Document:

<PAGE>

                                 EXHIBIT 10.9

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                               CREDIT AGREEMENT

                                     Among

                        STANCORP FINANCIAL GROUP, INC.

                                      and

                        U.S. BANK NATIONAL ASSOCIATION

                           Dated as of June 30, 1999

                                 $ 100,000,000

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<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                         <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...............................    1

 Section 1.1   Defined Terms.............................................    1
 Section 1.2   Accounting Terms and Calculations.........................    8
 Section 1.3   Computation of Time Periods...............................    8
 Section 1.4   Other Definitional Terms..................................    8

ARTICLE II TERMS OF LENDING..............................................    8

 Section 2.1   The Commitment............................................    8
 Section 2.2   Advance Options...........................................    8
 Section 2.3   Borrowing Procedures......................................    9
 Section 2.4   Continuation or Conversion of Loan........................    9
 Section 2.5   The Note..................................................   10
 Section 2.6   Funding Losses............................................   10
 Section 2.7   Letters of Credit.........................................   10

ARTICLE III INTEREST AND FEES............................................   12

 Section 3.1   Interest..................................................   12
 Section 3.2   Facility Fee..............................................   12
 Section 3.3   Computation...............................................   12
 Section 3.4   Payment Dates.............................................   12

ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
           OF THE CREDIT AND FUNDING OF THE BANK.........................   13

 Section 4.1   Repayment.................................................   13
 Section 4.2   Prepayments...............................................   13
 Section 4.3   Payments..................................................   13
 Section 4.4   Optional Reduction or Termination of Commitment...........   13

ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOAN AND LETTERS OF CREDIT...   14

 Section 5.1   Increased Costs...........................................   14
 Section 5.2   Deposits Unavailable or Interest Rate Unascertainable or
                Inadequate; Impracticability.............................   15
 Section 5.3   Changes in Law Rendering LIBOR Advances Unlawful..........   15
 Section 5.4   Discretion of the Bank as to Manner of Funding............   16
 Section 5.5   Claims for Increased Costs................................   16
</TABLE>

                                       i
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<TABLE>
<S>                                                                         <C>
ARTICLE VI CONDITIONS PRECEDENT..........................................   16

 Section 6.1   Conditions of Initial Advance.............................   16
 Section 6.2   Conditions Precedent to all Advances......................   17

ARTICLE VII REPRESENTATIONS AND WARRANTIES...............................   17

 Section 7.1   Organization, Standing, Etc...............................   18
 Section 7.2   Authorization and Validity................................   18
 Section 7.3   No Conflict; No Default...................................   18
 Section 7.4   Government Consent........................................   18
 Section 7.5   Financial Statements and Conditions.......................   19
 Section 7.6   Litigation and Contingent Liabilities.....................   19
 Section 7.7   Compliance................................................   19
 Section 7.8   Environmental, Health and Safety Laws.....................   19
 Section 7.9   ERISA.....................................................   20
 Section 7.10  Regulation U..............................................   20
 Section 7.11  Ownership of Property.....................................   20
 Section 7.12  Taxes.....................................................   20
 Section 7.13  Trademarks, Patents.......................................   21
 Section 7.14  Investments Company Act...................................   21
 Section 7.15  Public Utility Holding Company Act........................   21
 Section 7.16  Subsidiaries..............................................   21
 Section 7.17  Partnerships and Joint Ventures...........................   21
 Section 7.18  Year 2000.................................................   21

ARTICLE VIII AFFIRMATIVE COVENANTS.......................................   22

 Section 8.1   Financial Statements and Reports..........................   22
 Section 8.2   Corporate Existence.......................................   24
 Section 8.3   Insurance.................................................   24
 Section 8.4   Payment of Taxes and Claims...............................   24
 Section 8.5   Inspection................................................   24
 Section 8.6   Maintenance of Properties.................................   25
 Section 8.7   Books and Records.........................................   25
 Section 8.8   Compliance................................................   25
 Section 8.9   ERISA.....................................................   25
 Section 8.10  Environmental Matters.....................................   25

ARTICLE IX NEGATIVE COVENANTS............................................   25

 Section 9.1   Merger....................................................   25
 Section 9.2   Sale of Assets............................................   26
</TABLE>

                                      ii
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<TABLE>
<S>                                                                         <C>
 Section 9.3   Plans.....................................................   26
 Section 9.4   Change in Nature of Business..............................   26
 Section 9.5   Subsidiaries..............................................   26
 Section 9.6   Other Agreements..........................................   26
 Section 9.7   Funded Debt...............................................   27
 Section 9.8   Unconditional Purchase Obligations........................   27
 Section 9.9   Transactions with Related Parties.........................   27
 Section 9.10  Use of Proceeds...........................................   27
 Section 9.11  Borrower's Retained Earnings..............................   27
 Section 9.12  SMI's Tangible Net Worth..................................   27
 Section 9.13  SIC's Claims Paying Ability Rating........................   28

ARTICLE X EVENTS OF DEFAULT AND REMEDIES.................................   28

 Section 10.1  Events of Default.........................................   28
 Section 10.2  Remedies..................................................   29
 Section 10.3  Letters of Credit.........................................   30
 Section 10.4  Offset....................................................   30

ARTICLE XI ARBITRATION...................................................   31

 Section 11.1  Arbitration of Claims.....................................   31
 Section 11.2  Arbitrators...............................................   31
 Section 11.3  Other Remedies............................................   31
 Section 11.4  Non-Waiver; Governing Provision...........................   31

ARTICLE XII MISCELLANEOUS................................................   31

 Section 12.1  Waiver and Amendment......................................   31
 Section 12.2  Amendments, Etc...........................................   32
 Section 12.3  Assignments and Participations............................   32
 Section 12.4  Costs, Expenses and Taxes.................................   34
 Section 12.5  Notices...................................................   34
 Section 12.6  Successors................................................   34
 Section 12.7  Severability..............................................   34
 Section 12.8  Subsidiary References.....................................   35
 Section 12.9  Captions..................................................   35
 Section 12.10 Entire Agreement..........................................   35
 Section 12.11 Counterparts..............................................   35
 Section 12.12 Governing Law.............................................   35
 Section 12.13 Consent to Jurisdiction...................................   35
 Section 12.14 Waiver of Jury Trial......................................   36
 Section 12.15 Disclosure................................................   36
</TABLE>

                                      iii
<PAGE>

     Section 12.16 Termination of SIC Credit Agreement...................   36

     EXHIBITS:

   Exhibit A:       Promissory Note
   Exhibit B:       Subsidiary Guaranty
   Exhibit C:       Compliance Certificate
   Exhibit D:       Opinion of Counsel to the Borrower
   Exhibit E:       Material Actions, Suits, and Proceedings (Section 7.6)
   Exhibit F:       Material Contingent Liabilities (Section 7.6)
   Exhibit G:       Subsidiaries (Section 7.16)
   Exhibit H:       Partnerships and Joint Ventures (Section 7.17)

                                      iv
<PAGE>

                               CREDIT AGREEMENT

     THIS CREDIT AGREEMENT, dated and effective as of June 30, 1999, is made by
and among StanCorp Financial Group, Inc., an Oregon corporation (the "Borrower")
and U.S. BANK NATIONAL ASSOCIATION, a national banking association ("Bank").

     Standard Insurance Company and Bank are parties to an agreement entitled
Credit Agreement dated as of March 19, 1999 which provides in part for the
extension by Bank to Standard Insurance Company of up to $100,000,000 in credit
facilities (the "SIC Credit Agreement").

     Standard Insurance Company, Borrower and Bank, as contemplated by the SIC
Credit Agreement, now wish to replace the SIC Credit Agreement with this
Agreement.

     Now, therefore, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank agree as follows:

                  ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
                  ---------

      Section 1.1 Defined Terms.
                  -------------

     In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following respective meanings (and such
meanings shall be equally applicable to both the singular and plural form of
the terms defined, as the context may require):

     "Advance": The portion of the outstanding Loan bearing interest at an
      -------
identical rate for an identical Interest Period, provided that all Federal Funds
Rate Advances shall be deemed a single Advance. An Advance may be a "LIBOR
Advance" or "Federal Funds Rate Advance" (each, a "type" of Advance).

     "Adverse Event": The occurrence of any event that could have a material
      -------------
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as whole,
or on the ability of the Borrower to perform its obligations under the Loan
Documents.

     "Agreement": This Credit Agreement, as it may be amended, modified,
      ---------
supplemented, restated or replaced from time to time.

     "Applicable Margin": The percentages set forth below, calculated based on
      -----------------
 SIC's Claims Paying Ability Rating:

                                       1
<PAGE>

                                                            Federal Funds Rate
                                                            ------------------
          Rating:                     LIBOR Advances               Advances
          ------                      --------------               --------
     A.M. Best "A" or better
     and Standard and Poor's
     "A+" or better                       0.40%                      0.50%

     A.M. Best less than "A" or
     Standard and Poor's less
     than "A+"                            0.50%                      0.60%

The Applicable Margin shall initially be 0.40% for LIBOR advances and 0.50% for
Reference Rate Advances.

     "Business Day": Any day (other than a Saturday, Sunday or legal holiday in
      ------------
the State of Oregon) on which national banks are permitted to be open in
Portland, Oregon and, with respect to LIBOR Advances, a day on which dealings in
Dollars may be carried on by the Banks in the interbank LIBOR market.

     "Capitalized Lease": Any lease which is or should be capitalized on the
      -----------------
books of the lessee in accordance with GAAP.

     "Claims Paying Ability Rating": SIC's ability to pay claims as determined
      ----------------------------
by the ratings of A.M. Best Company, Inc. and Standard and Poor's Rating Group,
or if either or both of such companies cease to provide ratings of SIC's ability
to pay claims, the ratings of SIC's ability to pay claims as determined by a
substitute rating company or companies of recognized standing selected by Bank.
If A.M. Best Company, Inc., Standard and Poor's Rating Group, or other rating
companies selected by Bank to determine SIC's ability to pay claims materially
change its current or future system of ratings, Bank shall determine the new
rating or ratings which most nearly correspond to the ratings set forth herein
and shall notify the Borrower of such determination in writing, at which time
such determination(s) shall become effective and this Agreement shall be deemed
modified to reflect such determination(s).

     "Code": The Internal Revenue Code of 1986, as amended, or any successor
      ----
statute, together with regulations thereunder.

     "Commitment": One hundred million dollars ($100,000,000) as such amount may
      ----------
be reduced from time to time pursuant to Section 4.4 or Section 10.2, or the
                                         -----------    ------------
Bank's commitment to make Loans and issue Letters of Credit hereunder, as the
context may require.

     "Compliance Certificate": A certificate in the form of Exhibit C, duly
      ----------------------                                ---------
completed and signed by an authorized officer of the Borrower.

                                       2
<PAGE>

     "Default": Any event which, with the giving of notice to the Borrower or
      -------
lapse of time, or both, would constitute an Event of Default.

     "ERISA": The Employee Retirement Income Security Act of 1974, as amended,
      -----
and any successor statute, together with regulations thereunder.

     "ERISA Affiliate": Any trade or business (whether or not incorporated) that
      ---------------
is a member of a group of which the Borrower is a member and which is treated as
a single employer under Section 414 of the Code.

     "Event of Default": Any event described in Section 10.1.
                                                ------------

     "Executive Officer": The chief executive officer, president, chief
      -----------------
financial officer, chief investment officer, a senior vice president or
corporate secretary.

     "Federal Funds Rate": The daily opening rate of interest on overnight
      ------------------
federal funds transactions (a) as such rate appears on Dow Jones Page 5
(designated as such) of the on-line service provided by Dow Jones Market Service
(formerly known as Telerate Service) or such page as may replace Page 5 of that
service for the purpose of displaying opening federal funds rates, or (b) the
rate determined by Bank based on such other published service of general
application as shall be selected by Bank for such purpose, or (c) if Dow Jones
Market Service (formerly known as Telerate Service) or such other service does
not report such rates or such rates do not, in the judgment of Bank, accurately
reflect the rates of interest applicable to Bank in the relevant markets, the
rate shall be determined by Bank based on opening rates of interest offered to
Bank for overnight deposits in the federal funds market. If such rate is not
provided for any day (e.g., weekend or holiday), such rate for such day shall be
the rate for the next preceding day on which such rate was provided.

     "Federal Funds Rate Advance": An Advance designated as such in a notice of
      --------------------------
borrowing under Section 2.3 or a notice of continuation or conversion under
                -----------
Section 2.4.
-----------

     "Federal Reserve Board": The Board of Governors of the Federal Reserve
      ---------------------
System or a successor thereto.

     "Funded Debt": Without duplication, the following obligations, contingent
      -----------
or otherwise, of Borrower and its Subsidiaries (whether or not classified as
liabilities upon the obligor's balance sheet, whether originally incurred or
later assumed, and whether or not incurred as a general partner or joint
venturer of a partnership or joint venture): (a) obligations under this
Agreement; (b) Indebtedness for borrowed money; (c) "surplus notes" as set forth
in Borrower's financial statements prepared in accordance with NAIC Standards;
(d) any obligations as lessee under any Capitalized Lease or synthetic lease;
(e) obligations secured by any mortgage, pledge, security interest, lien, charge
or other encumbrance existing on property owned or acquired and whether or not
the obligation secured is the obligation of the owner or another party; (f) all
guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others, including agreements to maintain net worth or working

                                       3
<PAGE>

capital of, or provide funds to satisfy any other financial test applicable to
any other Person; and (g) undertakings or agreements to reimburse or indemnify
issuers of letters of credit; but in any event excluding: (v) obligations in
which the creditor's only recourse is to the property which secures the
obligation; and (w) obligations of partnerships or joint ventures where the
recourse of the creditor on the obligation is limited to assets of the
partnership or joint venture; (x) obligations arising on account of the
endorsement of negotiable instruments for deposit or collection (or similar
transactions) in the ordinary course of business; (y) obligations of Borrower or
any wholly owned Subsidiary to another wholly owned Subsidiary or the Borrower;
and (z) extensions, renewals, or refinancings of obligations under
paragraphs (v), (w), (x), and (y) so long as such obligations are in an amount
not greater than the amount of the obligation being extended, renewed or
refinanced.

     "GAAP": Generally accepted accounting principles consistently applied.
      ----

     "Guarantors": SIC and SMI.

     "Guaranty": A guaranty in the form of Exhibit B, duly completed and signed
by authorized officers of the Guarantors.

     "Indebtedness": Without duplication, all obligations, contingent or
      -------------
otherwise, which in accordance with GAAP should be classified upon the obligor's
balance sheet as liabilities, but in any event including the following (whether
or not they should be classified as liabilities upon such balance sheet): (a)
obligations secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the obligation secured thereby shall have been assumed and
whether or not the obligation secured is the obligation of the owner or
another party; (b) any obligation on account of deposits or advances; (c) any
obligation for the deferred purchase price of any property or services, except
Trade Accounts Payable, (d) any obligation as lessee under any Capitalized
Lease; (e) all guaranties, endorsements and other contingent obligations in
respect to Indebtedness of others; and (f) undertakings or agreements to
reimburse or indemnify issuers of letters of credit. For all purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer.

     "Interest Period" For any LIBOR Advance, the period commencing on the
      ---------------
borrowing date of such LIBOR Advance or the date a Federal Funds Rate Advance is
converted into such LIBOR Advance, or the last day of the preceding Interest
Period for such LIBOR Advance, as the case may be, and ending on the numerically
corresponding day one, two, three, six, or nine months thereafter, as selected
by the Borrower pursuant to Section 2.3 or Section 2.4; provided, that:
                            -----------    -----------  ---------

          (i) any Interest Period which would otherwise end on a day which is
     not a Business Day shall end on the next succeeding Business Day unless
     such next succeeding Business Day falls in another calendar month, in
     which case such Interest Period shall end on the next preceding Business
     Day;

                                       4
<PAGE>

          (ii)  any Interest Period which 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 Interest Period) shall end on
     the last Business Day of the calendar month at the end of such Interest
     Period; and

          (iii) no Interest Period shall extend beyond the Termination Date.

     "Letters of Credit": Shall have the meaning set forth in Section 2.7.
      -----------------                                       -----------

     "Letter of Credit Agreements": Shall have the meaning set forth in
      ---------------------------
Section 2.7.
-----------

     "Letter of Credit Obligations": Shall mean the aggregate amount of all
      ----------------------------
possible drawings under all outstanding Letters of Credit plus all amounts drawn
under any Letter of Credit and not reimbursed by the Borrower under the
applicable Letter of Credit Agreement.

     "LIBOR Advance": An Advance designated as such in a notice of borrowing
      -------------
under Section 2.3 or a notice of continuation or conversion under Section 2.4.
      -----------                                                 -----------

     "LIBOR Interbank Rate": The offered rate for deposits in United 5tates
      --------------------
Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%), for
delivery of such deposits on the first day of an Interest Period of a LIBOR
Advance, for the number of days comprised therein, which appears on Dow Jones
Page 3750 as of 11:00 a.m., London time, on the day that is two Banking Days
preceding the first day of the Interest Period of such LIBOR Advance or the rate
determined by the Bank at such time based on such other published service of
general application as shall be selected by the Bank for such purpose. If Dow
Jones Page 3750 or such other service does not report such rates or such rates
do not, in the judgment of the Bank, accurately reflect the rates of interest
applicable to the Bank in the relevant markets, the rate for such Interest
Period shall be determined by the Bank based on rates offered to the Bank for
United States Dollar deposits in the interbank LIBOR market. "Dow Jones Page
3750" means the display designated as 3750 on the service provided by Dow Jones
Market Service (formerly known as Telerate Service) or such other page as may
replace such page of that services for the purpose of displaying London
interbank offered rates of major banks for United States Dollar deposits.

     "LIBOR Rate (Reserve Adjusted)": A rate per annum (rounded upwards, if
      -----------------------------
necessary, to the nearest 1/16th of 1%) calculated for the Interest Period of a
LIBOR Advance in accordance with the following formula:

     ERRA      =  LIBOR Interbank Rate
                  --------------------
                       1.00 - ERR

In such formula, "ERR" means "LIBOR Reserve Rate" and "ERRA" means "LIBOR Rate
(Reserve Adjusted)", in each instance determined by the Bank for the applicable
Interest Period. The Bank's determination of all such rates for any Interest
Period shall be conclusive in the absence of manifest error.

                                       5
<PAGE>

     "LIBOR Reserve Rate": A percentage equal to the daily average during such
      -------------------
Interest Period of the aggregate maximum reserve requirements (including all
basic, supplemental, marginal and other reserves), as specified under Regulation
D of the Federal Reserve Board, or any other applicable regulation that
prescribes reserve requirements applicable to Eurocurrency liabilities (as
presently defined in Regulation D) or applicable to extensions of credit by the
Bank or the rate of interest on which is determined with regard to rates
applicable to Eurocurrency liabilities. Without limiting the generality of the
foregoing, the Eurocurrency Reserve Requirement shall reflect any reserves
required to be maintained by the Bank against (i) any category of liabilities
that includes deposits by reference to which the LIBOR Rate is to be determined,
or (ii) any category of extensions of credit or other assets that includes LIBOR
Advances.

     "Lien": Any security interest, mortgage, pledge, lien, hypothecation,
      ----
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).

     "Loan Documents": This Agreement, the Note, the Guaranty, each Letter of
      ---------------
Credit Agreement, and each other instrument, document, guaranty, security
agreement, mortgage, or other agreement executed and delivered by the Borrower
or any guarantor or party granting security interests in connection with this
Agreement, the Loan or any collateral for the Loan.

     "NAIC Standards": Accounting standards of the National Association of
      ---------------
Insurance Commissioners for life and health insurers, as such standards may be
amended from time to time.

     "Note": A note in the form of Exhibit A, duly completed and signed by
      ----
authorized officer(s) of the Borrower.

     "Payment Date": The Termination Date, or date of any other termination of
      -------------
the Commitment, plus (a) the last day of each Interest Period and, in the case
of an Interest Period of more than three months, on the date(s) occurring every
three months after the first day of the Interest Period, for each LIBOR Advance;
(b) the last day of each month for each Federal Funds Rate Advance; and (c) the
last day of each quarter for any fees including, without limitation, Facility
Fees.

     "PBGC": The Pension Benefit Guaranty Corporation, established pursuant to
      ----
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.

     "Person": Any natural person, corporation, partnership, joint venture,
      ------
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.

     "Plan": An employee benefit plan or other plan, maintained for employees of
      ----
the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.

                                       6
<PAGE>

     "Related Party": Any Person (other than a Subsidiary): (a) which directly
      --------------
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, the Borrower, (b) which beneficially owns or
holds 5% or more of the equity interest of the Borrower; or (c) 5% or more of
the equity interest of which is beneficially owned or held by the Borrower or
a Subsidiary. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.

     "Reportable Event": A reportable event as defined in Section 4043 of ERISA
      -----------------
and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.

     "SIC": Standard Insurance Company, a Subsidiary of Borrower.

     "SIC Credit Agreement": A credit agreement entitled Credit Agreement dated
as of March 19, 1999 among SIC and Bank.

     "SMI": Standard Mortgage Investors, LLC, a Subsidiary of Borrower.
      ---

     "SREI": Standard Real Estate Investors, LLC, a Subsidiary of Borrower.
      ----

     "Subsidiary": Any Person of which or in which the Borrower or its other
      -----------
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such Person,
if it is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.

     "Tangible Net Worth": As of any date of determination, the sum of the
      -------------------
amounts set forth on the balance sheet of the Borrower on a consolidated or non-
consolidated basis (as indicated), as the sum of the common stock, preferred
stock, additional paid-in capital and retained earnings of the Borrower
(excluding treasury stock), less the book value of all assets of the Borrower
(and, if consolidated, its Subsidiaries) that would be treated as intangibles
under GAAP, including, without limitation, all such items as goodwill,
trademarks, trade names, service marks, copyrights, patents, licenses,
unamortized debt discount and unamortized deferred charges.

     "Termination Date": The earliest of (a) the date the Bank demands payment
      -----------------
of the entire balance of the Loan, (b) 364 days after the date of this
Agreement, or (c) the date on which the Commitment is terminated pursuant to
Section 4.4 or Section 10.2 hereof.
-------------- ------------

                                       7
<PAGE>

     "Trade Accounts Payable": The trade accounts payable of any Person with a
      -----------------------
maturity of not greater than 90 days incurred in the ordinary course of such
Person's business.

     Section 1.2 Accounting Terms and Calculations.

     Except as may be expressly provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder (including, without limitation, determination of compliance with
financial ratios and restrictions in Articles VIII and IX hereof) shall be made
                                     -------------     --
in accordance with GAAP as in effect on the date of application thereof. Any
reference to "consolidated" financial terms shall be deemed to refer to those
financial terms as applied to the Borrower and its Subsidiaries, as applicable,
in accordance with GAAP.

     Section 1.3 Computation of Time Periods.

     In this Agreement, in the computation of a period of time from a specified
date to a later specified date, unless otherwise stated the word "from" means
"from and including" and the word "to" or "until" each means "to but excluding."

     Section 1.4 Other Definitional Terms.

     The words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. References to Sections, Exhibits,
schedules and like references are to this Agreement unless otherwise expressly
provided.

                          ARTICLE II TERMS OF LENDING
                          ----------

     Section 2.1 The Commitment.
                 --------------

     Subject to the terms and conditions hereof and in reliance upon the
warranties of the Borrower herein, Bank shall make loans (the "Loan") to the
Borrower from time to time from the date hereof until the Termination Date,
during which period the Borrower may repay and reborrow in accordance with the
provisions hereof, provided, that the unpaid principal amount of the Loan plus
the Letter of Credit Obligations shall not at any time exceed the Commitment.

     Section 2.2 Advance Options.
                 ---------------

     The Loan shall be constituted of LIBOR Advances and Federal Funds Rate
Advances, as shall be selected by the Borrower, except as otherwise provided
herein. Any combination of types of Advances may be outstanding at the same
time, except that the total of outstanding LIBOR Advances shall not exceed five
(5) at any one time. Each LIBOR Advance shall be in a minimum amount of $500,000
and in an integral multiple of $100,000 if above such amount. Each Federal Funds
Rate Advance shall be in a minimum amount of $500,000 and in an integral
multiple of $100,000 if above such amount.

                                       8
<PAGE>

     Section 2.3 Borrowing Procedures.
     --------------------------------

     (a) Request by Borrower Any request by the Borrower for a Loan shall be in
         -------------------
     writing, or by telephone promptly confirmed in writing, and must be given
     so as to be received by the Bank not later than:

               (i)  4:00 p.m., Portland time, on the date of the requested
          Loan, if the Loan is a Federal Funds Rate Advance; or

               (ii) 12:00 noon, Portland time, two Business days prior to the
          date of the requested Loan, if the Loan is, or includes, a LIBOR
          Advance.

     Each request for a Loan shall specify (i) the borrowing date (which shall
     be a Business Day), (ii) the amount of such Loan and the type or types of
     Advances comprising such Loan, and (iii) if such Loan includes LIBOR
     Advances, the initial Interest Periods for such Advances.

     Section 2.4 Continuation or Conversion of Loan.
                 ----------------------------------

     The Borrower may elect to (i) continue any outstanding LIBOR Advance from
one Interest Period into a subsequent Interest Period to begin on the last day
of the earlier Interest Period, or (II) convert any outstanding Advance into
another type of Advance (on the last day of an Interest Period only, in the
instance of a LIBOR Advance), by giving the Bank notice in writing, or by
telephone promptly confirmed in writing, given so as to be received by the Bank
not later than:

          (a) 4:00 p.m., Portland time, on the date of the requested
     continuation or conversion, if the continuing or converted Advance shall
     be a Federal Funds Rate Advance; or

          (b) 12:00 noon, Portland time, two Business days prior to the date of
     the requested continuation or conversion, if the continuing or converted
     Advance shall be a LIBOR Advance.

Each notice of continuation or conversion of an Advance shall specify (i) the
effective date of the continuation or conversion date (which shall be a Business
Day), (ii) the amount and the type or types of Advances following such
continuation or conversion (subject to the limitation on amount set forth in
Section 2.2), and (iii) for continuation as, or conversion into, LIBOR
------------
Advances, the Interest Periods for such Advances. Absent timely notice of
continuation or conversion, each LIBOR Advance shall automatically convert into
a Federal Funds Rate Advance on the last day of an applicable Interest Period,
unless paid in full on such last day. No Advance shall be continued as, or
converted into, a LIBOR Advance if the shortest Interest Period for such
Advance may not transpire prior to the Termination Date or if a Default or Event
of Default shall exist.

                                       9
<PAGE>

     Section 2.5 The Note
                 --------

     The Loan shall be evidenced by the Note in the amount of the Commitment
originally in effect and dated as of the date of this Agreement. The Bank shall
enter in its records the amount of the Loan and each Advance, the rate of
interest borne by each Advance and the payments made on the Loan, and such
records shall be deemed conclusive evidence of the subject matter thereof,
absent manifest error.

     Section 2.6 Funding Losses.
                 --------------

     The Borrower will indemnify the Bank upon demand against any loss or
expense which the Bank may sustain or incur (including, without limitation, any
loss or expense sustained or incurred in obtaining, liquidating or employing
deposits or other funds acquired to effect, fund, or maintain any Advance) as a
consequence of (i) any failure of the Borrower to make any payment when due of
any amount due hereunder or under the Note, (ii) any failure of the Borrower to
borrow, continue or convert an Advance on a date specified therefor in a notice
thereof, or (iii) any payment (including, without limitation, any payment
pursuant to Section 4.2 or 10.2), prepayment or conversion of any LIBOR Advance
            -----------    ----
on a date other than the last day of the Interest Period for such Advance.
Determinations by the Bank for purposes of this Section 2.6 of the amount
                                                -----------
required to indemnify the Bank shall be conclusive in the absence of manifest
error.

     Section 2.7  Letters of Credit
                  -----------------

     (a) Letters of Credit. Subject to the terms and conditions of this
         -----------------
     Agreement, the Borrower may, in addition to requesting Loans, request that
     the Bank issue letters of credit for the account of the Borrower, by making
     such request to the Bank (such letters of credit as any of them may be
     amended, supplemented, extended or confirmed from time to time, being
     herein collectively called the `Letters of Credit'). The Bank may, at its
     discretion, elect to issue or decline to issue any requested Letter of
     Credit.

     (b) Additional Provisions. The following additional provisions shall apply
         ---------------------
     to each Letter of
     Credit:

               (i)  No Letter of Credit may be issued if after giving effect
          thereto the Letter of Credit Obligations shall exceed $10,000,000 or
          if the sum of (a) the outstanding principal amount of the Loan plus
                                                                         ----
          (B) the Letter of Credit Obligations would exceed the Commitment.

               (ii) No Letter of Credit shall be issued on or after the
          Termination Date. No Letter of Credit shall be issued which expires or
          which permits presentment of drafts or other documents for payment
          later than one year after the Termination Date.

                                      10
<PAGE>

               (iii) Upon receipt from the beneficiary of any Letter of Credit
          of any demand for payment thereunder, Bank shall promptly notify the
          Borrower as to the amount to be paid as a result of such demand and
          the payment date.

               (iv)  The Borrower shall be irrevocably and unconditionally
          obligated forthwith to reimburse the Bank for any amount paid by the
          Bank upon any drawing under any Letter of Credit, without
          presentment, demand, protest or other formalities of any kind, all of
          which are hereby waived. Such reimbursement may, subject to
          satisfaction of the conditions in Article VI hereof and to the
                                            ----------
          available Commitment (after adjustment in the same to reflect the
          elimination of the corresponding Letter of Credit Obligation), be made
          by the making of a Loan.

               (v)   The Borrower will pay to Bank a letter of credit fee with
          respect to each Letter of Credit equal to an amount, calculated on the
          basis of face amount of each Letter of Credit, in each case for the
          period from and including the date of issuance of such Letter of
          Credit to and including the date of expiration or termination thereof
          at a rate equal to the 0.50% per annum, but in no event less than
          $350, such fee to be due and payable in advance on the date of the
          issuance thereof, and shall be adjusted for any cancellation or
          reduction in the face amount of the Letter of Credit. All fees
          hereunder shall be computed on the basis of a year of 360 days and
          paid for the actual number of days elapsed.

               (vi) The issuance by the Bank of each Letter of Credit shall, in
          addition to the discretionary nature of this facility, be subject to
          the conditions precedent that the Borrower shall have executed and
          delivered such applications and other instruments and agreements
          relating to such Letter of Credit as the Bank shall have reasonably
          requested and are not inconsistent with the terms of this Agreement
          (the `Letter of Credit Agreements'). In the event of a conflict
          between the terms of this Agreement and the terms of any Letter of
          Credit Agreement (including the charging of any fees other than normal
          and customary reimbursable expenses), the terms hereof shall control.

     (c) Indemnification: Release. Borrower hereby indemnifies and holds
         ------------------------
harmless the Bank from and against any and all claims and damages, losses,
liabilities, costs or expenses which the Bank may incur (or which may be claimed
against the Bank by any Person whatsoever), in connection with the execution and
delivery of any Letter of Credit or transfer of or payment or failure to pay
under any Letter of Credit; provided that the Borrower shall not be required to
                            --------
indemnify any party seeking indemnification for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(i) the willful misconduct or gross negligence of the party seeking
indemnification, or (ii) by the failure by the party seeking indemnification to
pay under any Letter of Credit after the presentation to it of a request
required to be paid under applicable law.

                                      11
<PAGE>
                         ARTICLE III INTEREST AND FEES
                         -----------

     Section 3.1 Interest.
                 --------

          (a) LIBOR Advances. The unpaid principal amount of each LIBOR Advance
              --------------
     shall bear interest prior to maturity at a rate per annum equal to the
     LIBOR Rate (Reserve Adjusted) in effect for each Interest Period for such
     LIBOR Advance plus the Applicable Margin.

          (b) Federal Funds Rate Advances. The unpaid principal amount of each
              ---------------------------
     Federal Funds Rate Advance shall bear interest prior to maturity at a rate
     per annum equal to the Federal Funds Rate plus the Applicable Margin. The
     interest rate on Advances which bear interest at a rate tied to the Federal
     Funds Rate shall be determined and adjusted daily.

          (c) Interest After Maturity. Any amount of the Loan not paid when due,
              -----------------------
     whether at the date scheduled therefor or earlier upon acceleration, shall
     bear interest until paid in full at a rate per annum equal to 2.00% in
     excess of the rate applicable to the unpaid principal amount immediately
     before it became due.

     Section 3.2 Facility Fee.
                 ------------

     On the applicable Payment Date, the Borrower shall pay to the Bank a non-
refundable fee (the "Facility Fee") in an amount determined by applying a rate
of 0.075% per annum to the daily amount of the Commitment for the quarter then
ended.

     Section 3.3 Computation.
                 -----------

     Interest and the Facility Fee shall be computed on the basis of actual days
elapsed and a year of 360 days.

     Section 3.4 Payment Dates.
                 -------------

     Accrued interest under Section 3.1 (a), and (b) and Facility Fee under
                            ----------------
Section 3.2 shall be payable on the Payment Dates for the applicable types of
-----------
Advances and for fees. Accrued interest under Section 3.1(c) shall be payable on
                                              -------------
demand.

                                      12
<PAGE>

                                  ARTICLE IV

                PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
                     OF THE CREDIT AND FUNDING OF THE BANK

     Section 4.1 Repayment.
                 ---------

     Principal of the Loan, together with all accrued and unpaid interest
thereon, shall be due and payable on demand and on any other Termination Date.
Any demand for payment shall not require the occurrence of an Event of Default.

     Section 4.2 Prepayments.
                 -----------

     (a) Optional. The Borrower may, upon at least 2 Business Days' prior
         --------
     written or telephonic notice received by the Bank, prepay the Loan, in
     whole or in part. Any such prepayment must be accompanied by accrued and
     unpaid interest on the amount prepaid. Each partial prepayment shall be in
     an amount of $100,000 or an integral multiple thereof.

     (b) Funding Indemnity. All prepayments, whether or not following the
         -----------------
      occurrence of an Event of Default, shall be subject to the provisions of
      Section 2.6 hereof.
      -----------

     Section 4.3 Payments.
                 --------

     Payments and prepayments of principal of, and interest on, the Note and all
fees, expenses and other obligations under the Loan Documents shall be made
without set-off or counterclaim in immediately available funds not later than
4:00 p.m., Portland time, on the dates due at the main office of the Bank in
Portland, Oregon. Funds received on any day after such time shall be deemed to
have been received on the next Business Day. Subject to the definition of the
term "Interest Period", whenever any payment to be made hereunder or on the Note
shall be stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in the computation of any interest or fees.

     Section 4.4 Optional Reduction or Termination of Commitment.
                 -----------------------------------------------

     The Borrower may, at any time, upon no less than 5 Business Days prior
written or telephonic notice received by the Bank, reduce the Commitment, with
any such reduction in a minimum amount of $1,000,000 or an integral multiple
thereof. Upon any reduction in the Commitment pursuant to this Section 4.4, the
                                                               -----------
Borrower shall pay to the Bank the amount, if any, by which the unpaid principal
amount of outstanding Loan plus the Letter of Credit Obligations exceeds the
Commitment as so reduced. Amounts so paid cannot be reborrowed. The Borrower
may, at any time, upon not less than five (5) Business Days prior written notice
to the Bank, terminate the Commitment in its entirety. Upon termination of the
Commitment pursuant to this Section, the Borrower shall pay to the Bank the full

                                       13
<PAGE>

amount of the outstanding Loan, all accrued and unpaid interest thereon, all
unpaid Commitment Fees accrued to the date of such termination and all other
unpaid obligations of the Borrower to the Bank hereunder. All payments
described in this Section are subject to the provisions of Section 2.6.
                                                           -----------
Notwithstanding the foregoing, the Commitment may not be reduced to an amount
below outstanding Letter of Credit Obligations, or terminated, if Letters of
Credit are outstanding.

                                   ARTICLE V

         ADDITIONAL PROVISIONS RELATING TO LOAN AND LETTERS OF CREDIT

     Section 5.1  Increased Costs.
                  ---------------

     If, as a result of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not having the force of
law) from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency:

          (a) any tax, duty or other charge with respect to the Loan, the Note
     or the Commitment is imposed, modified or deemed applicable, or the basis
     of taxation of payments to the Bank of interest or principal of the Loan or
     of the Facility Fees (other than taxes imposed on the overall net income of
     the Bank is changed;

          (b) any reserve, special deposit, special assessment or similar
     requirement against assets of, deposits with or for the account of, or
     credit extended by, the Bank is imposed, modified or deemed applicable;

          (c) any increase in the amount of capital required or expected to be
     maintained by the Bank or any Person controlling the Bank is imposed,
     modified or deemed applicable; or

          (d) any other condition affecting this Agreement or the Commitment is
     imposed on the Bank or the relevant funding markets;

and the Bank determines that, by reason thereof, the cost to the Bank of making
or maintaining the Loan, issuing or participating in the Letters of Credit or
extending the Commitment is increased, or the amount of any sum receivable by
the Bank hereunder or under the Note in respect of any Loan or Letters of Credit
is reduced;

then, the Borrower shall pay to the Bank upon demand such additional amount or
----
amounts as will compensate the Bank (or the controlling Person in the instance
of (c) above) for such additional costs or reduction (provided that the Bank has
not been compensated for such additional cost or reduction in the calculation of
the LIBOR Reserve Rate). Determinations by the Bank for purposes of this
Section 5.1 of the additional amounts required to compensate the Bank shall be
-----------
conclusive in the absence of manifest

                                       14
<PAGE>

error. In determining such amounts, the Bank may use any reasonable averaging,
attribution and allocation methods.

     Section 5.2    Deposits Unavailable or Interest Rate Unascertainable or
                    --------------------------------------------------------
Inadequate; Impracticability.
----------------------------

     If the Bank in good faith determines (which determination shall be
conclusive and binding on the parties hereto) that:

          (a)  deposits of the necessary amount for the relevant Interest Period
     for any LIBOR Advance are not available to the Bank in the relevant markets
     or that, by reason of circumstances affecting such market, adequate and
     reasonable means do not exist for ascertaining the LIBOR Rate for such
     Interest Period;

          (b)  the LIBOR Rate (Reserve Adjusted) will not adequately and fairly
     reflect the cost to the Bank of making or funding the LIBOR Advance for a
     relevant Interest Period; or

          (c)  the making or funding of LIBOR Advances has become impracticable
     as a result of any event occurring after the date of this Agreement which,
     in the opinion of the Bank, materially and adversely affects such Advances
     or the Bank's Commitment to make such Advances or the relevant market;

     the Bank shall promptly give notice of such determination to the Borrower,
     and (i) any notice of a new LIBOR Advance previously given by the Borrower
     and not yet borrowed or converted shall be deemed to be a notice to make a
     Federal Funds Rate Advance, and (ii) the Borrower shall be obligated to
     either prepay in full any outstanding LIBOR Advances, without premium or
     penalty, on the last day of the current Interest Period with respect
     thereto or convert any such LIBOR Advance to a Federal Funds Rate Advance
     on such last day.

     Section 5.3    Changes in Law Rendering LIBOR Advances Unlawful.
                    ------------------------------------------------

     If at any time due to the adoption of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority, agency or
instrumentality, or comparable agency charged with the interpretation or
administration thereof, or for any other reason arising subsequent to the date
of this Agreement, it shall become unlawful or impossible for the Bank to make
or fund any LIBOR Advance, the obligation of the Bank to provide such Advance
shall, upon the happening of such event, forthwith be suspended for the duration
of such illegality or impossibility. If any such event shall make it unlawful or
impossible for the Bank to continue any LIBOR Advance previously made by it
hereunder, the Bank shall, upon the happening of such event, notify the Borrower
thereof in writing, and the Borrower shall, at the time notified by the Bank,
either convert each such unlawful Advance to a Federal Funds Rate Advance or
repay such Advance in full, together with accrued interest thereon, subject to
the provisions of Section 2.6.
                  -----------

                                      15
<PAGE>

     Section 5.4  Discretion of the Bank as to Manner of Funding.
                  -----------------------------------------------

     Notwithstanding any provision of this Agreement to the contrary, the Bank
shall be entitled to fund and maintain its funding of all or any part of the
Loan in any manner it elects; it being understood, however, that for purposes of
this Agreement, all determinations hereunder shall be made as if the Bank had
actually funded and maintained each LIBOR Advance during the Interest Period for
such Advance through the purchase of deposits having a term corresponding to
such Interest Period and bearing an interest rate equal to the LIBOR Rate for
such Interest Period (whether or not the Bank shall have granted any
participations in such Advances).

     Section 5.5  Claims for Increased Costs.
                  --------------------------

     The Bank shall not be entitled to compensation under this Article V for any
increased costs incurred with respect to any date unless the Bank shall have
notified the Borrower of such increased costs not more than 180 days after the
later of (i) such date and (ii) the date on which the Bank became aware of such
increased costs.

                        ARTICLE VI CONDITIONS PRECEDENT
                        ----------

     Section 6.1  Conditions of Initial Advance.
                  -----------------------------

     The obligation of the Bank to make the initial Advance hereunder shall be
subject to the satisfaction of the conditions precedent, in addition to the
applicable conditions precedent set forth in Section 6.2 below, that the Bank
                                             -----------
shall have received all of the following, in form and substance satisfactory to
the Bank, each duly executed and certified or dated the date of the initial Loan
or such other date as is satisfactory to the Bank:

          (a)  The Note

          (b)  The Guaranty

          (c)  A copy of the corporate resolution of the Borrower authorizing
     the execution, delivery and performance of the Loan Documents, certified by
     the Secretary or an Assistant Secretary of the Borrower.

          (d)  A copy of the corporate resolutions of the Guarantors authorizing
     the execution, delivery and performance of the Guaranty, certified by the
     Secretary or an Assistant Secretary of Guarantors.

          (e)  An incumbency certificate showing the names and titles, and
     bearing the signatures of, the officers of the Borrower authorized to
     execute the Loan Documents and to request Loan hereunder, certified by the
     Secretary or an Assistant Secretary of the Borrower.

                                      16
<PAGE>

          (f) Incumbency certificates showing the names and titles, and bearing
     the signatures of, the officers of the Guarantors authorized to execute the
     Guaranty, certified by the Secretary or an Assistant Secretary of the
     Guarantors.

          (g) A status certificate for the Borrower and each Guarantor in the
     jurisdiction of its incorporation, certified by the appropriate
     governmental officials.

          (h) Copies of the Articles or Certificate of Incorporation and the By-
     Laws of the Borrower and each Guarantor with all amendments thereto,
     certified by the Secretary or an Assistant Secretary of the Borrower.

          (f) An opinion of counsel to the Borrower, addressed to the Bank, in
     substantially the form of Exhibit D.
                               ---------

          (h) Payment of the Facility Fees as provided in Section 3.2 and the
                                                          -----------
     expenses of the Bank as provided in Section 12.4 hereof.
                                         ------------

     Section 6.2 Conditions Precedent to all Advances.

     The obligation of the Bank to make any Advance hereunder (including the
initial Advance) shall be subject to the satisfaction of the following
conditions precedent (and each request for an Advance shall be deemed a
representation and warranty by the Borrower that the following have been
satisfied):

          (a) Before and after giving effect to such Advance, the representation
     and warranties contained in Article VII shall be true and correct in all
                                 -----------
     material respects, as though made on the date of such Advance (except to
     the extent such representation or warranty expressly relates to an earlier
     date.

          (b) Before and after giving effect to such Advance, no Default or
     Event of Default shall have occurred and be continuing.

                  ARTICLE VII REPRESENTATIONS AND WARRANTIES
                  -----------

     To induce the Bank to enter into this Agreement, and to make the Loan and
issue Letters of Credit hereunder, the Borrower represents and warrants to the
Bank:

                                      17
<PAGE>

     Section 7.1 Organization, Standing, Etc.
                 ---------------------------

     The Borrower and each of the corporate Subsidiaries are corporations duly
incorporated and validly existing and if applicable in good standing under the
laws of the jurisdiction of their respective incorporation and have all
requisite corporate power and authority to carry on their respective businesses
as now conducted, to enter into the Loan Documents and to perform its
obligations under the Loan Documents. The Borrower and each of the Subsidiaries
are duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the failure to qualify could reasonably be expected to
have an Adverse Effect.

     Section 7.2  Authorization and Validity.
                  --------------------------

     The execution, delivery and performance by the Borrower of the Loan
Documents have been duly authorized by all necessary corporate action by the
Borrower, and the Loan Documents constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, subject to limitations as to enforceability which might
result from bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and subject to limitations on the availability of
equitable remedies.

     Section 7.3  No Conflict; No Default.
                  -----------------------

     The execution, delivery and performance by the Borrower of the Loan
Documents will not (a) violate any provision of any law, statute, rule or
regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Borrower, (b) violate or contravene any provisions of the
Articles (or Certificate) of Incorporation or by-laws of the Borrower, or (c)
result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or any of its properties may be bound or
result in the creation of any Lien on any asset of the Borrower or any
Subsidiary. Neither the Borrower nor any Subsidiary is in default under or in
violation of any such law, statute, rule or regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, loan or credit
agreement or other agreement, lease or instrument in any case in which the
consequences of such default or violation could reasonably be expected to result
in an Adverse Event.

     Section 7.4  Government Consent.
                  ------------------

     No order, consent, approval, license, authorization or validation of, or
filing, recording or registration with, or exemption by, any governmental or
public body or authority is required on the part of the Borrower to authorize,
or is required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, the Loan Documents.

                                      18
<PAGE>

     Section 7.5  Financial Statements and Condition.
                  ----------------------------------

     The Borrower's audited consolidated and consolidating financial statements
and its unaudited consolidated and consolidating financial statements as
heretofore furnished to the Bank have been prepared in accordance with GAAP or
in accordance with NAIC Standards on a consistent basis and fairly present the
financial condition of the Borrower and its Subsidiaries as at such dates and
the results of their operations and changes in financial position for the
respective periods then ended, subject, in the case of interim financial
statements, to the absence of footnotes and year-end adjustments. As of the
dates of such financial statements, neither the Borrower nor any Subsidiary had
any material obligation, contingent liability, liability for taxes or long-term
lease obligation which is not reflected in such financial statements or in the
Note thereto. Since the dates of the most recent of such financial statements,
no Adverse Event has occurred.

     Section 7.6  Litigation and Contingent Liabilities.
                  -------------------------------------

     Except as described in Exhibit E, there are no actions, suits or
                            ---------
proceedings pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary or any of their properties before any
court or arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Borrower or any
Subsidiary, could reasonably be expected to result in an Adverse Event. Except
as described in Exhibit F, neither the Borrower nor any Subsidiary has any
contingent liabilities which are material to the Borrower and the Subsidiaries
as a consolidated enterprise.

     Section 7.7  Compliance.
                  ----------

     The Borrower and the Subsidiaries are in material compliance with all
statutes and governmental rules and regulations applicable to them.

     Section 7.8  Environmental, Health and Safety Laws.
                  -------------------------------------

     There does not exist any violation by the Borrower or any Subsidiary of any
applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
could reasonably be expected to impose a material liability on the Borrower or a
Subsidiary or which would or could reasonably be expected to require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower nor
any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, the consequences of which non-compliance or remedial action could
reasonably be expected to result in an Adverse Event.

                                      19
<PAGE>

     Section 7.9   ERISA
                   -----

     Each Plan complies with all material applicable requirements of ERISA and
the Code and with all material applicable rulings and regulations issued under
the provisions of ERISA and the Code setting forth those requirements. No
Reportable Event, other than a Reportable Event for which the reporting
requirements have been waived by regulations of the PBGC, has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would permit the institution of proceedings to terminate any
Plan under Section 4042 of ERISA. The current value of the Plans' benefits
guaranteed under Title IV or ERISA does not exceed the current value of the
Plans' assets allocable to such benefits.

     Section 7.10  Regulation U.
                   ------------

     Neither the Borrower nor any Subsidiary is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of the Loan will be used to purchase or carry
margin stock or for any other purpose which would violate any of the margin
requirements of the Board of Governors of the Federal Reserve System.

     Section 7.11  Ownership of Property.
                   ---------------------

     Each of the Borrower and the Subsidiaries has good and marketable title to
its real properties and good and sufficient title to or right to use its other
properties, including all properties and assets referred to as owned by the
Borrower and its Subsidiaries in the audited financial statement of the Borrower
referred to in Section 7.5 (other than property disposed of since the date of
               -----------
such financial statement in the ordinary course of business).

     Section 7.12  Taxes.
                   -----

     Each of the Borrower and the Subsidiaries has filed all federal, state and
local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to
any assessments made against it or any of its property and all other taxes, fees
and other charges imposed on it or any of its property by any governmental
authority (other than taxes, fees or charges the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the
books of the Borrower). No tax Liens have been filed and no material claims are
being asserted with respect to any such taxes, fees or charges. The charges,
accruals and reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate

                                      20
<PAGE>

     Section 7.13  Trademarks, Patents.
                   -------------------

     Each of the Borrower and the Subsidiaries possesses or has the right to use
all of the patents, trademarks, trade names, service marks and copyrights, and
applications therefor, and all technology, know-how, processes, methods and
designs which are material to the conduct of its business, without known
conflict with the rights of others.

     Section 7.14  Investment Company Act.
                   ----------------------

     Neither the Borrower nor any Subsidiary is an "investment company" or a
company "controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended.

     Section 7.15  Public Utility Holding Company Act.
                   ----------------------------------

     Neither the Borrower nor any Subsidiary is a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" of a holding company
or of a subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

     Section 7.16  Subsidiaries.
                   ------------

     Exhibit G sets forth as of the date of this Agreement a list of all
     ---------
Subsidiaries and the number and percentage of the shares of each class of
capital stock owned beneficially or of record by the Borrower or any Subsidiary
therein, and the jurisdiction of incorporation of each Subsidiary.

     Section 7.17  Partnerships and Joint Ventures.
                   -------------------------------

     Exhibit H sets forth as of the date of this Agreement a list of all
     ---------
partnerships or joint ventures in which the Borrower or any Subsidiary is a
partner (limited or general) or joint venturer.

     Section 7.18  Year 2000.
                   ---------

     Borrower has reviewed and assessed its and its Subsidiaries business
operations and computer systems and applications to address the "year 2000
problem" (that is, that computer applications and equipment used by Borrower and
its Subsidiaries, directly or indirectly through third parties, may be unable to
properly perform date-sensitive functions before, during and after January 1,
2000). Borrower and its Subsidiaries are in the process of implementing a plan
to remediate year 2000 problems and will complete implementation of such plan
with respect to any material year 2000 problems, and testing thereof, by
September 30, 1999. Borrower believes the year 2000 problem will not result in
an Adverse Event. Borrower warrants this representation will be true and correct
on and shall be deemed made by Borrower on each date Borrower requests any Loan
or the issuance of any Letter of Credit or delivers any information to Bank.

                                      21
<PAGE>

                      ARTICLE VIII AFFIRMATIVE COVENANTS
                      ------------

     From the date of this Agreement and thereafter until the Loan and all
other liabilities and obligations of the Borrower to the Bank hereunder and
under the Note have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will do, and will cause each Subsidiary (except
in the instance of Section 8.1) to do, all of the following:
                   -----------

     Section 8.1 Financial Statements and Reports.
                 --------------------------------

     Furnish to Bank:

          (a)  As soon as available and in any event within 120 days after the
     end of each fiscal year of the Borrower, the consolidated annual audit
     reports of the Borrower (and its Subsidiaries) prepared on a consolidated
     basis and in conformity with GAAP, consisting of at least statements of
     income, cash flow, changes in financial position and stockholders' equity,
     and a consolidated balance sheet as at the end of such year, setting forth
     in each case in comparative form corresponding figures from the previous
     annual audit, certified without qualification by independent certified
     public accountants of recognized standing selected by the Borrower and
     reasonably acceptable to the Bank, together with any management letters,
     management reports or other supplementary comments or reports to the
     Borrower or its board of directors furnished by such accountants, and a
     statement by the accounting firm performing such audit stating that it has
     reviewed this Agreement and that in performing its examination nothing
     came to its attention that caused it to believe that any Default or Event
     of Default exists, or, if such Default or Event of Default exists,
     describing its nature.

          (b) As soon as available and in any event within 120 days after the
     end of each fiscal year of Borrower, the unaudited annual financial
     statements of SIC prepared in conformity with NAIC Standards and the
     unaudited annual financial statements of SMI and SREI prepared in
     conformity with GAAP, each certified by the Borrower's chief financial
     officer or controller, consisting of at least statements of income, cash
     flow, changes in financial position and stockholders' equity, and a balance
     sheet as at the end of such year setting forth in each case in comparative
     form corresponding figures from the previous annual financial statements.

          (c) As soon as available and in any event within 45 days after the end
     of the first three fiscal quarters of each fiscal year of Borrower, the
     unaudited financial statements of SIC prepared in conformity with NAIC
     Standards and the unaudited financial statements of SMI and SREI prepared
     in conformity with GAAP (except for the absence of footnotes and subject to
     year-end audit adjustments), each certified by the Borrower's chief
     financial officer or controller, consisting of at least statements of
     income, cash flow, changes in financial position and stockholders' equity
     for such quarter and for the period from the beginning of such fiscal year
     to the end of such quarter, and a balance sheet as at the end of such
     quarter.

                                      22
<PAGE>

          (d) Together with the financial statements furnished by the Borrower
     under Sections 8. 1 (a) and 8.1 (c), a Compliance Certificate in
           ----------- -----     -------
     substantially the form of Exhibit C signed by the chief financial officer
     or controller of the Borrower.

          (e) As soon as available and in any event within 30 days after the end
     of each month, Borrower's internal Monthly Investment Division Report
     describing investments and returns on investments made by Borrower and its
     Subsidiaries, as such report may be amended or modified from time to time,
     signed by Borrower's chief financial officer or controller.

          (f) Immediately upon an Executive Officer of Borrower becoming aware
     thereof, notice of any change in SIC's Claims Paying Ability Rating.

          (g) Immediately upon an Executive Officer of Borrower becoming aware
     of any Default or Event of Default, a notice describing the nature thereof
     and what action the Borrower proposes to take with respect thereto.

          (h) Immediately upon an Executive Officer of Borrower becoming aware
     of the occurrence, with respect to any Plan, of any Reportable Event (other
     than a Reportable Event for which the reporting requirements have been
     waived by PBGC regulations) or any "prohibited transaction" (as defined in
     Section 4975 of the Code), a notice specifying the nature thereof and what
     action the Borrower proposes to take with respect thereto, and, when
     received, copies of any notice from PBGC of intention to terminate or have
     a trustee appointed for any Plan.

          (i) Promptly upon the mailing or filing thereof, copies of all
     financial statements, reports and proxy statements mailed to the Borrower's
     stockholders, and copies of all registration statements, periodic reports
     and other documents filed by Borrower or any of its Subsidiaries with the
     Securities and Exchange Commission and Oregon Department of Consumer and
     Business Services (and any successor to either entity).

          (j) Immediately upon an Executive Officer of Borrower becoming aware
     of the occurrence thereof, notice of the institution of any litigation,
     arbitration or governmental proceeding, or the rendering of a judgment or
     decision in such litigation or proceeding, which could reasonably be
     expected to result in an Adverse Event, and the steps being taken by the
     Person(s) affected by such proceeding.

          (k) Immediately upon an Executive Officer of Borrower becoming aware
     of the occurrence thereof, notice of any violation as to any environmental
     matter by the Borrower or any Subsidiary and of the commencement of any
     judicial or administrative proceeding relating to health, safety or
     environmental matters (i) in which an adverse determination or result could
     reasonably be expected to result in the revocation of or have a material
     adverse effect on any operating permits, air emission permits, water
     discharge permits, hazardous waste permits or other permits held by the
     Borrower or any Subsidiary which are material to the operations of the
     Borrower or such Subsidiary, or (ii) which will or reasonably could be
     expected to impose a

                                      23
<PAGE>

     material liability on the Borrower or such Subsidiary to any Person or
     which will require a material expenditure by the Borrower or such
     Subsidiary to cure any alleged problem or violation.

          (l) From time to time, such other information regarding the business,
     operation and financial condition of the Borrower and the Subsidiaries as
     the Bank may reasonably request, including information regarding Borrower's
     response to the "year 2000 problem".

     Section 8.2  Corporate Existence.
                  -------------------

     Subject to Section 9.1 in the instance of Borrower and each Subsidiary,
                -----------
maintain its corporate existence under the laws of its jurisdiction of
incorporation and its qualification to transact business in each jurisdiction in
which the failure to qualify could reasonably be expected to Adverse an Adverse
Effect.

     Section 8.3  Insurance.
                  ---------

     Maintain with financially sound and reputable insurance companies such
insurance as may be required by law and such other insurance in such amounts and
against such hazards as is customary in the case of reputable corporations
engaged in the same or similar business and similarly situated.

     Section 8.4  Payment of Taxes and Claims.
                  ---------------------------

     File all tax returns and reports which are required by law to be filed by
it and pay before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including, without limitation, those of suppliers, mechanics,
carriers, warehouses, landlords and other like Persons) which, if unpaid, might
result in the creation of a Lien upon its property; provided that the foregoing
                                                    --------
items need not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower's or such Subsidiary's title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower's or such
Subsidiary's books in accordance with GAAP.

     Section 8.5  Inspection.
                  ----------

     Permit any Person designated by the Bank to visit and inspect any of its
properties, corporate books and financial records, to examine and to make copies
of its books of accounts and other financial records, and to discuss the
affairs, finances and accounts of the Borrower and the Subsidiaries with, and to
be advised as to the same by, its officers, all at such reasonable times and
intervals as the Bank may designate.

                                      24
<PAGE>

Section 8.6 Maintenance of Properties.
            -------------------------

     Maintain its properties used or useful in the conduct of its business in
good condition, repair and working order, and supplied with all necessary
equipment, and make repairs, renewals, replacements, betterments and
improvements thereto, all as may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.

     Section 8.7  Books and Records.
                  -----------------

     Keep adequate and proper records and books of account in which full and
correct entries will be made of its dealings, business and affairs.

     Section 8.8  Compliance.
                  ----------

     Comply in all material respects with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject.

     Section 8.9  ERISA.
                  -----

     Maintain each Plan in compliance with all material applicable requirements
of ERISA and of the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and of the Code.

     Section 8.10 Environmental Matters.
                  ---------------------

     Observe and comply with all laws, rules, regulations and orders of any
government or government agency relating to health, safety, pollution, hazardous
materials or other environmental matters to the extent non-compliance could
result in a material liability or otherwise constitute an Adverse Event.

                         ARTICLE IX NEGATIVE COVENANTS
                         ----------

     From the date of this Agreement and thereafter until the Loan and all other
liabilities and obligations of the Borrower to the Bank hereunder and under the
Note have been paid in full, unless the Bank shall otherwise expressly consent
in writing, the Borrower will not, and will not permit any Subsidiary to, do any
of the following:

     Section 9.1  Merger.
                  ------

     Merge or consolidate or enter into any analogous reorganization or
transaction with any Person; provided, however, (a) any wholly-owned Subsidiary
                             --------- -------
(except SIC) may be merged with or liquidated into the Borrower (if the Borrower
is the surviving corporation) or SIC (if SIC is the surviving corporation) or
any other wholly-owned Subsidiary; and (b) the Borrower or any Subsidiary may
merge or consolidate

                                      25
<PAGE>

with any other Person so long as (i) (A) the Borrower or such Subsidiary shall
be the continuing or surviving Person or (B) in the case of a merger with a
Subsidiary, the acquired Person is, as a result of the merger transaction, a
wholly owned Subsidiary of the Borrower, and (ii) immediately before and after
giving effect to such merger, there shall be no Default or Event of Default.

     Section 9.2 Sale of Assets.
                 --------------

     Sell, transfer, lease or otherwise convey all or any substantial part of
its assets except for sales or other transfers by a wholly-owned Subsidiary to
the Borrower or another wholly-owned Subsidiary.

     Section 9.3 Plans.
                 -----

     Permit any condition to exist in connection with any Plan which might
constitute grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan, permit any Plan to
terminate under any circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to any property, revenue or asset of the
Borrower or any Subsidiary.

     Section 9.4 Change in Nature of Business.
                 ----------------------------

     Make any material change in the nature of the business of the Borrower and
its Subsidiaries, taken as a whole, carried on at the date hereof.

     Section 9.5 Subsidiaries.
                 ------------

     Take any action or permit any Subsidiary to take any action, which would
result in either (a) Borrower's direct or indirect ownership interest in SIC or
SMI to be less than 100%, or (b) the Borrower's or the Subsidiary's direct
ownership interest in any other Subsidiary now owned or hereafter acquired to
be less than 50%.

     Section 9.6 Other Agreements.
                 ----------------

     Enter into any agreement, bond, note or other instrument with or for the
benefit of any Person other than the Bank which would: (a) prohibit the Borrower
or any Subsidiary from granting, or otherwise limit the ability of the Borrower
or such Subsidiary to grant, to the Bank any Lien on any assets or properties
of the Borrower or such Subsidiary (other than prohibitions or limitations (i)
existing on the date of this Agreement, (ii) affecting the assets of any Person
acquired after the date of this Agreement, and existing on the date of the
acquisition of the Person, (iii) existing under, or by reason of, applicable
law, or (iv) constituting an encumbrance or restriction on any property or
assets in an agreement relating to the acquisition of such property or asset
that is otherwise permitted by the terms of this Agreement; or (b) be violated
or breached by the Borrower's performance of its obligations under the Loan
Documents.

                                      26
<PAGE>

     Section 9.7   Funded Debt.
                   -----------

     Incur, create, issue, assume or suffer to exist Funded Debt in excess of
$150,000,000 outstanding at any time.

     Section 9.8   Unconditional Purchase Obligations.
                   ----------------------------------

     Enter into or be a party to any contract for the purchase or lease of
materials, supplies or other property or services involving payments of more
than $5,000,000 if such contract requires that payment be made by it regardless
of whether or not delivery is ever made of such materials, supplies or other
property or services.

     Section 9.9   Transactions with Related Parties.
                   ---------------------------------

     Enter into or be a party to any transaction or arrangement, including
without limitation, the purchase, sale, lease or exchange of property or the
rendering of any service, with any Related Party, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's or the
applicable Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not a Related Party.

     Section 9.10  Use of Proceeds.
                   ---------------

     Permit any proceeds of the Loan to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying any margin stock" within the meaning of Regulation U of the Federal
Reserve Board, as amended from time to time, and furnish to the Bank, upon its
request, a statement in conformity with the requirements of Federal Reserve
Form U-1 referred to in Regulation U.

     Section 9.11  Borrower's Equity.
                   -----------------

     Permit the stockholder's equity of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP as of the last day of any
fiscal quarter to be less than $650,000,000, but excluding the effect of net
unrealized gains and losses included in or excluded from stockholder's equity on
account of Statement No. 115 of the Financial Accounting Standards Board and
similar accounting rules.

     Section 9.12  SMI's Tangible Net Worth.
                   ------------------------

     Permit the Tangible Net Worth of SMI as of the last day of any fiscal
quarter to be less than $5,000,000.

                                       27
<PAGE>

     Section 9.13  SIC's Claims Paying Ability Rating.
                         ----------------------------

     Cause SIC to maintain a Claims Paying Ability Rating from A.M. Best of A-
or better and maintain a Claims Paying Ability Rating from Standard and Poor's
of A or better.

                   ARTICLE X EVENTS OF DEFAULT AND REMEDIES
                   ---------

     Section 10.1  Events of Default.
                   -----------------

     The occurrence of any one or more of the following events shall constitute
an Event of Default:

          (a) The Borrower shall fail to make when due, whether by acceleration
     or otherwise, any payment of principal or any payment of interest on the
     Note or any fee or other amount required to be made to the Bank pursuant to
     the Loan Documents within three business days of the due date thereof;

          (b) Any representation or warranty made or deemed to have been made by
     or on behalf of the Borrower or any Subsidiary in the Loan Documents or on
     behalf of the Borrower or any Subsidiary in any certificate, statement,
     report or other writing furnished by or on behalf of the Borrower to the
     Bank pursuant to the Loan Documents or any other instrument, document or
     agreement shall prove to have been false or misleading in any material
     respect on the date as of which the facts set forth are stated or certified
     or deemed to have been slated or certified;

          (c) The Borrower shall fail to comply with Section 8.2 hereof or any
                                                     -----------
     Section of Article IX hereof;
                ----------

          (d) The Borrower shall fail to comply with any agreement, covenant,
     condition, provision or term contained in the Loan Documents except the
     inadvertent failure to list less than $500,000 in contingent obligations in
     a Compliance Certificate required by Section 8.1(d) (and such failure shall
                                          -------------
     not constitute an Event of Default under any of the other provisions of
     this Section 10.1) and such failure to comply shall continue for 30
          ------------
     calendar days after notice thereof to the Borrower by the Bank;

          (e) The Borrower or any Subsidiary shall become insolvent or shall
     generally not pay its debts as they mature or shall apply for, shall
     consent to, or shall acquiesce in the appointment of a custodian,
     trustee or receiver of the Borrower or such Subsidiary or for a substantial
     part of the property thereof or, in the absence of such application,
     consent or acquiescence, a custodian, trustee or receiver shall be
     appointed for the Borrower or a Subsidiary or for a substantial part of the
     property thereof and shall not be discharged within 45 days;

          (f) Any bankruptcy, reorganization, debt arrangement or other
     proceedings under any bankruptcy or insolvency law shall be instituted by
     or against the Borrower or a Subsidiary, and, if instituted against the
     Borrower or a Subsidiary, shall have been consented to or acquiesced in by

                                       28
<PAGE>

     the Borrower or such Subsidiary, or shall remain undismissed for 45 days,
     or an order for relief shall have been entered against the Borrower or such
     Subsidiary, or the Borrower or any Subsidiary shall take any corporate
     action to approve institution of, or acquiescence in, such a proceeding;

          (g) Any dissolution or liquidation proceeding shall be instituted by
     or against the Borrower or a Subsidiary and, if instituted against the
     Borrower or such Subsidiary, shall be consented to or acquiesced in by the
     Borrower or such Subsidiary or shall remain for 45 days undismissed, or the
     Borrower or any Subsidiary shall take any corporate action to approve
     institution of, or acquiescence in, such a proceeding;

          (h) A judgment or judgments for the payment of money in excess of the
     sum of $5,000,000 in the aggregate shall be rendered against the Borrower
     or a Subsidiary and the Borrower or such Subsidiary shall not discharge the
     same or provide for its discharge in accordance with its terms, or procure
     a stay of execution thereof, prior to any execution on such judgments by
     such judgment creditor, within 30 days from the date of entry thereof, and
     within said period of 30 days, or such longer period during which execution
     of such judgment shall be stayed, appeal therefrom and cause the execution
     thereof to be stayed during such appeal;

          (i) The institution by the Borrower, any ERISA Affiliate or the PBGC
     of steps to terminate any Plan other than a termination under Section
     4041(b) of ERISA by the Borrower or ERISA Affiliate;

          (j) The maturity of any Indebtedness of the Borrower (other than
     Indebtedness under this Agreement) or a Subsidiary shall be accelerated, or
     the Borrower or a Subsidiary shall fail to pay any such Indebtedness when
     due or, in the case of such Indebtedness payable on demand, when demanded,
     or any event shall occur or condition shall exist and shall continue for
     more than the period of grace, if any, applicable thereto and shall have
     the effect of causing, or permitting (any required notice having been
     given and grace period having expired) the holder of any such Indebtedness
     or any trustee or other Person acting on behalf of such holder to cause,
     such indebtedness to become due prior to its stated maturity or to realize
     upon any collateral given as security therefor; or

          (k) Either SIC or SMI shall cease to be a wholly owned Subsidiary of
     Borrower.

     Section 10.2 Remedies.
                  --------

     If (a) any Event of Default described in Sections 10.1 (e), (f) or (g)
                                              -----------------
shall occur with respect to the Borrower, the Commitment shall automatically
terminate and the outstanding unpaid principal balance of the Note, the accrued
interest thereon and all other obligations of the Borrower to the Bank under the
Loan Documents shall automatically become immediately due and payable; or (b)
any other Event of Default shall occur and be continuing, then the Bank may take
any or all of the following actions: (i) declare the Commitment terminated,
whereupon the Commitment shall terminate, (ii)

                                      29
<PAGE>

declare that the outstanding unpaid principal balance of the Note, the accrued
and unpaid interest thereon and all other obligations of the Borrower to the
Bank under the Loan Documents to be forthwith due and payable, whereupon the
Note, all accrued and unpaid interest thereon and all such obligations shall
immediately become due and payable, in each case without demand or notice of
any kind, all of which are hereby expressly waived, anything in this Agreement
or in the Note to the contrary notwithstanding, (iii) exercise all rights and
remedies under any other instrument, document or agreement between the Borrower
and the Bank, and (iv) enforce all rights and remedies under any applicable law.

     Section 10.3 Letters of Credit.
                  -----------------

     In addition to the foregoing remedies, if any Event of Default described
in Section 10.1(e), (f) or (g) shall have occurred, or if any other Event of
    ---------------
Default shall have occurred and the Bank shall have declared that the principal
balance of the Note is due and payable, the Borrower shall pay to the Bank an
amount equal to the all Letter of Credit Obligations. Such payment shall be in
immediately available funds or in similar cash collateral acceptable to the Bank
and shall be pledged to the Bank. Such amount shall be held by the Bank in a
cash collateral account until the outstanding Letters of Credit are terminated
without payment or are paid and Letter of Credit Obligations with respect
thereto are payable. In the event the Borrower defaults in the payment of any
Letter of Credit Obligations, the proceeds of the cash collateral account shall
be applied to the payment thereof. The Borrower acknowledges and agrees that the
Bank would not have an adequate remedy at law for failure by the Borrower to pay
immediately to the Bank the amount provided under this Section 10.3, and that
                                                       ------------
the Bank shall have the right to require the Borrower to perform specifically
such undertaking whether or not any of the Letter of Credit Obligations are due
and payable. Upon the failure of the Borrower to make any payment required under
this Section, the Bank may proceed to use all remedies available at law or
equity to enforce the obligation of the Borrower to pay or reimburse the Bank.
The balance of any payment due under this Section shall bear interest payable
on demand until paid in full at a per annum rate equal to the Federal Funds Rate
plus 3.00%.

     Section 10.4 Offset.
                  ------

     In addition to the remedies set forth in Section 10.2, upon the occurrence
                                              ------------
of any Event of Default or at any time thereafter while such Event of Default
continues, the Bank may offset any and all balances, credits, deposits (general
or special, time or demand, provisional or final), accounts or monies of the
Borrower then or thereafter with the Bank, or any obligations of the Bank
against the Indebtedness then owed by the Borrower to such Bank.

                                      30
<PAGE>

                            ARTICLE XI ARBITRATION

     Section 11.1  Arbitration of Claims.
                   ---------------------

     Notwithstanding Sections 12.13 and 12.14 of this Agreement, Borrower, any
                     ------------------------
Guarantor or Bank may require that any and all disputes, claims, counterclaims,
and defenses, including those based on or arising from any alleged tort
("Claims") relating in any way to this Agreement, the Loan, any of the Loan
Documents, or any transaction of which this Agreement is a part (each a
"Credit"), 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 Credit, 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 the Borrower or Guarantor) would be to materially
impair the Bank's ability to realize on any collateral securing the Credit.

     Section 11.2  Arbitrators.
                   -----------

     If each party's Claim is less than $100,000, one neutral arbitrator will
decide all issues; if any party's claim is $100,000 or more three neutral
arbitrators will decide all issues. All arbitrators will be active Oregon State
Bar members in good standing. All arbitration hearings will be held in Portland,
Oregon. In addition to all other powers, the arbitrator(s) shall have the
exclusive right to determine all issues of arbitrability. Judgment on any
arbitration award may be entered in and enforced by any court with jurisdiction.

     Section 11.3  Other Remedies.
                   --------------

     Each party has the right before, during, and after any arbitration to
exercise any number of the following remedies, in any order or concurrently; (a)
setoff; (b) self-help repossession; (c) judicial or non-judicial foreclosure
against real or personal property collateral; and (d) provisional remedies,
including injunction, appointment of receiver, attachment, claim and delivery
and replevin.

     Section 11.4  Non-Waiver; Governing Provision.
                   -------------------------------

     The institution of any judicial proceeding relating to any Credit shall not
be a waiver of the right to submit any Claim to arbitration. The provision of
this Article shall govern the arbitration of all matters described herein
notwithstanding any contrary provision of any Note or any Loan Document.

                           ARTICLE XII MISCELLANEOUS

     Section 12.1  Waiver and Amendment.
                   --------------------

     No failure on the part of the Bank to exercise and no delay in exercising
any power or right hereunder or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or

                                      31
<PAGE>

partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right. The remedies herein and in
any other instrument, document or agreement delivered or to be delivered to the
Bank hereunder or in connection herewith are cumulative and not exclusive of any
remedies provided by law. No notice to or demand on the Borrower not required
hereunder or under the Note shall in any event entitle the Borrower to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the right of the Bank or the holder of the Note to any other or
further action in any circumstances without notice or demand. Borrower and SIC
hereby waive and discharge any and all defenses, claims, counterclaims and
offsets which either or both may have against Bank and which have arisen or
accrued through the date of this Agreement.

     Section 12.2  Amendments, Etc.
                   ---------------

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

     Section 12.3  Assignments and Participations.
                   ------------------------------

          (a)  Assignments. With the prior written consent of the Borrower, the
               -----------
     Bank shall have the right, subject to the further provisions of this
     Section 12.3, to sell or assign all or any part of the Loan, Note, and
     ------------
     other rights and obligations under this Agreement and related documents
     (such transfer, and "Assignment") to any commercial lender, other financial
     institution or other entity (an "Assignee"). Upon such Assignment becoming
     effective as provided in Section 12.3(b), the Bank shall be relieved from
                              ---------------
     its obligations hereunder to the extent assumed and undertaken by the
     Assignee, and to such extent the Assignee shall have the rights and
     obligations of the Bank hereunder. Notwithstanding the foregoing, unless
     otherwise consented to by the Borrower and the Bank, each Assignment shall
     be in the initial principal amount of not less than $10,000,000 in the
     aggregate for all Loan and Commitments assigned, or an integral multiple of
     $10,000,000 if above such amount. Each Assignment shall be documented by an
     agreement between the Bank and the Assignee (an "Assignment and Assumption
     Agreement") in form and substance satisfactory to the Bank.

          (b)  Effectiveness of Assignments. An Assignment shall become
               ----------------------------
     effective hereunder when the Borrower shall have been given notice of the
     Assignment. Upon the Assignment becoming effective, if requested by the
     Bank, the Borrower shall make appropriate arrangements so that a new Note
     is issued to the Bank and the Assignee.

          (c)  Participations. With the prior written consent of the Borrower,
               --------------
     the Bank shall have the right, subject to the further provisions of this
     Section 12.3, to grant or sell a participation in all or any part of the
     ------------
     Loan and Note (a "Participation") to any commercial lender, other financial
     institution or other entity (a "Participant"). The Borrower agrees that if
     amounts outstanding under this Agreement and the Note are due and unpaid,
     or shall have been declared or shall have

                                      32
<PAGE>

     become due and payable upon the occurrence of an Event of Default, each
     Participant shall be deemed to have the right of setoff in respect of its
     Participation in amounts owing under this Agreement and any Note to the
     same extent as if the amount of its Participation were owing directly to it
     as a Bank under this Agreement or the Note. The Borrower also agrees that
     each Participant shall be entitled to the benefits of Article V with
                                                           ---------
     respect to its Participation, provided, that no Participant shall be
     entitled to receive and greater amount pursuant to such Sections than the
     transferor Bank would have been entitled to receive in respect of the
     amount of the Participation transferred by such transferor Bank to such
     Participant had no such transfer occurred.

          (d)  Limitation of Rights of any Assignee or Participant.
               ---------------------------------------------------
     Notwithstanding anything in the foregoing to the contrary, except in the
     instance of an Assignment that has become effective as provided in Section
                                                                        -------
     12.3(b), (i) no Assignee or Participant shall have any direct rights
     -------
     hereunder, (ii) the Borrower shall deal solely with the Bank and shall not
     be obligated to extend any rights or make any payment to, or seek any
     consent of the Assignee or Participant, (iii) no Assignment or
     Participation shall relieve the Bank from any of its other obligations
     hereunder and the Bank shall remain solely responsible for the performance
     hereof, the (iv) no Assignee or Participant shall be entitled to require
     the Bank to take or omit to take any action hereunder, except that the Bank
     may agree with such Assignee or Participant that the Bank will not, without
     such Assignee's or Participant's consent, take any action which would, in
     the case of any principal, interest or fee in which the Assignee or
     Participant has an ownership or beneficial interest: (w) extend the final
     maturity of the Loan or extend the Termination Date, (x) reduce the
     interest rate on the Loan, or (y) forgive any principal of, or interest on,
     the Loan or any fees.

          (e)  Tax Matters. The Bank shall not be permitted to enter into any
               -----------
     Assignment or Participation with any Assignee or Participant who is not a
     United States Person unless such Assignee or Participant represents and
     warrants to such Bank that, as at the date of such Assignment or
     Participation, it is entitled to receive interest payments without
     withholding or deduction of any taxes and such Assignee or Participant
     executes and delivers to the Bank on or before the date of execution and
     delivery of documentation of such Participation or Assignment, a United
     States Internal Revenue Service Form 1001 or 4224, or any successor to
     either of such forms, as appropriate, properly completed and claiming
     complete exemption from withholding and deduction of all Federal Income
     Taxes. A "United States Person" means any citizen, national or resident of
     the United States, any corporation or other entity created or organized in
     or under the laws of the United States or any political subdivision hereof
     or any estate or trust, in each case that is not subject to withholding of
     United States Federal income taxes or other taxes on payment of interest,
     principal of fees hereunder.

          (f)  Information. The Bank may furnish any information concerning the
               -----------
     Borrower in the possession of such Bank from time to time to Assignees and
     Participants and potential Assignees and Participants.

                                      33
<PAGE>

          (g)  Federal Reserve Bank. Nothing herein stated shall limit the right
               --------------------
     of the Bank to assign any interest herein and in the Note to a Federal
     Reserve Bank.

     Section 12.4  Costs, Expenses and Taxes.
                   -------------------------

     The Borrower agrees, whether or not any Loan is made hereunder, to pay on
demand all costs and expenses of the following persons (including the reasonable
fees and expenses of counsel and paralegals for such persons who may be
employees of such persons), incurred in connection with the following matters:
(i) the Bank in connection with the preparation, execution and delivery of the
Loan Documents and the preparation, negotiation and execution of any and all
amendments to each thereof and (ii) the Bank in connection with the enforcement
of the Loan Documents. The Borrower agrees to pay, and save the Bank harmless
from all liability for, any stamp or other taxes which may be payable with
respect to the execution or delivery of the Loan Documents. The Borrower agrees
to indemnify and hold the Bank harmless from any loss or expense which may arise
or be created by the acceptance of telephonic or other instructions for making
the Loan or disbursing the proceeds thereof. The obligations of the Borrower
under this Section 13.4 shall survive any termination of this Agreement.
           ------------

     Section 12.5  Notices.
                   -------

     Except when telephonic notice is expressly authorized by this Agreement,
any notice or other communication to any party in connection with this Agreement
shall be in writing and shall be sent by manual delivery, telegram, telex,
facsimile transmission, overnight courier or United States mail (postage
prepaid) addressed to such party at the address specified on the signature page
hereof, or at such other address as such party shall have specified to the other
party hereto in writing. All periods of notice shall be measured from the date
of delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
after the date of sending if sent by overnight courier, or upon receipt if
mailed; provided, however, that any notice to the Bank under Article II hereof
        --------  -------                                    ----------
shall be deemed to have been given only when received by the Bank.

     Section 12.6  Successors.
                   ----------

     This Agreement shall be binding upon the Borrower and the Bank and their
respective successors and permitted assigns, and shall inure to the benefit of
the Borrower and the Bank and the successors and permitted assigns of the Bank.
The Borrower shall not assign its rights or duties hereunder without the written
consent of the Bank, except as expressly permitted herein.

     Section 12.7  Severability.
                   ------------

     Any provision of the Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

                                      34
<PAGE>

     Section 12.8   Subsidiary Reference
                    --------------------

     The provisions of this Agreement relating to Subsidiaries shall apply
     only during such times as the Borrower has one or more Subsidiaries.

     Section 12.9   Captions.
                    --------
     The captions or headings herein and any table of contents hereto are for
convenience only and in no way define, limit or describe the scope or intent of
any provision of this Agreement.

     Section 12.10  Entire Agreement.
                    ----------------

     The Loan Documents embody the entire agreement and understanding between
the Borrower and the Bank with respect to the subject matter hereof and thereof.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.

     Section 12.11  Counterparts.
                    ------------

     This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and either of the
parties hereto may execute this Agreement by signing any such counterpart.

     Section 12.12  Governing Law.
                    -------------

     THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OREGON, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLE THEREOF, BUT GIVING EFFECT TO
FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANK.

     Section 12.13  Consent to Jurisdiction.
                    -----------------------
     WITHOUT LIMITING ARTICLE XI, AT THE OPTION OF THE BANK, THIS AGREEMENT AND
THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR OREGON STATE COURT SITTING IN
PORTLAND, OREGON; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY
SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.
IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE
UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY AND INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED
TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

                                      35
<PAGE>

     Section 12.14  Waiver of Jury Trail.
                    --------------------

     WITHOUT LIMITING ARTICLE XI, THE BORROWER WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.

     Section 12.15  Disclosure.
                    -----------

          Under Oregon law, most agreements, promises and commitments made by
          -------------------------------------------------------------------
lenders after October 3, 1989, concerning loans and other credit extensions
---------------------------------------------------------------------------
which are not for personal, family or household purposes or secured solely by
-----------------------------------------------------------------------------
the borrower's residence must be in writing, express consideration and be signed
--------------------------------------------------------------------------------
by the lender to be enforceable.
-------------------------------

     Section 12.16  Termination of SIC Credit Agreement.
                    -----------------------------------

          The SIC Credit Agreement is hereby terminated. SIC and Bank affirm
that there are no outstanding Advances or Letter of Credit Obligations under the
SIC Credit Agreement. Bank hereby waives prior written notice of termination of
the commitment under Section 4.4 of the SIC Credit Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.

                              STANCORP FINANCIAL GROUP, INC.

                              By: /s/ Patricia J. Brown
                                 ----------------------------

                              Title: AVP & Controller
                                    -------------------------

                              1100 SW Sixth Avenue
                              Portland, OR 97304-1093
                              Attention: Eric E. Parsons
                              Telephone: (503) 321-8616
                              Fax: (503) 321-7935

                                       36
<PAGE>

                              STANDARD INSURANCE COMPANY

                              By: /s/ Patricia J. Brown
                                 ----------------------------------
                              Title: AVP, Controller and Treasurer
                                    -------------------------------
                              1100 SW Sixth Avenue
                              Portland, OR 97304-1093
                              Attention: Eric E. Parsons
                              Telephone: (503) 321-8616
                              Fax: (503) 321-7935

                              U.S. BANK NATIONAL ASSOCIATION

                              By: /s/ Jennifer L. Briglia
                                 ----------------------------------
                                 Vice President

                              Oregon Corporate Banking
                              4th Floor
                              111 SW Fifth Avenue
                              Portland, OR 97204
                              Attention: Jennifer Briglia
                              Telephone: (503) 275-6991
                              Fax: (503) 275-5415

                                      37
<PAGE>

                                   EXHIBIT A

                                PROMISSORY NOTE

$ 100,000,000                                                    June 30, 1999

     FOR VALUE RECEIVED, the undersigned StanCorp Financial Group, Inc., an
Oregon corporation (the "Borrower"), promises to pay to the order of U.S. BANK
NATIONAL ASSOCIATION (the "Bank"), on the due date or dates determined under
the Credit Agreement hereinafter referred to, the principal sum of ONE HUNDRED
MILLION DOLLARS ($100,000,000.00), or if less, the then unpaid principal amount
of the Loan (as such terms are defined in the Credit Agreement) as may be
borrowed by the Borrower from the Bank under the Credit Agreement. All Loans
and all payments of principal shall be recorded by the holder in its records
which records shall be conclusive evidence of the subject matter thereof, absent
manifest error.

     The Borrower further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date hereof until paid in full at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement. Accrued
interest shall be payable on the dates specified in the Credit Agreement.

     All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
the Bank's office at Corporate Loan Servicing (PL-7), 111 SW Fifth Avenue,
                     -----------------------------------------------------
Portland, Oregon 97204, or at such other place as may be designated by the Bank
----------------------
to the Borrower in writing.

     This Note is the Note referred to in, and evidences indebtedness incurred
under, a Credit Agreement dated as of June 30, 1999 (herein, as it may be
                                      -------------
amended, modified or supplemented from time to time, called the "Credit
Agreement") among the Borrower arid the Bank to which Credit Agreement reference
is made for a statement of the terms and provisions thereof, including those
under which the Borrower is permitted and required to make prepayments and
repayments of principal of such indebtedness and under which such indebtedness
may be declared to be immediately due and payable.

     All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.

     This Note is made under and governed by the internal laws of the State of
Oregon.

                                   STANCORP FINANCIAL GROUP, INC.

                                   By:___________________________________

                                   Title:________________________________
<PAGE>

                                   EXHIBIT B
                              SUBSIDIARY GUARANTY

     GUARANTY, dated as of June 30, 1999 (as amended, modified or supplemented
from time to time, this "Guaranty"), made by each of the undersigned (each, a
"Guarantor" and, collectively, the "Guarantors"). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as defined below)
shall be used herein as therein defined.

                                  WITNESSETH:

     WHEREAS, StanCorp Financial Group, Inc. (the "Borrower") and U.S. Bank
National Association (the "Bank"), have entered into a Credit Agreement, dated
as of June 30, 1999 providing for the making of Loans and the issuance of
Letters of Credit as contemplated therein (as used herein, the term "Credit
Agreement" means the Credit Agreement described above in this paragraph, as the
same may be amended, modified, extended, renewed, replaced or supplemented from
time to time, and including any agreement extending the maturity of, refinancing
or restructuring all or any portion of the Indebtedness under such agreement or
any successor agreement).

     WHEREAS, each Guarantor is a Subsidiary of the Borrower and each Guarantor
and the Borrower are operated as one consolidated business entity and are
directly dependent upon each other for and in connection with their respective
financial resources;

     WHEREAS, it is a condition to the making of Loans and the issuance of
Letters of Credit under the Credit Agreement that each Guarantor shall have
executed and delivered this Guaranty; and

     WHEREAS, each Guarantor will obtain direct and indirect economic, financial
and other benefits from the incurrence of Loans by the Borrower and the issuance
of Letters of Credit under the Credit Agreement and, accordingly, desires to
execute this Guaranty in order to satisfy the conditions described in the
preceding paragraph and to induce the Bank to make Loans and issue Letters of
Credit for the account of the Borrower;

     NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Bank and hereby covenants and agrees with the Bank as
follows:

     1.   As used herein, the term "Guaranteed Obligations" means (x) the
principal of and interest on the Note issued by, and the Loan made to, the
Borrower under the Credit Agreement and all Letter of Credit Obligations and (y)
all other obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and liabilities
owing by the Borrower to the Bank under the Credit Agreement (including, without
<PAGE>

limitation, indemnities, fees and interest thereon) whether now existing or
hereafter incurred under, arising out of or in connection with the Credit
Agreement or any other Loan Document and the due performance and compliance with
the terms of the Loan Documents by the Borrower.

     2.   Notwithstanding any other term or provision of this Guaranty, the
liability of (a) Standard Insurance Company hereunder shall be limited to the
amount of Guaranteed Obligations in existence on the date an Event of Default
occurs which is not subsequently cured, less twenty million dollars
($20,000,000), plus interest thereon from such date until paid at the highest
rate of interest which any outstanding Advance under the Note bears, as such
rate may vary from time to time, and (b) Standard Mortgage Investors, LLC
hereunder shall be unlimited.

     3.   Each Guarantor, jointly and severally, irrevocably and unconditionally
guarantees to the Bank the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of the Guaranteed Obligations to
the extent provided herein. Each Guarantor understands, agrees and confirms that
the Bank may enforce this Guaranty against each Guarantor without proceeding
against any other Guarantor, the Borrower, against any security for the
Guaranteed Obligations, or under any other guaranty covering all or a portion of
the Guaranteed Obligations.

     4.   Additionally, each Guarantor, jointly and severally, unconditionally
and irrevocably, guarantees to the extent provided herein the payment of any and
all Guaranteed Obligations of the Borrower to the Bank whether or not due or
payable by the Borrower upon the occurrence in respect of the Borrower of an
Event of Default, and unconditionally and irrevocably, jointly and severally,
promises to pay such Guaranteed Obligations to the Bank, on order, or on demand,
in lawful money of the United States.

     5.   The liability of each Guarantor hereunder is exclusive and independent
of any security for or other guaranty of the Guaranteed Obligations of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the Guaranteed Obligations of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any termination of, or
increase, decrease or charge in, personnel by the Borrower or (e) any payment
made to Bank on the Guaranteed Obligations which Bank repays the Borrower
pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and each Guarantor waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding.

     6.   The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against each Guarantor
whether or not action is brought against any other Guarantor, any other
guarantor or the Borrower and whether or not any' other Guarantor, any other
guarantor of the Borrower or the Borrower be joined in any such action or
actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of
<PAGE>

limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any statute
of limitations as to the Borrower shall operate to toll the statute of
limitations as to each Guarantor.

     7.   Each Guarantor hereby waives (to the fullest extent permitted by
applicable law) notice of acceptance of this Guaranty and notice of any
liability to which it may apply, and waives promptness, diligence, presentment,
demand of payment, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by the Bank against, and any other
notice to, any party liable thereon (including such Guarantor or any other
Guarantor or guarantor or the Borrower).

     8.   Bank may at any time and from time to time without the consent of, or
notice to, any Guarantor, without incurring responsibility to such Guarantor,
without impairing or releasing the obligations of such Guarantor hereunder, upon
or without any terms or conditions and in whole or in part:

          (a)  change the manner, place or terms of payment of, and/or change or
     extend the time of payment of, renew, increase, accelerate or alter, any of
     the Guaranteed Obligations, any security therefor, or any liability
     incurred directly or indirectly in respect thereof, and the guaranty herein
     made shall apply to the Guaranteed Obligations as so changed, extended,
     renewed or altered;

          (b)  sell, exchange, release, surrender, realize upon or otherwise
     deal with in any manner and in any order any property by whomsoever at any
     time pledged or mortgaged to secure, or howsoever securing, the Guaranteed
     Obligations or any liabilities (including any of those hereunder) incurred
     directly or indirectly in respect thereof or hereof, and/or any offset
     thereagainst;

          (c)  exercise or refrain from exercising any rights against the
     Borrower, any Guarantor or others or otherwise act or refrain from acting;

          (d)  settle or compromise any of the Guaranteed Obligations, any
     security therefor or any liability (including any of those hereunder)
     incurred directly or indirectly in respect thereof or hereof, and may
     subordinate the payment of all or any part thereof to the payment of any
     liability (whether due or not) of the Borrower to creditors of the
     Borrower;

          (e)  apply any sums by whomsoever paid or howsoever realized to any
     liability or liabilities of the Borrower to the Bank regardless of what
     liabilities or the Borrower remain unpaid;

          (f)  consent to or waive any breach of, or any act, omission or
     default under the Loan Documents or any of the instruments or agreements
     referred to therein, or otherwise amend, modify or supplement the Loan
     Documents or any of such other instruments or agreements; and/or
<PAGE>

          (g)  act or fail to act in any manner referred to in this Guaranty
     which may deprive such Guarantor of its right to subrogation against the
     Borrower to recover full indemnity for any payments made pursuant to this
     Guaranty.

     9.   No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations or of any security therefor shall affect, impair or
be a defense to this Guaranty, and this Guaranty shall be primary, absolute and
unconditional notwithstanding the occurrence of any event or the existence of
any other circumstances which might constitute a legal or equitable discharge of
a surety or guarantor except payment in full of the Guaranteed Obligations.

     10.  This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of Bank in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which the Bank would otherwise have. No notice to or demand on any Guarantor
in any case shall entitle such Guarantor to any other further notice or demand
in similar or other circumstances or constitute a waiver of the rights of Bank
to any other or further action in any circumstances without notice or demand. It
is not necessary for Bank to inquire into the capacity or powers of the Borrower
or any of its Subsidiaries or the officers, directors, partners or agents acting
or purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.

     11.  Any indebtedness of the Borrower now or hereafter held by any
Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Bank; and such indebtedness of the Borrower to any Guarantor, if the Bank,
after an Event of Default has occurred and is continuing, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the Bank and
be paid over to the Bank on account of the indebtedness of the Borrower to the
Bank, but without affecting or impairing in any manner the liability of such
Guarantor under the other provisions of this Guaranty. Prior to the transfer by
any Guarantor of any note or negotiable instrument evidencing any indebtedness
of the Borrower to such Guarantor, such Guarantor shall mark such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Bank that it will not exercise any right of subrogation
which it may at any time otherwise have as a result of this Guaranty (whether
contractual, under Section 509 of the Bankruptcy Code or otherwise) until all
Guaranteed Obligations have been irrevocably paid in full in cash.

     12.  (a)  Each Guarantor waives any right (except as shall be required by
applicable statute or law and cannot be waived) to require the Bank to: (i)
proceed against the Borrower, any other Guarantor, any other guarantor of the
Borrower or any other party; (ii) proceed against or exhaust any security held
from the Borrower, any other Guarantor, any other guarantor of the Borrower or
any other party; or (iii) pursue any other remedy in the Bank's power
whatsoever. Each Guarantor waives any (to the fullest extent permitted by
applicable law) defense based on or
<PAGE>

arising out of any defense of the Borrower, any other Guarantor, any other
guarantor of the Borrower or any other party other than payment in full of the
Guaranteed Obligations, including, without limitation, any defense based on or
arising out of the disability of the Borrower, any other Guarantor, any other
guarantor of the Borrower or any other party, or the unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation from
any cause of the liability of the Borrower other than payment in full of the
Guaranteed Obligations. The Bank may, at its election, foreclose on any security
held by the Bank by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Bank may have against the Borrower or any other party, or any security, without
affecting or impairing in any way the liability of any Guarantor hereunder
except to the extent the Guaranteed Obligations have been paid In full. Each
Guarantor waives any defense arising out of any such election by the Bank, even
though such election operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of such Guarantor against the Borrower
or any other party or any security.

          (b)  Each Guarantor waives (to the fullest extent permitted by
applicable law) all presentments, demands for performance, protests and notices,
including, withoutout limitation, notices of nonperformance, notices of protest,
notices of dishonor, notices of acceptance of this Guaranty, and notices of the
existence, creation or incurring of new or additional indebtedness. Each
Guarantor assumes all responsibility for being and keeping itself informed of
the Borrower's financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations and the
nature, scope and extent of the risks which such Guarantor assumes and incurs
hereunder, and agrees that the Bank shall have no duty to advise any Guarantor
of information known to them regarding such circumstances or risks.

     13. In order to induce the Bank to make Loans and issue Letters of Credit
pursuant to the Credit Agreement, each Guarantor represents, warrants and
covenants that:

          (a)  Such Guarantor and each of its Subsidiaries (i) is a duly
     organized and validly existing corporation and is (if applicable) in good
     standing under the laws of the jurisdiction of its organization, and has
     the corporate power and authority to own its property and assets and to
     transact the business in which it is engaged and presently proposes to
     engage and (ii) is duly qualified and is authorized to do business and is
     in good standing in all jurisdictions where it is required to be so
     qualified, except for failures to be so qualified which, individually or in
     the aggregate could not reasonably be expected to have a material adverse
     effect on the business, assets, liabilities, operations, properties,
     condition (financial or otherwise) or prospects of such Guarantor or such
     Guarantor and its Subsidiaries taken as a whole.

          (b)  Such Guarantor has the corporate power and authority to execute,
     deliver and carry out the terms and provisions of this Guaranty and each
     other Loan Document to which it is a party and has taken all necessary
     corporate action to authorize the execution, delivery and performance by it
     of each such Loan Document. Such Guarantor has duly executed and delivered
     this Guaranty and each other Loan Document to which it is a party
<PAGE>

     and each such Loan Document constitutes the legal, valid and
     binding obligation of such Guarantor enforceable in accordance with its
     terms, except to the extent that the enforceability hereof or thereof may
     be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium or other similar laws affecting creditors'
     rights generally and by equitable principles (regardless of whether
     enforcement is sought in equity or at law).

          (c)  Neither the execution, delivery or performance by such Guarantor
     of this Guaranty or any other Loan Document to which it is a party, nor
     compliance by it with the terms and provisions hereof or thereof (i) will
     contravene any applicable provision of any law, statute, rule or
     regulation, or any order, writ, injunction or decree of any court or
     governmental instrumentality, (ii) will conflict or be inconsistent with or
     result in any breach of, any of the terms, covenants, conditions or
     provisions of, or constitute a default under, or (other than in favor of
     the Bank) result in the creation or imposition of (or the obligation to
     create or impose) any Lien upon any of the property or assets of such
     Guarantor or any of its Subsidiaries pursuant to the terms of any
     indenture, mortgage, deed of trust, loan agreement, credit agreement or any
     other agreement or other instrument to which such Guarantor or any of its
     Subsidiaries is a party or by which it or any of its property or assets is
     bound or to which it may be subject or (iii) will violate any provision of
     the articles or certificate of incorporation or by-laws or other governing
     instrument) of such Guarantor or any of its Subsidiaries.

          (d)  No order, consent, approval, license, authorization or validation
     of, or filing, recording or registration with (except as have been obtained
     or made prior to the initial Advance and are in full force and effect), or
     exemption by, any governmental or public body or authority, or any
     subdivision thereof, is required to authorize, or is required in
     connection with, (i) the execution, delivery and performance of this
     Guaranty or any other Loan Document to which such Guarantor is a party, or
     (ii) the legality, validity, binding effect or enforceability of this
     Guaranty or any other Loan Document to which such Guarantor is a party.

          (e)  There are no actions, suits or proceedings pending or, to the
     best knowledge of the Guarantor, threatened (i) with respect to this
     Guaranty, (ii) with respect to any Indebtedness of the Guarantor or any of
     its Subsidiaries, (iii) that could reasonably be expected to have a
     material adverse effect on the business, assets, liabilities, operations,
     properties, condition (financial or otherwise) or prospects of such
     Guarantor or such Guarantor and its Subsidiaries taken as a whole, or (iv)
     that could have a material adverse effect on the rights or remedies of the
     Bank or on the ability of such Guarantor to perform its respective
     obligations to the Bank hereunder and under the other Loan Documents to
     which it is a party.

     14. Each Guarantor covenants and agrees that on and after the date hereof
and until the termination of the Commitment and when no Note or Letter of Credit
remains outstanding and all Guaranteed Obligations have been paid in full, such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no
<PAGE>

violation of any provision, covenant or agreement contained in the Credit
Agreement, and so that no Default or Event of Default, is caused by the actions
of such Guarantor or any of its Subsidiaries.

     15.  The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses of the Bank in connection with the
enforcement of this Guaranty and any amendment, waiver or consent relating
hereto (including, without limitation, the reasonable fees and disbursements of
counsel (including in-house counsel) employed by the Bank at trial and on
appeal).

     16.  This Guaranty shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of the Bank and its successors and
assigns.

     17.  Neither this Guaranty nor any provision hereof may be changed, waived,
discharged or terminated except with the written consent of each Guarantor
directly affected thereby and the Bank.

     18.  Each Guarantor acknowledges that an executed (or conformed) copy of
each of the Loan Documents has been made available to its principal executive
officers and such officers are familiar with the contents thereof.

     19.  In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuance of an Event of Default (such term to mean and include any
"Event of Default" as defined in the Credit Agreement continuing after any
applicable grace period and shall in any event, include, without limitation, any
payment default on any of the Guaranteed Obligations after giving effect to any
grace period applicable thereto), the Bank is hereby authorized at any time or
from time to time, without notice to any Guarantor or to any other Person, any
such notice being expressly waived, to set off and to appropriate and apply any
and all deposits (general or special) and any other indebtedness at any time
held or owing by the Bank to or for the credit or the account of such Guarantor,
against and on account of the obligations and liabilities of such Guarantor to
the Bank under this Guaranty, irrespective of whether or not the Bank shall have
made any demand hereunder and although said obligations, liabilities, deposits
or claims, or any of them, shall be contingent or unmatured.

     20.  All notices, requests, demands or other communications pursuant hereto
shall be deemed to have been duly given or made when delivered to the Person to
which such notice, request, demand or other communication is required or
permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of the Bank, as provided in the Credit Agreement, and (ii) in
the case of any Guarantor, at its address set forth opposite its signature
below; or in any case at such other address as any of the Persons listed above
may hereafter notify the others in writing.

     21.  If claim is ever made upon the Bank for repayment or recovery of any
amount or amounts received in payment or on account of any of the Guaranteed
Obligations and the Bank
<PAGE>

repays all or part of said amount by reason of (i) any judgment, decree or order
of any court or administrative body having jurisdiction over such payee or any
of its property or (ii) any settlement or compromise of any such claim effected
by the Bank with any such claimant (including the Borrower), then and in such
event each Guarantor agrees that any such judgment, decree, order, settlement
or compromise shall be binding upon such Guarantor, nothwithstanding any
revocation hereof or the cancellation of any Note or other instrument evidencing
any liability of the Borrower, and such Guarantor shall be and remain liable to
the aforesaid payees hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by any such payee.

     22.  Any acknowledgment or new promise, whether by payment of principal or
interest or otherwise and whether by the Borrower or other Persons liable in
respect of the Guaranteed Obligations (including any Guarantor), with respect
to any of the Guaranteed Obligations shall, if the statute of limitations in
favor of any Guarantor against the Bank shall have commenced to run, toll the
running of such statute of limitations, and if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.

     23.  (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND
OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF OREGON. Any legal action or proceeding with respect
to this Guaranty or any other Loan Document to which such Guarantor is a party
may be brought in the courts of the State of Oregon or of the United States of
America for the District of Oregon, and by execution and delivery of this
Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts. Each Guarantor hereby further irrevocably waives any claim
that any such courts lack jurisdiction over such Guarantor, and agrees not to
plead or claim, in any legal action or proceeding with respect to this Guaranty
or any other Loan Document to which such Guarantor is a party brought in any of
the aforesaid courts, that any such court lacks jurisdiction over such
Guarantor.

          (b)  Each Guarantor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid actions
or proceedings arising out of or in connection with this Guaranty or any other
Loan Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that such action or proceeding brought in any such court has been brought in an
inconvenient forum.

     24.  This Guaranty may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.

     25.  Guarantor or Bank may require that any and all disputes, claims,
counterclaims, and defenses including those based on or arising from any alleged
torts relating in any way to this Guaranty be settled by binding arbitration in
accordance with Article XI of the Credit Agreement.
<PAGE>

     26.  WITHOUT LIMITING PARAGRAPH 25 ABOVE, EACH GUARANTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

     27.  All payments made by any Guarantor hereunder will be made without
setoff, counterclaim or other defense.

     28.  (a) It is the desire and intent of each Guarantor and the Bank that
this Guaranty shall be enforced against each Guarantor to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought.

          (b) If, however, and to the extent, that the obligations of any
Guarantor under this Guaranty shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers), then the amount of the Guaranteed Obligations of such Guarantor (but
not the Guaranteed Obligations of any other Guarantor unless such other
Guarantor or Guarantors are individually subject to the circumstances covered
by this Section 28) shall be deemed to be reduced and the affected Guarantor
shall pay the maximum amount of the Guaranteed Obligations which would be
permissible under applicable law.

     29.  If litigation or arbitration is commenced to enforce or construe any
term of this Guaranty, the prevailing party shall be entitled to recover from
the other party all costs thereof, including but not limited to such sums as the
court or arbitrator(s) may adjudge reasonable as attorney fees at trial, in any
appellate proceeding, proceeding under the bankruptcy code or receivership and
post-judgment attorney fees incurred in enforcing any judgment.

     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
<PAGE>

STANDARD INSURANCE COMPANY

By:____________________________________

Title:_________________________________

Address: 1100 SW Sixth Avenue
       Portland, OR 97304-1093
Telephone: (503) 321-8616
Fax: (503) 321-7935

STANDARD MORTGAGE INVESTORS, LLC

By:____________________________________

Title:_________________________________

Address: 1100 SW Sixth Avenue
       Portland, OR 97304-1093
Telephone: (503) 321-8616
Fax: (503) 321-7935

ACCEPTED AND AGREED TO:

U.S. BANK NATIONAL ASSOCIATION

By:____________________________________

Title:_________________________________
<PAGE>

                                   EXHIBIT C

                             Compliance Certificate

     This Compliance Certificate is executed and delivered by StanCorp Financial
Group, Inc. ("Borrower") to U.S. Bank National Association ("Bank") pursuant to
the requirements of the Credit Agreement dated as of June 30, 1999 between
Borrower and Bank ("Credit Agreement"). Any capitalized terms used herein and
not defined herein shall have the meanings given to such terms in the Credit
Agreement. This Compliance Certificate covers Borrower's fiscal ______________
ended ________________.

     1.  Financial Covenants. Attached are the calculations showing whether
Borrower was in compliance with sections 9.7, 9.11, and 9.12 of the Credit
Agreement as of the end of the fiscal period covered by this Compliance
Certificate. Each such calculation is derived from the books and records of
Borrower and correctly reflects whether Borrower is in compliance with the
applicable sections of the Credit Agreement.

     2.  Contingent Liabilities. Attached is a list of all contingent
obligations of Borrower and its Subsidiaries, including guaranties,
endorsements, undertakings or agreements to reimburse or indemnify issuers of
letters of credit, and agreements to maintain net worth or working capital of or
provide funds to satisfy any other financial test applicable to any other Person
(whether or not they should be classified as liabilities upon the obligor's
balance sheet, whether originally incurred or later assumed, and whether or not
incurred as a general partner or joint venturer of a partnership or joint
venture), but in any event excluding contingent obligations arising on account
of the endorsement of negotiable instruments for deposit or collection (or
similar transactions) in the ordinary course of business.

     3.  Claims Paying Ability Ratings. The most recent Claims Paying Ability
Rating assigned to SIC by A.M. Best is ______________, effective as of
__________, and by Standard & Poor's is _________, effective as of ____________.

     4.  Defaults. A review of the activities of Borrower during the fiscal
period covered by this Compliance Certificate has been made under the
supervision of the undersigned with a view to determining whether during such
fiscal period Borrower performed and observed all of its obligations under the
Credit Agreement. To the best knowledge of the undersigned after reasonable
investigation, all covenants and conditions of Borrower have been performed and
observed during such fiscal period and no Default has occurred and is continuing
under the Credit Agreement [with the exceptions set forth below in response to
which Borrower has taken or proposes to take the following actions:___________
_____________].

<PAGE>

     5.  Adverse Events. To the best knowledge of the undersigned after
reasonable investigation, no Adverse Event has occurred since the last
Compliance Certificate was delivered to the Bank [with the exceptions set forth
below: _________________________].

     6.  Date. This Compliance Certificate is executed on _____________________.

                                     Borrower: StanCorp Financial Group, Inc.

                                     By:_______________________________________

                                     Title:____________________________________
<PAGE>

                                   EXHIBIT D

                       Opinion of Counsel to the Borrower

To:  U.S. Bank National Association

Ladies/Gentlemen:

     We have acted as counsel for StanCorp Financial Group, Inc. (the
"Borrower"), and we are delivering to you this opinion of counsel upon which
you may rely, in connection with a Credit Agreement, dated as of June 30, 1999,
entered into among the Borrower and U.S. Bank National Association (the "Credit
Agreement"), and the transactions and other Loan Documents described therein.
Unless otherwise defined herein, capitalized terms used herein shall have the
respective meanings assigned to such terms in the Credit Agreement.

     In so acting, we, as counsel for the Borrower, have made such factual
inquiries, and have examined or caused to be examined such questions of law, as
we have considered necessary or appropriate for the purposes of this opinion
and, upon the basis of such inquiries and examinations, advise you that, in our
opinion:

     (1) The Borrower and each of its Subsidiaries are corporations duly
organized and validly existing under the laws of the state of their respective
incorporation, and each is duly qualified and in good standing as a foreign
corporation in all other jurisdictions in which its respective present
operations or properties require such qualification.

     (2) The Borrower has full corporate power and authority to own and operate
its properties and assets, carry on its business as presently conducted, and
enter into and perform its obligations under the Loan Documents to which it is
a party.

     (3) The execution and delivery of the Loan Documents to which the Borrower
is a party, the performance by the Borrower of its obligations thereunder, and
the borrowing by the Borrower under the Credit Agreement, have been duly
authorized by all necessary corporate action, and all of said Loan Documents
have been duly executed and delivered on behalf of the Borrower and constitute
valid and binding obligations of the Borrower, enforceable in accordance with
their respective terms.

     (4) There is no provision in the Borrower's Articles of Incorporation or
By-Laws, nor any provision in any indenture, mortgage, contract or agreement to
which the Borrower is a party or by which it or its properties may be bound, nor
any law, statute, rule or regulation, nor any writ, order or decision of any
court or governmental instrumentality binding on the Borrower which would be
contravened by the execution and delivery of the Loan Documents to which the
Borrower is a party, nor do any of the foregoing prohibit the Borrower's
performance of any term, provision, condition, covenant or any other obligation
of the Borrower contained therein.
<PAGE>

     (5) There are no actions, suits or proceedings pending or, to the best of
our knowledge after due inquiry, threatened against or affecting the Borrower
before any court or arbitrator or by or before any administrative agency or
government authority, which, if adversely determined, could constitute an
Adverse Event.

     (6) Neither the making nor performance of the Loan Documents, nor the
borrowing(s) under the Credit Agreement, requires the consent or approval of
any governmental instrumentality.

     (7) The Borrower is not a "holding company", a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.

     (8) The Borrower is not an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended.

     (9) The Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System), and, to the best of
our knowledge after due inquiry, no part of the proceeds of any loan under the
Credit Agreement will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock.

                               Very truly yours,
<PAGE>

                                   Exhibit E

              Material Action, Suits and Proceeding (Section 7.6)

There is no material actions, suits or proceedings pending against the Borrower
or its subsidiaries. However, on April 26, 1999, Standard Insurance Company
received notice from the San Francisco office of the U.S. Department of Labor
(the "Department") that it was conducting an investigation with respect to
Standard Insurance Company's employee benefit plan clients pursuant to (S)
504(a)(1) of the Employee Retirement Plan Security Act of 1974 ("ERISA", to
determine whether any person has violated or is about to violate any provision
of Title I of ERISA. Standard Insurance Company and certain of its employee
benefit plan clients are subject to ERISA in connection with, among other
things, certain policies sold by Standard Insurance Company's group insurance
division. The notice included a subpoena requesting that certain documents and
records be provided to the department. Standard Insurance Company intends to
fully cooperate with the Department. To date no claims or charges have been
asserted as a result of the investigation, and the Department states that its
investigation should not be construed as an indication that any violation of
ERISA has occurred or as a reflection upon any person involved. Management
believes that Standard Insurance Company's business practices comply in all
material respects with ERISA and that the investigation will not have a material
adverse effect on Standard Insurance Company's business, financial condition, or
results of operation.
<PAGE>

                                   Exhibit F

                 Material Contingent Liabilities (Section 7.6)

The Borrower or its subsidiaries have no material contingent liability.
<PAGE>

                                   Exhibit G

                          Subsidiaries (Section 7.16)

                          Standard Insurance Company
                             (As of June 30, 1999)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
     Company Name                       Incorporation            Ownership                     Direct Parent/Equity Owner
                                          Location              Percentage
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                     <C>                       <C>
 Standard Insurance Company               Oregon                  100%                    StanCorp Financial Group Inc.
------------------------------------------------------------------------------------------------------------------------------------
 Standard Management, Inc.                Oregon                  100%                    StanCorp Financial Group Inc.
------------------------------------------------------------------------------------------------------------------------------------
 Standard Mortgage Investors, LLC (1)     Oregon                   99%                    StanCorp Financial Group Inc.
------------------------------------------------------------------------------------------------------------------------------------
 Standard Real Estate Investors, LLC (1)  Oregon                   99%                    StanCorp Financial Group Inc.
------------------------------------------------------------------------------------------------------------------------------------
 400 Health Club, Inc.                    Oregon                  100%                    Standard Management, Inc.
------------------------------------------------------------------------------------------------------------------------------------
 Standard Assigned Benefits, Inc.         Oregon                  100%                    Standard Management, Inc.
------------------------------------------------------------------------------------------------------------------------------------
 StanWest Equities, Inc.                  Oregon                  100%                    Standard Management, Inc.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Entities are corporations unless otherwise noted: (1) = Limited Liability
Company; (2) = Limited Partnership

<PAGE>

                                   Exhibit H

                  Partnerships/Joint Ventures (Section 7.17)

                          Standard Insurance Company
                             (As of June 30, 1999)

<TABLE>
<CAPTION>
                Company   Name                   Incorporation   Ownership   Direct Parent/Equity Owner
                                                    Location     Percentage
--------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>          <C>
Alder House, LP (2)                               Oregon                 33%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Gold/West Henry Building, LP (2)                  Oregon               19.8%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Oregon Equity Fund, LP (2)                        Oregon               24.8%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Oregon Equity Fund II, LP (2)                     Oregon               29.1%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Oregon Equity Fund III, LP (2)                    Oregon               19.2%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Canyon Park Development (2)                       Washington             75%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Hillsboro Hotel Association (2)                   Washington           21.6%  Standard Insurance Company
--------------------------------------------------------------------------------------------------------
Portland West CYM LLC (1)                         Washington           20.3%  Standard insurance Company
--------------------------------------------------------------------------------------------------------
</TABLE>

Entities are corporations unless otherwise noted: (1) = Limited Liability
Company; (2) = Limited Partnership<PAGE>

                              [LOGO] WELLS FARGO

                                 EXHIBIT 10.10

National Financial Services
MAC #6101-133                     May 28, 1999
1300 S.W. 5th Avenue
P.O. Box 3131
Portland, OR 97204

Standard Insurance Company
1100 S.W. 6/th/ Avenue
Portland, Oregon 97201

Ladies and Gentlemen:

     This letter is to confirm that Wells Fargo Bank, N. A. ("Bank"), subject to
all terms and conditions contained herein, has agreed to make available to
Standard Insurance Company ("Borrower") a revolving line of credit under which
Bank will make advances to Borrower from time to time up to and including May
26, 2000, not to exceed at any time the maximum principal amount of Ten Million
Dollars ($10,000,000) ("Line of Credit"), the proceeds of which shall be used to
fund timing differences between liquidation of existing investments and
acquisition of new investments.

LINE OF CREDIT:

     Borrowing and Repayment. Borrower may from time to time during the term of
     -----------------------
the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
and reborrow as set forth in the Revolving Credit Note evidencing the Line of
Credit ("Revolving Credit Note"); provided however, that the total outstanding
borrowings under the Line of Credit shall not at any time exceed the maximum
principal amount available thereunder, as set forth above.

INTEREST/FEES:

     Interest. The outstanding principal balance of the Line of Credit shall
     --------
bear interest at the rates set forth in the Revolving Credit Note.

     Commitment Fee. Borrower shall pay to Bank a fee equal to one-eighth
     --------------
percent (1/8%) per annum (computed on the basis of a 360-day year, actual days
elapsed) on the amount of the Line of Credit (used or unused), which fee shall
be calculated on a quarterly basis by Bank and shall be due and payable by
Borrower in arrears on the last day of each August, November, February, and May.
<PAGE>

Standard Insurance Company
May 28, 1999
Page 2

REPRESENTATIONS AND WARRANTIES:

    The Borrower is not in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.

    The representations and warranties contained herein and in the Revolving
Credit Note must be true on and as of the date Borrower accepts this letter and
on the date of each borrowing pursuant hereto, with the same effect as though
such representations and warranties had been made on and as of each such date.

CONDITIONS PRECEDENT:

    Prior to Bank's extension to Borrower of any credit contemplated by this
letter, all of the following shall have occurred:

    Corporate Resolution and Incumbency Certificate. Bank shall have received
    -----------------------------------------------
copies of resolutions of the Board of Directors of the Borrower, in form and
substance satisfactory to Bank, approving execution and performance of this
letter and the Revolving Credit Note. Bank shall also have received an
incumbency certificate executed by the Secretary or an Assistant Secretary of
the Borrower, certifying the names and signatures of the officers of the
Borrower authorized to sign this letter and the Revolving Credit Note.

    Loan Documents. Borrower shall have executed and delivered to Bank, any and
    --------------
all promissory notes and other documents required by Bank to evidence Bank's
extension of credit pursuant to the terms and conditions of this letter, all of
which shall be in form and substance satisfactory to Bank and shall include, in
addition to the terms and conditions of this letter, such representations,
warranties, conditions, covenants, events of default and other provisions as
Bank deems appropriate.

    Financial Condition. There shall have been no material adverse change, as
    -------------------
determined by Bank, in the financial condition or business of Borrower, nor any
material decline, as determined by Bank, in the market value of a substantial or
material portion of the assets of Borrower.

COVENANTS:

    As soon as available, but in any event within 120 days after the end of each
fiscal year of the Borrower:

    (a) a copy of the Borrower's consolidated balance sheet of itself and its
consolidated subsidiaries as at the end of each fiscal year and the related
consolidated statements of income and retained earnings (or comparable
statement) employed in the business and changes in financial position and cash
flow for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, accompanied by an unqualified report and
opinion thereon of independent certified public accountants acceptable to the
Bank; all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail acceptable to the Bank and in
accordance with generally acceptable accounting principles applied consistently
throughout the periods reflected therein (except as approved by such accountants
and disclosed therein); and
<PAGE>

Standard Insurance Company
May 28, 1999
Page 3

    (b) the annual financial statements of the Borrower as of the end of such
fiscal year, as filed with (and in the form required under applicable law and
regulations of) the state or states licensing the Borrower, accompanied by or
including the opinion or statement of the Borrower's actuary required to be
filed with such annual financial statements.

    As soon as available, but in any event within 45 days after the end of each
of the first three quarters of each fiscal year:

    (a) the Borrower's unaudited consolidated balance sheet of itself and its
consolidated subsidiaries as at the end of each such period and the related
unaudited consolidated statements of income and retained earnings (or comparable
statement) and changes in financial position and cash flow for each such period
and year to date, setting forth in each case in comparative form the figures as
at the end of the previous fiscal year as to the balance sheet and the figures
for the previous corresponding period as to the other statements, certified by a
duly authorized officer of the Borrower as being fairly stated in all material
respects subject to year end adjustments; all such financial statements to be
complete and correct in all material respects and to be prepared in reasonable
detail acceptable to the Bank and in accordance with generally accepted
accounting principles applied consistently throughout the periods reflected
therein; and

    (b) the quarterly financial statements of the Borrower as of the end of each
such period, as filed with (and in the form required under applicable law and
regulations of) the state or states licensing the Borrower, accompanied by or
including the opinion or statement of the Borrower's actuary required to be
filed with such quarterly financial statements.

ADDITIONAL TERMS AND PROVISIONS:

    Whether or not any credit is extended to Borrower or any documents are
agreed to and executed, Borrower shall be liable for and shall pay to Bank,
immediately upon demand, the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel) expended or
incurred by Bank in connection with the negotiation and/or preparation of this
letter, and any contracts, instruments and documents required hereunder or
thereunder.

    Borrower shall perform all acts reasonably necessary to ensure that (i)
Borrower and any business in which Borrower holds a substantial interest, and
(ii) all customers, suppliers and vendors that are material to Borrower's
business, become Year 2000 Compliant in a timely manner. Such acts shall
include, without limitation, performing a comprehensive review and assessment of
all of Borrower's systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems. As used in this
paragraph, "Year 2000 Compliant" shall mean, in regard to any entity, that all
software, hardware, firmware, equipment, goods or systems utilized by or
material to the business operations or financial condition of such entity, will
properly perform date sensitive functions before, during and after the year
2000. Borrower shall, immediately upon request, provide to Bank such
certifications or other evidence of Borrower's compliance with the terms of this
paragraph as Bank may from time to time require.

    This letter shall be governed by and construed in accordance with the laws
of the State of California. Upon the demand of any party, any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, arising under or in any way pertaining to this
letter or any extensions of credit or other activities, transactions or
<PAGE>

Standard Insurance Company
May 28, 1999
Page 4

obligations of any kind related hereto, shall be resolved by binding
arbitration administered by the American Arbitration Association ("AAA") in
accordance with the AAA Commercial Arbitration Rules and the Federal Arbitration
Act (Title 9 of the United States Code), notwithstanding any conflicting choice
of law provision herein. Bank's current standard provision governing arbitration
of disputes is deemed incorporated herein as though set forth in full and shall
be included in full in the contracts, instruments and documents required hereby.
Any party who fails or refuses to submit to arbitration following a lawful
demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration.

    The commitment set forth herein is personal to Borrower and may not be
transferred or assigned without the prior written consent of Bank. Neither this
letter, nor any portions hereof, may be disclosed or exhibited to any person or
entity without the prior written consent of Bank.

    Bank reserves the right to terminate this commitment at any time prior to
receipt by Bank of a copy of this letter executed below by Borrower.

    Your acknowledgment of this letter shall constitute acceptance of the
foregoing terms and conditions. Unless accepted or terminated, this commitment
shall expire on June 15, 1999. If the loan documentation required by Bank
hereunder is not completed and the credit contemplated hereby has not been
extended by Bank to Borrower for any reason by June 28, 1999, then this
commitment shall expire on said date.

                                             Sincerely,

                                             WELLS FARGO BANK,
                                               NATIONAL ASSOCIATION

                                             By:   /s/ John R. Bean
                                                -------------------------------
                                                Name:  John R. Bean
                                                     --------------------------
                                                Title: Assistant Vice President
                                                      -------------------------

Acknowledged and accepted as of 6/24/99:

STANDARD INSURANCE COMPANY

By: /s/ Eric E. Parsons
    --------------------------------
  Name:  Eric E. Parsons
       -----------------------------
  Title: Sr. Vice President & CFO
       -----------------------------

By: /s/ Patricia J. Brown
    --------------------------------
  Name:  Patricia J. Brown
         ---------------------------
  Title: AVP, Controller & Treasurer
         ---------------------------
<PAGE>

                             REVOLVING CREDIT NOTE
                      (Eurodollar, LIBO & Fed Funds Rates)
        $10,000,000                                                May 28, 1999
                                                        Los Angeles, California

    On May 26, 2000 (the "Maturity Date"), for value received, the undersigned
(the "Borrower") hereby promises to pay to the order of WELLS FARGO BANK, N.A.
(the "Bank") at its offices at 707 Wilshire Boulevard, 16/th/ Floor, Los
Angeles, California 90017, the principal amount of Ten Million Dollars
($10,000,000) (the "Revolving Commitment"), or so much thereof as shall be
outstanding on said date. If at any time the amount outstanding under this Note
shall exceed the Revolving Commitment, the Borrower shall immediately repay the
Loans in an amount sufficient to reduce the outstanding balance hereunder to an
amount not in excess of the Revolving Commitment. Any such repayment shall first
be applied against outstanding Eurodollar Rate Loans.

    The Bank agrees, on the terms and conditions set forth herein, to make
Loans to the Borrower from time to time during the period from the date hereof
to and including the Maturity Date in an aggregate amount not to exceed the
Revolving Commitment. Loans (other than Fed Funds Loans) shall be in a minimum
amount of One Million Dollars ($1,000,000) or an integral multiple of One
Hundred Thousand Dollars ($100,000) above such amount. Fed Funds Loans shall be
in a minimum amount of Five Million Dollars ($5,000,000) or an integral multiple
of One Hundred Thousand Dollars ($100,000) above such amount.

    Interest on the unpaid principal balance shall accrue from the date of this
Note as set forth herein. Prior to maturity and provided there is no default
hereunder, the Borrower may borrow, repay and reborrow hereunder so long as the
aggregate amount of advances does not exceed, after taking into consideration
any proposed Loan, the Revolving Commitment.

    The following capitalized terms are defined as set forth below:

       "Applicable Margin": One and one-quarter percent (1 1/4%).

       "Business Day": A day other than a Saturday, Sunday or any day on which
commercial banks in California are authorized or required by law to close.

       "Eurodollar Business Day": A day which is a Business Day and on which
dealings in dollar deposits may be carried out in the Eurodollar interbank
market.

       "Eurodollar Loans": Loans hereunder at such time as the accruing interest
is based upon the Eurodollar Rate.
<PAGE>

    "Eurodollar Rate": for each Interest Period the sum of (a) (i) the
prevailing rate of interest per annum determined by the Bank to be the rate at
which dollar deposits for the relevant Interest Period would be offered to the
Lender in the approximate amount of the relevant Eurodollar Loan in the
Eurodollar interbank market upon request of the Bank for delivery on the first
day of such Interest Period, divided by (ii) a number equal to 1.00 minus the
aggregate (but without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on the day on which the pricing for
the relevant Eurodollar Loan is set (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as in effect at the time the
Bank quotes the rate to the Borrower) for Eurocurrency funding of domestic
assets (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of such System
(such rate to be adjusted to the next higher 1/16 of 1%), plus (b) a margin
determined by the Bank.

    "Fed Funds Loans": Loans hereunder at such time as the accruing interest is
based upon the Fed Funds Rate.

    "Fed Funds Rate": for any day an interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100th of 1%) equal to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on any day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such
Business Day, provided that (a) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Bank on such day on such transactions as calculated by the
Bank and presented in reasonable detail to Borrower.

    "Interest Payment Date": The last day of each Interest Period of a Loan and
the Maturity Date. Interest on Prime Rate Loans and Fed Funds Loans is payable
on demand.

    "Interest Period":

    (i) initially, the period commencing on, as the case may be, the borrowing
or conversion date with respect to such Loan and ending one, two, or three
month(s) thereafter as selected by the Borrower in its notice of borrowing or
its notice of conversion, as provided hereafter, and

    (ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Loan and ending one, two, or three
month(s)

                                       2
<PAGE>

thereafter as selected by the Borrower in its notice of continuation as provided
hereafter;

provided, that all of the foregoing provisions relating to Interest Periods are
subject to the following:

   (a) if any Interest Period for a LIBO Rate Loan would otherwise end on a day
which is not a LIBO Business Day, that Interest Period shall be extended to the
next succeeding LIBO Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding LIBO Business Day;

   (b) if any Interest Period for a Eurodollar Loan would otherwise end on a
day which is not a Eurodollar Business Day, that Interest Period shall be
extended to the next succeeding Eurodollar Business Day unless the result of
such extension would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the immediately preceding
Eurodollar Business Day.

   (c) the Borrower may not select an Interest Period with respect to any
portion of principal of a Loan which extends beyond the Maturity Date or a date
on which the Borrower is required to make a scheduled payment of part or all of
that at portion of principal; and

   (d) there shall be no more than six Interest Periods for Eurodollar Loans and
LIBO Rate Loans outstanding at any time.

Each day constitutes an Interest Period for Prime Rate Loans and Fed Funds
Loans.

    "LIBO Business Day": A day which is a Business Day and on which dealings in
dollar deposits may be carried out in the London interbank market.

    "LIBO Rate": For each Interest Period (i) the rate of interest determined by
the Bank at which deposits for the relevant Interest Period would be offered to
it in the approximate amount of the relevant LIBO Rate Loan in the London
interbank market upon request of the Bank at 11:00 A.M. (London time) on the
day which is two LIBO Business Days prior to the first day of such Interest
Period, divided by (ii) a number equal to 1.00 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two LIBO Business Days prior to the
beginning of such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other governmental authority
having jurisdiction with respect thereto, as in effect at the time the Bank
quotes the rate to the Borrower) for Eurocurrency funding of domestic assets
(currently referred to as "Eurocurrency liabilities" in Regulation D of such
Board) which

                                       3
<PAGE>

are required to be maintained by a member bank of such System (such rate to be
adjusted to the next higher 1/16 of 1%).

    "LIBO Rate Loans": Loans hereunder at such time as the accruing interest is
based upon the LIBO Rate.

    "Loan(s)": Collectively and severally each portion of the principal amount
outstanding hereunder which, as determined by the interest rate applicable to
it, is a Eurodollar Loan, LIBO Rate Loan, Fed Funds Loan or Prime Rate Loan.

    "Prime Rate": A base rate that the Bank from time to time establishes and
which serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto.

    "Prime Rate Loans": Loans hereunder at such time as the accruing interest is
based upon the Prime Rate.

    Loans which are LIBO Rate Loans shall bear interest for each Interest Period
with respect thereto on the unpaid principal amount thereof at a rate per annum
equal to the LIBO Rate determined for such Interest Period, plus the Applicable
Margin. Loans which are Eurodollar Loans shall bear interest for each Interest
Period with respect thereto on the unpaid principal amount thereof at a rate per
annum equal to the Eurodollar Rate determined for such Interest Period. Loans
which are Fed Funds Loans shall bear interest for each Interest Period with
respect thereto on the unpaid principal amount thereof at a rate per annum equal
to the Fed Funds Rate determined for such Interest Period, plus the Applicable
Margin. Loans which are Prime Rate Loans shall bear interest for each Interest
Period with respect thereto on the unpaid principal amount thereof at a rate
per annum equal to the Prime Rate determined for such Interest Period. Interest
with respect to each Loan shall be payable in arrears on each Interest Payment
Date for such Loan. In no event shall interest on a Loan exceed the maximum rate
permitted by applicable law.

    Notwithstanding anything to the contrary contained herein, if all or a
portion of the principal amount of any of the Loans made hereunder or any
interest accrued thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), any such overdue amount shall bear
interest at a rate per annum which is equal to the greater of: two percent (2%)
above the rate applicable from time to time to the Loan and two percent (2%)
above the Prime Rate. In addition, such Loan shall be converted to a Prime
Rate Loan at the end of the then current Interest Period.

    Interest shall be calculated on the basis of a three hundred sixty (360) day
year for the actual days elapsed.

    The Borrower acknowledges that interest rates may vary daily and during the
day and that, as a result, the interest rate applicable to principal for one
Interest Period or

                                       4
<PAGE>

Loan may differ from the interest rate applicable to principal for another
Interest Period or Loan. The Borrower agrees that any notice of an interest rate
election given to the Bank is irrevocable and that, therefore, the Borrower is
"at risk" to the extent that the Borrower and the Bank will not know the actual
interest rate the Borrower must pay until the date the interest rate commences
or is otherwise set. The Borrower acknowledges that any quote provided by the
Bank prior to the date of applicability is only an estimate and shall not be
binding as to the actual rate.

    Notwithstanding anything to the contrary contained in this Note except the
paragraphs limiting the availability of certain interest rate options, a Fed
Funds Rate, a Eurodollar Rate or LIBO Rate may be selected by the Borrower to
apply to a Loan only prior to the Maturity Date and provided there is no default
hereunder or under any agreement with the Bank involving an extension of credit,
and so long as no event exists which, with the giving of notice or passage of
time, or both, would constitute a default hereunder. Each borrowing, conversion
or continuation notice shall be a representation and warranty by the Borrower
that there exists as of the date of the notice no default or event as set forth
in the immediately preceding sentence.

    The Borrower may borrow under the Revolving Commitment on any Business Day
if the Loan is to consist of a Fed Funds Loan or a Prime Rate Loan, on any
Eurodollar Business Day if the Loan is to consist of a Eurodollar Loan, and on
any LIBO Business Day if the Loan is to consist of a LIBO Rate Loan, provided
that the Borrower shall give the Bank irrevocable notice (which notice must be
received by the Bank prior to 11:00 A.M., Los Angeles time) (i) on the Business
Day which is the requested borrowing date in the case of a Fed Funds Loan or a
Prime Rate Loan, (ii) on the Eurodollar Business Day which is the requested
borrowing date in the case of a Eurodollar Loan, and (iii) three LIBO Business
Days prior to the requested borrowing date in the case of a LIBO Rate Loan,
specifying (a) the amount of the proposed Loan, (b) the requested date of the
Loan, (c) whether the Loan is to consist of a Fed Funds Loan, Prime Rate Loan,
Eurodollar Loan or LIBO Rate Loan, and (d) if the Loan is to be a Eurodollar
Loan or LIBO Rate Loan, the length of the Interest Period therefor. The proceeds
of the Loan will then be made available to the Borrower by the Bank on the
requested date of the Loan by crediting the account of the Borrower on the books
of the Bank, or as otherwise directed by the Borrower.

    The Borrower may elect from time to time to convert an outstanding Loan
from a Loan bearing interest at a rate determined by reference to one basis to a
Loan bearing interest at a rate determined by reference to an alternative basis
by giving the Bank (i) prior irrevocable notice (which must be received by Bank
prior to 11:00 A.M., Los Angeles time) on the Business Day of the conversion, of
an election to convert a Loan to a Fed Funds Loan, (ii) at least three LIBO
Business Days' prior irrevocable notice (which notice must be received by the
Bank prior to 11:00 A.M., Los Angeles time) of an election to convert a Loan to
a LIBO Rate Loan, and (iii) prior irrevocable notice (which notice must be
received by the Bank prior to 11:00 A.M., Los Angeles time) on the Eurodollar
Business Day of the conversion, of an election to convert a Loan to a

                                       5
<PAGE>

Eurodollar Loan, provided that any conversion of a Loan shall only be made on
the last day of the Interest Period with respect thereto. The Borrower may elect
from time to time to continue its outstanding Fed Funds Loans, Eurodollar Loans
and LIBO Rate Loans upon the expiration of the Interest Period(s) applicable
thereto by giving to the Bank (i) prior irrevocable notice of continuation
(which must be received by Bank prior to 11:00 A.M., Los Angeles time) on the
Business Day of the continuation of a Fed Funds Loan, (ii) at least three LIBO
Business Days' prior irrevocable notice of continuation (which must be received
by Bank prior to 11:00 A.M., Los Angeles time) of a LIBO Rate Loan and (iii)
prior irrevocable notice of continuation (which must be received by Bank prior
to 11:00 A.M., Los Angeles time) on the Eurodollar Business Day of the
continuation of a Eurodollar Loan. Each notice electing to convert or continue a
Loan shall specify: (i) the proposed conversion/continuation date; (ii) the
amount of the Loan to be converted/continued; (iii) the nature of the proposed
continuation/conversion; and (iv) the requested Interest Period. On the date on
which such conversion or continuation is being made the Bank shall take such
action as is necessary to effect such conversion or continuation. Subject to the
limitations set forth in this Note, all or any part of outstanding Loans may be
converted or continued as provided herein, provided that partial conversions or
continuations shall be in the same amounts as set forth for new Loans in the
beginning paragraphs of this Note.

   Notices of borrowing, conversion or continuation may be given orally
(including telephonically) or in writing (including telex or facsimile
transmissions) and any conflict applicable to any Loan shall be determined by
the Bank's books and records. The Bank's failure to receive any notice regarding
a particular Loan shall not relieve the Borrower of its obligations to repay the
Loan made and to pay interest thereon. The Bank shall not incur any liability to
the Borrower in acting upon any notice of borrowing which the Bank believes in
good faith to have been given by a person duly authorized to borrow on behalf of
the Borrower. Upon failure of the Bank to receive timely notice from the
Borrower selecting a particular interest rate option with respect to a proposed
Loan request, conversion or continuation, such Loan shall be a Prime Rate Loan.

   The Borrower may at its option pay the Loans, in whole or in part, at any
time and from time to time, provided the Bank shall have received from the
Borrower notice of any such payment at least one Business Day prior to the date
of the proposed payment if such date is not the last day of the then current
Interest Period for such loan, in each case specifying the date and the amount
of payment. Partial payments hereunder shall be in an aggregate principal amount
of the lesser of (a) Fifty Thousand Dollars ($50,000) or any integral multiple
thereof and (b) the balance of the Loan being paid.

   The Borrower agrees to indemnify and to hold the Bank harmless from any loss
or expense, including, but not limited to, any such loss or expense arising from
interest or fees payable by the Bank to lenders of funds obtained by it in order
to maintain its Eurodollar Loans or LIBO Rate Loans hereunder, which the Bank
may sustain or incur as a consequence of (i) default by the Borrower in payment
when due of the principal amount of or interest on the Eurodollar Loans or LIBO
Rate Loans of the Bank, (ii)

                                       6
<PAGE>

default by the Borrower in making a conversion or continuation after the
Borrower has given a notice of such conversion or continuation, (iii) default by
the Borrower in making any payment after the Borrower has given a notice of
payment, or (iv) the Borrower making any payment of a Eurodollar Loan or LIBO
Rate Loan on a day other than the last day of the then current Interest Period
for such Loan. It shall be assumed that the Bank had funded or would have
funded, as the case may be, 100% of the Eurodollar Loans in the Eurodollar
interbank market, or one hundred percent (100%) of the LIBO Rate Loans in the
London interbank market for a corresponding amount and term. In the event of a
payment set forth in (iv) above, the Borrower shall be credited with a
reinvestment interest rate equal to one-sixteenth of one percent (.0625%) less
than the rate of interest generally available to the Bank at the time of the
payment for a period of time approximately equal to the period remaining on the
then applicable Interest Period and for an amount approximately equal to the
amount of the payment. The determination of such amount by the Bank shall be
presumed correct in the absence of manifest error. This covenant shall survive
payment of this Note.

  In the event that the Bank shall have determined (which determination shall be
conclusive and binding upon the Borrower) that adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate or LIBO Rate applicable for any
Interest Period with respect to a requested Loan or that such rate of interest
is not generally available to the Bank or does not adequately cover the cost of
funding such Loan, the Bank shall forthwith give notice of such determination to
the Borrower not later than 1:00 P.M., Los Angeles time, on the requested
borrowing date, the requested conversion date or the last day of an Interest
Period of a Loan which was to be continued as a Eurodollar Loan or LIBO Rate
Loan. If such notice is given and has not been withdrawn (i) any requested
Eurodollar Loan or LIBO Rate Loan as the case may be, shall be made as a Prime
Rate Loan, or, at the Borrower's option, such Loan shall not be made, (ii) any
Loan that was to have been converted to a Eurodollar Loan or a LIBO Rate Loan,
as the case may be, shall be continued as, or converted into, a Prime Rate Loan
and (iii) any outstanding Eurodollar Loan or LIBO Rate Loan, as the case may be,
shall be converted, on the last day of the then current Interest Period with
respect thereto, to a Prime Rate Loan. Until such notice has been withdrawn by
the Bank, no further Eurodollar Loans or LIBO Rate Loans, as the case may be,
shall be made and the Borrower shall not have the right to convert a Loan to a
Eurodollar Loan or LIBO Rate Loan, as the case may be. The Bank will review the
circumstances affecting the Eurodollar interbank market and the London interbank
market, as the case may be, from time to time and the Bank will withdraw such
notice at such time as it shall determine that the circumstances giving rise to
said notice no longer exist.

  In the event that any law, regulation or directive or any change therein or in
the interpretation or application thereof or compliance by the Bank with any
request or directive (whether or not having the force of law) from any central
bank or other governmental authority, agency or instrumentality:

                                       7
<PAGE>

     (a)  does or shall subject the Bank to any tax of any kind whatsoever with
respect to this Note or any Loan made hereunder, or change the basis of
taxation of payments to the Bank of principal, interest or any other amount
payable hereunder (except for changes in the rate of tax on the overall net
income of the Bank);

     (b)  does or shall impose, modify or hold applicable any reserve,
assessment rate, special deposit, compulsory loan or other requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by or other credit extended by, or any other acquisition of
funds by, any office of the Bank which are not otherwise included in the
determination of any Eurodollar Rate or the LIBO Rate at the time a Loan was
originally extended;

     (c)  does or shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or other requirement against commitments to extend
credit;

     (d)  does or shall impose on the Bank any other condition; and the result
of any of the foregoing is to increase the cost to the Bank of making, renewing
or maintaining its Revolving Commitment, Eurodollar Loans or LIBO Rate Loans or
to reduce any amount receivable thereunder (which increase in cost shall be
determined by the Bank's reasonable allocation of the aggregate of such cost
increases resulting from such events), then, in any such case, the Borrower
shall pay to the Bank, within three Business Days of its demand, any additional
amounts necessary to compensate the Bank for such additional cost or reduced
amount receivable as determined by the Bank with respect to this Agreement. If
the Bank becomes entitled to claim any additional amounts pursuant to this
paragraph, it shall notify the Borrower of the event by reason of which it has
become so entitled. A statement incorporating the calculation as to any
additional amounts payable pursuant to the foregoing sentence, submitted by the
Bank to the Borrower, shall be conclusive in the absence of manifest error.

   Notwithstanding any other provision herein, if any law, regulation treaty or
directive or any change therein or in the interpretation or application thereof,
shall make it unlawful, impossible or impracticable for the Bank to make or
maintain Eurodollar Loans or LIBO Rate Loans as contemplated by this Agreement,
(a) the commitment of the Bank hereunder to make Eurodollar Loans or LIBO Rate
Loans or convert Loans to Eurodollar Loans or LIBO Rate Loans shall forthwith be
cancelled and (b) the Bank's Loans then outstanding as Eurodollar Loans or LIBO
Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the
last day of the then existing Interest Period or within such earlier period as
required by law. The Borrower hereby agrees to pay the Bank, within three
Business Days of its demand, any additional amounts necessary to compensate
the Bank for any costs incurred by the Bank in making any conversion in
accordance with this paragraph, including but not limited to any interest or
fees payable by the Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Loans or LIBO Rate Loans hereunder (the Bank's

                                       8
<PAGE>

notice of such costs, as certified to the Borrower, to be conclusive absent
manifest error).

   The books and records of the Bank shall be conclusive evidence of any
advance or payment hereunder and computation by the Bank of interest due shall
be conclusive, absent manifest error.

   Both principal and interest on this Note are payable in lawful currency of
the United States of America without deduction for or on account of any present
or future taxes, duties or other charges levied or imposed on this Note. The
Borrower will pay the amounts necessary such that the gross amount of principal
and interest received by the Bank shall not be less than that required under
this Note. All stamp and documentary taxes shall be paid by the Borrower. If,
notwithstanding the foregoing, the Bank pays any such tax, the Borrower will
reimburse the Bank upon demand for the amount so paid.

   Any of the following shall constitute an event of default under this Note:

     (a)  The nonpayment when due of principal or interest under this Note or
any other obligation of any nature or description owed by the Borrower to the
Bank;

     (b)  The dissolution or termination of business of the Borrower;

     (c)  The filing of any petition in bankruptcy or the commencement of any
proceeding under bankruptcy, insolvency or other laws relating to the relief of
debtors, or the readjustment of any indebtedness, either through reorganization,
composition, extension or otherwise, by the Borrower;

     (d)  The making of an assignment for the benefit of creditors by the
Borrower;

     (e)  The appointment of a receiver of any property of the Borrower;

     (f)  Any seizure vesting of rights, or intervention by or under any
authority, of any government in the Borrower or any of its property;

     (g)  The entry of a judgment which, in the Bank's opinion, materially
impairs the ability of the Borrower to meet its obligations to the Bank;

     (h)  The failure of the Borrower to furnish any financial information upon
the request of the Bank;

     (i)  Any material misrepresentation of the Borrower to the Bank in
obtaining credit or the breach of any agreement of the Borrower with the Bank
arising from or in connection with any extension of credit; or

                                       9
<PAGE>

     (j)  The institution of any proceeding against the Borrower for which
forfeiture of any property is a potential penalty.

Upon the occurrence of any event set forth in (c) above, this Note and any other
obligation owed to the Bank by the Borrower shall become due and payable in full
and the Revolving Commitment shall terminate. At any time after the occurrence
of any other event of default set forth above, this Note and any other
obligation owed to the Bank by the Borrower may, at the Bank's discretion,
become immediately due and payable in full and the Bank may immediately
terminate the Revolving Commitment.

     If this Note is placed in the hands of an attorney for collection, the
Borrower, each endorser and each guarantor agrees to pay all costs and expenses
of the Bank, including reasonable attorneys' fees whether or not a suit is
brought. "Reasonable attorneys' fees" shall include reasonable attorneys' fees
and allocated costs of in-house counsel incurred in any and all judicial,
bankruptcy and other proceedings (including appellate level proceedings) whether
such proceedings arise before or after entry of a final judgment.

     The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The right to plead any and all statutes of
limitation as a defense to this Note or to any agreement to pay the same, is
hereby expressly waived by such parties to the fullest extent permitted by
law.

     THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF CALIFORNIA.

ARBITRATION

     (a)  Arbitration. Upon the demand of any party, any Dispute shall be
          -----------
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of these provisions. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this Note, or any past, present or
future extensions of credit and other activities, transactions or obligations of
any kind related directly or indirectly to this Note, including without
limitation, any of the foregoing arising in connection with the exercise of any
self-help, ancillary or other remedies pursuant to this Note. Any party may by
summary proceedings bring an action in court to compel arbitration of a Dispute.
Any party who fails or refuses to submit to arbitration following a lawful
demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any Dispute.

     (b)  Governing Rules. Arbitration proceedings shall be administered by the
          ---------------
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All

                                      10
<PAGE>

Disputes submitted to arbitration shall be resolved in accordance with the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in this Note. The arbitration shall be
conducted at a location in California selected by the AAA or other
administrator. If there is any inconsistency between the terms hereof and any
such rules, the terms and procedures set forth herein shall control. All
statutes of limitation applicable to any Dispute shall apply to any arbitration
proceeding. All discovery activities shall be expressly limited to matters
directly relevant to the Dispute being arbitrated. Judgment upon any award
rendered in an arbitration may be entered in any court having jurisdiction;
provided however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
(SS)91 or any similar applicable state law.

     (c)  No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
          ----------------------------------------------------------
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration hereunder.

     (d)  Arbitrator Qualifications and Powers; Awards. Arbitrators must be
          --------------------------------------------
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered
to resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.

     (e)  Judicial Review. Notwithstanding anything herein to the contrary, in
          ---------------
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is

                                      11
<PAGE>

not supported by substantial evidence or which is based on legal error, (ii) an
award shall not be binding upon the parties unless the findings of fact are
supported by substantial evidence and the conclusions of law are not erroneous
under the substantive law of the state of California, and (iii) the parties
shall have in addition to the grounds referred to in the Federal Arbitration Act
for vacating, modifying or correcting an award the right to judicial review of
(A) whether the findings of fact rendered by the arbitrators are supported by
substantial evidence, and (B) whether the conclusions of law are erroneous under
the substantive law of the state of California. Judgment confirming an award in
such a proceeding may be entered only if a court determines the award is
supported by substantial evidence and not based on legal error under the
substantive law of the state of California.

     (f)  Miscellaneous. To the maximum extent practicable, the AAA, the
          -------------
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to this Note or the subject matter of the Dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of this Note or any relationship between the parties.

STANDARD INSURANCE COMPANY

By: /s/ Eric E. Parsons
    ----------------------------------
    Name: Eric E. Parsons
          ----------------------------
    Title:  Sr. Vice President & CFO
          ----------------------------

By: /s/ Patricia J. Brown
    ----------------------------------
    Name:  Patricia J. Brown
         -----------------------------
    Title: AVP, Controller & Treasurer
          ----------------------------

Address  1100 SW Sixth Avenue
       -------------------------------
         Portland, Oregon 97204
--------------------------------------

______________________________________

                                      12
<PAGE>

                              [LOGO OF WELLS FARGO]

National Financial Services
MAC #6101-133
1300 SW. 5th Avenue                                               May 28, 1999
P.O. Box 3131
Portland, OR 97204

     Standard Insurance Company
     1100 SW. 6/th/ Avenue
     Portland, Oregon 97201

     Ladies and Gentlemen:

     Reference is made to the letter agreement of even date herewith (the
     "Letter Agreement") between Wells Fargo Bank, N.A. ("WFB") as lender and
     Standard Insurance Company ("Borrower") as borrower, and the Revolving
     Credit Note of even date herewith (the "Note") executed by Borrower in
     favor of WFB.

     Notwithstanding anything to the contrary in the Letter Agreement or the
     Note, as a condition to WFB's making any advance to Borrower under the
     Letter Agreement and the Note, Borrower shall, concurrently with each
     request for an advance thereunder, provide WFB with a certificate, in the
     form of Exhibit A attached hereto and executed by the Secretary of
     Borrower, certifying to WFB that the requested advance meets the conditions
     for authorization set forth in the Short-Term Borrowing Resolution dated
     April 29, 1998 previously provided to WFB.

     Except as modified by this letter, the terms of the Letter Agreement and
     the Note remain in full force and effect.

     If the above terms and conditions are acceptable to you, please indicate by
     signing and returning, the enclosed copy of this letter and the original
     note.

     We sincerely appreciate the opportunity to continue to provide you with
     this competitive source of short-term funding.

     WELLS FARGO BANK, N. A.

     By: /s/ John R. Bean
        ----------------------------------
     John R. Bean
     -------------------------------------
     Name

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

     Accepted By:

     STANDARD INSURANCE COMPANY

     By: /s/ Eric E. Parsons
     -------------------------------------
     Name

       Sr. Vice President & CFO
     -------------------------------------
     Title

     By: /s/ Patricia J. Brown
     -------------------------------------
       Patricia J. Brown
     -------------------------------------
     Name

       AVP, Controller & Treasurer
    --------------------------------------
    Title
<PAGE>

May 28, 1999
Page 2

                                   EXHIBIT A

                              FORM OF CERTIFICATE

The undersigned Secretary of Standard Insurance Company (the "Company") hereby
certifies that as of the date hereof and as of the date of the requested
advance, WFB is one of Company's principal banks of deposit, that such advance
constitutes a "short-term borrowing" of Company and that such advance together
with all other borrowings authorized by the Short-Term Borrowing Resolution
dated April 29, 1998 previously provided to WFB does not exceed six percent of
Company's total assets rounded out to the nearest million dollars.

Dated:  ______________, 19

                                   ______________________________
                                   J.Greg Ness, Secretary

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