
observance or performance of any other material provisions of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing, or relating thereto; or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause or to permit the holder or holders of such Indebtedness to
cause, with the giving of notice if required, such Indebtedness to become due
prior to the date of maturity, any applicable grace period having expired; or

(c) If any representation or warranty (i) made by Borrower in this
Agreement or (ii) made by Borrower or any other Person in any document,
certificate, or

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statement furnished pursuant to this Agreement or in connection herewith, is
false or misleading in any material respect; or

(d) If Borrower fails to observe or perform, or to cause any
Subsidiary to observe or perform, any term, covenant, or agreement to be
performed or observed pursuant to ARTICLES V and VI herein, except that with
respect to SECTIONS 6.15 through 6.21 herein, Borrower shall have 31 days,
commencing on the date Borrower was required to deliver to Agent the financial
statements required under SECTION 5.1(a), (b), or (c), as the case may be, to
cure any such default; or

(e) If Borrower fails to observe or perform, or to cause any
Subsidiary to observe or perform, (not otherwise specified in this SECTION 8.1)
any term, covenant, or agreement to be performed or observed pursuant to the
provisions of this Agreement, the other Loan Documents, or any other agreement
incidental hereto and such default is not cured within 30 days; or

(f) If Borrower or any of its Subsidiaries fails to perform any of
its obligations under any of the Loan Documents not otherwise specified in this
SECTION 8.1, or if the validity of any of such documents has been disaffirmed by
or on behalf of any of the parties thereto other than Agent or Lenders and such
default is not cured within 30 days; or

(g) If custody or control of any substantial part of the property of
Borrower or any of its Subsidiaries is assumed by any Governmental Body or if
any Governmental Body takes any final action, the effect of which would be to
have a material adverse effect on Borrower and its Subsidiaries; or

(h) If (i) Borrower or any of its Subsidiaries shall commence any
case, proceeding, or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition, or other relief with respect to it or its debts, or
(B) seeking appointment of a receiver, trustee, custodian, or other similar
official for it or for all or any substantial part of its assets, or Borrower or
any of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Borrower or any of its
Subsidiaries any case, proceeding, or other action of a nature referred to in
clause (i) above which (X) results in the entry of an order for relief or any
such adjudication or appointment or (Y) remains undismissed, undischarged,
unstayed, or unbonded for a period of 60 days; or (iii) there shall be commenced
against Borrower or any of its Subsidiaries any case, proceeding, or other
action seeking issuance of a warrant of attachment, execution, distraint, or
similar process against all or any substantial part of its assets that results
in the entry of an order for any such relief which shall not have been vacated,
discharged, stayed, or bonded pending appeal within 60 days from the entry
thereof;

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or (iv) Borrower or any of its Subsidiaries shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in any of the
acts set forth in clauses (i), (ii), or (iii) above; or (v) Borrower or any of
its Subsidiaries shall admit in writing its inability to pay its debts as they
become due or shall, within the meaning of the Bankruptcy Code, generally not
pay its debts (other than debts that are the subject of a bona fide dispute) as
they become due; or (vi) Borrower or any of its Subsidiaries suspends or
discontinues its business; or

(i) If there is any refusal or failure by any Governmental Body to
issue, renew, or extend any lease or Governmental Approval with respect to the
operation of the business of Borrower and its Subsidiaries, or any denial,
forfeiture or revocation by any Governmental Body of any Governmental Approval
that could have a material adverse effect on Borrower and its Subsidiaries; or

(j) If any of the events described in SECTION 5.10 herein occur or
are threatened and, in Agent's reasonable judgment, such event jeopardizes or
could reasonably be expected to jeopardize repayment of the Notes or
reimbursement of any draw under any Letter of Credit; or

(k) If (i) any Plan shall be terminated pursuant to Subtitle C of
Title IV ERISA, (ii) a trustee shall be appointed by the appropriate
U. S. District Court to administer such Plan, (iii) the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any such Plan, or (iv) any
such Plan fails to satisfy the minimum funding standards for such Plan for a
Plan year as established in Section 412 of the Internal Revenue Code; or

(l) One or more judgments or decrees shall be entered against
Borrower or any of its Subsidiaries involving in the aggregate liability (not
paid or fully covered by insurance) of $100,000 or more which judgment or decree
shall not have been vacated, discharged, stayed, or bonded pending appeal within
30 days from entry thereof; or

(m) If there shall occur any event that has a material adverse effect
upon the business or financial condition of Borrower and its Subsidiaries, or
that materially increases Lenders' risk that Borrower will not repay the Loans
or pay the amount of any draw under the Letter of Credit, or materially impairs
the Collateral.

8.2 ACCELERATION; REMEDIES.

(a) If any Event of Default described in SECTIONS 8.1(h)(i) or (ii)
shall occur then immediately and automatically (i) the Revolving Credit
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement and the Notes
shall immediately become due and payable and Lender's obligations to make any
Loan shall immediately terminate, and (ii) all obligations of Borrower in
respect of the Letters of Credit, although contingent and

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unmatured, shall become immediately due and payable and Issuing Lender's
obligation to open the Letters of Credit shall immediately terminate.

(b) If any other Event of Default other than described in
SECTION 8.1(h), (i), or (ii) shall occur and be continuing, with the consent of
Requisite Lenders, Agent may, or upon the request of Requisite Lenders, Agent
shall (i) by notice to Borrower, declare the Revolving Credit Commitments and
Issuing Lender's obligation to open the Letters of Credit to be terminated
forthwith, whereupon such obligations shall immediately terminate; and (ii) by
notice of default to Borrower, (1) declare all or a portion of the Loans
hereunder, with accrued interest thereon, and all other amounts owing under this
Agreement and the Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable; and (2) declare all or a portion of
the obligations of Borrower in respect of the Letters of Credit, although
contingent and unmatured, to be due and payable forthwith, whereupon the same
shall immediately become due and payable and/or demand that Borrower discharge
any or all of the obligations supported by the Letters of Credit by paying or
prepaying any amount due or to become due in respect of such obligations.

(c) Except as expressly provided above in this SECTION 8.2,
presentment, demand, purchase, and all other notices of any kind are hereby
expressly waived. Agent and Lenders may proceed to protect and enforce its
rights hereunder or realize on any or all security granted pursuant hereto in
any manner or order it deems expedient without regard to any equitable
principles of marshaling or otherwise. No failure or delay on the part of
Agent, any Lender, or the holder of any of the Notes in exercising any right,
power, or privilege hereunder and no course of dealing between Borrower and
Agent, any Lender, or the holder of any of the Notes shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any right, power, or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any rights or remedies
that Agent, any Lender, or any subsequent holder of any of the Notes would
otherwise have. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances or shall constitute a waiver of the right of Agent and/or Lenders
to any other or further action in any circumstances without notice or demand.

ARTICLE IX. AGENCY PROVISIONS

9.1 AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers hereunder and under the other Loan Documents as are delegated to Agent by
the terms hereof or thereunder, together with such powers as are reasonably
incidental thereto. Agent shall have no duties or responsibilities except those
expressly set forth hereunder and in the other Loan Documents. The duties of
Agent shall be mechanical and administrative in

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nature; Agent shall not have by reason of any Loan Document a fiduciary
relationship in respect of any Lender; and nothing in any Loan Document,
expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of the Loan Documents except as expressly set
forth herein. As to any matters not expressly provided for by this Agreement,
including enforcement or collection of the Loans, or other Obligations, Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining) upon the instructions of Lenders, acting in agreement, and
such instructions shall be binding upon all Lenders, provided that Agent shall
not be required to take any action which exposes Agent to personal liability or
which is contrary to the Loan Documents or Applicable Law. In the absence of
instructions from Lenders, Agent shall have authority, in its sole discretion,
to take or not to take any action, unless this Agreement specifically requires
the consent of Requisite Lenders and any such action or failure to act shall be
binding on Lenders and on all holders of the Notes. Each Lender and each holder
of any Notes shall execute and deliver such additional instruments, including
powers of attorney in favor of the Agent, as may be necessary or desirable to
enable Agent to exercise its powers hereunder and under the other Loan
Documents.

9.2 DUTIES AND OBLIGATIONS.

(a) Neither Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or omitted to be taken by it or
any of them under or in connection with this Agreement or any other Loan
Document except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the foregoing, Agent (i) may treat each
Lender which is a party hereto as the party entitled to receive payments
hereunder until Agent receives written notice of the assignment of such Lender's
interest herein signed by such Lender and a written agreement of the assignee
that it is bound hereby to the same extent as it would have been had it been an
original party hereto, in each case in form satisfactory to Agent; (ii) may
consult with legal counsel (including counsel for Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties, or
representations made in or in connection with this Agreement, any other Loan
Document, or in any instrument or document furnished pursuant hereto or thereto;
(iv) shall not have any duty to ascertain or to inquire as to the performance of
any of the terms, covenants, or conditions of the Loan Documents on the part of
Borrower, or as to the use of the proceeds of the Loan, or as to the existence
or possible existence of any Default or Event of Default; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, effectiveness, or value of this Agreement, of any
other Loan Document, or of any instrument or document furnished pursuant hereto
or thereto; and (vi) shall incur no liability under or in respect to this
Agreement or any other Loan Document by acting upon any oral or written notice,
consent, certificate, or other instrument or writing (which may be

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<PAGE>

by telegram, facsimile transmission, cable, or telex) believed by it to be
genuine and signed, sent or made by the proper party or parties or by acting
upon any representation or warranty of Borrower made or deemed to be made herein
or in any other Loan Document.

(b) Agent will transmit to Lenders copies of all documents received
from Borrower pursuant to the requirements hereof other than documents which, by
the terms hereof, Borrower are obligated to deliver directly to Lenders.

(c) Each Lender or its assignees shall furnish to Agent in a timely
fashion such documentation (including, but not by way of limitation, IRS Forms
Nos. 101 and 4224) as may be required by applicable law or regulation to
establish such Lender's status for tax withholding purposes.

9.3 RIGHTS OF AGENT AS LENDER. With respect to the Loans made by
Agent and the Note issued to Agent, Agent in its individual capacity as a Lender
and not as Agent, shall have the same rights hereunder and otherwise as any
other Lender and may exercise the same as though it were not Agent, and it is
understood and agreed that Agent may exercise its rights and powers under other
agreements and instruments to which it is or may be a party, and engage in other
transactions with Borrower as though it were not Agent hereunder.

9.4 LENDERS' CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based upon
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon Agent or any other Lender and based upon such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action hereunder and the other Loan Documents.

9.5 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrower) ratably according to their respective Pro Rata Share
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of this Agreement or any
other Loan Document or any action taken or omitted by Agent under this Agreement
or any other Loan Document, except any such as result from Agent's gross
negligence or willful misconduct. Without limiting the foregoing, each Lender
agrees to reimburse Agent promptly on demand in proportion to its Pro Rata Share
for any out-of-pocket expenses, including attorney fees, incurred by Agent in
connection with the administration or enforcement or preservation of any rights
under any Loan Document (to the extent that Agent is not reimbursed for such
expenses by Borrower).

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9.6 SUCCESSOR AGENT. Agent may give written notice of resignation at
any time to Lenders and may be removed at any time with cause by agreement of
Lenders. Lenders, acting in agreement, shall have the right to appoint a
successor Agent. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges, and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement, other than from liabilities to Lenders for
Agent's gross negligence or willful misconduct arising prior to the date of such
discharge. Until the acceptance by such a successor Agent, the retiring Agent
shall continue as "Agent" hereunder. After any retiring Agent's resignation or
removal hereunder as Agent shall become effective, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.

9.7 NO EFFECT ON BORROWER. Lenders and Agent agree that this
ARTICLE IX outlines the rights and responsibilities of Agent and Lenders as
among themselves and is not intended to affect the rights or obligations of
Borrower under this Agreement or the other Loan Documents, other than Borrower
being obligated to treat the successor Agent as "Agent for all purposes."

ARTICLE X. MISCELLANEOUS

10.1 NOTICES. All notices, requests, consents, demands, approvals,
and other communications hereunder shall be deemed to have been duly given,
made, or served if made in writing and delivered personally, sent via facsimile,
or mailed by first class mail, postage prepaid, to the respective parties to
this Agreement. For purposes of this Agreement, the address of each party
hereto shall be as set forth under such party's name on the signature pages
hereof. The designation of the persons to be so notified or the address of such
persons for the purposes of such notice may be changed from time to time by
similar notice in writing, except that any communication with respect to a
change of address shall be deemed to be given or made when received by the party
to whom such communication was sent.

10.2 PAYMENT OF EXPENSES AND TAXES. Borrower agrees (a) to pay or
reimburse Agent for all of their reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, the Loan Documents and any other
documents prepared in connection therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
fees and disbursements of counsel to Agent, (b) to pay or reimburse Agent and
each Lender for all their respective reasonable costs and expenses incurred in
connection with, and to pay, indemnify, and hold Agent, each Lender, and their
respective officers, directors, employees, and agents and attorneys (the
"Indemnified Persons") harmless from and against any and all other liabilities,
obligations,

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losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever arising out of or in connection
with, the enforcement or preservation of any rights under the Loan Documents and
any such other documents prepared in connection therewith, including without
limitation, the reasonable fees and disbursements of counsel to Agent and each
Lender, (c) to pay, indemnify, and to hold Agent and each Lender harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other Taxes (other
than income and gross revenue taxes), if any, which may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, any Loan
Document and any such other documents including, without limitation, the
reasonable fees and disbursements of counsel to Agent and each Lender in
connection with the foregoing and in connection with advising Agent with respect
to its rights and responsibility under any Loan Document and (d) to pay,
indemnify, and hold the Indemnified Persons harmless from and against any and
all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, reasonable fees and disbursements of
counsel) which may be incurred by or asserted against any Indemnified Person
arising out of or in connection with any investigation, litigation or proceeding
related to the Loan Documents or the use of the proceeds of the Loans, whether
or not any of the Indemnified Persons is a party thereto or by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to make payments under, Letters of Credit, (it being agreed that nothing in this
SECTION 10.2 is intended to limit Borrower's obligations pursuant to
SECTION 2.12) (all the foregoing, collectively, the "Indemnified Liabilities"),
provided, that Borrower shall have no obligation hereunder with respect to
Indemnified Liabilities of any Indemnified Person arising from (i) the gross
negligence or willful misconduct of such Indemnified Person, (ii) legal
proceedings commenced against Agent or a Lender by any security holder or
creditor thereof arising out of and based upon rights afforded any such security
holder or creditor solely in its capacity as such, (iii) disputes between Agent
and the Lenders and (iv) legal proceedings which are resolved in favor of
Borrower. The agreements in this subsection shall survive repayment of the
Notes and all other amounts payable hereunder.

10.3 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS.

(a) This Agreement and the other Loan Documents shall be binding upon
and inure to the benefit of Borrower, Lenders, Agent, all future holders of the
Notes and their respective successors and assigns, except that Borrower may not
assign or transfer any of its rights or obligations under any Loan Document
without the prior written consent of each Lender.

(b) Any Lender may, with the prior written consent of all the other
Lenders and in accordance with applicable law, at any time sell to one or more
banks or

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other entities ("Participants") participating interests in any Loan owing to a
Lender, the Notes, the commitments or any other interest of a Lender hereunder.
In the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note for all purposes
under this Agreement, and Borrower and Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and such Participant shall have no voting
rights as a Lender hereunder. Borrower agrees that if amounts outstanding under
this Agreement and the Notes are due or unpaid, or shall have been declared or
shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement or any Note to the
same extent as if the amount of its participating interest were owing directly
to it under this Agreement or any Note to the same extent as if the amount of
its participating interest were owing directly to it under this Agreement or any
Note; provided that such right of setoff shall be subject to the obligation of
such Participant to share with Lenders, and Lenders agree to share with such
Participant, as provided in SECTION 10.4 hereof. In addition, Borrower agrees
that each Participant shall be entitled to the benefits of SECTIONS 2.17 and 3.8
hereof with respect to its participation in the Revolving Credit Commitments,
the Loans, and the Letters of Credit outstanding from time to time; provided
that no Participant shall be entitled to receive any greater amount pursuant to
such subsection than such Lender would have been entitled to receive in respect
to the amount of the participation transferred by such Lender to such
Participant had no such transfer occurred.

(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any Lender
or any Affiliate thereof and, with the consent of Borrower and the Agent (which
in each case shall not be unreasonably withheld), to one or more additional
banks or financial institutions ("Purchasing Lenders") all or any portion of its
rights and obligations under this Agreement, the L/C Applications, and any Note
(provided that the amount of the Revolving Credit Commitment sold shall in no
event be less than $5,000,000), pursuant to an agreement substantially in the
form of EXHIBIT K (a "Commitment Transfer Supplement"), executed by such
Purchasing Lender, such transferor Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an Affiliate thereof, by Borrower and
Agent), and delivered to Agent for its acceptance and recording in the Register.
Upon such execution, delivery, acceptance and recording from and after the
Transfer Effective Date specified in such Commitment Transfer Supplement, (x)
the Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and obligations
of a Lender hereunder with a Revolving Credit Commitment as set forth therein,
and (y) the transferor thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement (and, in the case of a Commitment Transfer Supplement covering all or
the remaining portion of a transferor Lender's rights and obligations under this
Agreement, such transferor Lender shall cease to

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be a party hereto). Such Commitment Transfer Supplement shall be deemed to
amend this Agreement, including without limitation SCHEDULE 1.1.2 relating to
Lenders' Revolving Credit Commitments, to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender and the resulting
adjustment of Pro Rata Shares, if any, arising from the purchase by such
Purchasing Lender of all of the rights and obligations of such transferor Lender
under this Agreement and any Note. On or prior to the Transfer Effective Date
specified in such Commitment Transfer Supplement, Borrower, at its own expense,
shall execute and deliver to Agent in exchange for the surrendered Note a new
Note to the order of such Purchasing Lender in an amount equal to the Revolving
Credit Commitment assumed by it pursuant to such Commitment Transfer Supplement
and, unless the transferor Lender has not retained a Revolving Credit Commitment
hereunder, a new Note to the order of the transferor Lender in an amount equal
to the Revolving Credit Commitment retained by it hereunder. Such new Note
shall be in a principal amount equal to the principal amount of such surrendered
Note, shall be dated the date of the initial Loans evidenced thereby and shall
otherwise be in the form of the Note replaced thereby. The Note surrendered by
the transferor Lender shall be returned by Agent to Borrower marked "canceled".
On or prior to the Transfer Effective Date specified in such Commitment Transfer
Supplement, the Transferor Lender shall make appropriate arrangements with
Issuing Lender so that replacement Letter of Credit Participation Certificates
are issued to the Transferor Lender, and new Letter of Credit Participation
Certificates or replacement Letter of Credit Participation Certificates, as
appropriate, are issued to each Purchasing Lender, in each case indicating L/C
Participating Interests reflecting their respective revised Revolving Credit
Commitments. Each such new Letter of Credit Participation Certificate or
replacement Letter of Credit Participation Certificate, as the case may be,
shall be dated the date of the related original Letter of Credit Participation
Certificate.

(d) Agent shall maintain at its address referred to in SECTION 10.1 a
copy of each Commitment Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and may treat each Person whose name is
recorded in the Register as the owner of the Loans recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.

(e) Borrower authorizes each Lender to disclose to any Participant or
Purchasing Lender (each, a "Transferee") any prospective Transferee any and all
financial information in such Lender's possession concerning Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of Borrower
pursuant to this Agreement or which has been delivered to such Lender by or on
behalf of Lender's in connection with such Lender's credit evaluation of
Borrower and its Affiliates prior to becoming a party to this Agreement.

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10.4 ADJUSTMENTS; SETOFF.

(a) If any Lender (a "Benefited Lender") shall at any time receive
any payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by setoff,
pursuant to events or proceedings of the nature referred to in SECTION 8.1(h)
hereof, or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of such Lender's
Loans, or interest thereon, such Benefited Lender shall purchase for cash from
the other Lenders such portion of each such other Lender's Loans, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefited Lender to share
the excess payment or benefits of such collateral or proceeds ratably with all
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefited Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest unless Benefited Lender is obligated to pay
interest on the amount so returned, in which case each other Lender shall pay
its pro rata share of such interest. Borrower agrees that each Lender so
purchasing a portion of another Lender's Loan may exercise all rights of payment
(including, without limitation, rights of setoff) with respect to such portion
as fully as if such Lender were the direct holder of such portion. Agent shall
promptly give Borrower notice of any setoff, provided that the failure to give
such notice shall not affect the validity of such setoff.

(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, to the extent permitted by law, without
prior notice to Borrower, any such notice being expressly waived by Borrower to
the extent permitted by applicable law, upon the filing of a petition under any
of the provisions of the United States Bankruptcy Code or amendments thereto, by
or against; the making of an assignment for the benefit of creditors by; the
application for the appointment, or the appointment, of any receiver of, or of
any of the property of; the issuance of any execution against any of the
property of; the issuance of a subpoena or order, in supplementary proceedings,
against or with respect to any of the property of; or the issuance of a warrant
of attachment against any of the property of; Borrower, to setoff and apply
against any Indebtedness, whether matured or unmatured, of Borrower to such
Lender, any amount owing from such Lender to Borrower, at or at any time after,
the happening of any of the above mentioned events, and the aforesaid right of
setoff may be exercised by such Lender against Borrower or against any trustee
in bankruptcy, debtor in possession, assignees for the benefit of creditors,
received or execution, judgment or attachment creditor of Borrower, or against
anyone else claiming through or against Borrower or such trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact that such
right of setoff shall not have been exercised by such Lender prior to the
making, filing or issuance, or service upon such Lender of, or of notice of, any
such petition; assignment for the benefit of creditors; appointment or
application for the appointment of a receiver; or issuance of execution,
subpoena, order or warrant. Each

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Lender agrees promptly to notify Borrower and Agent after any such setoff and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such setoff and application.

10.5 SETOFF. Borrower hereby pledges and gives to Agent and each
Lender, and any Participant, a lien and security interest in the balance of any
deposit account maintained by Borrower at Agent or such Lender, as the case may
be, or any Participant to secure payment of all Obligations. In the case of
Borrower's Default hereunder, Borrower hereby authorizes Agent and Lenders or
any such Participant at their sole option, at any time and from time to time, to
apply to the payment of all or any portion of the Obligations any deposit
balance or balances now or hereafter in the possession of Agent, Lenders, or
such Participant that belong to or are owed to Borrower.

10.6 WAIVER OF SETOFF. In the event that any Lender sells all or any
portion of the Loans to any Participant, Borrower hereby waives the right to
interpose any setoff, counterclaim, or cross-claim (other than compulsory
counterclaims or cross-claims) in connection with any litigation or dispute
under this Agreement, regardless of the nature of such setoff, counterclaim, or
cross-claim.

10.7 FEES AND COMMISSIONS. Borrower agrees to indemnify Agent and
Lenders and hold them harmless with regard to any commissions, fees, judgments,
or expenses of any nature and kind that Agent and Lenders may become liable to
pay by reason of any claims by or on behalf of brokers, finders, or agents in
connection with any act or failure to act by Borrower or any litigation or
similar proceeding arising from such claims. Borrower states that it is aware
of no valid basis for any such claims.

10.8 AMENDMENTS AND WAIVERS.

(a) No Loan Document nor any terms thereof may be amended,
supplemented, or modified, except in accordance with the provisions of this
SECTION 10.8. Subject to the terms of subsection (b) below and with the written
consent of the Requisite Lenders, Agent and Borrower may, from time to time,
enter into written amendments, supplements, or modifications hereto, for the
purpose of adding any provisions to any Loan Document or changing in any manner
the rights of Lenders or of Borrower thereunder or waiving, on such terms and
conditions as Agent may specify in such instrument, any of the requirements of
any Loan Document.

(b) Notwithstanding subsection (a) above, no amendment, waiver, or
consent shall, unless in writing and signed by all Lenders, do any of the
following: (i) reduce the percentage specified in the definition of Requisite
Lenders; (ii) subject Lenders to any additional obligations; (iii) reduce the
principal of, or interest on, the Notes or any fees under this Agreement;
(iv) postpone any date fixed for any payment of principal of, or interest on,
the Notes or any fees under this Agreement; (v) consent to the assignment or

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transfer by Borrower of any of their rights and obligations under this
Agreement; (vi) waive any Default or Event of Default under SECTION 8.1(a) of
this Agreement and its consequences; or (vii) release any Collateral; and
provided further, that no amendment, waiver, or consent shall, unless in writing
and signed by Agent in addition to the Requisite Lenders, affect the rights or
duties of Agent under of the Loan Documents.

(c) Any such waiver, any such amendment, supplement, or modification
shall be binding upon Borrowers, Lenders, Agent, and all future holders of the
Notes. In the case of any waiver, Borrower, Lenders, and Agent shall be
restored to their former position and rights hereunder and under the outstanding
Notes, and any Default or Event of Default waived shall be deemed to be cured
and not continuing; but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right consequent thereon.

10.9 SEVERABILITY. If any provision of this Agreement or any of
the Loan Documents is held invalid under any Applicable Laws, such invalidity
shall not affect any other provision of this Agreement that can be given an
effect without the invalid provision, and, to this end, the provisions hereof
are severable.

10.10 DESCRIPTIVE HEADINGS. The descriptive headings of the
several sections of this Agreement are inserted for convenience only and do not
affect the meaning or construction of any of the provisions hereof.

10.11 GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder and under the other Loan Documents shall be
construed in accordance with and shall be governed by the laws of the state of
Washington.

10.12 CONSENT TO JURISDICTION, SERVICE, AND VENUE. For the
purpose of enforcing payment of any of the Notes, performance of the obligations
under any of the Notes, any arbitration award under the other Loan Documents, or
otherwise in connection herewith, Borrower hereby consents to the jurisdiction
and venue of the courts of the state of Washington or of any federal court
located in such state including but not limited to the Superior Court of
Washington for King County and the United States District Court for the Western
District of Washington. Borrower hereby waives the right to contest the
jurisdiction and venue of courts located in King County, Washington, on the
ground of inconvenience or otherwise and waives any right to bring any action or
proceeding against Agent and Lenders in any court outside King County,
Washington. The provisions of this Section do not limit or otherwise affect the
right of Agent and Lenders to institute and conduct action in any other
appropriate manner, jurisdiction, or court and do not otherwise limit Borrower's
right to contest such manner, jurisdiction, or court as may be sought by Agent
and Lenders in any such action.

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10.13 ARBITRATION.

(a) Borrower, Agent, or any Lender may require that all
disputes, claims, counterclaims, and defenses, including those based on or
arising from any alleged tort ("Claims") relating in any way to the Loans be
settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association and Title 9 of the U. S. Code.
All Claims will be subject to the statutes of limitations that would be
applicable if they were litigated.

(b) This provision is void if the Loans, at the time of the
proposed submission to arbitration, are secured by real property located outside
of Oregon or Washington or if the effect of the arbitration procedure (as
opposed to any Claims of Borrower) would be to materially impair Agent's or
Lender's ability to realize on any Collateral pursuant to an arbitration ruling
favorable to Agent and/or Lenders.

(c) If arbitration occurs and each party's Claim is less than
$100,000, one neutral arbitrator will decide all issues; if either party's Claim
is more than $100,000, three neutral arbitrators will decide all issues. All
arbitrators will be active Washington State Bar members in good standing. All
arbitration hearings will be held in Seattle, Washington. In addition to all
other powers, the arbitrator or arbitrators shall have the exclusive right to
determine all issues of arbitrability and shall have the authority to issue
subpoenas. Judgment on any arbitration award may be entered in any court with
jurisdiction.

(d) If any party institutes any judicial proceeding relating to
the Loans, that action shall not be a waiver of the right to submit any Claim to
arbitration. In addition, each has the right before, during, and after any
arbitration to exercise any number of the following remedies, in any order or
concurrently: (i) setoff, (ii) self-help repossession, (iii) judicial or
nonjudicial foreclosure against real or personal collateral, (iv) provisional
remedies, including injunction, appointment of a receiver, attachment, claim and
delivery, and replevin.

10.14 COUNTERPARTS. This Agreement and each of the Loan Documents
may be executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to constitute an original agreement, but all of such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

10.15 STATUTORY NOTICE. ORAL AGREEMENTS OR ORAL COMMITMENTS TO
LOAN MONEY, EXTEND CREDIT, OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.

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IN WITNESS WHEREOF, Borrower, Agent, and Lenders have caused this
Agreement to be duly executed by the respective, duly authorized signatories as
of the date first above written.

BORROWER:

EAGLE HARDWARE & GARDEN, INC.

By
------------------------------------------
David J. Heerensperger
Chairman and Chief Executive Officer

Notice Address: Eagle Hardware & Garden, Inc.
981 Powell Avenue SW
Renton, Washington 98055
Facsimile: (206) 204-5169
Attention: Steve Stenberg, Assistant Treasurer

LENDERS:

U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By
------------------------------------------
David B. Westburg, Vice President

Notice Address: U. S. Bank of Washington,
National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101
Facsimile: (206) 344-2332
Attention: David B. Westburg

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FIRST HAWAIIAN BANK

By
------------------------------------------
Robert M. Wheeler, III, Vice President

Notice Address: First Hawaiian Bank
Corporate Banking Division
1132 Bishop Street, 19th Floor
Honolulu, Hawaii 96847
Facsimile: (808) 525-6372
Attention: Robert M. Wheeler, III

UNITED STATES NATIONAL BANK
OF OREGON

By
------------------------------------------

Title
------------------------------------------

Notice Address: U. S. Bank of Washington,
National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101
Facsimile: (206) 344-2332
Attention: David B. Westburg

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<PAGE>

KEY BANK OF WASHINGTON

By
------------------------------------------

Title
------------------------------------------

Notice Address: Key Bank of Washington
Large Corporate Group
700 Fifth Avenue, 48th Floor
Post Office Box 90, WA-31-10-4812
Seattle, Washington 98111
Facsimile: (206) 684-6035
Attention: Kathleen Johanson

THE SUMITOMO BANK, LIMITED

By
------------------------------------------

Title
------------------------------------------

By
------------------------------------------
Title
------------------------------------------

Notice Address: The Sumitomo Bank, Limited
U.S. Commercial Banking Department
Pine Street Center
100 Pine Street, Suite 3300
San Francisco, California 94111
Facsimile: (415) 394-9797
Attention: Bill Bloore

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<PAGE>

FIRST SECURITY BANK OF IDAHO, N.A.

By
------------------------------------------
Title
------------------------------------------

Notice Address: First Security Bank of Idaho, N.A.
Commercial Banking Division
119 North 9th Street, 2nd Floor
Boise, Idaho 83702
Facsimile: (208) 393-2162
Attention: Brian Cook

AGENT:

U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By
------------------------------------------
David B. Westburg, Vice President

Notice Address: U. S. Bank of Washington,
National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101
Facsimile: (206) 344-2332
Attention: David B. Westburg

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SCHEDULE 1.1.1
to Amended and Restated Credit Agreement

Eagle Hardware and Garden, Inc.
L/C's Outstanding at 6/30/95 Which Were Also Outstanding at 5/16/96

Outstanding Outstanding
Balance Balance
L/C Number 30-Jun-95 16-May-96
---------- --------- ----------
SO95873 $4,400.00 $4,400.00
SO96215 $102,674.00 $102,674.00
SO97559 $1,010,600.00 $92,560.00
S100286 $290,000.00 $290,000.00
S100338 $66,420.00 $66,420.00
S100339 $372,846.00 $372,846.00
S100340 $288,247.50 $288,247.50
S100341 $5,402.00 $5,402.00
S100342 $143,500.00 $143,500.00
S100343 $85,550.00 $85,550.00
S100344 $129,500.00 $129,500.00
S100414 $47,642.00 $47,642.00
S100415 $37,772.00 $37,772.00
S100574 $150,000.00 $150,000.00
----------- -----------
Total $2,732,553.50 $1,814,513.50

<PAGE>

SCHEDULE 1.1.2
to Amended and Restated Credit Agreement

LENDERS' COMMITMENTS AND PRO RATA SHARES

Revolving Pro Rata Share
Credit of Revolving
LENDER COMMITMENT CREDIT LOANS
- -------------------------- ------------ ------------

U. S. Bank of Washington, $25,000,000 33 1/3%
National Association

First Hawaiian Bank $10,000,000 13 1/3%

U. S. National Bank $5,000,000 6 2/3%
of Oregon

First Security Bank of Idaho, N.A. $10,000,000 13 1/3%

Key Bank of Washington $10,000,000 13 1/3%

The Sumitomo Bank, Limited $15,000,000 20 %
----------- -------

TOTAL $75,000,000 100 %

<PAGE>

SCHEDULE 6.4
to Amended and Restated Credit Agreement

SCHEDULE OF EXISTING LIENS

1. $8,000,000 loan dated November 4, 1994, from The Prudential
Insurance Company of America secured by a lien against the Tukwila store.

2. $6,000,000 loan dated December 20, 1995, from PLF Life Insurance
Company secured by a lien against the Spokane Valley Store.

<PAGE>

SCHEDULE 7.5
to Amended and Restated Credit Agreement

1. EAGLE FOOD CENTERS, INC. V. EAGLE HARDWARE & GARDEN, INC., United
States Patent and Trademark Office, Trademark Trial and Appeal Board ("TTAB"),
Concurrent Use Proceeding No. 1030, June 6, 1995. Having initiated a concurrent
use proceeding, the Company expects that a concurrent use trademark registration
will issue in the near future. The parties already entered into a settlement
agreement in which it was agreed that the Company seek a federal registration
for the western United States, that Eagle Food Centers apply for a federal
registration in the eastern United States, and that the parties cross-license
each other. Eagle Food Centers filed its trademark application to register the
mark EAGLE for the eastern United States on July 17, 1995. In accordance with
procedure at the Patent & Trademark Office ("PTO"), the PTO has suspended the
concurrent use proceeding pending its approval of Eagle Food Centers'
application.

2. MARIE GUIMONT TRUST

The Marie Guimont Trust (the "Trust") owns a trailer park in the City
of Seattle that it wishes to sell to the Company. Under Washington law, Chapter
59.23 RCW, a trailer park owner is required to give its tenants notice of the
intended sale and the first right of refusal, i.e., an opportunity to purchase
the land on which their trailers are situated under the same terms offered to
the outside buyer. The Trust gave its tenants notice of the proposed sale and
an opportunity to purchase the trailer park, but the tenants were unable to
obtain outside financing for the purchase. The tenants asserted that the Trust
had not given them sufficient notice as required under the law, and that the
Company had somehow influenced the Association's potential lenders to withhold
financing. The Trust has now renewed its offer to sell the trailer park to its
tenants and has given them renewed notice of the proposed sale. The tenants have
created the National Homeowners Association (the "Association") that has
commenced four lawsuits dealing with this series of events. One of the tenants
has commenced a fifth lawsuit.

a. NATIONAL HOMEOWNERS ASSOCIATION V. EAGLE HARDWARE & GARDEN, INC.,
ET AL., Cause No. 96-2-01299-8, King County Superior Court, filed January 12,
1996. The Association brought this lawsuit against the Company and its
consultant for alleged interference (in 1995) with trailer owners' ability to
gain financing for the purchase of the trailer park. The Association is seeking
unspecified damages on behalf of the tenants. Discovery has not yet begun, An
evaluation of the likelihood for an unfavorable outcome, and an estimate of an
amount or range of possible loss, cannot be expressed with sufficient certainty
at this time.

<PAGE>

b. NATIONAL HOMEOWNERS ASSOCIATION V. MARIE GUIMONT TRUST, ET AL.,
Cause No. 95-2-00401-6, King County Superior Court, filed January 6, 1995.
This is the Association's original lawsuit, which seeks to compel the Trust to
sell the trailer park to the tenants. The Association is also seeking
unspecified damages against the Trust. The Company is involved as an intervenor
in the case and is seeking to invalidate the Association's claim to a continuing
right of first refusal to purchase the park under the statute. The Company
asserts that the Trust fulfilled all of its notice and offering requirements to
the trailer owners, but the trailer owners and their Association failed to
comply with the purchase requirements set forth in the statute. If the Company
is successful in this lawsuit, it will be free to purchase the park from the
Trust. If the Association is successful, it will presumably attempt to purchase
the park again. The Association has not asserted any claims against the Company
in this action. Accordingly, at this time we are unable to express with
sufficient certainly any evaluation of the likelihood of an unfavorable outcome
or an estimate of any amount or range of possible loss that could occur if any
claims are asserted against the Company.

c. NATIONAL HOMEOWNERS ASSOCIATION V. CITY OF SEATTLE, King County
Superior Court Docket No. 95-2-08977-1; Washington Court of Appeals (Division
I) Docket No. 36933-4. The Association brought this lawsuit against the City
of Seattle challenging the appropriateness of the Company's plan for relocating
the current tenants of the trailer park. Any decision in this lawsuit that is
favorable to the Association could result in increased relocation costs for the
Company. King County Superior Court dismissed the action for failure to name an
indispensable party. The Association appealed the dismissal to the Washington
Court of Appeals where the action is now pending. The Company intends to
vigorously oppose the Association in this lawsuit. We are unable to express
with sufficient certainty any evaluation of the likelihood of an unfavorable
outcome or an estimate of any amount or range of possible loss that could occur
from these claims.

d. ISHBEL DICKENS AND BROADVIEW COMMUNITY CHURCH VS. CITY OF SEATTLE,
ET AL., Seattle Hearing Examiner administrative appeal. Docket No. MUP-95-037
(W). Ishbel Dickens, one of the tenants in the trailer park, brought this
administrative appeal in her own name and in the name of her church to oppose
the City of Seattle's finding that the Environment Impact Statement (EIS) for
the proposed improvements to the Trust property was adequate and the City's
decision to issue the Company a master use permit for the construction project.
On February 28, 1996, the City of Seattle Hearing Examiner dismissed this appeal
and affirmed the City's determination that the EIS was adequate and the City's
issuance of the master use permit. The appellants have not yet indicated
whether they will appeal this decision to superior court. If they do so, the
company intends to contest any such action vigorously. We are unable to express
with sufficient certainty any evaluation of the likelihood of an unfavorable
outcome or an estimate of Any amount or range of possible loss that could occur
from these claims.

<PAGE>

e. NATIONAL HOMEOWNERS ASSOCIATION VS. THE CITY OF SEATTLE, ET AL.,
Seattle Hearing Examiner administrative appeal, Docket No. MUP-95-038(W). The
Association brought this administrative appeal to oppose the City of Seattle's
finding that the Environmental Impact Statement for the proposed improvements to
the Trust property was adequate and the City's decision to issue the Company a
master use permit for the construction project. The Association voluntarily
dismissed this administrative appeal. The Company intends to vigorously contest
these claims if the Association should choose to renew them in either an
administrative appeal or court lawsuit. We are unable to express with
sufficient certainty any evaluation of the likelihood of an unfavorable outcome
or an estimate of any amount or range of possible loss that could occur from
these claims.

1. MICHAEL A. SOTO V. EAGLE HARDWARE & GARDEN, United States District
Court, District of Hawaii, Civil NO. 95-00893 DAE (filed November 1995) Mr.
Soto was employed as a loss prevention associate at the Waipahu store from March
16, 1994, to November 4, 1994, then he was terminated for policy violations
following a sexual harassment allegation in which he was the accused. Mr. Soto
subsequently filed a discrimination charge with the EEOC, claiming national
origin discrimination (Puerto Rican/Hawaiian). The Commission could not find
evidence to support his claim. Subsequently, Mr. Soto filed a discrimination
lawsuit in Hawaii federal court. Mr. Soto is PRO SE, I.E., representing
himself. The Company is vigorously defending the lawsuit. An Answer has been
filed; however, discovery has not commenced. In view of the inherent
uncertainties in this matter and in light of this definitions contained in the
ABA Statement of Policy as to when an unfavorable outcome may be probable or
remote, we are not able to make a judgment at this time about the outcome of
this matter.

2. LARRY MITCHELL V. EAGLE HARDWARE & GARDEN, United States District
Court, for the Western District of Washington, Civil No. C95-1207C (filed
August 1995). Mr. Mitchell was employed as a sales person at the Tukwila store
from September 1992 to February 1994, when he was terminated. Mr. Mitchell
subsequently filed a race discrimination lawsuit. An Answer has been filed, and
discovery has commenced although it is in the early stages. The Company has
sent one set of initial written discovery to Mr. Mitchell, to which he and his
attorney have responded. Mr. Mitchell has not conducted any discovery. Mr.
Mitchell's deposition will be taken within the next three weeks, The company
intends to vigorously defend against Mr. Mitchell's claims. In view of the
inherent uncertainties in this matter and in light of the definitions contained
in the ABA Statement of Policy when an unfavorable outcome may be probable
or remote, we are not able to make a judgment at this time about the outcome
of this matter.

<PAGE>

1. THREATENED LITIGATION. A former supplier of lamps to the company, Osram
Sylvania, Inc. ("Sylvania"), has asserted a claim of $285,277.20 for alleged
unearned portions of new store and grand opening allowances and an additional
$242,000 in promotional allowances allegedly contingent on the company remaining
a Sylvania customer. The claims were asserted in letters dated June 23, 1995
and October 10, 1995 following the company's decision to switch its lamp
business from Sylvania to General Electric.

The company's position is that Sylvania was given every opportunity to
retain the company's business during a review process but that Sylvania's
program was not as attractive to the company as was General Electric's and the
company thereupon entered into an agreement with General Electric to supply its
lamps, commencing April 1, 1995.

Sylvania bases its $285,277.20 claim on its own "standard policy" and an
alleged "verbal contract" that the company was required to remain a customer of
Sylvania for three years after a store opened. The additional $242,000 claim is
based on an allegation that promotional allowances were contingent upon the
letter. Sylvania threatened to turn the matter over to its house counsel for
further action if it did not receive a response. Shortly thereafter, the
company, by letter dated October 24, 1995, assessed that it had fulfilled the
terms of a certain written contract with Sylvania dated October 6, 1992 and
denied that any promotional allowances were made subject to restrictions or
conditions.

The company's position is that it has no further obligation to Sylvania.
The company's most recent contact with Sylvania occurred in the early part of
January, 1996, during a phone conversation in which Sylvania stated that it was
going to sue the company.

Evaluation of risk is difficult due to Sylvania's alleged reliance on
policy and verbal understandings. it does appear that the company has complied
fully with the October 6, 1992 written agreement which by its terms expired in
three years or earlier as soon as certain stores attained a total sales volume
of $5,000,000. Apparently there is no disagreement that such figure was met
before Sylvania asserted its claims.

<PAGE>

The October 6, 1992 agreement covered thirteen stores, including some that
were only scheduled to open in the future. It is my understanding that no
subsequent written agreements were entered into and thus there are no written
agreements covering the most recent new stores opened by the company, which
apparently are the ones in dispute. Although the October 6, 1992 agreement
provided that Eagle would reimburse Sylvania a portion of the allowance if it
had not purchased at least $5,000,000 of lamps within three years, that
threshold was apparently met. One of the problems with Sylvania's reliance on
"policy" is the apparent absence of any sales volume threshold figure for the
newest stores. There is not even any such figure asserted in Sylvania's
reliance on a "verbal contract." Sylvania would presumedly have to argue that
its "policy" or any such alleged verbal contract was not conditioned upon a
sales quota. This may lack conviction in view of the fact that a sales quota
was indeed a major term of the written contract between the parties.

Although not a legal factor, it is also possible that Sylvania may be
reluctant to sue a large former customer who still might at some future date
again become a significant source of business.

Unless and until Sylvania follows through on its threat to sue (obviously
some time has passed since the October, 1995 claim letter), the probability of
unfavorable outcome to the company would appear to lessen as time passes.

2. SETTLED LITIGATION. The shareholder class action litigation, the
espresso cart suit and the Hawaii personal injury suit described in my March 1,
1995 report to you have all been settled or dismissed in favor of the company.

<PAGE>

SCHEDULE 7.14
to Amended and Restated Credit Agreement

SCHEDULE OF TRADEMARKS, ETC.

TRADE NAMES

Eagle Hardware & Garden

Federal Federal
Service Mark Serial No. Registration
- ------------ ---------- ------------

EAGLE HARDWARE 74224159 Pending
& GARDEN
with eagle design

Eagle design None None

MORE OF EVERYTHING 74224155 1728432
design

EAGLE EXPERT None None

Circle design with None None
serrated edges and
other design elements

The foregoing is not necessarily a complete list of all possible trademarks,
service marks, and trade dress rights to which the Company may claim an
interest.

<PAGE>

EXHIBIT A
to Amended and Restated Credit Agreement

REVOLVING CREDIT NOTE

$__,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of
___________________________ ("Payee"), the principal sum of __________ Million
Dollars ($ ,000,000) or so much thereof as advanced by Payee in lawful,
immediately available money of the United States of America, in accordance with
the terms and conditions of that certain amended and restated credit agreement
dated as of May 28, 1996, by and among Borrower, the financial institutions
named therein as Lenders, and U. S. Bank of Washington, National Association
("U. S. Bank") as agent for Lenders (in such capacity "Agent") (said Credit
Agreement together with all supplements, exhibits, amendments and modifications
thereto, the "Credit Agreement"). Borrower also promises to pay interest on the
unpaid principal balance hereof, commencing as of the first date of an advance
hereunder, in like money in accordance with the terms and conditions, and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on November 30, 1997.

All advances under this Note, all conversions between interest rate
options, and all payments of principal and interest may be reflected on a
schedule or a computer-generated statement which shall become a part of this
Note.

All payments of principal and interest in respect of this Note shall
be made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly
and severally waive presentment for payment, demand, notice of nonpayment,
notice of protest, and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor, or enforcement of
the payment of this Note except such notices as are specifically required by
this Note or by the Credit Agreement, and they agree that the liability of each
of them shall be unconditional without regard to the liability of any other
party and shall not be in any manner affected by any indulgence, extension of
time, renewal, waiver, or modification granted or consented to by Requisite
Lenders. Borrower and all endorsers, sureties, and guarantors hereof
(1) consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Requisite Lenders with respect to the
payment or other provisions of this Note and the Credit Agreement;

-1-

<PAGE>

(2) consent to the release of any property now or hereafter securing this Note
with or without substitution; and (3) agree that additional makers, endorsers,
guarantors, or sureties may become parties hereto without notice to them and
without affecting their liability hereunder.

This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement and as such is entitled to all of the benefits and obligations
specified in the Credit Agreement, including but not limited to any Collateral
and any conditions to making advances hereunder.

Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
repayment of this Note and the acceleration of the maturity hereof.

EAGLE HARDWARE & GARDEN, INC.

By
------------------------------------------
David J. Heerensperger, Chairman and
Chief Executive Officer

-2-

<PAGE>

EXHIBIT B
to Amended and Restated Credit Agreement

LETTER OF CREDIT PARTICIPATION CERTIFICATE

____________________, 199____

[Name of Lender]
______________________
______________________

Dear Sirs:

Pursuant to subsection 2.12(b) of the Amended and Restated Credit
Agreement dated as of May 28, 1996 (the "Credit Agreement"; terms defined in the
Credit Agreement being used herein with their respective defined meanings) among
Eagle Hardware & Garden, Inc., the Lenders parties thereto and U. S. Bank of
Washington, National Association, as agent for the Lenders, the undersigned
hereby acknowledges receipt from you on the date hereof of an L/C Participating
Interest in the amount of ____________________________________________ Dollars
($___________) in the following Letter of Credit and the L/C Application
relating thereto: ____________________________________.

Very truly yours,

U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By
---------------------------------------------

Its
----------------------------------------

<PAGE>

EXHIBIT C
to Amended and Restated Credit Agreement

IBOR BORROWING NOTICE

This IBOR Borrowing Notice, executed and delivered this ____ day of
_______________, 19___, by EAGLE HARDWARE & GARDEN, INC., a Washington
corporation ("Borrower"), pursuant to Section 2.20 of that certain amended and
restated credit agreement (the "Credit Agreement") dated as of May 28, 1996,
among Borrower, the Lenders party thereto, and U. S. Bank of Washington,
National Association, as agent for Lenders (in such capacity "Agent"). All
terms not otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement.

1. Aggregate Current Amount: $_______________

2. Net availability of credit under
Section 2.1 of the Credit Agreement
(the Total Revolving Credit Commitment
minus item 1): $_______________

3. Request for a new IBOR Rate Borrowing:

(a) Amount: $_______________

(b) Length of IBOR Interest
Period: ________________

4. Request for conversion of Prime
Rate Borrowing to IBOR Rate
Borrowing:

(a) Amount: $_______________

(b) Length of Interest Period: ________________

- 1 -

<PAGE>

5. Request for conversion of Quoted
Rate Borrowing to IBOR Rate
Borrowing:

(a) Amount: $_______________

(b) Length of Interest Period: ________________

6. Request for new IBOR Interest
Period:

(a) Amount of existing IBOR Rate
Borrowing: $_______________

(b) Amount of borrowing for $_______________
New Interest Period:

(d) New IBOR Interest Period
requested: ________________

7. Special Instructions: ________________________________________
________________________________________
________________________________________

In connection with the foregoing borrowing and pursuant to the terms
and provisions of the Credit Agreement, the undersigned hereby certifies that:

(a) The undersigned is the duly elected, qualified and acting
_______________ of Borrower, and as such is duly authorized to make and deliver
this certificate.

(b) The representations and warranties contained in Article VII of
the Credit Agreement (except Sections 7.5, 7.11, and 7.14) are true and correct
in all material respects on and as of the date hereof with the same force and
effect as though made on and as of the date hereof.

(c) No event has occurred and is continuing, or would result from,
the borrowing requested hereby, which constitutes a Default or an Event of
Default.

- 2 -

<PAGE>

(d) The Aggregate Current Amount will not, after giving effect to the
borrowing requested hereby, exceed the Total Revolving Credit Commitment or the
amount permitted by Section 2.19 of the Credit Agreement.

(e) There has been no material adverse change in Borrower's financial
condition since the date of the financial statements of Borrower for the most
recent Fiscal Quarter then ended delivered to U. S. Bank pursuant to
Section 5.1(c) of the Credit Agreement to the date hereof.

(f) The information contained herein is true and correct.

EXECUTED AND DELIVERED this ____ day of _______________, 19___.

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By
-------------------------

Title
-------------------------

Agent confirms that the IBOR Borrowing Rate is _____ percent per annum for
the IBOR Rate Borrowing requested above for the corresponding Interest Period.

U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION, as
Agent for Lenders

By
-------------------------

Title
-------------------------

- 3 -

<PAGE>

EXHIBIT D
to Amended and Restated Credit Agreement

EAGLE HARDWARE & GARDEN, INC. --------------------------------
CASH MANAGEMENT ATTN: Ray Mah (206) 344-2332
FROM: Tony Pound (206) 204-5158
--------------------------------

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

BID LINE FACILITY REQUEST - USBW

Date of request: 5/6/95
-----------------------------------

Date funding requested: 5/7/95
-----------------------------------

Amount requested: $2,000,000
-----------------------------------

# of days requested (30-day max.): 3 days
-----------------------------------

Name, title of person requesting Steve Stenberg, Asst. Treasurer
-----------------------------------

Signature: /s/ Steve Stenberg
-----------------------------------

NOTE: The current Bid Line Facility is a $15,000,000 commitment, which means a
$15mm is the maximum total that can be outstanding at any point in time under
the Bid Line Facility. Borrowings must be in increments of $1,000,000 and can
be for periods up to 30 days. This form should be completed and faxed by 9 a.m.
to USBW (attn: Eric Hynes) for every Bid Line Facility request. Funding occurs
the following day.

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

HSBW BID LINE APPROVAL

Amount approved: $2,000,000
-----------------------------------

Interest rate: 7.43%
-----------------------------------

Maturity date: 5/10/96
-----------------------------------

Approved by: /s/ Ray Mah
-----------------------------------

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

<PAGE>

EXHIBIT E
to Amended and Restated Credit Agreement

FIRST AMENDMENT TO SECURITY AGREEMENT

This first amendment to security agreement ("Amendment") is made and
entered into as of May 28, 1996, by EAGLE HARDWARE & GARDEN, INC., a Washington
corporation ("Borrower"), for the benefit of U. S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, a national banking association, ("U. S. Bank"), as agent for and
representative of (in such capacity herein called "Secured Party") the financial
institutions ("Lenders") party to the Credit Agreement (hereinafter defined).

R E C I T A L S :

A. EXISTING LOAN AND SECURITY AGREEMENT. On or about June 30, 1995,
Borrower, Lenders, and Secured Party entered into that certain credit agreement
("Original Credit Agreement"), pursuant to which Lenders advanced funds to
Borrower. Contemporaneously with the execution of the Original Credit
Agreement, Borrower granted to Lenders a security interest in certain of its
existing and future assets as security for all past, present, and future
indebtedness of Borrower to Lenders, as more fully set forth in the security
agreement dated as of June 30, 1995, among Borrower and Lenders ("Security
Agreement").

B. PARTIES AND PURPOSE. Contemporaneously with the execution of
this Amendment, Secured Party, Lenders, and Borrower entered into an amended and
restated credit agreement of even date herewith, pursuant to which Agent and
Lenders agreed to modify certain terms in the Original Credit Agreement and to
restate the Original Credit Agreement.

NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to amend and restate the Original Credit Agreement, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Secured Party as follows:

1. AMENDMENT. All references to the "Credit Agreement" in the
Security Agreement are hereby amended to mean the amended and restated credit
agreement of even date herewith among Borrower, Lender, and Agent (together with
all supplements, exhibits, modifications, and amendments thereto, the "Credit
Agreement").

2. RATIFICATION. Secured Party and Borrower agree that the Security
Agreement is hereby amended as set forth herein, and that the Security Agreement
shall remain in full force and effect, except as expressly modified by this
Amendment. Borrower hereby reaffirms and ratifies the Security Agreement and
the grant of security thereunder.

- 1 -

<PAGE>

3. COUNTERPARTS. This Amendment may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to constitute an original
Amendment, but all of such counterparts together shall constitute but one and
the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.

IN WITNESS WHEREOF, Borrower and Secured Party have caused these
presents to be duly executed by their respective duly authorized signatories as
of the day and year first above written.

BORROWER:

EAGLE HARDWARE & GARDEN, INC.

By
---------------------------------------
David J. Heerensperger
Chairman and Chief Executive Officer

Notice Address:

Eagle & Hardware & Garden, Inc.
981 Powell Avenue, S.W.
Renton, Washington 98005
Facsimile: (206) 204-5168
Attention: Steve Stenberg, Asst. Treasurer

- 2 -

<PAGE>

SECURED PARTY:

Accepted by: U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION, as
Agent for Lenders

By
----------------------------------------
David B. Westburg, Vice President

Notice Address:

U. S. Bank of Washington,
National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101
Facsimile: (206) 344-2332
Attention: David B. Westburg
Vice President

- 3 -

<PAGE>

EXHIBIT F
to Amended and Restated Credit Agreement

FIRST AMENDMENT TO TRADEMARK ASSIGNMENT

This first amendment to trademark assignment ("Amendment") is made as
of this 20th day of May, 1996, between EAGLE HARDWARE & GARDEN, INC., a
Washington corporation having a mailing address at 981 Powell Avenue S.W.,
Renton, Washington 98005 ("Borrower"), and U. S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, as agent for and representative of (in such capacity herein called
"Secured Party") the financial institutions ("Lenders") party to the Credit
Agreement (as hereinafter defined), having a mailing address at 1420 Fifth
Avenue, Seattle, Washington 98101.

R E C I T A L S :

A. On or about June 30, 1995, Borrower, Lenders, and Secured Party
entered into that certain credit agreement ("Original Credit Agreement"),
pursuant to which Lenders advanced funds to Borrower. Contemporaneously with
the execution of the Original Credit Agreement, Borrower, Secured Party and
Lenders entered into that certain trademark assignment ("Trademark Assignment"),
whereby Borrower granted to Secured Party for its benefit and ratable benefit of
Lenders, a first priority and exclusive security interest in all of the
trademarks, trade names, service marks, patents and applications therefor of
Borrower, now owned or hereafter acquired.

B. Contemporaneously with the execution of the Original Credit
Agreement, Borrower and Secured Party entered into a security agreement
("Security Agreement"), under which Borrower granted to Secured Party a lien on
and security interest in accounts, chattel paper, deposit accounts, documents,
general intangibles, goods, instruments, and inventory ("Other Assets"), whereby
Secured Party shall have the right to foreclose on the Trademarks and Other
Assets in the event of the occurrence and continuance of an Event of Default
under the Credit Agreement.

C. Contemporaneously with the execution of this Amendment, Borrower,
Lenders, and Secured Party entered into an amended and restated credit agreement
of even date herewith, pursuant to which Lenders agreed to modify certain terms
in the Original Credit Agreement.

NOW, THEREFORE, in consideration of the premises, and in order to
induce Secured Party and Lenders to amend and restate the Original Credit
Agreement and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Borrower hereby agrees with Secured
Party as follows:

1. AMENDMENT. All references to the "Credit Agreement" in the
Trademark Assignment are hereby amended to mean the amended and restated credit

-1-

<PAGE>

agreement of even date herewith among Borrower, Lender, and Agent (together with
all supplements, exhibits, modifications, and amendments thereto, the "Credit
Agreement").

2. RATIFICATION. Secured Party and Borrower agree that the
Trademark Assignment is hereby amended as set forth herein, and that the
Trademark Assignment shall remain in full force and effect, except as expressly
modified by this Amendment. Borrower hereby reaffirms and ratifies the
Trademark Assignment and the grant of security thereunder.

IN WITNESSES WHEREOF, Borrower and Secured Party have caused these
presents to be duly executed by their respective, duly authorized signatures as
of the day first above written.

BORROWER:

EAGLE HARDWARE & GARDEN, INC.

By
----------------------------------
David J. Heerensperger
Chairman and Chief Executive
Officer

SECURED PARTY:

U. S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, as Agent for Lenders

By
----------------------------------
David B. Westburg, Vice President

-2-

<PAGE>

EXHIBIT G
to Amended and Restated Credit Agreement

May 28, 1996

TO: The Financial Institutions named
as "Lenders" in the "Credit Agreement"
defined below

AND TO:

U. S. Bank of Washington,
National Association, as agent for Lenders
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101

Attention: David B. Westburg

Subject: Eagle Hardware & Garden, Inc.

Ladies and Gentlemen:

We have acted as counsel for Eagle Hardware & Garden, Inc.
("Borrower") in connection with that certain amended and restated credit
agreement of even date herewith (together with all amendments, modifications,
and exhibits thereto, the "Credit Agreement") entered into among Borrower, the
financial institutions named therein as Lenders, and U. S. Bank of Washington,
National Association ("U. S. Bank") as agent for Lenders (in such capacity
"Agent"). We have been asked to provide this opinion letter in accordance with
the requirement set forth for it in the Credit Agreement. Terms used but not
defined in this letter have the meanings given to them in the Credit Agreement.

In connection with this opinion, we have examined the following:

A. The Credit Agreement;
B. The Revolving Credit Notes;
C. The Amendment to Security Agreement;
D. The Amendment to Trademark Assignment;
E. Amendment to Intercreditor Agreement;
F. UCC-3 Change Statements;
G. The board resolutions of Borrower; and
H. The articles of incorporation for Borrower.

The documents referred to as items A through F above may be
collectively referred to hereinafter as the "Loan Documents."

<PAGE>

U.S. Bank of Washington
National Association -2- May 28, 1996

We have also examined and relied on such other certificates,
agreements, instruments, documents, and Governmental Approvals as we have deemed
necessary or appropriate in order to render the opinions set forth in this
letter.

In rendering these opinions, we have assumed that all signatures on
all documents we have examined are genuine, that all original documents are
authentic, and that all copies are true copies.

For the purposes of this opinion, we have assumed that Agent and
Lenders have all requisite power and authority and have taken all necessary
corporate and other action to authorize, execute, and deliver the Loan Documents
and to effect such transactions.

The opinions hereinafter expressed are subject to the following
qualifications:

(i) The enforceability of the Loan Documents is subject to
applicable bankruptcy, reorganization, and other laws now or hereafter
in effect applicable to creditors' rights generally, but the existence
of such rights does not, in our opinion, affect the validity of the
Loan Documents, and adequate remedies for the practical realization of
the benefits contemplated by the Loan Documents are available.

(ii) The enforceability of certain remedies authorized or
contained in the Loan Documents is subject to the effect of rules of
law governing specific performance, injunctive relief, and other
equitable remedies, but the existence of such rules of law does not,
in our opinion, affect the validity of the Loan Documents, and
adequate remedies for the practical realization of the benefits
contemplated by the Loan Documents are available.

(iii) We express no opinion as to any laws other than laws of
the state of Washington and the federal laws of the United States.

Based upon and subject to the following, it is our opinion that:

1. Borrower is a corporation duly organized, validly existing, and
in good standing under the laws of the state of Washington and is duly qualified
to do business as a foreign corporation and is in good standing as such under
the laws of each state in which it is presently doing business.

2. Borrower has all requisite power and authority, corporate or
otherwise, to conduct its business, to own, operate and encumber its property,
and to execute, deliver and perform all of its obligations under the Loan
Documents.

<PAGE>

U.S. Bank of Washington,
National Association -3- May 28, 1996

3. The execution, delivery, and performance of the Loan Documents by
Borrower are within its power, have been duly authorized by all necessary
corporate action, require no action by or with regard to or filing with any
Governmental Body, and do not contravene or constitute a default under any
provision of (a) its articles of incorporation or bylaws or (b) to the best of
our knowledge after reasonable inquiry, any Applicable Law.

4. Each of the Loan Documents has been duly authorized, executed,
and delivered by the respective parties thereto, and constitutes a legal,
valid, and binding obligation of the respective parties thereto, enforceable
against the parties in accordance with its respective terms.

5. The Security Agreement, as amended by the first amendment to
security agreement, creates a valid security interest in favor of Agent, for the
benefit of Lenders, in the collateral described therein, as security for the
secured obligations described therein. Based on the UCC-1 financing statement
filed in the office of the Department of Licensing, Uniform Commercial Code
Division, of the State of Washington, on _______________, 1995, under filing
No. _______________ (copy attached), Agent will hold, for the benefit of
Lenders, a perfected security interest in the collateral described in the
Security Agreement, to the extent that such collateral consists of accounts,
inventory, general intangibles and chattel paper, as such terms are defined in
the Uniform Commercial Code ("Code"), and no other act or filing is required
under the Code to perfect such security interest.

6. Except as otherwise disclosed in the Credit Agreement, there is
no action, suit, or proceeding pending against or, to the best of our knowledge,
threatened against or affecting Borrower before any Governmental Body in which
there is a reasonable possibility of an adverse decision that could have a
material adverse affect on the business, financial position, or results of
operations of Borrower or which in any manner could bring into question the
validity of the Loan Documents.

7. To the best of our knowledge, after due inquiry, Borrower is in
compliance in all material respects with all Applicable Laws, a violation of
which could have a material adverse affect on the financial condition,
operations, or property of Borrower.

This opinion letter may be relied on by each Lender as if it were
specifically addressed to each such Lender.

Very truly yours,

<PAGE>

EXHIBIT H
to Amended and Restated Credit Agreement

CERTIFICATE AS TO AUTHORIZING RESOLUTIONS
AND INCUMBENCY CERTIFICATE

The undersigned hereby certifies that he is the assistant treasurer of
Eagle Hardware & Garden, Inc., a Washington corporation ("Company"), that as
such he is authorized to execute this Certificate on behalf of the Company, and
that:

(a) annexed hereto as Exhibit A is a true and correct copy of the
resolutions duly adopted by of the board of directors of the Company on May 28,
1996;

(b) such resolutions have not been modified or rescinded, and remain
in full force and effect;

(c) annexed hereto as Exhibit B is a true, correct, and complete copy
of the articles of incorporation of the Company as heretofore amended; and

(d) the following persons whose names, titles, and signatures appear
below are now duly qualified to hold their respective offices as of the date
hereof:

Name Signature Office
---- --------- ------

David J. Heerensperger ____________________ Chairman and Chief
Executive Officer

Richard T. Takata ____________________ President and Chief
Operating Officer

DATED this 28th day of May, 1996

-----------------------------------
Steve Stenberg, Assistant Treasurer

<PAGE>

RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
EAGLE HARDWARE & GARDEN, INC.

The undersigned, being all of the directors of Eagle Hardware &
Garden, Inc., a Washington corporation (the "Corporation") do hereby adopt the
following resolutions at a meeting held on May 28, 1996:

REVOLVING CREDIT FACILITY

RESOLVED, that the actions undertaken to date by the officers of the
Corporation in negotiating the terms of a proposed $75,000,000 revolving credit
facility between the Corporation and U. S. Bank of Washington, National
Association as Agent and as a participating bank and other banks yet to be
determined pursuant to the draft of the amended and restated credit agreement
attached hereto ("Credit Agreement") be and hereby are authorized, approved,
ratified and confirmed in all respects.

RESOLVED FURTHER, that the terms of the proposed credit facility as
set forth in the Credit Agreement be and hereby are authorized, accepted and
approved in all respects.

RESOLVED FURTHER, that the officers of the Corporation be and hereby
are, and each of them hereby is, authorized to negotiate and prepare the Credit
Agreement and agreements, instruments and documents related thereto, including a
note or notes to be delivered by the Corporation, a security agreement, a
trademark assignment, and any other such agreements, documents and instruments
as are advisable or required thereby, with such changes in the terms thereof
from those contained in the draft Credit Agreement as said officers in their
discretion and judgment shall approve.

RESOLVED FURTHER, that any one of the Corporation's Chairman of the
Board of Directors and President be and each of them hereby is authorized, on
behalf and in the name of the Corporation, to execute and deliver the Credit
Agreement evidencing the $75,000,000 credit facility, with such terms and in
such form as such officer or officers determine to be in the best interests of
the Corporation, such determination to be conclusively evidenced by such
actions, execution and delivery.

RESOLVED FURTHER, that the officers of the Corporation be, and each of
them hereby is, authorized to execute and deliver, in the name and on behalf of
the Corporation, any and all agreements, notes, instruments, certifications and
documents and to do any and all acts or things as they or any of them may deem
necessary or advisable to document, evidence and carry out fully the terms and
provisions of the credit facility hereby approved and the intent of purposes of
the resolutions adopted herein.

GENERAL BANKING-ARRANGEMENTS

-1-

<PAGE>

I. RESOLVED, that the Chairman of the Board and President of the
Corporation be and hereby are, and each of them hereby is, authorized to select
from time to time banks and financial institutions for the establishment of one
or more checking accounts, deposit accounts and other financial accounts and
arrangements as they deem appropriate and in the best interests of the
Corporation (each and every bank and financial institution so selected is herein
referred to as a "Bank"); and

II. RESOLVED FURTHER, that any one of the Corporation's Chairman of the
Board and President ("the Authorizing Officers") be, and each of them hereby is,
authorized on behalf of the Corporation:

A. to designate in writing at any time and from time to time
officers (including themselves), agents and employees of the Corporation (each a
"Designated Person," which term may include the plural) each of whom, on behalf
of the Corporation, is authorized to do any one or more of the following:

1. sign, by manual or facsimile signature (including any
signature made with or generated by a signature plate, any similar device, or a
computer), any and all checks, drafts, and other orders for the payment of
money, including orders or directions in informal or letter form, against any
funds at any time standing to the credit of the Corporation in any account with
the Bank;

2. issue written, telephonic, electronic or oral instructions
with respect to the transfer of funds of the Corporation on deposit with the
Bank (or otherwise transferable by the Bank) (a) by wire, automated
clearinghouse or other electronic means of transfer, without any written order
for the payment of money being issued with respect to such transfer or (b) by
check, draft or other written order for the payment of money, whether signed by
persons authorized pursuant to this resolution or authorized by the Bank;
3. issue pre-authorized drafts by any authorized signatory or
signatories against the bank accounts of the corporation;

4. authorize the issuance of depository transfer checks (each
having plainly printed on its face "DEPOSITORY TRANSFER CHECK" and being by its
wording payable to the payee bank for credit to an account of the Corporation
with the payee bank) for the purpose of transferring funds from any bank or
other financial institution in which the Corporation has funds on deposit to an
account of the Corporation at another depository bank or financial institution
designated under the authority exercised hereunder. Such checks shall require
no signature other than the name of the Corporation printed at the lower right
hand corner, which name so printed shall constitute the official signature of
the Corporation for use in connection with depository transfer checks;

B. to amend, revoke or terminate any designation made pursuant to
the authority contained in paragraph A;

-2-

<PAGE>

C. to enter into such agreements with the Bank with respect to any
banking services (including without limitation electronic services) as such
officers in their sole discretion deem advisable or in the interest of the
Corporation; and

D. to open new accounts with the Bank and to close any or all
accounts opened with the Bank and to terminate any agreement entered into with
the Bank.

III. RESOLVED FURTHER, that the Bank be, and it hereby is, authorized and
directed to honor:

A. any and all checks, drafts and orders signed manually by any
person or persons authorized by the Authorizing Officers designated in
Resolution I above, as aforesaid, including those drawn to the individual order
of any such person or persons whose names appear thereon as signer or signers
thereof, without further inquiry or regard to the authority of said person or
persons or the use of the checks, drafts or orders, or the proceeds thereof;

B. any and all checks, drafts and other orders for the payment of
money drawn in the Corporation's name, including those drawn to the individual
order of any person or persons whose name or names appear thereon as signer or
signers thereof, without further inquiry or regard to the authority of said
person or persons or the use of the checks, drafts or orders, or the proceeds
thereof when bearing or purporting to bear the facsimile signature(s) of any
person(s) authorized so to sign by the Authorizing Officers as aforesaid, and to
charge the account of the Corporation for such checks, drafts or other orders
for the payment of money, regardless of by whom or by what means the actual or
purported facsimile signature or signatures thereon may have been affixed
thereto, if such signature or signatures resemble(s) the facsimile specimens of
such signature(s) certified to or filed with the Bank by or on behalf of this
Corporation;

C. any written, oral, telephonic, or electronic instruction for the
transfer of funds of the Corporation (a) by wire or other electronic means
initiated by a person or persons designated by the Authorizing Officers or made
by the Bank in accordance with the procedure provided by any agreement for wire
or other electronic means of transfer of funds entered into on behalf of the
Corporation by the Authorizing Officers, or (b) by check, draft, or other
written order for the payment of money authorized in accordance with this
resolution; and

D. any preauthorized draft or depository transfer check authorized
in accordance with the provisions of this resolution.

IV. RESOLVED FURTHER, that any one of the Authorizing Officers designated
in Resolution I above be, and each of them hereby is, authorized on behalf of
the Corporation:

-3-

<PAGE>

A. to designate in writing or any time and from time to time
officers (including themselves), agents and employees of the Corporation (each a
"Designated Person," which term may include the plural) each of whom, on behalf
of the Corporation is authorized to do any one or more of the following:

1. borrow money, apply for letters of credit and obtain other
credit and financial accommodations from the Bank on a current or long-term
basis upon such terms, rates of interest and conditions as said Designated
Person may deem advisable and to execute and deliver, in the name of the
Corporation, such notes, drafts, applications for letters of credit,
undertakings and agreements (including amendments and waivers thereto) with
respect to said credit-and other accommodations as said Designated Person may
deem advisable;

2. execute and deliver, in the name of the Corporation, dollar-
denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants and other
similar contractual agreements with the Bank, and any amendments, modifications,
cancellations, buy-backs, reversals, terminations or assignments of any of the
foregoing which said Designated Person may deem advisable;

3. discount with the Bank any of the notes, drafts, or
acceptances held by the Corporation, upon such terms and conditions as said
Designated Person may deem advisable;

4. receive and receipt for, sign orders, and issue instructions
(written or oral) on behalf of the Corporation for the handling and delivery of
the proceeds of any extension of credit;

5. endorse for deposit or negotiation, or to deposit without
endorsement, any and all checks, drafts, notes, bills of exchange, and orders
for the payment of money, either belonging to or coming into possession of the
Corporation (including any of the foregoing payable to the Corporation in any
trade name or style it may have adopted); endorsements for deposit may be by the
written or stamped endorsement of this Corporation without designation of the
person making the endorsement;

6. enter into security transactions and other transactions with
the Bank upon such terms and conditions which the Designated Person may deem
advisable and, without limiting the generality of the foregoing, to:

a. purchase or sell, thorough the Bank, either as agent,
principal or otherwise, and either for immediate or future delivery,
commercial paper, Federal Reserve funds, foreign exchange or any other
property of a similar nature whatsoever;

b. deliver to and deposit with the Bank for safekeeping,
custody, or other purposes any and all securities of any kind whatsoever,
and, in connection

-4-

<PAGE>

therewith, to open and maintain with the Bank a safekeeping or custody
account and to sign agreements, orders and issue instructions in respect
thereto as said Designated Person may deem advisable;

c. withdraw, receive, and receipt for and sign orders and issue
instructions for the handling, transfer, registration, sale, substitution,
exchange and delivery of any stocks, bonds, other securities or other
property held by the Bank for the account of the Corporation; such
withdrawals, substitutions, exchanges, and deliveries, whether subject to
payment or not, may also be made by the bearer of any order, receipt, or
request so signed;

B. to amend, revoke or terminate any designation made pursuant to
the authority contained in paragraph A; and

C. to enter into such agreements with the Bank with respect to any
banking services (including without limitation financial advisory services) and
financial accommodations as such officers in their sole discretion deem
advisable or in the interest of the Corporation.

V. RESOLVED FURTHER, that any one of the Corporation's Chairman of the
Board and the President be, and each hereby is, authorized on behalf of the
Corporation, to enter into agreements to assume, guaranty, contingently agree to
purchase or provide funds for the payment of or otherwise become liable upon the
obligations of a third party to the Bank or otherwise to assure the Bank against
losses related to an extension of credit to a third party, PROVIDED, HOWEVER,
that any one of the Corporation's Chairman of the Board and President be, and
each hereby is, authorized to so act with respect to obligations of subsidiaries
of the Corporation.

VI. RESOLVED FURTHER, that each of the foregoing resolutions shall also
apply in full to any account, financial accommodation, transaction or property
at or with any facility or branch of the Bank and its subsidiaries and
affiliates.

VII. RESOLVED FURTHER, that any request for a loan or other financial
accommodation may be made by telephone, writing, by telex or facsimile
transmission, or by any other form of communication deemed advisable by the
Designated Person and that the Bank shall incur no liability for acting in
accordance with requests or instructions which the Bank believes in good faith
to have emanated from a properly authorized person.

VIII. RESOLVED FURTHER, that each of the foregoing resolutions and any
designation of Designated Persons made pursuant thereto shall continue in force
until express written notice of its revocation or modification has been received
by the Bank, but if the authority contained in them should be revoked or
terminated by operation of law without such notice, it is resolved and hereby
agreed, for the purpose of inducing the Bank to act thereunder, that the Bank
shall be saved harmless from any loss suffered or liability incurred by it in so
acting after such revocation or termination without such notice.

-5-

<PAGE>

IX. RESOLVED FURTHER, that any Designated Person designated pursuant to
Resolution I above be and hereby is authorized and directed to execute and
deliver on behalf of the Corporation any and all forms of corporate resolutions
of authority for bank accounts, borrowings and other transaction herein approved
required by said Bank, with the representation that any such resolutions have
been duly authorized and approved by the Board of Directors of the Corporation,
with executed copies of such resolutions to be placed in the minute book of the
Corporation, and all such resolutions so executed and delivery are hereby
authorized, affirmed, ratified and approved.

DIRECTORS:

DATED:
------------------------ ------------------------------------

<PAGE>

EXHIBIT I
to Amended and Restated Credit Agreement

May 28, 1996

Mr. David B. Westburg
Vice President
U. S. Bank of Washington,
National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101-2333

Subject: Loan by U. S. Bank of Washington, National Association
("U. S. Bank") and Lenders to Eagle Hardware & Garden, Inc.
("Eagle")

Dear Mr. Westburg:

On or about June 30, 1995, U. S. Bank, as agent for Lenders, Eagle,
Tungsram U.S.A., Ltd. ("Tungsram"), and General Electric Company acting through
its GE Lighting business ("G.E."), entered into that certain intercreditor
agreement ("Intercreditor Agreement"), whereby G.E. and Tungsram waived all of
their present and future rights, claims, interest, and remedies whatsoever in,
to, and against the proceeds only of the Consigned Goods (as that term is
defined in the Intercreditor Agreement) (and not the Consigned Goods
themselves), whether identifiable cash proceeds or otherwise, and in any form
whatsoever.

In consideration of the commitment by U. S. Bank and Lenders to modify
certain terms under the amended and restated credit agreement dated as of
May 28, 1996 ("Credit Agreement"), G.E. and Tungsram, reaffirm that the waivers
and agreement set forth in the Intercreditor Agreement continue to remain in
full force and effect, regardless of

<PAGE>

Mr. David B. Westburg - 2 - May 28, 1996

whether any party hereto in the future seeks to rescind, amend, terminate, or
reform, by litigation or otherwise, its respective agreements with Eagle.

GENERAL ELECTRIC COMPANY, acting
through its GE LIGHTING business

By
--------------------------------------

Title
--------------------------------------

TUNGSRAM, U.S.A., LTD.

By
--------------------------------------

Title
--------------------------------------

<PAGE>

EXHIBIT J
to Amended and Restated Credit Agreement

Borrowing Base Certificate
for Eagle Hardware & Garden, Inc.

For Period Ending: ________

<S> <C> <C>
Accounts Receivable -- Gross $__________
- ----------------------------
less accounts more than 90 days past date of invoice ($__________)
less accounts with 25% of total balance ineligible ($__________)
less accounts over approved concentrations ($__________)
less accounts due from officers, employees, or affiliates ($__________)
less accounts resulting from COD sales, finance charges
and consignments ($__________)
less accounts due from Governmental Bodies ($__________)
less foreign accounts ($__________)
less accounts that constitute dated or progress billings ($__________)
less other ineligible ($__________)
Total Eligible Accounts Receivable $__________
Inventory -- Gross $__________
- ------------------
less raw materials ($__________)
less consigned inventory ($__________)
less inventory located outside U.S. ($__________)
less obsolete inventory ($__________)
less inventory not in salable condition ($__________)
less work in process ($__________)
less other ineligible items ($__________)
Total Eligible Inventory $__________
Less Trade Payables ($__________)
Net Eligible Inventory $__________

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

Eligible Accounts Receivable X 80% = $__________
Net Eligible Inventory X 55% = $__________
Plus $10,000,000
Total Borrowing Base $__________
Revolving Loans Outstanding $__________
Letters of Credit Outstanding $__________
Aggregate Current Amount ($__________)
Net Available under Revolving Credit Commitment $__________

</TABLE>

I certify the above to be true and correct.

Eagle Hardware & Garden, Inc.

By
------------------------

Title
------------------------

Date
------------------------

<PAGE>

EXHIBIT K
to Amended and Restated Credit Agreement

Form of Commitment Transfer Supplement

COMMITMENT TRANSFER SUPPLEMENT

COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item
1 of Schedule I hereto, among [each of] the Transferor Lender[s] set forth in
Item 2 of Schedule I hereto (the "Transferor Lender[s]"), each Purchasing Lender
set forth in Item 3 of Schedule I hereto (each, a "Purchasing Lender"), EAGLE
HARDWARE & GARDEN, INC., a Washington corporation ("Borrower"), and U. S. BANK
OF WASHINGTON, NATIONAL ASSOCIATION, as agent for Lenders under the Credit
Agreement described below (in such capacity, the "Agent").

W I T N E S S E T H:

WHEREAS this Commitment Transfer Supplement is being executed and
delivered in accordance with subsection 10.3(c) of the Amended and Restated
Credit Agreement, dated as of May 28, 1996, among Borrower, the Transferor
Lender[s] and the other Lenders named therein, and the Agent (as from time to
time amended, supplemented or otherwise modified in accordance with the terms
thereof, the "Credit Agreement"; terms defined therein being used herein as
therein defined);

WHEREAS each Purchasing Lender (if it is not already a Lender party to
the Credit Agreement) wishes to become a Lender party to the Credit Agreement;
and

WHEREAS [each of] the Transferor Lender[s] [is][are] selling and
assigning to each Purchasing Lender, rights, obligations and commitments under
the Credit Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1. From and after the Transfer Effective Date set forth in Item 4 of
Schedule I hereto (the "Transfer Effective Date"), each Purchasing Lender shall
be a Lender party to the Credit Agreement for all purposes thereof.

2. [Each of the] [The] Transferor Lender[s] acknowledges receipt
from each Purchasing Lender of an amount equal to the purchase price, as agreed
between each of the Transferor Lender[s] and such Purchasing Lender (the
"Purchasing Price"), of the portion being purchased by such Purchasing Lender
(such Purchasing Lender's "Purchased Percentage") of the outstanding Loans,
Letters of Credit and other amounts owing to [each of] the Transferor Lender[s]
under the Credit Agreement, the L/C Applications, and the Notes. The Transferor
Lender[s] hereby irrevocably sell[s], assign[s] and transfers to each Purchasing
Lender, without recourse, and, except as expressly set forth in paragraphs 8 and

- 1 -

<PAGE>

9 hereof, without representation or warranty, and each Purchasing Lender hereby
irrevocably purchases, takes and assumes from [each of] the Transferor
Lender[s], such Purchasing Lender's Purchased Percentage of the Revolving Credit
Commitments and the presently outstanding Loans, Letters of Credit and other
amounts owing to [each of] the Transferor Lender[s] under the Credit Agreement,
the L/C Applications, and the Notes, together with all instruments, documents
and collateral security pertaining thereto.

3. The Transferor Lender[s] [has] [have] made arrangements with each
Purchasing Lender with respect to (i) the portion, if any, to be paid, and the
date or dates for payment, by [each of] the Transferor Lender[s] to such
Purchasing Lender of any fees heretofore received by each the Transferor
Lender[s] pursuant to the Credit Agreement prior to the Transfer Effective Date
and (ii) the portion, if any, to be paid, and the date or dates for payment, by
such Purchasing Lender to [each of] the Transferor Lender[s] of fees or interest
received by such Purchasing Lender pursuant to the Credit Agreement from and
after the Transfer Effective Date.

4. a. From and after the Transfer Effective Date, principal,
interest, fees and other amounts that would otherwise be payable to or for the
account of the Transferor Lender[s] pursuant to the Credit Agreement, the L/C
Applications, and the Notes shall, instead, be payable to or for the account of
[each of] the Transferor Lender[s] and the Purchasing Lender, as the case may
be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement, whether such amounts have accrued prior to the
Transfer Effective Date or accrue subsequent to the Transfer Effective Date.

b. The Transferor Lender[s] and each Purchasing Lender hereby agree
and instruct the Agent that, notwithstanding the provisions of subparagraph
(a) of this paragraph 4, on each date hereafter on which interest or fees are
payable under the Credit Agreement, the L/C Applications, and the Notes in
respect of any period (an "Accrual Period") ending on or prior to the Transfer
Effective Date, any such interest or fees payable to the Purchasing Lender on
account of such Accrual Period in respect of its interests as reflected in this
Commitment Transfer Supplement shall be paid over to [each of] the Transferor
Lender[s] (and, if such interest or fees are not paid in full when due, the
payment over to the Transferor Lender[s] shall be ratable), and [each of] the
Transferor Lender[s] and such Purchasing Lender will make appropriate
arrangements for the payment to such Purchasing Lender of the portion thereof
owing to it to reflect the amount, if any, included in the Purchase Price for
interest and fees in respect of any Accrual Period.

5. a. The Notes of [each of] the Transferor Lender[s] are being
delivered to the Agent concurrently with this Commitment Transfer Supplement.
On or prior to the Transfer Effective Date, the Borrower shall make appropriate
arrangements with the Agent so that replacement Notes are issued to [each of]
the Transferor Lender[s], and new Notes or replacement Notes, as appropriate,
are issued to each Purchasing Lender, in each case in principal amounts
reflecting, in accordance with the Credit Agreement, their Revolving Credit
Commitments (as adjusted pursuant to this Commitment Transfer Supplement). As
provided in subsection 10.3(c) of the Credit Agreement, each such new

- 2 -

<PAGE>

Note or replacement Note, as the case may be, shall be dated the date of the
initial Loans evidenced thereby.

b. Any Letter of Credit Participation Certificates are being
delivered to U. S. Bank concurrently with this Commitment Transfer Supplement.
On or prior to the Transfer Effective Date, the Transferor Lender[s] shall make
appropriate arrangements with Agent so that replacement Letter of Credit
Participation Certificates are issued to [each of] the Transferor Lender[s], and
new Letter of Credit Participation Certificates or replacement Letter of Credit
Participation Certificates, as appropriate, are issued to each Purchasing
Lender, in each case indicating L/C Participating Interests reflecting, in
accordance with the Credit Agreement, their Revolving Credit Commitments (as
adjusted pursuant to this Commitment Transfer Supplement). As provided in
subsection 10.3(c) of the Credit Agreement, each such new Letter of Credit
Participation Certificate or replacement Letter of Credit Participation
Certificate, as the case may be, shall be dated the date of the related original
Letter of Credit Participation Certificate.

6. Concurrently with the execution and delivery hereof, the Agent
will, at the expense of the Transferor Lender[s], provide to each Purchasing
Lender (if it is not already a Lender party to the Credit Agreement) photocopies
of all documents delivered to the Agent on the Closing Date and on each date on
which a Loan is made under the Credit Agreement in satisfaction of the
conditions precedent set forth in the Credit Agreement.

7. Each of the parties to this Commitment Transfer Supplement agrees
that at any time and from time to time upon the written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Commitment Transfer Supplement.

8. By executing and delivering this Commitment Transfer Supplement,
[each of] the Transferor Lender[s] and each Purchasing Lender confirm to and
agree with each other and the Agent and the Lenders as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of the
interest being assigned hereby free and clear of any adverse claim, [each of]
the Transferor Lender[s] makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, the L/C Applications, the Notes, or any other instrument or document
furnished pursuant thereto; (ii) the Transferor Lender[s] make[s] no
representation or warranty and assume[s] to responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement, the L/C
Applications, the Notes, or any other instrument or document furnished pursuant
thereto; (iii) each Purchasing Lender confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in subsection 7.10 of the Credit Agreement, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Commitment Transfer Supplement;

- 3 -

<PAGE>

(iv) each Purchasing Lender will, independently and without reliance upon the
Agent, the Transferor Lender[s] or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement;
(v) each Purchasing Lender appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, all in accordance with Article IX of the
Credit Agreement; and (vi) each Purchasing Lender agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender.

9. Schedule II hereto sets forth the revised Revolving Credit
Commitments and Pro Rata Shares of [each of] the Transferor Lender[s] and each
Purchasing Lender as well as administrative information with respect to each
Purchasing Lender.

10. This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the State of Washington.

IN WITNESS WHEREOF, the parties hereto have cause this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
as of the date set forth in Item 1 of Schedule I hereto.

----------------------------------------
Transferor Lender

By
----------------------------------

Title
----------------------------------

----------------------------------------
Purchasing Lender

By
----------------------------------

Title
----------------------------------

- 4 -

<PAGE>

----------------------------------------
Purchasing Lender

By
----------------------------------

Title
----------------------------------

CONSENTED TO AND ACKNOWLEDGED:

EAGLE HARDWARE & GARDEN, INC.

By
-----------------------------

Title
-----------------------------

U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By
-----------------------------

Title
-----------------------------

[Consents required only when Purchasing Lender is not already
a Lender or affiliate thereof]

ACCEPTED FOR RECORDATION IN
REGISTER:

U. S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By
-----------------------------

Title
-----------------------------

- 5 -

<PAGE>

SCHEDULE I
to Commitment Transfer Supplement

ITEM #1: The date of this Commitment Transfer Supplement is
____________________________________________________.

ITEM #2: The names of the Transferor Lender[s] is[are]:
____________________________________________________.

ITEM #3: The names of the Purchasing Lender[s] is[are]:
_____________________________________________________.

ITEM #4: The Transfer Effective Date is ______________________.

<PAGE>

SCHEDULE II
to Commitment Transfer Supplement

LIST OF ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
----------------------------------

[Name of
Transferor Lender] Revised Commitment Amounts:
--------------------------

Revolving Credit Commitment $_____________

Revised Pro Rata Share ____________%

[Name of
Purchasing Lender] New Commitment Amounts:
----------------------

Revolving Credit Commitment $_____________

Revised Pro Rata Share ____________%

Address for Notices:

____________________________________
____________________________________
____________________________________
Attn:_______________________________

[Name of
Purchasing Lender] New Commitment Amounts:
----------------------

Revolving Credit Commitment $_____________

Revised Pro Rata Share ____________%

Address for Notices:

____________________________________
____________________________________
____________________________________
Attn:_______________________________
<PAGE>
REVOLVING CREDIT NOTE

$25,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of U.S. BANK
OF WASHINGTON, NATIONAL ASSOCIATION ("Payee"), the principal sum of Twenty-five
Million Dollars ($25,000,000) or so much thereof as advanced by Payee in lawful,
immediately available money of the United States of America, in accordance with
the terms and conditions of that certain amended and restated credit agreement
dated as of May 28, 1996, by and among Borrower, the financial institutions
named therein as Lenders, and U.S. Bank of Washington, National Association
("U.S. Bank") as agent for Lenders (in such capacity "Agent") (said Credit
Agreement together with all supplements, exhibits, amendments and modifications
thereto, the "Credit Agreement"). Borrower also promises to pay interest on the
unpaid principal balance hereof, commencing as of the first date of an advance
hereunder, in like money in accordance with the terms and conditions, and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on November 30, 1997.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Requisite Lenders.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Requisite Lenders with respect to the payment or other provisions of
this Note and the Credit Agreement; (2) consent to the release of any property
now or hereafter securing this Note with or without substitution; and (3) agree
that additional makers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.

-1-

<PAGE>
This Note is one of the Revolving Credit Notes referred to in the Credit
Agreement and as such is entitled to all of the benefits and obligations
specified in the Credit Agreement, including but not limited to any Collateral
and any conditions to making advances hereunder.

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
--------------------------------
David J. Heerensperger, Chairman
and Chief Executive Officer

-2-

<PAGE>
REVOLVING CREDIT NOTE

$5,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of UNITED
STATES NATIONAL BANK OF OREGON ("Payee"), the principal sum of Five Million
Dollars ($5,000,000) or so much thereof as advanced by Payee in lawful,
immediately available money of the United States of America, in accordance with
the terms and conditions of that certain amended and restated credit agreement
dated as of May 28, 1996, by and among Borrower, the financial institutions
named therein as Lenders, and U.S. Bank of Washington, National Association
("U.S. Bank") as agent for Lenders (in such capacity "Agent") (said Credit
Agreement together with all supplements, exhibits, amendments and modifications
thereto, the "Credit Agreement"). Borrower also promises to pay interest on the
unpaid principal balance hereof, commencing as of the first date of an advance
hereunder, in like money in accordance with the terms and conditions, and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on November 30, 1997.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Requisite Lenders.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Requisite Lenders with respect to the payment or other provisions of
this Note and the Credit Agreement; (2) consent to the release of any property
now or hereafter securing this Note with or without substitution; and (3) agree
that additional makers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.

-1-

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
------------------------------------
David J. Heerensperger, Chairman
and Chief Executive Officer

-2-

<PAGE>
REVOLVING CREDIT NOTE

$15,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of THE
SUMITOMO BANK, LIMITED ("Payee"), the principal sum of Fifteen Million Dollars
($15,000,000) or so much thereof as advanced by Payee in lawful, immediately
available money of the United States of America, in accordance with the terms
and conditions of that certain amended and restated credit agreement dated as of
May 28, 1996, by and among Borrower, the financial institutions named therein as
Lenders, and U.S. Bank of Washington, National Association ("U.S. Bank") as
agent for Lenders (in such capacity "Agent") (said Credit Agreement together
with all supplements, exhibits, amendments and modifications thereto, the
"Credit Agreement"). Borrower also promises to pay interest on the unpaid
principal balance hereof, commencing as of the first date of an advance
hereunder, in like money in accordance with the terms and conditions, and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on November 30, 1997.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Requisite Lenders.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Requisite Lenders with respect to the payment or other provisions of
this Note and the Credit Agreement; (2) consent to the release of any property
now or hereafter securing this Note with or without substitution; and (3) agree
that additional makers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.

-1-

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
-----------------------------------
David J. Heerensperger, Chairman
and Chief Executive Officer

-2-

<PAGE>
REVOLVING CREDIT NOTE

$10,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of KEY BANK
OF WASHINGTON, ("Payee"), the principal sum of Ten Million Dollars
($10,000,000) or so much thereof as advanced by Payee in lawful, immediately
available money of the United States of America, in accordance with the terms
and conditions of that certain amended and restated credit agreement dated as
of May 28, 1996, by and among Borrower, the financial institutions named
therein as Lenders, and U.S. Bank of Washington, National Association ("U.S.
Bank") as agent for Lenders (in such capacity "Agent") (said Credit Agreement
together with all supplements, exhibits, amendments and modifications
thereto, the "Credit Agreement"). Borrower also promises to pay interest on
the unpaid principal balance hereof, commencing as of the first date of an
advance hereunder, in like money in accordance with the terms and conditions,
and at the rate or rates provided for in the Credit Agreement. All
principal, interest, and other charges are due and payable in full on
November 30, 1997.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Requisite Lenders.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Requisite Lenders with respect to the payment or other provisions of
this Note and the Credit Agreement; (2) consent to the release of any property
now or hereafter securing this Note with or without substitution; and (3) agree
that additional makers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.

-1-

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
-----------------------------------
David J. Heerensperger, Chairman
and Chief Executive Officer

-2-

<PAGE>
REVOLVING CREDIT NOTE

$10,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of FIRST
SECURITY BANK OF IDAHO, N.A. ("Payee"), the principal sum of Ten Million Dollars
($10,000,000) or so much thereof as advanced by Payee in lawful, immediately
available money of the United States of America, in accordance with the terms
and conditions of that certain amended and restated credit agreement dated as of
May 28, 1996, by and among Borrower, the financial institutions named therein as
Lenders, and U.S. Bank of Washington, National Association ("U.S. Bank") as
agent for Lenders (in such capacity "Agent") (said Credit Agreement together
with all supplements, exhibits, amendments and modifications thereto, the
"Credit Agreement"). Borrower also promises to pay interest on the unpaid
principal balance hereof, commencing as of the first date of an advance
hereunder, in like money in accordance with the terms and conditions, and at the
rate or rates provided for in the Credit Agreement. All principal, interest,
and other charges are due and payable in full on November 30, 1997.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Requisite Lenders.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Requisite Lenders with respect to the payment or other provisions of
this Note and the Credit Agreement; (2) consent to the release of any property
now or hereafter securing this Note with or without substitution; and (3) agree
that additional makers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.

-1-

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
-----------------------------------
David J. Heerensperger, Chairman
and Chief Executive Officer

-2-

<PAGE>
REVOLVING CREDIT NOTE

$10,000,000 May 28, 1996

For value received, the undersigned, EAGLE HARDWARE & GARDEN, INC., a
Washington corporation ("Borrower"), promises to pay to the order of FIRST
HAWAIIAN BANK ("Payee"), the principal sum of Ten Million Dollars ($10,000,000)
or so much thereof as advanced by Payee in lawful, immediately available money
of the United States of America, in accordance with the terms and conditions of
that certain amended and restated credit agreement dated as of May 28, 1996, by
and among Borrower, the financial institutions named therein as Lenders, and
U.S. Bank of Washington, National Association ("U.S. Bank") as agent for Lenders
(in such capacity "Agent") (said Credit Agreement together with all supplements,
exhibits, amendments and modifications thereto, the "Credit Agreement").
Borrower also promises to pay interest on the unpaid principal balance hereof,
commencing as of the first date of an advance hereunder, in like money in
accordance with the terms and conditions, and at the rate or rates provided for
in the Credit Agreement. All principal, interest, and other charges are due and
payable in full on November 30, 1997.

All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
office of Agent located at 1420 Fifth Avenue, Seattle, Washington 98101 or at
such other place as shall be designated in writing for such purpose in
accordance with the terms of the Credit Agreement.

Borrower and all endorsers, sureties, and guarantors hereof jointly and
severally waive presentment for payment, demand, notice of nonpayment, notice of
protest, and protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, dishonor, or enforcement of the
payment of this Note except such notices as are specifically required by this
Note or by the Credit Agreement, and they agree that the liability of each of
them shall be unconditional without regard to the liability of any other party
and shall not be in any manner affected by any indulgence, extension of time,
renewal, waiver, or modification granted or consented to by Requisite Lenders.
Borrower and all endorsers, sureties, and guarantors hereof (1) consent to any
and all extensions of time, renewals, waivers, or modifications that may be
granted by Requisite Lenders with respect to the payment or other provisions of
this Note and the Credit Agreement; (2) consent to the release of any property
now or hereafter securing this Note with or without substitution; and (3) agree
that additional makers, endorsers, guarantors, or sureties may become parties
hereto without notice to them and without affecting their liability hereunder.

-1-

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
-----------------------------------
David J. Heerensperger, Chairman
and Chief Executive Officer

-2-

<PAGE>

FIRST AMENDMENT TO SECURITY AGREEMENT

This first amendment to security agreement ("Amendment") is made and
entered into as of May 28, 1996, by EAGLE HARDWARE & GARDEN, INC., a Washington
corporation ("Borrower"), for the benefit of U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, a national banking association, ("U.S. Bank"), as agent for and
representative of (in such capacity herein called "Secured Party") the financial
institutions ("Lenders") party to the Credit Agreement (hereinafter defined).

R E C I T A L S:

B. PARTIES AND PURPOSE. Contemporaneously with the execution of this
Amendment, Secured Party, Lenders, and Borrower entered into an amended and
restated credit agreement of even date herewith, pursuant to which Agent and
Lenders agreed to modify certain terms in the Original Credit Agreement and to
restate the Original Credit Agreement.

NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to amend and restate the Original Credit Agreement, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower hereby agrees with Secured Party as follows:

1. AMENDMENT. All references to the "Credit Agreement" in the Security
Agreement are hereby amended to mean the amended and restated credit agreement
of even date herewith among Borrower, Lender, and Agent (together with all
supplements, exhibits, modifications, and amendments thereto, the "Credit
Agreement").

-1-

<PAGE>
3. COUNTERPARTS. This Amendment may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to constitute an original
Amendment, but all of such counterparts together shall constitute but one and
the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.

IN WITNESS WHEREOF, Borrower and Secured Party have caused these presents
to be duly executed by their respective duly authorized signatories as of the
day and year first above written.

BORROWER:

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
----------------------------
David. J. Heerensperger
Chairman and Chief Executive Officer

Notice Address:

Eagle Hardware & Garden, Inc.
981 Powell Avenue, S.W.
Renton, Washington 98005
Facsimile: (206) 204-5168
Attention: Steve Stenberg, Asst.
Treasurer

-2-

<PAGE>
SECURED PARTY:

Accepted by: U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION, as
Agent for Lenders

By /s/ David B. Westburg
------------------------------------
David B. Westburg, Vice President

Notice Address:

U.S. Bank of Washington,
National Association
1420 Fifth Avenue, 11th Floor
Seattle, Washington 98101
Facsimile: (206) 344-2332
Attention: David B. Westburg
Vice President

-3-
<PAGE>

FIRST AMENDMENT TO TRADEMARK ASSIGNMENT

The first amendment to trademark assignment ("Amendment") is made as
of this 20th day of May, 1996, between EAGLE HARDWARE & GARDEN, INC., a
Washington corporation having a mailing address at 981 Powell Avenue S.W.,
Renton, Washington 98005 ("Borrower"), and U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, as agent for and representative of (in such capacity herein called
"Secured Party") the financial institutions ("Lenders") party to the Credit
Agreement (as hereinafter defined), having a mailing address at 1420 Fifth
Avenue, Seattle, Washington 98101.

R E C I T A L S:

1. AMENDMENT. All references to the "Credit Agreement" in the
Trademark Assignment are hereby amended to mean the amended and restated credit

- 1 -

<PAGE>

agreement of even date herewith among Borrower, Lender, and Agent (together with
all supplements, exhibits, modifications, and amendments thereto, the "Credit
Agreement").

IN WITNESSES WHEREOF, Borrower and Secured Party have caused these
presents to be duly executed by their respective, duly authorized signatures as
of the day first above written.

BORROWER:

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
------------------------------------
David J. Heerensperger
Chairman and Chief Executive Officer

SECURED PARTY:

U.S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION, as Agent for Lenders

By /s/ David Westburg
-------------------------------------
David B. Westburg, Vice President

- 2 -

<PAGE>

COMMITMENT TRANSFER SUPPLEMENT

COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set forth in Item
1 of Schedule I hereto, among the Transferor Lender set forth in Item 2 of
Schedule I hereto (the "Transferor Lender"), each Purchasing Lender set forth in
Item 3 of Schedule I hereto (each, a "Purchasing Lender"), EAGLE HARDWARE &
GARDEN, INC., a Washington corporation ("Borrower"), and U.S. BANK OF
WASHINGTON, NATIONAL ASSOCIATION, as agent for Lenders under the Credit
Agreement described below (in such capacity, the "Agent").

W I T N E S S E T H:

WHEREAS this Commitment Transfer Supplement is being executed and
delivered in accordance with subsection 10.3(c) of the Credit Agreement dated as
of June 30, 1995, among Borrower, the Transferor Lender and the other Lenders
named therein, and the Agent (as from time to time amended, supplemented or
otherwise modified in accordance with the terms thereof, the "Credit Agreement";
terms defined therein being used herein as therein defined);

WHEREAS each Purchasing Lender (if it is not already a Lender party to
the Credit Agreement) wishes to become a Lender party to the Credit Agreement;
and

WHEREAS the Transferor Lender is selling and assigning to each
Purchasing Lender, rights, obligations and commitments under the Credit
Agreement;

NOW, THEREFORE, the parties hereto hereby agree as follows:

2. The Transferor Lender acknowledges receipt from each Purchasing
Lender of an amount equal to the purchase price, as agreed between the
Transferor Lender and such Purchasing Lender (the "Purchasing Price"), of the
portion being purchased by such Purchasing Lender (such Purchasing Lender's
"Purchased Percentage") of the Revolving Credit Commitments and the presently
outstanding Loans, Letters of Credit and other amounts owing to the Transferor
Lender under the Credit Agreement, the L/C Applications, and the Notes. The
Transferor Lender hereby irrevocably sells, assigns and transfers to each
Purchasing Lender, without recourse, and, except as expressly set forth in
paragraphs 8 and 9 hereof, without representation or warranty, and each
Purchasing Lender hereby irrevocably purchases, takes and assumes from the
Transferor Lender, such Purchasing Lender's Purchased Percentage of the
Revolving Credit Commitments and the presently outstanding Loans, Letters of
Credit and other amounts owing to the Transferor Lender under the Credit

- 1 -

<PAGE>

Agreement, the L/C Application, and the Notes, together with all instruments,
documents and collateral security pertaining thereto.

3. The Transferor Lender has made arrangements with each Purchasing
Lender with respect to (i) the portion, if any, to be paid, and the date or
dates for payment, by the Transferor Lender to such Purchasing Lender of any
fees heretofore received by the Transferor Lender pursuant to the Credit
Agreement prior to the Transfer Effective Date and (ii) the portion, if any, to
be paid, and the date or dates for payment, by such Purchasing Lender to the
Transferor Lender of fees or interest received by such Purchasing Lender
pursuant to the Credit Agreement from and after the Transfer Effective Date.

4. a. From and after the Transfer Effective Date, principal,
interest, fees and other amounts that would otherwise be payable to or for the
account of the Transferor Lender pursuant to the Credit Agreement, the L/C
Applications, and the Notes shall, instead, be payable to or for the account of
the Transferor Lender and the Purchasing Lender, as the case may be, in
accordance with their respective interests as reflected in this Commitment
Transfer Supplement, whether such amounts have accrued prior to the Transfer
Effective Date or accrue subsequent to the Transfer Effective Date.

b. The Transferor Lender and each Purchasing Lender hereby agree and
instruct the Agent that, notwithstanding the provisions of subparagraph (a) of
this paragraph 4, on each date hereafter on which interest or fees are payable
under the Credit Agreement, the L/C Applications, and the Notes in respect of
any period (an "Accrual Period") ending on or prior to the Transfer Effective
Date, any such interest or fees payable to the Purchasing Lender on account of
such Accrual Period in respect of its interests as reflected in this Commitment
Transfer Supplement shall be paid over to the Transferor Lender (and, if such
interest or fees are not paid in full when due, the payment over to the
Transferor Lender shall be ratable), and the Transferor Lender and such
Purchasing Lender will make appropriate arrangements for the payment to such
Purchasing Lender of the portion thereof owing to it to reflect the amount, if
any, included in the Purchase Price for interest and fees in respect of any
Accrual Period.

5. a. The Notes of the Transferor Lender are being delivered to
the Agent concurrently with this Commitment Transfer Supplement. On or prior to
the Transfer Effective Date, the Borrower shall make appropriate arrangements
with the Agent so that replacement Notes are issued to the Transferor Lender,
and new Notes or replacement Notes, as appropriate, are issued to each
Purchasing Lender, in each case in principal amounts reflecting, in accordance
with the Credit Agreement, their Revolving Credit Commitments (as adjusted
pursuant to this Commitment Transfer Supplement). As provided in subsection
10.3(c) of the Credit Agreement, each such new Note or replacement Note, as the
case may be, shall be dated the date of the initial Loans evidenced thereby.

b. Any Letter of Credit Participation Certificates are being
delivered to the Agent concurrently with this Commitment Transfer Supplement.
On or prior to the Transfer Effective Date, the Transferor Lender shall make
appropriate arrangements with

- 2 -

<PAGE>

Agent so that replacement Letter of Credit Participation Certificates are issued
to the Transferor Lender, and new Letter of Credit Participation Certificates or
replacement Letter of Credit Participation Certificates, as appropriate, are
issued to each Purchasing Lender, in each case indicating L/C Participating
Interests reflecting, in accordance with the Credit Agreement, their Revolving
Credit Commitments (as adjusted pursuant to this Commitment Transfer
Supplement). As provided in subsection 10.3(c) of the Credit Agreement, each
such new Letter of Credit Participation Certificate or replacement Letter of
Credit Participation Certificate, as the case may be, shall be dated the date of
the related original Letter of Credit Participation Certificate.

6. Concurrently with the execution and delivery hereof, the Agent
will, at the expense of the Transferor Lender, provide to each Purchasing Lender
(if it is not already a Lender party to the Credit Agreement) photocopies of all
documents delivered to the Agent on the Closing Date and on each date on which a
Loan is made under the Credit Agreement in satisfaction of the conditions
precedent set forth in the Credit Agreement.

8. By executing and delivering this Commitment Transfer
Supplement, the Transferor Lender and each Purchasing Lender confirm to and
agree with each other and the Agent and the Lenders as follows: (i) other
than the representation and warranty that it is the legal and beneficial
owner of the interest being assigned hereby free and clear of any adverse
claim, the Transferor Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Credit Agreement, the L/C/ Applications, the Notes, or any other
instrument or document furnished pursuant thereto; (ii) the Transferor Lender
makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under the Credit
Agreement, the L/C Applications, the Notes, or any other instrument or
document furnished pursuant thereto; (iii) each Purchasing Lender confirms
that it has received a copy of the Credit Agreement, together with copies of
the financial statements referred to in subsection 7.10 of the Credit
Agreement, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Commitment Transfer Supplement; (iv) each Purchasing Lender will,
independently and without reliance upon the Agent, the Transferor Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under the Credit Agreement; (v) each Purchasing Lender
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under the Credit Agreement as are delegated to
the Agent by the terms thereof, together with such powers as are reasonably

- 3 -

<PAGE>

incidental thereto, all in accordance with Article IX of the Credit Agreement;
and (vi) each Purchasing Lender agrees that it will perform in accordance with
their terms all of the obligations which by the term of the Credit Agreement are
required to be performed by it as a Lender.

9. Schedule II hereto sets forth the revised Revolving Credit
Commitments and Pro Rata Shares of the Transferor Lender and each Purchasing
Lender as well as administrative information with respect to each Purchasing
Lender.

10. This Commitment Transfer Supplement shall be governed by, and
construed in accordance with, the laws of the State of Washington.

TRANSFEROR LENDER:

U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By /s/ David B. Westburg
-----------------------------------
David B. Westburg, Vice President

PURCHASING LENDERS:

FIRST HAWAIIAN BANK

By /s/ Robert M. Wheeler, III
------------------------------------
Robert M. Wheeler, III
Vice President

- 4 -

<PAGE>

FIRST SECURITY BANK OF
IDAHO, N.S.

By /s/ Brian Cook
-------------------------------
Brian Cook, Vice President

THE SUMITOMO BANK, LIMITED

By /s/ Andrea B. Sargent
-------------------------------
Andrea B. Sargent

Title Vice President and Manager
-------------------------------

By C.A. Daley
-------------------------------
Carole A. Daley

Title Vice President
-------------------------------

CONSENTED TO AND ACKNOWLEDGED:

EAGLE HARDWARE & GARDEN, INC.

By /s/ David J. Heerensperger
--------------------------------
Title Chairman/CEO
--------------------------------

U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By /s/ David Westburg
---------------------------------
David B. Westburg, Vice President

- 5 -

<PAGE>

ACCEPTED FOR RECORDATION IN
REGISTER:

U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION

By /s/ David Westberg
---------------------------------
David B. Westburg, Vice President

- 6 -

<PAGE>

SCHEDULE I
to Commitment Transfer Supplement

ITEM #1: The date of this Commitment Transfer Supplement is May 27, 1996.

ITEM #2: The name of the Transferor Lender is: U. S. Bank of Washington,
National Association.

ITEM #3: The names of the Purchasing Lenders are: First Hawaiian Bank, First
Security Bank of Idaho, N.A., and The Sumitomo Bank, Limited.

ITEM #4: The Transfer Effective Date is May 28, 1996.

- 7 -

<PAGE>

SCHEDULE II
to Commitment Transfer Supplement

LIST OF ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS

TRANSFEROR LENDER:

U.S. Bank of Washington,
National Association REVISED COMMITMENT AMOUNTS:

Revolving Credit Commitment $25,000,000
Revised Pro Rate Share 33 1/3%

PURCHASING LENDERS:

First Hawaiian Bank NEW COMMITMENT AMOUNTS:

Revolving Credit Commitment $10,000,000
Revised Pro Rata Share 13 1/3%

Address for Notices:

Corporate Banking Division
1132 Bishop Street, 19th Floor
Honolulu, Hawaii 96847
Attn: Robert M. Wheeler, III

First Security Bank
of Idaho, N.A. NEW COMMITMENT AMOUNTS:

Revolving Credit Commitment $10,000,000
Revised Pro Rata Share 13 1/3%

Address for Notices:

Commercial Banking Division
119 N. Ninth Street, 2nd Floor
Boise, Idaho 83702
Attn: Brian Cook

- 8 -

<PAGE>

The Sumitomo Bank, Limited NEW COMMITMENT AMOUNTS:

Revolving Credit Commitment $15,000,000

Revised Pro Rata Share 20%

Address for Notices:

U.S. Commercial Banking Department
100 Pine Street, Suite 3300
San Francisco, California 94111
Attn: Bill Bloore

- 9 -

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT

This agreement (the "Agreement") is made as of the Effective Date of
July 2nd, 1996 by and between TERRACE POINT PARTNERSHIP, a Colorado general
partnership ("Seller") and EAGLE HARDWARE & GARDEN, INC., a Washington
corporation, or assigns ("Buyer") for purchase and sale of that certain real
property consisting of approximately 12.22 acres located at the northeast corner
of Wadsworth Boulevard and Eastman in Lakewood, Colorado, the legal description
of which is described on Exhibit A and any improvements thereon and all rights
appurtenant thereto (the "Property"). The Property is shown as Parcel B on the
proposed site plan dated March 28, 1996 and numbered X327-08 (the "Site Plan")
and attached hereto as Exhibit B.

Seller agrees to sell, and Buyer agrees to buy, the Property upon and
subject to the terms and conditions set forth below:

1. PURCHASE PRICE; PAYMENT. The total purchase price for the
Property shall be five dollars ($5.00) per square foot of the Property. It is
estimated that the Property contains 532,490 square feet and that the purchase
price will be two million six hundred sixty-two thousand four hundred fifty
dollars ($2,662,450). The area of the Property and the purchase price shall be
determined by the survey to be provided by Seller. The purchase price shall be
adjusted to the final square footage, which amount, including the Deposit and
interest accrued thereon, shall be paid in cash upon closing.

2. EARNEST MONEY DEPOSIT. Within ten (10) business days after the
Effective Date, Buyer will deposit earnest money of fifty thousand dollars
($50,000) (the "Deposit") with Chicago Title Insurance Company (the "Closing
Agent"). The Closing Agent shall place the Deposit in an interest-bearing
account, with interest to accrue to Buyer's benefit. If this transaction does
not close for any reason other than default by Buyer, the Deposit, and all
interest accrued thereon, shall be returned to Buyer.

3. CONTINGENCIES. Buyer's obligation to purchase the Property is
subject to Buyer's satisfaction or waiver, in writing, of the following
conditions precedent, all at Buyer's expense and in Buyers sole and absolute
discretion, on or before the dates described below:

3.1 Feasibility. Buyer's determination that the site plan,
parking plan and access plan for the Property are acceptable; that utilities are
available of adequate capacity to serve the Property; and that the Property is
otherwise feasible for its intended use.

3.2 Studies. Buyer's approval of all soils, engineering,
environmental, topography, hazardous waste, geotechnical, wetlands and other
studies in connection with the Property and Buyer's proposed project. If Buyer
or its agents or contractors cause any physical damage to the Property, Buyer
agrees to restore or repair the Property at its own expense.

3.3 Approvals and Permits. Issuance of all required
governmental approvals including but not limited to PUD and plat of the Property
by City of Lakewood, subdivision approvals, rezoning approvals, Colorado
Department of Transportation highway access and traffic signal approvals,
building permits, use permits, site plan approvals, and approvals of any kind
from any and all governmental agencies having jurisdiction over the Property,
necessary for Buyer to develop, construct it's building and site improvements
and operate its business on the Property. The timing, conditions and cost of
the permits and approvals (including any mitigation fees) must be satisfactory
to Buyer.

Buyer shall have sixty (60) days from the Effective Date (the
"Feasibility Period") to satisfy or waive the contingencies set forth in
Sections 3.1 and 3.2 (the "Feasibility Period"). Buyer shall have one hundred
eighty (180) days (the "Contingency Period") from the end of the Feasibility
Period to satisfy or waive the contingencies set forth in Section 3.3. If Buyer
does not satisfy or waive the contingencies by the applicable dates, the
Deposit, with interest, shall be refunded to Buyer and the Agreement shall
terminate.

<PAGE>

4. CLOSING.

4.1 Time for Closing; Termination Date. This sale shall be
closed in the office of the Closing Agent within fifteen (15) days after all of
Buyer's conditions precedent have been satisfied or waived by Buyer on a date
selected by Buyer and agreeable to Seller. Buyer and Seller shall deposit in
escrow with Closing Agent all instruments, documents and monies necessary to
complete the sale in accordance with this Agreement. As used herein, "closing"
or "date of closing" means the date on which all appropriate documents are
recorded and proceeds of sale are available for disbursement to Seller. Funds
held in reserve accounts pursuant to escrow instructions shall be deemed, for
purposes of this definition, as available for disbursement to Seller.

4.2 Prorations; Closing Costs. Taxes and assessments for the
current year and utilities constituting liens shall be prorated as of and at the
date of closing. Seller shall pay the premium for the title insurance policy,
real estate excise, transfer and/or conveyance taxes, the cost of conveyance tax
stamps, if any, and one-half of Closing Agent's escrow fee. Buyer shall pay the
cost of recording the statutory warranty deed and one-half of Closing Agent's
escrow fee.

4.3 Possession. Buyer shall be entitled to possession upon
closing.

5. CONVEYANCE OF TITLE. On closing, Seller shall execute and
deliver to Buyer a statutory special warranty deed conveying good and marketable
title to the Property free and clear of any defects or encumbrances except for
the lien of real estate taxes for the current calendar year not yet due and
payable, those defects or encumbrances shown on the preliminary commitment that
are acceptable to Buyer (the "Permitted Exceptions"), and other encumbrances or
defects approved by Buyer in writing.

6. TITLE INSURANCE. Within fifteen (15) days after the Effective
Date, Seller shall provide Buyer with a preliminary commitment for owner's title
insurance with extended coverage issued by Chicago Title Insurance Company, with
copies of all exceptions set forth therein. Within thirty (30) days after the
Effective Date, Seller shall provide Buyer with a current ALTA survey with land
area certification of the Property, at Seller's cost. If Buyer or its
representatives have a current survey, Seller may utilize it for the purpose of
having it recertified (if acceptable to Buyer) or to use in having its own
survey prepared. Buyer shall have fifteen (15) days from the later receipt of
either the preliminary commitment or the survey (and any amendments, supplements
and revisions to either in which new or revised exceptions or items first
appear) to notify Seller of its disapproval of any exceptions shown in the
preliminary commitment or any items on the survey. If, within twenty (20) days
after the receipt of such notice Seller has not removed or given reasonable
written assurances to Buyer that such disapproved exceptions or items will be
removed on or before closing, Buyer may, at its option, at any time within
thirty (30) days thereafter and prior to such removal or receipt of such
reasonable written assurances, terminate this Agreement by giving notice of such
termination to Seller. On such termination Closing Agent shall refund the
Deposit and all interest accrued thereon to Buyer and all rights and obligations
of Seller and Buyer under this Agreement shall terminate and be of no further
force or effect. If no notice of termination is given by Buyer, any objections
that Buyer may have as to the survey or title commitment will be deemed to be
waived.

Notwithstanding the foregoing, Seller shall remove any defect or
encumbrance attaching by, through or under Seller after the Effective Date of
this Agreement. Exceptions to be discharged by Seller may be paid out of the
purchase price at closing.

As soon as available after closing, Seller shall provide to Buyer a
policy of title insurance pursuant to the preliminary commitment, dated as of
the closing date and insuring Buyer in the amount of the purchase price against
loss or damage by reason of defect in Buyer's title to the Property subject only
to the printed exclusions and general exceptions appearing in the policy form;
any Permitted Exceptions; the exceptions specified in the preliminary commitment
which Buyer has not disapproved of or waived as provided herein; and real
property taxes and assessments that are not delinquent.

<PAGE>

7. RISK OF LOSS; CONDEMNATION. Risk of loss of or damage to the
Property shall be borne by Seller until the date of closing. Thereafter, Buyer
shall bear the risk of loss. In the event of material loss of or damage to the
Property prior to the date upon which Buyer assumes the risk, Buyer may
terminate this Agreement by giving notice of such termination to Seller and
Closing Agent, and such termination shall be effective and the Deposit and
interest thereon shall be refunded ten (10) days thereafter; provided, however,
that such termination shall not be effective if Seller agrees in writing within
such ten (10) day period to restore the Property substantially to its present
condition by the closing date.

If the Property is or becomes the subject of a condemnation proceeding
prior to closing, Buyer may, at its option, terminate this Agreement by giving
notice of such termination to Seller, and upon such termination the Deposit and
accrued interest shall be returned to Buyer and this Agreement shall be of no
further force or effect; provided, however, that Buyer may elect to purchase the
Property, in which case the total purchase price shall be reduced by the total
of any condemnation award received by Seller. On closing, Seller shall assign
to Buyer all of Seller's rights in and to any future condemnation awards or
other proceeds payable or to become payable by reason of any taking. Seller
agrees to notify Buyer of eminent domain proceedings within five (5) days after
Seller learns thereof.

8. SELLER'S REPRESENTATIONS AND WARRANTIES. In addition to other
representations herein, Seller represents and warrants to Buyer as of the date
of closing that:

8.1 Seller, and the person signing on behalf of Seller, has
full power and authority to execute this Agreement and perform Seller's
obligations hereunder, and all necessary partnership action to authorize this
transaction has been taken;

8.2 The Property is not subject to any leases, tenancies or
rights of persons in possession;

8.3 To the best of Seller's knowledge, neither the Property
nor the sale of the Property violates any applicable statute, ordinance or
regulation, nor any order of any court or any governmental authority or agency,
pertaining to the Property or the use occupancy or condition thereof;

8.4 To the best of Seller's knowledge, Seller is unaware of
any material defect in the Property;

8.5 All persons and entities supplying labor, materials and
equipment to the Property thru Seller have been paid and there are no claims or
liens;

8.6 There are no currently due and payable assessments for
public improvements against the Property and Seller is not aware of any local
improvement district or other taxing authority having jurisdiction over the
Property in the process of formation;

8.7 To the best of Seller's knowledge, the Property has legal
access to all streets adjoining the Property;

8.8 Seller has good and marketable title to the Property;

8.9 One of Seller's general partners may be a "foreign
person" for purposes of Section 1445 of the Internal Revenue Code. Prior to
closing, Seller shall execute and deliver to Closing Agent such papers as are
necessary in order to meet the Foreign Investment in Real Property Tax Act
("FIRPTA") requirements of I.R.C. #1445 or withhold the proper amount of money
from the closing proceeds; and

8.10 Seller has not received notification of any kind from any
agency suggesting that the Property is or may be targeted for a Superfund
cleanup. To the best of Seller's knowledge, without due inquiry, neither the
Property nor any portion thereof is or has been used (i) for the storage,
disposal or discharge of oil, solvents, fuel, chemicals or any type of toxic or
dangerous or hazardous waste or substance, (ii) as a landfill or waste disposal
site, and (iii) does not contain any underground storage tanks. Seller agrees
to indemnify, defend and hold Buyer harmless from and against any and all loss,
damage, claims, penalties, liability, suits, costs and expenses (including
without limitation, reasonable attorneys' fees) and also including without
limitation, costs of remedial action or cleanup, suffered or incurred by Buyer
arising out of or related to any such use of the Property, or portion thereof,
occurring prior to the conveyance to Buyer, about which Seller had notice
without due inquiry.

<PAGE>

9. BUYER'S AUTHORITY. Buyer represents and warrants to Seller that
at the date of execution hereof and at the date of closing Buyer, and the person
signing on behalf of Buyer, has full power and authority to execute this
Agreement and to perform Buyer's obligations hereunder, and all necessary
corporate action to authorize this transaction has been or will be taken prior
to closing.

10. DEFAULT. If Seller defaults hereunder, Buyer may seek specific
performance of this Agreement, damages or rescission and Buyer shall be entitled
to return of the Deposit with accrued interest, on demand. If Buyer defaults,
the Deposit and accrued interest shall be forfeited to Seller as liquidated
damages and as Seller's sole and exclusive remedy and upon payment thereof to
Seller, Buyer shall have no further obligations or liability hereunder. In any
suit, action or appeal therefrom to enforce this Agreement or any term or
provision hereof, or to interpret this Agreement, the prevailing party shall be
entitled to recover its costs incurred therein, including reasonable attorneys'
fees.

11. NOTICES. All notices, waivers, elections, approvals and demands
required or permitted to be given hereunder shall be in writing and shall be
personally delivered (by overnight courier service or other means of personal
service) or sent by United States certified mail, return receipt requested, to
the addressee's mailing address set forth below:

and, in the case of Buyer, a copy to: William N. Moloney
5711 NE Tolo Rd.
Bainbridge Island, WA 98110

and, in the case of Seller, a copy to: Andrea Shpall
c/o Majestic Travel
3773 Cherry Creek N. Dr., Suite 130
Denver, CO 80209.

Either party hereto may, by proper notice to the other, designate any other
address for the giving of notice. Any notice shall be effective when personally
delivered or, if mailed as provided herein, on the date of actual receipt.

12. ASSIGNMENT. Buyer may assign its rights hereunder to any person
or entity but any such assignment shall not release Buyer from its obligations
hereunder.

13. SITE WORK.

13.1 Buyer shall complete all access drive aisles (shown
shaded on attached Site Plan), street access curb cuts, traffic signal
installations and clearing, grubbing, site balancing earthwork and rough
subgrading related to Parcel A and Parcel B shown on the attached Site Plan, in
accordance with local codes, ordinances, industry standards, Buyer's
construction plans and City of Lakewood's requirements, within sixty (60) days
of closing or receipt of all required permits for such work, whichever later
occurs, subject to delays due to any usual and unusual acts of force majeure.
Buyer shall deliver to Seller a rough graded Parcel A. Seller shall pay its
pro-rata share of the cost of the finished construction of said drive aisle
across Parcel A, street access curb cut, traffic signal installations and any
other offsite and onsite costs pertinent to the use of any Parcel B site
improvements, by it's owner. Such costs shall include architectural, civil,
geotechnical and any other pertinent engineering expenses. Said pro-rata share
shall be based on the ratio of the land area of Parcel A compared to the total
land area of Parcel A and Parcel B.

13.2 In the event Seller believes that the bids to do the work
as described in Section 13.1 on Parcel A are excessive, Seller at its option may
have the work on Parcel A completed by its own contractor at its own expense,
provided such work is scheduled and completed in conjunction with Buyer's work
on Parcel B as described in Section 13.1 above and is accomplished in compliance
with all the criteria described in Section 13.1 governing such work.

13.3 Seller shall pay 100% of any costs of work serving Parcel
A exclusively which shall include but is not limited to the clearing, grubbing,
site balancing, rough subgrading and import or export of materials as needed on
Parcel A. Seller shall reimburse Buyer in accordance with the terms and
described in this Section 13, paragraph 13.6 below.

<PAGE>

13.4 Seller shall have the right, at Seller's expense, to
relocate the access drive located on Parcel A but said relocation shall only be
permitted in the area described on the Site Plan and provided further that the
point of connection with Parcel B and point of access to Wadsworth Boulevard as
shown on the Site Plan remains the same with a maximum of two (2) (or less)
ninety (90 DEG.) (or less) degree turns between such points and such relocated
access drive is constructed to the original standards and specifications
contained in Buyer's plans.

13.5 Buyer shall be responsible for all the related costs of
relocating a portion of the existing parking located on the north side of the
Terrace Point Building (shown by light dashed line on the Site Plan) to the east
side of the Terrace Point Building as shown on the Site Plan. The work shall be
done in accordance with local codes, ordinances, industry standards, Buyer's
construction plans and City of Lakewood's requirements, designed as shown on the
Site Plan. The work shall include the removal of existing right-in, right-out
entrance driveway on Wadsworth Blvd. and the new access connections from the
remaining parking north of the Terrace Point Building and the new parking east
of the Terrace Point Building to the access drive aisles on Parcel B plus all
related landscaping repairs and City of Lakewood required landscaping
modifications.

13.6 Seller agrees to pay its pro-rata share of the costs
described in this Section 13, paragraphs 13.1 thru 13.5, and reimburse Buyer no
later than fifteen (15) days after the work is completed and Buyer invoices
Seller for its share of the cost. Prior to closing, Buyer shall estimate the
total cost of such work, and Seller's pro-rata share thereof which amount will
be agreed upon by Seller, and Seller's estimated share shall be retained and
held by the Closing Agent from the purchase price following closing to provide a
reserve fund for Seller's share of the costs. The Closing Agent shall place the
retainage in an interest-bearing account with interest to accrue to Seller's
benefit. When Seller's share of the costs is finally determined and Seller is
billed by Buyer for it's actual pro-rata share, Seller shall direct the Closing
Agent to pay the retained amount directly to Buyer in partial payment of
Seller's pro-rata share of the costs if the retainage is less than Seller's pro-
rata share. Seller shall pay any balance owing of Seller's pro-rata share
directly to Buyer. If the retainage exceeds Seller's pro-rata share, the
remainder shall be turned over to Seller by the Closing Agent.

14. RECIPROCAL EASEMENT AND OPERATING AGREEMENT. At closing, Seller
and Buyer shall execute and record a Reciprocal Easement and Operating Agreement
(the "Easement Agreement") for the benefit of Parcel A, Parcel B, Parcel C and
the Terrace Point property covering, among other things, reciprocal access, and
cost sharing of maintenance and repair of the easement areas of the project.
The form of the agreement to be prepared by Seller shall be finalized in the
first sixty (60) days of the Contingency Period. The Easement Agreement shall
run with the land and encumber any future owners of Parcels A, B, C and the
Terrace Point Property.

15. GENERAL. This is the entire agreement of Buyer and Seller with
respect to the matters covered hereby and supersedes all prior agreements
between them, written or oral. This Agreement may be modified only in writing,
signed by Buyer and Seller. Any waivers hereunder must be in writing. No waive
of any right or remedy in the event of default hereunder shall constitute a
waiver of such right or remedy in the event of any subsequent default. This
Agreement shall be governed by the laws of the state of Colorado. This
Agreement is for the benefit only of the parties hereto and shall inure to the
benefit of and bind the heirs, personal representatives, successors and assigns
of the parties hereto. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision hereof.

16. SURVIVAL OF WARRANTIES. The terms, covenants, representations
and warranties shall not merge in the deed of conveyance, but shall survive
closing.

17. COMMISSIONS. Buyer and Seller acknowledge that Frederick Ross
Company has acted as broker for Seller. H. C. Properties has acted as broker
for Buyer in this transaction. Seller shall pay a brokers commission of seven
percent (7%) at closing to be divided equally between Frederick Ross Company and
H. C. Properties. Each party represents to the other that it has engaged no
other broker in connection with the negotiations leading to this Agreement.

<PAGE>

18. TAX FREE EXCHANGE. Buyer agrees to cooperate with Seller so
that Seller can effect a tax-free exchange pursuant to Section 1031 of the
Internal Revenue Code. In order to implement such exchange, Seller may, upon
written notice to Buyer, assign its rights, but not its obligations, under this
Agreement to a third party designated by Seller to act as a qualified
intermediary (as such phrase is defined in applicable Internal Revenue Service
regulations). In no event shall Buyer incur any additional expense or liability
as a result of such exchange or as a result of Seller's sale of any other
property. If the Seller chooses, in its sole discretion, to not effect a
tax-free exchange, then the terms and provisions of this paragraph shall be
of no further force of effect.

19. EXHIBITS. Exhibits A and B attached hereto are incorporated
herein as if fully set forth.

20. EFFECTIVE DATE. The later of the Buyer's signature date and the
Seller's signature date, set forth below, shall be the "Effective Date" of this
Agreement.

BUYER: EAGLE HARDWARE & GARDEN, INC.

By: /s/ David J. Heerensperger
------------------------------
July 1. 1996 David J. Heerensperger
--------------------------- Its: Chairman of the Board
Buyer's signature date -----------------------------

Address:
981 Powell Avenue S.W.
Renton, WA 98055

SELLER: TERRACE POINT PARTNERSHIP

By: /s/ illegible
------------------------------
7/2/96 It's general partner
---------------------------
Seller's signature date
Address:

12600 W. Colfax Ave.
Suite B-130
Lakewood, Colorado 80215

<PAGE>

EXHIBIT 'A'

Parcel B Legal Description

(to be provided by Seller upon completion
of ALTA Survey by Seller)

EXHIBIT 'A'

<PAGE>

EXHIBIT "B"

[MAP]

EXHIBIT "B"

<PAGE>

Loan No. C-331951

PROMISSORY NOTE

$9,000,000.00 Seattle, Washington July 18, 1996

For value received, the undersigned, herein called "Borrower," promises
to pay to the order of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a
Wisconsin corporation, who, together with any subsequent holder of this note, is
hereinafter referred to as "Lender", at 720 E. Wisconsin Avenue, Milwaukee, WI
53202 or at such other place as Lender shall designate in writing, in coin or
currency which, at the time or times of payment, is legal tender for public and
private debts in the United States, the principal sum of Nine Million And No/100
Dollars ($9,000,000.00) or so much thereof as shall have been advanced from time
to time plus interest on the outstanding principal balance at the rate and
payable as follows:

Interest shall accrue from the date of advance until maturity at the
rate of seven and ninety-seven one-hundredths percent (7.97%) per annum (the
"Interest Rate").

Accrued interest only on the amount advanced shall be paid on the first
day of the month following the date of advance ("Amortization Period
Commencement Date"). On the first day of the following month and on the first
day of each month thereafter until maturity, installments of principal and
interest shall be paid in the amount of $109,052.22. All installments shall be
applied first in payment of interest, calculated monthly on the unpaid principal
balance, and the remainder of each installment shall be applied in payment of
principal. The entire unpaid principal balance plus accrued interest thereon
shall be due and payable on August 1, 2006 (the "Maturity Date").

Borrower shall have the right, upon thirty (30) days advance written
notice, beginning September 1, 2001 of paying this note in full with a
prepayment fee. This fee represents consideration to Lender for loss of yield
and reinvestment costs. The fee shall be the greater of Yield Maintenance or
1.0% of the outstanding principal balance of this note.

As used herein, "Yield Maintenance" means the amount, if any, by which

(i) the present value of the Then Remaining Payments (as hereinafter
defined) calculated using a periodic discount rate (corresponding to the payment
frequency under this note) which, when compounded for such number of payment
periods in a year, equals the per annum effective yield of the Most Recently
Auctioned United States Treasury Obligation having a maturity date equal to the
Maturity Date (or, if there is no such equal maturity date, then the linearly
interpolated per annum effective yield of the two Most Recently Auctioned United
States Treasury Obligations having maturity dates most nearly equivalent to the
Maturity Date) as reported by THE WALL STREET JOURNAL five business days prior
to the date of prepayment; exceeds

(ii) the outstanding principal balance of this note (exclusive of all
accrued interest).

If such United States Treasury obligation yields shall not be reported
as of such time or the yields reported as of such time shall not be
ascertainable, then the periodic discount rate shall be equal to the Treasury
Constant Maturity Series yields reported, for the latest day for which

<PAGE>

such yields shall have been so reported, as of five business days preceding the
prepayment date, in Federal Reserve Statistical Release H.15(519) (or any
comparable successor publication) for actively traded United States Treasury
obligations having a constant maturity most nearly equivalent to the Maturity
Date.

As used herein, "Then Remaining Payments" means payments in such amounts
and at such times as would have been payable subsequent to the date of such
prepayment in accordance with the terms of this note.

As used herein, "Most Recently Auctioned United States Treasury
Obligations" means the U. S. Treasury bonds, notes and bills with maturities of
30 years, 10 years, 5 years, 3 years, 2 years and 1 year which, as of the date
the prepayment fee is calculated, were most recently auctioned by the United
States Treasury.

Upon the occurrence of an Event of Default (as defined in the Lien
Instrument) followed by the acceleration of the whole indebtedness evidenced by
this note, or a condemnation or sale under threat of condemnation of all or
substantially all of the Property, the payment of such indebtedness will
constitute an evasion of the prepayment terms hereunder and be deemed to be a
voluntary prepayment hereof and such payment will, therefore, to the extent not
prohibited by law, include the prepayment fee required under the prepayment in
full privilege recited above or, if such prepayment occurs prior to September 1,
2001 and results from an Event of Default followed by an acceleration of the
whole indebtedness, then such payment will, to the extent not prohibited by law,
include a prepayment fee equal to the greater of Yield Maintenance or 6% of the
outstanding principal balance of this note. If such prepayment occurs prior to
September 1, 2001 and results from a condemnation or sale under threat of
condemnation of all or substantially all of the Property, the prepayment fee
shall be the greater of Yield Maintenance or 2% of the outstanding principal
balance of this note.

Notwithstanding the above and provided Borrower is not in default under
any provision contained in the Loan Documents (as defined in the Lien
Instrument), this note may be prepaid in full at any time, without a prepayment
fee, during the last 60 days of the term of this note.

This note is secured by certain property (the "Property") in the City of
Issaquah, State of Washington, described in a Deed of Trust and Security
Agreement (the "Lien Instrument") of even date herewith executed by Borrower to
Washington Administrative Services, Inc., as Trustee for The Northwestern Mutual
Life Insurance Company.

Upon the occurrence of an Event of Default (as defined in the Lien
Instrument), the whole unpaid principal hereof and accrued interest shall, at
the option of Lender, to be exercised at any time thereafter, become due and
payable at once without notice, notice of the exercise of, and the intent to
exercise, such option being hereby expressly waived.

All parties at any time liable, whether primarily or secondarily, for
payment of indebtedness evidenced hereby, for themselves, their heirs, legal
representatives, successors and assigns, respectively, expressly waive
presentment for payment, notice of dishonor, protest, notice of protest, and
diligence in collection; consent to the extension by Lender of the time of said

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<PAGE>

payments or any part thereof; further consent that the real or collateral
security or any part thereof may be released by Lender, without in any way
modifying, altering, releasing, affecting, or limiting their respective
liability or the lien of the Lien Instrument; and agree to pay reasonable
attorneys' fees and expenses of collection in case this note is placed in the
hands of an attorney for collection or suit is brought hereon and any attorneys'
fees and expenses incurred by Lender to enforce or preserve its rights under any
of the Loan Documents in any bankruptcy or insolvency proceeding.

Any principal, interest or other amounts payable under any of the Loan
Documents (as defined in the Lien Instrument), not paid when due (without regard
to any notice and/or cure provisions contained in any of the Loan Documents),
including principal becoming due by reason of acceleration by Lender of the
entire unpaid balance of this note, shall bear interest from the due date
thereof until paid at the Default Rate. As used herein, "Default Rate" means
the lower of a rate equal to the interest rate in effect at the time of the
default as herein provided plus 5% per annum or the maximum rate permitted by
law.

No provision of this note shall require the payment or permit the
collection of interest, including any fees paid which are construed under
applicable law to be interest, in excess of the maximum permitted by law. If
any such excess interest is collected or herein provided for, or shall be
adjudicated to have been collected or be so provided for herein, the provisions
of this paragraph shall govern, and Borrower shall not be obligated to pay the
amount of such interest to the extent that it is in excess of the amount
permitted by law. Any such excess collected shall, at the option of Lender,
unless otherwise required by applicable law, be immediately refunded to Borrower
or credited on the principal of this note immediately upon Lender's awareness of
the collection of such excess.

This note shall be governed by and construed in accordance with the laws
of Washington.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, MODIFY
LOAN TERMS, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE
UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, this note has been executed by the undersigned as of
the day and year first above written.

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

By /s/ Ronald P. Maccarone
-----------------------------------

Ronald P. Maccarone
---------------------------------
Its Executive Vice President/
Chief Financial Officer

-3-

<PAGE>

Loan No. C-331951

ENVIRONMENTAL INDEMNITY AGREEMENT

THIS INDEMNITY AGREEMENT is entered into as of July 18, 1996 by the
undersigned (the "Indemnitor") in favor of The Northwestern Mutual Life
Insurance Company ("Northwestern") and the other Indemnified Parties referred to
herein.

RECITALS

A. Northwestern is contemporaneously herewith making a loan (the
"Loan") to Eagle Hardware & Garden, Inc., a Washington corporation, secured or
to be secured by a Mortgage, Deed to Secure a Debt or Deed of Trust and Security
Agreement from Borrower to Northwestern (the "Mortgage") on the fee title and/or
leasehold interest in the property described in Exhibit A attached hereto.

B. In order to induce Northwestern to make the Loan, the Indemnitor
has agreed to execute and deliver this Indemnity Agreement.

C. Indemnitor owns the Property and is the borrower of the Loan.

AGREEMENT

NOW, THEREFORE, in consideration of the recitals and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Indemnitor hereby agrees and covenants for the benefit of
Northwestern and the other Indemnified Parties as follows:

1. The following definitions shall apply to this Indemnity
Agreement:

(a) "Environmental Activity or Condition" means the
presence, use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or transportation of any Hazardous Substance on,
onto, in, under, over or from the Property or the violation of any Environmental
Law because of the condition of, or activity on, the Property.

(b) "Environmental Law" means all law relating to hazardous
waste, chemical substances or mixtures or hazardous, toxic, dangerous or
unhealthy substances or conditions or relating to the interaction of the use or
ownership of property and the environment, whether such law is: (i) criminal or
civil, (ii) federal, state or local, (iii) statutory, common law or
administrative regulation, (iv) currently in effect or enacted in the future.

(c) "Hazardous Substance" means any substance which (i) is
designated as hazardous, toxic or dangerous or similarly designated under any
Environmental Law, (ii) is regulated under any Environmental Law or by any
governmental or quasi-governmental agency, or (iii) could be a hazard to health,
safety or property values. Without limiting the foregoing,

<PAGE>

Hazardous Substances shall include underground storage tanks, asbestos, urea
formaldehyde insulation, polychlorinated biphenyls, dioxins and petroleum
products.

(d) "Property" means the property described in Exhibit A
attached hereto, including the soil, surface water, ground water, air and
improvements on, beneath or above such property.

2. The Indemnitor hereby agrees to indemnify, defend and hold
Northwestern and its trustees, officers, policyholders, employees and agents
(collectively, the "Indemnified Parties") harmless from and against any and all
damages, liabilities, losses, costs and expenses, including reasonable
attorneys' fees, (collectively, "Damages") suffered or incurred by any of the
Indemnified Parties as a result of any Environmental Activity or Condition which
would not have been suffered or incurred if Northwestern had not made the Loan.
The liability of Indemnitor as set forth in the preceding sentence includes,
without limitation, the following:

(a) Any costs of, or liability for, investigation, cleanup
or remediation of environmental damage;

(b) Any damages resulting from the diminution in value or
unmarketability of the Property or any other property;

(d) Any fines, penalties, assessments, judgments or other
liabilities resulting from any claim, judgment or finding concerning the
violation of any Environmental Law;

(e) Any amounts expended by any of the Indemnified Parties
in good faith to settle or compromise any claim or allegation of liability
covered by this Agreement.

The liability of the Indemnitor hereunder shall continue, without
reduction or change, upon and subsequent to Northwestern becoming owner of the
Property through foreclosure, deed-in-lieu of foreclosure or otherwise,
excepting only Damages resulting from actions taken either by Northwestern, by
successive owners of the Property or by those contracting with Northwestern or
any successive owner subsequent to Northwestern becoming owner of the Property;
provided, however, that the Indemnitor shall nonetheless be responsible for the
actions of any party investigating or cleaning up Hazardous Substances, whether
or not contracted for by Northwestern, if the Indemnitor is otherwise liable
hereunder or otherwise for such investigation or clean up. The liability of the
Indemnitor hereunder shall not be reduced or otherwise affected by any
Environmental Activity or Condition occurring or existing prior to Northwestern
becoming owner of the Property even if caused in whole or part by a predecessor
in title, tenant, trespasser or other third person, whether on or off of the
Property. As between the Indemnitor and the Indemnified Parties, the agreements
by the Indemnitor hereunder shall override and be in lieu of any statutory,
regulatory or common law prescriptions for liability, contribution or cost
sharing.

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<PAGE>

3. The liability of the Indemnitor under this Indemnity Agreement
(i) shall not be subject to any limitations on liability set forth in any of the
documents evidencing the Loan and (ii) shall be an unsecured obligation of
Indemnitor to each of the Indemnified Parties, notwithstanding the terms of the
Mortgage or any other agreement.

4. Without limitation, the obligations and liability of any
Indemnitor under this Indemnity Agreement shall in no way be waived, released,
discharged, reduced, mitigated or otherwise affected by:

(a) The repayment of the Loan and/or the satisfaction or
release of the Mortgage; or

(b) Any neglect, delay or forbearance of Northwestern in
demanding, requiring or enforcing payment of the indemnity due hereunder; or

(d) Any sale or refinancing of, or other transactions
related to, the Property by Borrower or Northwestern; or

(e) Indemnitor transferring or divesting any or all of its
estate, right, title or interest in or to the Property or any interest in any
entity.

5. Without limiting the other provisions hereof, in the event any
claim (whether or not a judicial or administrative action is involved) is
asserted against any of the Indemnified Parties with respect to any
Environmental Activity or Condition, Northwestern shall have the right to select
the engineers, other consultants and attorneys for the defense of the
Indemnified Parties, to determine the appropriate legal strategy for such
defense and to compromise or settle such claim, all in Northwestern's
discretion, and the Indemnitor shall be liable to Northwestern in accordance
with the terms hereof for all Damages suffered or incurred by Northwestern in
this regard.

6. Without limiting the other provisions hereof, if Northwestern
acquires legal possession and/or title to the Property and Northwestern becomes
aware of any Environmental Activity or Condition for which Indemnitor may have
liability in accordance with the other provisions of this Indemnity Agreement,
whether or not a claim is asserted against Northwestern or any of the other
Indemnified Parties, Northwestern shall have the right to take such action as
Northwestern shall deem reasonably necessary, in Northwestern's discretion, to
protect health, safety and property values and to minimize the probability or
extent of liability to Northwestern and the other Indemnified Parties,
including, without limitation, investigation and/or cleanup, and the Indemnitor
shall be liable to Northwestern in accordance with the terms hereof for all
Damages suffered or incurred by Northwestern in this regard.

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<PAGE>

7. No action or proceeding brought or instituted under this
Indemnity Agreement and no recovery made as a result thereon shall be a bar or
defense to any further action or proceeding under this Indemnity Agreement.

8. The covenants, agreements, indemnities, terms and conditions
contained in this Indemnity Agreement shall extend to, and be binding upon, the
Indemnitor, its heirs, executors, administrators, successors and assigns, and
shall inure to the benefit of, and may be enforced by, Northwestern or any of
the other Indemnified Parties and its and their successors and assigns.

9. Each provision of this Indemnity Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Indemnity Agreement shall be prohibited, invalid or
ineffective under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this Indemnity Agreement.

10. Indemnitor shall reimburse Northwestern and the other
Indemnified Parties for all reasonable attorneys' fees and expenses incurred in
connection with the enforcement of the Indemnified Parties' rights under this
Indemnity Agreement, including those incurred in any case, action, proceeding,
claim under the Federal Bankruptcy Code or any successor statute.

11. As additional assurance for the timely performance of the
obligations of the Indemnitor hereunder, Indemnitor hereby assigns to
Northwestern any rights such Indemnitor may have against any other person or
entity (including, without limitation, any present, future or former owners,
tenants or other occupants or users of the Property or any portion thereof)
relating, to the matters covered by this Indemnity Agreement.

12. No consent by any Indemnitor shall be required for any
assignment or reassignment of the rights of Northwestern hereunder to one or
more purchasers of the Loan or the Property or any portion of either.

IN WITNESS WHEREOF, the undersigned Indemnitor has executed this
Indemnity Agreement as of the day and year first above written.

Indemnitor

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

By /s/ Ronald P. Maccarone
------------------------------------
Ronald P. Maccarone
------------------------------------
Its Executive Vice President/C. F. O.
------------------------------------

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<PAGE>

EXHIBIT A

LEGAL DESCRIPTION

That certain real property located in the State of Washington, County
of King, described as follows:

PARCEL 1:

A PORTION OF LOTS 16, 17, 18, 23, 24, 25 AND A PORTION OF VACATED STREETS
ADJOINING I-90 CORPORATE CENTER, ACCORDING TO THE PLAT THEREOF RECORDED IN
VOLUME 149 OF PLATS, PAGES 65 THROUGH 70, RECORDS OF KING COUNTY,
WASHINGTON, DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHWEST CORNER OF SAID LOT 16;
THENCE SOUTH 02 DEGREES 08' 32" WEST ALONG THE WEST LINE THEREOF A DISTANCE OF
135.76 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING SOUTH 02 DEGREES 08' 32" WEST ALONG THE WEST LINE OF LOT 16,
17 AND 18 A DISTANCE OF 636.67 FEET TO AN ANGLE POINT IN THE WESTERLY LINE OF
SAID LOT 18;
THENCE SOUTH 16 DEGREES 45'56" EAST ALONG THE SOUTHWESTERLY LINE OF SAID LOT 18
A DISTANCE OF 136.04 FEET;
THENCE NORTH 73 DEGREES 14' 04" EAST AT RIGHT ANGLES A DISTANCE OF 45.00 FEET;
THENCE NORTH 16 DEGREES 45' 56" WEST PARALLEL TO SAID SOUTHWESTERLY LINE OF LOT
18 A DISTANCE OF 31.25 FEET;
THENCE SOUTH 88 DEGREES 53' 55" EAST A DISTANCE OF 276.21 FEET;
THENCE NORTH 32 DEGREES 39' 03" EAST A DISTANCE OF 125.30 FEET;
THENCE NORTH 56 DEGREES 39' 03" EAST A DISTANCE OF 75.20 FEET;
THENCE SOUTH 32 DEGREES 01' 41" EAST A DISTANCE OF 20.21 FEET;
THENCE SOUTH 51 DEGREES 53' 17" EAST A DISTANCE OF 301.33 FEET TO A POINT WITHIN
SAID LOT 24;
THENCE NORTH 26 DEGREES 52' 01" EAST A DISTANCE OF 28.49 FEET;
THENCE NORTH 52 DEGREES 26' 21" EAST A DISTANCE OF 59.11 FEET TO A POINT WHICH
IS IN A NON-TANGENT CURVE TO THE LEFT HAVING A RADIUS 200.00 FEET, THE CENTER
POINT OF WHICH BEARS SOUTH 78 DEGREES 51' 50" WEST;
THENCE NORTHWESTERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL ANGLE 08
DEGREES 40' 23" A DISTANCE OF 30.27 FEET TO THE POINT OF TANGENCY;
THENCE NORTH 19 DEGREES 48' 33" WEST A DISTANCE OF 132.68 FEET TO THE POINT OF
CURVATURE OF A TANGENT CURVE TO THE RIGHT HAVING A RADIUS OF 200.00 FEET;
THENCE NORTHERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL ANGLE OF 46
DEGREES 23' 29" A DISTANCE OF 161.94 FEET TO A POINT OF REVERSE CURVATURE WITHIN
SAID LOT 25, HAVING A RADIUS OF 210.00 FEET, THE CENTER POINT OF WHICH BEARS
NORTH 63 DEGREES 25' 04" WEST;
THENCE NORTHERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL ANGLE OF 36
DEGREES 12' 04" A DISTANCE OF 132.68 FEET TO THE POINT OF TANGENCY;
THENCE NORTH 09 DEGREES 37' 08" WEST A DISTANCE OF 13.40 FEET;
THENCE NORTH 09 DEGREES 30' 09" WEST A DISTANCE OF 174.92 FEET TO THE POINT OF
CURVATURE OF A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 25.00 FEET, THE
CENTER POINT OF WHICH BEARS SOUTH 80 DEGREES 29' 51" WEST;

Page 1 of 2

<PAGE>

THENCE NORTHERLY AND WESTERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL
ANGLE OF 94 DEGREES 07' 09" A DISTANCE OF 41.07 FEET TO A POINT IN THE SOUTHERLY
LINE OF VACATED LAKE DRIVE, SAID POINT BEING ON A CURVE TO THE LEFT, HAVING A
RADIUS OF 335.00 FEET, THE CENTER POINT OF WHICH BEARS SOUTH 13 DEGREES 37' 17"
EAST;
THENCE WESTERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL ANGLE OF 08
DEGREES 22' 06" A DISTANCE OF 48.93 FEET TO A POINT OF CURVATURE OF A COMPOUND
CURVE TO THE RIGHT, HAVING A RADIUS OF 190.00 FEET, THE CENTER POINT OF WHICH
BEARS NORTH 21 DEGREES 59' 23" WEST;
THENCE WESTERLY ALONG THE ARC OF SAID CURVE, THROUGH A CENTRAL ANGLE OF 51
DEGREES 37' 54" A DISTANCE OF 171.22 FEET TO THE POINT OF TANGENCY, FROM WHICH
SAID CENTER POINT BEARS NORTH 29 DEGREES 38' 31" EAST;
THENCE NORTH 60 DEGREES 21' 29" WEST ALONG A LINE WHICH IS PARALLEL WITH AND
35.00 FEET DISTANT WHICH MEASURED AT RIGHT ANGLES TO THE SOUTHWESTERLY LINE OF
LOT "A" OF CITY OF ISSAQUAH LLA NO. 93-08, A DISTANCE OF 138.50 FEET; THENCE
NORTH 87 DEGREES 51' 28" WEST ALONG A LINE WHICH IS PARALLEL WITH AND 35.00 FEET
SOUTHERLY WHEN MEASURED AT RIGHT ANGLES TO THE SOUTHERLY LINE OF SAID LOT "A", A
DISTANCE OF 345.71 FEET TO THE TRUE POINT OF BEGINNING;

(ALSO KNOWN AS LOT "A" IN CITY OF ISSAQUAH LOT LINE ADJUSTMENT NO. 94-04
RECORDED MARCH 18, 1994 UNDER KING COUNTY RECORDING NO.
9403181458 AND AS SHOWN ON SURVEY OF LOT LINE ADJUSTMENT NO. 94-04
RECORDED UNDER KING COUNTY RECORDING NO. 9403189001).

PARCEL 2:

EASEMENT OVER COMMON AREAS AS DEFINED AND AS PROVIDED BY THE AMENDED AND
RESTATED DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS APPLICABLE TO
PICKERING PLACE, RECORDED NOVEMBER 16, 1993, UNDER KING COUNTY RECORDING NO.
9311161931.

SITUATE IN THE COUNTY OF KING, STATE OF WASHINGTON.

Page 2 of 2

<PAGE>

CERTIFICATION OF BORROWER

The Northwestern Mutual Life
Insurance Company
720 East Wisconsin Avenue
Milwaukee, WI 53202

Re: $9,000,000.00 Loan to Eagle Hardware & Garden, Inc. ("Borrower")
Northwestern Loan No.:- C-331951

Gentlemen:

Pursuant to paragraph 32 of the loan application executed on March 11, 1996
(the "Commitment"), Borrower certifies to you that (i) all information submitted
to The Northwestern Mutual Life Insurance Company ("Lender") in connection with
the Loan is true and complete to the best of Borrower's knowledge, (ii) except
as disclosed in the Environmental Report, no underground storage tanks,
asbestos, urea formaldehyde insulation, PCB's, petroleum products, drums,
materials spills, stressed vegetation, present or past dumping or fill,
discolored or disturbed soil, unusual or noxious odors, monitoring wells, roads
or trails with no apparent outlet or purpose, hazardous substances, toxic
substances, radon or other material that could be a hazard to health, safety or
property values, or could be a violation of any law or regulation are located on
the Property, (iii) no part of the Property contains a cemetery or burial
ground, (iv) except as disclosed on the survey provided to Lender, no part of
the Property has been designated as wetlands under any federal, state or local
law or regulation or by any governmental agency, (v) the Property is not located
in flood zone X, (vi) the Property and improvements described in the Commitment
are legally occupied and do not violate any existing environmental, building,
zoning, use or other applicable laws, affecting Borrower or the Property, (vii)
the Property is in compliance with the Americans with Disabilities Act, and
(viii) the Property is adequately served by public water and sewage systems, gas
and electricity.

Borrower acknowledges that Lender is relying upon the certifications
contained herein in making the Loan described in the Commitment.

All capitalized terms used herein shall have the meaning ascribed to them
in the Commitment.

Dated: July 18, 1996

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

By /s/Ronald P. Maccarone
---------------------------------
Ronald P. Maccarone
---------------------------
Its Exec. VP/CFO
-----------------------

<PAGE>

[LETTERHEAD]

ORDER TO PAY FOR LOAN FUNDS

Date 7/17, 1996

The Northwestern Mutual Life
Insurance Company
720 E. Wisconsin Avenue
Milwaukee, WI 53202

ATTN: Real Estate Services RE: Investment No(s). C-331951

In the matter of the investment(s) of $9,000,000 to be made on real
property in King County, Washington and to be secured by our note and mortgage,
or deed of trust, you are hereby authorized and requested to WIRE TRANSFER the
proceeds thereof payable to the order of:

NAME AND ADDRESS
OF BANK: Seafirst Bank, Seattle, Washington
-----------------------------------------------------------------------
ABA Routing No. 125000024
- --------------------------------------------------------------------------------

NAME AND NUMBER
OF ACCOUNT: First American Title Insurance Company
---------------------------------------------------------------------
Account No. 50570 902
- --------------------------------------------------------------------------------

NAME AND TELEPHONE NO. OF PERSON IN
CHARGE OF ACCOUNT AT BANK: N/A
------------------------------------------------------
UPON RECEIPT OF FUNDS BANK IS TO
NOTIFY: (MUST IDENTIFY CONTACT
PERSON AND PHONE NUMBER.) Judy Fredrickson (206) 728-0400
-------------------------------------------------------

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

By /s/Ronald P. Maccarone
---------------------------------
Ronald P. Maccarone
---------------------------
Its Exec. VP/CFO
-----------------------

NOTE: This order must be signed by all makers of the note.

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT
(WITH EARNEST MONEY PROVISION AND COMMISSION AGREEMENT)

THIS CONTRACT CONTROLS THE TERMS AND SALE OF THE PROPERTY. READ CAREFULLY
BEFORE SIGNING.

Tacoma, Washington, August _4_, 1994

Atlantic Seaboard Realty, an affiliate of Wahl & Associates, Inc., a licensed
real estate broker, and or assigns ("Purchaser"), hereby agrees to purchase
and Ronald V. and Kathleen A. Gratias, ("Seller") hereby agree to sell the
following real estate located in the City of Tacoma, County of Pierce, State
of Washington, commonly known as 3106 S. 76th Street, real property
consisting of two parcels of land containing a aggregate total of
approximately eleven and fifty six hundredths (11.56) acres and any
improvements thereon, and legally described as:

Flood Zone: No _X_ Yes ___ (Attach Form 5230.)

Purchaser and Seller hereby authorize Broker to insert over their signatures
the correct legal description or to correct a legal description entered if it
is erroneous or incomplete.

The following personal property is included, and Purchaser agrees to pay any
sales tax which may be due on the sale of such personal property:

TERMS OF SALE:

1. The total purchase price is SEVEN HUNDRED TWENTY FIVE THOUSAND DOLLARS
($725,000.00) payable as follows: Thirty Thousand Dollars ($30,000.00) as
Earnest Money Deposit (herein called "Deposit"), which deposit is evidenced
by Promissory Note. Unless this agreement is previously terminated, said
note to be paid to escrow holder five days after the contingency described in
Paragraph 8 of this Agreement is waived or accepted. If this agreement is
terminated for any reason other than default by Purchaser, said Deposit plus
interest, if any, shall be refunded to Purchaser. The balance of the
purchase price shall be payable as follows:

At closing Seven Hundred Twenty Five Thousand Dollars ($725,000) cash less
earnest money deposit and other deposits applied to the purchase price.

2. Upon mutual execution of this Agreement, the parties shall execute
instructions to TRANSAMERICA TITLE COMPANY, 1200 Sixth Avenue, Seattle,
Washington 98101 (the "Closing Agent"), to consummate the purchase in
accordance with the terms and provisions hereof. They shall place with the
Closing Agent all instruments, documents and moneys necessary to complete the
sale in accordance with this Agreement. The provisions hereof shall
constitute joint instructions to the Closing Agent; provided, however, that
the parties shall execute such additional instructions as they may agree upon
or as requested by the Closing Agent not inconsistent with provisions hereof.
Said escrow shall provide for a closing at the office of Closing Agent on or
before thirty (30) days after the waiver or acceptance of all contingencies
contained herein ("Closing"). Escrow fees shall be paid by Seller and
Purchaser on a 50/50 basis. Closing Agent will place Deposit in an interest
bearing account with interest to accrue to Purchaser's benefit.

<PAGE>

3. Seller shall pay for and furnish to Purchaser standard form Owner's
Policy of Title Insurance, such policy to be effective on the date of
Closing. Within thirty (30) days of the full execution of this Agreement,
Purchaser shall be furnished with a preliminary title commitment (herein
called "Commitment") on the subject property, together with full copies of
any exceptions set forth therein. Purchaser shall have ninety (90) days
after receipt of the Commitment within which to notify Seller and Closing
Agent in writing of Purchaser's disapproval of any exceptions shown in the
Commitment; provided, however, that general exceptions and exceptions in the
title company's extended form of policy, rights reserved in Federal patents
or State deeds, building or use restrictions general to the district,
existing easements not inconsistent with Purchaser's intended use, and
building or zoning regulations shall not be deemed exceptions which Purchaser
may disapprove. In the event of disapproval of any exceptions as set forth
in the Commitment, Seller shall have until one hundred fifty (150) days from
mutual execution of this Agreement to attempt to eliminate any disapproved
exception(s) from the Policy of Title Insurance to be issued in favor of
Purchaser and, if not eliminated by that date, the escrow and this Agreement
shall be terminated unless Purchaser then elects to waive its prior
disapproval. Failure of Purchaser to disapprove in writing any exception(s)
within the aforementioned time limit shall be deemed an approval of the
Commitment.

4. Seller shall deliver to Purchaser copies of any and all reports, surveys,
and studies in Seller's possession within ten (10) days of full execution of
the Agreement.

5. Title shall be conveyed by Statutory Warranty Deed free of encumbrance or
defects except those permitted herein or as Purchaser and Seller shall
otherwise agree.

6. Taxes for the current year, rents, insurance, interest, mortgage
reserves, water and other utilities constituting liens shall be prorated as
of date of Closing. Local improvement district or special district
assessments, if any, shall be similarly prorated and assumed by Purchaser.
Washington real estate excise tax and deed stamps shall be paid for by
Seller. Any other real estate excise or conveyance tax imposed on a
purchaser by state or local law shall be the responsibility of Purchaser.

7. Purchaser shall be entitled to possession on the date of Closing.

8. Purchaser shall have one hundred twenty (120) days from the date of this
Agreement within which to obtain the Tacoma Metropolitan Parks District's
("District") approval of Purchaser's bid to trade the Property for property
currently owned by the District ("District Property"). If Purchaser is
unable to obtain said District approval satisfactory to Purchaser, this
Agreement shall be terminated. If Purchaser elects to proceed with the
transaction, Purchaser shall pay to Seller One Percent (1%) of the total
purchase price within five (5) business days of Purchaser's acceptance or
waiver of the contingencies provided for in this Paragraph. Said payment
shall be non-refundable, but shall be applied to the purchase price.

9. Purchaser shall have one hundred eighty (180) days from date of this
Agreement within which to investigate the property, its value, zoning,
environmental and building matters, its condition -- including, but not
limited to the presence of asbestos, hazardous materials and underground
storage tanks -- and its suitability for Purchaser's intended use. Seller
hereby warrants that, to the best of its knowledge, the premises described
herein and the improvements thereon do not violate the applicable building or
zoning regulations and that it is unaware of any material defect in the
premises or improvements thereon. If Purchaser is dissatisfied with any of
these investigations, Purchaser may terminate this Agreement.

10. Purchaser shall have three hundred sixty five (365) days from the date of
this agreement to obtain and approve of all studies, permits and approval
("Permits and Approvals") it deems necessary for its intended use of the
District Property. If Purchaser is unable to obtain said Permits and
Approvals satisfactory to Purchaser, this Agreement shall be [illegible]

<PAGE>

11. Purchaser may extend the time to obtain said Permits and Approvals
described in Paragraph 10 of this Agreement for a period of one hundred
eighty (180) days upon payment in the amount of Fifteen Thousand Dollars
($15,000) to Seller. Said payment shall be non-refundable, but shall be
applied to the purchase price at closing.

12. For purposes of this Agreement "date of Closing" shall be construed as
the date upon which all appropriate documents are recorded and proceeds of
this sale are available for disbursement to Seller. Funds held in reserve
accounts pursuant to escrow instructions shall be deemed, for purposes of
this definition, as available for disbursement to Seller.

13. All risk of loss or damage to the property shall be borne by the Seller
until Closing. In the event that there is loss or damage to the property
between the date hereof and the date of Closing, by reason of fire,
vandalism, flood, earthquake, or acts of God, and the cost to repair such
damage shall exceed ten percent (10%) of the purchase price of the property,
Purchaser may at his option either proceed with this transaction if Seller
agrees in writing to repair or replace damaged property prior to Closing or
declare this Agreement null and void. If damage to the property is less than
ten percent (10%) of the purchase price and Seller agrees in writing to
repair or replace and does actually repair and replace damaged property prior
to Closing, this transaction shall proceed as agreed.

14. This Agreement supersedes any and all agreements between the parties
hereto regarding the property which are prior in time to this Agreement.
Neither Purchaser, Seller, or Broker shall be bound by any understanding,
agreement, promise, representation or stipulation, express or implied, not
specified herein.

15. Any addendum or exhibit attached hereto and either signed or initialled
by the parties is hereby incorporated herein and shall be deemed a part
hereof.

16. Time is of the essence of this Agreement. Except as otherwise provided
herein, in the event that any contingency to this Agreement has not been
eliminated, satisfied, or waived in writing within the time limits and
pursuant to the provisions herein, this Agreement shall be deemed null and
void, and the Deposit shall be returned to Purchaser, and the escrow shall be
canceled.

17. If Purchaser, Seller, Broker or any other person brings suit or
institutes arbitration relating to this Agreement, the substantially
prevailing party, in addition to any other relief, shall be entitled to
recover reasonable attorneys' fees and costs, including expert witness fees,
and including any such fees and costs incurred on appeal. Venue shall be in
the county where Broker's office is located, and Washington law shall govern.
The parties waive any claim against each other or Broker for punitive
damages.

18. In the event that Seller defaults, Purchaser shall be entitled to return
of the Deposit on demand. If either party defaults hereunder, the other
party may seek performance of this Agreement, damages, or rescission.
Notwithstanding the foregoing, and by way of limitation thereof, by
separately initialing below, the parties agree to waive certain rights and
remedies and provide instead for damages limited to the amount of the earnest
money deposit.

By their initials below, Purchaser and Seller hereby specifically
acknowledge that they have read the preceding provision regarding
forfeiture of the earnest money and understand and agree to it.

Purchasers' Initials /s/ PP Sellers' Initials /s/ RG/KG
------------ ------------

<PAGE>

19. In the event that Broker deems it advisable to file an interpleader action
in court to resolve a dispute over the Deposit, the Purchaser and Seller
authorize Broker to draw from the Deposit an amount necessary to pay the
attorneys' fees and costs of bringing the interpleader action. The amount of
the Deposit remaining after advancing those fees and costs shall be interpleaded
into court in accordance with state law. The Purchaser and Seller further agree
that the defaulting party shall pay any further court costs and reasonable
attorney's fees incurred by the Broker in bringing or being involved in such
action.

20. Purchaser and Seller represent and warrant to Broker and to each other that
they have dealt with no real estate broker, agent of finder in connection with
this sale other than WAHL & ASSOCIATES. INC., FIRST AMERICAN PROPERTIES, INC.
AND REGENCY GROUP, INC. and that no other broker, agent or finder is entitled
to any commission of other fee on account of this Agreement.

21. (a) "Selling agent" means the broker who procured the Purchaser as a
purchaser in this transaction. "Listing agent" means the broker who listed the
subject property for sale.

(b) AGENCY DISCLOSURE: At the signing of this agreement WAHL & ASSOCIATES,
INC. and FIRST AMERICAN PROPERTIES, INC. represent Purchaser and the REGENCY
GROUP, INC. represents Seller in this transaction. Each party signing this
document confirms that prior oral and/or written disclosure of agency was
provided to him/her/it into his transaction. (WAC 308-124D-040).

22. The Foreign Investment in Real Property Tax Act ("FIRPTA"), IRC Sec. 1445,
requires that every Purchaser of U.S. real property must, unless an exemption
applies, deduct an withhold from the seller's proceeds ten percent (10%) of the
gross sale price. The primary exemptions which might be applicable are: (a)
Seller provides the Purchaser with an affidavit under penalty of perjury, that
Seller is not a "foreign person", as defined in FIRPTA, or (b) Seller provides
the Purchaser with a "qualifying statement", as defined in FIRPTA, issued by the
Internal Revenue Service. Seller and Purchaser agree to execute and deliver as
appropriate, any instrument, affidavit and statement, and to perform any acts
reasonably necessary to carry out the provisions of FIRPTA and regulations
promulgated thereunder.

23. Notices to either party shall be given in writing to the address set forth
herein for the party to be given notice, or at such other address as may be
supplied pursuant to the manner specified herein for giving notice. Delivery of
notice shall be by prepaid, certified United States mail, return receipt
requested, and shall be effective three days after deposit.

24. The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive
Environmental Response Compensation and Liability Act, and The Americans With
Disabilities Act.

Purchaser:
Atlantic Seaboard Realty, and or assigns

By: /s/ Peter Papadopulos
----------------------------
Peter Papadopulos

Address: 2025 First Avenue, Suite 710
Seattle, WA 98121

<PAGE>

BROKER:

WAHL & ASSOCIATES, INC.
Licensed Real Estate Broker

By: /s/Arthur L. Wahl
--------------------------------
Arthur L. Wahl
Its President

FIRST AMERICAN PROPERTIES, INC.
Licensed Real Estate Broker

By: /s/ Illegible
----------------------------------
Its: President
----------------------------------

REGENCY GROUP, INC.
Licensed Real Estate Broker

By: /s/ Illegible
----------------------------------
Its:/s/ Illegible
----------------------------------

The undersigned Seller hereby accepts this Agreement and agrees to sell the
subject property to Purchaser for the price and on the terms and conditions
set forth herein. Seller agrees to pay Broker a real estate brokerage
commission for services rendered in effecting this sale, in the amount of
Sixty Thousand Dollars ($60,000). This commission is earned pursuant to the
terms of said contract, if any, or if there is none, then as of the mutual
execution of this Agreement. Proceeds of the sale sufficient to pay the
commission are hereby assigned to Broker. Closing Agent is hereby instructed
to pay said commission to Broker out of Seller's proceeds at the close of
escrow, and this instruction shall not be withdrawn or modified without
Broker's written consent. If earnest money or similar deposits made by
Purchaser are retained by Seller as liquidated damages, then, in addition to
any other rights of Broker, Broker shall be entitled to one-half (1/2)
thereof, but not to exceed the total amount of the anticipated commission.
Nothing contained herein shall negate any additional rights Broker may have
under any other contract between Seller and Broker for a commission in
connection with the offering or sale of the subject property. Seller hereby
acknowledges receipt of a copy of this Agreement.

Seller:

By: /s/ Ronald V. Gratias
------------------------------------
Ronald V. Gratias

By: /s/ Kathleen F. Gratias
------------------------------------
Kathleen F. Gratias

Address: Illegible
-------------------------------

Tacoma, WA 98466
-------------------------------

CONSULT YOUR ADVISORS - This document has been prepared for approval by your
attorney and financial advisor. No representation or recommendations is made by
the Broker as to the legal sufficiency or tax consequences of this document or
the transaction to which it relates. These are questions for your attorney and
financial advisor.

In any real estate transaction, it is recommended that you consult with a
professional, such as a civil engineer, industrial hygienist or other person
with experience in evaluating the condition of property, including the possible
presence of asbestos, hazardous materials and underground storage tanks. Broker
makes no representations regarding such matters.

<PAGE>

PROMISSORY NOTE

$30,000.00 Tacoma, Washington
August 4, 1994

FOR VALUE RECEIVED, the undersigned ("Purchaser") hereby agrees to pay to the
order of Transamerica Title ("Closing Agent") for the benefit of RONALD V. AND
KATHLEEN A. GRATIAS ("Seller"), the sum of Thirty Thousand Dollars ($30,000.00)
as Earnest Money Deposit ("Deposit") on or before one hundred twenty (120) days
from the date of this note, pursuant to the Real Estate Purchase and Sales
Agreement ("Agreement") dated the same date as this Note.

Said Deposit plus interest, if any, shall be refundable to Purchaser if the
Agreement is terminated for any reason other than Purchaser's default. Said
Deposit shall be applicable as credit for Purchaser at closing of this
transaction, if closed.

ATLANTIC SEABOARD REALTY

by: /s/ Peter Papdopulos
-------------------------------
Peter Papadopulos
Vice President

<PAGE>

FIRST AMENDMENT TO
REAL ESTATE PURCHASE AND SALES AGREEMENT

This amendment, effective as of the 1st day of December, 1994 is made by
and among RONALD V. AND KATHLEEN A. GRATIAS AND CHARLES AND DOROTHY PECKENPAUGH
("SELLER") AND ATLANTIC SEABOARD REALTY, AN AFFILIATE OF WAHL & ASSOCIATES,
INC., A LICENSED REAL ESTATE BROKER, AND OR ASSIGNS ("PURCHASER").

RECITALS

A. Purchaser and Seller entered into a Purchase and Sales Agreement dated
August 4, 1994 (such agreement and all amendments, riders, and addenda thereto
are collectively referred to herein as the "Agreement") pertaining to the sale
and purchase of certain property ("Property") described in the Agreement.

B. The Tacoma Metropolitan Parks District ("District") has not completed
its process for granting approval of the trade described in Paragraph 8 of the
Agreement which has resulted in a delay in Purchaser's investigations of the
Property as described in Paragraph 9 of the Agreement and Purchaser's ability to
obtain the Permits and Approvals described in Paragraph 10 of the Agreement.

C. Seller and Purchaser desire to extend the periods of time described in
Paragraphs 8, 9, and 10 of the Agreement and also the period of time after which
the Deposit described in Paragraph 1 of the Agreement is to be converted to
cash.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1. RECITALS. The foregoing recitals are true and correct and are
incorporated herein by this reference.

2. AMENDMENT TO THE AGREEMENT.

A. DEPOSIT. By reference in this amendment, the date on which the
Promissory Note shall be converted to cash shall be thirty (30) days from the
date on which the District awards the above referenced bid to Purchaser.

B. PARAGRAPH 8. Purchaser shall have until May 31, 1995 to obtain
the District's approval of Purchaser bid to trade the Property for District
Property. If the District has not

<PAGE>

granted its approval of the trade by May 31, 1995, Seller shall grant Purchaser
three (3), thirty (30) day extensions provided that the District's process for
awarding the bid is continuing in good faith. Purchaser shall, in writing,
notify Seller of its intent to exercise said thirty day extensions on or before
May 31, 1995 and on or before the expiration of each extension period.

C. PARAGRAPH 9. Purchaser shall have sixty (60) days from the date
on which the District awards the above referenced bid to Purchaser in which to
perform its investigations of the Property.

D. PARAGRAPH 10. Purchaser shall have three hundred sixty five (365)
days from the date on which the District awards the above referenced bid to
Purchaser in which to obtain its Permits and Approvals.

E. SELLERS. With their signature of this Amendment, Charles
Peckenpaugh and Dorothy A. Peckenpaugh hereby approve and become parties to the
Purchase and Sales Agreement.

3 . PAYMENT TO SELLERS. As called for in Paragraph 8 of the Agreement,
Purchaser shall make a payment to Seller in the amount of one percent (1%) of
the purchase price on or before December 2, 1994, which payment shall be non-
refundable, but applicable to the purchase price. While Purchaser's obligation
to make said payment will be satisfied with said payment, Purchaser shall retain
the right to terminate this agreement if said contingency is not met or waived
by Purchaser.

4. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS AMENDMENT is executed by the parties, intending to be legally bound,
as of the date first written above.

SELLER: /s/ Ronald V. Gratias 11/30/94
--------------------------
Ronald V. Gratias

/s/ Kathleen F. Gratias 11/30/94
--------------------------
Kathleen F. Gratias

/s/ Charles Peckenpaugh 11/30/94
--------------------------
Charles Peckenpaugh

/s/ Dorothy A. Peckenpaugh 11/30/94
--------------------------
Dorothy A. Peckenpaugh

PURCHASER: /s/ Peter Papadopulos
--------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

SECOND AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 30th day of August, 1995 is made by and
among RONALD V. GRATIAS, KATHLEEN A. GRATIAS, CHARLES PECKENPAUGH AND DOROTHY A.
PECKENPAUGH ("SELLERS") AND ATLANTIC SEABOARD REALTY, AN AFFILIATE OF WAHL &
ASSOCIATES, INC., A LICENSED REAL ESTATE BROKER, AND OR ASSIGNS ("PURCHASER").

RECITALS

A. Purchaser and Sellers entered into a Purchase and Sale Agreements
dated August 4, 1994, (such agreement and all amendments, riders, and addenda
thereto are collectively referred to herein as the "Agreement") pertaining to
the sale and purchase of certain property ("Property") described in the
Agreement.

C. Sellers and Purchaser desire to extend the periods of time described
in Paragraphs 8, 9, and 10 of the Agreement and also the period of time after
which the Deposit described in Paragraph 1 of the Agreement is to be converted
to cash.

AGREEMENT

1. RECITALS. The foregoing are true and correct and are incorporated
herein by this reference.

2. AMENDMENT TO THE AGREEMENT

A. PARAGRAPH 8. Purchaser shall have until September 30, 1995 to
obtain the District's approval of Purchaser's bid to trade the Property for
District Property. If the District has not granted its approval of the trade by
11:59pm on September 30, 1995 Sellers shall grant Purchaser five (5), thirty
(30) day extensions provided that the District's process for awarding the bid is
continuing in good faith. Purchaser shall, in writing, notify Sellers of its
intent to exercise said thirty day extensions on or before the expiration of
each previous period.

<PAGE>

B. PARAGRAPH 9. Purchaser shall have sixty (60) days from the date
on which the District awards the above referenced bid to Purchaser in which to
perform its investigations of the Property.

C. PARAGRAPH 10. Purchaser shall have three hundred sixty five (365)
days from the date on which the District awards the above referenced bid to
Purchaser in which to obtain its Permits and Approvals.

D. DEPOSIT. By reference in this amendment, the date on which the
Promissory Note shall be converted to cash shall be thirty (30) days from the
date on which the District awards the above referenced bid to Purchaser.

E. EXTENSION CONSIDERATION. Sellers shall grant the first two (2)
extensions to Purchaser for free. Thereafter, Purchaser shall pay to Sellers in
cash extension consideration in the amount of One Thousand Five Hundred Dollars
($1,500.00) for each of the four (4) remaining thirty (30) day extensions. Said
consideration shall be non-refundable, but applicable to the purchase price and
shall be paid along with above referenced notice of Purchaser's exercising of
said extensions.

3. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS SECOND AMENDMENT is executed by the parties, intending to be legally
bound, as of the date first written above.

SELLERS: /s/ Ronald V. Gratias 8/30/95
-------------------------------------
Ronald V. Gratias

/s/ Kathleen F. Gratias 8/30/95
-------------------------------------
Kathleen F. Gratias

/s/ Charles Peckenpaugh 8/31/95
-------------------------------------
Charles Peckenpaugh

/s/ Dorothy A. Peckenpaugh 8/31/95
-------------------------------------
Dorothy A. Peckenpaugh

PURCHASER: /s/ Peter Papadopulos
-------------------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

THIRD AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 23rd day of February, 1996 is made by
and among RONALD V. GRATIAS, KATHLEEN A. GRATIAS, CHARLES PECKENPAUGH AND
DOROTHY A. PECKENPAUGH ("SELLERS") AND ATLANTIC SEABOARD REALTY, AN AFFILIATE
OF WAHL & ASSOCIATES, INC., A LICENSED REAL ESTATE BROKER, AND OR ASSIGNS
("PURCHASER").

RECITALS

A. Purchaser and Sellers entered into a Purchase and Sale Agreement
dated August 4, 1994, (such agreement and all amendments, riders, and addenda
thereto are collectively referred to herein as the "Agreement") pertaining to
the sale and purchase of certain property ("Property") described in the
Agreement.

B. Sellers and Purchaser desire to add the legal description of the
Property in the form of Exhibit A.

C. Sellers and Purchaser desire to amend Paragraphs 10 and 11 of the
Agreement and also the period of time after which the Deposit described in
Paragraph 1 of the Agreement is to be converted to cash.

AGREEMENT

1. RECITALS. The foregoing are true and correct and are incorporated
herein by this reference.

2. AMENDMENT TO THE AGREEMENT.

A. LEGAL DESCRIPTION. The parties agree that the legal description
of the Property is as described in Exhibit A attached hereto and incorporated
herein by this reference.

B. PARAGRAPH 10. Paragraph 10 is amended in its entirety to
hereafter provide as follows:

Purchaser shall have until April 1, 1997 in which to obtain and approve of
all studies, Permits and Approvals it deems necessary for its intended use of
the District Property.

C. PARAGRAPH 11. A new paragraph is hereby added to Paragraph 11 as
follows:

In the event a judicial appeal of the Permits and Approvals is pending at
the expiration of the 180 day extension, Buyer shall have the right to extend
this Agreement in thirty (30) day increments for a maximum of three hundred and
sixty (360) days. To exercise each thirty (30) day extension, Buyer must
deliver to Seller one thousand, five hundred dollars ($1,500) on or before
the first day of each thirty (30) day extension. Said payments shall be non-
refundable, but shall be applicable to the purchase price. If, after all of the
extensions provided herein have been exhausted and the sale has not closed,
either party may terminate this Agreement upon ten (10) days written notice.

<PAGE>

D. DEPOSIT. By reference in this amendment, the date by which the
Promissory Note shall be converted to cash shall be May 10, 1996.

E. EXTENSION CONSIDERATION. Purchaser shall pay to Sellers herewith,
in cash, extension consideration in the amount of One Thousand Five Hundred
Dollars ($1,500.00) for the extensions referenced in Paragraphs 2.A. and 2.B. of
this Third Amendment. Said consideration shall be non-refundable, but
applicable to the purchase price.

3. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS THIRD AMENDMENT is executed by the parties, intending to be legally
bound, as of the date first written above.

SELLERS: /s/Ronald V. Gratias
--- --------------------------------
Ronald V. Gratias

/s/Kathleen F. Gratias
--- --------------------------------
Kathleen F. Gratias

/s/Charles Peckenpaugh
--- --------------------------------
Charles Peckenpaugh

/s/Dorothy A. Peckenpaugh
--- --------------------------------
Dorothy A. Peckenpaugh

PURCHASER: /s/ Peter Papadopulos
-----------------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos
<PAGE>

ORDER NO. 94-1-5806

"EXHIBIT A"

PARCEL A:

The South 260 feet of the following described property:

Beginning at the Northeast corner of the Southeast 1/4 of the Southwest 1/4 of
Section 30, Township 20 North, Range 3 East, W.M.;
thence South along the centerline of Section 30, 665 feet;
thence West 474 feet;
thence North 665 feet parallel with the said centerline of said section to the
South line of Squire's Subdivision, as per plat recorded in Volume 2 of Plats,
page 107, records of Pierce County Auditor;
thence East 474 feet to place of beginning;
EXCEPT the East 30 feet for street purposes;

TOGETHER WITH the South 977.36 feet of the following described property:

Beginning at a point on the South line of Section 30, Township 20 North,
Range 3 East of the W.M. 474.2 feet West of Southeast corner of Southwest 1/4
of said Section 30; thence North parallel with centerline of Section 30,
1,313.1 feet to the South line of Squire's Subdivision, as per plat recorded
in Volume 2 of Plats, page 107, records of Pierce County Auditor; thence West
along South line of Squire's Subdivision, 320 feet; thence South 1,313.1
feet, more or less, to South line of said section; thence East 320 feet to
the place of beginning;

Situate in the City of Tacoma, County of Pierce, State of Washington.

PARCEL B:

That portion of the following described tract of land lying Southeasterly of the
Southeasterly line of the right of way, granted to Tacoma Light and Water
Company by instrument recorded July 26, 1884 in Volume 17 of Deeds, page 221:

Beginning at a point on the South line of Section 30, Township 20 North, Range 3
East, W.M., 474.2 feet West of Southeast corner of Southwest 1/4 of said Section
30;
thence North parallel with centerline of Section 30, 1,313.1 feet to South line
of Squire's Subdivision, as per plat recorded in Volume 2 of Plats, page 107,
records of Pierce County Auditor;
thence West along South line of Squire's Subdivision 320 feet;
thence South 1,313.1 feet, more or less, to South line of said section;
thence East 320 feet to place of beginning;
EXCEPT South 977.36 feet thereof;
AND EXCEPT a strip 35 feet in width along the North line for street purposes as
excepted in deed executed by Grace N. Catton, recorded October 18, 1919 under
Recording No. 539586;

Situate in the City of Tacoma, County of Pierce, State of Washington.

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT
(WITH EARNEST MONEY PROVISION AND COMMISSION AGREEMENT)

THIS CONTRACT CONTROLS THE TERMS AND SALE OF THE PROPERTY. READ CAREFULLY
BEFORE SIGNING.

Tacoma, Washington, August 4, 1994

Atlantic Seaboard Realty, an affiliate of Wahl & Associates, Inc., a licensed
real estate broker, and or assigns ("Purchaser"), hereby agrees to purchase and
Chlo Elaine Jackson and Charles L. Betts, ("Seller") hereby agree to sell the
following real estate located in the City of Tacoma, County of Pierce, State of
Washington, commonly known as 3106 S. 76th Street, real property consisting of
approximately eight (8.0) acres and any improvements thereon, and legally
described as:

Flood Zone: No X Yes (Attach Form 5230.)
--- ---

Purchaser and Seller hereby authorize Broker to insert over their signatures the
correct legal description or to correct a legal description entered if it is
erroneous or incomplete.

The following personal property is included, and Purchaser agrees to pay any
sales tax which may be due on the sale of such personal property:

TERMS OF SALE:

1. The total purchase price is FOUR HUNDRED TWENTY THOUSAND DOLLARS
($420,000.00) payable as follows: Seventeen Thousand Five Hundred Dollars
($17,500.00) as Earnest Money Deposit (herein called "Deposit"), which deposit
is evidenced by Promissory Note. Said note to be paid to escrow holder five
days after the contingency described in Paragraph 8 of this Agreement is waived
or accepted. If this Agreement is terminated for any reason other than default
by Purchaser, said deposit plus interest, if any, shall be refunded to
Purchaser. The balance of the purchase price shall be payable as follows:

At closing FOUR HUNDRED TWENTY THOUSAND DOLLARS ($420,000) cash less
earnest money deposit and other deposits applied to the purchase price.

2. Upon mutual execution of this Agreement, the parties shall execute
instructions to TRANSAMERICA TITLE COMPANY, 1200 Sixth Avenue, Seattle,
Washington 98101 (the "Closing Agent"), to consummate the purchase in accordance
with the terms and provisions hereof. They shall place with Closing Agent all
instruments, documents and moneys necessary to complete the sale in accordance
with this Agreement. The provisions hereof shall constitute joint instructions
to the Closing Agent; provided, however, that the parties shall execute such
additional instructions as they may agree upon or as requested by the Closing
Agent not inconsistent with provisions hereof. Said escrow shall provide for a
closing at the office of Closing Agent on or before thirty (30) days after the
Waiver or acceptance of all contingencies contained herein ("Closing"). Escrow
fees shall be paid by Seller and Purchaser on a 50/50 basis. Closing Agent will
place Deposit in an interest bearing account with interest to accrue to
Purchaser's benefit.

<PAGE>

3. Seller shall pay for and furnish to Purchaser standard form Owner's
Policy of Title Insurance, such policy to be effective on the date of
Closing. Within thirty (30) days of the full execution of this Agreement,
Purchaser shall be furnished with a preliminary title commitment (herein
called Commitment") on the subject property, together with full copies of any
exceptions set forth therein. Purchaser shall have ninety (90) days after
receipt of the Commitment within which to notify Seller and Closing Agent in
writing of Purchaser's disapproval of any exceptions shown in the Commitment;
provided, however, that general exceptions and exceptions in the title
company's extended form of policy, rights reserved in Federal patents or
State deeds, building or use restrictions general to the district, existing
easements not inconsistent with Purchaser's intended use, and building or
zoning regulations shall not be deemed exceptions which Purchaser may
disapprove. In the event of disapproval of any exceptions as set forth in the
Commitment, Seller shall have until one hundred fifty (150) days from mutual
execution of this Agreement to attempt to eliminate any disapproved
exception(s) from the Policy of Title Insurance to be issued in favor of
Purchaser and, if not eliminated by that date, the escrow and this Agreement
shall be terminated unless Purchaser then elects to waive its prior
disapproval. Failure of Purchaser to disapprove in writing any exception(s)
within the aforementioned time limit shall be deemed an approval of the
Commitment.

4. Seller shall deliver to Purchaser copies of any and all reports, surveys,
and studies in Seller's possession within ten (10) days of full execution of the
Agreement.

5. Title shall be conveyed by Statutory Warranty Deed free of encumbrance or
defects except those permitted herein or as Purchaser and Seller shall otherwise
agree.

6. Taxes for the current year, rents, insurance, interest, mortgage reserves,
water and other utilities constituting liens shall be prorated as of date of
Closing. Local improvement district or special district assessments, if any,
shall be similarly prorated and assumed by Purchaser. Washington real estate
excise tax and deed stamps shall be paid for by Seller. Any other real estate
excise or conveyance tax imposed on a purchaser by state or local law shall be
the responsibility of Purchaser.

7. Purchaser shall be entitled to possession on the date of Closing.

8. Purchaser shall have one hundred twenty (120) days from the date of this
Agreement within which to obtain the Tacoma Metropolitan Parks District's
("District") approval of Purchaser's bid to trade the Property for property
currently owned by the District ("District Property"). If Purchaser is unable
to obtain said District approval satisfactory to Purchaser this Agreement shall
be terminated. If Purchaser elects to proceed with the transaction, Purchaser
shall pay to Seller One Percent (1%) of the total purchase price within five (5)
business days of Purchaser's acceptance or waiver of the contingencies provided
for in this Paragraph. Said payment shall be non-refundable, but shall be
applied to the purchase price.

9. Purchaser shall have one hundred eighty (180) days from date of this
Agreement within which to investigate the property, its value, zoning,
environmental and building matters, its condition - including, but not limited
to the presence of asbestos, hazardous materials and underground storage tanks -
and its suitability for Purchaser's intended use. Seller hereby warrants that,
to the best of its knowledge, the premises described herein and the improvements
thereon do not violate the applicable building or zoning regulations and that it
is unaware of any material defect in the premises or improvements thereon. If
Purchaser is dissatisfied with any of these investigations, Purchaser may
terminate this Agreement.

10. Purchaser shall have three hundred sixty five (365) days from the date of
this agreement to obtain and approve of all studies, permits and approval
("Permits and Approvals") it deems necessary for its intended use of the
District Property. If Purchaser is unable to obtain said Permits and Approval
satisfactory to Purchaser, this Agreement shall be terminated.

<PAGE>

11. Purchaser may extend the time to obtain said Permits and Approvals
described in Paragraph 10 of this Agreement for a period of one hundred eighty
(180) days upon payment in the amount of Ten Thousand Dollars ($10,000) to
Seller. Said payment shall be non-refundable, but shall be applied to the
purchase price at closing.

12. For purposes of this Agreement "date of Closing" shall be construed as the
date upon which all appropriate documents are recorded and proceeds of this sale
are available for disbursement to Seller. Funds held in reserve accounts
pursuant to escrow instructions shall be deemed, for purposes of this
definition, as available for disbursement to Seller.

13. All risk of loss or damage to the property shall be borne by the Seller
until Closing. In the event that there is loss or damage to the property
between the date hereof and the date of Closing, by reason of fire, vandalism,
flood, earthquake, or acts of God, and the cost to repair such damage shall
exceed ten percent (10%) of the purchase price of the property, Purchaser may at
his option either proceed with this transaction if Seller agrees in writing to
repair or replace damaged property prior to Closing or declare this Agreement
null and void. If damage to the property is less than ten percent (10%) of the
purchase price and Seller agrees in writing to repair or replace and does
actually repair and replace damaged property prior to Closing, this transaction
shall proceed as agreed.

14. This Agreement supersedes any and all agreements between the parties
hereto regarding the property which are prior in time to this Agreement. Neither
Purchaser, Seller, or Broker shall be bound by any understanding, agreement,
promise, representation or stipulation, express or implied, not specified
herein.

15. Any addendum or exhibit attached hereto and either signed or initialized by
the parties is hereby incorporated herein and shall be deemed a part hereof.

16. TIME IS OF THE ESSENCE OF THIS AGREEMENT. Except as otherwise provided
herein, in the event that any contingency to this Agreement has not been
eliminated, satisfied, or waived in writing within the time limits and pursuant
to the provisions herein, this Agreement shall be deemed null and void, and the
Deposit shall be returned to Purchaser, and the escrow shall be canceled.

17. If Purchaser, Seller, Broker or any other person brings suit or institutes
arbitration relating to this Agreement, the substantially prevailing party, in
addition to any other relief, shall be entitled to recover reasonable attorneys'
fees and costs, including expert witness fees, and including any such fees and
costs incurred on appeal. Venue shall be in the county where Broker's office is
located, and Washington law shall govern. The parties waive any claim against
each other or Broker for punitive damages.

18. In the event that Seller defaults, Purchaser shall be entitled to return of
the Deposit on demand. If either party defaults hereunder, the other party may
seek performance of this Agreement, damages, or rescission. Notwithstanding the
foregoing, and by way of limitation thereof, by separately initialing below, the
parties agree to waive certain rights and remedies and provide instead for
damages limited to the amount of the earnest money deposit.

By their initials below, Purchaser and Seller hereby specifically
acknowledge that they have read the preceding provision regarding
forfeiture of the earnest money and understand and agree to it.

Purchasers' Initials PP Sellers' Initials CB CEJ
---- ---- ---- -----

<PAGE>

20. Purchaser and Seller represent and warrant to Broker and to each other that
they have dealt with no real estate broker, agent of finder in connection with
this sale other than WAHL & ASSOCIATES, INC., FIRST AMERICAN PROPERTIES, INC.
AND REGENCY GROUP, INC. and that no other broker, agent or finder is entitled to
any commission of other fee on account of this Agreement.

21. (a) "Selling agent" means the broker who procured the Purchaser as a
purchaser in this transaction. "Listing agent" means the broker who listed the
subject property for sale.

(b) AGENCY DISCLOSURE: At the signing of this agreement WAHL &
ASSOCIATES, INC. and FIRST AMERICAN PROPERTIES, INC. represents Purchaser and
the REGENCY GROUP, INC. represents Seller in this transaction. Each party
signing this document confirms that prior oral and/or written disclosure of
agency was provided to him/her/it into his transaction. (WAC 308-124D-040).

22. The Foreign Investment in Real Property Tax Act ("FIRPTA"), IRC Sec. 1445,
requires that every Purchaser of U.S. real property must, unless an exemption
applies, deduct an withhold from the seller's proceeds ten percent (10%) of the
gross sale price. The primary exemptions which might be applicable are: (a)
Seller provides the Purchaser with an affidavit under penalty of perjury, that
Seller is not a "foreign person", as defined in FIRPTA, or (b) Seller provides
the Purchaser with a "qualifying statement", as defined in FIRPTA, issued by
the Internal Revenue Service. Seller and Purchaser agree to execute and
deliver as appropriate, any instrument, affidavit and statement, and to
perform any acts reasonably necessary to carry out the provisions of FIRPTA and
regulations promulgated thereunder.

24. The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over parties, property or the subject matter of this Agreement,
including but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive
Environmental Response Compensation and Liability Act, and The Americans With
Disabilities Act.

Purchaser:

Atlantic Seaboard Realty, and or assigns

By: /s/ Peter Papadopulos
-------------------------------------
Peter Papadopulos

Address: 2025 First Avenue, Suite 710
Seattle, WA 98121

<PAGE>

BROKER:

WAHL & ASSOCIATES, INC.
Licensed Real Estate Broker

By: /s/ Arthur L. Wahl
----------------------------
Arthur L. Wahl
Its President

FIRST AMERICAN PROPERTIES, INC.
Licensed Real Estate Broker

By: /s/ illegible
----------------------------

Its: President
---------------------------

REGENCY GROUP, INC.
Licensed Real Estate Broker

By: /s/ illegible
----------------------------

Its: illegible
---------------------------

The undersigned Seller hereby accepts this Agreement and agrees to sell the
subject property to Purchaser for the price and on the terms and conditions set
forth herein. Seller agrees to pay Broker a real estate brokerage commission
for services rendered in effecting this sale, in the amount of Thirty Five
Thousand Dollars ($35,000.00). This commission is earned pursuant to the terms
of said contract, if any, or if there is none, then as of the mutual execution
of this Agreement. Proceeds of the sale sufficient to pay the commission are
hereby assigned to Broker. Closing Agent is hereby instructed to pay said
commission to Broker out of Seller's proceeds at the close of escrow, and this
instruction shall not be withdrawn or modified without Broker's written consent.
If earnest money or similar deposits made by Purchaser are retained by Seller as
liquidated damages, then, in addition to any other rights of Broker, Broker
shall be entitled to one-half (1/2) thereof, but not to exceed the total amount
of the anticipated commission. Nothing contained herein shall negate any
additional rights Broker may have under any other contract between Seller and
Broker for a commission in connection with the offering or sale of the subject
property. Seller hereby acknowledges receipt of a copy of this Agreement.

Seller:

By: /s/ Chlo Elaine Jackson
-------------------------
Chlo Elaine Jackson

By: /s/ Charles L. Betts
-------------------------
Charles L. Betts

Address: 8118 33rd Ave. So.
--------------------
Tacoma WA 98409
--------------------

<PAGE>

PROMISSORY NOTE

$17,500.00 Tacoma, Washington
August 4, 1994

FOR VALUE RECEIVED, the undersigned ("Purchaser") hereby agrees to pay to
the order of Transamerica Title ("Closing Agent") for the benefit of CHLO
ELAINE JACKSON AND CHARLES L. BETTS ("Seller"), the sum of Seventeen
Thousand Five Hundred Dollars ($17,500.00) as Earnest Money Deposit
("Deposit") on or before one hundred twenty (120) days from the date of
this note, pursuant to the Real Estate Purchase and Sales Agreement
("Agreement") dated the same date as this Note.

Said Deposit plus interest, if any, shall be refundable to Purchaser if the
Agreement is terminated for any reason other than Purchaser's default.
Said Deposit shall be applicable as credit for Purchaser at closing of this
transaction, if closed.

ATLANTIC SEABOARD REALTY

by: /s/ Peter Papadopulos
-----------------------
Peter Papadopulos
Vice President

<PAGE>

FIRST AMENDMENT TO
REAL ESTATE PURCHASE AND SALES AGREEMENT

This amendment, effective as of the 1st day of December, 1994 is made by
and among CHLO ELAINE JACKSON, CHARLES L. BETTS AND RUSSELL L. BETTS
("SELLERS") and ATLANTIC SEABOARD REALTY, AN AFFILIATE OF WAHL & ASSOCIATES,
INC., A LICENSED REAL ESTATE BROKER, AND OR ASSIGNS ("PURCHASER").

RECITALS

A. Purchaser and Seller entered into a Purchase and Sales Agreement dated
August 4, 1994 (such agreement and all amendments, riders and addenda thereto
are collectively referred to herein as the "Agreement") pertaining to the sale
and purchase of certain property ("Property") described in the Agreement.

B. The Tacoma Metropolitan Parks District ("District") has not completed
its process for granting approval of the bid and trade described in Paragraph 8
of the Agreement which has resulted in a delay in Purchaser's investigations of
the Property as described in Paragraph 9 of the Agreement and Purchaser's
ability to obtain the Permits and Approvals described in Paragraph 10 of the
Agreement.

C. Seller and Purchaser desire to extend the periods of time
described in Paragraphs 8, 9, and 10 of the Agreement and also the period of
time after which the Deposit described in Paragraph 1 of the Agreement is to be
converted to cash.

D. Seller and Purchaser desire to include Russell Betts as a party to the
Sellers in the Agreement.

AGREEMENT

1. RECITALS. The foregoing recitals are true and correct and are
incorporated herein by this reference.

2. AMENDMENTS TO THE AGREEMENT.

B. PARAGRAPH 8. Purchaser shall have until May 31, 1995 to obtain
the District's approval of Purchaser bid to trade the Property for District
Property. If the District has not granted its approval of the trade by May 31,
1995, Seller shall

<PAGE>

grant Purchaser three (3), thirty (30) day extensions provided that the
District's process for awarding the bid is continuing in good faith. Purchaser
shall, in writing, notify Seller of its intent to exercise said thirty day
extensions on or before the expiration of each previous period.

C. PARAGRAPH 9. Purchaser shall have sixty (60) days from the date
on which the District awards the above referenced bid to Purchaser in to which
perform its investigations of the Property.

E. SELLERS. With his signature of this Amendment, Russell E. Betts
hereby approves and becomes a party to the Purchase and Sales Agreement.

3. PAYMENT TO SELLERS. As called for in Paragraph 8 of the Agreement,
Purchaser shall make a payment to Seller in the amount of one percent (1%) of
the purchase price on or before December 2, 1994, which payment shall be non-
refundable, but applicable to the purchase price. While Purchaser's obligation
to make said payment will be satisfied with said payment, Purchaser shall retain
the right to terminate this agreement if said contingency is not met or waived
by Purchaser.

4. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS AMENDMENT is executed by the parties, intending to be legally bound,
as of the date first written above.

SELLER: /s/ Chlo Elaine Jackson
-----------------------
Chlo Elaine Jackson

/s/ Charles L. Betts
-----------------------
Charles L. Betts

/s/ Russell L. Betts
-----------------------
Russell L. Betts

PURCHASER: /s/ Peter Papadopulos
-----------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

SECOND AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 30th day of August, 1995 is made by and
among CHLO ELAINE JACKSON, CHARLES L. BETTS AND RUSSELL BETTS ("SELLERS") and
ATLANTIC SEABOARD REALTY, AN AFFILIATE OF WAHL & ASSOCIATES, INC., A LICENSED
REAL ESTATE BROKER, AND OR ASSIGNS ("PURCHASER").

RECITALS

B. - The Tacoma Metropolitan Parks District ("District") has not
completed its process for granting approval of the trade described in Paragraph
8 of the Agreement which has resulted in a delay in Purchaser's investigations
of the Property as described in Paragraph 9 of the Agreement and Purchaser's
ability to obtain the Permits and Approvals described in Paragraph 10 of the
Agreement.

AGREEMENT

NOW, THEREFORE. in consideration of the covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

1 . RECITALS. The foregoing are true and correct and are incorporated
herein by this reference.

2. AMENDMENT TO THE AGREEMENT.

<PAGE>

B. PARAGRAPH 9. Purchaser shall have sixty (60) days from the date
on which the District awards the above referenced bid to Purchaser in which to
perform its investigations of the Property.

C. PARAGRAPH 10. Purchaser shall have three hundred sixty five
(365) days from the date on which the District awards the above referenced bid
to Purchaser in which to obtain its Permits and Approvals.

E. EXTENSION CONSIDERATION. Sellers shall grant the first two (2)
extensions to Purchaser for free. Thereafter, Purchaser shall pay to Seller in
cash extension consideration in the amount of Seven Hundred Fifty Dollars
($750.00) for each of the four(4) remaining thirty (30) day extensions. Said
consideration shall be nonrefundable, but applicable to the purchase price and
shall be paid along with above referenced notice of Purchaser's exercising of
said extensions.

3. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS SECOND AMENDMENT is executed by the parties, intending to by legally
bound, as of the date first written above.

SELLERS: /s/ Chlo Elaine Jackson
---------------------------
Chlo Elaine Jackson

/s/ Charles L. Betts
---------------------------
Charles L. Betts

/s/ Russell Betts Charles Betts P.O.E.
---------------------------
Russell Betts

PURCHASER: /s/ Peter Papadopulos
---------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

THIRD AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 23rd day of February, 1996 is made by
and among CHLO ELAINE JACKSON, CHARLES L. BETTS AND RUSSELL BETTS ("SELLERS")
AND ATLANTIC SEABOARD REALTY, AN AFFILIATE OF WAHL & ASSOCIATES, INC., A
LICENSED REAL ESTATE BROKER, AND OR ASSIGNS ("PURCHASER").

RECITALS

B. Sellers and Purchaser desire to add the legal description of the
Property in the form of Exhibit A.

AGREEMENT

1. RECITALS. The foregoing are true and correct and are incorporated
herein by reference.

2. AMENDMENT TO THE AGREEMENT

A. LEGAL DESCRIPTION. The parties agree that the legal description
of the Property is as described in Exhibit A attached hereto and incorporated
herein by reference.

B. PARAGRAPH 10. Paragraph 10 is amended in its entirety to
hereafter provide as follows:

Purchaser shall have until April 1, 1997 in which to obtain and approve of
its studies, Permits and Approvals it deems necessary for its intended use of
the District Property.

C. PARAGRAPH 11. A new paragraph is hereby added to Paragraph 11 as
follows:

In the event a judicial appeal of the Permits and Approvals is pending at
the expiration of the 180 day extension, Buyer shall have the right to extend
this Agreement in thirty (30) day increments for a maximum of three hundred
and sixty (360) days. To exercise each thirty (30) day extension, Buyer must
deliver to Seller five hundred dollars ($500) on or before the first day of
each thirty (30) day extension. Said payments shall be non-refundable, but
shall be applicable to the purchase price. If, after all of the extensions
provided herein have been exhausted and the sale has not closed, either party
may terminate this Agreement upon ten (10) days written notice.

D. DEPOSIT. By reference in this amendment, the date by which the
Promissory Note shall be converted to cash shall be May 10, 1996.

<PAGE>

E. EXTENSION CONSIDERATION. Purchaser shall pay to Sellers
herewith, in cash, extension consideration in the amount of five hundred
dollars ($500.00) for the extensions referenced in Paragraphs 2.A. and 2.B.
of this Third Amendment. Said consideration shall be non-refundable, but
applicable to the purchase price.

3. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS THIRD AMENDMENT is executed by the parties, intending to be legally
bound, as of the date first written above.

SELLERS: /s/ Chlo Elaine Jackson
-------------------------------------
Chlo Elaine Jackson

/s/ Charles L. Betts
-------------------------------------
Charles L. Betts

/s/ Russell Betts P.O.E Chuck Betts
-------------------------------------
Russell Betts

PURCHASER: /s/ Peter Papadopulos
-----------------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

"EXHIBIT A"

The land referred to in this Commitment is situated in the County of Pierce,
State of Washington and described as follows:

Beginning at a point on the South line of Section 30, Township 20 North, Range 3
East of the W.M., 794 feet West of the Southeast corner of the Southeast 1/4 of
the Southwest 1/4 of said Section 30;
thence West along the South of Section 30, 526 feet to the Southeast corner of
Lot 4 in said Section 30;
thence North along the East line of Lot 4, 936.6 feet;
thence East at right angles, 346 feet;
thence South 280 feet;
thence East 180 feet;
thence South 652.1 feet to the point of beginning;

EXCEPTING therefrom the right of way granted to the Tacoma Light and Water
Company;

EXCEPT that portion lying Northwesterly of said right of way of Tacoma Light
and Water Company;

Situate in the City of Tacoma, County of Pierce, State of Washington.

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT
(WITH EARNEST MONEY PROVISION AND COMMISSION AGREEMENT)

THIS CONTRACT CONTROLS THE TERMS AND SALE OF THE PROPERTY. READ CAREFULLY
BEFORE SIGNING.

Tacoma, Washington, August 4, 1994

Atlantic Seaboard Realty, an affiliate of Wahl & Associates, Inc., a licensed
real estate broker, and or assigns ("Purchaser"), hereby agrees to purchase
and MARY J. McCOLM, ("Seller") hereby agrees to sell the following real
estate located in the City of Tacoma, County of Pierce, State of Washington,
commonly known as 3106 S. 76th Street, real property consisting of
approximately two and one tenth (2.1) acres and any improvements thereon, and
legally described as:

Flood Zone: No X Yes (Attach Form 5230.)
--- ---

Purchaser and Seller hereby authorize Broker to insert over their signatures the
correct legal description or to correct a legal description entered if it is
erroneous or incomplete.

The following personal property is included, and Purchaser agrees to pay any
sales tax which may be due on the sale of such personal property:

TERMS OF SALE:

1. The total purchase price is FIFTY FIVE THOUSAND DOLLARS ($55,000.00)
payable as follows: Five Thousand Dollars ($5,000.00) as Earnest Money Deposit
(herein called "Deposit"), which deposit is evidenced by Promissory Note. Said
note is to be paid to escrow holder five days after the contingency described in
Paragraph 8 of this Agreement is waived or accepted. If this Agreement is
terminated for any reason other than default by Purchaser, said deposit plus
interest, if any, shall be refunded to Purchaser. The balance of the purchase
price shall be payable as follows:

At closing FIFTY FIVE THOUSAND DOLLARS ($55,000.00) cash less earnest money
deposit and other deposits applied to the purchase price.

2. Upon mutual execution of this Agreement, the parties shall execute
instructions to TRANSAMERICA TITLE COMPANY, 1200 Sixth Avenue, Seattle,
Washington 98101 (the "Closing Agent"), to consummate the purchase in accordance
with the terms and provisions hereof. They shall place with Closing Agent all
instruments, documents and moneys necessary to complete the sale in accordance
with this Agreement. The provisions hereof shall constitute joint instructions
to the Closing Agent; provided, however, that the parties shall execute such
additional instructions as they may agree upon or as requested by the Closing
Agent not inconsistent with provisions hereof. Said escrow shall provide for a
closing at the office of Closing Agent on or before thirty (30) days after the
waiver or acceptance of all contingencies contained herein ("Closing"). Escrow
fees shall be paid by Seller and Purchaser on a 50/50 basis. Closing Agent will
place Deposit in an interest bearing account with interest to accrue to
Purchaser's benefit.

<PAGE>

3. Seller shall pay for and furnish to Purchaser standard form Owner's
Policy of Title Insurance, such policy to be effective on the date of
Closing. Within thirty (30) days of the full execution of this Agreement,
Purchaser shall be furnished with a preliminary title commitment (herein
called Commitment") on the subject property, together with full copies of any
exceptions set forth therein. Purchaser shall have ninety (90) days after
receipt of the Commitment within which to notify Seller and Closing Agent in
writing of Purchaser's disapproval of any exceptions shown in the Commitment;
provided, however, that general exceptions and exceptions in the title
company's extended form of policy, rights reserved in Federal patents or
State deeds, building or use restrictions general to the district, existing
easements not inconsistent with Purchaser's intended use, and building or
zoning regulations shall not be deemed exceptions which Purchaser may
disapprove. In the event of disapproval of any exceptions as set forth in
the Commitment, Seller shall have until one hundred fifty (150) days from
mutual execution of this Agreement to attempt to eliminate any disapproved
exception(s) from the Policy of Title Insurance to be issued in favor of
Purchaser and, if not eliminated by that date, the escrow and this Agreement
shall be terminated unless Purchaser then elects to waive its prior
disapproval. Failure of Purchaser to disapprove in writing any exeception(s)
within the aforementioned time limit shall be deemed an approval of the
Commitment.

4. Seller shall deliver to Purchaser copies of any and all reports, surveys,
and studies in Seller's possession within ten (10) days of full execution of the
Agreement.

5. Title shall be conveyed by Statutory Warranty Deed free of encumbrance or
defects except those permitted herein or as Purchaser and Seller shall otherwise
agree.

6. Taxes for the current year, rents, insurance, interest, mortgage reserves,
water and other utilities constituting liens shall be prorated as of date of
Closing. Local improvement district or special district assessments, if any,
shall be similarly prorated and assumed by Purchaser. Washington real estate
excise tax and deed stamps shall be paid for by Seller. Any other real estate
excise or conveyance tax imposed on a purchaser by state or local law shall be
the responsibility of Purchaser.

7. Purchaser shall be entitled to possession on the date of Closing.

8. Purchaser shall have one hundred twenty (120) days from the date of this
Agreement within which to obtain the Tacoma Metropolitan Parks District's
("District") approval of Purchaser's bid to trade the Property for property
currently owned by the District ("District Property"). If Purchaser is
unable to obtain said District approval, this Agreement shall be terminated.
If Purchaser elects to proceed with this transaction, Purchaser shall pay to
Seller One Percent (1%) of the total purchase price within five (5) business
days of Purchaser's acceptance or waiver of the contingencies provided for in
this Paragraph. Said payment shall be non-refundable, but shall be applied
to the purchase price.

9. Purchaser shall have one hundred eighty (180) days from date of this
Agreement within which to investigate the property, its value, zoning,
environmental and building matters, its condition - including, but not
limited to the presence of asbestos, hazardous materials and underground
storage tanks -and its suitability for Purchaser's intended use. Seller
hereby warrants that, to the best of its knowledge, the premises described
herein and the improvements thereon do not violate the applicable building or
zoning regulations and that it is unaware of any material defect in the
premises or improvements thereon. If Purchaser is dissatisfied with any of
these investigations, Purchaser may terminate this Agreement.

<PAGE>

11. Purchaser may extend the time to obtain said Permits and Approvals
described in Paragraph 10 of this Agreement for a period of one hundred eighty
(180) days upon payment in the amount of Five Thousand Dollars ($5,000) to
Seller. Said payment shall be non-refundable, but shall be applied to the
purchase price at closing.

12. For purposes of this Agreement "date of Closing" shall be construed as the
date upon which all appropriate documents are recorded and proceeds of this sale
are available for disbursement to Seller. Funds held in reserve accounts
pursuant to escrow instructions shall be deemed, for purposes of this
definition, as available for disbursement to Seller.

13. All risk of loss or damage to the property shall be borne by the Seller
until Closing. In the event that there is loss or damage to the property
between the date hereof and the date of Closing, by reason of fire, vandalism,
flood, earthquake, or acts of God, and the cost to repair such damage shall
exceed ten percent (10%) of the purchase price of the property, Purchaser may at
his option either proceed with this transaction if Seller agrees in writing to
repair or replace damaged property prior to Closing or declare this Agreement
null and void. If damage to the property is less than ten percent (10%) of the
purchase price and Seller agrees in writing to repair or replace and does
actually repair and replace damaged property prior to Closing, this transaction
shall proceed as agreed.

15. Any addendum or exhibit attached hereto and either signed or initialled by
the parties is hereby incorporated herein and shall be deemed a part hereof.

16. Time is of the essence of this Agreement. Except as otherwise provided
herein, in the event that any contingency to this Agreement has not been
eliminated, satisfied, or waived in writing within the time limits and pursuant
to the provisions herein, this Agreement shall be deemed null and void, and the
Deposit shall be returned to Purchaser, and the escrow shall be cancelled.

17. If Purchaser, Seller, Broker or any other person brings suit or institutes
arbitration relating to this Agreement, the substantially prevailing party, in
addition to any other relief, shall be entitled to recover reasonable attorneys'
fees and costs, including expert witness fees, and including any such fees and
costs incurred on appeal. Venue shall be in the county where Broker's office is
located, and Washington law shall govern. The parties waive any claim against
each other or Broker for punitive damages.

18. In the event that Seller defaults, Purchaser shall be entitled to return of
the Deposit on demand. If either party defaults hereunder, the other party may
seek performance of this Agreement, damages, or rescission. Notwithstanding the
foregoing, and by way of limitation thereof, by separately initialing below, the
parties agree to waive certain rights and remedies and provide instead for
damages limited to the amount of the earnest money deposit.

By their initials below, Purchaser and Seller hereby specifically
acknowledge that they have read the preceding provision regarding
forfeiture of the earnest money and understand and agree to it.

Purchasers' Initials PP Sellers' Initials MJM
---- ---- ---- ----

<PAGE>

19. In the event that Broker deems it advisable to file an interpleader action
in court to resolve a dispute over the Deposit, the Purchaser and Seller
authorize Broker to draw from the Deposit an amount necessary to pay the
attorneys' fees and costs of bringing the interpleader action. The amount of
the deposit remaining after advancing those fees and costs shall be interpleaded
into court in accordance with state law. The Purchaser and Seller further agree
that the defaulting party shall pay any further court costs and reasonable
attorney's fees incurred by the Broker in bringing or being involved in such
action.

20. Purchaser and Seller represent and warrant to Broker and to each other that
they have dealt with no real estate broker, agent of finder in connection with
this sale other than WAHL & ASSOCIATES, INC., FIRST AMERICAN PROPERTIES, INC.
AND REGENCY GROUP, INC. and that no other broker, agent or finder is entitled to
any commission of other fee on account of this Agreement.

21. (a) "Selling agent" means the broker who procured the Purchaser as a
purchaser in this transaction. "Listing agent" means the broker who listed the
subject property for sale.

22. The Foreign Investment in Real Property Tax Act ("FIRPTA"), IRC Sec.
1445, requires that every Purchaser of U.S. real property must, unless an
exemption applies, deduct an withhold from the seller's proceeds ten percent
(10%) of the gross sale price. The primary exemptions which might be
applicable are: (a) Seller provides the Purchaser with an affidavit under
penalty of perjury, that Seller is not a "foreign person", as defined in
FIRPTA, or (b) Seller provides the Purchaser with a "qualifying statement",
as defined in FIRPTA, issued by the Internal Revenue Service. Seller and
Purchaser agree to execute and deliver as appropriate, any instrument,
affidavit and statement, and to perform any acts reasonably necessary to
carry out the provisions of FIRPTA and regulations promulgated thereunder.

Purchaser:

Atlantic Seaboard Realty, and or assigns

By: /s/ Peter Papadopulos
-------------------------------------
Peter Papadopulos

Address: 2025 First Avenue, Suite 710
Seattle, WA 98121

<PAGE>

BROKER:

WAHL & ASSOCIATES, INC.
Licensed Real Estate Broker

By: /s/ Arthur L. Wahl
----------------------------
Arthur L. Wahl
Its President

FIRST AMERICAN PROPERTIES, INC.
Licensed Real Estate Broker

By: /s/ illegible
----------------------------

Its: President
---------------------------

REGENCY GROUP, INC.
Licensed Real Estate Broker

By: /s/ illegible
----------------------------

Its: illegible
---------------------------

The undersigned Seller hereby accepts this Agreement and agrees to sell the
subject property to Purchaser for the price and on the terms and conditions set
forth herein. Seller agrees to pay Broker a real estate brokerage commission
for services rendered in effecting this sale, in the amount of Five Thousand
Dollars ($5,000.00). This commission is earned pursuant to the terms of said
contract, if any, or if there is none, then as of the mutual execution of this
Agreement. Proceeds of the sale sufficient to pay the commission are hereby
assigned to Broker. Closing Agent is hereby instructed to pay said commission
to Broker out of Seller's proceeds at the close of escrow, and this instruction
shall not be withdrawn or modified without Broker's written consent. If earnest
money or similar deposits made by Purchaser are retained by Seller as liquidated
damages, then, in addition to any other rights of Broker, Broker shall be
entitled to one-half (1/2) thereof, but not to exceed the total amount of the
anticipated commission. Nothing contained herein shall negate any additional
rights Broker may have under any other contract between Seller and Broker for a
commission in connection with the offering or sale of the subject property.
Seller hereby acknowledges receipt of a copy of this Agreement.

Seller:

By: /s/ Mary J. McColm
-------------------------
Mary J. McColm

Address: 8084 S. Ainsworth
--------------------
Tacoma WA 98408
--------------------

<PAGE>

PROMISSORY NOTE

$5,000.00 Tacoma, Washington
August, 4, 1994
-

FOR VALUE RECEIVED, the undersigned ("Purchaser") hereby agrees to pay to the
order of Transamerica Title ("Closing Agent") for the benefit of MARY J. MCCOLM
("Seller"), the sum of Five Thousand Dollars ($5,000.00) as Earnest Money
Deposit ("Deposit") on or before one hundred twenty (120) days from the date of
this note, pursuant to the Real Estate Purchase and Sales Agreement
("Agreement") dated the same date as this Note.

ATLANTIC SEABOARD REALTY

by: /s/ Peter Papadopulos
------------------------
Peter Papadopulos
Vice President

<PAGE>

SECOND AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 30th day of August, 1995 is made by and
among MARY J. MCCOLM ("SELLER") AND ATLANTIC SEABOARD REALTY, AN AFFILIATE OF
WAHL & ASSOCIATES, INC., A LICENSED REAL ESTATE BROKER, AND OR ASSIGNS
("PURCHASER").

RECITALS

A. Purchaser and Seller entered into a Purchase and Sale Agreements
dated August 4, 1994, (such agreement and all amendments, riders, and addenda
thereto are collectively referred to herein as the "Agreement") pertaining to
the sale and purchase of certain property ("Property") described in the
Agreement.

C. Seller and Purchaser desire to extend the periods of time described
in Paragraphs 8, 9, and 10 of the Agreement and also the period of time after
which the Deposit described in Paragraph 1 of the Agreement is to be converted
to cash.

AGREEMENT

1. RECITALS. The foregoing are true and correct and are incorporated
herein by this reference.

2. AMENDMENT TO THE AGREEMENT.

A. PARAGRAPH 8. Purchaser shall have until September 30, 1995 to
obtain the District's approval of Purchaser's bid to trade the Property for
District Property. If the District has not granted its approval of the trade by
11:59pm on September 30, 1995 Seller shall grant Purchaser five (5), thirty
(30) day extensions provided that the District's process for awarding the bid is
continuing in good faith. Purchaser shall, in writing, notify Seller of its
intent to exercise said thirty day extensions on or before the expiration of
each previous period.

<PAGE>

B. PARAGRAPH 9. Purchaser shall have sixty (60) days from the date
on which the District awards the above referenced bid to Purchaser in which to
perform its investigations of the Property.

E. EXTENSION CONSIDERATION. Seller shall grant the first two (2)
extensions to Purchaser for free. Thereafter, Purchaser shall pay to Seller
in cash extension consideration in the amount of Two Hundred Dollars
($200.00) for each of the four (4) remaining thirty (30) day extensions.
Said consideration shall be non-refundable, but applicable to the purchase
price and shall be paid along with above referenced notice of Purchaser's
exercising of said extensions.

3. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS SECOND AMENDMENT is executed by the parties, intending to be legally
bound, as of the date first written above.

SELLERS: /s/ Mary J. McColm
-------------------------------------
Mary J. McColm

PURCHASER: /s/ Peter Papadopulos
-------------------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

THIRD AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 23rd day of February, 1996 is made by
and among MARY J. MCCOLM ("SELLERS") AND ATLANTIC SEABOARD REALTY, AN AFFILIATE
OF WAHL & ASSOCIATES, INC., A LICENSED REAL ESTATE BROKER, AND OR ASSIGNS
("PURCHASER").

RECITALS

A. Purchaser and Seller entered into a Purchase and Sale Agreement dated
August 4, 1994, (such agreement and all amendments, riders, and addenda thereto
are collectively referred to herein as the "Agreement") pertaining to the sale
and purchase of certain property ("Property") described in the Agreement.

B. Seller and Purchaser desire to add the legal description of the
Property in the form of Exhibit A.

C. Seller and Purchaser desire to amend Paragraphs 10 and 11 of the
Agreement and also the period of time after which the Deposit described in
Paragraph 1 of the Agreement is to be converted to cash.

AGREEMENT

1. RECITALS. The foregoing are true and correct and are incorporated
herein by this reference.

2. AMENDMENT TO THE AGREEMENT.

A. LEGAL DESCRIPTION. The parties agree that the legal description
of the Property is as described in Exhibit A attached hereto and incorporated
herein by this reference.

B. PARAGRAPH 1O. Paragraph 10 is amended in its entirety to
hereafter provide as follows:

Purchaser shall have until April 1, 1997 in which to obtain and approve of
all studies, Permits and Approvals it deems necessary for its intended use of
the District Property.

<PAGE>

C. PARAGRAPH 11. A new paragraph is hereby added to Paragraph 11 as
follows:

In the event a judicial appeal of the Permits and Approvals is pending at
the expiration of the 180 day extension, Buyer shall have the right to extend
this Agreement in thirty (30) day increments for a maximum of three hundred and
sixty (360) days. To exercise each thirty (30) day extension, Buyer must
deliver to Seller two hundred dollars ($200) on or before the first day of each
thirty (30) day extension. Said payments shall be non-refundable, but shall be
applicable to the purchase price. If, after all of the extensions provided
herein have been exhausted and the sale has not closed, either party may
terminate this Agreement upon ten (10) days written notice.

D. DEPOSIT. By reference in this amendment, the date by which the
Promissory Note shall be converted to cash shall be May 10, 1996.

E. EXTENSION CONSIDERATION. Purchaser shall pay to Seller herewith,
in cash, extension consideration in the amount of Two Hundred Dollars ($200.00)
for the extensions referenced in Paragraphs 2.A. and 2.B. of this Third
Amendment. Said consideration shall be non-refundable, but applicable to the
purchase price.

3. NO OTHER MODIFICATIONS. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS THIRD AMENDMENT is executed by the parties, intending to be legally
bound, as of the date first written above.

SELLER: /s/ Mary J. McColm
-------------------------------------
Mary J. McColm

PURCHASER: /s/ Peter Papadopulos
-------------------------------------
Atlantic Seaboard Realty
by: Peter Papadopulos

<PAGE>

"EXHIBIT A"

The land referred to in this Commitment is situated in the County of Pierce,
State of Washington and described as follows:

That part of the following described land lying Southerly of Flume line right of
way:

Beginning on the South line of SQUIRE'S SUBDIVISION at center of Lawrence Street
in the Southwest 1/4 of Section 30, Township 20 North, Range 3 East of the
Willamette Meridian;
thence South 380.9 feet;
thence East 490 feet;
thence South 280 feet;
thence East 180 feet;
thence North 660.9 feet to South line of Squire's Subdivision;
thence West 670 feet to point of beginning;

Situate in the City of Tacoma, County of Pierce, State of Washington.

<PAGE>

ASSIGNMENT OF RIGHTS UNDER
REAL ESTATE PURCHASE AND SALE AGREEMENTS

ATLANTIC SEABOARD REALTY, an affiliate of Wahl & Associates, Inc., a
Washington corporation ("Wahl"), hereby assigns to EAGLE HARDWARE & GARDEN,
INC., a Washington corporation ("Eagle"), and Eagle accepts, all of Wahl's
right, title and interest (except any right to receive payment of a brokerage
commission) in and to the following Real Estate Purchase and Sale Agreements
concerning certain real property located in Pierce County, Washington
(collectively "Trade Property Agreements"):

1. Real Estate Purchase and Sale Agreement dated August 4, 1994 between
Wahl as buyer and Mary J. McColm as seller, as amended;

2. Real Estate Purchase and Sale Agreement dated August 4, 1994 between
Wahl as buyer and Chlo Elaine Jackson and Charles L. Betts, as seller,
as amended;

3. Real Estate Purchase and Sale Agreement dated August 4, 1994 between
Wahl as buyer and Ronald V. and Kathleen A. Gratias, as seller, as
amended.

A true and complete copy of the Trade Property Agreements is attached as EXHIBIT
A.

Eagle expressly assumes and agrees to perform all of Wahl's obligations
under the Trade Property Agreements and to indemnify, defend and hold Wahl
harmless from any and all claims, liabilities or expenses arising under or
relating to the Trade Property Agreements. Wahl's assignment to Eagle of Wahl's
interest under the Trade Property Agreements is "AS-IS" and Wahl makes no
representation or warranty to Eagle concerning the real property which is the
subject matter of the Trade Property Agreements including but not limited to the
feasibility of the use of such property by Eagle for Eagle's intended purpose.

In connection with the Trade Property Agreements, Wahl has paid to the
sellers under the Trade Property Agreements extension payments in the total
amount of $20,800 and has paid $365.68 for title report costs. Concurrently
with execution of this instrument by Eagle, Eagle shall pay $21,165.68 to Wahl
to reimburse Wahl for such extension payments and title report costs. A
schedule of the extension payments made by Wahl is attached as EXHIBIT B.

ASSIGNMENT OF RIGHTS UNDER PAGE 1
PURCHASE AND SALE AGREEMENTS APRIL 11, 1996

<PAGE>

In the event of litigation between the parties hereto, declaratory or
otherwise, in connection with this instrument, the prevailing party shall
recover its costs and attorneys' fees actually incurred including those incurred
before filing suit, which shall be determined and fixed by the court as part of
the judgment. The parties covenant and agree that they intend by this paragraph
to compensate for attorneys' fees actually incurred by the prevailing party to
the particular attorneys involved at such attorneys' then normal hourly rates
and that this paragraph shall constitute a request to the court that such rate
or rates be deemed reasonable.

This instrument contains the entire agreement between the parties. The
provisions of this instrument shall inure to the benefit of, and shall be
binding upon, the successors in interest and assigns of the respective parties
hereto. This instrument may not be amended, modified, altered, or changed in
any respect whatsoever, except by further agreement in writing duly executed by
all the parties hereto.

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

Date 5-10-96 By /s/ Richard T. Takata
-------------------------- --------------------------------------
Its President and C.O.O.
-------------------------------------

ATLANTIC SEABOARD REALTY,
an affiliate of Wahl & Associates, Inc.,
a Washington corporation

Date 6 Aug 96 By /s/ Arthur L. Wahl
-------------------------- --------------------------------------
Its President
-------------------------------------

ASSIGNMENT OF RIGHTS UNDER PAGE 2
PURCHASE AND SALE AGREEMENTS APRIL 11, 1996

<PAGE>

EXHIBIT A

TRADE PROPERTY AGREEMENTS

<PAGE>

EXHIBIT B

EXTENSION PAYMENTS SCHEDULE
- -------------------------------------------------------------------------------
Name Date Amount Paid
- -------------------------------------------------------------------------------
Gratias 12/2/94 $7,250.00
11/29/95 1,500.00
12/28/95 1,500.00
1/28/96 1,500.00
4/10/96 1,500.00
--------
$13,250.00
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
Jackson 12/2/94 4,200.00
11/29/95 500.00
12/28/95 500.00
1/28/96 500.00
4/10/96 500.00
------
$6,200.00
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
McColm 12/2/94 550.00
11/29/95 200.00
12/28/95 200.00
1/28/96 200.00
4/10/96 200.00
------
$1,350.00
- -------------------------------------------------------------------------------

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT
(WITH EARNEST MONEY PROVISION)

THIS CONTRACT CONTROLS THE TERMS AND SALE OF THE
PROPERTY. READ CAREFULLY BEFORE SIGNING.

Tacoma, Washington, March 6, 1996

ATLANTIC SEABOARD REALTY, an affiliate of Wahl & Associates, Inc., a Washington
corporation and licensed real estate broker, and/or assigns ("Purchaser"),
hereby agrees to purchase and the TACOMA ALLIANCE CHURCH, a Washington
corporation ("Seller") hereby agrees to sell the following real estate located
in the City of Tacoma, County of Pierce, State of Washington, commonly known as
the southeast corner of 2401 South Orchard Street, real property consisting of
approximately 41,795 square feet and any improvements thereon, as shown on the
sketch attached as Exhibit A, and legally described as:

Flood Zone: No Yes (Attach Form 5230.)
--- ---

Purchaser and Seller hereby authorize Broker to insert over their signatures the
correct legal description entered if it is erroneous or incomplete.

The following personal property is included, and Purchaser agrees to pay any
sales tax which may be due on the sale of such personal property: NONE

TERMS OF SALE:
1. The total purchase price is TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) payable as follows: Ten Thousand Dollars ($10,000.00) as Earnest
Money Deposit (herein called "Deposit"), which Deposit is Cash - non-refundable.
Unless this agreement is previously terminated, Cash is to be paid to Tacoma
Alliance Church five days after the contingency described in Paragraph 7(b) of
this Agreement is waived or accepted. If this Agreement is terminated for any
reason other than default by Purchaser, said Deposit plus interest, if any,
shall be refunded to Purchaser. The balance of the purchase price shall be
payable as follows: AT CLOSING, TWO HUNDRED FIFTY THOUSAND DOLLARS
($250,000.00) CASH LESS EARNEST MONEY DEPOSIT AND OTHER DEPOSITS APPLIED TO THE
PURCHASE PRICE.

2. Upon mutual execution of this Agreement (herein called the "Agreement
Date"), the parties shall execute instruction to TRANSAMERICA TITLE COMPANY,
1200 Sixth Avenue, Seattle, Washington, 98101 (the "Closing Agent") to
consummate the purchase in accordance with the terms and provisions hereof.
They shall place with Closing Agent all instruments, documents and moneys
necessary to complete the sale in accordance with this Agreement. The
provisions hereof shall constitute joint instructions to the Closing Agent not
inconsistent with provision hereof. Said escrow shall provide for a closing at
the office of Closing Agent on or before thirty (30) days after the waiver or
acceptance of the contingency described in Paragraph 7(c) herein ("Closing").
Escrow fees shall be paid by Seller and Purchaser on a 50/50 basis.

3. Seller shall pay for and furnish to Purchaser standard form Owner's Policy
of Title Insurance, such policy to be effective on the date of Closing. Within
fifteen (15) days of the Agreement Date, Purchaser shall be furnished with a
preliminary title commitment (herein called "Commitment") on the subject
property, together with full copies of any exceptions set forth therein.
Purchaser shall have fifteen (15) days after receipt of the Commitment within
which to notify Seller and Closing Agent, in writing, of Purchaser's disapproval
of any exceptions shown in the title company's extended for of policy, rights
reserved in federal patents or State deeds, building or use restriction general
to the district, existing easements not inconsistent with Purchaser's intended
use, and building or zoning regulations shall not be deemed exceptions which
Purchaser may disapprove. In the event of disapproval of any exceptions as set
forth in the Commitment, Seller shall have ninety (90) days from the Agreement
Date of attempt to eliminate any disapproved exception(s) from the Policy of
Title Insurance to be issued in favor of Purchaser and, if not eliminated by
that date, the escrow and this Agreement shall be terminated unless Purchaser
then elects to waive its prior disapproval. Failure of Purchaser to disapprove
in writing any exception(s) within the aforementioned time limit shall be
deemed an approval of the Commitment.

4. (a) If this Agreement is for conveyance of fee title, title shall be
conveyed by Statutory Warranty Deed free of encumbrance or defects except those
permitted herein or as Purchaser and Seller shall otherwise agree.
(b) If this Agreement is for sale on real estate contract, Seller and
Purchaser agree to execute a real estate contract for the balance of the
purchaser price on such form as is attached hereto, the terms of which are
hereby incorporated herein by reference. Said contract shall provide that title
be conveyed by Statutory Warranty Deed.
(c) If all or any portion of the purchase price is to be paid in the form
of a promissory note secured by deed of trust on the subject property, such note
and deed of trust shall be on the forms attached hereto, the terms of which are
incorporated by reference herein.
(d) If said property is subject to an existing contract, mortgage, deed of
trust or other encumbrance which Seller is to continue to pay, Seller agrees to
pay said contract, mortgage, deed of trust or other encumbrance in accordance
with its terms, and upon default Purchaser shall have the right to make any
payments necessary to remove the default, and any payments so made shall be
applied to the payments next falling due on the real estate contract or note and
deed of trust between Seller and Purchaser herein.
(e) If this Agreement is for sale and transfer of vendee's interest under
existing real estate contract, the transfer shall be by a purchaser's assignment
of contract and deed sufficient in form to convey after-acquired title.

<PAGE>

5. Taxes for current year, rents, insurance, interest, mortgage reserves,
water and other utilities constituting liens shall be prorated and paid by
Seller. Washington excise tax and deed stamps shall be paid for by Seller. Any
other real estate excise tax or conveyance tax imposed on a purchaser by state
or local law shall be the responsibility of Purchaser.

6. Purchaser shall be entitled to possession on the date of Closing.

7. (a) Seller shall have thirty (30) days, from the Agreement Date, to obtain
approvals from the congregation of the Tacoma Alliance Church, the Pacific
Northwest District of The Christian and Missionary Alliance and to be reviewed
by legal counsel, to sell the property as described in the Agreement.
(b) Purchaser shall have one hundred twenty (120) days from the Agreement
Date within which to investigate the property, its value, zoning, environmental
and building matters, its condition - including, but not limited to the presence
of asbestos, hazardous materials and underground storage tanks and its
suitability for Purchaser's intended use. Seller hereby warrants that, to the
best of its knowledge, the premises described herein and the improvements
thereon do not violate the applicable building or zoning regulations and that it
is unaware of any material defect in the premises or improvements thereon with
the exception of the following, to wit;________________________________________
_______________________________________________________________________________
_______________________________________________________________________________

(c) Purchaser shall have three hundred sixty five (365) days from the
Agreement Date within which to obtain any approvals, rezoning, lot line
adjustments and building permits, in a form reasonable acceptable to Purchaser,
in Purchasers sole and absolute discretion, necessary to build, construct and
operate the property for its intended use. Provided that Purchaser is
diligently working to obtain said approvals and permits. Seller shall grant one
(1) sixty (60) day extension without cost to Purchaser (upon written request
from Purchaser) in order to provide Purchaser additional time to obtain said
approvals and permits. If Purchaser obtains all approvals, rezoning, lot line
adjustments and building permits prior to the end of this contingency Purchaser
will close within 30 days from the date it receives such approvals and permits.

(d) Seller shall grant two (2) additional 60 day extensions upon written
request from the purchaser for $5,000.00 non-refundable earnest money cash
deposit per extension to be paid at the time of extension. Extension money is
to be applicable to the sale price.

If the Purchaser gives written notice to Seller by 5:00pm of the dates of each
of the above-referenced periods, 7A & B only, of dissatisfaction with any of the
referenced matters, and Seller and Purchaser have not entered into a mutually
agreeable resolution of the matter by 5:00 pm five (5) days thereafter, this
Agreement shall be deemed canceled and Purchaser shall be entitled to return of
the Deposit. If Purchaser fails to give written notice of dissatisfaction by
5:00pm of the referenced period, then Purchaser's right to object to such
matters shall be deemed waived.

8. For purpose of this Agreement "date of Closing" shall be construed as the
date upon which all appropriate documents are recorded and proceeds of this sale
are available for disbursement to Seller. Funds held in reserve accounts
pursuant to escrow instructions shall be deemed, for purposes of this
definition, as available for disbursement to Seller.

9. All risk or damage to the property shall be borne by the Seller until
Closing. In the event that there is loss or damage to the property between the
date hereof and the date of closing, by reason of fire, vandalism, flood,
earthquake, or acts of God, and the cost to repair such damage shall exceed ten
percent (10%) of the purchase price of the property, Purchaser may, at his
option, either proceed with this transaction if Seller agrees in writing to
repair or replace damaged property prior to Closing or declare this Agreement
null and void. If damage to the property is less than ten percent (10%) of the
purchase price and Seller agrees to repair or replace and does actually repair
and replace damaged property prior to Closing, this transaction shall proceed as
agreed.

10. This Agreement supersedes any and all agreements between the parties hereto
regarding the property which are prior in time to this Agreement. Neither
Purchaser, Seller, nor Broker shall be bound by any understanding, agreement,
promise, representation or stipulation, express or implied, not specified
herein.

11. Purchaser may assign this Agreement and its rights hereunder by providing
written notice to Seller prior to Closing.

12. Any addendum or exhibit attached hereto and either signed or initialed by
the parties is hereby incorporated herein and shall be deemed a part hereof.

13. Time is of the essence of this Agreement. Except as otherwise provided
herein, in the event that any contingency to this Agreement has not been
eliminated, satisfied, or waived in writing within the time limits and pursuant
to the provisions herein, this Agreement shall be deemed null and void, and the
Deposit shall be returned to Purchaser within the first one hundred twenty (120)
days as described in 7B, and the escrow shall be canceled.

14. If Purchaser, Seller, Broker or any other person brings suit or institutes
arbitration relating to this Agreement, the substantially prevailing party, in
addition to any other relief, shall be entitled to recover reasonable attorney's
fees and costs, including expert witness fees, and including any such fees and
cost incurred on appeal. Venue shall be in the county where Broker's office is
located, and Washington law shall govern. The parties waive any claim against
each other or Broker for punitive damages.

<PAGE>

15. In the event that Seller defaults, Purchaser shall be entitled to return of
the Deposit on demand. If either party defaults hereunder, the other party may
seek specific performance of this agreement, damages, or rescission.
Notwithstanding the foregoing, and by way of limitation thereof, by separately
initialing below, the parties agree to waive certain rights and remedies and
provide instead for damages limited to the amount of the earnest money deposit:

IN THE EVENT THE PURCHASER FAILS, WITHOUT LEGAL EXCUSE, TO COMPLETE THE PURCHASE
OF THE PROPERTY, THE EARNEST MONEY DEPOSIT MADE BY PURCHASER SHALL BE FORFEITED
TO THE SELLER AS THE SOLE AND EXCLUSIVE REMEDY AVAILABLE TO THE SELLER FOR SUCH
FAILURE. IF THE EARNEST MONEY DEPOSIT IS GREATER THAN EIGHT PERCENT (8%) OF THE
PURCHASE PRICE, ONLY THAT PORTION OF THE EARNEST MONEY DEPOSIT EQUAL TO EIGHT
PERCENT (8%) OF THE PURCHASER PRICE SHALL BE FORFEITED TO THE SELLER.

BY THEIR INITIALS BELOW, PURCHASER AND SELLER HEREBY SPECIFICALLY ACKNOWLEDGE
THAT THEY HAVE READ THE PRECEDING PROVISION REGARDING FORFEITURE OF THE EARNEST
MONEY AND UNDERSTAND AND AGREE TO IT.

PURCHASER'S INITIALS RP
------

SELLER'S INITIALS T.I.B.
------

16. In the event that Closing agent holding the earnest money deposit deems it
advisable to file an interpleader action in court to resolve a dispute over the
Deposit, the Purchaser and Seller authorize the Closing Agent to draw from the
Deposit an amount necessary to pay the attorney's fees and costs of bringing the
interpleader action. The amount of Deposit remaining after the advancing those
fees and costs shall be interpleaded into court in accordance with state law.
The Purchaser and seller further agree that the defaulting party shall pay any
further court costs and reasonable attorney's fees incurred by the Closing Agent
bringing or being involved in such action.

17. Purchaser and Seller represent and warrant to Broker and to each other that
they have dealt with no other real estate broker, agent or finder in connection
with this sale other than WAHL & ASSOCIATES, INC. and that no broker, agent or
finder is entitled to any commission or other fee on account of this Agreement.

18. (a) "Selling agent" means the broker who procured the Purchaser as a
purchaser in this transaction. "Listing agent" means the broker who listed the
subject property for sale.

(b) AGENCY DISCLOSURE: At the signing of this agreement the selling agent
WAHL & ASSOCIATES, INC. represented ATLANTIC SEABOARD REALTY and no broker
represented TACOMA ALLIANCE CHURCH. Each party signing this document confirms
that prior oral and/or written disclosure of agency was provided to him/her/it
in this transaction.

19. The Foreign Investment in Real Property Tax Act ("FIRPTA"), IRC Sec. 1445,
requires that every Purchaser of U.S. real property must, unless an exemption
applies, deduct and withhold from the seller's proceeds ten percent (10%) of the
gross sales price. The primary exemptions which might be applicable are: (a)
Seller provides the Purchaser with an affidavit under penalty of perjury, that
Seller is not a "foreign person", as defined in FIRPTA, or (b) Seller provides
the Purchaser with a "qualifying statement", as defined in FIRPTA, issued by the
Internal Revenue Service. Seller and Purchaser agree to execute and deliver as
appropriate, any instrument, affidavit and statement, and to perform any acts
reasonable necessary to carry out the provisions of FIRPTA and regulations
promulgated thereunder.

20. Purchaser's offer is made subject to the acceptance of Seller on or before
five o'clock on _________________________________. If Seller does not accept
this Agreement within the time specified, the Deposit shall be returned to
Purchaser on demand.

21. Notices to either party shall be given in writing to the address set forth
herein for giving notice. Delivery of notice shall be by prepaid, certified
United States mail, return receipt requested, and shall be effective on the
postmarked date.

22. The parties hereto agree to comply with all applicable federal, state and
local laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the foreign Investment in Real Property Tax act, the Comprehensive
Environmental Response compensation and Liability Act, and The Americans With
Disabilities Act.
<PAGE>

Broker:
WAHL & ASSOCIATES, INC. Purchaser: ATLANTIC SEABOARD REALTY
Licensed Real Estate Broker An affiliate of Wahl & Associates, Inc.

By: /s/ Arthur L. Wahl By: /s/ Peter Papadopulos
--------------------------- ------------------------------------
Peter Papadopulos

Address: 1001 Fairview Avenue North
Suite 1400
Seattle, WA 98109

The undersigned Seller hereby accepts this Agreement and agrees to sell the
subject property to the Purchaser for the price and on the terms and conditions
set forth herein. Seller hereby acknowledges receipt of a copy of this
Agreement.

Seller: TACOMA ALLIANCE CHURCH

By: /s/ Thomas I. Bailey
--------------------------------

Title: Chairman, Governing Board
-----------------------------

Address: 2401 South Orchard Street
Tacoma, WA 98466

A true copy of the foregoing Agreement is hereby received on, 3/12, 1996.

Purchaser: ATLANTIC SEABOARD REALTY

By: /s/ Peter Papadopulos
--------------------------------

- -------------------------------------------------------------------------------
CONSULT YOUR ADVISORS - This document has not been prepared for approval by your
attorney or financial advisor. No representation or recommendation is made by
Broker or Seller as to the legal sufficiency or tax consequences of this
document or the transaction to which it relates. These are questions for your
attorney and financial advisor.

<PAGE>

EXHIBIT A

[SURVEY MAP]

<PAGE>

EXHIBIT A

[STREET MAP]

<PAGE>

Broker:
WAHL & ASSOCIATES, INC. Purchaser: ATLANTIC SEABOARD REALTY
Licensed Real Estate Broker An affiliate of Wahl & Associates, Inc.

By: /s/ Arthur L. Wahl By: /s/ Peter Papadopulos
--------------------------- ------------------------------------
Peter Papadopulos

Address: 1001 Fairview Avenue North
Suite 1400
Seattle, WA 98109

Seller: TACOMA ALLIANCE CHURCH

By: /s/ Thomas I. Bailey
------------------------------------

Title: Chairman, Governing Board
---------------------------------

Address: 2401 South Orchard Street
Tacoma, WA 98466

A true copy of the foregoing Agreement is hereby received on ___________, 1996.

Purchaser: ATLANTIC SEABOARD REALTY

By:
------------------------------------

<PAGE>

PROTECTIVE COVENANTS

this Declaration of covenants running with the land is made the 6th day of
March, 1996, by Tacoma Alliance Church, a nonprofit corporation ("Seller") and
ATLANTIC SEABOARD REALTY (collectively "Buyer").

W I T N E S S E T H:

WHEREAS, Seller is the owner of real property located in Tacoma, Pierce
County, Washington, commonly known as 2401 South Orchard Street, Tacoma,
Washington 98466-7323, more specifically described on Exhibit A (Dominant
Estate) attached hereto; and

WHEREAS, Buyer is purchasing from Seller the adjacent real property
described on Exhibit B attached hereto (Servient Estate), and

WHEREAS, it is the desire of said parties that said Covenants be recorded
and that said protective covenants be imposed on the Servient Estate for the
protection of the Dominant Estate;

NOW, THEREFORE, IT IS HEREBY MADE KNOWN THAT said parties do by these
presents make, establish, confirm and hereby impose upon the Servient Estate the
following protective covenants to run with the land and do hereby bind said
parties and all their future grantees, assignees and successors to said
covenants for the term hereinafter stated and as follows:

1. PROHIBITED USES.

A. The real property designated as the Servient Estate shall never
be used in any way for an abortion clinic or for an establishment
which gives pro-abortion advice.

2. GENERAL PROVISIONS.

Any owner of the Dominant Estate shall have the right to enforce by
any proceeding at law or in equity all terms hereunder now or
hereafter imposed and the prevailing party in said litigation, in
addition to other sums which said party shall recover, shall be
awarded reasonable attorney's fees, court costs and any expense of
litigation.

IN WITNESS WHEREOF, the parties hereto being the owners of the Dominant
Estate and Servient Estate have executed this document effective the day first
above written.

OWNER OF DOMINANT ESTATE OWNER OF SERVIENT ESTATE

TACOMA ALLIANCE CHURCH
/s/ Peter Papadopulos
----------------------------------

By: /s/ Thomas I. Bailey
---------------------------
Thomas I. Bailey
Chairman of the Church Vice President
Governing Board ----------------------------------

<PAGE>

FIRST AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This amendment, effective as of the 31st day of March, 1996 is made by and
between the Tacoma Alliance Church ("Seller") and Atlantic Seaboard Realty, an
affiliate of Wahl & Associates, Inc., a licensed real estate broker, and or
assigns ("Purchaser").

RECITALS

A. Purchaser and Seller entered into a Purchase and Sale Agreement dated March
6, 1996 (such agreement and all amendments, riders, and addenda thereto are
collectively referred to herein as the "Agreement") pertaining to the sale and
purchase of certain property ("Property") described in the Agreement.

B. Seller and Purchaser desire to add the legal description of the Property in
the form of Exhibit A.

C. Seller and Purchaser desire to extend the period of time described in
Paragraph 7(c) and (d) of the Agreement.

AGREEMENT

1. RECITALS. The foregoing are true and correct and are incorporated
herein by this reference.

2. AMENDMENT TO THE AGREEMENT.

A. The parties agree that the legal description of the Property as
described in Exhibit A attached hereto and incorporated herein by reference.

B. Paragraphs 7(c) and (d) of the Agreement are hereby amended in
their entirety to hereafter provide as follows:

Purchaser shall have until April 1, 1997 to obtain all permits and
approvals ("Permits and Approvals") it deems necessary for its intended use of
the property and the adjacent property known as Golfland and owned by the
Metropolitan Park District of Tacoma (the "District Property") and to close its
purchase of the District Property. If Purchaser has not obtained all such
Permits and Approvals or closed such purchase by said date, Purchaser may elect
to extend the time in which to do so by giving Seller notice in writing prior to
April 1, 1997, in which case, this contingency shall extend until Purchaser
gives Seller a subsequent notice in writing that it is ready to close the
purchase of the property under this Agreement or has been unable to acquire the
District Property and is therefore giving notice that this Agreement is
terminated.

If Purchaser extends this Agreement beyond May 5, 1997, Purchaser shall on
that date pay Seller a $5,000 non-refundable earnest money cash deposit and if
Purchaser extend this Agreement beyond July 5, 1997, Purchaser shall on that
date pay Seller an additional $5,000 non-refundable deposit. Any such extension
money shall be applied as partial payment of the sale price at closing.

3. NO OTHER MODIFICATION. Except as modified by this Amendment, the
terms and conditions of the Agreement remain unchanged and in full force and
effect.

THIS FIRST AMENDMENT is executed by the parties, intending to be legally
bound, as of the date first written above.

SELLER: TACOMA ALLIANCE CHURCH

By:
--------------------------------

The:
-------------------------------

PURCHASER: ATLANTIC SEABOARD REALTY

By:
--------------------------------
Peter Papadopulos
<PAGE>

ORDER NO. 96-09013

"EXHIBIT A"

PARCEL A:

That portion of the North 1/2 of the Southwest 1/4 of the Northwest 1/4 of
Section 12, Township 20 North, Range 2 East of the W.M., lying Westerly of Bantz
Boulevard;

EXCEPT that portion appropriated for Bantz Boulevard by the City of Tacoma, in
Pierce County Superior Court Case Nos. 103512 and 115038 and by the State of
Washington in Pierce County Superior Court Case Nos. 206667 and 89-2-03557-5;

AND EXCEPT that portion deeded to the City of Tacoma by instrument recorded
December 13, 1972 under Recording No. 2477593;

AND EXCEPT that portion deeded to the City of Tacoma by instrument recorded May
15, 1989 under Recording No. 8905150218;

Situate in the City of Tacoma, County of Pierce, State of Washington.

PARCEL B:

Beginning at the Northeast corner of the North 1/2 of the Southeast 1/4 of the
Southwest 1/4 of the Northwest 1/4 of Section 12, Township 20 North, Range 2
East of the W.M.;
thence West 420.1 feet;
thence Southerly to a point on the South line of said subdivision 437 feet West
of the Southeast corner of said subdivision; thence East to said Southeast
corner;
thence North to the point of beginning;

EXCEPT that portion lying Easterly of a line 120 feet Westerly of and parallel
with the center line of Bantz Boulevard;

AND EXCEPT that portion appropriated for Bantz Boulevard/SR 16 by the State of
Washington in Pierce County Superior Court Cause Nos. 206667 and 89-2-03557-5;

Situate in the City of Tacoma, County of Pierce, State of Washington.

<PAGE>

ASSIGNMENT OF RIGHTS UNDER
REAL ESTATE PURCHASE AND SALE AGREEMENT

ATLANTIC SEABOARD REALTY, an affiliate of Wahl & Associates, Inc., a
Washington corporation ("Wahl"), hereby assigns to EAGLE HARDWARE & GARDEN,
INC., a Washington corporation ("Eagle"), and Eagle accepts, all of Wahl's
right, title and interest (except any right to receive payment of a brokerage
commission) in and to that certain Real Estate Purchase and Sale Agreement dated
March 6, 1996, between Tacoma Alliance Church, a Washington corporation, as
seller ("Seller"), and Wahl, as buyer, as amended, concerning certain real
property located in Pierce County, Washington ("Church Sale Agreement"). A true
and complete copy of the Church Sale Agreement is attached as EXHIBIT A.

Eagle expressly assumes and agrees to perform all of Wahl's obligations
under the Church Sale Agreement and to indemnify, defend and hold Wahl harmless
from any and all claims, liabilities or expenses arising under or relating to
the Church Sale Agreement. Wahl's assignment to Eagle of Wahl's interest under
the Church Sale Agreement is "AS-IS" and Wahl makes no representation or
warranty to Eagle concerning the real property which is the subject matter of
the Church Sale Agreement including but not limited to the feasibility of
development of any of such property by Eagle.

ASSIGNMENT OF RIGHTS UNDER PAGE 1
REAL ESTATE PURCHASE AND SALE AGREEMENT APRIL 11, 1996

<PAGE>

hereto. This instrument may not be amended, modified, altered, or changed in
any respect whatsoever, except by further agreement in writing duly executed by
all the parties hereto.

ATLANTIC SEABOARD REALTY,
an affiliate of Wahl & Associates, Inc.,
a Washington corporation

Date 6 AUG 96 By /s/ Arthur L. Wahl
--------------------- --------------------------------------
Its PRESIDENT
-------------------------------------

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

Date August 12, 1996 By /s/ Richard T. Takata
--------------------- --------------------------------------
Its PRESIDENT & COO
-------------------------------------

Seller hereby acknowledges receipt of a copy of this Assignment, accepts Eagle
Hardware & Garden, Inc. as the Buyer under the Church Sale Agreement in lieu of
Atlantic Seaboard Realty, an affiliate of Wahl & Associates, Inc., and releases
Atlantic Seaboard Realty, an affiliate of Wahl & Associates, Inc., from any
further liability or obligation under the Church Sale Agreement.

TACOMA ALLIANCE CHURCH,
a Washington corporation

Date By
--------------------- --------------------------------------
Thomas I. Barley
Chairman, Governing Board

ASSIGNMENT OF RIGHTS UNDER PAGE 2
REAL ESTATE PURCHASE AND SALE AGREEMENT APRIL 11, 1996

<PAGE>

EXHIBIT A

CHURCH SALE AGREEMENT

<PAGE>

[LETTERHEAD]

July 9, 1996

Pete Papadopulos
Eagle Hardware
Wahl & Associates Incorporated
Real Estate-Services
1001 Fairview Avenue N, Suite 1400
Seattle, WA 98109

To Whom It May Concern:

This authorizes an extension of the due date for 72 hours (3 days) as pertains
to the non-refundable cash deposit of $10,000.00 as per Paragraphs 1 & 7b in
the terms of sale contract.

Sincerely,

/s/ Thomas I. Bailey

Thomas I. Bailey
Chairman of the Governing Board, Senior Pastor

TIB:clb

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT

This Real Estate Purchase and Sale Agreement (the "Agreement") is made by
and between METROPOLITAN PARK DISTRICT OF TACOMA, a municipal corporation
("Seller") and WAHL & ASSOCIATES, INC., a Washington corporation ("Buyer") for
the purchase and sale of that certain real property situated in Pierce County,
Washington, and described on EXHIBIT "A" attached hereto and incorporated herein
by reference and all rights appurtenant thereto (the "Property"), and is
effective as of the date specified on the last page.

1. PURCHASE PRICE; PAYMENT. The total purchase price for the
Property is Three Million Two Hundred Thousand Dollars (U.S. $3,200,000.00)
which amount including the Deposit shall be paid as follows:

1.1 Except as otherwise provided in this Agreement, as partial
payment of the purchase price, Buyer shall convey to Seller approximately 21.66
acres of forested land located in the City of Tacoma, commonly known as Black
Oaks Hill, and described on EXHIBIT "B" attached hereto and incorporated herein
by reference and all rights appurtenant thereto (the "Trade Property"). The
parties agree that the value of the Trade Property shall be One Million Two
Hundred Thousand Dollars (U.S. $1,200,000.00).

1.2 The balance of the purchase price shall be paid in cash at
closing.

2. SELLER DUE DILIGENCE. Seller shall have until July 31, 1996 in
which to determine whether the Trade Property is satisfactory for Seller's
proposed use, in Seller's sole and absolute discretion (the "Evaluation
Period"). Seller, its agents and consultants shall have the right to come upon
the Trade Property and conduct soils tests, environmental assessments, title
surveys and such other tests and studies as it deems necessary to conduct its
due diligence. If Seller does not acquire the Trade Property, Seller shall, at
Buyer's election, repair or compensate Buyer for any physical damage done to the
Trade Property as a result of such tests and inspections.

On or before the end of the Evaluation Period, Seller agrees to notify
Buyer in writing whether the Trade Property is satisfactory. If Seller notifies
Buyer that the Trade Property is satisfactory, Seller shall be obligated to
accept the Trade Property as partial payment of the purchase price except as
otherwise provided in this Agreement. If Seller determines, in its sole and
absolute discretion, that the Trade Property is unsatisfactory in any respect
and that Seller does not desire to obtain the Trade Property, Buyer shall pay
the entire purchase price for the Property in cash. Seller's failure to notify
Buyer at the end of the Evaluation Period of its rejection of the Trade Property
shall be deemed an acceptance of the Trade Property as satisfactory.

3. BUYER DUE DILIGENCE. Buyer shall have until July 31, 1996 in
which to determine whether the Property is satisfactory for Buyer's proposed
use, in Buyer's sole and absolute

PURCHASE AND SALE AGREEMENT - 1

<PAGE>

discretion (the "Evaluation Period"). Buyer, its agents and consultants shall
have the right to come upon the Property and conduct soils tests, environmental
assessments, title surveys and such other tests and studies as it deems
necessary to conduct its due diligence. If Buyer does not purchase the
Property, Buyer shall, at Seller's election, repair or compensate Seller for any
physical damage done to the Property as a result of such tests and inspections.

On or before the end of the Evaluation Period, Buyer agrees to notify
Seller in writing whether the Property is satisfactory. If Buyer notifies
Seller that the Property is satisfactory, Buyer shall pay Seller the Deposit
described in Section 4 below and this Agreement shall remain in full force and
effect. If Buyer determines, in its sole and absolute discretion, that the
Property is unsatisfactory in any respect, Buyer may terminate this Agreement
and the parties shall be released from any further obligations, duties or
liabilities hereunder (other than Buyer's duty to restore or compensate Seller
for any physical damage to the Property). Buyer's failure to notify Seller at
the end of the Evaluation Period of its rejection of the Property shall be
deemed an acceptance of the Property as satisfactory.

4. EARNEST MONEY DEPOSIT. Buyer agrees to deposit One Hundred Sixty
Thousand Dollars (U.S. $160,000.00) as an earnest money deposit (the "Deposit"),
payable to Closing Agent, and shall deliver the Deposit to Closing Agent within
five (5) days after Buyer notifies Seller that the Property is satisfactory as
provided in Section 3 above, and the Deposit shall be held in escrow and applied
or disposed of by Closing Agent as provided herein.

5. PERMITS AND APPROVALS. This Agreement and Buyer's obligations,
duties and liabilities hereunder are subject to the condition that Buyer is able
to obtain all land use, rezoning, permits and other approvals (the "Approvals")
from the City of Tacoma and all other applicable governmental authorities (and
there are no appeals of any Approvals and the time periods in which such appeals
are required to be filed have expired) which are necessary in Buyer's sole and
absolute discretion for Buyer to develop and construct its planned standard
Eagle Hardware & Garden store building, greenhouse and garden yard, parking area
and other improvements and to open and operate its business on the Property and
on certain contiguous property that Buyer has contracted to purchase from an
adjacent owner subject to the usual conditions of purchase, no later than April
1, 1997 (the "Contingency Date"). If all Approvals are not obtained or if any
such appeals have not been finally extinguished or if all rights to appeal have
not expired on or before the Contingency Date, Buyer may, at its election,
terminate this Agreement by giving written notice (the "Termination Notice")
thereof to Seller. In the event this Agreement is so terminated by Buyer, the
Deposit shall be returned to Buyer, and neither party shall have any further
obligations, duties or liabilities to the other. If Buyer has not given the
Termination Notice by the Contingency Date but still desires to pursue its
Approvals, Buyer shall have three (3) consecutive sixty (60) day extensions to
continue to try and obtain its Approvals, provided that Buyer is diligently
pursuing such Approvals.

In the event a judicial appeal of the Approvals is pending at the
expiration of the three sixty (60) day extensions, Buyer shall have the right to
extend this Agreement in thirty (30) day increments for a maximum of three
hundred and sixty (360) days. To exercise each thirty (30)

PURCHASE AND SALE AGREEMENT - 2

<PAGE>

day extension, Buyer must deliver to Seller twelve thousand five hundred dollars
($12,500) on or before the first day of each thirty (30) day extension if Seller
is accepting the Trade Property or twenty thousand dollars ($20,000) on or
before the first day of each thirty (30) day extension if Seller is not
accepting the Trade Property. If, after all of the extensions provided herein
have been exhausted and the sale has not closed, either party may terminate this
Agreement upon ten (10) days written notice.

6. CLOSING.

6.1 TIME FOR CLOSING. This sale shall be closed in the office
of First American Title Insurance Company ("Closing Agent") within thirty (30)
days after all of Buyer's conditions have been satisfied or waived by Buyer.
Buyer and Seller shall deposit in escrow with Closing Agent all instruments,
documents and monies necessary to complete the sale in accordance with this
Agreement. Any dispute concerning the form of any of the documents shall be
determined by arbitration in accordance with the laws of the state of
Washington, with the Closing Agent designating the arbitrator. As used herein,
"closing" or "date of closing" means the date on which all appropriate documents
are recorded and proceeds of sale are available for disbursement to Seller.
Funds held in reserve accounts pursuant to escrow instructions shall be deemed,
for purposes of this definition, as available for disbursement to Seller.

6.2 PRORATIONS; CLOSING COSTS. Seller represents that there
are no items to be pro-rated. Buyer shall pay the premium for a title insurance
policy on the Property, the real estate excise tax on the Property, the cost of
recording the deed to the Property, and one-half (1/2) of Closing Agent's escrow
fee plus any amount thereof in excess of Two Thousand Dollars (U.S. $2,000.00).
Seller shall pay the premium for any title insurance policy it may wish to
obtain on the Trade Property, any real estate excise tax on the Trade Property,
the cost of recording the deed to the Trade Property and one-half (1/2) of
Closing Agent's escrow fee, but shall not be required to contribute more than
One Thousand Dollars (U.S. $1,000.00) to such escrow fee.

6.3 POSSESSION. Buyer shall be entitled to possession of the
Property and Seller shall be entitled to possession of the Trade Property upon
closing.

7. CONVEYANCE OF TITLE.

7.1 Upon closing, Seller shall execute and deliver to Buyer a
statutory warranty deed conveying good and marketable title to the Property free
and clear of any defects or encumbrances except for the lien of real estate
taxes for the current calendar year not yet due and payable and those defects or
encumbrances identified on EXHIBIT "C" (the "Permitted Exceptions").

7.2 Upon closing, Buyer shall execute and deliver to Seller a
statutory warranty deed conveying good and marketable title to the Trade
Property free and clear of any defects or encumbrances, except for the lien of
real estate taxes for the current calendar year not yet due and payable and
those defects or encumbrances identified on EXHIBIT "D".

PURCHASE AND SALE AGREEMENT - 3

<PAGE>

8. RISK OF LOSS; CONDEMNATION.

8.1 Risk of loss of or damage to the Property shall be borne by
Seller until the date of closing. Thereafter, Buyer shall bear the risk of
loss. In the event of material loss of or damage to the Property prior to the
date upon which Buyer assumes the risk, Seller shall not be obligated to restore
the Property nor pay damages to Buyer by reason of such loss or damage, and
Buyer may terminate this Agreement by giving notice of such termination to
Seller and Closing Agent, and such termination shall be effective and the
Deposit shall be refunded ten (10) days thereafter; provided, however, that such
termination shall not be effective if Seller agrees in writing within such ten
(10) day period to restore the Property substantially to its present condition
by the closing date; and provided further that Buyer may elect to purchase the
Property in the condition existing on the date of the closing and on closing
Seller shall assign to Buyer the proceeds of any policy of insurance carried by
or for the benefit of Seller covering any loss or damage to the Property
occurring after the date hereof and prior to the closing date. If the loss or
damage is covered by an insurance policy, Seller will submit an insurance claim
and use its best efforts to obtain insurance proceeds. Seller will pay to
Buyer, outside of escrow, the entire amount of insurance proceeds received from
such claim.

If the Property is or becomes the subject of a condemnation or
other legal or administrative proceeding relating to the sale of the Property
prior to closing, Buyer may defer closing or, at its option, at any time
thereafter may terminate this Agreement by giving notice of such termination to
Seller, and upon such termination the Deposit shall be returned to Buyer and
this Agreement shall be of no further force or effect; provided, however, that
Buyer may elect to purchase the Property, in which case the total purchase price
shall be reduced by the total of any condemnation award received by Seller. On
closing, Seller shall assign to Buyer all Seller's rights in and to any future
condemnation awards or other proceeds payable or to become payable by reason of
any taking. Seller agrees to notify Buyer of eminent domain or other legal or
administrative proceedings within five (5) days after Seller learns thereof.

8.2 Risk of loss of or damage to the Trade Property shall be
borne by Buyer until the date of closing. Thereafter, Seller shall bear the
risk of loss. In the event of material loss of or damage to the Trade Property
prior to the date upon which Seller assumes the risk, Buyer shall not be
obligated to restore the Trade Property nor pay damages to Seller by reason of
such loss or damage, and Seller may elect to receive all cash at Closing by
giving notice to Buyer and Closing Agent; provided, however, that such election
shall not be effective if Buyer agrees in writing within such ten (10) day
period to restore the Trade Property substantially to its present condition by
the closing date; and provided further that Seller may elect to purchase the
Trade Property in the condition existing on the date of the closing and on
closing Buyer shall assign to Seller the proceeds of any policy of insurance
carried by or for the benefit of Buyer covering any loss or damage to the Trade
Property occurring after the date hereof and prior to the closing date. If the
loss or damage is covered by an insurance policy, Buyer will submit an insurance
claim and use its best efforts to obtain insurance proceeds. Buyer will pay to
Seller, outside of escrow, the entire amount of insurance proceeds received from
such claim.

PURCHASE AND SALE AGREEMENT - 4

<PAGE>

If the Trade Property is or becomes the subject of a condemnation or
other legal or administrative proceeding prior to closing or for reasons beyond
the control of Buyer the Trade Property cannot be conveyed to Seller at closing,
Seller may defer closing or, at its option, at any time thereafter may (1) elect
to receive all cash at closing or (2) terminate this Agreement by giving notice
of such termination to Buyer, and upon such termination the Deposit shall be
returned to Buyer and this Agreement shall be of no further force or effect;
provided, however, that Seller may elect to accept the Trade Property, in which
case the total purchase price shall be increased by the total of any
condemnation award received by Buyer. On closing, Buyer shall assign to Seller
all Buyer's rights in and to any future condemnation awards or other proceeds
payable or to become payable by reason of any taking relating to the Trade
Property. Buyer agrees to notify Seller of eminent domain or other legal or
administrative proceedings within five (5) days after Buyer learns thereof.

9. SELLER'S REPRESENTATIONS AND WARRANTIES.

9.1 In addition to other representations herein, Seller
represents and warrants to Buyer as of the date of closing as follows:

9.1.1 Seller, and the person signing on behalf of Seller,
has full power and authority to execute this Agreement and perform Seller's
obligations hereunder and all necessary municipal action to authorize this
transaction has been taken;

9.1.2 The Property is not subject to any leases,
tenancies or rights of persons in possession;

9.1.3 Seller has good and marketable title to the
Property;

9.1.4 All persons and corporations supplying labor,
materials and equipment to the Property have been paid and there are no claims
or liens;

9.1.5 Seller is not a "foreign person" for purposes of
Section 1445 of the Internal Revenue Code. Prior to closing, Seller shall
execute and deliver to Closing Agent an affidavit in order to meet the Foreign
Investment in Real Property Tax Act ("FIRPTA") requirement of I.R.C. #1445; and

9.2 Seller has leased the Property to a private business for
the last twenty years or more. The lessee conducted activities on the Property
which may be considered inconsistent with the Buyer's proposed use, including
the construction, maintenance and operation of a golf driving range and golf
course. However, Seller represents to the best of its knowledge and without
investigation as follows:

9.2.1 There is no known violation of any applicable
statute, ordinance or regulation, nor any order of any court or other
governmental authority or agency, pertaining to the use, occupancy or condition
of the Property;

PURCHASE AND SALE AGREEMENT - 5

<PAGE>

9.2.2 Seller is unaware of any material defect in the
Property;

9.2.3 There are no currently due and payable assessments
for public improvements against the Property and Seller is not aware of any
local improvement district or other taxing authority having jurisdiction over
the Property in the process of formation;

9.2.4 One parcel included in the Property has legal
access to Mullen Street;

9.2.5 Seller has not received notification of any kind
from any agency suggesting that the Property is or may be targeted for a
Superfund cleanup. To the best of Seller's knowledge, neither the Property nor
any portion thereof is or has been used as a landfill, waste storage or disposal
site or for the storage or disposal of any chemicals, petroleum or oil products
or hazardous or dangerous wastes or substances and there are no underground
storage tanks located on, in or about the Property.

10. BUYER'S REPRESENTATIONS AND WARRANTIES.

10.1 In addition to other representations herein, Buyer
represents and Warrants to Seller as of the date of closing as follows:

10.1.1 Buyer, and the person signing on behalf of Buyer,
has full power and authority to execute this Agreement and perform Buyer's
obligations hereunder and all necessary corporate action to authorize this
transaction has been taken;

10.1.2 The Trade Property is not subject to any leases,
tenancies or rights of persons in possession;

10.1.3 Buyer has good and marketable title to the Trade
Property;

10.1.4 All persons and corporations supplying labor,
materials and equipment to the Trade Property have been paid and there are no
claims or liens;

10.1.5 Buyer is not a "foreign person" for purposes of
Section 1445 of the Internal Revenue Code. Prior to closing, Seller shall
execute and deliver to Closing Agent an affidavit in order to meet the Foreign
Investment in Real Property Tax Act ("FIRPTA") requirement of I.R.C. #1445; and

10.2 Buyer represents and Seller acknowledges that Buyer does
not presently own the Trade Property and will only be acquiring it to reconvey
to Seller as partial payment of the purchase price. However, Buyer represents
to the best of its knowledge and without investigation as follows:

PURCHASE AND SALE AGREEMENT - 6

<PAGE>

10.2.1 There is no known violation of any applicable
statute, ordinance or regulation, nor any order of any court or other
governmental authority or agency, pertaining to the use, occupancy or condition
of the Trade Property;

10.2.2 Buyer is unaware of any material defect in the
Trade Property;

10.2.3 There are no currently due and payable assessments
for public improvements against the Trade Property and Buyer is not aware of any
local improvement district or other taxing authority having jurisdiction over
the Trade Property in the process of formation;

10.2.4 Buyer has not received notification of any kind
from any agency suggesting that the Trade Property is or may be targeted for a
Superfund cleanup. To the best of Buyer's knowledge, neither the Trade Property
nor any portion thereof is or has been used as a landfill, waste storage or
disposal site or for the storage or disposal of any chemicals, petroleum or oil
products or hazardous or dangerous wastes or substances and there are no
underground storage tanks located on, in or about the Trade Property.

10.3 Buyer shall, prior to closing, use its best efforts
to remove any tires located on the Trade Property.

11. DEFAULT.

11.1 Time is of the essence of this Agreement.

11.2 If Seller defaults hereunder, Buyer may seek specific
performance of this Agreement or termination and Buyer shall be entitled to
return of the Deposit on demand. However, Buyer shall not be entitled to
damages resulting from Seller's default.

11.3 If Buyer defaults, the Deposit shall be forfeited on demand
by Seller as liquidated damages and as Seller's sole and exclusive remedy and
upon payment thereof to Seller, Buyer shall have no further obligations, duties
or liabilities hereunder.

11.4 In any suit, action or appeal therefrom to enforce this
Agreement or any term or provision hereof or to interpret this Agreement, the
prevailing party shall be entitled to recover its costs incurred therein,
including reasonable attorney's fees. Venue for such action shall be Pierce
County, Washington.

12. NOTICES. All notices, waivers, elections, approvals and demands
required or permitted to be given hereunder shall be in writing and shall be
personally delivered or sent by United States certified mail, return receipt
requested to the addressee's mailing address set forth below and, in the case of
Buyer, a copy to William N. Moloney, 5711 N.E. Tolo Road, Bainbridge Island,
Washington 98110, and, in the case of Seller, a copy to Mark R. Roberts, Davies
Pearson, P.C., P.O. Box 1657, Tacoma, Washington 98401. Either party hereby
may, by

PURCHASE AND SALE AGREEMENT - 7

<PAGE>

proper notice to the other, designate any other address for the giving of
notice. Any notice shall be effective when personally delivered or, if mailed
as provided herein, on the date of actual receipt or refused delivery.

13. ASSIGNMENT. Buyer may assign its rights hereunder to any person
or entity but any such assignment shall not release Buyer from its obligations
hereunder.

14. GENERAL. This is the entire agreement of Buyer and Seller with
respect to the matters covered hereby and supersedes all prior agreements
between them, written or oral. This Agreement may be amended or modified only
in writing, signed by Buyer and Seller. Any waivers hereunder must be in
writing. No waiver of any right or remedy in the event of default hereunder
shall constitute a waiver of such right or remedy in the event of any subsequent
default. This Agreement shall be governed by the laws of the state of
Washington. This Agreement is for the benefit only of the parties hereto and
shall inure to the benefit of and bind the heirs, personal representatives,
successors and assigns of the parties hereto. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision hereof.

15. SURVIVAL OF WARRANTIES. The terms, covenants, representations and
warranties shall not merge in the deeds of conveyance, but shall survive
closing.

16. COMMISSIONS. Buyer and Seller acknowledge that Wahl & Associates,
Inc. has acted as broker for Buyer in this transaction. Each party represents
to the other that it has engaged no other broker in connection with the
negotiations leading to this Agreement and each shall indemnify and hold the
other harmless from any such claims. Buyer shall be solely responsible for the
payment of any commissions to Wahl & Associates, Inc.

Buyer and Seller have executed this Agreement as of the dates set forth
below.

SELLER: BUYER:
METROPOLITAN PARK DISTRICT WAHL & ASSOCIATES, INC.
OF TACOMA

By /s/ Neil A. Ofsthun By /s/ Arthur L. Wahl
-------------------------------- -----------------------------------
NEIL A. OFSTHUN Typed name: ARTHUR L. WAHL
--------------------------
Its Executive Director Its PRESIDENT
----------------------------------
Date of Execution: 4-1-96 Date of Execution: 4-10-96
---------------- -------------------

Address: Address:
4702 South 19th Street c/o Eagle Hardware & Garden, Inc.
Tacoma, Washington 98405 981 Powell Avenue S.W.
Renton, Washington 98055

PURCHASE AND SALE AGREEMENT - 8

<PAGE>

Order No. 381754
D-E-S-C-R-I-P-T-I-0-N

PARCEL "A":
The South half of the Southwest quarter of the Northwest quarter of Section 12,
Township 20 North, Range 2 East of the Willamette Meridian, in Pierce County,
Washington.
EXCEPT that portion thereof conveyed to the City of Tacoma, a municipal
corporation, by deed recorded September 15, 1972 under Auditor's No. 2464956;
ALSO EXCEPT that portion thereof conveyed to the Town of Fircrest, a
municipal corporation, by deed recorded June 1, 1951 under Auditor's No.
1595790;
ALSO EXCEPT the following described tract of land:
Beginning at the Northeast corner of the North half of the Southeast quarter of
the Southwest quarter of the Northwest quarter of Section 12, Township 20 North,
Range 2 East of the Willamette Meridian; thence West 420.10 feet; thence
Southerly to a point on the South line of said Subdivision 437 feet West of the
Southeast corner; thence North to the point of beginning.
ALSO EXCEPT Bantz Boulevard;
EXCEPT that portion thereof conveyed to the State of Washington for SR16 by deed
recorded March 19, 1973 under Auditor's No. 2490999.

PARCEL "B":
Beginning at the Northwest corner of the Northeast quarter of the Southwest
quarter of Section 12, Township 20 North, Range 2 East of the Willamette
Meridian; thence South along the West line of said Subdivision 285.37 feet;
thence East on an angle of 90 DEG., a distance of 80.64 feet to an arc of curve
to the left, a radius of 987.39 feet; thence Easterly along said curve to
intersect a line drawn parallel to and 207.09 feet East of the West line of said
Subdivision; thence on said line North 277.51 feet to the North line of said
Subdivision; thence West on said North line 207.09 feet to the true point of
beginning, in Pierce County, Washington.

- 2 -

<PAGE>

Schedule B - Section 2 (continued) Order No. 381754
Special Exceptions

3. Liability, if any, for pro-rata portion of 1996 taxes which are carried
on the Pierce County Tax Rolls as exempt.
(as to Parcels "A" and "B")

5. Investigation should be made in the office of the City of Tacoma,
Department of Public Works, to determine if there are any "connection" or
"tap" charges or in lieu of assessment fees in accordance with Statute,
City Charter or by instrument recorded NOVEMBER 1, 1978 under Auditor's
No. 2864651.

6. Assessment by the City of: TACOMA
Original Amount: $22,308.00 PLUS INTEREST AT 6.5%
Original Number of Installments: 10
Number of Installments Paid: 4
Number of Installments Delinquent: NONE
Local Improvement District No.: 3882
Filing Date: APRIL 12, 1991
Next Payment Due: APRIL 12, 1996
Improvement: SANITARY SEWER
Account No.: 0220122004

Call 591-5832 for current payoff figures.

-6-

<PAGE>

Schedule B - Section 2 (continued) Order No. 381754
Special Exceptions

7. Assessment by the City of: TACOMA
Original Amount: $33,678.90 plus interest at 6.5%
Original Number of Installments: 10
Number of Installments Paid: 4
Number of Installments Delinquent: NONE
Local Improvement District No.: 3882
Filing Date: APRIL 12, 1991
Next Payment Due: APRIL 12, 1996
Improvement: SANITARY SEWER
Account No.: 0220122002

Call 591-5832 for current payoff figures.

8. Matters of extended owner/purchaser coverage which are dependent upon AN
INSPECTION AND AN ALTA SURVEY of the property for determination of
insurability.

Please submit a copy of the ALTA Survey at your earliest convenience for
review. Our inspection will be held pending our review of the ALTA
survey and the results of said inspection will be furnished by
supplemental report.

9. Unrecorded leaseholds, if any, rights of vendors and security agreement
on personal property and rights of tenants, and secured parties to remove
trade fixtures at the expiration of the term.

10. According to the application for title insurance, title is to vest in
persons not yet revealed and when so vested will then be subject to
matters disclosed by a search of the records against their names.

11. Transmission line right of way per Superior Court Case No. 81978.

12. Access restrictions concerning Bantz Boulevard per Superior Court Case
No. 115038.

13. Condemnation in Pierce County Superior Court by the State of Washington
of the rights of access to State highway and of light, view and air.
Decree Entered: JUNE 4, 1975
Cause No.: 206667

14. Easement and the conditions contained therein.
Recorded: FEBRUARY 9, 1940
Auditor's No.: 1256235
In favor of: CITY OF TACOMA
For: ELECTRIC TRANSMISSION AND POWER LINE
Affects: a portion of Parcel "A"

- 7 -

<PAGE>

ORDER NO. 96-08680

"EXHIBIT A"
PARCEL A:

The South 260 feet of the following described property:

TOGETHER WITH the South 977.36 feet of the following described property:

Beginning at a point on the South line of Section 30, Township 20 North, Range 3
East of the W.M. 474.2 feet West of Southeast corner of Southwest 1/4 of said
Section 30;
thence North parallel with centerline of Section 30, 1,313.1 feet to the South
line of Squire's Subdivision, as per plat recorded in Volume 2 of Plats, page
107, records of Pierce County Auditor;
thence West along South line of Squire's Subdivision, 320 feet;
thence South 1,313.1 feet, more or less, to South line of said section;
thence East 320 feet to the place of beginning;

Situate in the City of Tacoma, County of Pierce, State of Washington.

PARCEL B:

Situate in the City of Tacoma, County of Pierce, State of Washington.

<PAGE>

PARCEL C:

Beginning at a point on the South line of Section 30, Township 20
North, Range 3 East of the W.M., 794 feet West of the Southeast
corner of the Southeast 1/4 of the Southwest 1/4 of said Section 30;
thence West along the South of Section 30, 526 feet to the Southeast
corner of Lot 4 in said Section 30;
thence North along the East line of Lot 4, 936.6 feet;
thence East at right angles, 346 feet;
thence South 280 feet;
thence East 180 feet;
thence South 652.1 feet to the point of beginning;

EXCEPTING therefrom the right of way granted to the Tacoma Light and Water
Company;

EXCEPT that portion lying Northwesterly of said right of way of Tacoma Light and
Water Company;

Situate in the City of Tacoma, County of Pierce, State of Washington.

PARCEL D:

That part of the following described land lying Southerly of Flume line right of
way:

Beginning on the South line of SQUIRE'S SUBDIVISION at center of
Lawrence Street in the Southwest 1/4 of Section 30, Township 20 North,
Range 3 East of the Willamette Meridian;
thence South 380.9 feet;
thence East 490 feet;
thence South 280 feet;
thence East 180 feet;
thence North 660.9 feet to South line of Squire's Subdivision;
thence West 670 feet to point of beginning;

Situate in the City of Tacoma, County of Pierce, State of Washington.

<PAGE>

Schedule B - Section 2 (continued) Order No. 381754
Special Exceptions

15. Easement and the conditions contained therein:
Recorded: NOVEMBER 7, 1945
Auditor's NO.: 1386010
In favor of: CITY OF TACOMA
For: ELECTRIC LINE AND ACCESS
Affects: a portion of Parcel "B"

16. Easement and the conditions contained therein:

Recorded: JANUARY 4, 1951
Auditor's No.: 1581035
In favor of: THE TOWN OF FIRCREST, A MUNICIPAL CORPORATION
For: WATER MAINS AND/OR WATER PIPE LINES
Affects: NORTHERLY PORTION OF PARCEL "A"

17. Easement and the conditions contained therein:
Recorded: JUNE 1, 1951
Auditor's No.: 1595791
In favor of: TOWN OF FIRCREST
For: WATER PIPE LINES AND ELECTRIC POWER LINES
Affects: NORTHERLY 30 FEET OF THE WESTERLY PORTION OF PARCEL
"A"
18. Easement and the conditions contained therein:
Recorded: MAY 19, 1964
Auditor's No.: 2055777
In favor of: CITY OF TACOMA
For: WIRES AND EQUIPMENT
Affects: SOUTHEASTERLY PORTION OF PARCEL "A"

19. Right to make necessary slopes for cuts or fills upon said premises for
ORCHARD STREET as granted by Deed recorded SEPTEMBER 15, 1972 under
Auditor's No. 2464956.

20. A record of survey recorded September 11, 1986 under Auditor's No.
8609110395, said Survey discloses the following matters:

APPARENT ENCROACHMENT OF A FENCE ONTO THE EASTERLY 3.4 FEET OF PARCEL
0220122002

21. Easement and the conditions contained therein:
Recorded: SEPTEMBER 25, 1987
Auditor's No.: 8709250438
In favor of: CITY OF TACOMA
For: INSTALL AND MAINTAIN WATER MAINS AND APPURTENANCES
Affects: THE WEST 20 FEET of PARCEL "A"

- 8 -

<PAGE>

Schedule B - Section 2 (continued) Order No. 381754
Special Exceptions

22. Easement and the conditions contained therein:
Recorded: JULY 8, 1988
Auditor's No.: 8807080118
In favor of: CITY OF TACOMA
For: CONSTRUCT AND MAINTAIN WATER MAINS AND ALL APPURTENANT EQUIPMENT
Affects: REFER TO SAID INSTRUMENT FOR THE EXACT LOCATION

Said instrument is a re-record of Auditor's No. 8806230224.

23. Right of Pierce County to make necessary slopes for cuts or fills upon
said premises for BANTZ BOULEVARD, acquired by Condemnation Decree
entered in Pierce County Superior Court Cause No. 89-2-03557-5.

NOTE #1: In the event this transaction fails to close, a cancellation fee
will be charged for services rendered in accordance with our rate
schedule.

-9-

<PAGE>

ORDER NO. 96-08680

SCHEDULE B

EXCEPTIONS: Schedule B of the policy or policies to be issued will contain
exceptions to the following matters unless the same are disposed of to the
satisfaction of the company.

A. Standard exceptions set forth on the inside back cover.

B. Defects, liens, encumbrances, adverse claims or other matters, if any,
created, first appearing in the public records or attaching subsequent to
the effective date hereof but prior to the date the proposed Insured
acquires for value of record the estate or interest or mortgage thereon
covered by this Commitment.

C. Instruments necessary to create the estate or interest to be properly
executed, delivered and duly filed for record.

1. Real Estate Excise tax pursuant to the authority of RCW Chapter 82.45 and
subsequent amendments thereto.

As of the date herein, the tax rate for said property is 1.78%.

(continued)
-1-

<PAGE>

SCHEDULE B (continued) ORDER NO. 96-08680

3. NOTICE OF TAP OR CONNECTION CHARGES WHICH HAVE BEEN OR WILL BE LEVIED
AGAINST THE LAND AS DISCLOSED BY RECORDED INSTRUMENT. INQUIRIES
REGARDING THE SPECIFIC AMOUNT OF THE CHARGES SHOULD BE MADE TO THE
CITY/COUNTY/AGENCY.

CITY/COUNTY/AGENCY: City of Tacoma
RECORDING NO.: 2864651

4. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:

GRANTEE: TACOMA RAILWAY AND POWER COMPANY
PURPOSE: Transmission line
AREA AFFECTED: A portion of Parcel A
RECORDED: August 16, 1906
RECORDING NO.: 219253

S. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:

DISCLOSED BY: Instrument recorded under Recording
No. 1671846
PURPOSE: Road purposes and ingress and
egress
AREA AFFECTED: A portion of Parcel B

6. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:

GRANTEE: THE PACIFIC TELEPHONE AND TELEGRAPH
COMPANY
PURPOSE: Pole line
AREA AFFECTED: A portion of Parcel A
RECORJDING NO.: 1681927

7. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:

GRANTEE: PUGET SOUND POWER & LIGHT COMPANY,
a Washington corporation
PURPOSE: Perpetual easement
AREA AFFECTED: A portion of Parcel A
RECORDED: JANUARY 15, 1985
RECORDING NO.: 8501150207

(continued)
-2-

<PAGE>

SCHEDULE B (continued) ORDER NO. 96-08680

NOTE 1:
We find no corporation under the name of ATLANTIC SEABOARD REALTY on the list of
active corporations in the office of the Secretary of State. If it is an
unincorporated association, title to real property so acquired cannot be
insured. The forthcoming deed or contract must run to a legal entity.

NOTE 2:
The above captioned description may be incorrect, because the application for
title insurance contained only an address and/or Parcel No. Prior to closing,
all parties to the transaction must verify the legal description. If further
changes are necessary, notify the Company well before closing so that those
changes can be reviewed. Closing instructions must indicate that the legal
description has been reviewed and approved by all parties.

END OF EXCEPTIONS

INVESTIGATION SHOULD BE MADE TO DETERMINE IF THERE ARE ANY SERVICE,
INSTALLATION, MAINTENANCE OR CONSTRUCTION CHARGES FOR SEWER, WATER OR
ELECTRICITY, GARBAGE COLLECTION OR DISPOSAL OR OTHER UTILITIES.

IN THE EVENT THIS TRANSACTION FAILS TO CLOSE, A CANCELLATION FEE WILL BE CHARGED
FOR SERVICES RENDERED IN ACCORDANCE WITH OUR RATE SCHEDULE.

enclosures:
sketch
vesting deed
exception(s)

TMM/SM

4+2cc: addressee

<PAGE>

ORDER NO. 96-08681

SCHEDULE B

EXCEPTIONS: Schedule B of the policy or policies to be issued will contain
exceptions to the following matters unless the same are disposed of to the
satisfaction of the company.

A. Standard exceptions set forth on the inside back cover.

C. Instruments necessary to create the estate or interest to be properly
executed, delivered and duly filed for record.

1. Real Estate Excise Tax pursuant to the authority of RCW Chapter 82.45 and
subsequent amendments thereto.

As of the date herein, the tax rate for said property is 1.78%.

2. LOCAL IMPROVEMENT ASSESSMENTS, IF ANY, LEVIED BY TACOMA; A REPORT OF
WHICH WILL FOLLOW.

CITY/COUNTY/ACENCY: City of Tacoma
RECORDING NO.: 2864651

(continued)
-1-

<PAGE>

SCHEDULE B (continued) ORDER NO. 96-08681

4. Lack of a recorded means of ingress or egress to a public road from said
property. It is assumed that there exists a valid and subsisting
easement for that purpose over adjoining properties, but the Company does
not insure against any rights based on a contrary state of facts.

5. The land described in this commitment appears to be residential in nature
and may be subject to the provisions of R.C.W.6.13.060 provided the land
is occupied as a homestead. If the land is occupied as a homestead, all
instruments conveying or encumbering the land must be executed by each
spouse, individually, or by an attorney-in-fact.

NOTE 1:
We find no corporation under the name of ATLANTIC SEABOARD REALTY on the
list of active corporations in the office of the Secretary of State. If
it is an unincorporated association, title to real property so acquired
cannot be insured. The forthcoming deed or contract must run to a legal
entity.

NOTE 2:
The County Tax Rolls disclose the current assessed valuations as
follows:

Land: $9,500.00
Improvements: $0.00
Total: $9,500.00

NOTE 3:
The above captioned description may be incorrect, because the application
for title insurance contained only an address and/or Parcel No. Prior to
closing, all parties to the transaction must verify the legal
description. If further changes are necessary, notify the Company well
before closing so that those changes can be reviewed. Closing
instructions must indicate that the legal description has been reviewed
and approved by all parties.

END OF EXCEPTIONS

IN THE EVENT THIS TRANSACTION FAILS TO CLOSE, A CANCELLATION FEE WILL BE
CHARGED FOR SERVICES RENDERED IN ACCORDANCE WITH OUR RATE SCHEDULE.

enclosures:
sketch
vesting deed
exception(s)
TMM/SM
4+2cc: addressee

<PAGE>

ORDER NO. 96-08682

SCHEDULE B

EXCEPTIONS: Schedule B of the policy or policies to be issued will contain
exceptions to the following matters unless the same are disposed of to the
satisfaction of the company.

A. Standard exceptions set forth on the inside back cover.

B. Defects, liens, encumbrances, adverse claims or other matters, if any,
created, first appearing in the public records or attaching subsequent
to the effective date hereof but prior to the date the proposed Insured
acquires for value of record the estate or interest or mortgage thereon
covered by this Commitment.

C. Instruments necessary to create the estate or interest to be properly
executed, delivered and duly filed for record.

1. Real Estate Excise Tax pursuant to the authority of RCW Chapter 82.45 and
subsequent amendments thereto.

As of the date herein, the tax rate for said property is 1.78%.

3. LOCAL IMPROVEMENT ASSESSMENTS, IF ANY, LEVIED BY TACOMA; A REPORT OF
WHICH WILL FOLLOW.

4. NOTICE OF TAP OR CONNECTION CHARGES WHICH HAVE BEEN OR WILL BE LEVIED
AGAINST THE LAND AS DISCLOSED DY RECORDED INSTRUMENT. INQUIRIES
REGARDING THE SPECIFIC AMOUNT OF THE CHARGES SHOULD BE MADE TO THE
CITY/COUNTY/AGENCY.

CITY/COUNTY/AGENCY: City of Tacoma
RECORDING NO.: 2864651

(continued)
-1-

<PAGE>

SCHEDULE B (continued) ORDER NO. 96-08682

5. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:

GRANTEE: CITY OF TACOMA
PURPOSE: Sewer
AREA AFFECTED: A portion of said promises
RECORDED: JUNE 18, 1965
RECORDING NO.: 2105401

6. EASEMENT AND THE TERMS AND CONDITIONS THEREOF:

GRANTEE: PUGET SOUND POWER AND LIGHT COMPANY
PURPOSE: Electrical transmission and/or
distribution lines and
appurtenances
AREA AFFECTED: A portion of said premises
RECORDED: OCTOBER 18, 1984
RECORDING No.: 8410180132

7. Lack of a recorded means of ingress or egress to a public road from said
property. It is assumed that there exists a valid and subsisting easement
for that purpose over adjoining properties, but the Company does not
insure against any rights based on a contrary state of facts.

8. The land described in this commitment appears to be residential in nature
and may be subject to the provisions of R.C.W.6.13.060 provided the land
is occupied as a homestead. If the land is occupied as a homestead, all
instruments conveying or encumbering the land must be executed by each
spouse, individually, or by an attorney-in-fact.

NOTE 1:

We find no corporation under the name of ATLANTIC SEABOARD REALTY on the
list of active corporations in the office of the Secretary of State. If
it is an unincorporated association, title to real property so acquired
cannot be insured. The forthcoming deed or contract must run to a legal
entity.

(continued)
-2-

<PAGE>

SCHEDULE B (continued) ORDER NO. 96-08682

END OF EXCEPTIONS

INVESTIGATION SHOULD BE MADE TO DETERMINE IF THERE ARE ANY SERVICE,
INSTALLATION, MAINTENANCE OR C0NSTRUCTION CHARGES FOR SEWER, WATER OR
ELECTRICITY, GARBAGE COLLECTION OR DISPOSAL OR OTHER UTILITIES.

IN THE EVENT THIS TRANSACTION FAILS TO CLOSE, A CANCELLATION FEE WILL BE CHARGED
FOR SERVICES RENDERED IN ACCORDANCE WITH OUR RATE SCHEDULE.

enclosures:
sketch
vesting deed
exception(s)

TMM/SM

4+2cc: addressee

<PAGE>

ASSIGNMENT OF RIGHTS UNDER
REAL ESTATE PURCHASE AND SALE AGREEMENT
AND BROKERAGE COMMISSION AGREEMENT

WAHL & ASSOCIATES, INC., a Washington corporation ("Wahl"), hereby assigns
to EAGLE HARDWARE & GARDEN, INC., a Washington corporation ("Eagle"), and Eagle
accepts, all of Wahl's right, title and interest (except any right to receive
payment of a brokerage commission) in and to that certain Real Estate Purchase
and Sale Agreement between Metropolitan Park District of Tacoma, a municipal
corporation, as seller ("Seller"), and Wahl, as buyer, executed by Seller on
April 1, 1996, as amended, concerning certain real property located in Pierce
County, Washington ("Park Sale Agreement"). A true and complete copy of the
Park Sale Agreement is attached as EXHIBIT A.

Eagle expressly assumes and agrees to perform all of Wahl's obligations
under the Park Sale Agreement and to indemnify, defend and hold Wahl harmless
from any and all claims, liabilities or expenses arising under or relating to
the Park Sale Agreement. Wahl's assignment to Eagle of Wahl's interest under
the Park Sale Agreement is "AS-IS" and Wahl makes no representation or warranty
to Eagle concerning the real property which is the subject matter of the Park
Sale Agreement including but not limited to the feasibility of development of
any of such property by Eagle.

In consideration of this assignment of the Park Sale Agreement by Wahl to
Eagle and for services rendered, Eagle shall pay to Wahl upon the closing of the
Park Sale Agreement (or the closing of Eagle's purchase of the real property
described in the Park Sale Agreement under any other terms) a real estate
brokerage commission in the sum of sixty-four thousand dollars ($64,000).
Wahl is hereby authorized to communicate with any closing agent concerning the
closing of the Park Sale Agreement for purposes of coordinating payment to Wahl
of such commission.

ASSIGNMENT OF RIGHTS UNDER
REAL ESTATE PURCHASE AND SALE AGREEMENT PAGE 1
AND BROKERAGE COMMISSION AGREEMENT APRIL 11, 1996

<PAGE>

WAHL & ASSOCIATES, INC.,
a Washington corporation

Date 6 Aug 96 By /s/Arthur L. Wahl
- ------------------ ---------------------------------
Its President
----------------------------------

EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation

Date August 12, 1996 By /s/ Richard T. Takata
------------------ ---------------------------------
Its
---------------------------------

Seller hereby acknowledges receipt of a copy of this Assignment, accepts Eagle
Hardware & Garden, Inc. as the Buyer under the Park Sale Agreement in lieu of
Wahl & Associates, Inc., and releases Wahl & Associates, Inc., from any further
liability or obligation under the Park Sale Agreement.

METROPOLITAN PARK DISTRICT OF TACOMA,
a municipal corporation,

Date By
----------------- ----------------------------------
Neil A. Ofsthun, Its Executive Director

ASSIGNMENT OF RIGHTS UNDER
REAL ESTATE PURCHASE AND SALE AGREEMENT PAGE 2
AND BROKERAGE COMMISSION AGREEMENT APRIL 11, 1996

<PAGE>

EXHIBIT A

PARK SALE AGREEMENT

<PAGE>

[LETTERHEAD]

July 20, 1995
Ron Maccarone
23592 Wind Song #46H
Alisa Viejo CA 92656

Dear Ron:

Let me start this offer letter by saying that it was a pleasure seeing you
again on Friday, July 14th, and we are looking forward to you joining the
Eagle Hardware & Garden Team. Based on my discussion with Rich Takata, the
following are the specifics of our offer of employment:

TITLE: Executive Vice President of Finance (Chief Financial Officer)

ANNUAL SALARY:
$150,000.00 (Since paychecks are issued every two weeks, the gross
amount would be $5769.23 bi-weekly).

STOCK OPTIONS:
50,000 Eagle hardware & Garden stock options vesting over 5 years (20%
per year). The options will be priced based on the closing stock
price the day you report to work.

INCENTIVE COMPENSATION:
.2% Corporate Bonus participation. Enclosed is a copy of our
corporate management incentive compensation (Bonus) plan.

SEVERANCE:You will receive a 1 (one) year severance agreement. This agreement
will pay you a one-year salary if your job is terminated for any
reasons other than cause. The payments will either be in a lump sum
or in bi-weekly installments, at the discretion of the company.

HEALTH & WELFARE PLAN:
You will participate in the Executive Medical, Dental and Vision plan.
The Executive plan covers you and your family 100% and the premiums are
paid by the company. In addition,the company pays for life insurance
equal to one time your annual salary. You may purchase additional
life insurance coverage in multiples of your annual salary.

981 POWELL AVE. S.W.
RENTON, WA 98055
PHONE 206-227-574O
FAX 206-204-5169

cont.'d

<PAGE>
Ron Maccarone
July 20, 1995
Page 2

401 (K): The company has a non-contributory 401 (k) plan which is available
should you wish to participate or rollover from an existing 401 (k)
plan. After six months with Eagle, you can make contributions to the
401(k) plan. Eligibility to rollover from any other 401(k) plan is
effective the first day of employment.

ESOP: You are eligible for the Employee Stock Ownership Plan (ESOP) after two
years of employment. Participation in this plan, after the two-year
eligibility has been met, is the 1st of January or the 1st of July,
whichever comes first. The plan is fully funded by the company and
the contribution is up to 10% of your annual salary or a maximum of
$3500. This of course is dependent on the company's profitability.
The funding of the plan takes place after December 31st of the plan
year and is invested in Eagle Hardware & Garden stock.

VACATION:
You will have two weeks of vacation vested the day you report to work.

ALL OTHER BENEFITS:
Life Insurance, L.T.D. (long term disability), A.D.D. (accidental
death and dismemberment), Vacations, Holidays, Employee Discounts,
etc., are detailed in the hiring package you were provided.

RELOCATION:
Enclosed is acopy of our relocation policy and based on your
position,you are entitled to a professional household move and living
expenses for up to 60 days. This also includes a trip and expenses
for your wife to come up and get familiar with the area and find a
place to live, as well as the final trip to relocate to the area.
Should you at anytime decide to sell your house in Southern
California, the company will pay your closing costs to a maximum of
$20,000.

cont.'d

<PAGE>

Ron Maccarone
July 20, 1995
Page 3

Please feel free to contact Rich Takata or myself should you have any
questions. Again, it was a pleasure seeing you and we look forward to you
joining the Eagle Hardware and Garden Team and working with you.

Please call Rich Takata or myself once you have had the opportunity to
review and discuss this offer with your wife. We would like your answer by
July 21, 1995.

Very truly yours,

/s/John Foucrier
John Foucrier
Executive Vice President
Administration and Human Resources

JF:ec
Attachment

<PAGE>
[LETTERHEAD]

August 3, 1995

Ron Maccarone
Executive Vice President and
Chief Financial Officer
Eagle Hardware & Garden, Inc.

Re: SEVERANCE AGREEMENT

Dear Ron:

This letter is intended to confirm one of the terms of your employment with
Eagle Hardware & Garden, Inc.'s (the "Company") stated under severance in your
offer letter dated, July 20, 1995. Should your employment be terminated in
connection with and as a result of a sale or merger of the Company or change in
control of the ownership and management of the Company, the Company agrees to
pay you one year's severance. Such sum to be payable bi-weekly or in one lump
sum, at the Company's discretion. Payments or payment to start immediately
after your date of termination. This one year's severance would be based on
your then current salary, less any required deductibles such as FICA,
unemployment, etc.

In the event that you resign from the Company or the Company terminates you for
"cause", you will forfeit the one year's salary. "Cause" means any act or
failure to act by executives which constitutes just cause for termination of
executives' employment with the Company. "Cause" may include, but is not
limited to: any dishonesty; neglect of duties; conflict of interest; commission
of a felony; professional negligence; misconduct; fraud; misrepresentation;
refusal or repeated failure to carry out reasonable directions of the Board of
Directors, the C.E.O., or the President; act or failure to act, which
substantially impairs the Company's business, good will or reputation; or any
material breach of this agreement.

Further, you hereby re-affirm all the terms of the Confidentiality Agreement,
dated July 14, 1995, previously executed by you and agree that the provisions
thereof shall apply equally to any information of, about or concerning the
Company that you obtain knowledge or possession of hereafter and throughout the
remainder of your employment with the Company as well as subsequent to such
employment.

Please confirm your agreement to the foregoing by signing below, whereupon this
agreement shall become a binding agreement between you and the Company.

Very truly yours,

Richard T. Takata
----------------------------
Richard T. Takata, President

Acknowledged, understood and
agreed to, this 3rd day of
August, 1995.

/s/Ronald P. Maccarone
- ----------------------
Ronald P. Maccarone

<PAGE>

EAGLE HARDWARE & GARDEN, INC.
COMPUTATION OF NET INCOME PER SHARE - EXHIBIT 11.1
[000, EXCEPT PER SHARE DATA]

[UNAUDITED] [UNAUDITED]
13 WEEKS ENDED 26 WEEKS ENDED
------------------------- -------------------------
JULY 26, JULY 28, JULY 26, JULY 28,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income as reported $8,065 $4,553 $11,029 $7,233
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income used for primary
computation $8,065 $4,553 $11,029 $7,233

Add (where dilutive):
Tax effected interest and amortization
of debt expense on convertible debt 922 922 1,844 1,844
---------- ---------- ---------- ----------
Net income used for fully
diluted computation $8,987 $5,475 $12,873 $9,077
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Weighted average number of
common shares outstanding 22,942 22,844 22,922 22,842

Add (where dilutive):
Assumed exercise of those
options that are common stock
equivalents net of treasury
shares deemed to have been
repurchased 417 231 376 246
---------- ---------- ---------- ----------

Weighted average number of
common and common equivalent
shares outstanding, used for
primary computation 23,359 23,075 23,298 23,088

Add (where dilutive):
Shares applicable to stock options
in addition to those used in primary
computation due to the use of
period-end market price when
higher than average price 62 12 31 6

Assumed exercise of
convertible debt 4,792 4,792 4,792 4,792
---------- ---------- ---------- ----------
Adjusted shares outstanding used
for fully diluted computation 28,213 27,879 28,121 27,886
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

</TABLE>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-26-1996
<CASH> 5,942
<SECURITIES> 0
<RECEIVABLES> 4,162
<ALLOWANCES> 2,183
<INVENTORY> 156,296
<CURRENT-ASSETS> 173,036
<PP&E> 256,247
<DEPRECIATION> 23,889
<TOTAL-ASSETS> 409,944
<CURRENT-LIABILITIES> 124,252
<BONDS> 109,203
0
0
<COMMON> 136,725
<OTHER-SE> 30,909
<TOTAL-LIABILITY-AND-EQUITY> 409,944
<SALES> 209,078
<TOTAL-REVENUES> 209,078
<CGS> 150,739
<TOTAL-COSTS> 150,739
<OTHER-EXPENSES> 43,471
<LOSS-PROVISION> 330
<INTEREST-EXPENSE> 2,192
<INCOME-PRETAX> 12,692
<INCOME-TAX> 4,627
<INCOME-CONTINUING> 8,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,065
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.32

</TABLE>