THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS. THIS DEBENTURE
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO JAY JACOBS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO THE PROVISIONS OF RULE 144 OF THE ACT.

THIS DEBENTURE AND THE INDEBTEDNESS EVIDENCED HEREBY IS SUBORDINATED IN THE
MANNER AND TO THE EXTENT SET FORTH IN A SUBORDINATION AGREEMENT (THE
"SUBORDINATION AGREEMENT"), DATED AS OF MARCH 11, 1998, BY THE PAYEE OF THIS
DEBENTURE IN FAVOR OF GENERAL ELECTRIC CAPITAL CORPORATION (THE "LENDER") TO ALL
INDEBTEDNESS (INCLUDING INTEREST) AT ANY TIME OWED BY THE MAKER OF THIS
DEBENTURE TO LENDER, AND EACH HOLDER OF THIS DEBENTURE, BY ITS ACCEPTANCE
HEREOF, SHALL BE BOUND BY THE SUBORDINATION AGREEMENT.


                                    [FORM OF]

                                JAY JACOBS, INC.

          14% Subordinated Convertible Debenture due December 31, 1998


[$_________]                                                     March  11, 1998


     FOR VALUE RECEIVED, JAY JACOBS, INC., a Washington corporation (the
"Company"), hereby promises to pay to [PURCHASER'S NAME] (the "Purchaser"), or
permitted assigns (the Purchaser or its registered assign(s), as applicable, is
referred to herein as the "Holder"), the principal amount of [AMOUNT IN WORDS
($_________)] on December 31, 1998, and to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the annual rate of
fourteen percent (14%). Interest shall be computed on the basis of a 360 day
year and the actual number of days elapsed. Accrued and unpaid interest shall be
due and payable semiannually in arrears on June 30 and December 31 of each year
from the date hereof until the entire principal amount is paid. All amounts due
and owing hereunder shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Holder
or at such other place as the Holder may designate from time to time in writing
to the Company. Any payment on this Debenture coming due on a Saturday, a Sunday
or a day which is a legal holiday in the place at which a payment is to be made
hereunder shall be made on the next succeeding day which is a business day in
such place, and any such extension of the time of payment shall be included in
the computation of interest hereunder.
<PAGE>
This Debenture is issued pursuant and subject to and is entitled to the benefits
of a certain Debenture Purchase Agreement dated as of March 11, 1998 between the
Company and the Purchaser and other parties named therein (the "Debenture
Purchase Agreement"). Capitalized words not defined herein shall have the
meaning set forth in the Debenture Purchase Agreement

     Subject to the terms of the Debenture Purchase Agreement (including, but
not limited to, the subordination provisions thereof), upon the occurrence or
existence of an Event of Default (as defined in the Debenture Purchase
Agreement) the Holder may, by notice to the Company, declare the entire unpaid
principal amount of this Debenture, all interest accrued and unpaid hereon, and
all other amounts payable to the Holder hereunder or under the Debenture
Purchase Agreement to be forthwith due and payable, whereupon this Debenture,
all such accrued interest and all such amounts shall become and be forthwith due
and payable, and in addition thereto, and not in substitution therefor, the
Holder shall be entitled to exercise any one or more of the rights and remedies
provided by applicable law. Failure to exercise any right or remedy under this
Debenture or available under applicable law shall not constitute a waiver of
such option or such other remedies or of the right to exercise any of the same
in the event of any subsequent Event of Default. The Company and all makers,
sureties, guarantors, endorsers and other persons assuming obligations pursuant
to this Debenture hereby waive presentment, protest, demand, notice of dishonor
and all other notices and all defenses and pleas on the grounds of any extension
or extension of the time of payments or the due dates hereof, in whole or in
part, before or after maturity, with or without notice. No renewal or extension
of this Debenture, no release of any obligor and no delay in enforcement of this
Debenture or in exercising any right or power hereunder shall affect the
liability of any obligor hereunder. The pleading of any statute of limitations
as a defense to any demand against any obligor is expressly waived.

     1. Warrant. As part of the consideration for the loan evidenced by this
Debenture, the Company has authorized and issued a Warrant (the "Warrant"), to
Purchaser. The Warrant shall be exercisable at any time from the date hereof and
on or before the date of the fifth anniversary hereof (the "Exercise Period"),
regardless of whether this Debenture has been redeemed. The Warrant and this
Debenture are not attached and may be assigned separately.

     2. Prepayment of Debenture.

          (a) Voluntary Prepayment. The Company may not prepay or redeem all or
     part of the Debenture prior to maturity hereof, without the prior written
     consent of the Holder of the Debenture.

          (b) Mandatory Prepayment. Unless agreed to in writing by the Holder,
     the Company shall be required to prepay:

               (i) In the event that the Company consummates a registered
          underwritten public offering covering the offer and sale of Common
          Stock for the account of the Company in which net proceeds to the
          Company of the public

                                      - 2 -
<PAGE>
          offering equals or exceeds $5 million (a "Public Offering"), then the
          Company must apply, at the request of the Holder, the proceeds of such
          Public Offering (to the extent available after payment of all Senior
          Indebtedness (as defined in Section 12(e) below) to prepay the unpaid
          principal amount and outstanding interest of this Debenture;

               (ii) Upon an Event of Default, subject to Section 5 herein;

               (iii) Upon a Change of Control (as defined below) of the Company,
          in which case the Holder shall have the right, at is sole discretion,
          to require the Company to repurchase the Debenture upon ten (10)
          business days' prior written notice at a price equal to 105% of the
          principal amount of the Debenture plus any unpaid interest thereon.
          The Company shall provide the Holder with written notice within two
          (2) business days of a Change of Control. For purposes of this Section
          only, "Change of Control" means any event or series of events by which
          (A) any Person or group obtains a majority (by voting or otherwise) of
          the securities of the Company ordinarily having the right to vote in
          the election of directors; (B) during any two year period, individuals
          who at the beginning of any such two year period constituted the Board
          of Directors of the Company (together with any new directors whose
          election by such Board or whose nomination for election by the
          stockholders of the Company was approved by a vote of the majority of
          the directors then still in office who were either directors at the
          beginning of such period or whose election, recommendation, or
          nomination for election was previously so approved) cease for any
          reason to constitute a majority of the Board of Directors of the
          Company then in office; (C) the merger, consolidation, reorganization,
          recapitalization, dissolution or liquidation of the Company if as a
          result the current stockholders no longer own more than 50% of the
          voting securities of the Company; (D) any sale, lease, exchange or
          other transfer of all, or substantially all, of the assets of the
          Company; or (E) the adoption of a plan leading to the liquidation or
          dissolution of the Company; or

               (iv) Upon the issuance of any subordinated indebtedness by the
          Company, other than the Debentures ("New Subordinated Debt").

     3. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, or any other similar voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Debenture, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder against impairment due to such event. Without
limiting the generality of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on exercise of this Debenture above
the Exercise Price then in effect, (b) will take all action that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all taxes,

                                      - 3 -
<PAGE>
liens and charges with respect to the issue thereof, on the exercise of this
Debenture from time to time and (c) will not consolidate with or merge into any
other person or permit any such person to consolidate with or merge into the
Company, unless such other person (or, in the case of a merger or consolidation
in which the Company is the surviving entity, the person issuing the securities
involved in such merger or consolidation) shall expressly assume in writing and
will be bound by all the terms of this Debenture.

     4. Notices of Record Date, etc. In the event the Company (a) takes a record
of the holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend on, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or (b)
consolidates or merges into, or transfers all or substantially all of its assets
to, another corporation, or (c) dissolves or liquidates (the events described in
the foregoing clauses (b) and (c) being hereinafter referred to as a
"Fundamental Change"), then and in each such event the Company will mail or
cause to be mailed to the registered Holder of this Debenture a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, (ii) the date on which any such
Fundamental Change is to be effected, and the time, if any to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for securities or other property, if any, deliverable on
any Fundamental Change and (iii) the amount and character of any stock or other
securities, or rights or options with respect thereto, proposed to be issued or
granted, the date of such proposed issue or grant and the persons or class of
persons to whom such proposed issue or grant is to be offered or made. Such
notice shall also state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), or a favorable vote of
stockholders, if either is required. Such notice shall be mailed at least 20
days prior to the date specified in such notice on which any such action is to
be taken or 20 days prior to the record date therefor, whichever is earlier.

     5. Holder's Rights upon an Event of Default. Upon an Event of Default
(including without limitation failure to pay principal and interest), as more
fully set forth in the Debenture Purchase Agreement, the Holder, at its
discretion, shall have the right to:

          (a) demand payment in full of the principal amount of this Debenture
     and all unpaid interest hereon;

          (b) extend the term of the Debenture subject to receiving additional
     warrants (the "Additional Warrants") to purchase Common Stock or Common
     Stock Equivalent Shares equal to such Holder's Pro Rata Interest (as set
     forth on Exhibit A to the Debenture Purchase Agreement) in an aggregate of
     three percent (3%) of the Common Stock or Common Stock Equivalent Shares on
     a fully diluted basis; in such case the terms of the Additional Warrants
     shall be substantially similar to those of the Warrants, including without
     limitation a term of five years and an exercise price of $.01 per share of
     Common Stock or $1.00 per Common Stock Equivalent Share;

                                      - 4 -
<PAGE>
          (c) convert the principal amount of this Debenture, or any portion
     thereof, into the number of fully paid and non-assessable shares of Series
     C Convertible Preferred Stock, par value $.01 per share, with the rights
     and preferences set forth in Exhibit E of the Debenture Purchase Agreement,
     of the Company determined by dividing the principal amount so converted by
     the purchase price of $100 per share (the "Conversion Shares"); or

          (d) enter into such other written agreement with the Company upon
     terms and conditions mutually agreeable to the parties thereto.

The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Debenture pursuant to this Section, all
shares of Series C Convertible Preferred Stock from time to time issuable upon
such exercise and such shares of Common Stock or Common Stock Equivalent Shares
issuable upon exercise of the Additional Warrants and/or conversion of the
Conversion Shares.

     6. Manner of Conversion.

          (a) In order to exercise the conversion right described in Section 5
     above, the Holder shall surrender this Debenture to the Company at the
     address of the Company set forth in the Debenture Purchase Agreement (or at
     such other address as the Company, in accordance with the Debenture
     Purchase Agreement, shall specify in writing to the Holder), accompanied by
     written notice (the "Conversion Notice") to the Company stating that the
     Holder elects to convert this Debenture.

          (b) As soon as practicable after any such conversion, and in any event
     within ten (10) business days thereafter, the Company, at its expense
     (including the payment by it of any applicable issue or stamp taxes), will
     cause to be issued in the name of and delivered to the Holder, or as the
     Holder (upon payment by such holder of any applicable transfer taxes) may
     direct, a certificate or certificates for the number of fully paid and
     nonassessable shares of Conversion Shares to which the Holder shall be
     entitled on such conversion, in such denominations as may be requested by
     the Holder. Concurrently with the issuance of such shares, the Company
     shall (i) pay all unpaid interest which accrued prior to the date of the
     Conversion Notice with respect to the portion of the principal amount of
     this Debenture then being converted, and (ii) cause to be issued in the
     name of and delivered to the Holder, or as the Holder may direct, a
     Debenture of like tenor in lieu of this Debenture for the principal amount
     not converted.

          (c) Each certificate for Conversion Shares initially issued upon
     conversion of this Debenture, unless at the time of conversion of such
     Conversion Shares are registered under the Act, shall bear the following
     legend (and any additional legend required by any securities exchange upon
     which such Conversion Shares may, at the time of such exercise, be listed)
     on the face thereof:

                                      - 5 -
<PAGE>
     "These securities have not been registered under the Securities Act of
     1933, as amended, or under any state securities laws and may be offered,
     sold or transferred only if registered pursuant to the provisions of such
     laws, or if in the opinion of counsel satisfactory to the Company, an
     exemption from such registration is available."

     7. Transfer. Subject to applicable federal and state securities laws, the
transfer of this Debenture and all rights hereunder, in whole or in part, is
registrable at the office or agency of the Company by the Holder hereof in
person or by his duly authorized attorney, upon surrender of this Debenture
properly endorsed, provided that this Debenture (and any rights of the Holder
hereunder) is non-transferable except to a person or entity controlled by, or
under common control with, the Holder. Each taker and holder of this Debenture,
by taking or holding the same, consents and agrees that this Debenture, when
endorsed in blank, shall be deemed negotiable, and that the Holder hereof, when
this Debenture shall have been so endorsed, may be treated by the Company and
all other persons dealing with this Debenture as the absolute owner and holder
hereof for any purpose and as the person entitled to exercise the rights
represented by this Debenture, or to the registration of transfer hereof on the
books of the Company; and until due presentment for registration of transfer on
such books the Company may treat the registered holder hereof as the owner and
holder for all purposes, and the Company shall not be affected by notice to the
contrary.

     8. Register. The Company shall maintain, at the principal office of the
Company (or such other office as it may designate by notice to the Holder
hereof), a register for the Debenture, in which the Company shall record the
name and address of the person in whose name a Debenture has been issued, as
well as the name and address of each transferee and each prior owner of such
Debenture.

     9. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Debenture and, in
the case of any such loss, theft or destruction of this Debenture, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Debenture, the Company at its expense will execute and
deliver, in lieu thereof, a new Debenture of like tenor; provided, however, if a
Debenture held by Holder its nominee or any of its partners, principals,
officers or directors is lost, stolen or destroyed, the affidavit of a general
partner or any principal or corporate officer of Holder setting forth the
circumstances with respect to such loss, theft or destruction shall be delivered
to the Company and shall be accepted as satisfactory evidence thereof, and no
indemnity bond or other security shall be required as a condition to the
execution and delivery by the company of a new Debenture in replacement of such
lost, stolen or destroyed Debenture.

     10. Remedies. The Company stipulates that the remedies at law of the Holder
of this Debenture in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Debenture are not and will not be adequate, and that such terms may be
specifically enforced pursuant to a decree for the specific performance of

                                      - 6 -
<PAGE>
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

     11. No Sinking Fund; Payment Unsecured. No sinking fund or similar
provision shall be required to fund payment of principal or interest under this
Debenture. Payment of principal and interest on this Debenture is unsecured.

     12. Subordination.

          (a) Subordination to Senior Indebtedness. The payment of the principal
     of and interest on this Debenture is hereby expressly made subject to the
     terms and conditions contained in that certain Subordination Agreement,
     dated as of March 11, 1998, by and between each of the Purchasers and
     General Electric Capital Corporation.

          (b) Ranking with respect to other Subordinated Indebtedness. This
     Debentures shall rank pari passu with all other Subordinated Indebtedness
     of the Company. "Subordinated Indebtedness" means any indebtedness of the
     Company, whether outstanding on the date hereof or incurred, assumed or
     guaranteed by the Company, which is subordinated in right of payment or in
     rights upon liquidation to Senior Indebtedness.

     13. Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent pursuant to this Debenture
shall be given, served and sent in accordance with the provisions of the
Debenture Purchase Agreement.

     14. Miscellaneous. This Debenture and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. Any amendment, modification or addition to this Debenture is subject
to the provisions governing same in the Debenture Purchase Agreement. This
Debenture shall be construed and enforced in accordance with and governed by the
laws of the State of Delaware (excluding the choice of law rules thereof). The
headings in this Debenture are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.


      [Balance of Page Left Blank Intentionally -- Signature Page Follows]

                                      - 7 -

<PAGE>

         IN WITNESS WHEREOF, the undersigned has caused this Debenture to be
duly executed on its behalf as of the date first hereinabove set forth.


                                       JAY JACOBS, INC.



                                       By: _____________________________________
                                           Name:  Rex L. Steffey
                                           Title:  President and Chief Executive
                                                   Officer

                                      - 8 -