EXHIBIT 10.16

                            ALTERNATIVE RATE OPTIONS
                                 PROMISSORY NOTE
                               (PRIME RATE, LIBOR)
Obligor #:
          ---------------

$5,000,000.00                                         Dated as of:  1-29-01
------------------------------------------------------             -------------

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  555  SW Oak Portland, OR  97204,
            --------------------------------------------------------------------
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,  Minneapolis,  Minnesota, 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  December 31, 2001 ; (iii) no LIBOR  Interest  Period shall be selected
          -----------------
which would extend beyond January 31, 2002 ; (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.



                                       22
<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.


                                       23

<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:

      / /    on demand.
      /X/    on demand, or if no demand, on January 31, 2002    .
                                            --------------------
      / /    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, 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.
      / /            .
             --------

(b)   INTEREST.

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

             /X/    on  the  1st  day  of  February  ,  2001  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.


                                       24

<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                   with
                                                          -----------------
lender.  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


                                       25

<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 request
Advances and to select interest rate options:
n/a unless Lender is otherwise instructed in writing.
---

(c)   All Advances  shall be disbursed by deposit directly to Borrower's account
number n/a 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


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<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.   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 1, 1999, in the amount of $5,000,000.00 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.

25.   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.


                                          U.S. BANK NATIONAL ASSOCIATION

                                          By:   /s/ David Wynde
                                              --------------------

                                          Title: Vice President

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

                                          Date: Jan. 30, 2001
                                                ------------------




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