Loan No. 3032893

                                 PROMISSORY NOTE

$3,000,000.00                                                     April 24, 1998
                                                                Portland, Oregon

     FOR VALUE RECEIVED,  the undersigned ("Maker" or "Borrower")  promise(s) to
pay to the  order  of BANK OF  AMERICA  NATIONAL  TRUST  &  SAVINGS  ASSOCIATION
("Lender" or "Bank"),  at its principal office in Portland,  Oregon,  or at such
other place or places or to such other party as the "Holder" (defined below) may
from time to time  designate in writing,  the principal sum of THREE MILLION AND
NO/100 DOLLARS  ($3,000,000.00) or so much thereof as may be advanced, in lawful
money of the United States of America,  together with interest  thereon,  on the
following  agreements,  terms and conditions.  The term "Holder" as used in this
Note means Lender or any future holder of this Note,  and their  successors  and
assigns.

     1. TERM. The unpaid  principal  balance of this Note and all unpaid accrued
interest  thereon and other sums payable by Maker in  connection  with this Note
shall be due and payable in full on May 1, 2008 ("Maturity Date").

     2. INTEREST AND PAYMENTS.  Interest  shall  commence to run on each advance
under  this  Note  from the date of the  advance  and  will be  computed  on the
outstanding  balance of this Note as it exists from time to time. After maturity
or after default,  interest shall accrue on the outstanding principal balance of
this Note at an annual rate equal to four percentage points (4%) per annum above
the interest rate(s) otherwise applicable to this Note.

          a.  Interest.   Interest  shall  accrue  at  the  rate  of  eight  and
     three-tenths percentage points (8.30%) per year (the "Note Rate").

          b. Monthly  Payments.  If the Deed of Trust records on any day but the
     first day of a month,  Borrower  will pay interest in advance from the date
     of recording to the first day of the next month. Thereafter,  principal and
     interest shall be payable in monthly installments of Twenty-Three  Thousand
     Seven Hundred Fifty-Three and 83/100ths Dollars ($23,753.83),  beginning on
     the first (1st) day of June, 1998, and continuing on the first (1st) day of
     each  month  thereafter,  with a  final  payment  of all  remaining  unpaid
     principal,  interest  and other sums due under this Note due and payable on
     the Maturity Date.

          c. Interest  Apportionment  and Allocation.  The amount of each year's
     interest on the Note will, as it accrues,  be  apportioned  among  calendar
     months on the basis of a year consisting of 12 thirty-day months. The early
     or late date of making a monthly  payment will be disregarded  for purposes
     of allocating the payment between principal and interest. For this purpose,
     the payment will be treated as though made on the date due.

     3.  PREPAYMENT.  Borrower  may prepay  principal on the Loan in whole or in
part in minimum  amounts  equal to or greater than twenty  percent  (20%) of the
face amount of this Note. Borrower shall give Bank irrevocable written notice of
Borrower's  intention to make the prepayment,  specifying the date and amount of
the  prepayment.  The notice  must be received by Bank at least five (5) Banking
Days in advance of the  prepayment.  All  prepayments  of  principal on the Loan
shall be applied to the most remote principal  installment or installments  then
unpaid.  Each  such  prepayment  shall  be  accompanied  by the  Prepayment  Fee
described in this subsection.

          a. Except for any required  principal  repayment under Section 2.10 of
     the Standing  Loan  Agreement of even date,  each  prepayment  of the Loan,
     whether  voluntary,  by  reason  of  acceleration  or  otherwise,  shall be
     accompanied  by  payment  of all  accrued  interest  on the  amount  of the
     prepayment,  a  prepayment  servicing  fee of $250 and the  Prepayment  Fee
     described below.

          b. The Prepayment Fee shall be the sum of fees  calculated  separately
     for each Prepaid Installment, as follows:

               (1)  Determine  the amount of interest  which would have  accrued
          each month for the Prepaid  Installment  had it  remained  outstanding
          until the applicable Original Payment Date, using the Fixed Rate;

               (2) Subtract from each monthly interest amount determined in (1),
          above,  the amount of  interest  which would  accrue for that  Prepaid
          Installment if it were reinvested from the date of prepayment  through
          the Original Payment Date at the Treasury Rate;

               (3) If (1) minus (2) for the Prepaid  Installment is greater than
          zero, discount the monthly difference to the date of prepayment by the
          rate used in (2). The sum of the discounted monthly differences is the
          Prepayment Fee for that Prepaid Installment; plus

               (4) An amount  equal to all costs and  expenses  Bank  reasonably
          expects to incur in liquidation and reinvestment of any prepaid funds.

          c. For purposes of this subsection,

               (1)  "Treasury  Rate"  means  the  interest  rate  yield for U.S.
          Government Treasury Securities which Bank determines could be obtained
          by reinvesting a specified Prepaid Installment in such securities from
          the date of prepayment through the Original Payment Date.

               (2)  "Original  Payment  Dates"  mean  the  dates  on  which  the
          applicable  Fixed Rate period  would have expired if there had been no
          prepayment.

               (3)  "Prepaid  Installment"  means  the  portion  of the  prepaid
          principal of the Loan which would have been paid on a single  Original
          Payment Date.

               (4) "Banking  Day" means a day,  other than a Saturday or Sunday,
          on which  Bank is open  for  business  for all  banking  functions  in
          Oregon.

          d. Bank may  adjust the  Treasury  Rate to  reflect  the  compounding,
     accrual basis,  or the costs of the Loan. The rate is Bank's estimate only,
     and Bank is under no obligation to actually  reinvest any  prepayment.  The
     rate shall be based on  information  from  either the  Telerate  or Reuters
     information services, The Wall Street Journal, or other information sources
     the Bank deems appropriate.

     4. BORROWER'S WAIVER OF PREPAYMENT RIGHT. By its signature below,  Borrower
expressly  waives any right to prepay the Loan except on the  express  terms set
forth above. Borrower agrees to pay the Prepayment Fee even if the prepayment is
made following Bank's acceleration of the Note due to a default by Borrower,  or
by reason of any transfer  giving Bank the right to  accelerate  the maturity of
this Note pursuant to the terms of the Deed of Trust. Borrower acknowledges that
prepayment of the Loan may result in Bank incurring  additional costs (including
lost opportunity costs), expenses or liabilities. Borrower therefore agrees that
the  Prepayment Fee  represents a reasonable  estimate of the prepayment  costs,
expenses or liabilities  Bank may suffer on a prepayment.  Borrower  agrees that
Bank's  willingness to offer a fixed interest rate to Borrower is sufficient and
independent  consideration for this waiver. Borrower understands that Bank would
not offer a fixed interest rate to Borrower absent this waiver.


SRC VISION, INC., an Oregon corporation



By:  /s/ Alan R. Steel
---------------------------------------
 ALAN R. STEEL, Chief Financial Officer


     5. LATE  CHARGES;  RETURNED  ITEM FEE. If any payment due  hereunder is not
received by the Holder  within  fifteen (15) days of the due date, at the option
of the Holder without waiving such default or any of its remedies, a late charge
shall be added to the  delinquent  payment in the amount of four percent (4%) of
the full payment not timely paid.  Any such late charge shall be due and payable
on demand, and the Holder, at its option, may (a) refuse any late payment or any
subsequent payment unless accompanied by the applicable late charge, (b) add the
late charge to the principal  balance of this Note, (c) pay any late charge with
advances  of the  undisbursed  proceeds  of the Loan,  if any,  or (d) treat the
failure to pay the late charge as demanded  as a default  under this Note.  If a
late  charge is added to the  principal  balance  of this  Note,  it shall  bear
interest at the same rate as the principal  balance of this Note. Any payment to
Holder by check,  draft or other item  shall be  received  by Holder  subject to
collection and will  constitute  payment when  collected not when received.  For
each "nsf" or returned check, draft or other item, in addition to any applicable
late  charge,  Maker  shall pay to the Holder on demand a  returned  item fee in
accordance with the Holder's schedule of such fees then in effect.

     6. DEFAULT.  After a default under any of the Loan  Documents,  or if Maker
fails to make any  payment  under this Note when due,  the then  Holder,  at its
option,  without  notice to Maker  (except as provided  below),  may declare the
entire  principal  balance of this Note and all unpaid accrued  interest thereon
and other  charges  payable  by Maker  pursuant  to this Note or any other  Loan
Document,  immediately  due and payable in full, and the Holder may exercise any
and all other rights or remedies available to it under any Loan Document, at law
or in equity. Any additional interest due because of a default shall accrue from
the date of  default  and  shall be paid as a  condition  to the  curing  of the
default.  Notwithstanding  the  foregoing,  the Holder will not  accelerate  the
Maturity Date (a) because of a monetary  default by Maker under this Note or any
other Loan Document  unless the default is not cured within ten (10) days of the
date on which the Holder  mails or  delivers  written  notice of the  default to
Maker,  or (b) because of a nonmonetary  default by Maker under this Note or any
other Loan Document  unless the default is not cured within fifteen (15) days of
the date on which the Holder mails or delivers  written notice of the default to
Maker. For purposes of this Note, the term "monetary default" means a failure by
Maker to make any  payment  required  pursuant  to this Note or any  other  Loan
Document,  and the term  "nonmonetary  default" shall mean a failure by Maker to
perform any obligation contained in this Note or any other Loan Document,  other
than the obligation to make the payments  provided for in this Note or any other
Loan Document.  If the nonmonetary  default is capable of being cured and cannot
reasonably be made within the thirty (30)-day cure period, the cure period shall
be extended up to ninety (90) days so long as Maker has commenced action to cure
within the fifteen (15)-day cure period,  and in the Holder's opinion,  Maker is
proceeding to cure the default with due diligence.  None of the foregoing  shall
be  construed  to  obligate  the  Holder to  forbear  in any other  manner  from
exercising  its  remedies and the Holder may pursue any other rights or remedies
which the Holder may have because of the default.

     7.  CUMULATIVE  REMEDIES.  The rights and remedies of any Holder under this
Note or any other Loan Document, or at law or in equity, shall be cumulative and
concurrent,  may be pursued singly,  successively or together against Maker, any
guarantor  of this Note,  or any security for this Note. A failure by any Holder
to exercise its option to accelerate  this Note upon the occurrence of a default
or to exercise any other rights to which it may be entitled shall not constitute
a waiver of the right to exercise such option or any such rights in the event of
any subsequent default, whether of the same or a different nature.

     8. WAIVERS.  Maker and all  endorsers,  guarantors and all other persons or
entities who may become liable for all or any part of the obligations  evidenced
by this Note, jointly and severally: waive diligence,  presentment,  protest and
demand, and also notice of protest,  demand,  non-payment,  dishonor or maturity
and also recourse to suretyship defenses  generally;  and consent to any and all
renewals,  extensions and  modifications  of the terms of this Note or any other
Loan  Document,  including  the time for  payment,  and agree any such  renewal,
extension or modification or the release or substitution of any security for the
indebtedness  evidenced by this Note or any other indulgences,  shall not affect
the liability of said parties for the  indebtedness  evidenced by this Note. Any
such renewals,  extensions,  modifications,  releases or indulgences may be made
without notice to such parties.

     9. COSTS AND  EXPENSES.  Whether or not suit is brought  Maker shall pay on
demand all reasonable  costs and expenses,  including  attorneys' fees and costs
and allocated  costs of in-house legal counsel,  incurred by or on behalf of the
Holder in connection with this Note, including without limitation costs incurred
in the  collection of this Note, in protecting  the security for this Note or in
foreclosing or enforcing this Note or any other Loan Document, or resulting from
the Holder being made a party to any litigation because of the existence of this
Note  or any  other  Loan  Document.  Without  limiting  the  generality  of the
foregoing,  if  Maker  becomes  the  subject  of any  bankruptcy  or  insolvency
proceeding,  Maker shall pay all  reasonable  fees and expenses  incurred by the
Holder in connection with such bankruptcy or insolvency proceeding.

     10. MAXIMUM  INTEREST.  Maker  represents and warrants the proceeds of this
Note shall be used solely for commercial,  investment and business purposes, and
not for  personal,  family  or  household  purposes.  Notwithstanding  any other
provision  of this  Note or any other  Loan  Document,  interest,  loan fees and
charges payable by reason of the  indebtedness  evidenced by this Note shall not
exceed  the  maximum,  if any,  permitted  by  applicable  law.  If by virtue of
applicable law, sums in excess of such maximum would otherwise be payable,  then
such excess sums shall be  construed as having been  immediately  applied by the
Holder to the principal  balance of this Note when received.  If at the time any
such sum is received by the Holder,  the principal balance of this Note has been
paid in full, such sums shall be promptly  refunded by the Holder to Maker, less
any sums due to the Holder.

     11.  SECURITY.  This Note is secured by a commercial  deed of trust of even
date (the "Deed of Trust")  encumbering certain real property located in Jackson
County,  Oregon (the "Property").  Unless otherwise  specified in this Note, all
notices given  pursuant to this Note must be in writing and will be  effectively
given if given in accordance with the terms of the Deed of Trust.

     12. GENERAL.  This Note shall be binding upon Maker and Maker's  successors
and assigns.  If Maker  consists of more than one person or entity,  all of such
persons  and  entities  shall  be  jointly  and  severally  liable  for  Maker's
obligations  under this Note. This Note is governed by and shall be construed in
accordance with the laws of the State of Oregon. Each person or entity executing
this Note consents to the non-exclusive  personal  jurisdiction and venue of the
courts of the State of Oregon  and the  United  States  federal  courts  located
therein,  in any  action  relating  to or  arising  out of  the  enforcement  or
interpretation  of this Note or any other  Loan  Document.  Each such  person or
entity  further  agrees not to assert in any such action that the proceeding has
been brought in an inconvenient forum.

     13. ARBITRATION.  Any dispute relating to this Note or the Loan (whether in
contract or tort) shall be settled by  arbitration  if requested  by Maker,  the
Holder or any other party to the dispute (such as a guarantor);  provided,  both
Maker and the Holder must  consent to a request for  arbitration  relating to an
obligation secured by real property.  The arbitration  proceedings shall be held
in Portland,  Oregon in accordance with the commercial  arbitration rules of the
Arbitration  Services of Portland,  Inc., and the United States  Arbitration Act
(i.e., Title 9, U.S.C.).  There shall be one arbitrator who shall decide whether
an  issue is  arbitrable  or  whether  any  claim  is  barred  by a  statute  of
limitations.  Judgment  on the  arbitration  award may be  entered  in any court
having jurisdiction.  Commencement of a lawsuit shall not constitute a waiver of
the right of any party to request arbitration if the lawsuit is contested.  Each
party  shall have the right  before,  during and after the  commencement  of any
arbitration  proceeding to exercise any of the following remedies,  in any order
or concurrently:  (i) self-help  remedies such as setoff or  repossession;  (ii)
judicial  or  nonjudicial   foreclosure   against  real  or  personal   property
collateral; and (iii) provisional remedies including injunction,  appointment of
receiver,  attachment, claim and delivery and replevin. The exercise of any such
remedy shall not waive a party's right to request  arbitration.  Nothing in this
paragraph  shall limit in any way any right the Holder may have to foreclose the
Deed of Trust judicially as a mortgage,  or nonjudicially  pursuant to the power
of sale.

     14. DISPUTED OBLIGATIONS.  All communications concerning disputed debts and
obligations  of Maker  under  this Note or any other  Loan  Document,  including
without limitation disputes as to the amount of any payment,  fee or charge, and
including an instrument  tendered as full  satisfaction of a disputed debt, must
be in  writing  and  must be sent to the  following  address,  or to such  other
address as the Holder may hereafter specify:

                  Bank of America National Trust & Savings Association
                  Eugene Commercial Banking, Unit  2091
                  201 East 11th Avenue, 2nd Floor
                  Eugene, Oregon  97401

Any such  communication  should include the name of Maker,  the applicable  loan
number, a description of the dispute and the relief or remedy requested,  and an
address  and  telephone  number  where the  person  sending  the  notice  can be
contacted.

     15. CROSS-DEFAULT. A default under this Note and/or the Loan Documents will
constitute a default  under any and all documents  (the "Other Loan  Documents")
relating  to,  evidencing  or securing (a) any and all loans by Lender to Maker,
and (b) the $2,000,000.00 revolving line of credit loan (Loan No. 0041962870) by
Lender to Advanced Machine Vision Corporation, a California corporation ("AMVC")
(the "Line of Credit")  (collectively,  the "Other Loan"). Any default under the
Other Loan  Documents  will  constitute  a default  under this Note and the Loan
Documents. Any default under this Note will give rise to any and all of Lender's
rights and remedies hereunder and/or under the Other Loan Documents. Any default
under any of the Other Loan Documents shall give rise to any and all of Lender's
rights under such Loan Document, the Other Loan Documents, and/or this Note.

     16. CROSS-COLLATERALIZATION.  Maker agrees that the Property secured by the
Deed of Trust securing this Note will constitute collateral under the Other Loan
Documents,  as if said property was  encumbered as collateral for the Other Loan
transactions.  Maker further agrees that the property which serves as collateral
under the Other Loan Documents shall  constitute  collateral for this Loan as if
said property was encumbered as collateral for this Loan transaction.  Thus, the
collateral  for the Other Loan  secures the Loan  evidenced by this Note and the
Property which secures this Note shall also secure the Other Loan.

     17. ACKNOWLEDGMENT AND WAIVER. Maker represents and warrants to Holder that
although the maker of the Other Loan is not the same entity as Maker, Maker is a
wholly-owned  subsidiary of AMVC. AMVC is a guarantor of this Loan and the maker
of the Other Loan.  Maker  acknowledges  and agrees that at Maker's  request and
solely as an accommodation to Maker, Holder has agreed that the borrower for the
Other Loan may be a separate  entity,  so long as Maker  remains a  wholly-owned
subsidiary  of AMVC.  Maker hereby  waives any and all claims or defenses it may
have to the  cross-defaulting and  cross-collateralization  of this Loan and the
Other  Loan  based on the fact that  Maker and the maker for the Other  Loan are
separate entities. Maker acknowledges that it has received actual and sufficient
consideration in exchange for the cross-defaulting  and  cross-collateralization
of this Loan to the Other Loan.

     18. TOTAL  LIABILITIES-TO-TANGIBLE  NET WORTH RATIO.  Borrower  agrees that
AMVC  (together  with its  consolidated  subsidiaries  hereinafter  collectively
referred  to as "AMVC")  shall  maintain a ratio of total  liabilities  to total
tangible net worth not exceeding the amounts indicated for each period specified
below, as measured on a quarterly basis:

     a. 2.75:1 for the period December 31, 1997 through December 30, 1998;
     b. 2.20:1 for the period December 31, 1998 through December 30, 1999;
     c. 1.75:1 for the period December 31, 1999 through December 30, 2000;
     d. 1.50:1 for the period December 31, 2000 through December 30, 2001; and
     e. 1.25:1 thereafter.

"Total  liabilities"  means  the  sum of  current  liabilities  plus  long  term
liabilities,  excluding debt subordinated to AMVC's obligations to the Bank in a
manner acceptable to the Bank, using the Bank's standard form.

"Tangible net worth" means the gross book value of the AMVC's assets  (excluding
goodwill,  patents,  trademarks,  trade names,  organization  expense,  treasury
stock, unamortized debt discount and expense,  deferred research and development
costs, deferred marketing expenses,  and other like intangibles,  and monies due
from  affiliates,   officers,  directors  or  shareholders  of  the  AMVC)  plus
liabilities  subordinated to the Bank in a manner  acceptable to the Bank (using
the Bank's standard form) less total  liabilities,  including but not limited to
accrued and deferred income taxes and any reserves against assets.

     19. MINIMUM TRADING ASSET RATIO. Borrower agrees that AMVC shall maintain a
minimum  trading  asset ratio of at least 2.65:1  "Minimum  trading asset ratio"
means the ratio of  accounts  receivable  plus  inventory  divided  by  accounts
payable plus short term bank debt.

     20. CASH FLOW RATIO.  Borrower  agrees that AMVC shall maintain a cash flow
ratio of at least 1.20:1.  "Cash flow ratio" means the ratio of cash flow to the
current  portion of long term debt plus interest  expense plus income taxes plus
dividends plus capital  expenditures.  "Cash flow" is defined as earnings before
interest expense, income taxes,  depreciation and amortization.  This ratio will
be  calculated  at the end of each  fiscal  quarter,  using the  results of that
quarter and each of the three (3) immediately  preceding  quarters.  The current
portion  of long term debt will be  measured  as of the first day of the  fiscal
year in which the  quarter  falls.  The  current  portion of long term debt will
exclude the Notes payable to Veneer Technology, Inc.

     21.  LIQUIDITY.  Borrower agrees that AMVC shall (on a consolidated  basis)
maintain  unencumbered liquid assets equal to at least Three Million Two Hundred
Fifty  Thousand and No/100  Dollars  ($3,250,000.00)  through July 31, 1999,  as
measured by the sum of AMVC's borrowing capacity under the Line of Credit,  plus
unpledged cash and marketable securities held by AMVC.

     22. ORS 41.580 Disclosure. UNDER OREGON LAW, MOST AGREEMENTS,  PROMISES AND
COMMITMENTS BY HOLDER AFTER OCTOBER 3, 1989,  CONCERNING  LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL,  FAMILY OR HOUSEHOLD PURPOSES, OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND
BE SIGNED BY AN AUTHORIZED REPRESENTATIVE OF HOLDER TO BE ENFORCEABLE.


MAKER:

SRC VISION, INC., an Oregon corporation


By:  /s/ Alan R. Steel
---------------------------------------
 ALAN R. STEEL, Chief Financial Officer
<PAGE>

AFTER RECORDING RETURN TO:

BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
Real Estate Industries Division, Unit 2098
Attention: Ms. Deanne L. Hildebrand
P.O. BOX 6400
PORTLAND, OR 97228                                              Loan No. 3032893


                  COMMERCIAL DEED OF TRUST, SECURITY AGREEMENT
                       AND FIXTURE FILING WITH ASSIGNMENT
                               OF LEASES AND RENTS


     THIS COMMERCIAL DEED OF TRUST,  SECURITY  AGREEMENT AND FIXTURE FILING WITH
ASSIGNMENT  OF LEASES AND RENTS  ("Deed of Trust") is made April 24, 1998 by SRC
VISION,  INC.,  an Oregon  corporation,  as  "Grantor",  whose  address  is 2067
Commerce Drive,  Medford,  Oregon 97504; to  JOSEPHINE-CRATER  TITLE  COMPANIES,
INC., an Oregon  corporation,  as  "Trustee",  whose address is c/o Crater Title
Insurance,  300 West Main, P.O. Box 250, Medford,  Oregon 97501; for the benefit
of BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, as "Beneficiary", whose
address is Eugene  Commercial  Banking,  Unit 2091,  201 East 11th  Avenue,  2nd
Floor, Eugene, Oregon 97401.

     The  Tax  Account  Number  for the  property  subject  to the  lien of this
instrument is: 1-71150-9.

Notice to Recorder:

     THIS  DOCUMENT   CONSTITUTES  A  FIXTURE  FILING  IN  ACCORDANCE  WITH  ORS
79.4020(6).

                                    ARTICLE I


     1. Granting Clause. Grantor irrevocably grants, bargains, sells and conveys
to Trustee and its successors and assigns in trust,  with power of sale and with
right of entry and possession as provided herein,  all Grantor's estate,  right,
title,  interest,  claim and demand, now owned or hereafter acquired,  in and to
the following (the "Property"):

     (a) The real  property in Jackson  County,  Oregon,  described in Exhibit A
attached  and any and all  improvements  now or hereafter  located  thereon (the
"Real Property").

     (b) All land lying in streets and roads  adjoining the Real  Property,  and
all access rights and easements pertaining to the Real Property.

     (c)  All  the  lands,  tenements,   privileges,   reversions,   remainders,
irrigation and water rights and stock, oil and gas rights,  royalties,  minerals
and  mineral   rights,   all  development   rights  and  credits,   air  rights,
hereditaments and  appurtenances  belonging or in any way pertaining to the Real
Property.

     (d) All buildings,  structures,  improvements and fixtures now or hereafter
attached to or used in  connection  with the use,  occupancy or operation of the
Real Property including,  but not limited to, heating and incinerating apparatus
and equipment,  boilers,  engines, motors,  generating equipment,  telephone and
other  communication  systems,  piping and plumbing  fixtures,  ranges,  cooking
apparatus and mechanical kitchen equipment, refrigerators, cooling, ventilating,
sprinkling and vacuum cleaning systems,  fire extinguishing  apparatus,  gas and
electric fixtures,  irrigation equipment,  carpeting,  underpadding,  elevators,
escalators,  partitions,  mantles,  built-in  mirrors,  window  shades,  blinds,
screens,  storm sash, awnings,  furnishings of public spaces, halls and lobbies,
and shrubbery and plants. All property mentioned in this subsection (d) shall be
deemed part of the realty and not severable  wholly or in part without  material
injury to the Real Property.

     (e) All rents,  issues and profits of the Real  Property,  all existing and
future  leases  of  the  Real  Property  (including  extensions,   renewals  and
subleases),  all agreements for use and occupancy of the Real Property (all such
leases and agreements  whether written or oral, are hereafter referred to as the
"Leases"), and all guaranties of lessees' performance under the Leases, together
with the immediate and continuing right to collect and receive all of the rents,
income, receipts,  revenues,  issues, profits and other income of any nature now
or  hereafter  due  (including  any income of any  nature  coming due during any
redemption  period) under the Leases or from or arising out of the Real Property
including minimum rents,  additional rents,  percentage rents, parking or common
area  maintenance  contributions,  tax and insurance  contributions,  deficiency
rents,  liquidated  damages following default in any Lease, all proceeds payable
under  any  policy  of  insurance   covering  loss  of  rents   resulting   from
untenantability  caused  by  destruction  or damage  to the Real  Property,  all
proceeds  payable  as a result of  exercise  of an option to  purchase  the Real
Property, all proceeds derived from the termination or rejection of any Lease in
a bankruptcy  or other  insolvency  proceeding,  all security  deposits or other
deposits for the performance of any lessee's  obligations under the Leases,  and
all  proceeds  from any rights and  claims of any kind  which  Grantor  may have
against any lessee under the Leases or any  occupants of the Real  Property (all
of the  above are  hereafter  collectively  referred  to as the  "Rents").  This
subsection  (e) is  subject  to the  right,  power  and  authority  given to the
Beneficiary in the Loan  Documents (as defined  herein) to collect and apply the
Rents.

     (f) All of Grantor's rights to further encumber said Real Property for debt
and all Grantor's  rights to enter into any lease agreement which would create a
tenancy that is or may become subordinate in any respect to any mortgage or deed
of trust other than this Deed of Trust.

     2.  Collateral.  The  following  described  estate,  property and rights of
Grantor are also included as security for the  performance  of each covenant and
agreement  of  Grantor  contained  herein  and the  payment of all sums of money
secured hereby:

     (a) All  compensation,  awards,  damages,  rights  of action  and  proceeds
(including  insurance proceeds and any interest on any of the foregoing) arising
out of or  relating  to a taking or  damaging  of the  Property by reason of any
public or private  improvement,  condemnation  proceeding  (including  change of
grade), fire,  earthquake or other casualty,  injury or decrease in the value of
the Property.

     (b) All  returned  premiums  or other  payments on any  insurance  policies
pertaining to the Property and any refunds or rebates of taxes or assessments on
the Property, greater than $10,000.00.

     (c) All  rights to the  payment  of money,  accounts  receivable,  deferred
payments,  refunds, cost savings, payments and deposits, whether now or later to
be received from third parties (including all utility  deposits),  architectural
and  engineering   plans,   specifications   and  drawings,   contract   rights,
governmental  permits and licenses,  and  agreements  and purchase  orders which
pertain to or are incidental to the design or construction  of any  improvements
on the Property, Grantor's rights under any payment,  performance, or other bond
in  connection  with  construction  of  improvements  on the  Property,  and all
construction  materials,  supplies,  and equipment  delivered to the Property or
intended to be used in connection  with the  construction of improvements on the
Property wherever actually located.

     (d) All  contracts and  agreements  pertaining to or affecting the Property
including,  but not limited to, management,  operating and franchise agreements,
licenses, trade names and trademarks.

     (e) All of  Grantor's  interest  in and to the  proceeds  of the loan  (the
"Loan") evidenced by the Note (defined below), whether disbursed or not.

     (f)  All  loan  commitments  or  other  agreements,  now  or  hereafter  in
existence,  which will  provide  Grantor  with  proceeds  to satisfy the Secured
Obligations (defined below) and the right to receive the proceeds due under such
commitments or agreements including refundable deposits and fees.

     (g) All books and records pertaining to any and all of the Property and the
other collateral described above.

     (h)  All  additions,  accessions,  replacements  and  substitutions  of the
Property described in this Section 2.

     The Property and all of the property and rights described in Sections 1 and
2 above are referred to collectively in this Deed of Trust as the "Collateral".

     3.  Financing  Statement.  This  Deed of  Trust  shall  also  constitute  a
financing  statement  filed for record in the real  estate  records as a fixture
filing pursuant to the Uniform  Commercial Code. This Deed of Trust may be given
to secure an obligation  incurred for the  construction  of  improvements on the
Property,  including the acquisition of the Property, or to secure an obligation
incurred  to  refinance  an  obligation   incurred  for  the   construction   of
improvements on the Property, including the acquisition of the Property.

     4. Obligations Secured. The following obligations  ("Secured  Obligations")
are secured by this Deed of Trust:

     (a) Payment of the sum of THREE MILLION AND NO/100 DOLLARS  ($3,000,000.00)
with interest  thereon  according to the terms of a promissory note of even date
herewith,  payable to  Beneficiary  or order and made by Grantor,  including all
renewals, amendments, modifications,  extensions and substitutions therefor (the
"Note").  The  maturity  date of the Note and this Deed of Trust shall be May 1,
2008. THE NOTE MAY CONTAIN PROVISIONS ALLOWING FOR CHANGES IN THE INTEREST RATE.

     (b)  Payment of any  further  sums now or  hereafter  advanced or loaned by
Beneficiary  to Grantor,  or any of its  successors  or assigns,  and payment of
every other present and future obligation owing by Grantor to Beneficiary of any
kind, and all renewals,  modifications,  and extensions  thereof,  including any
interest, fees, costs, service charges,  indemnifications and expenses connected
with such  obligations,  if (i) the  promissory  note or other written  document
evidencing the future advance or loan or other  obligation  specifically  states
that it is secured by this Deed of Trust,  or (ii) the advance,  including costs
and expenses incurred by Beneficiary, is made pursuant to the Note, this Deed of
Trust or any other  documents  executed  by  Grantor  evidencing,  securing,  or
relating  to the  Loan,  and/or  the  Collateral,  whether  executed  prior  to,
contemporaneously with, or subsequent to this Deed of Trust (this Deed of Trust,
the Note and all such other documents,  including any construction or other loan
agreement,  and all renewals,  amendments,  modifications or extensions thereof,
are hereafter  collectively referred to as the "Loan Documents"),  together with
interest thereon at the rate set forth in the Note,  unless otherwise  specified
in the Loan Documents or agreed in writing.

     (c)  Performance  of each  agreement,  term  and  condition  set  forth  or
incorporated by reference in the Loan Documents, as such may be amended.

     (d)  Performance  and payment of the  obligations  of Grantor (or any other
obligor  under  the  Note)  under  each  and  every  existing  or  future  "swap
transaction"  (i.e., any transactions  governed by an ISDA master  agreement) to
which Grantor (or the obligor under the Note) and  Beneficiary  are parties,  if
this  Deed of Trust  is  referenced  in such  transaction  as a  credit  support
document.

     Notwithstanding  any of the foregoing,  the Secured  Obligations  shall not
include the obligations of Grantor under any Certificate and Indemnity Agreement
Regarding  Building Laws and Hazardous  Substances now or hereafter  executed by
Grantor (or any other person or entity) in connection with the loan evidenced by
the Note.

                                   ARTICLE II

     1.  Assignment  of  Rents  and  Leases.   Grantor  hereby   absolutely  and
irrevocably  assigns to  Beneficiary  all  Grantor's  interest  in the Rents and
Leases.  The foregoing  assignment is subject to the terms and conditions of any
separate assignment of the Leases and/or Rents,  whenever executed,  in favor of
Beneficiary  and covering the  Property.  Grantor  warrants it has made no prior
assignment  of the Rents or the  Leases and will make no  subsequent  assignment
(other than to Beneficiary) without the prior written consent of Beneficiary. At
Beneficiary's  request,  Grantor  shall  execute  and deliver to  Beneficiary  a
separate assignment of rents containing such terms and conditions as Beneficiary
may reasonably require.

     (a) Unless  otherwise  provided in any  separate  assignment  of the Leases
and/or  the  Rents,  and so long as  Grantor  is not in  default  under the Loan
Documents,  Grantor may collect the Rents as the Rents become due. Grantor shall
use the Rents to pay normal operating expenses for the Property and sums due and
payments  required under the Loan  Documents.  No Rents shall be collected for a
period  subsequent  to the  current  one month  rental  period and first or last
month's  rent.  Grantor's  right to  collect  the  Rents  shall  not  constitute
Beneficiary's   consent  to  the  use  of  cash  collateral  in  any  bankruptcy
proceeding.

     (b) If  Grantor  is in  default  under this Deed of Trust or any other Loan
Document,  without  notice to Grantor,  Beneficiary  or its  agents,  or a court
appointed  receiver,  may collect the Rents.  In doing so,  Beneficiary  may (i)
evict lessees for  nonpayment of rent,  (ii)  terminate in any lawful manner any
tenancy or occupancy,  (iii) lease the Property in the name of the then owner on
such terms as it may deem best,  (iv) institute  proceedings  against any lessee
for past due rent,  and (v) do all other  acts and things as  Beneficiary  deems
necessary or desirable.  The Rents  received  shall be applied to payment of the
costs and  expenses  of  collecting  the Rents,  including a  reasonable  fee to
Beneficiary, a receiver or an agent, operating expenses for the Property and any
sums due or  payments  required  under  the  Loan  Documents,  in such  order as
Beneficiary  may  determine.  Any  excess  shall  be paid to  Grantor,  however,
Beneficiary  may  withhold  from any  excess  a  reasonable  amount  to pay sums
anticipated   to  become  due  which  exceed  the   anticipated   future  Rents.
Beneficiary's  failure to collect or discontinuing  collection at any time shall
not in any manner affect the subsequent enforcement by Beneficiary of its rights
to collect the Rents.  The collection of the Rents by or for  Beneficiary  shall
not cure or waive any  default  under  the Loan  Documents.  Any  Rents  paid to
Beneficiary  or a receiver  shall be  credited  against  the amount due from the
lessees  under the  Leases.  In the event any lessee  under a Lease  becomes the
subject of any proceeding under the Bankruptcy Code or any other federal,  state
or local statute which provides for the possible termination or rejection of any
Lease assigned hereby, Grantor covenants and agrees that in the event any of the
Leases are so rejected,  no damages  settlement  shall be made without the prior
written consent of Beneficiary; any check in payment of damages for rejection or
termination  of any such  Lease will be made  payable  both to the  Grantor  and
Beneficiary;  and Grantor  hereby  assigns any such payment to  Beneficiary  and
further  covenants  and agrees that upon  request of  Beneficiary,  it will duly
endorse to the order of Beneficiary  any such check,  the proceeds of which will
be applied to any portion of the indebtedness  secured  hereunder in such manner
as Beneficiary may elect.

     (c) Regardless of whether or not Beneficiary,  in person or by agent, takes
actual  possession of the Property or any part thereof,  Beneficiary  is not and
shall not be deemed to be: (i) "a mortgagee in possession" for any purpose; (ii)
responsible for performing any of the obligations of the lessor under any Lease;
(iii)  responsible for any waste committed by lessees or any other parties,  any
dangerous  or defective  condition of the  Property,  or any  negligence  in the
management,  upkeep,  repair or control of the  Property;  or (iv) liable in any
manner for the Property or the use, occupancy,  enjoyment or operation of all or
any part of it. In exercising its rights under this Section 1 Beneficiary  shall
be  liable  only for the  proper  application  of and  accounting  for the Rents
collected by Beneficiary or its agents.

     2. Leases. Grantor shall fully comply with all of the terms, conditions and
provisions of the Leases so that the same shall not become in default and do all
things  necessary to preserve the Leases in force.  Unless  otherwise  agreed in
writing by Beneficiary,  without  Beneficiary's  prior written consent,  Grantor
will not enter into any Lease (i) on a form of Lease not previously  approved by
Beneficiary,  (ii) for a term of three (3) years or more, or (iii) containing an
option or right to purchase  all or any part of the  Collateral  in favor of any
lessee.  With  respect  to any  Lease of the  whole or any part of the  Property
involving an initial term of three (3) years or more, Grantor shall not, without
the  prior  written  consent  of  Beneficiary,  (a)  permit  the  assignment  or
subletting  of all or part of the  lessee's  rights  under the Lease  unless the
right to assign or sublet is  expressly  reserved by the lessee under the Lease,
(b)  modify  or amend  the Lease  for a lesser  rental  or term,  or (c)  accept
surrender of the Lease or  terminate  the Lease  except in  accordance  with the
terms of the Lease  providing  for  termination  in the event of a default.  Any
proceeds  or damages  resulting  from a  lessee's  default  under any Lease,  at
Beneficiary's option, shall be paid to Beneficiary and applied against sums owed
under the Loan  Documents  even  though  such  sums may not be due and  payable.
Except  for real  estate  taxes and  assessments,  without  Beneficiary's  prior
written  consent,  Grantor  shall not permit any lien to be created  against the
Property  which may be or may become  prior to any  Lease.  If the  Property  is
partially  condemned or suffers a casualty,  Grantor shall  promptly  repair and
restore the Property in order to comply with the Leases.

                                   ARTICLE III

     1.  Non-Agricultural  Use.  Grantor  represents and warrants to Beneficiary
that  neither the  Property  nor any other  Collateral  is used  principally  or
primarily for agricultural or farming purposes.

     2.  Performance of  Obligations.  Grantor shall promptly and timely pay all
sums due pursuant to the Loan Documents,  strictly comply with all the terms and
conditions  of the Loan  Documents,  and  perform  each  Secured  Obligation  in
accordance with its terms.

     3.  Warranty of Title.  Grantor  warrants  that it has good and  marketable
title to an  indefeasible  fee simple estate in the Property  (unless  Grantor's
present  interest  in the  Property  is  described  in Exhibit A as a  leasehold
interest,  in which case Grantor warrants that it lawfully possesses and holds a
valid leasehold  interest in the Property as described in Exhibit A), subject to
no liens, encumbrances,  easements,  assessments,  security interests, claims or
defects  of any kind  prior or  subordinate  to the lien of this  Deed of Trust,
except  those  listed in  Beneficiary's  title  insurance  policy or approved by
Beneficiary in writing (the  "Exceptions") and real estate taxes and assessments
for the current year.  Grantor warrants the Exceptions and the real estate taxes
and assessments  are not delinquent or in default,  and Grantor has the right to
convey the  Property  to Trustee for the benefit of  Beneficiary.  Grantor  will
warrant and defend  title to the  Collateral  and will defend the  validity  and
priority of the lien of this Deed of Trust and the  security  interests  granted
herein against any claims or demands.

     4. Prohibited Liens.

     (a) Subject to Grantor's rights under  subsection (b) below,  Grantor shall
not permit any governmental or statutory liens (including  taxes,  mechanic's or
materialmen's  liens) to be filed against the Collateral  except for real estate
taxes and  assessments  not yet due and liens permitted by the Loan Documents or
approved  by  Beneficiary  in  writing.  Notwithstanding  any  provision  to the
contrary,  Grantor  expressly agrees not to have outstanding or incur any direct
or contingent  debts (other than those to Beneficiary  and its  affiliates),  or
become  liable  for the  debts of others  without  Beneficiary's  prior  written
consent. This does not prohibit Grantor from: (i) acquiring goods,  supplies, or
merchandise  on normal  trade  credit;  (ii)  endorsing  negotiable  instruments
received in the usual course of business;  (iii)  obtaining  surety bonds in the
usual course of business;  (iv) incurring additional debts and lease obligations
for the acquisition of fixed or capital assets,  to the extent  permitted herein
and in the Loan Documents;  and (v) accrual of normal  expenses  incurred in the
ordinary  course of  business,  including  but not limited to  payroll,  payroll
taxes,  and deferred  taxes.  Grantor  further  expressly  agrees to not create,
assume, or allow any security interest or lien (including judicial liens) on the
Property or any other property the Borrower now or later owns, except: (i) deeds
of trust and security  agreements in favor of  Beneficiary  and its  affiliates;
(ii) liens for taxes not yet due;  (iii)  liens  outstanding  on the date of the
recording of this Deed of Trust as disclosed in writing to Beneficiary; and (iv)
additional purchase money security interests in property acquired after the date
of the  recording  of this Deed of Trust if the  aggregate  principal  amount of
debts  secured  by such  liens does not exceed  Five  Hundred  Thousand  Dollars
($500,000.00) per year.

     (b)  Grantor  will have the right to contest  in good faith by  appropriate
legal  or  administrative  proceeding  the  validity  of  any  prohibited  lien,
encumbrance or charge so long as (i) no default exists under the Loan Documents,
(ii)  Grantor  first  deposits  with   Beneficiary  a  bond  or  other  security
satisfactory  to Beneficiary in the amount  reasonably  required by Beneficiary,
but not more than the  amounts  specified  by Oregon  law,  as now or  hereafter
amended;   (iii)  Grantor  immediately  commences  its  contest  of  such  lien,
encumbrance  or charge,  applies to court for a show  cause as  provided  for by
Oregon law, as now or hereafter amended, and continuously pursues the contest in
good faith and with due diligence;  (iv) foreclosure of the lien, encumbrance or
charge is  stayed;  and (v)  Grantor  pays any  judgment  rendered  for the lien
claimant  or other  third  party  within  ten (10)  days  after the entry of the
judgment.  If the contested item is a mechanic's or materialmen's  lien, Grantor
will furnish Beneficiary with an endorsement to its title insurance policy which
insures  the  priority  of this  Deed of Trust  over the lien  being  contested.
Grantor will discharge or elect to contest and post an appropriate bond or other
security within twenty (20) days of written demand by Beneficiary.

     5.  Payment  of Taxes and Other  Encumbrances.  Grantor  shall pay the real
estate taxes and any  assessments  or ground rents at least seven (7) days prior
to delinquency unless otherwise provided for in the reserve account described in
Section  15 below.  All other  encumbrances,  charges  and liens  affecting  the
Collateral,  including  mortgages  and  deeds  of  trust,  whether  prior  to or
subordinate to the lien of this Deed of Trust,  shall be paid when due and shall
not be in default. On request Grantor shall furnish evidence of payment of these
items.

     6. Maintenance--No Waste. Grantor shall protect and preserve the Collateral
and maintain it in good condition and repair. Grantor shall do all acts and take
all  precautions  which,  from  the  character  and use of the  Collateral,  are
reasonable,  proper or  necessary  to so  maintain,  protect  and  preserve  the
Collateral. Grantor shall not commit or permit any waste of the Collateral.

     7. Alterations,  Removal and Demolition. Unless otherwise agreed in writing
by Beneficiary,  Grantor shall not  structurally  alter,  remove or demolish any
building or  improvement  on the Property  without  Beneficiary's  prior written
consent, except that alterations under $300,000.00,  in the aggregate,  will not
require  Beneficiary's  prior  written  approval.  Grantor  shall not remove any
material  fixture  or other  item of  property  which is part of the  Collateral
without  Beneficiary's  prior  written  consent  unless  the  fixture or item of
property is replaced by an article of equal  suitability,  owned by Grantor free
and clear of any lien or security interest.

     8. Completion,  Repair and Restoration.  Grantor shall promptly complete or
repair and restore in good workmanlike manner any building or improvement on the
Property  which may be  constructed  or damaged or  destroyed  and shall pay all
costs incurred therefor. Prior to commencement of any construction Grantor shall
submit the plans and  specifications  for  Beneficiary's  approval  and  furnish
evidence of  sufficient  funds to complete the work,  except that repairs  under
$300,000,  in the  aggregate,  will  not  require  Beneficiary's  prior  written
approval.

     9.  Compliance with Laws.  Grantor shall comply with all laws,  ordinances,
regulations,  covenants,  conditions, and restrictions affecting the Collateral,
including,  without limitation,  all applicable requirements of the Fair Housing
Act of 1968 (as amended) and the Americans With Disabilities Act of 1990 (as the
same may be amended  from time to time),  and shall not commit or permit any act
upon or concerning  the  Collateral  in violation of any such laws,  ordinances,
regulations,  covenants,  conditions,  and  restrictions.  Grantor shall defend,
indemnify  and  hold  Beneficiary   harmless  from  and  against  all  liability
threatened  against or suffered by  Beneficiary by reason of a breach by Grantor
of the foregoing  representations,  warranties,  covenants and  agreements.  The
foregoing  indemnity shall include the cost of all alterations to the Collateral
(including architectural,  engineering,  legal and accounting costs), all fines,
fees and penalties, and all legal and other expenses (including attorneys' fees,
including on appeal or otherwise) incurred in connection with the Property being
in violation of any such laws, ordinances,  regulations,  covenants,  conditions
and  restrictions.  If  Beneficiary or its designee shall become the owner of or
acquire an interest in or rights to the  Collateral  by  foreclosure  or deed in
lieu of  foreclosure  of this  Deed of Trust or by other  means,  the  foregoing
indemnification  obligation  shall survive such  foreclosure  or deed in lieu of
foreclosure  or  other  acquisition  of  the  Collateral.   Notwithstanding  the
preceding  sentence,  Grantor shall have no  obligation to defend,  indemnify or
hold  Beneficiary  harmless  from  any  liability  arising  from  or  out of the
activities  of  Beneficiary  or its agents with respect to the  Collateral on or
after the transfer of the  Collateral  to  Beneficiary  pursuant to  foreclosure
proceedings or in lieu thereof.

     10.  Impairment of  Collateral.  Grantor shall not,  without  Beneficiary's
prior  written  consent,  change  the  general  nature of the  occupancy  of the
Property,  initiate,  acquire  or permit  any  change in any  public or  private
restrictions (including without limitation a zoning  reclassification)  limiting
the uses which may be made of the Collateral, or take or permit any action which
would impair the Collateral or  Beneficiary's  lien or security  interest in the
Collateral.

     11. Inspection of Collateral.  Beneficiary and/or its  representatives  may
enter on to and inspect the  Collateral  (including  taking and  removing  soil,
groundwater and other samples) at reasonable times after reasonable  notice.  If
any of the Collateral is in the possession of a third party,  Grantor authorizes
the third party to permit Beneficiary and/or its  representatives to have access
to and perform  inspections of the Collateral and to respond fully and freely to
Beneficiary's and/or its representatives requests for information concerning the
Collateral.  Grantor agrees that Beneficiary neither has nor undertakes any duty
or  obligation  to examine or inspect the  Collateral  or any records,  books or
papers relating thereto.  In the event that Beneficiary  inspects the Collateral
or examines, audits or copies any records, books or papers relating thereto, the
Beneficiary   will  be  acting  solely  for  the  purposes  of  protecting   the
Beneficiary's security and Beneficiary's rights under this Deed of Trust and the
other Loan  Documents.  Neither  the  Grantor nor any other party is entitled to
rely  on  any   inspection   or  other   inquiry  by   Beneficiary   and/or  its
representatives. Neither Beneficiary nor its representatives owes a duty of care
to protect the Grantor or any other party  against,  or to inform the Grantor or
any other party of, any adverse  condition that may be observed or discovered as
affecting the  Collateral or the  Grantor's or such third party's  business.  If
Beneficiary and/or its  representatives  believes it has a duty or obligation to
disclose any report or findings made as a result of, or in  connection  with any
inspection of the Collateral,  then Beneficiary  and/or its  representative  may
make  such  disclosure.  Any  failure  by  Grantor  or a third  party to  permit
Beneficiary  to exercise  its rights  herein,  following  five (5) days  written
demand from  Beneficiary,  shall entitle  Beneficiary  without further notice to
Grantor to make ex parte  application  to the court of  applicable  jurisdiction
where the  Collateral  Beneficiary  seeks to inspect is  located  for  immediate
issuance  of  any  order,   without  bond,  granting  specific   performance  of
Beneficiary's rights to enter on and inspect the Collateral.

     12. Grantor's Defense of Collateral. Grantor shall appear in and defend any
action or proceeding  which may affect the Collateral or the rights or powers of
Beneficiary or Trustee under this Deed of Trust.

     13.  Beneficiary's Right to Protect  Collateral.  Beneficiary may commence,
appear in, and defend any action or proceeding  which may affect the  Collateral
or the  rights or powers of  Beneficiary  or  Trustee  under this Deed of Trust.
Beneficiary may pay, purchase, contest or compromise any encumbrance,  charge or
lien not listed as an  Exception  which in its  judgment  appears to be prior or
superior to the lien of this Deed of Trust. If Grantor fails to make any payment
or do any act  required  under  the Loan  Documents,  Beneficiary,  without  any
obligation to do so and without releasing Grantor from any obligations under the
Loan  Documents,  may make the payment or cause the act to be  performed in such
manner and to such  extent as  Beneficiary  may deem  necessary  to protect  the
Collateral.  Beneficiary  is  authorized  to enter  upon the  Property  for such
purposes. In exercising any of these powers Beneficiary may incur such expenses,
in its absolute discretion, it deems necessary.

     14. Hazardous Substances.

     (a)  Grantor  represents  and  warrants  to  Beneficiary,  to the  best  of
Grantor's  knowledge after due and diligent inquiry, no hazardous or toxic waste
or substances are being stored on the Property or any adjacent property nor have
any such waste or substances  been stored or used in, on,  under,  over or about
the Property or any adjacent  property prior to or during  Grantor's  ownership,
possession  or  control  of the  Property,  other  than  the use or  storage  of
hazardous or toxic waste or substances  generally used in the ordinary course of
operating,  maintaining or developing  properties  such as the Property,  all of
which  Grantor  covenants  have and  will be used,  stored  and  disposed  of in
accordance with commercially  reasonable  practices and all applicable  federal,
state and local laws, regulations and ordinances.  Grantor shall provide written
notice to Beneficiary  immediately upon Grantor becoming aware that the Property
or any adjacent  property is being or has been  contaminated  with  hazardous or
toxic waste or  substances.  Grantor will not cause nor permit any activities on
the Property  which  directly or indirectly  could result in the Property or any
other  property   becoming   contaminated  with  hazardous  or  toxic  waste  or
substances.  For purposes of this Deed of Trust,  the term  "hazardous  or toxic
waste or  substances"  means any chemical,  substance or material  classified or
designated  as hazardous,  toxic or  radioactive,  or similar  term,  and now or
hereafter  regulated  under  any  applicable  federal,  state or local  statute,
regulation,  ordinance or requirement, now or hereafter in effect, pertaining to
environmental protection, contamination or cleanup.

     (b)  Grantor  shall  comply,  at  Grantor's  expense,  with  all  statutes,
regulations and ordinances  which apply to Grantor or the  Collateral,  and with
all orders,  decrees or judgments of  governmental  authorities or courts having
jurisdiction which Grantor is bound by, relating to the use, collection storage,
treatment,  control, removal or cleanup of hazardous or toxic substances in, on,
under,  over or about the Property or in, on, under,  over or about any adjacent
property  that becomes  contaminated  with  hazardous or toxic  substances  as a
result of construction,  operations or other activities on, or the contamination
of, the  Property.  Beneficiary  may,  but is not  obligated  to, enter upon the
Property to inspect it for  compliance  and to take such  actions and incur such
costs and expenses to effect such  compliance  as it deems  advisable to protect
its interest as Beneficiary;  and whether or not Grantor has actual knowledge of
the existence of hazardous or toxic substances in, on, under,  over or about the
Property or any adjacent property as of the date hereof, Grantor shall reimburse
Beneficiary on demand for the full amount of all costs and expenses  incurred by
Beneficiary  prior  to  Beneficiary  acquiring  title  to the  Property  through
foreclosure or deed in lieu of  foreclosure,  in connection with such compliance
activities.

     (c) Grantor's obligations under this Section 14 are unconditional and shall
not be limited by a non-recourse or other limitations of liability  provided for
in this Deed of Trust or any other Loan Document.

     15. Reserve Account.

     (a) Subject to subsection (d) below,  if  Beneficiary so requires,  Grantor
shall pay to Beneficiary monthly,  together with and in addition to any payments
due under the Note,  a sum, as  estimated  by  Beneficiary,  equal to the ground
rents,  if any, the real estate taxes and  assessments  next due on the Property
and the  premiums  next  due on  insurance  policies  required  under  the  Loan
Documents, less all sums already paid therefor,  divided by the number of months
to elapse  before two (2) months prior to the date when the ground  rents,  real
estate taxes,  assessments and insurance  premiums will become  delinquent.  The
monthly  reserve  accounts  payments  and any other  payments due under the Note
shall be paid in a single payment and applied by Beneficiary,  at its option, in
the following  order:  (1) ground  rents,  real estate  taxes,  assessments  and
insurance  premiums,  (2)  expenditures  made pursuant to the Loan Documents and
interest  thereon,  (3) interest on the Note, and (4) principal due on the Note.
Grantor shall promptly  deliver to Beneficiary all bills and notices  pertaining
to the ground rents, taxes, assessments and insurance premiums.

     (b) The  reserve  account  is solely  for the  protection  of  Beneficiary.
Beneficiary  shall have no  responsibility  except to credit  properly  the sums
actually  received by it. No  interest  will be paid on the funds in the reserve
account  and  Beneficiary  shall have no  obligation  to deposit the funds in an
interest-bearing  account. Upon assignment of this Deed of Trust by Beneficiary,
any funds in the reserve  account  shall be turned over to the  assignee and any
responsibility  of  Beneficiary  with  respect  thereto  shall  terminate.  Each
transfer of the Property shall automatically  transfer to the grantee all rights
of Grantor to any funds in the reserve account.

     (c) If the total of the  payments  to the  reserve  exceeds  the  amount of
payments actually made by Beneficiary, plus such amounts as have been reasonably
accumulated in the reserve  account  toward  payments to become due, such excess
may, at Beneficiary's election, be (1) credited by Beneficiary against sums then
due and payable under the Loan Documents, or (2) refunded to Grantor as its name
appears on the records of Beneficiary. If, however, the reserve account does not
have sufficient  funds to make the payments when they become due,  Grantor shall
pay to Beneficiary the amount necessary to make up the deficiency within fifteen
(15) days after written  notice to Grantor.  If this Deed of Trust is foreclosed
or if Beneficiary  otherwise acquires the Collateral,  the Beneficiary shall, at
the time of  commencement  of the  proceedings  or at the time the Collateral is
otherwise acquired,  apply the remaining funds in the reserve account, less such
sums as will become due during the pendency of the proceedings, against the sums
due under the Loan  Documents  and/or to make payments  required  under the Loan
Documents.

     (d) Unless  required by the terms of  Beneficiary's  loan commitment or any
other Loan  Document,  Grantor  shall not be  required  to pay  monthly  reserve
account  payments so long as there has been no more than four (4) late  payments
due under the Note throughout the term of the Loan and there is no other default
under the Loan and so long as Grantor  remains in ownership  of the  Collateral,
provided  receipted bills evidencing the payment of all taxes and/or assessments
and insurance  premiums are exhibited to  Beneficiary  within  fifteen (15) days
after  Beneficiary's  request  therefor.   Upon  any  change  in  any  of  these
conditions, Beneficiary may, at its option then or thereafter exercised, require
the payment of reserves pursuant to this Section 15.

     16. Repayment of Beneficiary's  Expenditures.  Grantor shall pay within ten
(10) days after written notice from  Beneficiary all reasonable sums expended by
Beneficiary  and all costs and expenses  incurred by  Beneficiary  in taking any
actions pursuant to the Loan Documents including attorneys' fees (including fees
on appeal or otherwise),  accountants' fees,  appraisal and inspection fees, and
the costs for title reports. If any laws or regulations are passed subsequent to
the date of this Deed of Trust which require  Beneficiary to incur out-of-pocket
expenses in order to maintain,  modify,  extend or foreclose this Deed of Trust,
revise the terms of the Loan or consent to an Accelerating  Transfer (as defined
below),  Grantor shall  reimburse  Beneficiary  for such expenses within fifteen
(15) days after written  notice from  Beneficiary.  Expenditures  by Beneficiary
shall bear interest from the date of such advance or  expenditure at the default
interest  rate in the Note,  shall  constitute  advances made under this Deed of
Trust and shall be  secured  by and have the same  priority  as the lien of this
Deed of Trust. If Grantor fails to pay any such expenditures, costs and expenses
and interest thereon,  Beneficiary may, at its option,  without  foreclosing the
lien of this Deed of Trust,  commence an independent  action against Grantor for
the recovery of the expenditures and/or advance any undisbursed Loan proceeds to
pay the expenditures.

     17. Accelerating Transfers.

     (a) "Accelerating  Transfer" means any sale, contract to sell,  conveyance,
encumbrance, transfer of full possessory rights, or other transfer of all or any
material  part of the  Collateral  or any  interest  in it,  whether  voluntary,
involuntary,  by operation of law or otherwise  and whether or not for record or
for  consideration.  If Grantor is a corporation,  "Accelerating  Transfer" also
means any transfer or transfers of shares  possessing,  in the  aggregate,  more
than fifty  percent  (50%) of the  voting  power.  If Grantor is a  partnership,
"Accelerating Transfer" also means withdrawal or removal of any general partner,
dissolution  of  the  partnership  under  Oregon  law,  or any  transfer  or any
transfers of, in the aggregate, more than fifty percent (50%) of the partnership
interests.  If Grantor is a limited  liability  company or other form of limited
liability entity,  "Accelerating  Transfer" also means any transfer or transfers
of  membership or  management  units,  shares or other forms of interest in such
entity, possessing, in the aggregate, more than fifty (50%) of the voting power.
If Grantor is the  majority  owner of a business,  either  through  ownership of
shares of a corporation or interest in a partnership,  limited liability company
or  other  entity,  which  occupies  seventy-five  percent  (75%) or more of the
improvements  on the  Property,  "Accelerating  Transfer"  also  means any sale,
contract to sell, or other transfer of the business or substantial assets of the
business,  other than in the ordinary course,  or the failure of the business to
continue to occupy the Property.

     (b) Grantor  acknowledges  Beneficiary is taking actions in reliance on the
expertise,  skill,  experience and  reliability of Grantor,  and the obligations
secured hereby include material elements similar in nature to a personal service
contract or ownership  interest.  In consideration  of  Beneficiary's  reliance,
Grantor  agrees that Grantor shall not make any  Accelerating  Transfer  without
Beneficiary's prior written consent,  which Beneficiary may withhold in its sole
discretion.  If  Beneficiary  consents,  it  may  charge  the  Grantor  a fee as
consideration  for such consent and condition its consent on such changes to the
terms and  conditions of the Note and other Loan  Documents as  Beneficiary  may
require,  including without limitation increasing the interest rate on the Note.
Grantor shall pay Beneficiary's  actual costs incurred in making its decision to
consent to an  Accelerating  Transfer,  including but not limited to the cost of
credit reports, an updated appraisal of the Property,  an updated  environmental
assessment  and  documentation.  If any  Accelerating  Transfer  occurs  without
Beneficiary's  prior written  consent,  Beneficiary  in its sole  discretion may
declare an  immediate  default and all sums  secured by this Deed of Trust to be
immediately due and payable,  and Beneficiary may invoke any rights and remedies
provided  herein.  This  provision  shall  apply to each and every  Accelerating
Transfer  regardless of whether or not  Beneficiary  has consented or waived its
rights,  whether  by  action  or  nonaction,  in  connection  with any  previous
Accelerating Transfer(s).

     (c)  If all or any  part  of  this  Section  17  relevant  to a  particular
Accelerating  Transfer is  unenforceable  according  to the law in effect at the
time of the Accelerating Transfer,  then Grantor shall reimburse Beneficiary for
its actual reasonable costs incurred in processing the Accelerating  Transfer on
its  records,  including  but not limited to the cost of  modifications  of Loan
Documents,   an  appraisal,   and  obtaining   relevant   credit  and  financial
information.

     18. Release of Parties or Collateral.  Without affecting the obligations of
any party under the Loan  Documents and without  affecting the lien of this Deed
of Trust and  Beneficiary's  security  interest in the  Collateral,  Beneficiary
and/or  Trustee may,  without  notice (a) release all or any Grantor  and/or any
other  party  now  or  hereafter  liable  for  any of  the  Secured  Obligations
(including  guarantors),  (b)  release  all or any part of the  Collateral,  (c)
subordinate the lien of this Deed of Trust or Beneficiary's security interest in
the Collateral,  (d) take and/or release any other security for or guarantees of
the Secured  Obligations,  (e) grant an extension of time for performance of the
Secured Obligations, (f) modify, waive, forbear, delay or fail to enforce any of
the Secured Obligations,  (g) sell or otherwise realize on any other security or
guaranty prior to,  contemporaneously with or subsequent to a sale of all or any
part of the  Collateral,  (h)  make  advances  pursuant  to the  Loan  Documents
including  advances in excess of the Note  amount,  (i) consent to the making of
any map or plat of the  Property,  and (j) join in the grant of any  easement on
the Property.  Any subordinate lienholder shall be subject to all such releases,
extensions or  modifications  without notice to or consent from the  subordinate
lienholder.  Grantor  shall  pay any  Trustee's,  attorneys',  title  insurance,
recording,  inspection  or other fees or expenses  incurred in  connection  with
release of Collateral, the making of a map, plat or the grant of an easement.

                                   ARTICLE IV

     1. Insurance.

     (a) Grantor  shall  maintain  such  insurance on the  Collateral  as may be
required  from time to time by  Beneficiary,  with premiums  prepaid,  providing
replacement cost coverage and insuring against loss by fire and such other risks
covered by  extended  coverage  insurance,  and such  other  perils and risks as
Beneficiary may require from time to time, including  earthquake,  loss of rents
and business  interruption.  Grantor also shall maintain  comprehensive  general
public liability  insurance and if the Property is located in a designated flood
hazard area, flood insurance. All insurance shall be with companies satisfactory
to Beneficiary  and in such amounts and with such  coverages as Beneficiary  may
require from time to time, with lender's loss payable clauses in favor of and in
form  satisfactory  to  Beneficiary.  At least  thirty  (30)  days  prior to the
expiration  of  the  term  of  any  insurance  policy,   Grantor  shall  furnish
Beneficiary  with  written  evidence of renewal or  issuance  of a  satisfactory
replacement policy. If requested Grantor shall deliver copies of all policies to
Beneficiary.  Each policy of insurance  shall provide  Beneficiary  with no less
than  thirty (30) days prior  written  notice of any  cancellation,  expiration,
non-renewal or modification.

     (b) In the  event of  foreclosure  of this Deed of Trust  all  interest  of
Grantor in any insurance policies pertaining to the Collateral and in any claims
against the policies  and in any  proceeds due under the policies  shall pass to
Beneficiary.

     (c) If under  the terms of any Lease the  lessee is  required  to  maintain
insurance of the type  required by the Loan  Documents  and if the  insurance is
maintained for the benefit of both the lessor and Beneficiary,  Beneficiary will
accept such policies  provided all of the  requirements  of Beneficiary  and the
Loan  Documents  are  met.  In the  event  the  lessee  fails to  maintain  such
insurance,  Grantor shall  promptly  obtain such policies as are required by the
Loan Documents.

     (d)  If  Grantor  fails  to  maintain  any  insurance  required  of  it  by
Beneficiary,  or fails  to pay any  premiums  with  respect  to such  insurance,
Beneficiary  may obtain such  replacement  insurance  as it deems  necessary  or
desirable,  or pay the  necessary  premium  on behalf of  Grantor,  and any sums
expended by Beneficiary  in so doing shall be added to the principal  balance of
the Note and bear interest at the default interest rate set forth in the Note.

     2. Damages and Condemnation and Insurance Proceeds.

     (a) Grantor hereby absolutely and irrevocably  assigns to Beneficiary,  and
authorizes  the payor to pay to  Beneficiary,  the following  claims,  causes of
action,  awards,  payments and rights to payment:  (i) all awards of damages and
all other compensation payable directly or indirectly because of a condemnation,
proposed  condemnation  or taking for public or private use which affects all or
part of the Collateral or any interest in it; (ii) all other awards,  claims and
causes of action,  arising out of any warranty  affecting all or any part of the
Collateral,  or for damage or injury to or  decrease  in value of all or part of
the  Collateral  or any interest in it;  (iii) at  Beneficiary's  election,  all
proceeds of any insurance  policies  payable because of loss sustained to all or
part of the  Collateral;  and (iv) all  interest  which may accrue on any of the
foregoing.

     (b) Grantor shall  immediately  notify  Beneficiary  in writing if: (i) any
damage  occurs or any  injury or loss is  sustained  in the amount of $25,000 or
more to all or part of the Collateral,  or any action or proceeding  relating to
any such damage, injury or loss is commenced;  or (ii) any offer is made, or any
action or  proceeding  is  commenced,  which  relates to any actual or  proposed
condemnation or taking of all or part of the Collateral.  If Beneficiary chooses
to do so, it may in its own name appear in or prosecute any action or proceeding
to enforce any cause of action based on warranty,  or for damage, injury or loss
to all or part of the  Collateral,  and it may make any compromise or settlement
of the action or proceeding.  Beneficiary,  if it so chooses, may participate in
any action or proceeding  relating to  condemnation  or taking of all or part of
the Collateral, and may join Grantor in adjusting any loss covered by insurance.

     (c) All proceeds of these assigned claims,  other property and rights which
Grantor  may receive or be  entitled  to shall be paid to  Beneficiary.  In each
instance,  Beneficiary shall apply those proceeds first toward  reimbursement of
all of  Beneficiary's  costs and expenses of recovering the proceeds,  including
attorneys' fees, on appeal or otherwise.

     (d) If,  in any  instance,  each and all of the  following  conditions  are
satisfied in Beneficiary's reasonable judgment, Beneficiary shall permit Grantor
to use the  balance of the  proceeds  ("Net  Claims  Proceeds")  to pay costs of
repairing or  reconstructing  the Collateral in the manner  described below: (i)
the  plans  and   specifications,   cost   breakdown,   construction   contract,
construction schedule,  contractor and payment and performance bond for the work
of  repair  or  reconstruction  must  all be  acceptable  to  Beneficiary;  (ii)
Beneficiary  must  receive  evidence  satisfactory  to it that  after  repair or
reconstruction,  the  Collateral  will  be  at  least  as  valuable  as  it  was
immediately  before the damage or  condemnation  occurred;  (iii) the Net Claims
Proceeds must be sufficient in Beneficiary's  determination to pay for the total
cost of repair or reconstruction, including all associated development costs and
interest  projected to be payable on the Note until the repair or reconstruction
is  complete;  or Grantor  must  provide its own funds in an amount equal to the
difference  between the Net Claims Proceeds and a reasonable  estimate,  made by
Grantor  and found  acceptable  by  Beneficiary,  of the total cost of repair or
reconstruction;  (iv) Beneficiary must receive evidence  satisfactory to it that
all  Leases  which it may find  acceptable  will  continue  after the  repair or
reconstruction is complete;  (v) Beneficiary has received evidence  satisfactory
to it, that  reconstruction  and/or  repair can be  completed at least three (3)
months  prior  to the date the  Note  secured  by this  Deed of Trust is due and
payable; and (vi) no default under any of the Loan Documents shall have occurred
and be  continuing.  If  the  foregoing  conditions  are  met  to  Beneficiary's
satisfaction, Beneficiary shall hold the Net Claims Proceeds and any funds which
Grantor is required to provide and shall  disburse  them to Grantor to pay costs
of  repair  or   reconstruction   upon   presentation  of  evidence   reasonably
satisfactory  to Beneficiary  that repair or  reconstruction  has been completed
satisfactorily and lien-free.  However, if Beneficiary finds that one or more of
the conditions are not satisfied, it may apply the Net Claims Proceeds to pay or
prepay some or all of the Note.

                                    ARTICLE V

     1. Default-Remedies.

     (a)  Grantor  will be in default  under  this Deed of Trust if (i)  Grantor
fails to make any  payment  when due under  the Note,  this Deed of Trust or any
other Loan  Document;  (ii) there is a default under, a breach of, or failure to
perform any other  covenant,  agreement or obligation to be performed under this
Deed of Trust or any other Loan  Document  or under any  guaranty  of all or any
part of the Secured Obligations;  (iii) any representation or warranty contained
in this Deed of Trust or any other Loan Document,  or any financial  information
furnished by Grantor or its agents to Beneficiary  in connection  with the Loan,
proves  to  be  false  or  misleading  in  any  material  respect  or  Grantor's
representations  regarding  the  "year  2000  problem"  shall  cease to be true,
whether  or not true  when  made,  and as a result  the  Beneficiary  reasonably
believes that Grantor's  financial  condition or its ability to pay its debts as
they become due will thereby be materially impaired; (iv) Grantor defaults under
any lease or other contract or agreement  relating to the  Collateral,  and such
default is not cured within the applicable  cure period,  if any; (v) Grantor is
in default with respect to any other loan from Beneficiary to Grantor or Grantor
defaults  under any other Loan  Document;  (vi) Grantor or any  guarantor of the
Loan fails to pay his, her or its debts generally as they become due, or files a
petition or action for relief under any bankruptcy, reorganization or insolvency
laws  or  makes  an  assignment  for the  benefit  of  creditor;  and  (vii)  an
involuntary petition is filed against Grantor or any guarantor of the Loan under
any  bankruptcy,  reorganization  or  other  insolvency  laws,  or a  custodian,
receiver or trustee is appointed to take  possession,  custody or control of the
Collateral or any other properties of Grantor, or the assets of any guarantor of
the Loan,  and such  petition  or  appointment  is not set aside,  withdrawn  or
dismissed  within  fifteen  (15) days  from the date of  filing or  appointment.
Notwithstanding anything contained herein to the contrary, Beneficiary shall not
exercise its default remedies  provided herein and in the Loan Documents because
of a default  pursuant to subsection  (ii) through (vii) herein  (excepting  the
filing of a petition or action by Grantor  seeking relief under any  bankruptcy,
reorganization  or  insolvency  laws),  unless such  default is not cured within
fifteen  (15) days of the date on which  Beneficiary  mails or delivers  written
notice of the default to Grantor.  If a  bankruptcy  petition or action is filed
with  respect to the  Grantor or Grantor  defaults  pursuant to  subsection  (i)
herein,  the entire debt outstanding under the Note shall  automatically  become
due and payable.

     (b)  In  the  event  of a  default  Beneficiary  may  declare  the  Secured
Obligations, including the Loan and all other indebtedness evidenced by the Note
or any other Loan  Document,  immediately  due and payable  after  notice as set
forth in Section 2 below, and/or exercise its rights and remedies under the Loan
Documents  and  applicable  law  including  foreclosure  of this  Deed of  Trust
judicially  as a  mortgage  or  non-judicially  pursuant  to the  power of sale.
Beneficiary's  exercise of any of its rights and remedies shall not constitute a
waiver or cure of a default.  Beneficiary's failure to enforce any default shall
not constitute a waiver of the default or any subsequent  default.  In the event
of  foreclosure,  the cost of the title premium for the trustee's sale guarantee
(or equivalent title policy or report) shall be paid for by Grantor. If the Loan
Documents  are  referred to an  attorney  for  enforcement  or  preservation  of
Beneficiary's  rights  or  remedies,  whether  or  not  suit  is  filed  or  any
proceedings  are  commenced,  Grantor  shall  pay all  Beneficiary's  costs  and
expenses including Trustee's and attorneys' fees (including  attorneys' fees for
any appeal,  bankruptcy proceeding or any other proceeding),  accountants' fees,
appraisal and inspection fees and cost of title report.

     2. Notice and Opportunity to Cure.  Notwithstanding  any other provision of
this Deed of Trust, Beneficiary shall not accelerate the maturity of one or more
of the Secured  Obligations (a) because of a monetary default (defined below) by
Grantor  unless  Grantor  fails to cure the default  within ten (10) days of the
date on which  Beneficiary  mails or delivers  written  notice of the default to
Grantor,  or (b) because of a  nonmonetary  default  (defined  below) by Grantor
unless  Grantor fails to cure the default within thirty (30) days of the date on
which  Beneficiary  mails or delivers  written notice of the default to Grantor.
For purposes of this Deed of Trust, the term "monetary  default" means a failure
by Grantor to make any payment  required of it pursuant to the Note or any other
Loan Document,  and the term "nonmonetary default" means a failure by Grantor or
any other  person or entity to perform any  obligation  contained in the Note or
any other Loan Document, other than the obligation to make payments provided for
in the Note or any other Loan Document.  If a nonmonetary  default is capable of
being cured and the cure cannot  reasonably be completed  within the thirty (30)
day cure  period,  the cure  period  shall be extended up to ninety (90) days so
long as Grantor  has  commenced  action to cure  within the thirty (30) day cure
period, and in Beneficiary's opinion,  Grantor is proceeding to cure the default
with due  diligence.  None of the  foregoing  shall  be  construed  to  obligate
Beneficiary  to forebear in any other  manner from  exercising  its remedies and
Beneficiary  may pursue any other rights or remedies which  Beneficiary may have
because of a default.

     3.  Cumulative  Remedies.  To  the  fullest  extent  allowed  by  law,  all
Beneficiary's and Trustee's rights and remedies  specified in the Loan Documents
(including this Deed of Trust) are cumulative, not mutually exclusive and not in
substitution for any rights or remedies  available at law or in equity.  Without
waiving its rights in the Collateral, Beneficiary may proceed against Grantor or
may proceed against any other security or guaranty for the Secured  Obligations,
in such  order  and  manner  as  Beneficiary  may  elect.  The  commencement  of
proceedings to enforce a particular remedy shall not preclude the discontinuance
of the  proceedings  and the  commencement of proceedings to enforce a different
remedy.

     4. Entry.  After a default,  Beneficiary,  in person,  by agent or by court
appointed receiver, may enter, take possession of, manage and operate all or any
part of the  Collateral,  and may also do any and all other things in connection
with those actions that  Beneficiary  may consider  necessary and appropriate to
protect the security of this Deed of Trust,  including taking and possessing all
of Grantor's or the then owner's books and records;  entering  into,  enforcing,
modifying,  or canceling  Leases on such terms and conditions as Beneficiary may
consider  proper;  obtaining and evicting  tenants;  fixing or modifying  Rents;
collecting  and receiving any payment of money owing to Grantor;  completing any
unfinished   construction;   and/or  contracting  for  and  making  repairs  and
alterations.  Grantor hereby irrevocably constitutes and appoints Beneficiary as
its  attorney-in-fact  to  perform  such  acts and  execute  such  documents  as
Beneficiary in its sole  discretion may consider to be appropriate in connection
with  taking  these  measures.  Although  the  foregoing  power of  attorney  is
effective  immediately,  Beneficiary  shall not  exercise  the  power  until the
occurrence of a default.

     5. Appointment of Receiver. In the event of a default, Grantor consents to,
and  Beneficiary,  to the fullest extent  permitted by applicable  law, shall be
entitled,  without notice, bond or regard to the adequacy of the Collateral,  to
the  appointment of a receiver for the  Collateral.  The receiver shall have, in
addition to all the rights and powers  customarily  given to and  exercised by a
receiver,  all  the  rights  and  powers  granted  to  Beneficiary  by the  Loan
Documents.  The  receiver  shall be  entitled  to receive a  reasonable  fee for
management  of  the  Property.  If  Grantor  is an  occupant  of  the  Property,
Beneficiary  has the right to require  Grantor to pay rent at fair market  rates
and the right to remove Grantor from Property if Grantor fails to pay rent.

     6. Sale of Property After Default.  Following a default and the foreclosure
of this Deed of Trust,  either judicially or non-judicially,  the Collateral may
be sold separately or as a whole, at the option of Beneficiary.  In the event of
a trustee's sale,  Grantor,  and the holder of any subordinate liens or security
interest  with  actual or  constructive  notice  hereof,  waive  any  equitable,
statutory  or other  right  they may have to  require  marshaling  of  assets in
connection with the exercises of any of the remedies permitted by applicable law
or provided  herein,  or to direct the order in which any of the Collateral will
be sold in the event of any sale under this Deed of Trust or  foreclosure in the
inverse order of alienation.

     7. Foreclosure of Lessee's Rights-Subordination. Beneficiary shall have the
right,  at its option,  to foreclose this Deed of Trust subject to the rights of
any lessees of the  Property.  Beneficiary's  failure to  foreclose  against any
lessee  shall not be asserted  as a claim  against  Beneficiary  or as a defense
against any claim by Beneficiary in any action or proceeding. Beneficiary at any
time may subordinate  this Deed of Trust to any or all of the Leases except that
Beneficiary  shall retain its priority  claim to any  condemnation  or insurance
proceeds.

     8. Repairs During  Redemption.  In the event of a judicial  foreclosure the
purchaser during any redemption  period may make such repairs and alterations to
the Property as may be  reasonably  necessary  for the proper  operation,  care,
preservation,  protection  and  insuring  of the  Property.  Any  sums so  paid,
together with interest from the date of the  expenditure at the rate provided in
the judgment, shall be added to the amount required to be paid for redemption of
the Property.

                                   ARTICLE VI

     1. Additional  Security  Documents.  Grantor shall within fifteen (15) days
after  request by  Beneficiary  execute  and deliver  any  financing  statement,
renewal,  affidavit,  certificate,  continuation  statement,  or other  document
Beneficiary  may request in order to perfect,  preserve,  continue,  extend,  or
maintain  security  interests or liens  granted  herein to  Beneficiary  and the
priority of such security  interests or liens.  Grantor shall pay all reasonable
costs and expenses  incurred by Beneficiary in connection with the  preparation,
execution, recording, filing, and refiling of any such document.

     2. Reconveyance After Payment.  Upon written request of Beneficiary stating
that all obligations secured by this Deed of Trust have been paid, Trustee shall
reconvey, without warranty, the Collateral then subject to the lien of this Deed
of Trust.  Grantor  shall  pay any  costs,  trustee's  fees and  recording  fees
incurred in so reconveying the Property.

     3. Nonwaiver of Terms and  Conditions.  Time is of the essence with respect
to  performance  of the  obligations  under  the Loan  Documents.  Beneficiary's
failure  to  require  prompt  enforcement  of  any  such  obligation  shall  not
constitute a waiver of the obligation or any subsequent required  performance of
the  obligation.  No term or  condition  of this Deed of Trust or any other Loan
Documents  may be  waived,  modified  or amended  except by a written  agreement
signed by Grantor and  Beneficiary.  Any waiver of any term or  condition of the
Loan Documents shall apply only to the time and occasion specified in the waiver
and shall not  constitute a waiver of the term or  condition  at any  subsequent
time or occasion.

     4. Waivers by Grantor. Without affecting any of Grantor's obligations under
the Loan  Documents,  Grantor  waives  the  following:  (a) any right to require
Beneficiary to proceed  against any specific party liable for sums due under the
Loan Documents or to proceed  against or exhaust any specific  security for sums
due under the Loan  Documents;  (b) notice of new or additional  indebtedness of
any Grantor or any other party  liable for sums due under the Loan  Documents to
Beneficiary; (c) any defense arising out of Beneficiary entering into additional
financing or other  arrangements  with any Grantor or any other party liable for
sums due  under  the Loan  Documents  and any  action  taken by  Beneficiary  in
connection  with  any  such  financing  or  other  arrangements  or any  pending
financing  or other  arrangements;  (d) any defense  arising out of the absence,
impairment,   or  loss  of  any  or  all  rights  of  recourse,   reimbursement,
contribution  or  subrogation  or any other  rights or remedies  of  Beneficiary
against  any  Grantor  or any  other  party  liable  for sums due under the Loan
Documents or any Collateral; and (e) any obligation of Beneficiary to see to the
proper  use and  application  of any  proceeds  advanced  pursuant  to the  Loan
Documents.

     5. Right of Subrogation.  Beneficiary is subrogated to the rights,  whether
legal or equitable,  of all  beneficiaries,  mortgagees,  lienholders and owners
directly or indirectly paid off or satisfied in whole or in part by any proceeds
advanced by  Beneficiary  under the Loan  Documents,  regardless of whether such
parties assigned or released of record their rights or liens upon payment.

     6. Joint and Several  Liability.  If there is more than one Grantor of this
Deed of Trust, their obligations shall be joint and several.

     7.  Statement  of Amount  Owing.  Grantor  within  fifteen  (15) days after
request by  Beneficiary  will  furnish  Beneficiary  a written  statement of the
amount due under the Loan Documents,  any offsets or defenses against the amount
claimed by Grantor, and such other factual matters as Beneficiary may reasonably
request.

     8. Books and Records; Financial Statements. Grantor will keep and maintain,
at  Grantor's  address  stated  above,  or such other place as  Beneficiary  may
approve in writing,  accurate books and records of the operations of Grantor and
of the  Property,  and copies of all  leases,  contracts,  agreements  and other
documents which affect the operation of the Property, subject to examination and
copying  at any  reasonable  time  by  Beneficiary.  Grantor  shall  deliver  to
Beneficiary,  for Grantor's  parent,  Advanced Machine Vision  Corporation,  (a)
within  120 days of each  fiscal  year end (or  within 20 days of  Beneficiary's
request  therefor  if Grantor is in  default)  annual  CPA-audited  consolidated
financial  statements,  including a year-end  balance  sheet and profit and loss
statement,  (b) within 45 days of each fiscal  quarter end (or within 20 days of
Beneficiary's   request   therefor   if   Grantor  is  in   default)   quarterly
internally-prepared financial statements, and (c) within 30 days of filing same,
a copy of the most recent  federal income tax return and related  schedules,  in
each case  certified in a manner  acceptable to Beneficiary as true and correct.
In addition to the foregoing,  in the event the Property or any portion  thereof
is leased or rented,  within 120 days of each fiscal year end (or within 20 days
of  Beneficiary's  request  therefor  if Grantor is in  default)  Grantor  shall
provide  to  Beneficiary  a current  statement  of income and  expenses  for the
Property,  a statement  of changes in  financial  position  with  respect to the
Property for the prior year,  and a current  rent roll for the Property  showing
the  name  and  mailing  address  of each  tenant,  the  space  occupied,  lease
commencement  and expiration  dates  including a description of any extension or
renewal  rights,  the current  monthly  rent and the date to which rent has been
paid,  the date on which the rent will next change and the amount,  any deposit,
prepaid rent or other sum paid by the tenant  including the amount and the place
where  held,  and  describing  any right which a tenant may have or may claim to
reduce,  offset, abate or withhold any rent or other sum payable under the lease
with tenant.  Grantor has  conducted a  comprehensive  review and  assessment of
Grantor's  computer  applications  and made inquiry of Grantor's key  suppliers,
vendors,  and customers  with respect to the "year 2000  problem"  (that is, the
risk  that  computer   applications   may  not  be  able  to  properly   perform
date-sensitive  functions  after December 31, 1999) and based on that review and
inquiry,  Grantor  does not  believe  the year  2000  problem  will  result in a
material  adverse  change  in  Grantor's   business   condition   (financial  or
otherwise),  operations,  properties,  or  prospects,  or  ability  to repay the
Secured  Obligations.  If any change occurs in the basis for Grantor's belief in
this regard, Grantor will give Beneficiary notice of such change.

     9. Appraisals.  In the event of a default  Beneficiary may obtain a current
regulatory conforming appraisal of the Collateral.  In addition,  appraisals may
be  commissioned  by  Beneficiary  when required by laws and  regulations  which
govern  Beneficiary's  lending  practices.  The cost of all such appraisals (and
related  internal  review fees and costs) will be paid by Grantor within fifteen
(15) days after request by Beneficiary.

     10.  Evasion  of  Prepayment  Fee.  If  Grantor  is  in  default,   whether
Beneficiary has accelerated the maturity of the  indebtedness or not, any tender
of payment  sufficient to satisfy all sums due under the Loan  Documents made at
any time prior to foreclosure sale shall constitute an evasion of the prepayment
terms of the Note, if any, and shall be deemed a voluntary prepayment.  Any such
payment,  to the extent  permitted by law, shall include the additional  payment
required  under the  prepayment fee provision in the Note, if any, or if at that
time prepayment is not permitted,  then such payment, to the extent permitted by
law,  will  include  an  additional  payment  of five  percent  (5%) of the then
principal balance.

     11.  Payment of New  Taxes.  If any  federal,  state or local law is passed
subsequent to the date of this Deed of Trust which  requires  Beneficiary to pay
any tax  because of this Deed of Trust or the sums due under the Loan  Documents
(excluding  income  taxes),  then Grantor shall pay to Beneficiary on demand any
such  taxes if it is lawful  for  Grantor  to pay them,  or, in the  alternative
Grantor may repay all sums due under the Loan  Documents plus any prepayment fee
within  thirty (30) days of such demand.  If it is not lawful for Grantor to pay
such taxes, then at its option  Beneficiary may declare a default under the Loan
Documents.

     12.  In-House  Counsel  Fees.  Whenever  Grantor  is  obligated  to  pay or
reimburse Beneficiary or Trustee for any attorneys' fees, including on appeal or
otherwise,  those fees shall include the allocated reasonable costs for services
of in- house counsel.

     13. Notices.  Any notice given by Grantor,  Trustee or Beneficiary shall be
in  writing  and  shall be  effective  (1) on  personal  delivery  to the  party
receiving  the notice or (2) on the third day after deposit in the United States
mail, postage prepaid with return receipt  requested,  addressed to the party at
the  address  set forth  above (or such other  address as a party may specify by
written  notice  given  pursuant  to this  paragraph),  or with  respect  to the
Grantor,  to the address at which  Beneficiary  customarily or last communicated
with Grantor.

     14.  Controlling  Document.  In the event of a  conflict  or  inconsistency
between  the  terms  and  conditions  of this  Deed of Trust  and the  terms and
conditions  of  any  other  of the  Loan  Documents  (except  for  any  separate
assignment  of the Rents  and/or the Leases and any loan  agreement  which shall
prevail over this Deed of Trust), the terms and conditions of this Deed of Trust
shall prevail.

     15.  Invalidity of Terms and  Conditions.  If any term or condition of this
Deed of Trust is found to be invalid,  the invalidity shall not affect any other
term or  condition of the Deed of Trust and the Deed of Trust shall be construed
as if not containing the invalid term or condition.

     16. Legislation Affecting  Beneficiary's Rights. If enactment or expiration
of  applicable  laws has the effect of rendering  any material  provision of the
Note or this Deed of Trust unenforceable according to its terms, Beneficiary, at
its option,  may require  immediate  payment in full of all sums secured by this
Deed of Trust and may invoke any remedies permitted herein.

     17.  Cross-Default.  A default  under this Deed of Trust will  constitute a
default under any and all documents  (the "Other Loan  Documents")  relating to,
evidencing or securing (a) any and all loans by  Beneficiary  to Grantor and (b)
the  revolving  line  of  credit  loan  in the sum of  $2,000,000.00  (Loan  No.
0041962870) by Beneficiary to Advanced Machine Vision Corporation,  a California
corporation  ("AMVC") (the "Other Loan")  secured by property  owned by Advanced
Machine  Vision  Corporation,  a California  corporation.  Any default under the
Other Loan  Documents  will  constitute a default under this Deed of Trust.  Any
default under this Deed of Trust will give rise to any and all of  Beneficiary's
rights and remedies  hereunder and/or under the Other Loan Documents.  A default
under  any of the  Other  Loan  Documents  shall  give  rise  to any  and all of
Beneficiary's rights under such loan document, the Other Loan Documents,  and/or
this Deed of Trust.

     18.  Cross-Collateralization.  Grantor agrees that the Property  secured by
this Deed of Trust will constitute collateral under the Other Loan Documents, as
if said property was encumbered as collateral  for the Other Loan  transactions.
Grantor  further agrees that the property  which serves as collateral  under the
Other  Loan  Documents  shall  constitute  collateral  for this  loan as if said
property was  encumbered  as collateral  for this Loan  transaction.  Thus,  the
collateral  for the Other Loan  secures the loan  evidenced  and secured by this
Deed of Trust and the Property securing this Deed of Trust shall also secure the
Other Loan.

     19.   Acknowledgment  and  Waiver.   Grantor  represents  and  warrants  to
Beneficiary  that although the maker of the Other Loan is not the same entity as
Grantor,  Grantor is a wholly-owned  subsidiary of AMVC.  AMVC is a guarantor of
this Loan and the Grantor of the Other  Loan.  Grantor  acknowledges  and agrees
that at Grantor's request and solely as an accommodation to Grantor, Beneficiary
has agreed that the  borrower  for the Other Loan may be a separate  entity,  so
long as Grantor remains a wholly-owned subsidiary of AMVC. Grantor hereby waives
any  and  all  claims  or  defenses  it may  have  to the  cross-defaulting  and
cross-collateralization  of this Loan and the Other  Loan based on the fact that
Grantor  and the  maker  for the  Other  Loan  are  separate  entities.  Grantor
acknowledges  that  it has  received  actual  and  sufficient  consideration  in
exchange for the  cross-defaulting and  cross-collateralization  of this Loan to
the Other Loan.

     20. Rules of  Construction.  This Deed of Trust shall be construed so that,
whenever  applicable,  the use of the singular shall include the plural, the use
of the plural  shall  include the  singular,  and the use of any gender shall be
applicable  to all genders and shall  include  corporations,  limited  liability
companies,  partnerships and limited partnerships.  This Deed of Trust inures to
the benefit  of, and binds all parties  named  herein and their  successors  and
assigns. The headings to the various sections have been inserted for convenience
of reference only and shall not be used to construe this Deed of Trust.

     21.  Applicable  Law. This Deed of Trust and remaining Loan Documents shall
be governed by and construed in accordance with the laws of the State of Oregon.

     22. ORS 41.580 Disclosure. UNDER OREGON LAW, MOST AGREEMENTS,  PROMISES AND
COMMITMENTS BY  BENEFICIARY  AFTER OCTOBER 3, 1989,  CONCERNING  LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL,  FAMILY OR HOUSEHOLD PURPOSES,  OR
SECURED  SOLELY  BY  THE  BORROWER'S  RESIDENCE  MUST  BE  IN  WRITING,  EXPRESS
CONSIDERATION AND BE SIGNED BY AN AUTHORIZED REPRESENTATIVE OF BENEFICIARY TO BE
ENFORCEABLE.

     23. ORS 93.040 Warning.  THIS INSTRUMENT WILL NOT ALLOW USE OF THE PROPERTY
DESCRIBED  IN THIS  INSTRUMENT  IN  VIOLATION  OF  APPLICABLE  LAND USE LAWS AND
REGULATIONS.  BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT,  THE PERSON ACQUIRING
FEE TITLE TO THE  PROPERTY  SHOULD  CHECK  WITH THE  APPROPRIATE  CITY OR COUNTY
PLANNING  DEPARTMENT  TO VERIFY  APPROVED  USES AND TO  DETERMINE  ANY LIMITS ON
LAWSUITS AGAINST FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930.

                                     WARNING

          UNLESS YOU  PROVIDE US WITH  EVIDENCE  OF THE  INSURANCE  COVERAGE  AS
     REQUIRED BY OUR CONTRACT OR LOAN  AGREEMENT,  WE MAY PURCHASE  INSURANCE AT
     YOUR EXPENSE TO PROTECT OUR  INTEREST.  THIS  INSURANCE  MAY, BUT NEED NOT,
     ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE
     WE PURCHASE  MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE  AGAINST YOU.
     YOU MAY LATER  CANCEL THIS  COVERAGE BY  PROVIDING  EVIDENCE  THAT YOU HAVE
     OBTAINED PROPERTY COVERAGE ELSEWHERE.

          YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US. THE
     COST OF THIS  INSURANCE MAY BE ADDED TO YOUR  CONTRACT OR LOAN BALANCE.  IF
     THE COST IS ADDED TO YOUR  CONTRACT OR LOAN  BALANCE,  THE INTEREST RATE ON
     THE  UNDERLYING  CONTRACT  OR LOAN WILL  APPLY TO THIS  ADDED  AMOUNT.  THE
     EFFECTIVE  DATE OF COVERAGE MAY BE THE DATE YOUR PRIOR  COVERAGE  LAPSED OR
     THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.

          THE  COVERAGE WE PURCHASE  MAY BE  CONSIDERABLY  MORE  EXPENSIVE  THAN
     INSURANCE  YOU CAN  OBTAIN  ON YOUR  OWN AND MAY NOT  SATISFY  ANY NEED FOR
     PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE  REQUIREMENTS
     IMPOSED BY APPLICABLE LAW.


GRANTOR


SRC VISION, INC., an Oregon corporation



By:  /s/ Alan R. Steel
---------------------------------------
 ALAN R. STEEL, Chief Financial Officer




                      [NOTARY ACKNOWLEDGMENT ON NEXT PAGE.]


<PAGE>



STATE OF OREGON                             )
                                            )  ss.
COUNTY OF                                   )

     This instrument was  acknowledged  before me on , 1998, by ALAN R. STEEL as
Chief Financial Officer of SRC VISION, INC., an Oregon corporation.



                            ________________________
                            Notary Public for Oregon
                            My Commission Expires:_________________


<PAGE>


                                    EXHIBIT A

EXHIBIT  ATTACHED TO AND FORMING A PART OF  COMMERCIAL  DEED OF TRUST,  SECURITY
AGREEMENT AND FIXTURE FILING WITH ASSIGNMENT OF LEASES AND RENTS DATED APRIL 24,
1998,   AMONG  SRC   VISION,   INC.,   AN  OREGON   CORPORATION,   AS   GRANTOR,
JOSEPHINE-CRATER TITLE COMPANIES,  INC., AN OREGON CORPORATION,  AS TRUSTEE, AND
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, AS BENEFICIARY.

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

LEGAL DESCRIPTION:

         TRACT A:
         Lot 2 of KING CENTER SUBDIVISION, UNIT NO. 1, to the City of
         Medford, Jackson County, Oregon, according to the Official Plat
         thereof, now of record.

         TRACT B:
         The East Half of Lot 3 in KING  CENTER  SUBDIVISION  UNIT NO. 1, to the
         City of Medford, Jackson County, Oregon, according to the Official Plat
         thereof, now of record.

<PAGE>


Bank of America                                          Standing Loan Agreement
--------------------------------------------------------------------------------

This Loan Agreement dated as of April 24, 1998, is between SRC VISION,  INC., an
Oregon  corporation  ("Borrower")  and Bank of America  National Trust & Savings
Association ("Bank").

I.  LOAN TERMS

1.1  Amount and Purpose
Bank shall make a loan to Borrower in the principal  amount of THREE MILLION AND
NO/100THS  DOLLARS  ($3,000,000.00)  (the  "Loan") to be used for the  following
purpose: Real estate investment. The Loan will be evidenced by a promissory note
(the  "Note")  payable  to Bank in the  original  principal  amount  of the Loan
secured by a Commercial  Deed of Trust,  Security  Agreement and Fixture  Filing
with  Assignment  of Leases and Rents  ("Deed of Trust")  covering  certain real
property  commonly  known as 2067  Commerce  Drive,  Medford,  Oregon 97504 (the
"Property").  Advanced Machine Vision Corporation,  a California corporation and
Ventek, Inc., an Oregon corporation  (collectively,  "Guarantors") will guaranty
(the "Guaranties") Borrower's obligations to Bank. This Agreement, the Note, the
Deed of Trust, the Guaranties,  and all other documents evidencing,  securing or
otherwise pertaining to the Loan will be referred to as the "Loan Documents."

1.2  Documentation
At the  closing  of  this  transaction,  Borrower  will  deliver  the  following
documents and other items, executed and acknowledge as appropriate,  all in form
and substance satisfactory to Bank:

(a)  This Loan Agreement;

(b)  The Promissory Note;

(c)  The Commercial Deed of Trust, Security Agreement and Fixture Filing with
     Assignment of Leases and Rents;

(d)  A UCC-1 Financing Statement;

(e)  The Guaranties;

(f)  Certificate and Indemnity Agreement;

(g)  An ALTA extended  coverage title  insurance  policy  insuring Bank that the
     Deed of Trust  constitutes  a valid and  enforceable  lien on the  Property
     subject  and  subordinate  only to such liens or other  matters as Bank has
     approved in writing;

(h)  If the Deed of Trust is to be junior to any other lien or deed of trust on
     the Property, a Beneficiary's Statement from the holder of such prior lien
     or deed of trust;

(i)  Evidence of the casualty and other insurance coverage required under this
     Agreement;

(j)  If Borrower is anything other than a natural person, evidence of Borrower's
     due formation and good standing, as well as due authorization and execution
     of the Loan Documents;

(k)  If applicable, Subordination Agreements from tenants leasing space in the
     Property;

(l)  A loan fee in the amount of $15,000.00; and

(m)  Such other documents and assurances as Bank may require.

II. COVENANTS OF THE BORROWER

Borrower promises to keep each of the following covenants:

2.1  Compliance with Law
Borrower  shall comply with all existing and future laws,  regulations,  orders,
and requirements applicable to the Property and to Borrower's business.

2.2  Site Visits
     (a) Borrower shall allow Bank access to the Property at any reasonable time
for the purposes of  performing an appraisal,  inspecting  the Property,  taking
soil or  groundwater  samples,  and  conducting  tests,  among other things,  to
investigate for the presence of Hazardous Substances,  as defined in Article IV.
Borrower shall also allow Bank to examine, copy and audit its books and records.

     (b) Bank is under no duty to visit or observe the  Property,  or to examine
any books or records.  Any site visit,  observation or examination by Bank shall
be solely for the purpose of protecting  Bank's  security and preserving  Bank's
rights under the Loan Documents.  Bank owes no duty of care to protect  Borrower
or any other person  against,  or to inform Borrower or any other person of, any
adverse condition affecting the Property, including any defects in the design or
construction  of  any  improvements  on the  Property  or  the  presence  of any
Hazardous Substances on the Property.

2.3  Insurance
Borrower  shall  provide and  maintain  in force at all times all risk  property
damage  insurance on the Property;  Comprehensive  General  Liability  coverage,
including an  additional  insured  endorsement  in favor of Bank,  written on an
occurrence  basis,  not claims  made;  and such other type of  insurance  on the
Property or Borrower as may be required by Bank in its reasonable  judgment.  At
Bank request,  Borrower  shall  provide Bank with a counterpart  original of any
policy, together with a certificate of insurance setting forth the coverage, the
limits of liability,  the carrier,  the policy number and the  expiration  date.
Each such policy of insurance shall be in an amount, for a term, and in form and
content satisfactory to Bank, and shall be written only by companies approved by
Bank. In addition,  each policy of hazard  insurance shall include a Form 438BFU
or equivalent loss payable endorsement in favor of Bank.

2.4  Payment of Expenses
Borrower  shall pay all costs and expenses  incurred by Bank in connection  with
the  making,  disbursement  and  administration  of the  Loan,  as  well  as any
revisions,  extensions,  renewals or "workouts" of the Loan, and in the exercise
of any of  Bank's  rights or  remedies  under  this  Agreement.  Such  costs and
expenses  include  title  insurance,  recording  and  escrow  charges,  fees for
appraisal,  legal fees and expenses of Bank's  counsel and any other  reasonable
fees and costs for  services,  regardless of whether such services are furnished
by Bank's employees or by independent  contractors.  Borrower  acknowledges that
the Loan fee does not include amounts payable by Borrower under this section.

2.5  Financial and Other Information
On request,  Borrower shall  promptly  provide Bank with such financial or other
information  concerning its and each Guarantor's  affairs and properties as Bank
may request.

2.6  Notices
Borrower shall promptly notify Bank in writing of:

     (a) any litigation affecting Borrower, any Guarantor or the Property,  and,
if Borrower or Guarantor is a  partnership,  any general  partner of Borrower or
Guarantor where the amount claimed is One Million Dollars ($1,000,000) or more;

     (b) any  notice  that the  Property  or  Borrower's  business  fails in any
respect to comply with any applicable law, regulation or court order; and

     (c) any material  adverse change in the physical  condition of the Property
of  Borrower's  or any  Guarantor's  financial  condition or operations or other
circumstance that adversely affects  Borrower's  intended use of the Property or
Borrower's ability to repay the Loan.

2.7  Indemnity
Borrower  agrees  to  indemnify  and hold Bank  harmless  from and  against  all
liabilities,  claims, actions,  damages, costs and expenses (including all legal
fees and  expenses  of Bank's  counsel)  arising  out of or  resulting  from the
ownership,  operation, or use of the Property,  whether such claims are based on
theories  of  derivative   liability,   comparative   negligence  or  otherwise.
Notwithstanding  anything  to the  contrary  in any  other  Loan  Document,  the
provisions  of this  Section 2.7 shall not be secured by the Deed of Trust,  and
shall survive the termination of this Agreement and the repayment of the Loan or
foreclosure of the Deed of Trust.

2.8  Business Operation
Without Bank's prior written consent, Borrower shall not:

(a)  engage in any business activities substantially different from Borrower's
     present business;

(b)  liquidate or dissolve Borrower's business;

(c)  lease or dispose of all or a substantial part of Borrower's business or
     Borrower's assets;

(d)  sell or dispose any assets for less than fair market price;

(e)  enter into any sale or leaseback agreement covering a substantial portion
     of its fixed or capital assets;

(f)  enter into any consolidation, merger, pool, joint venture, syndicate or
     other combination; or

(g)  Acquire or purchase a business or its assets in excess of $2,000,000.00 in
     any fiscal year.

2.9  Performance of Acts
Upon request by Bank,  Borrower shall perform all acts which may be necessary or
advisable  to  perfect  any  lien  or  security  interest  provided  for in this
Agreement or to carry out the intent of this Agreement.

 2.11  Further Encumbrances
Borrower  acknowledges  that Bank has relied upon the Property not being subject
to  additional  liens or  encumbrances  for reasons which  include,  but are not
limited  to, the  possibility  of  competing  claims or the  promotion  of plans
disadvantageous  to  Bank  in  bankruptcy;   the  risks  to  Bank  in  a  junior
lienholder's  bankruptcy;   questions  which  involve  the  priority  of  future
advances,  the priority of future  leases of the  Property,  the  marshaling  of
Borrower's   assets,   and  Bank's  rights  to  determine  the   application  of
condemnation awards and insurance  proceeds;  the impairment of Bank's option to
accept  a deed  in lieu  of  foreclosure;  and  Bank's  requirements  concerning
Borrower's  preservation  of its equity in the  Property and the absence of debt
which could  increase  the  likelihood  of  Borrower's  inability to perform its
obligations when due. Therefore,  as a principal  inducement to Bank to make the
Loan and with the knowledge that Bank will  materially rely upon this section in
so doing.  Borrower  covenants not to voluntarily or involuntarily  encumber the
Property or any part thereof.  Without  limiting the generality of the foregoing
and irrespective of the priority thereof, no mortgages,  deeds of trust or other
forms of security  interests shall encumber any real or personal  property which
is the subject of any lien or security  interest granted to Bank as security for
the Note.  Encumbrances and hypothecations of stock or partnership  interests in
Borrower or any  successor of Borrower,  sale  lease-backs,  transfers by leases
with purchase  options,  and  conveyances by real estate  contract shall each be
deemed an encumbrance for the purposes of this Section.

III. USE OF THE PROPERTY; LEASING

3.1  Use of the Property
Unless  required  by  applicable  law or  unless  Bank has  otherwise  agreed in
writing,  Borrower  shall not allow changes in the use for which all or any part
of the  Property  was  intended at the time this Loan  Agreement  was  executed.
Borrower  shall not  initiate or acquiesce in a change in the zoning or land use
classification of the Property without Bank's prior written consent.

3.2  Leasing
At Bank's  request,  Borrower shall provide Bank copies of all lease  agreements
and the Bank  reserves  the  right to  approve  the  Borrower's  form of  lease.
Borrower shall not materially  deviate from the Bank's approved form of lease or
from a current Bank  approved  schedule of rents,  without  Bank's prior written
consent.  If Borrower  leases any portion of the Property to third parties,  all
such leases shall be with bona fide third party tenants  financially  capable of
performing  their  obligations  under the lease and shall  reflect  arm's-length
transactions at the then current market rate for comparable space.

3.3  Delivery of Leasing Information and Documents
Borrower  shall  promptly  deliver  to Bank such  monthly  rent  rolls,  leasing
schedules and reports, operating statements or other leasing information as Bank
from time to time may request.  In addition,  Borrower shall promptly obtain and
deliver to Bank such estoppel  certificates  and  subordination  and  attornment
agreements from tenants as Bank from time to time may require.

IV.  HAZARDOUS SUBSTANCES

The  provisions of this Article IV shall survive  termination  of this Agreement
and repayment of the Loan, and shall also survive as unsecured obligations after
any  acquisition by Bank of the Property or any part of it by foreclosure or any
other means.

4.1  Definition of Hazardous Substance
For purposes of this Agreement,  a "Hazardous  Substance" is defined to mean any
substance,  material or waste,  including petroleum  (including crude oil or any
fraction thereof),  which is or becomes  designated,  classified or regulated as
being  "toxic",  "hazardous",  a "pollutant"  or similar  designation  under any
federal, state or local law, regulation or ordinance.

4.2  Indemnity Regarding Hazardous Substances
Borrower  agrees  to  indemnify  and hold Bank  harmless  from and  against  all
liabilities,   claims,  actions,  foreseeable  and  unforeseeable  consequential
damages,  costs and expenses  (including  attorney's  fees) or loss  directly or
indirectly  arising  out of or  resulting  from the  presence  of any  Hazardous
Substance in or around any part of the Property,  or in the soil or  groundwater
under  the  Property,   including  expenses  incurred  in  connection  with  any
investigation  of  site  conditions  or  any  clean-up,   remedial,  removal  or
restoration  work,  including any resulting damages or injuries to the person or
property of any third persons or to any natural resources.

4.3  Representation and Warranty
Before  signing  this  Agreement,  Borrower  researched  and  inquired  into the
previous  uses and  ownership  of the  Property.  Based  on that due  diligence,
Borrower  represents  and  warrants  that,  to the  best  of its  knowledge,  no
Hazardous  Substance has been disposed of, released onto or otherwise exists in,
on, or under the Property, except as Borrower has disclosed to Bank in writing.

4.4  Compliance with Law; Notices
Borrower has complied,  and shall comply and cause all occupants of the Property
to comply, with all laws,  regulations and ordinances governing or applicable to
Hazardous   Substances  as  well  as  the   recommendations   of  any  qualified
environmental engineer or other expert.

Borrower  shall  promptly  notify Bank if it knows or suspects  there may be any
Hazardous  Substance in or around the  Property,  or in the soil or  groundwater
under the Property, or if any action or investigation by any governmental agency
or third party pertaining to Hazardous Substances is pending or threatened.

V. REPRESENTATIONS AND WARRANTIES

Borrower promises that each representation and warranty set forth below is true,
accurate and correct as of the date of this Agreement and will be true as of the
date of any request for disbursement of Loan proceeds.

5.1  Authority
Borrower is authorized  to execute,  deliver and perform its  obligations  under
each of the Loan Documents.

5.2 No Violation
Neither  Borrower nor the Property is in  violation  of any law,  regulation  or
ordinance,  any order of any court or  governmental  entity,  or any covenant or
agreement  affecting  Borrower or the  Property.  There are no claims,  actions,
proceedings  or  investigations   pending  or  threatened  against  Borrower  or
affecting the Property except for those previously disclosed by Borrower to Bank
in writing.

5.3  Financial Information
All  financial  information  which  has  been  and  will be  delivered  to Bank,
including all information relating to the financial condition of Borrower or any
of its partners or joint venturers,  any Guarantor, or the Property,  fairly and
accurately  represents  the  financial  condition  being  reported  on. All such
information was prepared in accordance with accounting  principles  consistently
applied,  acceptable to Bank.  There has been no material  adverse change in any
financial condition reported at any time to Bank.

5.4  Borrower Not a "Foreign Person"
Borrower is not a "foreign  person" within the meaning of Section  1445(f)(3) of
the Internal Revenue Code of 1986, as amended from time to time.

VI.  DEFAULT AND REMEDIES

6.1  Events of Default
Borrower will be in default under this  Agreement upon the occurrence of any one
or more of the following events (some or all collectively,  "Events of Default:"
any one singly, an "Event of Default"):

(a)  Borrower fails to make any payment of principal or interest under the Note
     within ten (10) days after the date demanded; or

(b)  Borrower  fails to comply with any  covenant  contained  in this  Agreement
     other than those  referred to in clause (a),  and does not either cure that
     failure  within thirty (30) days after written  notice from Bank, or if the
     default cannot be cured in thirty (30) days, within ninety (90); or

(c)  An assignment  for the benefit of creditors is made by, or any  bankruptcy,
     reorganization, receivership, moratorium or other debtor-relief proceedings
     are commenced by or against, Borrower or any Guarantor; or

(d)  Borrower or any Guarantor becomes  insolvent,  dissolves or liquidates,  or
     any of these  events  happens to  Borrower's  or any  Guarantor's  managing
     general partner or shareholder; or

(e)  Any representation or warranty made or given in any of the Loan Documents
     proves to be false or misleading in any material respect; or

(f)  Any Guarantor revokes its Guaranty or any Guaranty becomes ineffective for
     any reason; or

(g)  Under any of the Loan Documents, an event of default occurs; or

(h)  Borrower and Guarantor  fail to meet the  conditions of, or fail to perform
     any obligation  under,  any other agreement  Borrower or Guarantor has with
     Bank or any affiliate of Bank; or

(i)  There  is a  material  adverse  change  in  Borrower's  or any  Guarantor's
     financial  condition,   or  event  or  condition  that  materially  impairs
     Borrower's  intended use of the Property or Borrower's ability to repay the
     Loan.

6.2  Remedies
If an Event of Default occurs under this Agreement,

     (a) Bank may  exercise  any right or  remedy  which it has under any of the
Loan  Documents,  or which is  otherwise  available  at law or in  equity  or by
statute,  and all of Bank's  rights and  remedies  shall be  cumulative.  Bank's
obligation  to  lend  shall  automatically  terminate,  and  Bank  in  its  sole
discretion  may withhold any one or more  disbursements.  Bank may also withhold
any one or more  disbursements  after an event  occurs  that with  notice or the
passage  of time could  become an Event of  Default,  if Bank in its  reasonable
judgment  determines that the event is a default,  breach or failure of a nature
which is not susceptible of cure.  Notwithstanding  anything contained herein to
the contrary,  Bank shall not exercise its default remedies  provided herein and
in the Loan Documents because of a default pursuant to paragraph 6.1 (b) through
(i)  (excepting  the filing of a petition or action by Borrower  seeking  relief
under any bankruptcy, reorganization or insolvency laws), unless such default is
not cured  within  fifteen (15) days of the date on which Bank mails or delivers
written notice of the default to Borrower. If a bankruptcy petition or action is
filed with  respect to the Borrower or Borrower  defaults  pursuant to paragraph
6.1(a) herein,  the entire debt outstanding  under the Note shall  automatically
become due and payable.

     (b) Bank shall have the right in its sole  discretion to enter the Property
and take  possession of it,  whether in person,  by agent or by  court-appointed
receiver,  collect rents and otherwise protect its collateral. If Bank exercises
any of the rights or remedies  provided in this clause (b), that exercise  shall
not make Bank, or cause Bank to be deemed to be, a partner or joint  venturer of
Borrower. All sums which are expended by Bank in preserving its collateral shall
be  considered an additional  loan to Borrower  bearing  interest at the Default
Rate provided in the Note and secured by the Deed of Trust.

VII. ARBITRATION

7.1
This paragraph  concerns the resolution of any  controversies  or claims between
the Borrower and the Bank,  including  but not limited to those that arise from:
(a) This Agreement (including any renewals,  extensions or modifications of this
Agreement); (b) Any document,  agreement or procedure related to or delivered in
connection with this Agreement;  (c) Any violation of this Agreement; or (d) Any
claims for damages  resulting from any business  conducted  between the Borrower
and the Bank,  including  claims  for  injury to person,  property  or  business
interests (torts).

7.2
At the request of the  Borrower or the Bank,  any such  controversies  or claims
will be settled by arbitration in accordance with the United States  Arbitration
Act. The United  States  Arbitration  Act will apply even though this  agreement
provides that it is governed by Oregon law.

7.3
Arbitration  proceedings  will be  administered  by the  Arbitration  Service of
Portland, Inc., and will be subject to its commercial rules of arbitration.

7.4
For the purposes of the application of the statute of limitations, the filing of
an  arbitration  pursuant to this paragraph is the equivalent of the filing of a
lawsuit  and any  claim  or  controversy  which  may be  arbitrated  under  this
paragraph is subject to any applicable  statute of limitations.  The arbitrators
will have the  authority  to decide  whether  any such claim or  controversy  is
barred by the statute of limitations  and, if so, to dismiss the  arbitration on
that basis.

7.5
If there is a dispute as to whether an issue is arbitrable, the arbitrators will
have the authority to resolve any such dispute.

7.6
The decision that results from an arbitration proceeding may be submitted to any
authorized court of law to be confirmed and enforced.

7.7
This  provision  does not limit the right of the  Borrower  or the Bank to:  (a)
exercise self-help remedies such as setoff; (b) foreclosure  against or sell any
real or  personal  property  collateral;  or (c) act in a court of law,  before,
during or after  the  arbitration  proceeding  to obtain  (i) a  provisional  or
interim and/or (ii) additional or supplementary remedies.

7.8
The pursuit of or a successful  action for interim,  additional or supplementary
remedies,  or the filling of a court action, does not constitute a waiver of the
right of the  Borrower or the Bank,  including  the suing  party,  to submit the
controversy or claim to arbitration if the other party contests the lawsuit.

7.9
If the Bank forecloses  against any real property  securing this Agreement,  the
Bank has the  option to  exercise  the power of sale  under the deed of trust or
mortgage, or to proceed by judicial foreclosure.

VIII. MISCELLANEOUS PROVISIONS

8.1  No Waiver; Consents
Each waiver by Bank must be in writing,  and no waiver  shall be  construed as a
continuing  waiver. No waiver shall be implied from any delay or failure by Bank
to take action on account of any default of Borrower. Consent by Bank to any act
or  omission  by Borrower  shall not be  construed  as a consent to any other or
subsequent act or omission.

8.2  No Third Parties Benefitted
This  Agreement is made and entered into for the sole  protection and benefit of
Bank and Borrower and their successors and assigns.  No trust fund is created by
this  Agreement and no other persons or entities  shall have any right of action
under this Agreement or any right to the Loan funds.

8.3  Notices
All  notices  given  under  this  Agreement  shall be in  writing  and  shall be
effectively served upon delivery, or if mailed, upon receipt of certified United
States mail,  postage prepaid,  sent to the party at its address appearing below
its signature.  Those  addresses may be changed by either Party by notice to the
other Party.

8.4  Attorneys' Fees
If any lawsuit,  reference,  arbitration,  bankruptcy or any other proceeding is
commenced  which arises out of, or which relates to or affects,  this Agreement,
the Loan  Documents  or the Loan,  the  prevailing  party  shall be  entitled to
recover  from  each  other  party  such  sums  as the  court,  reference  judge,
arbitrator, or other decision maker may adjudge to be reasonable attorneys' fees
in the action,  reference  or  arbitration,  in  addition to costs and  expenses
otherwise  allowed by law,  including appeal or rehearing or any other review or
proceeding.

8.5  Heirs, Successors and Assigns
The  terms  of  this  Agreement   shall  bind  and  benefit  the  heirs,   legal
representatives,  successors and assigns of the parties; provided, however, that
Borrower  may not assign this  Agreement  without the prior  written  consent of
Bank.  Bank shall have the right to  transfer  the Loan to any other  persons or
entities without the consent of or notice to Borrower. Without the consent of or
notice to  Borrower,  Bank may  disclose  to any  prospective  purchaser  of any
securities  issued by Bank, and to any  prospective  or actual  purchaser of any
interest in the Loan or any other loans made by Bank to Borrower,  any financial
or other information relating to Borrower, the Loan or the Property.

8.6  Interpretation
The language of this  Agreement  shall be construed as a whole  according to its
fair meaning,  and not strictly for or against any party. The word  "include(s)"
means  "include(s),   without   limitation,"  and  the  word  "including"  means
"including,  but not limited to." Time is of the essence in the  performance  of
this Agreement by Borrower.  Whenever  Borrower is obligated to pay or reimburse
Bank for any attorneys'  fees,  those fees shall include the allocated costs for
services of in-house counsel. This Agreement shall be governed by Oregon law.

8.7  Miscellaneous
This  Agreement  may not be  modified or amended  except by a written  agreement
signed by the parties.  The  invalidity or  unenforceability  of any one or more
provisions  of this  Agreement  shall in no way affect any other  provision.  If
Borrower  consists of more than one person or entity,  each shall be jointly and
severally liable to Bank for the faithful performance of this Agreement.

8.8  Year 2000 Compliance
The  Borrower  has  conducted  a  comprehensive  review  and  assessment  of the
Borrower's  computer  applications  and will make inquiry of the  Borrower's key
suppliers,  vendors and customers  with respect to the "year 2000 problem" (that
is, the risk that  computer  applications  may not be able to  properly  perform
date-sensitive  functions after December 31, 1999) by September 30, 1998.  Based
on year to date review and inquiry,  the Borrower does not believe the year 2000
problem  will result in a material  adverse  change in the  Borrower's  business
condition  (financial or  otherwise),  operations,  properties or prospects,  or
ability to repay the credit.

8.9  Integration and Relation to Loan Commitment
The Loan  Documents  fully state all of the terms and conditions of the parties'
agreement  regarding the matters  mentioned in or incidental to this  Agreement.
The Loan Documents supersede all oral negotiations and prior writings concerning
the subject matter of the Loan  Documents,  including  Bank's loan commitment to
Borrower.

Under Oregon law, most  agreements,  promises and  commitments  made by us after
October 3, 1989,  concerning loans and other credit extensions which are not for
personal,  family or  household  purposes  or secured  solely by the  borrowers'
residence must be in writing,  express  consideration  and be signed by us to be
enforceable.

                                     WARNING

         UNLESS YOU  PROVIDE  US WITH  EVIDENCE  OF THE  INSURANCE  COVERAGE  AS
     REQUIRED BY OUR CONTRACT OR LOAN  AGREEMENT,  WE MAY PURCHASE  INSURANCE AT
     YOUR EXPENSE TO PROTECT OUR  INTEREST.  THIS  INSURANCE  MAY, BUT NEED NOT,
     ALSO PROTECT YOUR INTEREST. IF THE COLLATERAL BECOMES DAMAGED, THE COVERAGE
     WE PURCHASE  MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE  AGAINST YOU.
     YOU MAY LATER  CANCEL THIS  COVERAGE BY  PROVIDING  EVIDENCE  THAT YOU HAVE
     OBTAINED PROPERTY COVERAGE ELSEWHERE.

         YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE  PURCHASED BY US. THE
     COST OF THIS  INSURANCE MAY BE ADDED TO YOUR  CONTRACT OR LOAN BALANCE.  IF
     THE COST IS ADDED TO YOUR  CONTRACT OR LOAN  BALANCE,  THE INTEREST RATE ON
     THE  UNDERLYING  CONTRACT  OR LOAN WILL  APPLY TO THIS  ADDED  AMOUNT.  THE
     EFFECTIVE  DATE OF COVERAGE MAY BE THE DATE YOUR PRIOR  COVERAGE  LAPSED OR
     THE DATE YOU FAILED TO PROVIDE PROOF OF COVERAGE.

         THE  COVERAGE WE  PURCHASE  MAY BE  CONSIDERABLY  MORE  EXPENSIVE  THAN
     INSURANCE  YOU CAN  OBTAIN  ON YOUR  OWN AND MAY NOT  SATISFY  ANY NEED FOR
     PROPERTY DAMAGE COVERAGE OR ANY MANDATORY LIABILITY INSURANCE  REQUIREMENTS
     IMPOSED BY APPLICABLE LAW.


BORROWER'S NAME


SRC VISION, INC.,
an Oregon corporation


By:  /s/ Alan R. Steel
---------------------------------------
 ALAN R. STEEL, Chief Financial Officer


Address where notices to the Borrower are to be sent:
2067 Commerce Drive
Medford, Oregon 97504


BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION


By:  /s/ Ron Farmer
---------------------------------------
         RON FARMER, Vice President


By:
---------------------------------------
         SANDRA PIERCE, Vice President


Address where notices to the Bank are to be sent:

Bank of America National Trust & Savings Association
Eugene Commercial Banking, Unit  2091
201 East 11th Avenue, 2nd Floor
Eugene, Oregon  97401