ALTERNATIVE RATE OPTIONS
                                 PROMISSORY NOTE
                               (PRIME RATE, LIBOR)

$5,000,000.00                                             Dated as of:  12-01-99
----------------------------------------------------------             ---------

PHOENIX GOLD INTERNATIONAL, INC.                                    ("BORROWER")
--------------------------------------------------------------------

U.S. BANK NATIONAL ASSOCIATION                                        ("LENDER")

1.       TYPE OF CREDIT. This note is given to evidence Borrower's obligation to
repay  all  sums  which  Lender  may from  time  to  time  advance  to  Borrower
("Advances") under a:

  |_|    single  disbursement loan. Amounts loaned to Borrower hereunder will be
         disbursed in a single Advance in the amount shown in Section 2.

  |X|    revolving  line of credit.  No  Advances  shall be made which  create a
         maximum  amount  outstanding  at any one time which exceeds the maximum
         amount shown in Section 2. However, Advances hereunder may be borrowed,
         repaid and reborrowed, and the aggregate Advances loaned hereunder from
         time to time may exceed such maximum amount.

  |_|    non-revolving  line of  credit.  Each  Advance  made  from time to time
         hereunder shall reduce the maximum amount available shown in Section 2.
         Advances loaned hereunder which are repaid may not be reborrowed.

2.       PRINCIPAL BALANCE.  The  unpaid  principal  balance  of   all  Advances
outstanding  under this note ("Principal  Balance") at one time shall not exceed
$5,000,000.00 .
---------------

3.      PROMISE TO PAY.  For value received  Borrower  promises to pay to Lender
or order at COMMERCIAL  LOAN  SERVICING - WEST,  the  Principal  Balance of this
note, with interest thereon at the rate(s) specified in Sections 4 and 11 below.

4.      INTEREST RATE.  The interest rate on the Principal  Balance  outstanding
may vary from time to time pursuant to the  provisions of this note.  Subject to
the provisions of this note, Borrower shall have the option from time to time of
choosing to pay interest at the rate or rates and for the applicable  periods of
time based on the rate options provided  herein;  PROVIDED,  however,  that once
Borrower  notifies  Lender  of the rate  option  chosen in  accordance  with the
provisions of this note, such notice shall be irrevocable.  The rate options are
the Prime Borrowing Rate and the LIBOR Borrowing Rate, each as defined herein.

(a)     DEFINITIONS. The following terms shall have the following meanings:

               "Business  Day" means any day other than a Saturday,  Sunday,  or
other  day  that  commercial  banks in  Portland,  Oregon  or New York  City are
authorized  or required  by law to close;  provided,  however  that when used in
connection  with a LIBOR Rate,  LIBOR Amount or LIBOR Interest  Period such term
shall also  exclude any day on which  dealings in U.S.  dollar  deposits are not
carried on in the London interbank market.

                "Dow Jones Page 3750"  means the display  designated  as such on
the Dow Jones Markets  Service  (formerly known as Telerate) (or such other page
as may replace  page 3750 on that service for the purpose of  displaying  London
interbank offered rates of major banks for United States Dollar deposits).

                "LIBOR  Amount" means each  principal  amount for which Borrower
chooses to have the LIBOR  Borrowing Rate apply for any specified LIBOR Interest
Period.

                "LIBOR Interest  Period" means as to any LIBOR Amount,  a period
of 1, 2 OR 3 months  commencing  on the date the LIBOR  Borrowing  Rate  becomes
applicable  thereto;  PROVIDED,  however,  that: (i) the first day of each LIBOR
Interest  Period must be a Business  Day;  (ii) no LIBOR  Interest  Period shall
commence on or after expiry;  (iii) no LIBOR  Interest  Period shall be selected
which would extend  beyond EXPIRY ; (iv) no LIBOR  Interest  Period shall extend
beyond the date of any principal  payment required under Section 6 of this note,
unless the sum of the Prime Rate Amount,  plus LIBOR Amounts with LIBOR Interest
Periods ending on or before the scheduled date of such principal  payment,  plus
principal amounts remaining unborrowed under a line of credit, equals or exceeds
the amount of such principal payment;  (v) any LIBOR Interest Period which would
otherwise  expire on a day which is not a Business Day, shall be extended to the
next  succeeding  Business Day,  unless the result of such extension would be to
extend such LIBOR Interest  Period into another  calendar  month, in which event
the LIBOR Interest Period shall end on the immediately  preceding  Business Day;
and (vi) any LIBOR  Interest  Period that begins on the last  Business  Day of a
calendar month (or on a day for which there is no numerically  corresponding day
in the calendar month at the end of such LIBOR Interest Period) shall end on the
last Business Day of a calendar month.


<PAGE>

                "LIBOR Rate" means, for any LIBOR Interest  Period,  the average
offered  rate for  deposits  in  United  States  Dollars  (rounded  upwards,  if
necessary, to the nearest 1/16 of 1%) for delivery of such deposits on the first
day of such  LIBOR  Interest  Period,  for the number of months  therein,  which
appears on Dow Jones Page 3750 as of 11:00 a.m., London time (or such other time
as of which such rate  appears) on the day that is two Business  Days  preceding
the first  day of such  LIBOR  Interest  Period;  or the rate for such  deposits
determined  by Lender at such time  based on such  other  published  service  of
general  application as shall be selected by Lender for such purpose;  provided,
that  in lieu of  determining  the  rate in the  foregoing  manner,  Lender  may
determine  the rate based on the rates  offered to Lender for deposits in United
States Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%) in the
interbank  eurodollar  market at such time for delivery on the first day of such
LIBOR Interest Period for the number of months therein;  and provided,  further,
that in any case the LIBOR  Rate  shall be  adjusted  to take into  account  the
maximum reserves required to be maintained for Eurocurrency liabilities by banks
during each such LIBOR Interest Period as specified in Regulation D of the Board
of Governors of the Federal Reserve System or any successor regulation.

                "Prime  Rate" means the rate of interest  which Lender from time
to time establishes as its prime or reference rate and is not, for example,  the
lowest rate of interest  which  Lender  collects  from any  borrower or class of
borrowers.  When the Prime Rate is applicable  under Section 4(b) or 11(b),  the
interest rate hereunder  shall be adjusted  without notice  effective on the day
the Prime Rate  changes,  but in no event  shall the rate of  interest be higher
than allowed by law.

                "Prime Rate Amount" means any portion of the  Principal  Balance
bearing interest at the Prime Borrowing Rate.

(b)      THE PRIME BORROWING RATE.

         (i)    The Prime Borrowing Rate is a variable  per annum  rate equal to
the Prime Rate plus  0.00%.
                     ------

          (ii)  Whenever  Borrower  desires  to  use  the  Prime  Borrowing Rate
option,  Borrower  shall give Lender  notice  orally or in writing in accordance
with Section 15 of this note, which notice shall specify the requested effective
date  (which  must be a Business  Day) and  principal  amount of the  Advance or
increase in the Prime Rate  Amount,  and whether  Borrower is  requesting  a new
Advance  under a line of credit  or  conversion  of a LIBOR  Amount to the Prime
Borrowing Rate.

         (iii)  Subject to Section 11 of this note, interest shall accrue on the
unpaid  Principal  Balance at the Prime  Borrowing Rate unless and except to the
extent that the LIBOR Borrowing Rate is in effect.

(c)      THE LIBOR BORROWING RATE.

         (i)    The LIBOR Borrowing Rate is the LIBOR Rate plus 1.75% per annum.
                                                               -------

         (ii)   Borrower  may obtain  LIBOR  Borrowing  Rate  quotes from Lender
between before 10:00 a.m. (Portland,  Oregon time) on any Business Day. Borrower
may request an Advance,  conversion of any portion of the Prime Rate Amount to a
LIBOR Amount or a new LIBOR  Interest  Period for an existing  LIBOR Amount,  at
such rate only by giving Lender  notice in  accordance  with Section 4 (c) (iii)
before 10:00 a.m. (Portland, Oregon time) on such day.

        (iii)   Whenever Borrower  desires  to  use  the  LIBOR  Borrowing  Rate
option,  Borrower  shall give Lender  irrevocable  notice  (either in writing or
orally and promptly  confirmed  in writing) no later than 10:00 a.m.  (Portland,
Oregon time) two (2) Business Days prior to the desired  effective  date of such
rate. Any oral notice shall be given by, and any written notice or  confirmation
of an oral notice shall be signed by, the person(s)  authorized in Section 15 of
this note,  and shall specify the requested  effective  date of the rate,  LIBOR
Interest  Period and LIBOR  Amount,  and whether  Borrower is  requesting  a new
Advance at the LIBOR Borrowing Rate under a line of credit, conversion of all or
any portion of the Prime Rate Amount to a LIBOR Amount,  or a new LIBOR Interest
Period for an outstanding LIBOR Amount.  Notwithstanding  any other term of this
note,  Borrower  may elect the LIBOR  Borrowing  Rate in the  minimum  principal
amount of $  500,000.00  and in  multiples  of $  100,000.00  above such amount;
PROVIDED,  however, that no more than N/A separate LIBOR Interest Periods may be
in effect at any one time.

         (iv)   If at any time the LIBOR  Rate is unascertainable or unavailable
to Lender or if LIBOR Rate loans become unlawful, the option to select the LIBOR
Borrowing Rate shall terminate immediately.  If the LIBOR Borrowing Rate is then
in  effect,  (A) it shall  terminate  automatically  with  respect  to all LIBOR
Amounts (i) on the last day of each then applicable  LIBOR Interest  Period,  if
Lender may lawfully  continue to maintain  such loans,  or (ii)  immediately  if
Lender may not lawfully  continue to maintain  such loans  through such day, and
(B) subject to Section 11, the Prime Borrowing Rate  automatically  shall become
effective as to such amounts upon such termination.

         (v)    If at any time  after  the  date  hereof  (A) any revision in or
adoption of any applicable law, rule, or regulation or in the  interpretation or
administration thereof (i) shall subject Lender or its Eurodollar lending office
to any tax,  duty, or other charge,  or change the basis of taxation of payments
to Lender with respect to any loans bearing interest based on the LIBOR Rate, or
(ii) shall impose or modify any reserve, insurance,  special deposit, or similar
requirements  against assets of,  deposits with or for the account of, or credit
extended by Lender or its Eurodollar  lending office, or impose on Lender or its
Eurodollar lending office any other condition  affecting any such loans, and (B)
the  result of any of the  foregoing  is (i) to  increase  the cost to Lender of
making or  maintaining  any such  loans or (ii) to reduce  the amount of any sum
receivable under this note by Lender or its Eurodollar lending office,  Borrower
shall pay Lender within 15 days after demand by Lender such additional amount as
will compensate  Lender for such increased cost or reduction.  The determination
hereunder by Lender of such additional amount shall be conclusive in the absence
of manifest error. If Lender demands  compensation  under this Section  4(c)(v),
Borrower  may upon three (3)  Business  Days'  notice to Lender pay the  accrued
interest on all LIBOR  Amounts,  together with any  additional  amounts  payable
under  Section  4(c)(vi).  Subject to Section  11, upon  Borrower's  paying such
accrued  interest and additional  costs,  the Prime  Borrowing Rate  immediately
shall be effective  with respect to the unpaid  principal  balance of such LIBOR
Amounts.


<PAGE>

         (vi)   Borrower will  indemnify Lender upon demand, against any loss or
expense which Lender may sustain or incur (including,  without  limitation,  any
loss or expense  sustained or incurred in  obtaining,  liquidating  or employing
deposits or other funds acquired to effect,  fund or maintain any portion of the
loan or any Advance) as a consequence of (A) any failure of Borrower to make any
payment  when due of any amount due  hereunder,  (B) any  failure of Borrower to
borrow, if permitted by the terms of this note,  continue or convert any portion
of the Prime Rate Amount to a LIBOR Amount,  on a date  specified  therefor in a
notice thereof, or (C) any payment, voluntary or mandatory prepayment or payment
on default or conversion of any LIBOR Amount to the Prime  Borrowing  Rate, on a
date  other  than  the  last  day  of  the  applicable  LIBOR  Interest  Period.
Determinations  by Lender of the amount  required to  indemnify  Lender shall be
conclusive in the absence of manifest error.

         (vii)  Notwithstanding  any  provision  of this  note to the  contrary,
Lender  shall be entitled to fund and maintain its funding of all or any part of
the loan  evidenced by this note in any manner it elects;  it being  understood,
however,  that with respect to any LIBOR Amount,  all  determinations  hereunder
shall be made as if Lender had actually  funded and maintained each LIBOR Amount
during the LIBOR  Interest  Period  applicable  to it through  the  purchase  of
deposits having a term  corresponding  to such LIBOR Interest Period and bearing
an interest rate equal to the LIBOR Rate for such LIBOR Interest Period (whether
or not Lender shall have granted any participations in such LIBOR Amounts).

         (viii) Notwithstanding  any other term  of this note,  Borrower may not
select the LIBOR  Borrowing  Rate if an event of default  hereunder has occurred
and is continuing.

         (ix)   Nothing contained in this note, including without limitation the
determination  of any LIBOR Interest  Period or Lender's  quotation of any LIBOR
Borrowing  Rate,  shall be  construed to prejudice  Lender's  right,  if any, to
decline to make any requested Advance or to require payment on demand.

5.       COMPUTATION  OF INTEREST.  All interest  under Section 4 and Section 11
will be computed at the  applicable  rate based on a 360-day year and applied to
the actual number of days elapsed.

6.       PAYMENT SCHEDULE.

(a)      Principal.  Principal shall be paid:

         |X|  on demand.
         |_|  on demand, or if no demand, on___
         |_|  on ___.
              subject to Section 8, in installments of
                |_| ___each, plus accrued interest, beginning on___and on the
                    same day of each___thereafter until___when the entire
                    Principal Balance plus interest thereon shall be due and
                    payable.
                |_| ___each, including accrued interest, beginning on___and on
                    the same day of each___thereafter___until  when the entire
                    Principal Balance plus interest thereon shall be due and
                    payable.
         |_|  ___.

(b)      INTEREST.

         (i)    Interest on the Prime Rate Amount shall be paid:

                |X|   on the FIRST day of JANUARY, 2000 and on the same day of
                      each MONTH thereafter prior to maturity and at maturity.
                |_|   at maturity.
                |_|   at the time each principal installment is due and at
                      maturity.
                |_|   ___.

         (ii)   Interest on all LIBOR Amounts shall be paid:

                |X|   on the last day of the applicable  LIBOR Interest  Period,
                      and if such  LIBOR  Interest  Period is longer  than three
                      months,  on  the  last  day of  each  three  month  period
                      occurring  during  such  LIBOR  Interest  Period,  and  at
                      maturity.
                |_|   on the____day of____and on the same day of each___
                      thereafter prior to maturity and at maturity.
                |_|   at maturity.
                |_|   at the time each principal installment is due and at
                      maturity.
                |_|   ____.

7.       PREPAYMENT.

(a)      Prepayments of all or any part of the Prime Rate Amount may be made at
         any time without penalty.
(b)      Except as otherwise  specifically  set forth  herein,  Borrower may not
         prepay all or any part of any LIBOR Amount or terminate any LIBOR
         Borrowing Rate, except on the last day of the applicable LIBOR Interest
         Period.


<PAGE>

(c)      Principal  prepayments  will not  postpone  the date of or  change  the
         amount of any regularly scheduled payment. At the time of any principal
         prepayment,  all accrued interest,  fees, costs and expenses shall also
         be paid.

8.      CHANGE  IN  PAYMENT  AMOUNT.  Each  time  the interest rate on this note
changes  the  holder of this  note may,  from  time to time,  in  holder's  sole
discretion,  increase  or  decrease  the  amount  of  each  of the  installments
remaining  unpaid at the time of such change in rate to an amount  holder in its
sole discretion deems necessary to continue  amortizing the Principal Balance at
the same rate established by the installment  amounts specified in Section 6(a),
whether or not a "balloon"  payment may also be due upon  maturity of this note.
Holder shall notify the  undersigned of each such change in writing.  Whether or
not  the  installment  amount  is  increased  under  this  Section  8,  Borrower
understands  that,  as a result of  increases  in the rate of interest the final
payment  due,  whether or not a  "balloon"  payment,  shall  include  the entire
Principal   Balance  and  interest   thereon  then   outstanding,   and  may  be
substantially more than the installment specified in Section 6.

9.      ALTERNATE  PAYMENT  DATE.  Notwithstanding  any other term of this note,
if in any month there is no day on which a  scheduled  payment  would  otherwise
be due (e.g.  February 31),  such  payment shall be paid on the last banking day
of that month.

10.     PAYMENT BY AUTOMATIC DEBIT.

|X|     Borrower hereby authorizes Lender to  automatically deduct the amount of
all principal and interest payments from account  number_________.  If there are
insufficient funds in the account to pay the automatic deduction in full, Lender
may allow the account to become  overdrawn,  or Lender may reverse the automatic
deduction.  Borrower  will pay all the fees on the account which result from the
automatic deductions,  including any overdraft and non-sufficient funds charges.
If for any reason  Lender does not charge the  account  for a payment,  or if an
automatic payment is reversed,  the payment is still due according to this note.
If the account is a Money Market  Account,  the number of withdrawals  from that
account is limited as set out in the  account  agreement.  Lender may cancel the
automatic deduction at any time in its discretion.

Provided, however, if no account number is entered above, Borrower does not want
to make payments by automatic debit.

11.     DEFAULT.

(a)     Without prejudice to any right of Lender to require payment on demand or
to decline to make any  requested  Advance,  each of the  following  shall be an
event of default: (i) Borrower fails to make any payment when due. (ii) Borrower
fails to perform or comply with any term, covenant or obligation in this note or
any agreement  related to this note, or in any other  agreement or loan Borrower
has with Lender.  (iii) Borrower  defaults 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  ability  to  repay  this  note or  perform
Borrower's  obligations  under  this  note or any  related  documents.  (iv) Any
representation  or  statement  made or  furnished  to Lender by  Borrower  or on
Borrower's  behalf is false or misleading in any material  respect either now or
at the time made or furnished. (v) Borrower dies, becomes insolvent,  liquidates
or  dissolves,  a receiver is  appointed  for any part of  Borrower's  property,
Borrower makes an assignment for the benefit of creditors,  or any proceeding is
commenced  either by  Borrower  or  against  Borrower  under any  bankruptcy  or
insolvency  laws. (vi) Any creditor tries to take any of Borrower's  property on
or in which Lender has a lien or security interest.  This includes a garnishment
of any of Borrower's accounts with Lender.  (vii) Any of the events described in
this default  section occurs with respect to any general  partner in Borrower or
any guarantor of this note, or any guaranty of Borrower's indebtedness to Lender
ceases to be, or is asserted  not to be, in full force and effect.  (viii) There
is any material  adverse  change in the  financial  condition or  management  of
Borrower  or Lender in good faith  deems  itself  insecure  with  respect to the
payment or  performance  of Borrower's  obligations  to Lender.  If this note is
payable  on demand,  the  inclusion  of  specific  events of  default  shall not
prejudice  Lender's right to require payment on demand or to decline to make any
requested Advance.

(b)     Without  prejudice  to any right of Lender to require payment on demand,
upon the occurrence of an event of default, Lender may declare the entire unpaid
Principal  Balance on this note and all accrued unpaid interest  immediately due
and payable, without notice; provided, however, that if any proceeding under any
bankruptcy  or  insolvency  law  is  commenced  by  or  against  Borrower,   the
availability of advances shall be immediately  terminated without notice and the
entire Principal Balance and all accrued interest shall, without notice,  become
immediately due and payable.  Upon default,  including failure to pay upon final
maturity,  Lender,  at its option,  may also, if permitted under applicable law,
increase the interest  rate on this note to a rate equal to the Prime  Borrowing
Rate plus 5%. The interest  rate will not exceed the maximum  rate  permitted by
applicable  law. In  addition,  if any payment of principal or interest is 19 or
more  days  past  due,  Borrower  will be  charged  a late  charge  of 5% of the
delinquent payment.

12.     EVIDENCE  OF  PRINCIPAL  BALANCE;  PAYMENT  ON  DEMAND. Holder's records
shall, at any time, be conclusive  evidence of the unpaid Principal  Balance and
interest owing on this note.  Notwithstanding any other provisions of this note,
in the event holder makes Advances hereunder which result in an unpaid Principal
Balance on this note which at any time exceeds the maximum  amount  specified in
Section 2,  Borrower  agrees that all such  Advances,  with  interest,  shall be
payable on demand.

13.     LINE OF CREDIT PROVISIONS. If the type of  credit indicated in Section 1
is a revolving line of credit or a non-revolving line of credit, Borrower agrees
that Lender is under no  obligation  and has not  committed to make any Advances
hereunder. Each Advance hereunder shall be made at the sole option of Lender.

14.     DEMAND NOTE. If  this note is payable on demand,  Borrower  acknowledges
and agrees that (a) Lender is entitled to demand Borrower's immediate payment in
full of all amounts  owing  hereunder  and (b) neither  anything to the contrary
contained  herein or in any other loan documents  (including but not limited to,
provisions  relating to  defaults,  rights of cure,  default  rate of  interest,
installment  payments,  late charges,  periodic  review of Borrower's  financial
condition, and covenants) nor any act of Lender pursuant to any such


<PAGE>

provisions shall limit or impair Lender's right or ability to require Borrower's
payment in full of all amounts owing hereunder immediately upon Lender's demand.

15.      REQUESTS FOR ADVANCES.

(a)     Any  Advance  may  be  made  or  interest  rate option selected upon the
request of Borrower  (if an  individual),  any of the  undersigned  (if Borrower
consists  of more than one  individual),  any  person or persons  authorized  in
subsection  (b) of  this  Section  15,  and  any  person  or  persons  otherwise
authorized  to  execute  and  deliver  promissory  notes to  Lender on behalf of
Borrower.

(b)     Borrower  hereby  authorizes  any   ONE of the following  individuals to
requestAdvances  and  to  select  interest  rate  options:____unless  Lender  is
otherwise instructed in writing.

(c)     All  Advances  shall  be disbursed  by  deposit  directly  to Borrower's
account_______number with Lender, or by cashier's check issued to Borrower.

(d)     Borrower  agrees  that  Lender  shall  have  no obligation to verify the
identity  of any person  making any  request  pursuant  to this  Section 15, and
Borrower  assumes all risks of the validity and  authorization of such requests.
In consideration of Lender  agreeing,  at its sole discretion,  to make Advances
upon such  requests,  Borrower  promises to pay holder,  in accordance  with the
provisions of this note, the Principal  Balance  together with interest  thereon
and other sums due hereunder, although any Advances may have been requested by a
person or persons not authorized to do so.

16.     PERIODIC  REVIEW.  Lender  will  review Borrower's credit accommodations
periodically.  At the time of the review,  Borrower will furnish Lender with any
additional  information  regarding  Borrower's  financial condition and business
operations that Lender requests. This information may include but is not limited
to, financial statements,  tax returns, lists of assets and liabilities,  agings
of receivables and payables, inventory schedules, budgets and forecasts. If upon
review,  Lender,  in its  sole  discretion,  determines  that  there  has been a
material adverse change in Borrower's financial  condition,  Borrower will be in
default. Upon default, Lender shall have all rights specified herein.

17.      NOTICES.  Any notice  hereunder may be given by ordinary  mail, postage
paid and addressed to Borrower at the last known  address of  Borrower  as shown
on holder's records.  If Borrower consists of more than one person, notification
 of any of said persons shall be complete notification of all.

18.     ATTORNEY  FEES.  Whether or not litigation or arbitration  is commenced,
Borrower  promises  to pay all  costs of  collecting  overdue  amounts.  Without
limiting the foregoing,  in the event that holder consults an attorney regarding
the  enforcement  of any of its rights under this note or any document  securing
the same,  or if this note is placed in the hands of an attorney for  collection
or if suit or  litigation  is  brought  to  enforce  this  note or any  document
securing the same,  Borrower  promises to pay all costs thereof  including  such
additional sums as the court or arbitrator(s) may adjudge reasonable as attorney
fees,  including  without  limitation,  costs and attorney  fees incurred in any
appellate  court,  in  any  proceeding  under  the  bankruptcy  code,  or in any
receivership and post-judgment attorney fees incurred in enforcing any judgment.

19.     WAIVERS;  CONSENT. Each party hereto, whether maker, co-maker, guarantor
or otherwise,  waives  diligence,  demand,  presentment  for payment,  notice of
non-payment,  protest  and notice of protest  and waives all  defenses  based on
suretyship or impairment of  collateral.  Without notice to Borrower and without
diminishing or affecting  Lender's rights or Borrower's  obligations  hereunder,
Lender may deal in any manner  with any person who at any time is liable for, or
provides  any real or personal  property  collateral  for, any  indebtedness  of
Borrower to Lender,  including the indebtedness  evidenced by this note. Without
limiting the foregoing,  Lender may, in its sole discretion: (a) make secured or
unsecured  loans to Borrower and agree to any number of waivers,  modifications,
extensions  and  renewals  of any  length  of such  loans,  including  the  loan
evidenced by this note; (b) impair, release (with or without substitution of new
collateral),  fail to perfect a security interest in, fail to preserve the value
of,  fail to  dispose of in  accordance  with  applicable  law,  any  collateral
provided by any person;  (c) sue, fail to sue,  agree not to sue,  release,  and
settle or compromise with, any person.

20.     JOINT  AND  SEVERAL  LIABILITY.   All  undertakings  of  the undersigned
Borrowers  are joint and several and are binding  upon any marital  community of
which any of the  undersigned  are members.  Holder's  rights and remedies under
this note shall be cumulative.

21.     SEVERABILITY.  If  any  term  or provision of this note is declared by a
court of competent jurisdiction to be illegal,  invalid or unenforceable for any
reason whatsoever,  such illegality,  invalidity or  unenforceability  shall not
affect  the  balance  of the  terms  and  provisions  hereof,  which  terms  and
provisions  shall  remain  binding  and  enforceable,  and  this  note  shall be
construed as if such illegal,  invalid or  unenforceable  provision had not been
contained herein.

22.     ARBITRATION.

(a)     Either Lender or  Borrower  may  require  that  all   disputes,  claims,
counterclaims and defenses, including those based on or arising from any alleged
tort  ("Claims")  relating in any way to this note or any  transaction  of which
this  note  is a part  (the  "Loan"),  be  settled  by  binding  arbitration  in
accordance  with the Commercial  Arbitration  Rules of the American  Arbitration
Association  and Title 9 of the U.S.  Code.  All  Claims  will be subject to the
statutes of limitation applicable if they were litigated. This provision is void
if the Loan, at the time of the proposed  submission to arbitration,  is secured
by real property  located  outside of Oregon or Washington,  or if the effect of
the  arbitration  procedure  (as opposed to any Claims of Borrower)  would be to
materially  impair  Lender's  ability to realize on any collateral  securing the
Loan.

(b)     If  arbitration occurs and each party's Claim is less than $100,000, one
neutral  arbitrator will decide all issues;  if any party's Claim is $100,000 or
more, three neutral  arbitrators will decide all issues. All arbitrators will be
active Oregon State Bar members in good


<PAGE>

standing. All arbitration hearings will be held in Portland, Oregon. In addition
to all  other  powers,  the  arbitrator(s)  shall  have the  exclusive  right to
determine all issues of arbitrability.  Judgment on any arbitration award may be
entered in any court with jurisdiction.

(c)     If either party institutes any judicial proceeding relating to the Loan,
such  action  shall  not be a  waiver  of the  right  to  submit  any  Claim  to
arbitration.  In  addition,  each has the  right  before,  during  and after any
arbitration  to exercise any number of the following  remedies,  in any order or
concurrently:  (i)  setoff;  (ii)  self-help  repossession;  (iii)  judicial  or
non-judicial foreclosure against real or personal property collateral;  and (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery and replevin.

23.     GOVERNING LAW. This note shall be governed by and construed and enforced
in accordance  with the laws of the State of Oregon  without regard to conflicts
of law principles; provided, however, that to the extent that Lender has greater
rights or remedies  under  Federal law,  this  provision  shall not be deemed to
deprive  Lender of such rights and  remedies as may be available  under  Federal
law.

24.     YEAR 2000.  Borrower  has reviewed and assessed its business  operations
and computer  systems and  applications to address the "year 2000 problem" (that
is, that computer  applications and equipment used by the Borrower,  directly or
indirectly   through  third   parties,   may  be  unable  to  properly   perform
date-sensitive  functions  before,  during and after January 1, 2000).  Borrower
reasonably  believes  that the year 2000  problem  will not result in a material
adverse  change in  Borrower's  business  condition  (financial  or  otherwise),
operations,  properties or prospects or ability to repay Lender. Borrower agrees
that this representation will be true and correct on and shall be deemed made by
Borrower on each date  Borrower  requests  any advance  under this  Agreement or
delivers any  information  to Lender.  Borrower will promptly  deliver to Lender
such information relating to this representation as Lender requests from time to
time.

25.     RENEWAL AND  EXTENSION.  This Note is given in renewal and extension and
not in novation of the following described indebtedness: That certain Promissory
Note dated  December  28,  1998,  in the  amount of  $5,500,000.00  executed  by
Borrower  payable to Lender.  It is further  agreed that all liens and  security
interest  securing said  indebtedness  are hereby renewed and extended to secure
the Note and all renewals, extensions and modifications thereof.

26.     PAYMENT OF INTEREST ACCRUED ON REPLACED  NOTE.  All interest accrued but
unpaid on Borrower's  promissory  note dated  December 28, 1998,  payable to the
order of Lender in the original amount $5,500,000.00,  as amended, supplemented,
extended or  otherwise  modified,  shall be due and payable in full on the first
interest payment date under this Note.

27.     DISCLOSURE.

        UNDER OREGON LAW, MOST  AGREEMENTS,  PROMISES AND  COMMITMENTS  MADE BY
LENDERS AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR  PERSONAL,  FAMILY OR  HOUSEHOLD  PURPOSES OR SECURED  SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING,  EXPRESS CONSIDERATION AND BE SIGNED BY
THE LENDER TO BE ENFORCEABLE.

EACH OF THE UNDERSIGNED HEREBY ACKNOWLEDGES  RECEIPT OF A COMPLETED COPY OF THIS
DOCUMENT.

PHOENIX GOLD INTERNATIONAL, INC.
--------------------------------------------------------
Borrower Name (Corporation, Partnership  or other Entity)


/S/ JOSEPH K. O'BRIEN                 CFO & SECRETARY
-----------------------------------------------------
By                                      Title


For  valuable  consideration,  Lender  agrees  to the  terms of the  arbitration
provision set forth in this note.

                                      Lender Name:U.S. BANK NATIONAL ASSOCIATION
                                                  ------------------------------
                                      By:   /s/ Jeffery Swift
                                         --------------------
                                      Title:   Vice President
                                            -----------------
                                      Date: 12/1/99
                                           --------