February 17, 1999

                               2                       0199378.01
                                      Portland Commercial Banking
                                      0000 XX Xxxxx Xxxxxx
                                      XX Xxx 0000, XXX0000-133
                                      Portland, OR 97208-3131

XXXXX
FARGO



                        February 17, 1999


Xxxxx's Restaurants, Inc.
00000 X.X. Stark Street
Portland, OR 97216

Dear Gentlemen:

     This letter is with respect to that certain credit
accommodation (the "Loan") to be granted to Xxxxx's Restaurants,
Inc. ("Borrower") by Xxxxx Fargo Bank, National Association
("Bank"), as evidenced by and subject to the terms of a
promissory note substantially in the form of Exhibit A attached
hereto (the "Note"), all terms of which are incorporated herein
by this reference.

     The initial rate of interest applicable to the Note shall be
fixed on the date of disbursement at one and sixty-five
hundredths percent (1.65%) above the Money Market Funds Rate in
effect on said date.  Further, the initial amount of each
installment of principal and interest payable on the Note shall
be set on the date of disbursement based on a 15 year
amortization schedule.

     Xxxxxxxx has executed the Note with the initial rate of
interest and initial repayment schedule left blank.  By signing
below, Xxxxxxxx hereby authorizes Bank to complete the Note on
the date of disbursement by inserting the initial interest rate
applicable to the Note and the initial amount of each installment
of principal and interest due under the Note, all in accordance
with the terms of this letter.  Xxxxxxxx further agrees that
Bank's commitment to grant the Loan shall terminate on March 17,
1999.

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Xxxxx's Restaurants, Inc.
February 17, 1999
Page 2


     Bank shall send Borrower a copy of the completed Note as
soon as possible after the date of disbursement.

                                   Sincerely,

                                   XXXXX FARGO BANK,
                                     NATIONAL ASSOCIATION


                                   By:__/s/Xxxxx Xxx____________
                                      Xxxxx Xxx
                                      Vice President


     The undersigned, the Borrower named in the foregoing letter,
xxxxxx agrees to all provisions thereof and authorizes Bank to
complete the Note in accordance with the terms set forth therein.


Xxxxxxxxxxxx and agreed as of February 17, 1999:


ELMER'S RESTAURANTS, INC.


By:  __/s/Xxxxx X. Xxxxx__
Title:  President

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