Document:

<PAGE>

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Prepared by and upon recording return to: W. Kirk Grimm,  Esq.,  McGuireWoods
 LLP, 77 West Wacker Drive,  Chicago, Illinois 60601 (312) 849-3697

                                  MASTER LEASE

                           dated as of August 30, 2000

                                     between

                         LEASE PLAN NORTH AMERICA, INC.,

                                  as the Lessor

                                       and

                        TRIQUINT SEMICONDUCTOR TEXAS, LP,

                                  as the Lessee

                           RICHARDSON, TEXAS FACILITY

THIS LEASE IS SUPERIOR TO A DEED OF TRUST IN FAVOR OF ABN AMRO BANK N.V., AS
AGENT (THE "AGENT") UNDER THE PARTICIPATION AGREEMENT DATED AS OF AUGUST 30,
2000, AMONG THE LESSEE, THE CONSTRUCTION AGENT, THE LESSEE'S GENERAL PARTNER,
THE GUARANTOR, THE LESSOR, THE PARTICIPANTS AND THE AGENT FOR THE BENEFIT OF
THE PARTICIPANTS. THIS LEASE HAS BEEN EXECUTED IN COUNTERPARTS. TO THE
EXTENT, IF ANY, THAT THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS
DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO LIEN ON THIS LEASE MAY BE CREATED THROUGH THE TRANSFER OF
POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART CONTAINING
THE RECEIPT THEREFOR EXECUTED BY THE AGENT ON THE SIGNATURE PAGE HEREOF.

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<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                               PAGE
                                                                                                               ----
<S>           <C>                                                                                              <C>
ARTICLE I........................................................................................................1

   1.1        Definitions; Interpretation........................................................................1

ARTICLE II.......................................................................................................2

   2.1        Acceptance and Lease of Property...................................................................2
   2.2        Acceptance Procedure...............................................................................2
   2.3        Lease Term.........................................................................................3
   2.4        Title..............................................................................................3

ARTICLE III......................................................................................................3

   3.1        Rent...............................................................................................3
   3.2        Payment of Basic Rent..............................................................................3
   3.3        Supplemental Rent..................................................................................4
   3.4        Method of Payment..................................................................................4

ARTICLE IV.......................................................................................................4

   4.1        Utility Charges....................................................................................4

ARTICLE V........................................................................................................5

   5.1        Quiet Enjoyment....................................................................................5

ARTICLE VI.......................................................................................................5

   6.1        Net Lease..........................................................................................5
   6.2        No Termination or Abatement........................................................................6

ARTICLE VII......................................................................................................6

   7.1        Nature of Transaction; Intent of the Parties.......................................................6
   7.2        UCC Information....................................................................................9

ARTICLE VIII....................................................................................................10

   8.1        Condition of the Property.........................................................................10
   8.2        Possession and Use of the Property................................................................11

ARTICLE IX......................................................................................................11

   9.1        Compliance with Requirements of Law and Insurance Requirements....................................11

ARTICLE X.......................................................................................................11

   10.1       Maintenance and Repair; Return....................................................................11

ARTICLE XI......................................................................................................12

   11.1       Modifications, Substitutions and Replacements.....................................................12
</TABLE>

                                       i

<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                                                              <C>
ARTICLE XII.....................................................................................................13

   12.1       Warranty of Title.................................................................................13
   12.2       Grants and Releases of Easements and Other Agreements.............................................14

ARTICLE XIII....................................................................................................15

   13.1       Permitted Contests Other Than in Respect of Indemnities...........................................15

ARTICLE XIV.....................................................................................................16

   14.1       General Liability and Workers' Compensation Insurance.............................................16
   14.2       Hazard and Other Insurance........................................................................16
   14.3       Coverage..........................................................................................17

ARTICLE XV......................................................................................................18

   15.1       Casualty and Condemnation.........................................................................18
   15.2       Environmental Matters.............................................................................20
   15.3       Notice of Environmental Matters...................................................................20

ARTICLE XVI.....................................................................................................21

   16.1       Termination by the Lessee upon Certain Events.....................................................21
   16.2       Procedures........................................................................................21
   16.3       Purchase of Property..............................................................................21

ARTICLE XVII....................................................................................................22

   17.1       Lease Events of Default...........................................................................22
   17.2       Lease Remedies....................................................................................25
   17.3       Waiver of Certain Rights..........................................................................29
   17.4       Power and Sale of Foreclosure.....................................................................29
   17.5       Remedies Cumulative...............................................................................30
   17.6       The Lessee's Right to Cure........................................................................30

ARTICLE XVIII...................................................................................................31

   18.1       The Lessor's Right to Cure the Lessee's Lease Defaults............................................31

ARTICLE XIX.....................................................................................................31

   19.1       Provisions Relating to the Lessee's Termination of this Lease or Exercise of Purchase Option or
              Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events...............31

ARTICLE XX......................................................................................................32

   20.1       Purchase Option...................................................................................32
   20.2       Expiration Date Purchase Obligation...............................................................33
   20.3       Acceleration of Purchase Obligation...............................................................33

ARTICLE XXI.....................................................................................................33

   21.1       Renewal...........................................................................................33
</TABLE>

                                       ii

<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                                                              <C>
ARTICLE XXII....................................................................................................34

   22.1       Option to Remarket................................................................................34
   22.2       Certain Obligations Continue......................................................................37
   22.3       Support Obligations...............................................................................37

ARTICLE XXIII...................................................................................................38

   23.1       Holding Over......................................................................................38

ARTICLE XXIV....................................................................................................38

   24.1       Risk of Loss......................................................................................38

ARTICLE XXV.....................................................................................................39

   25.1       Subletting and Assignment.........................................................................39

ARTICLE XXVI....................................................................................................40

   26.1       Estoppel Certificates.............................................................................40

ARTICLE XXVII...................................................................................................40

   27.1       Right to Inspect..................................................................................40
   27.2       No Waiver.........................................................................................41

ARTICLE XXVIII..................................................................................................41

   28.1       Acceptance of Surrender...........................................................................41

ARTICLE XXIX....................................................................................................41

   29.1       No Merger of Title................................................................................41

ARTICLE XXX.....................................................................................................41

   30.1       Notices...........................................................................................41

ARTICLE XXXI....................................................................................................42

   31.1       Miscellaneous.....................................................................................42
   31.2       Amendments and Modifications......................................................................43
   31.3       Successors and Assigns............................................................................43
   31.4       Headings and Table of Contents....................................................................43
   31.5       Counterparts......................................................................................43
   31.6       GOVERNING LAW.....................................................................................43
   31.7       Limitations on Recourse...........................................................................43
   31.8       Original Lease....................................................................................44
   31.9       Landlord's Waiver.................................................................................44
</TABLE>

                                       iii

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<TABLE>
<CAPTION>

APPENDICES
<S>                         <C>
APPENDIX I                  Definitions and Interpretation

EXHIBITS

EXHIBIT A                  Form of Lease Supplement
EXHIBIT B                  Form of Restated Lease Supplement
EXHIBIT C                  Equipment Schedule
EXHIBIT D                  Legal Description of Land
</TABLE>

                                       iv

<PAGE>

                                  MASTER LEASE

         THIS MASTER LEASE (as amended, supplemented or otherwise modified
from time to time, this "LEASE"), dated as of August 30, 2000, is by and
between LEASE PLAN NORTH AMERICA, INC., an Illinois corporation, having its
principal office at 135 S. LaSalle Street Chicago, Illinois 60603, as the
lessor (together with its permitted successors and assigns, the "LESSOR") and
TRIQUINT SEMICONDUCTOR TEXAS, LP, a Texas limited partnership, having its
principal office at 13512 North Central Expressway, Dallas, Texas 75243, as
the lessee (the "LESSEE").

                              W I T N E S S E T H:

         A.       WHEREAS, the Lessor will purchase the Existing Facility on the
Land Interest Acquisition Date, and the Existing Facility will be leased to the
Lessee subject to the terms of this Lease;

         B.       WHEREAS, with respect to the Existing Facility, the Lessee, as
Construction Agent, will construct certain Tenant Improvements and, if the
Expansion Improvements Closing Date occurs, certain Expansion Improvements which
as constructed will be the property of the Lessor, will become part of the
Property and will be leased to the Lessee subject to the terms of this Lease;

         C.       WHEREAS, on commencement of the applicable Term, the Lessor
desires to lease to the Lessee and the Lessee desires to lease from the Lessor,
the Property pursuant to this Lease; and

         D.       WHEREAS, this Lease contains certain provisions that are
operative with respect to the Expansion Improvements prior to the commencement
of the Term for such Expansion Improvements, as more fully set forth herein,
provided that the operative effect of such terms shall not be construed as
granting to the Lessee, and the Lessee shall not have, any property rights in
respect of the Expansion Improvements prior to the commencement of the Term with
respect to the Expansion Improvements.

         NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                   ARTICLE I.

         1.1      DEFINITIONS; INTERPRETATION. Capitalized terms used but not
otherwise defined in this Lease have the respective meanings specified in
APPENDIX 1 to this Lease; and the rules of interpretation set forth in
APPENDIX 1 to this Lease shall apply to this Lease.

<PAGE>

                                   ARTICLE II.

         2.1.  ACCEPTANCE AND LEASE OF PROPERTY. Effective as of the Closing
Date, the Lessor, subject to the satisfaction or waiver of the conditions set
forth in Sections 6.1 and 6.3 of the Participation Agreement, hereby agrees
to accept delivery of the Existing Facility to be delivered on the Land
Interest Acquisition Date pursuant to the terms of the Participation
Agreement, and to lease to the Lessee hereunder for the applicable Term (as
defined in SECTION 2.3), the Lessor's interest in such Existing Facility and
any Tenant Improvements and, subject to satisfaction or waiver of the
conditions set forth in Section 6.2 and 6.3 of the Participation Agreement,
effective as of the Expansion Improvements Closing Date, any Expansion
Improvements which thereafter may be constructed thereon and any Equipment,
if any, which may be purchased for use in connection therewith pursuant to
the Construction Agency Agreements, this Lease or the Participation
Agreement, and the Lessee hereby agrees, expressly for the direct benefit of
the Lessor, to lease commencing on the applicable Lease Commencement Date
from the Lessor for the related Term, the Lessor's interest in such Existing
Facility to be delivered on such Land Interest Acquisition Date and any
Tenant Improvements and Expansion Improvements which thereafter may be funded
pursuant to the Participation Agreement and constructed thereon and such
Equipment, pursuant to the Construction Agency Agreements, this Lease or the
Participation Agreement.

         2.2.  ACCEPTANCE PROCEDURE. The Lessor hereby authorizes one or more
employees of the Lessee, to be designated by the Lessee, as the authorized
representative or representatives of the Lessor to accept delivery on behalf
of the Lessor of the Property identified on the Acquisition Request or an
Equipment Schedule.

               (a) The Lessee hereby agrees that such acceptance of delivery
by such authorized representative or representatives and the execution and
delivery by the Lessee on the Land Interest Acquisition Date of a Lease
Supplement in the form of EXHIBIT A hereto (appropriately completed) shall,
without further act, constitute the irrevocable acceptance by the Lessee of
the Existing Facility and any Tenant Improvements to be constructed thereon
which are the subject thereof for all purposes of this Lease and the other
Operative Documents on the terms set forth therein and herein.

               (b) On the Expansion Improvements Closing Date, the parties
will enter into an Amended and Restated Lease Supplement in the form of
Exhibit B hereto (appropriately completed), which shall, without further act,
constitute the irrevocable acceptance by the Lessee of the Expansion
Improvements to be constructed thereon which are the subject thereof for all
purposes of this Lease and the other Operative Documents on the terms set
forth therein and herein. Lessee hereby agrees that the Expansion
Improvements (i) shall be deemed to be included in the leasehold estate of
this Lease as of the Expansion Improvements Closing Date, and (ii) shall be
subject to the terms and conditions of this Lease on the Expansion
Improvements Closing Date to the extent set forth in Section 2.7(f) of the
Expansion Improvements Construction Agency Agreement.

               (c) The Lessee hereby agrees that such acceptance of delivery
by such authorized representative or representatives and the execution and
delivery by the Lessee of an Equipment Schedule in the form of EXHIBIT C
hereto (appropriately completed) on or prior to the

                                       2

<PAGE>

applicable Funding Date with respect to the acquisition of Equipment shall,
without further act, constitute the irrevocable acceptance of the Equipment
which is the subject thereof for all purposes of this Lease and the other
Operative Documents on the terms set forth therein and herein, and that the
Equipment shall be deemed to be included in the leasehold estate of this
Lease as of the applicable Funding Date and shall be subject to the terms and
conditions of this Lease as of such Funding Date.

         2.3.  LEASE TERM. The term of this Lease (the "TERM") shall begin
(1) with respect to the Existing Facility and the Tenant Improvements, on the
Lease Commencement Date applicable thereto; and (2) with respect to the
Expansion Improvements, on the Lease Commencement Date applicable thereto
and, in each case, shall end on the fifth anniversary of the Closing Date,
unless the Term is renewed or earlier terminated in accordance with the
provisions of this Lease. Prior to the Lease Commencement Date for the
Expansion Improvements only, the Expansion Improvements and the Property
shall be subject to the provisions of this Lease as they are acquired,
constructed or equipped, as the case may be, but as to the Expansion
Improvements, only to the extent set forth in Section 2.7(f) of the Expansion
Improvements Construction Agency Agreement; provided that the Lessee shall
have no property rights in respect of the Expansion Improvements prior to
such Lease Commencement Date.

         2.4.  TITLE. The Property is leased to the Lessee without any
representation or warranty of title, condition of the Improvements or
permitted uses, express or implied, by the Lessor and subject to the rights
of parties in possession, the existing state of title (including, without
limitation, the Permitted Exceptions) and all applicable Requirements of Law.
The Lessee shall in no event have any recourse against the Lessor for any
defect in or exception to title to the Property, other than for any such
defect or exception constituting a Lessor Lien.

                                  ARTICLE III.

         3.1.  RENT.

               (a) During the Term, the Lessee shall pay Basic Rent on each
Payment Date, on the date required under SECTION 22.1(i) in connection with
the Lessee's exercise of the Remarketing Option and, subject to the terms and
provisions of this Lease governing termination hereof, on any date on which
this Lease shall terminate.

               (b) Neither the Lessee's inability or failure to take
possession of all or any portion of the Property when delivered by the
Lessor, nor the Lessor's inability or failure to deliver all or any portion
of the Property to the Lessee on or before the applicable Lease Commencement
Date, whether or not attributable to any act or omission of the Lessee or any
act or omission of the Lessor, or for any other reason whatsoever, shall
delay or otherwise affect the Lessee's obligation to pay Rent for the
Property from and after commencement of the Term.

         3.2.  PAYMENT OF BASIC RENT. Basic Rent shall be paid absolutely net
to the Lessor, so that this Lease shall yield to the Lessor the full amount
thereof, without setoff, deduction or reduction, whether or not the Lessee's
quiet possession of the Property is disturbed.

                                       3

<PAGE>

         3.3.  SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor or the
Person entitled thereto any and all Supplemental Rent promptly as the same
shall become due and payable, and if the Lessee fails to pay any Supplemental
Rent and such failure constitutes a Lease Event of Default, the Lessor shall
have all rights, powers and remedies provided for in SECTIONS 17.2, 17.3,
17.4 and 17.5 or by law or equity or otherwise in the case of nonpayment of
Basic Rent. The Lessee shall pay to the Lessor, as Supplemental Rent, among
other things, on demand, to the extent permitted by Applicable Law, interest
at the applicable Overdue Rate on any installment of Basic Rent not paid when
due for the period for which the same shall be overdue and on any payment of
Supplemental Rent not paid when due or demanded by the Lessor for the period
from the due date or the date of any such demand, as the case may be, until
the same shall be paid. The expiration or other termination of the Lessee's
obligations to pay Basic Rent hereunder shall not limit or modify the
obligations of the Lessee with respect to Supplemental Rent. Unless expressly
provided otherwise in this Lease, in the event of any failure on the part of
the Lessee to pay and discharge any Supplemental Rent as and when due, the
Lessee shall also promptly pay and discharge any fine, penalty, interest or
cost which may be assessed or added under any agreement with a third party
for nonpayment or late payment of such Supplemental Rent, all of which shall
also constitute Supplemental Rent.

         3.4.  METHOD OF PAYMENT. Each payment of Rent shall be made by the
Lessee to the Lessor by 12:00 noon, Chicago time at the place of payment
designated by Agent in funds consisting of lawful currency of the United
States of America which shall be immediately available on the scheduled date
when such payment shall be due, unless such scheduled date shall not be a
Business Day, in which case such payment shall be made on the next succeeding
Business Day or as otherwise required by the definition of the term "Interest
Period" set forth in Appendix 1 hereto. Payments initiated after 12:00 noon,
Chicago time shall be deemed received on the next succeeding Business Day for
purposes of the second sentence of Section 3.3 hereof, but shall be deemed
received on the same day for purposes of Section 17.1 hereof.

                                   ARTICLE IV.

         4.1.  UTILITY CHARGES. Subject to the Lessee's rights under the
terms of Article XIII relating to permitted contests, the Lessee shall pay or
cause to be paid all charges for electricity, power, gas, oil, water,
telephone, sanitary sewer service and all other rents and utilities used in
or on the Property during the Term. The Lessee shall be entitled to seek and
receive any credit or refund with respect to any utility charge paid by the
Lessee and the amount of any credit or refund received by the Lessor on
account of any utility charges paid by the Lessee, net of the costs and
expenses reasonably incurred by the Lessor in obtaining such credit or
refund, shall be promptly paid over to the Lessee. All charges for utilities
imposed with respect to the Property for a billing period during which this
Lease expires or terminates shall be adjusted and prorated on a daily basis
between the Lessor and the Lessee, and each party shall pay or reimburse the
other for each party's pro rata share thereof, except that if the Lessee
retains possession of the Property after termination or expiration of this
Lease, no such adjustment and proration shall be made.

                                       4

<PAGE>

                                   ARTICLE V.

         5.1.  QUIET ENJOYMENT. Subject to the rights of the Lessor contained
in SECTION 17.2 and the other terms of this Lease and so long as no Lease
Event of Default shall have occurred and be continuing, the Lessee shall
peaceably and quietly have, hold and enjoy the Property for the Term, free of
any claim or other action by the Lessor or anyone rightfully claiming by,
through or under the Lessor (other than the Lessee or the Construction Agent)
with respect to any matters arising from and after (i) the Land Interest
Acquisition Date, in the case of the Existing Facility and the Tenant
Improvements, and (ii) the Expansion Improvements Closing Date, in the case
of the Expansion Improvements.

                                   ARTICLE VI.

         6.1.  NET LEASE. This Lease shall constitute a net lease. It is the
further express intent of the Lessor and the Lessee that the obligations of
the Lessor and the Lessee hereunder shall be separate and independent
covenants and agreements and that the Basic Rent and Supplemental Rent, and
all other charges and sums payable by the Lessee hereunder, shall commence at
the times provided herein and shall continue to be payable in all events
unless the obligations to pay the same shall be terminated pursuant to an
express provision in this Lease. Any present or future law to the contrary
notwithstanding, this Lease shall not terminate, nor shall the Lessee be
entitled to any abatement, suspension, deferment, reduction, setoff,
counterclaim, or defense (other than the defense of payment) with respect to
the Rent, nor shall the obligations of the Lessee hereunder be affected
(except as expressly herein permitted and by performance of the obligations
in connection therewith) by reason of: (i) any defect in the condition,
merchantability, design, construction, quality or fitness for use of the
Property or any part thereof, or the failure of the Property to comply with
all Requirements of Law and Insurance Requirements, including any inability
to occupy or use the Property by reason of such non-compliance; (ii) any
damage to, removal, abandonment, salvage, loss, contamination of or Release
from, scrapping or destruction of, or any requisition or taking of the
Property or any part thereof; (iii) any restriction, prevention or
curtailment of or interference with any use of the Property or any part
thereof; (iv) any defect in title to or rights to the Property or any Lien on
such title or rights or on the Property (other than Lessor Liens); (v) any
change, waiver, extension, indulgence or other action or omission or breach
in respect of any obligation or liability of or by the Lessor, the Agent or
any Participant (other than the breach by the Lessor of its covenant of quiet
enjoyment set forth in SECTION 5.1); (vi) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceedings relating to the Lessee, the Guarantor, the Construction
Agent, the Lessor, the Agent, any Participant or any other Person, or any
action taken with respect to this Lease by any trustee or receiver of the
Lessee, the Guarantor, the Construction Agent, the Lessor, the Agent, any
Participant or any other Person, or by any court, in any such proceeding;
(vii) any claim that the Lessee has or might have against any Person,
including without limitation the Lessor, the Guarantor, the Construction
Agent, any vendor, manufacturer, contractor of or for the Property, the Agent
or any Participant (other than for the breach by the Lessor of its covenant
of quiet enjoyment set forth in SECTION 5.1); (viii) any failure on the part
of the Lessor to perform or comply with any of the terms of this Lease, any
other Operative Document or any other agreement (other than the breach by the
Lessor of its covenant of quiet enjoyment set forth in

                                       5

<PAGE>

SECTION 5.1); (ix) any invalidity or unenforceability or illegality or
disaffirmance of this Lease, against or by the Lessee or any provision hereof
or any of the other Operative Documents or any provision of any thereof; (x)
the impossibility or illegality of performance by the Lessee, the Lessor or
both; (xi) any action by any court, administrative agency or other
Governmental Authority; (xii) any restriction, prevention or curtailment of
or interference with the construction on or any use of the Property or any
part thereof; or (xiii) any other cause or circumstances whether similar or
dissimilar to the foregoing and whether or not the Lessee shall have notice
or knowledge of any of the foregoing (other than the breach by the Lessor of
its covenant of quiet enjoyment set forth in SECTION 5.1). The parties intend
that the obligations of the Lessee hereunder shall be covenants and
agreements that are separate and independent from any obligations of the
Lessor hereunder or under any other Operative Document and the obligations of
the Lessee shall continue unaffected unless such obligations shall have been
modified or terminated in accordance with an express provision of this Lease.

         6.2.  NO TERMINATION OR ABATEMENT. The Lessee and the Lessor shall
remain obligated under this Lease in accordance with its terms and shall not
take any action to terminate (except as provided herein), rescind or avoid
this Lease, notwithstanding any action for bankruptcy, insolvency,
reorganization, liquidation, dissolution, or other proceeding affecting the
Lessor, the Agent, any Participant or the Lessee or any action with respect
to this Lease or any Operative Document which may be taken by any trustee,
receiver or liquidator of the Lessor, the Agent, any Participant or the
Lessee or by any court with respect to the Lessor, the Agent or any
Participant. The Lessee hereby waives, to the extent permitted by Applicable
Law, all right (i) to terminate or surrender this Lease (except as provided
herein) or (ii) to avail itself of any abatement, suspension, deferment,
reduction, setoff, counterclaim or defense (other than the defense of
payment) with respect to any Rent. The Lessee and the Lessor shall remain
obligated under this Lease in accordance with its terms and each hereby
waives, to the extent permitted by Applicable Law, any and all rights now or
hereafter conferred by statute or otherwise to modify or to avoid strict
compliance with its obligations under this Lease. Notwithstanding any such
statute or otherwise, the Lessee and the Lessor shall be bound by all of the
terms and conditions contained in this Lease.

                                  ARTICLE VII.

         7.1.  NATURE OF TRANSACTION; INTENT OF THE PARTIES.

               (a) It is the intent of the parties hereto that: (i) this
Lease constitutes an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended and interpreted, for purposes of the
Lessee's financial reporting, and (ii) for purposes of federal, state, and
local income or franchise taxes (and for any other tax imposed on or measured
by income) and documentary, intangibles and transfer taxes, the transaction
contemplated hereby is a financing arrangement and preserves ownership in the
Property in the Lessee. The parties shall take no action inconsistent with
such intention. Nevertheless, the Lessee acknowledges and agrees that neither
the Agent, the Lessor nor any Participant has made any representations or
warranties to the Lessee concerning the tax, accounting or legal
characteristics of the Operative Documents and that the Lessee has obtained
and relied upon such tax, accounting and legal advice concerning the
Operative Documents as it deems appropriate.

                                       6

<PAGE>

               (b) Anything to the contrary in the Operative Documents
notwithstanding, the Lessor and the Lessee intend and agree that with respect
to the nature of the transactions evidenced by this Lease in the context of
the exercise of remedies under the Operative Documents, including, without
limitation, in the case of any insolvency or receivership proceedings or a
petition under the United States bankruptcy laws or any other applicable
insolvency laws or statute of the United States of America or any State or
Commonwealth thereof or any foreign country affecting the Lessee, the Lessor,
or any Participant or any enforcement or collection actions arising out of or
relating to bankruptcy or insolvency laws, (i) the transactions evidenced by
this Lease shall be deemed to be loans made by the Lessor and the
Participants to the Lessee secured by the Property, (ii) the obligations of
the Lessee under this Lease to pay Basic Rent, Supplemental Rent, Asset
Termination Value, the Existing Facility and Tenant Improvements Residual
Value Guarantee Amount or the Expansion Improvements Residual Value Guarantee
Amount in connection with a purchase of the Property pursuant to this Lease
shall be treated as payments of interest on (with respect to Basic Rent), and
principal of (with respect to all other such payments), loans from the Lessor
and the Participants to the Lessee, and (iii) this Lease grants a security
interest and mortgage or deed of trust lien, as the case may be, in the
Property to the Lessor and the Lease has been assigned by the Lessor to the
Agent for the benefit of the Participants to secure the Lessee's performance
under and payment of all amounts under this Lease and the other Operative
Documents.

               (c) Specifically, without limiting the generality of
SUBSECTIONS (a) and (b) of this SECTION 7.1 and SECTION 7.2, the parties
hereto intend and agree that, for purposes of filing federal, state and local
returns, reports and other statements relating to income or franchise taxes,
or any other taxes imposed upon or measured by income, (i) the Lessee shall
be entitled to take any deduction, credit, allowance or other reporting
position consistent with its status as owner of the Property; and (ii)
neither the Lessor nor any Participant shall take an initial position on its
federal, state and local returns, reports and other statements relating to
income or franchise taxes that is inconsistent with the Lessee's status as
owner of the Property.

               (d) If the transactions evidenced by this Agreement and the
other Operative Documents can no longer be treated as an operating lease
pursuant to GAAP for accounting purposes, all provisions in the Operative
Documents limiting the Lessee's obligation to pay the Asset Termination Value
(including the Remarketing Option) on the Expiration Date or otherwise shall
no longer apply. If any such change in accounting treatment shall occur, the
Lessee, the Lessor, the Agent and the Participants shall negotiate in good
faith to enter into such amendments to the Operative Documents as may be
reasonably necessary or desirable to reflect the foregoing.

               (e) In the event that, after the date hereof, the UCC as
enacted and in effect in any applicable jurisdiction shall be revised or
amended or amendments thereto shall become effective, the Lessee, the Lessor,
the Agent and the Participants shall negotiate in good faith to enter into
such amendments to the Operative Documents as may be reasonably necessary or
desirable to effect the intended purposes of this Lease and the other
Operative Documents in light of the effect of such revisions or amendments.

               (f) Specifically, without limiting the generality of
subsection (b) of SECTION 7.1, in order to secure the Lessee's obligation to
pay Basic Rent, Supplemental Rent,

                                       7

<PAGE>

Asset Termination Value, the Residual Value Guarantee Amount, the Purchase
Option Price and all other obligations owing by the Lessee under the
Operative Documents (the "OBLIGATIONS"), the Lessee hereby grants, remises,
releases, aliens, conveys, transfers, mortgages, assigns and warrants to
Charles R. Swartz, as trustee (as "Trustee") for the benefit of Lessor WITH
POWER OF SALE and right of entry and possession, all of the Lessee's right,
title and interest in and to the following (collectively, the "COLLATERAL"):

                                    (i) all right, title and interest of the
                  Lessee in and to the Property or any part thereof and the
                  reversions, remainders, rents, issues and profits thereof;

                                    (ii) all right, title and interest of the
                  Lessee in and to all Fixtures and Improvements and all
                  substitutes and replacements of, and all additions and
                  improvements to, the Improvements and the Fixtures,
                  subsequently acquired by the Lessee or constructed, assembled
                  or placed by Lessee on the Land Interest, immediately upon
                  such acquisition, release, construction, assembling or
                  placement, including, without limitation, any and all building
                  materials whether stored at the Property or offsite, and, in
                  each such case, without any further mortgage, deed of trust,
                  conveyance, assignment or other act by the Lessee;

                                    (iii) all right, title and interest of the
                  Lessee in, to and under all books and records relating to or
                  used in connection with the operation of the Property or the
                  Fixtures or any part thereof and the Equipment (other than any
                  records related to the business conducted from the Property);

                                    (iv) all right, title and interest of the
                  Lessee in and to all insurance policies (including title
                  insurance policies) required to be maintained by the Lessee
                  pursuant to the Operative Documents, including the right to
                  collect and receive such proceeds; and all awards and other
                  compensation, including the interest payable thereon and the
                  right to collect and receive the same, made to the owner of
                  the Property for the taking by eminent domain, condemnation or
                  otherwise, of all or any part of the Property or any easement
                  or other right therein, all to the extent the same are
                  assignable by the Lessee;

                                    (v) all right, title and interest of the
                  Lessee in and to (i) all governmental consents, licenses,
                  building permits, certificates of occupancy and other
                  governmental approvals relating to construction, completion,
                  occupancy, use or operation of the Property or any part
                  thereof, PROVIDED that any such consent, license, permit,
                  certificate or approval that by its terms or by operation of
                  law would become void, voidable, terminable or revocable or
                  would result in a breach or default thereunder or under any
                  applicable law if subjected to the lien granted pursuant to
                  this CLAUSE (v) is expressly excepted and excluded from this
                  CLAUSE (v) to the extent necessary to avoid such result, and
                  (ii) all plans and specifications relating to the Property, in
                  each case to the extent assignable;

                                       8

<PAGE>

                                    (vi) all Rent and all other rents, payments,
                  purchase prices, receipts, revenues, issues and profits
                  payable under this Lease or pursuant to any other lease with
                  respect to the Property;

                                    (vii) all proceeds, both cash and noncash,
                  of the foregoing and any items acquired in substitution of, or
                  replacement for, any of the foregoing; and

                                    (viii) all right, title and interest of the
                  Lessee in and to all of the Operative Documents, including,
                  without limitation, the Lease Supplement, the Restated Lease
                  Supplement, and the Equipment Schedules, regardless of whether
                  the interest of the Lessee therein is that of lessee,
                  sublessee, sublessor or borrower.

         7.2.  UCC INFORMATION.

               (a) Specifically, without limiting the generality of
subsection (b) of SECTION 7.1, the Lessor and the Lessee further intend and
agree that, for the purpose of securing the Lessee's obligations for the
repayment of the above-described loans from the Lessor and the Participants
to the Lessee, (i) this Lease shall also be deemed to be a security agreement
and financing statement within the meaning of Article 9 of the Uniform
Commercial Code (and specifically, a construction mortgage, as said term is
defined in Section 9-313(1)(c) of the Uniform Commercial Code), a fixture
filing and a real property deed of trust of the Property; (ii) the conveyance
provided for in Article II shall be deemed to be a grant by the Lessee to the
Lessor, assigned by the Lessor to the Agent for the benefit of the
Participants, of a mortgage or deed of trust, as applicable, lien and
security interest in all of the Lessee's right, title and interest in and to
the Property and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, investments, securities or other property, whether
in the form of cash, investments, securities or other property (it being
understood that the Lessee hereby mortgages and warrants and grants a
security interest in the Property to Lessor to secure such loans); (iii) the
possession by the Lessor or any of its agents of any notes and such other
items of the Collateral as constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be "possession by the secured
party" for purposes of perfecting the security interest pursuant to Section
9-305 of the Uniform Commercial Code; and (iv) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations from
financial intermediaries, bankers or agents (as applicable) of the Lessee
shall be deemed to have been given for the purpose of perfecting such
security interest under Applicable Law. The Lessor and the Lessee shall, to
the extent consistent with this Lease, take such actions and execute,
deliver, file and record such other documents, financing statements,
mortgages and deeds of trust as may be necessary to ensure that, if this
Lease were deemed to create a Lien and/or security interest in the Property
in accordance with this Section, such Lien and/or security interest would be
deemed to be a perfected Lien and/or security interest of first priority
(except as to Permitted Exceptions) under Applicable Law and will be
maintained as such throughout the Term.

               (b) For the purposes of the security agreement and financing
statement provided herein the following information applies:

                                       9

<PAGE>

<TABLE>
              <S>                                                        <C>
              (i)      Name and Address of Debtor:                       TriQuint Semiconductor Texas, LP
                                                                         13512 North Central Expressway
                                                                         Dallas, Texas  75243

              (ii)     Name and Address of Secured                       Lease Plan North America, Inc.
                       Party:                                            135 South LaSalle Street, Suite 740
                                                                             Chicago, Illinois  60603

              (iii)    Description of the types (or Those items
                       described as Improvements, items) by
                       property covered by Fixtures and Equipment
                       and other personal this Financing Statement
                       property in paragraph 7.1(f) hereof

              (iv)     Description of real estate to                      See EXHIBIT D hereto
                       which collateral is attached
                       or upon which it is located:
</TABLE>

                                  ARTICLE VIII.

         8.1.  CONDITION OF THE PROPERTY. THE LESSEE ACKNOWLEDGES AND AGREES
THAT ALTHOUGH THE LESSOR WILL HOLD FEE TITLE TO THE PROPERTY, THE LESSEE IS
SOLELY RESPONSIBLE FOR THE IMPROVEMENTS AND ANY ALTERATIONS OR MODIFICATIONS.
THE LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE PROPERTY
"AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY
THE LESSOR, THE AGENT OR ANY PARTICIPANT AND IN EACH CASE SUBJECT TO (A) THE
EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF,
(C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT
SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW WHICH MAY EXIST ON THE DATE
HEREOF. NEITHER THE LESSOR, THE AGENT NOR ANY PARTICIPANT HAS MADE OR SHALL
BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE
(EXCEPT FOR THE LESSOR'S COVENANT OF QUIET ENJOYMENT SET FORTH IN SECTION
5.1), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR
USE OF THE PROPERTY (OR ANY PART THEREOF, INCLUDING ANY IMPROVEMENTS EXISTING
THEREON), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY (OR ANY PART THEREOF,
INCLUDING ANY IMPROVEMENTS EXISTING THEREON) AND NEITHER THE LESSOR, THE
AGENT NOR ANY PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT
DEFECT THEREIN OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY
WITH ANY REQUIREMENT OF LAW.

                                       10

<PAGE>

         8.2.  POSSESSION AND USE OF THE PROPERTY. The Property shall be used
in a manner consistent with properties of a similar nature in the businesses
in which the Lessee is engaged or as permitted in any sublease or assignment
allowed by SECTION 25.1 hereof and in compliance in all material respects
with any covenants, conditions and restrictions of record and any ordinance
or law affecting the use and occupancy of the Property; and PROVIDED that
such other uses do not increase the liability, directly or indirectly, of the
Lessor or adversely affect the value, utility or remaining useful life of the
Property. The Lessee shall pay, or cause to be paid, all charges and costs
required in connection with the use of the Property as contemplated by this
Lease and the Construction Agency Agreements. The Lessee shall not commit or
knowingly permit any waste of the Property or any part thereof.

                                   ARTICLE IX.

         9.1.  COMPLIANCE WITH REQUIREMENTS OF LAW AND INSURANCE
REQUIREMENTS. Subject to the terms of ARTICLE XIII relating to permitted
contests, the Lessee, at its sole cost and expense, shall (a) comply with (i)
all Requirements of Law in all material respects and (ii) all Insurance
Requirements, in each case relating to the Property, including the
construction, use, operation, maintenance, repair and restoration thereof and
the remarketing thereof pursuant to ARTICLE XXII, whether or not compliance
therewith shall require structural or extraordinary changes in the
Improvements or interfere with the use and enjoyment of the Property, and (b)
procure, maintain and comply with all licenses, permits, orders, approvals,
consents and other authorizations required for the construction, use,
maintenance and operation of the Property and for the use, operation,
maintenance, repair and restoration of the Improvements.

                                   ARTICLE X.

         10.1. MAINTENANCE AND REPAIR; RETURN.

               (a) The Lessee, at its sole cost and expense, shall maintain
the Property in good working order, mechanical condition and repair, subject
to reasonable wear and tear, and make all necessary repairs thereto, of every
kind and nature whatsoever, whether interior or exterior, ordinary or
extraordinary, structural or nonstructural or foreseen or unforeseen, in each
case in compliance with all applicable Requirements of Law and in compliance
with all Insurance Requirements and on a basis consistent with the operation
and maintenance of commercial properties comparable in type and location to
the Property and in compliance with prudent industry practice.

               (b) The Lessor shall under no circumstances be required to
build any improvements on the Property, make any repairs, replacements,
alterations or renewals of any nature or description to the Property, make
any expenditure whatsoever in connection with this Lease or maintain the
Property in any way. The Lessor shall not be required to maintain, repair or
rebuild all or any part of the Property, and the Lessee waives any right to
(i) require the Lessor to maintain, repair, or rebuild all or any part of the
Property, or (ii) make repairs at the expense of the Lessor pursuant to any
Requirement of Law, Insurance Requirement, contract, agreement, or covenant,
condition or restriction in effect at any time during the Term.

                                      11

<PAGE>

               (c) The Lessee shall, upon the expiration or earlier
termination of this Lease (unless the Property is conveyed to the Lessee as
provided herein), vacate and surrender the Property to the Lessor in its
then-current, "AS IS" condition, subject to the Lessee's obligations under
SECTIONS 9.1, 10.1(a), 11.1, 12.1, 15.1(e), 15.2, 17.2(h), 22.1 and 23.1.

               (d) The Lessee warrants that it shall cause the Tenant
Improvements and the Expansion Improvements to be constructed on the Property
to be designed and constructed in a workmanlike manner and in material
compliance with all applicable Requirements of Law and in accordance with all
Insurance Requirements, prior to the applicable Outside Completion Date
(subject, in the case of the Expansion Improvements, to Force Majeure Delays)
so that, prior to such date, such Improvements will be fit in all material
respects for their intended purpose.

                                   ARTICLE XI.

         11.1. MODIFICATIONS, SUBSTITUTIONS AND REPLACEMENTS.

               (a) After Completion of the Tenant Improvements or the
Expansion Improvements, as the case may be, the Lessee, at its sole cost and
expense, may at any time and from time to time make alterations, renovations,
improvements and additions to that portion of the Property as to which
construction has been Completed or any part thereof and substitutions and
replacements therefor (collectively, "MODIFICATIONS"); PROVIDED that: (i) no
Modification shall materially impair the value, utility or remaining useful
life of the Property or any part thereof from that which existed immediately
prior to such Modification; (ii) the Modification shall be done expeditiously
and in a good and workmanlike manner; (iii) the Lessee shall comply with all
Requirements of Law and all Insurance Requirements applicable to the
Modification, including the obtaining of all permits and certificates of
occupancy, and the structural integrity of the Property shall not be
adversely affected; (iv) subject to the terms of ARTICLE XIII relating to
permitted contests, the Lessee shall pay all costs and expenses and shall
discharge (or cause to be insured or bonded over) within sixty (60) days
after the same shall be filed (or otherwise become effective) any Liens
arising with respect to the Modification; and (v) such Modifications shall
comply with SECTIONS 8.2 and 10.1. All Modifications (other than those that
both are not Modifications required to be made pursuant to a Requirement of
Law or an Insurance Requirement ("REQUIRED MODIFICATION") and are readily
removable without impairing the value, utility or remaining useful life of
the Property) shall remain part of the realty and shall be subject to this
Lease, and title thereto shall immediately vest in the Lessor. So long as no
Lease Event of Default has occurred and is continuing, the Lessee may place
upon the Property any trade fixtures, machinery, equipment or other property
belonging to the Lessee or third parties and may remove the same at any time
during the Term, subject, however, to the terms of SECTION 10.1(a); PROVIDED
that such trade fixtures, machinery, equipment or other property do not
materially impair the value, utility or remaining useful life of the
Property; PROVIDED, FURTHER, that the Lessee shall keep and maintain at the
Property and shall not remove from the Property any Equipment financed or
otherwise paid for (directly or indirectly) by the Lessor or any Participant
pursuant to the Participation Agreement.

                                      12

<PAGE>

                  (b) The Lessee shall deliver to the Lessor and the Agent
and each Participant a brief written narrative description of the work to be
done in connection with any Modification to the Property the cost of which is
anticipated to exceed $1,000,000 in the aggregate.

                                  ARTICLE XII.

           12.1.  WARRANTY OF TITLE.

                  (a) The Lessee agrees that except as otherwise provided
herein and subject to the terms of ARTICLE XIII relating to permitted
contests, the Lessee shall not directly or indirectly create or allow to
remain, and shall promptly discharge at its sole cost and expense, any Lien,
defect, attachment, levy, title retention agreement or claim upon the
Property (or the Lessor's interest therein) or any Modifications or any Lien,
attachment, levy or claim with respect to the Rent, the Cash Collateral or
the Securities Collateral or with respect to any amounts held by the Agent or
any other Person pursuant to the Participation Agreement or the other
Operative Documents, other than, with respect to the Property only, Permitted
Exceptions and Lessor Liens.

                  (b) Nothing contained in this Lease shall be construed as
constituting the consent or request of the Lessor, expressed or implied, to
or for the performance by any contractor, mechanic, laborer, materialman,
supplier or vendor of any labor or services or for the furnishing of any
materials for any construction, alteration, addition, repair or demolition of
or to the Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NEITHER
THE LESSOR, ANY PARTICIPANT NOR THE AGENT IS OR SHALL BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, THE
CONSTRUCTION AGENT OR TO ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF
THROUGH OR UNDER THE LESSEE.

                  (c) The Lessee shall pay all sums due to the contractors,
sub-contractors, materialmen, laborers, engineers, architects or other
persons, firms or corporations rendering services or furnishing material for
the construction of any Improvements or Modifications. The Lessee shall not
suffer or permit any mechanic's lien to be filed against the Property or any
part thereof by reason of any work, labor, services or materials supplied to
the Lessee, the Construction Agent or anyone holding the Property or any part
thereof through or under the Lessee. If any mechanic's lien or claim or
notice thereof shall at any time be filed against the Property, the Lessee
shall cause the same to be discharged of record within seventy-five (75) days
after the date of the Lessee's knowledge of the filing of same, but in any
event no later than the Expiration Date. In the event that the Lessee
believes that it has a valid defense to any such claim of lien which it
desires to assert, the Lessee may make such defense upon delivery to the
Lessor of an undertaking sufficient to indemnify the Lessor on an After Tax
Basis against any losses, costs, expenses or damages in connection therewith
with such collateral as the Lessor may reasonably approve. If the Lessee
shall fail to discharge and cause the release of such mechanic's lien within
such period, or to provide satisfactory indemnification to the Lessor, then,
in addition to any other right or remedy of the Lessor, the Lessor may, but
shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the

                                       13

<PAGE>

discharge of such lien by deposit in court, or by giving security in such
other manner as is, or may be, prescribed by law, in each case at the
Lessee's expense.

           12.2.  GRANTS AND RELEASES OF EASEMENTS AND OTHER AGREEMENTS.
Provided that no Lease Event of Default shall have occurred and be continuing
and subject to the provisions of ARTICLES VIII, IX, X and XI, the Lessor
hereby consents in each instance to the following actions by the Lessee, in
the name and stead of the Lessor, but at the Lessee's sole cost and expense:
(a) the granting of easements, licenses, rights-of-way and other rights and
privileges in the nature of easements reasonably necessary or desirable for
the completion of construction of the Tenant Improvements and the Expansion
Improvements and for the use, repair, operation or maintenance of the
Property as herein provided; (b) the release of easements, licenses,
rights-of-way and other rights and privileges in the nature of easements
which are for the benefit of the Property; (c) the execution of petitions to
have the Property annexed to any municipal corporation or utility district;
(d) the execution of amendments to any covenants, restrictions, easements,
licenses, rights-of-way, and other rights and privileges in the nature of
easements affecting the Property; (e) the entering into of utility contracts
and related agreements affecting the Property; and (f) the seeking of,
application for, entering into of (including by way of assuming those already
in existence) and amendment of tax abatement, phase-in, or similar agreements
affecting the Property; PROVIDED, HOWEVER, in each case the Lessee shall have
delivered to the Lessor a Responsible Officer's Certificate stating that (i)
such grant, release, contract or agreement does not materially impair the
value, utility and remaining useful life of the Property, (ii) such grant,
release, contract or agreement is reasonably necessary or desirable in
connection with the completion of construction of the Tenant Improvements and
the Expansion Improvements or for the use, operation, maintenance, alteration
or improvement of the Property, (iii) the Lessee shall remain obligated under
this Lease and under any instrument executed by the Lessee consenting to the
assignment of the Lessor's interest in this Lease as security for
indebtedness, in each such case in accordance with their terms, as though
such grant, release, contract, agreement or transfer had not been effected,
and (iv) the Lessee shall pay and perform any obligations of the Lessor under
such grant, release, contract or agreement, and (v) such easements,
rights-of-way, grants, releases, contracts, agreements and other rights shall
be subordinate and subject to the Lien of the Mortgage. Without limiting the
effectiveness of the foregoing, provided that no Lease Event of Default shall
have occurred and be continuing, the Lessor shall, upon the request of the
Lessee, and at the Lessee's sole cost and expense, execute and deliver, any
instruments necessary or appropriate to confirm any such grant, agreement or
release to any Person permitted under this SECTION 12.2. Notwithstanding the
foregoing, Lessor, in its capacity as owner of the Property and at the
request of the Lessee, expressly agrees to join in the execution of an
instrument (the "ASSIGNMENT AND ASSUMPTION OF TAX ABATEMENT AGREEMENTS")
whereby Lessor, as owner of the Property, takes assignment of, and assumes
the obligations of the Property owner under, the Tax Abatement Agreements.
Lessee acknowledges that Lessor will be executing the Assignment and
Assumption of Tax Abatement Agreements solely to satisfy the requirements of
Applicable Law, and that Lessee, if requested, shall join in the execution of
the Assignment and Assumption of Tax Abatement Agreements and shall be solely
responsible for ensuring compliance with all of the terms and provisions
thereof binding upon the Property owner. Lessor further agrees to execute and
deliver such instruments as may be reasonably necessary to authorize all
taxing authorities having jurisdiction over the Property to deliver property
tax statements and bills covering the Property directly to Lessee. In
addition, the Lessor covenants and agrees that, to the extent required by
Applicable Law and at the request

                                       14

<PAGE>

of the Lessee upon reasonable notice, it agrees to be named on and will join
in the execution of any environmental permits, licenses, consents, or similar
documents, instruments or agreements relating to environmental matters with
respect to the Property and the conduct of the Lessee's business thereon to
the extent related to environmental matters, and any applications, updates,
renewals or other documents or instruments relating thereto or required
thereunder (collectively, the "OTHER DOCUMENTS"); provided, however, (i) in
no event shall the naming of the Lessor on any such Other Document or the
Lessor's execution of any such Other Document operate or be construed to
limit in any fashion the Lessee's indemnification obligations and other
covenants and agreements under any of the Operative Documents with respect to
environmental matters, (ii) the Lessor shall not be obligated to be named on
or join in the execution of any Other Documents if such naming or execution
would subject the Lessor to any liability for which the Lessee is not
required to indemnify the Lessor and (iii) the Lessee agrees that it will be
solely responsible for compliance with any terms and conditions of the Other
Documents.

                                  ARTICLE XIII.

           13.1.  PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES.
Except to the extent otherwise provided for in Section 13 of the
Participation Agreement, the Lessee, on its own or on the Lessor's behalf but
at the Lessee's sole cost and expense, may contest, by appropriate
administrative or judicial proceedings conducted in good faith and with due
diligence, the amount, validity or application, in whole or in part, of any
Requirement of Law, or utility charges payable pursuant to SECTION 4.1 or any
Lien, attachment, levy, encumbrance or encroachment, and the Lessor agrees
not to pay, settle or otherwise compromise any such item, PROVIDED that (a)
the commencement and continuation of such proceedings shall suspend the
collection thereof from, and suspend the enforcement thereof against, the
Property, the Cash Collateral, the Securities Collateral, the Lessor, the
Agent and the Participants or the Lessee shall have bonded or otherwise
secured such amount in a manner satisfactory to the Lessor and the Agent; (b)
there shall be no material risk of the imposition of a Lien as a result of
such contest (other than, as to the Property, Permitted Exceptions) on the
Property, the Cash Collateral or the Securities Collateral, and no part of
the Property, the Cash Collateral, the Securities Collateral, nor any Rent
would be in any danger of being sold, forfeited, lost or deferred as a result
of such contest; (c) at no time during the permitted contest shall there be a
risk of the imposition of criminal liability or material civil liability on
the Lessor, the Agent or any Participant for failure to comply therewith
(unless, in the case of civil liability, the Lessee shall have bonded or
otherwise secured such amount in a manner satisfactory to the Lessor and the
Agent); and (d) in the event that, at any time, there shall be a material
risk of extending the application of such item beyond the end of the Term,
then the Lessee shall deliver to the Lessor a Responsible Officer's
Certificate certifying as to the matters set forth in CLAUSES (a), (b) and
(C) of this SECTION 13.1. The Lessor, at the Lessee's sole cost and expense,
shall cooperate in good faith with the Lessee with respect to any permitted
contests conducted by the Lessee pursuant to this SECTION 13.1 and shall, at
the Lessee's sole cost and expense, execute and deliver to the Lessee such
authorizations and other documents as may reasonably be required in
connection with any such contest and, if reasonably requested by the Lessee,
shall join as a party therein at the Lessee's sole cost and expense.

                                       15

<PAGE>

                                  ARTICLE XIV.

           14.1.  GENERAL LIABILITY AND WORKERS' COMPENSATION INSURANCE. The
Lessee shall procure and carry commercial general liability insurance,
including contractual liability, for claims for injuries or death sustained
by persons or damage to property while on the Property and such other general
liability coverages as are ordinarily procured by Persons who own or operate
similar properties and consistent with prudent business practice, which
policies shall include contractual liability endorsements covering the
Lessee's indemnification obligations in Section 13.1 of the Participation
Agreement. Such insurance shall be on terms and in amounts (which shall be
reasonably acceptable to the Lessor and in the event of liability insurance
shall be maintained at a level set forth on SCHEDULE 14.2) that are no less
favorable than insurance maintained by the Guarantor and its Subsidiaries
with respect to similar properties that it owns and that are in accordance
with prudent business practice and may be provided under blanket policies
maintained by or on behalf of the Guarantor and its Subsidiaries. The policy
shall be endorsed to name the Lessor, the Agent and each Participant as
additional insureds. The policy shall also specifically provide that the
policy shall be considered primary insurance which shall apply to any loss or
claim before any contribution by any insurance which the Lessor, the Agent or
the Participants may have in force. The Lessee shall, in the construction of
the Improvements and the operation of the Property (including in connection
with any Modifications thereof) comply with the applicable workers'
compensation laws and protect the Lessor, the Agent and the Participants
against any liability under such laws.

           14.2.  HAZARD AND OTHER INSURANCE. The Lessee shall keep, or cause
to be kept, the Property insured against loss or damage by fire, flood and
other risks in an amount not less than the greater of the amount set forth on
SCHEDULE 14.2 and the then current replacement costs of the buildings and
improvements on the Property and on terms that are no less favorable than
insurance covering other similar properties owned or leased by the Lessee or
any of its Affiliates and that are in accordance with prudent business
practice. The Lessee may provide such coverage under blanket policies
maintained by or on behalf of the Lessee; PROVIDED, that if the Lessee does
not elect to terminate the Lease pursuant to ARTICLE XVI hereof following the
occurrence of an event covered by any such blanket policy, the proceeds shall
be applied to the repair, rebuilding and restoration of any damage to the
Property. Prior to the Completion Date for the Expansion Improvements, no
insurance coverage applicable to the Expansion Improvements required under
this SECTION 14.2 shall be subject to any deductible. During the construction
of the Expansion Improvements the Lessee shall also maintain builders' risk
insurance. Each policy of insurance maintained by the Lessee pursuant to this
SECTION 14.2 shall provide that all insurance proceeds with respect to the
Property in respect of any loss or occurrence with respect to the Property
shall be paid to and adjusted solely by the Agent (at the expense of the
Lessee) during the Construction Period with respect to the Expansion
Improvements only and at any other time, by (and such proceeds shall be paid
to) the Lessee, except from and after the date on which the insurer receives
written notice from the Lessor or the Agent that a Lease Event of Default
exists (and unless and until such insurer receives written notice from the
Lessor or the Agent that all Lease Events of Default have been cured), all
losses shall be adjusted solely by, and all insurance proceeds shall be paid
solely to, the Agent (or the Lessor if the Participation Interests have been
fully paid) for application pursuant to ARTICLE XV. The costs and expenses of
all insurance required under this SECTION 14.2 (i) applicable to the
Expansion Improvements (A) shall be paid by the Lessor (and funded as an
Advance funded by

                                       16

<PAGE>

the Participants and capitalized as provided in Section 3.7(e)(i) of the
Participation Agreement), if arising prior to the related Completion Date,
and (B) from and after the related Completion Date, shall be at the sole cost
and expense of the Lessee and (ii) applicable to the remainder of the
Property, shall be at the sole cost and expense of the Lessee.

           14.3.  COVERAGE.

                  (a) The Lessee shall furnish the Lessor and the Agent with
(i) certificates of insurance on the Land Interest Acquisition Date showing
the insurance then required under SECTIONS 14.1 and 14.2 to be in effect and
naming the Lessor, the Agent and each Participant as additional insureds and,
with respect to the insurance required under SECTION 14.2, naming the Agent,
for the benefit of the Participants, as loss payees, and showing the
mortgagee endorsement required by SECTION 14.3(C) and (ii) upon the request
of the Lessor or the Agent, certified copies of such policies. Subject to the
last sentence of SECTION 14.2, all such insurance shall be at the cost and
expense of the Lessee. Such policies and certificates in respect thereof
shall include a provision for thirty (30) days' advance written notice by the
insurer to the Lessor and the Agent in the event of cancellation of or any
significant reduction in the coverage provided by such insurance.

                  (b) The Lessee agrees that the insurance policy or policies
required by SECTIONS 14.1 and 14.2 shall include (i) an appropriate clause
pursuant to which such policy shall provide that it will not be invalidated
should the Lessee waive, in writing, prior to a loss, any or all rights of
recovery against any party for losses covered by such policy, and that the
insurance in favor of the Lessor, the Agent and the Participants, and their
respective rights under and interests in said policies shall not be
invalidated or reduced by any act or omission or negligence of the Lessee or
any other Person having any interest in the Property, and (ii) a so-called
"Waiver of Subrogation Clause". The Lessee hereby waives any and all such
rights against the Lessor, the Agent and the Participants to the extent of
payments made under such policies.

                  (c) All such insurance shall be written by reputable
insurance companies that are financially sound and solvent and otherwise
reasonably appropriate considering the amount and type of insurance being
provided by such companies. Any insurance company selected by the Lessee
which is rated in Best's Key Rating Guide or any successor thereto (or if
there be none, an organization having a similar national reputation) shall
have a general policyholder rating of "A" and a financial rating of at least
8 in Best's Key Rating Guide or be otherwise acceptable to the Lessor and the
Agent. All insurance policies required by SECTION 14.2 shall include a
standard form mortgagee endorsement in favor of the Agent.

                  (d) The Lessor shall not carry separate insurance
concurrent in kind or form or contributing in the event of loss with any
insurance required under this ARTICLE XIV except that the Lessor may carry
separate liability insurance (at its sole cost) so long as (i) the Lessee's
insurance is designated as primary and in no event excess or contributory to
any insurance the Lessor may have in force which would apply to a loss
covered under the Lessee's policy and (ii) each such insurance policy will
not cause the Lessee's insurance required under this ARTICLE XIV to be
subject to a coinsurance exception of any kind.

                                       17

<PAGE>

                  (e) The Lessee shall pay as they become due all premiums
for the insurance required by SECTION 14.1 and, when required under SECTION
14.2, for the insurance required under SECTION 14.2, and shall renew or
replace each policy prior to the expiration date thereof. During the
Construction Period relating to the Expansion Improvements, at the time each
of the Lessee's insurance policies is renewed (but in no event less
frequently than once each year), upon the request of the Lessor or the Agent,
the Lessee shall deliver to the Lessor and the Agent certified copies of the
insurance policies required by this ARTICLE XIV to be maintained by the
Lessee with respect to the Property. At the time each of the Lessee's
insurance policies is renewed (but in no event less frequently than once each
year), the Lessee shall deliver to the Lessor and the Agent certificates of
insurance with respect to the insurance policies required by this ARTICLE XIV
to be maintained by the Lessee with respect to the Property.

                  (f) The Lessee hereby waives, releases and discharges the
Lessor, the Agent and each Participant and their agents and employees from
all claims whatsoever arising out of loss, claim, expense or damage to or
destruction covered or coverable by insurance required under this ARTICLE XIV
notwithstanding that such loss, claim, expense or damage may have been caused
by the Lessor, the Agent or any Participant or any of their agents or
employees, and the Lessee agrees to look to the insurance coverage only in
the event of such loss.

                                   ARTICLE XV.

           15.1.  CASUALTY AND CONDEMNATION.

                  (a) Subject to the provisions of ARTICLE XIV, this ARTICLE
XV and (in the event the Lessee delivers, or is obligated to deliver, a
Termination Notice) ARTICLE XVI, and prior to the occurrence and continuation
of a Lease Event of Default, the Lessee shall be entitled to receive (and the
Lessor shall pay over to the Lessee, if received by the Lessor, and hereby
irrevocably assigns to the Lessee all of the Lessor's right, title and
interest in) any award, compensation or insurance proceeds to which the
Lessee or the Lessor may become entitled by reason of their respective
interests in the Property (i) if all or a portion of the Property is damaged
or destroyed in whole or in part by a Casualty or (ii) if the use, access,
occupancy, easement rights or title to the Property or any part thereof, is
the subject of a Condemnation; PROVIDED, HOWEVER, subject to ARTICLE XIV, if
a Lease Event of Default shall have occurred and be continuing or if any such
proceeds are received by the Lessee during any Construction Period, such
award, compensation or insurance proceeds shall be paid directly to the Agent
or, if received by the Lessee, shall be held in trust for the Agent, and
shall be paid over by the Lessee to the Agent (or, if the Participation
Interests have been fully paid, to the Lessor) and held in accordance with
the terms of this PARAGRAPH (a). If, contrary to such provision, any such
award, compensation or insurance proceeds are paid to the Lessor or the
Lessee rather than to the Agent, the Lessor and the Lessee, as the case may
be, hereby agree to transfer any such payment to the Agent. All amounts held
by the Lessor or the Agent under the preceding sentences on account of any
award, compensation or insurance proceeds either paid directly to the Lessor
or the Agent or turned over to the Lessor or the Agent (whether arising prior
to or after any Completion Date) shall either be (i) paid to the Lessee for
the repair of damage caused by such Casualty or Condemnation in accordance
with PARAGRAPH (e) of this SECTION 15.1, or (ii) applied to the purchase
price of the Property on a Termination Date resulting from a Casualty or
Condemnation in accordance with PARAGRAPH (d)

                                       18

<PAGE>

of this SECTION 15.1 or PARAGRAPH (a) of SECTION 16.2, with any Excess
Proceeds being payable to the Lessee.

                  (b) In any proceeding or action under the control of the
Lessor or the Agent pursuant to the terms of SECTION 14.2, the Lessee may
participate and shall pay all expenses of such proceeding and its
participation. At the Lessee's reasonable request, and at the Lessee's sole
cost and expense, the Lessor and the Agent shall participate in any such
proceeding, action, negotiation, prosecution or adjustment under the control
of the Lessee. The Lessor and the Lessee agree that this Lease shall control
the rights of the Lessor and the Lessee in and to any such award,
compensation or insurance payment.

                  (c) If the Lessor or the Lessee shall receive notice of a
Casualty or of an actual, pending or threatened Condemnation of the Property
or any interest therein, the Lessor or the Lessee, as the case may be, shall
give notice thereof to the other and to the Agent promptly after the receipt
of such notice.

                  (d) In the event of a Casualty or receipt of notice by the
Lessee or the Lessor of a Condemnation, the Lessee may deliver to the Lessor
and the Agent a Termination Notice with respect to the Property pursuant to
SECTION 16.1. If the Lessee does not deliver a Termination Notice within
forty-five (45) days after such occurrence, then this Lease shall (subject to
the terms and conditions thereof) remain in full force and effect, and the
Lessee shall, at the Lessee's sole cost and expense, promptly and diligently
restore the Property pursuant to PARAGRAPH (e) of this SECTION 15.1 and
otherwise in accordance with this Lease. If the Lessee delivers a Termination
Notice within forty-five (45) days after such occurrence, a Significant Event
shall irrevocably be deemed to have occurred with respect to the Property,
and, in such event, this Lease shall terminate and the Lessee shall purchase
the Property on the next Payment Date (but in no event to exceed forty-five
(45) days after such occurrence) (a "TERMINATION DATE") pursuant to ARTICLE
XVI hereof.

                  (e) If pursuant to this SECTION 15.1 this Lease shall
continue in full force and effect following a Casualty or Condemnation, the
Lessee shall, at its sole cost and expense (and, without limitation, if any
award, compensation or insurance payment is not sufficient to restore the
Property in accordance with this paragraph, the Lessee shall pay the
shortfall), promptly and diligently repair any damage to the Property caused
by such Casualty or Condemnation or substitute new or like new Equipment for
the affected Equipment in conformity with the requirements of SECTIONS 10.1
and 11.1 using the as-built Plans and Specifications for the Property (as
modified to give effect to any subsequent Modifications, any Condemnation
affecting the Property and in compliance with all applicable Requirements of
Law and all Insurance Requirements) so as to restore the Property as nearly
as practicably possible to at least the same condition, operation, function
and value as existed immediately prior to such Casualty or Condemnation. In
the event of such restoration, title to the Property shall remain with the
Lessor; PROVIDED, that (i) title to any such substituted equipment shall vest
in the Lessor and such equipment shall constitute Equipment thereafter for
all purposes of this Lease, and (ii) the Lessor shall assign all of its
right, title and interest to the Lessee in any such replaced equipment
without representation or warranty of any kind other than that such equipment
is free of Lessor Liens and Liens created pursuant to the Operative
Documents. Upon completion of such restoration, and only with respect to
restorations, the costs of which exceed, in the aggregate, $250,000, the

                                       19

<PAGE>

Lessee shall furnish the Lessor an architect's certificate of substantial
completion and a Responsible Officer's Certificate confirming that such
restoration has been completed pursuant to this Lease; PROVIDED, HOWEVER, no
architect's certificate of substantial completion shall be required with
respect to the repair or replacement of Equipment.

                  (f) In no event shall a Casualty or Condemnation with
respect to which this Lease remains in full force and effect under this
SECTION 15.1 affect the Lessee's obligations to pay Rent pursuant to SECTION
3.1 or to perform its obligations and pay any amounts due on the Expiration
Date or pursuant to ARTICLES XIX and XX.

                  (g) Any Excess Proceeds received by the Lessor or the Agent
in respect of a Casualty or Condemnation shall be turned over to the Lessee.

           15.2.  ENVIRONMENTAL MATTERS. Promptly upon the Lessee's actual
knowledge of the presence of Hazardous Substances in any portion of the
Property in concentrations and conditions that constitute or could reasonably
be expected to constitute an Environmental Violation, the Lessee shall notify
the Lessor in writing of such condition. In the event of such Environmental
Violation, the Lessee shall, not later than forty-five (45) days after the
Lessee has actual knowledge of such Environmental Violation, either, if such
Environmental Violation is a Significant Event, deliver to the Lessor and the
Agent a Responsible Officer's Certificate and a Termination Notice with
respect to the Property pursuant to SECTION 16.1, or, if such Environmental
Violation is not a Significant Event, at the Lessee's sole cost and expense,
promptly and diligently commence any Response Actions necessary to
investigate, remove, clean up or remediate the Environmental Violation in
accordance with the terms of SECTION 9.1. If the Lessee does not deliver a
Termination Notice with respect to the Property pursuant to SECTION 16.1, the
Lessee shall, upon completion of Response Actions by the Lessee, cause to be
prepared by an environmental consultant reasonably acceptable to the Lessor a
report describing the Environmental Violation and the Response Actions taken
by the Lessee (or its agents or contractors) for such Environmental
Violation, and a statement by the consultant that the Environmental Violation
has been remedied in compliance in all material respects with applicable
Environmental Law. Each such Environmental Violation shall be remedied prior
to the Expiration Date, unless the Lessee has elected to, and on or prior to
the Expiration Date does, purchase the Property pursuant to the provisions of
SECTIONS 16.2, 16.3, 20.1, 20.2 or 20.3. Nothing in this ARTICLE XV shall
reduce or limit the Lessee's obligations under Sections 13.1, 13.2 or 13.3 of
the Participation Agreement.

           15.3.  NOTICE OF ENVIRONMENTAL MATTERS. Promptly, but in any event
within thirty (30) Business Days from the date the Lessee has actual
knowledge thereof, the Lessee shall provide to the Lessor written notice of
any material pending or threatened claim, action or proceeding involving any
Environmental Law or any Release on or in connection with the Property. All
such notices shall describe in reasonable detail the nature of the claim,
action or proceeding and the Lessee's proposed response thereto. In addition,
the Lessee shall provide to the Lessor, within thirty (30) Business Days of
receipt, copies of all material written communications with any Governmental
Authority relating to any Environmental Law in connection with the Property.
The Lessee shall also promptly provide such detailed reports of any such
Material environmental claims as are available to Lessee and may reasonably
be requested by the Lessor and the Agent.

                                       20

<PAGE>

                                  ARTICLE XVI.

           16.1.  TERMINATION BY THE LESSEE UPON CERTAIN EVENTS. If either:
(i) the Lessee or the Lessor shall have received notice of a Condemnation,
and the Lessee shall have delivered to the Lessor a Responsible Officer's
Certificate that such Condemnation is a Significant Condemnation; or (ii) a
Casualty occurs, and the Lessee shall have delivered to the Lessor a
Responsible Officer's Certificate that such Casualty is a Significant
Casualty; or (iii) an Environmental Violation occurs or is discovered and the
Lessee shall have delivered to the Lessor a Responsible Officer's Certificate
stating that, in the reasonable, good-faith judgment of the Lessee, the cost
to remediate the same will cause the same to be a Significant Event, or (iv)
if the Lessee shall not have delivered a Termination Notice with respect to
such Environmental Violation described in clause (iii) but the requirements
of SECTION 16.3 are met with respect to such Environmental Violation; then,
(A) the Lessee shall, simultaneously with the delivery of the Responsible
Officer's Certificate pursuant to the preceding CLAUSE (i), (ii) or (iii)
deliver a written notice in the form described in SECTION 16.2(a) (a
"TERMINATION NOTICE"), or (B) if CLAUSE (iv) is applicable, the Lessor may
deliver a Termination Notice pursuant to SECTION 16.3.

         16.2.    PROCEDURES.

                  (a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the Property or the affected
portion thereof on a date that is no later than forty-five (45) days after
the occurrence of the applicable event described in CLAUSE (i), (ii) or (iii)
of SECTION 16.1 (the "TERMINATION DATE"), such termination to be effective
upon the Lessee's payment of the Asset Termination Value (or portion thereof
representing the Property Cost of the affected portion of the Property); and
(ii) a binding and irrevocable agreement of the Lessee to pay the Asset
Termination Value and purchase the Property on the Termination Date.

                  (b) On the Termination Date, the Lessee shall pay to the
Lessor the Asset Termination Value (or such portion thereof, as applicable),
plus all other amounts owing in respect of Rent for the Property (including
Supplemental Rent) theretofore accruing, and the Lessor shall convey the
Lessor's interest in the Property or such portion thereof to the Lessee (or
the Lessee's designee) all in accordance with SECTION 19.1 and, to the extent
applicable, SECTION 19.2, as well as any Net Proceeds with respect to the
Casualty or Condemnation giving rise to the termination of this Lease with
respect to the Property theretofore received by the Lessor.

         16.3.    PURCHASE OF PROPERTY. Upon receipt of any notice pursuant
to SECTION 15.2 or 15.3, the Lessor or the Required Participants, at the
Lessee's expense, shall have the right to select an independent environmental
consultant acceptable to the Lessee, which acceptance shall not be
unreasonably withheld or delayed, to determine the estimated cost of
conducting any clean-up or remediation required as a result of the
Environmental Violation disclosed in such notice. If such independent
environmental consultant determines that the cost of any such clean-up or
remediation would exceed thirty percent (30%) of the original Property Cost,
the Lessor shall, at the direction of the Required Participants, by written
notice require the Lessee to purchase, or arrange for an Affiliate of Lessee
or other third party to purchase, the Property on the Termination Date by
delivering a Termination Notice following the requirements of SECTION 16.2
hereof.

                                       21

<PAGE>

                                  ARTICLE XVII.

           17.1.  LEASE EVENTS OF DEFAULT. The occurrence of any one or more
of the following events (whether such event shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in
compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body) shall constitute a
"LEASE EVENT OF DEFAULT":

                  (a) the Lessee shall fail to make payment of (i) any Basic
Rent (other than a payment of Basic Rent due on the Expiration Date or
Termination Date) within five (5) Business Days after the same has become due
and payable or (ii) Basic Rent, Purchase Option Price, Asset Termination
Value, or Residual Value Guarantee Amount or other amounts due on the
Expiration Date or the Termination Date, including, without limitation,
amounts due pursuant to SECTIONS 16.2, 16.3, 17.2(h), 20.2, 20.3 or 22.1,
after the same has become due and payable;

                  (b) the Lessee shall fail to make payment of any
Supplemental Rent (other than Supplemental Rent referred to in CLAUSE (a) of
this Section) due and payable within five (5) Business Days after the same
has become due and payable by Lessee (subject to the provisions of SECTION
13.1), and to the extent that any Supplemental Rent represents reimbursements
to, or Lessee would not know of its obligation to pay absent notice from, the
Lessor, the Agent or any Participants, then such five (5) Business Day period
shall not commence until the Lessee has received such notice;

                  (c) the Lessee shall fail to maintain insurance as required
by ARTICLE XIV of this Lease;

                  (d) the Guarantor, the Construction Agent, the Lessee or
the Lessee's General Partner shall fail in any material respect to observe or
perform any term, covenant or condition of such Person under this Lease, the
Participation Agreement or any other Operative Document to which it is a
party (other than those described in SECTION 17.1(a), (b), (c) or (o) hereof
and other than as may constitute a Guarantee Event of Default or a
Construction Agency Agreement Event of Default), or any representation or
warranty of any such Person set forth in this Lease or in any other Operative
Document or in any document entered into in connection herewith or therewith
or in any document, certificate or financial or other statement delivered in
connection herewith or therewith shall be false or inaccurate in any Material
way, and, if such failure to perform or misrepresentation or breach of
warranty is other than with respect to a covenant, agreement, representation
or warranty contained in (i) as to the Guarantor, Section 10.1(b) and Section
10.2 of the Participation Agreement or as otherwise constitutes a Guarantee
Event of Default, (ii) as to the Lessee and the Lessee's General Partner,
Section 10.5 of the Participation Agreement, as applied to Section 10.1(b) of
the Participation Agreement, and (iii) as to the Construction Agent, Section
10.5 of the Participation Agreement, as applied to Section 10.1(b) of the
Participation Agreement, or such other failure to perform or
misrepresentation or breach as otherwise constitutes a Construction Agency
Agreement Event of Default, with respect to which there shall be no cure
period; such failure or misrepresentation or breach of warranty shall remain
uncured for a period of thirty (30) days after the earlier of (x) the date
upon which an executive officer of the Lessee, the Guarantor, the Lessee's
General Partner or the Construction Agent has actual knowledge thereof and
(y) the date upon which the Agent or the Lessor gives notice to the

                                       22

<PAGE>

Lessee, the Guarantor or the Construction Agent thereof, PROVIDED, HOWEVER,
no Lease Event of Default shall be deemed to have occurred if such failure,
misrepresentation or breach is of such a nature that it (A) can be cured and
(B) is not reasonably susceptible of cure within such thirty (30) day period,
but within such thirty (30) day period the Lessee commences to cure the same
and thereafter diligently prosecutes such cure to completion within a
reasonable period of time in light of the attendant circumstances; PROVIDED
FURTHER, HOWEVER, that any such cure must be completed within one hundred
twenty (120) days after the date the Lessee, the Guarantor, the Lessee's
General Partner or the Construction Agent has such knowledge or the Agent or
the Lessor gives such notice;

                  (e) [Intentionally deleted.]

                  (f) (i) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Lessee, the Guarantor,
the Lessee's General Partner or the Construction Agent in an involuntary case
under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or any other similar
relief shall be granted under any applicable federal or state law; or (ii) an
involuntary case shall be commenced against the Lessee, the Guarantor, the
Lessee's General Partner or the Construction Agent under the Bankruptcy Code
or under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Lessee,
the Guarantor, the Lessee's General Partner or the Construction Agent or over
all or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of the Lessee, the Guarantor, the Lessee's General
Partner or the Construction Agent for all or a substantial part of its
property; or a warrant of attachment, execution or similar process shall have
been issued against any substantial part of the property of the Lessee, the
Guarantor, the Lessee's General Partner or the Construction Agent and any
such event described in this CLAUSE (II) shall continue for sixty (60) days
unless dismissed, bonded or discharged;

                  (g) (i) the Lessee, the Guarantor, the Lessee's General
Partner or the Construction Agent shall (i) have an order for relief entered
with respect to it or commence a voluntary case under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect, or shall consent to the entry of an order for relief in
an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or the Lessee, the Guarantor, the Lessee's
General Partner or the Construction Agent shall make any assignment for the
benefit of creditors; (ii) be unable, or shall fail generally, or shall admit
in writing its inability, to pay its debts as such debts become due; (iii) be
dissolved or liquidated in full or in part; (iv) become insolvent (as such
term may be defined or interpreted under any applicable statute); or (v) the
Board of Directors of the Guarantor, the Lessee's General Partner or the
Construction Agent (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to
herein or in SECTION 17.1(f);

                  (h) (i) one or more judgments, orders, decrees or
arbitration awards requiring Lessee, the Guarantor or the Construction Agent
to pay an aggregate amount of $5,000,000 or

                                       23

<PAGE>

more (exclusive of amounts covered by insurance issued by an insurer a
solvent and unaffiliated insurance company and otherwise satisfying the
requirements set forth in SECTION 14.3(c)) shall be rendered against Lessee,
the Guarantor or the Construction Agent in connection with any single or
related series of transactions incidents or circumstances and the same shall
not be satisfied, vacated or stayed for a period of thirty (30) consecutive
days after the issue of levy; (ii) any judgment, writ, assessment, warrant of
attachment, tax lien or execution or similar process shall be issued or
levied against a substantial part of the property of Lessee, the Guarantor or
the Construction Agent and the same shall not be released, stayed, vacated or
otherwise dismissed within the applicable appeals period after issue or levy;
or (iii) any other judgments, orders, decrees, arbitration awards, writs,
assessments, warrants of attachment, tax liens or executions or similar
process which, alone or in the aggregate, are reasonable likely to have a
Material Adverse Effect are rendered, issued or levied;

                  (i) any Operative Document or any material term thereof
shall cease to be, or be asserted by the Lessee not to be, a legal, valid and
binding obligation of the Lessee enforceable in accordance with its terms;

                  (j) any ERISA Event which constitutes grounds for the
termination of any Employee Benefit Plan by the PBGC or for the appointment
of a trustee by the PBGC to administer any Employee Benefit Plan shall occur,
or any Employee Benefit Plan shall be terminated within the meaning of Title
IV of ERISA or a trustee shall be appointed by the PBGC to administer any
Employee Benefit Plan;

                  (k) a Change of Control shall occur;

                  (l) a Construction Agency Agreement Event of Default shall
have occurred and be continuing;

                  (m) the Lessee shall have abandoned or constructively
abandoned all or any material portion of the Property for a period of 30
consecutive days which results in the Property not being properly maintained
in accordance with the terms of this Lease;

                  (n) the Lessee shall have elected to or be required to
purchase the Property pursuant to SECTIONS 16.2 or 16.3 hereof and such
purchase shall not have been consummated on the Termination Date pursuant to
either such Section (other than as a direct result of the breach by the
Lessor, the Agent, the Tranche B Participants or the Tranche C Participants
of any of their express obligations contained in the Operative Documents,
unless such breach is a result of any act or omission of the Lessee, the
Construction Agent, the Lessee's General Partner, the Guarantor or the
Tranche T Participant);

                  (o) in the event the Lessee is not purchasing the Property
upon the Expiration Date or earlier termination of this Lease, failure to
comply with the return conditions set forth in SECTIONS 19.1(b) and 22.3
hereof;

                  (p) any event(s) or condition(s) which have a Material
Adverse Effect shall occur and be continuing or exist; or

                  (q) A Guarantee Event of Default shall have occurred and be
continuing.

                                       24

<PAGE>

           17.2.  LEASE REMEDIES. Upon the occurrence of any Lease Event of
Default and at any time thereafter, the Lessor may, so long as such Lease
Event of Default is continuing, do one or more of the following as the Lessor
in its sole discretion shall determine, without limiting any other right or
remedy the Lessor may have on account of such Lease Event of Default
(including, without limitation, the obligation of the Lessee to purchase the
Property as set forth in SECTION 20.3):

                  (a) The Lessor may, by notice to the Lessee, terminate the
Commitments and rescind or terminate this Lease as to all of the Property as
of the date specified in such notice; however, (i) no reletting, reentry or
taking of possession of the Property (or any portion thereof) by the Lessor
will be construed as an election on the Lessor's part to terminate this Lease
unless a written notice of such intention is given to the Lessee, (ii)
notwithstanding any reletting, reentry or taking of possession, the Lessor
may at any time thereafter elect to terminate this Lease for a continuing
Lease Event of Default, and (iii) no act or thing done by the Lessor or any
of its agents, representatives or employees and no agreement accepting a
surrender of the Property shall be valid unless the same be made in writing
and executed by the Lessor;

                  (b) The Lessor may (i) demand that the Lessee, and the
Lessee shall upon the written demand of the Lessor, return the Property
promptly to the Lessor in the manner and condition required by, and otherwise
in accordance with all of the provisions of, ARTICLES VIII, IX and X hereof
as if the Property were being returned at the end of the Term, and the Lessor
shall not be liable for the reimbursement of the Lessee for any costs and
expenses incurred by the Lessee in connection therewith and (ii) without
prejudice to any other remedy which the Lessor may have for possession of the
Property, and to the extent and in the manner permitted by Applicable Law,
enter upon the Property and take immediate possession of (to the exclusion of
the Lessee) the Property or any part thereof and expel or remove the Lessee
and any other Person who may be occupying the Property, by summary
proceedings or otherwise, all without liability to the Lessee for or by
reason of such entry or taking of possession, whether for the restoration of
damage to property caused by such taking or otherwise and, in addition to the
Lessor's other damages, the Lessee shall be responsible for all reasonable
costs and expenses incurred by the Lessor and/or the Agent or the
Participants in connection with any reletting, including, without limitation,
brokers' fees and all costs of any alterations or repairs made by the Lessor;

                  (c) The Lessor may (i) sell all or any part of the Property
at public or private sale, as the Lessor may determine, pursuant to such
notices and procedures as may be required by Applicable Law, free and clear
of any rights of the Lessee and without any duty to account to the Lessee
with respect to such action or inaction or any proceeds with respect thereto
(except to the extent required by CLAUSE (ii) below if the Lessor shall elect
to exercise its rights thereunder) in which event the Lessee's obligation to
pay Basic Rent hereunder for periods commencing after the date of such sale
shall be terminated or proportionately reduced, as the case may be; and (ii)
if the Lessor shall so elect, demand that the Lessee pay to the Lessor, and
the Lessee shall pay to the Lessor, on the date of such sale, as liquidated
damages for loss of a bargain and not as a penalty (the parties agreeing that
the Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of
such amount) (in lieu of Basic Rent due for periods commencing on or after
the Payment Date coinciding with such date of sale (or, if the sale date is
not a Payment Date, the Payment Date next preceding the date of such sale)),
an amount equal to (subject to SECTION 17.2(h)) (A) the excess, if any, of (1)

                                       25

<PAGE>

the Asset Termination Value calculated as of such Payment Date (including all
Rent due and unpaid to and including such Payment Date) less the aggregate
amount of the Cash Collateral and Securities Collateral, if any, retained by
the Lessor, the Agent or the Participants, over (2) the net proceeds of such
sale, if any (that is, after deducting all costs and expenses incurred by the
Lessor, the Agent and the Participants incident to such conveyance,
including, without limitation, repossession costs, brokerage commissions,
prorations, transfer taxes, fees and expenses for counsel, title insurance
fees, survey costs, recording fees, and any repair or alteration costs); plus
(B) interest at the Overdue Rate on the foregoing amount from such Payment
Date until the date of payment; PROVIDED, that the Lessor shall deliver all
proceeds from the sale of the Property and other amounts received hereunder
to the Agent for application as provided in Sections 3.14 and 3.17 of the
Participation Agreement.

                  (d) The Lessor, may, at its option, not terminate the Lease
with respect to the Property, and continue to collect all Basic Rent,
Supplemental Rent, and all other amounts due the Lessor (together with all
costs of collection) and enforce the Lessee's obligations under this Lease as
and when the same become due, or are to be performed, and at the option of
the Lessor, upon any abandonment of the Property by the Lessee or re-entry of
same by the Lessor, the Lessor, may, in its sole and absolute discretion,
elect not to terminate this Lease and may make such reasonable alternations
and necessary repairs in order to relet the Property, and relet the Property
or any part thereof for such term or terms (which may be for a term extending
beyond the Term of this Lease) and at such rental or rentals and upon such
other terms and conditions as the Lessor in its reasonable discretion may
deem advisable; and upon each such reletting all rentals actually received by
the Lessor from such reletting shall be applied to the Lessee's obligations
hereunder and the other Operative Documents in such order, proportion and
priority as the Lessor may elect in the Lessor's sole and absolute
discretion; and if such rentals received from such reletting during any
period be less than the Rent with respect to the Property to be paid during
that period by the Lessee hereunder, the Lessee shall pay any deficiency, as
calculated by the Lessor, to the Lessor on the next Payment Date;

                  (e) Unless the Property has been sold in its entirety, the
Lessor may, subject to SECTION 17.2(i), whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights under
PARAGRAPH (b), (c) or (d) of this SECTION 17.2 with respect to the Property
or portions thereof, demand, by written notice to the Lessee specifying a
date (a "TERMINATION DATE") not earlier than 10 days after the date of such
notice, that the Lessee purchase, on such Termination Date, the Property (or
the remaining portion thereof) in accordance with the provisions of ARTICLE
XIX and SECTION 20.3;

                  (f) The Lessor may exercise any other right or remedy that
may be available to it under the Operative Documents or otherwise under
Applicable Law, or proceed by appropriate court action (legal or equitable)
to enforce the terms hereof or to recover damages for the breach hereof.
Separate suits may be brought to collect any such damages for any period(s),
and such suits shall not in any manner prejudice the Lessor's right to
collect any such damages for any subsequent period(s), or the Lessor may
defer any such suit until after the expiration of the Term, in which event
such suit shall be deemed not to have accrued until the expiration of the
Term;

                                       26

<PAGE>

                  (g) The Lessor may retain and apply against the Lessor's
damages all sums which the Lessor would, absent such Lease Event of Default,
be required to pay to, or turn over to, the Lessee pursuant to the terms of
this Lease;

                  (h) Notwithstanding anything contained in this Lease to the
contrary, in the event that the Lease Event of Default resulting in the
exercise of remedies by the Lessor hereunder is solely a Lease Event of
Default described in SECTION 17.1(l) arising under the Expansion Improvements
Construction Agency Agreement and occurring during the Construction Period
with respect to the Expansion Improvements, the Lessee shall, at the request
of the Lessor, (i)(A) return the Property to the Lessor or a Person
designated by the Lessor on a date specified by the Lessor (which date shall
constitute the Expiration Date) and/or (B) remarket the Property for the
Lessor as the Lessor's agent subject to the Lessor's direction and, in each
case, comply with SECTION 19.1(b) and (2) pay to the Lessor the sum of (1)
the maximum Expansion Improvements Residual Value Guarantee Amount PLUS (2)
the Existing Facility Lease Balance PLUS (3) the Tenant Improvements Lease
Balance on the date that is ten (10) Business Days after the date the Lessor
furnishes the Lessee with notice that it will require the Lessee to return or
remarket the Property, PROVIDED that the Lessor may recover from the Lessee,
and the Lessee shall be obligated to pay to the Lessor the entire Asset
Termination Value as of such date (notwithstanding the limitation contained
in CLAUSE (ii) above) if a Lease Event of Default under SECTION 17.1(f) or
(G) shall have occurred or if the Lease Event of Default described in SECTION
17.1(l) arose solely under the Tenant Improvements Construction Agency
Agreement or arose out of a Fully Indemnifiable Event or constituted an
Environmental Obligation. If the Lessee has not purchased the Property but
has paid the amounts required under CLAUSE (ii), (1), (2) and (3) of this
SECTION 17.2(h), proceeds from a sale of the Property pursuant to this
SECTION 17.2(h) or, if not sold as provided in this SECTION 17.2(h), from a
sale of the Property occurring thereafter, shall be distributed as provided
in Section 3.14 of the Participation Agreement.

                  (i) Notwithstanding anything contained in this Lease to the
contrary, in the event that the Lease Event of Default resulting in the
exercise of remedies by the Lessor hereunder is solely a Lease Event of
Default described in SECTION 17.1 (p) the Lessee shall have the option or, if
the Lessor terminates this Lease, the Lessee shall be required to elect to
(i) remarket the Property for 180 days after the occurrence of such Event of
Default in accordance with ARTICLE XXII hereof (which period shall constitute
the Marketing Period), with the purchase of the Property to be consummated no
later than the date that is 180 days following the occurrence of such Lease
Event of Default (which date shall constitute the Expiration Date if such
option is exercised or required to be exercised), or (ii) exercise its
Purchase Option under SECTION 20.1 hereof, with the purchase of the Property
by the Lessee to be consummated, and the other payments required thereunder
to be made to the Lessor, on the next Payment Date following the occurrence
of such Lease Event of Default (which date shall constitute the Expiration
Date if such option is exercised). The Lessee shall notify the Lessor within
twenty (20) days after the occurrence of such Lease Event of Default which
option it is exercising. If the Lessee elects to remarket the Property the
Lessee shall pay to the Lessor no later than the Expiration Date (i) the
maximum Existing Facility and Tenant Improvements Residual Value Guarantee
Amount and Expansion Improvements Residual Value Guarantee Amount no later
than the Expiration Date, (ii) all breakage costs incurred by the
Participants for the duration of all then current Interest Periods under the
Participation Agreement with respect to the amount so paid following notices
thereof by the Agent, (iii) Basic Rent when due for the duration of the 180

                                       27

<PAGE>

day Marketing Period and (iv) the other payments required under SECTION 22.1
when required thereunder and no later than the Expiration Date.

                  (j) In addition to the other rights and remedies set forth
herein, the Lessor shall have the right to continue this Lease in effect and
to enforce, by suit or otherwise, all covenants and conditions hereof to be
performed or complied with by the Lessee and exercise all of the Lessor's
rights and remedies under this Lease, including, without limitation, the
right to recover Basic Rent and Supplemental Rent from the Lessee as it
becomes due under this Lease, even though the Lessee shall have breached this
Lease and abandoned the Property. Acts of maintenance or preservation, or
efforts by the Lessor or on the Lessor's behalf to relet the Property, or the
appointment of a receiver upon the initiative of the Lessor to protect the
Lessor's interest under this Lease shall not constitute a termination of the
Lessee's right to possession of the Property; PROVIDED, HOWEVER, that the
foregoing enumeration shall not be construed as in any way limiting the
actions the Lessor may take without terminating the Lessee's right to
possession. In furtherance of the rights hereby granted to the Lessor, and to
the extent permitted by law, the Lessee hereby appoints the Lessor its agent
and attorney-in-fact, which appointment shall be deemed to be coupled with an
interest and is irrevocable, with power of substitution, to enter the
Property upon a Lease Event of Default hereunder and remove therefrom all
persons and property (with the right to store such property on the Property
or elsewhere in an environment suitable for storage of the same, taking into
account industry standards and practice with respect to such property, at the
cost and risk and for the account of the Lessee) and to alter the Property in
such manner as the Lessor may deem necessary or advisable so as to put the
Property in good order and to make the same rentable and from time to time
and sublet the Property or any part thereof for such term or terms whether or
not extending beyond the then current term of this Lease (but such sublease
may provide for a new and successive lease to commence immediately upon the
termination of this Lease), at such rentals and upon such other terms as the
Lessor in its sole discretion may deem advisable, and with the right to make
alterations and repairs to the Property; and the Lessee agrees to pay to the
Lessor on demand all reasonable expenses incurred by the Lessor in such
subletting, and in altering, repairing and putting the Property in good order
and condition, and in reletting the same, including fees of attorneys and
architects, and all other reasonable expenses or commissions. The Lessor
shall be the Lessee's agent and representative on the Property in respect of
all matters arising under or in connection with any such sublease made for
the Lessee by the Lessor. Under each such sublease, the Lessee shall retain
the right to enter upon and use the Property, subject to the terms and
conditions of such sublease and the rights of the sublessee thereunder. The
Lessee further agrees to pay to the Lessor, following the date of such
subletting, to and including the date provided in this Lease for the
expiration of the Term, the sums of money which would have been payable by
the Lessee as Basic Rent and Supplemental Rent, deducting only the net amount
of rent, if any, which the Lessor shall actually receive (after deducting
from the gross receipts the expenses, costs and payments of the Lessor which
in accordance with the terms of this Lease would have been borne by the
Lessee) in the meantime from and by any such subletting of the Property, and
the Lessee hereby agrees to remain liable for all sums otherwise payable by
the Lessee under this Lease, including, but not limited to, the expenses of
the Lessor aforesaid, as well as for any deficiency aforesaid. The Lessor
shall have the right from time to time to begin and maintain successive
actions or other legal proceedings against the Lessee for the recovery of
such deficiency, expenses or damages or for a sum equal to any installments
of Basic Rent or Supplemental Rent and other sums payable hereunder, and to
recover the same upon the liability

                                       28

<PAGE>

of the Lessee herein provided, which liability it is expressly covenanted
shall survive the commencement or determination of any action to secure
possession of the Property. Nothing herein contained shall be deemed to
require the Lessor to wait to begin such action or other legal proceedings
until the date when this Lease would have expired by limitation had there
been no such Lease Event of Default. Notwithstanding any such subletting
without termination, pursuant to the terms hereof, the Lessor shall retain
the right to and may at any time thereafter elect to terminate this Lease or
the Lessee's right to possession of the Property for any previous breach
which remains uncured or for any subsequent breach by giving the Lessee
written notice thereof as herein provided, and in such event the Lessee shall
forfeit any rights or interest under any such sublease and thereafter the
obligations of any such sublessee shall run directly to the Lessor for its
own account. Upon application by the Lessor, a receiver may be appointed to
take possession of the Property, exercise all rights granted to the Lessor as
agent and attorney-in-fact for the Lessee set forth in this Section 17.2(h)
and apply any rentals collected from the Property as hereinabove provided. No
taking of possession of the Property or other act by the Lessor as the agent
and attorney-in-fact for the Lessee pursuant to the foregoing provisions, nor
any subletting by the Lessor for the Lessee pursuant to the foregoing
provisions, nor any such appointment of a receiver shall constitute or be
construed as an election by the Lessor to terminate this Lease or the
Lessee's right to possession of the Property unless a written notice of such
intention be given to the Lessee.

           17.3.  WAIVER OF CERTAIN RIGHTS. If this Lease shall be terminated
pursuant to SECTION 17.2, the Lessee waives, to the fullest extent permitted
by law, (a) any notice of re-entry or the institution of legal proceedings to
obtain re-entry or possession; (b) any right of redemption, re-entry or
repossession; (c) the benefit of any laws now or hereafter in force exempting
property from liability for rent or for debt or limiting the Lessor with
respect to the election of remedies; and (d) any other rights which might
otherwise limit or modify any of the Lessor's rights or remedies under this
ARTICLE XVII.

           17.4.  POWER AND SALE OF FORECLOSURE. In the event that a court of
competent jurisdiction rules that this Lease constitutes a mortgage, deed of
trust or other secured financing as is the intent of the parties pursuant to
SECTION 7.1, and subject to the availability of such remedy under applicable
law, then the Lessor and the Lessee agree that the Lessee hereby grants,
bargains, sells, transfers, assigns and conveys unto Trustee, as trustee, and
its successors (the Lessor hereby reserving the right to from time to time,
with or without cause and at Lessor's sole discretion, by instrument in
writing, substitute a successor or successor to Trustee, which instrument,
executed by the Lessor duly acknowledged and recorded in the office of the
recorder of the county or counties where the Property is situated, shall be
conclusive proof of proper substitution of such successor, who shall, without
conveyance from Trustee or any successor trustee, succeed to all its title,
estate, rights, powers and duties), in trust the Property, to have and to
hold the Property, together with all and singular rights, hereditaments, and
appurtenances in any way appertaining or belonging thereto, unto such trustee
and such trustee's successor or substitute in such trust, and such trustee's
and its or his successors and assigns, in trust, and that, upon the
occurrence of any Lease Event of Default such trustee, at the direction of
the Lessor, may proceed with foreclosure, and in such event such trustee, at
the direction of the Lessor, is hereby authorized and empowered, and it shall
be such trustee's special duty, upon such request of the Lessor, acting upon

                                       29

<PAGE>

a request from the Participants, to sell the Property, or any part thereof,
to the highest bidder or bidders for cash or credit, as directed by the
Lessor, acting upon a request from the Participants, at the location at the
county courthouse specified by the commissioner's court of the county in the
State of Texas wherein the land then subject to the lien hereof is situated
or, if no such location is specified by the commissioner's court, then at the
location specified in such trustee's notice of such sale to the Lessee;
provided, that if the Land Interest is situated in more than one county, then
such sale of the Property, or part thereof, may be made in any county in the
State of Texas wherein any part of the land then subject to the lien hereof
is situated. Any such sale shall be made at public outcry, between the hours
of ten o'clock (10:00) A.M. and four o'clock (4:00) P.M. on the first (1st)
Tuesday in any month. Written or printed notice of such sale shall be posted
at the courthouse door in the county, or if more than one, then in each of
the counties, wherein the land then subject to the lien hereof is situated.
Such notice shall designate the county where the Property, or part thereof,
will be sold and the earliest time at which the sale will occur, and such
notice shall be posted at least twenty-one (21) days prior to the date of
sale. Such notice shall also be filed with the county clerk in the county, or
if more than one, then in each of the counties wherein the land is located.
Lessor shall, at least twenty-one (21) days preceding the date of sale, serve
written notice of the proposed sale by certified mail on each debtor
obligated to pay the Asset Termination Value and other obligations secured
hereby according to the records of the Agent. After such sale, the Lessor
shall make to the purchaser or purchasers thereunder good and sufficient
assignments, deeds, bills of sale, and other instruments, in the name of the
Lessor, conveying the Property, or part thereof, so sold to the purchaser or
purchasers with general warranty of title by the Lessor. The sale of a part
of the Property shall not exhaust the power of sale, but sales may be made
from time to time until the Asset Termination Value and other obligations
secured hereby are paid and performed in full. It shall not be necessary to
have present or to exhibit at any such sale any of the personal property.
Upon the occurrence and during the continuance of a Lease Event of Default,
the Lessor, in lieu of or in addition to exercising any power of sale
hereinabove given, may proceed by a suit or suits in equity or at law,
whether for a foreclosure hereunder, or for the sale of the Property, or
against the Lessee on a recourse basis for the Asset Termination Value
(subject to SECTION 17.2(h) and (i) hereof), or the specific performance of
any covenant or agreement herein contained or in aid of the execution of any
power herein granted, or for the appointment of a receiver pending any
foreclosure hereunder or the sale of the Property, or for the enforcement of
any other appropriate legal or equitable remedy. The foregoing provisions of
this SECTION 17.4 shall be deemed amended to the extent necessary from time
to time to permit the Lessor (or the Trustee, as applicable) to effect a
non-judicial foreclosure upon the Property in compliance with the applicable
provisions of the Texas Property Code, as amended.

           17.5.  REMEDIES CUMULATIVE. The remedies herein provided shall be
cumulative and in addition to (and not in limitation of) any other remedies
available at law, equity or otherwise, including, without limitation, any
mortgage foreclosure remedies.

           17.6.  THE LESSEE'S RIGHT TO CURE. Notwithstanding any provision
contained in the Lease or any other Operative Document, if a Lease Event of
Default has occurred and is continuing, the Lessee shall have the right to
cure such Lease Event of Default by (a) exercising its Purchase Option at any
time prior to the entering into by the Lessor of a binding contract to sell
the Property and (b) purchasing the Property in accordance with SECTION 20.1
at any time prior to such time as a foreclosure upon or sale of the Property
has been completed.

                                       30

<PAGE>

                                 ARTICLE XVIII.

         18.1 THE LESSOR'S RIGHT TO CURE THE LESSEE'S LEASE DEFAULTS. The
Lessor, without waiving or releasing any obligation or Lease Event of Default,
may (but shall be under no obligation to) remedy any Lease Default or Lease
Event of Default for the account and at the sole cost and expense of the Lessee,
including the failure by the Lessee to maintain the insurance required by
ARTICLE XIV (subject to the limitations set forth in SECTION 24.1), and may, to
the fullest extent permitted by law, and notwithstanding any right of quiet
enjoyment in favor of the Lessee, enter upon the Property for such purpose and
take all such action thereon as may be reasonably necessary or appropriate
therefor. No such entry shall be deemed an eviction of the Lessee. All
reasonable out-of-pocket costs and expenses so incurred (including reasonable
fees and expenses of counsel), together with interest thereon at the Overdue
Rate from the date on which such sums or expenses are paid by the Lessor, shall
be paid by the Lessee to the Lessor on demand (subject to the limitations set
forth in SECTION 24.1), as Supplemental Rent.

                                  ARTICLE XIX.

         19.1 PROVISIONS RELATING TO THE LESSEE'S TERMINATION OF THIS LEASE
OR EXERCISE OF PURCHASE OPTION OR OBLIGATION AND CONVEYANCE UPON REMARKETING AND
CONVEYANCE UPON CERTAIN OTHER EVENTS.

                  (a) In connection with any termination of this Lease pursuant
to the terms of Section 16.2 or 16.3 (if the Lessee is obligated to purchase the
Property), or in connection with the Lessee's exercise of its Purchase Option or
Expiration Date Purchase Obligation, upon the date on which this Lease is to
terminate or upon the Expiration Date, and upon tender by the Lessee of the
amounts set forth in Sections 16.2(b), 20.1, 20.2 or 20.3, as applicable, the
Lessor shall execute, acknowledge and deliver to the Lessee (or to the Lessee's
designee) at the Lessee's cost and expense a Special Warranty Deed conveying to
the Lessee (or its designee) fee simple title to the Land Interest and the
Improvements, and an assignment or transfer without recourse of the Lessor's
right, title and interest in the remainder of the Property (which shall include
a release, quitclaim and assignment of all of the Lessor's right, title and
interest in and to any net proceeds with respect to the Property or such portion
thereof not previously received by the Lessor), in each case subject to (i) the
Permitted Exceptions (other than Lessor Liens and, so long as all amounts
required to be paid upon such termination or exercise have been paid and
discharged in full, free of all Liens created by the Operative Documents) and,
(ii) any and all Liens or agreements subject to which the Lessor itself took
title to the Property subject to and those which were granted or assumed by the
Lessor with the consent or approval of, or at the direction of, the Lessee) and
(iii) any encumbrance caused by the fault, neglect or intention of the Lessee,
in recordable form and otherwise in conformity with local custom and free and
clear of any Lessor Liens. The Improvements and the Equipment shall be conveyed
to the Lessee "AS IS" and in their then present condition of title and physical
condition free of any Lessor Liens and, so long as all amounts required to be
paid upon such termination or exercise have been paid and discharged in full,
free of all Liens created by the Operative Documents. Lessor agrees that
following the purchase of the Property by the Lessee pursuant to this SECTION
19.1, the Lessor will execute and deliver, at the Lessee's expense, all
assignment and transfer documents

                                      31
<PAGE>

reasonably requested by the Lessee to effect the sale by the Lessor and the
purchase by the Lessee of the Property.

                  (b) If the Lessee properly exercises the Remarketing Option or
is required to remarket the Property or return the Property to the Lessor
pursuant to SECTION 17.2(h) or SECTION 17.2(i), then the Lessee shall, on the
Expiration Date, and at its own cost, transfer possession of the Property (or
remaining portion thereof) to the Lessor or the independent purchaser thereof,
as the case may be, by surrendering the same into the possession of the Lessor
or such purchaser, as the case may be, free and clear of all Liens other than
Permitted Exceptions described in clauses (iv) and (vi) of the definition of
such term, Liens for taxes not yet due, easements, rights-of-way, agreements and
other rights permitted by SECTION 12.2 and Lessor Liens, in good condition (as
modified by Modifications permitted by this Lease), ordinary wear and tear
excepted, in compliance with Applicable Law, and in "broom-swept clean"
condition. The Lessee shall cooperate reasonably with the Lessor and the
independent purchaser of the Property (or remaining portion thereof) in order to
facilitate the purchase by such purchaser of the Property (or remaining portion
thereof) which cooperation shall include the following, all of which the Lessee
shall do on or before the Expiration Date: providing all books and records
regarding the maintenance and ownership of the Property (or remaining portion
thereof) and all know-how, data and technical information relating thereto,
providing a current copy of the "as built" Plans and Specifications for the
Property, granting or assigning (to the extent assignable) all existing licenses
necessary for the operation and maintenance of the Property and cooperating
reasonably in seeking and obtaining all necessary Governmental Action and
complying with the provisions of SECTION 22.3 hereof. The obligations of the
Lessee under this paragraph shall survive the expiration or termination of this
Lease.

                                   ARTICLE XX.

         20.1 PURCHASE OPTION. Without limitation of the Lessee's purchase
obligation pursuant to SECTIONS 20.2 or 20.3, unless the Lessee shall have given
notice of its intention to exercise the Remarketing Option and the Lessor shall
have entered into a binding contract to sell the Property, at all times during
the Term, including any extensions or renewals permitted hereunder, the Lessee
shall have the option (exercisable by giving the Lessor irrevocable written
notice (each, a "PURCHASE NOTICE") of the Lessee's election to exercise such
option) to purchase, or to designate a third party to purchase, all of the
Property (the "PURCHASE OPTION"), on the date specified in such Purchase Notice,
which date shall be a Payment Date. The purchase price in respect of the
Property (the "PURCHASE OPTION PRICE") shall be equal to the Asset Termination
Value plus in each case all other amounts owing in respect of Rent (including
Supplemental Rent) theretofore accruing (offsetting against such amount the
aggregate amount of the Cash Collateral and the Securities Collateral, if any).
The Lessee shall deliver the Purchase Notice to the Lessor not less than thirty
(30) days prior to the purchase date. If the Lessee exercises its Purchase
Option, pursuant to this SECTION 20.1 (the "PURCHASE OPTION"), the Lessor shall
transfer to the Lessee all of the Lessor's right, title and interest in and to
all of the Property, as of the date specified in the Purchase Notice upon
receipt of the Purchase Option Price and (without duplication) all Rent and all
other amounts then due and payable under this Lease and any other Operative
Document, in accordance with SECTION 19.1(a).

                                      32
<PAGE>

         20.2 EXPIRATION DATE PURCHASE OBLIGATION. Unless (a) the Lessee
shall have properly exercised the Purchase Option pursuant to SECTION 20.1 and
purchased the Property pursuant thereto, (b) the Lessee shall have properly
exercised the Remarketing Option and shall have fulfilled all of the conditions
of CLAUSES (a) through (j) and (m) of SECTION 22.1 hereof, or (c) the Lessee
shall have properly exercised the Renewal Option pursuant to SECTION 21.1 and
the terms and conditions of a Renewal Term shall have been agreed upon pursuant
to such Section, then, subject to the terms, conditions and provisions set forth
in this SECTION 20.2, and in accordance with the terms of SECTION 19.1(a), the
Lessee shall purchase from the Lessor, and the Lessor shall assign and convey to
the Lessee without recourse, on the Expiration Date of the Term (as such Term
may be renewed pursuant to SECTION 21.1) all of the Lessor's right, title and
interest in the Property for an amount equal to the Asset Termination Value (the
"EXPIRATION DATE PURCHASE OBLIGATION"), offsetting against such amount the
aggregate amount of the Cash Collateral and the Securities Collateral, if any.
The Lessee may designate, in a notice given to the Lessor not less than ten (10)
Business Days prior to the closing of such purchase (time being of the essence),
the transferee or transferees to whom the conveyance shall be made (if other
than to the Lessee), in which case such conveyance shall (subject to the terms
and conditions set forth herein) be made to such designee; PROVIDED, HOWEVER,
that such designation of a transferee or transferees shall not cause the Lessee
to be released, fully or partially, from any of its obligations under this
Lease, including, without limitation, the obligation to pay the Lessor an amount
equal to the Asset Termination Value that was not fully and finally paid by such
designee on such Expiration Date.

         20.3 ACCELERATION OF PURCHASE OBLIGATION.

              (a) The Lessee shall be obligated to purchase for an amount
equal to the Asset Termination Value the Lessor's interest in the Property
(notwithstanding any prior election to exercise its Purchase Option pursuant
to SECTION 20.1) (i) automatically and without notice upon the occurrence and
during the continuance of any Lease Event of Default specified in CLAUSE (f)
or (g) of SECTION 17.1, and (ii) as provided for at SECTION 17.2(e)
immediately upon written demand of the Lessor upon the occurrence of any
other Lease Event of Default (except as provided in SECTION 17.2(h) or
17.2(i)).

              (b) The Lessee shall be obligated to purchase for an amount
equal to the Asset Termination Value (plus all other amounts (without
duplication) owing in respect of Rent (including Supplemental Rent)
theretofore accruing) (offsetting against such amount the aggregate amount of
the Cash Collateral and Securities Collateral, if any) immediately upon
written demand of the Lessor the Lessor's interest in the Property at any
time during the Term when the Lessor ceases to have title as contemplated by
SECTION 12.1.

                                  ARTICLE XXI.

         21.1 RENEWAL.

              (a) Subject to the conditions set forth herein, the Lessee
shall have the option (the "Renewal Option") by written request (the "Renewal
Request") to the Lessor and the Agent (which request the Agent shall promptly
forward to each Participant) and each Participant given not later than 180
days prior to the Expiration Date then in effect, to renew the Term for two

                                      33
<PAGE>

additional two-year periods commencing on the date following the Expiration Date
then in effect. No later than the date (the "Renewal Response Date") which is
thirty (30) days after such request has been delivered to each of the Lessor and
the Agent, the Lessor will notify the Lessee in writing (with a copy to Agent)
whether or not it consents to such Renewal Request (which consent may be granted
or denied in its sole discretion and may be conditioned on receipt of such
financial information or other documentation as may reasonably be specified by
the Lessor including without limitation a satisfactory appraisal of the
Property), provided that if the Lessor shall fail to notify the Lessee on or
prior to the Renewal Response Date, it shall be deemed to have denied such
Renewal Request. If the Lessor shall have consented to the Renewal Request, the
Renewal Term contemplated by such request shall become effective as of the
Expiration Date then in effect after the Lessor has consented to such Renewal
Request (each an "Extension Effective Date"); provided that such renewal shall
be subject to and conditioned upon the following:

                           (A) on both the Extension Effective Date and the date
                  of the Renewal Request, (i) no Lease Default or Lease Event of
                  Default shall have occurred and be continuing, and (ii) the
                  Lessor and the Agent shall have received a Responsible
                  Officer's Certificate of the Lessee as to the matters set
                  forth in CLAUSE (i) above,

                           (B) the Lessee shall not have exercised the
                  Remarketing Option, and

                           (C) the Participants shall have agreed to extend the
                  Maturity Date contemporaneously therewith pursuant to Section
                  3.6 of the Participation Agreement such that the Renewal Term
                  will expire on the same date as the extended Maturity Date.

                  (b) No more than two Renewal Terms shall be permitted
                  hereunder.

                                  ARTICLE XXII.

         22.1 OPTION TO REMARKET. Subject to the fulfillment of each of the
conditions set forth in this SECTION 22.1, the Lessee shall have the option (the
"REMARKETING OPTION") to market for the Lessor and complete the sale of all, but
not less than all, of the Lessor's interest in the Property on the Expiration
Date for the Lessor.

         The Lessee's effective exercise and consummation of the Remarketing
Option shall be subject to the due and timely fulfillment of each of the
following provisions as of the dates set forth below.

              (a) Not later than one hundred eighty (180) days prior to the
Expiration Date, the Lessee shall give to the Lessor written notice of the
Lessee's exercise of the Remarketing Option, which exercise shall be
irrevocable (except by delivery of a Purchase Notice and consummation of the
exercise of the Purchase Option prior to the earlier of (i) the Expiration
Date or (ii) the date on which the Lessor enters into a binding contract to
sell the Property pursuant to the exercise of the Remarketing Option).

                                      34
<PAGE>

              (b) The Lessee shall deliver to the Lessor an Environmental
Audit of the Property together with its notice of exercise of the Remarketing
Option. Such Environmental Audit shall be prepared by an environmental
consultant selected by the Lessor in the Lessor's reasonable discretion and
shall contain conclusions reasonably satisfactory to the Lessor as to the
environmental status of the Property. If such Environmental Audit indicates
any material exceptions reasonably requiring remedy or further investigation,
the Lessee shall have also delivered a Phase Two environmental assessment by
such environmental consultant prior to the Expiration Date showing the
completion of the remedying of such exceptions in compliance with
Environmental Laws.

              (c) On the date of the Lessee's notice to the Lessor of the
Lessee's exercise of the Remarketing Option, no Lease Event of Default or
Lease Default shall exist, and thereafter, no uncured Lease Event of Default
or Lease Default shall exist.

              (d) The Lessee shall have completed in all material respects
all Modifications, restoration and rebuilding of the Property pursuant to
SECTIONS 11.1 and 15.1(e) (as the case may be) and shall have fulfilled in
all material respects all of the conditions and requirements in connection
therewith pursuant to said Sections, in each case by the date on which the
Lessor receives the Lessee's notice of the Lessee's exercise of the
Remarketing Option (time being of the essence), regardless of whether the
same shall be within the Lessee's control. The Lessee shall have also paid
the cost of all Modifications commenced prior to the Expiration Date. The
Lessee shall not have been excused pursuant to SECTION 13.1 from complying
with any Applicable Law that involved the extension of the ultimate
imposition of such Applicable Law beyond the last day of the Term. Any
Permitted Exceptions on the Property that were contested by the Lessee shall
have been removed.

              (e) During the Marketing Period, the Lessee shall, as
nonexclusive agent for the Lessor, use commercially reasonable efforts to
sell the Lessor's interest in the Property on or prior to the Expiration Date
(without diminishing the Lessee's obligation to consummate the sale on the
Expiration Date) and will attempt to obtain the highest purchase price
therefor and for not less than the Fair Market Sales Value. The Lessee will
be responsible for hiring and compensating brokers and making the Property
available for inspection by prospective purchasers. The Lessee shall promptly
upon request permit inspection of the Property and any maintenance records
relating to the Property by the Lessor, any Participant and any potential
purchasers, and shall otherwise do all things necessary to sell and deliver
possession of the Property to any purchaser. All such marketing of the
Property shall be at the Lessee's sole expense. The Lessee shall allow the
Lessor and any potential qualified purchaser reasonable access to the
Property for the purpose of inspecting the same.

              (f) The Lessee shall submit all bids to the Lessor and the
Agent, and the Lessor will have the right to review the same and the right to
submit any one or more bids. All bids shall be on an all-cash basis unless
the Lessor, the Agent and the Participants shall otherwise agree in their
sole discretion. Should the Lessee procure bids from one or more bona fide
prospective purchasers, the Lessee shall deliver to the Lessor and the Agent
not less than ninety (90) days prior to the Expiration Date a binding written
unconditional (except as set forth below), irrevocable offer by such
purchaser or purchasers offering the highest bid to purchase the Property. No
such purchaser shall be the Lessee, or any Subsidiary or Affiliate of the
Lessee.

                                      35
<PAGE>

The written offer must specify the Expiration Date as the closing date unless
the Lessor, the Agent and the Participants shall otherwise agree in their
sole discretion.

                  (g) In connection with any such sale of the Property, the
Lessee will provide to the purchaser (if the purchaser so requires) all
customary "seller's" indemnities, representations and warranties regarding
title, absence of Liens (except Permitted Exceptions described in clauses (iv)
and (vi) of the definition of such term, Liens for taxes not yet due, easements,
rights-of-way, agreements and other rights permitted pursuant to SECTION 12.2
and Lessor Liens) and the condition of the Property, as well as such other terms
and conditions as may be negotiated between the Lessee and the purchaser. The
Lessee or the purchaser, as applicable, shall have obtained, at its cost and
expense, all required governmental and regulatory consents and approvals and
shall have made all filings as required by Applicable Law in order to carry out
and complete the transfer of the Property. As to the Lessor, any such sale shall
be made on an "as is, with all faults" basis without representation or warranty
by the Lessor other than the absence of Lessor Liens and Liens created by the
Operative Documents. Any agreement as to such sale shall be made subject to the
Lessor's rights hereunder.

                  (h) Unless and to the extent paid for by the purchaser, the
Lessee shall pay directly all prorations, credits, costs and expenses of the
sale of the Property acceptable to the Lessor and the Participants, whether
incurred by the Lessor, the Participants or the Lessee, including without
limitation, the cost of all title insurance, surveys, environmental reports,
appraisals, transfer taxes, the Lessor's, the Participants' and the Agent's
reasonable attorneys' fees, the Lessee's attorneys' fees, commissions, escrow
fees, recording fees, and all applicable documentary and other transfer taxes,
but excluding all costs associated with the existence or removal of Lessor
Liens, which costs Lessor agrees to bear, Lessor hereby covenanting to cause the
removal of all Lessor Liens at its expense.

                  (i) The Lessee shall pay to the Agent on the Expiration Date
(or to such other Person as the Lessor shall notify the Lessee in writing, or in
the case of Supplemental Rent, to the Person entitled thereto) an amount equal
to the Existing Facility and Tenant Improvements Residual Value Guarantee Amount
(which shall be paid in accordance with Section 3.22 of the Participation
Agreement) and, if applicable, the Expansion Improvements Residual Value
Guarantee Amount, PLUS (without duplication) all Rent and all other amounts
hereunder which have accrued or will accrue prior to or as of the Expiration
Date, in the type of funds specified in SECTION 3.4 hereof.

                  (j) If, within ninety (90) days prior to the Expiration Date,
it is determined (based upon the highest bid by a purchaser to purchase the
Property pursuant to PARAGRAPH (f) of this SECTION 22.1) that there would, after
giving effect to the proposed sale of the Property, be a Shortfall Amount, the
Lessee (i) shall cause to be delivered to the Lessor and the Agent the End of
Term Report required by Section 13.2 of the Participation Agreement and (ii)
shall on the Expiration Date pay to the Agent (or to such other person as the
Lessor shall notify the Lessee in writing), the amounts (not to exceed the
Shortfall Amount) required to be paid pursuant to Section 13.2 of the
Participation Agreement.

                  (k) The purchase of the Property shall be consummated on the
Expiration Date following the payment by the Lessee pursuant to PARAGRAPHS (i)
and (j) above and

                                      36
<PAGE>

contemporaneously with the Lessee's surrender of the Property pursuant to
SECTION 19.1(b) and the Net Sales Proceeds of the sale of the Property shall
be paid directly to the Agent; PROVIDED, HOWEVER, that if the sum of the Net
Sale Proceeds from such sale of the Property plus the Residual Value
Guarantee Amount paid by Lessee pursuant to PARAGRAPH (i) above exceeds the
Asset Termination Value as of such date, then the excess shall be paid to the
Lessee on the Expiration Date.

                  (l) The Lessee shall not be entitled to exercise or consummate
the Remarketing Option if a circumstance that would permit the Lessor to require
the Lessee to repurchase the Property under SECTION 16.3 exists and is
continuing.

                  (m) No subleases affecting the Property shall be in effect on
the Expiration Date.

         If one or more of the foregoing provisions shall not be fulfilled as of
the relevant date set forth above, then the Lessor shall declare by written
notice to the Lessee the Remarketing Option to be null and void (whether or not
it has been theretofore exercised by the Lessee) as to the Property, in which
event all of the Lessee's rights under this SECTION 22.1 shall immediately
terminate and the Lessee shall be obligated to vacate the Property on the
Expiration Date and comply with the obligations set forth in SECTION 22.3.
Except as expressly set forth herein, the Lessee shall have no right, power or
authority to bind the Lessor in connection with any proposed sale of the
Property.

         If the Lessee has paid the Existing Facility and Tenant Improvements
Residual Value Guarantee Amount and the Expansion Improvements Residual
Guarantee Amount as required herein and in Section 3.22 of the Participation
Agreement, proceeds from a sale of the Property pursuant to the Remarketing
Option or, if not sold as provided in this SECTION 22.1 from a sale of the
Property occurring thereafter shall be distributed as provided in Section 3.14
of the Participation Agreement.

         22.2 CERTAIN OBLIGATIONS CONTINUE. During the Marketing Period, the
obligation of the Lessee to pay Rent (including the installment of Basic Rent
due on the fifth anniversary of the Closing Date or at the end of any Renewal
Term, as the case may be) shall continue undiminished until payment in full to
the Lessor, for deposit into an account with the Agent (or as otherwise required
pursuant to Section 3.22 of the Participation Agreement), of the Net Sales
Proceeds, the Existing Facility and Tenant Improvements Residual Value Guarantee
Amount and the Expansion Improvements Residual Guarantee Amount, and (without
duplication) all other amounts due to the Lessor with respect to the Property
under the Operative Documents. The Lessor shall have the right, but shall be
under no duty, to solicit bids, to inquire into the efforts of the Lessee to
obtain bids or otherwise to take action in connection with any such sale, other
than as expressly provided in this ARTICLE XXII.

         22.3 SUPPORT OBLIGATIONS. In the event that (a) the Lessee does not
elect to purchase the Property on the Expiration Date, (b) this Lease is
terminated without a purchase of the Property by the Lessee as expressly
permitted herein, or (c) pursuant to the Lessor's exercise of remedies under
ARTICLE XVII, this Lease is terminated, the Lessee shall, upon the request of
the Lessor, exercise all commercially reasonable efforts to provide the Lessor
or other purchaser of

                                      37
<PAGE>

the Property, effective on the Expiration Date or earlier termination of this
Lease, with (i) all permits, certificates of occupancy, governmental licenses
and authorizations held by the Lessee or any of its Affiliates with respect
to the Property (to the extent such items are transferable), (ii) such
easements, licenses, rights-of-way and other rights and privileges in the
nature of an easement held by the Lessee or any of its Affiliates with
respect to the Property and (iii) any service agreements, contracts or
subcontracts to which the Lessee or any of its Affiliates is a party or a
beneficiary at such time relating to the use and operation of the Property,
in each case to the extent assignable. All assignments, licenses, easements,
agreements and other deliveries required by clauses (i), (ii) and (iii) of
this SECTION 22.3 shall be in form reasonably satisfactory to the Lessor and
shall, to the extent permissible pursuant to the underlying assigned interest
or Applicable Law, be fully assignable (including both primary assignments
and assignments given in the nature of security) without payment of any fee,
cost or other charge.

                                 ARTICLE XXIII.

         23.1 HOLDING OVER. If the Lessee shall for any reason remain in
possession of the Property after the expiration or earlier termination of this
Lease (unless the Property is conveyed to the Lessee), such possession shall be
as a tenancy at sufferance during which time the Lessee shall continue to pay
Prepaid Rent, to the extent such possession occurs prior to the Completion Date,
or Supplemental Rent, to the extent such possession occurs from and after the
Completion Date, that would be payable by the Lessee hereunder were the Lease
then in full force and effect and the Lessee shall continue to pay Basic Rent at
an annual rate equal to 110% of the average annual rate of Basic Rent payable
hereunder during the Term. Such Basic Rent shall be payable from time to time
upon demand by the Lessor. During any period of tenancy at sufferance, the
Lessee shall, subject to the second preceding sentence, be obligated to perform
and observe all of the terms, covenants and conditions of this Lease, but shall
have no rights hereunder other than the right, to the extent given by law to
tenants at sufferance, to continue its occupancy and use of the Property.
Nothing contained in this ARTICLE XXIII shall constitute the consent, express or
implied, of the Lessor to the holding over of the Lessee after the expiration or
earlier termination of this Lease (unless the Property is conveyed to the
Lessee), and nothing contained herein shall be read or construed to relieve the
Lessee of its obligations to purchase or remarket the Property on the Expiration
Date pursuant to ARTICLE XX or ARTICLE XXII or as preventing the Lessor from
maintaining a suit for possession of the Property or exercising any other remedy
available to the Lessor at law or in equity or hereunder.

                                  ARTICLE XXIV.

         24.1 RISK OF LOSS. The Lessee assumes all risks of loss arising
from any Casualty or Condemnation which arises or occurs prior to the Expiration
Date or while the Lessee is in possession of the Property and all liability for
all personal injuries and deaths and damages to property suffered by any Person
or property on or in connection with the Property which arises or occurs prior
to the Expiration Date or while the Lessee is in possession of the Property,
except in each case to the extent any such loss or liability is primarily caused
by the gross negligence or willful misconduct of a Lessor Party; PROVIDED,
HOWEVER, that the Lessee shall have no obligation

                                      38
<PAGE>

under this SECTION 24.1 on account of any such loss or liability arising with
respect to the Expansion Improvements only prior to the Completion Date,
except as follows:

                                    (i) The Lessee shall be liable to the Lessor
                  under this SECTION 24.1 for all such losses and liabilities
                  within the Lessee's Control, subject to the following:

                                        (A) if any such loss or liability is
                                    not related to an inability or failure to
                                    complete construction of the Expansion
                                    Improvements (or if such loss or liability
                                    is related to an inability or failure to
                                    complete construction of the Expansion
                                    Improvements but also constitutes or arises
                                    out of a Fully Indemnifiable Event), the
                                    Lessee's obligations in this SECTION 24.1
                                    shall not be subject to any monetary
                                    limitation; and

                                        (B) if such loss or liability is
                                    related to an inability or failure to
                                    complete construction of the Expansion
                                    Improvements and such loss or liability does
                                    not constitute or arise out of a Fully
                                    Indemnifiable Event, the Lessee's monetary
                                    obligation provided in this SECTION 24.1,
                                    together with all other amounts payable
                                    prior to the Completion Date for the
                                    Expansion Improvements under Section
                                    9.1(b)(i) of the Participation Agreement,
                                    Section 9.3(b)(i) of the Participation
                                    Agreement, clause (5)(a)(ii) of Section 13.1
                                    of the Participation Agreement or Section
                                    13.10 of the Participation Agreement and any
                                    similarly limited payment obligation of the
                                    Lessee in connection with the return or sale
                                    of the Property under this Lease or the
                                    Construction Agency Agreement, shall not
                                    exceed the maximum Expansion Improvements
                                    Residual Value Guarantee Amount.

                                    (ii) If any Lessor Party incurs any such
                  loss or liability for which the Lessee is not liable pursuant
                  to this SECTION 24.1, the amount of such loss or liability
                  shall, if such Lessor Party shall so request by a written
                  notice to the Lessor and the Lessor shall give its prior
                  written consent thereto, be capitalized pursuant to Section
                  3.7(e)(ii) of the Participation Agreement.

                                  ARTICLE XXV.

         25.1     SUBLETTING AND ASSIGNMENT. THE LESSEE MAY NOT ASSIGN THIS
LEASE OR ANY OF ITS RIGHTS OR OBLIGATIONS WITHOUT THE PRIOR WRITTEN CONSENT
OF LESSOR. The Lessee may, without the consent of the Lessor, sublease the
Property or portion thereof to any Person, PROVIDED, that no such sublease
shall, in the opinion of the Lessor, materially adversely affect any of the
Lessor's interests, rights or remedies under the Lease or the Lessor's title
to the Property. No assignment, sublease or other relinquishment of
possession of the Property shall in any way discharge or diminish any of the
Lessee's obligations to the Lessor hereunder and the Lessee shall remain
directly and primarily liable under this Lease

                                      39
<PAGE>

as to the Property, or portion thereof, so assigned or sublet. Any sublease
of the Property shall be made subject to and subordinated to this Lease and
to the rights of the Lessor hereunder, and shall expressly provide for the
surrender of the Property (or portion thereof) after a Lease Event of Default
hereunder, PROVIDED THAT, the Lessor hereby consents to the sublease by
Lessee to Micron pursuant to the Micron Sublease of approximately 25,000
square feet of office space at the Property for a term not to exceed nine (9)
months and agrees that it will cause the Agent to enter into the Micron SNDA;
PROVIDED, that in no event shall the term of such Micron SNDA exceed nine (9)
months. All such subleases shall expressly provide for termination at or
prior to the earlier of the applicable Expiration Date or other date of
termination of this Lease unless the Lessee shall have purchased the Property
pursuant to ARTICLE XX. No assignee or sublessee shall use the Property in a
manner which is substantially different from the manner in which the Property
is used or intended for use by the Lessee or in any manner not otherwise
permitted under SECTION 8.2, without the prior written consent of the Lessor.

                                  ARTICLE XXVI.

         26.1 ESTOPPEL CERTIFICATES. At any time and from time to time upon
not less than twenty (20) days' prior request by the Lessor or the Lessee (the
"REQUESTING PARTY"), the other party (whichever party shall have received such
request, the "CERTIFYING PARTY") shall furnish to the Requesting Party (but not
more than four times per year unless required to satisfy the requirements of any
sublessees and only to the extent that the required information has been
provided to the Certifying Party by the other party) a certificate signed by an
individual having the office of vice president or higher in the Certifying Party
certifying that this Lease is in full force and effect (or that this Lease is in
full force and effect as modified and setting forth the modifications); the
dates to which the Basic Rent and Supplemental Rent have been paid; to the best
knowledge of the signer of such certificate, whether or not the Requesting Party
is in default under any of its obligations hereunder (and, if so, the nature of
such alleged default); and such other matters under this Lease as the Requesting
Party may reasonably request. Any such certificate furnished pursuant to this
ARTICLE XXVI may be relied upon by the Requesting Party, and any existing or
prospective mortgagee, purchaser or lender, and any accountant or auditor, of,
from or to the Requesting Party (or any Affiliate thereof), as well as by Micron
in connection with the Micron Sublease.

                                 ARTICLE XXVII.

         27.1 RIGHT TO INSPECT. During the Term, the Lessee shall upon
reasonable notice from the Lessor (except that no notice shall be required if a
Lease Event of Default has occurred and is continuing), permit the Lessor, the
Agent and their respective authorized representatives to inspect the Property
during normal business hours, provided that (i) such inspections shall not
unreasonably interfere with the Lessee's business operations at the Property,
(ii) the Lessee may, if it so chooses, be present during such inspections and
(iii) the Lessor shall be responsible for the reasonable costs of any damage to
the Property caused by the gross negligence or willful misconduct of the Lessor
during such inspection.

                                      40
<PAGE>

         27.2 NO WAIVER. No failure by the Lessor or the Lessee to insist
upon the strict performance of any term hereof or to exercise any right, power
or remedy upon a default hereunder, and no acceptance of full or partial payment
of Rent during the continuance of any such default, shall constitute a waiver of
any such default or of any such term. To the fullest extent permitted by law, no
waiver of any default shall affect or alter this Lease, and this Lease shall
continue in full force and effect with respect to any other then existing or
subsequent default.

                                 ARTICLE XXVIII.

         28.1 ACCEPTANCE OF SURRENDER. No surrender to the Lessor of this
Lease or of all or any portion of the Property or of any part thereof or of any
interest therein shall be valid or effective unless agreed to and accepted in
writing by the Lessor and, prior to the payment or performance of all
obligations under the Participation Agreement and termination of the
Commitments, the Agent, and no act by the Lessor or the Agent or any
representative or agent of the Lessor or the Agent, other than a written
acceptance, shall constitute an acceptance of any such surrender.

                                  ARTICLE XXIX.

         29.1 NO MERGER OF TITLE. There shall be no merger of this Lease or
of the leasehold estate created hereby by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, in whole or in part,
(a) this Lease or the leasehold estate created hereby or any interest in this
Lease or such leasehold estate, or (b) any estate of others in the Property
created by any sublease permitted under this Lease, except as may expressly be
stated in a written instrument duly executed and delivered by the appropriate
Person.

                                  ARTICLE XXX.

         30.1 NOTICES. All notices, demands, requests, consents, approvals
and other communications hereunder shall be in writing and delivered (i)
personally, (ii) by a nationally recognized overnight courier service, (iii) by
mail (by registered or certified mail, return receipt requested, postage
prepaid) or (iv) by confirmed facsimile, addressed to the respective parties, as
follows:

               If to the Lessee:        TriQuint Semiconductor Texas, LP
                                        13512 North Central Expressway
                                        Dallas, Texas 75243-1108
                                        Attention:  Vice President
                                        Telephone:  (972) 994-8511
                                        Facsimile:  (972) 994-8499

                                      41

<PAGE>

                                        TriQuint Semiconductor, Inc.
               with a copy to:          2300 N.E. Brookwood Parkway
                                        Hillsboro, Oregon  97124
                                        Attention:  Treasurer
                                        Telephone: (503) 615-9189
                                        Facsimile: (503) 615-8904

               If to the Lessor:        Lease Plan North America, Inc.
                                        135 South LaSalle Street, Suite 740
                                        Chicago, Illinois  60603
                                        Attention: Elizabeth R. McClellan
                                        Telephone: (312) 904-2809
                                        Facsimile: (312) 904-6217

               If to the Agent:         ABN AMRO Bank N.V.
                                        208 South LaSalle Street, Suite 1500
                                        Chicago, Illinois  60604
                                        Attention: Gregory R. Miller
                                        Telephone: (312) 992-5170
                                        Facsimile: (312) 992-5111

               with a copy to:          ABN AMRO Bank N.V.
                                        One Union Square
                                        600 University Street, Suite 2323
                                        Seattle, Washington  98101
                                        Attention:  Lee Lee Miao
                                        Telephone: (206) 654-0362
                                        Facsimile: (206) 682-5641

or such additional parties and/or other address as such party may hereafter
specify in writing in accordance with this Lease, and shall be effective upon
receipt or refusal thereof.

                                  ARTICLE XXXI.

         31.1 MISCELLANEOUS. Anything contained in this Lease to the
contrary notwithstanding, all claims against and liabilities of the Lessee or
the Lessor arising from events commencing prior to the expiration or earlier
termination of this Lease shall survive such expiration or earlier termination.
If any term or provision of this Lease or any application thereof shall be
declared invalid or unenforceable, the remainder of this Lease and any other
application of such term or provision shall not be affected thereby. If any
right or option of the Lessee provided in this Lease, including any right or
option described in ARTICLES XV, XVI, XX, XXI or XXII, would, in the absence of
the limitation imposed by this sentence, be invalid or unenforceable as being in
violation of the rule against perpetuities or any other rule of law relating to
the vesting of an interest in or the suspension of the power of alienation of
property, then such right or option shall be exercisable only during the period
which shall end twenty-one (21) years after the date of death of the last
survivor of the descendants of Franklin D. Roosevelt, the former president of
the

                                      42
<PAGE>

United States, Henry Ford, the deceased automobile manufacturer, and John D.
Rockefeller, the founder of the Standard Oil Company, known to be alive on
the date of the execution, acknowledgment and delivery of this Lease.

         31.2 AMENDMENTS AND MODIFICATIONS. Subject to the requirements,
restrictions and conditions set forth in the Participation Agreement, neither
this Lease, any Lease Supplement nor any provision hereof may be amended,
waived, discharged or terminated except by an instrument in writing in
recordable form signed by the Lessor and the Lessee.

         31.3 SUCCESSORS AND ASSIGNS. All the terms and provisions of this
Lease shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.

         31.4 HEADINGS AND TABLE OF CONTENTS. The headings and table of
contents in this Lease are for convenience of reference only and shall not limit
or otherwise affect the meaning hereof.

         31.5 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same instrument.

         31.6 GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICT OF LAW OR
CHOICE OF LAW RULES (OTHER THAN SECTION 5-1401 OR 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK) WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF
LEASEHOLD INTERESTS AND THE CREATION, ATTACHMENT AND PERFECTION OF SECURITY
INTERESTS OR EXERCISE OF REMEDIES WITH RESPECT THERETO, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, SUBJECT TO
SECTIONS 9-103 AND 1-105 OF THE APPLICABLE UNIFORM COMMERCIAL CODE.

         31.7 LIMITATIONS ON RECOURSE. The parties hereto agree that the
Lessor shall have no personal liability whatsoever to the Lessee or its
respective successors and assigns for any claim based on or in respect of this
Lease or any of the other Operative Documents or arising in any way from the
transactions contemplated hereby or thereby; PROVIDED, HOWEVER, that the Lessor
shall be liable in its individual capacity (a) for its own fraud, willful
misconduct or gross negligence (or negligence in the handling of funds), (b) for
liabilities that may result from the incorrectness of any representation or
warranty expressly made by it in Section 8.1 of the Participation Agreement or
from the failure of the Lessor to perform its covenants and agreements set forth
in Section 10.3 of the Participation Agreement, and (c) for any Taxes based on
or measured by any fees, commission or compensation received by it for acting as
the Lessor as contemplated by the Operative Documents. It is understood and
agreed that, except as provided in the preceding proviso: (i) the Lessor shall
have no personal liability under any of the Operative Documents as a result of
acting pursuant to and consistent with any of the Operative Documents; (ii) all
obligations of the Lessor to the Lessee are solely nonrecourse obligations

                                      43
<PAGE>

except to the extent that it has received payment from others and are
enforceable solely against the Lessor's interest in the Property; and (iii) all
such personal liability of the Lessor is expressly waived and released as a
condition of, and as consideration for, the execution and delivery of the
Operative Documents by the Lessor.

         31.8 ORIGINAL LEASE. The single executed original of this Lease
marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature
page thereof and containing the receipt of the Agent therefor on or following
the signature page thereof shall be the Original Executed Counterpart of this
Lease (the "ORIGINAL EXECUTED COUNTERPART"). To the extent that this Lease
constitutes chattel paper, as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, no security interest in this
Lease may be created through the transfer or possession of any counterpart other
than the Original Executed Counterpart.

         31.9 LANDLORD'S WAIVER. The Lessor hereby waives all statutory,
contractual or common law landlord's liens or any other Liens in favor of the
Lessor with respect to all inventory, equipment and personalty of the Guarantor
and the Lessee located at the Property, other than the Equipment and all
renewals and replacements of the Equipment. The Lessor agrees to execute such
further and additional instruments as the Lessee (or its other lenders) may
reasonably request, including, without limitation, UCC-3's, to evidence and
effectuate the waiver contained in the preceding sentence.

                            [signature page follows]

                                      44

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.

                            LEASE PLAN NORTH AMERICA, INC.,
                            an Illinois corporation, as Lessor

                              By:      /S/ ELIZABETH R. McCELLAN
                                       ---------------------------------------
                              Name:    ELIZABETH R. McCELLAN
                                       ---------------------------------------
                              Title:   VICE PRESIDENT
                                       ---------------------------------------

                            TRIQUINT SEMICONDUCTOR TEXAS, LP, a Texas limited
                            partnership, as Lessee

                            By:      TriQuint Texas General Holding Company,
                                     its general partner

                            By:      /s/ STEVEN J. SHARP
                               -----------------------------------------------
                            Name:    STEVEN J. SHARP
                                 ---------------------------------------------
                            Title:   PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                  --------------------------------------------

<PAGE>

          THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.

         Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of August 30, 2000.

                                       ABN AMRO BANK N.V., as Agent

                                       By:      /S/ ELIZABETH R. McCELLAN
                                                -----------------------------
                                       Name:    ELIZABETH R. McCELLAN
                                                -----------------------------
                                       Title:   VICE PRESIDENT
                                                -----------------------------

                                       By:      /S/ BLAKE J. LACHER
                                                -----------------------------
                                       Name:    BLAKE J. LACHER
                                                -----------------------------
                                       Title:   VICE PRESIDENT
                                                -----------------------------

<PAGE>

Prepared by and upon recording return to: W. Kirk Grimm, Esq., McGuireWoods
LLP, 77 West Wacker Drive, Chicago, Illinois 60601 (312) 849-3697

                                    EXHIBIT A
                                  TO THE LEASE

                             LEASE SUPPLEMENT NO. 1,
                       MEMORANDUM OF LEASE, DEED OF TRUST
                             AND SECURITY AGREEMENT

         THIS LEASE SUPPLEMENT NO. 1, MEMORANDUM OF LEASE, DEED OF TRUST AND
SECURITY AGREEMENT (this "LEASE SUPPLEMENT") dated as of August ___, 2000 among
LEASE PLAN NORTH AMERICA, INC. an Illinois corporation, (the "LESSOR"), with an
address at 135 S. LaSalle Street, Chicago, Illinois 60603 and TriQuint
Semiconductor Texas, LP, a Texas limited partnership, as lessee (the "LESSEE"),
with an address at 13512 North Central Expressway, Dallas, Texas 75243, and
Charles R. Swartz, as Trustee, with an address at McGuireWoods LLP, One James
Center, 901 East Cary Street, Richmond, Virginia 23219-4030, for the benefit of
Lessor (the "TRUSTEE").

         WHEREAS, the Lessor is the fee owner of the Existing Facility (the
"EXISTING FACILITY") described on SCHEDULE 1 hereto and Tenant Improvements to
be constructed thereon ("TENANT IMPROVEMENTS") and wishes to lease the Existing
Facility and Tenant Improvements to the Lessee;

         WHEREAS, the Lessee desires to grant a deed of trust lien on its
interest in the Existing Facility and Tenant Improvements created by the Lease
to the Trustee for the benefit of the Lessor to secure the Obligations (as
hereinafter defined) of the Lessee;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

         SECTION 1. DEFINITIONS; INTERPRETATION. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in Appendix 1 to that certain Deed of Trust,
Security Agreement and Financing Statement from Lessor, as Grantor, to the
Trustee for the benefit of ABN AMRO Bank N.V., in its capacity as agent under
the Participation Agreement, to be recorded hereafter in the Real Property
Records of Collin County, Texas; and the rules of interpretation set forth in
such Appendix 1 shall apply to this Lease Supplement.

         SECTION 2. EXISTING FACILITY. Attached hereto as SCHEDULE 1 is the
description of the Existing Facility. Effective upon the execution and delivery
of this Lease Supplement by the Lessor and the Lessee, the Existing Facility and
Tenant Improvements shall be subject to the terms and provisions of the Lease.
Subject to the terms and conditions of the Lease, the Lessor hereby leases to
the Lessee for the Term (as defined below) of the Lease, the Lessor's interest
in the Existing Facility and Tenant Improvements, and the Lessee hereby agrees,
expressly for the

                                     A-1
<PAGE>

direct benefit of the Lessor, to lease from the Lessor for the Term, the
Lessor's interest in the Existing Facility and Tenant Improvements.

         SECTION 3. PARTIES AND ADDRESSES. The Lease is dated as of August ___,
2000, between the Lessor, whose principal office is at 135 South LaSalle Street,
Chicago, Illinois 60603 and the Lessee, whose principal office is 13512 North
Central Expressway, Dallas, Texas 75243-1108.

         SECTION 4. LEASE TERM. The term of the Lease (the "TERM") shall begin
on the Lease Commencement Date and shall end on August ___, 2005 unless the Term
is renewed or earlier terminated in accordance with the provisions of the Lease.
The Lease contains two option periods of two years each, which give the Lessee
the right, subject to the terms thereof, to extend the term of the Lease to no
later than August ___, 2009.

         SECTION 5. OWNERSHIP OF THE PROPERTY.

         (a) It is the intent of the parties hereto that: (i) the Lease
constitutes an "operating lease" pursuant to Statement of Financial Accounting
Standards No. 13, as amended and interpreted, for purposes of the Lessee's
financial reporting, and (ii) for purposes of federal, state, and local income
or franchise taxes (and for any other tax imposed on or measured by income) and
documentary, intangibles and transfer taxes, the transaction contemplated hereby
and by the Lease is a financing arrangement and preserves ownership in the
Property in the Lessee. The parties shall take no action inconsistent with such
intention. Nevertheless, the Lessee acknowledges and agrees that neither the
Agent, the Lessor nor any Participant has made any representations or warranties
to the Lessee concerning the tax, accounting or legal characteristics of the
Operative Documents and that the Lessee has obtained and relied upon such tax,
accounting and legal advice concerning the Operative Documents as it deems
appropriate.

         (b) Anything to the contrary in the Operative Documents
notwithstanding, the Lessor and the Lessee intend and agree that with respect to
the nature of the transactions evidenced by the Lease in the context of the
exercise of remedies under the Operative Documents, including, without
limitation, in the case of any insolvency or receivership proceedings or a
petition under the United States bankruptcy laws or any other applicable
insolvency laws or statute of the United States of America or any State or
Commonwealth thereof or any foreign country affecting the Lessee, the Lessor, or
any Participant or any enforcement or collection actions arising out of or
relating to bankruptcy or insolvency laws, (i) the transactions evidenced by the
Lease shall be deemed to be loans made by the Lessor and the Participants to the
Lessee secured by the Property, (ii) the obligations of the Lessee under the
Lease to pay Basic Rent, Supplemental Rent, Asset Termination Value, Existing
Facility and Tenant Improvements Residual Value Guarantee Amount or Expansion
Improvements Residual Value Guarantee Amount in connection with a purchase of
the Property pursuant to the Lease shall be treated as payments of interest on
(with respect to Rent), and principal of (with respect to all other such
payments), loans from the Lessor and the Participants to the Lessee, and (iii)
the Lease grants a security interest and mortgage or deed of trust lien, as the
case may be, in the Property to the Lessor and the Lease has been assigned by
the Lessor to the Agent for the benefit of the Participants to secure the
Lessee's performance under and payment of all amounts under the Lease and the
other Operative Documents.

                                     A-2

<PAGE>

         (c) Specifically, without limiting the generality of SUBSECTIONS
(a) and (b) of this SECTION 5, the parties hereto intend and agree that, for
purposes of filing federal, state and local returns, reports and other
statements relating to income or franchise taxes, or any other taxes imposed
upon or measured by income, (i) the Lessee shall be entitled to take any
deduction, credit, allowance or other reporting position consistent with its
status as owner of the Property; and (ii) neither the Lessor nor any Participant
shall take an initial position on its federal, state and local returns, reports
and other statements relating to income or franchise taxes that is inconsistent
with the Lessee's status as owner of the Property.

         (d) If the transactions evidenced by this Agreement and the other
Operative Documents can no longer be treated as an operating lease pursuant to
GAAP for accounting purposes, all provisions in the Operative Documents limiting
the Lessee's obligation to pay the Asset Termination Value (including the
Remarketing Option) on the Expiration Date shall no longer apply. If any such
change in accounting treatment shall occur, the Lessee, the Lessor, the Agent
and the Participants shall negotiate in good faith to enter into such amendments
to the Operative Documents as may be reasonably necessary or desirable to
reflect the foregoing.

         (e) In the event that, after the date hereof, the UCC as enacted
and in effect in any applicable jurisdiction shall be revised or amended, the
Lessee, the Lessor, the Agent and the Participants shall negotiate in good faith
to enter into such amendments to the Operative Documents as may be reasonably
necessary or desirable to effect the intended purposes of the Lease and the
other Operative Documents in light of the effect of such revisions or
amendments.

         (f) Specifically, without limiting the generality of subsection
(b) of this SECTION 5, in order to secure the Lessee's obligation to pay Basic
Rent, Supplemental Rent, Asset Termination Value, the Residual Value Guarantee
Amount, the Purchase Option Price and all other obligations owing by the Lessee
under the Operative Documents (the "OBLIGATIONS"), the Lessee hereby grants,
remises, releases, aliens, conveys, transfers, mortgages, assigns and warrants
to the Trustee for the benefit of the Lessor, WITH POWER OF SALE and right of
entry and possession, all of the Lessee's right, title and interest in and to
the following (collectively, the "COLLATERAL"):

                  (i) all right, title and interest of the Lessee in and to the
         Property, including, without limitation, the property described on
         Schedule 1 hereto, or any part thereof and the reversions, remainders,
         rents, issues and profits thereof;

                  (ii) all right, title and interest of the Lessee in and to all
         Fixtures and Improvements and all substitutes and replacements of, and
         all additions and improvements to, the Improvements and the Fixtures,
         subsequently acquired by the Lessee or constructed, assembled or placed
         by Lessee on the Land Interest, immediately upon such acquisition,
         release, construction, assembling or placement, including, without
         limitation, any and all building materials whether stored at the
         Property or offsite, and, in each such case, without any further
         mortgage, deed of trust, conveyance, assignment or other act by the
         Lessee;

                  (iii) all right, title and interest of the Lessee in, to and
         under all books and records relating to or used in connection with the
         operation of the Property or the Fixtures

                                     A-3

<PAGE>

        or any part thereof and the Equipment (other than any records related
        to the business conducted from the Property);

                  (iv) all right, title and interest of the Lessee in and to all
         insurance policies (including title insurance policies) required to be
         maintained by the Lessee pursuant to this Lease, including the right to
         collect and receive such proceeds; and all awards and other
         compensation, including the interest payable thereon and the right to
         collect and receive the same, made to the owner of the Property for the
         taking by eminent domain, condemnation or otherwise, of all or any part
         of the Property or any easement or other right therein, all to the
         extent the same are assignable by the Lessee;

                  (v) all right, title and interest of the Lessee in and to (i)
         all governmental consents, licenses, building permits, certificates of
         occupancy and other governmental approvals relating to construction,
         completion, occupancy, use or operation of the Property or any part
         thereof, provided that any such consent, license, permit, certificate
         or approval that by its terms or by operation of law would become void,
         voidable, terminable or revocable or would result in a breach or
         default thereunder or under any applicable law if subjected to the lien
         granted pursuant to this clause (v) is expressly excepted and excluded
         from this clause (v) to the extent necessary to avoid such result, and
         (ii) all plans and specifications relating to the Property, in each
         case to the extent assignable;

                  (vi) all Rent and all other rents, payments, purchase prices,
         receipts, revenues, issues and profits payable under the Lease or
         pursuant to any other lease with respect to the Property;

                  (vii) all proceeds, both cash and noncash, of the foregoing
         and any items acquired in substitution of, or replacement for, any of
         the foregoing; and

                  (viii) all right, title and interest of the Lessee in and to
         all of the Operative Documents, including, without limitation, this
         Lease Supplement, the Restated Lease Supplement and the Equipment
         Schedules, regardless of whether the interest of the Lessee therein is
         that of lessee, sublessee, sublessor or borrower.

         (g) Specifically, without limiting the generality of subsection
(b) of this SECTION 5, the Lessor and the Lessee further intend and agree that,
for the purpose of securing the Lessee's obligations for the repayment of the
loans from the Lessor and the Participants to the Lessee, (i) the Lease shall
also be deemed to be a security agreement and financing statement within the
meaning of Article 9 of the Uniform Commercial Code (and specifically, a
construction mortgage, as said term is defined in Section 9-313(1)(c) of the
Uniform Commercial Code), a fixture filing and a real property deed of trust of
the Property; (ii) the conveyance provided for in Article II of the Lease shall
be deemed to be a grant by the Lessee to the Lessor, assigned by the Lessor to
the Agent for the benefit of the Participants, of a mortgage or deed of trust,
as applicable, lien and security interest in all of the Lessee's right, title
and interest in and to the Property, and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, investments, securities or
other property, whether in the form of cash, investments, securities or other
property (it being understood that the Lessee hereby mortgages and warrants and
grants a

                                     A-4

<PAGE>

security interest in the Property to Lessor to secure the loans); (iii) the
possession by the Lessor or any of its agents of any notes and such other
items of the Collateral as constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be "possession by the secured
party" for purposes of perfecting the security interest pursuant to Section
9-305 of the Uniform Commercial Code; and (iv) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations from
financial intermediaries, bankers or agents (as applicable) of the Lessee
shall be deemed to have been given for the purpose of perfecting such
security interest under Applicable Law. The Lessor and the Lessee shall, to
the extent consistent with the Lease, take such actions and execute, deliver,
file and record such other documents, financing statements, mortgages and
deeds of trust as may be necessary to ensure that, if the Lease were deemed
to create a Lien and/or security interest in the Property in accordance with
this Section, such Lien and/or security interest would be deemed to be a
perfected Lien and/or security interest of first priority (except as to
Permitted Exceptions) under Applicable Law and will be maintained as such
throughout the Term.

         SECTION 6. LEASE EVENTS OF DEFAULT AND REMEDIES. Sections 17.2 through
17.5 of the Lease, which are hereby incorporated by reference, set forth the
remedies available to the Lessor and, as applicable, the Trustee, in the event
of a Lease Event of Default.

         SECTION 7. PURCHASE OPTION. Sections 17.2(h), 17.2(i), 19 and 20 of the
Lease contain various purchase options which may be exercised by the Lessee
during the term of the Lease subject to the terms and conditions of said
Sections of the Lease.

         SECTION 8. LIENS.

         (a) THIS LEASE SUPPLEMENT IS SUPERIOR TO A DEED OF TRUST IN FAVOR
OF ABN AMRO BANK N.V., AS AGENT (THE "AGENT") UNDER THE PARTICIPATION AGREEMENT
DATED AS OF AUGUST ___, 2000 AS AMENDED OR SUPPLEMENTED, AMONG THE LESSOR, THE
AGENT, THE LESSEE, THE CONSTRUCTION AGENT, THE LESSEE'S GENERAL PARTNER, THE
GUARANTOR, THE TRANCHE T PARTICIPANT AND THE BANKS OR FINANCIAL INSTITUTIONS
PARTIES THERETO.

         (b) NOTICE IS HEREBY GIVEN THAT NEITHER THE LESSOR, ANY
PARTICIPANT NOR THE AGENT IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, THE CONSTRUCTION AGENT OR
TO ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE,
AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS
SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR IN AND TO THE PROPERTY.

         SECTION 9. RATIFICATION. Except as specifically modified hereby,
the terms and provisions of the Lease are hereby ratified and confirmed and
remain in full force and effect.

         SECTION 10. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED

                                     A-5

<PAGE>

COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the Original
Executed Counterpart of this Lease Supplement (the "ORIGINAL EXECUTED
COUNTERPART"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.

         SECTION 11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICT OF LAW OR
CHOICE OF LAW RULES (OTHER THAN SECTION 5-1401 OR 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK) WHICH MIGHT LEAD TO THE APPLICATION OF
THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF
LEASEHOLD INTERESTS AND THE CREATION, ATTACHMENT AND PERFECTION OF SECURITY
INTERESTS OR EXERCISE OF REMEDIES WITH RESPECT THERETO, WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, SUBJECT TO
SECTIONS 9-103 AND 1-105 OF THE APPLICABLE UNIFORM COMMERCIAL CODE.

         SECTION 12. COUNTERPART EXECUTION. This Lease Supplement may be
executed in any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together constituting but one
and the same instrument.

         SECTION 13. INCORPORATION BY REFERENCE. The terms and provisions of the
Lease are incorporated herein as if they were fully set forth herein and are
made a part of this Lease Supplement.

         SECTION 14. RECEIPT. The Lessee hereby declares and acknowledges
that the Lessee has received, without charge, a true copy of the Lease and
this Lease Supplement.

         SECTION 15. SUBSTITUTION OF TRUSTEE. From time to time, by a writing
signed and acknowledged by Lessor and recorded in the Real Property Records of
the County in which the Property is situated, Lessor may appoint another trustee
to act in the place and stead of Trustee or any successor. Such writing shall
refer to this Lease Supplement No. 1, Memorandum of Lease, Deed of Trust and
Security Agreement and set forth the date, book and page of its recordation. The
recordation of such instrument of substitution shall discharge Trustee herein
named and shall appoint the new trustee as the trustee hereunder with the same
effect as if originally named trustee herein. A writing recorded pursuant to the
provisions of this paragraph shall be conclusive proof of the proper
substitution of such new trustee.

                            [signature page follows]

                                     A-6

<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of the
date and year first above written.

                                      LEASE PLAN NORTH AMERICA, INC.
                                      an Illinois corporation, as the Lessor

                                      By:-------------------------------------
                                      Name:-----------------------------------
                                      Title:----------------------------------

                                      TRIQUINT SEMICONDUCTOR TEXAS, LP, a
                                      Texas limited partnership, as Lessee

                                      By: TriQuint Texas General Holding
                                      Company, its general partner

                                      By:-------------------------------------
                                      Name:-----------------------------------
                                      Title:----------------------------------

                                     A-7

<PAGE>

STATE OF                            )
         ---------------------------
                                     SS::
COUNTY OF                           )
          --------------------------

         Before me, the undersigned, a Notary Public within and for the State
and County aforesaid, personally appeared _______________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who, upon oath, acknowledged [himself/herself] to be a Vice President of
LEASE PLAN NORTH AMERICA, INC., a corporation, and that [he/she] as such
_________________, being duly authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by [himself/herself] as such Vice President.

         WITNESS my hand and seal, at office, on this the ____ day of August,
2000.

                                           -----------------------------------
                                                        Notary Public

My Commission Expires:

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

                                     A-8

<PAGE>

STATE OF                            )
         ---------------------------
                                     SS::
COUNTY OF                           )
          --------------------------

         Before me, the undersigned, a Notary Public within and for the State
and County aforesaid, personally appeared __________________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory evidence),
and who, upon oath, acknowledged [himself/herself] to be the _________ of
TriQuint Texas General Holding Company, a corporation and the general partner of
TriQuint Semiconductor Texas, LP, a limited partnership, and that [he/she] as
such _________, being duly authorized so to do, executed the foregoing
instrument for the purposes therein contained by signing the name of the
corporation by [himself/herself], as such _________, as general partner of
TriQuint Semiconductor Texas, LP.

         WITNESS my hand and seal, at office, on this the ____ day of August,
2000.

                                     -----------------------------------------
                                                   Notary Public

My Commission Expires:

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

                                     A-9

<PAGE>

THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.

         Receipt of this original counterpart of the foregoing Lease Supplement
is hereby acknowledged as of August ____, 2000.

                                     ABN AMRO BANK N.V., as Agent

                                     By:
                                        --------------------------------------
                                     Name:
                                          ------------------------------------
                                     Title:
                                           -----------------------------------

                                       A-10
<PAGE>

                                   SCHEDULE 1

                            TO LEASE SUPPLEMENT NO. 1

              EXISTING FACILITY AND TENANT IMPROVEMENTS DESCRIPTION

                                       A-11
<PAGE>

Prepared by and upon recording return to: W. Kirk Grimm, Esq., McGuireWoods LLP,
77 West Wacker Drive,  Chicago, Illinois 60601 (312) 849-3697

                                    EXHIBIT B
                                  TO THE LEASE

                  AMENDED AND RESTATED LEASE SUPPLEMENT NO. 1,
            MEMORANDUM OF LEASE, DEED OF TRUST AND SECURITY AGREEMENT

         THIS AMENDED AND RESTATED LEASE SUPPLEMENT NO. 1, MEMORANDUM OF
LEASE, DEED OF TRUST AND SECURITY AGREEMENT (this "RESTATED LEASE
SUPPLEMENT") dated as of _________ ___, among LEASE PLAN NORTH AMERICA, INC.,
an Illinois corporation, (the "LESSOR"), with an address at 135 S. LaSalle
Street, Chicago, Illinois 60603, and TRIQUINT SEMICONDUCTOR TEXAS, LP, a
Texas limited partnership, as lessee (the "LESSEE"), with an address at 13512
North Central Expressway, Dallas, Texas 75243, and ____________, as Trustee,
with an address at ___________, for the benefit Lessor (the "TRUSTEE").

         WHEREAS, the Lessor and the Lessee entered into that certain Lease
Supplement No. 1, Memorandum of Lease, Deed of Trust and Security Agreement,
dated as of August ___, 2000, recorded with the Real Property Records of
Collin County, Texas, in Book _________, at Page ________ for the benefit,
among others, of the Trustee;

         WHEREAS, the Lessor is the fee owner of the Existing Facility
("EXISTING FACILITY") described on Schedule 1 hereto, Tenant Improvements
("TENANT IMPROVEMENTS") and Expansion Improvements ("EXPANSION IMPROVEMENTS")
to be constructed thereon hereto and wishes to lease the Existing Facility,
Tenant Improvements and Expansion Improvements to the Lessee;

         WHEREAS, the Lessee desires to grant a deed of trust lien on its
interest in the Existing Facility, Tenant Improvements and Expansion
Improvements created by the Lease to the Trustee for the benefit of the
Lessor to secure the Obligations (as hereinafter defined) of the Lessee;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

         SECTION 1. DEFINITIONS; INTERPRETATION. For purposes of this
Restated Lease Supplement, capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to them in Appendix 1 to that
certain Deed of Trust, Security Agreement and Financing Statement from
Lessor, as Grantor, to the Trustee for the benefit of ABN AMRO Bank N.V., in
its capacity as agent under the Participation Agreement, recorded in the Real
Property Records of Collin County, Texas in Book ___ at Page ____; and the
rules of interpretation set forth in Appendix 1 shall apply to this Lease
Supplement.

         SECTION 2. THE PROPERTY. Attached hereto as SCHEDULE I is the
description of the Existing Facility. Effective upon the execution and
delivery of this Restated Lease Supplement

                                       B-1
<PAGE>

by the Lessor and the Lessee, the Existing Facility, Tenant Improvements and
Expansion Improvements shall be subject to the terms and provisions of the
Lease. Subject to the terms and conditions of the Lease, the Lessor hereby
leases to the Lessee for the Term (as defined below) of the Lease, the
Lessor's interest in the Existing Facility, Tenant Improvements and Expansion
Improvements, and the Lessee hereby agrees, expressly for the direct benefit
of the Lessor, to lease from the Lessor for the Term, the Lessor's interest
in the Existing Facility, Tenant Improvements and Expansion Improvements.

         SECTION 3. PARTIES AND ADDRESSES. The Lease is dated as of August
___, 2000, between the Lessor, whose principal office is at 135 South LaSalle
Street, Chicago, Illinois 60603, and the Lessee, whose principal office is
13512 North Central Expressway, Dallas, Texas 75243-1108.

         SECTION 4. LEASE TERM. The term of the Lease (the "TERM") began on
the Lease Commencement Date and shall end on August ___, 2005 unless the Term
is renewed or earlier terminated in accordance with the provisions of the
Lease. The Lease contains two option periods of two years each, which give
the Lessee the right, subject to the terms thereof, to extend the term of the
Lease to no later than August ___, 2009.

         SECTION 5. OWNERSHIP OF THE PROPERTY.

         (a) It is the intent of the parties hereto that: (i) the Lease
constitutes an "operating lease" pursuant to Statement of Financial
Accounting Standards No. 13, as amended and interpreted, for purposes of the
Lessee's financial reporting, and (ii) for purposes of federal, state, and
local income or franchise taxes (and for any other tax imposed on or measured
by income) and documentary, intangibles and transfer taxes, the transaction
contemplated hereby and by the Lease is a financing arrangement and preserves
ownership in the Property in the Lessee. The parties shall take no action
inconsistent with such intention. Nevertheless, the Lessee acknowledges and
agrees that neither the Agent, the Lessor nor any Participant has made any
representations or warranties to the Lessee concerning the tax, accounting or
legal characteristics of the Operative Documents and that the Lessee has
obtained and relied upon such tax, accounting and legal advice concerning the
Operative Documents as it deems appropriate.

         (b) Anything to the contrary in the Operative Documents
notwithstanding, the Lessor and the Lessee intend and agree that with respect
to the nature of the transactions evidenced by the Lease in the context of
the exercise of remedies under the Operative Documents, including, without
limitation, in the case of any insolvency or receivership proceedings or a
petition under the United States bankruptcy laws or any other applicable
insolvency laws or statute of the United States of America or any State or
Commonwealth thereof or any foreign country affecting the Lessee, the Lessor,
or any Participant or any enforcement or collection actions arising out of or
relating to bankruptcy or insolvency laws, (i) the transactions evidenced by
the Lease shall be deemed to be loans made by the Lessor and the Participants
to the Lessee secured by the Property, (ii) the obligations of the Lessee
under the Lease to pay Basic Rent, Supplemental Rent, Asset Termination Value
or Existing Facility and Tenant Improvements Residual Value Guarantee Amount
or Expansion Improvements Residual Value Guarantee Amount in connection with
a purchase of the Property pursuant to the Lease shall be treated as payments
of interest on (with respect to Rent), and principal of (with respect to all
other such payments),

                                       B-2
<PAGE>

respectively, loans from the Lessor and the Participants to the Lessee, and
(iii) the Lease grants a security interest and mortgage or deed of trust
lien, as the case may be, in the Property to the Lessor and the Lease has
been assigned by the Lessor to the Agent for the benefit of the Participants
to secure the Lessee's performance under and payment of all amounts under the
Lease and the other Operative Documents.

         (c) Specifically, without limiting the generality of SUBSECTIONS (a)
AND (b) of this SECTION 5, the parties hereto intend and agree that, for
purposes of filing federal, state and local returns, reports and other
statements relating to income or franchise taxes, or any other taxes imposed
upon or measured by income, (i) the Lessee shall be entitled to take any
deduction, credit, allowance or other reporting position consistent with its
status as owner of the Property; and (ii) neither the Lessor nor any
Participant shall take an initial position on its federal, state and local
returns, reports and other statements relating to income or franchise taxes
that is inconsistent with the Lessee's status as owner of the Property.

         (d) If the transactions evidenced by this Agreement and the other
Operative Documents can no longer be treated as an operating lease pursuant
to GAAP for accounting purposes, all provisions in the Operative Documents
limiting the Lessee's obligation to pay the Asset Termination Value
(including the Remarketing Option) on the Expiration Date shall no longer
apply. If any such change in accounting treatment shall occur, the Lessee,
the Lessor, the Agent and the Participants shall negotiate in good faith to
enter into such amendments to the Operative Documents as may be reasonably
necessary or desirable to reflect the foregoing.

         (e) In the event that, after the date hereof, the UCC as enacted and
in effect in any applicable jurisdiction shall be revised or amended, the
Lessee, the Lessor, the Agent and the Participants shall negotiate in good
faith to enter into such amendments to the Operative Documents as may be
reasonably necessary or desirable to effect the intended purposes of the
Lease and the other Operative Documents in light of the effect of such
revisions or amendments.

         (f) Specifically, without limiting the generality of subsection (b)
of this SECTION 5, in order to secure the Lessee's obligation to pay Basic
Rent, Supplemental Rent, Asset Termination Value, the Residual Value
Guarantee Amount, the Purchase Option Price, and all other obligations owing
by the Lessee under the Operative Documents (the "OBLIGATIONS"), the Lessee
hereby grants, remises, releases, aliens, conveys, transfers, mortgages,
assigns and warrants to the Trustee for the benefit of the Lessor, WITH POWER
OF SALE and right of entry and possession, all of the Lessee's right, title
and interest in and to the following (collectively, the "COLLATERAL"):

                  (i) all right, title and interest of the Lessee in and to the
         Property, including, without limitation, the property described on
         Schedule 1 hereto, or any part thereof and the reversions, remainders,
         rents, issues and profits thereof;

                  (ii) all right, title and interest of the Lessee in and to all
         Fixtures and Improvements and all substitutes and replacements of, and
         all additions and improvements to, the Improvements and the Fixtures,
         subsequently acquired by the Lessee or constructed, assembled or placed
         by Lessee on the Land Interest, immediately upon such acquisition,
         release, construction, assembling or placement, including, without

                                       B-3
<PAGE>

         limitation, any and all building materials whether stored at the
         Property or offsite, and, in each such case, without any further
         mortgage, deed of trust, conveyance, assignment or other act by the
         Lessee;

                  (iii) all right, title and interest of the Lessee in, to and
         under all books and records relating to or used in connection with the
         operation of the Property or the Fixtures or any part thereof and the
         Equipment (other than any records related to the business conducted
         from the Property);

                  (iv) all right, title and interest of the Lessee in and to all
         insurance policies (including title insurance policies) required to be
         maintained by the Lessee pursuant to this Lease, including the right to
         collect and receive such proceeds; and all awards and other
         compensation, including the interest payable thereon and the right to
         collect and receive the same, made to the owner of the Property for the
         taking by eminent domain, condemnation or otherwise, of all or any part
         of the Property or any easement or other right therein, all to the
         extent the same are assignable by the Lessee;

                  (v) all right, title and interest of the Lessee in and to (i)
         all governmental consents, licenses, building permits, certificates of
         occupancy and other governmental approvals relating to construction,
         completion, occupancy, use or operation of the Property or any part
         thereof, PROVIDED that any such consent, license, permit, certificate
         or approval that by its terms or by operation of law would become void,
         voidable, terminable or revocable or would result in a breach or
         default thereunder or under any applicable law if subjected to the lien
         granted pursuant to this CLAUSE (v) is expressly excepted and excluded
         from this CLAUSE (v) to the extent necessary to avoid such result, and
         (ii) all plans and specifications relating to the Property, in each
         case to the extent assignable;

                  (vi) all Rent and all other rents, payments, purchase prices,
         receipts, revenues, issues and profits payable under the Lease or
         pursuant to any other lease with respect to the Property;

                  (vii) all proceeds, both cash and noncash, of the foregoing
         and any items acquired in substitution of, or replacement for, any of
         the foregoing; and

                  (viii) all right, title and interest of the Lessee in and to
         all of the Operative Documents, including, without limitation, this
         Lease Supplement, the Restated Lease Supplement and the Equipment
         Schedules, regardless of whether the interest of the Lessee therein is
         that of lessee, sublessee, sublessor or borrower.

         (g) Specifically, without limiting the generality of subsection (b)
of this SECTION 5, the Lessor and the Lessee further intend and agree that,
for the purpose of securing the Lessee's obligations for the repayment of the
loans from the Lessor and the Participants to the Lessee, (i) the Lease shall
also be deemed to be a security agreement and financing statement within the
meaning of Article 9 of the Uniform Commercial Code (and specifically, a
construction mortgage, as said term is defined in Section 9-313(1)(c) of the
Uniform Commercial Code), a fixture filing and a real property deed of trust
of the Property; (ii) the conveyance provided for in

                                       B-4
<PAGE>

Article II of the Lease shall be deemed to be a grant by the Lessee to the
Lessor, assigned by the Lessor to the Agent for the benefit of the
Participants, of a mortgage or deed of trust, as applicable, lien and
security interest in all of the Lessee's right, title and interest in and to
the Property, and all proceeds of the conversion, voluntary or involuntary,
of the foregoing into cash, investments, securities or other property,
whether in the form of cash, investments, securities or other property (it
being understood that the Lessee hereby mortgages and warrants and grants a
security interest in the Property to the Lessor to secure the loans); (iii)
the possession by the Lessor or any of its agents of any notes and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Uniform Commercial Code; and (iv) notifications to Persons holding such
property, and acknowledgments, receipts or confirmations from financial
intermediaries, bankers or agents (as applicable) of the Lessee shall be
deemed to have been given for the purpose of perfecting such security
interest under Applicable Law. The Lessor and the Lessee shall, to the extent
consistent with the Lease, take such actions and execute, deliver, file and
record such other documents, financing statements, mortgages and deeds of
trust as may be necessary to ensure that, if the Lease were deemed to create
a Lien and/or security interest in the Property in accordance with this
Section, such Lien and/or security interest would be deemed to be a perfected
Lien and/or security interest of first priority (except as to Permitted
Exceptions) under Applicable Law and will be maintained as such throughout
the Term.

         SECTION 6. LEASE EVENTS OF DEFAULT AND REMEDIES. Sections 17.2
through 17.5 of the Lease, which are hereby incorporated by reference, set
forth the remedies available to the Lessor and, as applicable, the Trustee,
in the event of a Lease Event of Default.

         SECTION 7. PURCHASE OPTION. Sections 17.2(h), 17.2(i), 19 and 20 of
the Lease contain various purchase options which may be exercised by the
Lessee during the term of the Lease subject to the terms and conditions of
said Sections of the Lease.

         SECTION 8. LIENS.

         (a) THIS RESTATED LEASE SUPPLEMENT IS SUPERIOR TO A DEED OF TRUST IN
FAVOR OF ABN AMRO BANK N.V., AS AGENT (THE "AGENT") UNDER THE PARTICIPATION
AGREEMENT DATED AS OF AUGUST ___, 2000 AS AMENDED OR SUPPLEMENTED, AMONG THE
LESSOR, THE AGENT, THE LESSEE, THE CONSTRUCTION AGENT, THE LESSEE'S GENERAL
PARTNER, THE GUARANTOR, THE TRANCHE T PARTICIPANT AND THE BANKS OR FINANCIAL
INSTITUTIONS PARTIES THERETO.

         (b) NOTICE IS HEREBY GIVEN THAT NEITHER THE LESSOR, ANY PARTICIPANT
NOR THE AGENT IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS
FURNISHED OR TO BE FURNISHED TO THE LESSEE, THE CONSTRUCTION AGENT OR TO
ANYONE HOLDING THE PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE,
AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR IN AND TO THE
PROPERTY.

                                       B-5
<PAGE>

         SECTION 9. RATIFICATION. Except as specifically modified hereby,
the terms and provisions of the Lease are hereby ratified and confirmed
and remain in full force and effect. This Restated Lease Supplement amends,
restates, supersedes and replaces that certain Lease Supplement No. 1,
Memorandum of Lease, Deed of Trust and Security Agreement dated as of
August ___, 2000 between the Lessee and the Lessor in its entirety.

         SECTION 10. ORIGINAL LEASE SUPPLEMENT. The single executed original
of this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the
Original Executed Counterpart of this Restated Lease Supplement (the
"ORIGINAL EXECUTED COUNTERPART"). To the extent that this Restated Lease
Supplement constitutes chattel paper, as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction, no security
interest in this Restated Lease Supplement may be created through the
transfer or possession of any counterpart other than the Original Executed
Counterpart.

         SECTION 11. GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICT OF LAW
OR CHOICE OF LAW RULES (OTHER THAN SECTION 5-1401 OR 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK) WHICH MIGHT LEAD TO THE APPLICATION
OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, EXCEPT AS TO MATTERS RELATING TO THE
CREATION OF LEASEHOLD INTERESTS AND THE CREATION, ATTACHMENT AND PERFECTION
OF SECURITY INTERESTS OR EXERCISE OF REMEDIES WITH RESPECT THERETO, WHICH
MATTERS SHALL BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE PROPERTY IS
LOCATED, SUBJECT TO SECTIONS 9-103 AND 1-105 OF THE APPLICABLE UNIFORM
COMMERCIAL CODE.

         SECTION 12. COUNTERPART EXECUTION. This Restated Lease Supplement
may be executed in any number of counterparts and by each of the parties
hereto in separate counterparts, all such counterparts together constituting
but one and the same instrument.

         SECTION 13. INCORPORATION BY REFERENCE. The terms and provisions of
the Lease are incorporated herein as if they were fully set forth herein and
are made a part of this Restated Lease Supplement.

         SECTION 14. RECEIPT.  The Lessee hereby declares and  acknowledges
that the Lessee has received,  without charge, a true copy of the Lease and
this  Restated Lease Supplement.

         SECTION 15. SUBSTITUTION OF TRUSTEE. From time to time, by a writing
signed and acknowledged by Lessor and recorded in the Real Property Records
of the County in which the Property is situated, Lessor may appoint another
trustee to act in the place and stead of Trustee or any successor. Such
writing shall refer to this Restated Lease Supplement and set forth the date,
book and page of its recordation. The recordation of such instrument of
substitution shall discharge Trustee herein named and shall appoint the new
trustee as the trustee hereunder with the same effect as if originally named
trustee herein. A writing recorded pursuant to the

                                       B-6
<PAGE>

provisions of this paragraph shall be conclusive proof of the proper
substitution of such new trustee.

                            [signature page follows]

                                       B-7
<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Restated Lease Supplement to be duly executed by an officer thereunto duly
authorized as of the date and year first above written.

                               LEASE PLAN NORTH AMERICA, INC.,

                               an Illinois corporation, as Lessor

                               By:
                                  ---------------------------------------
                               Name:
                                    -------------------------------------
                               Title:
                                     ------------------------------------

                               TRIQUINT SEMICONDUCTOR TEXAS,
                               LP, a Texas limited partnership, as Lessee

                               By:  TriQuint Texas General Holding
                                    Company, its general partner

                               By:
                                  ---------------------------------------
                               Name:
                                    -------------------------------------
                               Title:
                                     ------------------------------------

                                       B-8
<PAGE>

STATE OF                           )
         ---------------------------
                                     SS::
COUNTY OF                          )
          --------------------------

         Before me, the undersigned, a Notary Public within and for the State
and County aforesaid, personally appeared _______________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged [himself/herself] to be a Vice
President of LEASE PLAN NORTH AMERICA, INC., a corporation, and that [he/she]
as such __________________, being duly authorized so to do, executed the
foregoing instrument for the purposes therein contained by signing the name
of the corporation by [himself/herself] as such Vice President.

         WITNESS my hand and seal, at office, on this the ____ day of August,
2000.

                                         -------------------------------------
                                                    Notary Public

My Commission Expires:

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

                                       B-9
<PAGE>

STATE OF                           )
         ---------------------------
                                     SS::
COUNTY OF                          )
          --------------------------

         Before me, the undersigned, a Notary Public within and for the State
and County aforesaid, personally appeared __________________, with whom I am
personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged [himself/herself] to be the
_________ of TriQuint Texas General Holding Company, a corporation and the
general partner of TriQuint Semiconductor Texas, LP, a limited partnership,
and that [he/she] as such _________, being duly authorized so to do, executed
the foregoing instrument for the purposes therein contained by signing the
name of the corporation by [himself/herself], as such _________, as general
partner of TriQuint Semiconductor Texas, LP.

         WITNESS my hand and seal, at office, on this the ____ day of August,
2000.

                                         -------------------------------------
                                                    Notary Public

My Commission Expires:

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

                                       B-10

<PAGE>

THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.

         Receipt of this original counterpart of the foregoing Restated
Lease Supplement is hereby acknowledged as of __________________. _______.

                                   ABN AMRO BANK N.V., as Agent

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------

                                   By:
                                      ----------------------------------------
                                   Name:
                                        --------------------------------------
                                   Title:
                                         -------------------------------------

                                       B-11
<PAGE>

                                   SCHEDULE I

                 TO AMENDED AND RESTATED LEASE SUPPLEMENT NO. 1

                        DESCRIPTION OF EXISTING FACILITY,
                 TENANT IMPROVEMENTS AND EXPANSION IMPROVEMENTS

                                       B-12
<PAGE>

                                   EXHIBIT C

                                  TO THE LEASE

                          [FORM OF EQUIPMENT SCHEDULE]

                           EQUIPMENT SCHEDULE NO. ___

         Forming a part of Master Lease dated as of August ___, 2000 (the
"LEASE"), between LEASE PLAN NORTH AMERICA, INC., as the Lessor (the
"LESSOR"), and TRIQUINT SEMICONDUCTOR TEXAS, LP, a Texas limited partnership,
as the Lessee (the "LESSEE").

         1. EQUIPMENT. The Equipment leased hereunder shall be as set forth
in the schedule attached hereto as Annex A.

               TOTAL PROPERTY IMPROVEMENTS COST:  $____________

         2. TERM. Upon and after the date of execution hereof, the Equipment
shall be subject to the terms and conditions provided herein and in the Lease
(which is incorporated herein by reference).

         3. RENT. From and after the date hereof, the Basic Rent for said
Equipment during the Term shall be payable on the dates and in the amounts
set forth in Article III of the Lease which is incorporated herein by
reference.

         4. LESSEE CONFIRMATION. The Lessee hereby confirms and warrants to
the Lessor that the Equipment: (a) was duly delivered to the Lessee on or
prior to the date hereof at the locations specified in Section 5 hereof; (b)
has been received, inspected and determined to be in compliance with all
applicable specifications and that the Equipment is hereby accepted for all
purposes of the Lease; and (c) is a part of the "Equipment" referred to in
the Lease and is taken subject to all terms and conditions therein and herein
provided.

         5. LOCATION  OF  EQUIPMENT.  The  locations  of the  Equipment  are
specified  on the  Schedule  of Equipment attached hereto as ANNEX A.

         6. FINANCING STATEMENTS. ANNEX B attached hereto specifies the
location of all UCC financing statements or other similar documents under
applicable law covering the Equipment.

                          [signature page follows]

                                       C-1
<PAGE>

         Date of Execution:  ____________, ____

LEASE PLAN NORTH AMERICA, INC.,     TRIQUINT SEMICONDUCTOR TEXAS,
an Illinois corporation             LP, a Texas limited partnership

                                    By:  TriQuint Texas General Holding
                                         Company, its general partner

By:                                 By:
   -----------------------------       -----------------------------
Name:                               Name:
     ---------------------------         ---------------------------
Title:                              Title:
      --------------------------          --------------------------

                                       C-2
<PAGE>

                                     ANNEX A

                              TO EQUIPMENT SCHEDULE

                                    EQUIPMENT

Approved by ____________________________________ Page No. ___ of ___ total pages
             (The Lessee to initial each page)

Attached Bill of Sale dated       Equipment located at:

---------------, ----
                                  -------------------------
and                               Street No.

                                  ---------   --------    --------   --------
Equipment Schedule No. ___.         City       County       State       Zip

            This location is      owned, X leased, X mortgaged.
                             ---        ---       ---

        MANUFACTURER AND/OR
           VENDOR NAME &
            INVOICE NO.          DESCRIPTION           EQUIPMENT COST

                            See Schedule 1 Attached

                                       C-3
<PAGE>

                                     ANNEX B

                              TO EQUIPMENT SCHEDULE

                     FINANCING STATEMENTS COVERING EQUIPMENT

  SECURED PARTY         STATEMENT NO.        FILING DATE        FILING LOCATION
  -------------         -------------        -----------        ---------------

                                       C-4
<PAGE>

                                    EXHIBIT D

                                  TO THE LEASE

                       LEGAL DESCRIPTION OF LAND INTEREST

         Being Lot 1, in Block 1, of TELECOM INDUSTRIAL PARK (Replat), an
addition to the City of Richardson, Collin County, Texas, according to the
Map or Plat thereof recorded in Volume J, Page 733, Map and Plat Records of
Collin County, Texas.

                                       D-1<PAGE>

                   SECOND AMENDED AND RESTATED LOAN AGREEMENT

                                  By and Among

              WASHINGTON MUTUAL BANK doing business as WESTERN BANK

                              BANK OF AMERICA, N.A.

              The Several Lenders from Time to Time Parties Hereto

                                 as the Lenders

                                       and

              WASHINGTON MUTUAL BANK doing business as WESTERN BANK

                         as the Letter of Credit Issuer

                                       and

                               CUTTER & BUCK INC.

                                 as the Borrower

                                       and

              WASHINGTON MUTUAL BANK doing business as WESTERN BANK

   as the Administrative Agent to the Lenders and the Letter of Credit Issuer

                         Dated as of July 28, 2000

<PAGE>

<TABLE>
<CAPTION>

<S>                                                                                                                <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.........................................................................2
         Section 1.1       Certain Defined Terms...................................................................2
         Section 1.2       Computation of Time Periods.............................................................10
         Section 1.3       Accounting Terms........................................................................10

ARTICLE II AMOUNTS AND TERMS OF THE BORROWINGS.....................................................................10
         Section 2.1       The Facilities..........................................................................10
         Section 2.2       The Borrowings..........................................................................11
         Section 2.3       Making the Borrowings...................................................................18
         Section 2.4       Interest Rates; Late Charges............................................................19
         Section 2.5       Repayment...............................................................................20
         Section 2.6       Fees....................................................................................21
         Section 2.7       Prepayments.............................................................................21
         Section 2.8       Payments and Computations...............................................................21
         Section 2.9       Increased Costs.........................................................................22
         Section 2.10      Illegality..............................................................................23
         Section 2.11      Prepayment Indemnity; Fee...............................................................23
         Section 2.12      Evidence of Debt........................................................................25
         Section 2.13      Collateral..............................................................................25
         Section 2.14      Use of Proceeds finance the Borrower's equipment and leasehold improvements.............25

ARTICLE III CONDITIONS OF BORROWING................................................................................25
         Section 3.1       Conditions Precedent to Effective Date..................................................25
         Section 3.2       Conditions Precedent to Each Borrowing..................................................26

ARTICLE IV REPRESENTATIONS AND WARRANTIES..........................................................................27
         Section 4.1       Organization............................................................................27
         Section 4.2       Authorization...........................................................................27
         Section 4.3       Financial Information...................................................................27
         Section 4.4       Legal Effect............................................................................27
         Section 4.5       Properties..............................................................................28
         Section 4.6       Hazardous Substances....................................................................28
         Section 4.7       Litigation and Claims...................................................................28
         Section 4.8       Taxes...................................................................................28
         Section 4.9       Lien Priority...........................................................................28
         Section 4.10      Binding Effect..........................................................................28
         Section 4.11      Commercial Purposes.....................................................................28
         Section 4.12      Employee Benefit Plans..................................................................28
         Section 4.13      Location of The Borrower's Offices and Records..........................................29
         Section 4.14      Information.............................................................................29
         Section 4.15      Survival of Representations and Warranties..............................................29

ARTICLE V COVENANTS OF THE BORROWER................................................................................29
         Section 5.1       Affirmative Covenants...................................................................29
         Section 5.2       Negative Covenants......................................................................32

                                       i

<PAGE>

         Section 5.3       Financial Covenants.....................................................................33

ARTICLE VI EVENTS OF DEFAULT.......................................................................................34
         Section 6.1       Events of Default.......................................................................34
         Section 6.2       Remedies................................................................................35
         Section 6.3       Adjustments; Right of Set-Off...........................................................36
         Section 6.4       Cumulative Remedies.....................................................................36
         Section 6.5       Application of Payments.................................................................37

ARTICLE VII THE ADMINISTRATIVE AGENT...............................................................................37
         Section 7.1       Appointment.............................................................................37
         Section 7.2       Delegation of Duties....................................................................37
         Section 7.3       Exculpatory Provisions..................................................................38
         Section 7.4       Reliance by Administrative Agent........................................................38
         Section 7.5       Notice of Default.......................................................................38
         Section 7.6       Non-Reliance on Administrative Agent and Other Lenders..................................38
         Section 7.7       Indemnification.........................................................................39
         Section 7.8       Administrative Agent in Its Individual Capacity.........................................39
         Section 7.9       Successor Administrative Agent..........................................................39

ARTICLE VIII MISCELLANEOUS.........................................................................................40
         Section 8.1       Amendments..............................................................................40
         Section 8.2       Notices.................................................................................40
         Section 8.3       No Waiver; Remedies.....................................................................41
         Section 8.4       Costs and Expenses; Indemnification.....................................................41
         Section 8.5       Binding Effect; Successors and Assigns; Participations and Assignments..................42
         Section 8.6       Execution in Counterparts...............................................................44
         Section 8.7       Governing Law...........................................................................44
         Section 8.8       Mediation/Arbitration Provisions........................................................44
         Section 8.9       Severability............................................................................46
         Section 8.10      Entire Agreement........................................................................46
         Section 8.11      Descriptive Headings....................................................................46
         Section 8.12      Gender and Number.......................................................................46
         Section 8.13      Confirmation of Security Documents......................................................46

</TABLE>

                                       ii
<PAGE>

EXHIBIT A-1           FORM OF REVOLVING FACILITY NOTE
EXHIBIT A-2           FORM OF TERM FACILITY NOTE
EXHIBIT B             FORM OF NOTICE OF BORROWING
EXHIBIT C             FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT D             COMMITMENT AMOUNTS

                                      iii

<PAGE>

                       AMENDED AND RESTATED LOAN AGREEMENT

     THIS AMENDED AND RESTATED LOAN AGREEMENT (this "Agreement") dated as of
JULY 28, 2000 is made by and among CUTTER & BUCK INC., a Washington
corporation (the "Borrower"), WASHINGTON MUTUAL BANK doing business as
WESTERN BANK ("Western Bank"), BANK OF AMERICA, N.A. ("BofA"), the several
banks and other financial institutions from time to time parties to this
Agreement (including Western Bank and BofA in their respective capacities as
lenders, the "Lenders"), Western Bank, as issuer of letters of credit (the
"Letter of Credit Issuer") and as issuer of credit cards (the "Credit Card
Issuer"), and Western Bank, as administrative agent for the Lenders, the
Letter of Credit Issuer and the Credit Card Issuer (in such capacity, the
"Administrative Agent"), and amends and restates in its entirety the Amended
and Restated Loan Agreement dated as of April 28, 1999 among the Borrower,
Western Bank and BofA (then known as Bank of America National Trust and
Savings Association doing business as Seafirst Bank) (the "Original Loan
Agreement").

                                    RECITALS

     The Borrower, Western Bank and BofA are parties to the Original Loan
Agreement pursuant to which Western Bank and BofA agreed to provide certain
credit facilities to the Borrower. The Borrower, Western Bank and BofA have
agreed, among other things, to increase the amount of the commitment under
the Original Loan Agreement, to amend certain financial covenants and to
extend the termination date of the Original Loan Agreement. The Borrower,
Western Bank and BofA desire to amend and restate the Original Loan Agreement
to reflect the foregoing.

     Accordingly, the parties agree as follows:

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

     Section 1.1  CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):

     "ACCEPTANCE" means a Draft presented to the Letter of Credit Issuer and
accepted by the Letter of Credit Issuer in accordance with Section 2.2(d).

     "ADVANCE" means an advance to the Borrower pursuant to Article II, and
refers to a Floating Rate Advance or a Fixed Rate Advance (each of which
shall be a "TYPE" of Advance). Revolving Facility Advances may be borrowed as
Floating Rate Advances or LIBOR Rate Advances. Term Facility Advances may be
borrowed as Floating Rate Advances, LIBOR Rate Advances or Term Rate Advances.

                                       2

<PAGE>

     "AFFILIATE" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 20% or more of
the voting interests of such Person or (b) direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.

     "AUTHORIZED OFFICER" means the President, any Senior Vice-President or
the Chief Financial Officer or Controller of the Borrower.

     "BORROWER" means Cutter & Buck Inc., a Washington corporation.

     "BORROWING" means a borrowing consisting of (a) the making of an
Advance, (b) the issuance of a Letter of Credit, (c) the acceptance of Drafts
or (d) the funding of risk participations pursuant to Section 2.2(b)(iii) or
2.2(c)(ii).

      "BORROWING REQUEST" means a request made by the Borrower to the
Administrative Agent for (a) a Borrowing or (b) the conversion or
continuation of an Advance pursuant to the terms of this Agreement and shall,
if requested by the Administrative Agent, be in the form of a Notice of
Borrowing attached as Exhibit B.

     "BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in Seattle, Washington and, if the applicable Business
Day relates to any LIBOR Rate Advances, on which dealings are carried on in
the London interbank market.

     "CAPITAL EXPENDITURES" means expenditures in respect of the purchase or
other acquisition of fixed or capital assets that are required to be
capitalized for financial reporting purposes in accordance with GAAP.

     "COLLATERAL" means the collateral described in the Security Agreement or
any other Loan Document at any time now or hereafter in effect between the
Borrower and the Administrative Agent, acting on behalf and for the benefit
of each of the Lenders, the Letter of Credit Issuer and the Credit Card
Issuer, including all items of real and personal property in which the
Administrative Agent holds a Lien to secure the credit facilities provided in
this Agreement.

     "COMMERCIAL LETTERS OF CREDIT" means irrevocable commercial letters of
credit issued pursuant to Section 2.2(b) from time to time by the Letter of
Credit Issuer or one of its correspondents for the account of the Borrower.

     "COMMITMENT" means, with respect to each Lender, the dollar amount
constituting a portion of the Revolving Commitment set forth opposite such
Lender's name on Exhibit D hereof, including any recalculation thereof
resulting from an assignment of any portion of its rights and obligations
under this Agreement pursuant to Section 8.5(c).

     "COMMITMENT PERCENTAGE" means, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the Revolving
Commitment.

                                       3

<PAGE>

     "CREDIT CARDS" means one or more Business Visa Cards issued pursuant to
Section 2.2(c) for the account of the Borrower.

     "CREDIT CARD PARTICIPANT" means as to any Credit Card, each Lender other
than the Letter of Credit Issuer and BofA.

     "CREDIT CARD ISSUER" means Washington Mutual Bank doing business as
Western Bank.

     "DEBT SERVICE" means, as of the last day of any fiscal quarter, the sum
of (a) interest on Indebtedness paid during the fiscal quarter then ended and
the immediately preceding three fiscal quarters, (b) factoring commissions
paid during the fiscal quarter then ended and the immediately preceding three
fiscal quarters, (c) all amounts required to be paid or prepaid with respect
to Funded Indebtedness within one year of such date and (d) all amounts
required to be paid or prepaid with respect to capital leases or long term
operating leases within one year of such date.

     "DEFAULT" has the meaning specified in the definition of "Event of
Default."

     "DEFAULT RATE" has the meaning specified in Section 2.4(b).

     "DOLLARS", "DOLLARS" or the symbol "$" means lawful money of the United
States of America denominated in United States dollars.

     "DRAFT" has the meaning specified in Section 2.2(d).

     "EBITDA" means, for any period, the net income or net loss of the
Borrower and its subsidiaries computed on a consolidated basis in accordance
with GAAP (but excluding extraordinary gains or losses), after restoring
amounts deducted for, without duplication, (a) interest expense, (b) taxes
based upon net income and (c) depreciation and amortization.

     "EFFECTIVE DATE" means July 31, 2000.

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

     "EVENT OF DEFAULT" means any of the events specified in Section 6.1,
provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.

     "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.

                                       4

<PAGE>

     "FIXED RATE" means a LIBOR Rate or a Term Rate.

     "FIXED RATE ADVANCE" means a LIBOR Rate Advance or a Term Rate Advance.

     "FLOATING RATE" means, with respect to any Floating Rate Advance, the
interest rate per annum reported as the Prime Rate in the Money Rates section
of the Wall Street Journal. If the Wall Street Journal ceases reporting the
Prime Rate as currently reported, the Floating Rate shall be another
reasonably comparable rate selected by the Lender.

     "FLOATING RATE ADVANCE" means an Advance which bears interest at a rate
determined by reference to the Floating Rate as provided in Section 2.4(a)(i).

     "FUNDED DEBT" means, as of any date of determination, (a) the
Indebtedness of the Borrower under this Agreement, plus (b) any other
Indebtedness of the Borrower or its subsidiaries that (i) has a stated
maturity date in excess of one year from the date of the creation of such
Indebtedness or (ii) has a stated maturity date of one year or less from the
date of creation of such Indebtedness but is renewable or extendable at the
option of the Borrower.

     "GAAP" means generally accepted accounting principles in the United
States.

     "INDEBTEDNESS" means, with respect to any Person: (i) all items of
indebtedness or liability which would be included in determining total
liabilities as shown on the liability side of a balance sheet as of the date
as of which indebtedness is determined; (ii) indebtedness secured by any Lien
on property carried on the asset side of the balance sheet of such Person
whether or not such indebtedness shall have been assumed; (iii) any other
indebtedness or liability for borrowed money or for the deferred purchase
price of property or services for which such Person is directly or
contingently liable as obligor, guarantor, or otherwise, or in respect of
which such Person otherwise assures a creditor against loss; and (iv) any
other obligations of such Person under leases which shall have been or,
pursuant to GAAP, should be recorded as capital leases.

     "INTEREST PERIOD" means, for each Fixed Rate Advance, the period
beginning on the date of such Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be (a) in the case of a LIBOR
Rate Advance, one, two, three or six months, and (b) in the case of a Term
Rate Advance, one, three, four or five years, in each case as selected by the
Borrower in its applicable Borrowing Request; provided, however, that:

        (i) no Interest Period shall end after the Termination Date,
in the case of a Revolving Facility Advance, or after the Maturity Date, in
the case of a Term Facility Advance; and

       (ii) if the last day of such Interest Period would otherwise
occur on a day which is not a Business Day, such last day shall be extended
to the next succeeding Business Day, EXCEPT if such Interest Period is for a
LIBOR Rate Advance and such extension would

                                       5

<PAGE>

cause such last day to occur in a new calendar month, then such last day
shall occur on the next preceding Business Day.

     "LETTER OF CREDIT" means any letter of credit issued by the Letter of
Credit Issuer or one of its correspondents for the account of the Borrower in
accordance with the provisions of Section 2.2(b), which letter of credit
shall be: (i) in the case of a Commercial Letter of Credit, issued in
connection with the purchase of inventory by the Borrower and, in the case of
a Standby Letter of Credit, issued for such other purposes, if any, for which
the Borrower has historically obtained letters of credit or for such other
purposes as are acceptable to the Lender; (ii) denominated in United States
Dollars, and (iii) otherwise in such form as may be approved from time to
time by the Letter of Credit Issuer.

     "LETTER OF CREDIT AGREEMENTS" means, collectively, the Continuing
Agreement for Commercial Letters of Credit dated as of January 29, 1997 from
the Borrower to the Letter of Credit Issuer and the Continuing Agreement for
Standby Letters of Credit dated as of January 29, 1997 from the Borrower to
the Letter of Credit Issuer.

     "LETTER OF CREDIT ISSUER" means Washington Mutual Bank doing business as
Western Bank.

     "LETTER OF CREDIT PARTICIPANT" means as to any Letter of Credit, each
Lender other than the Letter of Credit Issuer.

     "LIBOR RATE" means, with respect to any LIBOR Rate Advance for any
Interest Period, an interest rate per annum (rounded upward to the next 1/100
of 1%) reported as the London Interbank Offered Rate in the Money Rates
section of the Wall Street Journal published on the Business Day next
preceding the date such LIBOR Rate Advance is made (which rate may be
reported as of an earlier date) for maturities equal to the requested
Interest Period. Unless and until the Wall Street Journal publishes such rate
for two-month periods, the LIBOR Rate for two-month Interest Periods shall be
the average of the one-month and the three-month London Interbank Offered
Rates as reported in the Wall Street Journal on the relevant day. If the Wall
Street Journal ceases reporting London Interbank Offered Rates comparable to
those currently reported, the LIBOR Rate shall be another reasonably
comparable rate selected by the Lender.

     "LIBOR RATE ADVANCE" means an Advance which bears interest at a rate
determined by reference to the LIBOR Rate as provided in Section 2.4(a)(ii).

     "LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, any lease in the
nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).

     "LOAN DOCUMENTS" means this Agreement, the Notes, the Letter of Credit
Agreements, the Security Documents and all other documents, instruments and
agreements related thereto, including all documentation delivered pursuant to
Section 2.2(b)(ii).

                                       6
<PAGE>

     "MATURITY DATE" means, with respect to each Term Facility Advance,
August 1, 2005.

     "NOTES" means the Revolving Facility Note and the Term Facility Note.

     "NOTICE OF BORROWING" means a written notice in the form of Exhibit B.

     "OUTSTANDING" means, as of any date of determination, (a) with respect
to Letters of Credit, all Letters of Credit issued pursuant to Section
2.2(b), with respect to which the full amount available to be drawn
thereunder has not been drawn and which have not expired at their stated
expiration dates or otherwise in accordance with their terms or been
surrendered to the Letter of Credit Issuer for cancellation, or (b) with
respect to Advances, the principal amount thereof remaining unpaid and owing
by the Borrower. As used in connection with Acceptances, the term
"Outstanding" shall have the meaning specified in Section 2.2(d)(v).

     "PERMITTED LIENS" means (a) Liens securing Indebtedness owed by the
Borrower to the Lenders, (b) Liens for taxes, assessments or similar charges
either not yet due or being contested in good faith, (c) Liens of material
men, mechanics, warehousemen or carriers, or other like Liens arising in the
ordinary course of business and securing obligations which are not yet
delinquent, (d) purchase money Liens or purchase money security interests
upon or in any property acquired or held by the Borrower in the ordinary
course of business to secure Indebtedness outstanding on the Effective Date
or permitted to be incurred under Section 5.2(a), (e) Liens which, as of the
Effective Date, have been disclosed to and approved by the Lender in writing,
(f) Liens which in the aggregate constitute an immaterial and insignificant
monetary amount with respect to the net value of the Borrower's assets and
(g) Liens granted pursuant to capital leases.

     "PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or any governmental authority or entity.

     "REQUIRED LENDERS" means, at any date, the Lenders having an aggregate
Commitment Percentage equal to 100% of the Commitment.

     "REVOLVING COMMITMENT" has the meaning specified in Section 2.1.

     "REVOLVING FACILITY" has the meaning specified in Section 2.1(a).

     "REVOLVING FACILITY ADVANCES" means Advances by the Lenders to the
Borrower under the Revolving Facility as Floating Rate Advances or LIBOR Rate
Advances.

     "REVOLVING FACILITY NOTE" means the promissory note payable to the order
of each of the Lenders, in substantially the form of Exhibit A-1, in the
amount of such Lender's Commitment Percentage, evidencing the aggregate
Indebtedness of the Borrower to such Lender resulting from Borrowings under
the Revolving Facility.

                                       7
<PAGE>

     "SECURITY AGREEMENT" means the Amended and Restated Security Agreement
dated the Effective Date between the Borrower and the Administrative Agent,
as secured party on behalf of the Lenders, the Letter of Credit Issuer and
the Credit Card Issuer.

     "SECURITY DOCUMENTS" means the Security Agreement and all other
documents, instruments and agreements (a) under which any Person grants a
security interest to the Administrative Agent on behalf and for the benefit
of the Lenders, the Letter of Credit Issuer and the Credit Card Issuer for
the purpose of securing the obligations of the Borrower contained in this
Agreement and the other Loan Documents, or (b) which relate to the perfection
of such a security interest.

     "STANDBY LETTERS OF CREDIT" means irrevocable standby letters of credit
issued pursuant to Section 2.2(b) from time to time by the Letter of Credit
Issuer or one of its correspondents for the account of the Borrower.

     "TANGIBLE NET WORTH" means the sum of common stock, additional paid in
capital and retained earnings of the Borrower and its subsidiaries calculated
on a consolidated basis in accordance with GAAP.

     "TERM COMMITMENT" has the meaning specified in Section 2.1.

     "TERM FACILITY" has the meaning specified in Section 2.1(b).

     "TERM FACILITY ADVANCES" means Advances by the Term Lender to the
Borrower under the Term Facility as Floating Rate Advances, LIBOR Rate
Advances or Term Rate Advances.

     "TERM FACILITY NOTE" means the promissory note payable to the order of
the Term Lender, in substantially the form of Exhibit A-2 evidencing the
aggregate Indebtedness of the Borrower to the Term Lender resulting from
Borrowings under the Term Facility.

     "TERM LENDER" means Washington Mutual Bank doing business as Western
Bank.

     "TERM RATE" means, with respect to any Term Rate Advance, for any
Interest Period, an interest rate per annum (rounded upward to the next 1/100
of 1%) equal to the yield adjusted to constant maturity on U.S. Treasury
securities as reported by the Federal Reserve Bank of San Francisco based on
composites of quotations by five leading U.S. government securities dealers
to the Federal Reserve Bank of New York for maturities equal to the requested
Interest Period. Unless and until the Federal Reserve Bank reports yields
adjusted to constant maturity on U.S. Treasury securities with maturities of
four years, the Term Rate applicable to any Interest Period of four years
shall be determined by straight-line interpolation between the yield on U.S.
Treasury securities with maturities of two years and three years. If the
Federal Reserve Bank ceases reporting the U.S. Treasury yields adjusted to
constant maturities, the Term Rate shall be another reasonably comparable
rate selected by the Lender.

     "TERM RATE ADVANCE" means an Advance which bears interest at a rate
determined by reference to the Term Rate as provided in Section 2.4(a)(iii).

                                       8
<PAGE>

     "TERMINATION DATE" means August 1, 2002, unless earlier terminated
pursuant to Section 6.2.

     "TYPE" has the meaning specified in the definition of "Advance".

     "UCC" means the Uniform Commercial Code as enacted in the state of
Washington (presently Revised Code of Washington title 62A).

     "UNUSED ACCEPTANCE SUBLIMIT" means, as of any date of determination, an
amount equal to $5,000,000 minus the sum of (a) the aggregate amount of all
Acceptances Outstanding and/or which have not been converted into a Floating
Rate Advance as provided in Section 2.2(d)(vii) and (b) the aggregate amount
of Acceptances for which a Borrowing Request has been made but for which
Drafts have not been accepted by the Letter of Credit Issuer.

     "UNUSED REVOLVING FACILITY COMMITMENT" means, as of any date of
determination, an amount equal to the Revolving Commitment minus the sum of:
(a) the aggregate principal amount of all Revolving Facility Advances
Outstanding, (b) the aggregate amount available to be drawn under all Letters
of Credit Outstanding and the aggregate amount drawn under Letters of Credit
for which the Letter of Credit Issuer has not been reimbursed or which has
not been converted into a Floating Rate Advance, as provided in Section
2.2(b)(iii), (c) the aggregate amount of all Acceptances Outstanding which
have not been paid or converted into a Floating Rate Advance, as provided in
Section 2.2(d)(vii), (d) the aggregate principal, stated or face amounts of
Revolving Facility Advances, Letters of Credit and Acceptances for which a
Borrowing Request has been made pursuant to Section 2.3(a) but which have not
been disbursed or issued as of the date of determination and (e) the Credit
Card sublimit of $250,000.

     "UNUSED SLC SUBLIMIT" means, as of any date of determination, an amount
equal to $8,000,000 minus the sum of (a) the aggregate amount available to be
drawn under all Standby Letters of Credit Outstanding and the aggregate
amount drawn under Standby Letters of Credit for which the Letter of Credit
Issuer has not been reimbursed or which has not been converted into a
Floating Rate Advance, as provided in Section 2.2(b)(iii) and (b) the
aggregate stated amounts of Standby Letters of Credit for which a Borrowing
Request has been made pursuant to Section 2.3(a) but which have not been
issued as of the date of determination.

     "UNUSED TERM FACILITY COMMITMENT" means, as of any date of
determination, an amount equal to the Term Commitment minus the sum of (a)
the aggregate principal amount of all Term Facility Advances Outstanding and
(b) the aggregate principal amount of Term Facility Advances for which a
Borrowing Request has been made pursuant to Section 2.3(a) but which have not
been issued as of the date of determination.

     "WORKING CAPITAL" means current consolidated assets of the Borrower and
its subsidiaries minus current consolidated liabilities of the Borrower and
its subsidiaries, as defined according to GAAP.

                                       9
<PAGE>

     Section 1.2  COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified
date: (a) the word "from" means "from and including," (b) the words "to" and
"until" each means "to but excluding"; and (c) the word "through" means
"through and including."

     Section 1.3  ACCOUNTING TERMS. All accounting terms not specifically
defined in this Agreement shall be construed, and all accounting procedures
shall be performed, in accordance with GAAP applicable as of the date of this
Agreement, consistently applied.

                                   ARTICLE II

                       AMOUNTS AND TERMS OF THE BORROWINGS

     Section 2.1  THE FACILITIES.

            (a)   Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make available to the Borrower for working capital
and general corporate purposes its Commitment Percentage of a revolving
credit facility and (the "Revolving Facility") in the maximum amount of
$55,000,000, subject to increase as provided in Section 2.1(c) (the
"Revolving Commitment"), consisting of (i) Floating Rate Advances and LIBOR
Advances, (ii) Standby Letters of Credit, (iii) Commercial Letters of Credit,
(iv) Credit Cards and (v) Acceptances; provided, however, that:

                  (i)   The aggregate stated amount of Standby Letters of
Credit at any time Outstanding may not exceed $8,000,000;

                  (ii)  The aggregate credit limit of all Credit Cards issued
to the Borrower may not exceed $250,000;

                  (iii) The Letter of Credit Issuer shall be obligated to issue
Commercial Letters of Credit in an aggregate stated amount equal to, but not
to exceed, the full amount of the Unused Revolving Facility Commitment;

                  (iv)  The Letter of Credit Issuer shall be obligated to issue
Standby Letters of Credit in an aggregate stated amount equal to, but not to
exceed, the full amount of the Unused SLC Sublimit; and

                  (v)   The aggregate amount of Acceptances at any time
Outstanding may not exceed $5,000,000.

            (b)   Subject to the terms and conditions of this Agreement, the
Term Lender shall make available to the Borrower for financing equipment and
leasehold improvements a line of credit (the "Term Facility") in the maximum
amount of $5,000,000 (the "Term Commitment") consisting of Floating Rate
Advances, LIBOR Rate Advances and Term Rate Advances. The Term Facility and
the Revolving Facility are sometimes collectively referred to herein as the
"Facilities".

                                       10

<PAGE>

      (c) (i) Upon written notice from the Borrower to the Administrative
Agent, given within thirty (30) days following the delivery pursuant to
Section 5.1(c)(i) of the audited consolidated financial statements of the
Borrower for the fiscal year ended April 30, 2001, the Revolving Commitment
shall be increased by $10,000,000 TO $65,000,000, provided that the
following conditions are satisfied:

            (A) EBITDA for the fiscal year ended April 30, 2001 is at least
$24,000,000; and

            (B) the number of "inventory days on hand" as of April 30, 2001
(determined as provided below) does not exceed 185.

         "Inventory days on hand" means (x) 365, divided by (y) the number
obtained by dividing (1) the cost of goods sold of the Borrower as reflected on
such financial statements by (2) inventory of the Borrower as reflected on such
financial statements.

      (ii)  In the event the Borrower elects to increase the Revolving
Commitment pursuant to clause (i) above, the Commitment of Western Bank shall
be increased by $10,000,000 to $40,000,000. The Administrative Agent shall
deliver to each Lender a new Exhibit D to this Agreement reflecting such
increase. In addition, the Borrower shall execute and deliver to Western Bank
a new Note in the principal amount of $40,000,000. Except for the foregoing
and the receipt of written notice from the Borrower pursuant to Section
2.1(c)(i) above, the increase in the Revolving Commitment provided in this
Section 2.1(c) shall take effect without any action on the part of any of
the parties hereto.

     Section 2.2  THE BORROWINGS.

     (a)  ADVANCES UNDER THE FACILITIES.

        (i) In the case of Revolving Facility Advances, each Lender agrees,
on the terms and conditions set forth below, to make its pro rata share of
Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date to the Termination Date in an aggregate amount
not to exceed such Lender's Commitment Percentage of the Unused Revolving
Facility Commitment. Within the limits of the Unused Revolving Facility
Commitment, the Borrower may request an Advance under the Revolving Facility
on any Business Day and may prepay such Advance pursuant to Section 2.7 and
re-borrow under the Revolving Facility pursuant to this Section 2.2(a).

       (ii) In the case of a Term Facility Advance, the Term Lender agrees,
on the terms and conditions set forth below, to make Advances to the Borrower
from time to time on any Business Day during the period from the Effective
Date to the Termination Date in an amount not to exceed the Unused Term
Facility Commitment. Any Borrowing under the Term Facility that is repaid
pursuant to Section 2.5(b) or prepaid pursuant to Section 2.7 may not be
reborrowed.

                                       11

<PAGE>

      (iii) Each request for an Advance shall be in an amount not less than
$500,000, or an integral multiple of $100,000 in excess thereof. At no time
may LIBOR Rate Advances bearing more than four different LIBOR Rates be
Outstanding.

     (b) ISSUANCE OF LETTERS OF CREDIT UNDER THE REVOLVING FACILITY.

        (i) The Letter of Credit Issuer agrees that it shall, on the terms
and conditions set forth below, provide Standby Letters of Credit for the
account of the Borrower; provided, however, that no Standby Letter of Credit
shall be issued if the stated amount thereof exceeds the lesser of the Unused
Revolving Facility Commitment or the Unused SLC Sublimit. No Standby Letter
of Credit shall have an expiration date that is more than ninety (90) days
after the Termination Date. A Standby Letter of Credit may provide for a
single draw or a number of partial draws, as specified by the Borrower.

       (ii) The Letter of Credit Issuer agrees that it shall, on the terms
and conditions set forth below, provide Commercial Letters of Credit for the
account of the Borrower; provided, however, that no Commercial Letter of
Credit shall be issued if the stated amount thereof exceeds the Unused
Revolving Facility Commitment. No Commercial Letter of Credit shall have an
expiration date that is more than ninety (90) days after the Termination
Date. A Commercial Letter of Credit may provide for a single draw or a number
of partial draws, as specified by the Borrower.

      (iii) The Letter of Credit Issuer hereby grants to each Letter of
Credit Participant, and, to induce the Letter of Credit Issuer to issue
Letters of Credit hereunder, each Letter of Credit Participant hereby accepts
and purchases from the Letter of Credit Issuer, on the terms and conditions
set forth below, for such Letter of Credit Participant's own account and
risk, an undivided interest equal to such Letter of Credit Participant's
Commitment Percentage in the Letter of Credit Issuer's obligations and rights
under each Letter of Credit issued by the Letter of Credit Issuer hereunder
and the amount of each draft paid by the Letter of Credit Issuer thereunder.
Each Letter of Credit Participant unconditionally agrees with the Letter of
Credit Issuer that, if a draft is paid under any Letter of Credit issued by
the Letter of Credit Issuer for which the Letter of Credit Issuer is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such Letter of Credit Participant shall, upon demand by the Letter
of Credit Issuer, pay to the Administrative Agent for the account of the
Letter of Credit Issuer an amount equal to such Letter of Credit
Participant's Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed. Any amount so paid shall be a Borrowing
hereunder.

       (iv) If any amount required to be paid by any Letter of Credit
Participant to the Letter of Credit Issuer pursuant to Section 2.2(b)(iii),
in respect of any unreimbursed portion of any payment made by the Letter of
Credit Issuer under any Letter of Credit, is paid to the Administrative Agent
for the account of the Letter of Credit Issuer within three Business Days
after the date such payment is due, such Letter of Credit Participant shall,
upon demand by the Letter of Credit Issuer, pay to the Administrative Agent
for the account of the Letter of Credit Issuer an amount equal to the product
of (a) such amount, times (b) the Federal Funds Effective Rate, during the
period from and including the date such payment is

                                     12

<PAGE>

required to the date on which such payment is immediately available to the
Administrative Agent for the account of the Letter of Credit Issuer, times
(c) a fraction the numerator of which is the number of days that elapse
during such period and the denominator of which is 360. If any such amount
required to be paid by any Letter of Credit Participant pursuant to Section
2.2(b)(iii) is not in fact made available to the Administrative Agent for the
account of the Letter of Credit Issuer by such Letter of Credit Participant
within three Business Days after the date such payment is due, the Letter of
Credit Issuer shall be entitled to recover from such Letter of Credit
Participant, on demand, such amount with interest thereon calculated from
such due date at the rate per annum applicable to Floating Rate Advances
hereunder. A certificate of any Letter of Credit Issuer submitted to any
Letter of Credit Participant with respect to any amounts owing under this
Section 2.2(b) shall be conclusive in the absence of manifest error.

        (v) Whenever, at any time after the Letter of Credit Issuer has made
payment under any Letter of Credit issued by the Letter of Credit Issuer and
has received from any Letter of Credit Participant its PRO RATA share of such
payment in accordance with Section 2.2(b)(iii), the Letter of Credit Issuer
receives any payment related to such Letter of Credit (whether directly from
the Borrower or otherwise), or any payment of interest on account thereof,
the Letter of Credit Issuer will distribute to such Letter of Credit
Participant its PRO RATA share thereof; PROVIDED, HOWEVER, that in the event
that any such payment received by the Letter of Credit Issuer shall be
required to be returned by the Letter of Credit Issuer, such Letter of Credit
Participant shall return to the Letter of Credit Issuer the portion thereof
previously distributed by the Letter of Credit Issuer to it.

       (vi) No Letter of Credit shall be issued unless it is issued in
accordance with the Letter of Credit Issuer's customary requirements,
standards, fees and procedures and as set forth in the Letter of Credit
Agreements and the Letter of Credit Issuer's other customary letter of credit
documentation requirements, nor if it is for a purpose not described in the
definition of "Letter of Credit" in Section 1.1.

      (vii) The Borrower shall reimburse the Letter of Credit Issuer for any
draw on any Letter of Credit by making payment thereof to the Lender by 3:00
P.M. (Seattle time) on the date on which such draw is paid or, if any draw is
to be made pursuant to a time draft, by 3:00 P.M. (Seattle time) at least one
Business Day prior to the maturity of such time draft. Unless reimbursement
is made by 3:00 P.M. (Seattle time) on any such date, the Borrower shall be
conclusively deemed to have made a Borrowing Request requesting a Floating
Rate Advance under the Facilities to be made on such date in an amount equal
to the amount of such draw. Such a deemed Borrowing Request will be honored
only if it would have been honored if actually made by the Borrower.

     (viii) The obligations of the Borrower to reimburse the Letter of Credit
Issuer for drawings made under each Letter of Credit shall be unconditional
and irrevocable and shall be paid strictly in accordance with the terms of
this Agreement under all circumstances, including without limitation (it
being understood that any such payment by the Borrower shall be without
prejudice to, and shall not constitute a waiver of, any rights the Borrower
might have or might acquire against the beneficiary of the Letter of Credit
as a result of the payment by the Letter of Credit Issuer of any draft or the
reimbursement by the Borrower thereof): (A) the

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<PAGE>

existence of any claim, setoff, defense or other right which the Borrower may
have at any time against a beneficiary of any Letter of Credit or against the
Letter of Credit Issuer, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction; (B) any lack
of validity or enforceability of any Letter of Credit or any other Loan
Document, (C) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (D) any interruption, error or delay in
transmission or delivery by facsimile or any other method, (E) payment by the
Letter of Credit Issuer of any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit; (F) any other circumstances or happening
whatsoever, which is similar to any of the foregoing; or (G) the fact that
any Default or Event of Default shall have occurred and be continuing.

       (ix) In connection with the Letters of Credit to be issued under the
Revolving Facility, the Borrower may submit communications (a "Faxed
Document") to Letter of Credit Issuer by facsimile transmission. With respect
to such facsimile transmission, the Borrower agrees as follows:

            (A) Each such Faxed Document shall be deemed an original document
and shall be effective for all purposes as if it were an original. The
Borrower shall retain the original of any Faxed Document and shall deliver it
to the Letter of Credit Issuer on request.

            (B) If the Borrower sends the Letter of Credit Issuer a manually
signed confirmation of a Faxed Document, the Letter of Credit Issuer shall
have no duty to compare it to the previously received Faxed Document nor
shall it have any liability or duty to act should the contents of the
confirmation differ therefrom. Any manually signed confirmation of a Faxed
Document must be conspicuously marked "previously transmitted by facsimile,"
and the Letter of Credit Issuer shall not be liable for the issuance of
duplicate Letters of Credit or amendments thereto that result from the Letter
of Credit Issuer's receipt of confirmations not so marked.

            (C) The Borrower shall have sole responsibility for the security
of using facsimile transmissions and for any authorized or unauthorized Faxed
Document received by the Letter of Credit Issuer, purportedly on behalf of
the Borrower.

            (D) The Borrower agrees to indemnify and hold harmless the Letter
of Credit Issuer from each and every claim, demand, liability, loss, cost or
expense (including attorneys' fees and expenses) which may arise or be
created by the Letter of Credit Issuer's acceptance of telecommunication
instructions in connection with any Letter of Credit, including facsimile
instructions in connection with any waiver of discrepancies.

        (x) The Borrower will promptly examine each Letter of Credit issued
hereunder, any amendments thereto and all information, documents and
instruments delivered to the Borrower from time to time by the Letter of
Credit Issuer or any of its correspondents. The Borrower shall notify the
Letter of Credit Issuer within five Business Days after receipt of any of

                                     14

<PAGE>

the foregoing if the Borrower claims that the Letter of Credit Issuer has
failed to comply with the Borrower's instructions or the Letter of Credit
Issuer's obligations with respect to such Letter of Credit or has wrongfully
honored or dishonored any presentation under the Letter of Credit or if the
Borrower claims any other irregularity. If the Borrower does not so notify
the Letter of Credit Issuer within such time period, the Borrower shall be
conclusively deemed to have waived, and therefore be precluded from
asserting, such claims.

     (c) ISSUANCE OF CREDIT CARDS UNDER THE REVOLVING FACILITY.

        (i) The Credit Card Issuer shall provide the Borrower with one or
more Credit Cards with an aggregate credit limit of $250,000 during the
period from the Effective Date through the Termination Date. The Borrower
agrees to execute the Credit Card Issuer's standard business card agreement
and any other documents the Credit Card Issuer may request in connection with
the provision of such Credit Cards.

       (ii) The Credit Card Issuer hereby grants to each Credit Card
Participant, and, to induce the Credit Card Issuer to issue Credit Cards
hereunder, each Credit Card Participant hereby accepts and purchases for the
Credit Card Issuer, on the terms and conditions set forth below, for such
Credit Card Participant's own account and risk, an undivided interest equal
to such Credit Card Participant's Commitment Percentage in the Credit Card
Issuer's obligations and rights under each Credit Card issued by the Credit
Card Issuer hereunder and the amount of each draft paid by the Credit Card
Issuer thereunder. Each Credit Card Participant unconditionally agrees with
the Credit Card Issuer that, if any amounts are disbursed under any Credit
Card issued by the Credit Card Issuer for which the Credit Card Issuer is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such Credit Card Participant shall, upon demand by the Credit Card
Issuer, pay to the Administrative Agent for the account of the Credit Card
Issuer an amount equal to such Credit Card Participant's Commitment
Percentage of the amount of such disbursement, or any part thereof, which is
not so reimbursed.

      (iii) If any amount required to be paid by any Credit Card Participant
to the Credit Card Issuer pursuant to Section 2.2(c)(ii), in respect of any
unreimbursed portion of any disbursement made by the Credit Card Issuer under
any Credit Card, is paid to the Administrative Agent for the account of the
Credit Card Issuer within three Business Days after the date such payment is
due, such Credit Card Participant shall, upon demand by the Credit Card
Issuer, pay to the Administrative Agent for the account of the Credit Card
Issuer an amount equal to the product of (a) such amount, times (b) the
Federal Funds Effective Rate, during the period from and including the date
such payment is required to the date on which such payment is immediately
available to the Administrative Agent for the account of the Credit Card
Issuer, times (c) a fraction the numerator of which is the number of days
that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any Credit Card Participant pursuant to
Section 2.2(c)(ii) is not in fact made available to the Administrative Agent
for the account of the Credit Card Issuer by such Credit Card Participant
within three Business Days after the date such payment is due, the Credit
Card Issuer shall be entitled to recover from such Credit Card Participant,
on demand, such amount with interest thereon calculated from such due date at
the rate per annum applicable to Floating Rate Advances

                                      15

<PAGE>

hereunder. A certificate of any Credit Card Issuer submitted to any Credit
Card Participant with respect to any amounts owing under this Section 2.2(c)
shall be conclusive in the absence of manifest error.

       (iv) Whenever, at any time after the Credit Card Issuer has made a
disbursement under any Credit Card issued by the Credit Card Issuer and has
received from any Credit Card Participant its PRO RATA share of such
disbursement in accordance with Section 2.2(c)(ii), the Credit Card Issuer
receives any payment related to such Credit Card (whether directly from the
Borrower or otherwise), or any payment of interest on account thereof, the
Credit Issuer will distribute to such Credit Card Participant its PRO RATA
share thereof; PROVIDED, HOWEVER, that in the event that any such payment
received by the Credit Card Issuer shall be required to be returned by the
Credit Card Issuer, such Credit Card Participant shall return to the Credit
Card Issuer the portion thereof previously distributed by the Credit Card
Issuer to it.

        (v) If the balance owing on any Credit Card issued to the Borrower
under this Section 2.2(c) is more than 60 days past due, the Administrative
Agent may terminate such Credit Card.

      (d)  ISSUANCE OF ACCEPTANCES UNDER THE REVOLVING FACILITY.

        (i) The Letter of Credit Issuer agrees that it shall, on the terms
and conditions hereinafter set forth, accept drafts (the "Drafts") drawn on
the Letter of Credit Issuer and submitted to it in connection with Commercial
Letters of Credit issued hereunder; provided, however, that no Draft will be
accepted if the face amount thereof exceeds the Unused Acceptance Sublimit.

       (ii) Each Draft presented for acceptance shall mature not later than
90 days after the date of presentation to the Letter of Credit Issuer for
acceptance; provided, however, that no Draft shall have a maturity date later
than the Termination Date unless the Letter of Credit Issuer otherwise agrees
in its sole discretion. Notwithstanding the foregoing, if any Acceptance is
Outstanding as of the Termination Date, the Borrower shall, on or before the
Termination Date, deliver to the Letter of Credit Issuer, as collateral for
the Borrower's obligations with respect to such Acceptance, immediately
available funds in an amount equal to the face amount of each such Acceptance.

      (iii) The Borrower represents and warrants that each Draft it presents
for acceptance is an eligible Draft as determined by the Federal Reserve Bank
and complies with the Federal Reserve Act and with applicable regulations of
the Board of Governors of the Federal Reserve System of the United States
governing banker's acceptances, or any successor thereto. Without limiting
the generality of the foregoing, The Borrower represents and warrants that
each Draft it presents for acceptance and discounting results from a bona
fide business transaction and (a) will grow out of one or more transactions
involving the importation or exportation of goods; (b) will grow out of one
or more transactions involving the domestic shipment of goods; or (c) will be
secured at the time of acceptance of the Draft by warehouse receipts or
similar documents conveying or securing title and covering readily marketable
goods. The Borrower represents and warrants that no other financing of the
transactions underlying any

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<PAGE>

requested Acceptance whether characterized as a loan, sale, or an account
receivable has been obtained or will be solicited or accepted and that no
lien or security interest in or rights to the subject matter under the
underlying transaction has been or will be granted to any other person
without the Letter of Credit Issuer's prior written consent. The Borrower
further represents and warrants that (x) completion of each transaction
related to a Draft is anticipated to occur on or before the maturity date of
such Draft, (y) that the maturity of each Draft will be consistent with the
period usually and reasonably necessary to finance transactions of such kind,
and (z) that no banker's acceptances other than the Acceptance requested
hereunder have been or will be outstanding with respect to the goods covered
by the Draft whose acceptance is requested hereunder.

       (iv) Each accepted Draft shall be held to maturity by the Letter of
Credit Issuer unless otherwise agreed by the Letter of Credit Issuer in its
sole discretion.

        (v) The Borrower shall pay to the Letter of Credit Issuer a fee for
the issuance of each Acceptance in an amount equal to the face amount of the
Acceptance multiplied by one and one-half percent (1.5%) per year (calculated
on the basis of a 360-day year and the actual number of days elapsed) for the
period of time from the acceptance of the Draft creating the Acceptance
through the date on which the Borrower pays such Draft in full to the Letter
of Credit Issuer and such Acceptance shall be deemed to be "Outstanding" for
that period of time. Such fee shall be paid upon acceptance of the Draft by
the Letter of Credit Issuer. In addition, the Borrower shall pay to the
Letter of Credit Issuer all of its normal and customary charges and fees for
the issuance and administration of banker's acceptances.

       (vi) The Borrower agrees to pay to the Letter of Credit Issuer the
face amount of each Acceptance together with all unpaid charges of and
expenses paid or incurred by the Letter of Credit Issuer in connection
therewith on the maturity date of such Acceptance. All such payments to be
made by the Borrower shall be made not later than 11:00 a.m. Seattle time on
the due dates thereof (or, if earlier, on the Termination Date) in the manner
provided for repayment of Advances under the terms of this Agreement.

      (vii) The Letter of Credit Issuer hereby grants to each Letter of
Credit Participant, and, to induce the Letter of Credit Issuer to accept
Drafts hereunder, each Letter of Credit Participant hereby accepts and
purchases from the Letter of Credit Issuer, on the terms and conditions set
forth below, for such Letter of Credit Participant's own account and risk, an
undivided interest equal to such Letter of Credit Participant's Commitment
Percentage in the Letter of Credit Issuer's obligations and rights under each
Draft accepted by the Letter of Credit Issuer hereunder. In the event that
the Borrower fails to pay any Acceptance in full on the maturity date
thereof, then each Letter of Credit Participant shall, upon demand by the
Letter of Credit Issuer, pay to the Letter of Credit Issuer an amount equal
to such Letter of Credit Participant's Commitment Percentage multiplied by
the amount of such Acceptance, or any part thereof which is not so
reimbursed. Such payments shall be made on the terms set forth in Section
2.2(b) applicable to payments to be made by the Letter of Credit Participants
to the Letter of Credit Issuer in respect of payments on Letters of Credit
which are not timely reimbursed by the Borrower.

                                     17

<PAGE>

      Section 2.3  MAKING THE BORROWINGS.

      (a)  PROCEDURE FOR BORROWINGS.

        (i) BORROWING REQUESTS. Each Borrowing Request for an Advance shall
be made by the Borrower to the Administrative Agent (A) in the case of
Floating Rate Advances, not later than 9:00 A.M. (Seattle time) on the day of
the proposed Borrowing; and (B) in the case of Fixed Rate Advances, not later
than 9:00 A.M. on the third Business Day prior to the date of the proposed
Borrowing. Each Borrowing Request (A) for the issuance of a Letter of Credit
shall be made by the Borrower to the Letter of Credit Issuer not later than
9:00 A.M. (Seattle time) on the date of the proposed Borrowing, and (B) for
the issuance of a Credit Card shall be made by the Borrower to the Credit
Card Issuer not later than 9:00 A.M. on the date of the proposed issuance of
a Credit Card. Each Borrowing Request shall be made by an Authorized Officer
of the Borrower by telephone or, if requested by the Administrative Agent,
the Letter of Credit Issuer or the Credit Card Issuer, by telecopy or
personal delivery, in writing, in substantially the form of Exhibit B hereto,
fully and accurately specifying the information required therein. Upon
receipt by the Administrative Agent of a Borrowing Request from the Borrower
requesting either a Floating Rate Advance or a Fixed Rate Advance under the
Revolving Facility, the Administrative Agent shall promptly notify each
Lender thereof. Thereafter, each Lender shall make the amount of its pro rata
share of each Revolving Facility Advance available to the Administrative
Agent for the account of the Borrower at the office of the Administrative
Agent specified in Section 8.2 prior to 1:00 P.M. (Seattle time), on the date
of the proposed Borrowing in funds immediately available to the
Administrative Agent. Such Revolving Facility Advance shall then be made
available to the Borrower by the Administrative Agent.

       (ii) AVAILABILITY OF BORROWINGS. The Administrative Agent shall make
Borrowings available to the Borrower as follows:

            (A) In the case of a Borrowing consisting of Advances, the
Administrative Agent will make such funds available to the Borrower in
immediately available funds to the account of the Borrower at Washington
Mutual Bank doing business as Western Bank, Account No. 201-02386601, or such
other account of the Borrower as may be approved by the Lender.

            (B) In the case of a Borrowing consisting of the issuance of a
Letter of Credit, the Letter of Credit Issuer shall deliver the Letter of
Credit to the beneficiary thereof on the date specified in the applicable
Borrowing Request.

            (C) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a Borrowing of a Revolving Facility Advance
that such Lender will not make the amount that would constitute such Lender's
Commitment Percentage of such Revolving Facility Advance available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the date of the Borrowing,
such Lender shall pay to the

                                      18

<PAGE>

Administrative Agent, on demand, such amount with interest thereon at a rate
equal to the daily average Federal Funds Effective Rate for the period until
such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this Section 2.3(a)(ii)(C) shall be
conclusive in the absence of manifest error. If such Lender's Commitment
Percentage of such Revolving Facility Advance is not made available to the
Administrative Agent by such Lender within three Business Days of the date of
such Borrowing, the Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum applicable to
Floating Rate Advances hereunder, on demand, from the Borrower.

     (b) CONVERSION AND CONTINUATION OF ADVANCES. The Borrower may, pursuant
to a Borrowing Request (A) received by the Administrative Agent not later
than 9:00 A.M. (Seattle time) on the last day of any applicable Interest
Period for a Fixed Rate Advance, elect to convert such Fixed Rate Advance to
a Floating Rate Advance; (B) received by the Administrative Agent not later
than 9:00 A.M. (Seattle time) on the third Business Day prior to the day the
conversion is to take effect, elect to convert any Floating Rate Advance to a
Fixed Rate Advance; and (C) received by the Administrative Agent not later
than 9:00 A.M. (Seattle time) on the third Business Day prior to the last day
of any applicable Interest Period for a Fixed Rate Advance, elect to convert
or continue such Fixed Rate Advance at the same or another Fixed Rate. Each
Borrowing Request shall be made by an Authorized Officer of the Borrower by
telephone or, if requested by the Administrative Agent, by telecopy or
personal delivery, in writing, in substantially the form of Exhibit B hereto,
fully and accurately specifying the information required therein.

      (c) UNAVAILABILITY OF FIXED RATES. Notwithstanding any election of a
Fixed Rate Advance for an Interest Period pursuant to Section 2.3(a) or (b)
above, if:

        (i) on or prior to the determination of the applicable interest rate
for such Advance, the Administrative Agent determines (which determination
shall be conclusive and binding) that quotations of interest rates are not
being provided in the relevant market in the relevant amount, for an Interest
Period; or

        (ii) on or prior to the first day of an Interest Period, the
Administrative Agent determines (which determination shall be conclusive and
binding) that, as a result of conditions in or generally affecting the
relevant market, the rates of interest on the basis of which the applicable
Fixed Rate is to be computed do not accurately reflect the cost to the
Lenders of making or maintaining such Advance for such Interest Period;

then the Administrative Agent shall give the Borrower prompt notice thereof
by telephone and the election by the Borrower of a Fixed Rate Advance for
such Interest Period shall not be effective, and such Advance shall be made
as a Floating Rate Advance.

     Section 2.4  INTEREST RATES; LATE CHARGES.

     (a)  ADVANCES. The Borrower shall pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal
amount is paid in full, at the following rates:

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<PAGE>

        (i) FLOATING RATE ADVANCES. Except to the extent the Borrower has
made an effective election of a Fixed Rate with respect to such Advance
pursuant to Section 2.3(a) or (b), at a rate per annum equal at all times to
the Floating Rate in effect from time to time, payable monthly on the first
day of each month while such Advance is Outstanding.

       (ii) LIBOR RATE ADVANCES. If the Borrower has made an effective
election of a LIBOR Rate with respect to such Advance, at a rate per annum
equal at all times during each Interest Period for such Advance to the sum of
the LIBOR Rate for the applicable Interest Period plus one and three-quarters
percent (1.75%) per annum, payable on the last day of each such Interest
Period; provided, that if the Interest Period is longer than three months,
interest shall be payable on the last day of each three-month period during
such Interest Period and on the last day of such Interest Period.

      (iii) TERM RATE ADVANCES. If the Borrower has made an effective
election of a Term Rate with respect to such Advance, at a rate per annum
equal at all times during each Interest Period for such Advance to the sum of
the Term Rate for the applicable Interest Period plus two percent (2%) per
annum, payable on the first day of each month.

     (b) DEFAULT RATE. Any amount owing by the Borrower under this
Agreement or any other Loan Document which is not paid when due (whether at
stated maturity, by acceleration or otherwise) shall bear interest, from the
date on which such amount is due until such amount is paid in full, payable
on demand, at a rate per year equal at all times to the greater of (i) the
Floating Rate plus three percent (3%) and (ii) with respect to any Fixed Rate
Advance, the Fixed Rate then in effect plus three percent (3%).

     (c) LATE CHARGE. If any payment due hereunder in respect of any
Borrowing Outstanding is ten (10) days or more late, the Borrower shall be
charged two percent (2%) of such payment or $25.00, whichever is greater;
provided that no such amount shall be charged on or after the date on which
the Administrative Agent has declared all amounts owing hereunder to be due
and payable as provided in Section 6.2.

     Section 2.5  REPAYMENT.

     (a) BORROWINGS UNDER THE REVOLVING FACILITY. The Borrower shall repay
the outstanding principal amount of each Revolving Facility Advance made by
the Lenders on the Termination Date, together with all accrued and unpaid
interest thereon. The Borrower shall reimburse the Letter of Credit Issuer
for all draws on each Letter of Credit as provided in Section 2.2(b)(vii).

     (b) BORROWINGS UNDER THE TERM FACILITY. The Borrower shall repay the
aggregate principal amount of all Term Facility Advances that are Outstanding
on August 1, 1999 (the "1999 Principal Amount") in installments equal to 1/7
of the 1999 Principal Amount on each August 1, 2000, August 1, 2001, August
1, 2002, August 1, 2003 and August 1, 2004 and in a final installment equal
to the unpaid balance of the 1999 Principal Amount on the Maturity Date,
together with all accrued and unpaid interest thereon.

                                       20

<PAGE>

     Section 2.6  FEES.

     (a)  REVOLVING FACILITY FEES.

        (i) UPFRONT FACILITY FEE. On the Effective Date, the Borrower shall
pay to the Administrative Agent (A) for the account of the Lenders a facility
fee equal to 1/10 of one percent (.10%) of the Total Commitment and (B) for
the account of Western Bank a facility fee equal to $10,000 in consideration
of Western Bank's agreement to increase its Commitment on the terms and
subject to the conditions set forth in Section 2.1(c).

       (ii) UNUSED COMMITMENT FEE. On each September 30, December 31, March
31 and June 30, commencing September 30, 2000, the Borrower shall pay to the
Administrative Agent for the benefit of the Lenders an unused commitment fee
equal to 15/100s of one percent (.15%) per annum of the amount equal to (A)
the Total Commitment minus (B) the average of the aggregate principal and
stated amounts of Advances and Letters of Credit Outstanding on the last day
of each month in the fiscal quarter then ended; provided, however, that the
amount of such fee payable on September 30, 2000 shall be calculated at the
rate of .1875% per annum for the period from June 30, 2000 through July 31,
2000 and at the rate of .15% per annum for the period from August 1, 2000
through September 30, 2000.

     (b) TERM FACILITY FEES. On the date of each Term Facility Advance, the
Borrower shall pay to the Term Lender a facility fee equal to 1/2% of the
principal amount of such Term Facility Advance.

     (c) LETTER OF CREDIT FEES. The fees and charges for the issuance,
payment and administration of Letters of Credit are set forth in the Letter
of Credit Agreements.

     (d) ADMINISTRATIVE AGENT FEE. On the Effective Date, the Borrower shall
pay the Administrative Agent from its own account the "Agent Bank Fee" as set
forth in the letter dated June 28, 2000 from the Administrative Agent to the
Borrower.

     Section 2.7  PREPAYMENTS. If the Borrower desires to prepay any Advances,
the Borrower shall give the Administrative Agent the same number of Business
Days' written notice required in Section 2.3(a) for a Borrowing Request given
with respect to Advances, specifying the proposed date and aggregate
principal amount of the prepayment and the Interest Period or Interest
Periods (if any) relating to such Advances. If notice of prepayment is given,
the Borrower shall prepay the Advances comprising the same Borrowing in whole
or in part with (A) accrued interest to the date of such prepayment on the
amount prepaid and (B) in the case of Fixed Rate Advances, any amounts
required to be paid pursuant to Section 2.11.

     Section 2.8  PAYMENTS AND COMPUTATIONS.

     (a) The Borrower shall make each payment hereunder and under the Note
not later than 11:00 A.M. (Seattle time) on the day when due in U.S. Dollars
to the Administrative Agent at 1201 Third Avenue, Suite 1000, Seattle,
Washington 98101, or at such other location

                                       21

<PAGE>

designated by notice from the Administrative Agent pursuant to the notice
provision of this Agreement, in immediately available funds.

     (b) All computations of interest and all fees pursuant to Section 2.6
shall be made by the Administrative Agent on the basis of a year of 360 days,
in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or
fees are payable. Each determination by the Administrative Agent of an
interest rate or an increased cost or of illegality hereunder shall be
presumptive evidence thereof and binding for all purposes if made reasonably
and in good faith.

     (c) Whenever any payment hereunder or under the Notes shall be stated to
be due (or an Interest Period shall be stated to end) on a day other than a
Business Day, such payment shall be made (and such Interest Period shall end)
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fees, as the
case may be; provided, however, if such extension would cause payment of
interest based on a LIBOR Rate to be made (or an Interest Period for a Fixed
Rate Advance to end) in the next following calendar month, such payment shall
be made (and such Interest Period shall end) on the next preceding Business
Day.

     Section 2.9  INCREASED COSTS.

     (a) If, due to either (i) the introduction after the date of this
Agreement of or any change after the date of this Agreement (including any
change by way of imposition or increase of reserve requirements or
assessments other than those referred to in the definition of LIBOR Rate) in
or in the interpretation of any law or regulation or (ii) the compliance with
any guideline or request issued or made after the date of this Agreement from
or by any central bank or other governmental authority (whether or not having
the force of law), in each case above, other than those referred to in
Section 2.9(b), there shall be any increase in the cost to any Lender of
agreeing to make or maintain, or of making or maintaining, Fixed Rate
Advances or there shall be any increase in the cost to the Letter of Credit
Issuer of agreeing to issue or maintain, or of issuing or maintaining any
Letter of Credit, then the Borrower shall from time to time, upon demand by
such Lender or the Letter of Credit Issuer, as the case may be, pay to such
Lender or Letter of Credit Issuer additional amounts sufficient to reimburse
such Lender or the Letter of Credit Issuer for all such increased costs. A
certificate as to the amount of such increased cost, submitted to the
Borrower by such Lender or the Letter of Credit Issuer, as the case may be,
shall be presumptive evidence of such increased cost and binding for all
purposes, if made reasonably and in good faith.

     (b) If either (i) the introduction after the date of this Agreement of,
or the application after the date of this Agreement as a result of phase-in
or transitional rules of, or any change after the date of this Agreement in
or in the interpretation of, any law or regulation or (ii) compliance by a
Lender, the Letter of Credit Issuer or the Credit Card Issuer with any
guideline or request issued or made after the date of this Agreement or
deemed applicable after the date hereof as a result of phase-in or
transitional rules from or by any central bank or other governmental
authority (whether or not having the force of law) affects or would affect
the amount of capital required or expected to be maintained by such Lender,
the Letter of Credit Issuer or the Credit Card Issuer and such Lender, Letter
of Credit Issuer or Credit Card Issuer

                                       22

<PAGE>

determine(s) that the amount of such capital is increased by or based upon
the existence of the Revolving Commitment or its Commitment Percentage of the
Revolving Commitment (or by or based upon the making of Fixed Rate Advances
or the issuance of or obligation to issue or purchase risk participations in
Letters of Credit or Credit Cards), then, upon demand by such Lender, the
Letter of Credit Issuer or the Credit Card Issuer, the Borrower shall
immediately pay to the Lender, the Letter of Credit Issuer or the Credit Card
Issuer, from time to time as specified by the Lender, the Letter of Credit
Issuer or the Credit Card Issuer, additional amounts sufficient to compensate
such Lender, the Letter of Credit Issuer or the Credit Card Issuer in the
light of such circumstances, to the extent that such Lender, the Letter of
Credit Issuer or the Credit Card Issuer reasonably determine(s) such increase
in capital to be allocable to the maintenance of the Revolving Commitment or
its Commitment Percentage of the Revolving Commitment (or the making of Fixed
Rate Advances or the issuance and maintenance of or obligation to issue
Letters of Credit or Credit Cards). A certificate as to such amounts
submitted to the Borrower by a Lender, the Letter of Credit Issuer or the
Credit Card Issuer, shall, if made reasonably and in good faith, be
presumptive evidence of such amounts and binding for all purposes.

     Section 2.10 ILLEGALITY. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation
of any law or regulation shall make it unlawful, or any central bank or other
governmental authority shall assert that it is unlawful, for a Lender to
perform its obligations hereunder to make Fixed Rate Advances or to purchase
risk participations in any Letter of Credit or Credit Card, to continue to
fund or maintain such Advances hereunder, for the Letter of Credit Issuer to
issue or maintain Letters of Credit or for the Credit Card Issuer to issue or
maintain Credit Cards, such Lenders, the Letter of Credit Issuer or the
Credit Card Issuer may, by notice to the Borrower, suspend the right of the
Borrower to elect such Fixed Rate Advances or to request Letters of Credit to
be issued, as the case may be, and, if necessary in the reasonable opinion of
such Lender to comply with such law or regulation, Borrower shall prepay all
such Fixed Rate Advances at the latest time permitted by the applicable law
or regulation. The Borrower shall not be obligated to pay any amount pursuant
to Section 2.11 in respect of such prepayment.

     Section 2.11 PREPAYMENT INDEMNITY; FEE. If (i) due to payments made by
the Borrower pursuant to Section 2.7 or due to acceleration of the maturity
of the Notes pursuant to Section 6.2 or due to any other reason attributable
to the Borrower (but not due to any prepayment pursuant to Section 2.10), a
Lender receives payments of principal of a Fixed Rate Advance other than on
the last day of an Interest Period relating to such Advance, or (ii) the
Borrower fails to prepay any Fixed Rate Advance pursuant to a notice of
prepayment given pursuant to Section 2.7, the Borrower shall, upon demand by
a Lender, pay to the Administrative Agent on behalf of such Lender the
following:

     (a) LIBOR RATE ADVANCES. In the case of prepayment of LIBOR Rate
Advances, the Borrower shall pay any amounts required to compensate the
Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment or failure to prepay, including, without
limitation, any loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by the Lender to fund or
maintain such Advances.

                                       23
<PAGE>

     (b) TERM RATE ADVANCES. In the case of prepayment of Term Rate Advances
(but subject to the provisions of paragraph (v) below), the Borrower shall
pay a prepayment fee calculated separately for each Prepaid Installment:

          (i) The Term Lender shall first determine the amount of interest
which would have accrued each month on the Prepaid Installment had it
remained outstanding until the applicable Original Payment Date, using the
applicable Term Rate.

          (ii) The Term Lender shall then subtract from each monthly interest
amount determined in paragraph (i) above, the amount of interest which would
accrue on that Prepaid Installment if the Prepaid Installment were reinvested
from the date of prepayment through the Original Payment Date at the Treasury
Rate.

          (iii) If the remainder determined in paragraph (ii) with respect to
the Prepaid Installment is greater than zero, the Term Lender shall discount
the monthly differences to the date of prepayment by the Treasury Rate. The
sum of the discounted monthly differences for the Prepaid Installment shall
be the amount of the prepayment fee due hereunder with respect to the Prepaid
Installment.

          (iv) The following definitions will apply to the calculation of the
prepayment fee for purposes of this Section 2.11(b):

               (A) "ORIGINAL PAYMENT DATES" means the dates on which
principal of a Term Rate Advance would have been paid if there had been no
prepayment.

               (B) "PREPAID INSTALLMENT" means the amount of the prepaid
principal of a Term Rate Advance which would have been paid on a single
Original Payment Date.

               (C) "TREASURY RATE" means the interest rate yield for U.S.
Treasury securities which the Lender determines could be obtained by
reinvesting a specified Prepaid Installment in such securities from the date
of prepayment through the Original Payment Date. The Treasury Rate may be
based on information from either the Telerate or Reuters information
services, the Wall Street Journal or other information sources the Lender
deems appropriate.

         Notwithstanding the foregoing provisions of this Section 2.11(b), the
Borrower may prepay the principal of Term Rate Advances, without liability for
any prepayment fee that would otherwise be payable under this Section 2.11(b),
in an amount of up to 10% of the aggregate principal amount of all Term Rate
Advances made by the Term Lender to the Borrower from time to time under the
Term Facility (including any Term Rate Advances that have previously been
prepaid or repaid pursuant to the terms of this Agreement). Any prepayment in
excess of such amount shall be subject to payment of a prepayment fee in
accordance with this Section 2.11(b).

                                        24

<PAGE>

         Section 2.12 EVIDENCE OF DEBT. The Advances made by the Lenders to
the Borrower, and the obligations of the Borrower to both reimburse the
Letter of Credit Issuer for draws on Letters of Credit and reimburse the
Credit Card Issuer for disbursements made under Credit Cards, shall be
evidenced by a Note payable to the order of each Lender in a principal amount
equal to such Lender's Commitment Percentage of the Revolving Commitment.
Each Lender may maintain in accordance with its usual practice an account or
accounts evidencing the Indebtedness of the Borrower resulting from Advances
and payments made from time to time hereunder. In any legal action or
proceeding in respect of this Agreement or the Notes, the entries made in
such account or accounts shall be presumptive evidence of the existence and
amounts of the obligations of the Borrower therein recorded, if made
reasonably and in good faith.

         Section 2.13 COLLATERAL. As security for the obligation of the
Borrower to repay Advances, to pay the principal of and interest on the Notes
and the other Indebtedness of the Borrower under this Agreement and to
reimburse the Letter of Credit Issuer for draws on any Letter of Credit and
the Credit Card Issuer for disbursements made under any Credit Card, and for
the performance by the Borrower of its other obligations hereunder and under
all the other Loan Documents, the Borrower shall grant to the Administrative
Agent, on behalf and for the benefit of each Lender, the Letter of Credit
Issuer and the Credit Card Issuer, an attached, fully perfected,
first-priority security interest in the Collateral, subject to the terms of
the Security Agreement.

         Section 2.14 USE OF PROCEEDS. Proceeds of the Revolving Facility
Advances and disbursements made under Credit Cards shall be used for general
corporate purposes of the Borrower, including, without limitation, for
repayment of any other Advances and reimbursement of draws under Letters of
Credit. Proceeds of the Term Facility Advances may be used to finance the
Borrower's equipment and leasehold improvements.

                                   ARTICLE III

                             CONDITIONS OF BORROWING

         Section 3.1 CONDITIONS PRECEDENT TO EFFECTIVE DATE. The occurrence
of the Effective Date is subject to the condition precedent that the
Administrative Agent shall have received in form and substance satisfactory
to the Administrative Agent and all duly executed by the parties thereto:

               (a) The respective Revolving Facility Notes made payable to
each Lender.

               (b) A copy of the Articles of Incorporation of the Borrower
certified by the Secretary of State of the state of its incorporation, and a
copy of the Bylaws of the Borrower certified by its secretary.

               (c) Certified copies of the resolutions of the Board of
Directors of the Borrower approving the Borrowings contemplated hereby and
authorizing the execution of

                                        25

<PAGE>

the Loan Documents, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to the Loan Documents.

               (d) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign the Loan Documents and the other documents to
be delivered hereunder.

               (e) Certificates of good standing of a recent date for the
Borrower from the Secretary of State of the state of its incorporation.

               (f) The facility fee due pursuant to Section 2.6(a)(i) and the
Administrative Agent Fee due pursuant to Section 2.6(a)(iv).

               (g) Such other documents or instruments as the Administrative
Agent may reasonably request.

         Section 3.2 CONDITIONS PRECEDENT TO EACH BORROWING. The obligation
of the Lenders to make, continue or convert Revolving Facility Advances, or
the obligation of the Term Lender to continue or convert Term Facility
Advances, or the obligation of the Letter of Credit Issuer to issue Letters
of Credit or the Credit Card Issuer to issue Credit Cards, shall be subject
to the following further conditions precedent:

               (a) On the date of a Borrowing pursuant to Section 2.3(a) or
the continuation or conversion of an Advance pursuant to Section 2.3(b),
before and immediately after giving effect thereto, the following statements
shall be true and correct, and the making by the Borrower of the applicable
Borrowing Request shall constitute its representation and warranty that on
and as of the date of such Borrowing, conversion or continuation, before and
immediately after giving effect thereto, the following statements are true
and correct:

                    (i) The representations and warranties contained in
Article IV of this Agreement are correct in all material respects as though
made on and as of such date, unless such representations and warranties are
expressly stated to be made as of an earlier date;

                    (ii) After giving effect to (A) a requested Borrowing,
conversion or continuation of a Revolving Facility Advance, the Unused
Revolving Facility Commitment is not less than zero; (B) a requested
Borrowing of a Letter of Credit, the Unused Revolving Facility Commitment is
not less than zero; (C) a requested Borrowing consisting of a Standby Letter
of Credit, neither the Unused Revolving Facility Commitment nor the Unused
SLC Sublimit is less than zero and (D) a requested Borrowing consisting of an
Acceptance, neither the Unused Revolving Facility Commitment nor the Unused
Acceptance Sublimit is less than zero;

                    (iii) No event has occurred and is continuing, or would
result from such Borrowing, conversion or continuation, which constitutes an
Event of Default or Default;

                    (iv) The most recent financial statements of the Borrower
delivered pursuant to Section 5.1(c)(i) present fairly the financial position
and results of operations of the

                                        26

<PAGE>

Borrower as of the date of, and for the periods presented in, such financial
statements, and since the date of such financial statements there has not
been any material adverse change in the financial condition or operations of
the Borrower; and

                    (v) The Borrower is in compliance with all covenants
contained in Article V of this Agreement.

               (b) If requested by the Administrative Agent, the Borrower
shall have delivered to the Administrative Agent a Notice of Borrowing.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants as follows:

         Section 4.1 ORGANIZATION. The Borrower is a corporation which is
duly organized, validly existing, and in good standing under the laws of the
State of Washington. The Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged or
presently proposes to engage. The Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its businesses
or financial condition.

         Section 4.2 AUTHORIZATION. The execution, delivery, and performance
of this Agreement and all other Loan Documents by the Borrower, to the extent
to be executed, delivered or performed by the Borrower, have been duly
authorized by all necessary action by the Borrower; do not require the
consent or approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute a
default under (a) any provision of its articles of incorporation or bylaws,
or any agreement or other instrument binding upon the Borrower or (b) any
law, governmental regulation, court decree, or order applicable to the
Borrower.

         Section 4.3 FINANCIAL INFORMATION. Each financial statement of the
Borrower supplied to the Administrative Agent truly and completely disclosed
the Borrower's financial condition as of the date of the statement, and there
has been no material adverse change in the Borrower's financial condition
subsequent to the date of the most recent financial statement supplied to the
Administrative Agent. The Borrower has no material contingent obligations
except as disclosed in such financial statements.

         Section 4.4 LEGAL EFFECT. This Agreement constitutes, and any
instrument or agreement required hereunder to be given by the Borrower when
delivered will constitute, legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms, subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and to general principles of equity (whether
considered in a proceeding at law or in equity).

                                        27

<PAGE>

         Section 4.5 PROPERTIES. Except for Permitted Liens, capital leases
and real property leases, the Borrower owns and has good title to all of the
Borrower's properties free and clear of all Liens, and has not executed any
security documents or financing statements relating to such properties. All
of the Borrower's properties are titled in the Borrower's legal name, and the
Borrower has not used, or filed a financing statement under, any other name
for at least the last five (5) years.

         Section 4.6 HAZARDOUS SUBSTANCES. The Borrower's use of its
properties comply in all material respects with all applicable laws and
regulations relating to the environment, including without limitation, all
laws and regulations relating to pollution and environmental control.

         Section 4.7 LITIGATION AND CLAIMS. No litigation, claim,
investigation, administrative proceeding or similar action (including those
for unpaid taxes) against the Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect the Borrower's
financial condition or properties, except for (a) litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by each of
the Lenders in writing and (b) threatened or pending claims which, if
adversely determined against the Borrower, would not either individually or
in the aggregate exceed $150,000.

         Section 4.8 TAXES. To the best of the Borrower's knowledge, all tax
returns and reports of the Borrower that are or were required to be filed,
have been filed, and all taxes, assessments and other governmental charges
have been paid in full, except those presently being or to be contested by
the Borrower in good faith in the ordinary course of business and for which
adequate reserves have been provided.

         Section 4.9 LIEN PRIORITY. Unless otherwise previously disclosed to
each of the Lenders in writing and except for Permitted Liens, the Borrower
has not entered into or granted any Lien, or permitted the filing or
attachment of any Lien on or affecting any of the Collateral that would be
prior or that may in any way be superior to the Administrative Agent's Lien
and rights, on behalf of the Lenders, in and to such Collateral.

         Section 4.10 BINDING EFFECT. This Agreement and all of the other
Loan Documents are binding upon the Borrower as well as upon the Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and to
general principles of equity (whether considered in a proceeding at law or in
equity).

         Section 4.11 COMMERCIAL PURPOSES. The Borrower intends to use the
proceeds of all Advances solely for business or commercial related purposes,
and intends to use the proceeds of the Term Facility Advances for purposes of
financing equipment and leasehold improvements.

         Section 4.12 EMPLOYEE BENEFIT PLANS. Each employee benefit plan as
to which the Borrower may have any liability complies in all material
respects with all applicable requirements of law and regulations, and (a) no
Reportable Event or Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (b) the Borrower has not

                                        28

<PAGE>

withdrawn from any such plan or initiated steps to do so, (c) no steps have
been taken to terminate any such plan, and (d) there are no unfunded
liabilities other than those previously disclosed to the Lenders in writing.

         Section 4.13 LOCATION OF THE BORROWER'S OFFICES AND RECORDS. The
Borrower's place of business, or the Borrower's chief executive office, if
the Borrower has more than one place of business, is located at 2701 First
Avenue, Suite 500, Seattle, Washington 98121. Unless the Borrower has
designated otherwise in writing, this location is also the office or offices
where the Borrower keeps its records concerning the Collateral.

         Section 4.14 INFORMATION. All information furnished by the Borrower
to either the Administrative Agent or the Lenders for the purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all information hereafter furnished by or on behalf of the Borrower to either
the Administrative Agent or the Lenders will be, true and accurate in every
material respect on the date as of which such information is dated or
certified; and none of such information is or will be incomplete by omitting
to state any material fact necessary to make such information not misleading.

         Section 4.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Borrower understands and agrees that the Lenders, without independent
investigation, are relying upon the above representations and warranties in
extending the Facilities to the Borrower. The Borrower further agrees that
the foregoing representations and warranties shall be continuing in nature
and shall remain in full force and effect until such time as the Borrower's
Indebtedness under this Agreement shall be paid in full, or until this
Agreement shall be terminated in the manner provided above, whichever is the
last to occur.

                                    ARTICLE V

                            COVENANTS OF THE BORROWER

         Section 5.1 AFFIRMATIVE COVENANTS. So long as the Notes or other
amounts payable by the Borrower hereunder shall remain unpaid, or the Lenders
shall have any Revolving Commitment hereunder, or the Term Lender shall have
any Term Commitments hereunder, or the Term Lender Shall have any Term
Commitment hereunder, or any Letter of Credit remains Outstanding, the
Borrower covenants and agrees that it will:

                  (a) LITIGATION. Promptly inform the Administrative Agent in
writing of (i) all material adverse changes in the Borrower's financial
condition, and (ii) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar actions affecting the
Borrower which could materially affect the financial condition of the
Borrower.

                  (b) FINANCIAL RECORDS. Maintain its books and records in
accordance with GAAP, applied on a consistent basis, and permit the
Administrative Agent or any Lender to examine and audit the Borrower's books
and records at all reasonable times upon reasonable prior notice from the
Administrative Agent or any such Lender to the Borrower.

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<PAGE>

                  (c) REPORTING REQUIREMENTS.

                           (i) FINANCIAL STATEMENTS. Furnish the
Administrative Agent with, as soon as available, but in no event later than
ninety (90) days after the end of each fiscal year, the consolidated balance
sheet and consolidated statement of income and retained earnings of the
Borrower and its subsidiaries for the year ended, audited by a certified
public accountant reasonably satisfactory to the Administrative Agent, and,
as soon as available, but in no event later than forty five (45) days after
the end of each fiscal quarter, the consolidated balance sheet and
consolidated statement of income and retained earnings of the Borrower and
its subsidiaries for the period ended, prepared and certified as correct to
the best knowledge and belief by the Borrower's chief financial officer or
other officer or person acceptable to the Administrative Agent. All financial
reports required to be provided under this Agreement (A) shall be prepared in
accordance with GAAP, applied on a consistent basis, (B) certified by the
Borrower as being true and correct and (C) accompanied by a certificate of
the Borrower's chief financial officer demonstrating compliance with the
financial covenants set forth in Section 5.3.

                           (ii) AGING AND LISTING OF ACCOUNTS RECEIVABLE.
Deliver to the Administrative Agent within thirty (30) days after the end of
each quarter, a summary of the Borrower's accounts and contracts receivable
aging as of the last day of the quarter, which shall be net of any
adjustments made at the end of that quarter, all in a form acceptable to the
Administrative Agent.

                           (iii) INVENTORY REPORT. Deliver to the
Administrative Agent within thirty (30) days after the end of each quarter
inventory reports detailing location, amounts of raw materials and finished
goods on a quarterly basis, prepared in form acceptable to the Administrative
Agent.

                           (iv) INSURANCE REPORTS. Furnish to the
Administrative Agent, upon request of the Administrative Agent, reports on
each existing insurance policy showing such information as the Administrative
Agent may reasonably request, including without limitation the following: (A)
the name of the insurer; (B) the risks insured; (C) the amount of the policy;
(D) the properties insured; (E) the then current property values on the basis
of which insurance has been obtained, and the manner of determining those
values; and (F) the expiration date of the policy.

                           (v) ADDITIONAL INFORMATION. Furnish such
additional information and statements, lists of assets and liabilities,
agings of receivables and payables, inventory schedules, budgets, forecasts,
tax returns, and other reports with respect to the Borrower's financial
condition and business operations as the Administrative Agent may reasonably
request from time to time.

                  (d) INSURANCE. Maintain fire and other risk insurance,
public liability insurance, and such other Insurance as the Administrative
Agent on behalf of the Lenders may require with respect to the Borrower's
properties and operations, in form, amounts, coverages and with insurance
companies reasonably acceptable to the Administrative Agent. The Borrower,
upon request of the Administrative Agent, will deliver to the Administrative
Agent

                                        30

<PAGE>

from time to time the policies or certificates of insurance in form
satisfactory to the Administrative Agent, including stipulations that
coverages will not be cancelled or diminished without at least ten (10) days'
prior written notice to the Administrative Agent. Each insurance policy also
shall include an endorsement providing that coverage in favor of the
Administrative Agent on behalf of the Lenders will not be impaired in any way
by any act, omission or default of the Borrower or any other Person. In
connection with all policies covering the Collateral, the Borrower will
provide the Administrative Agent with such loss payable or other endorsements
as the Administrative Agent may require.

                  (e) OTHER AGREEMENTS. Comply with all terms and conditions
of all other agreements, whether now or hereafter existing, between the
Borrower and any other party and notify the Administrative Agent immediately
in writing of any default in connection with any other such agreements that
would likely have a material adverse effect on the Borrower's business or
financial condition.

                  (f) LOAN PROCEEDS. Use all proceeds of the Advances solely
for the Borrower's business operations, unless specifically consented to the
contrary by the Required Lenders in writing.

                  (g) TAXES, CHARGES AND LIENS. Pay and discharge when due
all of its Indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind and
nature, imposed upon the Borrower or its properties, income, or profits,
prior to the date on which penalties, would attach, and all lawful claims
that, if unpaid, might become a lien or charge upon any of the Borrower's
properties, income, or profits; provided however, the Borrower will not be
required to pay and discharge any such assessment, tax, charge, levy, lien or
claim so long as (i) the legality of the same shall be contested in good
faith by appropriate proceedings, and (ii) the Borrower shall have
established on its books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with GAAP. The
Borrower, upon demand of the Administrative Agent, will furnish to the
Administrative Agent evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate governmental
official to deliver to the Administrative Agent at any time a written
statement of any assessments, taxes, charges, levies, liens and claims
against the Borrower's properties, income, or profits.

                  (h) PERFORMANCE. Perform and comply with all terms,
conditions, and provisions set forth in this Agreement and in the other Loan
Documents in a timely manner, and promptly notify the Administrative Agent if
the Borrower learns of the occurrence of any event which constitutes an Event
of Default under this Agreement or under any of the other Loan Documents.

                  (i) OPERATIONS. Maintain executive and management personnel
with substantially the same qualifications and experience as the present
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in material compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding

                                        31

<PAGE>

standards and other requirements of ERISA and other laws applicable to the
Borrower's employee benefit plans.

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

                  (k) COMPLIANCE CERTIFICATE. Upon request of the
Administrative Agent, provide the Administrative Agent at least annually with
a certificate executed by the Borrower's chief financial officer, or other
officer or person acceptable to the Administrative Agent, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as of
the date of the certificate, no Event of Default exists under this Agreement.

                  (l) ENVIRONMENTAL COMPLIANCE AND REPORTS. Comply in all
respects with all environmental protection federal, state and local laws,
statutes, regulations and ordinances.

                  (m) ADDITIONAL ASSURANCES. Make, execute and deliver to the
Administrative Agent such promissory notes, mortgages, deeds of trust,
security agreements, financing statements, instruments, documents and other
agreements as the Administrative Agent or its attorneys may reasonably
request to evidence and secure the Borrowings and to perfect all Liens in the
Collateral.

         Section 5.2  NEGATIVE COVENANTS. So long as the Notes or other
amount payable by the Borrower hereunder shall remain unpaid or the Lenders
shall have any Commitment hereunder or any Letter of Credit remains
Outstanding, the Borrower covenants and agrees that it will not:

                  (a) INDEBTEDNESS AND LIENS. (i) Except for trade debt
incurred in the normal course of business and Indebtedness to the Lenders,
the Letter of Credit Issuer and the Credit Card Issuer contemplated by this
Agreement, create, incur or assume Indebtedness, other than capital leases,
(ii) except for Permitted Liens, grant or permit to exist any Lien on any of
the Borrower's assets, or (iii) sell with recourse any of the Borrower's
accounts, except to the Lenders.

                  (b) CONTINUITY OF OPERATIONS. (i) Engage in any business
activities substantially different than those in which the Borrower is
presently engaged, (ii) cease operations, liquidate, merge, transfer, acquire
or consolidate with any other entity, other than mergers, transfers,
acquisitions or consolidations in which the consideration has a fair market
value of less than $3,500,000.00 and the Borrower is the acquiring or
surviving entity, or

                                        32

<PAGE>

(iii) change its name, dissolve or transfer or sell Collateral or other
assets out of the ordinary course of business except (A) transfers, sales
or dispositions of Collateral that is obsolete or worn out property
disposed of in the ordinary course of business and (B) other asset
dispositions provided that such other asset dispositions do not exceed
$200,000.00 in the aggregate for any fiscal year.

                  (c) LOANS, ACQUISITIONS AND GUARANTIES. (i) Loan, invest in
or advance money or assets, or purchase, create or acquire any interest in
any other enterprise or entity, except (A) commercial bank demand deposits
and time deposits maturing within one year, (B) marketable general
obligations of the United States or a state or marketable obligations fully
guaranteed by the United States, (C) short-term commercial paper with the
highest rating of a generally recognized rating service, (D) loans and
advances to employees in the ordinary course of business related to expenses
incurred in the ordinary course of employment not to exceed $500,000
outstanding at any time, (E) bankers' acceptances, repurchase agreements, or
other investments reasonably acceptable to the Administrative Agent and (F)
loans or advances to, or investments in wholly owned subsidiaries in an
amount not to exceed $5,000,000.00 or (ii) incur any obligation as surety or
guarantor other than in the ordinary course of business.

         Section 5.3 FINANCIAL COVENANTS. So long as the Notes or any other
amount payable by the Borrower hereunder shall remain unpaid, or the Lenders
shall have any Commitment hereunder, or the Term Lender shall have any Term
Commitment hereunder, or any Letter of Credit remains Outstanding, the
Borrower covenants and agrees that unless it receives the prior written
consent of the Required Lenders, it will:

                  (a) TANGIBLE NET WORTH. Not permit, as of the Effective
Date and the last day of each fiscal quarter thereafter, Tangible Net Worth
to be less than the sum of (i) $82,000,000, (ii) 50% of the cumulative
consolidated net income of the Borrower for all fiscal quarters of the
Borrower ending after the Effective Date in which the Borrower earned net
income (and excluding each fiscal quarter in which it incurred a net loss),
(iii) 100% of the cumulative net cash proceeds from the sale of capital stock
of the Borrower during any fiscal quarter ending after the Effective Date and
(iv) 100% of the cumulative amount of principal of any Indebtedness of the
Borrower converted into capital stock of the Borrower during any fiscal
quarter ending after the Effective Date.

                  (b) WORKING CAPITAL. Not permit Working Capital to be less
than $70,000,000.00, as of the Effective Date and the last day of each fiscal
quarter occurring prior to April 30, 2001, or less than $77,000,000.00 as of
April 30, 2001 and the last day of each fiscal quarter thereafter.

                  (c) NET WORTH RATIO. Not permit the ratio of (i)
consolidated liabilities of the Borrower and its subsidiaries (defined in
accordance with GAAP) plus consolidated liabilities in respect of outstanding
letters of credit (which include Outstanding Letters of Credit) and
Outstanding Acceptances to (ii) Tangible Net Worth to exceed 1.00 to 1.00 as
of the Effective Date and the last day of each fiscal quarter thereafter.

                                        33
<PAGE>

     (d) CONSOLIDATED NET LOSSES. Not permit, as of the Effective Date and the
last day of each fiscal quarter thereafter, any consolidated net loss for the
fiscal quarter then ending and for the immediately preceding fiscal quarter.

     (e) CAPITAL EXPENDITURES. Not permit Capital Expenditures made during
any one fiscal year to exceed the sum of $14,000,000.00.

     (f) DEBT SERVICE COVERAGE RATIO. Maintain, as of the Effective Date
and the last day of each fiscal quarter thereafter, a ratio of (x) EBITDA
for the fiscal quarter then ended and the immediately preceding three fiscal
quarters to (y) Debt Service of at least 3:00 to 1:00.

                                   ARTICLE VI

                                EVENTS OF DEFAULT

     Section 6.1  EVENTS OF DEFAULT. The following events shall constitute
events of default hereunder ("Events of Default"):

     (a) DEFAULT ON INDEBTEDNESS. Failure of the Borrower (i) to pay when due
any principal of or interest on the Advances, (ii) to reimburse the Letter of
Credit Issuer when due for any drawing on any Letter of Credit, (iii) to
reimburse the Credit Card Issuer when due for any disbursement under any
Credit Card or (iv) to pay when due any other amount due hereunder or under
any of the other Loan Documents and, in the case of a failure described in
the foregoing clause (iv), the continuance thereof for a period of five (5)
days.

     (b) OTHER DEFAULTS. Failure of the Borrower to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the other Loan Documents, or failure of the Borrower
to comply with or to perform any other term, obligation, covenant or
condition contained in any other agreement between the Lenders and/or the
Administrative Agent and the Borrower and/or its subsidiaries.

     (c) DEFAULT IN FAVOR OF THIRD PARTIES. Default of the Borrower under any
loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of the Borrower's property or the Borrower's ability to
repay the Borrowings or perform its obligations under this Agreement or any
of the other Loan Documents.

     (d) FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to the Lenders, the Letter of Credit Issuer, the Credit Card Issuer
and/or the Administrative Agent by or on behalf of the Borrower under this
Agreement or the other Loan Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at any
time thereafter.

                                        34

<PAGE>

     (e) DEFECTIVE COLLATERALIZATION. This Agreement or any of the other Loan
Documents ceases to be in full force and effect (including failure of the
Security Agreement or any other Loan Document to create a valid and perfected
Lien in the Collateral) at any time and for any reason.

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

     (g) CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of the Borrower or by any
governmental agency, including a garnishment, attachment, or levy on or of
any of the Borrower's deposit accounts, provided, however, that the foregoing
shall not constitute an Event of Default if there is a good faith dispute by
the Borrower as to the validity or reasonableness of the claim which is the
basis of the creditor or forfeiture proceeding (other than any such
proceeding instituted by the Administrative Agent), the Borrower gives the
Administrative Agent written notice of such creditor or forfeiture proceeding
and the Borrower establishes reserves or a surety bond for such creditor or
forfeiture proceeding reasonably satisfactory to the Administrative Agent.

     (h) ADVERSE CHANGE. A material adverse change occurs in the Borrower's
financial condition.

     Provided, however, that none of the foregoing events (other than those
referred to in paragraph (a)) shall constitute an Event of Default hereunder
if (i) it is curable and if the Borrower has not been given a notice of a
similar default within the preceding twelve (12) months and (ii) the
Borrower, after receiving written notice from the Administrative Agent
demanding cure of such default, (A) cures the default within fifteen (15)
days or (B) if the cure requires more than fifteen (15) days, immediately
initiates steps which the Required Lenders deem in their sole discretion to
be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.

     Section 6.2 REMEDIES. If an Event of Default shall have occurred and be
continuing, the Administrative Agent may, by notice to the Borrower, (a)
declare the obligation of the Lenders to make Advances, the obligation of the
Letter of Credit Issuer to issue Letters of Credit and the obligation of the
Credit Card Issuer to issue a Credit Card to be terminated, whereupon the
same shall forthwith terminate, and (b) declare (i) the Notes and all
interest thereon, (ii) an amount equal to the stated amount of each
Outstanding Letter of Credit (notwithstanding that the obligation of the
Borrower to reimburse any draws under any such Letter of Credit may be
contingent or not matured), (iii) and an amount equal to the aggregate amount
of disbursements made under any issued Credit Cards, and (iv) all other
amounts payable under this Agreement and the other Loan Documents to be
immediately due and payable, whereupon the Notes, all such interest, all such
amounts payable with respect to Outstanding Letters of Credit and issued

                                        35

<PAGE>

Credit Cards and all such other amounts shall become and be immediately due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided,
however, that if an Event of Default under Section 6.01(f) shall occur, (A)
the obligation of the Lenders to make Advances, the obligation of the Letter
of Credit Issuer to issue Letters of Credit and the obligation of the Credit
Card Issuer to issue Credit Cards shall automatically be terminated and (B)
the Notes, all interest thereon, an amount equal to the stated amount of each
Outstanding Letter of Credit (notwithstanding that the obligation of the
Borrower to reimburse any draws under any such Letter of Credit may be
contingent or not matured), an amount equal to the aggregate amount of
disbursements made under any issued Credit Cards and all other amounts
payable under this Agreement and the other Loan Documents shall automatically
become and be immediately due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived
by the Borrower.

     Section 6.3  ADJUSTMENTS; RIGHT OF SET-OFF.

          (a) If any Lender (a "Benefited Lender") shall at any time receive
any payment of all or part of its Revolving Facility Advance owing to it, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings
of the nature referred to in Section 6.1(f) and (g), or otherwise), in a
greater proportion than any such payment to or Collateral received by any
other Lender, if any, in respect of each such other Lender's Revolving
Facility Advances owing to each such other Lender, or interest thereon, such
Benefited Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Revolving
Facility Advance owing to each such other Lender, or shall provide such other
Lenders with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such Benefited Lender to share the excess payment
or benefits of such Collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefited Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest.

          (b) Upon the declaration of the Notes, or the obligations of the
Borrower with respect to reimbursement of drawings under Outstanding Letters
of Credit or to reimbursement of disbursements under issued Credit Cards, as
due and payable pursuant to the provisions of Section 6.2, each Lender is
hereby authorized on behalf of the Lenders at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by said Lender to or for
the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement
and the other Loan Documents irrespective of whether or not such Lender shall
have made any demand. The rights of the Lenders under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Lenders may have.

     Section 6.4 CUMULATIVE REMEDIES. If an Event of Default shall occur and
be continuing, the Administrative Agent on behalf of the Lenders may proceed
to enforce the Loan Documents by exercising such remedies as are available
thereunder or in respect thereof under applicable law, whether for specific
performance of any covenant or other agreement contained

                                        36

<PAGE>

in the Loan Documents or in aid of the exercise of any power granted in the
Loan Documents. No remedy conferred in this Agreement or the other Loan
Documents is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or therein or now or hereafter existing at law, in
equity, by statute or otherwise.

     Section 6.5 APPLICATION OF PAYMENTS. After the occurrence and during the
continuance of an Event of Default, the Administrative Agent on behalf of the
Lenders shall apply all funds received in respect of amounts owing under this
Agreement and the other Loan Documents in such order as the Required Lenders
may determine in their sole discretion notwithstanding any instruction from
the Borrower.

                                   ARTICLE VII

                            THE ADMINISTRATIVE AGENT

     Section 7.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.

     Section 7.2 DELEGATION OF DUTIES. The Administrative Agent may execute
any of its duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.

     Section 7.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable to any of the Lenders for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Loan Document (except for its or such Person's
own gross negligence or willful misconduct) or (ii) responsible in any manner
to any of the Lenders for any recitals, statements, representations or
warranties made by the Borrower or any representative thereof contained in
this Agreement or any other Loan Document or in any certificate, report,
statement or other document referred to or provided for in, or received by
the Administrative Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this

                                        37

<PAGE>

Agreement or any other Loan Document or for any failure of the Borrower to
perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower.

     Section 7.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
taking any action or in failing or refusing to take any action under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders
of the obligations owing by the Borrower hereunder.

     Section 7.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Administrative Agent has received notice from
a Lender or the Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a "notice of default". In
the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received
such directions, and the Administrative Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to
such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.

     Section 7.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereinafter taken, including any review of the
affairs of the Borrower, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to
make Advances hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of
the

                                        38

<PAGE>

Borrower. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.

     Section 7.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought (or, if indemnification is sought
after the date upon which the Commitments shall have terminated and the
aggregate Advances Outstanding shall have been reduced to zero, ratably in
accordance with their Commitment Percentages immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the amounts owing hereunder) be imposed on,
incurred by or asserted against the Administrative Agent in any way relating
to or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Administrative Agent's gross negligence or willful misconduct. The
agreements in this Article VII shall survive the payment of the Loans and all
other amounts payable hereunder.

     Section 7.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the Borrower as though
the Administrative Agent were not the Administrative Agent hereunder and
under the other Loan Documents. With respect to the Advances made by it, the
Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not the Administrative Agent, and the terms "Lender",
"Term Lender", and "Lenders" shall include the Administrative Agent in its
individual capacity.

     Section 7.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be approved by the Borrower, whereupon such successor
agent shall succeed to the rights, powers and duties of the Administrative
Agent, and the term "Administrative Agent" shall mean such successor agent
effective upon such appointment and approval, and the former Administrative
Agent's rights, powers and duties as Administrative Agent shall be
terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement. After
any retiring Administrative

                                        39

<PAGE>

Agent's resignation as Administrative Agent, the provisions of this Article
VII shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement and the other
Loan Documents.

                                  ARTICLE VIII

                                  MISCELLANEOUS

     Section 8.1 AMENDMENTS. An amendment, modification or waiver of any
provision of this Agreement or the other Loan Documents, or a consent to any
departure by the Borrower therefrom, including, without limitation, any
amendment, modification or waiver reducing the amount of principal of an
Outstanding Advance, extending the Termination Date or reducing the stated
amount of any interest, fee or other amount payable to any Lender under this
Agreement, or any amendment, modification or waiver of any provision of this
Section 8.1, or any amendment reducing the percentage specified in the
definition of "Required Lenders", or any consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, shall be effective against the
Lenders if, but only if, it shall be in writing and approved and signed by
the Required Lenders, and then such a waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that: (a) any amendment, modification or waiver of any
provision of Article VII must be approved by written consent of the
Administrative Agent and the Required Lenders; (b) any amendment,
modification or waiver of any provision of Section 2.2(b) must be approved by
written consent of the Letter of Credit Issuer and the Required Lenders; and
(c) any amendment, modification or waiver of any provision of Section 2.2(c)
must be approved by written consent of the Credit Card Issuer and the
Required Lenders.

     Section 8.2 NOTICES. Except as otherwise specifically provided in this
Agreement, all notices and other communications provided for hereunder shall
be in writing (including telecopier) and mailed, telecopied or otherwise
transmitted or delivered, if to the Borrower, at:

             Cutter & Buck Inc.
             2701 First Avenue, Suite 500
             Seattle, WA  98121
             Attention:       Steve Lowber, Chief Financial Officer
             Telecopy:        (206) 448-0589
             Telephone        (206) 622-4191

if to a Lender, the Administrative Agent, the Letter of Credit Issuer or the
Credit Card Issuer, at the address as set forth under its name on the
signature page of this Agreement; or, as to any party, at such other address
as shall be designated by such party in a written notice to the other party
or parties. All such notices and communications shall, (i) if mailed, be
effective three (3) Business Days following deposit in the United States
mail, postage prepaid; (ii) if delivered by air courier, be effective the
first Business Day following transmittal to the air courier and (iii) if
telecopied, be effective when telecopied and electronic confirmation of
transmission is received, except that notices and communications to the
Administrative Agent, the Letter of Credit Issuer

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<PAGE>

or the Credit Card Issuer pursuant to Article II shall not be effective until
received by the Administrative Agent, the Letter of Credit Issuer or the
Credit Card Issuer, as the case may be. A notice received by the
Administrative Agent, the Letter of Credit Issuer or the Credit Card Issuer
by telephone pursuant to a provision of this Agreement providing for
telephone notice shall be effective if such party believes in good faith that
it was given by an Authorized Officer of the Borrower and acts pursuant
thereto, notwithstanding the absence of written confirmation.

     Section 8.3 NO WAIVER; REMEDIES. No failure on the part of the
Administrative Agent to exercise, and no delay in exercising, on behalf of
the Lenders, any right hereunder or under any other Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder or under any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided herein and in the other Loan Documents are cumulative and not
exclusive of any remedies provided by law.

     Section 8.4  COSTS AND EXPENSES; INDEMNIFICATION.

          (a) COSTS OF PREPARATION AND ADMINISTRATION OF LOAN DOCUMENTS. The
Borrower agrees to pay on demand the reasonable fees and out-of-pocket
expenses of counsel for the Administrative Agent in connection with the
preparation, execution and delivery of this Agreement and the other Loan
Documents. In addition, the Borrower shall pay any and all stamp and other
taxes, recording fees, escrow fees, title insurance premiums, fees for
searches of public records, and all other out-of-pocket costs and expenses
payable in connection with the execution and delivery of this Agreement and
the other Loan Documents and the administration thereof, and shall save the
Administrative Agent and the Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission
to pay such taxes, fees, costs and expenses.

          (b) COSTS OF LITIGATION. In the event of any Default or Event of
Default under this Agreement, or in the event that any dispute arises
(whether or not such dispute is with the Borrower) relating to the
interpretation, enforcement or performance of this Agreement or any of the
other Loan Documents, the Administrative Agent, the Lenders, the Letter of
Credit Issuer and the Credit Card Issuer shall be entitled to collect from
the Borrower on demand all fees and expenses incurred in connection
therewith, including but not limited to fees of attorneys, accountants,
appraisers, environmental inspectors, consultants, expert witnesses,
arbitrators, mediators and court reporters, subject, in circumstances other
than a bankruptcy or insolvency proceeding, to applicable law providing that
the prevailing party is entitled to be awarded its reasonable costs and
attorneys' fees. Without limiting the generality of the foregoing, the
Borrower shall pay all such costs and expenses incurred in connection with:
(i) arbitration or other alternative dispute resolution proceedings, trial
court actions and appeals; (ii) bankruptcy or other insolvency proceedings of
the Borrower, any guarantor or other party liable for any of the obligations
under this Agreement or any of the other Loan Documents, or any party having
any interest in any security for any of those obligations; (iii) judicial or
nonjudicial foreclosure on, or appointment of a receiver for, any property
securing the obligations of the Borrower; (iv) post-judgment collection
proceedings; (v) all claims, counterclaims, cross-claims and defenses
asserted in any of the foregoing whether or not they arise out of or are
related to this

                                        41

<PAGE>

Agreement or any other Loan Document; (vi) all preparation for any of the
foregoing; and (vii) all settlement negotiations with respect to any of the
foregoing.

          (c) INDEMNIFICATION. The Borrower agrees to indemnify and hold each
of the Administrative Agent, the Lenders, the Letter of Credit Issuer and the
Credit Card Issuer and their respective officers, directors, employees and
agents (collectively, "Indemnified Parties" and, individually, a "Indemnified
Party") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities, damages and expenses (regardless
of whether such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including without limitation reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities") incurred by
any of the Indemnified Parties as a result of, or arising out of, or relating
to, any Letter of Credit or any transaction financed or to be financed in
whole or in part out of the proceeds of any thereof or otherwise involving
any thereof, except for any such Indemnified Liabilities arising on account
of the relevant Indemnified Party's negligence or misconduct.

     Section 8.5  BINDING EFFECT; SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND
                  ASSIGNMENTS.

          (a) This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Lenders, the Letter of Credit Issuer, the Credit Card
Issuer, the Administrative Agent and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.

          (b) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, with the consent of the Borrower (such
consent not to be unreasonably withheld), at any time sell to one or more
banks or other entities ("Participants") participating interests in such
Lender's Commitment. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, and the
Borrower, the Administrative Agent, the Letter of Credit Issuer and the
Credit Card Issuer shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or
waiver of any provision of any Loan Document, or any consent to any departure
by any party of this Agreement therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on,
any Advance or any fees payable hereunder, or postpone the Termination Date,
in each case to the extent subject to such participation. The Borrower agrees
that each Participant shall be entitled to the benefits of Sections 2.9, 2.11
and 8.3(c) with respect to its participation in the Commitment and the
Advances Outstanding from time to time as if it was a Lender; provided that,
no Participant shall be entitled to receive any greater amount pursuant to
any such section than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred.

          (c) Any Lender may, in the ordinary course of its business and in
accordance with applicable law, with the consent of the Borrower (such
consent not to be unreasonably

                                        42

<PAGE>

withheld), at any time and from time to time assign to any Lender or any
Affiliate thereof or, with the consent of the Borrower, the Letter of Credit
Issuer, the Credit Card Issuer and the Administrative Agent (which in each
case shall not be unreasonably withheld), to any other Person (collectively,
"Purchasing Lenders") all or any part of its rights and obligations under
this Agreement and the other Loan Documents pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit C, executed by such
Purchasing Lender that is not then a Lender or an Affiliate thereof, by the
Borrower, the Administrative Agent, the Letter of Credit Issuer and the
Credit Card Issuer) and delivered to the Administrative Agent for its
acceptance and recording in the Register (as defined below); provided, that,
except in the case of an assignment of all of a Lender's rights and
obligations under this Agreement, (x) the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment shall equal
at least $5,000,000 and (y) after giving effect to each such assignment, the
amount of the remaining Commitment of the assigning Lender shall equal at
least $2,000,000 (or, in each case, such lesser amount as the Borrower may
consent to). Upon such execution, delivery, acceptance and recording, from
and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Purchasing Lender thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment Percentage as set forth
therein, and (y) the transferor Lender thereunder shall to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an transferor Lender's rights and
obligations under this Agreement, such transferor Lender shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender.

          (d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in Section
8.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the
Lenders and the Commitment Percentage of, and principal amount of the
Advances owing to, and risk participations in Letters of Credit or Credit
Cards purchased by, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders shall treat each Person
whose name is recorded in the Register as the percentage owner of an Advance,
risk participation or other obligation hereunder as the owner thereof for all
purposes of this Agreement and the other Loan Documents, notwithstanding any
notice to the contrary. The Register shall be available for inspection by the
Borrower, the Letter of Credit Issuer, the Credit Card Issuer or any Lender
at any reasonable time and from time to time upon reasonable prior notice.

          (e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Lender and a Purchasing Lender (and, in the case of a Purchasing
Lender that is not then a Lender or an Affiliate thereof, by the Borrower,
the Administrative Agent, the Letter of Credit Issuer and the Credit Card
Issuer), the Administrative Agent shall (i) promptly accept such Assignment
and Acceptance and (ii) on the effective date determined pursuant thereto

                                        43

<PAGE>

record the information contained therein in the Register and give notice of
such acceptance and recordation to the Lenders, the Letter of Credit Issuer,
the Credit Card Issuer and the Borrower.

          (f) The Borrower authorizes each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Borrower and its Affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
Affiliates prior to becoming a party to this Agreement.

          (g) Nothing herein shall prohibit any Lender from pledging or
assigning all or any portion of its Advance and its risk participation in any
Letter of Credit or Credit Card to any Federal Reserve Bank in accordance
with applicable law.

     Section 8.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto on separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.

     Section 8.7 GOVERNING LAW. All of the Loan Documents shall be governed
by and construed in accordance with the laws of the state of Washington,
without regard to the choice of law provisions or principles of Washington
law, except to the extent that the Uniform Commercial Code as enacted in the
state of Washington provides that the validity or perfection of any security
interests in, or remedies in respect of, any particular Collateral are
governed by the laws of a jurisdiction other than the state of Washington
(the "Governing Laws"). Except as otherwise provided in this Agreement or any
of the other Loan Documents and unless inconsistent with any provision of the
Governing Laws that cannot be waived, the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce ("UCP") as in
effect from time to time are fully incorporated herein and shall apply to all
Letters of Credit issued hereunder.

     Section 8.8 MEDIATION/ARBITRATION PROVISIONS.

          (a) POLICY -- MEDIATION. The parties hope there will be no disputes
arising out of their relationship. To that end, each commits to cooperate in
good faith and to deal fairly in performing its duties under this Agreement
in order to accomplish their mutual objectives and avoid disputes. But, if a
dispute arises, the parties agree to resolve all disputes by the following
alternate dispute resolution process: (i) the parties will seek a fair and
prompt negotiated resolution but if this is not successful, (ii) all disputes
shall be resolved by binding arbitration, provided that during this process,
(iii) at the request of either party made not later than seventy-five (75)
days after the initial arbitration demand, the parties will attempt to
resolve any dispute by nonbinding mediation (but without delaying the
arbitration hearing date). The parties recognize that negotiation or
mediation may not be appropriate to resolve some disputes and agree that
either party may proceed with arbitration without negotiating or mediating.
The

                                        44

<PAGE>

parties confirm that by agreeing to this alternate dispute resolution
process, they intend to give up their right to have any dispute decided in
court by a judge or jury.

          (b) BINDING ARBITRATION. Any claim between the parties arising out
of or relating to this Agreement shall be determined by arbitration in
Seattle commenced in accordance with RCW 7.04.060; provided that the total
award by a single arbitrator (as opposed to a majority of three arbitrators)
shall not exceed $250,000, including interest, attorneys' fees and costs. If
either party demands a total award greater than $250,000, there shall be
three (3) neutral arbitrators. If the parties cannot agree on the identity of
the arbitrator(s) within ten (10) days of the arbitration demand, the
arbitrator(s) shall be selected by the American Arbitration Association (AAA)
office in Seattle FROM ITS LARGE, COMPLEX CASE PANEL (OR HAVE SIMILAR
PROFESSIONAL CREDENTIALS). Each arbitrator shall be an attorney with at least
fifteen (15) years' experience in banking or commercial law and shall reside
in the Seattle metropolitan area. Whether a claim is covered by this
Agreement shall be determined by the arbitrator(s). All statutes of
limitations which would otherwise be applicable shall apply to any
arbitration hereunder.

          (c) PROCEDURES. The arbitration shall be conducted in accordance
with the AAA Commercial Arbitration Rules, in effect on the date hereof, as
modified by this Agreement. Submission of dispositive motions shall be at the
discretion of arbitrator(s). As may be shown to be necessary to ensure a fair
hearing, the arbitrator(s) may authorize appropriate discovery; and may enter
pre-hearing orders regarding (without limitation) scheduling,
interrogatories, document exchange, depositions, witness and exhibit
disclosure and issues to be heard. The arbitrator(s) shall not be bound by
the rules of evidence or of civil procedure, but may consider such writings
and oral presentations as reasonable business people would use in the conduct
of their day-to-day affairs, and may require the parties to submit some or
all of their case by written declaration or such other manner of
presentations as the arbitrator(s) may determine to be appropriate.

          (d) HEARING -- LAW -- APPEAL LIMITED. The arbitrator(s) shall take
such steps as may be necessary to hold a private hearing within one hundred
twenty (120) days of the initial demand for arbitration and to conclude the
hearing within three (3) days; and the arbitrator(s)' written decision shall
be made not later than fourteen (14) calendar days after the hearing. The
parties have included these time limits in order to expedite the proceeding,
but they are not jurisdictional, and the arbitrator(s) may for good cause
afford or permit reasonable extensions or delays, which shall not affect the
validity of the award. The written decision shall contain a brief statement
of the claim(s) determined and the award made on each claim. In making the
decision and award, the arbitrator(s) shall apply applicable substantive law.
Absent fraud, collusion or willful misconduct by an arbitrator, the award
shall be final, and judgment may be entered in any court having jurisdiction
thereof. The arbitrator(s) may award injunctive relief or any other remedy
available from a judge, including the joinder of parties or consolidation of
this arbitration with any other involving common issues of law or fact or
which may promote judicial economy, and may award attorneys' fees and costs
to the prevailing party but shall not have the power to award punitive or
exemplary damages. The decision and award of the arbitrators need not be
unanimous; rather, the decision and award of two arbitrators shall be final.

                                        45
<PAGE>

           (e) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. In addition
to any actions taken under the preceding subparagraphs: (i) the
Administrative Agent on behalf of the Lenders may exercise all rights and
remedies available under law with respect to any collateral, deposits and
accounts, including but not limited to: offset, self-help, sale or other
disposition of collateral, attachment, injunction, appointment of a receiver,
judicial foreclosure and deficiency judgment or foreclosure by power of sale;
(ii) by exercising any such rights and remedies under (i) the Administrative
Agent shall not waive the provisions of paragraphs (a) through (d) above;
(iii) any issues of law or fact which arise in connection with the exercise
by the Administrative Agent on behalf of the Lenders of any rights and
remedies available to the Lenders may at the Administrative Agent's election
be determined by arbitration in accordance with paragraphs (a) through (d)
above; and (iv) notwithstanding any other provision of this Agreement, so
long as an arbitration demand has not been filed or served with respect to a
claim, either party may elect to assert such claim in the small claims
department of the appropriate district court under RCW Ch. 12.40.

     Section 8.9 SEVERABILITY. Any provision of the Loan Documents that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability in such jurisdiction without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties waive any provision of law which
renders any provision of any other Loan Documents prohibited or unenforceable
in any respect.

     Section 8.10 ENTIRE AGREEMENT. This Agreement and the other Loan
Documents constitute the final and complete expression of the parties with
respect to the transactions contemplated by this Agreement and replace and
supersede all prior discussions, negotiations and understandings with respect
thereto. Neither this Agreement nor any term hereof nor of the other Loan
Documents may be changed, waived, discharged or terminated except as provided
herein.

     Section 8.11 DESCRIPTIVE HEADINGS. The descriptive headings of the
various provisions of this Agreement are for convenience of reference only,
do not constitute a part hereof, and shall not affect the meaning or
construction of any provision hereof.

     Section 8.12 GENDER AND NUMBER. Whenever appropriate to the meaning of
this Agreement or the other Loan Documents, use of the singular shall be
deemed to refer to the plural, the use of the plural to the singular, and
pronouns of certain gender to either or both the other genders.

     Section 8.13 CONFIRMATION OF SECURITY DOCUMENTS. The Borrower
acknowledges and agrees that each of the Security Documents continues, and
will continue, in full force and effect to secure all of the obligations of
the Borrower under this Agreement and any other Loan Documents, including any
and all obligations arising from any increase in the Revolving Commitment as
of the Effective Date and pursuant to Section 2.1(c).

                            [SIGNATURE PAGES FOLLOW]

                                        46

<PAGE>

         The parties have duly executed and delivered this Agreement as of the
date first written above.

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

BORROWER:                              CUTTER & BUCK INC.

                                       By:
                                          -----------------------
                                          Its:
                                              -------------------

ADMINISTRATIVE
AGENT, LETTER OF
CREDIT ISSUER AND
CREDIT CARD ISSUER:                    WASHINGTON MUTUAL BANK
                                       doing business as WESTERN BANK

                                       By:
                                          -----------------------
                                          Its:
                                              -------------------

                                       Address for Notices:

                                       1201 Third Avenue, Suite 1000
                                       Seattle, Washington 98101
                                       Attention: Todd Leber
                                       Telecopy: (206) 554-2696

         LENDERS:                      WASHINGTON MUTUAL BANK doing business as
                                       WESTERN BANK

                                       By:
                                          -----------------------
                                          Its:
                                              -------------------

                                       BANK OF AMERICA, N.A.

                                       By:
                                          -----------------------
                                          Its:
                                              -------------------

                                        47

<PAGE>

TERM LENDER:                           WASHINGTON MUTUAL BANK doing business as
                                       WESTERN BANK

                                       By:
                                          -----------------------
                                          Its:
                                              -------------------

                                        48

<PAGE>

                                   EXHIBIT A-1

           SECOND AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE

                                                             Seattle, Washington
                                                                __________, 2000

         For value received, CUTTER & BUCK INC. (the "Borrower") promises to
pay to the order of [NAME OF LENDER] (the "Lender") the unpaid principal
amount of all Borrowings made by the Lender to the Borrower under the
Revolving Facility pursuant to that certain Second Amended and Restated Loan
Agreement dated as of July ___, 2000 (as the same may be amended and modified
from time to time, the "Loan Agreement") by and among the Borrower, the
Lender, the several lenders also party thereto (the "Lenders"), WASHINGTON
MUTUAL BANK doing business as WESTERN BANK, as letter of credit issuer and as
credit card issuer, and WASHINGTON MUTUAL BANK doing business as WESTERN
BANK, as administrative agent to the Lenders (in such capacity, the
"Administrative Agent"), on the dates and in the amounts provided in the Loan
Agreement. The Borrower promises to pay interest on the unpaid principal
amount of all Borrowings under the Revolving Facility on the dates and at the
rate or rates provided for in the Loan Agreement. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest on the
principal amount hereof shall bear interest at the Default Rate, as provided
for in the Loan Agreement. All such payments of principal of and interest on
any Borrowing shall be made as provided in the Loan Agreement.

         All Borrowings and the Interest Periods and the interest rates from
time to time applicable thereto, and all payments of the principal thereof
shall be recorded by the Lender in accordance with its usual practices;
provided, that the failure of the Lender to make any such recordation shall
not affect the obligations of the Borrower hereunder or under the Loan
Agreement.

         The Borrower hereby waives diligence, presentment, demand, protest
and, except for notices required to be given pursuant to the Loan Agreement,
notice of any kind whatsoever. The non-exercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.

         This Note amends and restates in its entirety and, as so amended and
restated, continues the Amended and Restated Revolving Credit Facility Note
dated April 28, 1999, made by the Borrower to the order of the Lender. This
Note is one of the Notes referred to in the Loan Agreement. Capitalized terms
used in this Note without definition have the meanings assigned to them in
the Loan Agreement. Reference is made to the Loan Agreement for provisions
for the optional prepayment and the repayment hereof and the acceleration of
the maturity hereof. This Note is governed by the laws of the State of
Washington.

         The Loan Agreement, among other things, amends and restates in its
entirety and, as so amended and restated, continues the Amended and Restated
Loan Agreement dated as of April 28, 1999, between the Borrower, the
Administrative Agent, WASHINGTON MUTUAL BANK

                                   A-1 - 1

<PAGE>

doing business as WESTERN BANK and BANK OF AMERICA, N.A. (formerly known as
Bank of America National Trust and Savings Association doing business as
Seafirst) (the "Original Loan Agreement"). The indebtedness of the Borrower
evidenced by this Note includes the indebtedness of the Borrower resulting
from Borrowings made by the Lender to the Borrower from time to time pursuant
to the Loan Agreement and the indebtedness of the Borrower resulting from
loans previously made by the Lender to the Borrower under the Original Loan
Agreement.

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

                                                     CUTTER & BUCK INC.

                                                     By
                                                        -----------------------
                                                        Its
                                                            -------------------

                                   A-1 - 2

<PAGE>

                                   EXHIBIT A-2

                 AMENDED AND RESTATED TERM CREDIT FACILITY NOTE

                                                             Seattle, Washington
                                                                 _________, 1999

         For value received, CUTTER & BUCK INC. (the "Borrower") promises to
pay to the order of WASHINGTON MUTUAL BANK doing business as WESTERN BANK
(the "Term Lender") the unpaid principal amount of all Borrowings made by the
Term Lender to the Borrower under the Term Facility pursuant to that certain
Amended and Restated Loan Agreement dated as of April 28, 1999 (as the same
may be amended and modified from time to time, the "Loan Agreement") by and
among the Borrower, the Lender, the several lenders also party thereto (the
"Lenders"), WASHINGTON MUTUAL BANK doing business as WESTERN BANK, as letter
of credit issuer and as credit card issuer, and WASHINGTON MUTUAL BANK doing
business as WESTERN BANK, as administrative agent to the Lenders (in such
capacity, the "Administrative Agent"), on the dates and in the amounts
provided in the Loan Agreement. The Borrower promises to pay interest on the
unpaid principal amount of all Borrowings under the Term Facility on the
dates and at the rate or rates provided for in the Loan Agreement. Interest
on any overdue principal of and, to the extent permitted by law, overdue
interest on the principal amount hereof shall bear interest at the Default
Rate, as provided for in the Loan Agreement. All such payments of principal
of and interest on any Borrowing shall be made as provided in the Loan
Agreement.

         All Borrowings and the Interest Periods and the interest rates from
time to time applicable thereto, and all payments of the principal thereof
shall be recorded by the Term Lender in accordance with its usual practices;
provided, that the failure of the Term Lender to make any such recordation
shall not affect the obligations of the Borrower hereunder or under the Loan
Agreement.

         The Borrower hereby waives diligence, presentment, demand, protest
and, except for notices required to be given pursuant to the Loan Agreement,
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.

         This Note amends and restates in its entirety and, as so amended and
restated, continues the Facility B Promissory Note dated July 31, 1998 made
by the Borrower to the order of WASHINGTON MUTUAL BANK doing business as
WESTERN BANK. This Note is one of the Notes referred to in the Loan
Agreement. Capitalized terms used in this Note without definition have the
meanings assigned to them in the Loan Agreement. Reference is made to the
Loan Agreement for provisions for the optional prepayment and the repayment
hereof and the acceleration of the maturity hereof. This Note is governed by
the laws of the State of Washington.

                                   A-2 - 1

<PAGE>

         The Loan Agreement, among other things, amends and restates in their
entirety and, as so amended and restated, continues (a) the Loan Agreement
dated as of July 31, 1998 between the Borrower and WASHINGTON MUTUAL BANK
doing business as WESTERN BANK and (b) the Promissory Note dated July 31,
1998 made by the Borrower to the order of WASHINGTON MUTUAL BANK doing
business as WESTERN BANK (the "Original Loan Agreements"). The indebtedness
of the Borrower evidenced by this Note includes the indebtedness of the
Borrower resulting from Borrowings made by the Lender to the Borrower from
time to time pursuant to the Loan Agreement and the indebtedness of the
Borrower resulting from loans previously made by WASHINGTON MUTUAL BANK doing
business as WESTERN BANK to the Borrower under the Original Loan Agreements.

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

                                                     CUTTER & BUCK INC.

                                                     By
                                                        -----------------------
                                                        Its
                                                            -------------------

                                   A-2 - 2

<PAGE>

                                    EXHIBIT B

                               NOTICE OF BORROWING

Washington Mutual Bank doing business as
  Western Bank, as Administrative Agent
1201 Third Avenue, Suite 1000
Seattle, Washington  98101

Attention:____________________________________            ______________,  20__

         The undersigned CUTTER & BUCK INC. (the Borrower") refers to the
Second Amended and Restated Loan Agreement dated as of July ___, 2000 (the
"Loan Agreement") (capitalized terms used herein and not otherwise defined
have the meanings given to them in the Loan Agreement), by and among the
Borrower, WASHINGTON MUTUAL BANK doing business as WESTERN BANK, BANK OF
AMERICA, N.A., and the several banks and other financial institutions from
time to time parties thereto (collectively, the "Lenders"), WASHINGTON MUTUAL
BANK doing business as WESTERN BANK, as letter of credit issuer and credit
card issuer, and WASHINGTON MUTUAL BANK doing business as WESTERN BANK, as
administrative agent to the Lenders. The Borrower hereby gives you notice,
irrevocably, pursuant to Section 2.3(a) or (b) of the Loan Agreement, as the
case may be, that the undersigned hereby requests an Advance, the issuance of
a Letter of Credit, the issuance of an Acceptance or the issuance of a Credit
Card, or the continuation or conversion of an Advance Outstanding under the
Loan Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") or conversion or
continuation as required by Section 2.3(a) or (b) of the Loan Agreement, as
the case may be:

         ADVANCES.  If the Proposed Borrowing consists of an Advance:

         1.       The Business Day of the Proposed Borrowing is __________ 20__.

         2.       The Proposed Borrowing is a [Revolving Facility Advance]
[Term Facility Advance].*

         3. The Type of Advance comprising the Proposed Borrowing is a [Floating
Rate Advance] [LIBOR Rate Advance] [Term Rate Advance].

         4. The amount of the Proposed Borrowing is $_______________.

         5. The Interest Period for the Proposed Borrowing is _________________.

         LETTER OF CREDIT.  If the Proposed Borrowing consists of the
issuance of a Letter of Credit:

-------------------
* Only available for Term Facility Advances.

                                        B-1

<PAGE>

         1. The Business Day on which the Letter of Credit is to be issued is
_________, 20__.

         2. The Letter of Credit is a [Commercial Letter of Credit]
[Standby Letter of Credit].

         3. The stated amount and expiration date of the Letter of Credit are
$___________, and 19__.

         4. The name and address of the beneficiary of the Letter of Credit
are:

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

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

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

         5. Other terms of the Letter of Credit will be as set forth in the
Application relating thereto.

         ACCEPTANCE.  If the Proposed Borrowing consists of the issuance of
an Acceptance:

         1. The Business Day on which the related Draft is to be accepted is
_____________, 20__.

         2. The amount of the Draft is $_________________.

         CONVERSION/CONTINUATION.  If the Borrower elects to continue or
convert an Advance:

         1.       The Business Day of the proposed conversion/continuation is
__________, 20__.

         2. The Advance being converted or continued is a
[Revolving Facility Advance] [Term Facility Advance].

         3. The Advance being converted or continued currently is a
[Floating Rate Advance] [LIBOR Rate Advance] [Term Rate Advance].*

         4. The Advance will be converted to or continued as a
[Floating Rate Advance] [Fixed Rate Advance].

         5. The amount of the Advance being converted or continued is
$______________.

         6. The Interest Period for the continued or converted Advance is
__________________.

-------------------
* Only available for Term Facility Advances.

                                        B-2

<PAGE>

         CERTIFICATIONS. The undersigned hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
Proposed Borrowing or on the date of the proposed conversion or continuation,
as the case may be, before and immediately after giving effect thereto:

         (A) The representations and warranties contained in Article IV of
the Loan Agreement are correct as though made on and as of such dates, unless
such representations and warranties are expressly stated to be made as of an
earlier date;

         (B) The most recent financial statements of the Borrower delivered
pursuant to Section 5.1(c)(i) of the Loan Agreement present fairly the
financial position and results of operations of the Borrower as of the date
of and for the periods presented in such financial statements, and since the
date of such financial statements delivered by the Borrower pursuant to
Section 5.1(c)(i) there has not been any material adverse change in the
financial condition or operations of the Borrower;

         (C) The Borrower is in full compliance with all covenants contained
in Article V of the Loan Agreement.

         (D) No event has occurred and is continuing, or would result from
such Proposed Borrowing or proposed conversion or continuation, which
constitutes an Event of Default or a Default under the Loan Agreement; and

         (E) After giving effect to the Proposed Borrowing or the proposed
continuation or conversion of an Advance, none of the Unused Revolving
Facility Commitment, the Unused Term Facility Commitment, the Unused
Acceptance Sublimit or the Unused SLC Sublimit will be less than zero.

                                  Very truly yours,

                                  CUTTER & BUCK INC.

                                  By:
                                     -------------------------------------
                                     Its:
                                         ---------------------------------

                                        B-3

<PAGE>

                                      EXHIBIT C

                        FORM OF ASSIGNMENT AND ACCEPTANCE

         Reference is made to the Amended and Restated Loan Agreement dated
as of April 28, 1999 (as the same may be further amended, supplemented or
otherwise modified from time to time, the "Loan Agreement"), by and among
Cutter & Buck Inc. (the "BORROWER"), WASHINGTON MUTUAL BANK doing business as
WESTERN BANK, BANK OF AMERICA, N.A., and the several banks and other
financial institutions from time to time parties thereto (collectively, the
"Lenders"), WASHINGTON MUTUAL BANK doing business as WESTERN BANK, as letter
of credit issuer and credit card issuer, and WASHINGTON MUTUAL BANK doing
business as WESTERN BANK, as administrative agent to the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT"). Unless otherwise defined herein, terms
defined in the Loan Agreement and used herein shall have the meanings given
to them in the Loan Agreement.

         __________ (the "ASSIGNOR") and __________ (the "ASSIGNEE") agree as
follows:

         1.    The Assignor hereby irrevocably sells and assigns to
            the Assignee without recourse to the Assignor, and
            the Assignee hereby irrevocably purchases and assumes
            from the Assignor without recourse to the Assignor,
            as of the Effective Date (as defined below), an
            interest (the "ASSIGNED INTEREST"), as specified on
            SCHEDULE 1, in and to the Assignor's rights and
            obligations under the Loan Agreement with respect to
            the revolving facility contained in the Loan
            Agreement as are set forth on SCHEDULE 1
            (individually, an "ASSIGNED FACILITY"; collectively,
            the "ASSIGNED FACILITIES"), in a principal amount for
            each Assigned Facility as set forth on SCHEDULE 1.

         2.    The Assignor (a) makes no representation or warranty and
            assumes no responsibility with respect to any statements,
            warranties or representations made in or in connection
            with the Loan Agreement or with respect to the execution,
            legality, validity, enforceability, genuineness, sufficiency
            or value of the Loan Agreement, the other Loan Documents or
            any other instrument or document furnished pursuant thereto,
            other than that the Assignor has not created any adverse claim
            upon the interest being assigned by it hereunder and that such
            interest is free and clear of any such adverse claim; and (b)
            makes no representation or warranty and assumes no
            responsibility with respect to the financial condition of the
            Borrower, any of its Affiliates or any other obligor or the
            performance or observance by the Borrower, any of its Affiliates
            or any other obligor of any of their respective obligations
            under the Loan Agreement or any of the other Loan Documents or
            any other instrument or document furnished pursuant hereto or
            thereto.

         3.    The Assignee (a) represents and warrants that it is legally
            authorized to enter into this Assignment and Acceptance; (b)
            confirms that it has received a

                                        C-1

<PAGE>

            copy of the Loan Agreement, together with copies of the
            financial statements delivered pursuant to Section 5.1(c)
            thereof and such other documents and information as it has
            deemed appropriate to make its own credit analysis and decision
            to enter into this Assignment and Acceptance; (c) agrees that it
            will, independently and without reliance upon the Assignor, the
            Administrative Agent, the Letter of Credit Issuer or the Credit
            Card Issuer, or any other Lender and based on such documents and
            information as it shall deem appropriate at the time, continue
            to make its own credit decisions in taking or not taking action
            under the Loan Agreement, the other Loan Documents or any other
            instrument or document furnished pursuant hereto or thereto; (d)
            appoints and authorizes the Administrative Agent to take such
            action as agent on its behalf and to exercise such powers and
            discretion under the Loan Agreement, the other Loan Documents or
            any other instrument or document furnished pursuant hereto or
            thereto as are delegated to the Administrative Agent by the
            terms thereof, together with such powers as are incidental
            thereto; and (e) agrees that it will be bound by the provisions
            of the Loan Agreement and will perform in accordance with its
            terms all the obligations which by the terms of the Loan
            Agreement are required to be performed by it as a Lender.

         4.    The effective date of this Assignment and Acceptance
            shall be __________ _____, ________ (the "EFFECTIVE
            DATE"). Following the execution of this Assignment
            and Acceptance, it will be delivered to the
            Administrative Agent for acceptance by it and
            recording by the Administrative Agent pursuant to the
            Loan Agreement, effective as of the Effective Date
            (which shall not, unless otherwise agreed to by the
            Administrative Agent, be earlier than five Business
            Days after the date of such acceptance and recording
            by the Administrative Agent).

         5.    Upon such acceptance and recording, from and after
            the Effective Date, the Administrative Agent shall
            make all payments in respect of the Assigned Interest
            (including payments of principal, interest, fees and
            other amounts) to the Assignee whether such amounts
            have accrued prior to the Effective Date or accrue
            subsequent to the Effective Date. The Assignor and
            the Assignee shall make all appropriate adjustments
            in payments by the Administrative Agent for periods
            prior to the Effective Date or with respect to the
            making of this assignment directly between
            themselves.

         6.    From and after the Effective Date, (a) the Assignee
            shall be a party to the Loan Agreement and, to the
            extent provided in this Assignment and Acceptance,
            have the rights and obligations of a Lender
            thereunder and under the other Loan Documents and
            shall be bound by the provisions thereof and (b) the
            Assignor shall, to the extent provided in this
            Assignment and Acceptance, relinquish its rights and
            be released from its obligations under the Loan
            Agreement.

         7.    This Assignment and Acceptance shall be governed by
            and construed in accordance with the laws of the
            State of Washington.

                                        C-2

<PAGE>

         8.    This Assignment and Acceptance may be executed by one
            or more of the parties to this Assignment and
            Acceptance on any number of separate counterparts
            (including by facsimile transmission), and all of
            said counterparts taken together shall be deemed to
            constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Acceptance to be executed as of the date first
above written by their respective duly authorized officers on
Schedule 1 hereto.

                                        C-3

<PAGE>

                                   SCHEDULE I
                          TO ASSIGNMENT AND ACCEPTANCE
           RELATING TO THE SECOND AMENDED AND RESTATED LOAN AGREEMENT,
                           DATED AS OF JULY ___, 2000
                                      AMONG
                               CUTTER & BUCK INC.,
                            THE LENDERS NAMED THEREIN
                                       AND
             WASHINGTON MUTUAL BANK DOING BUSINESS AS WESTERN BANK,
                            AS AGENT FOR THE LENDERS
                 (IN SUCH CAPACITY, THE "ADMINISTRATIVE AGENT")

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

Name of Assignor:

Name of Assignee:

Effective Date of Assignment:

     Credit                 Principal
Facility Assigned        Amount Assigned          Commitment Percentage Assigned
-----------------        ---------------          ------------------------------

                         $ ----------                  ---.-----------%

[NAME OF ASSIGNEE]            [NAME OF ASSIGNOR]

By                            By
  -----------------------       -----------------------------
Name:                         Name:
Title:                        Title:

--------------------
(1) Calculate the Commitment Percentage that is assigned to at least 15
decimal places and show as a percentage of the aggregate commitments of all
Lenders.

                                   Schedule I-1

<PAGE>

Accepted for Recordation in the Register:            Consented To:(2)

Washington Mutual Bank doing business                Cutter & Buck
as Western Bank, as Administrative Agent

By                                                   By
  -----------------------                              -------------------------
Name:                                                Name:
Title:                                               Title:

                                                     Washington Mutual Bank
                                                     doing business as Western
                                                     Bank, as Administrative
                                                     Agent, Letter of Credit
                                                     Issuer and Credit Card
                                                     Issuer

                                                     By
                                                       -------------------------
                                                     Name:
                                                     Title:

-------------------
(2) If required.

                                   Schedule I-2

<PAGE>

                                    EXHIBIT D

                                   COMMITMENTS

      LENDER                                                COMMITMENT

Washington Mutual Bank                                   $30,000,000.00
doing business as Western
Bank

Bank of America, N.A.                                    $25,000,000.00

                                        D-1

<PAGE>

           SECOND AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE

                                                             Seattle, Washington
                                                                   July 28, 2000

     For value received, CUTTER & BUCK INC. (the "Borrower") promises to pay
to the order of BANK OF AMERICA, N.A. (the "Lender") the unpaid principal amount
of all Borrowings made by the Lender to the Borrower under the Revolving
Facility pursuant to that certain Second Amended and Restated Loan Agreement
dated as of July 28, 2000 (as the same may be amended and modified from time to
time, the "Loan Agreement") by and among the Borrower, the Lender, the several
lenders also party thereto (the "Lenders"), WASHINGTON MUTUAL BANK doing
business as WESTERN BANK, as letter of credit issuer and as credit card issuer,
and WASHINGTON MUTUAL BANK doing business as WESTERN BANK, as administrative
agent to the Lenders (in such capacity, the "Administrative Agent"), on the
dates and in the amounts provided in the Loan Agreement. The Borrower promises
to pay interest on the unpaid principal amount of all Borrowings under the
Revolving Facility on the dates and at the rate or rates provided for in the
Loan Agreement. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Loan Agreement. All such
payments of principal of and interest on any Borrowing shall be made as provided
in the Loan Agreement.

     All Borrowings and the Interest Periods and the interest rates from
time to time applicable thereto, and all payments of the principal thereof shall
be recorded by the Lender in accordance with its usual practices; provided, that
the failure of the Lender to make any such recordation shall not affect the
obligations of the Borrower hereunder or under the Loan Agreement.

     The Borrower hereby waives diligence, presentment, demand, protest and,
except for notices required to be given pursuant to the Loan Agreement, notice
of any kind whatsoever. The non-exercise by the holder of any of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.

     This Note amends and restates in its entirety and, as so amended and
restated, continues the Amended and Restated Revolving Credit Facility Note
dated April 28, 1999, made by the Borrower to the order of the Lender. This Note
is one of the Notes referred to in the Loan Agreement. Capitalized terms used in
this Note without definition have the meanings assigned to them in the Loan
Agreement. Reference is made to the Loan Agreement for provisions for the
optional prepayment and the repayment hereof and the acceleration of the
maturity hereof. This Note is governed by the laws of the State of Washington.

     The Loan Agreement, among other things, amends and restates in its
entirety and, as so amended and restated, continues the Amended and Restated
Loan Agreement dated as of April 28, 1999, between the Borrower, the
Administrative Agent, WASHINGTON MUTUAL BANK doing business as WESTERN BANK and
BANK OF AMERICA, N.A. (formerly known as Bank of America National Trust and
Savings Association doing business as Seafirst) (the "Original Loan Agreement").
The indebtedness of the Borrower evidenced by this Note includes the
indebtedness

<PAGE>

of the Borrower resulting from Borrowings made by the Lender to the
Borrower from time to time pursuant to the Loan Agreement and the indebtedness
of the Borrower resulting from loans previously made by the Lender to the
Borrower under the Original Loan Agreement.

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

                                        CUTTER & BUCK INC.

                                       By  ____________________________________

                                       Its ____________________________________

                                       2

<PAGE>

                 SECOND AMENDED AND RESTATED SECURITY AGREEMENT

     This SECOND AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement")
is entered into as of July 28, 2000, by and among CUTTER & BUCK INC., a
Washington corporation ("Grantor"), WASHINGTON MUTUAL BANK doing business as
WESTERN BANK ("Western Bank"), BANK OF AMERICA, N.A. ("BofA"), the several banks
and other financial institutions from time to time parties to this Agreement
(including Western Bank and BofA in their respective capacities as lenders, the
"Lenders"), Western Bank, as issuer of letters of credit (the "Letter of Credit
Issuer") and as issuer of credit cards (the "Credit Card Issuer"), and Western
Bank, as administrative agent for the Lenders, the Letter of Credit Issuer and
the Credit Card Issuer (in such capacity, the "Administrative Agent"), and
amends and restates in its entirety the Amended and Restated Security Agreement
dated as of April 28, 1999 among Grantor, Western Bank, BofA (then known as Bank
of America National Trust and Savings Association doing business as Seafirst
Bank), the Letter of Credit Issuer, the Credit Card Issuer and the
Administrative Agent (the "Original Security Agreement").

                                    RECITALS

     Concurrently with the execution and delivery of this Agreement,
Grantor, the Lenders, the Letter of Credit Issuer, the Credit Card Issuer and
the Administrative Agent are entering into the Second Amended and Restated Loan
Agreement dated as of July 28, 2000 (the "Loan Agreement") which amends and
restates in its entirety the Amended and Restated Loan Agreement dated as of
April 28, 1999 among the Grantor, Western Bank, BofA (then known as Bank of
America National Trust and Savings Association doing business as Seafirst Bank),
the Letter of Credit Issuer, the Credit Card Issuer and the Administrative Agent
(the "Original Loan Agreement"). The Original Loan Agreement was secured by
the Original Security Agreement.

     It is a condition precedent to the execution and delivery of the Loan
Agreement that the Original Security Agreement be amended and restated as
provided in this Agreement.

     Accordingly, Grantor and the Administrative Agent, acting on behalf of
the Lenders, the Letter of Credit Issuer and the Credit Card Issuer (in such
capacity, the "Secured Party") hereby agree as follows:

                                    AGREEMENT

     1.   DEFINITIONS.  As used in this Agreement:

          "COLLATERAL" means all items of the types described in Exhibit A to
this Agreement.

          "OBLIGATIONS" means any and all present and future indebtedness,
liabilities and obligations of Grantor to the Lenders, the Letter of Credit
Issuer and the Credit Card Issuer under the Loan Agreement and the other Loan
Documents, and all renewals and extensions thereof, and includes all such
indebtedness, liabilities and obligations regardless of whether or not they
are or were (i) direct or indirect, (ii) matured or not matured or (iii)
absolute or contingent.

                                       -1-
<PAGE>

     Capitalized terms used in this Agreement and not otherwise defined have
the meanings given to them in the Loan Agreement.

     2.   SECURITY FOR OBLIGATIONS. As collateral security for the prompt and
unconditional payment and performance of the Obligations, Grantor hereby grants
to the Secured Party a security interest in all of Grantor's right, title and
interest in and to the Collateral.

     3.   REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to
the Secured Party as follows:

          (a)  NO VIOLATION. The execution and delivery of this Agreement will
not violate any law or agreement governing Grantor or to which Grantor is a
party, and its articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.

          (b)  ENFORCEABILITY OF COLLATERAL. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content and manner of preparation and
execution, and all Persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear to
be on the Collateral. At the time any account becomes subject to a security
interest in favor of the Secured Party, the account will be a good and valid
account representing an undisputed, bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for services
theretofore performed by Grantor with or for the account debtor, or for advances
made to employees; and there shall be no setoffs or counterclaims against any
such account.

          (c)  TITLE. Grantor represents and warrants to the Secured Party that
it holds good and marketable title to the Collateral, free and clear of all
Liens, except for the Lien of this Agreement and Permitted Liens. No financing
statement covering any of the Collateral is on file in any public office other
than those which reflect the Liens created by this Agreement and Permitted Liens
or to which the Secured Party has specifically consented. Grantor will defend
the Secured Party's rights in the Collateral against the claims and demands of
all other persons.

          (d)  HAZARDOUS SUBSTANCES. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement remains
a Lien on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. The terms "hazardous waste" and "hazardous substance" shall
also include, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the Collateral for
hazardous wastes and substances. Grantor hereby (i) releases and

                                      -2-

<PAGE>

waives any future claims against the Secured Party for indemnity or contribution
in the event Grantor becomes liable for cleanup or other costs under any such
laws, and (ii) agrees to indemnify and hold harmless the Secured Party against
any and all claims and losses resulting from a breach of this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
Obligations and the satisfaction of this Agreement.

          (e)  TRADE NAMES. Grantor has not, during the past five years,
operated under any trade name different from its true legal name.

          (f)  CHIEF EXECUTIVE OFFICE. The chief executive office of Grantor is
located at 2701 first Avenue, Suite 500, Seattle, Washington 98121.

          (g)  LOCATION OF COLLATERAL. All the Collateral consisting of
tangible personal property (other than display fixtures and samples held by
sales representatives) is located in the states of Washington, Oregon, New York
and Texas.

     4. GRANTOR'S COVENANTS.

          (a)  PERFECTION OF SECURITY INTEREST. Grantor will execute such
financing statements and take whatever other actions are requested by the
Secured Party to perfect and continue the Secured Party's security interest in
the Collateral. Upon request of the Secured Party, Grantor will deliver to the
Secured Party any and all of the documents evidencing or constituting the
Collateral, and Grantor will note the Secured Party's interest upon any and all
chattel paper if not delivered to the Secured Party for possession by the
Secured Party. Grantor hereby appoints the Secured Party as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to perfect
or to continue the security interest granted in this Agreement. The Secured
Party may at any time, and without further authorization from Grantor, file a
carbon, photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse the Secured
Party for all expenses for the perfection and the continuation of the perfection
of the Secured Party's security interest in the Collateral. Grantor promptly
will notify the Secured Party before any change in Grantor's name including any
change to the assumed business names of Grantor. This Agreement will continue in
effect even though all or any part of the Obligations are paid in full and even
though for a period of time Grantor may not be indebted to the Secured Party.

          (b)  LOCATION OF THE COLLATERAL. Grantor, upon request of the Secured
Party, will deliver to the Secured Party in form satisfactory to the Secured
Party a schedule of real properties and Collateral locations relating to
Grantor's operations, including without limitation the following: (i) all real
property owned or being purchased by Grantor; (ii) all real property being
rented or leased by Grantor; (iii) all storage facilities owned, rented, leased,
or being used by Grantor; and (iv) all other properties where Collateral is or
may be located. Except in the ordinary course of its business, Grantor will not
remove the Collateral from its existing locations without the prior written
consent of the Secured Party.

          (c)  REMOVAL OF COLLATERAL. Grantor will keep the Collateral (other
than inventory-in-transit, inventory in the possession of contractors for
embroidery work and

                                      -3-
<PAGE>

Collateral consisting of intangible property) at Grantor's address shown above,
at Grantor's warehouse, at Inner City Warehouse, or at such other locations as
are acceptable to the Secured Party. Except in the ordinary course of its
business, including the sales of inventory, Grantor will not remove the
Collateral from its existing locations without the prior written consent of the
Secured Party. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor will not take or permit any action which would require
application for certificates of title for the vehicles outside the State of
Washington, without the prior written consent of the Secured Party.

          (d)  TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or
accounts collected in the ordinary course of Grantor's business, Grantor will
not sell, offer to sell, or otherwise transfer or dispose of the Collateral,
except (i) transfers, sales or dispositions of Collateral that is obsolete or
worn out property disposed of in the ordinary course of business and (ii) other
asset dispositions provided that such other asset dispositions do not exceed
$200,000.00 in the aggregate for any fiscal year. So long as no Event of Default
has occurred, Grantor may sell inventory, but only in the ordinary course of its
business and only to buyers who qualify as a buyer in the ordinary course of
business. A sale in the ordinary course of Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale. Grantor
will not, without the prior written consent of the Secured Party, pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to any Lien,
other than the Liens provided for in this Agreement and Permitted Liens. This
includes Liens even if junior in right to the Liens granted under this
Agreement. Unless waived by the Secured Party, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust for the Secured
Party and shall not be commingled with any other funds; provided, however, this
requirement shall not constitute consent by the Secured Party to any sale or
other disposition. Upon receipt Grantor will immediately deliver any such
proceeds to the Secured Party.

          (e)  COLLATERAL SCHEDULES AND LOCATIONS. As often as the Secured
Party shall require, and insofar as the Collateral consists of accounts and
general intangibles, Grantor will deliver to the Secured Party schedules of such
Collateral, containing such information as the Secured Party may require,
including without limitation names and addresses of account debtors and agings
of accounts and general intangibles. Insofar as the Collateral consists of
inventory, Grantor will deliver to the Secured Party, as often as the Secured
Party shall require, such lists, descriptions, and designations of such
Collateral as the Secured Party may require to identify the nature, extent, and
location of such Collateral.

          (f)  MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor will maintain
all tangible Collateral in good condition and repair. Grantor will not commit or
permit damage to or destruction of the Collateral or any part of the Collateral.
The Secured Party and its designated representatives and agents shall have the
right at all reasonable times to examine, inspect, and audit the Collateral
wherever located. Grantor will immediately notify the Secured Party of all cases
involving the return, rejection, repossession, loss or damage of or to any
Collateral outside the ordinary course of business; of any request for credit or
adjustment or of any other dispute arising with respect to the Collateral
outside the ordinary course of business; and generally of all material
happenings and events affecting the Collateral or the value or the amount of the
Collateral outside the ordinary course of business.

                                       -4-
<PAGE>

          (g)  TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or operation, upon
this Agreement or upon any of the other Loan Documents. Grantor may withhold any
such payment or may elect to contest any Lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and so
long as the Secured Party's interest in the Collateral is not jeopardized in the
Secured Party's sole opinion. If the Collateral is subjected to a Lien which is
not discharged within fifteen (15) days, Grantor will deposit with the Secured
Party cash, a sufficient corporate surety bond or other security satisfactory to
the Secured Party in an amount adequate to provide for the discharge of the lien
plus any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor will
defend itself and the Secured Party and will satisfy any final adverse judgment
before enforcement against the Collateral. Grantor will name the Secured Party
as an additional obligee under any surety bond furnished in the contest
proceedings.

          (h)  COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor will comply
promptly with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in effect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in good
faith any such law, ordinance or regulation and withhold compliance during any
proceeding. including appropriate appeals, so long as the Secured Party's
interest in the Collateral, in the Secured Party's opinion, is not jeopardized.

          (i)  MAINTENANCE OF CASUALTY INSURANCE. Grantor will procure and
maintain all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as the Secured Party may
require with respect to the Collateral, in form, amounts, coverages and basis
reasonably acceptable to the Secured Party and issued by a company or companies
reasonably acceptable to the Secured Party. Grantor, upon request of the Secured
Party, will deliver to the Secured Party from time to time the policies or
certificates of insurance in form satisfactory to the Secured Party, including
stipulations that coverages will not be canceled or diminished without at least
ten (10) days' prior written notice to the Secured Party and not including any
disclaimer of the insurer's liability for failure to give such a notice. Each
insurance policy also shall include an endorsement providing that coverage in
favor of the Secured Party will not be impaired in any way by any act, omission
or default of Grantor or any other person. In connection with all policies
covering assets in which the Secured Party holds or is offered a security
interest, Grantor will provide the Secured Party with such loss payable or other
endorsements as the Secured Party may require. If Grantor at any time falls to
obtain or maintain any insurance as required under this Agreement, the Secured
Party may (but shall not be obligated to) obtain such insurance as the Secured
Party deems appropriate, including if it so chooses "single interest insurance,"
which will cover only the Secured Party's interest in the Collateral.

          (j)  APPLICATION OF INSURANCE PROCEEDS. Grantor will promptly notify
the Secured Party of any loss or damage to the Collateral. The Secured Party may
make proof of loss if Grantor fails to do so within fifteen (15) days of the
casualty. All proceeds of any insurance on the Collateral, including accrued
proceeds thereon, shall be held by the Secured Party as part of the Collateral.
If the Secured Party consents to repair or replacement of the

                                      -5-
<PAGE>

damaged or destroyed Collateral, the Secured Party shall, upon satisfactory
proof of expenditure, pay or reimburse Grantor from the proceeds for the
reasonable cost of repair or restoration. If the Secured Party does not consent
to repair or replacement of the Collateral, the Secured Party shall retain a
sufficient amount of the proceeds to pay all of the Obligations, and shall pay
the balance to Grantor. Any proceeds which have not been disbursed within six
(6) months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Obligations.

          (k)  INSURANCE REPORTS. Grantor, upon request of the Secured Party,
will furnish to the Secured Party reports on each existing policy of insurance
showing such information as the Secured Party may reasonably request including
the following: (i) the name of the insurer; (ii) the risks insured; (iii) the
amount of the policy; (iv) the property insured; (v) the then current value on
the basis of which insurance has been obtained and the manner of determining
that value; and (vi) the expiration date of the policy.

          (l)  CHANGES TO CHIEF EXECUTIVE OFFICE; TRADE NAMES. Without giving
the Secured Party at least thirty (30) days prior written notice, Grantor will
not change the location of its chief executive office and will not use any trade
name different that its legal name.

     5.   EXPENDITURES BY THE SECURED PARTY. If not discharged or paid when due,
the Secured Party may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this Agreement,
including without limitation all taxes, liens, security interests, encumbrances,
and other claims, at any time levied or placed on the Collateral. The Secured
Party also may (but shall not be obligated to) pay all costs for insuring,
maintaining and preserving the Collateral. All such expenditures incurred or
paid by the Secured Party for such purposes will then bear interest at the
Floating Rate from the date incurred or paid by the Secured Party to the date of
repayment by Grantor. All such expenses shall become a part of the Obligations
and, at the Secured Party's option, will (a) be payable on demand, (b) be added
to the balance of either of the Notes and be apportioned among and be payable
with any installment payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the Notes, or (c) be
treated as a balloon payment which will be due and payable at the maturity of
such Note or Notes. This Agreement also will secure payment of these amounts.
Such right shall be in addition to all other rights and remedies to which the
Secured Party may be entitled.

     6.   RIGHTS AND REMEDIES OF THE SECURED PARTY. If an Event of Default
occurs under this Agreement, at any time thereafter, the Secured Party shall
have, subject to the provisions of Section 8, all the rights of a secured party
under the Washington Uniform Commercial Code. In addition and without
limitation, but subject to the provisions of Section 8, the Secured Party may
exercise any one or more of the following rights and remedies:

          (a)  ACCELERATE OBLIGATIONS. The Secured Party may declare the entire
Obligations, including any prepayment penalty which Grantor would be required to
pay, immediately due and payable, without notice.

                                       -6-
<PAGE>

          (b)  ASSEMBLE COLLATERAL. The Secured Party may require Grantor to
deliver to the Secured Party all or any portion of the Collateral and any and
all certificates of title and other documents relating to the Collateral. The
Secured Party may require Grantor to assemble the Collateral and make it
available to the Secured Party at a place to be designated by the Secured Party.
The Secured Party also shall have full power to enter upon the property of
Grantor to take possession of and remove the Collateral. If the Collateral
contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees the Secured Party may take such other goods, provided that the
Secured Party makes reasonable efforts to return them to Grantor after
repossession.

          (c)  SELL THE COLLATERAL. The Secured Party shall have full power to
sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof
in its own name or that of Grantor. The Secured Party may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market, the
Secured Party will give Grantor reasonable notice of the time after which any
private sale or any other intended disposition of the Collateral is to be made.
The requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Obligations secured by this Agreement and
shall be payable on demand, with interest at the Floating Rate from date of
expenditure until repaid.

          (d)  APPOINT RECEIVER. To the extent permitted by applicable law, the
Secured Party shall have the following rights and remedies regarding the
appointment of a receiver: (i) the Secured Party may have a receiver appointed
as a matter of right, (ii) the receiver may be an employee of the Secured Party
and may serve without bond, and (iii) all fees of the receiver and his or her
attorney shall become part of the Obligations secured by this Agreement and
shall be payable on demand, with interest at the Floating Rate from the date of
expenditure until repaid.

          (e)  COLLECT REVENUES, APPLY ACCOUNTS. The Secured Party, either
itself or through a receiver, may collect the payments, rents, income, and
revenues from the Collateral. The Secured Party may at any time in its
discretion transfer any Collateral into its own name or that of its nominee and
receive the payments, rents, income, and revenues therefrom and hold the same as
security for the Obligations or apply it to payment of the Obligations in such
order of preference as the Secured Party may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action, or similar property, the Secured
Party may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as the Secured Party may determine,
whether or not such Collateral is then due. For these purposes, the Secured
Party may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of title,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, the Secured Party may notify account
debtors and obligors on any Collateral to make payments directly to the Secured
Party.

                                      -7-
<PAGE>

          (f)  OBTAIN DEFICIENCY. To the extent permitted by applicable law, if
the Secured Party chooses to sell any or all of the Collateral, the Secured
Party may obtain a judgment against Grantor for any deficiency remaining on the
Obligations after application of all amounts received from the exercise of the
rights provided in this Agreement. Grantor shall be liable for a deficiency even
if the transaction described in this paragraph is a sale of accounts or chattel
paper.

          (g)  OTHER RIGHTS AND REMEDIES. The Secured Party shall have all the
rights and remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition, the Secured
Party shall have and may exercise any or all other rights and remedies it may
have available at law, in equity, or otherwise.

     7.   GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until an Event
of Default has occurred and except as otherwise provided below with respect to
accounts, Grantor may have possession of the tangible personal property and
beneficial use of all the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the other Loan Documents, provided that
Grantor's right to possession and beneficial use shall not apply to any
Collateral where possession of the Collateral by the Secured Party is required
by law to perfect the Secured Party's security interest in such Collateral.
Until an Event of Default has occurred and until otherwise notified by the
Secured Party, Grantor may collect any of the Collateral consisting of accounts.
At any time while an Event of Default exists, subject to the provisions of
Section 8, the Secured Party may exercise its rights to collect the accounts and
to notify account debtors to make payments directly to the Secured Party for
application to the Obligations. If the Secured Party at any time has possession
of any Collateral, whether before or after an Event of Default, the Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral if the Secured Party takes such action for that
purpose as Grantor shall request or as the Secured Party, in the Secured Party's
sole discretion, shall deem appropriate under the circumstances, but failure to
honor any request by Grantor shall not of itself be deemed to be a failure to
exercise reasonable care. The Secured Party shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Obligations.

     8.   CUMULATIVE REMEDIES. All of the Secured Party's rights and remedies,
whether evidenced by this Agreement or the other Loan Documents or by any other
writing, shall be cumulative and may be exercised singularly or concurrently.
Election by the Secured Party to pursue any remedy shall not exclude pursuit of
any other remedy, and an election to make expenditures or to take action to
perform an obligation of Grantor under this Agreement, after Grantor's failure
to perform, shall not affect the Secured Party's right to declare a default and
to exercise its remedies.

     9.   RETENTION. Under no circumstances shall the Secured Party be deemed
to have elected to retain possession of all or any part of the Collateral in
satisfaction of the Obligations unless the Secured Party has given Grantor
written notice of a proposal to do so pursuant to Revised Code of Washington
62A.9-505(2), regardless of the length of time the Collateral remains in the
Secured Party's possession after an Event of Default. Under no circumstances

                                      -8-
<PAGE>

shall the Secured Party have any liability as a result of a decline in the
market value of the Collateral while the Secured Party holds it.

     10.  REVIVAL OF SECURITY INTEREST. To the extent Grantor makes a payment
to the Secured Party or the Secured Party receives any payment of proceeds of
Collateral, which is later invalidated, declared to be a fraudulent transfer or
preference, set aside or required to be repaid under any bankruptcy law, other
law or equitable principle, the Secured Party's interest in the Collateral shall
be revived and continue as if the payment or proceeds had never been received by
the Secured Party.

     11.  MISCELLANEOUS.

          (a)  AMENDMENT. This Agreement and the other written documents,
instruments and agreements entered into in connection with the Loan and the
Obligations contain the complete and final expression of the entire agreement of
the parties. No provision of this Agreement may be amended, modified, waived or
supplemented, except by a writing signed by the party sought to be charged with
the amendment, modification, waiver or supplementation. No waiver by the Secured
Party of any Default or Event of Default shall be a waiver of any other Default
or Event of Default.

          (b)  EFFECTIVENESS. This Agreement shall remain in full force and
effect until (i) all of the Obligations shall have been indefeasibly paid in
full in cash; (ii) the Secured Party shall have no further obligation to advance
funds, or provide other financial accommodations, to or for the benefit of
Grantor; and (iii) this Agreement shall have been terminated in writing by the
Secured Party. This is a continuing security agreement and will continue in
effect even though Grantor may, for a period of time, pay the Obligations in
full and not be indebted to the Secured Party.

          (c) LEGAL EXPENSES. In the event of any default under this Agreement
or any of the Obligations, or in the event that any dispute arises relating to
the interpretation, enforcement or performance of any of the foregoing, the
Secured Party shall be entitled to collect from Grantor on demand all fees and
expenses incurred in connection therewith, including but not limited to fees of
attorneys, accountants, appraisers, environmental inspectors, consultants,
expert witnesses, arbitrators, mediators and court reporters, subject, in
circumstances other than a bankruptcy or insolvency proceeding, to applicable
law providing that the prevailing party is entitled to be awarded its reasonable
costs and attorneys' fees. Without limiting the generality of the foregoing,
Grantor shall pay all such costs and expenses incurred in connection with: (i)
arbitration or other alternative dispute resolution proceedings, trial court
actions and appeals; (ii) bankruptcy or other insolvency proceedings of Grantor
or other party liable for any of the Obligations or any party having any
interest in any Collateral; (iii) judicial or nonjudicial foreclosure on any
Collateral; (iv) post-judgment collection proceedings; (v) all claims,
counterclaims, cross-claims and defenses asserted in any of the foregoing
whether or not they arise out of or are related to this Agreement; (vi) all
preparation for any of the foregoing; and (vii) all settlement negotiations with
respect to any of the foregoing.

                                      -9-
<PAGE>

          (d)  NOTICES. Any notice under this Agreement shall be in writing and
shall be given as provided in the Loan Agreement.

          (e)  GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with the laws of the state of Washington without giving effect to
their principles or provisions regarding conflicts of laws or choice of law,
except to the extent that the Uniform Commercial Code as enacted in the state of
Washington provides that the validity or perfection of any security interests
in, or remedies in respect of, any particular Collateral are governed by the
laws of a jurisdiction other than the state of Washington (the "Governing
Laws"). Except as otherwise provided in this Agreement or any of the other Loan
Documents and unless inconsistent with any provision of the Governing Laws that
cannot be waived, the Uniform Customs and Practice for Documentary Credits of
the International Chamber of Commerce ("UCP") as in effect from time to time are
fully incorporated herein and shall apply to all Letters of Credit issued under
the Loan Agreement.

          (f)  COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be deemed an original and all of which taken
together shall constitute but one and the same instrument.

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

     IN WITNESS WHEREOF the parties have duly executed and delivered this
Agreement as of the date first written above.

GRANTOR:                               CUTTER & BUCK INC.

                                       By _____________________________________

                                        Its____________________________________

THE SECURED PARTY:                     WASHINGTON MUTUAL BANK doing business
                                       as WESTERN BANK, for itself and as agent

                                       By _____________________________________

                                        Its____________________________________

                                      -10-
<PAGE>

                                    EXHIBIT A
                            DESCRIPTION OF COLLATERAL

GRANTOR:                      CUTTER & BUCK INC.
THE SECURED PARTY:            WASHINGTON MUTUAL BANK doing business as WESTERN
                              BANK, as Administrative Agent

     As collateral security for all present and future obligations of Grantor
to the Secured Party under the Second Amended and Restated Loan Agreement dated
as of July 28, 2000 (the "Loan Agreement") by and among Grantor, WASHINGTON
MUTUAL BANK doing business as WESTERN BANK ("Western Bank"), BANK OF AMERICA,
N.A. ("BofA"), the several banks and other financial institutions from time to
time parties to this Agreement (including Western Bank and BofA in their
respective capacities as lenders, the "Lenders"), Western Bank, as issuer of
letters of credit (the "Letter of Credit Issuer") and as issuer of credit cards
(the "Credit Card Issuer"), and Western Bank, as administrative agent for the
Lenders, the Letter of Credit Issuer and the Credit Card Issuer (in such
capacity, the "Administrative Agent"), and the other Loan Documents, Grantor
hereby grants to the Administrative Agent acting on behalf of the Lenders, the
Letter of Credit Issuer and the Credit Card Issuer (in such capacity, the
"Secured Party") a security interest in all the following types of property of
Grantor, wherever located, now owned or hereafter acquired:

          (a) All accounts, accounts receivable, contract rights, interests in
leaseholds, general intangibles, trademarks and trade names, goodwill, rights in
patents and copyrights, instruments, investment property, financial assets,
chattel paper, documents, documents of title, tax refunds, deposits of any and
every kind, claims, causes of action against any person or entity, and rights to
payment (in cash or in kind) of any and every kind, including without limitation
any and all purchase orders, instruments and other documents evidencing
obligations for goods sold or leased and/or services rendered by Grantor.

          (b) All inventory of every nature and description and including
without limitation all raw materials and supplies used or consumed in Grantor's
business, work in process, finished goods, and all returns and refunds and the
right to collect the same.

          (c) All leasehold improvements, machinery, equipment, furniture,
fixtures, tools, attachments and vehicles, and all additions and accessions
thereto, substitutions therefor and replacements thereof.

          (d) All money and other property of Grantor which is now or hereafter
actually or constructively held or received by the Secured Party or in the
possession of the Secured Party.

          (e) All bills of lading, other documents of title, policies or
certificates of insurance, chattel paper and general intangibles accompanying or
relating to any Commercial Letter of Credit (as such term is defined in the Loan
Agreement) or any drafts drawn thereunder, and any and all inventory, goods and
other property shipped under, in connection with, or relating to any such
Commercial Letter of Credit or any drafts drawn thereunder.

          (f)      All Investment Property.

          (g) All proceeds, products (either in their unmanufactured state or
after manufacture), rents and profits of any of the foregoing, including but not
limited to insurance proceeds.

          (h) All books, records, customer lists, trade secrets, formulae and
other recorded information, whether in the form of a writing, photograph,
microfilm, microfiche, electronic medium, or otherwise, together with all the
Grantor's right, title and interest in and to all computer software used to
create, maintain

<PAGE>

or process any such records or data.

     To the extent terms used in this Exhibit are defined in the Uniform
Commercial Code, they have the meanings assigned to them in the Uniform
Commercial Code as the same may be amended or modified from time to time.

<PAGE>

           SECOND AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE

                                                             Seattle, Washington
                                                                   July 28, 2000

     For value received, CUTTER & BUCK INC. (the "Borrower") promises to pay to
the order of WASHINGTON MUTUAL BANK doing business as WESTERN BANK (the
"Lender") the unpaid principal amount of all Borrowings made by the Lender to
the Borrower under the Revolving Facility pursuant to that certain Second
Amended and Restated Loan Agreement dated as of July 28, 2000 (as the same may
be amended and modified from time to time, the "Loan Agreement") by and among
the Borrower, the Lender, the several lenders also party thereto (the
"Lenders"), WASHINGTON MUTUAL BANK doing business as WESTERN BANK, as letter of
credit issuer and as credit card issuer, and WASHINGTON MUTUAL BANK doing
business as WESTERN BANK, as administrative agent to the Lenders (in such
capacity, the "Administrative Agent"), on the dates and in the amounts provided
in the Loan Agreement. The Borrower promises to pay interest on the unpaid
principal amount of all Borrowings under the Revolving Facility on the dates and
at the rate or rates provided for in the Loan Agreement. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest on the
principal amount hereof shall bear interest at the Default Rate, as provided for
in the Loan Agreement. All such payments of principal of and interest on any
Borrowing shall be made as provided in the Loan Agreement.

     All Borrowings and the Interest Periods and the interest rates from time
to time applicable thereto, and all payments of the principal thereof shall be
recorded by the Lender in accordance with its usual practices; provided, that
the failure of the Lender to make any such recordation shall not affect the
obligations of the Borrower hereunder or under the Loan Agreement.

     The Borrower hereby waives diligence, presentment, demand, protest and,
except for notices required to be given pursuant to the Loan Agreement, notice
of any kind whatsoever. The non-exercise by the holder of any of its rights
hereunder in any particular instance shall not constitute a waiver thereof in
that or any subsequent instance.

     This Note amends and restates in its entirety and, as so amended and
restated, continues the Amended and Restated Revolving Credit Facility Note
dated April 28, 1999, made by the Borrower to the order of the Lender. This Note
is one of the Notes referred to in the Loan Agreement. Capitalized terms used in
this Note without definition have the meanings assigned to them in the Loan
Agreement. Reference is made to the Loan Agreement for provisions for the
optional prepayment and the repayment hereof and the acceleration of the
maturity hereof. This Note is governed by the laws of the State of Washington.

     The Loan Agreement, among other things, amends and restates in its entirety
and, as so amended and restated, continues the Amended and Restated Loan
Agreement dated as of April 28, 1999, between the Borrower, the Administrative
Agent, WASHINGTON MUTUAL BANK doing business as WESTERN BANK and BANK OF
AMERICA, N.A. (formerly known as Bank of America National Trust and Savings
Association doing business as Seafirst) (the "Original Loan

<PAGE>

Agreement"). The indebtedness of the Borrower evidenced by this Note includes
the indebtedness of the Borrower resulting from Borrowings made by the Lender to
the Borrower from time to time pursuant to the Loan Agreement and the
indebtedness of the Borrower resulting from loans previously made by the Lender
to the Borrower under the Original Loan Agreement.

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

                                       CUTTER & BUCK INC.

                                       By _____________________________________

                                       Its_____________________________________

                                       2

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