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Sample Business Contracts

Retail Agreement - Select Comfort Retail Corp. Bed Bath & Beyond Inc.

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                               LETTER OF AGREEMENT



April 20, 1999



Mr. Warren Eisenberg, Co-Chief Executive Officer
Bed Bath & Beyond Inc.
650 Liberty Avenue
Union, New Jersey 07083

Dear Mr. Eisenberg:

     The purpose of this letter agreement (the  "Agreement") is to set forth our
mutual understanding and agreement by which Select Comfort Retail Corporation, a
Minnesota  corporation  ("SCRC") will operate licensed departments within stores
owned or leased by Bed Bath & Beyond Inc., a New York corporation, or affiliates
of Bed Bath & Beyond Inc. (with such New York  corporation  and such  affiliates
being  hereinafter  referred to  collectively  as "BBB") for the retail sales of
mattresses  and related  products,  all as more  specifically  set forth in this
Agreement  (with  each  such  department  being  hereinafter  referred  to  as a
"Department",  and all of such  Departments in the aggregate  being  hereinafter
referred to as the "Departments").

1. DEPARTMENTS. The basic operations of the Departments shall be governed by the
following terms and conditions:

     (a) LOCATIONS.  SCRC currently operates  Departments in thirteen BBB stores
     located in various states. The locations of those existing  Departments are
     set forth on Exhibit 1(a) attached hereto and are  hereinafter  referred to
     as the "Existing Departments".  It is the anticipation of BBB and SCRC that
     SCRC will open and operate  approximately  50  Departments  by December 31,
     1999, 150 Departments by December 31, 2001 and that thereafter, eventually,
     SCRC  will  open  and  operate  Departments  in most BBB  stores  (provided
     however,  that nothing set forth in this Agreement shall be construed as an
     obligation  on the part of either BBB or SCRC to open  specific  minimum or
     maximum numbers of Departments).

     (b) [Intentionally Omitted]


<PAGE>

     (c) SIZE OF DEPARTMENTS.  SCRC is licensed to use an area of  approximately
     250 square  feet  within the  pillows  and pads  department  of each of the
     applicable  BBB  stores in order to  accommodate  two (2) or three (3) SCRC
     beds, related SCRC products (subject to the provisions of Section 6 below),
     a point  of sale  terminal  and a work  area  for  SCRC  employees  at each
     location,  with  the  precise  size  and  location  of the  space  for each
     Department to be determined by mutual agreement between SCRC and BBB.

     (d) RENT FOR DEPARTMENTS.  SCRC will pay annual rent for each Department as
     follows:

                      XXXXXXXXXXXXXXXXXXXXX
                      XXXXXXXXXXXXXXXXXXXXX
                      XXXXXXXXXXXXXXXXXXXXX



     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXX

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXX

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXX

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXX

<PAGE>

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXX

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXX

     [Portions  of this  section  have been  omitted  pursuant  to a request for
     confidential  treatment under Rule 24b-2 under the Securities  Exchange Act
     of 1934,  as amended.  A copy of this Exhibit with the portions  intact has
     been filed separately with the Securities and Exchange Commission]

     (e)  MAINTENANCE,   UTILITIES  AND  TAXES.  All  premises  maintenance  and
     utilities  reasonably necessary for the operation of the Department will be
     provided and paid for by BBB, except that SCRC shall be responsible for the
     cost of the installation and use of the telephone lines,  electrical lines,
     computer lines and all other services (including,  without limitation,  one
     "internal"  telephone which is connected to BBB's communications and paging
     lines [so that,  for  example,  a customer  calling  the BBB store could be
     "transferred over" to the SCRC Department]) reasonably required by SCRC for
     the operation of the Department. All "internal" telephone services shall be
     provided to the Department by BBB in consultation, to the extent reasonably
     possible,  with SCRC,  and SCRC shall  reimburse BBB the  reasonable  costs
     thereof (without any mark up or profit being paid to BBB). In the event any
     Department is located within states,  counties or cities in which (i) it is
     customary  for  retail  tenants  to pay taxes or fees  arising  from  their
     tenancy to the

<PAGE>

     applicable taxing or other authority, and (ii) BBB pays such tax or fees to
     the applicable  taxing or other authority or to its landlord (as collection
     agent for such taxing or other authority), then SCRC shall pay a portion of
     such tax or other fees in  proportion to either the rent payable by SCRC or
     the square  footage  occupied  by SCRC,  whichever  tax or fee  calculation
     method may be applicable. The provisions of the preceding sentence shall be
     applicable, for example, to the state-wide rent tax currently in effect for
     any store in the State of Florida  (currently at a rate of 6% of all rental
     payments),  but the  provisions  of the  preceding  sentence  shall  not be
     applicable  to typical  real  estate tax pass  through  charges or personal
     property tax pass through charges.

     (f) DESIGN AND  CONSTRUCTION OF  DEPARTMENTS.  SCRC will be responsible for
     the design and construction of the Departments with the construction  plans
     and actual  construction  to be subject to the approval of BBB. All signage
     located in the Departments shall be subject to the approval of BBB.

     (g) OPERATIONS AT DEPARTMENTS.  SCRC will be responsible for the conduct of
     all operations within the Departments,  including staffing, sales, customer
     service and  handling of sales  proceeds.  SCRC agrees to staff each of the
     Departments  with at least one (1) sales  person at all times that the host
     BBB store is open for business.  Late openings and early  closings shall be
     treated in the following  manner: A "late opening" shall be defined to mean
     an opening of the Department  which takes place more than 2 hours after the
     opening of the host BBB store;  an "early closing" shall be defined to mean
     a closing  of the  Department  prior to the  closing of the host BBB store.
     With respect to any such late opening or early closing  occurring  within a
     12 month period; the first offense shall result in a written reprimand from
     BBB to both the  Department  Manager and SCRC corporate  headquarters,  the
     second offense shall result in a written warning to the Department  Manager
     and SCRC corporate  headquarters,  the third offense shall result in a $100
     fine, and any  additional  offense shall result in a $200 fine (in addition
     to strong  disciplinary  action  from  SCRC).  SCRC  agrees to arrange  for
     delivery and setup for those customers that desire such service,  and shall
     inform  customers in advance of any additional  fees  associated  with such
     service. A poster or counter card indicating that such service is available
     [and the cost thereof]  shall be posted  prominently  within the Department
     within one month after the date the  Department  opens for  business.  SCRC
     agrees to conform its  operating  policies and  procedures to the operating
     policies and procedures of BBB to the extent reasonably practicable. In the
     event a potential customer at a Department  requests a phone number to call
     to obtain more information  and/or to consummate a purchase,  the employees
     of  SCRC  shall  provide  such  customer  with  the  phone  number  of  the
     Department,  not of any other  retail  store  maintained  by SCRC or of any
     other central or other phone lines maintained by SCRC.

     (h) MARKETING AND ADVERTISING PLAN.  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXX

<PAGE>

     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.

     [Portions  of this  section  have been  omitted  pursuant  to a request for
     confidential  treatment under Rule 24b-2 under the Securities  Exchange Act
     of 1934,  as amended.  A copy of this Exhibit with the portions  intact has
     been filed separately with the Securities and Exchange Commission]

     (i) DURATION OF AGREEMENT.  The term of this  Agreement  (the "Term") shall
     expire XXXXXXXXXX (the "Expiration Date") subject to earlier termination in
     accordance with the terms of this Agreement (including, without limitation,
     the  provisions  of  paragraph 2 below) or by mutual  agreement  of BBB and
     SCRC.

     [Portions  of this  section  have been  omitted  pursuant  to a request for
     confidential  treatment under Rule 24b-2 under the Securities  Exchange Act
     of 1934,  as amended.  A copy of this Exhibit with the portions  intact has
     been filed separately with the Securities and Exchange Commission]

     (j) PROCEDURES FOR EXISTING AND NEW DEPARTMENTS. Attached hereto as Exhibit
     1 (j) is a prototypical  Short Form License Agreement ("SFLA") between SCRC
     and the  tenant  or owner of the  store in which  the  Department  is to be
     located  (either Bed Bath & Beyond Inc. or the applicable  affiliate of Bed
     Bath & Beyond Inc.).  Simultaneously  with the execution of this Agreement,
     SCRC and BBB have  executed  and  delivered to each other SFLAs for each of
     the 13 Existing  Departments.  As new Departments are agreed to, additional
     SFLAs with respect to each such  Departments  will be executed prior to the
     date upon which SCRC enters the applicable  store for the  commencement  of
     the construction of the Department.

     SCRC agrees to submit its  marketing  and  advertising  plan,  as described
above,  together  with  its  plans  for  (i)  design  and  construction  of  the
Department,  (ii) opening plans and schedule for future  Departments,  and (iii)
operating  policies and  procedures for the  Departments,  as soon as reasonably
practicable to Martin Lynch,  the Vice President of Stores - Midwest and Western
Region for BBB, who will be  responsible  for reviewing and  finalizing the plan
with SCRC and  submitting  the plan for  approval  by BBB  corporate.  It is the
intention  of BBB and  SCRC to  jointly  produce  an  operating  manual  for the
Departments  which will detail the policy and procedures which should be adhered
to  by  SCRC,  BBB  and  their  respective  personnel  in  connection  with  the
construction, maintenance and operation of the Departments.

2.  TERMINATION/EXPIRATION  OF TERM. The Term and the respective  obligations of
the parties hereto shall be subject to termination (prior to the Expiration Date
set forth in Section 1(i) above) as follows:


<PAGE>

     (a) Either party hereto may  terminate  this  Agreement and under the SFLAs
     and the  respective  obligations  of the  parties  hereto in the event of a
     material  breach  by the  other  party  hereto  of  any of its  obligations
     hereunder  that shall not have been cured within ten (10) days after notice
     of such breach from the non-breaching party; and

     (b) This Agreement and the respective obligations of the parties hereto may
     be terminated (on either a single or multiple store basis,  or with respect
     to the entire terms of this Agreement) by mutual agreement of BBB and SCRC.

Notwithstanding the foregoing, however, no termination of this Agreement and the
respective  obligations of the parties hereto shall operate to relieve any party
hereto of any obligation that is due and owing without any further conditions at
the time of any such termination.

     Upon the expiration or earlier  termination of this Agreement,  the various
Departments  shall  be  removed  by SCRC  from  the  applicable  BBB  stores  in
accordance  with the applicable  provisions of Paragraph 20 below.  Such removal
shall  be  conducted  over  a 120  day  period,  with  approximately  1/4 of the
Departments removed every 30 days.

3. INSURANCE AND INDEMNIFICATION.

     (a) SCRC'S  INSURANCE.  Throughout the term of this  Agreement,  SCRC shall
     maintain,  at its expense,  the following insurance policies:  (1) property
     insurance, insuring the full replacement cost of property owned by SCRC and
     located in the Departments;  (2) commercial  general  liability  insurance,
     contractual  liability insurance and property damage insurance with respect
     to the  Departments,  with limits not less than $1,000,000  combined single
     limit  for  personal  injury,  sickness  or  death,  or  for  damage  to or
     destruction of property for any one occurrence (which policy shall name BBB
     as  an  additional  insured);   (3)  workers'  compensation   insurance  in
     accordance with statutory limits;  and (4) any other insurance  required by
     law.  SCRC  shall  have the  right to  satisfy  all or any  portion  of the
     foregoing  insurance  requirements  by including the  Departments  within a
     blanket or umbrella  policy of insurance  including  other  locations.  Any
     insurance  maintained  by  SCRC  may  have  deductibles  or  self-insurance
     retention in the amounts generally  utilized by SCRC for its insurance with
     respect to a majority of its locations, and SCRC may self-insure for SCRC's
     personal  property.  As evidence of the existence of any insurance required
     hereunder,  SCRC shall provide BBB with a certificate of insurance or other
     reasonably  satisfactory  evidence of such insurance coverage within thirty
     (30)  days of the  date  SCRC  opens  for  business  to the  public  in the
     Departments.

     (b) BBB'S INSURANCE.  BBB shall maintain the following insurance during the
     term  of  this  Agreement:   (1)  property   insurance  covering  the  full
     replacement  value  of  the  BBB  store  and  all  of  BBB's  improvements,
     merchandise  and  equipment  therein;   (2)  commercial  general  liability
     insurance, contractual liability insurance and property

<PAGE>

     damage  insurance with respect to the BBB store,  with limits not less than
     $1,000,000 combined single limit for personal injury,  sickness or death or
     for damage to or  destruction  of property  for any one  occurrence  (which
     policy shall name SCRC as an additional insured; (3) workers'  compensation
     insurance in accordance with statutory limits;  and (4) any other insurance
     required by law. As evidence of the  existence  of any  insurance  required
     hereunder,  BBB shall provide SCRC with a certificate of insurance or other
     reasonably  satisfactory  evidence of such insurance coverage within thirty
     (30)  days of the  date  SCRC  opens  for  business  to the  public  in the
     Departments.

     (c)  INDEMNIFICATION.  Subject to Section  3(d)  hereof,  and except to the
     extent  resulting  from the  negligence  or willful  misconduct of BBB, its
     employees,  agents or contractors,  SCRC hereby agrees to indemnify, defend
     and hold BBB  harmless  from and  against  all costs,  damages,  claims and
     liabilities  based on,  arising out of or resulting from (i) SCRC's use and
     occupancy  of the  Departments  or the  business  conducted by SCRC therein
     (including without limitation,  the use of the products sold by SCRC), (ii)
     any breach or  default  by SCRC in the  performance  or  observance  of its
     covenants or obligations under this Agreement,  (iii) any actual or alleged
     infringement  of any  patent  or  claim of  patent,  copyright  or  non-BBB
     trademark,  service  mark,  or trade name by SCRC,  or (iv) the omission or
     commission  of any  act,  lawful  or  unlawful,  by SCRC or its  agents  or
     employees,  whether  or not such act is within the scope of  employment  of
     such agents or employees. Subject to Section 3(d) hereof, and except to the
     extent  resulting  from the  negligence or willful  misconduct of SCRC, its
     employees,  agents or contractors,  BBB hereby agrees to indemnify,  defend
     and hold SCRC  harmless  from and  against all costs,  damages,  claims and
     liabilities  based on, arising out of or resulting from (i) BBB's operation
     and  management of the BBB store,  (ii) any breach or default by BBB in the
     performance  or  observance  of its  covenants  or  obligations  under this
     Agreement,  (iii) any actual or alleged infringement of any patent or claim
     of patent, copyright or non-SCRC trademark,  service mark, or trade name by
     BBB, or (iv) the omission or commission of any act, lawful or unlawful,  by
     BBB or its agents or employees, whether or not such act is within the scope
     of employment of such agents or employees.

     (d) WAIVER OF SUBROGATION.  BBB and SCRC each hereby release the other from
     liability for damage or destruction to the BBB store or the Departments and
     all  improvements and personal  property  located  therein,  whether or not
     caused by acts or  omissions of the other party;  provided,  however,  such
     release  shall  only be in force  and  effect  with  respect  to  damage or
     destruction  normally  covered by standard  policies of casualty  insurance
     with extended  coverage  (whether or not such coverage is in effect).  Each
     party shall cause its  casualty  insurance  policies to contain a provision
     whereby  the insurer  either  waives any right of  subrogation  against the
     other  party or  agrees  that  such a  release  shall  not  invalidate  the
     insurance, whichever is obtainable.

4.  CONFIDENTIALITY.   Each  of  the  parties  hereto  agrees  to  maintain  the
confidentiality  of any  proprietary  or  confidential  information of the other
party hereto that may be disclosed to the

<PAGE>

respective  parties  hereto in  connection  with the  transactions  contemplated
hereby.  In that  regard,  the  parties  acknowledge  that they have  previously
executed those certain Confidentially Agreements,  dated December 23, 1998, with
respect to various  real  estate  matters.  Any  information  of the  respective
parties  hereto  shall be  deemed  to be  proprietary  or  confidential,  unless
expressly  provided to the contrary.  Upon the  termination of the  relationship
between the parties for any reason,  each party agrees to promptly return to the
other any  confidential  information  of such other party in such first  party's
possession. The provisions of this Section 4 shall survive the termination,  for
any reason, of this Agreement.

5.  REPRESENTATION TO SCRC. BBB makes no promises or representations  whatsoever
as to the  potential  amount of  business  SCRC can  expect  at any time  during
operation of the  Departments.  SCRC is solely  responsible  for any expenses it
incurs related to this Agreement, including any increase in the number of SCRC's
employees or any expenditures for additional facilities or equipment.  BBB shall
clear the  respective  Departments  and  provide a broom clean  cement  floor or
carpeted floor, if it already exists, and BBB shall remove all shelving from the
respective Departments, if necessary.

6. UNAUTHORIZED  SALES.  SCRC shall use the respective  Departments only for the
purpose  authorized  in this  Agreement,  and will  offer  for sale  only  those
services and merchandise expressly authorized by this Agreement. For purposes of
this  Agreement,  SCRC is authorized  to sell  mattresses,  foundations  and bed
frames only (the  "Merchandise")  and to provide services in connection with the
sale of the Merchandise.  Notwithstanding  the foregoing,  BBB acknowledges that
SCRC is engaged  in an  on-going  process of  developing  new  product  lines to
complement  its sale of the  Merchandise,  and that  SCRC  may,  in the  future,
request BBB's  consent to market such new product lines within the  Departments.
In the event such request is made,  BBB, while under no obligation to consent to
such request, agrees that it shall in good faith consider such request.

7. USE OF TRADEMARKS AND TRADE NAMES.

     (a) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
     XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.  SCRC will  claim no right,  title or
     interest in any BBB Mark,  except the right to use the same pursuant to the
     terms and  conditions of this  Agreement  (for example,  in  advertisements
     prepared  in  accordance  with the terms of this  Agreement),  and will not
     register or attempt to register any BBB Mark. SCRC  acknowledges  that BBBL
     may assign its rights in and to the BBB Marks to an affiliated  entity, and
     that,  in the event of such an  assignment,  such  affiliated  entity shall
     retain and enjoy the same rights in and to the BBB Marks as BBBL.


<PAGE>

     [Portions  of this  section  have been  omitted  pursuant  to a request for
     confidential  treatment under Rule 24b-2 under the Securities  Exchange Act
     of 1934,  as amended.  A copy of this Exhibit with the portions  intact has
     been filed separately with the Securities and Exchange Commission]

     (b) SCRC recognizes and acknowledges that the use of any BBB Mark shall not
     confer upon SCRC any proprietary  rights to any BBB Mark. Upon  termination
     of this Agreement,  SCRC shall immediately stop using any licensed BBB Mark
     (including,  without  limitation,  the name "Bed Bath & Beyond"),  and will
     execute all necessary or appropriate documents to confirm BBBL's ownership,
     or to transfer to BBBL,  any rights SCRC may have acquired from BBBL in any
     BBB Mark.

     (c)  Nothing  in  this  Agreement  shall  be  construed  to bar  BBBL  from
     protecting its rights to the exclusive use of its trademarks, service marks
     or trade names  against  infringement  by any party or  parties,  including
     SCRC.

     (d) BBB Marks  which may be used by SCRC  under  this  Agreement  possess a
     special,  unique and  extraordinary  character  which makes it difficult to
     assess  the  monetary  damage  BBBL and BBB would  sustain  in the event of
     unauthorized  use.  Irreparable  injury  would be caused to BBBL and BBB by
     such  unauthorized  use,  and SCRC  agrees  that,  in addition to all other
     remedies at law or in equity,  preliminary or permanent  injunctive  relief
     would be appropriate in the event of breach of this Section 7 by SCRC.

     (e) If  SCRC  learns  of any  manufacture  or sale by any  third  party  of
     products  and/or  services  similar to those  offered by SCRC that would be
     confusingly  similar  to those  sold by SCRC in the minds of the public and
     which  bear or are  promoted  in  association  with BBB Marks or any names,
     symbols,  emblems,  or designs or colors which would be confusingly similar
     in the minds of the public to BBB Marks,  SCRC will  promptly  notify  BBB.
     BBB,  BBBL or BBB  shall,  at its sole  expense,  take  such  action  as it
     determines, in its sole discretion, is appropriate. SCRC will cooperate and
     assist in such  protest or legal  action at BBB's  expense.  SCRC shall not
     undertake any protest or legal action  relating to the BBB Marks on its own
     behalf  without first  securing  BBB's written  permission to do so. If BBB
     permits SCRC to undertake  such  protest or legal  action,  such protest or
     legal  action  shall be at SCRC's sole  expense.  BBB shall  cooperate  and
     assist SCRC at SCRC's expense. For the purposes of this paragraph, expenses
     shall include reasonable attorney's fees. All recovery in the form of legal
     damages or settlement shall belong to the party bearing the expense of such
     protest or legal action.

     (f) SCRC  shall not file suit using  BBB's  name (or  BBBL's  name or BBB's
     name) or commence any legal  proceeding  against any customer of any of the
     Departments  without prior written approval of BBB, which approval will not
     be unreasonably withheld.


<PAGE>

     (g) BBB  acknowledges and agrees that it shall not acquire any rights to or
     interests in any trademark,  trade name or other  intellectual  property of
     SCRC or its affiliates by or under this Agreement.  BBB agrees that it will
     not use any such intellectual property rights except with the prior written
     consent of SCRC.

8. PUBLICITY.  The parties agree that they will not make press releases,  public
statements or otherwise  seek publicity for the  respective  Departments  (other
than advertising  described in this Agreement) during the term of this Agreement
without the prior  written  approval of the other  party,  unless such  release,
statement or other disclosure is required by law (in which event a copy of which
legally required  release,  etc. shall be promptly  delivered to the other party
hereto).

9. RELATIONSHIP. SCRC is an independent contractor. Nothing contained in or done
pursuant to this Agreement shall be construed as creating a partnership,  agency
or joint  venture;  and neither party shall become bound by any  representation,
act or omission of the other party.

10.PRICE/WARRANTY.  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX


<PAGE>

[Portions  of  this  section  have  been  omitted  pursuant  to  a  request  for
confidential  treatment  under Rule 24b-2 under the  Securities  Exchange Act of
1934, as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission]

11. SCRC'S OBLIGATIONS.

     (a) SCRC will not make purchases or incur any obligations or expense of any
     kind in the name of BBB or BBB. At BBB's request, SCRC shall furnish to BBB
     the names of all parties with whom SCRC  contracts  to provide  services or
     materials in connection with the build-out or remodeling of the Departments
     and BBB will have the right to contact such parties.

     (b) SCRC shall promptly pay all its obligations,  including those for labor
     or material, and will not allow any liens to attach to the real property of
     which  each  respective  Department  forms a part or any BBB or  customer's
     property as a result of SCRC's failure to pay such sums.

12. SCRC'S EMPLOYEES/EQUIPMENT.

     (a) SCRC  has no  authority  to  employ  persons  on  behalf  of BBB and no
     employees of SCRC shall be deemed to be employed by BBB.  SCRC has sole and
     exclusive control over its labor and employee relations  policies,  and its
     policies relating to wages, hours,  working  conditions,  or its employees.
     SCRC has the sole and exclusive right to hire, transfer,  suspend, lay off,
     recall, promote,  assign,  discipline,  adjust grievances and discharge its
     employees.  SCRC agrees that its employees at the Departments  shall comply
     with all  policies  applicable  to BBB  employees  that are  posted  at the
     Departments   including,   without   limitation,   policies   relating   to
     non-solicitation.  BBB and  SCRC  agree  that  neither  shall  solicit  the
     employees of the other for employment or other opportunities.

     (b) SCRC is solely  responsible for all salaries and other  compensation of
     its  employees  and  will  make  all  necessary   salary   deductions   and
     withholdings from its employees' salaries and other  compensation.  SCRC is
     solely responsible for the payment of any and all contributions,  taxes and
     assessments and all other requirements of Federal Social Security,  Federal
     and  state   unemployment   compensation  and  Federal,   state  and  local
     withholding of income tax laws on all salary and other  compensation of its
     employees.

     (c) SCRC will comply with any other contract,  Federal, state or local law,
     ordinance,  rule, or regulation regarding its employees,  including Federal
     or state laws or regulations regarding minimum  compensation,  overtime and
     equal  opportunities for employment,  and, in particular,  SCRC will comply
     with the terms of the Federal  Civil Rights  Acts,  Age  Discrimination  in
     Employment Act, Occupational Safety and Health Act, and the

<PAGE>

     Federal  Fair Labor  Standards  Act,  whether or not SCRC may  otherwise be
     exempt from such acts  because of its size or the nature of its business or
     for any other reason whatsoever.

     (d) Entirely at its own expense,  and in accordance  with the provisions of
     Section 1 above,  SCRC shall install  furniture,  fixtures and equipment as
     necessary for the efficient operation of each Department, including a point
     of sale terminal or register ("SCRC's Equipment"). SCRC shall not allow any
     liens,  claims or  encumbrances to attach to any of SCRC's  Equipment,  or,
     because of installation of any of SCRC's Equipment, to the real property of
     which  the  Department  forms a part.  In the  event  any  lien,  claim  or
     encumbrance  attaches to any of SCRC's Equipment or to the real property of
     which  each  respective  Department  forms  a part,  SCRC  shall  take  all
     necessary  action to cause such lien,  claim or encumbrance to be released,
     within  thirty (30) days after  receipt of notice of such lien,  or BBB, at
     its option,  may take such action and charge SCRC all reasonable  expenses,
     including attorneys fees, incurred by BBB in removing such liens.

     (e) SCRC shall, at its expense, maintain SCRC's Equipment in good order and
     repair.  Any signage related to SCRC's business shall be located within any
     Department and shall be subject to BBB's approval.

13. CHANGE OF LOCATION.  Upon at least thirty (30) days prior written  notice to
SCRC,  BBB shall have the right to change the location,  dimensions  and size of
any Department from time to time during the Term of this Agreement in accordance
with BBB's judgment as to what  arrangements  will be most  satisfactory for the
general  good of each  respective  BBB store,  provided the new  Department  can
reasonably  and adequately  accommodate  the items set forth in Section 1(c). In
the event BBB desires that the location of any Department be changed,  BBB will,
at its  expense,  move SCRC's  Equipment to the new location and prepare the new
space for  occupancy by SCRC.  In the event that BBB notifies SCRC of its intent
to change the location,  dimensions and/or the size of any Department,  and SCRC
shall not be  satisfied  with such  change,  then SCRC  shall  have the right to
terminate  this Agreement  with respect to such  Department  effective as of the
date of the proposed change.

14. CUSTOMER ADJUSTMENT.  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

<PAGE>

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

[Portions  of  this  section  have  been  omitted  pursuant  to  a  request  for
confidential  treatment  under Rule 24b-2 under the  Securities  Exchange Act of
1934, as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission]

15. AUDIT/REPORTS.

     (a) SCRC shall keep and maintain books and records which accurately reflect
     the net sales made by SCRC under this  Agreement for a minimum of three (3)
     years  following the end of the calendar  year in which the sales  occurred
     (it being  understood and agreed that the obligation to maintain such books
     and records  would be  satisfied  by the  maintenance  of computer  systems
     data).  BBB shall have the right at any reasonable time and with reasonable
     prior  notice to SCRC to review  and  audit the books and  records  of SCRC
     regarding  this Agreement not more than once per year per  Department.  Any
     review and audit will be conducted at SCRC's headquarters or other location
     where the books  and  records  are kept,  except  that,  if such  books and
     records  are equal to or less than fifty (50)  pages,  then SCRC shall make
     them  available to BBB at a location  reasonably  designated  by BBB.  Such
     books and  records  shall be kept and  maintained  according  to  generally
     accepted accounting  principles.  If such an audit reveals a discrepancy of
     more  than  4%,  then  SCRC  will  reimburse  BBB  for the  reasonable  and
     documented  out-of-pocket  costs of the  audit.  In  addition,  SCRC  shall
     provide to BBB, from each  Department on a monthly basis, a report of sales
     by each day of the month.

     (b) Each party shall  submit its parent  company's  consolidated  financial
     report to the other party  annually  within one hundred  twenty  (120) days
     after the close of such party's fiscal year. Such report shall be certified
     by an  independent  third party CPA. If such  party's  parent  company is a
     publicly held corporation,  this requirement may be fulfilled by submission
     of the parent  company's  Annual  Report.  The  receiving  party  shall not
     disclose any such  information  which is not available to the public to any
     third parties without the disclosing  party's prior written consent (except
     that such information may be disclosed to the receiving party's landlord if
     required pursuant to the receiving party's lease).

16. WAIVER.  In no event shall BBB be responsible for any interruption to SCRC's
business if such interruption resulted from an act or omission of BBB's Landlord
or from any other matter beyond BBB's control. SCRC waives (on behalf itself and
any insurance  company which  provides  insurance to SCRC) any and all claims it
may have against BBB for damage to SCRC

<PAGE>

(including all  consequential  losses such as loss of earnings,  etc.),  for the
safekeeping or safe delivery or damage to any property  whatsoever of SCRC in or
about any  Department,  because  of the  actual or  alleged  negligence,  act or
omission of any tenant,  licensee or occupant of the premises at the Department;
or  because  of any  damage  caused by any  casualty  from any cause  whatsoever
(excluding events arising solely from BBB's gross  negligence),  including,  but
not limited to, fire, water, snow, steam, gas or odors in or from the because of
the leaking of any plumbing, or because of any accident or event which may occur
in the  Department  or because of the actual or alleged acts or omissions of any
janitors  or other  persons  in or about the  Department  or from any other such
cause whatsoever, provided, however, that SCRC shall not be obligated to pay any
rent  or  similar  compensation  to BBB  hereunder  for or with  respect  to any
Department   for  any  period  in  which  such   Concession   Area  is  rendered
uninhibitable or unusable due to any such cause.

17. SUBJECT  TO STORE  LEASES.  BBB  represents  to  SCRC that,  unless  SCRC is
informed by BBB  otherwise,  each BBB store is a retail store which is leased to
BBB, and SCRC agrees that this Agreement shall be subject and subordinate to all
of the terms,  agreements and conditions  contained in each respective lease. In
the event of the  termination  of such lease by expiration of time or otherwise,
this  Agreement  shall  immediately  terminate  with  respect  to  any  affected
Department.  In the event  BBB  executes  an  agreement  to assign  its lease or
sublease more than 25% of the floor area of the store in which the Department is
located,  this Agreement shall immediately become terminable by BBB with respect
to any  affected  Department.  BBB  represents  and  warrants  to SCRC that this
Agreement does not violate any provision of any such lease.  Notwithstanding the
foregoing,  in the event any  landlord  of a BBB  store (or a  co-tenant  in the
shopping center in which the BBB store is located)  delivers a notice of default
(or other notice  threatening  legal action) to BBB as a result of the operation
of the Department in such store, and in the event BBB reasonably determines that
such notice could result in either (i) a termination of the applicable lease, or
(ii) the  commencement of litigation  against BBB, then BBB shall have the right
to immediately  terminate this Agreement with respect to the applicable  SFLA on
fifteen (15) days notice to SCRC (or such shorter time period as may be required
to avoid such  termination or litigation),  in which event SCRC shall vacate the
Department in accordance with the provisions of Paragraph 20 below, and the sole
liability of BBB with respect to such termination shall be to reimburse SCRC for
the reasonable  costs  incurred in physically  vacating such  Department  (which
reimbursement shall not, in any event, exceed $10,000 per Department).


18. EXCLUSIVITY.  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

<PAGE>

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

[Portions  of  this  section  have  been  omitted  pursuant  to  a  request  for
confidential  treatment  under Rule 24b-2 under the  Securities  Exchange Act of
1934, as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission]

19. DATA. In  connection  with its  activities  under this  Agreement,  SCRC may
develop  customer lists and other purchase related  customer  information.  SCRC
shall not use or permit the use of such  customer  information  for any  purpose
except the performance of this Agreement and other purposes  consistent with the
ordinary business practices of SCRC. SCRC shall not reproduce, release or in any
way make available or furnish,  either  directly or  indirectly,  to any person,
firm,  corporation,  association or  organization at any time, any such customer
information  which will or may be used to solicit  sales or  business  from such
customers  without the consent of BBB,  which consent shall not be  unreasonably
withheld.  SCRC will send to BBB a  diskette  of the  customer  and  transaction
information  from the Departments  within thirty (30) days of written request by
BBB.  Except as  otherwise  provided  herein,  SCRC will hold  confidential  all
customer and other  information  regarding BBB and its affiliates,  and BBB will
hold  confidential  all customer and other  information  regarding  SCRC and its
affiliates.

20.  REMOVAL OF SCRC'S  EQUIPMENT.  Upon the  termination  of this  Agreement by
expiration  of time or  otherwise,  SCRC shall,  at its  expense,  remove all of
SCRC's  Equipment  from  each  respective  Departments  within  the time  period
described in Paragraph 2 above and shall,  without delay and at SCRC's  expense,
repair any damage to BBB's premises caused by such removal, and shall leave such
premises in a "broom clean"  condition.  In the event SCRC's equipment is not so
removed  within such time periods,  then the same shall be deemed  abandoned and
may be  disposed  of by BBB,  at the  expense of SCRC,  without  liability.  The
removal of the SCRC equipment  shall be subject to the provisions of Paragraph 2
above.

21. LICENSES,  LAWS, ORDINANCES.  SCRC shall, at its expense, obtain all permits
and licenses which may be required under any applicable Federal,  state or local
law, ordinance,  rule or regulation by virtue of any act performed in connection
with  the  operation  of each  Department.  SCRC  shall  comply  fully  with all
applicable  Federal,  state and local laws,  ordinances,  rules and regulations,
including all rules and regulations of the Federal Trade Commission.


<PAGE>

22. FEES, TAXES. SCRC shall, at its expense, pay and discharge all license fees,
business, use, sales, gross receipts, income, property or other applicable taxes
or assessments  which may be charged or levied by reason of any act performed in
connection  with  the  operation  of  each  Department.  SCRC  will  immediately
reimburse BBB for any assessment of sales,  use or other non-income tax assessed
upon BBB specifically related to the existence and operation of each Department.

23. TERMINATION OF EXISTING LETTER AGREEMENT.  Upon execution of this Agreement,
that  certain  Agreement,  dated  November  1, 1998,  between  SCRC and BBB with
respect to the Existing  Departments  shall be deemed null and void,  except for
(i) the  obligations  set forth  therein  which,  by their  terms,  survive  the
termination of such Agreements, and (ii) those provisions set forth in Paragraph
23 thereof.  Any  monetary  obligations  arising from such  provisions  shall be
promptly determined and satisfied.

24. RADIUS RESTRICTIONS. SCRC agrees that it shall use all reasonable efforts to
assure that any leases or other  agreements  it may  execute  from and after the
date hereof  shall not contain  radius or other  non-competitive  clauses  which
would  impose  restrictions  on the opening of a  Department  in any existing or
future BBB store.

25. TELEPHONE CALLS TO CENTRAL PHONE LINES. It is acknowledged that SCRC intends
to include in its general  advertisements  a reference  to a central  phone line
which interested  customers could call to receive information  regarding product
specifications  and/or  store  locations.  SCRC agrees  that,  in the event such
customer requests the location of the "nearest" or "most convenient" store, such
customer  shall  be  provided  with  either  the  SCRC  retail  store,  the SCRC
concession  within a  larger  store or the  Department  which is  geographically
closest to such customer (based upon the zip code of such customers' residence).
In the event it is not reasonably  possible to ascertain  which such location is
actually  closest,  then such customer shall be provided with the address of all
of the nearby  locations  (including the  Departments),  and no attempt shall be
made by SCRC to "steer" or  otherwise  suggest that such  customer  visit one or
more of such particular locations in preference to the Department.


<PAGE>

26. NOTICE  PROVISION.  Whenever it is provided herein that any notice,  demand,
request,  consent,  approval or other  communication  ("Notice") shall or may be
given to either of the parties by the other, it shall be in writing and, any law
or statute  to the  contrary  notwithstanding,  shall not be  effective  for any
purpose  unless same shall be given or served by registered  or certified  mail,
postage  prepaid,  return  receipt  requested,  or by any  recognized  overnight
carrier, with proof of delivery slip (public or private) addressed to Bed Bath &
Beyond at 650 Liberty  Avenue,  Union,  New Jersey  07083,  Attention:  Allan N.
Rauch,  Esq.,  or to SCRC at 6105  Trenton  Lane North,  Minneapolis,  Minnesota
55442,  Attention:  Mr. Tom Duffey,  or to such other person or other address as
may, from time to time, be specified by either party in a written  notice to the
other party. All notices given in accordance with the provisions of this Section
shall be  effective  upon  receipt (or refusal of receipt) at the address of the
addressee.

If the foregoing  correctly states your understanding of our mutual intention as
to the  transactions  contemplated  hereby,  please execute the enclosed copy of
this letter and return it to us at your earliest convenience.

SELECT COMFORT RETAIL CORPORATION

By: /s/Daniel J. McAthie

Its:President and CEO

The  undersigned  has reviewed the foregoing  Agreement and agrees to all of the
terms and conditions set forth therein.

BED BATH & BEYOND INC., a New York corporation



By: /s/Warren Eisenberg
    Warren Eisenberg, Co-Chief Executive Officer


<PAGE>



                                  EXHIBIT 1(a)

                          Huntington Station, New York
                          West Los Angeles, California
                              San Diego, California
                                Sunrise, Florida
                                  Dallas, Texas
                             Overland Park, Illinois
                                 Houston, Texas
                              Indianapolis, Indiana
                                Orlando, Florida
                               Roseville, Michigan
                                Geneva, Illinois
                              Milford, Connecticut
                                 Columbus, Ohio


<PAGE>


                                  EXHIBIT 1(h)

                                Bed Bath & Beyond
                         Marketing/Advertising Test Plan


XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX

[Portions  of  this  Exhibit  have  been  omitted  pursuant  to  a  request  for
confidential  treatment  under Rule 24b-2 under the  Securities  Exchange Act of
1934, as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission]



<PAGE>


                                  EXHIBIT 1(j)


                          Short Form License Agreement

                     BED BATH & BEYOND [OF ___________] INC.
                               650 Liberty Avenue
                             Union, New Jersey 07083

                                          ____________, 1999


Select Comfort Retail Corporation
6105 Trenton Lane North
Minneapolis, MN 55442

     Re:  Licensed  Department  (the  "Department")  in Bed Bath & Beyond  store
          located in ____________, _________ (the "Store")


Gentlemen:

        This short form license agreement,  when executed by the parties hereto,
shall  confirm that Bed Bath & Beyond [of  ___________]  Inc.  ("Licensor")  has
agreed to license a portion of the Store to Select  Comfort  Retail  Corporation
("Licensee").  Licensor and Licensee agree that the terms and provisions of that
certain letter agreement (the  "Agreement"),  dated April 20, 1999,  between Bed
Bath & Beyond Inc. and Licensee,  shall be incorporated herein by reference, and
the  Department  shall be  operated in strict  accordance  with the terms of the
Agreement,  as if the Agreement were fully set forth herein (including,  without
limitation,  in accordance  with those  provisions  of the  Agreement  regarding
length of license term and rental payments).

                                        BED BATH & BEYOND [OF ___________] INC.



                                        By:_____________________________________
                                           Warren Eisenberg, [President]
                                           [Co-Chief Executive Officer]

ACCEPTED AND AGREED TO:

SELECT COMFORT RETAIL CORPORATION


By:______________________________


<PAGE>


                                  EXHIBIT 7(a)

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX

[Portions  of  this  Exhibit  have  been  omitted  pursuant  to  a  request  for
confidential  treatment  under Rule 24b-2 under the  Securities  Exchange Act of
1934, as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission]