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                                                                    EXHIBIT 10.1

                                 LOAN AGREEMENT
                                 --------------


     This Loan  Agreement is made as of this 4th day of February,  1997,  by and
among Phoenix Gold International,  Inc., an Oregon corporation ("Borrower"), and
United States National Bank of Oregon, a national banking association ("Bank").

                                   BACKGROUND

     Borrower has  requested  Bank to lend it up to the sum of Five Million Five
Hundred  Thousand  Dollars  ($5,500,000)  in the  form of a  revolving  loan and
letters of credit  and Bank is  willing  to do so upon the terms and  conditions
hereinafter set forth.

                              TERMS AND CONDITIONS

     For valuable  consideration,  including the mutual  covenants  reflected in
this Agreement, the parties agree as follows:

     1.  Definitions.  In  addition  to other terms  defined  elsewhere  in this
Agreement,  the following  terms shall have the meanings set forth below.  Terms
not  otherwise  defined in this  Agreement  shall have the meanings  provided in
Article 9 of the  Uniform  Commercial  Code as enacted in the state of Oregon on
the date of this Agreement.

          1.1 This "Agreement" means this Loan Agreement,  including any and all
exhibits,  schedules,  and  supplements  made a part  hereof  and  any  and  all
amendments, modifications,  restatements, extensions, renewals, and replacements
hereof, whenever executed.

          1.2 "Assets"  means all assets and property of every nature,  real and
personal,  tangible and  intangible,  wherever  located and whether now owned or
hereafter acquired.

          1.3 "Bank" means United States National Bank of Oregon.

          1.4 "Borrower" means Phoenix Gold International, Inc.

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          1.5  "Business  Day" means any day other than a Saturday,  Sunday,  or
other day that commercial banks in Portland,  Oregon, are authorized or required
by law to close.

          1.6 "Capital Expenditures" means, for any period, the aggregate of all
cash  funded   expenditures   (including  such  portion  of  Capitalized   Lease
Obligations  as would be  capitalized  in  accordance  with  GAAP) for any Fixed
Assets (including replacements, substitutions, and additions) that have a useful
life of one year or more,  where such  expenditures  are or would, in accordance
with GAAP, be capitalized on the balance sheet of the Person in question.

          1.7 "Capitalized Lease Obligation" means any lease obligation that, in
accordance  with GAAP,  is required to be shown as a liability on the  financial
statement of the lessee.  The amount of a Capitalized  Lease Obligation shall be
the amount required by GAAP to be so shown.

          1.8 "Cash  Flow"  means,  for any  period,  Net Income for such period
after tax; plus, to the extent deducted in computing Net Income, depreciation of
Fixed Assets,  amortization of intangible assets, and net depletion of any other
assets.

          1.9   "Collateral"   means  all  accounts,   chattel  paper,   general
intangibles,  inventory,  and  equipment  of  Borrower,  together  with  (a) all
attachments,  accessions,  accessories,  tools, parts, supplies,  increases, and
additions  to  and  all  replacements  of and  substitutions  for  any  property
described herein,  (b) all products and produce of any of the property described
herein,  (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 herein, (d) all proceeds (including
insurance  proceeds) from the sale,  destruction,  loss, or other disposition of
any of the property  described herein,  and (e) all records and data relating to
any of  the  property  described  herein,  whether  in the  form  of a  writing,
photograph,  microfilm,  microfiche,  or electronic media,  together with all of
Borrower's  right,  title, and interest in and to all computer software required
to  utilize,  create,  maintain,  and  process  any  such  records  and  data on
electronic media.

          1.10  "Current  Assets"  means all  assets of a Person  classified  as
current assets in accordance with GAAP.

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          1.11  "Current   Liabilities"   means  all  liabilities  of  a  Person
classified as current liabilities in accordance with GAAP.

          1.12  "Current  Ratio"  means the ratio of  Current  Assets to Current
Liabilities.

          1.13 "Debt Service"  means for any period the sum of current  payments
of principal due with respect to any term debt (including  principal payments to
Carver Corporation),  plus Capital Expenditures, plus current principal payments
due with respect to any Capitalized  Lease Obligation,  plus any dividends.  The
foregoing  is not  intended  as a waiver or  limitation  of the  prohibition  on
dividends set forth in Section 10.6 hereof.

          1.14 "Debt  Service  Coverage  Ratio" means the ratio of (a) Cash Flow
for any period to (b) Debt Service for the period.

          1.15  "Debt-to-Worth  Ratio" means at any date the ratio of a Person's
(a) Liabilities to (b) its Tangible Net Worth.

          1.16 "Default Rate" means the rate of interest after default specified
in the Note.

          1.17  "Eligible  Accounts"  means all accounts  receivable of Borrower
except as hereinafter set forth:

          (a) All  accounts  aged  beyond  90 days  after  date of  invoice  are
     excluded.

          (b) Cash or "COD"  sales are  allowed  only to an  aggregate  limit of
     $150,000 at any one time.

          (c)  Progress  billing,  prebillings,  retainages  or  holdbacks,  and
     datings are all excluded.

          (d) Accounts  arising from  intercompany  or related company sales and
     sales to employees or officers are excluded.

          (e) Accounts  arising from sales to U.S. federal  government  agencies
     are excluded.

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          (f) Accounts  arising from sales  exceeding  the limit imposed by Bank
     with respect to any particular account debtor are excluded.

          (g) All accounts  from a debtor as to which 25 percent of the debtor's
     accounts are unpaid 90 days after date of invoice are excluded.

          (h)  Foreign  accounts  not  backed  by a  letter  of  credit,  credit
     insurance,  or cash  against  documents,  shall be limited  to $75,000  per
     account  unless a specific  limit has been assigned to the account  debtor.
     With  respect to foreign  debtors as to which no specific  dollar limit has
     been  assigned,  no more than  $1,000,000  in the aggregate at any one time
     shall be included. Foreign accounts backed by acceptable letters of credit,
     credit insurance,  or cash against documents are eligible for advance rates
     of 90 percent, 90 percent, and 60 percent, respectively.  Total eligibility
     for all foreign accounts  (including those with a specific dollar limit and
     those without) shall not exceed $2,500,000 at any one time.

          (i) All service charges are excluded.

          1.18 "Eligible  Inventory" means all inventory of Borrower,  including
raw materials, packaging, and finished goods, but "Eligible Inventory" shall not
include work in process and inventory in transit.

          1.19  "Environmental  Laws" means any and all laws,  statutes,  rules,
regulations,   orders,  consent  decrees,   permits,  or  licenses  relating  to
prevention, remediation, reduction, or control of pollution, or to protection of
the  environment,  natural  resources,  or human  health and  safety,  including
without  limitation  those relating to the treatment,  storage,  transportation,
release, and disposal of Hazardous Substances.

          1.20 "Expiration  Date" means December 31, 1997, or such later date as
to which the same is extended or renewed  pursuant to a writing signed on behalf
of Bank.

          1.21 "Fixed Assets" means property, plant, fixtures, and equipment.

          1.22 "GAAP" means  generally  accepted  accounting  principles  as set
forth in the opinions and pronouncements of the Accounting  Principles Board and
the American  Institute of Certified  Public  Accountants,  and  statements  and
pronouncements  of the Financial  Accounting  Standards  Board, or in such other
statements by such other entity as may be approved by a  significant  segment of
the public accounting  profession,  which are applicable to the circumstances as
of the date of determination.

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          1.23 "Hazardous  Substance"  means any explosive  material,  petroleum
(including crude oil and its fractions),  radioactive material, toxic substance,
polychlorinated biphenyls,  friable asbestos, and any substance now or hereafter
at  any  time  defined  as a  toxic  or  hazardous  substance  or  waste  in any
Environmental Law or included in any listing of toxic or hazardous substances or
wastes  promulgated by the EPA, or other state,  federal,  or local governmental
agency pursuant to any Environmental Law.

          1.24 "Inventory  Borrowing Cap" means the following  amounts as of the
following dates:

          Date of this agreement through     $3,000,000
          April 30, 1997

          May 1, 1997, through               $2,500,000
          May 31, 1997

          June 1, 1997, and thereafter       $2,000,000

          1.25 "Inventory  Borrowing Cap Reduction Date" shall mean May 1, 1997,
or such  earlier  date  upon  which  Borrower  agrees to  reduce  the  Inventory
Borrowing Cap permanently to $2,000,000.

          1.26  "Insolvency   Proceeding"  means  and  includes  any  proceeding
commenced by or against any Person under any provision of the federal Bankruptcy
Code, as amended, or under any other bankruptcy,  reorganization,  or insolvency
law.

          1.27 "Letter of Credit" shall have the definition set forth in Section
3.1 hereof.

          1.28  "Letters  of  Credit  Outstanding"  means  the  sum of  (a)  the
aggregate  Stated  Amount of all  outstanding  Letters of  Credit,  plus (b) the
aggregate principal amount of all Unpaid Drawings.

          1.29 "Liabilities"  means all liabilities of a Person as determined in
accordance  with GAAP,  excluding all  indebtedness  subordinated to Obligations
owing to Bank (provided that the principal and interest of such  indebtedness is
fully  subordinated  in  payment  and  collateral  to the  Obligations  and such
subordination is documented to the satisfaction of Bank).

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          1.30 "Loan  Documents"  means this  Agreement,  the Note, the Security
Agreement,  and all other  agreements,  instruments,  and  documents  (including
without limitation, security agreements, loan agreements, notes, fee agreements,
guarantees, mortgages, deeds of trust, subordination agreements, pledges, powers
of  attorney,  consents,  assignments,  contracts,  notices,  leases,  financing
statements,   letter   of   credit   applications,   reimbursement   agreements,
certificates,  statements, reports, notices, and all other writings) heretofore,
now, or hereafter  executed by, on behalf of, or for the benefit of Borrower and
delivered  to or  made  for the  benefit  of  Bank,  together  with  any and all
amendments,  modifications,  and supplements thereto and any and all extensions,
renewals, replacements, and restatements thereof.

          1.31 "Net  Income"  means,  for any  period,  the net  income for such
period  determined  in  accordance  with  GAAP,  provided,   however,   that  in
determining  Net  Income,  if the Person  has  acquired  all or any  substantial
portion of the assets and/or business of any other Person, any earnings properly
attributable to such assets and business to the date of such  acquisition  shall
not be included in Net Income.

          1.32 "Net Worth" means Assets less Liabilities.

          1.33 "Note" means the Revolving Note described in Section 2.

          1.34  "Obligations"  is  used  in its  most  comprehensive  sense  and
includes all debts, liabilities,  obligations, covenants, agreements, and duties
of any kind and nature  owing to Bank by  Borrower,  whether  present or future;
whether  or  not  evidenced  by  any  Loan  Document;   whether   liquidated  or
unliquidated;  whether  absolute  or  contingent;  whether due or to become due;
whether direct or indirect;  whether primary or secondary;  whether now existing
or hereafter arising; and including but not limited to all principal,  interest,
charges,  expenses,  advances,  fees,  and any  other  sum  payable  under  this
Agreement or any other Loan Document.

          1.35 "Person" means any individual, corporation,  partnership, limited
liability company, trust, association, or other entity or organization.

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          1.36  "Prime  Rate"  means  as of any  date  the  rate  most  recently
announced by Bank at its  principal  office in Portland,  Oregon,  as its "Prime
Rate." The Prime  Rate is one of Bank's  base rates and serves as the basis upon
which  effective  rates of  interest  are  calculated  for  those  loans  making
reference  thereto.  The Prime Rate is not  necessarily the lowest rate at which
Bank makes commercial  loans. Each and every change in the interest rate payable
in connection with any of the  Obligations  resulting from a change in the Prime
Rate  shall  become  effective  on the date such  change is  announced  by Bank.
Interest on all  obligations  shall be  calculated on the basis of a year of 360
days.

          1.37 "Security  Agreement" means the Security  Agreement  described in
Section 4.1 below.

          1.38 "Stated  Amount" means the maximum  amount  available to be drawn
under any Letter of Credit.

          1.39 "Tangible Net Worth" means Net Worth,  plus the aggregate  amount
of all indebtedness subordinated to Obligations owing to Bank (provided that the
principal and interest of such indebtedness is fully subordinated in payment and
collateral  to the  Obligations  and such  subordination  is  documented  to the
satisfaction of Bank), less the net book value of all intangible items.

          1.40 "Unpaid  Drawing" has the  definition set forth in Section 3.3 of
this Agreement.

     2. Revolving Loan.

          2.1 Revolving Line of Credit.  Upon the satisfaction of the conditions
precedent  contained  in this  Agreement,  Bank,  at its  option,  shall lend to
Borrower up to Five Million Five Hundred  Thousand  Dollars  ($5,500,000) in the
aggregate  subject to the terms and conditions of this Agreement (the "Revolving
Loan").  Such indebtedness  shall be evidenced by the execution by Borrower of a
promissory note in form acceptable to Bank (the "Revolving Note").

          2.2  Advances.  Borrower  agrees not to make a request  for an advance
unless, as of the date of request and disbursement,  (a) the representations and
warranties  contained herein are true and correct in all material respects,  and
(b) no event shall have  occurred  and be  continuing  or would  result from the
requested borrowing which constitutes,  or with the passage of time or giving of
notice or both, would constitute, an Event of Default under this Agreement.

<PAGE>

          2.3 Limit on Advances.  Borrower  may repay  advances and may reborrow
from time to time under the Revolving Note, but total advances outstanding under
the  Revolving  Note plus  Letters  of Credit  Outstanding  shall not exceed the
lesser of (a) $5,500,000 or (b) the sum of (i) 80 percent of Eligible  Accounts,
plus (ii) the lesser of (x) the Inventory Borrowing Cap or (y) 50 percent of the
remainder  of Eligible  Inventory,  less all trade  payables  owed to  inventory
vendors.

          2.4 Interest  Rate.  Each advance under the Revolving  Loan shall bear
interest  from the date of the advance  until  repaid  (unless the Default  Rate
shall become  applicable) at a per annum rate equal to the sum of the Prime Rate
plus 2 percent (200 basis points).  After the Inventory  Borrowing Cap Reduction
Date, the applicable rate of interest shall be based on Borrower's  Tangible Net
Worth as set forth  below in the  following  schedule.  Adjustments  to the rate
shall be made five business  days after receipt from Borrower of the  Compliance
Certificate  required by  subsection  9(d) of this  Agreement  and the financial
information required by subsection 9(b) of this Agreement.

             Tangible Net Worth                          Interest Rate
             ------------------                          -------------

         Greater than or equal to                    Prime Rate
         $12,800,000

         Greater than or equal to                    Prime Rate plus
         $12,000,000 but less than                   .5 percent
         $12,800,000

         Greater than or equal to                    Prime Rate plus
         $10,800,000 but less than                   1.25 percent
         $12,000,000

         Greater than or equal to                    Prime Rate plus
         $9,775,000 but less than                    2.0 percent
         $10,800,000

         Less than $9,775,000                        Default Rate

          2.5 Payment of Interest.  Interest on  outstanding  advances  shall be
paid  monthly  in  arrears  on the  first  day of each and  every  month  and at
maturity.

<PAGE>

          2.6 Repayment of Principal and Termination.  All of Bank's obligations
under Section 2 and Section 3 of this Agreement  shall terminate and all amounts
loaned or advanced to Borrower under the Revolving  Note,  together with accrued
interest  thereon,  shall be  immediately  due and payable on the earlier of the
occurrence  of an Event of Default,  on demand for payment as  specified  in the
Revolving Note, or the Expiration Date.

          2.7 Loan  Fee.  Borrower  agrees  to pay Bank on  demand a loan fee of
$20,625.

     3. Letters of Credit.

          3.1 Commitment to Issue.  Subject to and upon the terms and conditions
set forth herein,  Bank will issue,  within five (5) Business Days after receipt
of a written application of Borrower, in such form as Bank may designate, at any
time and from time to time on or prior to the  Expiration  Date, for the account
of Borrower,  one or more documentary  (commercial or import) or standby letters
of credit  which will not exceed  $500,000 in the  aggregate at any time (each a
"Letter of Credit").

          3.2 Maximum Amounts.  Notwithstanding the foregoing,  (i) no Letter of
Credit will be issued the Stated  Amount of which,  when added to the sum of the
outstanding  aggregate  principal  amount of the  Revolving  Loan and Letters of
Credit Outstanding at such time, would exceed the limit on advances set forth in
Section 2.3, (ii) each Letter of Credit will by its terms terminate,  or provide
an opportunity for prospective cancellation, not later than the Expiration Date,
and (iii) each Letter of Credit request will be subject to separate  approval by
Bank prior to issuance of the Letter of Credit.

          3.3  Agreement to Repay  Letter of Credit  Drawings.  Borrower  hereby
agrees to reimburse Bank, by making payment in immediately  available funds, for
any payment or  disbursement  made by Bank under any Letter of Credit (each such
amount, so paid or disbursed until reimbursed,  an "Unpaid Drawing") immediately
after,  and in any event on the date of,  such  payment  or  disbursement,  with
interest  on the  amount  so  paid or  disbursed  by  Bank,  to the  extent  not
reimbursed (including a reimbursement  pursuant to an advance made in accordance
with the last  sentence  of this  Section  3.3 on the  date of such  payment  or
disbursement, from and including the date paid or disbursed to but not including
the date Bank is  reimbursed  therefor  at a rate per annum equal to the Default
Rate,  such interest also to be payable on demand.  At the time that any drawing
under a Letter of Credit (each a "Drawing")  is made,  Bank shall  automatically
and without notice but subject to the  satisfaction of the conditions  specified
in Section 5, make an advance in the amount of such  Drawing (to the extent such
advance is then  permitted  to be  outstanding  pursuant  to Section  2.3),  the
proceeds of which will be applied  directly by Bank to reimburse  such  Drawing.
Borrower's  obligations under this Section 3.3 to reimburse Bank with respect to
Unpaid Drawings (including, in each case, interest thereon) will be absolute and
unconditional  under any and all  circumstances  and irrespective of any setoff,
counterclaim,  or defense to payment which Borrower may have or have had against
Bank, including,  without limitation,  any defense based upon the failure of any
Drawing to conform to the terms of the Letter of Credit or any nonapplication or
misapplication by the beneficiary of the proceeds of such Drawing.

<PAGE>

          3.4 Letter of Credit Fee.  Upon  issuance  and during the term of each
Letter of Credit, Borrower shall pay Bank on demand such standard fees as may be
charged by Bank to its customers in connection with such Letters of Credit.

     4. Collateral.

          4.1 Security  Agreement.  All of the Obligations shall be secured by a
first  priority  security  interest in the  Collateral.  Borrower has heretofore
executed and delivered a security  agreement  dated January 1, 1997,  granting a
security interest in the Collateral together with certain financing  statements.
Said  security  agreement  and financing  statements  shall remain  effective to
secure the Obligations.

          4.2 Cash  Collateral  Account.  All proceeds  from the  collection  of
accounts  receivable and the sale of inventory of Borrower  shall, at the option
of Bank, be  immediately  delivered to Bank for  placement in a cash  collateral
account for  Borrower.  Proceeds  received by Bank will be applied on the day of
receipt to principal owing to Bank under the Note.  Borrower shall be charged on
a monthly  basis for activity fees for account  maintenance  and use and for any
negative  collected  balance  resulting  from the time required to collect funds
through  normal  banking  channels  on items  deposited  in the cash  collateral
account.

          4.3  Partial  Subordination.  Bank  will  consider  subordinating  its
security  interest in a portion of Borrower's  Fixed Assets to a term loan of up
to   $1,000,000   from  a  third  party  lender.   Prior  to  Bank   considering
subordination, Borrower will deliver to Bank a third party independent appraisal
(from an appraiser and in a form acceptable to Bank) covering each item of Fixed
Assets  with  a  net  book  value  exceeding  $10,000.  Bank  approves  Maynards
Industries,  Inc., as an appraiser and approves a valuation of such Fixed Assets
at "orderly liquidation value" or "auction value" as appropriate.  The terms and
conditions of the loan from the third party lender, including the specific items
of equipment to which  subordination  will apply, must be approved by Bank. Bank
agrees  not  to  unreasonably  withhold  such  approval  so  long  as  following
implementation  of the  subordination  all  aspects  of the credit  extended  to
Borrower by Bank shall be in compliance with Bank's then effective  underwriting
standards  for  comparable   credits.   Borrower   agrees  that  upon  any  such
subordination,  the Inventory  Borrowing Cap shall be permanently  reduced by an
amount equal to 50 percent of the net loan proceeds, but the Inventory Borrowing
Cap shall not be less than $2,000,000. Upon such subordination,  Bank shall also
be entitled to modify the advance rates against inventory and accounts set forth
in Section 2.3 hereof upon providing Borrower with reasonable advance notice not
to exceed 60 days.

<PAGE>

     5. Conditions  Precedent to Lending.  The obligation of Bank to advance any
loan funds to Borrower or to issue a Letter of Credit pursuant to this Agreement
is subject to the conditions that Bank shall have received in form and substance
satisfactory  to Bank all of the  following  (to the extent  such items have not
previously been delivered to Bank), and that no Event of Default, or event which
with the giving of notice or the  passage of time or both  would  constitute  an
Event of Default has occurred and is continuing:

          5.1 This Agreement and the Note each duly executed by Borrower.

          5.2 Satisfactory evidence of required insurance on the Collateral.

          5.3 A certificate  from the  secretary of Borrower in form  reasonably
acceptable to Bank,  certifying  resolutions  of  Borrower's  board of directors
authorizing  this  Agreement,  the other Loan  Documents  and the  borrowing and
furnishing  of  collateral  provided  for in this  Agreement  and the other Loan
Documents;  and a certificate bearing the true signatures of officers authorized
to  sign  this  Agreement  and  any  of  the  other  Loan  Documents.  Bank  may
conclusively rely on such certificates until Bank receives further  certificates
from an officer of Borrower  canceling  or amending the prior  certificates  and
bearing the signatures of the officers named in such further certificates.

          5.4 A certificate  from the Secretary of State for the State of Oregon
for Borrower certifying that Borrower is an Oregon corporation in active status.

<PAGE>

          5.5 A copy of  Borrower's  articles of  incorporation  certified by an
officer of  Borrower  that as of the date of this  Agreement  such  articles  of
incorporation remain in full force and effect.

          5.6 A copy of  Borrower's  bylaws  certified by an officer of Borrower
that as of the date of this  Agreement  such  bylaws  remain  in full  force and
effect.

          5.7 All documents  granting  Bank a lien on or a security  interest in
the  Collateral  have been granted and  perfected by the filing,  recording,  or
registering of financing  statements in the appropriate  governmental offices or
by such  other  action as is  necessary  to  perfect  any such lien or  security
interest, and Bank shall have received evidence satisfactory to it that all such
liens and security interests are of first priority, subject only to encumbrances
permitted under the Security Agreement.

          5.8 Such other documents and information Bank may reasonably  require.
In addition,  the  obligation  of Bank to advance any loan funds or to issue any
Letter of Credit to Borrower is subject to receipt of the borrowing  certificate
required under subsection 9(e) hereof.

     6.  Representations and Warranties.  Borrower warrants and represents as of
the date hereof,  and shall be deemed to continuously  warrant and represent for
so long as the Agreement shall remain in effect and until full and final payment
of all Obligations that:

          6.1 Existence.  Borrower is a  corporation,  duly  organized,  validly
existing,  and in good  standing  under the laws of the state of Oregon,  and is
authorized to do business and is in good  standing  under the laws of all states
in which it is doing business.

          6.2 Authority. The execution, delivery, and performance by Borrower of
this  Agreement and the other Loan  Documents  have been duly  authorized by all
necessary action and will not violate any provision of law or of its articles of
incorporation  or bylaws or result in the breach of or  constitute  a default of
any lien,  charge,  or  encumbrance  upon any  Assets of  Borrower  or under any
indenture or other  agreement or instrument  to which  Borrower is a party or by
which  Borrower  or any of its  Assets may be bound or  affected,  other than as
specifically  provided herein. The officers of Borrower executing this Agreement
and any other Loan  Document  are and were duly and properly in office and fully
authorized to execute such instruments.

<PAGE>

          6.3 Binding Loan  Documents.  This  Agreement and the Loan  Documents,
when and as executed and delivered,  shall be and are valid and legally  binding
on Borrower.

          6.4 Pending Litigation. There is no litigation, proceeding, or dispute
pending  or,  to the  knowledge  of  Borrower,  threatened  that,  if  adversely
determined,  would have a material adverse effect on the Assets or the financial
condition of Borrower.

          6.5 Title to Assets and Peaceful  Possession.  Borrower has good title
to all  properties  included in assets  shown on its  financial  statement  most
recently  provided to Bank and enjoys peaceful and undisturbed  possession under
all  material  leases.  None of the leases of Borrower  contains  any unusual or
burdensome  provisions  which will materially  affect or impair the operation of
Borrower.

          6.6 Tax Returns.  All federal,  state, and other tax returns have been
filed by Borrower as required by law and the taxes in connection  therewith have
been paid except those which are not yet due and payable.

          6.7  Financial  Statements.  All  financial  statements  submitted  by
Borrower to Bank,  whether previously or in the future, are and will be true and
correct.  Such financial statements have been and will be prepared in accordance
with GAAP.

          6.8 Compliance  with ERISA.  Borrower is in compliance in all material
respects  with all  applicable  provisions  of the  Employee  Retirement  Income
Security Act of 1974 ("ERISA"),  as amended from time to time, including (unless
the context otherwise requires) any rules or regulations promulgated thereunder,
and no Reportable Event (as defined in Section 4043(b) of ERISA or any successor
act or acts) has occurred or is occurring.

<PAGE>

     7.  Affirmative  Covenants.  Borrower  covenants and agrees that so long as
this Agreement  shall remain in effect and so long as any of the Obligations are
outstanding, Borrower will:

          7.1  Preservation  of  Existence.  Maintain  and  preserve  Borrower's
existence  and its rights,  franchises,  and  privileges  and qualify and remain
qualified and in good standing in each jurisdiction in which such  qualification
is necessary to Borrower's business and operations or ownership of its Assets.

          7.2 Maintenance of Insurance.  Maintain and keep in force insurance of
the types and in the amounts  customarily  carried in similar lines of business,
including,  in adequate amounts,  fire,  liability,  property damage,  workmen's
compensation,  and such other insurance as Bank shall  reasonably  require.  All
insurance shall be carried in companies and amounts satisfactory to Bank and, if
required by Bank,  such  policies  shall be made payable to Bank as its interest
may appear.  Upon  request,  Borrower  will  deliver to Bank a current  schedule
setting forth all insurance in effect.

          7.3 Payment of Taxes,  Etc. Pay and discharge all taxes,  assessments,
and  governmental  charges prior to the date on which penalties  attach thereto,
except to the extent such taxes, assessments,  or governmental charges are being
contested in good faith and are adequately  reserved against to the satisfaction
of Bank.

          7.4 Compliance with Laws,  Etc.  Comply in all material  respects with
the requirements of all applicable laws, rules,  regulations,  and orders of any
governmental authority, including without limitation Environmental Laws.

          7.5  Keeping of  Records  and  Inspection  Rights.  Maintain  adequate
records  and books of account on a  consistent  basis in  accordance  with GAAP,
reflecting all financial transactions of Borrower, and permit any representative
of Bank, at any  reasonable  time,  to examine,  inspect,  and audit  Borrower's
books, records, and Assets, and arrange for verification of accounts receivable,
either directly with the Account Debtor or by other methods.

          7.6 Notice of  Default.  Promptly  notify  Bank,  in  writing,  of the
occurrence of any Event of Default  hereunder or of any event which would become
an Event of Default hereunder upon giving of notice, the lapse of time, or both.

<PAGE>

          7.7 Bank  Expenses.  Pay to Bank,  in  addition  to all other sums due
hereunder or provided for in this Agreement, all costs incurred by Bank pursuant
to any state or federal government investigation or proceeding arising out of or
in connection  with this Agreement,  its  negotiation,  or otherwise  concerning
Borrower  or its  Assets.  Borrower  shall  also  pay  Bank  all  sums  covering
reasonable costs incurred in performing periodic  inspections of the Collateral.
Such inspections can be requested as reasonably determined by Bank.

          7.8 Further Assurances. Borrower shall execute, acknowledge,  deliver,
file, and register,  at its expense,  all such further agreements,  instruments,
certificates,  documents,  and  assurances  and perform  such acts as Bank deems
necessary or appropriate to effect the purposes of this Agreement and other Loan
Documents.

     8. Financial  Covenants.  Until all of the Obligations have been fully paid
and satisfied,  Borrower  shall  strictly  comply with each and every one of the
financial covenants set forth below. The following covenants shall be determined
on a fully combined basis with respect to any present or future  subsidiaries of
Borrower:

          (a) Borrower  shall  maintain as of each  month-end set forth below, a
     Current Ratio of at least the ratios set forth below:

                  Month-End                       Current Ratio
                  ---------                       -------------

           February 1997                              1.55:1
           March, April,                              1.75:1
             and May 1997
           June, July, August, September,             2.00:1
           October, November, and
           December 1997

          (b)  Borrower  shall  maintain  as of each  month-end  set forth below
     Tangible Net Worth of at least the amounts set forth below:


<PAGE>



                  Month-End                       Tangible Net Worth
                  ---------                       ------------------

          February and March 1997                    $ 9,775,000
          April 1997                                  10,050,000
          May 1997                                    10,400,000
          June 1997                                   12,200,000
          July 1997                                   12,400,000
          August, September, October,                 12,600,000
            November, and December 1997

          (c) Borrower  shall  maintain as of each fiscal  quarter  year-end set
     forth below a  Debt-to-Worth  Ratio of no greater than the ratios set forth
     below:

                  Quarter-End                     Debt-to-Worth Ratio
                  -----------                     -------------------

          March 1997                                    0.90:1
          June 1997                                     0.75:1
          September 1997                                0.75:1
          December 1997                                 0.75:1

          (d) Borrower  shall  maintain as of each fiscal  quarter  year-end set
     forth below a minimum Debt Service  Coverage  Ratio  commencing  October 1,
     1996,  measured  quarterly on a cumulative basis through the fiscal quarter
     ending September 1997 and thereafter on a rolling four-quarter basis, of at
     least the ratios set forth below:

                  Quarter-End                     Debt Service Coverage Ratio
                  -----------                     ---------------------------

         March 1997                                  Not Applicable
         June 1997                                      1.25:1
         September 1997                                 1.25:1
         December 1997                                  1.25:1

     9. Reporting  Requirements.  Borrower shall provide,  at its expense and in
form and detail  satisfactory  to Bank and in such  number of copies as Bank may
require:

          (a) As soon as is available, and in any event within 90 days after the
     close of each fiscal year,  the balance sheet,  profit and loss  statement,
     and  statement  of  shareholders'  equity of  Borrower  on a  combined  and
     combining  basis, in reasonable  detail and stating in comparative form the
     figures as at the close of and for the previous fiscal year, accompanied by
     an unqualified  opinion  letter from a  certified  public  accounting  firm
     satisfactory to Bank.

<PAGE>

          (b) As soon as is available, and in any event within 30 days after the
     end of each  month,  a  balance  sheet,  profit  and  loss  statement,  and
     statement of shareholders' equity for Borrower, on a combined and combining
     basis.  Monthly  statements  shall include  cumulative  figures  indicating
     operating results for the fiscal year to date.

          (c) Within 20 days after the end of each  month,  a listing  and aging
     after date of invoice of all accounts payable and a listing and aging after
     date of invoice of all accounts receivable.

          (d)  Within  30  days  after  the  end of  each  month,  a  compliance
     certificate   for  Borrower  in  form   acceptable  to  Bank   ("Compliance
     Certificate")  attesting to Borrower's compliance or noncompliance with the
     terms of this Agreement.

          (e) By 4:00 p.m.  each Business Day a borrower's  certificate  in form
     sufficient to allow Bank to determine the amount of credit  available under
     the Revolving Loan.

          (f) By 4:00 p.m.  on the first  Business  Day of each week a cash flow
     projection for Borrower's operations over the 12-week period commencing the
     first day of the  second  week  immediately  prior to the week in which the
     projection  is  submitted,  together  with  management's  analysis  of  and
     commentary on any variance for past projections.

     10. Negative Covenants. Borrower agrees and covenants that, so long as this
Agreement  shall  remain in  effect  and until  full and  final  payment  of all
Obligations, Borrower will not:

          10.1  Dissolution  or Merger.  Liquidate or dissolve or enter into any
consolidation,  merger, pool, joint venture, syndicate or other combination,  or
sell,  lease  or  dispose  of all of its  Assets  or of such  portion  as in the
reasonable opinion of Bank constitutes a substantial portion thereof, or acquire
the assets of another  business in a transaction  analogous to a merger or other
consolidation.

          10.2 Third Party Indebtedness. Create, incur, or become liable for any
indebtedness, or become liable as a surety, guarantor, accommodation endorser or
otherwise for any other person, partnership, corporation, or business except:

<PAGE>

          (a) Borrowings under this Agreement.

          (b)  Extensions  or renewals of  indebtedness  existing on the date of
     this Agreement  (including  rescheduled  payments of trade accounts payable
     agreed to by vendors).

          (c) Obligations incurred in the usual course of Borrower's business by
     purchasing  on credit  goods,  supplies,  or  merchandise,  or by executing
     bonds,  contracts,  or by endorsing negotiable  instruments received in the
     normal course of business.

          (d) Term indebtedness approved by Bank under Section 4.3 hereof.

          (e)  All  indebtedness  subordinated  to  Obligations  owing  to  Bank
     (provided  that the  principal and interest of such  indebtedness  is fully
     subordinated  in  payment  and  collateral  to  the  Obligations  and  such
     subordination is documented to the satisfaction of Bank).

          10.3 Loans or  Extension  of  Credit.  Make any  loans,  advances,  or
extension of credit to any person, partnership,  corporation, or business except
such as are made in the ordinary course of Borrower's business.

          10.4 Liens and Encumbrances. Create, incur, assume, or permit to exist
any mortgage, deed of trust, security interest, or other encumbrance of any kind
upon or on any of its Assets now owned or hereafter acquired, other than:

          (a) Liens for taxes not delinquent or being contested in good faith by
     appropriate proceedings.

          (b)  Liens in  connection  with  worker's  compensation,  unemployment
     insurance, or other social security obligations.

          (c) Mechanic's,  worker's,  materialmen's,  landlord's,  carrier's, or
     other like liens arising in the ordinary and normal course of business with
     respect to  obligations  which are not due or which are being  contested in
     good faith.

<PAGE>

          (d) Mortgages,  deeds of trust, or other security interests which were
     executed,  delivered and recorded  prior to the date of this  Agreement and
     which encumber real property or mineral rights.

          (e) Liens securing the  indebtedness  identified under Section 10.2(d)
     and (e).

          10.5 Business  Activity.  Engage in any significant  business activity
substantially  different  from  or  unrelated  to  Borrower's  present  business
activities  and  operations,  or cease to engage in any  portion  of  Borrower's
business   activities  and  operations  which,  in  Bank's  reasonable  opinion,
constitutes a material portion thereof.

          10.6  Distributions.  Declare,  pay,  or make  any  dividend  or other
distribution on any ownership interest of Borrower.

          10.7  Hazardous Use and  Materials.  Permit any hazardous or dangerous
use to be made of any property owned or leased by it ("Property") and shall keep
all Property in a safe condition and in full compliance  with all  Environmental
Laws.  Borrower  agrees to defend,  indemnify,  and hold Bank  harmless from and
defend it against any and all costs,  damages, or losses arising from or related
to the breach of any  warranty or covenant in this  paragraph,  and for any lien
imposed against any Property or any portion thereof to secure the payment of any
costs  relating  to the  removal of  Hazardous  Substance  and/or any  resulting
restoration  of the  Property.  This  indemnification  shall be  secured  by the
Security  Agreement.  The creation of or filing of any lien against the Property
or any  portion  thereof as a result of the actual or  alleged  presence  on the
Property of any Hazardous Substance,  any  misrepresentation of Borrower herein,
or the failure of  Borrower  to make any  payment or  promptly  or  continuously
pursue any action  referred to in this  paragraph  shall  constitute an Event of
Default under this Agreement.

     11. Events of Default.  Each of the following shall  constitute an Event of
Default.

          11.1 Borrower  shall fail to pay any portion of the  Obligations  when
due; or

          11.2 Any representation or warranty by Borrower under or in connection
with  this  Agreement  or the Loan  Documents  shall  prove  to be or have  been
incorrect in any material respect; or

<PAGE>

          11.3 Any  failure to comply  with a  financial  covenant  set forth in
Section  8  hereof;  provided,  however,  failure  to  comply  with the  monthly
covenants set forth in  subsections  8(a) and 8(b) shall not constitute an Event
of Default unless the failure exists in two of any three consecutive months; or

          11.4 Borrower shall fail in any material respect to perform or observe
any other term,  covenant,  or agreement  contained in this  Agreement or in any
Loan Document; or

          11.5 Borrower  shall fail to pay or shall commit any material  default
(any default which results in an attempted  acceleration  of the maturity of the
indebtedness  is hereby deemed  material)  with respect to any  indebtedness  of
Borrower for borrowed money or with respect to any mortgage, indenture, or other
agreement with any lender, including,  without limitation,  any indebtedness now
existing  or  hereafter  created  and  whether  subordinated  or  senior  to the
Obligations; or

          11.6 Any  Reportable  Event which Bank  determines in good faith might
constitute  grounds for the termination of any employee  benefit plan maintained
by  Borrower  for its  employees  and  covered  by Title IV of ERISA or to which
Section 412 of the Internal Revenue Code of 1986, as amended, applies (a "Plan")
or grounds for the appointment by the  appropriate  United States District Court
of a  trustee  to  administer  any  Plan  if the  cause  therefor  shall  remain
unremedied  thirty (30) days after written notice to such effect shall have been
given to Borrower by Bank, or any Plan shall be  terminated,  or a trustee shall
be appointed by an  appropriate  United States  District Court to administer any
Plan, or the United States Pension Benefit Guaranty  Corporation shall institute
proceedings  to  terminate  any Plan or to appoint a trustee to  administer  any
Plan; or

          11.7 Entry  against  Borrower of any  judgment in excess of $50,000 on
any claim which is not covered by  insurance  satisfactory  to Bank and which is
not  discharged  within  sixty (60) days after such entry or within  thirty (30)
days after notice of default from Bank, whichever first occurs; or

          11.8 Any act of any  governmental  regulatory  authority which, in the
reasonable  opinion of Bank,  impairs the prospect of payment by Borrower of its
Obligations  to Bank and which remains in effect as of the earlier of sixty (60)
days after the act is  initially  taken or thirty  (30) days after  notice  from
Bank; or

<PAGE>

          11.9 Borrower shall:

          (a) Apply for or consent to the appointment of a receiver, trustee, or
     liquidator of itself, or of all or a substantial part of its Assets, or

          (b) Be unable to, or admit in writing its  inability to, pay its debts
     as they fall due (other than reschedules of trade accounts payable), or

          (c) Make a general assignment for the benefit of its creditors, or

          (d) Be adjudicated either bankrupt or insolvent, or

          (e) File a voluntary petition in bankruptcy or a petition or an answer
     seeking  reorganization  or  an  arrangement  with  creditors  or  to  take
     advantage  of  any  insolvency  law or an  answer  admitting  the  material
     allegations   of  a  petition   filed   against   it  in  any   bankruptcy,
     reorganization,  or insolvency proceeding, or any corporate action shall be
     taken by it for the purpose of effecting any of the foregoing, or

          (f) Have filed against it any petition in bankruptcy  which  continues
     unstayed and in effect for any period of more than thirty (30)  consecutive
     days.

     12. Bank's Remedies In Event of Default.

          12.1 Specific  Remedies.  Upon the occurrence of any Event of Default,
Bank shall have the right, immediately and without notice, to:

          (a) Cease making advances or extending credit to or for the benefit of
     Borrower;

          (b) Terminate  this  Agreement as to any future  obligation of Bank to
     Borrower,  but without affecting any of Bank's rights and without affecting
     the Obligations owing to Bank;

          (c) Declare  all  Obligations  immediately  due and  payable,  without
     presentment, demand, or other notice of any kind;

<PAGE>

          (d) Exercise the right of set off described in Section 13.7 below;

          (e)  Exercise  all other  remedies  provided in the Loan  Documents or
     otherwise available under applicable law.

          12.2 Covenant  Violation Fee. Bank may impose a covenant violation fee
of $1,500 upon the violation of any covenant in this Agreement by Borrower. Such
fee is intended as liquidated damages to compensate Bank for costs incurred as a
result of such  violations and represents  the parties'  reasonable  estimate of
such costs. Imposing said fee shall not preclude Bank from declaring an Event of
Default.

          12.3  Cumulative  Remedies.  All rights and  remedies of Bank,  either
under this Agreement,  under the other Loan Documents,  under law, or otherwise,
shall be cumulative and not exclusive, and any single or partial exercise of any
power or right shall not preclude the further exercise thereof,  or the exercise
of any other  power or right.  The  foregoing  listing of Events of Default  and
remedies  shall not diminish or modify in any respect the provisions of the Note
which  specify  that all  advances  are  optional  with Bank and that demand for
payment may be made at any time.

     13. Miscellaneous.

          13.1  Limitation of Liability.  Neither Bank, nor any of its officers,
employees  or agents,  shall have any  liability  to Borrower  (whether in tort,
contract,  or otherwise)  for losses  suffered by Borrower in  connection  with,
arising  out of, or in any way  related  to the  transactions  or  relationships
contemplated  by this  Agreement,  or any act,  omission or event  occurring  in
connection herewith, unless it is determined by final and nonappealable judgment
or order  binding on Bank,  that the losses were suffered as a result of acts or
omissions  constituting  gross  negligence  or willful  misconduct.  In any such
proceeding,  Bank shall be entitled to the benefit of the rebuttable presumption
that it acted in good faith and with the exercise of ordinary care.

          13.2  Indemnification.  Borrower  shall  hold Bank and its  directors,
officers,  employees,  agents and attorneys  harmless  from,  and indemnify them
fully against, any and all claims, actions, damages, liabilities,  losses, costs
and  expenses  imposed  on,  incurred  by or  asserted  against  any of  them in
connection with any litigation,  investigation, claim or proceeding commenced or
threatened  related  to  the  negotiation,   preparation,  execution,  delivery,
enforcement,  performance  or  administration  of this  Agreement and any of the
other Loan Documents, or related to any of the transactions  contemplated hereby
or any act, omission, event or transaction related thereto,  including,  without
limitation,  court costs and fees and  expenses of counsel,  but  excluding  any
claims  and  other  liabilities  arising  solely  as a result  of  Bank's  gross
negligence or willful misconduct.  The foregoing  indemnification  shall survive
payment of the Obligations and the termination or nonrenewal of this Agreement.

<PAGE>

          13.3  Amendments  or  Modifications.  No amendment,  modification,  or
waiver of any  provision  of this  Agreement  or any other  Loan  Document,  nor
consent to any departure by any of Borrower  therefrom,  shall, in any event, be
effective  unless the same shall be in writing and signed by Bank, and then such
waiver or consent shall be effective  only in the specific  instance and for the
specific purpose for which given.

          13.4 Notices. All notices,  requests,  and demands shall be in writing
and be given to or made upon the respective parties hereto as follows:

Borrower:      Phoenix Gold International, Inc.
               9300 North Decatur
               Portland, Oregon  97203

Bank:          United States National Bank of Oregon
               Oregon Commercial Loan Servicing (PL-7)
               555 S.W. Oak Street
               Portland, Oregon  97204

or to such other  address as any party shall  designate for itself in writing to
the other party.

          13.5 Cost and Expense.  Borrower agrees to pay on demand all costs and
expenses of Bank in connection with the  arrangement of the financing  hereunder
and the  preparation,  execution,  and delivery of this  Agreement and the other
Loan Documents  including,  without limitation,  reasonable  attorney's fees and
out-of-pocket  expenses of counsel to Bank. In addition,  Borrower agrees to pay
on demand  all costs and  expenses  of Bank in  connection  with any  amendment,
modification, or waiver of any of the terms of this Agreement or any of the Loan
Documents.  Borrower  further  agrees to pay on demand all costs and expenses of
Bank in connection with the  administration of this Agreement and any other Loan
Documents including, without limitation, costs and expenses sustained by Bank in
connection with collateral examinations.

<PAGE>

          13.6 No Waiver; Cumulative Remedies. No failure on the part of Bank to
exercise,  and no delay in  exercising,  any right  hereunder  or under any Loan
Document  shall  operate  as a waiver  thereof,  nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

          13.7 Right of Set Off. Upon the occurrence and during the  continuance
of any Event of Default,  Bank may,  without notice (such notice being expressly
waived by Borrower), set off and apply any and all deposits (general or special,
time  or  demand,  provisional  or  final)  at  any  time  held  by,  and  other
indebtedness  at any time owing by,  Bank to or for the credit or the account of
any one or more  of  Borrower  against  any  and all of the  Obligations  now or
hereafter   existing   under  this   Agreement  and  any  other  Loan  Document,
irrespective  of  whether  or not Bank  shall  have made any  demand  under this
Agreement  or any other Loan  Document  and  although  such  obligations  may be
unmatured.  Bank agrees  promptly to notify  Borrower after any such set-off and
application  made by Bank,  provided  that the failure to give such notice shall
not affect the  validity  of such  set-off and  application.  The rights of Bank
under this  section  are in addition to other  rights and  remedies  (including,
without limitation, other rights of set-off) which Bank may have.

          13.8 Arbitration.  Bank and Borrower agree that all disputes,  claims,
and controversies  between them, whether individual,  joint, or class in nature,
arising from this Agreement or otherwise,  including without limitation contract
and tort  disputes,  shall be  arbitrated  pursuant to the Rules of the American
Arbitration Association, upon request of either party. No act to take or dispose
of  any  collateral  securing  any  loan  shall  constitute  a  waiver  of  this
arbitration  agreement or be  prohibited  by this  arbitration  agreement.  This
includes,  without  limitation,  obtaining  injunctive  relief  or  a  temporary
restraining  order;  foreclosing  by notice  and sale under any deed of trust or
mortgage;  obtaining  a writ of  attachment  of  imposition  of a  receiver;  or
exercising  any  rights  relating  to  personal  property,  including  taking or
disposing of such property with or without  judicial process pursuant to Article
9 of the  Uniform  Commercial  Code.  Any  disputes,  claims,  or  controversies
concerning  the  lawfulness  or  reasonableness  or any act,  or exercise of any
right,  concerning  any  collateral  securing any loan,  including  any claim to
rescind,  reform,  or otherwise modify any agreement  relating to the collateral
securing  any  loan,  shall  also  be  arbitrated;  provided,  however,  that no
arbitrator  shall have the right or other power to enjoin or restrain any act of
any party.  Judgment upon any award rendered by any arbitrator may be entered in
any court having  jurisdiction.  Nothing  herein  shall  preclude any party from
seeking equitable relief from a court of competent jurisdiction.  The statute of
limitations,  estoppel,  waiver,  laches,  and  similar  doctrines  which  would
otherwise be applicable  in an action  brought by a party shall be applicable in
any arbitration  proceeding,  and the commencement of an arbitration  proceeding
shall be deemed the  commencement of any action for these purposes.  The Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.

<PAGE>

          13.9 Enforcement Costs. Borrower agrees to pay to Bank, on demand, all
out-of-pocket  expenses  and  attorneys'  fees  (including  allocated  costs for
in-house legal services) incurred by Bank prior to the commencement of any legal
action or  arbitration  proceeding in connection  with the  enforcement  of this
Agreement or any Loan  Document.  In the event of a legal action or  arbitration
proceeding,  including  appellate  proceedings and bankruptcy or  reorganization
proceedings  in which  any  party  may  appear to  protect  its  interests,  the
prevailing  party shall be entitled to  reasonable  attorneys'  fees  (including
allocated   costs  for  in-house   legal   services)  and  costs  and  necessary
disbursements  incurred  in  connection  with  such  action  or  proceeding,  as
determined by the court or arbitrator.

          13.10 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the  benefit  of the  parties  hereto and their  respective  heirs,
successors, and assigns, except that Borrower shall not have the right to assign
its rights hereunder or any interest herein.

          13.11 Governing Law;  Jurisdiction.  This Agreement and all other Loan
Documents  shall in all  respects be governed by, and  construed  in  accordance
with, the substantive law of the state of Oregon.

          13.12  Consents.  Whenever  this  Agreement  provides  for Borrower to
obtain the  approval or consent of Bank such  consent may be granted or withheld
in the sole absolute  discretion  of Bank,  unless this  Agreement  specifically
states that approval or consent shall not be unreasonably withheld.

<PAGE>

          13.13 Waiver of Default. By executing this Agreement, Bank waives that
certain  default by Borrower  which arose at the end of  Borrower's  1996 fiscal
year pertaining to Borrower's Debt Service Coverage Ratio.

          13.14 NO ORAL COMMITMENTS. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES
AND COMMITMENTS  MADE BY BANK AFTER OCTOBER 3, 1989,  CONCERNING LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL,  FAMILY OR HOUSEHOLD PURPOSES,  OR
SECURED   SOLELY  BY  BORROWER'S   RESIDENCE,   MUST  BE  IN  WRITING,   EXPRESS
CONSIDERATION AND BE SIGNED BY BANK TO BE ENFORCEABLE.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed  by their duly  authorized  officers as of the day and year first above
written.

UNITED STATES NATIONAL BANK OF OREGON


By: /s/ Daniel A. Rice
   ----------------------------------

Title:  V.P.
       ------------------------------


PHOENIX GOLD INTERNATIONAL, INC.


By: /s/ Timothy G. Johnson
   ----------------------------------

Title:  V.P.
      -------------------------------