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EXHIBIT 10.20    
  

 
 

CHANGE IN CONTROL AGREEMENT
  FOR
  JON P. RUNKEL
  (As amended September 18, 2002)    
  

        This Agreement is entered into this 9th day of September, 2002, by and between Cutter & Buck Inc. (the "Company") and Jon P. Runkel ("Executive").
Executive is an at-will employee of the Company. The parties wish to provide Executive with severance benefits if Executive's employment is terminated in connection with a change in
control of the Company. The Company is willing to provide such benefits if Executive enters into the Company's form of Confidentiality and Non-Competition Agreement for executive officers. 

        NOW,
THEREFORE, in consideration of the foregoing recitals and the covenants and conditions contained herein, the parties hereby agree as follows: 

        1.    CHANGE IN CONTROL.    

        (a)  If,
within the period commencing 90 days prior to the date of occurrence (the "Event Date") of a Control Event and ending on the date eighteen (18) months
after the Event Date (the "Window"), the Company terminates Executive's employment (other than for Cause) or Executive resigns for Good Reason, the Company shall pay to Executive the Severance Payment
in immediately available funds. If the termination occurs prior to the Control Event, the Severance Payment is due on the twentieth business day following the Event Date; if the termination occurs on
or subsequent to the Event Date, the Severance Payment is due on the twentieth business day following the date of termination (the "Termination Date"). 

        (b)  The
Severance Payment shall be equal to 150% of Executive's annual base salary as of the Termination Date. If the Termination Date occurs during the Window but prior to
the Control Event, the Severance Payment shall be reduced by the sum of any severance payments previously received by Executive from the Company (but not below zero). 

        (c)  Each
of the following shall constitute a "Control Event": 

        (1)  the
acquisition of Common Stock of the Company (the "Common Stock") by any "Person" (as such term is defined in the Rights Agreement dated as of November 20, 1998
between the Company and Mellon Investor Services LLC (the "Rights Plan"), together with all Affiliates and Associates (as such terms are defined in the Rights Plan) of such Person, such that such
Person becomes, after the date of this Agreement, the Beneficial Owner (as defined in the Rights Plan) of twenty-five percent (25%) or more of the shares of Common Stock then outstanding,
but shall not include any such acquisition by (i) the Company, (ii) any subsidiary of the Company, (iii) any employee or director of the Company as of the date hereof, or
(iv) any employee benefit plan of the Company or of any subsidiary of the Company or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any
such employee benefit plan; or 

        (2)  the
consummation of any merger, consolidation, reorganization or other transaction providing for the conversion or exchange of twenty-five percent (25%) or
more of the outstanding shares of Common Stock into securities of any Person, or cash, or property, or a combination of any of the foregoing; or 

        (3)  the
consummation of any sale or other disposition of all or substantially all of the assets of the Company; or 

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        (4)  individuals
who, as of the date hereof, constitute the Company's Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the
Company's Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for the election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors. 

        (d)  Each
of the following shall constitute "Good Reason", provided that it occurs during the Window: 

        (1)  the
material diminution of Executive's position, duties, responsibilities or status with the Company or its successor, as compared with the position, duties,
responsibilities or status of Executive with the Company immediately prior to the Event Date, except in connection with the termination of Executive for Cause; 

        (2)  the
Company's assignment of Executive on a substantially full-time basis to work at a location where the distance between the new location and Executive's
principal residence is at least 20 miles greater than the distance between the former location and such residence; provided, however, that this paragraph shall not apply to travel in the furtherance
of the Company's business to an extent substantially consistent with Executive's business travel obligations as of the date hereof; 

        (3)  the
Company's failure to obtain an assumption of the obligations of the Company to perform this Agreement by any successor to the Company; 

        (4)  any
reduction in Executive's base salary, or a material reduction in benefits payable to Executive or failure of the Company to pay Executive any earned salary, bonus or
benefits except with the prior written consent of Executive; 

        (5)  the
exclusion or limitation of Executive from participating in some form of variable compensation plan which provides the Executive the opportunity to achieve a level of
total compensation (base salary plus variable compensation) consistent with what the Executive had the opportunity to earn at the Event Date; or 

        (6)  any
demand by any director or officer of the Company that Executive take any action or refrain from taking any action where such action or inaction, as the case may be,
would violate any law, rule, regulation or other governmental pronouncement, court order, decree or judgment, or breach any agreement or fiduciary duty. 

        (e)  Each
of the following shall constitute "Cause": 

        (1)  any
violation by Executive of any material obligation under this Agreement or the attached Confidentiality and Non-Disclosure Agreement; 

        (2)  conviction
for commitment of a felony; 

        (3)  any
violation of law which has a material adverse effect on the Company; 

        (4)  habitual
abuse of alcohol or a controlled substance under circumstances that adversely affect the Executive's performance of his or her duties in any way; 

        (5)  theft
or embezzlement from the Company; 

        (6)  repeated
unexcused absence from work; 

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        (7)  Disability
of Executive (as defined below); and 

        (8)  repeated
failure or refusal by Executive to carry out the reasonable directives, orders or resolutions of the Company's Board of Directors or any officer to whom he or
she reports. 

        (f)    "Disability"
shall mean any physical, mental or other health condition which renders the Executive unable to perform the essential functions of his or her position with
or without reasonable accommodation. Any disagreement as to whether Executive is disabled shall be resolved by a physician selected by the Company after an examination of Executive. Executive hereby
consents to such physical examination and to the examination of all medical records of Executive necessary, in the judgment of the examining physician, to make the determination of disability. 

        (g)  Notwithstanding
any other provision of this Agreement to the contrary, in the event that any severance or other payment, benefit or right payable or accruing to
Executive hereunder or under any of the Company's benefit plans (the "Benefit Plans") would constitute a "parachute payment" as defined in Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), then the total amount of severance and other payments or benefits payable to Executive hereunder and under the Benefit Plans which is deemed to constitute a "parachute
payment" shall not exceed and shall, if necessary, be reduced to an amount (the "Revised Severance Payment") equal to 2.99 times Executive's "base amount" as defined in Code Section 280G(b)(3).
In the event of a disagreement between the Company and Executive as to whether the provisions of Code Section 280G are applicable or the amount of the Revised Severance Payment, such
determination shall be made by the Company's independent public accountants or, if such firm is unable or unwilling to render such a determination, then by a law firm mutually acceptable to Executive
and the Company. All costs relating to such determination shall be borne by the Company. The Company and the Executive shall cooperate in good faith to make the determination required by this
Section 1(g) by mutual agreement not later than the later of: (i) the fifth day preceding the date that the Severance Payment is or would be due or
(ii) the earlier of (x) the tenth day following the expiration of any period of accelerated vesting of options to purchase the Company's Common Stock provided by Section 5(n) of
the Benefit Plan or (y) the tenth day following the date of exercise by Executive of his or her last remaining option which was exercisable solely due to the application of Section 5(n)
of the Benefit Plan. Pending the final calculation of the Severance Payment or Revised Severance Payment, the Company shall pay the amounts described under subsection (b) above at the time and
in the manner provided herein; provided that, pending such determination, such payments shall be reduced by such amounts as the Company estimates in good faith to be necessary to satisfy its tax
(including excise tax) withholding obligations and effect the reduction in the amount of the Severance Payment, as contemplated by this subsection 1(g). The aggregate amount of any compensation
actually paid or provided to Executive under the terms of this Agreement and in excess of the Revised Severance Payment shall be deemed, to the extent of such excess, a loan to Executive payable upon
demand and bearing interest at the rate of 8% per annum. 

        2.    CONFIDENTIALLY AND NON-COMPETITION AGREEMENT.    In consideration of the obligations undertaken by
the Company pursuant to this Agreement, contemporaneously with the execution of this Agreement, Executive and the Company shall enter into the form of Confidentiality and Non-Competition
Agreement attached hereto as EXHIBIT A and each agreement shall be effective only if both agreements have been executed. 

        3.    TERM OF AGREEMENT.    The Company's obligations under Section 1 of this Agreement shall expire with
respect to Control Events occurring on or after the second anniversary of the date of this Agreement ("Initial Expiration Date"), provided however, that such obligations shall automatically extend for
one (1) year on each anniversary of the Initial Expiration Date unless terminated by the Company effective as of the last day of the then current one (1) year extension by written notice
to 

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that effect delivered to the Executive not fewer than ninety (90) days prior to such anniversary of the Expiration Date. 

        4.    AT WILL EMPLOYMENT.    Unless and to the extent otherwise agreed by the Company and Executive in a separate
written employment agreement, Executive's employment shall be "at will", with either party permitted to terminate the employment at any time, with or without cause. No term of any employment agreement
between the Company and Executive shall be construed to conflict with, lessen or expand the obligations of the parties under this Agreement. 

        5.    NOTICES.    All notices and other communications called for or required by this Agreement shall be in writing
and shall be addressed to the parties at their respective addresses stated below or to such other address as a party may subsequently specify by written notice and shall be deemed to have been
received (i) upon delivery in person, (ii) five days after mailing it by U.S. certified or registered mail, return receipt requested and postage prepaid, or (iii) two days after
depositing it with a commercial overnight carrier which provides written verification of delivery: 

	To the Company:	 	701 N. 34th Street, Suite 400

Seattle, Washington 98103

Attention: Chief Executive Officer
	

To Executive:	
 	

    
    
    

        6.    WITHHOLDING.    Except as described in subsection 1(g) of this Agreement, all payments
due to and all benefits to be provided to Executive hereunder shall be subject to reduction for any applicable withholding taxes, including excise taxes. 

        7.    ASSIGNMENT.    Executive's rights and duties hereunder are personal to Executive and are not assignable to
others, but Executive's obligations hereunder will bind his heirs, successors, and assigns. The Company may assign its rights under this Agreement in connection with any merger or consolidation of the
Company or any sale of all or any portion of the Company's assets (including, without limitation, any division or product line), provided that any such successor or assignee expressly assumes in
writing the Company's obligations hereunder. 

        8.    NO DUTY TO MITIGATE.    Executive shall not be required to mitigate the amount of any payment made or benefit
provided hereunder. The Company may offset any payment due hereunder by the amount of damages to the Company resulting from any breach of this Agreement by Executive. 

        9.    GENERAL.    This Agreement constitutes the exclusive agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements or understandings of the parties. No waiver of or forbearance to enforce any right or provision hereof shall be binding unless in writing and signed by the
party to be bound, and no such waiver or forbearance in any instance shall apply to any other instance or to any other right or provision. This Agreement will be governed by the local laws of the
State of Washington without regard to its conflicts of laws rules to the contrary. The parties hereby consent to the exclusive jurisdiction and venue of the state and federal courts sitting in King
County, Washington for all matters and actions arising under this Agreement. The prevailing party shall be entitled to reasonable attorneys' fees and costs incurred in connection with such litigation.
No term hereof shall be construed to limit or supersede any other right or remedy of the Company under applicable law with respect to the protection of trade secrets or otherwise. If any provision of
this Agreement is held to be invalid or unenforceable to any extent in any context, it shall nevertheless be enforced to the fullest extent allowed by law in that and other contexts, and the validity
and force of the remainder of this Agreement shall not be affected thereby. 

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

	CUTTER & BUCK INC.	 	EXECUTIVE:
	

By:	

/s/  FRANCES M. CONLEY      
	
 	

Signature	

/s/  JON P. RUNKEL      

	 	Frances M. Conley	 	Printed Name:	Jon P. Runkel
	Its:	Chief Executive Officer	 	 	 

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Exhibit A    
  

 
 

CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
  FOR

                                         
           

        This Agreement is entered into this        day
of                        , 2002, by and between Cutter & Buck Inc. (the "Company") and
                        ("Executive"). Executive is an at-will employee of the Company. In consideration of entering into an
agreement to provide Executive with severance benefits if Executive's
employment is terminated in connection with a change in control in the Company, Executive promises, on the terms set forth herein, at all times to protect the Company's proprietary information and to
not compete with the Company following termination of Executive's employment in connection with a change in control. 

        NOW,
THEREFORE, in consideration of the foregoing recitals and the covenants and conditions contained herein, the parties hereby agree as follows: 

        1.    Non-competition and Non-solicitation.    

        (a)  Executive
agrees that during the term of Executive's employment with the Company and, subject to receipt of the Severance Payment (as defined below) by the Executive,
until eighteen (18) months following the Termination Date (as defined below), Executive will not in any capacity directly or indirectly engage in, assist others to engage in or own a material
interest in any business or activity that is, or is preparing to be, in competition with the Company with respect to any product or service sold or service provided by the Company up to the time of
termination of employment in any geographical area in which at the time of termination of employment such product or service is sold or is actively engaged in. For the purposes of this Agreement, the
terms "Severance Payment" and "Termination Date" shall have the meanings assigned to them in the Change in Control Agreement (as defined in Section 6 below). 

        (b)  Executive
further agrees that during the period stated above, he/she will not directly or indirectly call on, reveal the name of, or otherwise solicit, accept business
from or attempt to entice away from the Company any actual or identified potential customer of the Company, nor will he/she assist others in doing so. Executive further agrees that he/she will not,
during the period stated above, encourage or solicit any other employee or consultant of the Company to leave such employment for any reason, nor will he/she assist others to do so. 

        (c)  Executive
acknowledges that the covenants in this Section 1 are necessary and reasonable to protect the Company in the conduct of its business and that compliance
with such covenants will not prevent him/her from pursuing his/her livelihood. However, should any court find that any provision of such covenants is unreasonable, invalid or unenforceable, whether in
period of time, geographical area, or otherwise, then in that event the parties hereby agree that such covenants shall be interpreted and enforced to the maximum extent which the court deems
reasonable. 

        2.    Trade Secrets and Confidential Information.    

        (a)  Executive
acknowledges that the Company's business and future success depend upon the preservation of the trade secrets and other confidential information of the Company
and its suppliers and customers (the "Secrets"). The Secrets may include, without limitation, existing and to-be-developed or acquired product designs, new product plans or
ideas, market surveys, the identities of past, present or potential customers, business and financial information, pricing methods or data, terms of contracts with present or past customers, proposals
or bids, marketing plans, personnel information, procedural and technical manuals and practices, servicing routines, and parts and supplier lists proprietary to the Company or its customers or
suppliers, and any other sorts of items or information of the Company or its customers or suppliers which are not 

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generally known to the public at large. Executive agrees to protect and to preserve as confidential during and after the term of his employment all of the Secrets at any time known to Executive or in
his/her possession or control (whether wholly or partially developed by Executive or provided to Executive, and whether embodied in a tangible medium or merely remembered). 

        (b)  Executive
shall mark all items containing any of the Secrets with prominent confidentiality notices acceptable to the Company. Executive shall neither use nor allow any
other person to use any of the Secrets in any way, except for the benefit of the Company and as directed by Executive's supervisor. All material containing or disclosing any portion of the Secrets
shall be and remain the property of the Company, shall not be removed from the Company's premises without specific consent from an officer of the Company, and shall be returned to the Company upon the
termination of Executive's employment or the earlier request of Executive's supervisor. At such time, Executive shall also assemble all materials in his possession or control which contain any of the
Secrets, and promptly deliver such items to the Company. 

        3.    Intellectual Properties.    

        (a)  All
ownership, copyright, patent, trade secrecy and other rights in all works, designs, inventions, ideas, manuals, improvements, discoveries, processes, customer lists
or other properties (the "Intellectual Properties") made or conceived by Executive during the term of his/her employment by the Company shall be the rights and property solely of the Company, whether
developed independently by Executive or jointly with others, and whether or not developed or conceived during regular working hours or at the Company's facilities, and whether or not the Company uses,
registers, or markets the same. 

        (b)  In
accordance with the Company's policy and RCW 49.44.140 and RCW 49.44.150, this Agreement (other than Subsection 3(c)) does not apply to, and Executive has no
obligation to assign to the Company, any invention for which no Company trade secrets and no equipment, supplies, services, or facilities of the Company were used and which was developed entirely on
Executive's own time, unless: (i) the invention relates directly to the business of the Company, (ii) the invention relates to actual or demonstrably anticipated research or development
work of the Company, or (iii) the invention results from any work performed by Executive for the Company. 

        (c)  If
and to the extent that Executive makes use, in the course of his employment, of any items or Intellectual Properties previously developed by Executive or developed by
Executive outside of the scope of this Agreement, Executive hereby grants the Company a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license (with right to sublicense) to
make, use, sell, copy, distribute, modify, and otherwise to practice and exploit any and all such items and Intellectual Properties. 

        (d)  Executive
will assist the Company as reasonably requested during and after the term of his employment to further evidence and perfect, and to enforce, the Company's
rights in and ownership of the Intellectual Properties covered hereby, including without limitation, the execution of additional instruments of conveyance and assisting the Company with applications
for patents or copyright or other registrations. 

        4.    Authority and Non-Infringement.    Executive warrants that any and all items, technology, and
Intellectual Properties of any nature developed or provided by Executive under this Agreement and in any way for or related to the Company will be original to Executive and will not, as provided to
the Company or when used and exploited by the Company and its contractors and customers and its and their successors and assigns, infringe in any respect on the rights or property of Executive or any
third party. Executive will not, without the prior written approval of the Company, use any equipment, supplies, facilities, or proprietary information of any other party. Executive warrants that
Executive is 

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fully authorized to enter into employment with the Company and to perform under this Agreement, without conflicting with any of Executive's other commitments, agreements, understandings or duties,
whether to prior employers or otherwise. Executive will indemnify the Company for all losses, claims, and expenses (including reasonable attorneys' fees) arising from any breach of by him/her of this
Agreement. 

        5.    Remedies.    The harm to the Company from any breach of Executive's obligations under this Agreement may be
wholly or partially irreparable, and Executive agrees that such obligations may be enforced by injunctive relief and other appropriate remedies, as well as by damages. If any bond from the Company is
required in connection with such enforcement, the parties agree that a reasonable value of such bond shall be $5,000. Any amounts received by Executive or by any other through Executive in breach of
this Agreement shall be held in constructive trust for the benefit of the Company. 

        6.    Executive Agreement.    In consideration of the obligations undertaken by Executive pursuant to this Agreement,
contemporaneously with the execution of this Agreement, Executive and the Company are entering into a Change in Control Agreement (the "Change in Control Agreement"), and each agreement shall be
effective only if both agreements have been executed. 

        7.    At Will Employment.    Unless and to the extent otherwise agreed by the Company and Executive in a separate
written employment agreement, Executive's employment shall be "at will", with either party permitted to terminate the employment at any time, with or without cause. No term of any employment agreement
between the Company and Executive shall be construed to conflict with or lessen Executive's obligations under this Agreement. 

        8.    Notices.    All notices and other communications called for or required by this Agreement shall be in writing
and shall be addressed to the parties at their respective addresses stated below or to such other address as a party may subsequently specify by written notice and shall be deemed to have been
received (i) upon delivery in person, (ii) five days after mailing it by U.S. certified or registered mail, return receipt requested and postage prepaid, or (iii) two days after
depositing it with a commercial overnight carrier which provides written verification of delivery: 

	To the Company:	 	701 N. 34th Street, Suite 400

Seattle, Washington 98103

Attention: Chief Executive Officer
	

To Executive:	
 	

    
    
    

        9.    Assignment.    Executive's rights and duties hereunder are personal to Executive and are
not assignable to others, but Executive's obligations hereunder will bind his/her heirs, successors, and assigns. The Company may assign its rights under this Agreement in connection with any merger
or consolidation of the Company or any sale of all or any portion of the Company's assets (including, without limitation, any division or product line), provided that any such successor or assignee
expressly assumes in writing the Company's obligations under the Executive Agreement. 

        10.    General.    This Agreement constitutes the exclusive agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements or understandings of the parties. No waiver of or forbearance to enforce any right or provision hereof shall be binding unless in writing and signed
by the party to be bound, and no such waiver or forbearance in any instance shall apply to any other instance or to any other right or provision. This Agreement will be governed by the local laws of
the State of Washington without regard to its conflicts of laws rules to the contrary. The parties hereby consent to the exclusive jurisdiction and venue of the state and federal courts residing in
King County, Washington for all matters and actions arising under this Agreement. The prevailing party shall be entitled to reasonable attorneys' fees and costs incurred in connection with such
litigation. No term hereof shall be construed to limit or supersede any other right or remedy of the Company under 

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applicable law with respect to the protection of trade secrets or otherwise. If any provision of this Agreement is held to be invalid or unenforceable to any extent in any context, it shall
nevertheless be enforced to the fullest extent allowed by law in that and other contexts, and the validity and force of the remainder of this Agreement shall not be affected thereby. 

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

	CUTTER & BUCK INC.	 	EXECUTIVE:
	

By:	

    
	
 	

Signature	

    

	 	Frances M. Conley	 	Printed Name	 
	Its:	Chief Executive Officer	 	 	 

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QuickLinks

EXHIBIT 10.20

CHANGE IN CONTROL AGREEMENT FOR JON P. RUNKEL (As amended September 18, 2002)

Exhibit A

CONFIDENTIALITY AND NON-COMPETITION AGREEMENT FORQuickLinks
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Exhibit 10.21    
  

EXECUTION COPY  

FOURTH AMENDED AND RESTATED LOAN AGREEMENT

   

By and Among

   

WASHINGTON MUTUAL BANK

BANK OF AMERICA, N.A.

The Several Lenders from Time to Time Parties Hereto

as the Lenders

   

and

   

WASHINGTON MUTUAL BANK

as the Letter of Credit Issuer and the Credit Card Issuer

  

and

  

CUTTER & BUCK INC.

as the Borrower

  

and

  

WASHINGTON MUTUAL BANK

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

   

Dated as of March 31, 2002  

 

	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS	 	1
	 	

Section 1.1	
 	

Certain Defined Terms.	
 	

1
	 	Section 1.2	 	Computation of Time Periods.	 	9
	 	Section 1.3	 	Accounting Terms.	 	9
	

ARTICLE II AMOUNTS AND TERMS OF THE BORROWINGS	
 	

10
	 	

Section 2.1	
 	

The Revolving Facility.	
 	

10
	 	Section 2.2	 	The Borrowings.	 	10
	 	Section 2.3	 	Making the Borrowings.	 	15
	 	Section 2.4	 	Interest Rates; Late Charges.	 	17
	 	Section 2.5	 	Repayment.	 	18
	 	Section 2.6	 	Fees.	 	18
	 	Section 2.7	 	Prepayments.	 	18
	 	Section 2.8	 	Payments and Computations.	 	19
	 	Section 2.9	 	Increased Costs.	 	19
	 	Section 2.10	 	Illegality.	 	20
	 	Section 2.11	 	Prepayment Indemnity; Fee.	 	20
	 	Section 2.12	 	Evidence of Debt.	 	21
	 	Section 2.13	 	Collateral.	 	21
	 	Section 2.14	 	Use of Proceeds.	 	21
	

ARTICLE III CONDITIONS OF BORROWING	
 	

21
	 	

Section 3.1	
 	

Conditions Precedent to Effective Date.	
 	

21
	 	Section 3.2	 	Conditions Precedent to Each Borrowing.	 	22
	

ARTICLE IV REPRESENTATIONS AND WARRANTIES	
 	

23
	 	

Section 4.1	
 	

Organization.	
 	

23
	 	Section 4.2	 	Authorization.	 	23
	 	Section 4.3	 	Financial Information.	 	23
	 	Section 4.4	 	Legal Effect.	 	23
	 	Section 4.5	 	Properties.	 	23
	 	Section 4.6	 	Hazardous Substances.	 	23
	 	Section 4.7	 	Litigation and Claims.	 	23
	 	Section 4.8	 	Taxes.	 	23
	 	Section 4.9	 	Lien Priority.	 	24
	 	Section 4.10	 	Binding Effect.	 	24
	 	Section 4.11	 	Commercial Purposes.	 	24
	 	Section 4.12	 	Employee Benefit Plans.	 	24
	 	Section 4.13	 	Location of The Borrower's Offices and Records.	 	24
	 	Section 4.14	 	Information.	 	24
	 	Section 4.15	 	Survival of Representations and Warranties.	 	24
	

ARTICLE V COVENANTS OF THE BORROWER	
 	

25
	 	

Section 5.1	
 	

Affirmative Covenants.	
 	

25
	 	Section 5.2	 	Negative Covenants.	 	27
	 	Section 5.3	 	Financial Covenants.	 	28
	

ARTICLE VI EVENTS OF DEFAULT	
 	

29
	 	

Section 6.1	
 	

Events of Default.	
 	

29
	 	Section 6.2	 	Remedies.	 	30

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	 	Section 6.3	 	Adjustments; Right of Set-Off.	 	30
	 	Section 6.4	 	Cumulative Remedies.	 	31
	 	Section 6.5	 	Application of Payments.	 	31
	

ARTICLE VII THE ADMINISTRATIVE AGENT	
 	

31
	 	

Section 7.1	
 	

Appointment.	
 	

31
	 	Section 7.2	 	Delegation of Duties.	 	31
	 	Section 7.3	 	Exculpatory Provisions.	 	31
	 	Section 7.4	 	Reliance by Administrative Agent.	 	32
	 	Section 7.5	 	Notice of Default.	 	32
	 	Section 7.6	 	Non-Reliance on Administrative Agent and Other Creditor Parties.	 	32
	 	Section 7.7	 	Indemnification.	 	33
	 	Section 7.8	 	Administrative Agent in Its Individual Capacity.	 	33
	 	Section 7.9	 	Successor Administrative Agent.	 	33
	

ARTICLE VIII MISCELLANEOUS	
 	

33
	 	

Section 8.1	
 	

Amendments.	
 	

33
	 	Section 8.2	 	Notices.	 	34
	 	Section 8.3	 	No Waiver; Remedies.	 	34
	 	Section 8.4	 	Costs and Expenses; Indemnification.	 	35
	 	Section 8.5	 	Binding Effect; Successors and Assigns; Participations and Assignments.	 	35
	 	Section 8.6	 	Execution in Counterparts.	 	37
	 	Section 8.7	 	Governing Law.	 	37
	 	Section 8.8	 	Mediation/Arbitration Provisions.	 	37
	 	Section 8.9	 	Severability.	 	39
	 	Section 8.10	 	Entire Agreement.	 	39
	 	Section 8.11	 	Descriptive Headings.	 	39
	 	Section 8.12	 	Gender, Number, Interpretation.	 	39
	 	Section 8.13	 	Confirmation of Security Documents.	 	39

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EXHIBIT
A FORM OF REVOLVING FACILITY NOTE 

EXHIBIT
B BORROWING BASE REPORT 

EXHIBIT
C FORM OF NOTICE OF BORROWING 

EXHIBIT
D FORM OF ASSIGNMENT AND ACCEPTANCE 

EXHIBIT
E COMMITMENT AMOUNTS 

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   FOURTH AMENDED AND RESTATED LOAN AGREEMENT  

        THIS FOURTH AMENDED AND RESTATED LOAN AGREEMENT (this "Agreement") dated as of March 31, 2002 is made by and among CUTTER & BUCK INC., a
Washington corporation (the "Borrower"), WASHINGTON MUTUAL BANK, a Washington corporation ("Washington Mutual"), BANK OF AMERICA, N.A., a national banking association ("BofA"), the several banks and
other financial institutions from time to time parties to this Agreement (including Washington Mutual and BofA in their respective capacities as lenders, the "Lenders"), Washington Mutual, as issuer
of letters of credit (the "Letter of Credit Issuer"), as issuer of credit cards (the "Credit Card Issuer"), and as administrative agent (the "Administrative Agent") in such capacity, for the Lenders,
the Letter of Credit Issuer and the Credit Card Issuer (the "Creditor Parties"). This Agreement amends and restates in its entirety the Third Amended and Restated Loan Agreement dated as of
November 3, 2000 as modified by a Modification Agreement re Third Amended and Restated Loan Agreement dated as of July 31, 2001 (collectively, the "Prior Loan Agreement"), as well as the
Second Amended and Restated Loan Agreement dated as of July 28, 2000 (the "Second Loan Agreement") and the Amended and Restated Loan Agreement dated April 28, 1999 among the Borrower,
Washington Mutual (then doing business as 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, Washington Mutual and BofA were parties to the Prior Loan Agreement, the Second Loan Agreement and the Original Loan Agreement pursuant to which
Washington Mutual and BofA agreed to provide certain credit facilities to the Borrower. 

        The
Borrower, Washington Mutual and BofA are making this Agreement for several purposes, including the following: to recognize that the BV Line is being paid off and eliminated; to
recognize the elimination of (i) the sublimit to accommodate Washington Mutual's direct issuance of Commercial Letters of Credit for the account of Cutter & Buck, BV ("BV") and
(ii) the Borrower's guarantee of BV's obligations to BofA and Washington Mutual under the Prior Loan Agreement; to reduce the Revolving Commitment amount to $35,000,000; to recognize the
elimination of the Term Commitment; to establish a Borrowing Base for Advances and to amend certain financial covenants. The Borrower, Washington Mutual and BofA (in their various capacities) desire
to amend and restate the Prior 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). 

        "Account Debtor" means any Person which is or may be obligated to pay all or any portion of any Receivable owed to Borrower. 

        "Administrative Agent" has the meaning specified in the Preamble and as referred to in Section 7.9. 

        "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. 

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        "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. 

        "Agent Bank Fee" has the meaning specified in Section 2.6(c). 

        "Agreement" has the meaning specified in the Preamble. 

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

        "Benefited Lender" has the meaning specified in Section 6.3(a). 

        "BofA" has the meaning specified in the Preamble. 

        "Borrower" means Cutter & Buck Inc., a Washington corporation, as also defined in the Preamble. 

        "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 Base" means, as of any date of determination, an amount equal to: 

	(1)
	The
sum of:

	(a)
	an
amount equal to 75% of the Net Value of Eligible Receivables, as accurately set forth on the most recent Borrowing Base Report delivered to the Administrative Agent; plus

	(b)
	an
amount equal to 45% of the Value of Classics Inventory, as accurately set forth on the most recent Borrowing Base Report delivered to the Administrative Agent; plus

	(c)
	an
amount equal to 25% of the Value of Current Season Fashion Inventory, as accurately set forth on the most recent Borrowing Base Report delivered to the Administrative Agent; 

provided,
however, that the sum of (b) and (c) above shall be limited to $10,000,000. 

	(2)
	Minus,
the sum of:

	(a)
	The
aggregate amount of all Revolving Facility Advances Outstanding; plus

	(b)
	The
aggregate amount available to be drawn under all Letters of Credit Outstanding and any amount drawn under Letters of Credit for which the Letter of Credit Issuer has not been
reimbursed by Borrower or which has not been converted into a Floating Rate Advance, as provided in Section 2.2(b)(vii); plus

	(c)
	The
aggregate amount of all Acceptances Outstanding which have not been paid as provided in Section 2.2(d)(vi); plus

	(d)
	The
aggregate principal or stated amounts of Revolving Facility Advances, Letters of Credit and Acceptances for which a Borrowing Request has been made pursuant to Section 2.3
but which have not been disbursed or issued as of the date of determination; plus

	(e)
	The
Credit Card sublimit of $250,000. 

        "Borrowing Base Report" means a report in substantially the form of Exhibit B
hereto, or in such other form as the Administrative Agent may specify from time to time, to be delivered by Borrower in accordance with the provisions of this Agreement. 

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        "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 C.

        "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. 

        "BV" means Cutter & Buck, BV, a corporation which is a wholly owned subsidiary of the Borrower and which is chartered in the
Netherlands, as also defined in the Preamble. 

        "BV Lender" means Bank of America, N.A., acting through its Amsterdam, Netherlands branch. 

        "BV Line" means the separate line of credit established by BV Lender in favor of BV in a maximum principal amount not exceeding
$5,000,000. 

        "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. 

        "Classics Inventory" means "inventory" (as that term is used in the UCC) owned by the Borrower which consists of products that
(i) are traditional in style, (ii) are marketed and sold throughout the year and (iii) are not a part of the Current Season Fashion Inventory. 

        "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 Creditor Parties, including all items of real and personal property in which the Administrative
Agent holds a Lien to secure the credit facilities described 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 E 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. 

        "Credit Card Issuer" means Washington Mutual Bank, also as defined in the Preamble. 

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

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

        "Creditor Parties" has the meaning specified in the Preamble. 

        "Current Season Fashion Inventory" means "inventory" (as that term is used in the UCC) owned by the Borrower which consists of products
that (i) are marketed and sold on a seasonal basis only and for a limited period of time and (ii) are not a part of the Classic Inventory. 

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

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        "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 March 31, 2002. 

        "Eligible Receivables" means, as of any date of determination, all Receivables of Borrower in which the Administrative Agent holds an
attached, fully perfected, first-priority security interest under the Security Documents for the benefit of the Lenders, the Letter of Credit Issuer, the Credit Card Issuer and which are otherwise
satisfactory to the Administrative Agent in all respects; provided, however, that Eligible Receivables do not include the following: 

          (i)  Receivables
which, as of such date, have not been paid within 60 days after the due date; 

        (ii)  Receivables
with respect to which the Account Debtor is an officer, employee, agent or Affiliate of Borrower; 

        (iii)  Receivables
which are Foreign Receivables; 

        (iv)  Receivables
with respect to which the Account Debtor is the United States or any department, agency, or instrumentality thereof (unless such Receivables have been
properly assigned to the Administrative Agent for the benefit of the Lenders, the Letter of Credit Issuer and the Credit Card Issuer under the Federal Assignment of Claims Act of 1940 and notice of
which assignment has been given to and acknowledged by the United States in a writing satisfactory to the Administrative Agent) or any other governmental authority or entity; 

        (v)  Receivables
the amounts of which cannot be confirmed by the Administrative Agent or with respect to which circumstances or facts exist which, as determined in the
Administrative Agent's sole discretion, would impair or delay the collectibility of all or a portion thereof; 

        (vi)  Receivables
to the extent they are subject to reduction by virtue of any claim of reduction, counterclaim, set-off, recoupment or any claim for credits,
allowances or adjustments (including discounts, disputes, rebates, warranties and expected returns); 

      (vii)  Receivables
with respect to which the Account Debtor is the subject of any bankruptcy, receivership or other Insolvency Proceeding; 

      (viii)  Receivables
with respect to which the Account Debtor does not have a credit standing satisfactory to the Administrative Agent as determined in the Administrative
Agent's reasonable discretion; 

        (ix)  Receivables
which are subject to any Lien other than Permitted Liens described in parts (a), (b) and (c) of the definition of "Permitted Liens"; 

        (x)  Receivables
with respect to which goods are placed on consignment, guaranteed sale or other terms by reason of which the payment by the Account Debtor may be
conditional; 

        (xi)  Receivables
with respect to which the goods have not been shipped or delivered, or the services have not been rendered to the Account Debtor; and 

4

 

      (xii)  Receivables
represented by promissory notes or other instruments or chattel paper which have not been indorsed and delivered to the Administrative Agent for the
benefit of the Lenders, the Letter of Credit Issuer and the Credit Card Issuer in a manner satisfactory to the Administrative Agent. 

        "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. 

        "Faxed Document" has the meaning specified in Section 2.2(b)(ix). 

        "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. 

        "Fixed Rate" means a LIBOR Rate. 

        "Fixed Rate Advance" means a LIBOR Rate Advance. 

        "Floating Rate" means, with respect to any Floating Rate Advance, a floating rate (redetermined daily) equal to the interest rate per
annum reported as the Prime Rate in the Money Rates section of The Wall Street Journal (Western Edition). 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 Administrative Agent. 

        "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). 

        "Foreign Receivables" means Receivables with respect to which the Account Debtor is not created and existing under the laws of the United
States or of one of its states and with a principal place of business in the United States. 

        "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. 

        "Governing Laws" has the meaning specified in Section 8.7. 

        "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. 

5

 

        "Indemnified Parties" and "Indemnified Party" each have the meaning specified in
Section 8.4(c). 

        "Indemnified Liabilities" has the meaning specified in Section 8.4(c). 

        "Insolvency Proceeding" means any proceeding commenced by or against any Person under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, any assignment for the benefit of creditors, or any other proceeding seeking reorganization, arrangement or other relief from Indebtedness. 

        "Interest Coverage Ratio" means, as of the last day of any fiscal quarter, the ratio of (a) EBITDA plus the Restructuring and Asset
Impairment Charge to (b) Interest Expense, in each case for a rolling period of four (4) consecutive fiscal quarters ending as of such date. 

        "Interest Expense" means, for any period, as applied to the Borrower and its consolidated subsidiaries, all interest expense, as
determined and computed on a consolidated basis in accordance with GAAP, but excluding any deduction for capitalization interest. 

        "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 for a LIBOR Rate Advance shall be one, three or six months, as selected by the Borrower in
its applicable Borrowing Request; provided, however, that: 

          (i)  no
Interest Period shall end after the Termination Date of a Revolving 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 cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business
Day. 

        "Lenders" has the meaning specified in the Preamble. 

        "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, as defined in the Preamble. 

        "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 (Western Edition) 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. 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 Administrative Agent. 

6

 

        "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). 

        "Net Value" means, as of any date of determination, with respect to Eligible Receivables, the aggregate amount remaining due and unpaid in
respect thereof. 

        "Notes" means the Revolving Facility Notes. 

        "Notice of Borrowing" means a written notice in the form of Exhibit C. 

        "Obligations" means, collectively, as of any date of determination, any and all obligations owing to Washington Mutual or BofA, in any of
their respective capacities under this Agreement and the other Loan Documents, including (i) all Advances Outstanding, (ii) obligations in respect of Acceptances Outstanding and Letters
of Credit Outstanding and (iii) all obligations in respect of Credit Cards. 

        "Original Loan Agreement" has the meaning specified in the Preamble. 

        "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 the Obligations, (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. 

        "Prior Loan Agreement" has the meaning specified in the Preamble. 

        "Purchasing Lenders" has the meaning specified in Section 8.5(c). 

        "Receivables" means all of Borrower's rights to payment arising from the sale of products by Borrower or the provision of services by
Borrower, in either case in the ordinary course of business, whether now in existence or arising from time to time hereafter, including rights evidenced by an 

7

 

account, account receivable, note, contract right, security agreement, chattel paper or other evidence of indebtedness. 

        "Register" has the meaning specified in Section 8.5(d). 

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

        "Required Tangible Net Worth" has the meaning specified in Section 5.3(a). 

        "Restructuring and Asset Impairment Charge" means a charge of $12,000,000 before taxes of which $10,300,000 shall be reflected on the
quarterly financial statements of the Borrower for its quarter ended January 31, 2002 and $1,700,000 shall be reflected on the quarterly financial statements of the Borrower for its quarter
ended April 30, 2002. 

        "Revolving Commitment" has the meaning specified in Section 2.1. 

        "Revolving Facility" has the meaning specified in Section 2.1. 

        "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, 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. 

        "Second Loan Agreement" has the meaning specified in the Preamble. 

        "Security Agreement" means the Fourth Amended and Restated Security Agreement dated the Effective Date between the Borrower and the
Administrative Agent, as secured party on behalf of the Creditor Parties. 

        "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 Creditor Parties 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" means a line of credit in the maximum amount of $5,000,000 made available by Washington Mutual Bank (then doing business
as Western Bank) pursuant to the Prior Loan Agreement. 

        "Term Facility" means a loan made to the Borrower pursuant to the Prior Loan Agreement. 

        "Termination Date" means August 1, 2003, unless earlier terminated pursuant to Section 6.2. 

        "Transferee" has the meaning specified in Section 8.5(f). 

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

8

 

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

        "UCP" has the meaning specified in Section 8.7. 

        "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 as provided in Section 2.2(d) 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)(vii), (c) the aggregate amount of all Acceptances Outstanding which have not been paid, as provided in Section 2.2(d)(vi), (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 $3,000,000 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)(vii) 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. 

        "Value of Classics Inventory" means, as of any date of determination, the value of all Classics Inventory of Borrower measured at the
lower of cost or fair market value and determined in accordance with GAAP. 

        "Value of Current Season Fashion Inventory" means, as of any date of determination, the value of all Current Season Fashion Inventory of
Borrower measured at the lower of cost or fair market value and determined in accordance with GAAP. 

        "Washington Mutual" has the meaning specified in the Preamble. 

        "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. 

        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. 

9

   ARTICLE II  

 AMOUNTS AND TERMS OF THE BORROWINGS  

        Section 2.1    The Revolving Facility.    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 (the "Revolving Facility") in the maximum
amount of $35,000,000 (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: 

        (a)  The
aggregate stated amount of Standby Letters of Credit at any time Outstanding may not exceed $3,000,000; 

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

        (c)  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; 

        (d)  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 

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

        Section 2.2    The Borrowings.    

        (a)    Advances Under the Revolving Facility.    

          (i)  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 lesser of the Unused Revolving Facility Commitment and the
Borrowing Base. Within such limits, 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)  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 least of the Unused Revolving Facility Commitment, the Unused SLC Sublimit or the Borrowing
Base. 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, 

10

 

however, that no Commercial Letter of Credit shall be issued if the stated amount thereof exceeds the lesser of the Unused Revolving Facility Commitment or the Borrowing Base. 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 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 

11

 

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 (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 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 

12

 

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 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 

13

 

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 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 least of the Unused
Revolving Facility Commitment, the Unused Acceptance Sublimit or the Borrowing Base. 

        (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 

14

 

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
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 two
and three-quarters percent (2.75%) 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. 

        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 

15

 

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, (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 and (C) for the issuance of a Draft presented for acceptance 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 Draft. 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 C  hereto, fully and accurately
specifying the information required therein. Each Borrowing Request shall be accompanied by a Borrowing Base Report dated, and accurate as of, the
date submitted to the Administrative Agent. 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, Account No. 3933688258, 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 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 

16

 

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 C 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: 

          (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 two and three-quarters percent (2.75%) 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. 

        (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 

17

 

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)    Borrowing Base Deficiency.    Notwithstanding anything in this Agreement to the contrary, in the event any
Borrowing Base Report delivered to the Administrative Agent indicates that the Borrowing Base is less than zero, Borrower shall prepay, subject to Section 2.7 and Section 2.11, within
three Business Days of the date of delivery of such Borrowing Base Report, an amount of Advances sufficient so that, after giving effect to all such prepayments, the Borrowing Base shall equal zero or
greater. Such prepayments shall be applied, pro rata in accordance with each Lender's Commitment Percentage, in payment of such Advances as the Administrative Agent may determine in its sole
discretion. If, after repaying all such Advances, the Borrowing Base still equals less than zero, Borrower shall deliver to the Administrative Agent an amount equal to the amount by which the
Borrowing Base is less than zero to be held by the Administrative Agent (without interest to Borrower) as cash collateral for Borrower's obligation to reimburse the Letter of Credit Issuer for draws
made on Outstanding Letters of Credit and Acceptances. 

        Section 2.6    Fees.    

        (a)    Revolving Facility Fees.

          (i)  Upfront Facility Fee. On the Effective Date, the Borrower shall pay to the Administrative Agent for the account of the
Lenders a facility fee equal to 1/4 of one percent (.25%) of the total Commitment. 

        (ii)  Unused Commitment Fee. On each December 31, March 31, June 30 and September 30, commencing
June 30, 2002, the Borrower shall pay to the Administrative Agent for the benefit of the Lenders an unused commitment fee equal to 3/8s of one percent (.375%) per annum of the amount equal to
(A) the Commitment minus (B) the average of the aggregate principal and stated amounts of Revolving Facility Advances and Letters of Credit Outstanding on the last day of each month in
the fiscal quarter then ended. 

        (b)    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. 

        (c)    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 March 7, 2002 from the Administrative Agent to the Borrower. 

        Section 2.7    Prepayments.    

        (a)    Optional 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 

18

 

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. 

        (b)    Mandatory Prepayments.    If, on any date of determination, (i) the sum of (A) Revolving Facility
Advances Outstanding, (B) Letters of Credit Outstanding, (C) Acceptances Outstanding and (D) the Credit Card sublimit of $250,000 exceeds (ii) the lesser of the Revolving
Commitment or Section (1) of the Borrowing Base definition, the Borrower shall immediately prepay a principal amount of Revolving Facility Advances equal to such excess or, if such a principal
amount of Revolving Facility Advances is not Outstanding, deliver to the Administrative Agent cash collateral, to hold as security for the Obligations, in an amount equal to such excess. 

        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 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 

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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 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 Creditor Party 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 Creditor Parties 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 Creditor Parties 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, in the case of prepayment of LIBOR Rate Advances, 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 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. 

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        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 Obligations 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 of 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 for repayment of any other Advances and reimbursement of draws under Letters of Credit. 

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 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)    Payment
of any unpaid fees due pursuant to Section 2.6. 

        (g)  The
Security Documents continue in full force and effect to secure all Obligations of the Borrower under this Agreement and any other Loan Documents. 

        (h)  The
Borrower warrants and represents to the Lenders that the only encumbrances and other matters of record affecting the Collateral as of the date of this Agreement are
those which were of record on the date the existing UCC filings were placed of record or those which are Permitted Liens. 

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        (i)    Evidence
that the BV Line has been paid off and the related facility terminated. 

        (j)    Evidence
that the Term Facility has been paid off and terminated. 

        (k)  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 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)  The
Security Documents continue in full force and effect to secure all Obligations of the Borrower under this Agreement and any other Loan Documents; 

        (iii)  The
Borrower warrants and represents to the Lenders that the only encumbrances and other matters of record affecting the Collateral as of the date of this Agreement
are those which were of record on the date the existing UCC filings were placed of record or those which are Permitted Liens; 

        (iv)  After
giving effect to (A) a requested Borrowing, conversion or continuation of a Revolving Facility Advance, neither the Unused Revolving Facility Commitment
nor the Borrowing Base will be 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; 

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

        (vi)  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 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 

      (vii)  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. 

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   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). 

        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 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. 

23

 

        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 Creditor Parties, in and to such Collateral. At or prior to the Effective Date, Borrower has granted to the
Administrative Agent, on behalf of and for the benefit of each of the Creditor Parties, an attached, fully perfected, first-priority security interest in the Collateral, subject to the terms of the
Security Agreement. 

        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. 

        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 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 confirms that it is an
organization and has more than one place of business. The Borrower's chief executive office remains at 2701 First Avenue, Suite 500, Seattle, Washington 98121, except the Borrower anticipates, as of
the date of this Agreement, the relocation of its chief executive office in September, 2002 to 701 N. 34th Street, Seattle, Washington 98103. Unless the Borrower has designated otherwise in writing,
the Borrower's chief executive office is also the place 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 Revolving Facility 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. 

24

 

ARTICLE V  

 COVENANTS OF THE BORROWER  

        Section 5.1    Affirmative Covenants.    So long as any Obligations remain 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. 

        (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 twenty
(20) days after the end of each month, a summary of the Borrower's accounts and contracts receivable aging as of the last day of the month, which shall be net of any adjustments made at the end
of that month, all in a form acceptable to the Administrative Agent. 

        (iii)    Inventory Report.    Deliver to the Administrative Agent within twenty (20) days after the end of each
month inventory reports detailing location, amounts of raw materials and finished goods on a monthly basis, prepared in form acceptable to the Administrative Agent. 

        (iv)    Borrowing Base Report.    Deliver to the Administrative Agent within twenty (20) days after the end of
each calendar month, a Borrowing Base Report setting forth the information therein as of the end of such calendar month. 

        (v)    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 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. 

25

 

        (vi)    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 Creditor Parties 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 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 Creditor Parties 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 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 compliance with the Americans With Disabilities Act 

26

 

and with all minimum funding 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 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)    Annual Collateral Audit.    Upon request of the Administrative Agent, permit employees or agents of the
Administrative Agent to perform an annual audit of any and all Collateral. 

        (l)    Compliance Certificate.    Furnish the Administrative Agent, no later than ninety (90) days after the
end of each fiscal year and no later than forty five (45) days after each of the first three quarters of the fiscal year, 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 and further certifying that no
Event of Default exists under this Agreement, in each case as of the end of the relevant quarter or fiscal year, as applicable. 

        (m)    Environmental Compliance and Reports.    Comply in all respects with all environmental protection federal,
state and local laws, statutes, regulations and ordinances. 

        (n)    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 any Obligations remain 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 the
Obligations, 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 (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 

27

 

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 $750,000 outstanding at any time (which total will exclude advances to employees in the ordinary course for
commissions, draws or sample inventory), (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 $7,000,000.00 excluding costs associated with restructuring or discontinuing the Borrower's European operations 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 any Obligations remain 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 January 31, 2002 and the last day of each fiscal quarter
thereafter, Tangible Net Worth to be less than the sum of (i) $81,870,000, plus (ii) 50% of the cumulative consolidated net income of the Borrower for all fiscal quarters of the Borrower
ending after April 30, 2002 in which the Borrower earned net income (and excluding each fiscal quarter in which it incurred a net loss), plus (iii) 100% of the cumulative net cash
proceeds from the sale of capital stock of the Borrower during any fiscal quarter ending after April 30, 2002, plus (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 April 30, 2002 (the "Required Tangible Net Worth"). In the event the Restructuring and Asset
Impairment Charge is less than forecast, the Required Tangible Net Worth shall be increased such that actual Tangible Net Worth shall be $1,500,000 greater than Required Tangible Net Worth as of
January 31, 2002 and the last day of each fiscal quarter thereafter. 

        (b)    Working Capital.    Not permit Working Capital to be less than $65,000,000.00, as of January 31, 2002
and the last day of each subsequent fiscal quarter occurring prior to April 30, 2003; and not permit Working Capital to be less than $70,000,000 as of April 30, 2003 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 April 30, 2002 and the last day of each fiscal quarter thereafter. 

        (d)    Consolidated Net Losses.    From and after July 31, 2002, not permit any two consecutive quarters where
there is a consolidated net loss at the end of each fiscal quarter. 

        (e)    Capital Expenditures.    Not permit Capital Expenditures made during any one fiscal year to exceed the sum of
$4,000,000.00, provided, however, that if Borrower requests modification or waiver of this provision it is expressly agreed that the approval of the Required Lenders will not be unreasonably withheld
or delayed. 

        (f)    Minimum Interest Coverage Ratio.    Not permit, at or after April 30, 2002, the Interest Coverage Ratio
to be less than 3.50 to 1.00. 

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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 or pay any Draft when due, (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 Creditor Parties 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 Creditor Parties 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. 

        (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 first-priority 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. 

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        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 accept Drafts 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) an amount equal to the aggregate amount of disbursements made under any issued Credit Cards, and (iv) all other Obligations (whether or not contingent
or unmatured) 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 Credit Cards and all such
other Obligations 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 accept Drafts 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 Obligations (whether or not contingent or unmatured) 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 Creditor Party (a "Benefited Lender") shall at any time receive any payment of all or part of the Obligations 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 Creditor Party, if any, in respect of the Obligations owing to each such other Creditor Party, or
interest thereon, such Benefited Lender shall purchase for cash from the other Creditor Parties a participating interest in such portion of the Obligations owing to each such other Creditor Party, or
shall provide such other Creditor Parties 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 Creditor Parties; 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 Obligations, as due and payable pursuant to the provisions of Section 6.2, each Creditor Party is hereby authorized on behalf of the
Creditor Parties at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all 

30

 

deposits (general or special, time or demand, provisional or final) at any time held and other Indebtedness at any time owing by said Creditor Party 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 Creditor Party shall have made any demand. The rights of the Creditor Parties under this Section are in addition to other
rights and remedies (including other rights of set-off) which the Creditor Parties may have. 

        Section 6.4    Cumulative Remedies.    If an Event of Default shall occur and be continuing, the Administrative
Agent on behalf of the Creditor Parties 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 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 Creditor Parties 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 Creditor Party hereby irrevocably designates and appoints the
Administrative Agent as the agent of such Creditor Party under this Agreement and the other Loan Documents, and each such Creditor Party 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 Creditor Party, 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 Creditor Parties 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 Creditor Parties 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 

31

 

connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this 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 Creditor Party 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 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 Creditor Parties 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 Creditor Party 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 Creditor Parties. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Creditor Parties; 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 Creditor Parties. 

        Section 7.6    Non-Reliance on Administrative Agent and Other Creditor Parties.    Each Creditor
Party 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 Creditor
Party. Each Creditor Party represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Creditor Party, 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 Creditor Party also represents that it will, independently and without reliance upon the Administrative Agent
or any other Creditor Party, 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 Borrower. Except for notices, reports and other documents expressly required to be furnished to the Creditor Parties by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any Creditor Party 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. 

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        Section 7.7    Indemnification.    The Creditor Parties 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 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
Creditor Party 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 Creditor Party
and may exercise the same as though it were not the Administrative Agent, and the term "Creditor Party" 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 Creditor Parties. 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 Creditor Parties a successor agent for the Creditor Parties, 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 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 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 Creditor Party 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 Creditor Parties 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 

33

 

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, as follows: 

        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

        Or,
based upon an anticipated change to the Borrower's chief executive office, from and after approximately September, 2002 at: 

	Cutter & Buck Inc.

701 N. 34th Street

Seattle, WA 98103

Attention:    Steve Lowber, Chief Financial Officer

Telecopy:    TBA

Telephone    TBA

        If
to a Lender, the Administrative Agent, the Letter of Credit Issuer, the Credit Card Issuer, or any other Creditor Party, 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 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 Creditor Parties, 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. 

34

 

        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 and the performance of any annual audit of Collateral. 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 Creditor Parties 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 and the Creditor Parties shall be entitled to collect from the Borrower on demand all fees and expenses incurred in connection therewith, including 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 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 and the Creditor
Parties 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 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 Creditor Parties, 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 Creditor Party. 

        (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 

35

 

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, the Credit Card Issuer and other Creditor Parties 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 8.4(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
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, the Administrative
Agent, and other Creditor Parties (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 D, 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 a 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, 

36

 

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 or any Creditor Party 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 record the information contained therein in the Register and give notice of such acceptance and recordation
to the Creditor Parties 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 Creditor Party 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 

37

 

(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 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. 

        (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 Creditor Parties may exercise all rights and remedies available under law with respect to any collateral, deposits and
accounts, including: 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 

38

 

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 Creditor Parties of any rights and remedies available to the Creditor
Parties 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, Number, Interpretation.    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. Whenever
the word "including" is used in this Agreement, it shall be read to mean "including but not limited to." 

        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. 

        [SIGNATURE
PAGES FOLLOW] 

39

 

        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
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	

	 	 	 	 	Its:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	 
	

 	
 	

Address for Notices:

1201 Third Avenue, Suite 1000

Seattle, Washington 98101

Attention:    Peter Bentley

Telecopy:    (206) 377-2575
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

40

 

	OTHER CREDITOR PARTIES:	 	WASHINGTON MUTUAL BANK
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	

	 	 	 	 	Its:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	 
	

 	
 	

Address for Notices:

1201 Third Avenue, Suite 1000

Seattle, Washington 98101

Attention:    Peter Bentley

Telecopy:    (206) 377-2575
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	

	 	 	 	 	Its:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	 
	

 	
 	

Address for Notices:

Bank of America

NW Commercial Banking

WA 1-501-35-01

800 5th Avenue, Floor 35

Seattle, WA 98104

Attention:    Luke Bienfang

Telecopy:    (206) 585-1794

41

  

 
 

EXHIBIT A    
  

        FOURTH
AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE 

        Seattle,
Washington

March    , 2002 

        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 Fourth Amended and Restated Loan Agreement dated as of March 31, 2002 (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, as letter of
credit issuer and as credit card issuer, and WASHINGTON MUTUAL BANK, as administrative agent to the foregoing parties (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 Third Amended and Restated Revolving Credit Facility Note dated November 3, 2000, the
Second Amended and Restated Revolving Credit Facility Note dated July 28, 2000, and the Amended and Restated Revolving Credit Facility Note dated April 28, 1999, each 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 Third Amended and Restated Loan Agreement dated as of
November 3, 2000 as modified by a Modification Agreement re Third Amended and Restated Loan Agreement dated as of July 31, 2001 (collectively, the "Prior Loan Agreement"), as well as the
Second Amended and Restated Loan Agreement dated as of July 28, 2000 (the "Second Loan Agreement") and the Amended and Restated Loan Agreement dated as of April 28, 1999, between the
Borrower, the Administrative Agent, WASHINGTON MUTUAL BANK (then 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 

A-1

 

indebtedness of the Borrower resulting from loans previously made by the Lender to the Borrower under the Prior Loan Agreement, the Second Loan Agreement or 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-2

  

EXHIBIT B  

BORROWING BASE REPORT 

Date
of this report:                        

        CUTTER &
BUCK INC., a Washington corporation ("Borrower") hereby certifies that set forth below is a true and correct calculation of the Borrowing Base under the terms of
the Fourth Amended and Restated Loan Agreement (the "Loan Agreement") dated as of March 31, 2002 by and among Borrower, WASHINGTON MUTUAL BANK, a Washington corporation ("Washington Mutual"),
BANK OF AMERICA, N.A., a national banking association ("BofA"), the several banks and other financial institutions from time to time party thereto (including Washington Mutual and BofA in their
respective capacities as lenders, the "Lenders"), Washington Mutual, as issuer of letters of credit (the "Letter of Credit Issuer") and as issuer of credit cards (the "Credit Card Issuer") and as
administrative agent (the "Administrative Agent") in such capacity, for the Lenders, the Letter of Credit Issuer and the Credit Card Issuer. Capitalized terms used but not otherwise defined herein
shall have the meanings given to them in the Credit Agreement. 

BORROWING
BASE 

	A.	 	CALCULATIONS REGARDING NET VALUE OF ELIGIBLE COLLATERAL	 	 	 
	

 	
 	

(1)	
 	
Eligible Receivables	
 	
 	

 
	

 	
 	

 	
 	

(a)	
 	

Receivables at the date of this Report	
 	
$	

 
	

 	
 	

 	
 	

(b)	
 	

Less Receivables which are not Eligible Receivables as defined in Section 1.1 of the Loan Agreement	
 	
$	

 
	

 	
 	

 	
 	

(c)	
 	

Net Value of Eligible Receivables (Item (a) minus Item (b))	
 	
$	

 
	 	 	 	 	(d)	 	Receivables Utilization Amount (75% of Item (c))	 	$	 
	 	 	 	 	 	 	 	 	 	 
	 	 	(2)	 	Inventory	 	 	 
	

 	
 	

 	
 	

(a)	
 	

Classics Inventory at the date of this Report (per Schedule 1 attached hereto)	
 	
$	

 
	

 	
 	

 	
 	

(b)	
 	

Current Season Fashion Inventory at the date of this Report (per Schedule 2 attached hereto)	
 	
$	

 
	

 	
 	

 	
 	

(c)	
 	

Value of Classics Inventory (as defined in Section 1.1 of the Loan Agreement)	
 	
$	

 
	

 	
 	

 	
 	

(d)	
 	

Value of Current Season Fashion Inventory (as defined in Section 1.1 of the Loan Agreement)	
 	
$	

 
	

 	
 	

 	
 	

(e)	
 	

Classics Inventory Utilization Amount (45% of Item (c))	
 	
$	

 
	

 	
 	

 	
 	

(f)	
 	

Current Season Fashion Inventory Utilization Amount (25% of Item (d))	
 	
$	

 
	

 	
 	

 	
 	

(g)	
 	

Total Inventory Utilization Amount (sum of Items A(2)(e) and A(2)(f) not to exceed $10,000,000	
 	
$	

 
	 	 	 	 	 	 	 	 	 	 
	 	 	(3)	 	Gross Borrowing Base	 	 	 
	

 	
 	

 	
 	

(a)	
 	

Item A(1)(d) plus Item A(2)(g)	
 	
$	

 
	 	 	 	 	 	 	 	 	 	 

B-1

 

	B.	 	CALCULATIONS REGARDING DEBT	 	 	 
	

 	
 	

(1)	
 	

Total Advances Outstanding	
 	
$	

 
	

 	
 	

(2)	
 	

Total Stated Amount of Letters of Credit Outstanding and Acceptances Outstanding	
 	
$	

 
	

 	
 	

(3)	
 	

Total amount of Advances, Acceptances and Letters of Credit with respect to which a Borrowing Request has been made but which have not, as of the date hereof, been disbursed or issued	
 	
$	

 
	

 	
 	

(4)	
 	

The Credit Card sublimit ($250,000)	
 	
$	

 
	

 	
 	

(5)	
 	

Total Debt (sum of Items B(1), (2), (3) and (4))	
 	
$	

 
	 	 	 	 	 	 	 	 	 	 
	C.	 	BORROWING BASE	 	 	 
	 	 	Item A(3)(a) minus Item B(5))	 	$	 

        Borrower
hereby certifies to the Administrative Agent, the Lenders, the Letter of Credit Issuer and the Credit Card Issuer that (a) all representations and warranties set forth in
Article IV of the Loan Agreement are true and correct as though made on and as of the date hereof unless expressly stated to be made as of an earlier date, (b) Borrower is in full
compliance with all covenants set forth in Articles V and VI of the Loan Agreement, and (c) no Default or Event of Default has occurred and is continuing. 

	 	 	CUTTER & BUCK INC.
	 	 	 	 	 
	 	 	By	 	 
	 	 	 	 	

	 	 	Its	 	 
	 	 	 	 	

B-2

 
 
 

Schedule 1 to Borrowing Base Report
  
  Classics Inventory—See attached data    

B-3

 
 
 

Schedule 2 to Borrowing Base Report
  
  Current Season Fashion Inventory—See attached data    

B-4

  

 
 

EXHIBIT C
  
  NOTICE OF BORROWING    

Washington
Mutual Bank, as Administrative Agent

1201 Third Avenue, Suite 1000

Seattle, Washington 98101 

	Attention:	 	, 20    

        The
undersigned CUTTER & BUCK INC. (the "Borrower") refers to the Fourth Amended and Restated Loan Agreement dated as of March 31, 2002 (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, BANK OF AMERICA, N.A., and the
several banks and other financial institutions from time to time parties thereto (including Washington Mutual Bank and Bank of America, N.A. in their respective capacities as lenders, the "Lenders"),
WASHINGTON MUTUAL BANK, as letter of credit issuer and credit card issuer, and WASHINGTON MUTUAL BANK, as administrative agent for the Creditor Parties. 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

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

	4.
	The
amount of the Proposed Borrowing is $                        .

	5.
	The
Interest Period for the Proposed Borrowing (if it is a LIBOR Rate Advance) is                        . 

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

	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 20    .

	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 $                        . 

C-1

 

        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.

	3.
	The
Advance being converted or continued currently is a [Floating Rate Advance] [LIBOR 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 (to the extent that it will be a LIBOR Rate Advance)
is                        . 

        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. 

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

	 	 	Very truly yours,
	 	 	 	 	 	 	 
	 	 	CUTTER & BUCK INC.
	

	
 	

 	
 	

 	
 	

 
	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	

	 	 	 	 	Its:	 	 
	 	 	 	 	 	 	

C-2

  

 
 

EXHIBIT D
  
  FORM OF ASSIGNMENT AND ACCEPTANCE    

        Reference
is made to the Fourth Amended and Restated Loan Agreement dated as of March 31, 2002, which amends and restates in its entirety the Third Amended and Restated Loan
Agreement dated as of November 3, 2000 as modified by a Modification Agreement re Third Amended and Restated Loan Agreement dated as of July 31, 2001, as well as the Second Amended and
Restated Loan Agreement dated as of July 28, 2000 and 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, BANK OF
AMERICA, N.A., and the several banks and other financial institutions from time to time parties thereto (including Washington Mutual Bank and Bank of America, N.A. in their respective capacities as
lenders, the "Lenders"), WASHINGTON MUTUAL BANK, as letter of credit issuer and credit card issuer, and WASHINGTON MUTUAL BANK, as administrative agent (the "Administrative Agent") in such capacity,
for the Creditor Parties. 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 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-1

 

(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.

	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. 

D-2

   
SCHEDULE I

TO ASSIGNMENT AND ACCEPTANCE

RELATING TO THE FOURTH AMENDED AND RESTATED LOAN AGREEMENT,

DATED AS OF MARCH 31, 2002

AMONG

CUTTER &BUCK INC.,

THE CREDITOR PARTIES NAMED THEREIN

AND

WASHINGTON MUTUAL BANK,

AS AGENT FOR THE CREDITOR PARTIES

(IN SUCH CAPACITY, THE "ADMINISTRATIVE AGENT") 

	

 	
 	

 	
 	

 	
 
	
	 
	

 	
 	

 	
 	

 	
 
	Name of Assignor:	 	 	 	 	 
	

Name of Assignee:	
 	

 	
 	

 	
 
	

Effective Date of Assignment:	
 	

 	
 	

 	
 
	
Credit Facility Assigned
	
 	
Principal Amount Assigned
	
 	
Commitment Percentage Assigned(1)
	
 
	
 	
 	

$	
 	

..	
%

	[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

 

	Accepted for Recordation in the Register:	 	Consented To:(2)
	 	 	 	 	 	 	 
	Washington Mutual Bank, as Administrative Agent	 	Cutter & Buck Inc.
	 	 	 	 	 	 	 
	By	 	 	 	By	 	 
	 	 	
	 	 	 	

	Name:	 	Name:
	Title:	 	Title:
	 	 	 	 	 	 	 
	 	 	 	 	Washington Mutual Bank, as Administrative Agent, Letter of Credit Issuer and Credit Card Issuer
	 	 	 	 	 	 	 
	 	 	 	 	By	 	 
	 	 	 	 	 	 	

	 	 	 	 	Name:

Title:

	(2)
	If
required. 

Schedule I-2

  

 
 

EXHIBIT E
  
  COMMITMENTS    

	Lender
 
	 	Commitment

	Washington Mutual Bank	 	$	21,000,000.00
	

Bank of America, N.A.	
 	
$	

14,000,000.00

E-1

  

 
 

Exhibit 10.18    
  

FOURTH AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE

(Bank of America, N.A.)  

Seattle,
Washington

March 31, 2002 

        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 Fourth Amended and Restated Loan Agreement dated as of March 31, 2002 (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, as letter of credit issuer and
as credit card issuer, and WASHINGTON MUTUAL BANK, as administrative agent to the foregoing parties (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 Third Amended and Restated Revolving Credit Facility Note dated November 3, 2000, the
Second Amended and Restated Revolving Credit Facility Note dated July 28, 2000, and 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 Third Amended and Restated Loan Agreement dated as of
November 3, 2000 as modified by a Modification Agreement re Third Amended and Restated Loan Agreement dated as of July 31, 2001 (collectively, the "Prior Loan Agreement"), as well as the
Second Amended and Restated Loan Agreement dated as of July 28, 2000 (the "Second Loan Agreement") and the Amended and Restated Loan Agreement dated as of April 28, 1999, between the
Borrower, the Administrative Agent, WASHINGTON MUTUAL BANK (then 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 

1

 

indebtedness of the Borrower resulting from loans previously made by the Lender to the Borrower under the Prior Loan Agreement, the Second Loan Agreement or 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

  

 
 

Exhibit 10.18    
  

FOURTH AMENDED AND RESTATED SECURITY AGREEMENT  

        This FOURTH AMENDED AND RESTATED SECURITY AGREEMENT (the "Agreement") is entered into as of March 31, 2002, by and between CUTTER &
BUCK INC., a Washington corporation ("Grantor"), and WASHINGTON MUTUAL BANK, a Washington corporation ("Washington Mutual"), as administrative agent (in such capacity, the "Administrative
Agent") for the following parties (the "Creditor Parties"): Washington Mutual, BANK OF AMERICA, N.A., a national banking association ("BofA"), and the several banks and other financial institutions
from time to time parties to the Loan Agreement (as defined below) (the "Lenders"); Washington Mutual, as issuer of letters of credit (the "Letter of Credit Issuer") and as issuer of credit cards (the
"Credit Card Issuer"). This Agreement amends and restates in its entirety the Third Amended and Restated Security Agreement dated as of November 3, 2000 (the "Prior Security Agreement"), as
well as the Second Amended and Restated Security Agreement dated as of July 28, 2000 (the "Second Security Agreement") and the Amended and Restated Security Agreement dated as of
April 28, 1999 among Grantor, Washington Mutual (then doing business as Western Bank), BofA (formerly 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 Fourth Amended and Restated Loan Agreement dated as of March 31, 2002 (the "Loan Agreement"), which amends and restates in its entirety the Third Amended and
Restated Loan Agreement dated as of November 3, 2000 as modified by a Modification Agreement re Third Amended and Restated Loan Agreement dated as of July 31, 2001 (collectively, the
"Prior Loan Agreement"), as well as the Second Amended and Restated Loan Agreement dated as of July 28, 2000 (the "Second Loan Agreement") and the Amended and Restated Loan Agreement dated as
of April 28, 1999 among the Grantor, Washington Mutual (then doing business as Western Bank), BofA (formerly 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 Prior Security Agreement, the Second Security Agreement and 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 

1

 

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. 

        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 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. 

2

 

        (e)    State of Organization.    Grantor is a corporation organized under the laws of the State of Washington. 

        (f)    Grantor's Name.    Grantor's full legal name is exactly as shown in the first paragraph of this Agreement.
Grantor has not, during the past five years, operated under any trade name different from its true legal name and does not currently anticipate changing Grantor's name. 

        (g)    Chief Executive Office.    The Grantor confirms that it is an organization and has more than one place of
business. The chief executive office of Grantor is located at 2701 First Avenue, Suite 500, Seattle, Washington 98121, except the Grantor anticipates, as of the date of this Agreement, the relocation
of its chief executive office in September, 2002 to 701 N. 34th Street, Seattle, Washington 98103. Unless the Grantor has designated otherwise in writing, the Grantor's chief executive office is also
the place where the Grantor keeps its records concerning the Collateral. 

        (h)    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. Grantor authorizes Secured Party to file such documents without Grantor's
signature. Any such financing statement may describe the Collateral as "all assets", "all personal property", or may describe the Collateral more particularly. 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. Where any Collateral is in the possession of a bailee, warehouse operator or other third party, Grantor will join with Secured
Party in notifying the third party of Secured Party's security interest and obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of Secured Party. Grantor
will cooperate to provide Secured Party with control (as defined in the UCC) of Collateral consisting of investment property, deposit accounts, letter-of-credit rights or
electronic chattel paper. 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. 

3

 

        (c)    Removal of Collateral.    Grantor will keep the Collateral (other than
inventory-in-transit, inventory in the possession of contractors for embroidery work and 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. Except in the ordinary course of its business,
Grantor will not: (a) grant any extension of the time of payment of any amount owing to it by any account debtor; (b) compromise or settle the same for less than the full amount thereof;
(c) release, wholly or partially, any Person liable for the payment thereof, or allow any credit or discount thereon. 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. The proceeds of sales, leases, collections or other dispositions of the Collateral will not be credited to the Obligations unless and
until actually received in cash by 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, addresses, telephone numbers and contact persons of account debtors and
agings of accounts and general intangibles. Grantor hereby authorizes Secured Party to contact account debtors to verify account information. 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 

4

 

events affecting the Collateral or the value or the amount of the Collateral outside the ordinary course of business. 

        (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 a Permitted Lien and 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 fails 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 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. 

5

 

        (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; Legal Name; 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 or change its legal name, and will not use any trade name different than 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. 

        (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 

6

 

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. 

        (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)    License.    Grantor hereby irrevocably grants to Secured Party a license or other right to use, after the
occurrence and during the continuance of an Event of Default, without charge, all Grantor's labels, patents, copyrights, trade secrets, trade names, trademarks, service marks, customer lists,
licenses, franchise agreements, advertising matter and other property of a similar nature, in completing production of, advertising for sale and selling, leasing, licensing or otherwise disposing of
any and all Collateral. 

        (h)    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 

7

 

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 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, 

8

 

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. 

        (d)    Administrative Agent's Allocation of Proceeds.    In the event of any default under this Agreement or any of
the Obligations, and in the event that Administrative Agent as Secured Party takes any action to collect from Grantor or to realize on Collateral, Secured Party will allocate any proceeds of such
efforts as follows. First, the proceeds will be applied to any expenses incurred with respect its role as the Administrative Agent. Next, the proceeds will be applied to any unpaid fees owing to the
Administrative Agent or any of the Creditor Parties. Next, the proceeds will be apportioned among the Creditor Parties in proportion to the relative amounts owed to each of them; and if the proceeds
are insufficient to cover all such amounts owing, the proceeds will be allocated pro rata among the Creditor Parties. 

        (e)    Notices.    Any notice under this Agreement shall be in writing and shall be given as provided in the Loan
Agreement. 

        (f)    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. 

        (g)    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.

9

 

        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, as agent for itself and others named in this Agreement
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	 	 	 	

	 	 	    Its:	 
	 	 	 	

10

  

 
 

Exhibit 10.18    
  

 
 

FOURTH AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE
  (Washington Mutual Bank)    
  

        Seattle, Washington

March 31, 2002  

        For value received, CUTTER & BUCK INC. (the "Borrower") promises to pay to the order of WASHINGTON MUTUAL 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 Fourth Amended and Restated Loan Agreement dated as of March 31, 2002 (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, as
letter of credit issuer and as credit card issuer, and WASHINGTON MUTUAL BANK, as administrative agent to the foregoing parties (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 Third Amended and Restated Revolving Credit Facility Note dated November 3, 2000, the
Second Amended and Restated Revolving Credit Facility Note dated July 28, 2000, and 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 Third Amended and Restated Loan Agreement dated as of
November 3, 2000 as modified by a Modification Agreement re Third Amended and Restated Loan Agreement dated as of July 31, 2001 (collectively, the "Prior Loan Agreement"), as well as the
Second Amended and Restated Loan Agreement dated as of July 28, 2000 (the "Second Loan Agreement") and the Amended and Restated Loan Agreement dated as of April 28, 1999, between the
Borrower, the Administrative Agent, WASHINGTON MUTUAL BANK (then 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 

1

 

indebtedness of the Borrower resulting from loans previously made by the Lender to the Borrower under the Prior Loan Agreement, the Second Loan Agreement or 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

QuickLinks

Exhibit 10.21

EXHIBIT A

Schedule 1 to Borrowing Base Report Classics Inventory—See attached data

Schedule 2 to Borrowing Base Report Current Season Fashion Inventory—See attached data

EXHIBIT C NOTICE OF BORROWING

EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE

EXHIBIT E COMMITMENTS

Exhibit 10.18

Exhibit 10.18

Exhibit 10.18

FOURTH AMENDED AND RESTATED REVOLVING CREDIT FACILITY NOTE (Washington Mutual Bank)

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