Exhibit
      10.23

    SECURED
      CONTINUING GUARANTY

    


    This
      SECURED CONTINUING GUARANTY (this “Continuing
      Guaranty”)
      is
      dated as of June 20, 2008, by SPORT CHALET VALUE SERVICES, LLC, a Virginia
      limited liability company (“Guarantor”),
      in
      favor of BANK OF AMERICA, N.A., a national banking association, as
      administrative agent for the Lenders (“Agent”)
      for
      value received and in consideration of any loan or other financial accommodation
      heretofore or hereafter at any time made or granted to SPORT CHALET, INC.,
      a
      Delaware corporation (“Borrower”),
      under
      or in connection with the Loan Agreement described below.

    


    R
      E C
      I T A L S:

    


    WHEREAS,
      Borrower is indebted to Agent and Secured Parties pursuant to that certain
      Amended and Restated Loan and Security Agreement dated as of even date herewith
      (as amended, restated, or otherwise modified from time to time, the
“Loan
      Agreement”);
      and

     

    WHEREAS,
      Guarantor is a Subsidiary of Borrower and, as such, will benefit by virtue
      of
      the financial accommodations extended to Borrower by Agent and Secured Parties;
      and

    


    WHEREAS,
      in order to induce Agent and Secured Parties to enter into the Loan Agreement
      and the other Loan Documents and to extend the financial accommodations to
      Borrower pursuant to the Loan Agreement, and in consideration thereof, Guarantor
      has agreed to guaranty the payment and performance of the Guarantied Obligations
      (as defined below);

    


    NOW,
      THEREFORE, for valuable consideration hereby acknowledged, the parties agree
      as
      follows:

    


    DEFINITIONS;
      RULES OF CONSTRUCTION

     

    1.1. Definitions.
      Initially capitalized terms used but not defined herein have the respective
      meanings set forth in the Loan Agreement.

     

    1.2. Certain
      Matters of Construction. The
      terms
“herein”, “hereof”, “hereunder” and other words of similar import refer to this
      Agreement as a whole and not to any particular section, paragraph or
      subdivision. Any pronoun used shall be deemed to cover all genders. In the
      computation of periods of time from a specified date to a later specified date,
      “from” means “from and including,”, “through” means “through and including,” and
“to” and “until” each mean “to but excluding,”. The terms “including” and
“include” shall mean “including, without limitation” and, for purposes of each
      Loan Document, the parties agree that the rule of ejusdem
      generis
      shall
      not be applicable to limit any provision. Section titles appear as a matter
      of
      convenience only and shall not affect the interpretation hereof. All references
      to (a) laws or statutes include all related rules, regulations,
      interpretations, amendments and successor provisions; (b) any document,
      instrument or agreement include any amendments, waivers and other modifications,
      extensions or renewals (to the extent permitted hereby); (c) any section mean,
      unless the context otherwise requires, a section of this Agreement; (d) any
      Person include successors and assigns; or (e) unless otherwise specified
      herein, discretion of Agent means the sole and absolute discretion of Agent.
      Guarantor shall have the burden of establishing any alleged negligence,
      misconduct or lack of good faith by Agent or any other Secured Party hereunder.
      No provision hereof shall be construed against any party by reason of such
      party
      having, or being deemed to have, drafted the provision. 


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    


    SECTION
      2. GUARANTY

     

    2.1. Guarantied
      Obligations. Guarantor unconditionally, absolutely and irrevocably
      guarantees the full and prompt payment and performance when due, whether by
      acceleration or otherwise, and at all times thereafter, of all “Obligations” as
      defined in the Loan Agreement (collectively, the “Guarantied
      Obligations”).
      This
      Continuing Guaranty is a guaranty of payment and performance when due and not
      of
      collection. In the event of any default by Borrower in making payment of, or
      default by Borrower in performance of, any of the Guarantied Obligations,
      Guarantor agrees on demand by Agent to pay and perform all of the Guarantied
      Obligations as are then or thereafter become due and owing or are to be
      performed under the terms of the Loan Documents. Guarantor further agrees to
      pay
      all expenses (including reasonable attorneys’ fees and expenses) paid or
      incurred by Agent in endeavoring to collect the Guarantied Obligations, or
      any
      part thereof, and in enforcing this Continuing Guaranty and any Loan
      Documents.

     

    2.2. Other
      Guaranties. Each of Agent and Guarantor agrees and acknowledges that each
      other Obligated Party (other than Borrower) has executed and delivered (or
      will
      execute and deliver) to Agent a guaranty of the Guarantied Obligations.


     

    2.3. Nature
      of Guaranty. Guarantor agrees and acknowledges that: (a) the Guarantied
      Obligations consist, in part, of a revolving loan facility, which may be repaid
      in full or part from time to time and reborrowed in accordance with the Loan
      Agreement; and (b) Guarantor shall not be released from any liability hereunder
      unless and until Full Payment of all Guarantied Obligations.

     

    2.4. Security
      for Continuing Guaranty. This Continuing Guaranty is secured by that certain
      Security Agreement executed by the Guarantor in favor of the Agent and dated
      as
      of even date herewith in the form attached hereto as Exhibit A and each
      of the documents, instruments, and agreements executed and delivered from time
      to time by the Guarantor in connection herewith or therewith, together with
      any
      and all other security agreements and mortgages or deeds of trust (if any)
      executed and delivered to the Agent by the Guarantor whether now existing or
      hereafter created, as each of the foregoing may be modified, amended, restated,
      supplemented or replaced from time to time (all such documents directly or
      indirectly securing any of the Guarantied Obligations are herein referred to,
      collectively, as the “Security
      Documents”).

     

    2.5. Continuing
      Nature of Guaranty and Guarantied Obligations. This Continuing Guaranty
      shall be continuing and shall not be discharged, impaired or affected by: (a)
      the insolvency of Borrower or any other Obligated Party or the payment in full
      of all of the Guarantied Obligations at any time or from time to time (other
      than Full Payment of all Guarantied Obligations); (b) the power or authority
      or
      lack thereof of Borrower or any other Obligated Party to incur the Guarantied
      Obligations; (c) the validity or invalidity of any of the Loan Documents or
      the
      documents securing the same; (d) the existence or non-existence of Borrower
      or
      any other Obligated Party as a legal entity; (e) any transfer by Borrower or
      any
      other Obligated Party of all or any part of any collateral in which Agent has
      been granted a lien or security interest pursuant to the Loan Documents; (f)
      any
      statute of limitations affecting the liability of Guarantor under this
      Continuing Guaranty or the Loan Documents or the ability of Agent to enforce
      this Continuing Guaranty or any provision of the Loan Documents; or (g) any
      right of offset, counterclaim or defense of Guarantor, including those that
      have
      been waived by Guarantor pursuant to this Continuing Guaranty.

     

    2.6. Payment
      Upon Insolvency. Without limiting the generality of any other provision
      hereof, Guarantor agrees that, in the event of any Event of Default under
      Section 11.1(j) of the Loan Agreement, Guarantor will pay to Agent forthwith
      the
      full amount that would be payable hereunder by Guarantor if all of the
      Guarantied Obligations were then due and payable, whether or not any of the
      Guarantied Obligations are otherwise then due and payable.


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    2.7. Payment
      of the Guarantied Obligations. Any amounts received by Agent from whatever
      source on account of the Guarantied Obligations may be applied by Agent toward
      the payment of such of the Guarantied Obligations, and in such order of
      application, as Agent may from time to time elect, and notwithstanding any
      payments made by or for the account of Guarantor pursuant to this Continuing
      Guaranty. Guarantor agrees that, if at any time all or any part of any payment
      theretofore applied by Agent to any of the Guarantied Obligations is or must
      be
      rescinded or returned by Agent for any reason whatsoever (including the
      insolvency, bankruptcy or reorganization of Borrower), such Guarantied
      Obligations shall, for the purposes of this Continuing Guaranty and to the
      extent that such payment is or must be rescinded or returned, be deemed to
      have
      continued in existence notwithstanding such application by Agent, and this
      Continuing Guaranty shall continue to be effective or be reinstated, as the
      case
      may be, as to such Guarantied Obligations, all as though such application by
      Agent had not been made.

     

    2.8. Permitted
      Actions of Agent. Agent may from time to time, in its sole discretion and
      without any other notice to Guarantor, take any or all of the following actions:
      (a) retain or obtain a security interest in any assets of Borrower or any
      third party to secure any of the Guarantied Obligations or any obligations
      of
      Guarantor hereunder; (b) retain or obtain the primary or secondary obligation
      of
      any obligor or obligors, in addition to Guarantor, with respect to any of the
      Guarantied Obligations; (c) extend or renew for one or more periods
      (whether or not longer than the original period), alter or exchange any of
      the
      Guarantied Obligations; (d) waive, ignore or forbear from taking action or
      otherwise exercising any of its default rights or remedies with respect to
      any
      Default or Event of Default; (e) release, waive or compromise any
      obligation of Guarantor hereunder or any obligation of any nature of any other
      Obligated Party or any other obligor primarily or secondarily obligated with
      respect to any of the Guarantied Obligations; (f) release its security interest
      in, or surrender, release or permit any substitution or exchange for, all or
      any
      part of any collateral now or hereafter securing any of the Guarantied
      Obligations or any obligation hereunder, or extend or renew for one or more
      periods (whether or not longer than the original period) or release, waive,
      compromise, alter or exchange any obligations of any nature of any obligor
      with
      respect to any such property; and (g) demand payment or performance of any
      of the Guarantied Obligations from Guarantor at any time or from time to time
      during the continuance of an Event of Default, whether or not Agent shall have
      exercised any of its rights or remedies with respect to any property securing
      any of the Guarantied Obligations or any obligation hereunder or proceeded
      against any other obligor primarily or secondarily liable for payment or
      performance of any of the Guarantied Obligations.

     

    2.9. Assignments
      of Lenders’ Rights. Any Lender may, from time to time, without notice to
      Guarantor, assign or transfer any or all of the Guarantied Obligations or any
      interest therein in accordance with the Loan Agreement and, notwithstanding
      any
      such assignment or transfer of the Guarantied Obligations or any subsequent
      assignment or transfer thereof, the Guarantied Obligations shall be and remain
      the Guarantied Obligations for the purpose of this Continuing Guaranty. Each
      and
      every immediate and successive assignee or transferee of any of the Guarantied
      Obligations or of any interest therein shall, to the extent of such party’s
      interest in the Guarantied Obligations, be entitled to the benefits of this
      Continuing Guaranty to the same extent as if such assignee or transferee were
      a
      Lender, as applicable; provided, however, that unless such Lender shall
      otherwise consent in writing, such Lender shall have an unimpaired right, prior
      and superior to that of any such assignee or transferee, to enforce this
      Continuing Guaranty for their own benefit as to those of the Guarantied
      Obligations that such Lender has not assigned or transferred.

     

    2.10. Specific
      Waivers.
      Without
      limiting the generality of any other provision of this Continuing Guaranty,
      to
      the extent permitted by applicable law, Guarantor hereby expressly waives:
      (a) notice of the acceptance of this Continuing Guaranty; (b) notice of the
      existence, creation, payment, nonpayment, performance or nonperformance of
      all
      or any of the Guarantied Obligations; (c) presentment, demand, notice of
      dishonor, protest, notice of protest and all other notices whatsoever with
      respect to the payment or performance of the Guarantied Obligations or the
      amount thereof or any payment or performance by Guarantor hereunder; (d) all
      diligence in collection or protection of or realization upon the Guarantied
      Obligations or any thereof, any obligation hereunder or any security for or
      guaranty of any of the foregoing; (e) any right to direct or affect the manner
      or timing of Agent’s enforcement of its rights or remedies; (f) any and all
      defenses that would otherwise arise upon the occurrence of any event or
      contingency described in Section 2.5 hereof or upon the taking of any
      action by Agent permitted hereunder; (g) any defense, right of set-off, claim
      or
      counterclaim whatsoever and any and all other rights, benefits, protections
      and
      other defenses available to Guarantor now or at any time hereafter, including
      under California Civil Code Sections 2787 to 2855, inclusive, and California
      Code of Civil Procedure Sections 580a, 580b, 580d or 726, and all successor
      sections; (h) all benefits or defenses arising under Chapter 2 of Title 14
      of the California Civil Code, and all successor sections; and (i) all other
      principles or provisions of law, if any, that conflict with the terms of this
      Continuing Guaranty, including the effect of any circumstances that may or
      might
      constitute a legal or equitable discharge of a guarantor or
      surety.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    2.11. Irrevocability.
      Guarantor hereby further waives all rights to revoke this Continuing Guaranty
      at
      any time, and all rights to revoke any agreement executed by Guarantor at any
      time to secure the payment and performance of Guarantor’s obligations under this
      Continuing Guaranty, including the Security Documents.

     

    2.12. Statutory
      Waiver of Rights and Defenses Regarding Election of Remedies. Guarantor
      waives all rights and defenses arising out of an election of remedies by Agent.
      Without limiting the generality of the foregoing, Guarantor acknowledges that
      it
      has been made aware of the provisions of California Civil Code Section 2856,
      has
      read and understands the provisions of that statute, has been advised by its
      counsel as to the scope, purpose and effect of that statute, and based thereon,
      and without limiting the foregoing waivers, Guarantor agrees, to the extent
      permitted by applicable law, to waive all suretyship rights and defenses
      available to Guarantor that are described in California Civil Code Section
      2856(a). Without limiting any other waivers herein, Guarantor hereby gives
      the
      following waivers pursuant to California Civil Code Sections 2856(c) and
      (d):

     

    (a) Guarantor
      waives all rights and defenses that Guarantor may have because the debtor’s debt
      is or may be secured by real property. This means, among other
      things:

     

    (i) The
      creditor may collect from Guarantor without first foreclosing on any real or
      personal property pledged by the debtor.

     

    (ii) If
      the
      creditor forecloses on any real property collateral pledged by the
      debtor:

     

    1) The
      amount of the debt may be reduced only by the price for which that collateral
      is
      sold at the foreclosure sale, even if the collateral is worth more than the
      sale
      price.

     

    2) The
      creditor may collect from the guarantor even if the creditor, by foreclosing
      on
      the real property collateral, has destroyed any right the guarantor may have
      to
      collect from the debtor.

     

    This
      is
      an unconditional and irrevocable waiver of any rights and defenses the guarantor
      may have because the debtor’s debt is secured by real property. These rights and
      defenses include, but are not limited to, any rights or defenses based upon
      Section 580a, 580b, 580d or 726 of the California Code of Civil
      Procedure.

     

    (b) Guarantor
      waives all rights and defenses arising out of an election of remedies by Agent
      or Secured Parties, even though that election of remedies, such as a nonjudicial
      foreclosure with respect to security for the Guarantied Obligations, has
      destroyed Guarantor’s rights of subrogation and reimbursement against the
      principal by the operation of Section 580d of the California Code of Civil
      Procedure or otherwise.

    


    SECTION
      3.FINANCIAL
      CONDITION

     

    3.1. Financial
      Condition. Guarantor represents and warrants that Guarantor is fully aware
      of the financial condition of Borrower and each other Obligated Party, and
      Guarantor delivers this Continuing Guaranty based solely upon Guarantor’s own
      independent investigation of Borrower’s and each other Obligated Party’s
      financial condition and in no part upon any representation or statement of
      Agent
      with respect thereto. Guarantor further represents and warrants that Guarantor
      is in a position to and hereby does assume full responsibility for obtaining
      such additional information concerning Borrower’s and each other Obligated
      Party’s financial condition as Guarantor may deem material to Guarantor’s
      obligations hereunder, and Guarantor is not relying upon, nor expecting Agent
      to
      furnish Guarantor any information in Agent’s possession concerning Borrower’s
      nor any other Obligated Party’s financial condition or concerning any
      circumstances bearing on the existence or creation, or the risk of nonpayment
      or
      nonperformance of the Guarantied Obligations.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    3.2. Waiver.
      Guarantor hereby waives any duty on the part of Agent to disclose to Guarantor
      any facts Agent may now or hereafter know about Borrower or any other Obligated
      Party, regardless of whether Agent has reason to believe that any such facts
      materially increase the risk beyond that which Guarantor intends to assume
      or
      has reason to believe that such facts are unknown to Guarantor.

     

    3.3. Continuing
      Guaranty. Guarantor hereby knowingly accepts the full range of risk
      encompassed within a contract of “Continuing Guaranty”, which includes, without
      limitation, the possibility that Borrower will contract for additional
      indebtedness for which Guarantor may be liable hereunder after Borrower’s
      financial condition or ability to pay their lawful debts when they fall due
      has
      deteriorated.

     

    SECTION
      4. SUBORDINATION
      AND SUBROGATION

     

    4.1. Subordination.
      Guarantor hereby subordinates any and all indebtedness of Borrower and the
      other
      Obligated Parties to Guarantor to the Full Payment of all of the Guarantied
      Obligations. Guarantor agrees that, upon and during the continuation of an
      Event
      of Default, Agent shall be entitled to receive Full Payment of all Guarantied
      Obligations prior to Guarantor’s receipt of payment of any amount of any
      indebtedness of Borrower and the other Obligated Parties to Guarantor. Any
      payments on such indebtedness to Guarantor, if Agent so requests during the
      continuance of an Event of Default, shall be collected, enforced and received
      by
      Guarantor, in trust, as trustee for Agent and shall be paid over to Agent on
      account of the Guarantied Obligations, but without reducing or affecting in
      any
      manner the liability of Guarantor under the other provisions of this Continuing
      Guaranty. Upon and during the continuation of an Event of Default, Agent is
      authorized and empowered, but not obligated, in its discretion, (a) in the
      name of Guarantor, to collect and enforce, and to submit claims in respect
      of,
      any indebtedness of Borrower and the other Obligated Parties to Guarantor and
      to
      apply any amounts received thereon to the Guarantied Obligations, and
      (b) to require Guarantor (i) to collect and enforce, and to submit
      claims in respect of, any indebtedness of Borrower and the other Obligated
      Parties to Guarantor, and (ii) to pay any amounts received on such
      indebtedness to Agent for application to the Guarantied
      Obligations.

     

    4.2. Subrogation.
      Guarantor will not exercise any rights that Guarantor may acquire by way of
      subrogation under this Continuing Guaranty, by any payment hereunder or
      otherwise, until Full Payment of all of the Guarantied Obligations. If any
      amount shall be paid to Guarantor on account of such subrogation rights at
      any
      other time, such amount shall be held in trust for the benefit of Agent and
      shall be forthwith paid to Agent to be credited and applied to the Guarantied
      Obligations, whether matured or unmatured, in such manner as Agent shall
      determine in its sole discretion.

     

    SECTION
      5. REPRESENTATIONS
      AND WARRANTIES

     

    5.1 General
      Representations and Warranties.
      To
      induce Agent to enter into the Loan Agreement and the other Loan Documents,
      Guarantor represents and warrants that:

     

    5.1.1. Organization
      and Qualification.
      Guarantor is duly organized, validly existing and in good standing under the
      laws of the jurisdiction of its organization. Guarantor is duly qualified,
      authorized to do business and in good standing as a foreign corporation in
      each
      jurisdiction where failure to be so qualified could reasonably be expected
      to
      have a Material Adverse Effect.


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    5.1.2. Power
      and Authority.
      Guarantor is duly authorized to execute, deliver and perform the Loan Documents
      to which it is a party. The execution, delivery and performance of the Loan
      Documents have been duly authorized by all necessary action, and do not (a)
      require any consent or approval of any holders of Equity Interests of Guarantor,
      other than those already obtained; (b) contravene the Organic Documents of
      Guarantor; (c) violate any Applicable Law or cause a default under any Material
      Contract; or (d) result in or require the imposition of any Lien (other than
      Permitted Liens) on any Property of Guarantor.

     

    5.1.3. Enforceability.
      Each
      Loan Document to which Guarantor is a party is a legal, valid and binding
      obligation of Guarantor, enforceable in accordance with its terms, except as
      enforceability may be limited by bankruptcy, insolvency or similar laws
      affecting the enforcement of creditors’ rights generally.

     

    5.1.4. Solvency.
      Guarantor is Solvent.

     

    5.1.5. Representations
      and Warranties in Loan Agreement Incorporated.
      Without
      limiting any of the foregoing representations and warranties, Guarantor
      represents and warrants that each of the representations and warranties set
      forth in the Loan Agreement to the extent applicable to Guarantor are true,
      correct and complete as written.

     

    5.2. Complete
      Disclosure.
      No Loan
      Document contains any untrue statement of a material fact regarding Guarantor
      or
      its properties, nor fails to disclose any material fact regarding Guarantor
      or
      its properties necessary to make the statements contained therein not materially
      misleading. There is no fact or circumstance that Guarantor has failed to
      disclose to Agent in writing that could reasonably be expected to have a
      Material Adverse Effect.

     

    SECTION
      6. COVENANTS

     

    6.1. Affirmative
      Covenants.
      Until
      the Full Payment of all Secured Obligations, Guarantor shall:

     

    6.1.1. Inspections;
      Appraisals. Permit Agent from time to time, subject (except when a Default
      or Event of Default exists) to reasonable notice and normal business hours,
      to
      visit and inspect the Properties of Guarantor, inspect, audit and make extracts
      from Guarantor’s books and records, and discuss with its officers, employees,
      agents, advisors and independent accountants Guarantor’s or its Subsidiary’s
      business, financial condition, assets, prospects and results of operations.
      Lenders may participate in any such visit or inspection, at their own expense.
      Neither Agent nor any Lender shall have any duty to Guarantor or any other
      Obligated Party or other obligor to make any inspection, nor to share any
      results of any inspection, appraisal or report with Guarantor or any other
      Obligated Party or other obligor. Guarantor acknowledges that all inspections,
      appraisals and reports are prepared by Agent and Lenders for their purposes,
      and
      Guarantor shall not be entitled to rely upon them.

     

    6.1.2. Financial
      Information. Keep adequate records and books of account with respect to its
      business activities, in which proper entries are made in accordance with GAAP
      reflecting all financial transactions; and furnish to Agent and Lenders all
      financial reports required to be furnished pursuant to the Loan
      Agreement.

     

    6.1.3. Compliance
      with Laws. Comply with all Applicable Laws, including ERISA, Environmental
      Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding collection and payment
      of Taxes, and maintain all Governmental Approvals necessary to the ownership
      of
      its Properties or conduct of its business, unless failure to comply (other
      than
      failure to comply with Anti-Terrorism Laws) or maintain could not reasonably
      be
      expected to have a Material Adverse Effect. Without limiting the generality
      of
      the foregoing, if any Environmental Release occurs at or on any Properties
      of
      Guarantor or its Subsidiary, it shall act promptly and diligently to investigate
      and report to Agent and all appropriate Governmental Authorities the extent
      of,
      and to make appropriate remedial action to eliminate, such Environmental
      Release, whether or not directed to do so by any Governmental
      Authority.


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    6.1.4. Taxes.
      Pay and discharge all Taxes prior to the date on which they become delinquent
      or
      penalties attach, unless such Taxes are being Properly Contested.

     

    6.1.5. Insurance.
      Maintain insurance as required by the Loan Documents, including satisfactory
      endorsements required thereby.

     

    6.2. Negative
      Covenants in Loan Agreement Incorporated.
      Guarantor agrees to refrain from taking any action that it has agreed not to
      take or that Borrower has agreed not to permit Guarantor to take pursuant to
      the
      terms of the Loan Agreement.

     

    SECTION
      7. REMEDIES;
      BANKRUPTCY.

     

    7.1. Cumulative
      Rights. All covenants, conditions, provisions, warranties, guaranties,
      indemnities and other undertakings of Borrower, Guarantor and each other
      Obligated Party contained in the Loan Documents are cumulative and not in
      derogation or substitution of each other. In particular, the rights and remedies
      of Agent and Lenders are cumulative, may be exercised at any time and from
      time
      to time, concurrently or in any order, and shall not be exclusive of any other
      rights or remedies that Agent and Lenders may have, whether under any agreement,
      by law, at equity or otherwise.

     

    7.2. Waivers.
      The failure or delay of Agent or any Lender to require strict performance by
      Guarantor with any terms of the Loan Documents, or to exercise any rights or
      remedies with respect to Collateral or otherwise, shall not operate as a waiver
      thereof nor as establishment of a course of dealing. All rights and remedies
      shall continue in full force and effect until Full Payment of all Guarantied
      Obligations. No waiver of any Default or Event of Default shall constitute
      a
      waiver of any other Default or Event of Default that may exist at such time,
      unless expressly stated. If Agent or any Lender accepts performance by Guarantor
      under any Loan Documents in a manner other than that specified therein, or
      during any Default or Event of Default, or if Agent or any Lender shall delay or
      exercise any right or remedy under any Loan Documents, such acceptance, delay
      or
      exercise shall not operate to waive any Default or Event of Default nor to
      preclude exercise of any other right or remedy.

     

    7.3. Bankruptcy.
      Guarantor hereby agrees that, except as hereinafter provided, its obligations
      under this Continuing Guaranty shall be unconditional, irrespective of (i)
      the
      institution of any proceeding under the Bankruptcy Code, or any similar
      proceeding, by or against Borrower or any other Obligated Party, or Agent’s
      election in any such proceeding of the application of Section 1111(b)(2) of
      the
      Bankruptcy Code, (ii) any borrowing or grant of a security interest by Borrower
      or any other Obligated Party as debtor-in-possession, under Section 364 of
      the
      Bankruptcy Code, or (iii) the disallowance, under Section 502 of the Bankruptcy
      Code, of all or any portion of Agent’s claim(s) for repayment of the Guarantied
      Obligations.

     

    SECTION
      8. MISCELLANEOUS

     

    8.1. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of Guarantor and Agent
      and their respective successors and assigns, except that Guarantor shall not
      have the right to assign its rights or delegate its obligations under any Loan
      Documents. 

     

    8.2. Amendments.
      No
      modification of this Agreement shall be effective without the prior written
      agreement of Agent and Guarantor.

     

    8.3. Indemnity.
      GUARANTOR
      SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY
      BE
      INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ARISING FROM
      THE NEGLIGENCE OF AN INDEMNITEE.
      In no
      event shall Guarantor have any obligation hereunder to indemnify or hold
      harmless an Indemnitee with respect to a Claim that is determined in a final,
      non-appealable judgment by a court of competent jurisdiction to result from
      the
      gross negligence or willful misconduct of such Indemnitee.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    8.4. Notices
      and Communications.
      All
      notices and other communications by or to a party hereto shall be in writing
      and
      shall be given to Guarantor, at Borrower’s address shown on the signature pages
      to the Loan Agreement, and to Agent at its address shown on the signature pages
      to the Loan Agreement, or at such other address as such party may hereafter
      specify by notice in accordance with this Section
      8.4.
      Each
      such notice or other communication shall be effective only (a) if given by
      facsimile transmission, when transmitted to the applicable facsimile number,
      if
      confirmation of receipt is received; (b) if given by mail, three Business Days
      after deposit in the U.S. mail, with first-class postage pre-paid, addressed
      to
      the applicable address; or (c) if given by personal delivery, when duly
      delivered to the notice address with receipt acknowledged. Any written notice
      or
      other communication that is not sent in conformity with the foregoing provisions
      shall nevertheless be effective on the date actually received by the noticed
      party. Any notice received by Borrower shall be deemed received by Guarantor.
      Electronic and voice mail may not be used as effective notice
      hereunder.

     

    8.5. Credit
      Inquiries.
      Guarantor hereby authorizes Agent and Lenders (but they shall have no
      obligation) to respond to usual and customary credit inquiries from third
      parties concerning Guarantor or any Subsidiary of Guarantor.

     

    8.6. Severability.
      Wherever possible, each provision of hereof shall be interpreted in such manner
      as to be valid under Applicable Law. If any provision is found to be invalid
      under Applicable Law, it shall be ineffective only to the extent of such
      invalidity and the remaining provisions hereof shall remain in full force and
      effect.

     

    8.7. Cumulative
      Effect; Conflict of Terms.The
      provisions of this Agreement and the other the Loan Documents are cumulative.
      The parties acknowledge that the Loan Documents may use several limitations,
      tests or measurements to regulate similar matters, and they agree that these
      are
      cumulative and that each must be performed as provided. Except as otherwise
      provided in another Loan Document (by specific reference to the applicable
      provision of this Agreement), if any provision contained herein is in direct
      conflict with any provision in another Loan Document, the provision herein
      shall
      govern and control.

     

    8.8. Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall constitute an
      original, but all of which when taken together shall constitute a single
      contract. This Agreement shall become effective when Agent has received
      counterparts bearing the signatures of all parties hereto. Delivery of a
      signature page of any Loan Document by telecopy shall be effective as delivery
      of a manually executed counterpart of such agreement.

     

    8.9. Entire
      Agreement. Time
      is
      of the essence of the Loan Documents. The Loan Documents constitute the entire
      contract among the parties relating to the subject matter hereof, and supersede
      any and all previous agreements and understandings, oral or written, relating
      to
      the subject matter hereof.

     

    8.10 No
      Advisory or Fiduciary Responsibility.
      In
      connection with all aspects of each transaction contemplated by any Loan
      Document, Guarantor acknowledges and agrees that (a)(i) the credit facility
      evidenced by the Loan Documents and any related arranging or other services
      by
      Agent, any Lender, any of their Affiliates or any arranger are arm’s-length
      commercial transactions between Borrower and Guarantor; (ii) Guarantor has
      consulted its own legal, accounting, regulatory and tax advisors to the extent
      they have deemed appropriate; and (iii) Guarantor is capable of evaluating
      and
      understanding, and does understand and accept, the terms, risks and conditions
      of the transactions contemplated by the Loan Documents; (b) each of Agent,
      Lenders, their Affiliates and any arranger is and has been acting solely as
      a
      principal in connection with this credit facility, is not the financial advisor,
      agent or fiduciary for Borrower, Guarantor, any of their Affiliates or any
      other
      Person, and has no obligation with respect to the transactions contemplated
      by
      the Loan Documents except as expressly set forth therein; and (c) Agent,
      Lenders, their Affiliates and any arranger may be engaged in a broad range
      of
      transactions that involve interests that differ from Borrower, Guarantor and
      their Affiliates, and have no obligation to disclose any of such interests
      to
      Borrower, Guarantor or their Affiliates. To the fullest extent permitted by
      Applicable Law, Guarantor hereby waives and releases any claims that it may
      have
      against Agent, Lenders, their Affiliates and any arranger with respect to any
      breach or alleged breach of agency or fiduciary duty in connection with any
      aspect of any transaction contemplated by a Loan Document.


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    8.11. GOVERNING
      LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
      CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING
      EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

     

    8.12. Consent
      to Forum; Arbitration.  

     

    8.12.1. Forum.
      GRANTOR
      HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT
      SITTING IN OR WITH JURISDICTION OVER LOS ANGELES, CALIFORNIA, IN ANY PROCEEDING
      OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH
      PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. GRANTOR IRREVOCABLY
      WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH
      COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.
      EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
      PROVIDED FOR NOTICES IN SECTION 8.3.
      Nothing
      herein shall limit the right of Agent or any Lender to bring proceedings against
      Guarantor in any other court, nor limit the right of any party to serve process
      in any other manner permitted by Applicable Law. Nothing in this Agreement
      shall
      be deemed to preclude enforcement by Agent of any judgment or order obtained
      in
      any forum or jurisdiction.

     

    8.12.2 Arbitration.
      Notwithstanding any other provision of this Agreement to the contrary, any
      controversy or claim among the parties relating in any way to any Guarantied
      Obligations or Loan Documents, including any alleged tort, shall at the request
      of any party hereto be determined by binding arbitration conducted in accordance
      with the United States Arbitration Act (Title 9 U.S. Code). Arbitration
      proceedings will be determined in accordance with the Act, the then-current
      rules and procedures for the arbitration of financial services disputes of
      the
      American Arbitration Association (“AAA”),
      and
      the terms of this Section 8.12.2. In the event of any inconsistency, the
      terms of this Section 8.12.2 shall control. If AAA is unwilling or unable
      to serve as the provider of arbitration or to enforce any provision of this
      Section 8.12.2, Agent may designate another arbitration organization with
      similar procedures to serve as the provider of arbitration. The arbitration
      proceedings shall be conducted in Los Angeles or Pasadena, California. The
      arbitration hearing shall commence within 90 days of the arbitration demand
      and
      close within 90 days thereafter. The arbitration award must be issued within
      30
      days after close of the hearing (subject to extension by the arbitrator for
      up
      to 60 days upon a showing of good cause), and shall include a concise written
      statement of reasons for the award. The arbitrator shall give effect to
      applicable statutes of limitation in determining any controversy or claim,
      and
      for these purposes, service on AAA under applicable AAA rules of a notice of
      claim is the equivalent of the filing of a lawsuit. Any dispute concerning
      this
Section 8.12.2 or whether a controversy or claim is arbitrable shall be
      determined by the arbitrator. The arbitrator shall have the power to award
      legal
      fees to the extent provided by this Agreement. Judgment upon an arbitration
      award may be entered in any court having jurisdiction. The institution and
      maintenance of an action for judicial relief or pursuant to a provisional or
      ancillary remedy shall not constitute a waiver of the right of any party,
      including the plaintiff, to submit the controversy or claim to arbitration
      if
      any other party contests such action for judicial relief. No controversy or
      claim shall be submitted to arbitration without the consent of all parties
      if,
      at the time of the proposed submission, such controversy or claim relates to
      an
      obligation secured by Real Estate, but if all parties do not consent to
      submission of such a controversy or claim to arbitration, it shall be determined
      as provided in the next sentence. At the request of any party, a controversy
      or
      claim that is not submitted to arbitration as provided above shall be determined
      by judicial reference; and if such an election is made, the parties shall
      designate to the court a referee or referees selected under the auspices of
      the
      AAA in the same manner as arbitrators are selected in AAA sponsored proceedings
      and the presiding referee of the panel (or the referee if there is a single
      referee) shall be an active attorney or retired judge; and judgment upon the
      award rendered by such referee or referees shall be entered in the court in
      which proceeding was commenced. None of the foregoing provisions of this
Section 8.12.2 shall limit the right of Agent or Lenders to exercise
      self-help remedies, such as setoff, foreclosure or sale of any Collateral or
      to
      obtain provisional or ancillary remedies from a court of competent jurisdiction
      before, after or during any arbitration proceeding. The exercise of a remedy
      does not waive the right of any party to resort to arbitration or reference.
      At
      Agent’s option, foreclosure under a Mortgage may be accomplished either by
      exercise of power of sale thereunder or by judicial
      foreclosure.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    8.13 Waivers
      by Guarantor. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
      GRANTOR WAIVES (A) THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND EACH LENDER
      HEREBY ALSO WAIVES) IN ANY PROCEEDING OR DISPUTE OF ANY KIND RELATING IN ANY
      WAY
      TO ANY LOAN DOCUMENTS, GUARANTIED OBLIGATIONS OR COLLATERAL; (B) PRESENTMENT,
      DEMAND, PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE,
      COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY COMMERCIAL PAPER, ACCOUNTS,
      DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT
      ON WHICH GRANTOR MAY IN ANY WAY BE LIABLE, AND HEREBY RATIFIES ANYTHING AGENT
      MAY DO IN THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF
      ANY COLLATERAL; (D) ANY
      BOND OR SECURITY THAT MIGHT BE REQUIRED BY A COURT PRIOR TO ALLOWING AGENT
      TO
      EXERCISE ANY RIGHTS OR REMEDIES; (E) THE BENEFIT OF ALL VALUATION, APPRAISEMENT
      AND EXEMPTION LAWS; (F) ANY CLAIM AGAINST AGENT OR ANY LENDER, ON ANY THEORY
      OF
      LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES
      (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) IN ANY WAY RELATING TO ANY ENFORCEMENT
      ACTION, GUARANTIED OBLIGATIONS, LOAN DOCUMENTS OR TRANSACTIONS RELATING THERETO;
      AND (G) NOTICE OF ACCEPTANCE HEREOF.
      Guarantor acknowledges that the foregoing waivers are a material inducement
      to
      Agent and Lenders entering into the Loan Agreement and that Agent and Lenders
      are relying upon the foregoing in their dealings with Guarantor. Guarantor
      has
      reviewed the foregoing waivers with its legal counsel and has knowingly and
      voluntarily waived its jury trial and other rights following consultation with
      legal counsel. In the event of litigation, this Agreement may be filed as a
      written consent to a trial by the court.

     

    8.14. Advice
      of Counsel. Guarantor acknowledges that it has either obtained the advice of
      counsel or has had the opportunity to obtain such advice in connection with
      the
      terms and provisions of this Continuing Guaranty.

     

    8.15. Patriot
      Act Notice.
      Agent
      and
      Lenders hereby notify Guarantor that pursuant to the requirements of the Patriot
      Act, Agent and Lenders are required to obtain, verify and record information
      that identifies Guarantor, including its legal name, address, tax ID number
      and
      other information that will allow Agent and Lenders to identify it in accordance
      with the Patriot Act. Agent and Lenders will also require information regarding
      each personal guarantor, if any, and may require information regarding
      Guarantor’s management and owners, such as legal name, address, social security
      number and date of birth.

     

    [Remainder
      of page intentionally left blank; signatures begin on following
      page]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, this Continuing Guaranty has been executed and delivered as
      of
      the date set forth above.

     

    
      	
              GUARANTOR:

            
	 	 
	
              SPORT
                CHALET VALUE SERVICES, LLC,

            
	
              a
                Virginia limited liability company

            
	 	 
	
              By:

            	
              /s/
                Howard Kaminsky  

            
	
              Name:

            	
              Howard
                Kaminsky

            
	
              Title:
                

            	
              Manager
                

            


    

    


    Signature
      Page

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Exhibit
      A

    Form
      of Security Agreement

    


    SECURITY
      AGREEMENT

     

    This
      SECURITY AGREEMENT (this “Agreement”)
      is
      dated as of June 20, 2008, among SPORT CHALET VALUE SERVICES, LLC, a Virginia
      limited liability company (“Grantor”)
      and
      BANK OF AMERICA, N.A., a national banking association, as agent for the Lenders
      (“Agent”)
      in
      connection with the Guaranty described below.

    


    R
      E C
      I T A L S:

    


    WHEREAS,
      SPORT CHALET, INC., a Delaware corporation (“Borrower”),
      is
      indebted to Agent and Secured Parties pursuant to that certain Amended and
      Restated Loan and Security Agreement dated as of even date herewith (as amended,
      restated, or otherwise modified from time to time, the “Loan
      Agreement”);
      and

     

    WHEREAS,
      Grantor is an Obligated Party and has guaranteed the payment and performance
      of
      Borrower’s obligations to Agent and Secured Parties under the Loan Agreement
      pursuant to that certain Secured Continuing Guaranty of even date herewith
      (the
“Guaranty”);
      and

     

    WHEREAS,
      the parties wish to provide for the terms and conditions upon which Grantor’s
      liabilities under the Guaranty shall be secured by the Collateral (as defined
      below); and

     

    WHEREAS,
      this Agreement is made to secure the obligations of Grantor under the Guaranty
      and in consideration of advances, credit or other financial accommodations
      now
      or hereafter being afforded to Borrower by Agent and Secured
      Parties;

     

    NOW,
      THEREFORE, for valuable consideration hereby acknowledged, the parties agree
      as
      follows:

     

    SECTION
      1.DEFINITIONS;
      RULES OF CONSTRUCTION

     

    1.1. Definitions.
      

     

    Initially
      capitalized terms used but not defined herein have the respective meanings
      set
      forth in the Loan Agreement. As used herein, the following terms have the
      meanings set forth below:

     

    Collateral:
      all of
      the property of Grantor described in Section
      2
      hereof,
      together with all other property of Grantor now or hereafter pledged to Agent
      to
      secure, either directly or indirectly, repayment of the Secured
      Obligations.

     

    Secured
      Obligations:
      any and
      all of Grantor’s indebtedness and/or liabilities to Agent and Secured Parties
      under the Loan Agreement, the Guaranty (including the “Guarantied Obligations”
as defined therein) and under this Agreement.

     

    UCC:
      the
      Uniform Commercial Code as in effect in the State of California or, when the
      laws of any other jurisdiction govern the perfection or enforcement of any
      Lien,
      the Uniform Commercial Code of such jurisdiction.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    1.2.
      Uniform
      Commercial Code.
      As used
      herein, the following terms are defined in accordance with the UCC in effect
      in
      the State of California from time to time: “Chattel
      Paper”,
      “Commercial
      Tort Claim”,
      “Deposit
      Account”,
      “Document”,
      “Equipment”,
      “General
      Intangibles”,
      “Goods”,
      “Instrument”,
      “Investment
      Property”,
      “Letter-of-Credit
      Right”
and
      “Supporting
      Obligation”.

     

    1.3.
      Certain
      Matters of Construction. The terms “herein”, “hereof”, “hereunder” and other
      words of similar import refer to this Agreement as a whole and not to any
      particular section, paragraph or subdivision. Any pronoun used shall be deemed
      to cover all genders. In the computation of periods of time from a specified
      date to a later specified date, “from” means “from and including,”, “through”
means “through and including,” and “to” and “until” each mean “to but
      excluding,”. The terms “including” and “include” shall mean “including, without
      limitation” and, for purposes of each Loan Document, the parties agree that the
      rule of ejusdem
      generis
      shall
      not be applicable to limit any provision. Section titles appear as a matter
      of
      convenience only and shall not affect the interpretation hereof. All references
      to (a) laws or statutes include all related rules, regulations,
      interpretations, amendments and successor provisions; (b) any document,
      instrument or agreement include any amendments, waivers and other modifications,
      extensions or renewals (to the extent permitted hereby); (c) any section mean,
      unless the context otherwise requires, a section of this Agreement; (d) any
      exhibits or schedules mean, unless the context otherwise requires, exhibits
      and
      schedules attached hereto, which are hereby incorporated by reference; (e)
      any
      Person include successors and assigns; (f) time of day mean time of day at
      Agent’s notice address under the Loan Agreement; or (g) unless otherwise
      specified herein, discretion of Agent means the sole and absolute discretion
      of
      Agent. Grantor shall have the burden of establishing any alleged negligence,
      misconduct or lack of good faith by Agent or any other Secured Party hereunder.
      No provision hereof shall be construed against any party by reason of such
      party
      having, or being deemed to have, drafted the provision.

     

    SECTION
      2. COLLATERAL

     

    2.1.
      Grant
      of Security Interest.
      To
      secure the prompt payment and performance of all Secured Obligations, Grantor
      hereby grants to Agent, for the benefit of Secured Parties, a continuing
      security interest in and Lien upon all Property of Grantor, including all of
      the
      following Property, whether now owned or hereafter acquired, and wherever
      located:

     

    (a) all
      Accounts;

     

    (b) all
      Chattel Paper, including electronic chattel paper;

     

    (c) all
      Commercial Tort Claims;

     

    (d) all
      Deposit Accounts;

     

    (e) all
      Documents;

     

    (f) all
      General Intangibles, including Intellectual Property;

     

    (g) all
      Goods, including Inventory, Equipment and fixtures;

     

    (h) all
      Instruments;

     

    (i) all
      Investment Property;


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    (j) all
      Letter-of-Credit Rights;

     

    (k) all
      Supporting Obligations;

     

    (l) all
      cash
      and other monies, whether or not in the possession or under the control of
      Agent, a Lender, or a bailee or Affiliate of Agent or a Lender, including any
      Cash Collateral;

     

    (m) all
      accessions to, substitutions for, and all replacements, products, and cash
      and
      non-cash proceeds of the foregoing, including proceeds of and unearned premiums
      with respect to insurance policies, and claims against any Person for loss,
      damage or destruction of any Collateral; and

     

    (n) all
      books
      and records (including customer lists, files, correspondence, tapes, computer
      programs, print-outs and computer records) pertaining to the
      foregoing.

     

    2.2.
      Lien
      on Deposit Accounts.
      To
      further secure the prompt payment and performance of all Secured Obligations,
      Grantor hereby grants to Agent, for the benefit of Secured Parties, a continuing
      security interest in and Lien upon all amounts credited to any Deposit Account
      of Grantor, including any sums in any blocked accounts or in any accounts into
      which such sums are swept. Grantor authorizes and directs each bank or other
      depository to deliver to Agent, on a daily basis during the continuation of
      an
      Event of Default, all balances in each Deposit Account maintained by Grantor
      with such depository for application to the Secured Obligations then
      outstanding. Grantor irrevocably appoints Agent as Grantor’s attorney-in-fact to
      collect such balances to the extent any such delivery is not so made.


     

    2.3.
      Other
      Collateral.
      

     

    2.3.1.
      Commercial
      Tort Claims. Grantor
      shall promptly notify Agent in writing if Grantor has a Commercial Tort Claim
      (other than, as long as no Default or Event of Default exists, a Commercial
      Tort
      Claim for less than $100,000) and, upon Agent’s request, shall promptly take
      such actions as Agent deems appropriate to confer upon Agent (for the benefit
      of
      Secured Parties) a duly perfected, first priority Lien upon such
      claim.

     

    2.3.2.
      Certain
      After-Acquired Collateral. Grantor
      shall promptly notify Agent in writing if, after the Closing Date, Grantor
      obtains any interest in any Collateral consisting of Deposit Accounts, Chattel
      Paper, Documents, Instruments, Intellectual Property, Investment Property or
      Letter-of-Credit Rights and, upon Agent’s request, shall promptly take such
      actions as Agent deems appropriate to effect Agent’s duly perfected, first
      priority Lien upon such Collateral, including obtaining any appropriate
      possession, control agreement or Lien Waiver. If any Collateral is in the
      possession of a third party, at Agent’s request, Grantor shall obtain an
      acknowledgment that such third party holds the Collateral for the benefit of
      Agent.

     

    2.3.3.
      No
      Assumption of Liability. The
      Lien
      on Collateral granted hereunder is given as security only and shall not subject
      Agent or any Lender to, or in any way modify, any obligation or liability of
      Grantor relating to any Collateral.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    2.4.
      Further
      Assurances.
      Promptly
      upon request, Grantor shall deliver such instruments, assignments, title
      certificates, or other documents or agreements, and shall take such actions,
      as
      Agent deems appropriate under Applicable Law to evidence or perfect its Lien
      on
      any Collateral, or otherwise to give effect to the intent of this Agreement.
      Grantor authorizes Agent to file any financing statement that indicates the
      Collateral as “all assets” or “all personal property” of Grantor, or words to
      similar effect, and ratifies any action taken by Agent before the Closing Date
      to effect or perfect its Lien on any Collateral.

     

    2.5.
      Foreign
      Subsidiary Stock.
      Notwithstanding
      Section
      2.1,
      not
      more than 65% of the voting stock of any Foreign Subsidiary and 100% of all
      non-voting stock (if any) of each Foreign Subsidiary shall be included in the
      Collateral.

     

    SECTION
      3. COLLATERAL
      ADMINISTRATION

     

    3.1.
      Administration
      of Accounts.

     

    3.1.1
      Records
      and Schedules of Accounts.
      Grantor
      shall keep accurate and complete records of its Accounts, including all payments
      and collections thereon, and shall submit to Agent upon request such reports
      thereon in form satisfactory to Agent.

     

    3.1.2.
      Taxes.
      If an
      Account of Grantor includes a charge for any Taxes, Agent is authorized, in
      its
      discretion, to pay the amount thereof to the proper taxing authority for the
      account of Grantor and add such amounts to the Secured Obligations; provided,
      however,
      that
      neither Agent nor Lenders shall be liable for any Taxes that may be due from
      Grantor or with respect to any Collateral.

     

    3.2.
      Administration
      of Inventory.

     

    3.2.1.
      Records
      and Reports of Inventory.
      Grantor
      shall keep accurate and complete records of its Inventory, including costs
      and
      daily withdrawals and additions, and shall submit to Agent, upon request,
      inventory and reconciliation reports in form satisfactory to Agent, on such
      periodic basis as Agent may request. Upon request of Agent from time to time,
      Grantor shall conduct a physical Inventory count, and shall provide to Agent
      a
      report based on such Inventory count promptly upon completion thereof, together
      with such supporting information as Agent may reasonably request. Agent may
      participate in and observe each such count.

     

    3.2.2.
      Acquisition,
      Sale and Maintenance.
      Grantor
      shall take all steps to assure that all Inventory produced by or under the
      direction or control of Borrower or its Subsidiaries is produced in accordance
      with Applicable Law, including the FLSA. Grantor shall not acquire or accept
      any
      Inventory that is known to it to have been produced in violation of Applicable
      Law, including the FLSA. Grantor shall not sell any Inventory on consignment
      or
      approval or any other basis under which the customer may return or require
      Borrower to repurchase such Inventory (excepting Grantor’s retail policies, or
      intercompany policies between Grantor and Borrower with respect to Borrower’s
      retail policies, concerning the return of purchases of Inventory). Grantor
      shall
      use, store and maintain all Inventory with reasonable care and caution, in
      accordance with applicable standards of any insurance and in conformity with
      all
      Applicable Law, and shall make current rent payments (within applicable grace
      periods provided for in leases) at all locations where any Collateral is located
      (other than such locations for which Borrower is the lessee).

     

    3.3
      Administration
      of Equipment.

     

    3.3.1
      Records
      and Schedules of Equipment.
      Grantor
      shall keep accurate and complete records of its Equipment, including kind,
      quality, quantity, cost, acquisitions and dispositions thereof. Promptly upon
      the request of Agent, Grantor shall submit to Agent a current schedule thereof,
      in form satisfactory to Agent. Promptly upon request, Grantor shall deliver
      to
      Agent evidence of its ownership or interests in any Equipment.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    3.3.2.
      Dispositions
      of Equipment.
      Grantor
      shall not sell, lease or otherwise dispose of any Equipment, without the prior
      written consent of Agent, other than (a) a Permitted Asset Disposition; and
      (b)
      replacement of Equipment that is worn, damaged or obsolete with Equipment of
      like function and value, if the replacement Equipment is acquired substantially
      contemporaneously with such disposition and is free of Liens.

     

    3.3.3.
      Condition
      of Equipment.
      Grantor
      represents that its Equipment is in good operating condition and repair, and
      all
      necessary replacements and repairs have been made so that the value and
      operating efficiency of the Equipment is preserved at all times, reasonable
      wear
      and tear excepted. Grantor shall ensure that the Equipment is mechanically
      and
      structurally sound, and capable of performing the functions for which it was
      designed, in accordance with manufacturer specifications.

     

    3.4.
      Administration
      of Deposit Accounts.
      Grantor
      shall take all actions necessary to establish Agent’s control of each Deposit
      Account (other than an account exclusively used for payroll, payroll taxes
      or
      employee benefits, or an account containing not more that $10,000 at any time).
      Grantor shall be the sole account holder of each Deposit Account and shall
      not
      allow any other Person (other than Agent) to have control over a Deposit Account
      or any Property deposited therein.

     

    3.5.
      General
      Provisions.

     

    3.5.1.
      Location
      of Collateral.
      All
      tangible items of Collateral, other than Inventory in transit, shall at all
      times be kept by Grantor at the business locations set forth on the schedules
      to
      the Loan Agreement, except that Grantor may (a) make sales or other dispositions
      of Collateral in accordance with the Loan Agreement; (b) move Equipment between
      (or, upon purchase, to) business locations set forth in Disclosure Schedule
      8.6.1 to the Loan Agreement; (c) permit Equipment to be in transit to and from,
      and in possession of, any Person in the business of repairing or maintaining
      such Equipment for the purpose of maintenance and repair in the Ordinary Course
      of Business; and (d) move Collateral to another location in the United States,
      upon 30 Business Days prior written notice to Agent.

     

    3.5.2.
      Insurance
      of Collateral; Condemnation Proceeds.

     

    (a) Grantor
      shall maintain insurance with respect to the Collateral, covering casualty,
      hazard, public liability, theft, malicious mischief, flood and other risks,
      in
      amounts, with endorsements and with insurers (with a Best Rating of at least
      A7,
      unless otherwise approved by Agent) satisfactory to Agent. All proceeds under
      each policy shall be payable to Agent. From time to time upon request, Grantor
      shall deliver to Agent the originals or certified copies of its insurance
      policies and updated flood plain searches. Unless Grantor shall agree otherwise,
      each policy shall include satisfactory endorsements (i) showing Agent as sole
      loss payee or additional insured, as appropriate; (ii) requiring 30 days prior
      written notice to Agent in the event of cancellation of the policy for any
      reason whatsoever; and (iii) specifying that the interest of Agent shall not
      be
      impaired or invalidated by any act or neglect of Grantor or the owner of the
      Property, nor by the occupation of the premises for purposes more hazardous
      than
      are permitted by the policy. If Grantor fails to provide and pay for any
      insurance, Agent may, at its option, but shall not be required to, procure
      the
      insurance and charge Grantor therefor. Grantor agrees to deliver to Agent,
      promptly as rendered, copies of all reports made to insurance companies. While
      no Event of Default exists, Grantor may settle, adjust or compromise any
      insurance claim, as long as the proceeds are delivered to Agent. If an Event
      of
      Default exists, only Agent shall be authorized to settle, adjust and compromise
      such claims.


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    (b) Any
      proceeds of insurance (other than proceeds from workers’ compensation or D&O
      insurance) and any awards arising from condemnation of any Collateral shall
      be
      paid to Agent for application to the Secured Obligations in accordance with
      the
      Loan Agreement.

     

    (c) If
      requested by Grantor in writing within 15 days after Agent’s receipt of any
      insurance proceeds or condemnation awards relating to any loss or destruction
      of
      Collateral, such proceeds will be returned to Grantor as long as no Default
      or
      Event of Default exists or would result therefrom.

     

    3.5.3.
      Protection
      of Collateral.
      All
      expenses of protecting, storing, warehousing, insuring, handling, maintaining
      and shipping any Collateral, all Taxes payable with respect to any Collateral
      (including any sale thereof), and all other payments required to be made by
      Agent to any Person to realize upon any Collateral, shall be borne and paid
      by
      Grantor. Agent shall not be liable or responsible in any way for the safekeeping
      of any Collateral, for any loss or damage thereto (except for reasonable care
      in
      its custody while Collateral is in Agent’s actual possession), for any
      diminution in the value thereof, or for any act or default of any warehouseman,
      carrier, forwarding agency or other Person whatsoever, but the same shall be
      at
      Grantor’s sole risk.

     

    3.5.4.
      Defense
      of Title to Collateral.
      Grantor
      shall at all times defend its title to Collateral and Agent’s Liens therein
      against all Persons, claims and demands whatsoever, except Permitted
      Liens.

     

    3.6.
      Power
      of Attorney.
      Grantor
      hereby irrevocably constitutes and appoints Agent (and all Persons designated
      by
      Agent) as Grantor’s true and lawful attorney (and agent-in-fact) for the
      purposes provided in this Section 3.6. Agent, or Agent’s designee, may,
      without notice and in either its or Grantor’s name, but at the cost and expense
      of Grantor:

     

    (a) Endorse
      Grantor’s name on any Payment Item or other proceeds of Collateral (including
      proceeds of insurance) that come into Agent’s possession or control;
      and

     

    (b) During
      the continuation of an Event of Default, (i) notify any Account Debtors of
      the
      assignment of their Accounts, demand and enforce payment of Accounts, by legal
      proceedings or otherwise, and generally exercise any rights and remedies with
      respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or
      release any Accounts or other Collateral, or any legal proceedings brought
      to
      collect Accounts or Collateral; (iii) sell or assign any Accounts and other
      Collateral upon such terms, for such amounts and at such times as Agent deems
      advisable; (iv) take control, in any manner, of any proceeds of Collateral;
      (v)
      prepare, file and sign Grantor’s name to a proof of claim or other document in a
      bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction
      of
      Lien or similar document; (vi) receive, open and dispose of mail addressed
      to
      Grantor, and notify postal authorities to change the address for delivery
      thereof to such address as Agent may designate; (vii) endorse any Chattel Paper,
      Document, Instrument, invoice, freight bill, bill of lading, or similar document
      or agreement relating to any Accounts, Inventory or other Collateral; (viii)
      use
      Grantor’s stationery and sign its name to verifications of Accounts and notices
      to Account Debtors; (ix) use the information recorded on or contained in any
      data processing equipment and computer hardware and software relating to any
      Collateral; (x) make and adjust claims under policies of insurance; (xi) take
      any proper action as may be necessary or appropriate to obtain payment under
      any
      letter of credit or banker’s acceptance for which Grantor is a beneficiary; and
      (xii) take all other actions as Agent deems appropriate to fulfill Grantor’s
      obligations under the Loan Documents.


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


    SECTION
      4. REPRESENTATIONS
      AND WARRANTIES

     

    4.1.
      General
      Representations and Warranties. To induce Agent to enter into the Loan
      Agreement and the other Loan Documents, Grantor represents and warrants
      that:

     

    4.1.1.
      Corporate
      Names; Locations.
      During
      the five years preceding the Closing Date, except as shown on the schedules
      to
      the Loan Agreement, Grantor has not been known as or used any corporate,
      fictitious or trade names, has been the surviving corporation of a merger or
      combination, or has acquired any substantial part of the assets of any Person.
      The chief executive offices and other places of business of Grantor are shown
      on
      the schedules to the Loan Agreement. During the five years preceding the Closing
      Date, Grantor has not had any other office or place of business, except as
      shown
      on the schedules to the Loan Agreement.

     

    4.1.2.
      Title
      to Properties; Priority of Liens.
      Grantor
      has good and marketable title to (or valid leasehold interests in) all of its
      Real Estate, and good title to all of its personal Property, including all
      Property reflected in any financial statements delivered to Agent or Lenders,
      in
      each case free of Liens except Permitted Liens. Grantor has paid and discharged
      all lawful claims that, if unpaid, could become a Lien on its Properties, other
      than Permitted Liens. All Liens of Agent in the Collateral are duly perfected,
      first priority Liens, subject only to Permitted Liens that are expressly allowed
      to have priority over Agent’s Liens.

     

    4.1.3.
      Representations
      and Warranties in Loan Agreement Incorporated. Without limiting any of the
      foregoing representations and warranties, Grantor represents and warrants that
      each of the representations and warranties set forth in the Loan Agreement
      to
      the extent applicable to Grantor are true, correct and complete as
      written.

     

    4.2.
      Complete
      Disclosure. No Loan Document contains any untrue statement of a material
      fact regarding Grantor or its properties, nor fails to disclose any material
      fact regarding Grantor or its properties necessary to make the statements
      contained therein not materially misleading. There is no fact or circumstance
      that Grantor has failed to disclose to Agent in writing that could reasonably
      be
      expected to have a Material Adverse Effect.

     

    SECTION
      5. COVENANTS

     

    5.1.
      Affirmative
      Covenants.
      Until
      the Full Payment of all Secured Obligations, Grantor shall:

     

    5.1.1.
      Inspections;
      Appraisals.
      Permit
      Agent from time to time, subject (except when a Default or Event of Default
      exists) to reasonable notice and normal business hours, to visit and inspect
      the
      Properties of Grantor, inspect, audit and make extracts from Grantor’s books and
      records, and discuss with its officers, employees, agents, advisors and
      independent accountants Grantor’s or its Subsidiary’s business, financial
      condition, assets, prospects and results of operations. Lenders may participate
      in any such visit or inspection, at their own expense. Neither Agent nor any
      Lender shall have any duty to Grantor or any other Obligated Party to make
      any
      inspection, nor to share any results of any inspection, appraisal or report
      with
      Grantor or any other Obligated Party. Grantor acknowledges that all inspections,
      appraisals and reports are prepared by Agent and Lenders for their purposes,
      and
      Grantor shall not be entitled to rely upon them.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    5.1.2.
      Landlord
      and Storage Agreements.
      Upon
      request, provide Agent with copies of all existing agreements, and promptly
      after execution thereof provide Agent with copies of all future agreements,
      between Grantor and any landlord, warehouseman, processor, shipper, bailee
      or
      other Person that owns any premises at which any Collateral may be kept or
      that
      otherwise may possess or handle any Collateral.

     

    5.1.3.
      Licenses.
      Keep
      each
      License affecting any Collateral (including the manufacture, distribution or
      disposition of Inventory) or any other material Property of Grantor and
      Grantor’s Subsidiaries in full force and effect; promptly notify Agent of any
      proposed modification to any such License, or entry into any new License, in
      each case at least 30 days prior to its effective date; pay all Royalties when
      due; and notify Agent of any default or breach asserted by any Person to have
      occurred under any License.

     

    5.1.4.
      Negative
      Covenants.
      Until
      the Full Payment of all Secured Obligations, Grantor shall not, and shall cause
      each Subsidiary of Grantor not to:

     

    5.1.5.
      Permitted
      Liens.
      Create
      or suffer to exist any Lien upon any of its Property, except Permitted
      Liens.

     

    5.1.6.
      Negative
      Covenants in Loan Agreement Incorporated. Without limiting the foregoing,
      Grantor agrees to refrain from taking any action that it has agreed not to
      take
      or that Borrower has agreed not to permit Grantor to take pursuant to the terms
      of the Loan Agreement.

     

    SECTION
      6. EVENTS
      OF
      DEFAULT; REMEDIES ON DEFAULT

     

    6.1.
      Events
      of Default. Any “Event of Default” as defined in the Loan Agreement shall be
      an “Event
      of Default”
      hereunder.

     

    6.2.
      Remedies
      upon Default. If an Event of Default described in Section 11.1(j) of the
      Loan Agreement occurs with respect to Grantor, then to the extent permitted
      by
      Applicable Law, all Secured Obligations shall become automatically due and
      payable by Grantor, without any action by Agent or notice of any kind. In
      addition, or if any other Event of Default has occurred and is continuing,
      Agent
      may in its discretion (and shall upon written direction of Required Lenders)
      do
      any one or more of the following from time to time:

     

    (a) declare
      any Secured Obligations immediately due and payable, whereupon they shall be
      due
      and payable without diligence, presentment, demand, protest or notice of any
      kind, including notice of intent to accelerate and notice of acceleration,
      all
      of which are hereby waived by Grantor to the fullest extent permitted by
      law;

     

    (b) exercise
      any default rights or remedies afforded under the Loan Agreement, any other
      Loan
      Document, or any other agreement, by law, at equity or otherwise, including
      the
      rights and remedies of a secured party under the UCC. Such rights and remedies
      include the rights to (i) take possession of any Collateral; (ii) require
      Grantor to assemble Collateral, at Grantor’s expense, and make it available to
      Agent at a place designated by Agent; (iii) enter any premises where Collateral
      is located and store Collateral on such premises until sold (and if the premises
      are owned or leased by Grantor, Grantor agrees not to charge for such storage);
      and (iv) sell or otherwise dispose of any Collateral in its then condition,
      or
      after any further manufacturing or processing thereof, at public or private
      sale, with such notice as may be required by Applicable Law, in lots or in
      bulk,
      at such locations, all as Agent, in its discretion, deems advisable. Grantor
      agrees that 10 days notice of any proposed sale or other disposition of
      Collateral by Agent shall be reasonable. Agent shall have the right to conduct
      such sales on Grantor’s premises, without charge, and such sales may be
      adjourned from time to time in accordance with Applicable Law. Agent shall
      have
      the right to sell, lease or otherwise dispose of any Collateral for cash, credit
      or any combination thereof, and Agent may purchase any Collateral at public
      or,
      if permitted by law, private sale and, in lieu of actual payment of the purchase
      price, may set off the amount of such price against the Secured
      Obligations.


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    6.3.
      License.
      Agent
      is hereby granted an irrevocable, non-exclusive license or other right to use,
      license or sub-license (without payment of royalty or other compensation to
      any
      Person) any or all Intellectual Property of Grantor, computer hardware and
      software, trade secrets, brochures, customer lists, promotional and advertising
      materials, labels, packaging materials and other Property, in advertising for
      sale, marketing, selling, collecting, completing manufacture of, or otherwise
      exercising any rights or remedies with respect to, any Collateral. Grantor’s
      rights and interests under Intellectual Property shall inure to Agent’s
      benefit.

     

    6.4.
      Setoff.
      At any
      time during an Event of Default, Agent, Issuing Bank, Lenders, and any of their
      Affiliates are authorized, to the fullest extent permitted by Applicable Law,
      to
      set off and apply any and all deposits (general or special, time or demand,
      provisional or final, in whatever currency) at any time held and other
      obligations (in whatever currency) at any time owing by Agent, Issuing Bank,
      such Lender or such Affiliate to or for the credit or the account of Grantor
      against any Secured Obligations, irrespective of whether or not Agent, Issuing
      Bank, such Lender or such Affiliate shall have made any demand under this
      Agreement or any other Loan Document and although such Secured Obligations
      may
      be contingent or unmatured or are owed to a branch or office of Agent, Issuing
      Bank, such Lender or such Affiliate different from the branch or office holding
      such deposit or obligated on such indebtedness. The rights of Agent, Issuing
      Bank, each Lender and each such Affiliate under this Section 6.4 are in
      addition to other rights and remedies (including other rights of setoff) that
      such Person may have.

     

    6.5.
      Remedies
      Cumulative; No Waiver.

     

    6.5.1.
      Cumulative
      Rights. All covenants, conditions, provisions, warranties, guaranties,
      indemnities and other undertakings of Borrower, Grantor and each other Obligated
      Party contained in the Loan Documents are cumulative and not in derogation
      or
      substitution of each other. In particular, the rights and remedies of Agent
      and
      Lenders are cumulative, may be exercised at any time and from time to time,
      concurrently or in any order, and shall not be exclusive of any other rights
      or
      remedies that Agent and Lenders may have, whether under any agreement, by law,
      at equity or otherwise.

     

    6.5.2.
      Waivers.
      The failure or delay of Agent or any Lender to require strict performance by
      Grantor with any terms of the Loan Documents, or to exercise any rights or
      remedies with respect to Collateral or otherwise, shall not operate as a waiver
      thereof nor as establishment of a course of dealing. All rights and remedies
      shall continue in full force and effect until Full Payment of all Secured
      Obligations. No modification of any terms of any Loan Documents (including
      any
      waiver thereof) shall be effective, unless such modification is specifically
      provided in a writing directed to Grantor and executed by Agent or the requisite
      Lenders, and such modification shall be applicable only to the matter specified.
      No waiver of any Default or Event of Default shall constitute a waiver of any
      other Default or Event of Default that may exist at such time, unless expressly
      stated. If Agent or any Lender accepts performance by Grantor under any Loan
      Documents in a manner other than that specified therein, or during any Default
      or Event of Default, or if Agent or any Lender shall delay or exercise any
      right
      or remedy under any Loan Documents, such acceptance, delay or exercise shall
      not
      operate to waive any Default or Event of Default nor to preclude exercise of
      any
      other right or remedy.


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    SECTION
      7. MISCELLANEOUS

     

    7.1.
      Successors
      and Assigns. This Agreement shall be binding upon and inure to the benefit
      of Grantor and Agent and their respective successors and assigns, except that
      Grantor shall not have the right to assign its rights or delegate its
      obligations under any Loan Documents. 

     

    7.2.
      Amendments.
      No modification of this Agreement shall be effective without the prior written
      agreement of Agent and Grantor.

     

    7.3.
      Indemnity.
      GRANTOR
      SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY
      BE
      INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ARISING FROM
      THE NEGLIGENCE OF AN INDEMNITEE.
      In no
      event shall Grantor have any obligation hereunder to indemnify or hold harmless
      an Indemnitee with respect to a Claim that is determined in a final,
      non-appealable judgment by a court of competent jurisdiction to result from
      the
      gross negligence or willful misconduct of such Indemnitee.

     

    7.4.
      Notices
      and Communications. All notices and other communications by or to a party
      hereto shall be in writing and shall be given to Grantor, at Borrower’s address
      shown on the signature pages to the Loan Agreement, and to Agent at its address
      shown on the signature pages to the Loan Agreement, or at such other address
      as
      such party may hereafter specify by notice in accordance with this Section
      7.4. Each such notice or other communication shall be effective only (a) if
      given by facsimile transmission, when transmitted to the applicable facsimile
      number, if confirmation of receipt is received; (b) if given by mail, three
      Business Days after deposit in the U.S. mail, with first-class postage pre-paid,
      addressed to the applicable address; or (c) if given by personal delivery,
      when
      duly delivered to the notice address with receipt acknowledged. Any written
      notice or other communication that is not sent in conformity with the foregoing
      provisions shall nevertheless be effective on the date actually received by
      the
      noticed party. Any notice received by Borrower shall be deemed received by
      Grantor. Electronic and voice mail may not be used as effective notice
      hereunder.

     

    7.5.
      Performance
      of Secured Obligations. Agent may, in its discretion at any time and from
      time to time, at Grantor’s expense, pay any amount or do any act required of
      Grantor hereunder or otherwise lawfully requested by Agent to (a) enforce any
      Loan Documents or collect any Secured Obligations; (b) protect, insure, maintain
      or realize upon any Collateral; or (c) defend or maintain the validity or
      priority of Agent’s Liens in any Collateral, including any payment of a
      judgment, insurance premium, warehouse charge, finishing or processing charge,
      or landlord claim, or any discharge of a Lien. All payments, costs and expenses
      (including Extraordinary Expenses) of Agent under this Section 7.5 shall
      be reimbursed to Agent by Grantor, on demand, with interest from the date
      incurred to the date of payment thereof at the Default Rate applicable to Base
      Rate Revolver Loans. Any payment made or action taken by Agent under this
Section 7.5 shall be without prejudice to any right to assert an Event of
      Default or to exercise any other rights or remedies under the Loan
      Documents.

     

    7.6.
      Severability.
      Wherever possible, each provision of hereof shall be interpreted in such manner
      as to be valid under Applicable Law. If any provision is found to be invalid
      under Applicable Law, it shall be ineffective only to the extent of such
      invalidity and the remaining provisions hereof shall remain in full force and
      effect.


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    7.7.
      Cumulative
      Effect; Conflict of Terms.
      The
      provisions of this Agreement and the other the Loan Documents are cumulative.
      The parties acknowledge that the Loan Documents may use several limitations,
      tests or measurements to regulate similar matters, and they agree that these
      are
      cumulative and that each must be performed as provided. Except as otherwise
      provided in another Loan Document (by specific reference to the applicable
      provision of this Agreement), if any provision contained herein is in direct
      conflict with any provision in another Loan Document, the provision herein
      shall
      govern and control.

     

    7.8.
      Counterparts.
      This
      Agreement may be executed in counterparts, each of which shall constitute an
      original, but all of which when taken together shall constitute a single
      contract. This Agreement shall become effective when Agent has received
      counterparts bearing the signatures of all parties hereto. Delivery of a
      signature page of any Loan Document by telecopy shall be effective as delivery
      of a manually executed counterpart of such agreement.

     

    7.9.
      Entire
      Agreement.
      Time
      is
      of the essence of the Loan Documents. The Loan Documents constitute the entire
      contract among the parties relating to the subject matter hereof, and supersede
      any and all previous agreements and understandings, oral or written, relating
      to
      the subject matter hereof.

     

    7.10.
      GOVERNING
      LAW.
      THIS
      AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
      GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL
      LAWS RELATING TO NATIONAL BANKS).

     

    7.11.
      Consent
      to Forum; Arbitration.
      

     

    7.11.1.Forum.
      GRANTOR
      HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT
      SITTING IN OR WITH JURISDICTION OVER LOS ANGELES, CALIFORNIA, IN ANY PROCEEDING
      OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH
      PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. GRANTOR IRREVOCABLY
      WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH
      COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.
      EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
      PROVIDED FOR NOTICES IN SECTION 7.4.
      Nothing
      herein shall limit the right of Agent or any Lender to bring proceedings against
      Grantor in any other court, nor limit the right of any party to serve process
      in
      any other manner permitted by Applicable Law. Nothing in this Agreement shall
      be
      deemed to preclude enforcement by Agent of any judgment or order obtained in
      any
      forum or jurisdiction.


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    7.11.2.
      Arbitration.
      Notwithstanding any other provision of this Agreement to the contrary, any
      controversy or claim among the parties relating in any way to any Secured
      Obligations or Loan Documents, including any alleged tort, shall at the request
      of any party hereto be determined by binding arbitration conducted in accordance
      with the United States Arbitration Act (Title 9 U.S. Code). Arbitration
      proceedings will be determined in accordance with the Act, the then-current
      rules and procedures for the arbitration of financial services disputes of
      the
      American Arbitration Association (“AAA”),
      and
      the terms of this Section 7.11.2. In the event of any inconsistency, the
      terms of this Section 7.11.2 shall control. If AAA is unwilling or unable
      to serve as the provider of arbitration or to enforce any provision of this
      Section 7.11.2, Agent may designate another arbitration organization with
      similar procedures to serve as the provider of arbitration. The arbitration
      proceedings shall be conducted in Los Angeles or Pasadena, California. The
      arbitration hearing shall commence within 90 days of the arbitration demand
      and
      close within 90 days thereafter. The arbitration award must be issued within
      30
      days after close of the hearing (subject to extension by the arbitrator for
      up
      to 60 days upon a showing of good cause), and shall include a concise written
      statement of reasons for the award. The arbitrator shall give effect to
      applicable statutes of limitation in determining any controversy or claim,
      and
      for these purposes, service on AAA under applicable AAA rules of a notice of
      claim is the equivalent of the filing of a lawsuit. Any dispute concerning
      this
Section 7.11.2 or whether a controversy or claim is arbitrable shall be
      determined by the arbitrator. The arbitrator shall have the power to award
      legal
      fees to the extent provided by this Agreement. Judgment upon an arbitration
      award may be entered in any court having jurisdiction. The institution and
      maintenance of an action for judicial relief or pursuant to a provisional or
      ancillary remedy shall not constitute a waiver of the right of any party,
      including the plaintiff, to submit the controversy or claim to arbitration
      if
      any other party contests such action for judicial relief. No controversy or
      claim shall be submitted to arbitration without the consent of all parties
      if,
      at the time of the proposed submission, such controversy or claim relates to
      an
      obligation secured by Real Estate, but if all parties do not consent to
      submission of such a controversy or claim to arbitration, it shall be determined
      as provided in the next sentence. At the request of any party, a controversy
      or
      claim that is not submitted to arbitration as provided above shall be determined
      by judicial reference; and if such an election is made, the parties shall
      designate to the court a referee or referees selected under the auspices of
      the
      AAA in the same manner as arbitrators are selected in AAA sponsored proceedings
      and the presiding referee of the panel (or the referee if there is a single
      referee) shall be an active attorney or retired judge; and judgment upon the
      award rendered by such referee or referees shall be entered in the court in
      which proceeding was commenced. None of the foregoing provisions of this
Section 7.11.2 shall limit the right of Agent or Lenders to exercise
      self-help remedies, such as setoff, foreclosure or sale of any Collateral or
      to
      obtain provisional or ancillary remedies from a court of competent jurisdiction
      before, after or during any arbitration proceeding. The exercise of a remedy
      does not waive the right of any party to resort to arbitration or reference.
      At
      Agent’s option, foreclosure under a Mortgage may be accomplished either by
      exercise of power of sale thereunder or by judicial foreclosure.

     

    7.12.
      Waivers
      by Grantor. TO
      THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, GRANTOR WAIVES (A) THE RIGHT
      TO
      TRIAL BY JURY (WHICH AGENT AND EACH LENDER HEREBY ALSO WAIVES) IN ANY PROCEEDING
      OR DISPUTE OF ANY KIND RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, SECURED
      OBLIGATIONS OR COLLATERAL; (B) PRESENTMENT, DEMAND, PROTEST, NOTICE OF
      PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
      EXTENSION OR RENEWAL OF ANY COMMERCIAL PAPER, ACCOUNTS, DOCUMENTS, INSTRUMENTS,
      CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT ON WHICH GRANTOR MAY
      IN
      ANY WAY BE LIABLE, AND HEREBY RATIFIES ANYTHING AGENT MAY DO IN THIS REGARD;
      (C) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF ANY COLLATERAL;
      (D) ANY BOND OR SECURITY THAT MIGHT BE REQUIRED BY A COURT PRIOR TO
      ALLOWING AGENT TO EXERCISE ANY RIGHTS OR REMEDIES; (E) THE BENEFIT OF ALL
      VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (F) ANY CLAIM AGAINST AGENT OR
      ANY
      LENDER, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL,
      EXEMPLARY OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) IN ANY
      WAY RELATING TO ANY ENFORCEMENT ACTION, SECURED OBLIGATIONS, LOAN DOCUMENTS
      OR
      TRANSACTIONS RELATING THERETO; AND (G) NOTICE OF ACCEPTANCE
      HEREOF.
      Grantor
      acknowledges that the foregoing waivers are a material inducement to Agent
      and
      Lenders entering into the Loan Agreement and that Agent and Lenders are relying
      upon the foregoing in their dealings with Grantor. Grantor has reviewed the
      foregoing waivers with its legal counsel and has knowingly and voluntarily
      waived its jury trial and other rights following consultation with legal
      counsel. In the event of litigation, this Agreement may be filed as a written
      consent to a trial by the court.


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    7.13.
      Advice
      of Counsel.
      Grantor
      acknowledges that it has either obtained the advice of counsel or has had the
      opportunity to obtain such advice in connection with the terms and provisions
      of
      this Continuing Guaranty.

     

    [Remainder
      of page intentionally left blank; signatures begin on following
      page]

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, this Agreement has been executed and delivered as of the date
      set forth above.

     

    
      	
              GRANTOR:

            
	 	 
	
              SPORT
                CHALET VALUE SERVICES, LLC,

            
	
              a
                Virginia limited liability company

            
	 	 
	
              By:
                

            	
              /s/
                Howard Kaminsky  

            
	
              Name:

            	
              Howard
                Kaminsky

            
	
              Title:
                

            	
              Manager
                

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    
      	
              AGENT:

            
	 	 
	
              BANK
                OF AMERICA, N.A.,

            
	
              as
                Agent

            
	 	 
	
              By:

            	
              /s/
                Stephen King  

            
	
              Name:

            	
              Stephen
                J. King

            
	
              Title:
                

            	
              Vice
                President