<PAGE>

EXHIBIT 10.16


        USBANK
                             BUSINESS LOAN AGREEMENT

<TABLE>
<CAPTION>
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    Principal        Loan Date     Maturity     Loan No    Call   Collateral      Account       Officer     Initials
<S>                  <C>           <C>          <C>        <C>    <C>            <C>            <C>         <C>
  $7,000,000.00      05-31-99      05-31-00      391-75               70         0339586566      ABC03
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</TABLE>

References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item.

Borrower: APPLIED MICROSYSTEMS CORPORATION
          5020 148TH AVENUE NORTHEAST
          REDMOND, WA 98073


Lender:  U.S. Bank National Association
         East King County Corporate Banking
         10800 NE 8th Street, Suite 1000
         Bellevue, WA 98004

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

TERM. This Agreement shall be effective as of May 31, 1999, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.

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

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

      Borrower. The word "Borrower" means APPLIED MICROSYSTEMS CORPORATION. The
      word "Borrower" also includes, as applicable, all subsidiaries and
      affiliates of Borrower as provided below in the paragraph titled
      "Subsidiaries and Affiliates."

      CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
      Compensation, and Liability Act of 1980, as amended.

      Cash Flow. The words "Cash Flow" mean net income after taxes, and
      exclusive of extraordinary gains and income, plus depreciation and
      amortization,

      Collateral. The word "Collateral" means and includes without limitation
      all property and assets granted as collateral security for a Loan, whether
      real or personal property, whether granted directly or indirectly, whether
      granted now or in the future, and whether granted in the form of a
      security interest, mortgage, deed of trust, assignment, pledge, chattel
      mortgage, chattel trust, factor's lien, equipment trust, conditional sale,
      trust receipt, lien, charge, lien or title retention contract, lease or
      consignment intended as a security device, or any other security or lien
      interest whatsoever, whether created by law, contract, or otherwise.

      Debt. The word "Debt" means all of Borrower's liabilities excluding
      Subordinated Debt.

      ERISA, The word "ERISA" means the Employee Retirement Income Security Act
      of 1974, as amended.

      Event of Default, The words "Event of Default" mean and include without
      limitation any of the Events of Default set forth below in the section
      titled "EVENTS OF DEFAULT."

      Grantor. The word "Grantor" means and includes without limitation each and
      all of the persons or entities granting a Security Interest in any
      Collateral for the indebtedness, including without limitation all
      Borrowers granting such a Security Interest.

      Guarantor, The word "Guarantor" means and includes without limitation each
      and all of the guarantors, sureties, and accommodation parties in
      connection with any Indebtedness.

      Indebtedness, The word "Indebtedness" means and includes without
      limitation all Loans, together with all other obligations, debts and
      liabilities of Borrower to Lender, or any one or more of them, as well as
      all claims by Lender against Borrower, or any one or more of them; whether
      now or hereafter existing, voluntary or involuntary, due or not due,
      absolute or contingent, liquidated or unliquidated; whether Borrower may
      be liable individually or jointly with others; whether Borrower may be
      obligated as a guarantor, surety, or otherwise: whether recovery upon such
      Indebtedness may be or hereafter may become barred by any statute of
      limitations; and whether such Indebtedness may be or hereafter may become
      otherwise unenforceable.

      Lender, The word "Lender" means U.S. Bank National Association, its
      successors and assigns.

      Liquid Assets, The words "Liquid Assets" mean Borrower's cash on hand plus
      Borrower's readily marketable securities.

      Loan. The word "Loan" or "Loans" means and includes without limitation any
      and all commercial loans and financial accommodations from Lender to
      Borrower, whether now or hereafter existing, and however evidenced,
      including without limitation those loans and financial accommodations
      described herein or described on any exhibit or schedule attached to this
      Agreement from time to time.

      Note. The word "Note" means and Includes without limitation Borrower's
      promissory note or notes, if any, evidencing Borrower's Loan obligations
      in favor of Lender, as welt as any substitute, replacement or refinancing
      note or notes therefor.

      Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
      interests securing Indebtedness owed by Borrower to Lender; (b) liens for
      taxes, assessments, or similar charges either not yet due or being
      contested in good faith; (c) liens of materialmen, mechanics,
      warehousemen, or carriers, or other like liens arising in the ordinary
      course of business and securing obligations which are not yet delinquent;
      (d) purchase money liens or purchase money security interests upon or in
      any property acquired or held by Borrower in the ordinary course of
      business to secure indebtedness outstanding on the date of this Agreement
      or permitted to be incurred under the paragraph of this Agreement titled
      "Indebtedness and Liens"; (e) liens and security interests which, as of
      the date of this Agreement, have been disclosed to and approved by the
      Lender in writing: and (I) those liens and security interests which in the
      aggregate constitute an immaterial and insignificant monetary amount with
      respect to the net value of Borrower's assets.

      Related Documents. The words "Related Documents" mean and include without
      limitation all promissory notes, credit agreements, loan agreements,
      environmental agreements, guaranties, security agreements, mortgages,
      deeds of trust, and all other instruments, agreements and documents,
      whether now or hereafter existing, executed in connection with the
      indebtedness.

      Security Agreement The words "Security Agreement" mean and include without
      limitation any agreements, promises, covenants, arrangements,
      understandings or other agreements, whether created by law, contract, or
      otherwise, evidencing, governing, representing, or creating a Security
      Interest.

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

      SARA, The word "SARA" means the Superfund Amendments and Reauthorization
      Act of 1986 as now or hereafter amended.

      Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
      liabilities of Borrower which have been subordinated by written agreement
      to indebtedness owed by Borrower to Lender in form and substance
      acceptable to Lender.

      Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
      assets excluding all intangible assets (i.e., goodwill, trademarks,
      patents, copyrights, organizational expenses, and similar intangible
      items, but including leaseholds and leasehold improvements) less total
      Debt.

      Working Capital. The words "Working Capital" mean Borrower's current
      assets, excluding prepaid expenses, less Borrower's current liabilities.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.

      Loan Documents. Borrower shall provide to Lender in form satisfactory to
      Lender the following documents for the Loan: (a) the Note, (b) Security
      Agreements granting to Lender security interests in the Collateral, (c)
      Financing Statements perfecting Lender's Security Interests: (d) evidence
      of insurance as required below: and (e) any other documents required under
      this Agreement or by Lender or its counsel.

[Page 1]

<PAGE>

      Borrower's Authorization. Borrower shall have provided in form and
      substance satisfactory to Lender properly certified resolutions, duty
      authorizing the execution and delivery of this Agreement, the Note and the
      Related Documents, and such other authorizations and other documents and
      instruments as Lender or its counsel, in their sole discretion, may
      require.

      Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
      charges, and other expenses which are then due and payable as specified in
      this Agreement or any Related Document.

      Representations and Warranties. The representations and warranties set
      forth in this Agreement, in the Related Documents, and in any document or
      certificate delivered to Lender under this Agreement are true and correct.

      No Event of Default. There shall not exist at the time of any advance a
      condition which would constitute an Event of Default under this Agreement.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender,
as of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any
Loan, and at all times any indebtedness exists:

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

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

      Financial Information. Each financial Statement of Borrower supplied to
      Lender truly and completely disclosed Borrower's financial condition as of
      the date of the Statement, and there has been no material adverse change
      in Borrower's financial condition subsequent to the dale of the most
      recent financial Statement supplied to Lender. Borrower has no material
      contingent obligations except as disclosed in such financial Statements.

      Legal Effect. This Agreement constitutes, and any instrument or agreement
      required hereunder to be given by Borrower when delivered will constitute,
      legal, valid and binding obligations of Borrower enforceable against
      Borrower in accordance with their respective terms.

      Properties. Except as contemplated by this Agreement or as previously
      disclosed in Borrower's financial statements or in writing to Lender and
      as accepted by Lender, and except for property tax liens for taxes not
      presently due and payable, Borrower owns and has good title to all of
      Borrower's properties free and clear of all Security Interests, and has
      not executed any Security documents or financing statements relating to
      such properties. All of Borrower's properties are titled in Borrower's
      legal name, and Borrower has not used, or filed a financing statement
      under, any other name for at least the last five (5) years.

      Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
      "disposal," "release," and "threatened release," as used in this
      Agreement, shall have the same meanings as set forth in the "CERCLA,"
      "SARA," the Hazardous Materials Transportation Act, 49 U.S.C. Section
      1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
      Section 6901, et seq., or other applicable State or Federal laws, rules,
      or regulations adopted pursuant to any of the foregoing. Except as
      disclosed to and acknowledged by Lender in writing, Borrower represents
      and warrants that: (a) During the period of Borrower's ownership of the
      properties, there has been no use, generation, manufacture, storage,
      treatment, disposal, release or threatened release of any hazardous waste
      or substance by any person on, under, about or from any of the properties.
      (b) Borrower has no knowledge of, or reason to believe that there has been
      (i) any use, generation, manufacture, storage, treatment, disposal,
      release, or threatened release of any hazardous waste or substance on,
      under, about or from the properties by any prior owners or occupants of
      any of the properties, or (ii) any actual or threatened litigation or
      claims of any kind by any person relating to such matters. (c) Neither
      Borrower nor any tenant, contractor, agent or other authorized user of any
      of the properties shall use, generate, manufacture, store, treat, dispose
      of, or release any hazardous waste or substance on, under, about or from
      any of the properties; and any such activity shall be conducted in
      compliance with all applicable federal, slate, and local laws,
      regulations, and ordinances, including without limitation those laws,
      regulations and ordinances described above. Borrower authorizes Lender and
      its agents to enter upon the properties to make such inspections and
      tests, as Lender may deem appropriate to determine compliance of the
      properties with this Section of the Agreement. Any inspections or tests
      made by Lender shall be at Borrower's expense and for Lender's purposes
      only and shall not be construed to create any responsibility or liability
      on the part of Lender to Borrower or to any other person. The
      representations and warranties contained herein are based on Borrower's
      due diligence in investigating the properties for hazardous waste and
      hazardous substances. Borrower hereby (a) releases and waives any future
      claims against Lender for indemnity or contribution in the event Borrower
      becomes liable for cleanup or other costs under any such laws, and (b)
      agrees to indemnity and hold harmless Lender against any and all claims,
      losses, liabilities, damages, penalties, and expenses which Lender may
      directly or indirectly sustain or suffer resulting from a breach of this
      section of the Agreement or as a consequence of any use, generation,
      manufacture, storage, disposal, release or threatened release of a
      hazardous waste or substance on the properties. The provisions of this
      section of the Agreement, including the obligation to indemnify, shall
      survive the payment of the Indebtedness and the termination or expiration
      of this Agreement and shall not be affected by Lender's acquisition of any
      interest in any of the properties, whether by foreclosure or otherwise.

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

      Taxes To the best of Borrower's knowledge, all tax returns and reports of
      Borrower that are or were required to be filed, have been filed, and all
      taxes, assessments and other governmental charges have been paid in full,
      except those presently being or to be contested by Borrower in good faith
      in the ordinary course of business and for which adequate reserves have
      been provided.

      Lien Priority. Unless otherwise previously disclosed to Lender in writing,
      Borrower has not entered into or granted any Security Agreements, or
      permitted the filing or attachment of any Security Interests on or
      affecting any of the Collateral directly or indirectly securing repayment
      of Borrower's Loan and Note, that would be prior or that may in any way be
      superior to Lender's Security Interests and rights in and to such
      Collateral.

      Binding Effect. This Agreement, the Note, all Security Agreements directly
      or indirectly securing repayment of Borrower's Loan and Note and all of
      the Related Documents are binding upon Borrower as well as upon Borrower's
      Successors, representatives and assigns, and are legally enforceable in
      accordance with their respective terms.

      Commercial Purposes. Borrower intends to use the Loan proceeds solely for
      business or commercial related purposes.

      Employee Benefit Plans, Each employee benefit plan as to which Borrower
      may have any liability complies in all material respects with all
      applicable requirements of law and regulations, and (i) no Reportable
      Event nor Prohibited Transaction (as defined in ERISA) has occurred with
      respect to any such plan, (ii) Borrower has not withdrawn from any such
      plan or initialed steps to do so, (iii) no steps have been taken to
      terminate any Such plan, and (iv) there are no unfunded liabilities other
      than those previously disclosed to Lender in writing.

      Location of Borrower's Offices and Records, Borrower's place of business,
      or Borrower's Chief executive office, if Borrower has more than one place
      of business, is located at 5020 148TH AVENUE NORTHEAST, REDMOND, WA 98073.
      Unless Borrower has designated otherwise in writing this location is also
      the office or offices where Borrower keeps its records concerning the
      Collateral.

      Information. All information heretofore or contemporaneously herewith
      furnished by Borrower to Lender for the purposes of or in connection with
      this Agreement or any transaction contemplated hereby is, and all
      information hereafter furnished by or on behalf of Borrower to Lender will
      be, true and accurate in every material respect on the date as of which
      such information is dated or certified and none of such information is or
      will be incomplete by omitting to state any material fact necessary to
      make such information not misleading.

      Survival of Representations and Warranties. Borrower understands and
      agrees that Lender, without independent investigation, is relying upon the
      above representations and warranties in extending Loan Advances to
      Borrower. Borrower further agrees that the foregoing representations and
      warranties shall be continuing in nature and shall remain in full force
      and effect until such time as Borrower's Indebtedness shall be paid in
      full, or until this Agreement shall be terminated in the manner provided
      above, whichever Is the last to occur,

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:"

      Litigation. Promptly inform Lender in writing of (a) all material adverse
      changes in Borrower's financial condition, and (b) all existing and all
      threatened litigation, claims, investigations, administrative proceedings
      or Similar actions affecting Borrower or any Guarantor which could
      materially affect the financial condition of Borrower or the financial
      condition of any Guarantor.

      Financial Records. Maintain its books and records in accordance with
      generally accepted accounting principles, applied on a consistent basis,
      and permit Lender to examine and audit Borrower's books and records at all
      reasonable times.

[Page 2]

<PAGE>

      Financial Statements. Furnish Lender with, as soon as available, but in no
      event later than one hundred twenty (120) days after the end of each
      fiscal year. Borrower's balance sheet and income statement for the year
      ended, audited by a certified public accountant satisfactory to Lender,
      and, as soon as available, but in no event later than sixty (60) days
      after the end of each fiscal quarter, Borrower's balance sheet and profit
      and loss statement for the period ended, prepared and certified as
      correct to the best knowledge and belief by Borrower's chief financial
      officer or other officer or person acceptable to Lender. All financial
      reports required to be provided under this Agreement shall be prepared
      in accordance with generally accepted accounting principles, applied on
      a consistent basis, and certified by Borrower as being true and correct.

      Additional Information. Furnish such additional information and
      statements, lists of assets and liabilities, agings of receivables and
      payables, inventory schedules, budgets, forecasts, tax returns, and other
      reports with respect to Borrower's financial condition and business
      operations as Lender may request from time to time.

      Financial Covenants and Ratios. Comply with the following covenants and
      ratios:

        Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less
        than $10,000,000.00.

        Working Capital. Maintain Working Capital in excess of $10,000,000.00

        Cash Flow Requirements. Maintain Cash Flow at not less than the
        following level: 1.20 TO 1.00, DEFINED AS (NET PROFIT PLUS NON-CASH
        EXPENSE PLUS INTEREST EXPENSE PLUS CASH INJECTIONS MINUS UNFUNDED
        CAPITAL EXPENDITURES MINUS DIVIDENDS/WITHDRAWALS) DIVIDED BY (CURRENT
        PORTION LONG TERM DEBT PLUS INTEREST EXPENSE). THIS CASH FLOW COVERAGE
        REOUIREMENT OF 1.20 TO 1.00 WILL BE ESTABLISHED IF TERM OUT OPTION IS
        SELECTED. THIS DEFINITION SHALL SUPERSEDE ANY INCONSISTENT DEFINITION IN
        THIS AGREEMENT.

      The following provisions shall apply for purposes of determining
      compliance with the foregoing financial covenants and ratios: Compliance
      with all covenants and ratios shall be determined by calculating the
      ratios/amounts as of the end of each fiscal quarter. Except as provided
      above, all computations made to determine compliance with the requirements
      contained in this paragraph shall be made in accordance with generally
      accepted accounting principles, applied on a consistent basis, and
      certified by Borrower as being true and correct.

      Insurance. Maintain fire and other risk insurance, public liability
      insurance, and such other insurance as Lender may require with respect to
      Borrower's properties and operations, in form, amounts, coverages and with
      insurance companies reasonably acceptable to Lender. Borrower, upon
      request of Lender, will deliver to Lender from time to time the policies
      or certificates of insurance in form satisfactory to Lender, Including
      stipulations that coverages will not be canceled or diminished without at
      least ten (10) days" prior written notice to Lender. Each insurance policy
      also shall include an endorsement providing that coverage in favor of
      Lender will not be impaired in any way by any act, omission or default of
      Borrower or any other person. In connection with all policies covering
      assets in which Lender holds or is offered a security interest for the
      Loans, Borrower will provide Lender with such loss payable or other
      endorsements as Lender may require.

      Insurance Reports. Furnish to Lender, upon request of Lender, reports on
      each existing insurance policy showing such information as Lender may
      reasonably request, including without limitation the following: (a) the
      name of the insurer: (b) the risks insured: (c) the amount of the policy:
      (d) the properties insured: (e) the then current property values on the
      basis of which insurance has been obtained, and the manner of determining
      those values: and (t) the expiration date of the policy. In addition, upon
      request of Lender (however not more often than annually), Borrower will
      have an independent appraiser satisfactory to Lender determine, as
      applicable, the actual cash value or replacement cost of any Collateral.
      The cost of such appraisal shall be paid by Borrower.

      Other Agreements. Comply with all terms and conditions of all other
      agreements, whether now or hereafter existing, between Borrower and any
      other party and notify Lender immediately in writing of any default in
      connection with any other such agreements.

      Loan Proceeds. Use all Loan proceeds solely for Borrowers business
      operations, unless specifically consented to the contrary by Lender in
      writing.

      Taxes, Charges and Liens. Pay and discharge when due all of its
      indebtedness and obligations, including without limitation all
      assessments, taxes, governmental charges, levies and liens, of every kind
      and nature, imposed upon Borrower or its properties, income, or profits,
      prior to the date on which penalties would attach, and all lawful
      claims that, if unpaid, might become a lien or charge upon any of
      Borrower's properties, income, or profits. Provided however, Borrower
      will not be required to pay and discharge any such assessment, tax,
      charge, levy, lien or claim so long as (a) the legality of the same shall
      be contested in good faith by appropriate proceedings, and (b) Borrower
      shall have established on its books adequate reserves with respect to such
      contested assessment, tax, charge, levy, lien, or claim in accordance with
      generally accepted accounting practices. Borrower, upon demand of Lender,
      will furnish to Lender evidence of payment of the assessments, taxes,
      charges, levies, liens and claims and will authorize the appropriate
      governmental official to deliver to Lender at any time a written statement
      of any assessments, taxes, charges, levies, liens and claims against
      Borrower's properties. Income, or profits.

      Performance. Perform and comply with aft terms, conditions, and provisions
      set forth in this Agreement and in the Related Documents in a timely
      manner, and promptly notify Lender if Borrower learns of the occurrence of
      any event which constitutes an Event of Default under this Agreement or
      under any of the Related Documents.

      Operations. Maintain executive and management personnel with substantially
      the same qualifications and experience as the present executive and
      management personnel: provide written notice to Lender of any change in
      executive and management personnel; conduct its business affairs in a
      reasonable and prudent manner and in compliance with all applicable
      federal, state and municipal laws, ordinances, rules and regulations
      respecting its properties, charters, businesses and operations, including
      without limitation, compliance with the Americans With Disabilities Act
      and with all minimum funding standards and other requirements of ERISA and
      other laws applicable to Borrower's employee benefit plans.

      Inspection. Permit employees or agents of Lender at any reasonable lime to
      inspect any and all Collateral for the Loan or Loans and Borrower's other
      properties and to examine or audit Borrower's books, accounts, and records
      and to make copies and memoranda of Borrower's books, accounts, and
      records. If Borrower now or at any time hereafter maintains any records
      (including without limitation computer generated records and computer
      software programs for the generation of such records) in the possession of
      a third party, Borrower, upon request of Lender, shall notify such party
      to permit Lender free access to such records at all reasonable times and
      to provide Lender with copies of any records it may request, all at
      Borrowers expense.

      Compliance Certificate. Unless waived in writing by Lender, provide Lender
      OUARTERLY and at the time of each disbursement of Loan proceeds with a
      certificate executed by Borrower's chief financial officer, or other
      officer or person acceptable to Lender, certifying that the
      representations and warranties set forth in this Agreement are true and
      correct as of the date of the certificate and further certifying that, as
      of the date of the certificate, no Event of Default exists under this
      Agreement.

      Environmental Compliance and Reports. Borrower shall comply in all
      respects with all environmental protection federal, state and local laws,
      statutes, regulations and ordinances; not cause or permit to exist, as a
      result of an intentional or unintentional action or omission on its part
      or on the part of any third party, on property owned and/or occupied by
      Borrower, any environmental activity where damage may result to the
      environment, unless such environmental activity is pursuant to and in
      compliance with the conditions of a permit issued by the appropriate
      federal, state or local governmental authorities; shall furnish to Lender
      promptly and in any event within thirty (30) days after receipt thereof a
      copy of any notice, summons, lien, citation, directive, letter or other
      communication from any governmental agency or instrumentality concerning
      any intentional or unintentional action or omission on Borrower's part in
      connection with any environmental activity whether or not there is damage
      to the environment and/or other natural resources.

      Additional Assurances. Make, execute and deliver to Lender such promissory
      notes, mortgages, deeds of trust, security agreements, financing
      statements, instruments, documents and other agreements as Lender or its
      attorneys may reasonably request to evidence and secure the Loans and to
      perfect all Security Interests.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

      Indebtedness and Liens. (a) Except for trade debt incurred in the normal
      course of business and indebtedness to Lender contemplated by this
      Agreement, create, incur or assume indebtedness for borrowed money,
      Including capital leases, (b) except as allowed as a Permitted Lien, sell,
      transfer, mortgage, assign, pledge, lease, grant a security interest in,
      or encumber any of Borrower's assets, or (c) sell with recourse any of
      Borrower's accounts, except to Lender.

      Continuity of Operations. (a) Engage in any business activities
      substantially different than those in which Borrower is presently engaged,
      (b) cease operations, liquidate, merge, transfer, acquire or consolidate
      with any other entity, change ownership, change its name, dissolve or
      transfer or sell Collateral out of the ordinary course of business, (c)
      pay any dividends on Borrower's stock (other than dividends payable in its
      stock), provided, however that notwithstanding the foregoing, but only so
      long as no Event of Default has occurred and is continuing or would result
      from the payment of dividends, if Borrower is a "Subchapter S Corporation"
      (as defined in the Internal Revenue Code of 1986, as amended), Borrower
      may pay cash dividends on its stock to its shareholders from time to time
      in amounts necessary to enable the shareholders to pay income taxes and
      make estimated Income tax payments to satisfy their liabilities under
      federal and state law which arise solely from their status as Shareholders
      of a Subchapter S Corporation because of their ownership of shares of
      stock of Borrower, or (d) purchase or retire any of Borrower's outstanding
      shares or alter or amend Borrower's capital structure.

[Page 3]

<PAGE>

      Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money
      or assets, (b) purchase, create or acquire any interest in any other
      enterprise or entity, or (c) incur any obligation as surety or guarantor
      other than in the ordinary course of business.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds
if: (a) Borrower or any Guarantor is in default under the terms of this
Agreement or any of the Related Documents or any other agreement that
Borrower or any Guarantor has with Lender; (b) Borrower or any Guarantor
becomes insolvent, files a petition in bankruptcy or similar proceedings, or
is adjudged a bankrupt; (c) there occurs a material adverse change in
Borrower's financial condition, in the financial condition of any Guarantor,
or in the value of any Collateral securing any Loan; (d) any Guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender; or (e) Lender in good
faith deems itself insecure, even though no Event of Default shall have
occurred. DISCLOSURE, ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT OR FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE
UNDER WASHINGTON LAW.

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

MAXIMUM QUARTERLY LOSS, BORROWER AND LENDER AGREE THE MAXIMUM QUARTERLY LOSS
WILL BE $5,000,000.00.

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

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

      Default on Indebtedness. Failure of Borrower to make any payment when due
      on the Loans.

      Other Defaults, Failure of Borrower or any Grantor to comply with or to
      perform when due any other term, obligation, covenant or condition
      contained in this Agreement or in any of the Related Documents, or failure
      of Borrower to comply with or to perform any other term, obligation,
      covenant or condition contained in any other agreement between Lender and
      Borrower.

      Default In Favor of Third Parties. Should Borrower or any Grantor default
      under any loan, extension of credit, security agreement, purchase or sales
      agreement, or any other agreement, in favor of any other creditor or
      person that may materially affect any of Borrower's property or Borrower's
      or any Grantor's ability to repay the Loans or perform their respective
      obligations under this Agreement or any of the Related Documents.

      False Statements, Any warranty, representation or statement made or
      furnished to Lender by or on behalf of Borrower or any Grantor under this
      Agreement or the Related Documents is false or misleading in any material
      respect at the time made or furnished, or becomes false or misleading at
      any time thereafter.

      Defective Collateralization. This Agreement or any of the Related
      Documents ceases to be in full force and effect (including failure of any
      Security Agreement to create a valid and perfected Security Interest) at
      any time and for any reason.

      Insolvency. The dissolution or termination of Borrower's existence as a
      going business, the insolvency of Borrower, the appointment of a receiver
      for any part of Borrower's property, any assignment for the benefit of
      creditors, any type of creditor workout, or the commencement of any
      proceeding under any bankruptcy or insolvency laws by or against Borrower.

      Creditor or Forfeiture Proceedings. Commencement of foreclosure or
      forfeiture proceedings, whether by judicial proceeding, self-help,
      repossession or any other method, by any creditor of Borrower, any
      creditor of any Grantor against any collateral securing the Indebtedness,
      or by any governmental agency. This includes a garnishment, attachment, or
      levy on or of any of Borrower's deposit accounts with Lender.

      Events Affecting Guarantor; Any of the preceding events occurs with
      respect to any Guarantor of any of the Indebtedness or any Guarantor dies
      or becomes incompetent, or revokes or disputes the validity of, or
      liability under, any Guaranty of the Indebtedness.

      Change In Ownership. Any change in ownership of twenty-five percent (25%)
      or more of the common stock of Borrower.

      Adverse Change. A material adverse change occurs in Borrower's financial
      condition, or Lender believes the prospect of payment or performance of
      the indebtedness is impaired.

      Insecurity. Lender, in good faith, deems itself insecure.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's Option,
all Indebtedness immediately will become due and payable, all without notice
of any kind to Borrower, except that in the case of an Event of Default of
the type described in the "Insolvency" subsection above, such acceleration
shall be automatic and not optional. In addition, Lender shall have all the
rights and remedies provided In the Related Documents or available at law, in
equity, or otherwise. Except as may be prohibited by applicable law, all of
Lender's rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or
to take action to perform an obligation of Borrower or of any Grantor shall
not affect Lender's right to declare a default and to exercise its rights and
remedies.

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

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

      Applicable Law. This Agreement has been delivered to Lender and accepted
      by Lender In the State of Washington. If there is a lawsuit, Borrower
      agrees upon Lender's request to submit to the jurisdiction of the courts
      of King County, the Slate of Washington. Subject to the provisions on
      arbitration, this Agreement shall be governed by and construed In
      accordance with the laws of the State of Washington.

      Arbitration; Lender 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 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; invoking a power of sale under any deed of trust or
      mortgage; obtaining a writ of attachment or 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 of any act, or
      exercise of any right, concerning any Collateral, including any claim to
      rescind, reform, or otherwise modify any agreement relating to the
      Collateral, shall also be arbitrated, provided however that no arbitrator
      shall have the right or the 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 in this Agreement 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 an action for these purposes. The Federal Arbitration Act shall apply
      to the construction, interpretation, and enforcement of this arbitration
      provision.

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

      Multiple Parties; Corporate Authority. All obligations of Borrower under
      this Agreement shall be joint and several, and all references to Borrower
      shall mean each and every Borrower. This means that each of the persons
      signing below is responsible for all obligations in this Agreement.

      Consent to Loan Participation. Borrower agrees and consents to Lender's
      sale or transfer, whether now or later, of one or more participation
      interests in the Loans to one or more purchasers, whether related or
      unrelated to Lender. Lender may provide, without any limitation
      whatsoever, to any one or more purchasers, or potential purchasers, any
      information or knowledge Lender may have about Borrower or about any other
      matter relating to the Loan, and Borrower hereby waives any rights to
      privacy it may have with respect to such matters. Borrower additionally
      waives any and all notices of sale of participation interests, as well as
      all notices of any repurchase of such participation interests. Borrower
      also agrees that

[Page 4]

<PAGE>

      The purchasers of any such participation interests will be considered as
      the absolute owners of such interests in the Loans and will have all the
      rights granted under the participation agreement or agreements governing
      the sale of such participation interests. Borrower further waives all
      rights of offset or counterclaim that it may have now or later against
      Lender or against any purchaser of such a participation interest and
      unconditionally agrees that either Lender or such purchaser may enforce
      Borrower's obligation under the Loans irrespective of the failure or
      insolvency of any holder of any interest in the Loans. Borrower further
      agrees that the purchaser of any such participation interests may enforce
      its interests irrespective of any personal claims or defenses that
      Borrower may have against Lender.

      COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
      expenses, including without limitation attorneys' fees, incurred in
      connection with the preparation, execution, enforcement, modification and
      collection of this Agreement or in connection with the Loans made pursuant
      to this Agreement. Lender may pay someone else to help collect the Loans
      and to enforce this Agreement, and Borrower will pay that amount. This
      includes, subject to any limits under applicable law, Lender's attorneys'
      fees and Lender's legal expenses, whether or not there is a lawsuit,
      including attorneys' fees for bankruptcy proceedings (including efforts to
      modify or vacate any automatic stay or injunction), appeals, and any
      anticipated post-judgment collection services. Borrower also will pay any
      court costs, in addition to all other sums provided by law.

      NOTICES. All notices required to be given under this Agreement shall be
      given in writing, may be sent by telefacsimile (unless otherwise required
      by law), and shall be effective when actually delivered or when deposited
      with a nationally recognized overnight courier or deposited in the United
      States mail, first class, postage prepaid, addressed to the party to whom
      the notice is to be given at the address shown above. Any party may change
      its address for notices under this Agreement by giving formal written
      notice to the other parties, specifying that the purpose of the notice is
      to change the party's address. To the extent permitted by applicable law,
      if there is more than one Borrower, notice to any Borrower will constitute
      notice to all Borrowers. For notice purposes, Borrower will keep Lender
      informed at all times of Borrower's current address(es).

      SEVERABILITY. It a court of competent jurisdiction finds any provision of
      this Agreement to be invalid or unenforceable as to any person or
      circumstance, such finding shall not render that provision invalid or
      unenforceable as to any other persons or circumstances. If feasible, any
      such offending provision shall be deemed to be modified to be within the
      limits of enforceability or validity; however, if the offending provision
      cannot be so modified, it shall be stricken and all other provisions of
      this Agreement in all other respects shall remain valid and enforceable.

      SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
      provisions of this Agreement makes it appropriate, including without
      limitation any representation, warranty or covenant, the word "Borrower"
      as used herein shall include all subsidiaries and affiliates of Borrower.
      Notwithstanding the foregoing however, under no circumstances shall this
      Agreement be construed to require Lender to make any Loan or other
      financial accommodation to any subsidiary or affiliate of Borrower.

      SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
      behalf of Borrower shall bind its successors and assigns and shall inure
      to the benefit of Lender, its successors and assigns. Borrower shall not,
      however, have the right to assign its rights under this Agreement or any
      interest therein, without the prior written consent of Lender.

      SURVIVAL. All warranties, representations, and covenants made by Borrower
      in this Agreement or in any certificate or other instrument delivered by
      Borrower to Lender under this Agreement shall be considered to have been
      relied upon by Lender and will survive the making of the Loan and delivery
      to Lender of the Related Documents, regardless of any investigation made
      by Lender or on Lender's behalf.

      WAIVER. Lender shall not be deemed to have waived any rights under this
      Agreement unless such waiver is given in writing and signed by Lender. No
      delay or omission on the part of Lender in exercising any right shall
      operate as a waiver of such right or any other right. A waiver by Lender
      of a provision of this Agreement shall not prejudice or constitute a
      waiver of Lender's right otherwise to demand strict compliance with that
      provision or any other provision of this Agreement. No prior waiver by
      Lender, nor any course of dealing between Lender and Borrower, or between
      Lender and any Grantor, shall constitute a waiver of any of Lender's
      rights or of any obligations of Borrower or of any Grantor as to any
      future transactions. Whenever the consent of Lender is required under this
      Agreement, the granting of such consent by Lender in any instance shall
      not constitute continuing consent in subsequent instances where such
      consent is required, and in all cases such consent may be granted or
      withheld in the sole discretion of Lender.


BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF MAY
31, 1999.

BORROWER:

APPLIED MICROSYSTEMS CORPORATION


By:      /s/ Robert L. Deinhammer
         ------------------------
         ROBERT L. DEINHAMMER, CHAIRMAN OF THE BOARD


By:      /s/ Stephen J. Verleye
         -----------------------
         STEPHEN J. VERLEYE, PRESIDENT/CHIEF EXECUTIVE OFFICER

LENDER:

U.S. Bank National Association


By:      /s/ Ann B.Caldwell
         ------------------
         Authorized Officer

[Page 5]

<PAGE>

                            ALTERNATIVE RATE OPTIONS
                                 PROMISSORY NOTE
                               (PRIME RATE1 LIBOR)
$7,000,000.00                                      Dated as of: 05/31/99
APPLIED MICROSYSTEMS CORPORATION                            ("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 $7,000,000.00

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

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

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

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

             "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 1,2,3,6 or 12 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 be selected which would extend beyond MAY 31, 2000: (iii) 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 tine of credit, equals or exceeds the amount of
such principal payment; (iv) 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 (v) 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.

             "LIBOR Rate" means, for any LIBOR Interest Period, the rate per
annum (computed on the basis of a 360-day year and the actual number of days
elapsed and rounded upward to the nearest 1/16 of 1%) established by Lender
as its LIBOR Rate, based on Lender's determination, on the basis of such
factors as Lender deems relevant, of the rate of Interest at which U.S.
dollar deposits would be offered to U.S. Bank National Association In the
London interbank market at approximately 11 a.m. London time on the date
which is two Business Days prior to the first day of such LIBOR Interest
Period for delivery on the first day of such LIBOR Interest Period for the
number of months therein; PROVIDED, however, that 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 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 per annum rate equal to the Prime
Rate plus 0.000% per annum.

        (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 1.450% per annum.

        (ii) Borrower may obtain LIBOR Borrowing Rate quotes from Lender
between 8:00 a.m. and 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.

[Page 1]

<PAGE>

        (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) between 8:00 a.m. and 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 FIVE 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.

        (vi) Borrower shall pay to Lender, on demand, such amount as Lender
reasonably determines (determined as though 100% of the applicable LIBOR
Amount had been funded in the London interbank market) is necessary to
compensate Lender for any direct or indirect losses, expenses, liabilities,
costs, expenses or reductions in yield to Lender, whether incurred in
connection with liquidation or re-employment of funds or otherwise, incurred
or sustained by Lender as a result of: (A) Any payment or prepayment of a
LIBOR Amount, termination of the LIBOR Borrowing Rate or conversion of a
LIBOR Amount to the Prime Borrowing Rate on a day other than the last day of
the applicable LIBOR Interest Period (including as a result of acceleration
or a notice pursuant to Section 4(c)(v)); or (B) Any failure of Borrower to
borrow, continue or prepay any LIBOR Amount or to convert any portion of the
Prime Rate Amount to a LIBOR Amount after Borrower has given a notice thereof
to Lender.

        (vii) If Borrower chooses the LIBOR Borrowing Rate, Borrower shall
pay interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Lender may have obtained the funds loaned to Borrower
from sources other than the London interbank market. Lender's determination
of the LIBOR Borrowing Rate and any such taxes or charges shall be conclusive
in the absence of manifest error.

        (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.
             on demand, or if no demand, on _____,
        X    on May 31, 2000
             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.

(b)     Interest

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

             X    on the LAST day of JUNE, 1999 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:

                  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.
             X    on the LAST day of JUNE, 1999 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.


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.

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<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 XXXXXXXXXXXX. 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) My 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. 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 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)     Advances under this Note, may be requested orally or in writing by
Borrower or by an authorized person. Lender may, but need not, require that
all oral requests be confirmed in writing. Borrower agrees to be liable for
all sums either: (a) advanced in accordance with the e instructions of an
authorized person or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced
by endorsements on this Note or by Lender's internal records, including daily
computer print-outs.

(b)     All Advances shall be disbursed by deposit directly to Borrower's
account number XXXXXXXXXXX or by cashier's check issued to Borrower.

(c)     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 imitation, 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.

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<PAGE>

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 transac tion
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 Washington State Bar members in good standing. All
arbitration hearings will be held in Seattle, Washington. 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 Washington without
regard to conflicts of law principles: provided, however, that to the extent
that Lender has greater rights or remedies under Federal law, this provision
shall not be deemed to deprive Lender of such rights and remedies as may be
available under Federal law.

24.     YEAR 2000. Borrower has reviewed and assessed its business operations
and computer systems and applications to address the "year 2000 problem"
(that is, that computer applications and equipment used by Borrower, directly
or indirectly through third parties, may be unable to properly perform
date-sensitive functions before, during and after January 1.2000). Borrower
reasonably believes that the year 2000 problem will not result in a material
adverse change in Borrower's business condition (financial or otherwise),
operations. properties or prospects or ability to repay Lender. Borrower
agrees that this representation will be true and correct on and shall be
deemed made by Borrower on each date Borrower requests any advance under this
Agreement or Note or delivers any information to Lender. Borrower will
promptly deliver to Lender such information relating to this representation
as Lender requests from time to time.

25.     RENEWAL AND EXTENSION. This Note is given in renewal and extension
and not in novation of the following described indebtedness: That certain
Promissory Note dated May 31, 1998, in the amount of $7,000,000.00 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.

26.     DISCLOSURE.

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

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

APPLIED MICROSYSTEMS CORPORATION


Borrower Name (Corporation, Partnership or other Entity)


By:      /s/ Robert L. Deinhammer
         ------------------------
         ROBERT L. DEINHAMMER
         Title: CHAIRMAN OF THE BOARD


By:      /s/ Stephen J. Verleye
         ----------------------
         STEPHEN J. VERLEYE
         Title: PRESIDENT/CHIEF EXECUTIVE OFFICER


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


                         Lender Name:         U.S. Bank National Association
                                              ------------------------------

                                     By:       /s/ Ann B.Caldwell
                                               ------------------
                                              ANN B. CALDWELL

                                     Title    Vice President
                                              --------------
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