EAGLE HARDWARE & GARDEN INC/WA/, 10-Q, 1997-12-04

EAGLE HARDWARE & GARDEN INC/WA/
10-Q, 1997-12-04
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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 October 31, 1997
----------------

OR
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)

(425) 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 29,050,556 SHARES OF COMMON STOCK, WITHOUT PAR VALUE,
OUTSTANDING AT OCTOBER 31, 1997.

<PAGE>

EAGLE HARDWARE & GARDEN, INC.

INDEX TO FORM 10-Q

PAGE
----

PART I - FINANCIAL INFORMATION_____________________________________________ 3

ITEM 1 - FINANCIAL STATEMENTS________________________________________ 3

Consolidated Balance Sheets______________________________________ 9

Consolidated Statements of Operations____________________________ 10

Consolidated Statements of Cash Flows____________________________ 11

Notes to Unaudited Consolidated Financial Statements_____________ 12

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

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK __________________________________________ 6

PART II - OTHER INFORMATION________________________________________________ 7

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K____________________________ 7

Exhibit 11.1 - Computation of Net Income Per Share_______________ 13

2
<PAGE>

PART I - FINANCIAL INFORMATION:

ITEM 1 - FINANCIAL STATEMENTS -

Eagle Hardware & Garden, Inc.'s (the "Company") unaudited consolidated
balance sheet as of October 31, 1997, audited consolidated balance sheet as of
January 31, 1997, unaudited statements of operations for the 13- and 39-week
periods ended October 31, 1997, and October 25, 1996, and unaudited consolidated
statements of cash flows for the 39-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 1996 Annual
Report to Shareholders, which has previously been filed with the Securities and
Exchange Commission.

The results of operations for the 13- and 39-week periods ended October 31,
1997, 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 390 store weeks
of operations during the third quarter of fiscal 1997, an increase of 21%
compared to the 321 store weeks during the comparable prior year period. For
the 39 weeks ended October 31, 1997, total store weeks increased 22% from 945 in
1996 to 1,155 in 1997.

RESULTS OF OPERATIONS -

(a) COMPARISON OF THE 13 WEEKS ENDED OCTOBER 31, 1997, AND OCTOBER 25,
1996.

NET INCOME. Net income for the third quarter of fiscal 1997 was $8.9
million, or $0.29 per share, fully diluted, compared to $7.6 million, or $0.28
per share, fully diluted, during the third quarter of fiscal 1996. The prior
year net income included a $2.1 million capital gain on the sale of surplus
property. The Company's 6.25% convertible subordinated debentures were dilutive
during the third quarter of fiscal 1997 and fiscal 1996 (see Exhibit 11.1).
Primary net income per share for the quarter ended October 31, 1997 was $0.30
compared to $0.29 in the prior year. The 17% increase in net income was due to
the factors discussed below.

Weighted average common and common equivalent shares outstanding increased
13% from 26,055,000 shares in the third quarter of fiscal 1996 to 29,416,000
shares in the third quarter of fiscal 1997. The primary reason for this
increase was the issuance of 5,750,000 shares of Common Stock in the Company's
September 1996 stock offering.

3
<PAGE>

NET SALES. Net sales for the third quarter of fiscal 1997 increased 26%
over the comparable prior year period. This increase was due to a 21% increase
in store weeks of operations during the quarter and an 8% increase in same store
sales for the period. Same store sales increased 19% during the third quarter
of fiscal 1996. Same store sales in the third quarter of fiscal 1997 increased
primarily as a result of a 6% increase in the number of customer transactions.
The increase in the number of transactions was due to several factors, including
favorable economic conditions in most of the Company's markets and continued
benefits from the liquidation and subsequent closure of Ernst Home Center Inc.
in the second half of fiscal 1996.

GROSS MARGIN. The Company's gross margin, in dollars, increased 29% over
the third quarter of fiscal 1996. As a percentage of net sales, gross margin
was 28.3% in the third quarter of fiscal 1997 compared to 27.5% in the prior
year. Gross margin as a percentage of sales improved primarily as a result of
reductions in realized inventory shrinkage and continued buying efficiencies.

OPERATING EXPENSES. Operating expenses as a percentage of net sales
decreased from 22.3% in the third quarter of fiscal 1996 to 22.1% in the third
quarter of fiscal 1997. Additional leverage attributable to the 8% increase in
same store sales was the primary factor that led to the decrease in operating
expenses as a percentage of sales. Expenses that decreased as a percentage of
sales included rent, insurance and corporate overhead. For the quarter, store
wages were consistent with the prior year as a percentage of sales.

OPERATING INCOME. For the reasons explained above, operating income
increased 56% in the third quarter of fiscal 1997 over the third quarter of
fiscal 1996. Expressed as a percentage of net sales, operating income improved
from 4.9% in the third quarter of fiscal 1996 to 6.1% in the third quarter of
fiscal 1997.

INTEREST EXPENSE. Net interest expense during both the third quarter of
fiscal 1997 and fiscal 1996 was $1.5 million. Interest on the Company's
convertible subordinated debentures, which represents the primary source of
interest expense, was comparable between the current and prior year. Interest
expense attributable to new mortgages has been offset by interest income on
existing cash balances. During both quarters, interest incurred was partially
offset by interest capitalized on construction projects.

INCOME TAXES. The effective tax rate for the third quarter of fiscal 1997
was 36.5% compared to 28.0% for the third quarter of fiscal 1996. The third
quarter effective tax rate for 1997 was lower than the combined federal and
state statutory tax rates that the Company expects to pay under normal
circumstances due to investments in tax-exempt securities. The effective rate
in the third quarter of fiscal 1996 was lower than normal due to utilization of
a portion of the Company's capital loss carryforward to offset a $2.1 million
capital gain.

(b) COMPARISON OF THE 39 WEEKS ENDED OCTOBER 31, 1997, AND OCTOBER 25,
1996.

NET INCOME. Net income for the first 39 weeks of fiscal 1997 was $26.4
million, or $0.85 per share, fully diluted, compared to $18.6 million, or $0.74
per share, fully diluted, during the first 39 weeks of fiscal 1996. The
Company's 6.25% convertible subordinated debentures were dilutive during the
first 39 weeks of fiscal 1997 and fiscal 1996 (see Exhibit 11.1). Primary net
income per share for the 39 weeks ended October 31, 1997 was $0.90 compared to
$0.77 in the prior year. The 42% increase in net income was due to the factors
discussed below.

Weighted average common and common equivalent shares outstanding increased
21% from 24,217,000 shares in the first 39 weeks of fiscal 1996 to 29,390,000
shares in the first 39 weeks of fiscal 1997. The primary reason for this
increase was the issuance of 5,750,000 shares of Common Stock in the Company's
September 1996 stock offering.

4
<PAGE>

NET SALES. Net sales for the first 39 weeks of fiscal 1997 increased 32%
over the comparable prior year period. This increase in net sales over the
prior 39-week period was due primarily to a 22% increase in store weeks of
operations and a 12% increase in same store sales for the period. Same store
sales increased 11% during the first 39 weeks of fiscal 1996. Same store sales
in the first 39 weeks of fiscal 1997 increased primarily as a result of an 11%
increase in the number of customer transactions. The increase in the number of
transactions was due to several factors, including favorable economic conditions
in most of the Company's markets and continued benefits from the liquidation and
subsequent closure of Ernst Home Center Inc. during the second half of fiscal
1996.

GROSS MARGIN. The Company's gross margin, in dollars, increased 34% over
the first 39 weeks of fiscal 1996. As a percentage of net sales, gross margin
was 28.2% in the first 39 weeks of fiscal 1997 compared to 27.8% in the prior
year. Gross margin as a percentage of sales improved primarily as a result of
reductions in realized inventory shrinkage and continued buying efficiencies.

OPERATING EXPENSES. Operating expenses as a percentage of net sales
decreased from 22.2% in the first 39 weeks of fiscal 1996 to 21.8% in the first
39 weeks of fiscal 1997. Increases in store wages as a percentage of sales were
more than offset by decreases in other operating expenses as a percentage of
sales, including rent, insurance and corporate overhead. For the first 39 weeks
of the fiscal year, store wages increased as a result of higher staffing levels
in place to support increased customer traffic.

PREOPENING EXPENSES. Preopening expenses were 0.3% of sales in the first
39 weeks of fiscal 1997, when the Company opened three stores. In the
comparable prior year period, when the Company opened one store, preopening
expenses were 0.1% of net sales.

OPERATING INCOME. For the reasons explained above, operating income
increased 45% in the respective 39-week periods. Expressed as a percentage of
net sales, operating income improved from 5.6% in the first 39 weeks of fiscal
1996 to 6.1% in the comparable current year period.

INTEREST EXPENSE. Net interest expense during the first 39 weeks of fiscal
1997 was $4.4 million, compared to $6.1 million during the comparable prior year
period. This decrease resulted primarily from the use of proceeds from the
Company's September 1996 stock offering for repayment of bank borrowings and for
investment. Interest on the Company's convertible subordinated debentures,
which represents 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 effective tax rate for the first 39 weeks of fiscal 1997
was 36.5% compared to 33.3% in the first 39 weeks of fiscal 1996. The effective
tax rate for the first 39 weeks of fiscal 1997 was lower than the combined
federal and state statutory rates that the Company expects to pay under normal
circumstances because of investments in tax-exempt securities. The effective
tax rate for the first 39 weeks of fiscal 1996 was lower than normal due to
utilization of a portion of the Company's capital loss carryforward to offset
$2.2 million in capital gains.

LIQUIDITY AND CAPITAL RESOURCES -

The Company did not open any stores during the third quarter of fiscal
1997. The Company has signed agreements to purchase eight future store sites at
a total cost of

5
<PAGE>

approximately $41.3 million and a future distribution center at a total cost
(including land) of approximately $26.5 million. In addition, the Company has
signed options to lease property for another future store site. The Company
currently plans to open one additional store during fiscal 1997 in Coeur
d'Alene, Idaho and has one store under construction in La Quinta, California
which is currently scheduled to open in early fiscal 1998. The Company
continues to review additional sites for future expansion, including numerous
sites in Southern California.

The Company's balance sheet at October 31, 1997, reflected an $82.6 million
(16%) increase in total assets since the fiscal year began on February 1. The
principal components of this change were an increase of $18.8 million (36%) in
cash and cash equivalents and short-term investments, $32.3 million (19%) in
inventories and $31.9 million (11%) in net property and equipment. The increase
in inventories is primarily attributed to the addition of three new stores,
higher sales volumes and seasonal inventory fluctuations. The increase in net
property and equipment is primarily related to the continuing store expansion
program. Net income adjusted for noncash items provided $39.3 million during
the first 39 weeks of the year to support the Company's expansion. The
increase in total assets was also accompanied by an increase of $9.5 million in
accounts payable and outstanding checks under the Company's integrated cash
management program and a $2.8 million increase in accrued liabilities and income
taxes payable, all primarily related to the continuing store expansion program.
In addition, the Company received $44.0 million in proceeds from mortgages on
five owned stores.

The Company's capital requirements are significantly 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 currently expects to finance its fiscal 1997
and fiscal 1998 expansion program through a combination of current cash, cash
generated from operations, bank borrowings under the existing line of credit and
proceeds of fixed-term capital asset loans and/or sale-leasebacks of owned
properties.

The Company reports on a 52/53-week year, consisting of four 13-week
quarters. 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.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK -

Not applicable.

6
<PAGE>

PART II - OTHER INFORMATION:

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

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

10.102B Second Amendment to Amended and Restated Credit Agreement dated as
of October 20, 1997, between the Lenders, U.S. Bank of Washington,
N.A., as Agent and Eagle Hardware & Garden, Inc.
10.103B Second Amendment to Real Estate Purchase and Sale Agreement dated
November 3, 1997, by and between Eagle Hardware & Garden, Inc. and
Terrace Point Partnership.
10.118A Extension Agreement dated August 30, 1997 for Agreement to Lease
and Put to Lease, between Tigard-Tualatin School District 23J and
Eagle Hardware & Garden, Inc.
10.122A Termination Letter dated September 22, 1997 from Eagle Hardware &
Garden, Inc. to Opus Northwest LLC.
10.126 Purchase Agreement and Joint Escrow Instructions dated October 16,
1997, by and between Hilton Hotels Corporation and Eagle Hardware &
Garden, Inc.
10.127 Promissory Note dated October 17, 1997, by Eagle Hardware &
Garden, Inc. to KeyBank National Association in the principal
amount of $11,000,000.
10.127A Amendment to Promissory Note dated November 1, 1997, by Eagle
Hardware & Garden, Inc. to KeyBank National Association.
10.128 Promissory Note dated October 17, 1997, by Eagle Hardware &
Garden, Inc. to KeyBank National Association in the principal
amount of $8,000,000.
10.128A Amendment to Promissory Note dated November 1, 1997, by Eagle
Hardware & Garden, Inc. to KeyBank National Association.
10.129 Promissory Note dated October 17, 1997, by Eagle Hardware &
Garden, Inc. to KeyBank National Association in the principal
amount of $6,000,000.
10.129A Amendment to Promissory Note dated November 1, 1997, by Eagle
Hardware & Garden, Inc. to KeyBank National Association.
10.130 Real Estate Purchase and Sale Agreement dated October 20, 1997 by
and between CFJ Properties and Eagle Hardware & Garden, Inc.
10.131 Real Estate Purchase and Sale Agreement dated November 12, 1997
by and between Waterman Properties, L.P. and Eagle Hardware &
Garden, Inc.
10.132 Real Estate Purchase and Sale Agreement dated November 14, 1997
by and between La Caze Development Company and Eagle Hardware &
Garden, Inc.
11.1 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule

(b) No reports on Form 8-K were filed during the third quarter of fiscal 1997.

7
<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

November 28, 1997 /s/ David J. Heerensperger
- ----------------- -------------------------------------
Date David J. Heerensperger
Chairman

November 28, 1997 /s/ Richard T. Takata
- ----------------- -------------------------------------
Date Richard T. Takata
President and Chief Executive Officer
(Principal Executive Officer)

November 28, 1997 /s/ Ronald P. Maccarone
- ----------------- -------------------------------------
Date Ronald P. Maccarone
Executive Vice-President-Finance and Chief
Financial Officer (Principal Financial Officer)

8
<PAGE>

EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
(UNAUDITED)
OCTOBER 31, JANUARY 31,
1997 1997
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $70,822 $20,738
Short-term investments 0 31,330
Trade and other accounts receivable (less allowance
for doubtful accounts of $2,914 and $1,891) 4,897 4,213
Merchandise inventories 206,590 174,299
Prepaid expenses 3,793 4,930
Deferred income taxes 2,689 2,559
---------- ----------
Total current assets 288,791 238,069
---------- ----------

Property and equipment, at cost:
Land and buildings 184,008 140,434
Furniture, fixtures and equipment 103,543 75,823
Leasehold improvements 48,216 45,730
Construction in progress 12,001 44,960
---------- ----------
347,768 306,947
Less accumulated depreciation 38,407 29,454
---------- ----------
Net property and equipment 309,361 277,493
---------- ----------

Preopening costs 718 1,468
Other assets 3,131 2,355
---------- ----------
Total assets $602,001 $519,385
---------- ----------
---------- ----------

LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Outstanding checks, not cleared by the bank $14,097 $8,762
Accounts payable 59,504 55,295
Sales taxes payable 6,536 6,029
Accrued payroll and related expenses 12,676 13,951
Other current liabilities 10,273 8,572
Current portion of long-term debt 6,071 2,109
-------- --------
Total current liabilities 109,157 94,718
Deferred income taxes 10,399 8,314
Other long-term liabilities 3,206 3,094
Long-term debt 146,426 108,416
-------- --------
Total liabilities 269,188 214,542
-------- --------

Commitments and contingencies

Shareholders' equity:
Common stock, without par value; 50,000 shares authorized;
29,051 and 28,890 shares issued and outstanding 264,769 263,226
Retained earnings 68,044 41,617
-------- --------
Total shareholders' equity 332,813 304,843
-------- --------

Total liabilities & shareholders' equity $602,001 $519,385
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.

9
<PAGE>

EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT STORE WEEK AND PER SHARE DATA)
(UNAUDITED)

13 WEEKS ENDED 39 WEEKS ENDED
--------------------------- --------------------------
OCTOBER 31, OCTOBER 25, OCTOBER 31, OCTOBER 25,
1997 1996 1997 1996
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Store weeks in period [390] [321] [1,155] [945]

Net sales $249,690 $198,731 $749,035 $568,915
Cost of sales 179,050 144,071 537,553 410,660
------------ ----------- ----------- -----------
Gross margin 70,640 54,660 211,482 158,255

Operating expenses 55,288 44,334 163,570 126,099
Preopening expenses 0 504 2,089 504
------------ ----------- ----------- -----------
Operating income 15,352 9,822 45,823 31,652

Other income (expense):
Interest income 761 340 1,637 346
Interest expense (2,253) (1,833) (6,079) (6,454)
Other income 76 2,209 214 2,354
------------ ----------- ----------- -----------
Income before tax 13,936 10,538 41,595 27,898

Income taxes 5,080 2,947 15,168 9,278
------------ ----------- ----------- -----------
Net income $8,856 $7,591 $26,427 $18,620
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------

Net income per share (see
Exhibit 11.1 for share
computations):

Net income per share, primary $0.30 $0.29 $0.90 $0.77

Net income per share, fully diluted $0.29 $0.28 $0.85 $0.74
</TABLE>

See accompanying notes to consolidated financial statements.

10
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EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

39 WEEKS ENDED
----------------------------
OCTOBER 31, OCTOBER 25,
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $26,427 $18,620
---------- ----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 10,933 8,382
Net gain on sale of assets 0 (2,189)
Deferred income taxes 1,956 241
Changes in operating assets and liabilities:
Trade and other accounts receivable (684) (1,636)
Merchandise inventories (32,291) (23,079)
Prepaid expenses (746) (242)
Other assets (776) 693
Preopening costs 751 (540)
Accounts payable and outstanding checks 9,545 21,452
Income taxes payable 3,627 (1,851)
Accrued liabilities (812) 10,097
Other 112 249
---------- ----------
(8,385) 11,577
---------- ----------
Net cash provided by operating activities 18,042 30,197
---------- ----------

INVESTING ACTIVITIES:
Capital expenditures for property and equipment (42,802) (64,493)
Sales of short-term investments 31,330 0
Purchases of short-term investments 0 (32,035)
Proceeds on sale of surplus property 0 7,422
Other 0 1,019
---------- ----------
Net cash used in investing activities (11,472) (88,087)
---------- ----------

FINANCING ACTIVITIES:
Advances on note payable to bank 6,700 292,100
Payments on note payable to bank (6,700) (326,600)
Net proceeds of stock offering 0 124,855
Proceeds from long-term borrowings 43,950 9,000
Payments on long-term borrowings and capital leases (1,978) (5,634)
Other 1,542 2,478
---------- ----------
Net cash provided by financing activities 43,514 96,199
---------- ----------
Increase in cash and cash equivalents 50,084 38,309
Cash and cash equivalents at beginning of period 20,738 6,591
---------- ----------
Cash and cash equivalents at end of period $70,822 $44,900
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for -
Interest $7,755 $10,474
Income taxes $9,006 $9,327
</TABLE>

See accompanying notes to consolidated financial statements.

11
<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 October 31, 1997, the consolidated results of
operations for the 13-week and 39-week periods ended October 31, 1997, and
October 25, 1996, and consolidated cash flows for the 39-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 31, 1997, filed with the Securities and Exchange
Commission.

2. As of November 28, 1997, the Company had signed agreements to purchase
sites for eight future store locations at a total cost of approximately $41.3
million. In addition, the Company has signed options to lease property for one
future store site. Purchases of these sites and these leases will be finalized
upon successful resolution of various contingencies. The Company also has
signed an agreement to purchase a future distribution center for a total cost
(including land) of approximately $26.5 million.

3. In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted by the Company on
January 30, 1998. At that time, the Company will be required to change the
method currently used to compute net income per share and to restate all prior
periods. Under the new requirements for calculating primary net income per
share, the dilutive effect of stock options will be excluded. The impact of
Statement 128 on primary and fully diluted earnings per share for the third
quarters ended October 31, 1997 and October 25, 1996, is not expected to be
material.

<PAGE>
SECOND AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT

This second amendment to amended and restated credit agreement
("Amendment") is dated as of October 20, 1997, and entered into by and among
Eagle Hardware & Garden, Inc., a Washington corporation ("Borrower"), THE
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually
referred to as a "Lender" and collectively as "Lenders"), and U. S. BANK
NATIONAL ASSOCIATION, as successor by merger to U. S. Bank of Washington,
National Association, as agent for Lenders (in such capacity "Agent").

RECITALS:

A. Borrower, Lenders and Agent are parties to an amended and restated
credit agreement dated as of May 28, 1996 (as amended, the "Credit Agreement";
capitalized terms used herein without definition shall have the meaning set
forth in the Credit Agreement), pursuant to which Agent and Lenders have
extended certain credit facilities to Borrower. On or about December 6, 1996,
Borrower, Lenders and Agent entered into that certain first amendment to amended
and restated credit agreement.

B. Borrower has requested Agent and Lenders to extend the Revolving
Credit Termination Date of the Revolving Credit Loans, to modify certain
financial covenants set forth in the Credit Agreement, and to eliminate all
references to "Collateral" in the Credit Agreement. Agent and Lenders wish to
grant Borrower's requests only on the terms and conditions set forth herein.

NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I. AMENDMENTS

1.1 TERMS DEFINED

On or after (but not before) the Effective Date, Section 1.1 of the Credit
Agreement is amended by (a) deleting the definition of "Collateral" and (b)
amending the definitions of "Applicable Margin" and "Revolving Credit
Termination Date" as set forth below:

"Applicable Margin" shall be determined as of the end of each
Fiscal Quarter based on Borrower's Capital Ratio for such Fiscal
Quarter in accordance with the table set forth below and shall be

Page 1

<PAGE>

effective as of the first day of the Fiscal Quarter following the delivery
of the financial statements required under Section 5. l(c) herein:

========================================
Capital Ratio Applicable Margin
========================================
> 0.33:1.0 1.25% per annum
----------------------------------------
< 0.33:1.0 0.75% per annum
========================================

where "< " means "equal to or less than" and ">" means "greater than."
Notwithstanding the foregoing, (a) if Borrower's senior debt rating from
Standard and Poor's Corporation is BB (or an equivalent rating from a
comparable rating agency) or better at the end of a Fiscal Quarter, then
effective as of the first day of the following Fiscal Quarter the
Applicable Margin shall be 0.75% per annum, and (b) if Borrower's senior
debt rating from Standard and Poor's Corporation is BBB (or an equivalent
rating from a comparable rating agency) or better at the end of a Fiscal
Quarter, then effective as of the first day of the following Fiscal Quarter
the Applicable Margin shall be 0.55% per annum.

"Revolving Credit Termination Date" means June 30, 1999, or such
earlier date as the Revolving Credit Commitments terminate.

1.2 REVOLVING CREDIT NOTE

On and after (but not before) the Effective Date, the form of Revolving
Credit Note attached as Exhibit A to the Credit Agreement shall be replaced with
the form of Revolving Credit Note attached hereto as Exhibit A.

1.3 FINANCIAL DATA

On and after (but not before) the Effective Date, subsections 5.1(f) and
5.1 (i) of the Credit Agreement are deleted in their entirety.

1.4 TANGIBLE NET WORTH

On and after (but not before) the Effective Date, Section 6.15 of the
Credit Agreement is hereby amended to read as follows:

6.15 TANGIBLE NET WORTH

Permit Tangible Net Worth plus Subordinated Debt at any time to fall
below the sum of (a) $385,000,000, plus (b) 75% of Borrower's Consolidated
positive Net Income for each Fiscal Quarter commencing

Page 2

<PAGE>

with the Fiscal Quarter ending on or about July 31, 1997, plus (c) 100% of
any equity plus Subordinated Debt raised by Borrower after July 31, 1997.

1.5 FIXED CHARGE COVERAGE RATIO

On and after (but not before) the Effective Date, Section 6.17 of the
Credit Agreement is hereby deleted in its entirety.

1.6 CURRENT RATIO

On and after (but not before) the Effective Date, Section 6.19 of the
Credit Agreement is hereby deleted in its entirety.

1.7 CAPITAL EXPENDITURES

On and after (but not before) the Effective Date, Section 6.21 of the
Credit Agreement is hereby amended to read as follows:

6.21 CAPITAL EXPENDITURES

Permit the aggregate amount of Borrower's Consolidated Capital
Expenditures to exceed (a) $95,000,000 for the Fiscal Year ending closest
to January 31, 1998, (b) $135,000,000 for the Fiscal Year ending closest to
January 31, 1999 and (c) $110,000,000 for any Fiscal Year thereafter.

1.8 RECORDING AND ENFORCEABILITY

On and after (but not before) the Effective Date, Section 7.4 of the Credit
Agreement is hereby amended to read as follows:

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.

1.9 LITIGATION

On and after (but not before) the Effective Date, Section 7.5 of the Credit
Agreement is hereby amended to read as follows:

Page 3

<PAGE>

7.5 LITIGATION

Except as set forth on Schedule 7.5 hereto, there are no actions,
suits, or proceedings pending against or affecting Borrower before any
Governmental Body that could have a material adverse effect on Borrower.
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.

1.10 EVENTS OF DEFAULT

On and after (but not before) the Effective Date, Section 8.l(m) of the
Credit Agreement is hereby amended to read as follows:

(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 Letters of Credit.

1.11 AMENDMENTS AND WAIVERS

On and after (but not before) the Effective Date, clause (vii) of Section
10.8(b) of the Credit Agreement is hereby deleted in its entirety.

ARTICLE II. REPRESENTATIONS AND WARRANTIES OF BORROWER

In order to induce Lenders and Agent to enter into this Amendment, Borrower
represents and warrants to each Lender and to Agent that the following
statements are true, correct, and complete:

2.1 CORPORATE POWER AND AUTHORITY

Borrower has all corporate power and authority to enter into this Amendment
and carry out the transactions contemplated hereby, and perform its obligations
under The Credit Agreement.

2.2 INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT

The representations and warranties contained in Article VII of the Credit
Agreement are and will be true, correct, and complete in all material respects
on the Effective Date to the same extent as though made on that date, except to
the extent

<PAGE>

such representations and warranties specifically relate to an earlier date, in
which they were true, correct, and complete in all material respects on and as
of such earlier date.

2.3 ABSENCE OF DEFAULT

No event has occurred and is continuing that will constitute a Default or
an Event of Default.

ARTICLE III. CONDITIONS TO EFFECTIVENESS

Article I of this Amendment shall become effective as of October 31, 1997
(the "Effective Date"), provided that (a) all representations and warranties
contained herein are true and correct as of the Effective Date, and (b) Agent
shall have received each of the following, dated the date hereof (or such other
date satisfactory to Agent), and in form and substance satisfactory to Agent.

3.1 AMENDMENT

A duly executed original (or, if elected by Agent, an executed facsimile
copy) of this Amendment, duly executed by Borrower and the Requisite Lenders.

3.2 REPLACEMENT NOTES

Duly executed originals of revolving credit notes in the form attached
hereto as Exhibit A, duly executed by Borrower, payable to the order of each
Lender in the principal amount of such Lender's Revolving Credit Commitment,
which shall be in substitution for, but not in payment of, the Revolving Credit
Note held by such Lender. Upon execution of such revolving credit notes, such
notes shall constitute the "Revolving Credit Notes" for all purposes of the
Credit Agreement and other Loan Documents and all amounts outstanding under the
substituted revolving credit notes shall be deemed outstanding under the
Revolving Credit Notes.

3.3 FURTHER ASSURANCES

All corporate and other proceedings taken or to be taken in connection with
the transactions contemplated by this Amendment and all documents relating
thereto shall be reasonably satisfactory in form and substance to Agent and
Agent shall have received all counterpart originals or certified copies of such
documents as it may reasonably request.

<PAGE>

ARTICLE IV. MISCELLANEOUS

4.1 RESERVATION OF RIGHTS

Borrower acknowledges and agrees that the execution and delivery by Agent
and Lenders of this Amendment shall not be deemed to create a course of dealing
or otherwise Obligate Agent or Lenders to give similar amendments in the future.

4.2. REAFFIRMATION

Except as hereby expressly amended, all terms, covenants, and provisions of
the Credit Agreement are and shall remain in full force and effect and all
references therein and in the other Loan Documents to such Credit Agreement
shall henceforth refer to the Credit Agreement as amended by this Amendment.
This Amendment shall be deemed incorporated into, and a part of, the Credit
Agreement.

4.3 SUPERSESSION

This Amendment, together with the Credit Agreement, contains the entire and
exclusive agreement of the parties hereto with reference to the matters
discussed herein and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not be amended except in
accordance with the provisions of Section 10.8 of the Credit Agreement.

4.4 FEES AND EXPENSES

Borrower acknowledges that all reasonable costs, fees, and expenses as
described in Section 10.2 of the Credit Agreement incurred by Agent, Lenders and
their respective counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Borrower.

4.5 INVALIDITY

If any term or provision of this Amendment shall be deemed prohibited by or
invalid under any applicable law, such provision shall be invalidated without
affecting the remaining provisions of this Amendment or the Credit Agreement,
respectively.

4.6 GOVERNING LAW

This Amendment and the rights and obligations of the parties hereunder
shall be governed by, and shall be construed and enforced in accordance with,
the internal laws of the state of Washington, without regard to conflicts of
laws principles.

<PAGE>

4.7 HEADINGS

Section and subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.

4.8 SUCCESSORS

This Amendment shall be binding upon and inure to the benefit of the
parties hereto and thereto and their respective successors and assigns. No
third-party beneficiaries are intended in connection with this Amendment.

4.9 COUNTERPARTS

This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed an original, but all 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, each of the parties hereto have caused this Amendment
to be duly executed and delivered by their respective officers therein to duly
authorized as of the date first above written.

BORROWER:

EAGLE HARDWARE & GARDEN, INC.

By /s/ Ronald P. Maccarone
--------------------------------
Name: Ronald P. Maccarone
Title: EVP/CFO

<PAGE>

LENDERS:

U. S. BANK NATIONAL ASSOCIATION, successor by
merger to U. S. Bank of Washington, National
Association and to United States National
Bank of Oregon

By /s/ Vance Gledhill
--------------------------------
Name: Vance Gledhill
Title: Vice President

FIRST HAWAIIAN BANK

By ________________________________
Name: ________________________
Title: _______________________

KEY BANK OF WASHINGTON

By ________________________________
Name: ________________________
Title: _______________________

THE SUMITOMO BANK, LIMITED

By ________________________________
Name: ________________________
Title: _______________________

<PAGE>

FIRST SECURITY BANK OF IDAHO, N.A.

By ________________________________
Name: ________________________
Title: _______________________

AGENT:

U. S. BANK NATIONAL ASSOCIATION, as successor
by merger to U. S. Bank of Washington,
National Association

By /s/ Vance Gledhill
--------------------------------
Name: Vance Gledhill
Title: Vice President

<PAGE>

EXHIBIT A
TO SECOND AMENDMENT TO AMENDED AND
RESTATED CREDIT AGREEMENT

REVOLVING CREDIT NOTE

$___________ Seattle, Washington
October 31, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Borrower"), promises to pay to the order of _______________________ ("Payee"),
on or before June 30, 1999, the lesser of (x) $_______________________ and (y)
the unpaid principal amount of all advances made by Payee to Borrower as
Revolving Credit Loans under the Credit Agreement referred to below.

Borrower also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with provisions of that certain Amended
and Restated Credit Agreement dated as of May 28, 1996, by and among Borrower,
the financial institutions listed therein as Lenders, and U. S. Bank of
Washington, National Association (now U. S. Bank National Association, its
successor by merger, "U. S. Bank"), as agent for Lenders (in such capacity,
"Agent") (said Credit Agreement as amended by the first amendment to credit
agreement dated as of December 6, 1996 and the second amendment to credit
agreement dated as of October 20, 1997, and as it may be amended, supplemented
or otherwise modified from time to time, being the "Credit Agreement," the terms
defined therein and not otherwise defined herein being used herein as therein
defined).

Borrower shall repay the entire unpaid principal balance of this Revolving
Credit Note together with all accrued and unpaid interest thereon, on June 30,
1999.

This Revolving Credit Note is one of Borrower's "Revolving Credit Notes" in
the aggregate principal amount of $75,000,000 and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is hereby
made for a more complete statement of the terms and conditions under which the
Revolving Credit Loans evidenced hereby were made and are to be repaid.

Page 1

<PAGE>

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. Until
notified in writing of the transfer or assignment of this Revolving Credit Note
in accordance with the terms of the Credit Agreement, Borrower and Agent shall
be entitled to deem Payee or any subsequent permitted assignee of this Revolving
Credit Note as the owner and holder of this Revolving Credit Note. Each of Payee
and any subsequent permitted assignee of this Revolving Credit Note agrees, by
its acceptance hereof, that before disposing of this Revolving Credit Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; provided, however, that the failure to make a notation of any payment made
on this Revolving Credit Note shall not limit or otherwise affect the
obligations of Borrower hereunder with respect to payments of principal of or
interest on this Revolving Credit Note.

Whenever any payment on this Revolving Credit Note shall be stated to be
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Revolving Credit Note.

THE CREDIT AGREEMENT AND THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF WASHINGTON, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Revolving Credit Note, together with all accrued and
unpaid interest thereon, may become, or may be declared to be, due and payable
in the manner, upon the conditions and with the effect provided in the Credit
Agreement.

The terms of this Revolving Credit Note are subject to amendment only in
the manner provided in the Credit Agreement.

This Revolving Credit Note is subject to restrictions on transfer or
assignment as provided in Section 10.3 of the Credit Agreement.

No reference herein to the Credit Agreement and no provision of this
Revolving Credit Note or the Credit Agreement shall alter or impair the
obligations of the Borrower, which are absolute and unconditional, to pay the
principal of and interest on this Revolving Credit Note at the place, at the
respective times, and in the currency herein prescribed.

Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in Section 10.2 of the Credit Agreement,
incurred in

Page 2

<PAGE>

the collection and enforcement of this Revolving Credit Note. Borrower and
any endorsers of this Revolving Credit Note hereby consent to renewals and
extensions of time at or after the maturity hereof, without notice, and
hereby waive diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder.

This Revolving Credit Note is in substitution for, but not in payment of,
the Revolving Credit Note dated as of May 28, 1996 in the principal amount of
$___________________ payable to Payee and as such is a Revolving Credit Note
for all purposes of the Credit Agreement and the other Loan Documents. All
amounts outstanding under the May 28, 1996 Revolving Credit Note constitute
amounts outstanding under this Revolving Credit Note. Upon execution and
delivery of this Revolving Credit Note, Borrower shall have no right to
borrow under the May 28, 1996 Revolving Credit Note.

IN WITNESS WHEREOF, Borrower has caused this Revolving Credit Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

EAGLE HARDWARE & GARDEN, INC.

By ________________________________

Title _____________________________

Page 3

<PAGE>

TRANSACTIONS

ON REVOLVING CREDIT NOTE

Page 4

<PAGE>

REVOLVING CREDIT NOTE

$15,000,000 Seattle, Washington
October 31, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Borrower"), promises to pay to the order of THE SUMITOMO BANK, LIMITED
("Payee"), on or before June 30, 1999, the lesser of (x) $15,000,000 and (y) the
unpaid principal amount of all advances made by Payee to Borrower as Revolving
Credit Loans under the Credit Agreement referred to below.

Borrower shall repay the entire unpaid principal balance of this Revolving
Credit Note together with all accrued and unpaid interest thereon, on June 30,
1999.

All payments of principal and interest in respect of this Revolving Credit
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, 11th Floor, 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. Until
notified in writing of the transfer or assignment of this Revolving Credit Note
in accordance with the terms of the Credit Agreement, Borrower and Agent shall
be entitled to deem Payee or any subsequent permitted assignee of this Revolving
Credit Note as the

Page 1
<PAGE>

owner and holder of this Revolving Credit Note. Each of Payee and any subsequent
permitted assignee of this Revolving Credit Note agrees, by its acceptance
hereof, that before disposing of this Revolving Credit Note or any part hereof
it will make a notation hereon of all principal payments previously made
hereunder and of the date to which interest hereon has been paid; provided,
however, that the failure to make a notation of any payment made on this
Revolving Credit Note shall not limit or otherwise affect the obligations of
Borrower hereunder with respect to payments of principal of or interest on this
Revolving Credit Note.

The terms of this Revolving Credit Note are subject to amendment only in
the manner provided in the Credit Agreement.

This Revolving Credit Note is subject to restrictions on transfer or
assignment as provided in Section 10.3 of the Credit Agreement.

Borrower promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in Section 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Revolving Credit Note.
Borrower and any endorsers of this Revolving Credit Note hereby consent to
renewals and extensions of time at or after the maturity hereof, without notice,
and hereby waive diligence, presentment, protest, demand and notice of every
kind and, to the full extent permitted

Page 2
<PAGE>

by law, the right to plead any statute of limitations as a defense to any demand
hereunder.

This Revolving Credit Note is in substitution for, but not in payment of,
the Revolving Credit Note dated as of May 28, 1996 in the principal amount of
$15,000,000 payable to Payee and as such is a Revolving Credit Note for all
purposes of the Credit Agreement and the other Loan Documents. All amounts
outstanding under the May 28, 1996 Revolving Credit Note constitute amounts
outstanding under this Revolving Credit Note. Upon execution and delivery of
this Revolving Credit Note, Borrower shall have no right to borrow under the May
28, 1996 Revolving Credit Note.

IN WITNESS WHEREOF, Borrower has caused this Revolving Credit Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

EAGLE HARDWARE & GARDEN, INC.

By /s/ Ronald P. Maccarone
--------------------------
Title EVP/CFO
-----------------------

Page 3

<PAGE>

TRANSACTIONS

ON REVOLVING CREDIT NOTE

Page 4

<PAGE>

REVOLVING CREDIT NOTE

$10,000,000 Seattle, Washington
October 31,1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Borrower"), promises to pay to the order of FIRST SECURITY BANK OF IDAHO, N.A.
("Payee"), on or before June 30, 1999, the lesser of (x) $10,000,000 and (y) the
unpaid principal amount of all advances made by Payee to Borrower as Revolving
Credit Loans under the Credit Agreement referred to below.

Borrower shall repay the entire unpaid principal balance of this Revolving
Credit Note together with all accrued and unpaid interest thereon, on June 30,
1999.

Page 1
<PAGE>

Payee or any subsequent permitted assignee of this Revolving Credit Note as the
owner and holder of this Revolving Credit Note. Each of Payee and any subsequent
permitted assignee of this Revolving Credit Note agrees, by its acceptance
hereof, that before disposing of this Revolving Credit Note or any part hereof
it will make a notation hereon of all principal payments previously made
hereunder and of the date to which interest hereon has been paid; provided,
however, that the failure to make a notation of any payment made on this
Revolving Credit Note shall not limit or otherwise affect the obligations of
Borrower hereunder with respect to payments of principal of or interest on this
Revolving Credit Note.

The terms of this Revolving Credit Note are subject to amendment only in
the manner provided in the Credit Agreement.

This Revolving Credit Note is subject to restrictions on transfer or
assignment as provided in Section 10.3 of the Credit Agreement.

Page 2
<PAGE>

by law, the right to plead any statute of limitations as a defense to any demand
hereunder.

This Revolving Credit Note is in substitution for, but not in payment of,
the Revolving Credit Note dated as of May 28, 1996 in the principal amount of
$10,000,000 payable to Payee and as such is a Revolving Credit Note for all
purposes of the Credit Agreement and the other Loan Documents. All amounts
outstanding under the May 28, 1996 Revolving Credit Note constitute amounts
outstanding under this Revolving Credit Note. Upon execution and delivery of
this Revolving Credit Note, Borrower shall have no right to borrow under the May
28, 1996 Revolving Credit Note.

IN WITNESS WHEREOF, Borrower has caused this Revolving Credit Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

EAGLE HARDWARE & GARDEN, INC.

By /s/ Ronald P. Maccarone
---------------------------
Title EVP/CFO
------------------------

Page 3
<PAGE>

TRANSACTIONS

ON REVOLVING CREDIT NOTE

Page 4
<PAGE>

REVOLVING CREDIT NOTE

$30,000,000 Seattle, Washington
October 31, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Borrower"), promises to pay to the order of U. S. BANK NATIONAL ASSOCIATION
("Payee"), on or before June 30, 1999, the lesser of (x) $30,000,000 and (y) the
unpaid principal amount of all advances made by Payee to Borrower as Revolving
Credit Loans under the Credit Agreement referred to below.

Borrower also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with provisions of that certain Amended
and Restated Credit Agreement dated as of May 28, 1996, by and among Borrower,
the financial institutions listed therein as Lenders, and U. S. Bank of
Washington, National Association (now U. S. Bank National Association, its
successor by merger, "U. S. Bank"), as agent for Lenders (in such capacity,
"Agent") (said Credit Agreement as amended by the first amendment to credit
agreement dated as of December 6, 1997 and the second amendment to credit
agreement dated as of October 20, 1997, and as it may be amended, supplemented
or otherwise modified from time to time, being the "Credit Agreement," the terms
defined therein and not otherwise defined herein being used herein as therein
defined).

Borrower shall repay the entire unpaid principal balance of this
Revolving Credit Note together with all accrued and unpaid interest thereon, on
June 30, 1999.

This Revolving Credit Note is one of Borrower's "Revolving Credit Notes"
in the aggregate principal amount of $75,000,000 and is issued pursuant to
and entitled to the benefits of the Credit Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Revolving Credit Loans evidenced hereby were made and are to be
repaid.

All payments of principal and interest in respect of this Revolving Credit
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, 11th Floor, 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. Until
notified in writing of the transfer or assignment of this Revolving Credit Note
in accordance with the terms of the Credit Agreement, Borrower and Agent shall
be entitled to deem Payee or any subsequent permitted assignee of this Revolving
Credit Note as the

Page 1

<PAGE>

The terms of this Revolving Credit Note are subject to amendment only in
the manner provided in the Credit Agreement.

This Revolving Credit Note is subject to restrictions on transfer or
assignment as provided in Section 10.3 of the Credit Agreement.

Page 2

<PAGE>

by law, the right to plead any statute of limitations as a defense to any demand
hereunder.

This Revolving Credit Note is in substitution for, but not in payment of,
the Revolving Credit Note dated as of May 28, 1996 in the principal amount of
$30,000,000 payable to Payee and as such is a Revolving Credit Note for all
purposes of the Credit Agreement and the other Loan Documents. All amounts
outstanding under the May 28, 1996 Revolving Credit Note constitute amounts
outstanding under this Revolving Credit Note. Upon execution and delivery of
this Revolving Credit Note, Borrower shall have no right to borrow under the May
28, 1996 Revolving Credit Note.

IN WITNESS WHEREOF, Borrower has caused this Revolving Credit Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

EAGLE HARDWARE & GARDEN, INC.

By /s/ Ronald P. Maccarone
---------------------------
Title EVP/CFO
------------------------
Page 3

<PAGE>

TRANSACTIONS

ON REVOLVING CREDIT NOTE

Page 4

<PAGE>

REVOLVING CREDIT NOTE

$1O,000,000 Seattle, Washington
October 31,1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Borrower"), promises to pay to the order of FIRST HAWAIIAN BANK ("Payee"), on
or before June 30, 1999, the lesser of (x) $10,000,000 and (y) the unpaid
principal amount of all advances made by Payee to Borrower as Revolving Credit
Loans under the Credit Agreement referred to below.

Borrower shall repay the entire unpaid principal balance of this Revolving
Credit Note together with all accrued and unpaid interest thereon, on June 30,
1999.

Page 1
<PAGE>

The terms of this Revolving Credit Note are subject to amendment only in
the manner provided in the Credit Agreement.

This Revolving Credit Note is subject to restrictions on transfer or
assignment as provided in Section 10.3 of the Credit Agreement.

Borrower promises to pay all costs and expenses, including reasonable
Attorneys' Fees, all as provided in Section 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Revolving Credit Note.
Borrower and any endorsers of this Revolving Credit Note hereby consent to
renewals and extensions of time at or after the maturity hereof, without notice,
and hereby waive diligence, presentment, protest, demand and notice of every
kind and, to the full extent permitted

Page 2
<PAGE>

by law, the right to plead any statute of limitations as a defense to any demand
hereunder.

This Revolving Credit Note is in substitution for, but not in payment of,
the Revolving Credit Note dated as of May 28, 1996 in the principal amount of
$l0,000,000 payable to Payee and as such is a Revolving Credit Note for all
purposes of the Credit Agreement and the other Loan Documents. All amounts
outstanding under the May 28, 1996 Revolving Credit Note constitute amounts
outstanding under this Revolving Credit Note. Upon execution and delivery of
this Revolving Credit Note, Borrower shall have no right to borrow under the May
28, 1996 Revolving Credit Note.

IN WITNESS WHEREOF, Borrower has caused this Revolving Credit Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

EAGLE HARDWARE & GARDEN, INC.

By /s/ Ronald P. Maccarone
--------------------------
Title EVP/CFO
-----------------------

Page 3
<PAGE>

TRANSACTIONS

ON REVOLVING CREDIT NOTE

Page 4
<PAGE>

REVOLVING CREDIT NOTE

$10,000,000 Seattle, Washington
October 31, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Borrower"), promises to pay to the order of KEY BANK OF WASHINGTON ("Payee"),
on or before June 30, 1999, the lesser of (x) $10,000,000 and (y) the unpaid
principal amount of all advances made by Payee to Borrower as Revolving Credit
Loans under the Credit Agreement referred to below.

Borrower shall repay the entire unpaid principal balance of this Revolving
Credit Note together with all accrued and unpaid interest thereon, on June 30,
1999.

Page 1

<PAGE>

The terms of this Revolving Credit Note are subject to amendment only in
the manner provided in the Credit Agreement.

This Revolving Credit Note is subject to restrictions on transfer or
assignment as provided in Section 10.3 of the Credit Agreement.

Borrower promises to pay all costs and expenses, including reasonable
Attorneys' Fees, ALL AS provided in Section 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Revolving Credit Note.
Borrower and any endorsers of this Revolving Credit Note hereby consent to
renewals and extensions of time at or after the maturity hereof, without notice,
and hereby waive diligence, presentment, protest, demand and notice of every
kind and, to the full extent permitted

Page 2
<PAGE>

by law, the right to plead any statute of limitations as a defense to any demand
hereunder.

IN WITNESS WHEREOF, Borrower has caused this Revolving Credit Note to be
duly executed and delivered by its officer thereunto duly authorized as of the
date and at the place first written above.

EAGLE HARDWARE & GARDEN, INC.

By Ronald P. Maccarone
----------------------------
Title EVP/CFO
-------------------------

Page 3
<PAGE>

TRANSACTIONS

ON REVOLVING CREDIT NOTE

Page 4
<PAGE>

LENDERS:

U. S. BANK NATIONAL ASSOCIATION, successor by
merger to U. S. Bank of Washington, National
Association and to United States National
Bank of Oregon

By /s/ Vance Gledhill
-------------------------------------
Name: Vance Gledhill
-----------------------------
Title: Vice President
----------------------------

FIRST HAWAIIAN BANK

By /s/ Travis Ruetenik
-------------------------------------
Name: Travis Ruetenik
-----------------------------
Title: Corporate Banking Officer
----------------------------

KEYBANK NATIONAL ASSOCIATION

By /s/ Kathleen J. Johanson
------------------------------------
Name: Kathleen J. Johanson
----------------------------
Title: Vice President
---------------------------

THE SUMITOMO BANK, LIMITED

By /s/ Carol A. Daley
------------------------------------
Name: Carol A. Daley
----------------------------
Title: Vice
---------------------------

By /s/ J. William Bloore
------------------------------------
Name: J. William Bloore
----------------------------
Title: Vice President
---------------------------

Page 5
<PAGE>

FIRST SECURITY BANK OF IDAHO, N.A.

By /s/ Brian W. Cook
------------------------------------
Name: Brian W. Cook
----------------------------
Title: Vice President
---------------------------

AGENT:

U. S. BANK NATIONAL ASSOCIATION, as successor
by merger to U. S. Bank of Washington,
National Association

By /s/ Vance Gledhill
------------------------------------
Name: Vance Gledhill
----------------------------
Title: Vice President
---------------------------

Page 6

<PAGE>

SECOND AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT

This Second Amendment to Real Estate Purchase and Sale Agreement ("Second
Amendment") is made and entered into as of the Effective Date of 11/3,
1997, by and between EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Buyer") and TERRACE POINT PARTNERSHIP, a Colorado general partnership
("Seller").

RECITALS

A. Buyer and Seller entered into a Real Estate Purchase and Sale Agreement
dated July 2, 1996 (the "Agreement"), together with a First Amendment thereto in
August 27, 1996.

B. By letter dated April 24, 1997, Buyer notified Seller that it had been
unable to obtain necessary permits and approvals, and that the Agreement was
effectively terminated. Buyer requested and received the return of its $50,000
deposit from Chicago Title Insurance Company.

C. The parties now desire to reinstate the Agreement, subject to certain
modifications set forth below, by entering into this Second Amendment.

NOW, THEREFORE, the parties hereby reinstate and amend the Agreement as
follows:

REINSTATEMENT AND AMENDMENTS

1. The Agreement is hereby reinstated in its entirety, except as modified
hereinafter, and the First Amendment is hereby superseded by this Second
Amendment.

2. The Property shall now consist of approximately 14.9707 acres rather
than 12.22 acres.

3. Section 1 is amended to change the estimated square footage from
532,490 square feet to 652,120 square feet and to change the estimated purchase
price from $2,662,450 to $3,260,600.

4. Section 2 is amended to provide that Buyer shall deposit the $50,000
earnest money with the Closing Agent within ten (10) business days after the
Effective Date of this Second Amendment.

5. Section 3 is amended as follows:

a) Buyer hereby waives contingencies Sub-sections 3.1 and 3.2.

b) Buyer shall have one hundred twenty (120) days from the
Effective Date of this Second Amendment (the "Contingency Period") to satisfy or
waive Sub-section 3.3.

c) Buyer may extend the Contingency Period two (2) thirty (30) day
periods by paying Seller $5,000 for each 30 day extension. Each $5,000 payment
shall be nonrefundable to Buyer (except in the case of Seller's default under
the Agreement) but credited to the purchase price at closing.

1
<PAGE>

6. Section 6 is amended as follows:

(a) Within seven (7) days from the Effective Date of this Second
Amendment, Seller shall provide Buyer with an update to a commitment for owner's
extended coverage title insurance issued by Chicago Title of Colorado, order
#1053295.

(b) In the event of closing, Seller shall credit Buyer in the
amount of $3,000 for the cost of an ALTA survey of the Property.

7. Section 13 is hereby superseded and replaced in its entirety as
follows:

13.1 As to the portion of Parcel B, Lot 3, and Parcel A, Lots 1, 2
and 9, which border Wadsworth Boulevard, the parties hereto recognize that
certain work must be completed. To that end the parties hereto agree that Buyer
shall complete all street access curb cuts, traffic signal installations and
clearing, grubbing, site balancing earthwork and rough subgrading related to
lots 1, 2 and 9 of Parcel A, Lot 6 of Parcel C, and lots 3, 4, 5 and 10 of
Parcel B shown on the attached Exhibit B in accordance with local codes,
ordinances, industry standards, Buyer's construction plans and City of
Lakewood's requirements, within ninety (90) 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 lots
1 and 2 of Parcel A and Lot 6 of Parcel C in rough graded condition.

Seller shall pay its prorata share of the cost of the clearing, grubbing, site
balancing earthwork, rough grading related to lots 1, 2 and 9 of Parcel A, Lot 6
of Parcel C, and lots 3, 4, 5 and 10 of Parcel B, new street access curb cut off
of Wadsworth, traffic signal installations and any other offsite costs along the
Wadsworth Boulevard frontage. Seller shall pay 100% of the costs of any other
site improvements related to Parcel A, lots 1 and 2, and Parcel C, lot 6, and
requested by Seller to be accomplished by Buyer in conjunction with all the
other work discussed in this Section 13. Such costs shall include
architectural, civil, geotechnical and any other pertinent engineering expenses.
Said prorata share shall be based on the ratio of the land area of Parcels A and
C compared to the total land area of Parcels A, B and C. However, the
relocation of the new access to Buyer's parking lot from Wadsworth Boulevard,
because of the relocation of the parking on Parcel D, shall be paid 100% by
Buyer.

13.2 Parcel A, lot 9, and Parcel B, lot 10, comprise the new street
Right of Way ("R.O.W.") required by the City of Lakewood as shown on Exhibit B.
Seller agrees to dedicate Parcel A, lot 9, (if required) to the City of Lakewood
and Buyer agrees to dedicate Parcel B, lot 10, (if required) to the City of
Lakewood. If the new street R.O.W. remains a private street it shall be
included in the Reciprocal Easement and Operating Agreement described in Section
14. Buyer shall be responsible for 100% of the costs of the improvements, as
required by the City of Lakewood, within the R.O.W. of the new street on parcel
A, lot 9, and Parcel B, lot 10, including all points of access within the R.O.W.
line (lot line), except for any obligations of Seller pursuant to Sub-section
13.1. Any reimbursements of costs received from the City of Lakewood or any
other governmental agency shall be 100% for the benefit of Buyer. If Buyer
receives any reimbursements of costs that Seller has paid a prorata share of,
then Seller shall be entitled to the same prorata share of the amount reimbursed
to Buyer that relates to the shared costs only.

2
<PAGE>

13.3 After completion of the work described in Sub-sections 13.1 and
13.2 Seller shall pay 100% of any costs of any work requested by Seller other
than the work described in Sub-sections 13.1 and 13.2 above and performed by
Buyer serving Parcels A and C exclusively which shall include but is not limited
to the import or export of materials, finish grading, retaining walls,
utilities, storm sewers, retention and drainage systems and any other
improvements on Parcels A and C. Seller shall reimburse Buyer in accordance
with the terms and conditions described in Sub-section 13.5 below. Seller shall
not be obligated to share in the costs of any retaining walls on Parcel A, Lots
8 and 9, that support Parcel B, Lot 10, and on Parcel B, Lots 3 and 5, that
support Parcel C, Lot 6.

13.4 Buyer shall be responsible for all the related costs of
relocating a portion of the existing parking lot located on the north side of
the Terrace Point Building (shown by light dashed line on Buyer's Site Plan) to
the east side of the Terrace Point Building also as shown on Exhibit C, Buyer's
new Site Development Plan (the "New Site Plan") to be approved by the City of
Lakewood. The work shall be done in accordance with local codes, ordinances,
industry standards, Buyer's construction plans and City of Lakewood's
requirements. The work shall include the removal of existing right-in,
right-out entrance driveway on Wadsworth Boulevard and the new access
connections from the remaining parking north of the Terrace Point Building to
the drive aisles in Buyer's parking lot to the north, and the new parking
adjoining the east side of the Terrace Point Building to west Eastman Place to
the south, plus all related landscaping repairs and City of Lakewood required
landscaping modifications. In the event a portion of Parcel B, Lot 4, is
utilized for new parking, then, upon completion, such portion will be deeded
back to Seller from Buyer, at no additional charge to Seller.

13.5 Seller agrees to pay its 100% or prorata share of any
applicable costs described in this Sub-sections 13.1 through 13.4 and authorizes
reimbursement to Buyer no later than fifteen (15) days after the work is
completed and approved by the City 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 applicable share thereof. Seller's estimated share plus 15%,
subject to Seller's prior reasonable approval, 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 said 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 its actual applicable share, Seller shall direct the Closing
Agent to pay the retained amount directly to Buyer in partial payment of
Seller's applicable share of the costs if the retainage is less than Seller's
applicable share. Seller shall pay any balance owing of Seller's applicable
share directly to Buyer within 15 days. If the retainage exceeds Seller's
applicable share, the remainder shall be turned over to Seller by the Closing
Agent. Prior to the release of any funds Seller shall be provided with
certification from the City, according to the City's normal and routine
practices, that the work was completed as specified in the approved plans and/or
as required by the City of Lakewood.

13.6 All of the above sub-sections of this Section 13 shall survive
the closing.

8. A new Exhibit A, the legal description of the Property, is attached
hereto and incorporated herein by reference.

3
<PAGE>

9. A new Exhibit B, which is the proposed parcel map (the "Parcel Map"),
lot identification plan and new street Right of Way ("R.O.W.") plan, area
calculations and survey meets and bounds dimensions of the entire approximately
28 acre site, Eagle Drawing Number X327-09 dated September 16, 1997, is attached
hereto and incorporated herein by reference. The old site plan that was
attached to the Agreement as Exhibit B is no longer applicable and is hereby
rescinded. A new Exhibit C which is Buyer's New Site Plan, Eagle Drawing Number
X327-10 dated September 16, 1997, is attached hereto and incorporated by
reference.

10. Parcel A is comprised of lots 1, 2, 8 and 9. Parcel B is comprised of
lots 3, 4, 5, 7 and 10. Parcel C is comprised of Lot 6.

11. Except as modified herein, all of the remaining terms and conditions
of the Agreement remain the same and in full force and effect.

12. The later of the Buyer's signature date and the Seller's signature
date set forth below, shall be the Effective Date of this Second Amendment.

BUYER: EAGLE HARDWARE & GARDEN, INC.

By: /s/ Paul B. Morris
----------------------------------
Typed name: Paul B. Morris
October 31, 1997 Its: Vice President
Buyer's signature date
Address: 981 Powell Avenue S.W.
Renton, WA 98055

SELLER: TERRACE POINT PARTNERSHIP

By: /s/ Daryll Propp
----------------------------------
Typed name: Daryll Propp
November 3, 1997 Its: General Partner
Seller's signature date
Address: 12600 W. Colfax Avenue
Suite B-130
Lakeview, CO 80215

4
<PAGE>

EXHIBIT "A"

LEGAL DESCRIPTION

TO BE ATTACHED UPON
COMPLETION OF NEW SURVEY

EXHIBIT "A"

<PAGE>

EXHIBIT "B"

[SITE PLAN]

<PAGE>

EXHIBIT "C"

[SITE PLAN]

<PAGE>

EXTENSION AGREEMENT

DATE: Effective as of August 30, 1997

PARTIES: Tigard-Tualatin School district 23J "TTSD"
and
Eagle Hardware & Garden, Inc. "Eagle"

RECITALS:

A. TTSD and Eagle entered into an Agreement to Lease dated April 30,
1997, (the "Agreement") covering certain real property in Tigard, Oregon (the
"10.5-acre parcel") and a Put to Lease Property dated April 30, 1997, (the
"Put") covering certain other adjoining real property in Tigard, Oregon (the
"1.52-acre parcel").

B. Section 3(b)(iii) of the Agreement gave Eagle until August 29,
1997, to notify TTSD that Eagle had concluded it will be able to develop the
10.5-acre parcel for the purpose that it intends.

C. Section 9 of the Agreement requires a $150,000 cash payment to
TTSD by Eagle unless, by 2 p.m. on August 29, 1997, Eagle notified TTSD in
writing that it had determined that it will not be able to develop the 10.5-acre
parcel. TTSD and Eagle disagree over whether the $150,000 is now owed by Eagle
to TTSD. Neither party desires to waive any related rights, remedies or
defenses associated with TTSD's potential claim under Section 9.

D. Eagle has concluded that it will take the City of Tigard more
than eight (8) additional months to determine if, and under what conditions, the
City of Tigard will issue the permits and approvals Eagle requires to develop
the 10.5-acre parcel and 1.52-acre parcel.

E. TTSD and Eagle each desire to successfully conclude the leases of
the 10.5-acre and 1.52-acre parcels from TTSD to Eagle and understand the need
to extend the deadlines for waiver of the remaining contingency and Closing.

AGREEMENT:

In consideration of the mutual covenants set forth below, TTSD and
Eagle agree as follows:

1. EXERCISE OF THE PUT. TTSD and Eagle hereby acknowledge that TTSD
has exercised the Put effective as of August 30, 1997. The 30-year ground lease
for the 1.52-acre parcel shall commence on the same date as the 30-year ground
lease for the 10.5-acre parcel (SEE Section 6 below) and shall expire 30 years
thereafter.

-1-
<PAGE>

2. EAGLE'S SOLE REMAINING CONDITION. TTSD has waived the condition
in Section 3(a) of the Agreement, and Eagle has waived the conditions in
Sections 3(b)(i) and 3(b)(ii). Provided that the $190,000 is remitted to TTSD
in accordance with Section 5 below, the August 29, 1997, date set forth in
Section 3(b)(iii) of the Agreement is hereby extended to August 29, 1998.

3. ELIMINATION OF TWO POTENTIAL 30-DAY EXTENSIONS. The two
potential 30-day extensions provided for in Sections 3(c) and 3(d) of the
Agreement are hereby eliminated from the Agreement. There will be no
extensions.

4. CLOSING. Provided that the $190,000 is remitted to TTSD in
accordance with Section 5 below, (a) the Closing shall occur on or before
October 17, 1998, and (b) the dates of September 19, 1997, October 20, 1997, and
November 21, 1997, set forth in Section 8 of the Agreement are hereby modified
to the effect that the sole specified date for the Closing is "on or before
October 17, 1998."

5. PAYMENT OF NONREFUNDABLE FEE. First American Title Insurance
Company of Oregon is currently holding $300,000 cash in escrow for this
transaction. Eagle Shall have until December 15, 1997, to cause First American
to remit $190,000 of the $300,000 to TTSD as a nonrefundable fee designed solely
to compensate TTSD for keeping the 10.5-acre parcel off the market between April
30, 1997, and December 15, 1997. (TTSD shall cooperate with Eagle in causing
First American to remit the $190,000 to TTSD on or before December 15, 1997.)
Eagle agrees that this fee is not a penalty, that this fee is fair and
reasonable compensation for keeping the property off the leasehold market, and
that this fee is nonrefundable. Provided that the $190,000 is remitted to TTSD
by December 15, 1997, and the Closing occurs in accordance with the Agreement
(as modified by this extension agreement), TTSD shall credit the $190,000 to
Eagle as prepaid rent for the 10.5-acre parcel. If Eagle fails to cause the
$190,000 to be remitted to TTSD by December 15, 1997, the Agreement (as modified
by this extension agreement) shall have no further force and effect, except that
the parties shall retain their rights, remedies, and defenses regarding the
potential claim under Section 9 of the Agreement (as to which, see Section 6
below).

6. POTENTIAL CLAIM UNDER SECTION 9 OF THE AGREEMENT. Upon the
timely payment to TTSD of the $190,000 in accordance with Section 5 above, TTSD
shall waive its potential claim under Section 9 of the Agreement (described in
Recital C above). Under all other circumstances, however, the parties shall
retain their rights, remedies, and defenses associated with that potential claim
and none of the terms and provisions of this extension agreement shall be
construed to cause a different or contrary result.

7. EXTENSION OF COMMENCEMENT DATE FOR THE LEASES. The commencement
date for the 30-year ground lease of the 10.5-acre parcel and the 30-year ground
lease of the 1.52-acre parcel shall be the date of Closing, which shall be on or
before October 17, 1998

-2-
<PAGE>

8. REMAINDER OF AGREEMENT. In all other respects, the terms and
conditions of the Agreement and the Put remain the same.

TIGARD-TUALATIN SCHOOL EAGLE HARDWARE & GARDEN,
DISTRICT 23J INC.

Merrily S. Haas

By /s/ Merrily S. Haas By /s/ Paul B. Morris
---------------------------- --------------------------
Chair of the School Board Paul B. Morris
Russell A. Joki
By /s/ Russell A. Joki Vice President
---------------------------- --------------------------
Superintendent (Typed Title)

-3-

<PAGE>

[LETTERHEAD]

September 22, 1997

VIA FACSIMILE AND HAND DELIVERY

Mr. John Solberg
Vice President - Real Estate
OPUS NORTHWEST LLC
200 - 112th Avenue N.E.
Suite 205
Bellevue, WA 98004

Re: Bend - High Desert Village

Dear John:

As you know our respective companies have been unable to agree on the terms of
an extension amendment to the Real Estate Purchase and Sale Agreement dated June
24, 1997 between us and our 90 day Contingency Period in Section 4.5 expires
today.

We decline to satisfy or waive the contingencies in Sections 4.3 and 4.4 and the
Agreement is therefore terminated without further action.

As provided in the Agreement, the Deposit, with interest, is to be refunded to
us. We are, by copy of this letter, so notifying First American Title Insurance
Company of Oregon and ask for your cooperation in getting a speedy return of our
money.

We regret not being able to pursue this project further and wish you well in
your own endeavors.

Sincerely,

EAGLE HARDWARE & GARDEN, INC.

By: /s/ Richard T. Takata
---------------------------
Its: President and C.E.O.
---------------------------

PWG:dw

Copy to: Opus U.S. Corporation William N. Moloney
Attn: Legal Department Attorney for Eagle
800 Opus Center 5711 N.E. Tolo Road
9900 Bren Road East Bainbridge Island, WA 98110
Minnetonka, MN 55343
First American Title Insurance
Tousley Brain PLLC Company of Oregon
Attn: Russell F. Tousley, P.S. Regional Commercial Division
56th Floor, Key Tower 200 S.W. Market Street, Suite 1776
700 Fifth Avenue Portland, OR 97201-5786
Seattle, WA 98104-5056 Escrow #: 97160552

<PAGE>

RECEIVED EAGLE HARDWARE & GARDEN, INC. LETTER DATED SEPTEMBER 22, 1997
RE: BEND - HIGH DESERT VILLAGE

BY: /s/ John Solberg
---------------------------

DATED: 9/22/97 TIME: 11:35 A.M.
------------------------ --------------------

<PAGE>

PURCHASE AGREEMENT AND
JOINT ESCROW INSTRUCTIONS

THIS PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS made this 16th day of
October, 1997, by and between Hilton Hotels Corporation, a Delaware corporation
(hereinafter "Seller") and Eagle Hardware & Garden, Inc. a Washington
corporation (hereinafter "Purchaser") (the "Agreement"). This Agreement
constitutes both an Agreement between Purchaser and Seller and joint escrow
instructions to Commonwealth Land Title Company ("Escrow Agent") with respect to
the transactions contemplated hereby.

WITNESSETH

For and in consideration of the mutual covenants and conditions herein
contained, Seller and Purchaser agree as follows:

1. PROPERTY. Seller agrees to sell and convey, and Purchaser agrees to
purchase and pay for that certain tract of land containing approximately 23
acres located in Washoe County, Nevada (the "Land"), described as tax
assessor parcel no. 040-081-35 ("Parcel 35") and tax assessor parcel no.
040-081-36 ("Parcel 36"), and more particularly described on Exhibit "A"
attached hereto and as generally shown on a reduced partial copy of an
assessor's map attached hereto as Exhibit "B", both of which are incorporated
herein by reference, together with all appurtenances thereto and improvements
thereon; provided, however, excluding any ditch, water or water rights except
for a portion of the Lake Ditch water rights owned by Seller equivalent to
twenty eight (28) acre feet (collectively, the "Property"). Purchaser
acknowledges that the exact description of the Land will be changing in
connection with the Zoning Application, as hereinafter defined.

2. PURCHASE PRICE. The total purchase price (the "Purchase Price") of
the Property shall be an amount equal to the sum of gross square footage (as
hereinafter defined) of Parcel 35 multiplied by $11.00 and the gross square
footage of Parcel 36 multiplied by $9.50. The estimated total Purchase Price
is Ten Million Five Hundred Seventeen Thousand Dollars ($10,517,00.00). Gross
square footage is the square footage of the Land as shown by

<PAGE>

the Survey, as hereinafter defined. The Purchase Price shall be payable at
Closing, as hereinafter defined, in cash. At the Closing, the Deposit shall be
applied to payment of the Purchase Price.

3. DEPOSIT. Within ten (10) days after execution of this Agreement by
Seller, Purchaser shall deliver a deposit (such sum, together with all interest
earned thereon, the "Deposit") in the amount of Two Hundred Ten Thousand Dollars
($210,000.00) in immediately available funds to Escrow Agent, which shall be
deposited into an interest-bearing account by Escrow Agent and held during the
pendency of this Agreement. If Purchaser defaults under this Agreement, Seller
shall be entitled to receive the Deposit as liquidated damages as provided in
this Agreement. If Seller defaults under this Agreement, or if any of
Purchaser's Conditions For Closing (as hereinafter defined) are not satisfied,
or if Purchaser terminates this Agreement as provided herein, Purchaser shall be
entitled to receive a return of the Deposit (subject to the provisions of
Section 4 hereof relating to payment for the Survey and retention of a portion
of the Deposit).

4. FEASIBILITY PERIOD AND CONTINGENCY. For a period of sixty (60) days
after the Effective Date (as hereinafter defined) of this Agreement
("Feasibility Period"), Purchaser shall be entitled to inspect the Property, to
conduct such tests, surveys, analyses and feasibility studies of the Property as
Purchaser deems necessary, advisable or desirable, and to meet with governmental
entities regarding the feasibility of future use or development of the Property,
including, but not limited to, obtain all required governmental approvals and/or
permits to construct and operate Purchaser's desired facility on Parcel 35.
Without limiting the generality of the foregoing, Purchaser (and persons
authorized by Purchaser) shall have the right and authority to go upon the
Property, from time to time on one or more occasions, for feasibility
determinations including, without limitation (1) determining the adequacy, cost
and availability of utilities, access, zoning and other restrictions on the use
of the Property; (2) performing environmental, soils and subsoil tests,
engineering and drainage studies; and (3) determining the economic feasibility
of future development of the Property as related to Purchaser's intended use of
the Property. Purchaser hereby agrees to indemnify and hold harmless Seller, its
successors and assigns, against all

2
<PAGE>

claims, costs loss or damage, including, without limitation, attorneys' fees
and mechanic's liens, arising out of or in any way connected with the
activities of Purchaser, its agents or contractors on or about the Property;
provided, however, that this provision is not intended to apply to the mere
discovery of underground storage tanks or hazardous material (as defined in
section 7.a.10 herein) on or under the Property by Purchaser or its
consultants, or any consequences of such mere discovery. Purchaser shall
immediately repair any condition to the Property resulting from Purchaser's
investigation or testing on the Property which creates or poses a health or
safety hazard or an unreasonable nuisance on the Property, and in the event
Purchaser does not purchase the Property in accordance with this Agreement,
Purchaser shall restore the Property to its condition immediately prior to
any testing or other investigation by Purchaser. The foregoing obligations to
indemnify Seller and restore the Property shall survive the Closing or
termination of this Agreement.

Seller agrees to cooperate with Purchaser in connection with the tests,
investigation and inspection of the Property, and to furnish Purchaser with
copies of any and all surveys, test reports, engineering studies and all
other documents and materials (excluding appraisals) in Seller's possession
or control relating to the Property that may be necessary or appropriate to
complete such investigation and inspection. If Purchaser determines, in
Purchaser's sole and absolute judgment that the Property is suitable for
Purchaser's intended use, Purchaser shall notify Seller and Escrow Agent on
or before expiration of the Feasibility Period, as the same may be extended
as herein provided. Should Purchaser fail to give such notice, this Agreement
shall automatically terminate upon expiration of the Feasibility Period,
Escrow Agent shall return the Deposit to Purchaser, less the cost of the
Survey provided for in Section 5.b below, which amount shall be delivered to
Seller by Escrow Agent, and, except as otherwise provided herein, neither
party shall have any further rights or obligations hereunder.
Notwithstanding, the foregoing, in the event the Zoning Application is fully
approved in all aspects by the Truckee Meadows Regional Planning Commission
and the Handbook, as hereinafter defined, is fully approved by the Reno City
Council, and all appeal periods with respect thereto have expired without an
appeal having been filed, during the Feasibility Period and thereafter
Purchaser elects to terminate this Agreement upon

3
<PAGE>

expiration of the Feasibility Period, Purchaser shall only be entitled to
receive a return of one-half of the Deposit and the remainder of the Deposit
shall be delivered to Seller as additional consideration for entering into this
Agreement.

5. TITLE REPORT AND SURVEY.

a. TITLE REPORT. Within twenty (20) days after the Effective Date
of this Agreement, Seller, at Seller's sole cost and expense, shall deliver or
cause to be delivered to Purchaser a preliminary title report covering the
Property issued by the Escrow Agent, together with true, complete and legible
copies of all documents referred to in such preliminary title report (the
preliminary title report and such documents are referred to collectively as
"Title Report").

b. SURVEY. Within forty-five (45) days after the Effective Date of
this Agreement, at Seller's sole cost and expense (subject to the provisions of
Section 4 above), Seller shall deliver or cause to be delivered to Purchaser a
current ALTA survey of the Property prepared by a licensed surveyor acceptable
to Purchaser and Escrow Agent and in accordance with the 1988 Minimum Standard
Detail Requirements for ALTA/ACSM Land Title Surveys ("Survey"). The Survey
shall show the total gross square footage of the Property.

c. REVIEW OF TITLE REPORT AND SURVEY. Purchaser shall have ten (10)
days from Purchaser's receipt of both the Title Report and the Survey (and any
amendments, supplements and revisions to either in which new or revised
exceptions or items first appear) in which to examine those documents and to
specify to Seller those items reflected thereupon which Purchaser will accept as
permitted exceptions to title ("Permitted Exceptions"), and those items which
Purchaser finds objectionable ("Title Objections"). Notwithstanding the
foregoing, the Zoning Application, as hereinafter defined, shall be a Permitted
Exception. Seller shall use all reasonable efforts to correct or remove all
Title Objections, give Purchaser written notice thereof and deliver at or prior
to Closing an amended Title Report and Survey reflecting the correction or
deletion of such matters. If Purchaser does not deliver to Seller a written
notice specifying those items which are Permitted Exceptions and Title
Objections

4
<PAGE>

within the above-stated time period, then all of the items reflected on the
Title Report shall be considered to be Permitted Exceptions. Any liens affecting
the Property, other than liens specifically provided for in this Agreement,
shall be Title Objections, and Seller shall cause the liens to be released at or
prior to Closing.

d. UNCORRECTED TITLE OBJECTIONS. If Seller fails to cause all of
the Title Objections to be corrected or removed prior to Closing, Purchaser
shall have the following rights:

(1) Purchaser may terminate this Agreement by giving Seller
written notice thereof, in which event the entire Deposit shall be returned to
Purchaser, and both parties shall be released from all further obligations under
this Agreement; or

(2) Purchaser may elect to purchase the Property subject to any
Title Objections not so corrected or removed.

6. ZONING. Purchaser acknowledges that Seller has filed an application
for approval of a Planned Unit Development (the "Zoning Application") affecting
the Property and other property owned by Seller with the Reno City Council, a
copy of which has been provided to Purchaser. Purchaser acknowledges that Seller
shall have the right to modify the Zoning Application in Seller's sole and
absolute discretion except that no modification which has a material adverse
impact on the Property or Purchaser's intended use thereof shall be made without
the prior consent of Purchaser. In the event the Zoning Application is modified
in a manner which has a material adverse impact on the Property or Purchaser's
intended use thereof, Purchaser shall be entitled to terminate this Agreement by
written notice to Seller in which case the Deposit shall be refunded to
Purchaser, and except as otherwise expressly provided herein, neither party
shall have any further rights or obligations hereunder. Purchaser acknowledges
that the terms and conditions of the Zoning Application will affect the Property
and Purchaser's use of the Property and Purchaser agrees to accept the Property
subject to all such terms and conditions, and to perform all terms and
conditions thereof as the same relate to the Property. Without limiting the
foregoing, Purchaser acknowledges that Seller shall have no obligation to
perform any terms or conditions contained in the Zoning Application or any
approval

5
<PAGE>

thereof, including, without limitation, the installation or construction of
any street, access, sidewalk, utilities, traffic signals or other
improvements which may be required or necessary in connection with the Zoning
Application, the approval thereof, or Purchaser's use of the Property and
Purchaser agrees that it shall be responsible for the construction of any
on-site or off-site improvements which may be required in connection with its
use, ownership and/or development of the Property including, without
limitation, streets, sidewalks, access roads, utilities and traffic signals.
Seller shall use reasonable diligence in pursuing approval of the Zoning
Application. Purchaser and Seller acknowledge that Purchaser intends to seek
separate approvals from the city of Reno for Purchaser's intended use on the
Property. Purchaser shall have no right to amend the Zoning Application or
otherwise affect any other property subject to the Zoning Application in
connection with seeking the approvals for its use of the Property without the
prior written consent of Seller, which consent will not be unreasonably
withheld or delayed.

7. REPRESENTATIONS AND WARRANTIES.

a. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby expressly
represents and warrants to Purchaser as follows:

1. SELLER'S AUTHORITY. The person signing this Agreement as Seller
on or behalf of Seller has the full right, power, and authority to enter into
this Agreement as Seller, and to carry out Seller's obligations, including the
conveyance of the Property to Purchaser as provided in this Agreement, without
the joinder of any other person.

2. PARTIES AND POSSESSION. There are no parties claiming adverse
possession of the Property. Other than those items described on Exhibit C
attached hereto and incorporated herein by reference, to Seller's actual
knowledge, Seller is the only party in possession of the Property, and there are
no outstanding written or oral leases or agreements relating to the use or
possession of the Property.

3. COMPLIANCE WITH REGULATIONS. To Seller's actual knowledge, there
is no condition existing with respect to the Property or the operation of the
Property that violates any

6
<PAGE>

restrictive covenant, or any city, county, state or federal regulation,
ordinance, or statute, including the violation of any zoning ordinance or use
restriction, and to Seller's actual knowledge, Seller has not received any
notice relating to any such violation.

4. MECHANIC'S LIEN. At the Closing, there will be no unpaid bills
for labor or materials furnished to Seller in connection with the Property that
would cause a mechanic's or materialmen's lien to be filed on the Property.

5. CONDEMNATION. To Seller's actual knowledge, there is no pending
or threatened condemnation or similar proceeding affecting the Property or any
portion thereof, nor has Seller knowledge that any such action is presently
contemplated. Seller agrees to give Purchaser prompt notice of any actual or
threatened condemnation or similar proceeding between the date hereof and the
Closing.

6. ACTIONS. There is no action, suit, proceeding or claim affecting
Seller or the Property or any portion thereof relating to or presently being
prosecuted for an increase of the assessed valuation or taxes or other
impositions payable in respect to any portion of the Property. Other than the
Zoning Application, there is no action, suit or proceeding pending or, to
Seller's actual knowledge, threatened affecting the Property or seeking to
enjoin the Seller's performance of this Agreement.

7. EVENTS. Seller will promptly notify Purchaser in writing of the
occurrence of any events or happenings which to Seller's knowledge may, would or
could change or vary the state of facts of any warranty or representation made
herein.

8. TRANSFER. The execution and delivery of this Agreement and sale
by Seller and the consummation of the transaction contemplated hereby will not
result in any breach of the terms and conditions of, or constitute a default
under any mortgage, note or other instrument or obligation to which the Seller
or the Property is now party or by which the Seller or the Property herein is
bound or affected or violate any order, writ, injunction or decree of any court
and any litigation to which Seller or the Property is a party or violate any
law.

7
<PAGE>

9. NON-FOREIGN STATUS. Seller is not a "foreign person" as defined
under Section 1445(f) of the Internal Revenue Code; and, at Closing, Seller
shall furnish Purchaser an affidavit confirming same in such form as Purchaser's
attorney may reasonably require.

10. HAZARDOUS MATERIAL. As used in this section, the term "Hazardous
Material" means:

A. Those substances defined as "hazardous substances",
"hazardous material", "toxic substances", "regulated substances", or "solid
waste" in the Toxic Substance Control Act, 15 U.S.C. Section 2601 ET. SEQ.,
as now existing or hereafter amended ("TSCA"), the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C.
Section 9601 ET. SEQ., as no existing or hereafter amended ("RCRA"), the
Federal Hazardous Substances Act, 15 U.S.C. Section 1261 ET. SEQ., as now
existing or hereafter amended ("FHSA"), the Occupational Safety and Health
Act of 1970, 29 U.S.C. Section 651 ET. SEQ., as now existing or hereafter
amended ("OSHA"), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 ET. SEQ., as now existing or hereafter amended ("HMTA"), and the
rules and regulations now in effect or promulgated hereafter pursuant to each
law referenced above;

B. Those substances defined as "hazardous waste", "hazardous
material", or "regulated substances" in Nev. Rev. Stat. ch. 459, 1989 Nev. Stat.
ch. 598 and 1989 Nev. Stat. ch. 363, or in the regulations now existing or
hereafter promulgated pursuant thereto or in the Uniform Fire Code, 1988
edition;

C. Those substances listed in the United States Department of
Transportation table (49 CFR Section 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and

D. Such other substances, mixtures, materials and waste which
are regulated under applicable local, state or federal law, or which are
classified as hazardous or toxic under federal, state or local laws or
regulations, including without limitation oil, gas and other petroleum and
petroleum related materials (all laws, rules and regulations referenced in
paragraphs (a), (b), (c)

8
<PAGE>

and (d) are collectively referred to as "Environmental Laws").

To Seller's actual knowledge, Seller has received no written notice from
any governmental agency or authority regarding the presence of Hazardous
Material on the Property or of any violation of any Environmental Law with
respect to the Property.

b. ACTUAL KNOWLEDGE. As used in this Section 7, "actual knowledge" means
the present actual knowledge of Tom Sears, Director or Corporate Planning for
Seller.

c. PROPERTY "AS-IS". Purchaser hereby acknowledges and agrees that by
accepting a deed to the Property on the Closing date: (a) Purchaser and its
agents have examined and are satisfied with the Property, the boundaries of
the Property, the soils on the Property, any existing easements effecting the
Property, utility availability, and all laws, ordinances, regulations,
permitted uses and other matters relating to the Property; and (b) except and
only to the extent of Seller's express representations and warranties set
forth herein, (i) Purchaser is accepting the Property in its "as is"
condition and confirming that the same is satisfactory for the uses and
purposes intended by Purchaser; (ii) Purchaser is acknowledging that Seller
has not made, does not make, and has not authorized anyone else to make any
representation as to the past, present and future condition or use of the
Property; and (iii) Purchaser is assuming all risks with respect to the
Property.

d. PURCHASER'S WARRANTIES AND REPRESENTATIONS. Purchaser hereby
expressly represents and warrants to Seller that the person signing this
Agreement as Purchaser on behalf of Purchaser has the full right, power, and
authority to enter into this Agreement as Purchaser, and to carry out
Purchaser's obligations without the joinder of any other person.

8. CLOSING

a. DATE AND PLACE. The Closing of the sale of the Property by
Seller to Purchaser (the "Closing") shall occur in the offices of Escrow Agent
at 10:00 a.m. and shall occur no later than thirty (30) days after the later of
(i) the end of the Feasibility Period or (ii) approval of the Zoning Application
and Handbook as provided in Section 8(C)(1); provided, however, in the event
such

9
<PAGE>

approval has not been obtained by March 1, 1998, either party may terminate this
Agreement by notice to the other, the Deposit shall be returned to Purchaser
and, except as otherwise expressly provided herein, neither party shall have any
further rights or obligations hereunder.

b. SELLER'S OBLIGATIONS AT CLOSING. At the Closing, Seller shall
deliver, or cause to be delivered, to Purchaser the following:

(1) GRANT BARGAIN AND SALE DEED. Seller shall execute and
deliver to Escrow Agent for recording a Grant, Bargain and Sale Deed, fully
executed and acknowledged by Seller, conveying fee simple title to the Property
to Purchaser.

(2) OWNER'S TITLE POLICY. Seller shall cause the Escrow Agent
to issue and deliver to Purchaser an ALTA extended coverage owner's policy of
title insurance with such customary endorsements as Purchaser shall reasonably
require ("Owner's Title Policy") from Commonwealth Title Insurance Company, in
the amount of the Purchase Price, insuring that Purchaser is owner of the
Property, subject only to any Permitted Exceptions.

(3) OTHER INSTRUMENTS. Seller shall execute and deliver such
other documents as are customarily executed in the State of Nevada in connection
with the conveyance of real property, including all required closing statements,
releases, affidavits, evidences of authority to execute the documents, and any
other instruments that may be required by the Escrow Agent.

(4) POSSESSION. Seller shall deliver possession of the Property
to Purchaser at Closing.

c. PURCHASER'S OBLIGATIONS AT CLOSING.

(1) CONDITIONS FOR CLOSING. Purchaser shall not be obligated to
close this transaction unless at or prior to the Closing the following
conditions have been satisfied: (i) all material representations and/or
warranties herein shall be true and correct as of the Closing; (ii) Seller shall
have performed all conditions and agreements of it herein; and (iii) the Zoning
Application shall have received final approval from the Truckee

<PAGE>

Meadows Regional Planning Commission and the PUD Handbook in connection with the
Zoning Application (the "Handbook") shall have received final approval from the
Reno City Council and the time for appeal shall have expired without an appeal
having been filed.

(2) PAYMENT OF PURCHASE PRICE. At the Closing, Purchaser shall
pay the Purchase Price in cash (or by Certified Check, Cashier's Check, wire
transfer of funds into a local bank account indicated by Seller, all of which
shall constitute "cash" for purposes of this Agreement), less the amount of the
Deposit to be paid to Seller at the Closing or previously delivered to Seller,
and subject to any adjustments for prorations and other credits provided for in
this Agreement.

d. PRORATIONS. All real estate taxes relating to the Property for
the year of the Closing shall be prorated as of the date of Closing between
Seller and Purchaser. If the amount of taxes for that year are not known at the
time of Closing, the prorations shall be based on an estimate of the taxes for
the year of Closing, and when the tax information becomes available, Seller or
Purchaser may request reimbursement from the other party for any excess amount
charged to that party at the Closing. Likewise, any other amounts normally
prorated between Seller and Purchaser, such as rents, insurance premiums, and
utility bills, if any, shall be prorated between Seller and Purchaser as of the
date of Closing.

e. CLOSING COSTS. Seller and Purchaser each agree to pay the
following costs at the Closing:

(1) PAID BY SELLER. Seller agrees to pay the cost of preparing
the Grant, Bargain and Sale Deed; the premium for the Owner's Title Policy
calculated as though it were a CLTA owner's policy of title insurance; the cost
of the Survey; real property transfer taxes or documentation taxes; the cost of
preparing and recording any releases and other documents necessary to convey the
Property in accordance with this Agreement; one-half (1/2) of any escrow or
closing fee charged by the Escrow Agent; Seller's attorney's fees and any other
similar closing costs customarily paid by a seller of real property.

(2) PAID BY PURCHASER. Purchaser agrees to pay the recording
fee for the Grant, Bargain and Sale Deed; the additional

<PAGE>

premium cost for an ALTA Extended Coverage policy of title insurance in excess
of the premium for a CLTA owner's policy; one-half (1/2) of any escrow or
closing fee charged by the Escrow Agent; Purchaser's attorney's fees and any
other similar closing costs customarily paid by a purchaser of real property.

9. DEFAULT AND REMEDIES.

(a) SELLER'S DEFAULTS. Seller shall be deemed to be in default under this
Agreement (a "Seller Default") if all conditions to Seller's obligations
hereunder have been satisfied and Seller fails or refuses to perform Seller's
obligations at Closing for any reason other than a default by Purchaser or
termination by Seller under some provision of this Agreement and Seller does not
cure such default within ten (10) days after written notice thereof from
Purchaser.

(b) PURCHASER'S REMEDIES. In the event of a Seller Default Purchaser may,
at Purchaser's sole option and as Purchaser's sole and exclusive remedy, either:

(1) Terminate this Agreement by written notice delivered to Seller on
or before the date of Closing and receive a refund of the Deposit; or

(2) Enforce specific performance of this Agreement against Seller.

(c) PURCHASER'S DEFAULT. Purchaser shall be in default under this
Agreement if all of Purchaser's Conditions For Closing have been satisfied and
Purchaser fails or refuses to perform Purchaser's obligations at Closing for any
reason other than a default by Seller or termination by Purchaser under some
provision of this Agreement.

(d) SELLER'S REMEDIES. If Purchaser defaults under this Agreement,
Seller, as Seller's sole and exclusive remedy for such default, shall be
entitled to receive the Deposit from Escrow Agent. It is agreed between
Purchaser and Seller that such amount shall be liquidated damages for a default
of Purchaser under this Agreement because of the difficulty, inconvenience and
uncertainty

12
<PAGE>

of ascertaining actual damages for such default. The foregoing provisions shall
not limit Purchaser's indemnity and restoration obligations contained in Section
4 of this Agreement.

10. BROKERS. At Closing, Seller agrees to pay a brokerage commission in
the total amount of four percent (4%) of the Purchase Price ("Seller's
Commission") to Ekman Properties and Wahl & Associates, Inc. (collectively, the
"Brokers"). Purchaser shall be responsible, and shall pay in full, any
commissions owing to Brokers in excess of Seller's Commission, if any. Seller
agrees to indemnify and hold harmless Purchaser from all loss, damages, cost,
expense and liability relating to any claim for a commission or compensation
asserted against Purchaser by brokers and any other party making such claim in
connection in connection with this transaction, claiming by, through or under
Seller. Purchaser agrees to indemnify and hold harmless Seller from all loss,
damage, cost, expense and liability relating to any claim for a commission with
this transaction, claiming by, through or under Purchaser, including, without
limitation, any claim by Brokers in excess of Seller's Commission.

11. LIKE-KIND EXCHANGE. Purchaser herein acknowledges that it is the
intention of Seller to create an IRS Code Section 1031 Tax Deferred Exchange and
that Seller's rights and obligations under this Agreement may be assigned to The
National 1031 Exchange Corporation, or other accommodator, to facilitate such
exchange. Purchaser shall cooperate with Seller in a manner necessary to enable
Seller to qualify for such exchange at no additional cost or liability to
Purchaser.

12. MISCELLANEOUS.

a. ASSIGNMENT OF CONTRACT. This Agreement may not be assigned by
Purchaser without the prior written consent of Seller, in its discretion.

b. NOTICES.

(1) Any and all notices and demands by any party hereto to any
other party or Escrow Agent, required or desired to be given hereunder shall be
in writing and shall be validly given or made only if personally delivered or
deposited in the United

<PAGE>

States mail, certified or registered, postage prepaid, return receipt requested
or if made by Federal Express or other similar delivery service keeping records
of deliveries and attempted deliveries. Service shall be conclusively deemed
made upon receipt if personally delivered or, if delivered by mail or delivery
service, on the first business day delivery is attempted or upon receipt,
whichever is sooner.

(2) Any notice or demand to Seller shall be addressed to Seller
at:

Hilton Corporate Plaza
3930 Howard Hughes Parkway
Las Vegas, Nevada 89109
Attention: Tom Sears

(3) Any notice or demand to Purchaser shall be addressed to
Purchaser at:

Eagle Hardware & Garden, Inc.
981 Powell Avenue, S.W.
Renton, WA 98055
Attention: President

with a copy to:

William N. Moloney
5711 N.E. Tolo Rd
Bainbridge Island, WA 98110

(4) Any notice or demand to Escrow Agent shall be addressed to
Escrow Agent at:

Commonwealth Land Title Company
888 West 6th Street
Los Angeles, California 90017
Attention: Donald R. Hallman

(5) The parties and Escrow Agent may change their address for
the purpose of receiving notices or demands as herein provided by a written
notice given in the manner aforesaid to the

14
<PAGE>

others, which notice of change of address shall not become effective, however,
until the actual receipt thereof by the others.

d. PARTIES BOUND. This Agreement shall be binding upon and inure to
the benefit of the parties to this Agreement and their respective heirs,
executors, administrators, legal representatives, successors and assigns.

e. SEVERABILITY. If any of the terms and conditions hereof shall
for any reason by held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other of
the terms and conditions hereof and the terms and conditions hereof thereafter
shall be construed as if such invalid, illegal, or unenforceable term or
conditions had never been contained herein.

f. ENTIRE AGREEMENT. The terms and conditions hereof relating to
the subject matter described herein (i) constitute the entire agreement and
understanding between the Seller and the Purchase, (ii) supersede all prior
agreements, and understandings, written or oral, between the Purchaser and the
Seller, and (iii) may not be modified or amended except by an instrument
mutually executed and delivered by the Seller and the Purchaser.

g. TIME. Time is of the essence to the performance of any provision
of this Agreement. If the date for performance of any provisions of the
Agreement is a Saturday, Sunday, or banking holiday (in the State of Nevada),
the date for performance shall be extended until the next day that is not a
Saturday, Sunday or banking holiday.

h. INTERPRETATION. Words of any gender used in this Agreement shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, and vice versa, unless the context
requires otherwise.

i. WAIVER. Either the Purchaser or the Seller may specifically
waive any breach of the terms and conditions hereof by the other party, but no
waiver specified in this Section shall constitute a continuing waiver of similar
or other breaches of the terms and conditions hereof. All remedies, rights,
undertaking, obligations, and agreements contained herein shall be cumulative

<PAGE>

and not mutually exclusive.

j. ATTORNEY'S FEES. Should either the Purchaser or the Seller
employ an attorney or attorneys to enforce any of the terms and conditions
hereof, or to protect any right, title, or interest created or evidenced
hereby, the non-prevailing party in any action pursued in courts of competent
jurisdiction shall pay to the prevailing party all reasonable costs, damages,
and expenses, including attorneys' fees, expended or incurred by the prevailing
party.

k. GOVERNING LAW. The terms and conditions hereof shall be governed
by and construed in accordance with the laws of the State of Nevada. The
exclusive venues for any action in connection with this Agreement shall be Clark
or Washoe County, Nevada.

l. HEADINGS. The headings herein are for reference purposes only
and shall not affect the meaning or interpretation of the terms and conditions
hereof.

m. EFFECTIVE DATE. The Effective Date of this Agreement shall be
the date that this Agreement is fully executed by both Buyer and Seller.

n. MUTUAL CONTRIBUTION. This Agreement has been drafted on the
basis of mutual contribution of language and is not to be construed against any
party hereto as being the drafter or causing the same to be drafted.

o. CONFIDENTIALITY. Except as may otherwise be required by law, the
parties agree that the terms of the proposed sale, including, without
limitation, the terms of this Agreement shall remain confidential and no party
shall disclose any such terms without the prior consent of each other party.
Nothing herein shall prevent a party from disclosing the existence of the
proposed transaction or this Agreement, so long as the terms of the transaction
are not disclosed, or to prevent disclosures which are essential to consummate
the transaction described herein such as disclosure of the purchase price to a
lender or an escrow holder or

16
<PAGE>

on a declaration of value form delivered in connection with the deed to the
Property.

Executed by Purchaser on October 14, 1997.

PURCHASER:
Eagle Hardware & Garden, Inc.
a Washington corporation

By: /s/ Richard T. Takata
--------------------------------------
Name: Richard T. Takata
------------------------------------
Title: President and CEO
-----------------------------------

Executed by Seller on October 16, 1996, 1997.

SELLER:
Hilton Hotels Corporation,
a Delaware corporation

By: /s/ Arthur M. Goldberg
--------------------------------------
Name: Arthur M. Goldberg
------------------------------------
Title: Executive Vice President-Hilton
-----------------------------------
Hotels Corporation and
President-Hilton Gaming

17
<PAGE>

EXHIBIT A

All that property located in Washoe County, Nevada LYING WESTERLY OF THE WEST
LINE OF HIGHWAY 395 SOUTH and described as follows:

APN# 040-081-35 AND 36

Beginning at the intersection of the West line of South Virginia Road with
the South line of a road extending Westerly along the North line of Section
36, Township 19 North, Range 19 East; thence Westerly and along the South
boundary of said road 1980 feet to a post; thence Southerly and along a line
deflected 98 DEG. left from the South line of said East and West road
protracted, 1217.5 feet to the stake on the South bank of a ditch extending
Easterly; thence Easterly along the South bank of said ditch 2166.5 feet,
more or less, to the West line of South Virginia Road; thence Northerly and
along the West line of said South Virginia Road 972 feet to the place of
beginning, situate in the NW 1/4 of NW 1/4 of Section 31, Township 19 North,
Range 20 East, M.D.B. & M., and N 1/2 of NE 1/4 of Section 36, Township 19
North, Range 19 East, M.D.B. &M.

EXCEPTING THEREFROM the parcel of land conveyed to the State of Nevada for
highway and purposes, by Deed recorded in Book 238, Page 313, File No.
176175, Deed Records.

ALSO EXCEPTING THEREFROM the parcel of land conveyed to the State of Nevada
for highway purposes, by Deed recorded March 21, 1978 in Book 1213, Page 8 as
Document No. 520703.

FURTHER EXCEPTING THEREFROM those certain parcels of land condemned to the State
of Nevada by Final Order of Condemnation recorded August 27, 1986 in Book 2395,
Page 334 as Document No. 1095756 and recorded September 17, 1986 in Book 2407,
Page 506 as Document No. 1100934, Official Records.

AND FURTHER EXCEPTING THEREFROM any portion lying within Meadowood Mall Circle
as shown and dedicated by Map recorded January 20, 1993 as Instrument No.
1639406, Map No. 2916 of Official Records.

AND FURTHER EXCEPTING therefrom APN # 040-081-65, more particularly described as
that portion of the foregoing described property which lies easterly of the east
line of Highway 395 South.
<PAGE>

EXHIBIT B

[MAP]
<PAGE>

EXHIBIT C

Grazing lease between Hilton Hotels Corporation and Dominic Peri.

<PAGE>

PROMISSORY NOTE

$11,000,000.00 Seattle, Washington
October 17, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington
corporation, ("BORROWER") promises to pay, in lawful money of the United States
of America, to the order of KEYBANK NATIONAL ASSOCIATION ("LENDER"), at 700
Fifth Avenue, Mailcode WA-31-10-5285, 52nd Floor, Seattle, Washington
98104-5099, or such other place either within or without the State of Washington
as Lender may designate in writing from time to time, the principal sum of
ELEVEN MILLION AND NO/100 DOLLARS ($11,000,000.00) payable with interest as
provided below.

1. INTEREST. The principal balance of this Note shall bear interest at a
variable rate per annum ("LIBOR BASED RATE") equal to one and one quarter
percent (1.25%) above the LIBO Rate. The LIBOR Based Rate shall be adjusted
and based on the LIBO Rate in effect two "BUSINESS DAYS" before each
"ADJUSTMENT DATE."

1.1 DEFINITIONS. The following terms are defined as follows:

(a) LIBO RATE means the percentage rate of interest at which thirty
(30) day deposits in United States dollars in the amount of the LIBOR
Advance are offered to major banks in the London Interbank Market two
Business Days before the applicable Adjustment Date. The LIBO Rate
shall be the "offered to" rate reported by a reliable source for LIBOR
quotes selected by Lender in its sole discretion. If two or more
applicable "offered to" rates are reported by that source, the LIBO
Rate shall be the arithmetic mean of such rates. If LIBOR quotes are
not available in the London Interbank Market, Lender may substitute a
comparable interest rate index selected by Lender in the exercise of
its sole and absolute discretion, and in such case reference herein
to the LIBO Rate shall be to such comparable interest rate index.

(b) ADJUSTMENT DATE means the first day of each calendar month.

(c) BUSINESS DAY means any day on which dealings in deposits in
United States dollars are conducted in the London Interbank Market
other than Saturday, Sunday or a day on which national banks in
Seattle, Washington are authorized or required by law to be closed.

1.2 INAPPLICABILITY OF LIBOR BASED RATE. No LIBOR Based Rate shall
be available if any change in applicable law, rules or regulations, or in
the interpretation thereof by any governmental agency or regulatory
authority with jurisdiction, makes it unlawful for Lender to apply a LIBOR
Based Rate to this Note. In such event, from and after the date on which
the LIBOR Based Rate becomes unlawful, the interest rate on this Note shall
be based on a reasonably comparable interest rate index selected by Lender.

1
<PAGE>

1.3 LIBOR COSTS. Borrower agrees to pay to Lender on demand and as
additional interest, such amounts as will compensate Lender for any cost to
Lender of any reserve or special deposit requirements against assets held
by or deposits in or for the amount of any loans by Lender which are
imposed on or are applicable to Lender from time to time under or pursuant
to (A) any law, treaty or regulation (or any interpretation thereof) now or
hereafter in effect (including Regulation D of the Board of Governors of
the Federal Reserve System), or (B) any other requirement imposed by any
central bank or such other authority, whether or not having the force of
law. A certificate from Lender as to the amount of such cost shall be
binding and conclusive absent manifest error.

2. PAYMENTS. On the date which is one month after the date of this Note, and
continuing on the same day of the month each month thereafter, Borrower shall
make monthly payments of principal and interest consisting of the sum of: (a)
all interest accrued through the last payment date, and (b) a payment of
principal in the amount of NINETY-ONE THOUSAND SIX HUNDRED SIXTY-SIX and 67/100
DOLLARS ($91,666.67).

3. MATURITY. The entire principal balance and all accrued interest shall
become immediately due and payable on November 1, 2007 ("MATURITY DATE").

4. PREPAYMENT. This Note may be prepaid in whole or in part without
prepayment premium upon no less than thirty (30) days prior written notice to
Lender and only upon an Adjustment Date (or if the Adjustment Date is not a
Business Day, on the next succeeding Business Day). No partial prepayment shall
reduce the amounts or postpone the due dates of any monthly payments required
under this Note.

5. LATE CHARGE. If any monthly payment is not made within fifteen (15) days
of the due date, Borrower shall pay to Lender on demand a late charge equal to
five percent (5%) of the amount of the payment to defray the overhead expenses
of the Lender incident to the delay.

6. SECURITY; LOAN DOCUMENTS. This Note is secured by three Deeds of Trust,
Assignments of Rents and Leases and Security Agreements (together, the "DEEDS
OF TRUST") encumbering real and personal property ("PROPERTY") as follows: a
second lien Deed of Trust on the Property located in Pierce County,
Washington; and first-lien Deeds of Trust on the Property located in Utah
County, Utah, and Boulder County, Colorado. The Deeds of Trust prohibit a
transfer or encumbrance of the Property, or the transfer of ownership
interests in the owner of the Property and certain entities holding ownership
interests in the owner of the Property, subject to certain exceptions stated
in the Deeds of Trust. This Note, the $6,000,000 promissory note made by
Borrower in favor of Lender dated the same as this Note, the $8,000,000
promissory note made by Borrower in favor of Lender dated the same as this
Note, the Deeds of Trust, and all related documents and instruments are
collectively referred to as the "LOAN DOCUMENTS."

7. EVENT OF DEFAULT. Any of the following is an "EVENT OF DEFAULT": (a)
Borrower fails to make any delinquent payment under this Note within three (3)
days of Lender's notice

<PAGE>

and demand to Borrower; or (b) there is an Event of Default as defined in any of
the other Loan Documents.

8. REMEDIES; DEFAULT INTEREST. Upon any Event of Default, Lender may
declare the entire principal balance and all accrued interest immediately due
and payable. Whether or not Lender exercises such option to accelerate, the
entire principal balance, all accrued interest, and all other amounts payable
under this Note and the Loan Documents shall bear interest from the date of
the Event of Default at a default rate equal to five percent (5%) plus the
rate of interest otherwise payable under this Note. Such default interest
shall be payable on demand. Lender's failure to exercise any right or remedy
shall not be a waiver of the right to exercise the same upon any subsequent
Event of Default. The foregoing remedies shall be in addition to all other
legal and equitable rights and remedies of Lender.

9. GENERAL.

9.1 WAIVERS. Except as otherwise provided in this Note and the Loan
Documents, Borrower waives all notices required by law; including without
limitation presentment and demand for payment, protest, and notice of
demand, protest, dishonor and nonpayment.

9.2 COLLECTION EXPENSES. Borrower shall reimburse Lender on demand
for all reasonable legal fees and other costs and expenses incurred in
collecting or enforcing this Note and other Loan Documents, and protecting
or realizing on any collateral. Such fees, costs and expenses shall
include those incurred with or without suit and in any appeal, any
proceedings under any present or future federal bankruptcy act or state
receivership, and any post-judgement collection proceedings.

9.3 JOINT AND SEVERAL LIABILITY. Each person or entity executing this
Note as Borrower is jointly and severally liable for all obligations and
liabilities of Borrower under this Note and the Loan Documents.

9.4 BUSINESS PURPOSE. Borrower warrants and represents that all funds
advanced under this Note shall be applied to and are intended solely for
business or commercial purposes.

9.5 GOVERNING LAW. This Note and the other Loan Documents shall be
construed, enforced and otherwise governed exclusively by the laws of the
State of Washington except for matters relating to the validity and
enforcement of the liens of the Deeds of Trust encumbering Property which
is not located in Washington, in which case the laws of the state in which
that Property is located shall govern the validity and enforceability of
the lien of that Deed of Trust. Borrower agrees that to the fullest extent
permitted by law, Washington law shall apply to all actions, defenses and
remedies including without limitation the existence and calculation of any
deficiency judgment upon foreclosure of any of the Deeds of Trust.

9.6 JURISDICTION AND VENUE. Borrower agrees that to the fullest extent
permitted by law, the courts of the State of Washington, at Lender's sole
and exclusive election,

3
<PAGE>

shall have exclusive jurisdiction of all actions, proceedings, defenses or
remedies arising out of the execution or enforcement of this Note or any of
the other Loan documents except as to the validity of or proceedings to
foreclose the liens of the Deeds of Trust encumbering Property which is not
located in Washington, in which case the courts of the state in which that
Property is located shall have exclusive jurisdiction to determine the
validity of nonjudicial proceedings or to conduct judicial proceedings to
foreclose the lien of that Deed of Trust. Borrower consents to personal
jurisdiction in the courts of Washington, Utah and Colorado, as provided
herein. Borrower waives any objection based upon FORUM NON CONVENIENS.

9.7 NOTICE. Any notice to Borrower under this Note shall be to the
address noted below, or such other address as may be designated in writing
by Borrower, and such notice shall be deemed given on the date delivered in
the case of personal delivery or, if mailed, three (3) days after the
postmark thereof.

9.8 REPLACEMENT NOTE. If this Note is lost, stolen, destroyed or
mutilated, Borrower shall execute a replacement note upon the written
request of Lender.

9.9 TIME. Time is of the essence for purposes of this Note and other
Loan Documents.

9.10 ASSIGNMENT OF NOTE. The term "LENDER" includes any subsequent
holder of or participant in this Note and other Loan Documents. Lender may
assign this Note and the Loan Documents in whole or in part. Lender may
make available to any proposed assignee or participant all credit and
financial data with respect to Borrower as may be in the possession of
Lender. Borrower agrees to provide any additional information that any
proposed assignee or participant may reasonably request.

EXCEPT AS OTHERWISE PROVIDED IN THIS NOTE OR THE OTHER LOAN DOCUMENTS, BORROWER
ACKNOWLEDGES LIABILITY FOR PAYMENT OF ALL AMOUNTS OWING UNDER THIS NOTE AND THE
OTHER LOAN DOCUMENTS AND AGREES THAT LENDER DOES NOT HAVE TO FORECLOSE ITS DEED
OF TRUST OR ANY OTHER COLLATERAL BEFORE DEMANDING FULL PAYMENT FROM BORROWER.

- -------------------------------------------------------------------------------
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT, OR FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
- -------------------------------------------------------------------------------

4
<PAGE>

[Remainer of this page is intentially left blank.)

IN WITNESS WHEREOF, borrower executes this Note as of the day and year
first above written.

"BORROWER"

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By: /s/ Ronald Maccarone
--------------------------------
, its EVP/CFO
----------- -------------------
Borrower's Address:
Eagle Hardware & Garden
981 Powell Avenue S.W.
Renton, Washington 98055

Borrower's tax identification number:
91-1465348

<PAGE>

AMENDMENT TO PROMISSORY NOTE

THAT CERTAIN Promissory Note ("NOTE") dated October 17, 1997, in the
principal sum of ELEVEN MILLION and NO/100 DOLLARS ($11,000,000), made by EAGLE
HARDWARE & GARDEN, INC., a Washington corporation, ("BORROWER") and payable to
KEYBANK NATIONAL ASSOCIATION ("LENDER"), is amended as follows:

1. The definition of Adjustment Date in Section 1.1(a) of the Note is
replaced with the following:

ADJUSTMENT DATE means the date of this Note and the fifteenth
(15th) day of each calendar month hereafter.

2. Section 2 of the Note is replaced with the following:

2. PAYMENTS. On the 15th day of November, 1997, and on the
same day of each month thereafter, Borrower shall make monthly
payments of principal and interest consisting of the sum of: (a)
all interest accrued through the last payment date, and (b) a
payment of principal in the amount of NINETY-ONE THOUSAND SIX
HUNDRED SIXTY-SIX and 67/100 DOLLARS ($91,666.67).

The Note, as amended hereby, is affirmed and ratified.

IN WITNESS WHEREOF, Borrower and Lender have signed this Amendment
effective as of this 1st day of November, 1997.

"LENDER"

KEYBANK NATIONAL ASSOCIATION, a national
banking association

By: /s/ Shelly L. Schwab
-----------------------------
Name: Shelly L. Schwab
-----------------------------
Title: Senior Loan Closing Officer
-----------------------------

"BORROWER"

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By: /s/ Ronald P. Maccarone
-----------------------------
Name: Ronald P. Maccarone
-----------------------------
Title: EVP/CFO
-----------------------------

<PAGE>

PROMISSORY NOTE

$8,000,000.00 Seattle, Washington
October 17, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington
corporation, ("BORROWER") promises to pay, in lawful money of the United States
of America, to the order of KEYBANK NATIONAL ASSOCIATION ("LENDER"), at 700
Fifth Avenue, Mailcode WA-31-10-5285, 52nd Floor, Seattle, Washington
98104-5099, or such other place either within or without the State of Washington
as Lender may designate in writing from time to time, the principal sum of EIGHT
MILLION and NO/100 DOLLARS ($8,000,000.00) payable with interest as provided
below.

1. INTEREST. The principal balance of this Note shall bear interest at a
variable rate per annum ("LIBOR BASED RATE") equal to one and one quarter
percent (1.25%) above the LIBO Rate. The LIBOR Based Rate shall be adjusted and
based on the LIBO Rate in effect two "BUSINESS DAYS" before each "ADJUSTMENT
DATE."

1.1 DEFINITIONS. The following terms are defined as follows:

(a) LIBO RATE means the percentage rate of interest at which thirty
(30) day deposits in United States dollars in the amount of the LIBOR
Advance are offered to major banks in the London Interbank Market two
Business Days before the applicable Adjustment Date. The LIBO Rate
shall be the "offered to" rate reported by a reliable source for LIBOR
quotes selected by Lender in its sole discretion. If two or more
applicable "offered to" rates are reported by that source, the LIBO
Rate shall be the arithmetic mean of such rates. If LIBOR quotes are
not available in the London Interbank Market, Lender may substitute a
comparable interest rate index selected by Lender in the exercise of
its sole and absolute discretion, and in such case reference herein to
the LIBO Rate shall be to such comparable interest rate index.

(b) ADJUSTMENT DATE means the first day of each calendar month.

1.2 INAPPLICABILITY OF LIBOR BASED RATE. No LIBOR Based Rate shall be
available if any change in applicable law, rules or regulations, or in the
interpretation thereof by any governmental agency or regulatory authority
with jurisdiction, makes it unlawful for Lender to apply a LIBOR Based Rate
to this Note. In such event, from and after the date on which the LIBOR
Based Rate becomes unlawful, the interest rate on this Note shall be based
on a reasonably comparable interest rate index selected by Lender.

1
<PAGE>

2. PAYMENTS. On the date which is one month after the date of this Note, and
continuing on the same day of the month each month thereafter, Borrower shall
make monthly payments of principal and interest consisting of the sum of: (a)
all interest accrued through the last payment date, and (b) a payment of
principal in the amount of SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX and 67/100
DOLLARS ($66,666.67).

3. MATURITY. The entire principal balance and all accrued interest shall
become immediately due and payable on November 1, 2007 ("MATURITY DATE").

6. SECURITY; LOAN DOCUMENTS. This Note is secured by three Deeds of Trust,
Assignments of Rents and Leases and Security Agreements (together, the "DEEDS
OF TRUST") encumbering real and personal property ("PROPERTY") as follows: a
second lien Deed of Trust on the Property located in Utah County, Utah; and
first-lien Deeds of Trust on the Property located in Boulder County,
Colorado, and Pierce County, Washington. The Deeds of Trust prohibit a
transfer or encumbrance of the Property, or the transfer of ownership
interests in the owner of the Property and certain entities holding ownership
interests in the owner of the Property, subject to certain exceptions stated
in the Deeds of Trust. This Note, the $8,000,000 promissory note made by
Borrower in favor of Lender dated the same as this Note, the $11,000,000
promissory note made by Borrower in favor of Lender dated the same as this
Note, the Deeds of Trust, and all related documents and instruments are
collectively referred to as the "LOAN DOCUMENTS."

7. EVENT OF DEFAULT. Any of the following is an "EVENT OF DEFAULT": (a)
Borrower fails to make any delinquent payment under this Note within three (3)
days of Lender's notice and demand to Borrower; or (b) there is an Event of
Default as defined in any of the other Loan Documents.

2
<PAGE>

8. REMEDIES; DEFAULT INTEREST. Upon any Event of Default, Lender may declare
the entire principal balance and all accrued interest immediately due and
payable. Whether or not Lender exercises such option to accelerate, the entire
principal balance, all accrued interest, and all other amounts payable under
this Note and the Loan Documents shall bear interest from the date of the Event
of Default at a default rate equal to five percent (5%) plus the rate of
interest otherwise payable under this Note. Such default interest shall be
payable on demand. Lender's failure to exercise any right or remedy shall not
be a waiver of the right to exercise the same upon any subsequent Event of
Default. The foregoing remedies shall be in addition to all other legal and
equitable rights and remedies of Lender.

9. GENERAL

9.2 COLLECTION EXPENSES. Borrower shall reimburse Lender on demand for
all reasonable legal fees and other costs and expenses incurred in
collecting or enforcing this Note and the other Loan Documents, and
protecting or realizing on any collateral. Such fees, costs and expenses
shall include those incurred with or without suit and in any appeal, any
proceedings under any present or future federal bankruptcy act or state
receivership, and any post-judgment collection proceedings.

9.4 BUSINESS PURPOSES. Borrower warrants and represents that all funds
advanced under this Note shall be applied to and are intended solely for
business or commercial purposes.

9.6 JURISDICTION AND VENUE. Borrower agrees that to the fullest extent
permitted by law, the courts of the State of Washington, at Lender's sole
and exclusive election, shall have exclusive jurisdiction of all actions,
proceedings, defenses or remedies arising out of the execution or
enforcement of this Note or any of the other Loan Documents except as to
the validity of or proceedings to foreclose the liens of the

3
<PAGE>

Deeds of Trust encumbering Property which is not located in Washington, in
which case the courts of the state in which that Property is located shall
have exclusive jurisdiction to determine the validity of nonjudicial
proceedings or to conduct judicial proceedings to foreclose the lien of
that Deed of Trust. Borrower consents to personal jurisdiction in the
courts of Washington, Utah and Colorado, as provided herein. Borrower
waives any objection based upon FORUM NON CONVENIENS.

9.8 REPLACEMENT NOTE. If this Note is lost, stolen, destroyed or
mutilated, Borrower shall execute a replacement note upon the written
request of Lender.

9.9 TIME. Time is of the essence for purposes of this Note and the other
Loan Documents.

9.10 ASSIGNMENT OF NOTE. The term "LENDER" includes any subsequent holder
of or participant in this Note and the other Loan Documents. Lender may
assign this Note and the Loan Documents in whole or in part. Lender may
make available to any proposed assignee or participant all credit and
financial data with respect to Borrower as may be in the possession of
Lender. Borrower agrees to provide any additional information that any
proposed assignee or participant may reasonably request.

- --------------------------------------------------------------------------------
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
- --------------------------------------------------------------------------------

[Remainder of this page is intentionally left blank.]

<PAGE>
IN WITNESS WHEREOF, Borrower executes this Note as of the day and year
first above written.

"BORROWER"

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By: /s/ Ronald Maccarone
-----------------------------------
, its EVP/CFO
---------- ----------------

Borrower's Address:
Eagle Hardware & Garden
981 Powell Avenue S.W.
Renton, Washington 98055

Borrower's tax identification number:
91-1465348

<PAGE>

AMENDMENT TO PROMISSORY NOTE

THAT CERTAIN Promissory Note ("NOTE") dated October 17, 1997, in the
principal sum of EIGHT MILLION and NO/100 DOLLARS ($8,000,000), made by EAGLE
HARDWARE & GARDEN, INC., a Washington corporation, ("BORROWER") and payable to
KEYBANK NATIONAL ASSOCIATION ("LENDER"), is amended as follows:

1. The definition of Adjustment Date in Section 1.1(a) of the Note is
replaced with the following:

ADJUSTMENT DATE means the date of this Note and the fifteenth
(15th) day of each calendar month hereafter.

2. Section 2 of the Note is replaced with the following:

2. PAYMENTS. On the 15th day of November, 1997, and on the
same day of each month thereafter, Borrower shall make monthly
payments of principal and interest consisting of the sum of: (a)
all interest accrued through the last payment date, and (b) a
payment of principal in the amount of SIXTY-SIX THOUSAND SIX
HUNDRED SIXTY-SIX and 67/100 DOLLARS ($66,666.67).

The Note, as amended hereby, is affirmed and ratified.

IN WITNESS WHEREOF, Borrower and Lender have signed this Amendment
effective as of this 1st day of November, 1997.

"LENDER"

KEYBANK NATIONAL ASSOCIATION, a national
banking association

By: /s/ Shelly L. Schwab
-----------------------------
Name: Shelly L. Schwab
-----------------------------
Title: Senior Loan Closing Officer
-----------------------------

"BORROWER"

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By: /s/ Ronald P. Maccarone
-----------------------------
Name: Ronald P. Maccarone
-----------------------------
Title: EVP/CFO
-----------------------------

<PAGE>

PROMISSORY NOTE

$6,000,000.00 Seattle, Washington
October 17, 1997

FOR VALUE RECEIVED, EAGLE HARDWARE & GARDEN, INC., a Washington
corporation, ("BORROWER") promises to pay, in lawful money of the United States
of America, to the order of KEYBANK NATIONAL ASSOCIATION ("LENDER"), at 700
Fifth Avenue, Mailcode WA-31-10-5285, 52nd Floor, Seattle, Washington
98104-5099, or such other place either within or without the State of Washington
as Lender may designate in writing from time to time, the principal sum of SIX
MILLION and NO/100 DOLLARS ($6,000,000.00) payable with interest as provided
below.

1. INTEREST. The principal balance of this Note shall bear interest at a
variable rate per annum ("LIBOR BASED RATE") equal to one and one quarter
percent (1.25%) above the LIBO Rate. The LIBOR Based Rate shall be adjusted and
based on the LIBO Rate in effect two "BUSINESS DAYS" before each "ADJUSTMENT
DATE."

1.1 DEFINITIONS. The following terms are defined as follows:

(a) LIBO RATE means the percentage rate of interest at which thirty (30)
day deposits in United States dollars in the amount of the LIBOR Advance
are offered to major banks in the London Interbank Market two Business Days
before the applicable Adjustment Date. The LIBO Rate shall be the "offered
to" rate reported by a reliable source for LIBOR quotes selected by Lender
in its sole discretion. If two or more applicable "offered to" rates are
reported by that source, the LIBO Rate shall be the arithmetic mean of such
rates. If LIBOR quotes are not available in the London Interbank Market,
Lender may substitute a comparable interest rate index selected by Lender
in the exercise of its sole and absolute discretion, and in such case
reference herein to the LIBO Rate shall be to such comparable interest rate
index.

(b) ADJUSTMENT DATE means the first day of each calendar month.

(c) BUSINESS DAY means any day on which dealings in deposits in United
States dollars are conducted in the London Interbank Market other than
Saturday, Sunday or a day on which national banks in Seattle, Washington
are authorized or required by law to be closed.

1.2 INAPPLICABILITY OF LIBOR BASED RATE. No LIBOR Based Rate shall be
available if any change in applicable law, rules or regulations, or in the
interpretation thereof by any governmental agency or regulatory authority
with jurisdiction, makes it unlawful for Lender to apply a LIBOR Based Rate
to this Note. In such event, from and after the date on which the LIBOR
Based Rate becomes unlawful, the interest rate on this Note shall be based on
a reasonably comparable interest rate index selected by Lender.

1
<PAGE>

1.3 LIBOR COSTS. Borrower agrees to pay to Lender on demand and as
additional interest, such amounts as will compensate Lender for any cost to
Lender of any reserve or special deposit requirements against assets held by
or deposits in or for the amount of any loans by Lender which are imposed on
or are applicable to Lender from time to time under or pursuant to (A) any
law, treaty or regulation (or any interpretation thereof) now or hereafter in
effect (including Regulation D of the Board of Governors of the Federal
Reserve System), or (B) any other requirement imposed by any central bank or
such other authority, whether or not having the force of law. A certificate
from Lender as to the amount of such cost shall be binding and conclusive
absent manifest error.

3. MATURITY. The entire principal balance and all accrued interest shall
become immediately due and payable on November 1, 2007 ("MATURITY DATE").

6. SECURITY; LOAN DOCUMENTS. This Note is secured by three Deeds of Trust,
Assignments of Rents and Leases and Security Agreements (together, the "DEEDS OF
TRUST") encumbering real and personal property ("PROPERTY") as follows: a
second lien Deed of Trust on the Property located in Boulder County, Colorado;
and first-lien Deeds of Trust on the Property located in Utah County, Utah, and
Pierce County, Washington. The Deeds of Trust prohibit a transfer or
encumbrance of the Property, or the transfer of ownership interests in the owner
of the Property and certain entities holding ownership interests in the owner of
the Property, subject to certain exceptions stated in the Deeds of Trust. This
Note, the $8,000,000 promissory note made by Borrower in favor of Lender dated
the same as this Note, the $11,000,000 promissory note made by Borrower in favor
of Lender dated the same as this Note, the Deeds of Trust, and all related
documents and instruments are collectively referred to as the "LOAN DOCUMENTS."

2
<PAGE>

8. REMEDIES; DEFAULT INTEREST. Upon any Event of Default, Lender may declare
the entire principal balance and all accrued interest immediately due and
payable. Whether or not Lender exercises such option to accelerate, the entire
principal balance, all accrued interest, and all other amounts payable under
this Note and the Loan Documents shall bear interest from the date of the Event
of Default at a default rate equal to five percent (5%) plus the rate of
interest otherwise payable under this Note. Such default interest shall be
payable on demand. Lender's failure to exercise any right or remedy shall not
be a waiver of the right to exercise the same upon any subsequent Event of
Default. The foregoing remedies shall be in addition to all other legal and
equitable rights and remedies of Lender.

9. GENERAL.

9.2 COLLECTION EXPENSES. Borrower shall reimburse Lender on demand for
all reasonable legal fees and other costs and expenses incurred in collecting
or enforcing this Note and the other Loan Documents, and protecting or
realizing on any collateral. Such fees, costs and expenses shall include
those incurred with or without suit and in any appeal, any proceedings under
any present or future federal bankruptcy act or state receivership, and any
post-judgment collection proceedings.

9.4 BUSINESS PURPOSE. Borrower warrants and represents that all funds
advanced under this Note shall be applied to and are intended solely for
business or commercial purposes.

9.5 GOVERNING LAW. This Note and the other Loan Documents shall be
construed, enforced and otherwise governed exclusively by the laws of the
State of Washington except for matters relating to the validity and
enforcement of the liens of the Deeds of Trust encumbering Property which is
not located in Washington, in which case the laws of the state in which that
Property is located shall govern the validity and enforceability of the lien
of that Deed of Trust. Borrower agrees that to the fullest extent permitted
by law, Washington law shall apply to all actions, defenses and remedies
including without limitation the existence and calculation of any deficiency
judgment upon foreclosure of any of the Deeds of Trust.

9.6 JURISDICTION AND VENUE. Borrower agrees that to the fullest extent
permitted by law, the courts of the State of Washington, at Lender's sole and
exclusive election, shall have exclusive jurisdiction of all actions,
proceedings, defenses or remedies arising out of the execution or enforcement
of this Note or any of the other Loan Documents except as to the validity of
or proceedings to foreclose the liens of the

3
<PAGE>
Deeds of Trust encumbering Property which is not located in Washington, in
which case the courts of the state in which that Property is located shall
have exclusive jurisdiction to determine the validity of nonjudicial
proceedings or to conduct judicial proceedings to foreclose the lien of that
Deed of Trust. Borrower consents to personal jurisdiction in the courts of
Washington, Utah and Colorado, as provided herein. Borrower waives any
objection based upon FORUM NON CONVENIENS.

9.7 NOTICE. Any notice to Borrower under this Note shall be to the
address noted below, or such other address as may be designated in writing by
Borrower, and such notice shall be deemed given on the date delivered in the
case of personal delivery or, if mailed, three (3) days after the postmark
thereof.

9.8 REPLACEMENT NOTE. If this Note is lost, stolen, destroyed or
mutilated, Borrower shall execute a replacement note upon the written request
of the Lender.

9.9 TIME. Time is of the essence for purposes of this Note and the other
Loan Documents.

9.10 ASSIGNMENT OF NOTE. The term "LENDER" includes any subsequent holder
of or participant in this Note and the other Loan Documents. Lender may
assign this Note and the Loan Documents in whole or in part. Lender may make
available to any proposed assignee or participant all credit and financial
data with respect to Borrower as may be in the possession of the Lender.
Borrower agrees to provide any additional information that any proposed
assignee or participant may reasonably request.

[Remainder of this page is intentionally left blank.)

4
<PAGE>

IN WITNESS WHEREOF, Borrower executes this Note as of the day and year
first above written.

"BORROWER"

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By: Ronald Maccarone
----------------------------
its EVP/CFO
---------- --------------

Borrower's Address:
Eagle Hardware & Garden
981 Powell Avenue S.W.
Renton, Washington 98055

Borrower's tax identification number:
91-1465348

<PAGE>

AMENDMENT TO PROMISSORY NOTE

THAT CERTAIN Promissory Note ("NOTE") dated October 17, 1997, in the
principal sum of SIX MILLION and NO/100 DOLLARS ($6,000,000), made by EAGLE
HARDWARE & GARDEN, INC., a Washington corporation, ("BORROWER") and payable to
KEYBANK NATIONAL ASSOCIATION ("LENDER"), is amended as follows:

1. The definition of Adjustment Date in Section 1.1(a) of the Note is
replaced with the following:

ADJUSTMENT DATE means the date of this Note and the fifteenth
(15th) day of each calendar month hereafter.

2. Section 2 of the Note is replaced with the following:

The Note, as amended hereby, is affirmed and ratified.

IN WITNESS WHEREOF, Borrower and Lender have signed this Amendment
effective as of this 1st day of November, 1997.

"LENDER"

KEYBANK NATIONAL ASSOCIATION, a national
banking association

By: /s/ Shelly L. Schwab
-----------------------------
Name: Shelly L. Schwab
-----------------------------
Title: Senior Loan Closing Officer
-----------------------------

"BORROWER"

EAGLE HARDWARE & GARDEN, INC., a
Washington corporation

By: /s/ Ronald P. Maccarone
-----------------------------
Name: Ronald P. Maccarone
-----------------------------
Title: EVP/CFO
-----------------------------

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT

This agreement (the "Agreement") is dated October 20, 1997 and entered into
by and between CFJ PROPERTIES, a Utah General Partnership ("Seller") and EAGLE
HARDWARE & GARDEN, INC., a Washington corporation, or assigns ("Buyer") for
purchase and sale of a portion of the Flying J Travel Plaza real property
situate in the City of Boise, Ada County , Idaho, consisting of approximately
13.24 acres of improved real property located on the north side of Overland Road
between St. Vincent Way to the west and S. Cole Road to the east and bounded by
I-84 on the north, together with any improvements thereon (exclusive of the
improvements to be removed by Seller pursuant to Section 5.1 below) and all
rights appurtenant thereto (the "Property"). The Property is shown on the
proposed site plan dated October 6, 1997, and numbered X-443-C (the "Site Plan")
and attached hereto as Exhibit A. The Site Plan identifies an Outpad A which is
not a part of the Property. The legal description of Seller's entire tract is
set forth in Exhibit B attached hereto. Following completion of the ALTA/ACSM
survey and parcel map described in Section 3.2 below, the legal description and
parcel map of the Property shall be attached to this Agreement as Exhibit C and
made a part hereof.

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 Three Million Four Hundred Twenty-five Thousand Dollars ($3,425,000).
The purchase price, 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 the First American Title Insurance Company agent
in Salt Lake City, Utah (the "Closing Agent"). Within ninety (90) business days
after the Effective Date, Buyer will deposit additional earnest money of fifty
thousand dollars ($50,000) (the "Additional Deposit") with the Closing Agent.
The Closing Agent shall place the Deposits 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 under this Agreement, the Deposits, and
all interest accrued thereon, shall be returned to Buyer. In the event of
Buyer's default under this Agreement, Seller shall have as its sole remedy the
right to terminate this Agreement and retain the Deposits, together with accrued
interest thereon, as liquidated damages, except that if Buyer notifies Seller
that all of its conditions precedent except Section 4.8 have been satisfied as
described in Section 5.1 Seller shall be entitled to specific performance as a
remedy if Seller presents Buyer with an environmentally clean site and Buyer
refuses to close.

3. TITLE INSURANCE AND SURVEY.

3.1 PRELIMINARY TITLE INSURANCE COMMITMENT. Within fifteen (15)
days after the Effective Date, Seller shall provide Buyer with a current
preliminary commitment for owner's title insurance with extended coverage (ALTA
Form 1970-B, as revised in 1984 or if unavailable, Form B-1987) issued by the
Closing Agent, with copies of all documents listed as exceptions set forth
therein. See Section 5.3 regarding added cost of extended coverage title
insurance.

3.2 ALTA/ACSM SURVEY. As soon as possible after the Effective Date,
Buyer shall contract for a new ALTA/ACSM survey with land area certification of
the Property, at Buyer's cost. The plan and legal descriptions establishing
Outpad A shall be incorporated into the new ALTA/ACSM survey. The additional
costs of including Outpad A in the survey, legal descriptions, and any costs or
expenses of any kind relating to the procurement of the required replatting or
lot line adjustments to create Outpad A from whatever governmental agencies have
jurisdiction shall be at Seller's sole obligation and cost.

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3.3 TITLE AND SURVEY APPROVAL PERIODS. Buyer shall have fifteen
(15) days from the later receipt of either the preliminary commitment or the
completed 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 prior to such removal or receipt of such reasonable
written assurances, terminate this Agreement by giving notice of such
termination to Seller. If, within the same twenty (20) days, Seller notifies
Buyer in writing that it will not remove an exception(s), Seller may terminate
this Agreement unless Buyer waives its disapproval within seven (7) days after
receipt of such notice from 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.

4. CONTINGENCIES. Buyer's obligation to purchase the Property is
subject to Buyer's satisfaction or waiver, in writing, of the following
conditions precedent, in Buyer's sole and absolute discretion, on or before the
dates described below:

4.1 FEASIBILITY. Buyer's sole determination that its proposed site
plan, building 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 Buyer's intended use.

4.2 STUDIES. Buyer's approval of all soils, engineering, seismic,
environmental, topography, hazardous waste, geotechnical, wetlands, drainage and
other studies that may be deemed necessary by Buyer or required by any
governmental agency in connection with the Property and Buyer's planned
development and use of the Property.

Buyer and the Buyer's employees, agents, representatives, engineers,
surveyors and any other consultants or services that Buyer deems necessary shall
have the right, from time to time during the Feasibility Period, to enter upon
the Property for the purposes of inspection, soil studies, survey, preparation
of plans, taking of measurements and obtaining such other information and data
as may be necessary or desirable to determine the condition of the Property and
its acceptability for the Buyer's intended purpose. The Buyer shall not allow
any liens to be attached to the Property in connection with the Buyer's
investigations pursuant to this Section 4.2 and shall indemnify, defend and hold
Owners harmless from and against all claims which arise from the Buyer's actions
and omissions taken pursuant to this Section; provided, however, this sentence
is not intended to apply to the mere discovery of underground storage tanks or
any hazardous materials or toxic waste on or under the Property or any
consequences or action taken as a result of such discovery.

4.3 APPROVALS AND PERMITS. Issuance of any and all required or
applicable governmental approvals including but not limited to PUD (if required)
and plat of the Property by the City or County, an environmental impact report
(EIR)(if required), replat or lot line adjustment of the Property, subdivision
approvals (by Seller, see Section 3.2), rezoning approvals, annexations (if
applicable), Idaho Department of Transportation highway access and traffic
signal approvals, City and/or County building permits, use permits, sign
permits, design review approvals, site plan approvals, parking variances, street
vacancies, environmental certifications, and approvals of any kind from any and
all governmental agencies having jurisdiction over the Property, necessary for
Buyer to develop, construct its store building, site improvements, drive through
building materials yard, garden yard and greenhouse and any other improvements
that Buyer deems necessary in its sole determination to conduct and operate its
selected business

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operations on the Property. The timing, conditions and cost of any or all of
the permits and approvals (including any mitigation fees) must be satisfactory
to Buyer in its sole discretion. Seller shall create a separate legal parcel
containing only the Property (the "Eagle Parcel") prior to closing and at the
earliest possible date if requested by Buyer to enable Buyer to expeditiously
comply and proceed with the requirements of any governmental authority to obtain
any and all permits and approvals. Buyer shall pay all costs involved in
obtaining any of the permits and approvals of this Subsection 4.3.

4.4 TIME PERIODS. Buyer shall have sixty (60) days from the
Effective Date (the "Feasibility Period") to satisfy or waive the contingencies
set forth in Sections 4.1 and 4.2. Buyer shall have ONE HUNDRED TWENTY (120)
DAYS (the "Contingency Period") from the end of the Feasibility Period to
satisfy or waive the contingencies set forth in Sections 4.3, 4.5 and 4.6. If
Buyer does not satisfy or waive the contingencies in writing by the applicable
dates, or if Buyer notifies Seller in writing at any time prior to the end of
the Contingency Period that it has decided not to pursue the project any further
and that this Agreement is terminated, the Deposit, with interest, shall be
refunded to Buyer and the Agreement shall terminate without further action and
be of no further force or effect.

If Buyer has satisfied or waived the contingencies set forth in
Sections 4.1 and 4.2 and is diligently pursuing the applicable required
approvals and permits set forth in Section 4.3, Buyer shall be allowed one (1)
sixty (60) day extension of the Contingency Period. Notice of the exercising of
the extension period shall be given at least ten (10) days prior to the end of
the Contingency Period. During any such extension period, Buyer shall be
charged interest at the rate of 8-1/2% per annum on the purchase price on a per
diem basis until such time as Buyer notifies Seller that the contingencies in
Section 4.3 are satisfied or waived. In the event that Buyer closes its
purchase of the Property pursuant to this Agreement, all of the accrued interest
shall be added to the purchase price at closing. If the sale does not close for
any reason other than Buyer's default, Buyer shall have no obligation to pay any
of the accrued interest.

4.5 SIGNS. Seller and Buyer shall each be allowed to erect separate
pylon signs at the locations shown on Exhibit A (Seller's pylon at location A at
the southeast corner of Outpad A and buyer's pylon at location B at the
southwest corner of the property). If the applicable governing sign codes and
ordinances prohibit two separate pylon signs fronting on Overland Road then
Seller and Buyer shall share a single pylon to be located at location A on
Outpad A. The maximum permitted sign face area (on each side) allowed by code
and the total cost of the single pylon sign shall both be shared at 70% by Buyer
and 30% by Seller. All other signs of Buyer and Seller shall be limited only to
the applicable governing sign codes and ordinances.

4.6 WAL-MART EASEMENT. Buyer obtaining full reciprocal access
easements between the Property and the Wal-Mart development to the west of the
Property. Such easements shall also be for the benefit of Outpad A.

4.7 RECIPROCAL ACCESS EASEMENT AGREEMENT. Buyer and Seller shall
enter into a reciprocal access easement agreement (the "R.E.A.") for the drive
aisles along the east, west and north sides of Outpad A as shown on Exhibit A
hereto. The R.E.A. shall be drafted, agreed to and executed during the first
sixty (60) days of the Contingency Period and recorded at closing.

4.8 ENVIRONMENTALLY CLEAN SITE. Seller shall, at its own cost and
expense, provide Buyer with an environmentally clean site and obtain
certifications and other approvals by and from the applicable local, state and
federal agencies that the Property is an environmentally clean site, including
but not limited to the removal of all underground storage tanks, pipelines, all
contaminated soils and any other toxic or contaminated materials, wastes and
other related items, governed by the Federal Environmental Protection Agency and
the Idaho Department of Ecology enforced laws, regulations, statutes, ordinances
and requirements. Prior to closing, Seller shall

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provide Buyer with either (a) a complete copy of a "No Further Action" letter
pertaining to the Property from the Idaho Department of Ecology (the "DOE") or
if applicable removal of the Property from any state or federal DOE - Toxics
Cleanup Program C&SCS (Contaminated and Suspected Contaminated Sites) List (the
"DOE List") or (b) a report from an independent, reputable, third party
environmental engineering firm certifying, to the reasonable satisfaction of
Buyer, that all levels of contaminants are below acceptable levels. If closing
occurs based on (b) above, Seller covenants to take prompt affirmative action to
obtain a "No Further Action" letter or cause the Property to be removed from the
DOE List as soon as possible following closing. This condition must be
satisfied prior to closing. If Seller is unable or unwilling to obtain such
environmental assurances or reach a mutually satisfactory agreement with Buyer
for Buyer's participation in obtaining such assurances, either party shall have
the right to terminate this Agreement and the Deposit shall be returned to Buyer
promptly thereafter.

4.9 SELLER'S CONTINGENCY. Seller's obligation to sell the Property
is subject to Seller being able to exercise its option to purchase the Property
from FFCA on terms acceptable to Seller and acquiring title to the property
shortly before closing.

5. CLOSING.

5.1 TIME FOR CLOSING; TERMINATION DATE. This sale shall be closed
in the office of the Closing Agent within six (6) months after all of Buyer's
conditions precedent except Section 4.8 have been satisfied or waived by Buyer.
During the six (6) months following Buyer's notification to Seller that all of
its conditions precedent except Section 4.8 have been satisfied or waived,
Seller shall discontinue its operations and dismantle and remove all of its
property from the Property site as soon as possible. Thereafter, upon Seller's
presentation to Buyer of an environmentally clean site and satisfaction of
Section 4.8, the sale shall be closed within fifteen (15) working days on a date
mutually agreeable to Buyer and 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.

5.2 ACCEPTANCE OF EXCEPTIONS. Neither Seller nor Buyer shall be
required to close, and the Deposit and all interest thereon shall be returned to
Buyer, if any exception or item disapproved by Buyer as herein provided cannot
be removed by the date of closing; provided, however, that Buyer may elect to
waive any disapproved exceptions or items and close on the remaining terms.
Notwithstanding the foregoing, Seller may remove any defect or encumbrance
attaching by, through or under Seller after the Effective Date of this Agreement
or may terminate the Agreement as provided in Section 3.3. Exceptions to be
discharged by Seller may be paid out of the purchase price at closing.

5.3 PRORATIONS; CLOSING COSTS. Taxes and assessments for the
current year and utilities constituting liens shall be prorated as of 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 special warranty deed, and one-half of Closing Agent's
escrow fee and the difference in the cost of the premium between standard
owner's and extended coverage.

5.4 POSSESSION. Buyer shall be entitled to possession upon closing.

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<PAGE>

6. CONVEYANCE OF TITLE. On closing, Seller shall execute and deliver to
Buyer a 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 appearing on the preliminary commitment for title
insurance that are approved by Buyer (the "Permitted Exceptions"), and other
encumbrances or defects approved by Buyer in writing.

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 as provided herein; and real property taxes
and assessments that are not delinquent.

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 has full power and authority to execute this Agreement and
perform Seller's obligations and duties hereunder;

8.2 The Property at closing shall not be 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 To the best of Seller's knowledge all persons and entities
supplying labor, materials and equipment to the Property have been paid and
there are no claims or liens;

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<PAGE>

8.6 To the best of Seller's knowledge 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 at closing shall have good and marketable title to the
Property;

8.9 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") requirements of I.R.C. # 1445; and

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.

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 except as
provided in the last Sentence of Section 2. 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 on the signature page:

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: Jeff Bell
50 West 990 South
Brigham City, UT 84302

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<PAGE>

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. 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 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.

13. SURVIVAL OF WARRANTIES. The terms, covenants, representations and
warranties shall not merge in the deed of conveyance, but shall survive closing.

14. COMMISSIONS. A real estate commission and/or broker's fee of two
percent (2%) each shall be payable by Seller at closing to White Leasure
Development Company ("Broker") and to Consolidated Realty Group ("Broker").
Said commissions and/or broker's fees shall be as agreed upon between Seller and
the Brokers. Seller shall hold Buyer harmless from any obligation for payment
of any real estate commissions and/or broker's fees.

15. EXHIBITS. Exhibits A, B and C attached hereto are incorporated
herein as if fully set forth.
Exhibit A - Site Plan of the Property and Outpad A
Exhibit B - Legal Description of Seller's Entire Tract
Exhibit C - Legal Description of the Property

16. 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/ Richard T. Takata
--------------------------------------
Typed name: Richard T. Takata
October 17th, 1997 Its: President and C.E.O.
- --------------------------
Buyer's signature date

Address: 981 Powell Avenue S.W.
Renton, WA 98055

SELLER: CFJ PROPERTIES, GENERAL PARTNERSHIP

By: /s/ Barre G. Burgon
--------------------------------------
Typed name: Barre G. Burgon
--------------------------
October 20, 1997 Its: Member of the Executive
- --------------------------- --------------------------
Seller's signature date Committee
Address: 50 West 990 South
Brigham City, UT 84302

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<PAGE>

EXHIBIT "A"

[SITE PLAN]

<PAGE>

EXHIBIT B [STAMP]

A parcel of land lying in the SE 1/4 of Section 13, Township 3 North Range 1
East of the Boise Meridian, Boise, Ada County, Idaho, more particularly
described as follows:

Commencing at the south 1/4 of Section 13, T.3N., R.1E., B.M., thence N 00 DEG.
15'43"E 485.00 feet along the west line of the SE 1/4 of Section 13 to a point;

Thence S 89 DEG. 29'09" E 224.85 to the REAL POINT OF BEGINNING of this
description;

Thence N 00 DEG. 15'50" E 154.29 feet to a point on the southerly right-of-way
of I-84;

Thence along a curve to the right 251.21 feet, said curve having a radius of
7,589.44 feet, a central angle of 01 DEG. 53'47", tangents of 125.61 feet, and a
chord of 251.19 feet which bears S 57 DEG. 04'26" E to a point on a curve;

Thence S 33 DEG. 52'26" W 5.00 feet to a point on a curve;

Thence a long a curve to the right 14.99 feet, said curve having a radius of
7,584.44 feet, a central angel of 00 DEG. 06'48", tangents of 7.50 feet and a
chord of 14.99 feet which bears S 56 DEG. 04'09" E to a point of tangency;

Thence S 56 DEG. 00'45" E 354.82 feet along said right-of-way to a point on the
west line of Cates Subdivision;

Thence S 00 DEG. 15'35" W 781.07 feet along said west line to a point on the
northerly right-of-way of Overland Road;

Thence N 89 DEG. 29'09" W 71.99 feet along said northerly right-of-way to a
point;

Thence S 00 DEG. 15'50" W 130.42 feet along said northerly right-of-way to a
point;

Thence S 52 DEG. 54'13" W 36.05 feet along said northerly right-of-way to a
point;

Thence N 89 DEG. 29'09" W 299.35 feet along said northerly right-of-way to a
point;

Thence N 00 DEG. 15'50" E 424.50 feet to a point;

Thence N 89 DEG. 29'09" W 290.75 feet to the REAL POINT OF BEGINNING of this
description.

This parcel contains 632,098 square feet, (14.51 acres), more or less.

Michael E. Marks, No. 4998
[SEAL]

<PAGE>

EXHIBIT "C"

LEGAL DESCRIPTION OF THE PROPERTY

AND

PARCEL MAP

(To be provided by Buyer upon completion of the ALTA/ACSM Class A survey as set
forth in Section 3.2).

EXHIBIT "C"

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT

This agreement (the "Agreement") dated Nov. 12, 1997 by and between
WATERMAN PROPERTIES, L.P., a limited 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
15.94 acres located on the east side of Highway 9, north of 233rd Place S.E.
and bounded by the B.N.R.R. and Highway 522 on the east, in Snohomish County,
Washington, the legal description of which is described on Exhibit "A" and
any improvements thereon and all rights appurtenant thereto (the "Property").
The Property is identified as Tax Parcels #352705-2-005, 008, 009, 010 and
023, and as shown on the reduced partial copy of a plat map which is attached
hereto as Exhibit "B", and is further described on the Buyer's proposed site
development plan numbered X353-A and dated August 5, 1997, which is attached
hereto as Exhibit "C".

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 nine dollars ($9.00) per square foot. It is estimated that the
Property contains 694,346 square feet and that the purchase price will be Six
Million Two Hundred Forty-nine Thousand One Hundred Seventeen Dollars
($6,249,117). The area of the Property and the total purchase price shall be
determined by a current ALTA/ACSM survey, with land area certification, to be
provided by Seller. The purchase price shall be adjusted to the final certified
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 One Hundred Fifty Thousand
Dollars ($150,000) (the "Deposit") with First American Title Insurance Company
in Bellevue, Washington (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 under this Agreement, the Deposit, and all interest accrued thereon,
shall be returned to Buyer. In the event of Buyer's default under this
Agreement, Seller shall have as its sole remedy the right to terminate this
Agreement and retain the Deposit, together with accrued interest thereon, as
liquidated damages.

3. TITLE INSURANCE AND SURVEY.

3.1 PRELIMINARY TITLE INSURANCE COMMITMENT. Within fifteen (15)
days after the Effective Date, Seller shall obtain and provide Buyer with a
current preliminary commitment for owner's title insurance with extended
coverage (ALTA Form 1970-B, as revised in 1984, or if unavailable, Form B-1987)
issued by First American Title Insurance Company, with copies of all documents
listed as exceptions set forth therein.

3.2 ALTA/ACSM SURVEY. Within thirty (30) days after the Effective
Date, Seller shall obtain and provide Buyer with a current ALTA/ACSM survey with
land area certification of the Property. Seller shall bear the cost of a
standard boundary survey with land area certification and Buyer shall pay the
additional cost for the ALTA/ACSM survey.

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<PAGE>

3.3 TITLE AND SURVEY APPROVAL PERIODS. Buyer shall have fifteen
(15) days from the later receipt of either the preliminary title insurance
commitment or the ALTA/ACSM 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
title insurance commitment or any items shown 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 title report
exceptions will be removed or such disapproved survey items will be resolved
and/or corrected on or before closing, Buyer may, at its option, at any time
prior to such removal, resolution and/or correction 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.

4.1 FEASIBILITY. Buyer's sole determination that its proposed site
plan, building plan, parking plan and access plan for the Property are
acceptable; that all needed utilities of adequate capacity to serve the Property
are or will be available to meet Buyer's construction schedule; and that the
Property is otherwise feasible for Buyer's intended use.

4.2 STUDIES AND ACCESS TO PROPERTY. Buyer's approval of all soils,
engineering, seismic, environmental, topography, hazardous waste, geotechnical,
wetlands, drainage and other studies that may be deemed necessary by Buyer or
required by any governmental agency in connection with the Property and Buyer's
planned development and use of the Property.

4.3 APPROVALS AND PERMITS. Issuance of any and all required or
applicable governmental approvals including but not limited to the following: a
PUD (if required), replat of the Property, lot line adjustments, subdivision
approvals, rezoning approvals, Washington Department of Transportation highway
access and traffic signal approvals, building permits, use permits, sign
permits, design review approvals, site plan approvals, parking variances, street
vacancies and approvals of any kind from any and all governmental agencies
having jurisdiction over the Property, necessary for Buyer to develop, construct
its site improvements, store building, garden yard and greenhouse and any other
improvements that Buyer deems necessary in its sole determination to conduct and
operate its selected business operations on the Property. The timing,
conditions and cost of any or all of the permits and approvals (including any
mitigation fees) must be satisfactory to Buyer in its sole discretion.

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<PAGE>

4.4 TIME PERIODS. Buyer shall have sixty (60) days from the
Effective Date to satisfy or waive the contingencies set forth in Sections 4.1
and 4.2 (the "Feasibility Period"). Buyer shall have one hundred eighty (180)
days from the end of the Feasibility Period or the day the Fitz Option (as
defined in Section 12 below) is terminated, whichever occurs last, to satisfy or
waive the contingencies set forth in Section 4.3 (the "Contingency Period"). If
Buyer does not satisfy or waive the contingencies in writing by the applicable
dates, or if Buyer notifies Seller in writing at any time prior to the end of
the Contingency Period that it has decided not to pursue the project any further
and that this Agreement is terminated, the Deposit, with interest, shall be
refunded to Buyer and the Agreement shall terminate without further action and
be of no further force or effect.

If Buyer has satisfied or waived the contingencies set forth in
Sections 4.1 and 4.2 and is diligently pursuing the applicable required
approvals and permits set forth in Section 4.3, Buyer shall be allowed two (2)
separate thirty (30) day extensions of the Contingency Period. Notice of the
exercising of each of the extension periods shall be given at least ten (10)
days prior to the end of the Contingency Period or extension period. Buyer
shall deposit into an interest bearing account with the Closing Agent a
non-refundable extension fee of Fifty Thousand Dollars ($50,000.00) ("Extension
Fee") each time notice is given exercising a separate thirty (30) day extension
of the Contingency Period. In the event that Buyer closes its purchase of the
Property pursuant to this Agreement, all of the Extension Fees and accrued
interest shall be credited toward the purchase price at closing.

4.5 DOE CLEAN SITE DETERMINATION. Seller shall provide Buyer with a
complete copy of a "No Further Action" letter pertaining to the Property from
the Washington Department of Ecology (the "DOE") or removal of the Property from
the DOE - Toxics Cleanup Program C&SCS (Contaminated and Suspected Contaminated
Sites) List (the "DOE List") prior to the later of the end of the Contingency
Period or the day the Fitz Option is terminated.

5. CLOSING.

5.1 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 and the Fitz Option
has terminated. Closing shall be on a date mutually agreeable to Buyer and
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.

5.2 ACCEPTANCE OF EXCEPTIONS. Neither Seller nor Buyer shall be
required to close, and the Deposit and all interest thereon shall be returned to
Buyer, if any exception or item disapproved by Buyer as herein provided cannot
be removed by the date of closing; provided, however, that Buyer may elect to
waive in writing any disapproved exceptions or items and close on the remaining
terms. 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.

5.3 PRORATIONS; CLOSING COSTS. Taxes and assessments, including
Cross Valley Water District water and sewer ULID assessments, for the current
year and utilities constituting liens shall be prorated as of 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 a standard boundary
survey with land area certification, 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, one-half of Closing Agent's escrow fee,
the difference in the cost of the premium between standard owner's and extended
coverage and the additional cost for an ALTA/ACSM survey.

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<PAGE>
5.4 POSSESSION. Buyer shall be entitled to possession upon closing.

5.5 IRC SECTION 1031 EXCHANGE. Seller intends to enter into a
Section 1031 exchange. Buyer agrees to cooperate with Seller in effecting a
Section 1031 exchange including executing all documents reasonably necessary to
facilitate the Section 1031 exchange provided no delays result and Buyer does
not incur any expenses or liability. Seller agrees to pay all costs thereof and
to assume all liabilities incurred by a Section 1031 exchange.

6. CONVEYANCE OF TITLE. On 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 and Cross Valley Water District water and sewer ULID
assessments for the current calendar year not yet due and payable, those defects
or encumbrances appearing on the preliminary commitment for title insurance
described in Section 3.1 above that are approved by Buyer (the "Permitted
Exceptions"), and other encumbrances or defects approved by Buyer in writing.

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
described in Section 3.1 above which Buyer has not disapproved of as provided
herein; and real property taxes and assessments that are not delinquent.

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
and duties 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;

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<PAGE>

8.3 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 Seller is unaware of any material defect in the Property;

8.5 All persons and entities supplying labor, materials and equipment
to the Property 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, except the Cross Valley Water District
water and sewer ULID, currently under construction;

8.7 The Property has legal access to all streets and roads adjoining
the Property;

8.8 Seller has good and marketable title to the Property;

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.

5
<PAGE>

and, in the case of Seller, a copy to: Richard P. Waterman
14415 Woodinville Redmond Road
Woodinville, WA 98072

12. NO NEGOTIATIONS WITH THIRD PARTY. This Agreement is subject to an
Option Agreement bearing various dates between April 1, 1995 and November 14,
1995 between A. Paul Waterman and Isabel F. Waterman and D. L. Fitzpatrick, Jr.,
D.L. Fitzpatrick III, and their respective spouses, Cheryl L. Fitzpatrick and
Pamela L. Fitzpatrick, which, among other things, grants the Fitzpatricks an
option to purchase the Property at any time on or before June 30, 1998 (the
"Fitz Option"). With the exception of the Fitz Option, Seller shall not commit
to sell, lease or otherwise transfer the Property on any portion thereof to any
other person or party as long as Buyer is proceeding in good faith to perform
its duties under this Agreement. This covenant shall remain in full force and
effect and be legally binding upon Seller until termination of this Agreement.

13. 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 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.

14. SURVIVAL OF WARRANTIES. The terms, covenants, representations and
warranties shall not merge in the deed of conveyance, but shall survive closing.

15. COMMISSIONS. All real estate commissions and/or brokers' fees shall
be payable by Seller at closing to Kidder, Mathews & Segner, Inc. and Wahl &
Associates, Inc. (the "Brokers"). Such commission and/or fee shall be agreed
upon in a separate agreement between Seller and Brokers. Each party represents
to the other that it has engaged no other broker in connection with the
negotiations leading to this Agreement. Seller agrees to indemnify and hold
Buyer harmless from and against all claims and demands of any and all brokers or
agents with respect to the Property.

16. EXHIBITS. Exhibits "A", "B" and "C" are attached hereto and
incorporated herein as if fully set forth.

Exhibit "A" - Legal Description
Exhibit "B" - Plat Map
Exhibit "C" - Site Development Plan

6
<PAGE>

17. 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/ Paul B. Morris
------------------------------
Typed name: Paul B. Morris
November 11 , 1997 Its: Vice President
- ----------------------
Buyer's signature date
Address:
981 Powell Avenue S.W.
Renton, WA 98055

SELLER: WATERMAN PROPERTIES, L.P..

By:
------------------------------
, 1997 Typed name: Richard P. Waterman
- ----------------------- Its: General Partner
Seller's signature date

By: /s/ A. Paul Waterman
------------------------------
November 12 , 1997 Typed name: A. Paul Waterman
- ----------------------- Its: General Partner
Seller's signature date
Address:
14415 Woodinville Redmond Road
Woodinville, WA 98072

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<PAGE>

EXHIBIT "A"

LEGAL DESCRIPTION OF THE PROPERTY

PARCEL 1:

THAT PORTION OF THE SOUTHWEST QUARTER OF THE NOTHWEST QUARTER OF SECTION
35, TOWNSHIP 27 NORTH, RANGE 5 EAST, W.M., DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT 125 FEET SOUTH OF THE NORTHWEST CORNER OF THE
SOUTHWEST QUARTER OF THE NORTHWEST QUARTER, THE TRUE POINT OF BEGINNING;
THENCE SOUTHERLY ALONG SAID SUBDIVSION 125 FEET; THENCE EASTERLY AT RIGHT
ANGLES 378.48 FEET; THENCE NORTHERLY AT RIGHT ANGLES 125 FEET; THENCE WEST
AT RIGHT ANGLES 378.48 FEET TO THE TRUE POINT OF BEGINNING;

EXCEPT THAT PORTION CONVEYED TO SNOHOMISH COUNTY BY QUIT CLAIM DEED
RECORDED UNDER AUDITOR'S FILE NO. 526882.

SITUATE IN THE COUNTY OF SNOHOMISH, STATE OF WASHINGTON.

TOGETHER WITH

THAT PORTION OF THE NORTH 30 RODS OF THE SOUTHWEST QUARTER OF THE NORTHWEST
QUARTER OF SECTION 35, TOWNSHIP 27 NORTH, RANGE 5 EAST, W.M., LYING WEST OF
THE WEST RIGHT OF WAY LINE OF THE NORTHERN PACIFIC RAILWAY RIGHT OF WAY;

EXCEPT THAT PORTION CONVEYED TO SNOHOMISH COUNTY BY QUIT CLAIM DEED
RECORDED UNDER AUDITOR'S FILE NO. 526882; AND

EXCEPT THAT PORTION DESCRIBED AS FOLLOWS:

PART OF THE SOUTHWEST QUARTER OF THE NORTHWEST QUARTER OF SECTION 35,
TOWNSHIP 27 NORTH, RANGE 5 EAST, W.M., DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT ON THE WEST LINE OF SAID SUBDIVISION, DISTANT
SOUTHERLY 125 FEET FROM THE NORTHWEST CORNER OF SAID SUBDIVISION; THENCE
SOUTHERLY, ALONG SAID WEST LINE, 125 FEET; THENCE EASTERLY, AT RIGHT
ANGLES, A DISTANCE OF 378.48 FEET; THENCE NORTHERLY, AT RIGHT ANGLES, A
DISTANCE OF 125 FEET; THENCE WESTERLY, AT RIGHT ANGLES, A DISTANCE OF
378.48 FEET TO THE POINT OF BEGINNING.

AND

THAT PORTION OF THE NORTHWEST QUARTER OF THE NORTHWEST QUARTER OF SECTION
35, TOWNSHIP 27 NORTH, RANGE 5 EAST, W.M., MORE PARTICULARLY DESCRIBED AS
FOLLOWS:

Page 1 of 2

EXHIBIT "A"

<PAGE>

EXHIBIT "A"

COMMENCING AT THE SOUTHWEST CORNER OF SAID SUBDIVISION; THENCE SOUTH 87
DEG. 42`11" EAST ALONG THE SOUTH LINE OF SAID SUBDIVISION 30.07 FEET TO THE
EAST MARGIN OF STATE HIGHWAY NO. 9, AS ESTABLISHED 60.00 FEET IN WIDTH, AND
THE POINT OF BEGINNING; THENCE NORTH 1 DEG. 37`01" WEST ALONG SAID HIGHWAY
MARGIN 20.00 FEET TO AN EXISTING FENCE; THENCE NORTH 88 DEG. 28`51" EAST
ALONG EXISTING FENCE LINE 1043.00 FEET, MORE OR LESS, TO THE WESTERLY
MARGIN OF THE NORTHERN PACIFIC RAILROAD RIGHT OF WAY; THENCE SOUTHERLY
ALONG SAID MARGIN 89.00 FEET, MORE OR LESS, TO THE SOUTH LINE OF SAID
SUBDIVISION; THENCE NORTH 87 DEG. 42`11" WEST ALONG SAID SOUTH LINE
1034.44 FEET, MORE OR LESS, TO THE POINT OF BEGINNING; EXCEPT THAT PORTION
CONVEYED TO SNOHOMISH COUNTY BY QUIT CLAIM DEED RECORDED UNDER AUDITOR'S
FILE NO. 526363.

ALL SITUATE IN THE COUNTY SNOHOMISH, STATE OF WASHINGTON.

PARCEL 2:

THAT PORTION OF THE SOUTH HALF OF THE SOUTH HALF OF THE NORTHWEST QUARTER
OF THE NORTHWEST QUARTER OF SECTION 35, TOWNSHIP 27 NORTH, RANGE 5 EAST
W.M., IN SNOHOMISH COUNTY, WASHINGTON, LYING WESTERLY OF THE NORTHERN
PACIFIC RAILWAY RIGHT-OF-WAY AND LYING NORTHERLY OF THE FOLLOWING DESCRIBED
LINE:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SUBDIVISION; THENCE SOUTH 87 DEG.
42`11" EAST ALONG THE SOUTH LINE OF SAID SUBDIVISION 30.07 FEET TO THE EAST
MARGIN OF STATE HIGHWAY NO. 9 AS ESTABLISHED 60 FEET IN WIDTH;
THENCE NORTH 1 DEG. 37`01" WEST, ALONG SAID HIGHWAY MARGIN 20.00 FEET TO AN
EXISTING FENCE AND THE TRUE POINT OF BEGINNING OF THIS LINE DESCRIPTION;
THENCE NORTH 88 DEG. 28`51" EAST ALONG SAID FENCE 993 FEET, MORE OR LESS,
TO THE WESTERLY MARGIN OF THE NORTHERN PACIFIC RAILWAY CO. RIGHT-OF-WAY AND
THE END OF THIS LINE DESCRIPTION;
EXCEPT THAT PORTION OF THE WEST 586.72 FEET THEREOF LYING NORTHERLY OF THE
SOUTHERLY 60.00 FEET THEREOF;
AND EXCEPT AT THE WESTERLY 30 FEET THEREOF FOR ROAD.

SITUATE IN THE COUNTY OF SNOHOMISH, STATE OF WASHINGTON.

Page 2 of 2

EXHIBIT "A"

<PAGE>

EXHIBIT "B"

PLAT MAP

EXHIBIT "B"

<PAGE>

EXHIBIT "C"

SITE DEVELOPMENT PLAN

EXHIBIT "C"

<PAGE>

REAL ESTATE PURCHASE AND SALE AGREEMENT

This agreement (the "Agreement") is dated November 14, 1997 and entered
into by and between LA CAZE DEVELOPMENT COMPANY, a _____________________
("Seller") and EAGLE HARDWARE & GARDEN, INC., a Washington corporation, or
assigns ("Buyer") for purchase and sale of approximately 12.107 acres of the
Evergreen Plaza Shopping Center in the City of Sparks, Washoe County, Nevada,
consisting of an approximately 1.991 acre parcel of improved commercial
property and an adjoining 10.216 acre parcel of partially improved land
(parking lot only) located on the north side of Oddie Boulevard between the
balance of the shopping center and El Rancho Drive to the east with a Wards
retail store and parking lot and Silverada Boulevard to the west and bounded
by Greenbrae Drive and Orovada Street on the north, together with any
improvements thereon and all rights appurtenant thereto (the "Property"). The
Property is shown on Buyer's site plan dated October 24, 1997 and numbered
X477-A (the "Site Plan") and attached hereto as Exhibit A. The legal
description of the entire shopping center is set forth in Exhibit B attached
hereto. Upon completion of the survey described in Section 3.2 below, a legal
description and parcel map of the Property shall be attached to this
Agreement as Exhibit C and made a part hereof.

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 eight dollars and seventy-five cents ($8.75) per square foot of land.
It is estimated that the Property contains approximately 527,374 square feet and
that the purchase price will be four million six hundred fourteen thousand five
hundred twenty-two dollars ($4,614,522). The area of the Property and the total
purchase price shall be determined by the new ALTA/ACSM survey described in
Section 3.2 below. The purchase price shall be adjusted to the final certified
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 First American Title Insurance Company in Reno,
Nevada (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 under this
Agreement, the Deposit, and all interest accrued thereon, shall be returned to
Buyer. In the event of Buyer's default under this Agreement, Seller shall have
as its sole remedy the right to terminate this Agreement and retain the Deposit,
together with accrued interest thereon, as liquidated damages.

3. TITLE INSURANCE AND SURVEY.

3.1 PRELIMINARY TITLE INSURANCE COMMITMENT. Within fifteen (15) days
after the Effective Date, Seller shall provide Buyer with a current preliminary
commitment for owner's title insurance with extended coverage (ALTA Form 1970-B,
as revised in 1984 or if unavailable, Form B-1987) issued by the Closing Agent,
with copies of all documents listed as exceptions set forth therein.

3.2 ALTA/ACSM Survey. Within thirty (30) days after the Effective
Date, Seller shall provide Buyer with a new ALTA/ACSM survey with land area
certification of the Property and a parcel map, at Seller's cost. The survey
shall include the 1.991 acre parcel and the 10.216 acre parcel or combine the
two parcels into one legally described parcel of 12.107 acres.

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<PAGE>

3.3 TITLE AND SURVEY APPROVAL PERIODS. Buyer shall have fifteen (15)
days from the later receipt of either the preliminary commitment or the final
(as opposed to preliminary) 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 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.

4. CONTINGENCIES. Buyer's obligation to purchase the Property is subject
to Buyer's satisfaction or waiver, in writing, of the following conditions
precedent, in Buyer's sole and absolute discretion, on or before the dates
described below:

4.3 APPROVALS AND PERMITS. Issuance of any and all required or
applicable governmental approvals including but not limited to a PUD (if
required), an environmental impact report (EIR)(if required), a replat of the
Property, subdivision approvals, rezoning approvals, Nevada Department of
Transportation highway access and traffic signal approvals, City (or the County,
if applicable) building permits, use permits, sign permits, design review
approvals, site plan approvals, parking variances, street vacancies,
environmental certifications, and approvals of any kind from any and all
governmental agencies having jurisdiction over the Property, necessary for Buyer
to develop and construct it's store building, site improvements, drive through
building materials yard, garden yard and greenhouse, signing and any other
improvements that Buyer deems necessary in its sole determination to conduct and
operate its selected business operations on the Property. The timing, conditions
and cost of any or all of the permits and approvals (including any mitigation
fees) must be satisfactory to Buyer in its sole discretion.

4.4 TIME PERIODS. Buyer shall have sixty (60) days from the
Effective Date (the "Feasibility Period") to satisfy or waive the contingencies
set forth in Sections 4.1 and 4.2. Buyer shall have ninety (90) days (the
"Contingency Period") from the end of the Feasibility Period to satisfy or waive
the contingencies set forth in Sections 4.3 and 4.6. If Buyer does not satisfy
or waive the contingencies in writing by the applicable dates, or if Buyer
notifies Seller in writing at any time prior to the end of the Contingency
Period that it has decided not to pursue the project any further and that this
Agreement is terminated, the Deposit, with interest, shall be refunded to Buyer
and the Agreement shall terminate without further action and be of no further
force or effect.

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<PAGE>

4.5 EXTENSION PERIODS. If Buyer has satisfied or waived the
contingencies set forth in Sections 4.1 and 4.2 above and is diligently pursuing
the applicable required approvals and permits described in Section 4.3 above,
Buyer shall be entitled to two (2) separate thirty (30) day extensions of the
Contingency Period. Notice of the exercise of each of the extension periods
shall be given by Buyer to Seller at least ten (10) days prior to the end of the
initial Contingency Period or the first extension period, whichever is
applicable.

4.6 ACCESS EASEMENT. Buyer obtaining a permanent, recordable access
easement that runs with the land in two locations across the Montgomery Ward
Center adjoining the Property on the west. The easement shall be for the
purposes of vehicular and pedestrian access to and from Silverada Boulevard.
This condition may be satisfied if Buyer is provided with a certified copy of an
already existing recorded permanent easement acceptable to Buyer.

4.7 RECIPROCAL ACCESS EASEMENT AGREEMENT. Buyer obtaining a
permanent, recordable reciprocal access easement agreement that runs with the
land (the "R.E.A.") for all the drive aisles, street accessing curb cuts, all
vehicular and pedestrian common areas and Mall Drive (if it is not a dedicated
public street) located in the Evergreen Plaza Shopping Center as shown on
Exhibit A. If required to satisfy Section 4.3 above, the R.E.A. shall include
parking. The R.E.A. shall be drafted, agreed to and executed during the first
sixty (60) days of the Contingency Period and recorded at Closing.

5. CLOSING.

5.1 TIME FOR CLOSING; TERMINATION DATE. This sale shall be closed in
the office of the Closing Agent within fifteen (15) business days after all of
Buyer's conditions precedent have been satisfied or waived by Buyer on a date
mutually agreeable to Buyer and 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.

5.2 ACCEPTANCE OF EXCEPTIONS. Neither Seller nor Buyer shall be
required to close, and the Deposit and all interest thereon shall be returned to
Buyer, if any exception or item disapproved by Buyer as herein provided cannot
be removed by the date of closing; provided, however, that Buyer may elect to
waive any disapproved exceptions or items and close on the remaining terms.
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.

5.3 PRORATIONS; CLOSING COSTS. Taxes and assessments for the current
year and utilities constituting liens shall be prorated as of 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 and the difference in the cost of the premium between standard
owner's and extended coverage.

5.4 POSSESSION. Buyer shall be entitled to possession upon closing.

6. CONVEYANCE OF TITLE. On 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, those
defects or encumbrances appearing on the preliminary commitment for title
insurance that are approved by Buyer (the "Permitted Exceptions"), and other
encumbrances or defects approved by Buyer in writing.

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<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 except as described in Section 8.10 below. 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 now and as of
the date of closing that:

8.1 Seller has full power and authority to execute this Agreement and
perform Seller's obligations and duties hereunder;

8.2 The Property is not subject to any leases, tenancies or rights of
persons in possession;

8.4 Seller is unaware of any material defect in the Property;

8.5 All persons and entities supplying labor, materials and equipment
to the Property have been paid and there are no claims or liens;

8.7 The Property has legal access to all streets adjoining the
Property;

8.8 Seller has good and marketable title to the Property;

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<PAGE>

8.9 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") requirements of I.R.C. # 1445; 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 or similar
type of cleanup. To the best of Seller's knowledge, 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 at its sole cost and expense
shall within ninety (90) calendar days after Closing complete the demolition and
removal from the Property of the vacant former Ernst Hardware building and
garden yard shown on Exhibit A (the "Demolition Site") including but not limited
to all concrete slabs, footings, foundations, underground utilities and any
other related items. Seller at its own cost and expense shall provide an
environmentally clean Demolition Site with certifications by the applicable
local, state and federal agencies including but not limited to the removal of
asbestos, all underground storage tanks, pipelines, all contaminated soils and
any other toxic, hazardous or contaminated materials, wastes and other related
items governed by environmental protection and hazardous and toxic wastes and
materials laws, statutes, regulations, ordinances and requirements. 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 or as a result of Seller's
failure to clean up the Demolition Site and provide the required certifications.

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.

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.

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: Norman R. La Caze
2601 Airport Dr., Ste. 300
Torrance, Ca 90505

5
<PAGE>

12. NO NEGOTIATIONS WITH THIRD PARTY. Seller shall not negotiate nor
commit to sell, lease or otherwise transfer the Property on any portion thereof
to any other person or party as long as Buyer is proceeding in good faith to
perform its duties under this Agreement. This covenant shall remain in full
force and effect and be legally binding upon Seller until termination of this
Agreement.

13. 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 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.

14. SURVIVAL OF WARRANTIES. The terms, covenants, representations and
warranties shall not merge in the deed of conveyance, but shall survive closing.

15. COMMISSIONS. All real estate commissions and/or brokers' fees shall
be payable by Seller at Closing to Ekman Properties, the broker, and to Wahl
& Associates, the cooperating broker. Said commissions and/or brokers' fees
shall be as agreed upon between Seller, the broker and the cooperating
broker. Seller shall indemnify and hold Buyer harmless from any obligation
for payment of any real estate commissions and/or brokers' fees.

16. EXHIBITS. Exhibits A, B and C attached hereto are incorporated
herein as if fully set forth.
Exhibit A - Site Plan
Exhibit B - Legal Description of the shopping center
Exhibit C - Legal Description of the Property and Parcel Map

17. 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/ Paul B. Morris
---------------------------------------
Typed name: Paul B. Morris
November 13, 1997
Buyer's signature date Its: Vice President

Address: 981 Powell Avenue S.W.
Renton, WA 98055

SELLER: LA CAZE DEVELOPMENT COMPANY

By: /s/ Norman R. La Caze
----------------------------------------
Typed name: Norman R. La Caze
Novmeber 14, 1997
Seller's Signature date Its: (Typed title) Owner & G. P. Sparks
Silverado Park

Address: 2601 Airport Dr., Ste. 300
Torrance, CA 90505

6
<PAGE>

EXHIBIT "A"

[Floor Plan]

EXHIBIT "A"

7
<PAGE>

EXHIBIT "B"

LEGAL DESCRIPTION OF THE SHOPPING CENTER

(To be provided by Seller at time of execution of this Agreement)

EXHIBIT "B"

<PAGE>

EXHIBIT "C"

LEGAL DESCRIPTION OF THE PROPERTY
AND PARCEL MAP

(To be provided by Seller upon completion of the ALTA/ACSM Class A survey as set
forth in Section 6).

EXHIBIT "C"

<PAGE>
EAGLE HARDWARE & GARDEN, INC.
COMPUTATION OF NET INCOME PER SHARE - EXHIBIT 11.1
(IN THOUSANDS)

(UNAUDITED) (UNAUDITED)
13 WEEKS ENDED 39 WEEKS ENDED
------------------------- -------------------------
OCTOBER 31, OCTOBER 25, OCTOBER 31, OCTOBER 25,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income as reported $8,856 $7,591 $26,427 $18,620
--------- --------- --------- ---------
--------- --------- --------- ---------

Net income used for primary
computation $8,856 $7,591 $26,427 $18,620

Add (where dilutive):
Tax effected interest and amortization
of debt expense on convertible debt 919 921 2,757 2,765
--------- --------- --------- ---------

Net income used for fully
diluted computation $9,775 $8,512 $29,184 $21,385
--------- --------- --------- ---------
--------- --------- --------- ---------

Weighted average number of
common shares outstanding 29,045 25,538 28,976 23,794

Add (where dilutive):
Assumed exercise of those
options that are common stock
equivalents net of treasury
shares deemed to have been
repurchased 371 517 414 423
--------- --------- --------- ---------

Weighted average number of
common and common equivalent
shares outstanding, used for
primary computation 29,416 26,055 29,390 24,217

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 0 61 0 41

Assumed exercise of
convertible debt 4,785 4,790 4,785 4,791
--------- --------- --------- ---------

Adjusted shares outstanding used
for fully diluted computation 34,201 30,906 34,175 29,049
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1998
<PERIOD-END> OCT-31-1997
<CASH> 70,822
<SECURITIES> 0
<RECEIVABLES> 7,811
<ALLOWANCES> 2,914
<INVENTORY> 206,590
<CURRENT-ASSETS> 288,791
<PP&E> 347,768
<DEPRECIATION> 38,407
<TOTAL-ASSETS> 602,001
<CURRENT-LIABILITIES> 109,157
<BONDS> 152,497
0
0
<COMMON> 264,769
<OTHER-SE> 68,044
<TOTAL-LIABILITY-AND-EQUITY> 602,001
<SALES> 249,690
<TOTAL-REVENUES> 249,690
<CGS> 179,050
<TOTAL-COSTS> 179,050
<OTHER-EXPENSES> 55,288
<LOSS-PROVISION> 807
<INTEREST-EXPENSE> 2,253
<INCOME-PRETAX> 13,936
<INCOME-TAX> 5,080
<INCOME-CONTINUING> 8,856
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,856
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.29

</TABLE>