<PAGE>

<TABLE>
                                                  
                                           LOAN AGREEMENT
<S>              <C>
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   PRINCIPAL     LOAN DATE     MATURITY    LOAN NO.   CALL   COLLATERAL   ACCOUNT   OFFICER   INITIALS
$20,000,000.00   01-28-1997   08-01-1998    56705      4A0      75        206030     175
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    REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE APPLICABILITY OF 
                            THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
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BORROWER: CUTTER & BUCK INC.                                      LENDER: WASHINGTON MUTUAL BANK DOING
          2701 FIRST AVENUE, SUITE 600                                    BUSINESS AS ENTERPRISE BANK
          SEATTLE, WA 98121                                               11225 S.E. SIXTH STREET
                                                                          BELLEVUE, WA 98004
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</TABLE>

THIS LOAN AGREEMENT between CUTTER & BUCK INC. ("Borrower") and Washington 
Mutual Bank doing business as Enterprise Bank ("Lender") is made and executed 
on the following terms and conditions. Borrower has received prior commercial 
loans from Lender or has applied to Lender for a commercial loan or loans and 
other financial accommodations, including those which may be described on any 
exhibit or schedule attached to this Agreement. All such loans and financial 
accommodations, together with all future loans and financial accommodations 
from Lender to Borrower, are referred to in this Agreement individually as 
the "Loan" and collectively as the "Loans." Borrower understands and agrees 
that: (a) in granting, renewing, or extending any Loan, Lender is relying 
upon Borrower's representations, warranties, and agreements, as set forth in 
this Agreement; (b) the granting, renewing, or extending of any Loan by 
Lender at all times shall be subject to Lender's sole judgment and 
discretion; and (c) all such Loans shall be and shall remain subject to the 
following terms and conditions of this Agreement.

TERM.  This Agreement shall be effective as of January 28, 1997, and shall 
continue thereafter until all indebtedness of Borrower to Lender has been 
performed in full or until August 1, 1998, whichever is later.

DEFINITIONS.  The following words shall have the following meanings when used 
in this Agreement. Terms not otherwise defined in this Agreement shall have 
the meanings attributed to such terms in the Uniform Commercial Code. All 
references to dollar amounts shall mean amounts in lawful money of the 
United States of America.

     AGREEMENT.  The word "Agreement" means this Loan Agreement, as this 
     Loan Agreement may be amended or modified from time to time, 
     together with all exhibits and schedules attached to this Loan 
     Agreement from time to time.

     ADVANCE.  The word "Advance" means a disbursement of Loan funds 
     under this Agreement.
     
     BORROWER.  The word "Borrower" means CUTTER & BUCK INC.
     
     Borrowing Base.  The words "Borrowing Base" mean an amount not to 
     exceed $20,000,000.00.
     
     CERCLA.  The word "CERCLA" means the Comprehensive Environmental 
     Response, Compensation, and Liability Act of 1980, as amended.
     
     COLLATERAL.  The word "Collateral" means and includes without 
     limitation all property and assets granted as collateral security 
     for a loan, whether real or personal property, whether granted 
     directly or indirectly, whether granted now or in the future, and 
     whether granted in the form of a security interest, mortgage, deed 
     of trust, assignment, pledge, chattel mortgage, chattel trust, 
     factor's lien, equipment trust, conditional sale, trust receipt, 
     lien, charge, lien or title retention contract, lease or 
     consignment intended as a security device, or any other security or 
     lien interest whatsoever, whether created by law, contract, or 
     otherwise. The word "Collateral" includes without limitation all 
     collateral described below in the section titled "COLLATERAL."
     
     ERISA.  The word "ERISA" means the Employee Retirement Income 
     Security Act of 1974, as amended.
     
     EVENT OF DEFAULT.  The words "Event of Default" mean any of the 
     Events of Default set forth below in the section titled "EVENTS OF 
     DEFAULT."
     
     EXPIRATION DATE.  The words "Expiration Date" mean the earlier of 
     August 1, 1998 or the date of termination of Lender's commitment to 
     lend under this Agreement.
     
     FACTORING AGREEMENT.  Factor Agreement means the Factoring 
     Agreement between Borrower and Republic Factors Corporation dated 
     as of March 1, 1995, and any renewal, extensions or modifications 
     thereof.
     
     GRANTOR.  The word "Grantor" means and includes without limitation 
     each and all of the persons or entities granting a Security 
     Interest in any Collateral for the Indebtedness, including without 
     limitation all Borrowers granting such a Security Interest.
     
     GUARANTOR.  The word "Guarantor" means and includes without 
     limitation each and all of the guarantors, sureties, and 
     accommodation parties in connection with any Indebtedness.
     
     INDEBTEDNESS.  The word "Indebtedness" means and includes without 
     limitation all Loans, together with all other obligations, debts 
     and liabilities of Borrower to Lender, or any one or more of them, 
     as well as all claims by Lender against Borrower, or any one or 
     more of them; whether now or hereafter existing, voluntary or 
     involuntary, due or not due, absolute or contingent, liquidated or 
     unliquidated; whether Borrower may be liable individually or 
     jointly with others; whether Borrower may be obligated as a 
     guarantor, surety, or otherwise.
     
     LENDER.  The word "Lender" means Washington Mutual Bank doing 
     business as Enterprise Bank, its successors and assigns.
     
     LETTER OF CREDIT.  The words "Letter of Credit" mean a letter of 
     credit issued by Lender on behalf of Borrower as described below in 
     the section titled "Letter of Credit Facility."
     
     LINE OF CREDIT. The words "Line of Credit" mean the credit facility 
     described in the Section titled "LINE OF CREDIT" below.
     
     LOAN.  The word "Loan" or "Loans" means and includes without 
     limitation any and all commercial loans and financial 
     accommodations from Lender to Borrower, whether now or hereafter 
     existing, and however evidenced, including without limitation those 
     loans and financial accommodations described herein or described on 
     any exhibit or schedule attached to this Agreement from time to 
     time.
     
     NOTE.  The word "Note" means and includes without limitation 
     Borrower's promissory note or notes, if any, evidencing Borrower's 
     Loan obligations in favor of Lender, as well as any substitute, 
     replacement or refinancing note or notes therefor.
     
     PERMITTED LIENS.  The words "Permitted Liens" mean: (a) liens and 
     security interests securing indebtedness owed by Borrower to 
     Lender; (b) liens for taxes, assessments, or similar charges either 
     not yet due or being contested in good faith; (c) liens of 
     materialmen, mechanics, warehousemen, or carriers, or other like 
     liens arising in the ordinary course of business and securing 
     obligations which are not yet delinquent; (d) purchase money liens 
     or purchase money security interests upon or in any property 
     acquired or held by Borrower in the ordinary course of business to 
     secure indebtedness outstanding on the date of this Agreement or 
     permitted to be incurred under the paragraph of this Agreement 
     titled "Indebtedness and Liens"; (e) liens and security interests 
     which, as of the date of this Agreement, have been disclosed to and 
     approved by the Lender in writing; (f) those liens and security 
     interests which in the aggregate constitute an immaterial and 
     insignificant monetary amount with respect to the net value of 
     Borrower's assets; (g) liens and security interests granted 
     pursuant to the Factoring Agreement; and (h) liens and security 
     interests granted pursuant to capital leases.
     
     RELATED DOCUMENTS.  The words "Related Documents" mean and include 
     without limitation all promissory notes, credit agreements, loan 
     agreements, environmental agreements, guaranties, security 
     agreements, mortgages, deeds of trust, and all other instruments, 
     agreements and documents, whether now or hereafter existing, 
     executed in connection with the indebtedness.
     
     SECURITY AGREEMENT.  The words "Security Agreement" mean and 
     include without limitation any agreements, promises, covenants, 
     arrangements, understandings or other agreements, whether created by 
     law, contract, or otherwise, evidencing, governing representing, or 
     creating a Security Interest.

     SECUITY INTEREST. The words "Security Interest" mean and include without 
     limitation any type of collateral security, whether in the form of a 
     lien, charge, mortgage, deed of trust, assignment, pledge, chattel 
     mortgage, chattel trust, factor's lien, equipment trust, conditional 
     sale, trust receipt, lien or title retention contract, lease or 
     consignment intended as a security device, or any other security or 
     lien interest whatsoever, whether created by law, contract, or 
     otherwise.
     
     SARA.  The word "SARA" means the Superfund Amendments and 
     Reauthorization Act of 1986 as now or hereafter amended.

LINE OF CREDIT.  Lender agrees to make Advances to Borrower from time to time 
from the date of this Agreement to the Expiration Date, provided the 
aggregate amount of such Advances outstanding at any time does not exceed the 
Borrowing Base. Within the foregoing limits, Borrower may borrow, partially 
or wholly prepay, and reborrow under this Agreement as follows.
<PAGE>

                                    LOAN AGREEMENT
                                      (CONTINUED)                 PAGE 2
LOAN NO 56705
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   CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any 
   Advance to or for the account of Borrower under this Agreement is subject 
   to the following conditions precedent, with all documents, instruments, 
   opinions, reports, and other items required under this Agreement to be in 
   form and substance satisfactory to Lender:
     
     (a) Lender shall have received evidence that this Agreement and all 
     Related Documents have been duly authorized, executed, and delivered by 
     Borrower to Lender.

     (b) Lender shall have received such opinions of counsel, supplemental 
     opinions, and documents as Lender may request.
     
     (c) The security interests in the Collateral shall have been duly 
     authorized, created, and perfected with first lien priority (Except for 
     Permitted Liens) and shall be in full force and effect.
     
     (d) All guaranties required by Lender for the Line of Credit shall have 
     been executed by each Guarantor, delivered to Lender, an be in full 
     force and effect.
     
     (e) Lender, all its option and for its sole benefit, shall have 
     conducted an audit of Borrower's books records, and operations, and 
     Lender shall be satisfied as to their condition.
     
     (f) Borrower shall have paid to Lender all fees, costs, and expenses 
     specified in this Agreement and the Related Documents as are then due 
     and payable.
     
     (g) There shall not exist at the time of any Advance a condition which 
     would constitute an Event of Default under this Agreement, and Borrower 
     shall have delivered to Lender the compliance certificate called for in 
     the paragraph below titled "Compliance Certificate."
     
   MAKING LOAN ADVANCES. Advances under the Line of Credit may be requested 
   orally by authorized persons. Lender may, but need not, require that all 
   oral requests be confirmed in writing. Each Advance shall be conclusively 
   deemed to have been made at the request of and for the benefit of Borrower 
   (a) when credited to any deposit account of Borrower maintained with 
   Lender or (b) when advanced in accordance with the instructions of an 
   authorized person. Lender, at its option, may set a cutoff time, after 
   which all requests for Advances will be treated as having been requested 
   on the next succeeding Business Day.
   
   MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount 
   of the outstanding Advances shall exceed the applicable Borrowing Base, 
   Borrower, immediately upon written or oral notice from Lender, shall pay 
   to Lender an amount equal to the difference between the outstanding 
   principal balance of the Advances and the Borrowing Base. On the 
   Expiration Date, Borrower shall pay to Lender in full the aggregate 
   unpaid principal amount of all Advances then outstanding and all accrued 
   unpaid interest, together with all other applicable fees, costs and 
   charges, if any, not yet paid.
   
   LOAN ACCOUNT. Lender shall maintain on its books a record of account in 
   which Lender shall make entries for each Advance and such other debits 
   and credits as shall be appropriate in connection with the credit 
   facility. Lender shall provide Borrower with periodic statements of 
   Borrower's account, which statements shall be considered to be correct 
   and conclusively binding on Borrower unless Borrower notifies Lender to 
   the contrary within thirty (30) days after Borrower's receipt of any such 
   statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Line of Credit and performance of all 
other Loans, obligations and duties owned by Borrower to Lender, Borrower 
(and others, if required) shall grant to Lender Security Interests in such 
property and assets as Lender may require (the "Collateral"). Lender's 
Security interests in the Collateral shall be continuing liens and shall 
include the proceeds and products of the Collateral, including without 
limitation the proceeds of any insurance. With respect to the Collateral, 
Borrower agrees and represents and warrants to Lender:

   PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such 
   financing statements and to take whatever other actions are requested by 
   Lender to perfect and continue Lender's Security interests in the 
   Collateral. Upon request of Lender, Borrower will deliver to Lender any 
   and all of the documents evidencing or consulting the Collateral, and 
   Borrower will note Lender's interest upon any and all chattel paper if 
   not delivered to Lender for possession by Lender. Contemporaneous with 
   the execution of this Agreement, Borrower will execute one or more UCC 
   financing statements and any similar statements as may be required by 
   applicable law, and will file such financing statements and all such 
   similar statements in the appropriate location or locations. Borrower 
   hereby appoints Lender as its irrevocable attorney-in-fact for the 
   purpose of executing any documents necessary to perfect or to continue 
   any Security interest. Lender may at any time, and without further 
   authorization from Borrower, file a carbon, photograph, facsimile, or 
   other reproduction of any financing statement for use as a financing 
   statement. Borrower will reimburse Lender for all expenses for the 
   perfection, termination, and the continuation of the perfection of 
   Lender's security interest in the Collateral. Borrower promptly will 
   notify Lender of any change in Borrower's name including any change to 
   the assumed business names of Borrower. Borrower also promptly will 
   notify Lender of any change in Borrower's Social Security Number or 
   Employer Identification Number. Borrower further agrees to notify Lender 
   in writing prior to any change in address or location of Borrower's 
   principal governance office or should Borrower merge or consolidate with 
   any other entity.

   COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall, 
   keep correct and accurate records of the Collateral, all of which records 
   shall be available to Lender or Lender's representative upon demand for 
   inspection and copying at any reasonable time.
   
   COLLATERAL SCHEDULES. Concurrently with the execution and delivery of 
   this Agreement, Borrower shall execute and deliver to Lender a schedule 
   of Collateral, in form and substance satisfactory to the Lender. 
   Thereafter and at such frequency as Lender shall require.

ADDITIONAL CREDIT FACILITIES. In addition to the Line of Credit facility, the 
following credit accommodations are either in place or will be made available 
to Borrower:

   LETTER OF CREDIT FACILITY. Subject to the terms of this Agreement, Lender 
   will issue standby letters of credit and commercial letters of credit 
   (each a "Letter of Credit") on behalf of Borrower. At no time, however, 
   shall the total face amount of all standby letters of credit outstanding, 
   less any partial draws paid under the standby letters of credit exceed the 
   sum of $1,000,000.00.
   
     (a) Upon Lender's request, Borrower promptly shall pay to Lender 
     issuance fees and such other fees, commissions, costs, and any 
     out-of-pocket expenses charged or incurred by Lender with respect to 
     any Letter of Credit.

     (b) The commitment by Lender to issue Letters of Credit shall, unless 
     earlier terminated in accordance with the terms of this Agreement, 
     automatically terminate on the Expiration Date and no Letter of Credit 
     shall expire on a date which is after the Expiration Date.

     (c) Each Letter of Credit shall be in form and substance satisfactory 
     to Lender and in favor of beneficiaries satisfactory to Lender, provided 
     that Lender may refuse to issue a Letter of Credit due to the nature of 
     the transaction or its terms or in connection with any transaction 
     where Lender, due to the beneficiary or the nationally or residence of 
     the beneficiary, would be prohibited by any applicable law, regulation, 
     or order from issuing such Letter of Credit. Under no circumstances, 
     however, will a Letter of Credit exceed three hundred sixty five (365) 
     days from the issue date.
     
     (d) Prior to the issuance of each Letter of Credit, and in all events 
     prior to any daily cutoff time Lender may have established for purposes 
     thereof, Borrower shall deliver to Lender a duly executed form of 
     Lender's standard form of application for issuance of letter of credit 
     with proper insertions.
     
   LENDER'S RIGHTS UPON DEFAULT. Upon the occurrence of any Event of 
   Default, Lender may, at its sole and absolute discretion and in addition 
   to any other remedies available to it under this Agreement or otherwise, 
   require Borrower to pay immediately to Lender, for application against 
   drawings under any outstanding Letters of Credit, the outstanding 
   principal amount of any such Letters of Credit which have not expired. Any 
   portion of this amount so paid to Lender which is not applied to satisfy 
   draws under any such Letters of Credit or any other obligations of 
   Borrower to the Lender shall be repaid to Borrower without interest.

   LENDER'S COSTS AND EXPENSES. Borrower shall, upon Lender's request, 
   promptly pay to and reimburse Lender for all costs incurred and payments 
   made by Lender by reason of any future assessment, reserve, deposit, or 
   similar requirement or any surcharge, tax, or fee imposed upon Lender or 
   as a result of Lender's compliance with any defective or requirement of 
   any regulatory authority pertaining or relating to any Letter of Credit.
   
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, 
as of the date of this Agreement, as of the date of each disbursement of Loan 
proceeds, as of the date of any renewal, extension or modification of any 
Loan, and at all times any indebtedness exists:

   ORGANIZATION. Borrower is a corporation which is duly organized, validly 
   existing, and in good standing under the laws of the State of Washington. 
   Borrower has the full power and authority to own its properties and to 
   transact the businesses in which it is presently engaged or presently 
   proposes to engage. Borrower also is duly qualified as a foreign 
   corporation and is in good standing in all states in which the failure 
   to so qualify would have a material adverse effect on its businesses or 
   financial condition.

   AUTHORIZATION. The execution, delivery, and performance of this Agreement 
   and all Related Documents by Borrower, to the extent to be executed, 
   delivered or performed by Borrower, have been duly authorized by all 
   necessary action by Borrower: do not require the consent or approval of 
   any other person, regulatory authority or governmental body; and do not 
   conflict with, result in a violation of, or constitute a default under 
   (a) any provision of its articles of incorporation or organization, or 
   bylaws, or any agreement or other instrument binding upon Borrower or (b) 
   any law, governmental regulation, court decree, or order applicable to 
   Borrower.
   
<PAGE>

01-28-1997                          LOAN AGREEMENT
LOAN NO 56705                         (CONTINUED)                        PAGE 3
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    FINANCIAL INFORMATION. Each financial statement of Borrower supplied to 
    Lender truly and completely disclosed Borrower's financial condition as 
    of the date of the statement, and there has been no material adverse 
    change in Borrower's financial condition subsequent to the date of the 
    most recent financial statement supplied to Lender. Borrower has no 
    material contingent obligations except as disclosed in such financial 
    statements.

    LEGAL EFFECT. This Agreement constitutes, and any instrument or 
    agreement required hereunder to be given by Borrower when delivered will 
    constitute, legal, valid and binding obligations of Borrower enforceable 
    against Borrower in accordance with their respective terms.
    
    PROPERTIES. Except for Permitted Liens and capital leases and real 
    property leases, Borrower owns and has good title to all of Borrower's 
    properties free and clear of all Security Interests, and has not 
    executed any security documents for financing statements relating to 
    such properties. All of Borrower's properties are titled in Borrower's 
    legal name, and Borrower has not used, or filed a financing statement 
    under, any other name for at least the last five (5) years.
    
    Borrower's legal name, and Borrower has not used, or filed a financing 
    statement under, any other name for at least the last five (5) years.

HAZARDOUS SUBSTANCES. Borrower's use of its properties comply in all material 
respects with all applicable laws and regulations relating to the 
environment, including without limitation, all laws and regulations relating 
to pollution and environmental control.

    LITIGATION AND CLAIMS. No litigation, claim, investigation, 
    administrative proceeding or similar action (including those for unpaid 
    taxes) against Borrower is pending or threatened, and no other event has 
    occurred which may materially adversely affect Borrower's financial 
    condition or properties, other than litigation, claims, or other events, 
    if any, that have been disclosed to and acknowledged by Lender in 
    writing.

    TAXES. To the best of Borrower's knowledge, all tax returns and reports 
    of Borrower that are or were required to be filed, have been filed, and 
    all taxes, assessments and other governmental charges have been paid in 
    full, except those presently being or to be contested by Borrower in 
    good faith in the ordinary course of business and for which adequate 
    reserves have been provided.
    
    LIEN PRIORITY. Unless otherwise previously disclosed to Lender in 
    writing, and except for permitted liens Borrower, has not entered into or 
    granted any Security Agreements, or permitted the filing or attachment 
    of any Security Interests on or affecting any of the Collateral directly 
    or indirectly securing repayment of Borrower's Loan and Note, that would 
    be prior or that may in any way be superior to Lender's Security 
    Interests and rights in any to such Collateral.

    BINDING EFFECT. This Agreement, the Note, all Security Agreements 
    directly or indirectly securing repayment of Borrower's Loan and Note 
    and all of the Related Documents are binding upon Borrower as well as 
    upon Borrower's successors, representatives and assigns, and are legally 
    enforceable in accordance with their respective terms.
    
    COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely 
    for business or commercial related purposes.

    EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower 
    may have any liability complies in all material respects with all 
    applicable requirements of law and regulations, and (i) no Reportable 
    Event nor Prohibited Transaction (as defined in ERISA) has occurred with 
    respect to any such plan, (ii) Borrower has not withdrawn from any such 
    plan or initiated steps to do so, (iii) no steps have been taken to 
    terminate any such plan, and (iv) there are no unfunded liabilities other 
    than those previously disclosed to Lender in writing.
    
    LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of 
    business, or Borrower's Chief executive office, if Borrower has more 
    than one place of business, is located at 2701 FIRST AVENUE, SUITE 500, 
    SEATTLE, WA 98121. Unless Borrower has designated otherwise in writing 
    this location is also the office or offices where Borrower keeps its 
    records concerning the Collateral.
    
    INFORMATION. All information heretofore or contemporaneously herewith 
    furnished by Borrower to Lender for the purposes of or in connection 
    with this Agreement or any transaction contemplated hereby is, and all 
    information hereafter furnished by or on behalf of Borrower to Lender 
    will be, true and accurate in every material respect on the date as of 
    which such information is dated or certified; and none of such 
    information is or will be incomplete by omitting to state any material 
    fact necessary to make such information not misleading.
    
    SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and 
    agrees that Lender, without independent investigation, is relying upon 
    the above representations and warranties in extending Loan Advances to 
    Borrower. Borrower further agrees that the foregoing representations and 
    warranties shall be continuing in nature and shall remain in full force 
    and effect until such time as Borrower's Indebtedness shall be paid in 
    full, or until this Agreement shall be terminated in the manner provided 
    above, whichever is the last to occur.
    
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while 
this Agreement is in effect, Borrower will:

    LITIGATION. Promptly inform Lender in writing of (a) all material 
    adverse changes in Borrower's financial condition, and (b) all existing 
    and all threatened litigation, claims, investigations, administrative 
    proceedings or similar actions affecting Borrower or any Guarantor which 
    could materially affect the financial condition of Borrower or the 
    financial condition of any Guarantor.
    
    FINANCIAL RECORDS. Maintain its books and records in accordance with 
    generally accepted accounting principles, applied on a consistent basis, 
    and permit Lender to examine and audit Borrower's books and records at 
    all reasonable times upon reasonable prior notice from Lender to Borrower.
    
    FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in 
    no event later than one hundred twenty (120) days after the end of each 
    fiscal year, Borrower's balance sheet and income statement for the year 
    ended, audited by a certified public accountant satisfactory to Lender, 
    and, as soon as available, but in no event later than forty five (45) 
    days after the end of each fiscal quarter, Borrower's balance sheet and 
    profit and loss statement for the period ended, prepared and certified 
    as correct to the best knowledge and belief by Borrower's chief 
    financial officer of other officer or person acceptable to Lender. All 
    financial reports required to be provided under this Agreement shall be 
    prepared in accordance with generally accepted accounting principles, 
    applied on a consistent basis, and certified by Borrower as being true 
    and correct.
    
    ADDITIONAL INFORMATION. Furnish such additional information and 
    statements, lists of assets and liabilities, agings of receivables and 
    payables, inventory schedules, budgets, forecasts, tax returns, and 
    other reports with respect to Borrower's financial condition and 
    business operations as Lender may reasonably request from time to time.
    
    INSURANCE. Maintain fire and other risk insurance, public liability 
    insurance, and such other insurance as Lender may require with respect 
    to Borrower's properties and operations, in form, amounts, coverages and 
    with insurance companies reasonably acceptable to Lender. Borrower, upon 
    request of Lender, will deliver to Lender from time to time the policies 
    or certificates of Insurance in form satisfactory to Lender, including 
    stipulations that coverages will not be cancelled or diminished without 
    at least ten (10) days' prior written notice to Lender. Each Insurance 
    policy also shall include an endorsement providing that coverage in 
    favor of Lender will not be impaired in any way by any act, omission or 
    default of Borrower or any other person. In connection with all policies 
    covering assets in which Lender holds or is offered a security interest 
    for the Loans, Borrower will provide Lender with such loss payable or 
    other endorsements as Lender may require.
    
    INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on 
    each existing Insurance policy showing such information as Lender may 
    reasonably request, including without limitation the following: (a) the 
    name of the Insurer; (b) the risks insured; (c) the amount of the 
    policy; (d) the properties insured; (e) the then current property values 
    on the basis of which insurance has been obtained, and the manner of 
    determining those values; and (f) the expiration date of the policy. In 
    addition, upon request of Lender (however not more often than annually), 
    Borrower will have an independent appraiser satisfactory to Lender 
    determine, as applicable, the actual cash value or replacement cost of 
    any Collateral. The cost of such appraisal shall be paid by Borrower.
    
    OTHER AGREEMENTS. Comply with all terms and conditions of all other 
    agreements, whether now or hereafter existing, between Borrower and any 
    other party and notify Lender immediately in writing of any default in 
    connection with any other such agreements that would likely have a 
    materially adverse effect on Borrower's business or financial condition.
    
    LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business 
    operations, unless specifically consented to the contrary by Lender in 
    writing.
    
    TAXES, CHARGES AND LIENS. Pay and discharge when due all of its 
    indebtedness and obligations, including without limitation all 
    assessments, taxes, governmental charges, levies and liens, of every 
    kind and nature, imposed upon Borrower or its properties, income, or 
    profits, prior to the date on which penalties would attach, and all 
    lawful claims that, if unpaid, might become a lien or charge upon any of 
    Borrower's properties, income, or profits. Provided however, Borrower 
    will not be required to pay and discharge any such assessment, tax, 
    charge, levy, lien or claim so long as (a) the legality of the same 
    shall be contested in good faith by appropriate proceedings, and (b) 
    Borrower shall have established on its books adequate reserves with 
    respect to such contested assessment, tax, charge, levy, lien, or claim 
    in accordance with generally accepted accounting practices. Borrower, 
    upon demand of Lender, will furnish to Lender evidence of payment of the 
    assessments, taxes, charges, levies,

<PAGE>

01-28-1997                LOAN AGREEMENT                             Page 4
Loan No 567045              (Continued)                   
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     liens and claims and will authorize the appropriate governmental 
     official to deliver to Lender at any time a written statement of any 
     assessment, taxes, charges, levies, liens and claims against 
     Borrower's properties, income, or profits.

     PERFORMANCE. Perform and comply with all terms, conditions, and 
     provisions set forth in this Agreement and in the Related Documents in 
     a timely manner, and promptly notify Lender if Borrower learns of the 
     occurrence of any event which constitutes an Event of Default under 
     this Agreement or under any of the Related Documents.
     
     OPERATIONS. Maintain executive and management personnel with 
     substantially the same qualifications and experience as the present 
     executive and management personnel; conduct its business affairs in a 
     reasonable and prudent manner and in compliance with all applicable 
     federal, state and municipal laws, ordinances, rules and regulations 
     respecting its properties, charters, businesses and operations, 
     including without limitation, compliance with the Americans With 
     Disabilities Act and with all minimum funding standards and other 
     requirements of ERISA and other laws applicable to Borrower's employee 
     benefit plans.
     
     INSPECTION. Permit employees or agents of Lender at any reasonable 
     time to inspect any and all Collateral for the Loan or Loans and 
     Borrower's other properties and to examine or audit Borrower's books, 
     accounts, and records and to make copies and memoranda of Borrower's 
     books, accounts, and records. If Borrower now or at any time hereafter 
     maintains any records (including without limitation computer generated 
     records and computer software programs for the generation of such 
     records) in the possession of a third party, Borrower, upon request of 
     Lender, shall notify such party to permit Lender free access to such 
     records at all reasonable times and to provide Lender with copies of 
     any records it may request, all at Borrower's expense.
     
     COMPLIANCE CERTIFICATE. Upon request of Lender, provide Lender at least 
     annually and at the time of each disbursement of Loan proceeds with a 
     certificate executed by Borrower's chief financial officer, or other 
     officer or person acceptable to Lender, certifying that the 
     representations and warranties set forth in this Agreement are true 
     and correct as of the date of the certificate and further certifying 
     that, as of the date of the certificate, no Event of Default exists 
     under this Agreement.
     
     ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all 
     respects with all environmental protection federal, state and local 
     laws, statutes, regulations and ordinances.
     
     ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such 
     promissory notes, mortgages, deeds of trust, security agreements, 
     financing statements, instruments, documents and other agreements as 
     Lender or its attorney's may reasonably request to evidence and secure 
     the Loans and to perfect all Security Interests.
     
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this 
Agreement is in effect, Borrower shall not, without the prior written consent 
of Lender;

     INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the 
     normal course of business and indebtedness to Lender contemplated by 
     this Agreement, create, incur or assume indebtedness for borrowed 
     money, other than capital leases, (b) except as allowed as a Permitted 
     Lien, sell, transfer, mortgage, assign, pledge, lease, grant a 
     security interest in, or encounter any of the Borrower's assets, or 
     (c) sell with recourse any of Borrower's accounts, except to Lender, 
     or pursuant to the Factor Agreement.
     
     CONTINUITY OF OPERATIONS. (a) Engage in any business activities 
     substantially different than those in which Borrower is presently 
     engaged, (b) cease operations, liquidate, merge, transfer, acquire or 
     consolidate with any other entity other than mergers, transfers, 
     acquisitions, or consolidations in which the consideration is less
     than $2,000,000.00 change its name, dissolve or transfer or sell 
     Collateral out of the ordinary course of business excepting sales of
     accounts receivable pursuant to the Factoring Agreement, and excepting
     transfers, sales or dispositions of Collateral that is obsolete or worn
     out property disposed of in the ordinary course of business excepting
     other asset dispositions provided that such other asset dispositions do 
     not exceed $100,000.00 in the aggregate for any fiscal year.
     
     LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance 
     money or assets or purchase create or acquire any interest in any 
     other enterprise or entity except (i) commercial bank demand deposits 
     and time deposits maturing within one year; (ii) marketable general 
     obligations of the United States or a state or marketable obligations 
     fully guaranteed by the United States; (iii) short-term commercial 
     paper with the highest rating of a generally recognized rating 
     service; (iv) loans and advances to employees in the ordinary course 
     of business related to expenses incurred in the ordinary course of 
     employment do not exceed $150,000 outstanding at any time; (v) 
     bankers' acceptances, repurchase agreements, or other investments 
     reasonably acceptable to Lender; and (vi) loans or advances to, or 
     investments in wholly owned subsidiaries in an amount not to exceed 
     $3,000,000.00, or (c) incur any obligation as surety or guarantor 
     other than in the ordinary course of business.
     
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to 
Borrower, whether under this Agreement or under any other agreement, Lender 
shall have no obligation to make Loan Advances or to disburse Loan proceeds 
if; (a) Borrower is in default under the terms of this Agreement or any of 
the Related Documents or any other agreement that Borrower or any Guarantor 
has with Lender; (b) Borrower becomes insolvent, files a petition in 
bankruptcy or similar proceedings, or is adjudged a bankrupt; (c) there 
occurs a material adverse change in Borrower's financial condition, or in the 
value of any Collateral securing any Loan; even though no Event of Default 
shall have occurred.

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

MEDIATION/ARBITRATION CLAUSE A. POLICY-MEDIATION. The parties hope there 
will be no disputes arising out of their relationship. To that and, each 
commits to cooperate in good faith and to deal fairly in performing its 
duties under this agreement in order to accomplish their mutual objectives 
and avoid disputes. But if a dispute arises, the parties agree to resolve all 
disputes by the following alternate dispute resolution process; (a) the 
parties will seek a fair and prompt negotiated resolution, but if this is not 
successful, (b) all disputes shall be resolved by binding arbitration, 
provided that during this process, (c) at the request of either party made 
not later than seventy-five (75) days after the initial arbitration demand, 
the parties will attempt to resolve any dispute by nonbinding mediation (but 
without delaying the arbitration hearing date.) The parties recognize that 
negotiation or mediation may not be appropriate to resolve some disputes and 
agree that either party may proceed with arbitration without negotiating or 
mediating. The parties confirm that by agreeing to this alternate dispute 
resolution process, they intend to give up their right to have any dispute 
decided in court by a judge or jury.

MEDIATION/ARBITRATION CLAUSE B. BINDING ARBITRATION. Any claim between the 
parties arising out of or relating to this agreement, shall be determined by 
arbitration in Seattle commenced in accordance with RCW 7.04.080; provided 
that the total award by a single arbitrator (as opposed to a majority of 
three arbitrators) shall not exceed $250,000, including interest, attorney's 
fees and costs. If either party demands a total award greater than $250,000, 
there shall be three (3) neutral arbitrators. If the parties cannot agree on 
the identity of the arbitrators(s) within ten (10) days of the arbitration 
demand, the arbitrator(s) shall be selected by the administrator of the 
American Arbitration Association (AAA) office in Seattle FROM ITS LARGE, 
COMPLEX CASE PANEL (OR HAVE SIMILAR PROFESSIONAL CREDENTIALS). Each 
arbitrator shall be an attorney with at least 15 years experience in banking 
or commercial law and shall reside in the Seattle metropolitan area. Whether 
a claim is covered by this agreement shall be determined by the 
arbitrator(s). All statutes of limitation which could otherwise be applicable 
shall apply to any arbitration hereunder.

MEDIATION/ARBITRATION CLAUSE C. PROCEDURES. The arbitration shall be 
conducted in accordance with the AAA Commercial Arbitration Rules, in effect 
on the date hereof, as modified by this agreement. Submission of dispositive  
motions shall be at the discretion of Arbitrator(s). As may be shown to be 
necessary to ensure a fair hearing; the arbitrator(s) may authorize 
appropriate discovery; and may enter pre-hearing orders regarding (without 
limitation) scheduling, interrogatories, document exchange, depositions, 
witness and exhibit disclosure and issues to be heard. The arbitrator(s) shall 
not be bound by the rules of  evidence or of civil procedure, but may 
consider such writing and oral presentations as reasonable business people 
would use in the conduct of their day-to-day affairs, and may require the 
parties to submit some or all of their case by written declaration or such 
other manner of presentation as the arbitrator(s) may determine to be 
appropriate.

MEDIATION/ARBITRATION CLAUSE D. HEARING-LAW-APPEAL LIMITED. The arbitrator(s) 
shall take such steps as may be necessary to hold a private hearing. The 
parties have included these time limits in order to expedite the proceeding, 
but they are NOT jurisdictional, and the arbitrator(s) may for good cause 
afford or permit reasonable extensions or delays, which shall not affect the 
validity of the award. The written decision shall contain a brief statement 
of the claim(s) determined and the award made on each claim. In making the 
decision and award, the arbitrator(s) shall apply applicable substantive 
law. Absent fraud, collusion or willful misconduct by an arbitrator, the 
award shall be final, and judgment may be entered in any court having 
jurisdiction thereof. The arbitrator(s) may award injunctive relief or any 
other remedy available from a judge, including the joinder of parties or 
consolidation of this arbitration with any other involving common issues of 
law or fact or which may promote judicial economy, and may award attorney's 
fees and costs to the prevailing party but shall not have the power to award 
punitive or exemplary damages. The decision and award of the arbitrators need 
not be unanimous; rather, the decision and award of two arbitrators shall be 
final.




<PAGE>
                                       
01-28-1997                         LOAN AGREEMENT                         PAGE 5
LOAN NO. 56705                      (CONTINUED)
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MEDIATION/ARBITRATION CLAUSE E. PROVISIONAL REMEDIES, SELF-HELP AND 
FORECLOSURE.  In addition to any actions taken under the preceding 
subparagraphs: (i) Lender may exercise all rights and remedies available 
under law with respect to any collateral, deposits and accounts, including 
but not limited to: offset, self-help, sale or other disposition of 
collateral, attachment, injunction, appointment of a receiver, judicial 
foreclosure and deficiency judgment or foreclosure by power of sale; (ii) by 
exercising any such rights and remedies under (1) Lender shall not waive the 
provisions of subparagraphs A through D above; (iii) any issues of law or 
fact which arise in connection with the exercise by Lender of its rights and 
remedies may at Lender's election be determined by arbitration in accordance 
with subparagraphs A through D above; and (iv) notwithstanding any other 
provision of this agreement, so long as an arbitration demand has not been 
filed or served with respect to a claim, either party may elect to assert 
such claim in the small claims department of the appropriate district court 
under RCW ch. 12.40.

LOAN FEES.  So long as Lender shall have any obligation to extend or continue 
credit to Borrower in any form, Borrower shall pay to Lender (i) a 
nonrefundable loan fee in the amount of $20,000.00 prior to the making of any 
advances of any letters of credit pursuant to this agreement, and (ii) 
beginning July 31, 1997, 1/4% per annum on the unused portion of the line of 
credit paid quarterly in arrears. The unused portion of the line of credit 
for any given borrower fiscal quarter shall be calculated by subtracting from 
the $20,000,000.00 line limit the sum of: (i) the average daily principle 
balance outstanding on the line of credit, and (ii) the average month end 
outstanding balance of commercial and standby letters of credit.

ADDITIONAL AFFIRMATIVE COVENANTS.  Borrower covenants and agrees with Lender 
that, while this Agreement is in effect, Borrower will comply with the 
following covenants and ratios, on an unconsolidated basis:

TANGIBLE NET WORTH.  Maintain a minimum Tangible Net Worth of not less than 
$24,000,000.00 increasing to $27,000,000.00 on and after April 30, 1997 and 
$30,000,000.00 on and after April 30, 1998. Tangible Net Worth is hereby 
defined as the sum of common stock, additional paid in capital, and retained 
earnings measured quarterly.

WORKING CAPITAL.  Maintain Working Capital in excess of $21,000,000.00 
increasing to $24,000,000.00 on and after April 30, 1997 and $27,000,000.00 
on and after April 30, 1998. Working Capital is hereby defined as current 
assets minus current liabilities, as defined according to generally accepted 
accounting principles.

NET WORTH RATIO.  The ratio of GAAP Liabilities plus outstanding letters of 
credit to Tangible Net Worth shall not exceed .85 to 1.00. This covenant 
shall be measured at the end of each quarter.

AGING AND LISTING OF ACCOUNTS RECEIVABLE.  Borrower covenants and agrees with 
Lender that, while this Agreement is in effect, Borrower shall deliver within 
thirty (30) days after the end of each month, a detailed aging of Borrower's 
accounts and contracts receivable as of the last day of the month, which 
shall be net of any adjustments made at the end of that month, all in a form 
acceptable to Lender.

INVENTORY REPORT.  Borrower covenants and agrees with Lender that, while this 
Agreement is in effect, Borrower shall deliver to Lender within thirty (30) 
days after the end of each quarter, inventory reports detailing location, 
amounts of raw materials and finished goods on a quarterly basis, prepared in 
form acceptable to Lender.

RIGHT OF SETOFF.  Borrower grants to Lender a contractual possessory security 
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to 
Lender all Borrower's right, title and interest in and to, Borrower's 
accounts with Lender (whether checking, savings, or some other account), 
including without limitation all accounts held jointly with someone else and 
all accounts Borrower may open in the future, excluding however all IRA and 
Keogh accounts, and all trust accounts for which the grant of a security 
interest would be prohibited by law. Borrower authorizes Lender, to the 
extent permitted by applicable law, to charge or setoff all sums owing on the 
indebtedness against any and all such accounts.

EVENTS OF DEFAULTS.  Each of the following shall constitute an Event of 
Default under this Agreement:

     DEFAULT ON INDEBTEDNESS.  Failure of Borrower to make any payment 
     when due on the Loans.

     OTHER DEFAULTS.  Failure of Borrower to comply with or to perform 
     when due any other term, obligation, covenant or condition 
     contained in this Agreement or in any of the Related Documents, or 
     failure of Borrower to comply with or to perform any other term, 
     obligation, covenant or condition contained in any other agreement 
     between Lender and Borrower.
     
     DEFAULT IN FAVOR OF THIRD PARTIES.  Should Borrower default under 
     any loan, extension of credit, security agreement, purchase or 
     sales agreement, or any other agreement, in favor of any other 
     creditor or person that may materially affect any of Borrower's 
     property or Borrower's or any Grantor's ability to repay the Loans 
     or perform their respective obligations under this Agreement or any 
     of the Related Documents.
     
     FALSE STATEMENTS.  Any warranty, representation or statement made 
     or furnished to Lender by or on behalf of Borrower under this 
     Agreement or the Related Documents is false or misleading in any 
     material respect at the time made or furnished, or becomes false or 
     misleading at any time thereafter.
     
     DEFECTIVE COLLATERALIZATION.  This Agreement or any of the Related 
     Documents ceases to be in full force and effect (including failure 
     of any Security Agreement to create a valid and perfected Security 
     Interest) at any time and for any reason.
     
     INSOLVENCY.  The dissolution or termination of Borrower's existence 
     as a going business, the insolvency of Borrower, the appointment of 
     a receiver for any part of Borrower's property, any assignment for 
     the benefit of creditors, any type of creditor workout, or the 
     commencement of any proceeding under any bankruptcy or insolvency 
     laws by or against Borrower.
     
     CREDITOR OR FORFEITURE PROCEEDINGS.  Commencement of foreclosure or 
     forfeiture proceedings, whether by judicial proceeding, self-help, 
     repossession or any other method, by any creditor of Borrower, any 
     creditor of any Grantor against any collateral securing the 
     indebtedness, or by any governmental agency. This includes a 
     garnishment, attachment, or levy on or of any of Borrower's deposit 
     accounts with Lender. However, this Event of Default shall not 
     apply if there is a good faith dispute by Borrower as to the 
     validity or reasonableness of the claim which is the basis of the 
     creditor or forfeiture proceeding, and if Borrower gives Lender 
     written notice of the creditor or forfeiture proceeding and 
     establishes reserves or a surety bond for the creditor or 
     forfeiture proceeding reasonably satisfactory to Lender.
     
     ADVERSE CHANGE.  A material adverse change occurs in Borrower's 
     financial condition.
     
     RIGHT TO CURE.  If any default, other than a Default on 
     indebtedness, is curable and if Borrower or Grantor, as the case 
     may be, has not been given a notice of a similar default within the 
     preceding twelve (12) months, it may be cured (and no Event of 
     Default will have occurred) if Borrower or Grantor, as the case may 
     be, after receiving written notice from Lender demanding cure of 
     such default: (a) cures the default within fifteen (15) days; or (b) 
     if the cure requires more than fifteen (15) days, immediately 
     initiates steps which Lender deems in Lender's sole discretion to 
     be sufficient to cure the default and thereafter continues and 
     completes all reasonable and necessary steps sufficient to produce 
     compliance as soon as reasonably practical.

EFFECT OF AN EVENT OF DEFAULT.  If any Event of Default shall occur, except 
where otherwise provided in this Agreement or the Related Documents, all 
commitments and obligations of Lender under this Agreement or the Related 
Documents or any other agreement immediately will terminate (including any 
obligation to make Loan Advances or disbursements), and, at Lender's option, 
all indebtedness immediately will become due and payable, except that in 
the case of an Event of Default of the type described in the "insolvency" 
subsection above, such acceleration shall be automatic and not optional. In 
addition, Lender shall have all the rights and remedies provided in the 
Related Documents or available at law, in equity, or otherwise. Except as may 
be prohibited by applicable law, all of Lender's rights and remedies shall be 
cumulative and may be exercised singularly or concurrently. Election by Lender 
to pursue any remedy shall not exclude pursuit of any other remedy, and an 
election to make expenditures or to take action to perform an obligation of 
Borrower shall not affect Lender's right to declare a default and to exercise 
its rights and remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part 
of this Agreement:

     AMENDMENTS.  This Agreement, together with any Related Documents, 
     constitutes the entire understanding and agreement of the parties 
     as to the matters set forth in this Agreement. No alteration of or 
     amendment to this Agreement shall be effective unless given in 
     writing and signed by the party or parties sought to be charged or 
     bound by the alteration or amendment.
     
     APPLICABLE LAW.  This Agreement has been delivered to Lender and 
     accepted by Lender in the State of Washington. If there is a 
     lawsuit, Borrower agrees upon Lender's request to submit to the 
     jurisdiction of the courts of King County, the State of Washington. 
     This Agreement shall be governed by and construed in accordance 
     with the laws of the State of Washington.
     
     CAPTION HEADINGS.  Caption headings in this Agreement are for 
     convenience purposes only and are not to be used to interpret or 
     define the provisions of this Agreement.
<PAGE>

                                   LOAN AGREEMENT
                                     (CONTINUED)                         PAGE 6
LOAN NO 56705
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   CONSENT TO LOAN PARTICIPATION. Lender may sell or transfer, whether now 
or later, one or more participation interests in the Loans to one or more 
purchasers, whether related or unrelated to Lender with the consent of 
Borrower which shall not be unreasonably withheld. Lender may provide, 
without any limitation whatsoever, to any one or more purchasers, or 
potential purchasers, an information or knowledge Lender may have about 
Borrower or about any other matter relating to the Loan, and Borrower hereby 
waives any rights to privacy it may have with respect to such matters.

    COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's 
    reasonable expenses, including without limitation attorneys' fees, 
    incurred in connection with the preparation, execution, enforcement, 
    modification and collection of this Agreement or in connection with the 
    Loans made pursuant to this Agreement. Lender may pay someone else to 
    help collect the Loans and to enforce this Agreement, and Borrower will 
    pay that amount. This includes, subject to any limits under applicable 
    law, Lender's attorneys' fees and Lender's legal expenses, whether or 
    not there is a lawsuit, including attorneys' fees for bankruptcy 
    proceedings (including efforts to modify or vacate any automatic stay 
    or injunction), appeals, and any anticipated post-judgment collection 
    services. Borrower also will pay any court costs, in addition to all 
    other sums provided by law.
    
    NOTICES. All notices required to be given under this Agreement shall be 
    given in writing, may be sent by telefacsimile, and shall be effective 
    when actually delivered or when deposited with a nationally recognized 
    overnight courier or deposited in the United States mail, first class, 
    postage prepaid, addressed to the party to whom the notice is to be 
    given at the address shown above. Any party may change its address for 
    notices under this Agreement by giving formal written notice to the 
    other parties, specifying that the purpose of the notice is to change 
    the party's address. To the extent permitted by applicable law, if 
    there is more than one Borrower, notice to any Borrower will constitute 
    notice to all Borrowers. For notice purposes, Borrower will keep Lender 
    informed at all times of Borrower's current address(es).
    
    SEVERABILITY. If a court of competent jurisdiction finds any provision 
    of this Agreement to be invalid or unenforceable as to any person or 
    circumstance, such finding shall not render that provision invalid or 
    unenforceable as to any other persons or circumstances. If feasible, 
    any such offending provision shall be deemed to be modified to be 
    within the limits of enforceability or validity; however, if the 
    offending provision cannot be so modified, it shall be stricken and all 
    other provisions of this Agreement in all other respects shall remain 
    valid and enforceable.
    
    SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on 
    behalf of Borrower shall bind its successors and assigns and shall 
    inure to the benefit of Lender, its successors and assigns. Borrower 
    shall not, however, have the right to assign its rights under this 
    Agreement or any interest therein, without the prior written consent of 
    Lender.
    
    SURVIVAL. All warranties, representations, and covenants made by 
    Borrower in this Agreement or in any certificate or other instrument 
    delivered by Borrower to Lender under this Agreement shall be 
    considered to have been relied upon by Lender and will survive the 
    making of the Loan and delivery to Lender of the Related Documents, 
    regardless of any investigation made by Lender or on Lender's behalf.
    
    WAIVER. Lender shall not be deemed to have waived any rights under this 
    Agreement unless such waiver is given in writing and signed by Lender. 
    No delay or omission on the part of Lender in exercising any right 
    shall operate as a waiver of such right or any other right. A waiver by 
    Lender of a provision of this Agreement shall not prejudice or 
    constitute a waiver of Lender's right otherwise to demand strict 
    compliance with that provision or any other provision of this 
    Agreement. No prior waiver by Lender, nor any course of dealing between 
    Lender and Borrower, or between Lender and any Grantor, shall 
    constitute a waiver of any of Lender's rights or of any obligations of 
    Borrower or of any Grantor as to any future transactions. Whenever the 
    consent of Lender is required under this Agreement, the granting of 
    such consent by Lender in any instance shall not constitute continuing 
    consent in subsequent instances where such consent is required and in 
    all cases such consent may be granted or withheld in the sole 
    discretion of Lender.
    
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, 
AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JANUARY 28, 
1997.

BORROWER:
CUTTER & BUCK INC.


By: /s/ MARTIN J. MARKS
    -------------------------------------
    MARTIN J. MARKS, Senior Vice President


LENDER:
Washington Mutual Bank doing business as Enterprise Bank


By: ILLEGIBLE
    -------------------------------------
    Authorized Officer
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<PAGE>

<TABLE>
                                    COMMERCIAL SECURITY AGREEMENT
<S>              <C>
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   PRINCIPAL      LOAN DATE    MATURITY    LOAN NO.   CALL   COLLATERAL   ACCOUNT   OFFICER   INITIALS
$20,000,000.00   01-28-1997   08-01-1998    56705      4A0       75        206030     175
------------------------------------------------------------------------------------------------------
      REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE APPLICABILITY 
                           OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
------------------------------------------------------------------------------------------------------

BORROWER: CUTTER & BUCK INC.                                      LENDER: WASHINGTON MUTUAL BANK DOING
          2701 FIRST AVENUE, SUITE 600                                    BUSINESS AS ENTERPRISE BANK
          SEATTLE, WA 98121                                               11225 S.E. SIXTH STREET
                                                                          BELLEVUE, WA 98004

------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>

THIS COMMERCIAL SECURITY AGREEMENT is entered into between CUTTER & BUCK INC. 
(referred to below as "Grantor"); and Washington Mutual Bank doing business 
as Enterprise Bank (referred to below as "Lender"). For valuable 
consideration, Grantor grants to Lender a security interest in the Collateral 
to secure the indebtedness and agrees that Lender shall have the rights 
stated in this Agreement with respect to the Collateral, in addition to all 
other rights which Lender may have by law.

DEFINITIONS.  The following words shall have the following meanings when used 
in this Agreement. Terms not otherwise defined in this Agreement shall have 
the meanings attributed to such terms in the Uniform Commercial Code. All 
references to dollar amounts shall mean amounts in lawful money of the United 
States of America.

     AGREEMENT.  The word "Agreement" means this Commercial Security 
     Agreement, as this Commercial Security Agreement may be amended or 
     modified from time to time, together with all exhibits and 
     schedules attached to this Commercial Security Agreement from time 
     to time.

     COLLATERAL.  The word "Collateral" means the following described 
     property of Grantor, whether now owned or hereafter acquired, 
     whether now existing or hereafter arising, and wherever located:
     
          ALL ACCOUNTS AND INVENTORY
     
     In addition, the word "Collateral" includes all the following, 
     whether now owned or hereafter acquired, whether now existing or 
     hereafter arising, and wherever located:
     
          (a) All attachments, accessions, accessories, tools, parts, 
          supplies, increases, and additions to and all replacements of and 
          substitutions for any property described above.
     
          (b) All products and product of any of the property described 
          in this Collateral section.
     
          (c) All accounts, general intangibles, instruments, rents, 
          monies, payments, and all other rights, arising out of a sale, 
          lease, or other disposition of any of the property described in 
          this Collateral section.
     
          (d) All proceeds (including insurance proceeds) from the sale, 
          destruction, loss, or other disposition of any of the property 
          described in this Collateral section.
     
          (e) All records and data relating to any of the property 
          described in this Collateral section, whether in the form of a 
          writing, photograph, microfilm, microfiche, or electronic media, 
          together with all of Grantor's right, title, and interest in and to 
          all computer software required to utilize, create, maintain, and 
          process any such records or data on electronic media.
     
     EVENT OF DEFAULT.  The words "Event of Default" means and include 
     without limitation any of the Events of Default set forth below in 
     the section titled "Events of Default," in the Loan Agreement of 
     even date herewith between Lender and Grantor ("Loan Agreement").
     
     GRANTOR.  The word "Grantor" means CUTTER & BUCK INC., its 
     successors and assigns
     
     GUARANTOR.  The word "Guarantor" means and includes without 
     limitation each and all of the guarantors, sureties, and 
     accommodation parties in connection with the Indebtedness.
     
     INDEBTEDNESS.  The word "Indebtedness" means the indebtedness as 
     defined in the Loan Agreement.
     
     LENDER.  The word "Lender" means Washington Mutual Bank doing 
     business as Enterprise Bank, its successors and assigns.
     
     NOTE.  The word "Note" means the note dated January 28, 1997, in 
     the principal amount of $20,000,000.00 from CUTTER & BUCK INC. to 
     Lender, together with all renewals of, extensions of, modifications 
     of, refinancings of, consolidations of and substitutions for the 
     note.
     
     RELATED DOCUMENTS.  The words "Related Documents" mean promissory 
     notes, credit agreements, loan agreements, environmental 
     agreements, guaranties, security agreements, mortgages, deeds of 
     trust, and all other instruments, agreements and documents, whether 
     now or hereafter existing, executed in connection with the 
     Indebtedness.

RIGHT OF SETOFF.  Grantor hereby grants Lender a contractual possessory 
security interest in and hereby assigns, conveys, delivers, pledges, and 
transfers all of Grantor's right, title and interest in and to Grantor's 
accounts with Lender (whether checking, savings, or some other account), 
including all accounts held jointly with someone else and all accounts 
Grantor may open in the future, excluding, however, all IRA and Keogh 
accounts, and all trust accounts for which the grant of a security interest 
would be prohibited by law. Grantor authorizes Lender, to the extent 
permitted by applicable law, to charge or setoff all indebtedness against any 
and all such accounts.

OBLIGATIONS OF GRANTOR.  Grantor warrants and covenants to Lender as follows:

     PERFECTION OF SECURITY INTEREST.  Grantor agrees to execute such 
     financing statements and to take whatever other actions are 
     requested by Lender to perfect and continue Lender's security 
     interest in the Collateral. Upon request of Lender, Grantor will 
     deliver to Lender any and all of the documents evidencing or 
     constituting the Collateral, and Grantor will note Lender's 
     interest upon any and all chattel paper if not delivered to Lender 
     for possession by Lender. Grantor hereby appoints Lender as its 
     irrevocable attorney-in-fact for the purpose of executing any 
     documents necessary to perfect or to continue the security interest 
     granted in this Agreement. Lender may at any time, and 
     without further authorization from Grantor, file a carbon, 
     photographic or other reproduction of any financing statement or of 
     this Agreement for use as a financing statement. Grantor will 
     reimburse Lender for all expenses for the perfection and the 
     continuation of the perfection of Lender's security interest in the 
     Collateral. Grantor promptly will notify Lender before any change 
     in Grantor's name including any change to the assumed business 
     names of Grantor. This is a continuing Security Agreement and will 
     continue in effect even though all or any part of the indebtedness 
     is paid in full and even though for a period of time Grantor may 
     not be indebted to Lender.
     
     NO VIOLATION.  The execution and delivery of this Agreement will 
     not violate any law or agreement governing Grantor or to which 
     Grantor is a party, and its certificate or articles of 
     incorporation and bylaws do not prohibit any term or condition of 
     this Agreement.
     
     ENFORCEABILITY OF COLLATERAL.  To the extent the Collateral 
     consists of accounts, chattel paper, or general intangibles, the 
     Collateral is enforceable in accordance with its terms, is genuine, 
     and complies with applicable laws concerning form, content 
     and manner of preparation and execution, and all persons appearing 
     to be obligated on the Collateral have authority and capacity to 
     contract and are in fact obligated as they appear to be on the 
     Collateral. At the time any account becomes subject to a security 
     interest in favor of Lender, the account shall be a good and valid 
     account representing an undisputed, bona fide indebtedness incurred 
     by the account debtor, for merchandise held subject to delivery 
     instructions or theretofore shipped or delivered pursuant to a 
     contract of sale, or for services theretofore performed by Grantor 
     with or for the account debtor; there shall be no setoffs or 
     counterclaims against any such account.
     
     LOCATION OF THE COLLATERAL.  Grantor, upon request of Lender, will 
     deliver to Lender in form satisfactory to Lender a schedule of real 
     properties and Collateral locations relating to Grantor's 
     operations, including without limitation the following: (a) all 
     real property owned or being purchased by Grantor; (b) all real 
     property being rented or leased by Grantor; (c) all storage 
     facilities owned, rented, leased, or being used by Grantor; and (d) 
     all other properties where Collateral is or may be located. Except 
     in the ordinary course of its business, Grantor shall not remove 
     the Collateral from its existing locations without the prior 
     written consent of Lender.
     
     REMOVAL OF COLLATERAL.  Grantor shall keep the Collateral other 
     than inventory-in-transit and inventory in the possession of 
     contractors for embroidery work (or to the extent the Collateral 
     consists of intangible property such as accounts, the records 
     concerning the Collateral) at Grantor's address shown above, at 
     Grantor's warehouse, at Inner City warehouse, or at such other 
     locations as are acceptable to Lender.  Except in the ordinary course
     of its business, including the sales of inventory, Grantor shall not 
     remove the Collateral from its existing locations without the prior 
     written consent of Lender. To the extent that the Collateral consists
     of vehicles, or other titled property, Grantor shall not take or permit
     any action which would require application for certificates of title 
     for the vehicles outside the State of Washington, without the prior 
     written consent of Lender.
     
     TRANSACTIONS INVOLVING COLLATERAL.  Except for inventory sold or 
     accounts collected in the ordinary course of Grantor's business, 
     Grantor shall not sell, offer to sell, or otherwise transfer or 
     dispose of the Collateral, excepting sales of accounts receivable 
     pursuant to the Factoring Agreement, and excepting transfers, sales 
     or dispositions of Collateral that is obsolete or worn out property 
     disposed of in the ordinary course of business and excepting other 
     asset dispositions provided that such other asset dispositions do 
     not exceed $100,000.00 in the aggregate for any fiscal year. While 
     Grantor is not in default under this Agreement, Grantor may sell 
     inventory, but only in the ordinary course of its business and only 
     to buyers who qualify as a buyer in the ordinary course of 
     business. A sale in the ordinary course of Grantor's business does
     not include a transfer in partial or total satisfaction of a debt or
     any bulk sale. Grantor shall not

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    pledge, mortgage, encumber or otherwise permit the Collateral to be 
    subject to any lien, security interest, encumbrance, or charge, other 
    than the security interest provided for in this Agreement, and 
    permitted liens as defined in the Loan Agreement dated of even date 
    herewith between Grantor and Lender, ("permitted liens") without the 
    prior written consent of Lender. This includes security interests even 
    if junior in right to the security interests granted under this 
    Agreement. Unless waived by Lender, all proceeds from any disposition 
    of the Collateral (for whatever reason) shall be held in trust for 
    Lender and shall not be commingled with any other funds; provided 
    however, this requirement shall not constitute consent by Lender to any 
    sale or other disposition. Upon receipt, Grantor shall immediately 
    deliver any such proceeds to Lender.
    
    TITLE. Grantor represents and warrants to Lender that it holds good and 
    marketable title to the Collateral, free and clear of all liens and 
    encumbrances except for the lien of this Agreement and permitted liens. 
    No financing statement covering any of the Collateral is on file in any 
    public office other than those which reflect the security interest created
    by this Agreement or with respect to a permitted lien or to which Lender 
    has specifically consented. Grantor shall defend Lender's rights in the 
    Collateral against the claims and demands of all other persons.
    
    COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, 
    and insofar as the Collateral consists of accounts and general 
    intangibles, Grantor shall deliver to Lender schedules of such 
    Collateral, including such information as Lender may require, including 
    without limitation names and addresses of account debtors and agings of 
    accounts and general intangibles. Insofar as the Collateral consists of 
    inventory, Grantor shall deliver to Lender, as often as Lender shall 
    require, such lists, descriptions, and designations of such Collateral 
    as Lender may require to identify the nature, extent, and location of 
    such Collateral.
    
    MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all 
    tangible Collateral in good condition and repair. Grantor will not 
    commit or permit damage to or destruction of the Collateral or any part 
    of the Collateral. Lender and its designated representatives and agents 
    shall have the right at all reasonable times to examine, inspect, and 
    audit the Collateral whenever located. Grantor shall immediately notify 
    Lender of all cases involving the return, rejection, repossession, loss 
    or damage of or to any Collateral outside the ordinary course of 
    business; of any request for credit or adjustment or of any other 
    dispute arising with respect to the Collateral; and generally of all 
    material happenings and events affecting the Collateral or the value or 
    the amount of the Collateral; and generally of all material happenings and
    events affecting the Collateral or the value or the amount of the 
    Collateral outside the normal course of business.
    
    TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes, 
    assessments and liens upon the Collateral, its use or operation, upon 
    this Agreement, upon any promissory note or notes evidencing the 
    indebtedness, or upon any of the other Related Documents. Grantor may 
    withhold any such payment or may elect to contest any lien if Grantor 
    is in good faith conducting an appropriate proceeding to contest the 
    obligation to pay and so long as Lender's interest in the Collateral is 
    not jeopardized in Lender's sole opinion. If the Collateral is 
    subjected to a lien which is not discharged within fifteen (15) days, 
    Grantor shall deposit with Lender cash, a sufficient corporate surety 
    bond or other security satisfactory to Lender in an amount adequate to 
    provide for the discharge of the lien plus any interest, costs, 
    attorneys' fees or other charges that could accrue as a result of 
    foreclosure or sale of the Collateral. In any contest Grantor shall 
    defend itself and Lender and shall satisfy any final adverse judgment 
    before enforcement against the Collateral. Grantor shall name Lender as 
    an additional obligee under any surety bond furnished in the contest 
    proceedings.
    
    COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply 
    promptly with all laws, ordinances, rules and regulations of all 
    governmental authorities, now or hereafter in effect, applicable to the 
    ownership, production, disposition, or use of the Collateral. Grantor 
    may contest in good faith any such law, ordinance or regulation and 
    withhold compliance during any proceeding, including appropriate 
    appeals so long as Lender's interest in the Collateral, in Lender's 
    opinion, is not jeopardized.
    
    HAZARDOUS SUBSTANCES. Grantor represents and warrants that the 
    Collateral never has been, and never will be so long as this Agreement 
    remains a lien on the Collateral, used for the generation, manufacture, 
    storage, transportation, treatment, disposal, release or threatened 
    release of any hazardous waste or substance, as those terms are defined 
    in the Comprehensive Environmental Response, Compensation, and 
    Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. 
    ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, 
    Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation 
    Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and 
    Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable 
    state or Federal laws, rules, or regulations adopted pursuant to any of 
    the foregoing. The terms "hazardous waste" and "hazardous substance" 
    shall also include, without limitation, petroleum and petroleum 
    by-products or any fraction thereof and asbestos. The representations 
    and warranties contained herein are based on Grantor's due diligence in 
    investigating the Collateral for hazardous wastes and substances, 
    Grantor hereby (a) releases and waives any future claims against Lender 
    for indemnity or contribution in the event Grantor becomes liable for 
    cleanup or other costs under any such laws, and (b) agrees to indemnify 
    and hold harmless Lender against any and all claims and losses 
    resulting from a breach of this provision of this Agreement. This 
    obligation to indemnify shall survive the payment of the indebtedness 
    and the satisfaction of this Agreement.

    MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain 
    all risks insurance, including without limitation fire, theft and 
    liability coverage together with such other insurance as Lender may 
    require with respect to the Collateral, in form, amounts, coverages and 
    basis reasonably acceptable to Lender and issued by a company or 
    companies reasonably acceptable to Lender. Grantor, upon request of 
    Lender, will deliver to Lender from time to time the policies or 
    certificates of insurance in form satisfactory to Lender, including 
    stipulations that coverages will not be cancelled or diminished without 
    at least ten (10) days' prior written notice to Lender and not 
    including any disclaimer of the Insurer's liability for failure to give 
    such a notice. Each Insurance policy also shall include an endorsement 
    providing that coverage in favor of Lender will not be impaired in any 
    way by any act, omission or default of Grantor or any other person. In 
    connection with all policies covering assets in which Lender holds or 
    is offered a security interest, Grantor will provide Lender with such 
    loss payable or other endorsements as Lender may require. If Grantor at 
    any time fails to obtain or maintain any insurance as required under 
    this Agreement, Lender may (but shall not be obligated to) obtain such 
    insurance as Lender deems appropriate, including if it so chooses 
    "single interest insurance," which will cover only Lender's interest in 
    the Collateral.
    
    APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender 
    of any loss or damage to the Collateral. Lender may make proof of loss 
    if Grantor fails to do so within fifteen (15) days of the casualty. All 
    proceeds of any insurance on the Collateral, including accrued 
    proceeds, thereon, shall be held by Lender as part of the Collateral. 
    If Lender consents to repair or replacement of the damaged or destroyed 
    Collateral, Lender shall, upon satisfactory proof of expenditure, pay 
    or reimburse Grantor from the proceeds for the reasonable cost of 
    repair or restoration. If Lender does not consent to repair or 
    replacement of the Collateral, Lender shall retain a sufficient amount 
    of the proceeds to pay all of the indebtedness, and shall pay the 
    balance to Grantor. Any proceeds which have not been disbursed within 
    six (6) months after their receipt and which Grantor has not committed 
    to the repair or restoration of the Collateral shall be used to prepay 
    the indebtedness.
    
    INSURANCE RESERVES. Lender may require Grantor to maintain with Lender 
    reserves for payment of insurance premiums, which reserves shall be 
    created by monthly payments from Grantor of a sum estimated by Lender 
    to be sufficient to produce, at least fifteen (15) days before the 
    premium due date, amounts at least equal to the insurance premiums to 
    be paid. If fifteen (15) days before payment is due, the reserve funds 
    are insufficient, Grantor shall upon demand pay any deficiency to 
    Lender. The reserve funds shall be held by Lender as a general deposit 
    and shall constitute a non-interest-bearing account which Lender may 
    satisfy by payment of the insurance premiums required to be paid by 
    Grantor as they become due. Lender does not hold the reserve funds in 
    trust for Grantor, and Lender is not the agent of Grantor for payment of 
    the insurance premiums required to be paid by Grantor.  The 
    responsibility for the payment of premiums shall remain Grantor's sole 
    responsibility.

    INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to 
    Lender reports on each existing policy of insurance showing such 
    information as Lender may reasonably request including the following: 
    (a) the name of the insurer; (b) the risks insured; (c) the amount of 
    the policy; (d) the property insured; (e) the then current value on the 
    basis of which insurance has been obtained and the manner of 
    determining that value; and (f) the expiration date of the policy. In 
    addition, Grantor shall upon request by Lender (however not more often 
    than annually) have an independent appraiser satisfactory to Lender 
    determine, as applicable, the cash value or replacement cost of the 
    Collateral.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and 
except as otherwise provided below with respect to accounts, Grantor may have 
possession of the tangible personal property and beneficial use of all the 
Collateral and may use it in any lawful manner not inconsistent with this 
Agreement or the Related Documents, provided that Grantor's right to 
possession and beneficial use shall not apply to any Collateral where 
possession of the Collateral by Lender is required by law to perfect Lender's 
security interest in such Collateral.  Until default and until otherwise 
notified by Lender, Grantor may collect any of the Collateral consisting of 
accounts. At any time while an Event of Default exists, Lender may exercise 
its rights to collect the accounts and to notify account debtors to make 
payments directly to Lender for application to the indebtedness, if Lender at 
any time has possession of any Collateral, whether before or after an Event 
of Default, Lender shall be deemed to have exercised reasonable care in the 
custody and preservation of the Collateral if Lender takes such action for 
that purpose as Grantor shall request or as Lender, in Lender's sole 
discretion, shall deem appropriate under the circumstances, but failure to 
honor any request by Grantor shall not of itself be deemed to be a failure to 
exercise reasonable care. Lender shall not be required to take any steps 
necessary to preserve any rights in the Collateral against prior parties, nor 
to protect, preserve or maintain any security interest given to secure the 
Indebtedness.

EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but 
shall not be obligated to) discharge or pay any amounts required to be 
discharged or paid by Grantor under this Agreement, including without 
limitation all taxes, liens, security interests, encumbrances, and other 
claims, at any time levied or placed on the Collateral. Lender also may (but 
shall not be obligated to) pay all costs for insuring, maintaining and 
preserving the Collateral. All such expenditures incurred or paid by Lender 
for such purposes will then bear interest at the rate charged under the Note 
from the date incurred or paid by Lender to the date of repayment by Grantor. 
All such expenses shall become a part of the indebtedness and, at Lender's 
option, will (a) be payable on demand, (b) be added to the balance of the 
Note and be apportioned among and be payable with any installment payments to 
become due during either (i) the term of any applicable insurance policy or 
(ii) the remaining term of the Note, or (c) be treated as a balloon payment 
which will be due and payable at the Note's maturity. This Agreement also 
will secure payment of these amounts. Such right shall be in addition to all 
other rights and remedies to which Lender may be entitled upon the occurrence 
of an Event of Default.


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RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this 
Agreement, at any time thereafter, Lender shall have all the rights of a 
secured party under the Washington Uniform Commercial Code.  In addition and 
without limitation, Lender may exercise any one or more of the following 
rights and remedies:

     ACCELERATE INDEBTEDNESS.  Lender may declare the entire Indebtedness, 
     including any prepayment penalty which Grantor would be required to pay, 
     immediately due and payable, without notice.

     ASSEMBLE COLLATERAL.    Lender may require Grantor to deliver to 
     Lender all or any portion of the Collateral and any and all 
     certificates of title and other documents relating to the Collateral.  
     Lender may require Grantor to assemble the Collateral and make it 
     available to Lender at a place to be designated by Lender.  Lender also 
     shall have the power to enter upon the property and Grantor to take 
     possession of and remove the Collateral.  If the Collateral contains 
     other goods not covered by this Agreement at the time of repossession, 
     Grantor agrees Lender may take such other goods, provided that Lender 
     makes reasonable efforts to return them to Grantor after repossession.

     SELL THE COLLATERAL.  Lender shall have full power to sell, lease, 
     transfer, or otherwise deal with the Collateral or proceeds thereof in 
     its own name or that of Grantor.  Lender may sell the Collateral at 
     public auction or private sale.  Unless the Collateral threatens to 
     decline speedily in value or is of a type customarily sold on a 
     recognized market, Lender will give Grantor reasonable notice of the 
     time after which any private sale or any other intended disposition of 
     the Collateral is to be made.  The requirements of reasonable notice 
     shall be met if such notice is given at least ten (10) days before the 
     time of the sale or disposition.  All expenses relating to the 
     disposition of the Collateral, including without limitation the expenses 
     of retaking, holding, insuring, preparing for sale and selling the 
     Collateral, shall become a part of the Indebtedness secured by this 
     Agreement and shall be payable on demand, with interest at the Note rate 
     from date of expenditure until repaid.

     APPOINT RECEIVER.  To the extent permitted by applicable law, Lender 
     shall have the following rights and remedies regarding the appointment 
     of a receiver: (a) Lender may have a receiver appointed as a matter of 
     right, (b) the receiver may be an employee of Lender and may serve 
     without bond, and (c) all fees of the receiver and his or her attorney 
     shall be come part of the Indebtedness secured by this Agreement and 
     shall be payable on demand, with interest at the Note rate from date of 
     expenditure until repaid.

     COLLECT REVENUES, APPLY ACCOUNTS.  Lender, either itself or through a 
     receiver, may collect the payments, rents, income, and revenues from the 
     Collateral.  Lender may at any time in its discretion transfer any 
     Collateral into its own name or that of its nominee and receive the 
     payments, rents, income, and revenues therefrom and hold the same as 
     security for the Indebtedness or apply it to payment of the Indebtedness 
     in such order of preference as Lender may determine.  Insofar as the 
     Collateral consists of accounts, general intangibles, insurance 
     policies, instruments, chattel paper, choses in action, or similar 
     property, Lender may demand, collect, receipt for, settle, compromise, 
     adjust, sue for, foreclose, or realize on the Collateral as Lender may 
     determine, whether or not Indebtedness or Collateral is then due.  For 
     these purposes, Lender may, on behalf of and in the name of Grantor, 
     receive, open and dispose of mail addressed to Grantor; change any 
     address to which mail an payments are to be sent; and endorse notes, 
     checks, drafts, money orders, documents of title, instruments and items 
     pertaining to payment, shipment, or storage of any Collateral.  To 
     facilitate collection, Lender may notify account debtors and obligors on 
     any Collateral to make payments directly to Lender.

     OBTAIN DEFICIENCY.  To the extent permitted by applicable law, if Lender 
     chooses to sell any or all of the Collateral, Lender may obtain a 
     judgment against Grantor for any deficiency remaining on the 
     Indebtedness due to Lender after application of all amounts received 
     from the exercise of the rights provided in this Agreement.  Grantor 
     shall be liable for a deficiency even if the transaction described in 
     this subsection is a sale of accounts or chattel paper.

     OTHER RIGHTS AND REMEDIES.  Lender shall have all the rights and 
     remedies of a secured creditor under the provisions of the Uniform 
     Commercial Code, as may be amended from time to time.  In addition, 
     Lender shall have and may exercise any or all other rights and remedies 
     it may have available at law, in equity, or otherwise.

     CUMULATIVE REMEDIES.  All of the Lender's rights and remedies, whether 
     evidenced by this Agreement or the Related Documents or by any other 
     writing, shall be cumulative and may be exercised singularly or 
     concurrently.  Election by Lender to pursue any remedy shall not exclude 
     pursuit of any other remedy, and an election to make expenditures or to 
     take action to perform an obligation of Grantor under this Agreement, 
     after Grantor's failure to perform, shall not affect Lender's right to 
     declare a default and to exercise its remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part 
of this Agreement:

     AMENDMENTS.  This Agreement, together with any Related Documents, 
     constitutes the entire understanding and agreement of the parties as to 
     the matters set forth in this Agreement.  No alteration of or amendment 
     to this Agreement shall be effective unless given in writing and signed 
     by the party or parties sought to be charged or bound by the alteration 
     or amendment.

     APPLICABLE LAW.  This Agreement has been delivered to Lender and 
     accepted by Lender in the State of Washington.  If there is a lawsuit, 
     Grantor agrees upon Lender's request to submit to the jurisdiction of 
     the courts of the State of Washington.  This Agreement shall be governed 
     by and construed in accordance with the laws of the State of Washington.
     

     ATTORNEYS' FEES; EXPENSES.  Grantor agrees to pay upon demand all of 
     Lender's reasonable costs and expenses, including attorneys' fees and 
     Lender's legal expenses, incurred in connection with the enforcement of 
     this Agreement.  Lender may pay someone else to help enforce this 
     Agreement, and Grantor shall pay the reasonable costs and expenses of such
     enforcement.  Costs and expenses include Lender's attorneys' fees and 
     legal expenses whether or not there is a lawsuit, including attorneys' 
     fees and legal expenses for bankruptcy proceedings (and including 
     efforts to modify or vacate any automatic stay or injunction), appeals, 
     and any anticipated post-judgment collection services.  Grantor also 
     shall pay all court costs and such additional fees as may be directed by 
     the court.

     CAPTION HEADINGS.  Caption headings in this Agreement are for 
     convenience purposes only and are not to be used to interpret or define 
     the provisions of this Agreement.

     MULTIPLE PARTIES; CORPORATE AUTHORITY.  All obligations of Grantor under 
     this Agreement shall be joint and several, and all references to Grantor 


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    shall mean each and every Grantor. This means that each of the persons 
    signing below is responsible for all obligations in this Agreement.

    NOTICES. All notices required to be given under this Agreement shall be 
    given in writing, may be sent by telefacsimile, and shall be effective 
    when actually delivered or when deposited with a nationally recognized 
    overnight courier or deposited in the United States mail, first class, 
    postage prepaid, addressed to the party to whom the notice is to be given 
    at the address shown above. Any party may change its address for notices 
    under this Agreement by giving formal written notice to the other 
    parties, specifying that the purpose of the notice is to change the 
    party's address. To the extent permitted by applicable law, if there is 
    more than one Grantor, notice to any Grantor will constitute notice to 
    all Grantors. For notice purposes, Grantor will keep Lender informed at 
    all times of Grantor's current address(es).
    
    POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful 
    attorney-in-fact, irrevocably, with full power of substitution to do the 
    following upon the occurrence of an Event of Default (a) to demand, 
    collect, receive, receipt for, sue and recover all sums of money or other 
    property which may now or hereafter become due, owing or payable from the 
    Collateral; (b) to execute, sign and endorse any and all claims, 
    instruments, receipts, checks, drafts or warrants issued in payment for 
    the Collateral; (c) to settle or compromise any and all claims arising 
    under the Collateral, and, in the place and stead of Grantor, to execute 
    and deliver its release and settlement for the claim; and (d) to file 
    any claim or claims or to take any action or institute or take part in 
    any proceedings, either in its own name or in the name of Grantor, or 
    otherwise, which in the discretion of Lender may seem to be necessary or 
    advisable. This power is given as security for the indebtedness, and the 
    authority hereby conferred is and shall be irrevocable and shall remain 
    in full force and effect until renounced by Lender.
    
    PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted 
    preference claim in Borrower's bankruptcy will be come a part of the 
    indebtedness and, at Lender's option, shall be payable by Borrower as 
    provided above in the "EXPENDITURES BY LENDER" paragraph.
    
    SEVERABILITY. If a court of competent jurisdiction finds any provision of 
    this Agreement to be invalid or unenforceable as to any person or 
    circumstance, such finding shall not render that provision invalid or 
    unenforceable as to any other persons or circumstances. If feasible, any 
    such offending provision shall be deemed to be modified to be within the 
    limits of enforceability or validity; however, if the offending provision 
    cannot be so modified, it shall be stricken and all other provisions of 
    this Agreement in all other respects shall remain valid and enforceable.
    
    SUCCESSOR INTERESTS. Subject to the limitations set forth above on 
    transfer of the Collateral, this Agreement shall be binding upon and 
    inure to the benefit of the parties, their successors and assigns.
    
    WAIVER. Lender shall not be deemed to have waived any rights under this 
    Agreement unless such waiver is given in writing and signed by Lender. No 
    delay or omission on the part of Lender in exercising any right shall 
    operate as a waiver of such right or any other right. A waiver by Lender 
    of a provision of this Agreement shall not prejudice or constitute a 
    waiver of Lender's right otherwise to demand strict compliance with that 
    provision or any other provision of this Agreement. No prior waiver by 
    Lender, nor any course of dealing between Lender and Grantor, shall 
    constitute a waiver of any of Lender's rights or of any of Grantor's 
    obligations as to any future transactions. Whenever the consent of Lender 
    is required under this Agreement, the granting of such consent by Lender 
    in any instance shall not constitute continuing consent to subsequent 
    instances where such consent is required and in all cases such consent 
    may be granted or withheld in the sole discretion of Lender.

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

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL 
SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED 
JANUARY 28, 1997.

GRANTOR:
CUTTER & BUCK INC.


By: /s/ MARTIN J. MARKS
    --------------------------------------
    MARTIN J. MARKS, Senior Vice President

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<PAGE>

<TABLE>
                                           PROMISSORY NOTE
<S>              <C>
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   PRINCIPAL      LOAN DATE    MATURITY    LOAN NO.   CALL   COLLATERAL   ACCOUNT   OFFICER   INITIALS
$20,000,000.00   01-28-1997   08-01-1998    66705      4A0       75        206030     175
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      REFERENCES IN THE SHADED AREA ARE FOR LENDER'S USE ONLY AND DO NOT LIMIT THE APPLICABILITY 
                           OF THIS DOCUMENT TO ANY PARTICULAR LOAN OR ITEM.
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BORROWER: CUTTER & BUCK INC.                                      LENDER: WASHINGTON MUTUAL BANK DOING
          2701 FIRST AVENUE, SUITE 600                                    BUSINESS AS ENTERPRISE BANK
          SEATTLE, WA 98121                                               11225 S.E. SIXTH STREET
                                                                          BELLEVUE, WA 98004

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Principal Amount: $20,000,000.00          Initial Rate: 8.250%          Date of Note: January 28, 1997

</TABLE>

PROMISE TO PAY.  CUTTER & BUCK INC. ("Borrower") promises to pay to 
Washington Mutual Bank doing business as Enterprise Bank ("Lender"), or 
order, in lawful money of the United States of America, the principal amount 
of Twenty Million & 00/100 Dollars ($20,000,000.00) or so much as may be 
outstanding, together with interest on the unpaid outstanding principal 
balance of each advance. Interest shall be calculated from the date of each 
advance until repayment of each advance.

PAYMENT.  Borrower will pay this loan in one payment of all outstanding 
principal plus all accrued unpaid interest on August 1, 1998. In addition, 
Borrower will pay regular monthly payments of accrued unpaid interest 
beginning March 1, 1997, and all subsequent interest payments are due on the 
same day of each month after that. Interest on this Note is computed on a 
365/360 simple interest basis; that is, by applying the ratio of the annual 
interest rate over a year of 360 days, multiplied by the outstanding 
principal balance, multiplied by the actual number of days the principal 
balance is outstanding. Borrower will pay Lender at Lender's address shown 
above or at such other place as Lender may designate in writing. Unless 
otherwise agreed or required by applicable law, payments will be applied 
first to accrued unpaid interest, then to principal, and any remaining amount 
to any unpaid collection costs and late charges.

LATE CHARGE.  If a payment is 10 days or more late, Borrower will be charged 
2.00% of the regularly scheduled payment or $25.00, whichever is greater.

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to change 
from time to time based on changes in an index which is the Washington Mutual 
Bank doing business as Enterprise Bank prime rate (the "Index"). This rate 
may or may not be the lowest rate available from Lender at any given time. 
Lender will tell Borrower the current Index rate upon Borrower's request. 
Borrower understands that Lender may make loans based on other rates as well. 
The interest rate change will not occur more often than each day. The Index 
currently is 8.250% per annum. The interest rate to be applied to the unpaid 
principal balance of this Note will be at a rate equal to the Index, 
resulting in an initial rate of 8.250 per annum. NOTICE: Under no 
circumstances will the interest rate on this Note be more than the maximum 
rate allowed by applicable law.

PREPAYMENT.  Borrower agrees that all loan fees and other prepaid finance 
charges are earned fully as of the date of the loan and will not be subject 
to refund upon early payment (whether voluntary or as a result of default), 
except as otherwise required by law. Except for the foregoing, Borrower may 
pay without penalty all or a portion of the amount owed earlier than it is 
due. Early payments will not, unless agreed to by Lender in writing, relieve 
Borrower of Borrower's obligation to continue to make payments of accrued 
unpaid interest. Rather, they will reduce the principal balance due.

DEFAULT.  Borrower will be in default, if any of the "Events of Default" as 
defined in the Loan Agreement happens.

LENDER'S RIGHTS.  Upon default, Lender may declare the entire unpaid 
principal balance on this Note and all accrued unpaid interest immediately 
due, and then Borrower will pay that amount. Upon default, including failure 
to pay upon final maturity, Lender, at its option, may also, if permitted 
under applicable law, increase the variable interest rate on this Note to 
3.000 percentage points over the Index. The interest rate will not exceed the 
maximum rate permitted by applicable law. Lender may hire or pay someone else 
to help collect this Note if Borrower does not pay. Borrower also will pay 
Lender that amount. This includes, subject to any limits under applicable 
law, Lender's attorney's fees and Lender's legal expenses whether or not 
there is a lawsuit, including attorneys' fees and legal expenses for 
bankruptcy proceedings (including efforts to modify or vacate any automatic 
stay or injunction), appeals, and any anticipated post-judgment collection 
services. If not prohibited by applicable law, Borrower also will pay any 
court costs, in addition to all other sums provided by law. This Note has 
been delivered to Lender and accepted by Lender in the State of Washington. 
If there is a lawsuit, Borrower agrees upon Lender's request to submit to the 
jurisdiction of the courts of King County, the State of Washington. This Note 
shall be governed by and construed in accordance with the laws of the State 
of Washington.

RIGHT OF SETOFF.  Borrower grants to Lender a contractual possessory security 
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to 
Lender all Borrower's right, title and interest in and to, Borrower's 
accounts with Lender (whether checking, savings, or some other account), 
including without limitation all accounts held jointly with someone else and 
all accounts Borrower may open in the future, excluding however all IRA and 
Keogh accounts, and all trust accounts for which the grant of a security 
interest would be prohibited by law, Borrower authorizes Lender, to the extent 
permitted by applicable law, to charge or setoff all sums owing on this Note 
against any and all such accounts.

COLLATERAL.  This Note is secured by a Commercial Security Agreement from 
Borrower to Lender dated January 28, 1997.

LINE OF CREDIT.  This Note evidences a revolving line of credit. Advances 
under this Note may be requested orally by Borrower or by an authorized 
person. Lender may, but need not, require that all oral requests be confirmed 
in writing. All communications, instructions, or directions by telephone or 
otherwise to Lender are to be directed to Lender's office shown above. The 
following party or parties are authorized to request advances under the line 
of credit until Lender receives from Borrower at Lender's address shown above 
written notice of revocation of their authority: MARTIN J. MARKS, SENIOR VICE 
PRESIDENT; HARVEY N. JONES, PRESIDENT; and NEIL D. JOHNSON, CONTROLLER. 
Borrower agrees to be liable for all sums either: (a) advanced in accordance 
with the instructions of an authorized person or (b) credited to any of 
Borrower's accounts with Lender. The unpaid principal balance owing on this 
Note at any time may be evidenced by endorsements on this Note or by Lender's 
internal records, including daily computer print-outs. Lender will have no 
obligation to advance funds under this Note if: (a) Borrower is in default 
under the terms of this Note or any agreement that Borrower has with Lender, 
including any agreement made in connection with the signing of this Note; (b) 
Borrower ceases doing business or is insolvent; or (c) Borrower has applied 
funds provided pursuant to this Note for purposes other than those authorized 
by Lender.

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

MEDIATION/ARBITRATION CLAUSE A. POLICY-MEDIATION.  The parties hope there 
will be no disputes arising out of their relationship. To that end, each 
commits to cooperate in good faith and to deal fairly in performing its 
duties under this agreement in order to accomplish their mutual objectives and 
avoid disputes. But if a dispute arises, the parties agree to resolve all 
disputes by the following alternate dispute resolution process: (a) the 
parties will seek a fair and prompt negotiated resolution, but if this is not 
successful, (b) all disputes shall be resolved by binding arbitration, 
provided that during this process, (c) at the request of either party made 
not later than seventy-five (75) days after the initial arbitration demand, 
the parties will attempt to resolve any dispute by nonbinding mediation (but 
without delaying the arbitration hearing date.) The parties recognize that 
negotiation or mediation may not be appropriate to resolve some disputes and 
agree that either party many proceed with arbitration without negotiating or 
mediating. The parties confirm that by agreeing to this alternate dispute 
resolution process, they intend to give up their right to have any dispute 
decided in court by a judge or jury.

MEDIATION/ARBITRATION CLAUSE B. BINDING ARBITRATION.  Any claim between the 
parties arising out of or relating to this agreement, shall be determined by 
arbitration in Seattle commenced in accordance with RCW 7.04.080; provided 
that the total award by a single arbitrator (as opposed to a
<PAGE>

01-28-1997                            PROMISSORY NOTE                   PAGE 2
LOAN NO 56705                           (CONTINUED)
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majority of three arbitrators) shall not exceed $250,000, including interest, 
attorneys' fees and costs. If either party demands a total award greater than 
$250,000, there shall be three (3) neutral arbitrators.  If the parties 
cannot agree on the identity of the arbitrator(s) within ten (10) days of the 
arbitration demand, the arbitrator(s) shall be selected by the administrator 
of the American Arbitration Association (AAA) office in Seattle FROM ITS 
LARGE, COMPLEX CASE PANEL (OR HAVE SIMILAR PROFESSIONAL CREDENTIALS).  Each 
arbitrator shall be an attorney with at least 15 years experience in banking 
or commercial law and shall reside in the Seattle metropolitan area.  Whether 
a claim is covered by this agreement shall be determined by the 
arbitrator(s).  All statutes of limitation which would otherwise be applicable 
shall apply to any arbitration hereunder.

MEDIATION/ARBITRATION CLAUSE C. PROCEDURES.  The arbitration shall be 
conducted in accordance with the AAA Commercial Arbitration Rules, in effect 
on the date hereof, as modified by this agreement.  Submission of dispositive 
motions shall be at the discretion of Arbitrator(s).  As may be shown to be 
necessary to ensure a fair hearing; the arbitrator(s) may authorize 
appropriate discovery; and may enter pre-hearing orders regarding (without 
limitation) scheduling, interrogatories, document exchange, depositions, 
witness and exhibit disclosure and issues to be heard.  The arbitrator(s) 
shall not be bound by the rules of evidence or of civil procedure, but may 
consider such writings and oral presentations as reasonable business people 
would use in the conduct of their day-to-day affairs, and may require the 
parties to submit some or all of their case by written declaration or such 
other manner of presentation as the arbitrator(s) may determine to be 
appropriate.

MEDIATION/ARBITRATION CLAUSE D. HEARING-LAW-APPEAL LIMITED.  The 
arbitrator(s) shall take such steps as may be necessary to hold a private 
hearing.  The parties have included these time limits in order to expedite 
the proceeding, but they are not jurisdictional, and the arbitrator(s) may 
for good cause afford or permit reasonable extensions or delays, which shall 
not affect the validity of the award. The written decision shall contain a 
brief statement of the claim(s) determined and the award made on each claim.  
In making the decision and award, the arbitrator(s) shall apply applicable 
substantive law.  Absent fraud, collusion or willful misconduct by an 
arbitrator, the award shall be final, and judgment may be entered in any 
court having jurisdiction thereof.  The arbitrator(s) may award injunctive 
relief or any other remedy available from a judge, including the joinder of 
parties or consolidation of this arbitration with any other involving common 
issues of law or fact or which may promote judicial economy, and may award 
attorney's fees and costs to the prevailing party but shall not have the 
power to award punitive or exemplary damages.  The decision and award of the 
arbitrators need not be unanimous; rather, the decision and award of two 
arbitrators shall be final.

MEDIATION/ARBITRATION CLAUSE E. PROVISIONAL REMEDIES, SELF-HELP AND 
FORECLOSURE.  In addition to any actions taken under the preceding 
subparagraphs: (i) Lender may exercise all rights and remedies available 
under law with respect to any collateral, deposits and accounts, including 
but not limited to: offset, self-help, sale or other disposition of 
collateral, attachment, injunction, appointment of a receiver, judicial 
foreclosure and deficiency judgment or foreclosure by power of sale; (ii) by 
exercising any such rights and remedies under (1) Lender shall not waive the 
provisions of subparagraphs A through D above; (iii) any issues of law or fact 
which arise in connection with the exercise by Lender of its rights and 
remedies may at Lender's election be determined by arbitration in accordance 
with subparagraphs A through D above; and (iv) notwithstanding any other 
provision of this agreement, so long as an arbitration demand has not been 
filed or served with respect to a claim, either party may elect to assert 
such claim in the small claims department of the appropriate district court 
under RCW ch. 12.40.

LIBOR RATE OPTION.  Notwithstanding the foregoing, Borrower may elect to have 
one or more advances of the principal amount of this Note ("LIBOR Advances") 
bear interest at a LIBOR Rate, as defined in the LIBOR Rate Addendum to the 
Business Loan Agreement between Borrower and Lender (the "Addendum"). 
Advances as to which Borrower effectively makes such an election, shall bear 
interest at a LIBOR rate (as defined in the Addendum) and shall be governed 
by the terms of the Addendum and by the terms of this Note.  In the event of 
an inconsistency between the Addendum and this Note with respect to such 
LIBOR Advances, the Addendum shall control.

GENERAL PROVISIONS.  Lender may delay or forgo enforcing any of its rights or 
remedies under this Note without losing them.  Borrower and any other person 
who signs, guarantees or endorses this Note, to the extent allowed by law, 
waive presentment, demand for payment, protest and notice of dishonor.  Upon 
any change in the terms of this Note, and unless otherwise expressly stated 
in writing, no party who signs this Note, whether as maker, guarantor, 
accommodation maker or endorser, shall be released from liability.  All such 
parties agree that Lender may renew or extend (repeatedly and for any length 
of time) this loan, or release any party or guarantor or collateral; or 
impair, fail to realize upon or perfect Lender's security interest in the 
collateral; and take any other action deemed necessary by Lender without the 
consent of or notice to anyone.  All such parties also agree that Lender may 
modify this loan without the consent of or notice to anyone other than the 
party with whom the modification is made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS 
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER 
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY 
OF THE NOTE.


BORROWER:

CUTTER & BUCK INC.

By: /s/ MARTIN J. MARKS
   --------------------------------------
   MARTIN J. MARKS, Senior Vice President

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<PAGE>
                                       
              ASSIGNMENT OF MONIES DUE UNDER FACTORING AGREEMENT
                          AND INTERCREDITOR AGREEMENT


     THIS ASSIGNMENT AND INTERCREDITOR AGREEMENT ("Agreement") is entered 
into as of the 20th day of February, 1997, by and among REPUBLIC FACTORS 
CORP., a Maryland corporation ("Republic"), CUTTER & BUCK INC., a Washington 
corporation ("Cutter & Buck") and WASHINGTON MUTUAL BANK, doing business as 
ENTERPRISE BANK ("Bank").

                                       
                                R E C I T A L S

     A.  Cutter & Buck (successor by name change to Jones/Rodolfo 
Corporation) entered into a Factoring Agreement with Republic dated as of 
March 1, 1995 (as amended from time to time, the "Factoring Agreement"), 
pursuant to which Republic has agreed to purchase certain accounts 
receivables from Cutter & Buck who, in turn, granted a security interest in 
certain of its assets to Republic. In connection therewith, Republic filed 
financing statements under the Uniform Commercial Code.

     B.  Cutter & Buck has also, as of the date hereof, entered into a Loan 
Agreement with Bank (as amended from time to time, the "Loan Agreement"), 
pursuant to which Bank has agreed to make loans, create and discount banker's 
acceptances and to issue commercial and standby letters of credit. In 
connection therewith, Cutter & Buck executed and delivered a Commercial 
Security Agreement as of the date hereof (the "Security Agreement") granting 
to Bank a security interest in certain of its assets. The Security Agreement 
secures obligations of Cutter & Buck to Bank arising under the Loan 
Agreement. Bank has filed and may hereafter file financing statements under 
the Uniform Commercial Code or other applicable law, and other title 
documents or assignments.

     C.  The parties hereto desire to agree amongst themselves as to the 
relative priority of their respective security interests in and liens on the 
collateral of Cutter & Buck and certain other rights, priorities and 
interests.

     NOW, THEREFORE, the parties hereto agree as follows:

                                       
                                   AGREEMENT

     1.  DEFINITIONS.

         1.1  CERTAIN DEFINED TERMS. As used in this Agreement, the following 
terms have the following meanings:

         "BANK COLLATERAL" has the meaning given in Section 3.2 hereof.



                                       1

<PAGE>

     "BANK DEBT" means any and all indebtedness, liabilities and obligations 
of Cutter & Buck owing to Bank and secured by Bank's Security Agreement.

     "COLLATERAL" means, in the case of Republic, the Republic Collateral, 
and in the case of Bank, the Bank Collateral.

     "COLLATERAL ASSETS" means the personal property described by item or 
type in the granting clauses of the Factoring Agreement, and the Security 
Agreement, now existing or hereafter arising.

     "DEBT" means, in the case of Republic, the Republic Debt, and in the 
case of Bank, the Bank Debt.

     "FACTORING AGREEMENT" has the meaning given in the Recitals.

     "LOAN AGREEMENT" has the meaning given in the Recitals.

     "LOAN DOCUMENTS" means Bank's Loan Agreement and the Related Documents, 
as defined in such Loan Agreement.

     "PURCHASED ACCOUNTS" means those certain accounts receivable purchased 
now or hereafter by Republic from Cutter & Buck pursuant to the terms of the 
Factoring Agreement.

     "REPUBLIC COLLATERAL" has the meaning given in Section 3.1 hereof.

     "REPUBLIC DEBT" means any and all indebtedness, liabilities and 
obligations of Cutter & Buck owing to Republic arising under the Factoring 
Agreement.

      1.2  GENERAL PRINCIPLES APPLICABLE TO DEFINITIONS. Definitions given 
herein shall be equally applicable to both singular and plural forms of the 
terms therein defined. References herein to any document including, but 
without limitation, this Agreement shall be deemed a reference to such 
document as it now exists, and as, from time to time hereafter, the same may 
be amended.

     2. ASSIGNMENT OF MONIES DUE UNDER FACTORING AGREEMENT.

     2.1 ASSIGNMENT. Cutter & Buck hereby assigns to Bank all of its right, 
title and interest in and to all monies now due or which may hereafter become 
due to Cutter & Buck under the Factoring Agreement, including any and all 
advance payments of the purchase price of Receivables (as that term is 
defined in the Factoring Agreement), as security for the full and timely 
performance by Cutter & Buck of any and all indebtedness, liabilities and 
obligations owing to Bank arising under the Loan Documents, as that term is 
defined in the Loan Agreement.


                                  2



<PAGE>

     2.2 PAYMENT. Republic shall remit all monies which would otherwise be 
payable to Cutter & Buck under the Factoring Agreement, subject to all of 
Republic's rights under the Factoring Agreement, directly to Bank by wire 
transfer of federal funds to:

       Washington Mutual Bank, doing
       business as Enterprise Bank
       1201 Third Avenue, Suite 1000
       Attention: Todd Leber - (206) 461-4344

       ABA #125108078
       Account #01023860

    2.3 MONTHLY STATEMENTS. Republic shall send Bank a copy of all monthly 
statements rendered to Cutter & Buck, including without limitation, a Summary 
of Monthly Activity report and a Monthly Summary fo Client Activity report as 
soon as available, but in any event within fifteen (15) days after the end of 
each month, PROVIDED, HOWEVER, that Republic shall have no liability to Bank 
for negligently or inadvertently failing to furnish such monthly statements.

   2.4 REPRESENTATIONS OF PARTIES. Cutter & Buck represents that it has not 
made, executed or delivered any other assignment of the monies now due or 
which may hereafter become due to it under the Factoring Agreement. Republic 
represents that, to the best of its knowledge, Republic has not received any 
notice of the assignment of the monies now due or which may hereafter become 
due to Cutter & Buck under the Factoring Agreement. Bank represents that, to 
the best of its knowledge, no other person is entitled to receive all amounts 
otherwise payable to Cutter & Buck pursuant to the Factoring Agreement. 
Notwithstanding the foregoing, the parties acknowledge that Bank of America 
NW, N.A. d/b/a Seafirst Bank holds a security interest in certain assets of 
Cutter & Buck, including but not limited to its accounts receivable, which 
security interst must be released as a condition to Bank's advancing funds to 
Cutter & Buck.

    2.5 AUTHORITY; FURTHER ASSURANCE. Cutter & Buck hereby irrevocably 
authorizes and empowers Bank to ask, demand, receive, receipt and give 
acquittance for any and all monies hereby assigned, and to endorse any checks 
or other orders for the payment of money payable to Cutter & Buck in payment 
thereof. Cutter & Buck agrees that it will at all times hereafter at the 
request of Bank, make, do and execute all such further acts, agreements, 
assurances and other documents and instruments as shall be reasonably 
required to enable Bank to collect all sums due or to become due under or in 
connection with the Factoring Agreement, according to the intent and purpose 
of this Agreement. Republic is hereby authorized to recognize Bank's claims 
to rights hereunder without investigating the reason for any action taken by 
Bank or the validity or the amount of the obligations owing from Cutter & 
Buck to Bank or the existence of any default or the application to be made by 
Bank of any of the amounts paid to Bank.

                                         3




<PAGE>

    2.6 AGREEMENT SUBJECT TO FACTORING AGREEMENT. This Agreement is subject 
to the terms and conditions of the Factoring Agreement, and applicable law, 
with respect to any matter, including but not limited to, Republic's right to 
"charge back" to Cutter & Buck's account any disputed invoices and other 
items and sums, Republic's right to retain reserves from time to time as set 
forth in the Factoring Agreement, Republic's right to offset any amounts owing 
by Cutter & Buck to Republic from time to time, Republic's right to accept as 
binding all instruments and documents of every kind (including without 
limitation credit memoranda issued by Cutter & Buck), and Republic's right to 
terminate the Factoring Agreement in accordance with the terms thereof all 
without prior notice to Bank (except as herein specifically provided), 
PROVIDED, HOWEVER, Republic's rights to retain reserves and to offset amounts 
as hereinbefore described shall be limited to the Republic Collateral 
(including, without limitation, any and all monies due Cutter & Buck under 
the Factoring Agreement and assigned to Bank under the terms of this 
Agreement). Bank and Cutter & Buck hereby acknowledge that any credit 
balance shown on any statement of account provided by Republic is provisional 
and, except as limited by this Agreement, is subject to all rights of 
Republic under the Factoring Agreement and otherwise. Nothing contained in 
this Agreement shall be construed to require Republic to remit any funds 
beyond any amount provided in the Factoring Agreement.

     2.7 CONFLICTING DEMANDS. Republic shall not be obligated  to make any 
payment to Bank hereunder, if any such payment is enjoined, restrained or 
stayed by any court or by any statute or governmental rule or regulation. In 
the event any conflicting demands are made on Republic with respect to monies 
to be paid hereunder, Republic shall not be required to determine the same 
and shall have the right to file suit in interpleader or for declaratory 
relief. In the event Republic shall bring any such action, Cutter & Buck 
agrees to reimburse Republic for its attorneys' fees, costs and expenses in 
connection therewith, and without limiting its other rights and remedies 
Republic shall be entitled to deduct such attorneys' fees, costs and 
expenses from the funds which are the subject of such interpleader or 
declaratory  relief action.

    2.8 BORROWING BY CUTTER & BUCK. Cutter & Buck hereby agrees that it will 
not borrow or take advances from Republic under the Factoring Agreement, and 
Republic hereby agrees not to make loans or advances requested by Cutter & Buck
pursuant to Section 4.C of the Factoring Agreement, PROVIDED, HOWEVER, that 
nothing herein shall restrict Cutter & Buck from (i) purchasing goods or 
services or otherwise becoming obligated to persons who are factoring clients 
of Republic and who factor with Republic the accounts owing to such persons 
from Cutter & Buck, or (ii) taking payments under the Factoring Agreement 
from Republic at maturity, or (iii) becoming obligated to Republic under the 
Factoring Agreement other than as a result of loans by Republic to Cutter & 
Buck.

     3. LIEN PRIORITY. Notwithstanding the date, manner or order of 
perfection of the security interest and liens granted Republic or Bank, and 
notwithstanding any provisions of the Uniform Commercial Code, or any 
applicable law or decision, or whether either Republic or Bank holds 
possession of all or any part of the Collateral Assets or has given any 
notice or taken any other action to perfect its interest therein, the 
following, as between Republic and Bank,

                                       
                                       4


<PAGE>

shall be the relative priority of security interests and liens of Republic 
and Bank in the Collateral Assets:

    3.1 REPUBLIC COLLATERAL. Republic shall have a first and prior security 
interest in (i) the Purchased Accounts, (ii) all right title and interest of 
Cutter & Buck in, to and in respect of all goods relating to, or which by sale 
have resulted in, the Purchased Accounts, including, without limitation, all 
returned, reclaimed or repossessed goods, and all goods described in invoices 
or other documents or instruments with respect to, or otherwise representing 
or evidencing any Purchase Account, (iii) all moneys, securities, and other 
property, now or hereafter held or received by, or in transit to, Republic 
from or for Cutter & Buck, whether for safekeeping, pledge, custody, 
transmission or collection and otherwise related to or incident to the 
Purchased Accounts (iv) all of Cutter & Buck's deposits (general or special), 
balances, sums and credits with, and all claims of Cutter & Buck against, 
Republic, at any time existing and the otherwise related to or incident to 
the Purchased Accounts, (v) all right title and interest of Cutter & Buck and 
all of Cutter & Buck's rights, remedies, security and liens, in, to and in 
respect of the Purchased Accounts, including, without limitation, rights of 
stoppage in transit, replevin, repossession and reclamation and other rights 
and remedies of an unpaid vendor, lienor or secured party, guaranties or 
other contracts of suretyship with respect to the Purchased Accounts, (vi) 
all deposits or other security for the obligation of any "Purchased Account 
Debtor" (meaning herein each debtor or obligor in any way obligated on or in 
connection  with any Purchased Account), (vii) all books, records, ledger 
cards, computer programs and other property and general intangibles of Cutter 
& Buck at any time evidencing or relating to any or all of the foregoing, 
(viii) all products and proceeds of any or all of the foregoing; in any form 
including, without limitation, any insurance proceeds or claims by Cutter & 
Buck against third parties, for loss or damage to or destruction of any or 
all of the foregoing (collectively, the "Republic Collateral"). Bank shall 
have a second and subordinate security interest in the Republic Collateral.

     3.2 BANK COLLATERAL. Bank shall have a first and prior security interest 
in all of the Collateral Assets, other than the Republic Collateral (the 
"Bank Collateral"). Republic shall have a second and subordinate security 
interest in the Bank Collateral.

     3.3 PROCEEDS OF COLLATERAL. All proceeds of Collateral shall be 
distributed in accordance with the following procedures to the extent 
permitted by applicable law:

          (a) Until the Republic Debt has been fully and finally paid, all 
proceeds of Republic Collateral shall be paid to Republic for application in 
accordance with the Factoring Agreement.

          (b) Until the Bank Debt has been fully and finally paid, all 
proceeds of Bank Collateral shall be paid to Bank for application in 
accordance with the Loan Agreement.


<PAGE>

     3.4 REPUBLIC AND BANK ONLY. The priority established under this Section 
3 is only as between Republic and Bank and to the extent that the operation 
of the foregoing provision would otherwise entitle any other person 
(including a trustee in bankruptcy) to either a priority over both parties 
or a right to avoid the lien of either party, then (and only to such extent) 
this section shall not be effective.

     3.5 PERFECTION BY POSSESSION. Republic and Bank each hereby acknowledge 
the other's security interest in and liens on the Collateral Assets. Republic 
and Bank each hereby agree, that to the extent that either holds physical 
possession of any Collateral Assets, it does so both in its own capacity and 
for the benefit of the other for the purpose of perfecting (to the extent 
necessary) the other's security interest in and liens on the Collateral 
Assets pursuant to RCW 62A.9-305. To the extent that Republic obtains 
possession of Bank Collateral, or Bank obtains possession of Republic 
Collateral, Republic and Bank hereby agree to promptly notify the other party 
of such fact and, as the case may be, Republic shall promptly deliver such 
Bank Collateral to Bank or Bank shall promptly deliver such Republic 
Collateral to Republic.

    4.  MODIFICATIONS TO DEBT. Subject to the restrictions contained herein, 
and subject to any restrictions on Cutter & Buck contained in the Loan 
Agreement, each of Republic and Bank may at any time, and from time to time, 
without the other's consent and without notice to the other, renew, extend or 
increase its Debt. Without limiting the foregoing, Republic and Bank may 
accept partial payments of its Debt, settle, release (by operation of law 
or otherwise), compound, compromise, collect or liquidate any of its Debt, 
change, alter or vary the interest charge on, or any other terms or 
provisions of its Debt or any present or future instrumental, document or 
agreement between Republic or Bank, as the case may be, and Cutter & Buck, 
release, exchange, fail to perfect, delay the perfection of, fail to resort 
to, or realize upon any of its Collateral, as the case may be, and take any 
other action or omit to take any other action with respect to its Debt or its 
Collateral as Republic or Bank, as the case may be, deems necessary or 
advisable in its sole discretion. Bank, but not Republic, may make loans or 
advances to Cutter & Buck secured in whole or in part by its Collateral or 
refrain from making any loans or advances to Cutter & Buck.

     5.  WAIVERS OF REPUBLIC AND BANK. To the extent allowed by law, Republic 
and Bank each hereby waive any and all rights to have the Collateral Assets, 
or any part thereof marshaled upon any foreclosure of any of the liens 
securing its respective Debt.

     6. ADDITIONAL DOCUMENTATION. Republic and Bank each agree, upon the 
other's request, to execute all such documents and instruments and take all 
such actions as the other shall deem reasonably necessary or advisable in 
order to carry out the purposes of this Agreement, including, without 
limitation appropriate amendments to financing statements executed by Cutter 
& Buck in favor of Republic or Bank in order to refer to the subordinations 
of each other's security interests in the Collateral Assets contained herein 
(but this Agreement shall remain fully effective notwithstanding any failure 
to execute any additional documents or instruments).

                                       6

<PAGE>

     7.  ACTIONS CONCERNING COLLATERAL.  Until the Republic Debt has been 
paid and performed in full, Bank shall not collect, take possession of, 
foreclose upon, or exercise any other rights or remedies with respect to, the 
Republic Collateral, judicially or nonjudicially, or attempt to do any of the 
foregoing. Until the Bank Debt has been paid and performed in full, Republic 
shall not collect, take possession of, foreclose upon, or exercise any other 
rights or remedies with respect to, the Bank Collateral, judicially or 
nonjudicially, or attempt to do any of the foregoing. In the event that 
Republic or Bank shall be required by the Uniform Commercial Code or any 
other applicable law to give notice to the other of intended disposition of 
Collateral Assets, such notice shall be given in accordance with Section 9.1 
hereof and ten (10) days' notice shall be deemed to be commercially 
reasonable.

     8.  FINANCIAL CONDITION OF CUTTER & BUCK.  Republic and Bank each 
represent that it is presently informed of the financial condition of Cutter 
& Buck and of all other circumstances which a diligent inquiry would reveal 
and which bear upon the risk of non-payment of the indebtedness of Cutter & 
Buck to them. Except as provided in Section 2.3 hereof Republic and Bank each 
waive any right to require the other to disclose any information which the 
other may now or hereafter acquire concerning Cutter & Buck.

     9.  MISCELLANEOUS.

         9.1  NOTICE OF DEFAULT.  Republic and Bank shall each promptly give 
written notice to the other, contemporaneously with the giving of such notice 
to Cutter & Buck, of any default by Cutter & Buck under any agreement such 
party has with Cutter & Buck including, but not limited to, the Factoring 
Agreement and the Loan Agreement, as the case may be. All such notices and 
any other communications provided for in this Agreement shall be in writing 
(unless otherwise specified) and shall be mailed (with first class postage 
prepaid) or sent or delivered to each party by facsimile transmission or 
courier service at the address or facsimile transmission number set forth 
under its name on the signature page hereof or at such other address as shall 
be designated by such party in a written notice to the other parties. Except 
as otherwise specified all such notices and communications if duly given or 
made shall be effective upon receipt.

         9.2  NO CONTEST. Niether Republic nor Bank shall contest the 
validity, perfection, priority or enforceability of any lien or security 
interest granted to the other.

         9.3  SUCCESSORS AND ASSIGNS.  This Agreement is solely for the 
benefit of Republic and Bank and their respective successors and assigns, and 
neither Cutter & Buck nor any other person shall have any right, benefit, 
priority or interest under, or because of the existence of, this Agreement. 
Neither Republic nor Bank shall sell or assign any of its interests in the 
Debt unless the purchaser or assignee thereof agrees to be bound by the terms 
thereof.

         9.4  TERMINATION.  The assignment in Section 1 above shall continue 
in effect until written notice of the termination is served by any one of the 
parties hereto on the others,



                                       7

<PAGE>

but such termination shall not affect the assignment to Bank of or Bank's 
rights to receive, any balances due to Cutter & Buck from Republic, until all 
loans and/or extensions of credit made by Bank to Cutter & Buck prior to the 
receipt of such written notice of termination are paid in full, subject to 
all of Republic's rights under the Factoring Agreement, which rights include, 
but are not limited to, the right to terminate the Factoring Agreement in 
accordance with the terms thereof. The subordination of Bank's security 
interest in the Republic Collateral and the other provisions of this 
Agreement shall continue in effect until the Factoring Agreement is 
terminated and all present and future indebtedness, liabilities and 
obligations of Cutter & Buck to Republic have been paid and performed in full.

     9.5  REMEDIES.  All of Republic's and Bank's rights and remedies 
hereunder and under applicable law are cumulative and not exclusive.

     9.6  ENTIRE AGREEMENT; AMENDMENT.  This Agreement sets forth in full the 
terms of agreement among the parties with respect to the subject matter 
hereof and may not be modified or amended, nor may any rights hereunder be 
waived, except in a writing signed by the parties hereto.

     9.7  CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.  Republic, Bank and 
Cutter & Buck each (i) agree that all actions and proceedings based upon, 
arising out of or relating in any way directly or indirectly to, this 
Agreement shall be litigated exclusively in courts located within King 
County, Washington, (ii) consent to the jurisdiction of any such court and 
consent to the service of process in any such action or proceeding by 
personal delivery, first-class mail, or any other method permitted by law, 
and (iii) waive any and all rights to transfer or change the venue of any 
such action or proceeding to any court located outside King County, 
Washington. Nothing in this Section 9.8 shall be construed to modify or 
otherwise limit the agreement between Bank and Cutter & Buck regarding 
mandatory arbitration contained in the Loan Agreement.

     9.8  GOVERNING LAW; ATTORNEY'S FEES.  This Agreement shall be construed 
in accordance with, and governed by, the laws of the State of Washington. In 
the event of any litigation between or among Republic, Bank and Cutter & Buck 
based upon, or arising out of or relating to this Agreement, the prevailing 
party shall be entitled to recover all of its costs and expenses (including 
without limitation attorneys' fees) from the non-prevailing party.

     9.9  MUTUAL WAIVER OF JURY TRIAL.  Republic, Bank and Cutter & Buck each 
hereby waive the right to trial by jury in any action or proceeding (i) based 
upon, arising out of or in any way relating to this Agreement or (ii) any 
conduct, acts or omissions of Republic, Bank or Cutter & Buck or any of their 
directors, officers, employees, agents, attorneys or any other persons 
affiliated with Republic, Bank or Cutter & Buck based upon, arising out of or 
in any way relating to this Agreement; in each of the foregoing case, whether 
sounding in contract or tort or otherwise.


                                      8
<PAGE>

     9.10  EXECUTED IN COUNTERPARTS.  This Agreement may be executed in any 
number of counterparts and by different parties in separate counterparts, 
each of which when so executed shall be deemed to be an original and all of 
which taken together shall constitute one and the same agreement.

     IN WITNESS WHEREOF, the parties hereto have caused their duly authorized 
officers to execute and deliver this Agreement as of the date first above 
written.


                                   REPUBLIC FACTORS CORP.

                                   By   /s/ DAVID LANDY
                                      -----------------------------------

                                   Its  Senior Vice President
                                       ----------------------------------

                                   Address:   1000 Wilshire Boulevard, Suite 400
                                              Los Angeles, California 90017
                                              Attn: David H. Landy

                                   Facsimile: (213) 312-3630


                                   WASHINGTON MUTUAL BANK, doing business
                                   as ENTERPRISE BANK

                                   By   /s/ TODD LEBER
                                      -----------------------------------

                                   Its  Vice President
                                       ----------------------------------

                                   Address:   1201 Third Avenue, Suite 1000
                                              Seattle, Washington 98101
                                              Attn: Todd Leber

                                   Facsimile: (206) 554-2696



                                      9

<PAGE>

                                   CUTTER & BUCK, INC.

                                   By   /s/ MARTIN MARKS
                                       -----------------------------------

                                   Its  Senior Vice President/Chief 
                                         Operating Officer
                                       ----------------------------------

                                   Address:   2701 First Avenue, Suite 500
                                              Seattle, Washington 98121
                                              Attn: Martin Marks

                                   Facsimile: (206) 448-0589










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