AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT

AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT
between
SSI VENTURE LLC
and
U.S. BANK NATIONAL ASSOCIATION

September 23, 2005

 

 

 

 

TABLE OF CONTENTS

ARTICLE I DEFINITIONS 1

ARTICLE II AMOUNTS AND TERMS OF LOANS 12

ARTICLE III LETTERS OF CREDIT 21

ARTICLE IV INTEREST, FEES AND PAYMENT CONVENTIONS 22

ARTICLE V COLLATERAL AND INDEBTEDNESS SECURED 25

ARTICLE VI REPRESENTATIONS AND WARRANTIES 26

6.2	CAPACITY	26
6.3	INVENTORY	27
6.4	TITLE TO COLLATERAL	27
6.5	NOTES RECEIVABLE	27
6.6	EQUIPMENT	28
6.7	PLACE OF BUSINESS	28
6.8	FINANCIAL CONDITION	28
6.9	TAXES	28
6.10	LITIGATION	28
6.11	ERISA MATTERS	29
6.12	ENVIRONMENTAL MATTERS	29
6.13	VALIDITY OF TRANSACTION DOCUMENTS	30
6.14	NO CONSENT OR FILING	30
6.15	NO VIOLATIONS	30
6.16	TRADEMARKS AND PATENTS	31
6.17	CONTINGENT LIABILITIES	31
6.18	COMPLIANCE WITH LAWS	31
6.19	LICENSES, PERMITS, ETC	31
6.20	LABOR CONTRACTS	31

 

ARTICLE VII CERTAIN DOCUMENTS TO BE DELIVERED TO LENDER 32

ARTICLE VIII AFFIRMATIVE COVENANTS 33

ARTICLE IX NEGATIVE COVENANTS 38

9.2 BORROWED MONEY 39

9.3 SECURITY INTEREST AND OTHER ENCUMBRANCES 39

9.4 STORING AND USE OF COLLATERAL 39

9.5 MERGERS, CONSOLIDATIONS, SALES OR ACQUISITIONS 39

9.6 CAPITAL CHANGES 40

9.7 RESTRICTED PAYMENT 40

9.8 INVESTMENTS AND ADVANCES 40

9.9 GUARANTIES 40

9.10 NAME CHANGE

9.11 DISPOSITION OF COLLATERAL 40

ARTICLE X EVENTS OF DEFAULT 41

ARTICLE XI [Intentionally omitted.] 45

ARTICLE XII LENDER'S RIGHTS AND REMEDIES 45

ARTICLE XIII MISCELLANEOUS 46

Schedules 5.1(d) 6.3 6.4 6.7 6.9 6.10 6.21 6.22 8.8	- Trademarks, Patents, etc. - Location of Inventory and Equipment - Existing Liens - Location of Books and Records - Unpaid Taxes Litigation - Consolidated Subsidiaries - Capitalization Insurance
Exhibits   A B C D F G H I J	Intentionally Omitted Form of Working Capital Revolving Note Form of Reducing Revolving Note Intentionally Omitted Financial Statements Certification Compliance Certificate Intentionally Omitted Borrowing Notice Borrowing Base Certificate
	iv	{00180721. DOC 4)

AMENDED AND RESTATED REVOLVING CREDIT
AND SECURITY AGREEMENT

This AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY AGREEMENT (this "Agreement"), dated as of September 23, 2005, is by and between SSI VENTURE LLC, a Colorado limited liability company, as borrower and debtor ('Borrower") and U.S. BANK NATIONAL ASSOCIATION, a national banking association, as lender ("Lender").

ARTICLE I
DEFINITIONS

For purposes of this Agreement, the following terms shall have the following meanings:

"ACCOUNT" means any account receivable, including any rights of payment for goods sold or leased or for services rendered, which is not evidenced by an instrument (as defined in the UCC) or chattel paper, whether or not it has been earned by performance and, in addition, includes all property included in the definition of "accounts" as used in the UCC together with any guaranties, letters of credit and other security therefor.

"ACCOUNT DEBTOR" means a Person who is obligated under any Account, general intangible, chattel paper or instrument.

"ACQUISITION REDUCING REVOLVING COMMITMENT" means a principal amount equal to $5,000,000, which principal amount shall decrease by $156,250 on January 31, April 30, July 31 and October 31 of each year beginning January 31, 2007 (for example, the principal amount shall be $4,843,750 on January 31, 2007, $4,687,500 on April 30, 2007 and so on).

"ACQUISITION REDUCING REVOLVING LINE OF CREDIT" means the revolving line of credit described in Section 2.3 hereof and all renewals, extensions, modifications, amendments, restatements and substations thereof or therefor.

"ACQUISITION REDUCING REVOLVING NOTE" means a promissory note evidencing the Acquisition Reducing Revolving Commitment in the form of Exhibit D.

"ADVANCE" means a loan made to Borrower by Lender pursuant to this Agreement under the Revolving Facilities.

"AFFILIATE" means (a) any officer or director of Borrower, (b) any other Person that controls, is controlled by or is under common control with Borrower (whether by contract, equity ownership or otherwise), (c) any Person that directly or indirectly owns ten percent (10%) or more of any shareholder or member of Borrower, (d) any Person ten percent (10%) or more of the equity of which is owned by a shareholder or member of Borrower, and (e) each of Thomas A. Gart, Kenneth Gart and GSSI LLC, a Colorado limited liability company.

"AGREEMENT" means this Amended and Restated Revolving Credit and Security Agreement as amended, extended or modified from time to time.

"AUTHORIZED REPRESENTATIVE" means any of the President, Chief Executive Officer, Chief Operating Officer, any Vice President or any Manager of the Borrower or, with respect to financial matters, the Chief Financial Officer, Vice President of Finance, or any other Person expressly designated by the Manager of the Borrower as an Authorized Representative of the Borrower.

'''BASE RATE" means, for any day, the rate per annum equal to the sum of the Prime Rate for such date minus the Applicable Margin. Any change in the Base Rate due to a change in the Prime Rate shall be effective on the effective date of such change in the Prime Rate. Lender's internal records of applicable interest rates shall be determinative in the absence of manifest error.

"BASE RATE ADVANCE" means an Advance that shall accrue interest based upon the Base Rate.

"BORROWER" has the meaning provided in the introductory paragraph of this Agreement.

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"BORROWING BASE" means (a) the amount obtained from the sum of (i) Eligible Accounts Receivable multiplied by 0.75, (ii) the sum, without duplication, of (A) Eligible Inventory comprised of Hard Inventory multiplied by 0.75, and (B) Eligible Inventory comprised of Soft Inventory multiplied by 0.55, and (iii) the net book value of Rental and Demo Equipment multiplied by 0.55, minus (b) all outstanding balances under the Revolving Facilities.

"BORROWING BASE CERTIFICATE" means a certificate furnished by Borrower to Lender in the form attached as Exhibit J.

"BORROWING NOTICE" means a request for an Advance (or a conversion or continuation of an interest rate) under the Revolving Line of Credit and, if written, in the form attached as Exhibit I.

"BUSINESS DAY" means, (a) except as expressly provided in clause (b) below, any day which is not a Saturday, Sunday or a day on which banks in the State are authorized or obligated by law, executive order or governmental decree to be closed, and (b) with respect to the selection, funding, interest rate, payment and Interest Period of any LIBOR Rate Advance, any day which is a business day, as described in clause (a) above, and on which commercial banks are open for business in New York, New York.

"CLOSING DATE" means the date on which all Transaction Documents have been executed and delivered to and accepted by Lender, and all conditions precedent to funding have been satisfied, including those set forth in Articles VI and VII.

"COLLATERAL" means collectively all of the property of Borrower subject to the Security Interest and described in Sections 5.1 and 5.2.

"CONSOLIDATED EBITDA" means, with respect to the Borrower and its Consolidated Subsidiaries for any twelve-month period (or other applicable period, if appropriate) ending on the date of computation thereof, the sum of, without duplication, (a) net income (exclusive of any extraordinary gains or losses), (b) Consolidated Interest Expense, (c) taxes on income (to be calculated by multiplying actual income for such period by 0.435), (d) amortization, and (e) depreciation, all determined on a consolidated basis in accordance with GAAP (except for calculation of cash taxes on income which shall be calculated as provided in the foregoing clause

(c)).

"CONSOLIDATED EBITDAR" means, with respect to the Borrower and its Consolidated Subsidiaries for any twelve-month period (or other applicable period, if appropriate) ending on the date of computation thereof, the sum of, without duplication, (a) net income (exclusive of any extraordinary gains or losses), (b) Consolidated Interest Expense, (c) taxes on income (to be calculated by multiplying actual income for such period by 0.435), (d) amortization, (e) depreciation, and (f) store location rent expense, all determined on a consolidated basis in accordance with GAAP (except for calculation of cash taxes on income which shall be calculated as provided in the foregoing clause (c)).

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"CONSOLIDATED INTEREST EXPENSE" means, with respect to any period of computation thereof, the gross cash interest expense of the Borrower and its Consolidated Subsidiaries, including without limitation the portion of any payments made in connection with capital leases allocable to interest expense, all determined on a consolidated basis in accordance with GAAP.

"CONSOLIDATED LEVERAGE RATIO" means the ratio of Senior Funded Debt to Consolidated EBITDA.

"CONSOLIDATED SUBSIDIARY" means any corporation, limited liability company, partnership or other entity of which more than fifty percent (50%) of the voting power is controlled by Borrower, directly or indirectly, through one or more intermediaries, whether existing on the date hereof or acquired at any time hereafter. If Borrower has no Consolidated Subsidiaries, the provisions of this Agreement relating to Consolidated Subsidiaries shall be inapplicable without affecting the applicability of such provisions to Borrower alone.

"DAILY RESET LIBOR RATE" means the one-month LIBOR Rate (as defined below, which includes the 0.875% addition to the base LIBOR rate) in effect and reset each Business Day, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation. Lender's internal records of applicable interest rates shall be determinative in the absence of manifest error.

"DAILY RESET LIBOR RATE ADVANCE" means a LIBOR Rate Advance that is to bear interest at the Daily Reset LIBOR Rate.

"DEBT" means with respect to the Borrower and its Consolidated Subsidiaries (a) indebtedness for borrowed money or for the deferred purchase price of property or services including performance bonds or other debt instruments, (b) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, and (c) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of the kinds referred to in clause (a) or (b) above.

"DEFAULT" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder.

"DEFAULT RATE" means with respect to the Revolving Facilities, a rate of interest per annum which shall be two percent (2%) above the interest rate effective immediately before any Event of Default, and in any case, the maximum interest rate permitted by applicable law, if lower.

"DISPOSAL" means the intentional or unintentional abandonment, discharge, deposit, injection, dumping, spilling, leaking, storing, burning, thermal destruction, or placing of any Hazardous Substance so that it or any of its constituents may enter the Environment.

"ELIGIBLE ACCOUNTS RECEIVABLE" means all Accounts of Borrower except (a) Accounts over ninety (90) days past their invoice date, (b) all Accounts of any Person if fifty percent (50%) or more of such Person's Accounts with Borrower are over ninety (90) days past their invoice date, (c) employee Accounts, (d) Affiliate Accounts (except that Accounts of Vail Resorts, Inc. or its Affiliates will not be ineligible due to being an Affiliate Account), (e) contra Accounts, (f) customer deposits, (g) Accounts owed by a governmental entity, (h) progress billings, or (i) foreign Accounts not secured by a letter of credit or foreign credit insurance in a form acceptable to Lender naming Lender as beneficiary.

"ELIGIBLE INVENTORY" means all Inventory of Borrower as shown on the financial statements of Borrower (and, if not reflected thereon, as adjusted downward for shrinkage and determination of the lower of cost or market valuation).

"ENVIRONMENT" means any water including, but not limited to, surface water and ground water or water vapor; any land including land surface or subsurface; stream sediments; air; fish; wildlife; plants; and all other natural resources or environmental media.

"'ENVIRONMENTAL LAWS" means all applicable federal, state, and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances, regulations, codes, and rules relating to the protection of the Environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production, or disposal of Hazardous Substances and the policies, guidelines, procedures, interpretations, decisions, orders, and directives of federal, state, and local governmental agencies and authorities with respect thereto which have the force of law.

"ENVIRONMENTAL PERMITS" means all licenses, permits, approvals, authorizations, consents, or registrations required by any applicable Environmental Laws and all applicable judicial and administrative orders in connection with ownership, lease, purchase, transfer, closure, use, and/or operation of any property owned, leased, or operated by Borrower or any Consolidated Subsidiary and/or as may be required for the storage, treatment, generation, transportation, processing, handling, production, or disposal of Hazardous Substances.

"ENVIRONMENTAL QUESTIONNAIRE" means a questionnaire and all attachments thereto concerning (a) activities and conditions affecting the Environment at any property owned, ].eased or operated by Borrower or any Consolidated Subsidiary, or (b) the enforcement or possible enforcement of any Environmental Law against Borrower or any Consolidated Subsidiary.

"ENVIRONMENTAL REPORT" means a written report prepared for Lender by an environmental consulting or environmental engineering firm.

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

"EVENT OF DEFAULT" means an Event of Default or Events of Default as defined in Article X.

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"'FEDERAL BANKRUPTCY CODE" means Title 11 of the United States Code, entitled "Bankruptcy," as amended, or any successor federal bankruptcy law.

"FEDERAL FUNDS RATE" means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published, the rate as determined by Lender based on the average of the quotations for such day on such transactions received by the Lender from three lending federal funds brokers of recognized national standing selected by the Lender.

"FISCAL YEAR" means the twelve-month fiscal period of the Borrower and its Consolidated Subsidiaries commencing on August 1 of each calendar year and ending on July 31 of each calendar year.

"FIXED CHARGE COVERAGE" means Operating Cash Flow divided by Fixed Charges.

"FIXED CHARGES" means, as of any date, the sum, without duplication, of (a) Consolidated Interest Expense, (b) scheduled principal payments on long term Debt, (c) scheduled commitment reductions on the Reducing Revolving Commitment and the Acquisition Reducing Revolving Commitment, (d) store location rent expense, and (e) current maturities of capital leases of the Borrower for the preceding twelve (12) month period.

"FUNDING LOSSES" means any actual loss or expense that any Lender reasonably incurs because (a) Borrower fails or refuses (for any reason whatsoever, other than a default by the Lender claiming such loss or expense) to take any Advance or other loan that it has requested under this Agreement, or (b) Borrower pays any LIBOR Rate Advance or converts any LIBOR Rate Advance to a Base Rate Advance, in each case, before the last day of the applicable Interest Period.

"GAAP" means generally accepted accounting principles, being those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report, consistently applied during the applicable periods.

"HARD INVENTORY" shall mean Inventory of Borrower consisting of merchandise in the following categories, Division 0 - rentals services, Division 6 - alpine hardgoods, Division 7

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- snowboard hardgoods, Division B - bicycles, Division C - camping, Division G -- golf, Division M - miscellaneous and Division N - nordic.

"HAZARDOUS SUBSTANCES" means any explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, hazardous wastes, hazardous or toxic substances, and any other material defined as a hazardous substance in Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601(14).

"INDEBTEDNESS" means the indebtedness evidenced by the Revolving Notes secured by the Security Interest described in Article V, together with all other amounts due, or which may become due, under the Transaction Documents.

"INDEMNIFIED LIABILITIES" has the meaning provided in Section 13.13 of this Agreement.

"INTEREST PERIOD" means the period of one (1), two (2), three (3) or six (6) months selected by Borrower for any LIBOR Rate Advance, unless it is a Daily Reset LIBOR Rate Advance, in which case the interest period shall be one-month, reset daily. Whenever the last day of an Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall occur on the preceding Business Day.

"INVENTORY" means inventory, as defined in the UCC as in effect as of the date of this Agreement, other than Rental and Demo Equipment and in any event shall include returned or repossessed goods.

"LENDER" means U.S. Bank National Association and any successors or assignees of Lender.

"LETTER OF CREDIT" means a commercial letter of credit issued by Lender pursuant to Article III hereof for the account of the Borrower in favor of a Person advancing credit or securing an obligation on behalf of the Borrower. The amount of any Letter of Credit shall be considered an Advance under the Working Capital Revolving Facility.

"LETTER OF CREDIT OUTSTANDINGS" means, as of the date of determination, the aggregate amount available to be drawn under all Letters of Credit plus Reimbursement Obligations then outstanding.

"LIBOR RATE" means, with respect to the Interest Period selected for any LIBOR Rate Advance, the LIBOR rate for such Interest Period, quoted by Lender from Telerate Page 3750 or any successor thereto, which shall be that LIBOR rate in effect two Business Days prior to the beginning of each Interest Period, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation, such rate to be reset at the beginning of each succeeding Interest Period, plus (c) 0.875%. If the initial Advances under this Agreement occur other than on the first day of an Interest Period, the initial LIBOR Rate shall be that LIBOR rate

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in effect two Business Days prior to the date of the initial Advances, which rate plus the percentage described above shall be in effect for the remaining days of the initial Interest Period; such LIBOR Rate to be reset at the beginning of each succeeding Interest Period. Lender's internal records of applicable interest rates shall be determinative in the absence of manifest error.

"LIBOR RATE ADVANCE" means an Advance that shall accrue interest based upon the LIBOR Rate for the applicable Interest Period, and includes any Daily Reset LIBOR Rate Advances.

"LIBOR RESERVE REQUIREMENT" means the percentage (expressed as a decimal fraction) provided by the Board of Governors of the Federal Reserve System (or any successor governmental body) on the date of determination for ascertaining the reserve requirements (including, without limitation, basic, supplemental, marginal and emergency reserves) under Regulation D with respect to Eurocurrency fundings, and requirements under any similar or replacement regulations.

"MAINTENANCE CAPEX" means fifty percent (50%) of Borrower and its Consolidated Subsidiaries total depreciation expense.

"MANAGER" means The Gart Companies, Inc., or any duly appointed successor manager of Borrower.

"MANAGEMENT AGREEMENT" means that certain Amended and Restated Management Agreement between Borrower and The Gart Companies, Inc. dated as of May 27, 2003.

"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, properties, operations or condition, financial or otherwise, of the Borrower and its Consolidated Subsidiaries, taken as a whole, (b) the ability of the Borrower and its Consolidated Subsidiaries taken as a whole to pay or perform its respective obligations, liabilities and indebtedness under the Transaction Documents as such payment or performance becomes due in accordance with the terms thereof, or (c) the rights, powers and remedies of the Lender or any Lender under any Transaction Document or the validity, legality or enforceability thereof

"NEGATIVE PLEDGE AGREEMENT" means that certain negative pledge agreement entered into by Borrower's members in connection with the Original Credit Agreement.

"OPERATING CASH FLOW" means Consolidated EBITDAR less all distributions (including Preferred Payments and Tax Distributions) less Maintenance CAPEX, all determined for the preceding twelve-month period, on a consolidated basis in accordance with GAAP.

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"'OPERATING AGREEMENT" means the Amended and Restated Operating Agreement of Borrower dated as of May 27, 2003.

"PENSION EVENT" means, with respect to any Pension Plan, the occurrence of (a) any nonexempt prohibited transaction described in Section 406 of ERISA or in Section 4975 of the Internal Revenue Code; (b) any Reportable Event for which there is no regulatory waiver; (c) any complete or partial withdrawal, or proposed complete or partial withdrawal, of Borrower or any Consolidated Subsidiary from such Pension Plan; (d) any complete or partial termination, or proposed complete or partial termination, of such Pension Plan; or (e) any accumulated funding deficiency (whether or not waived), as defined in Section 302 of ERISA or in Section 412 of the Internal Revenue Code.

"PENSION PLAN" means any pension plan, as defined in Section 3(2) of ERISA, which is a multi-employer plan or a single employer plan, as defined in Section 4001 of ERISA, and subject to Title IV of ERISA and which is (a) a plan maintained by Borrower or any Consolidated Subsidiary for employees or former employees of Borrower or of any Consolidated Subsidiary; (b) a plan to which Borrower or any Consolidated Subsidiary contributes or is required to contribute; (c) a plan to which Borrower or any Consolidated Subsidiary was required to make contributions at any time during the five (5) calendar years preceding the date of this Agreement; or (d) any other plan with respect to which Borrower or any Consolidated Subsidiary has incurred or may incur liability, including, without limitation, contingent liability, under Title IV of ERISA either to such plan or to the Pension Benefit Guaranty Corporation. For purposes of this definition and the definition of Pension Event, Borrower shall include any trade or business (whether or not incorporated) which, together with Borrower or any Consolidated Subsidiary, is deemed to be a "single employer" within the meaning of Section 4001(b)(1) of ERISA.

"PREFERRED PAYMENTS" means amounts to be paid to GSSI LLC, a member of Borrower, pursuant to the Operating Agreement of Borrower in an amount not to exceed $194,500 in Fiscal Year 2005 and none thereafter.

"PRIME RATE" means the rate of interest from time to time publicly announced by the Lender as its "prime rate". The Lender or Lender may lend to its customers at rates that are at, above or below the Prime Rate. For purposes of determining any interest rate hereunder or under any other Transaction Document that is based on the Prime Rate, such interest rate shall change as and when the Prime Rate changes.

"REDUCING REVOLVING COMMITMENT" means a principal amount equal to $10,000,000, which principal amount shall decrease by $312,500 on January 31, April 30, July 31 and October 31 of each year beginning January 31, 2006 (for example, the principal amount shall be $9,687,500 on January 31, 2006, $9,375,000 on April 30, 2006 and so on).

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"REDUCING REVOLVING LINE OF CREDIT" means the revolving line of credit described in Section 2.2 hereof and all renewals, extensions, modifications, amendments, restatements and substitutions thereof or therefor.

"REDUCING REVOLVING NOTE" means a promissory note evidencing the Reducing Revolving Commitment in the form of Exhibit C.

"REIMBURSEMENT OBLIGATION" shall mean, at any time, the obligation of the Borrower with respect to any Letter of Credit to reimburse the Lender for amounts theretofore paid by Lender pursuant to a drawing under such Letter of Credit.

"RELEASE" means "release," as defined in Section 101(22) of the Comprehensive, Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601(22), and the regulations promulgated thereunder.

"RENTAL AND DEMO EQUIPMENT" means all equipment (including ski equipment, snowboard equipment, bicycles) either rented by Borrower to customers or used as demonstrator equipment.

^" REPORTABLE EVENT" means any event described in Section 4043(b) of ERISA or in regulations issued thereunder with regard to a Pension Plan.

"RESTRICTED PAYMENT" means (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or securities of Borrower or any securities of its Consolidated Subsidiaries (other than those payable or distributable solely to the Borrower or a Consolidated Subsidiary of the Borrower) now or hereafter outstanding, except a dividend payable solely in shares of class of stock or securities to the holders of that class; (b) any redemption, conversion, exchange, retirement or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock or securities of Borrower or of any of its Consolidated Subsidiaries (other than those payable or distributable solely to the Borrower) now or hereafter outstanding; (c) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Borrower or of its Consolidated Subsidiaries now or hereafter outstanding; and (d) any issuance and sale of securities of any Consolidated Subsidiary of the Borrower (or any option, warrant or right to acquire such stock) other than to the Borrower.

"REVOLVING CREDIT OUTSTANDINGS" means, as of any date of determination, the aggregate principal amount of all Revolving Loans then outstanding or of any specifically referenced Revolving Facility or Revolving Facilities.

Agreement.

"'REVOLVING LOANS" means any borrowing pursuant to an Advance under any Revolving Facility.

"REVOLVING NOTES" means the Working Capital Revolving Note, the Reducing Revolving Note and the Acquisition Reducing Revolving Note.

"SCHEDULE" means any schedule executed in connection with, and which is a part of, this Agreement.

"SECURITY INTEREST" means the security interest granted to Lender by Borrower as described in Article V.

"SENIOR FUNDED DEBT" means (a) Total Funded Debt minus (b) any Debt subordinated to Lender in writing.

"'SOFT INVENTORY" shall mean Inventory of Borrower other than Hard Inventory, consisting of merchandise in the following categories, Division 1 - alpine clothing, Division 2 - snowboard clothing, Division 3 - casual clothing, Division 4 - lifestyle, Division 5 - logo clothing, Division 6 - alpine accessories, Division 7 - snowboard accessories and Division F - footwear.

"'TAX DISTRIBUTIONS" means distributions in an amount equal to the net taxable income allocated to members of Borrower multiplied by the highest federal and state (California or Colorado, as applicable) income tax rates payable by an individual with respect to such income.

"THIRD PARTY" means any Person who has executed and delivered, or who in the future may execute and deliver, to Lender any agreement, instrument, or document, pursuant to which such Person has guaranteed to Lender the payment of the Indebtedness or has granted Lender a security interest in or lien on some or all of such Person's real or personal property to secure the payment of the Indebtedness.

"TOTAL FUNDED DEBT" means the sum of (a) all Debt and (b) the present value, calculated with a discount rate of five percent (5%), of all basic rental obligations of Borrower under any synthetic lease, without duplication.

"TOTAL LETTER OF CREDIT COMMITMENT" means an amount not to exceed $500,000.

^" TRANSACTION DOCUMENTS" means this Agreement, the Notes and all other agreements and documents, including, without limitation, collateral documents, letter of credit agreements, notes, acceptance credit agreements, security agreements, pledges, guaranties, mortgages, title insurance, assignments, and subordination agreements now or hereafter required to be executed by Borrower or any Third Party.

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"WORKING CAPITAL REVOLVING COMMITMENT" means a principal amount equal to $18,000,000.

"WORKING CAPITAL REVOLVING LINE OF CREDIT" means the revolving line of credit described in Section 2.1 hereof and all renewals, extensions, modifications, amendments, restatements and substitutions thereof or therefor.

"WORKING CAPITAL REVOLVING NOTE" means a promissory note evidencing the Working Capital Revolving Commitment in the form of Exhibit B.

Unless the context otherwise requires, words in the singular include the plural, and in the plural include the singular. The word "including" means including without limitation, and is used for illustrative purposes rather than limiting purposes.

Unless otherwise defined in Section 1.1 or elsewhere in this Agreement, capitalized words shall have the meanings set forth in the UCC as of the date of this Agreement.

ARTICLE II
AMOUNTS AND TERMS OF LOANS

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(i) Expiration of Working Capital Revolving Line of Credit upon Revolvii g Credit Maturity Date. The term of the Working Capital Revolving Line of Credit will expire and all principal and interest amounts owed to Lender under the Working Capital Revolving Line of Credit shall be immediately due and payable on the Revolving Credit Maturity Date, and Lender shall have no further obligation with respect thereto after such date.

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Borrower shall indemnify Lender against any reasonable loss or expense incurred by Lender as a result of any failure by Borrower to consummate such disbursement or conversion, including, without limitation, any reasonable loss (including loss from anticipated profits) or any reasonable expense incurred by reason of liquidation or reemployment of Lender's deposits or other monies to fund any disbursement or conversion in connection with such LIBOR Rate Advance. A certificate as to the amount of such loss or expense submitted by Lender to Borrower shall be conclusive and binding for all purposes, absent manifest error.

(v) Funding from Lender. On the date of the requested Advance, Lender will make available to the Borrower in immediately available funds not later than 3:00 P.M. (Denver, Colorado time) on the requested date of Advance the amount of the requested Advance.

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Credit Maturity Date would fall within such subsequent Interest Period or such Interest Period is not available for any other reason, the LIBOR Rate Advance then maturing shall be automatically converted to a Base Rate Advance. At any time prior to the Revolving Credit Maturity Date, Borrower may request to convert a Base Rate Advance to a LIBOR Rate Advance upon submission of a Borrowing Notice to Lender at least three (3) Business Days prior to the effectiveness of such conversion.

(h) Reductions. The Borrower shall, by notice from an Authorized Representative, have the right from time to time upon not less than three (3) Business Days' written notice to the Lender, effective upon receipt, to reduce the Working Capital Revolving Credit Commitment. Each such reduction shall be in the aggregate amount of the lesser of (x) at least $5„000,000 or (y) the entire remaining Working Capital Revolving Credit Commitment, and shall permanently reduce the Working Capital Revolving Credit Commitment. Each reduction of the Working Capital Revolving Credit Commitment shall be accompanied by payment to the extent that the principal amount of Revolving Credit Outstandings under the Working Capital Line of Credit plus Letter of Credit Outstandings exceeds the lesser of the Working Capital Revolving Credit Commitment as reduced under this Section 2.1(h) or the Borrowing Base.

(i) Expiration of Reducing Revolving Line of Credit upon Revolving Credit Maturity Date. The term of the Reducing Revolving Line of Credit will expire and all principal and interest amounts owed to Lender under the Reducing Revolving Line of Credit shall be immediately due and payable on the Revolving Credit Maturity Date, and Lender shall have no further obligation with respect thereto after such date.

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certificate as to the amount of such loss or expense submitted by Lender to Borrower shall be conclusive and binding for all purposes, absent manifest error.

(v) Funding from Lender. On the date of the requested Advance, Lender will make available to the Borrower in immediately available funds not later than 3:00 P.M. (Denver, Colorado time) on the requested date of Advance the amount of the requested Advance.

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upon submission of a Borrowing Notice to Lender at least three (3) Business Days prior to the effectiveness of such conversion.

(h) Reductions. The Borrower shall, by notice from an Authorized Representative, have the right from time to time upon not less than three (3) Business Days' written notice to the Lender, effective upon receipt, to reduce the Reducing Revolving Credit Commitment. Each such reduction shall be in the aggregate amount of the lesser of (x) at least $5,000,000 or (y) the entire remaining Reducing Revolving Credit Commitment, and shall permanently reduce the Reducing Revolving Credit Commitment. Each reduction of the Reducing Revolving Credit Commitment shall be accompanied by payment to the extent that the principal amount of Revolving Credit Outstandings under the Reducing Revolving Line of Credit exceeds the lesser of the Reducing Revolving Credit Commitment as reduced under this Section 2.2(h) or the Borrowing Base.

(i) Requests for Base Rate Advance. Any request by an Authorized Representative of the Borrower for a Base Rate Advance under the Acquisition Reducing Revolving Line of Credit shall be by a written Borrowing Notice or by telephone (if given by

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telephone, such request must be followed by a written Borrowing Notice within twenty-four (24) hours thereof) and must be given on behalf of the Borrower so as to be received by the Lender not later than 1:00 P.M. (Denver, Colorado time) on the requested date of Advance.

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lesser of (x) at least $5,000,000 or (y) the entire remaining Acquisition Reducing Revolving Credit Commitment, and shall permanently reduce the Acquisition Reducing Revolving Credit Commitment. Each reduction of the Acquisition Reducing Revolving Credit Commitment shall be accompanied by payment to the extent that the principal amount of Acquisition Reducing Revolving Credit Outstandings exceeds the lesser of the Acquisition Reducing Revolving Credit Commitment as reduced under this Section 2.3(h) or the Borrowing Base.

In the event Borrower desires to enter into any interest rate swaps, Lender and Borrower shall negotiate the terms of such interest rate swaps in accordance with Lender's standard terms and conditions for such interest rate swaps; provided that the determination as to whether to enter into or facilitate the entering into any such interest rate swaps shall be in the sole discretion of Lender.

ARTICLE III LETTERS OF CREDIT

As part of the Working Capital Revolving Line of Credit, Borrower may, subject to the terms and conditions of this Agreement, request Letters of Credit to be issued in an amount not to exceed the Total Letter of Credit Commitment and in the event and to the extent Lender issues a Letter of Credit on behalf of Borrower, the Working Capital Revolving Credit Commitment shall be considered utilized by the amount of such Letter of Credit. Amounts drawn under any Letter of Credit and honored by the Lender shall become an Advance under the Working Capital Revolving Line of Credit in such amount, at such time and subject to the terms of this Agreement, whether or not any Event of Default has occurred. All Letters of Credit issued under this Agreement shall reduce the amount available under the Working Capital Revolving Credit Commitment. At no time shall the aggregate amount of Letter of Credit Outstandings exceed the lesser of the Total Letter of Credit Commitment or the Borrowing Base; provided, however, that upon expiration or termination of any Letter of Credit, the Lender may determine to issue, or cause to be issued, additional Letters of Credit provided that, in connection with any such additional Letter of Credit, the Total Letter of Credit Commitment shall not be exceeded and the other terms and conditions set forth herein have been satisfied. The Lender shall not be obligated to issue Letters of Credit that would cause all outstanding Letters of Credit to exceed the lesser of the Total Letter of Credit Commitment or the Borrowing Base. The Lender shall not be obligated to issue Letters of Credit with an expiration date that extends beyond the earlier of (a) one (1) year of the date of issuance and (b) the Revolving Credit Maturity Date.

Borrower hereby expressly agrees that Borrower's obligations relating to any Letter of Credit are secured by the Collateral.

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ARTICLE IV
INTEREST, FEES AND PAYMENT CONVENTIONS

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relating to this Agreement, the amount due shall bear interest until paid at two percent (2%) above the Base Rate (but not to exceed the maximum rate permitted by applicable law). Furthermore, such amount shall constitute part of the Facility, secured by all of the Collateral.

Interest and fees shall be computed on the basis of the actual number of days elapsed in the period during which interest or fees accrue and a year of three hundred sixty (360) days. Notwithstanding any of the terms and conditions contained in this Section, interest in respect of the Revolving Credit Outstandings and Letter of Credit Outstandings shall not exceed the maximum rate permitted by applicable law.

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reasonable averaging or attribution method), then (unless the effect is already reflected in the rate of interest then applicable under this Agreement) Lend