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                                   CREDIT AGREEMENT


     THIS CREDIT AGREEMENT is dated as of the 21st day of November, 1996, and
is by and among ULTIMATE ELECTRONICS, INC., a Delaware corporation (the
"Borrower").  NORWEST BANK COLORADO, NATIONAL ASSOCIATION (the "Lender") and
NORWEST BUSINESS CREDIT, INC. as administrative agent for the Lender
("Administrative Agent").

                                       RECITALS

     The Borrower, the Lender and First Security National Bank of Utah,  N.A.
("First Security") are parties to a Credit Agreement dated as of July 24, 1995,
pursuant to which the Lender and First Security agreed to make loans and other
financial accommodations available to the Borrower (the "Original Credit
Agreement").

     The parties hereto and First Security have agreed to terminate the Original
Credit Agreement and the Lender has agreed to redocument the credit facilities
provided by the Original Credit Agreement in the name of the Lender with the
Administrative Agent,  First Security and, possibly, other lenders purchasing
participations in the loans and other financial accommodations provided by the
Lender.

     NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, the parties agree as follows:

                                      ARTICLE I

                                     DEFINITIONS

     Section 1.1.  DEFINITIONS.  The following terms, as used herein, shall 
have the following meanings:

          "Acceptable Facility" means a distribution facility or retail store 
     (a) either (i) owned by the Borrower or (ii) leased by the Borrower 
     subject to a lease acceptable to the Administrative Agent pursuant to 
     which the landlord under such lease has executed a landlord's waiver 
     acceptable to the Administrative Agent, and (b) identified in the 
     Security Agreement as a location at which Inventory will be located or 
     otherwise identified in writing by the Borrower to the Administrative 
     Agent as a location at which Inventory will be located.

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          "Acceptable Inventory" means consumer electronics products held for 
     sale, net of any unearned vendors' discounts (a) in which the Lender has 
     a valid perfected first priority security interest, (b) which are 
     located in an Acceptable Facility and (c) which are subject to no other 
     lien, encumbrance or security interest.  Without limiting the foregoing, 
     the following shall not be Acceptable Inventory:

                   (1)  Supplies and packaging inventory;

                   (2)  Inventory that is damaged, defective, obsolete or not
              currently saleable in the normal course of the Borrower's
              operations.

                   (3)  Inventory that the Borrower has returned, has attempted
              to return, is in the process of returning or intends to return to
              the vendor thereof, including, without limitation, factory
              returns:

                   (4)  Inventory in an amount equal to the Borrower's invoice
              variance reserves;

                   (5)  Discontinued inventory in an amount in excess of 12% of 
              total Inventory (determined after deducting unearned vendors' 
              discounts);

                   (6)  Free goods;

                   (7)  That portion of the Borrower's aggregate service and
              parts Inventory, and Inventory consisting of cellular phones,
              promotional items, custom items and third party warranties which,
              in the aggregate, exceeds 12% of total Inventory (determined
              after deducting unearned vendors' discounts); and

                   (8)  Inventory otherwise deemed ineligible by the
              Administrative Agent in its sole discretion; provided, however,
              that unless an Event of Default or event that with notice or the
              passage of time would constitute an Event of Default then exists,
              the Administrative Agent will give Borrower (20) days' notice of
              any change in the types or amount of Inventory which shall be
              Acceptable Inventory and shall base any such change on the
              Administrative Agent's good faith judgment as to the liquidation
              value of such Inventory.

          "Accommodation Obligation" means as applied to any Person, any 
     obligation of such Person guaranteeing or intended to guarantee any 
     Indebtedness, leases, dividends or other obligations ("primary 
     obligations") or to hold harmless the owner of such primary obligation 
     against loss in respect thereof.  The amount of any Accommodation 
     Obligation shall be deemed to be an amount equal to the stated or 
     determinable amount of the primary obligation in respect of which such 
     Accommodation Obligation is made

                                        2

<PAGE>

     or, if not stated or determinable, the maximum anticipated liability in 
     respect thereof (assuming such Person is required to perform thereunder) 
     as determined by the Administrative Agent.

          "Administrative Agent" means Norwest Business Credit, Inc. in its 
     capacity as administrative agent for the Lender hereunder.

          "Advance" means an advance by the Lender to the Borrower pursuant 
     to Section 2 or any advance to fund any draw on any Letter of Credit.

          "Agreement" shall mean this Credit Agreement and all amendments, 
     restatements, modification and supplements hereto which may from time to 
     time become effective hereafter in accordance with the terms hereof.

          "Base Rate" shall have the meaning set forth in the Note.

          "Base Rate Advance" shall mean an Advance which initially bears 
     interest at the Base Rate.

          "Bond Indebtedness" means Indebtedness not in excess of $13,000,000 
     incurred in connection with Borrower's issuance of $13,000,000 of first 
     mortgage bonds due January 31, 2005.

          "Borrowing Base" shall mean, and at any time and subject to change 
     from time to time in the Administrative Agent's sole discretion, 70% of 
     the value of the Acceptable Inventory determined in accordance with GAAP 
     on a basis consistent with accounting practices used in the financial 
     statements of the Borrower referred to in Section 5.8 hereof, subject to 
     audit, review and adjustment based thereon by the Administrative Agent, 
     provided, however, that unless an Event of Default or event that with 
     notice or the passage of time would constitute an Event of Default then 
     exists, the Administrative Agent will give Borrower (20) days' notice of 
     any change in the method of calculation of the Borrowing Base, and will 
     base any reduction in the percentage of Acceptable Inventory used in 
     determining the Borrowing Base on the Administrative Agent's good faith 
     judgment as to the liquidation value of such Acceptable Inventory.

          "Borrowing Base Certificate" shall mean a schedule of the 
     Borrower's Acceptable Inventory, which shall be executed by an 
     authorized officer of the Borrower, the form of which is attached hereto 
     as Exhibit A.

          "Business Day" shall have the same meaning set forth in the Note.

                                       3

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           "Code" shall mean the Internal Revenue Code of 1986, as amended, 
     or any successor statute, and the regulations promulgated thereunder and 
     the rulings issued thereunder, as amended from time to time.

           "Collateral" shall have the meaning set forth in the Security 
     Agreement.

           "Collateral Account" shall have the meaning set forth in Section 
     4.l(a)(iii).

           "Collateral Account Agreement" shall have the meaning set forth in 
     Section 4.1(a)(iii).

           "Commitment" shall mean $35,000,000.

           "Default Rate" shall have the meaning set forth in the Note.

           "EBITDA" means earnings from continuing operations before interest 
     expense, taxes, amortization and depreciation expense and any 
     miscellaneous and/or extraordinary gains and losses for the Borrower 
     calculated in accordance with GAAP, and in each case, on the basis of 
     the four fiscal quarters immediately preceding the date of calculation.

           "ERISA" shall mean the Employee Retirement Income Security Act of 
     1974, as amended, or any successor statute and the regulations 
     promulgated and rulings issued thereunder, as amended from time to time.

           "ERISA Affiliate" shall mean any trade or business (whether or not 
     incorporated) which is a member of a controlled or affiliated group of 
     which the Borrower or any Subsidiary of the Borrower is a member and 
     which is under common control, or required to be aggregated with, with 
     the Borrower or any Subsidiary of the Borrower within the meaning of 
     Section 414(b), (c), (m), or (o) of the Code.

           "ERISA Event" shall mean (a) a "reportable event" as such term is 
     described in Section 4043 of ERISA (other than a "reportable event" not 
     subject to the provision for 30-day notice to the PBGC under 29 C.F.R. 
     2615) with respect to any Plan or (b) the withdrawal of the Borrower, 
     any Subsidiary of the Borrower or any ERISA Affiliate of either of them 
     from a Plan subject to Section 4063 of ERISA during a plan year in which 
     it was a "substantial employer," as such term is defined in Section 
     4001(a)(2) of ERISA, or the incurrence of liability by the Borrower, any 
     Subsidiary of the Borrower or any ERISA Affiliate of either of them 
     under Section 4064 of ERISA upon the termination of a Multiple Employer 
     Plan, or (c) an event described in Section 4068(a) of ERISA, or (d) the 
     filing of a notice of intent to terminate a Plan pursuant to Section 
     4041 or 4041A of ERISA, the treatment of a Plan amendment as a 
     termination under Section 4041 of

                                       4

<PAGE>

     ERISA or (e) the failure by the Borrower, a Subsidiary of the Borrower 
     or any ERISA Affiliate of either of them to make a payment to a Plan 
     pursuant to Section 302(f)(1) of ERISA or (f) the adoption of any 
     amendment to a Plan requiring the provision of security, to such Plan 
     pursuant to Section 307 of ERISA, or (g) the imposition of any liability 
     under Title IV of ERISA, other than PBGC premiums due but not delinquent 
     under Section 4007 of ERISA, upon the Borrower, any Subsidiary of the 
     Borrower, or any ERISA Affiliate of either of them, or (h) any other 
     event or condition which might constitute grounds under Section 4042 of 
     ERISA for the termination of, or the appointment of a trustee to 
     administer, any Plan, or (i) an application for a funding waiver or an 
     extension of any amortization period pursuant to Section 412 of the Code 
     with respect to any Plan, or (j) a nonexempt prohibited transaction that 
     occurs with respect to any Plan for which the Borrower or any Subsidiary 
     of the Borrower may be directly or indirectly liable.

          "Events of Default" shall mean any and all events of default 
     described in Section 7 hereof.

          "Financial Covenants" means the covenants of the Borrower set forth 
     in Section 6.13 of this Agreement.

          "Funded Indebtedness" means all Indebtedness of the Borrower other 
     than Manufacturer Payables and trade payables and accrued expenses 
     incurred in the ordinary course of business.

          "Indebtedness" of any Person means, without duplication (a) 
     indebtedness of such Person for borrowed money or for the deferred 
     purchase price of property or services, (b) the principal portion of 
     obligations of such Person as lessee under leases which have been or 
     should be, in accordance with GAAP, recorded as capital leases, (c) all 
     Accommodation Obligations of such Person in respect of borrowed money, 
     (d) at the date of such determination thereof the aggregate amount which 
     may then be drawn under, plus the aggregate amount of all unreimbursed 
     drawings in respect of, letters of credit issued for the account of such 
     Person, and (e) all indebtedness, obligations or other liabilities of 
     such Person or of others for borrowed money secured by a lien on any 
     property of such Person, whether or not such indebtedness, obligations 
     or liabilities are assumed by such Person.

           "Inventory" shall have the meaning set forth in the Security 
     Agreement.

           "Insufficiency" means, with respect to any Plan, the excess of its 
     benefit liabilities, as defined in Section 4001(a)(16) of ERISA over the 
     current value of such Plan's assets, determined in accordance with the 
     assumptions used by the Plan's actuaries for funding the Plan pursuant 
     to Section 412 of the Code for the applicable plan year.

                                       5

<PAGE>

           "Lender" shall mean Norwest Bank Colorado, National Association.

           "Letter of Credit Application" means the form of an application 
     for a Letter of Credit which shall be the form of application then 
     generally used by the Lender, or, if Norwest Minnesota is to issue the 
     Letter of Credit, Norwest Minnesota.

           "Letter of Credit Liability" means, without duplication (a) the 
     maximum amount available to be drawn under all outstanding Letters of 
     Credit (converted to U.S. Dollars based on the exchange rate generally 
     offered by the Lender at the time Letter of Credit Liability is 
     determined), PLUS (b) the maximum face amount of any Letters of Credit 
     that the Lender has committed in writing to issue or to cause to be 
     issued on behalf of the Borrower (even if such commitment is conditioned 
     or otherwise qualified).

           "Letters of Credit" means collectively all Letters of Credit 
     issued pursuant to the terms of this Agreement.

           "LIBOR Rate" shall have the meaning set forth in the Note.

           "LIBOR Rate Advance" means an Advance which initially bears 
     interest at the LIBOR Rate.

           "Loan" means the loan made by the Lender to the Borrower pursuant 
     to this Agreement consisting of all Advances hereunder and all other 
     amounts advanced pursuant hereto.

           "Loan Documents" means this Agreement, the Note, the Security 
     Agreement, the Collateral Account Agreement, and any and all other 
     documents, instruments or agreements evidencing, governing, securing or 
     otherwise relating to the Loan, as any such document may be amended, 
     extended, renewed, restated or modified at any time or from time to 
     time, and "Loan Document" means any one of the foregoing.

           "Loan Expenses" means all charges, costs, fees and expenses of any 
     nature whatsoever of or incurred by either or both of the Lender and the 
     Administrative Agent at any time in connection with the making, 
     administration, modification, amendment, repayment or enforcement of the 
     Loan or the Loan Documents, all recording and filing fees, charges and 
     taxes, collateral audit fees, document preparation fees, reasonable fees 
     and disbursements of attorneys acting jointly for the Lender and the 
     Administrative Agent and their staff (including allocated costs of 
     in-house counsel), search fees, and credit reporting and investigation 
     fees.

           "Manufacturer Payables" means Indebtedness of the Borrower to the 
     manufacturers, suppliers, providers, vendors or distributors of the 
     Borrower's Inventory

                                       6

<PAGE>

     incurred by Borrower for the acquisition of such Inventory, which 
     Indebtedness is not secured by any lien, security interest or 
     encumbrance.

           "Material Inventory Supplier" means any supplier, provider, 
     manufacturer, vendor or distributor of Borrower's Inventory from whom 
     Borrower purchases, directly or indirectly, one and one-half percent
     (1 1/2%) or more of the total Inventory purchased by Borrower.

           "Maximum Loan Amount" means, at any given time, an amount equal to 
     (a) the lesser of (i) the Commitment or (ii) the Borrowing Base, minus 
     (b) the Letter of Credit Liability.

           "Maturity Date" shall mean the earlier of the date on which the 
     maturity date of the Note is accelerated or September 30, 1998.

           "Multiemployer Plan" shall mean a "multiemployer plan" as defined 
     in Section 4001 (a)(3) of ERISA to which the Borrower, any Subsidiary of 
     the Borrower or any ERISA Affiliate of either of them is making or 
     accruing an obligation to make contributions or has within any of the 
     preceding three plan years made or accrued an obligation to make 
     contributions.

           "Multiple Employer Plan" shall mean an employee benefit plan, 
     other than a Multiemployer Plan, subject to Title IV of ERISA to which 
     the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate of 
     the Borrower or any Subsidiary of the Borrower, and more than one 
     employer other than the Borrower, any Subsidiary of the Borrower, or an 
     ERISA Affiliate of the Borrower or any Subsidiary of the Borrower, is 
     making or accruing an obligation to make contributions or, in the event 
     that any such plan has terminated, to which the Borrower, any Subsidiary 
     of the Borrower or any ERISA Affiliate of the Borrower or any Subsidiary 
     of the Borrower made or accrued an obligation to make contributions 
     during any of the five plan years preceding the date of termination of 
     such plan.

           "Net Worth" shall mean the sum of the par or stated value of all 
     outstanding capital stock, surplus and undivided profits of the 
     Borrower, less any amounts attributable to treasury stock, and any 
     intangible assets, including, but not limited to, goodwill, patents, 
     copyrights, mailing lists, catalogues, trademarks, bond discount and 
     underwriting expenses, organization expenses and other like intangibles, 
     all as determined in accordance with generally, accepted accounting 
     principles; PROVIDED HOWEVER, that capitalized offering costs in the 
     amount of $715,000 and organization and trademark costs in the amount of 
     $30,000 which are included as assets on Borrower's financial statements 
     as of July 31, 1996 shall not be considered to be intangible assets.

                                       7

<PAGE>

           "Norwest Minnesota" means Norwest Bank Minnesota, National 
     Association.

           "Note" shall mean the promissory note from the Borrower payable to 
     the Lender evidencing the Loan, as such promissory note may be amended, 
     extended, renewed, restated or modified at any time and from time to 
     time.

           "Obligations" shall mean all obligations and liabilities of the 
     Borrower under or in connection with the Loan Documents, now existing or 
     hereafter created, contingent or not, due or not, arising by operation 
     of law or otherwise.

           "PBGC" means the Pension Benefit Guaranty Corporation or any 
     entity succeeding to any or all of its functions under ERISA.

           "Person" means an individual, a corporation, a partnership, an 
     association, a trust or any other entity or organization, including a 
     government or political subdivision or an agency or instrumentality 
     thereof.

           "Plan" means an employee pension benefit plan (other than a 
     Multiemployer Plan) within the meaning of Section 3(2) of ERISA, which 
     is or has been maintained for employees of the Borrower, any Subsidiary 
     of the Borrower or any ERISA Affiliate of the Borrower or ERISA 
     Affiliate of any Subsidiary of the Borrower.

           "Request for Advance" means a request from Borrower for an Advance 
     of the Loan in the form of Exhibit C attached hereto.

           "Security Agreement" shall mean the General Security Agreement 
     dated July 24, 1995, as amended, from the Borrower to the Lender, 
     pursuant to which, among other things, the Borrower grants the Lender a 
     security interest in the Collateral, and any and all other security 
     agreements, assignments, pledges and other similar documents pursuant to 
     which the Borrower grants to the Lender a security interest in the 
     property of the Borrower, as any such agreement may be amended, 
     extended, restated or modified at any time and from time to time.

           "Security Documents" means the Security Agreement and the 
     Collateral Account Agreement, together with all other documents, 
     instruments or agreements securing the Loan.

           "Subsidiary" shall mean any corporation or other entity of which 
     securities or other ownership interests have ordinary voting power to 
     elect a majority of the board of directors or other persons performing 
     similar functions are at the time directly or indirectly owned by the 
     Borrower.

                                       8

<PAGE>

          "Welfare Plan" means an "employee welfare benefit plan" as defined 
     in Section 3(1) of ERISA maintained for the benefit of employees of the 
     Borrower, any Subsidiary of the Borrower or any ERISA Affiliate of the 
     Borrower or any Subsidiary of the Borrower.

          Section 1.2   ACCOUNTING TERMS AND TERMINATIONS.  Unless otherwise 
specified herein, all accounting terms used herein shall be interpreted, all 
accounting determinations hereunder shall be made, and all financial 
statements required to be delivered hereunder shall be prepared, in 
accordance with generally accepted accounting principles as in effect from 
time to time, applied on a basis consistent (except for changes concurred in 
by the Borrower's independent public accountants) with the most recent 
audited consolidated financial statements of the Borrower delivered to the 
Administrative Agent ("GAAP"). The parties hereto further agree that in the 
event that any change in accounting principles from those used in the 
preparation of the financial statements of the Borrower to be delivered to 
the Administrative Agent pursuant to the terms of this Agreement hereafter 
occasioned by the promulgation of rules, regulations, pronouncements and 
opinions by or required by the Financial Accounting Standards Board or 
Accounting Principles Board of the American Institute of Certified Public 
Accountants (or successors thereto or agencies with similar functions) 
results in any change in the method of calculation of Financial Covenants, 
standards or terms found in this Agreement, the parties hereto agree to 
likewise enter into negotiations to amend the Financial Covenants, terms or 
standards contained in this Agreement to reflect equitably such change in 
accounting principles with the desired result that the criteria for 
evaluating the Borrower's financial condition shall be the same after such 
change as if such change had not been made.  If the parties cannot agree on 
such an amendment as contemplated under the immediately preceding sentence, 
then the Financial Covenants shall be computed without giving effect to such 
change in accounting principles.

                                      ARTICLE II

                                       THE LOAN

     Section 2.1   THE LOAN.  Subject to the terms and conditions of this
Agreement, the Lender agrees to make advances to Borrower (each such advance is
called an "ADVANCE") from time to time prior to the Maturity Date, in an
aggregate principal amount outstanding at any time not to exceed the Maximum
Loan Amount.  So long as an Event of Default or event that with notice or the
passage of time would constitute an Event of Default has not occurred and is
continuing,  Borrower may borrow, repay and reborrow under the Loan prior to the
Maturity Date in accordance with the terms of this Agreement.

     Section 2.2   MAXIMUM LOAN AMOUNT.  No Advance requested hereunder 
(other than to fund a draw on a Letter of Credit) shall be requested by the 
Borrower if, immediately after such requested Advance, the aggregate 
principal amount of the Loan which would be

                                       9

<PAGE>

outstanding, would exceed the Maximum Loan Amount.  If at any time the
aggregate outstanding amount of the Loan exceeds the Maximum Loan Amount, the
Borrower shall, within five days after notice from the Administrative Agent,
repay the Loan in an amount at least equal to such excess.

     Section 2.3  INTEREST RATE.  The Loan shall bear interest at the LIBOR
Rate or the Base Rate as determined pursuant to the Note and be payable in
accordance with the terms of the Note.

     Section 2.4  MATURITY OF THE LOAN.  The principal of the Loan and all 
accrued and unpaid interest and all other amounts due under the Loan 
Documents shall be due and payable at the Maturity Date.

     Section 2.5  PAYMENTS OF PRINCIPAL AND INTEREST.  Principal and interest 
under the Loan shall be payable as follows:

          (a) Accrued but unpaid interest on the Loan shall be payable 
     monthly in arrears on the last day of each month commencing on the last 
     day of November, 1996 and continuing on the last day of each month 
     thereafter and with respect to portions of the Loan bearing interest at 
     the LIBOR Rate, on the last day of each Interest Period (as such term is 
     defined in the Note).  Notwithstanding the foregoing, if the aggregate 
     interest accruing on the Loan in any calendar month is less than 
     $20,000, the Borrower shall, on the first day of the next succeeding 
     month, pay the Lender a minimum interest charge equal to the difference 
     between $20,000 and the aggregate interest accruing in such month.

          (b) The entire principal balance of the Loan together with all 
     accrued but unpaid interest thereon and all other amounts due the Lender 
     or the Administrative Agent pursuant to the Loan Documents shall be due 
     and payable in full on the Maturity Date.

     Section 2.6  PREPAYMENT; TERMINATION OF CREDIT FACILITY.  Except as 
otherwise provided in the Note with respect to LIBOR Rate Advances, the 
Borrower may pay the Loan from time to time without penalty or premium.  The 
Borrower may terminate the Agreement and obtain a release of any security 
interests in the Collateral only upon thirty days prior written notice to the 
Administrative Agent, and, if such termination is on a date other than the 
Maturity Date, payment of a termination fee determined as follows:

         DATE OF TERMINATION                        FEE
         --------------------                        ---
         On or before September 30, 1997         1.5% of the Commitment

         After September 30, 1997                1% of the Commitment;



                                       10


<PAGE>

provided, however, that (i) no termination fee shall be payable if the 
Loan is refinanced by a direct or indirect subsidiary of Norwest Corporation, 
and (ii) provided that the termination occurs after September 30, 1997, the 
termination fee shall be 1/2 of 1% of the Commitment if the termination date 
occurs within 30 days of the acquisition by a Person and any of the "affiliates"
of such Person within the meaning of Rule 12b-2 promulgated under the 
Securities Exchange Act of 1934, as amended, (other than any current affiliate
of the Borrower) of an aggregate of 75% or more of the assets or capital stock
of the Borrower.

     Section 2.7  FEES.  The Borrower shall pay to the Lender the following fees
in connection with the Loan and this Agreement:

               (a)  Annually in advance an administrative fee equal to 
one-eighth of one percent of the Commitment.  Payment of the administrative 
fee shall be due on the date of this Agreement and annually on the same date 
each year thereafter.

               (b)  Monthly in arrears on the last day of November, 1996 and on
the last day of each month thereafter, an unused commitment fee of one eighth of
one percent per annum of the difference between the Commitment and the daily
average sum of the aggregate outstanding principal balance of the Loan and
Borrower's Letter of Credit Liability during such month.

     Section 2.8  SECURITY.  The Loan shall be secured by a first priority 
security interest in the Collateral.

     Section 2.9  REQUEST FOR ADVANCE UNDER THE LOAN.

               The Borrower agrees to comply with the following procedures in
requesting Advances:

               (a) Each request for a BASE Rate Advance shall be made to the
Administrative Agent prior to 11:00 a.m. (Colorado time) of the day of the
requested Advance, and each request for a LIBOR Rate Advance shall be made to
the Administrative Agent prior to 11:00 a.m. (Colorado time) of the day three
days prior to the date of the requested Advance.  Each request for an Advance
shall be made by (i) any officer of the Borrower; or (ii) any person designated
as the Borrower's agent by any officer of the Borrower in a writing delivered to
the Lender; or (iii) any person reasonably believed by the Lender to be an
officer of the Borrower or such a designated agent, by delivery to the
Administrative Agent of a Request for an Advance.

               (b) Upon fulfillment of the applicable conditions therefore, the
Lender, or the Administrative Agent acting on behalf of the Lender, shall
disburse loan proceeds by crediting the same to the Borrower's demand deposit
account maintained with the Lender unless the



                                     11

<PAGE>

Lender and the Borrower shall agree in writing to another manner of 
disbursement.  The Borrower shall be obligated to repay all Advances 
notwithstanding the fact that the person requesting the same was not in fact 
authorized to do so.  Any request for an Advance shall be deemed to be a 
representation by the Borrower that (i) the conditions set forth in Section 2.2
hereof have been met, and (ii) the conditions set forth in Section 4.2 hereof 
have been met as of the time of the request.

               (c) Each request for a Base Rate Advance under the Loan shall be
in an amount of at least $100,000 or such lesser amount equal to the unadvanced
portion of the Loan, and each request for a LIBOR Rate Advance shall be in an
amount of $1,000,000 or an integer multiple thereof.

               (d) Each request for an Advance under the Loan shall be
irrevocable and binding upon the Borrower from and after the time that a
Request for Advance is received by the Administrative Agent and the submission
of a Request for Advance to the Administrative Agent shall obligate Borrower to
accept such Advance.

               (e) If any Person shall acquire a participation in the Loan, the
Borrower shall be obligated to the Lender to pay the full amount of all interest
calculated under the Note, along with all other fees, charges and other amounts
due under this Agreement, regardless if such Person elects to accept interest
with respect to its participation at a lower rate, or otherwise elects to accept
less than its prorata share of such fees, charges or other amounts due under
this Agreement.

     Section 2.10 PAYMENTS BY BORROWER.  All payments of principal and interest
on the Loan shall be made to the Administrative Agent for the account of the
Lender in immediately available funds.  The Borrower hereby authorizes the
Lender, in its discretion at any time or from time to time and without request
by the Borrower, to make an Advance in an amount equal to the accrued interest
from time to time due and payable to the Lender hereunder and in the amount of
any fees, costs or expenses due to the Lender or the Administrative Agent
hereunder or under any other Loan Documents.

     Section 2.11 REPAYMENT OF EXISTING INDEBTEDNESS.  The Borrower hereby 
requests that the Lender make an initial Advance of the Loan in an amount 
equal to the outstanding principal amount and all accrued but unpaid interest 
and all the fees and expenses due in connection with the indebtedness of the 
Borrower under the Original Credit Agreement and that such advance be 
remitted directly to the Persons entitled thereto to pay the Borrower's 
outstanding obligations under the Original Credit Agreement.

                                     12

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                                   ARTICLE III

                                LETTERS OF CREDIT

     Section 3.1    LETTERS OF CREDIT.  Subject to the terms and conditions of
this Agreement, the Lender agrees, upon request of Borrower, to issue or to
cause Norwest Minnesota to issue one or more stand-by or documentary letters of
credit for such purposes as Borrower may reasonably request and the
Administrative Agent may reasonably approve; provided, however, that the
Borrower shall not request any Letter of Credit if immediately after the
issuance thereof, the Letter of Credit Liability would exceed S500,000.  The
Letter of Credit Liability shall be evidenced by the Note and secured by all of
the Security Documents.  The issuance of any Letter of Credit in accordance with
the provisions of this Section 3.1 shall require the satisfaction of each
condition set forth in this Article III.

    Section 3.2  LETTER OF CREDIT APPLICATION.

          (a) Whenever Borrower desires the issuance of a Letter of Credit, 
it shall deliver to the Administrative Agent a Letter of Credit Application 
no later than 12:00 noon, Denver time, at least five Business Days or such 
shorter period as may be agreed to by the Administrative Agent, in advance of 
the proposed date of issuance.  The Letter of Credit Application shall 
specify (i) the proposed date of issuance (which shall be a Business Day), 
(ii) the face amount and text of the Letter of Credit, (iii) the expiration 
date of the Letter of Credit, which shall be no later than the earlier of 365 
days after the date of issuance thereof or the Maturity Date and (iv) the 
name and address of the beneficiary, with respect to such Letter of Credit.

          (b) Prior to the date of issuance, Borrower shall specify a precise 
description of the form of Letter of Credit and related documents and the 
verbatim text of any certificate to be presented by the beneficiary of such 
Letter of Credit which, if presented by such beneficiary prior to the 
expiration date of such Letter of Credit, would require the Lender to make 
payment under such Letter of Credit; PROVIDED that the Administrative Agent 
or the Lender, in its sole judgment, may, prior to the date of issuance, 
require changes in the form of Letter of Credit and any such documents and 
certificates; and PROVIDED, FURTHER, that no Letter of Credit shall require 
payment against a conforming draft to be made thereunder sooner than the 
third Business Day after presentation of the conforming draft.

     Section 3.3  CONDITIONS TO ISSUANCE OF LETTER OF CREDIT.  The Lender's
obligation to issue or to cause any Letter of Credit to be issued by Norwest
Minnesota shall be subject to satisfaction of the following conditions in a
manner acceptable to the Lender prior to the issuance of such Letter of Credit:



                                     13

<PAGE>

               (a)  Receipt of the Letter of Credit Application in accordance
with the provisions of Section 3.2(a) above.

               (b)  Receipt of the Letter of Credit fee in accordance with the
provisions of Section 3.5 below.

               (c)  Satisfaction of all of the conditions set forth in Sections
4.1 and 4.2, below.

               (d)  The outstanding principal amount of the Loan shall not 
exceed the Maximum Loan Amount (taking into account the face amount of the 
Letter of Credit being requested).

               (e)  Such other conditions as the Lender may reasonably require.

     Section 3.4  PAYMENT OF AMOUNTS DRAWN UNDER LETTER OF CREDIT.  Any 
drawing under a Letter of Credit (whether before or after the Maturity Date) 
shall be deemed to be a Base Rate Advance under the Loan made by the Lender to 
Borrower on the date such drawing was paid by the Lender and shall remain 
outstanding under the Loan and be payable in accordance with the terms and 
conditions of other Advances; PROVIDED, HOWEVER, if any Advance deemed made 
to cover a draw on a Letter of Credit would cause the outstanding amount of 
the Loan to exceed the Maximum Loan Amount, Borrower shall immediately repay 
the Loan in an amount sufficient to reduce the outstanding amount of the Loan 
to an amount equal to no greater than the Maximum Loan Amount.

     Section 3.5  LETTER OF CREDIT FEES AND COMPENSATION.  Borrower agrees to
pay the following amounts to the Lender:

               (a) With respect to the issuance of each Letter of Credit which
is a standby Letter of Credit, a fee equal to the greater of $250.00 or one and
one-half percent (1 1/2%) per annum of the face amount of the Letter of Credit,
calculated for the term of the Letter of Credit.

               (b) With respect to issuance of each Letter of Credit which is a
documentary Letter of Credit, a fee equal to the Lender's then standard issuance
fee for documentary letters of credit based on the face amount of such Letter of
Credit.

               (c) With respect to any amendment or transfer of any Letter of 
Credit, documentary and processing charges in accordance with the Lender's
standard schedule for such charges in effect at the time of such drawing.



                                     14

<PAGE>

               (d)  With respect to drawing made under any Letter of Credit,
processing charges in accordance with the Lender's standard schedule for such
charges in effect at the time of such drawing.

               (e)  Amounts payable under this Section 3.5 shall be paid to the
Administrative Agent for the account of the Lender in immediately available
funds and shall be payable in full on the date of such issuance, amendment,
transfer or drawing, as the case may be.

     Section 3.6   OBLIGATIONS ABSOLUTE.  The obligation of Borrower to
reimburse the Lender for Advances made to fund drawings under the Letters of
Credit shall be unconditional and irrevocable and shall be paid strictly in
accordance with the terms of this Agreement under all circumstance including,
without limitation, the following circumstances:

               (a)  Any lack of validity or unenforceability of any Letter of
Credit;

               (b) The existence of any claim, set-off, defense or other right
which Borrower or any affiliate of Borrower may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any person or 
entities for whom any such beneficiary or transferee may be acting), the Lender
or any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying 
transaction between Borrower and the beneficiary for which the Letter of Credit
was procured);

               (c) Any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect other than solely as the result of gross negligence or
willful misconduct of the Lender or Norwest Minnesota as issuer of the Letter of
Credit;

               (d) Payment by the Lender or Norwest Minnesota as issuer of the
Letter of Credit under any Letter of Credit against presentation of a demand,
draft or certificate or other document which does not comply with the terms of
such Letter of Credit other than if said payment is solely the result of the
gross negligence or willful misconduct of the Lender or Norwest Minnesota as the
issuer of the Letter of Credit;

               (e) Any other circumstance or happening whatsoever, which is 
similar to any of the foregoing; or

               (f) The fact that an Event of Default or an event that with 
notice or the passage of time might constitute an Event of Default shall have
occurred.

     Section 3.7  INDEMNIFICATION: NATURE OF THE LENDER'S DUTIES.



                                     15

<PAGE>

               (a)  In addition to amounts payable as elsewhere provided in this
Article III, without duplication.  Borrower hereby agrees to protect, indemnify,
pay and hold harmless the Lender, the Administrative Agent and Norwest Minnesota
from and against any and all claims, demands, liabilities, judgments. damages,
losses, costs, charges and expenses (including reasonable attorneys' fees) which
the Lender or the Administrative Agent may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of the Letters of Credit,
other than solely as a result of the gross negligence or willful misconduct of
the Lender, the Administrative Agent or Norwest Minnesota or (ii) the failure of
the Lender or Norwest Minnesota as the issuer of such Letter of Credit to honor
a drawing under any Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future DE JURE or DE FACTO government or
governmental authority or court (all such acts or omissions herein called
"GOVERNMENT ACTS").

               (b)  Borrower assumes all risks of the acts and omissions of, or
misuses of the Letters of Credit by the respective beneficiaries of such Letters
of Credit.  In furtherance and not in limitation of the foregoing, neither the
Lender, the Administrative Agent nor Norwest Minnesota shall be responsible: (i)
for the form, validity, sufficiency, accuracy, genuineness or legal effects of
any document submitted by any party in connection with the application for and
issuance of such Letters of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii)
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason (unless the Lender acts upon such
transfer and such transfer is expressly prohibited on the face of this Letter of
Credit); (iii) for failure of the beneficiary of any such Letter or Credit to
comply fully with conditions required in order to draw upon such Letter of
Credit; (iv) for errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) for the misapplication by the beneficiary of any such
Letter of Credit of the proceeds of any drawing under such Letter of Credit; and
(viii) for any consequences arising from causes beyond the control of the
Lender, the Administrative Agent or Norwest Minnesota, including, without
limitation, any Government Acts.  None of the above shall affect, impair, or
prevent the vesting of any of the Lender's rights or powers hereunder, all of
which shall be borne by Borrower.

               (c)  In furtherance and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Lender, the
Administrative Agent or Norwest Minnesota under or in connection with any 
Letter of Credit or the related certificates, if taken or omitted in good 
faith, shall not put the Lender, the Administrative Agent or Norwest 
Minnesota under any resulting liability to Borrower.

                                     16

<PAGE>

               (d)  Notwithstanding anything to the contrary contained in this
Section 3.7, Borrower shall not have any obligation to indemnify the Lender, the
Administrative Agent or Norwest Minnesota in respect of any liability incurred
by the Lender, the Administrative Agent or Norwest Minnesota arising solely out
of the gross negligence or willful misconduct of the Lender, the Administrative
Agent or Norwest Minnesota.

     Section 3.8  RELEASE OF COLLATERAL.  The Lender shall not be under any
obligation whatsoever to release any Collateral until such time as all Letters
of Credit have expired or been surrendered for cancellation and the Lender has
no obligation to renew any such Letter of Credit, or any other obligation to
make any payments in connection with any Letter of Credit.

     Section 3.9  ISSUANCE OF LETTERS OF CREDIT.  Notwithstanding anything to
the contrary herein, all Letters of Credit will be issued by the Lender, Norwest
Minnesota or another affiliate of Norwest Corporation.  In the event that any
Letter of Credit is issued by Norwest Minnesota or any other affiliate of
Norwest Corporation, the Lender shall reimburse the issuer thereof for the
amount drawn under such Letter of Credit.  The fact that any Letter of Credit
may be issued by Norwest Minnesota or an affiliate of Norwest Corporation, shall
in no way alter or affect Borrower's obligations with respect to such Letter of
Credit set forth in this Article III.


                                  ARTICLE IV

                             CONDITIONS PRECEDENT

     Section 4.1  INITIAL ADVANCE.  The Lender shall not be obligated to make
the first Advance of the Loan hereunder or issue the first Letter of Credit
hereunder unless and until all of the following shall have been complied with in
a manner acceptable to the Administrative Agent:

          (a)  EXECUTION AND DELIVERY OF DOCUMENTS.  The Borrower shall have 
delivered the following to the Administrative Agent:

               (i)   The Loan Documents, duly executed by the Borrower;

               (ii)  Financing statements evidencing the security interest 
granted by the Security Agreement, duly executed by the Borrower;

               (iii) A Collateral Account Agreement, duly executed by the 
Borrower, the Administrative Agent and the Lender (the "Collateral Account 
Agreement"), pursuant to which the Borrower and the Lender establish a 
depository account (the "Collateral Account") in the name of and under the 
sole and exclusive control of the Lender, from which finally collected funds 
shall be transferred to Lender for application to the Advances;



                                     17

<PAGE>

               (iv)   Separate Support Agreements duly executed by William J. 
Pearse,  David J. Workman, Alan E. Kessock, Neal Bobrick and J. Edward McEntire;

               (v)    A copy, of the Borrower's certificate of incorporation 
certified by the Borrower's corporate secretary;

               (vi)   Certificates, as of the most recent dates practicable,
of the Secretary of State of the States of Colorado, Utah, New Mexico, Nevada,
Idaho and Oklahoma that the Borrower is qualified and in good standing as a
foreign corporation in each such state;

               (vii)  A certified copy of the Borrower's Articles of 
Incorporation and Bylaws;

               (viii) A copy of a resolution of the Borrower's board of
directors authorizing the execution, delivery and performance of this Agreement,
the Note, the Security Agreement, the Loan Documents and each other document to
be delivered pursuant hereto, certified by the Secretary of the Borrower;

               (ix)   A certificate of the Borrower's corporate secretary as
to the incumbency and signatures of the officers of the Borrower signing this
Agreement, the Note, all the other Loan Documents, and each other document to be
delivered pursuant hereto;

               (x)    Certificates of insurance, in form and substance
reasonably acceptable to the Lender, evidencing that Borrower's insurance
coverage is in compliance with the provisions of this Agreement and the Security
Agreement;

               (xi)   A written opinion from the Borrower's legal counsel in
form and substance satisfactory to the Lender;

               (xii)  An initial Borrowing Base Certificate; and

               (xiii) Such other documents as the Administrative Agent may
reasonably request.

          (b) NO DEFAULT. (i) The Borrower shall have complied with all of
the conditions, terms, covenants and agreements contained in this Agreement, the
Note, and all other Loan Documents, (ii) all representations and warranties of
the Borrower contained in any of the Loan Documents shall be true as of the date
of any Advance as if first made on that date, (iii) immediately before and
after such Advance, no default shall have occurred under any of the Loan
Documents and no event shall have occurred that with notice or the passage of
time or both would constitute a default under any of the Loan Documents and (iv)
no material adverse



                                     18

<PAGE>

change shall have occurred in the assets, liabilities, properties, business,
operation or financial condition of the Borrower.

          (c)  LOAN EXPENSES.  The Borrower shall have paid all of the Loan
Expenses incurred by the Lender or the Administrative Agent and invoiced to the
Borrower in connection with the transactions contemplated hereby.

          (d)  REQUEST FOR ADVANCE.  The Borrower shall have provided the 
Administrative Agent with a Request for Advance.

          (e)  LIEN CONFIRMATION.  The Administrative Agent shall have received
a search of the Uniform Commercial Code records of the Secretary of State of
the States of Colorado, Utah, New Mexico, Nevada, Idaho and Oklahoma which 
shall confirm that there are no liens, security interests or encumbrances 
against the Collateral.

          (f)  SUPPLIER AGREEMENTS.  The Administrative Agent shall have
received from the Borrower a certificate signed by an authorized officer of the
Borrower certifying that attached thereto are (i) a list of all Material
Inventory Suppliers and (ii) true and correct copies of all agreements in effect
as of such date between the Borrower and each Material Inventory Supplier.

         (g)   LANDLORD'S WAIVERS.  The Borrower shall deliver to the
Administrative Agent a landlord's waiver from the landlord of any premises at
which the Collateral is located.

          (h)  OTHER DOCUMENTS AND INFORMATION.  The Administrative Agent
shall have received such additional information and documents, in form and
substance satisfactory to the Administrative Agent, as the Administrative Agent
may reasonably request.

     Section 4.2   SUBSEQUENT ADVANCES.  The Lender will not be obligated to
make any Advance in connection with the Loan or to issue any Letters of Credit
unless and until all of the following shall have been complied with in a manner
acceptable to the Lender:

          (a)  REQUEST FOR ADVANCE.  The Borrower shall have provided the
Administrative Agent with a Request for Advance, or, in the case of a Letter of
Credit, a Letter of Credit Application.

          (b)  NO DEFAULT. (i) The Borrower shall have complied with all of
the conditions, terms, covenants and agreements contained in this Agreement, the
Note, and all other Loan Documents, (ii) all representations and warranties of
the Borrower contained in any of the Loan Documents shall be true as of the date
of any Advance as if first made on that date, (iii) immediately before and after
such Advance, no default shall have occurred and be continuing under any of the
Loan Documents and no event shall have occurred and be



                                     19

<PAGE>

continuing that with notice or the passage of time or both would constitute a
default under any of the Loan Documents and (iv) no material adverse change
shall have occurred in the assets, liabilities, properties, business, operation
or financial condition of the Borrower or its Subsidiaries.

          (c) LIEN CONFIRMATION.  Borrower shall have provided the 
Administrative Agent with such confirmation as the Administrative Agent may
reasonably request that there are no liens, security interests or encumbrances
against the Collateral.

          (d)  OTHER DOCUMENTS.  The Borrower shall have provided the
Administrative Agent with such other documents and information as the
Administrative Agent may reasonably request.


                                  ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     To induce the Lender to enter into this Agreement, the Borrower represents
and warrants to the Lender as of the date hereof and as of the date of any
Advance hereunder as follows:

     Section 5.1  ORGANIZATION; AUTHORITY; POWER; ETC.  The Borrower (a) is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware, (b) has the power and authority to own its properties and to carry
on its business in every jurisdiction in which the nature of its business or its
properties makes such qualification necessary, and (c) is in material 
compliance with all laws, regulations, ordinances, and orders of public 
authorities applicable to it.

     Section 5.2  VALIDITY OF LOAN DOCUMENTS.  The execution, delivery and
performance by the Borrower of this Agreement and all of the other Loan
Documents delivered to the Lender in connection herewith (a) are within the
power of the Borrower, (b) have been duly authorized by all requisite actions on
the part of the Borrower, and (c) do not require approval of any governmental
authority. This Agreement and all of the other Loan Documents are, or upon
execution and delivery will be, the legal, valid and binding obligations of the
Borrower, fully enforceable in accordance with their respective terms except to
the extent the enforceability thereof is limited by bankruptcy, insolvency or
other laws relating to or affecting the enforcement of creditors' rights or by
the general principles of equity.

     Section 5.3  NO CONFLICT.  The execution, delivery and performance by the
Borrower of this Agreement and all of the other Loan Documents will not (a)
violate any provision of any law, rule, regulation, writ, order, judgment,
injunction, decree, determination or award of any court or other governmental
authority applicable to the Borrower, or conflict with any of the



                                     20

<PAGE>

provisions of the certificate of incorporation or bylaws of the Borrower, or (b)
result in a breach of, or constitute a default under any indenture, agreement or
other instrument to which the Borrower is or will be a party or by which it or
its properties are bound.

     Section 5.4  NO LITIGATION OR ADVERSE PROCEEDINGS.  There is no pending or,
to the best of the Borrower's knowledge, threatened, action, suit, proceeding,
arbitration or investigation against or affecting the Borrower or the Collateral
which, in any case, might materially adversely affect the value of the
Collateral or any of the Borrower's operations, business, assets, properties,
condition (financial or otherwise) or ability to perform its obligations to the
Lender hereunder.  If, in the future, such action, suit, proceeding, arbitration
or investigation is pending or threatened, the Borrower shall immediately 
provide the Lender with detailed notification thereof.

     Section 5.5  NO DEFAULTS OR VIOLATION.  The Borrower is not in default,
in any manner which would materially adversely affect its properties, assets,
operations or condition (financial or otherwise), in the performance, observance
or fulfillment of any of the obligations, covenants or conditions set forth in
any agreement or instrument to which it is a party or by which it or any of its
properties, assets or revenues may be bound or affected, or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award of
any court or governmental authority.

      Section 5.6   ERISA.

               (a)  Neither the Borrower nor any of its Subsidiaries 
participates in any Multiemployer Plans.

               (b)  Each Plan and Welfare Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and other Federal or
state law, including all requirements under the Code or ERISA for filing reports
(that are true and correct in all material respects as of the date filed), and
benefits have been paid in accordance with the provisions of the Plan and
Welfare Plan.

               (c)  No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan that would result in any liability of the
Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate of the Borrower
or any Subsidiary of the Borrower.

               (d)  With respect to each Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and which, is intended
to qualify under Section 401 of the Code and each trust created thereunder, a
favorable determination letter has been received from the Internal Revenue
Service stating that such Plan so qualifies and is exempt from tax, and nothing
has occurred since the date of the issuance of such determination letter



                                     21

<PAGE>

which would cause such Plan and trust to cease to qualify under Section 401 of
the Code or to lose tax-exempt status under Section 501 of the Code.

               (e)  None of the transactions contemplated by this Agreement or
by any Plan constitute a prohibited transaction as such term is defined in
Section 406 of ERISA or Section 4976 of the Code.

               (f)  There is no outstanding liability that has been asserted or
assessed under Title IV of ERISA with respect to any Plan maintained or
sponsored by the Borrower, any Subsidiary of the Borrower, or any ERISA
Affiliate of the Borrower or any Subsidiary of the Borrower, nor with respect to
any Plan to which the Borrower, any Subsidiary of the Borrower, or any ERISA
Affiliate of the Borrower or any Subsidiary of the Borrower contributes or is
obligated to contribute.

               (g)  No Plan subject to Title IV of ERISA has any Insufficiency
as of the most recent valuation date for such Plan.

               (h)  Neither the Borrower, any Subsidiary of the Borrower, nor
any ERISA Affiliate of the Borrower or any Subsidiary of the Borrower has ever
represented, promised or contracted (whether in oral or written form) to any
current or former employee (either individually or to any employees as a group)
that such current or former employee(s) would be provided, at any cost to the
Borrower, any Subsidiary of the Borrower, or any ERISA Affiliate of the Borrower
or any Subsidiary of the Borrower, with life insurance or employee welfare plan
benefits (within the meaning of Section 3(3) of ERISA) following retirement or
termination of employment.  To the extent that the Borrower, any Subsidiary of
the Borrower or any ERISA Affiliate of the Borrower or any Subsidiary of the
Borrower has made any such representation, promise or contract, such person has
expressly reserved the right to amend or terminate such life insurance or
employee welfare plan benefits with respect to claims not yet incurred.

               (i)  The Borrower, each Subsidiary of the Borrower, and each
ERISA Affiliate of the Borrower or any ERISA Affiliate of any Subsidiary of the
Borrower have complied in all respects with the notice and continuation coverage
requirements of Section 4980B of the Code.

               (j)  There are no pending or threatened claims, actions or
lawsuits, other than routine claims for benefits in the usual and ordinary
course, asserted or instituted against any Plan, Welfare Plan, or any fiduciary
with respect to any Plan or Welfare Plan.

               (k)  Neither the Borrower, any Subsidiary of the Borrower, nor
any ERISA Affiliate of the Borrower or any ERISA Affiliate of any Subsidiary of
the Borrower has incurred or reasonably expects to incur any liability under
Title IV of ERISA (other than premiums due and not delinquent under Section 4007
of ERISA) with respect to a Plan.



                                     22
<PAGE>

                  (l)   Neither the Borrower, any Subsidiary of the Borrower, 
nor any ERISA Affiliate of the Borrower or any ERISA Affiliate of any 
Subsidiary of the Borrower has transferred any Insufficiency to a person 
other than the Borrower, any Subsidiary of the Borrower, or any ERISA 
Affiliate of the Borrower or any ERISA Affiliate of any Subsidiary of the 
Borrower or otherwise engaged in a transaction that could be subject to 
Section 4069 or 4212(c) of ERISA.

                  (m)   Neither the Borrower, any Subsidiary of the Borrower, 
nor any ERISA Affiliate of the Borrower or any ERISA Affiliate of any 
Subsidiary of the Borrower has engaged, directly or indirectly, in a 
nonexempt prohibited transaction (as defined in Section 406 of ERISA or 
Section 4975 of the Code) in connection with any Plan.

          Section 5.7   COMPLIANCE WITH FEDERAL RESERVE BOARD REGULATIONS.  
No part of the proceeds of the Loan will be used, directly or indirectly, for 
the purpose of purchasing or carrying any "margin stock" within the meaning 
of Regulation U or G of the Board of Governors of the Federal Reserve System.

          Section 5.8   FINANCIAL CONDITION.  The audited financial 
statements of the Borrower dated January 31, 1996 and the unaudited 
statements dated July 31, 1996 heretofore delivered to the Lender 
(collectively, the "Financial Statements") are accurate and complete in all 
material respects, have been prepared in accordance with GAAP and presents 
fairly the financial condition of the Borrower as of the respective dates 
thereof.  The Borrower does not know of any material contingent liabilities 
affecting the Borrower or the Collateral that are not disclosed in the 
Financial Statements.  Since the date of the Financial Statements delivered 
to the Lender, there has been no material adverse change in the Borrower's 
financial condition, assets, liabilities or business nor has any other vent 
or condition of any character occurred or arisen that materially and 
adversely affects or that could materially and adversely affect the business, 
or, to the extent reasonably foreseeable, the prospects of the Borrower.  No 
additional material obligations have been entered into by the Borrower since 
the date of the Financial Statements.

          Section 5.9   GOVERNMENTAL REGULATIONS.  The Borrower is not 
subject to any federal or state statute or regulation limiting its ability to 
incur Indebtedness.

         Section 5.10  VARIOUS REPRESENTATIONS TO THE LENDER OR 
ADMINISTRATIVE AGENT.  None of the statements or any certificate, document or 
statement furnished to the Lender or the Administrative Agent (or to be 
furnished to the Lender or the Administrative Agent) by or on behalf of the 
Borrower, and none of the representations and warranties in this Agreement or 
any other Loan Document contains (or will contain) any untrue statement of a 
material fact or omits (or will omit) to state a material fact necessary in 
order to make the statements contained herein or therein not misleading.  
There is no fact which materially adversely affects or in the future (so far 
as the Borrower can now reasonably foresee) may materially adversely affect 
the ability of the Borrower to perform its obligations to the Lender which 
has not been set forth herein or

                                       23
<PAGE>

in a certificate or opinion of counsel or other written statement furnished 
to the Lender by or on behalf of the Borrower.  All balance sheets, 
statements of profit and loss, and other financial data that have been given 
(or will be given) to the Lender or the Administrative Agent with respect to 
the Borrower (a) are (or will be) complete and correct in all material 
respects, (b) accurately present (or will present) the financial condition of 
the Borrower as of the dates, and the results of its operations for the 
periods for which, the same have been (or will be) furnished, (c) have been 
(or will be) prepared in accordance with GAAP consistently followed 
throughout the periods covered thereby.

         Section 5.11   TAXES.  The Borrower has filed all tax returns which 
are required to be filed by the Borrower and has paid all indebtedness, 
obligations, assessments, governmental charges and taxes, real and personal, 
including federal and state income taxes, levied upon or assessed against it 
or against its properties or income which are currently due.

         Section 5.12   TRADEMARKS, PATENTS, ETC.  The Borrower possesses all 
the trademarks, trade names, copyrights, patents, licenses, or rights in any 
thereof, adequate in all material respects for the conduct of its business as 
now conducted and presently proposed to be conducted, without conflict with 
the rights or claimed rights of others.  The Borrower has not within the 
four-year period preceding the date hereof received any notice of any deemed 
rights of others with respect to the foregoing.

         Section 5.13   SUBSIDIARIES AND AFFILIATES.  Borrower does not have 
any affiliates or Subsidiaries.

         Section 5.14   PARTNERSHIPS AND JOINT VENTURES.  Borrower is not a 
partner in any partnership, a member of any limited liability company or a 
partner or a party to any joint venture or similar agreement.

                                       
                                  ARTICLE VI
                                       
                             AFFIRMATIVE COVENANTS
                                       
         The Borrower covenants and agrees that so long as any indebtedness 
or Obligations remain outstanding hereunder, unless the Lender or the 
Administrative Agent shall otherwise consent in writing in advance, it will:

         Section 6.1    PAY NOTE.  Duly and punctually pay or cause to be 
paid the principal of and interest on the Note on the dates, in the places 
and in the manner set forth therein and herein, without notice or demand.
                                       
                                       24
<PAGE>

         Section 6.2    PERFORM OTHER OBLIGATIONS.  Promptly and strictly 
perform and comply with all other terms, conditions, covenants and 
prohibitions required by the terms of any of the Loan Documents.

         Section 6.3    COLLATERAL ACCOUNT.  The Borrower agrees to deposit 
in the Collateral Account or, at the Lender's option, to deliver to the 
Lender all collections on Receivables, contract rights, chattel paper and 
other rights to payment constituting Collateral, and all other cash proceeds 
of Collateral, which the Borrower may receive directly, immediately upon 
receipt thereof, in the form received, except for the Borrower's endorsement 
when deemed necessary; provided, however, that the Borrower may establish 
depository accounts to clear collections provided that (i) in the case of any 
depository account established in the State of Colorado, such account is 
swept to the Collateral Account on each Business Day, (ii) in the case of 
depository accounts established in states other than the State of Colorado, 
such accounts are swept to the Collateral Account at least one time per week 
(or more frequently if the Administrative Agent shall request), and (iii) at 
the request of the Administrative Agent, all depository accounts are assigned 
to the Lender as additional security for the Loan on terms and conditions 
satisfactory to the Administrative Agent in its sole discretion.  The 
Borrower further agrees to irrevocably require all processors of credit card 
receipts to remit all payments due in respect thereof directly to the 
depository account maintained in the State of Colorado.  Until delivered to 
the Lender or deposited in the Collateral Account, all proceeds or 
collections of Collateral shall be held in trust by the Borrower for and as 
the property of the Lender and shall not be commingled with any other funds 
or property of the Borrower.  Amounts deposited in the Collateral Account 
shall not bear interest and shall not be subject to withdrawal by the 
Borrower, except after full payment and discharge of all Obligations.  All 
such collections shall constitute proceeds of Collateral and shall not 
constitute payment of any Obligation.  Collected funds from the Collateral 
Account shall be transferred to the Lender's general account, and the Lender 
may deposit in its general account or in the Collateral Account any and all 
collections received by it directly from the Borrower.  The Lender may 
commingle such funds with other property of the Lender or any other person.  
The Lender shall apply such collected funds in the Collateral on a daily 
basis to the payment of any and all Obligations, in any order or manner of 
application satisfactory to the Lender provided, however, that in lieu of 
applying any such amounts to payment of LIBOR Rate Advances prior to the 
maturity thereof, the Lender may, at its option, remit such amounts to the 
Borrower.  All items delivered to the Lender or deposited in the Collateral 
Account shall be subject to final payment.  If any such item is returned 
uncollected, the Borrower will immediately pay the Lender, the amount of that 
item, or the Lender at its discretion may charge any uncollected item to the 
Borrower's commercial account or other account.  The Borrower shall be liable 
as an endorser on all items deposited in the Collateral Account, whether or 
not in fact endorsed by the Borrower.

                                       25
<PAGE>

         Section 6.4    CORPORATE.  Maintain and preserve the existence, 
rights, privileges and franchises of the Borrower in good standing under the 
laws of Delaware and maintain its right to transact business in all other 
states, including Colorado, Utah and any other states in which the Borrower 
has any retail operation or where its activities and ownership of assets are 
such that qualification to transact business is necessary under the laws of 
such states.

         Section 6.5    ACCOUNTS AND RECORDS.  Keep and maintain full and 
accurate accounts and records of its operations in accordance with GAAP 
applicable to businesses of the type in which the Borrower is engaged and 
consistent with principles heretofore applied by the Borrower in preparation 
of the Financial Statements, including, without limitation, records of the 
Borrower's verification of the validity of accounts.

         Section 6.6    INSPECTION/AUDIT RIGHTS.  Permit the Administrative 
Agent, the Lender or any representatives thereof at any reasonable time, and 
from time to time, to examine and make copies of and abstract from the files, 
records and books of account of the Borrower and to discuss the affairs, 
finances and accounts of the Borrower with any of its officers or directors 
and their independent public accountants.  The Administrative Agent and the 
Lender shall have the right to inspect the Collateral upon reasonable notice 
to the Borrower during the Borrower's normal business hours.  In addition, 
the Administrative Agent and the Lender shall have a right to conduct an 
audit of the Inventory at any time and from time to time to confirm, among 
other things, the existence and value of such Inventory and the Borrower 
shall be responsible for paying the cost of such audit (including the 
internal costs of the Administrative Agent's and the Lender's own employees 
at the rate of $50 per hour or the Administrative Agent's or the Lender's 
then current per hour auditor charge, if different); provided that the 
Borrower shall have the obligation to pay the cost of such audit no more 
frequently than four times in each twelve month period provided there is no 
Event of Default.  The Administrative Agent shall also have the right to 
obtain an appraisal of the Borrower's Inventory annually (or more frequently 
if an Event of Default has occurred and is continuing), at the expense of the 
Borrower.

         Section 6.7    REPORTING REQUIREMENTS.

                  (a)   ANNUAL FINANCIAL STATEMENT.  Within ninety (90) days 
after the end of each fiscal year, deliver to the Administrative Agent 
audited year-end financial statements of the Borrower (including balance 
sheets, statements of income and statements of cash flow), unqualified as to 
scope of review, prepared by certified public accountants reasonably 
acceptable to the Administrative Agent, together with a compliance 
certificate signed by the chief financial officer or other officer of the 
Borrower satisfactory to the Administrative Agent showing the calculation of 
the Financial Covenants set forth in Section 6.13 and certifying that no 
Event of Default exists under this Agreement or any of the other Loan 
Documents, in the form of Exhibit B attached hereto or such other form as the 
Administrative Agent may require.

                                       26
<PAGE>

                  (b)   QUARTERLY FINANCIAL STATEMENTS. Within forty-five 
(45) days after the end of each fiscal quarter, deliver to the Administrative 
Agent a copy of the Borrower's internally prepared quarterly financial 
statement (including a balance, sheet and income statement) prepared 
consistently with fiscal year-end statements and certified by the chief 
financial officer of the Borrower as being true and correct in all material 
respects together with a compliance certificate signed by the chief financial 
officer of the Borrower showing the calculation of the Financial Covenants 
set forth in Section 6.13 and certifying that no Event of Default exists 
under this Agreement or any of the other Loan Documents, in the form of 
Exhibit B attached hereto or such other form as the Administrative Agent may 
require.

                  (c)   MONTHLY FINANCIAL STATEMENTS. Within thirty (30) days 
after the end of each fiscal month, deliver to the Administrative Agent 
monthly internally prepared financial statements (including a balance sheet 
and income statement) of the Borrower prepared consistently with fiscal 
year-end statements and certified by the chief financial officer of the 
Borrower as being true and correct in all material respects.

                  (d)   MONTHLY ACCOUNTS PAYABLE AGING.  Within thirty (30) 
days after the end of each fiscal month, deliver to the Administrative Agent 
a copy of the Borrower's internally prepared monthly accounts payable aging.

                  (e)   BORROWING BASE CERTIFICATE.  Within fifteen (15) days 
after the end of each fiscal month, deliver to the Administrative Agent a 
Borrowing Base Certificate and an Inventory Report (with such supporting 
schedules as the Administrative Agent may request) signed by the chief 
financial officer or other officer of the Borrower satisfactory to the 
Administrative Agent, provided, however, that if excess Borrowing Base 
availability is less than or equal to $2,500,000, the Borrower shall deliver 
the Borrowing Base Certificate to the Administrative Agent on a weekly basis. 
Notwithstanding the foregoing, the Borrower shall deliver a Borrowing Base 
Certificate more frequently than otherwise provided herein at the request of 
the Administrative Agent.

                  (f)   ANNUAL PROJECTIONS.  Before the first day of each 
fiscal year, deliver to the Administrative Agent financial statement 
projections prepared on a monthly basis for the following fiscal year.

                  (g)   MATERIAL INVENTORY SUPPLIER LIST.  Within thirty (30) 
days after the end of each calendar year, deliver to the Administrative Agent 
a list of all Material Inventory Suppliers during the prior fiscal year.

                  (h)   SEC FILINGS.  Within five (5) days after filing with 
the Securities and Exchange Commission, deliver to the Administrative Agent a 
copy of the Borrower's Forms 10-K, 10-Q and any other material 
non-confidential filings with the SEC.

                                       27
<PAGE>

                  (i)   ADDITIONAL INFORMATION.  Deliver to the 
Administrative Agent such additional financial information, statements and 
reports as the Administrative Agent may reasonably request from time to time, 
including a Borrowing Base Certificate more frequently than monthly if the 
Administrative Agent so requests.

         Section 6.8    INSURANCE.  Carry and maintain in full force and 
effect at all times with financially sound and reputable insurance companies 
(a) all insurance required pursuant to the Security Agreement, (b) insurance 
acceptable to the Lender covering all of its property of an insurable nature 
(including, without limitation, the Inventory) against casualty risks of such 
types and in such amounts as such insurance is usually carried by businesses 
of established reputation and comparable type and size and as may be 
acceptable to the Lender; including, without limitation, liability on account 
of damage to persons or property and applicable workers' compensation 
insurance, and (c) and such other insurance as the Lender may reasonably 
require.  The Borrower shall deliver to the Administrative Agent from time to 
time at the Administrative Agent's request schedules setting forth all then 
in effect and shall cause the Lender to be named as additional insured or 
loss payee and provide the Lender with such certificates of insurance as the 
Lender may require.

         Section 6.9    MAINTENANCE OF PROPERTY.  Maintain and preserve all 
of its properties in good working order and condition, so that the efficiency 
of the Borrower's operations and business shall be fully maintained and 
preserved.

         Section 6.10  COMPLIANCE WITH LAWS.  Comply in all material respects 
with all laws, regulations, rules and orders of governmental authorities 
applicable to the Borrower or to its operations, business or property.

         Section 6.11   TAXES AND OTHER CHARGES. Duly pay and discharge all 
indebtedness, obligations, assessments, governmental charges and taxes, real 
and personal, including federal and state income taxes, levied upon or 
assessed against it or against its properties or income prior to the date on 
which penalties are attached thereto, unless, and only to the extent that, 
such shall be contested in good faith and by appropriate proceedings 
diligently conducted by the Borrower (unless and until foreclosure, 
distraint, sale or other similar proceedings shall have been commenced) and 
provided that such reserve or other appropriate provision, if any, as shall 
be required by GAAP has been made.

         Section 6.12   FURTHER ASSURANCE.  Execute and deliver to the Lender 
or the Administrative Agent such other and further instruments, security 
agreements, documents and information and do such other and further acts as 
may be reasonably required and requested by the Lender or the Administrative 
Agent in order to fully vest, perfect and maintain in the Lender any security 
interests or other rights herein contemplated.

         Section 6.13   FINANCIAL COVENANTS.  Maintain the following:

                                       28
<PAGE>

                  (a)   A ratio of current assets to the sum of current 
liabilities plus the aggregate outstanding balance under the Loan of at least 
1.10 to 1.00 computed monthly as at the end of each month.  Current assets 
and current liabilities shall be calculated in accordance with GAAP.  For 
purposes of this Section 6.13(a), prepaid expenses and stockholder 
receivables included in the calculation of current assets shall not exceed 
$1,250,000.

                  (b)   Maintain during each of the periods set forth below, 
a minimum Net Worth calculated as at the end of each month in such period in 
an amount which is greater than or equal to the amount set forth opposite 
such period; PROVIDED THAT the minimum Net Worth that the Borrower is 
required to maintain shall be increased by the sum of (i) 100% of the net 
proceeds received by the Borrower for the sale of any equity securities after 
the date of this Agreement, and (ii) 75% of the amount, if any, by which the 
Borrower's net after-tax income determined in accordance with GAAP for the 
fiscal year of the Borrower ending January 31, 1997 exceeds $2,900,000:

                Period                                 Minimum Net Worth
                ------                                 -----------------

     Date hereof to and including                         $39,000,000
         December 30, 1996
     December 31, 1996 to and including                   $42,000,000
         December 30, 1997
     December 31, 1997 to and including                   $44,500,000
         September 30, 1998

                  (c)   Maintain on each of the dates set forth below a 
maximum ratio of Funded Debt to EBITDA determined for the four fiscal 
quarters of the Borrower ending on such date that is less than or equal to 
the ratio set forth opposite such date;

           Date                                              Ratio
           ----                                              -----

     January 31, 1997                                      3.5 to 1.0
     April 30, 1997                                        3.5 to 1.0
     July 31, 1997                                         3.5 to 1.0
     October 31, 1997                                      3.5 to 1.0
     January 31, 1998                                      3.5 to 1.0
     April 30, 1998                                        3.5 to 1.0
     July 31, 1998                                         3.5 to 1.0

         Section 6.14   NOTIFICATIONS.  Promptly after learning thereof, 
notify the Administrative Agent in writing of the occurrence of (a) any Event 
of Default or any act, condition or event that with the giving of notice 
and/or the passage of time would constitute an Event of Default,

                                        29
<PAGE>

which notification shall include a statement of the chief executive or 
financial officer of the Borrower setting forth details of such act, 
condition or event and the action the Borrower proposes to take with respect 
thereto; (b) any material adverse change in the business, operations or 
financial condition of the Borrower; or (c) the pendency or threat of any 
investigation or material litigation or arbitration and of any tax deficiency 
or other proceeding before any governmental body or official affecting the 
Borrower.

         Section 6.15   PRIMARY DEPOSIT RELATIONSHIP.  Maintain the 
Borrower's primary deposit relationship with the Lender and its affiliates.

         Section 6.16   CHANGE IN MANAGEMENT.  Immediately notify the 
Administrative Agent of any change in the senior management (which shall mean 
vice president or above) of the Borrower.

         Section 6.17   INDEMNITY.  The Borrower shall indemnify and hold 
harmless the Lender and the Administrative Agent and persons or entities 
owned or controlled by or affiliated with the Lender or the Administrative 
Agent and their directors, officers, shareholders, partners, employees, 
consultants and agents (herein individually called an "INDEMNIFIED PARTY," 
and collectively called "INDEMNIFIED PARTIES") from and against, and 
reimburse and pay Indemnified Parties with respect to, any and all claims, 
demands, liabilities, losses, damages (including, without limitation, actual, 
consequential, exemplary and punitive damages), causes of action, judgments, 
penalties, fees, costs and expenses (including, without limitation, 
attorneys' fees, court costs and legal expenses and consultants' and experts' 
fees and expenses), of any and every kind or character, known or unknown, 
fixed or contingent, that may be imposed upon, asserted against or incurred 
or paid by or on behalf of any Indemnified Party on account of, in connection 
with, or arising out of (a) any act performed or omitted to be performed 
hereunder or the breach of or failure to perform any warranty, 
representation, indemnity, covenant, agreement or condition contained in any 
of the Loan Documents, (b) any transaction, act, omission, event or 
circumstance arising out of or in any way connected with the Collateral or 
the Borrower's performance or obligation under any of the Loan Documents, (c) 
the Borrower's violation of or failure to comply with any statute, law, rule, 
regulation or order now existing or hereafter occurring, including, without 
limitation, environmental laws and statutes, laws, rules, regulations and 
orders relating to pollutants, contaminants, wastes or hazardous, dangerous 
or toxic substances, and (d) the Borrower's failure to pay any expense 
associated with the Loan.  Without limiting the generality of the foregoing, 
it is the intention of the Borrower and the Borrower agrees that the 
foregoing indemnities shall apply to each Indemnified Party with respect to 
claims, demands, liabilities, losses, damages (including, without limitation, 
actual, consequential, exemplary and punitive damages, causes of action, 
judgments, penalties, fees, costs and expenses (including without 
limitation, attorneys' fees, court costs and legal expenses and consultants' 
and experts' fees and expenses) of any and every kind or character, known or 
unknown, fixed or contingent, that in whole or in part are caused by or arise 
out of the negligence of such Indemnified Party; however, such indemnities 
shall not apply to any

                                       30
<PAGE>

Indemnified Party to the extent the subject of that indemnification is caused 
by or arises out of the gross negligence or willful misconduct of such 
Indemnified Party. The foregoing indemnities shall not terminate upon release 
or foreclosure of the Collateral, but shall survive foreclosure of the liens 
and security interests created by the Loan Documents or conveyance in lieu of 
foreclosure and the repayment and performance of the Loan and the discharge 
and release of the liens and security interest created by the other Loan 
Documents. Any amount to be paid hereunder by the Borrower or for which the 
Borrower has indemnified an Indemnified Party shall be a demand obligation 
owing by the Borrower to the Lender or the Administrative Agent and shall 
bear interest at the Default Rate until paid, and shall constitute a part of 
the Obligations and be indebtedness secured and evidenced by the Loan 
Documents.

         Section 6.18   LANDLORD'S WAIVERS.  The Borrower shall deliver to 
the Administrative Agent a landlord's waiver in form and substance acceptable 
to the Administrative Agent from the landlord of any premises at which any of 
the Collateral is located.

         Section 6.19   LOAN EXPENSES.  Within five (5) days after demand by 
the Lender or the Administrative Agent, pay to the Administrative Agent any 
Loan Expenses incurred by either the Lender or the Administrative Agent.

         Section 6.20   MATERIAL INVENTORY SUPPLIER.  Promptly after entering 
into any agreement with any Material Inventory Supplier or any amendment to 
any agreement with any Material Inventory Supplier (other than any amendment 
which adds additional retail locations at which the Borrower is transacting 
business), provide the Administrative Agent with a copy of such agreement or 
amendment.

                                       
                                  ARTICLE VII

                               NEGATIVE COVENANTS

         Without the Lender's or the Administrative Agent's prior written 
consent, so long as any or Obligations remain outstanding hereunder, the 
Borrower will not:

         Section 7.1    FIXED ASSET EXPENDITURES.  Make any capital 
expenditures (as such term is defined in accordance with GAAP) or 
expenditures for fixed assets in excess of $8,000,000 during any fiscal year 
of the Borrower.

         Section 7.2    INDEBTEDNESS.  Create, incur, permit, assume or 
suffer to exist any Indebtedness, except (a) the obligations created hereby; 
(b) Indebtedness created or incurred in the ordinary course of business which 
constitutes trade payables or obligations other than indebtedness for 
borrowed money or Indebtedness representing the deferred purchase price of 
goods, (c) leases which are or should be classified as operating leases in 
accordance with

                                       31
<PAGE>

GAAP; (d) Manufacturer Payables, (e) the Bond Indebtedness, and (f) the 
capital leases and term debt described on Schedule 7.2 hereto and additional 
capital leases for store locations entered into in the ordinary course of 
business.

         Section 7.3   LIENS. Create, incur, permit, assume or suffer to 
exist any liens on any Collateral not permitted by the Security Agreement.

         Section 7.4    SELL, MERGE, DISPOSE OF ASSETS.  Merge or consolidate 
into or with any other corporation, or permit any other corporation to merge 
into the Borrower, or dissolve or liquidate, or sell, lease or otherwise 
dispose of, in a single transaction or a series of related transactions, all 
or a substantial part of its assets or operating properties or the Collateral.

         Section 7.5    CAPITAL STRUCTURE.  Effect any recapitalization, 
alter or amend its capital structure, or sell, transfer or otherwise convey any 
or all of the stock of the Borrower the result of which would be to effectuate 
a change in control of the Borrower.

         Section 7.6    CHANGE OF BUSINESS.  Change materially the nature of 
the business conducted by the Borrower, engage to any material extent in a 
kind of business materially different from that presently conducted or change 
the Borrower's fiscal year.

         Section 7.7    LOAN.  Make any loan or salary advance to any Person; 
except loans or salary advances to Borrower's officers, directors, 
shareholders or employees not in excess of $100,000 in the aggregate 
outstanding at any one time for all such loans and advances.

         Section 7.8    ERISA COMPLIANCE. Permit any Plan maintained by it to 
(a) engage in any "prohibited transaction" as such term is defined in Section 
4975 of the Code, (b) incur any "accumulated funding deficiency" as such term 
is defined in Section 302 of ERISA, (c) terminate in a manner which could 
result in liability to the Borrower, any Subsidiary of the Borrower, or any 
ERISA Affiliate of the Borrower or any ERISA Affiliate of any Subsidiary of 
the Borrower that exceeds $1,200,000 or in the imposition of a lien on the 
property of the Borrower pursuant to Section 4068 of ERISA or (d) experience 
an ERISA Event or any other event or condition that may reasonably be 
expected to result in liability to the Borrower, any ERISA Affiliate of any 
Subsidiary of the Borrower, or any ERISA Affiliate of the Borrower or any 
Subsidiary of the Borrower in an aggregate amount exceeding $1,200,000, or 
(e) have nonforfeitable accrued benefits with a present value in excess of 
the fair market value of Plan assets by $1,200,000 or more, all determined as 
of the most recent actuarial valuation date for each such Plan based upon the 
actuarial assumptions used by the Plan's actuaries for purposes of 
determining the funding for the Plan pursuant to Section 412 of the Code.  
The Borrower will not, and will not permit any Subsidiary of the Borrower or 
any ERISA Affiliate of either of them to, create or suffer to exist any 
liability, including, without limitation, liabilities with respect to 
terminated employees, with respect to a Welfare Plan, if, immediately after 
giving effect to such liability, the aggregate annualized cost (including, 
without limitation, the cost of

                                       32
<PAGE>

insurance premiums) with respect to Welfare Plans for which the Borrower, all 
Subsidiaries of the Borrower and all ERISA Affiliates thereof are or may 
become liable in any fiscal year of the Borrower would exceed $1,200,000.

         Section 7.9    DISTRIBUTIONS, DIVIDENDS.  Declare, pay, set aside 
funds for or make any distribution or dividend, in cash or assets or trust, 
to or for the benefit of the Borrower's shareholders.

         Section 7.10   ASSIGNMENT.  Assign or attempt to assign any of its 
rights or delegate any of its duties under this Agreement or any other Loan 
Document.

         Section 7.11   USE OF FUNDS.  Use funds advanced under this 
Agreement for any purpose other than for ordinary working capital purposes.

         Section 7.12   ACCOUNTING PROCEDURES.  Make a material change in the 
Borrower's accounting procedures, whether for tax purposes or otherwise, 
except as may be required by GAAP.

         Section 7.13   BORROWING BASE CONFORMITY.  The Borrowing Base shall 
not at any time include Inventory which the Borrower knows or should know to 
be other than Acceptable Inventory.

         Section 7.14   SUBSIDIARY OR AFFILIATE.  Form or consent to or take 
part in the formation of any Subsidiary or affiliate.

         Section 7.15   AMENDMENTS TO ORGANIZATIONAL DOCUMENTS.  Amend or 
permit any amendments to its Certificate of Incorporation, Bylaws or other 
governing documents.

         Section 7.16   INVESTMENTS AND NEW BUSINESSES.  Make any 
acquisitions of or capital contributions to or other investments in any 
Person other than (a) investments in open market commercial paper, maturing 
within 365 days after acquisition thereof, with a credit rating of at least 
A-1 or P-1 by either Standard & Poor's Corporation or Moody's Investors 
Service, Inc., (b) marketable obligations issued or unconditionally 
guaranteed by the United States of America or an instrumentality or agency 
thereof and entitled to the full faith and credit of the United States of 
America, (c) municipal bonds with a credit rating of at least A by either 
Standard & Poor's or Moody's, and (d) demand deposits, time deposits 
(including certificates of deposit), and money market accounts.

         Section 7.17   BURDENSOME UNDERTAKINGS. Undertake, or become 
contractually bound to undertake, any action that is reasonably likely to 
have a material adverse affect on Borrower or its present or future business, 
properties, assets, operations or financial condition.

                                       33

<PAGE>
                                     ARTICLE VIII
                                           
                                  EVENTS OF DEFAULT
                                           
     The occurrence of any one or more of the following events or existence of 
one or more of the following conditions shall, at the election of the Lender, 
constitute an Event of Default under this Agreement and all other Loan 
Documents:

     Section 8.1 FAILURE TO PAY NOTE.  The Borrower shall fail to pay the 
principal of or interest on the Note, or any installment thereof (whether due 
on the date provided for therein or by acceleration or otherwise).

     Section 8.2 OTHER OBLIGATIONS.  The failure of the Borrower properly to 
observe or perform any other obligation, covenant or agreement set forth 
herein, which failure is not cured within 10 days after notice from the 
Lender or the Administrative Agent.

     Section 8.3 MISREPRESENTATION.  Any representation or warranty made by 
the Borrower to the Lender herein or in connection with the making of the 
Loan, or in any certificate, statement or report made pursuant to this 
Agreement is false, misleading or erroneous in any material respect.

     Section 8.4 DEFAULT UNDER LOAN DOCUMENT.  The occurrence of any default 
by the Borrower, or the occurrence of any event or circumstance defined as an 
event of default, under any of the Loan Documents, not cured within the 
applicable cure period, if any, set forth therein.

    Section 8.5 BANKRUPTCY.  The Borrower or any of its Subsidiaries shall 
make an assignment for the benefit of creditors; file a petition in 
bankruptcy; be adjudicated insolvent or bankrupt or admit in writing the 
inability to pay debts as they mature; petition or apply to any tribunal for 
the appointment of a receiver of any trustee or similar officer for the 
Borrower or a substantial part of the assets of the Borrower; or shall 
commence any proceeding under any bankruptcy, reorganization, arrangement, 
readjustment of debt, dissolution or liquidation law or statute of any 
jurisdiction, whether now or hereafter in effect; or if there shall have been 
filed any such petition or application, or any such proceeding shall have 
been commenced against the Borrower that remains undismissed for a period of 
sixty (60) days or more; or the Borrower by any act or omission shall 
indicate its consent to, approval of or acquiescence in any such petition, 
application or proceeding, or the appointment of a receiver of or any trustee 
or similar officer for the Borrower, or the Collateral or any substantial 
part of any of the properties of the Borrower, or shall suffer any such 
receivership or trusteeship to continue undischarged for a period of thirty 
days or more; or any judgment, writ, warrant of attachment or execution or 
similar process shall be issued or levied against a substantial part of the 
property of the

                                    34
<PAGE>

Borrower, and such judgment, writ or similar process shall not be released, 
vacated or fully bonded within sixty days after its issue or levy.

     Section 8.6 INDEBTEDNESS.  The Borrower shall fail to pay when due the 
principal or interest on any Indebtedness of the Borrower in excess of 
$250,000 in the aggregate, or a default by the Borrower in the observance or 
performance of any term, covenant or agreement of the Borrower in any 
agreement relating to any indebtedness of the Borrower, and the passage of 
any period of grace with respect thereto, the effect of which default is to 
permit the holder of such indebtedness to declare the same due prior to the 
date fixed for its payment under the terms thereof.

     Section 8.7 LOAN DOCUMENTS.  This Agreement or any Loan Document shall at
any time for any reason cease to be in full force and effect.

     Section 8.8 CONTEST LOAN DOCUMENTS.  The Borrower shall contest the 
validity or enforceability of, or deny that it has any or further liability 
or obligations under, this Agreement or any Loan Document.

     Section 8.9 MATERIAL ADVERSE CHANGE.  There shall occur a material 
adverse change, as reasonably determined by the Lender acting in good faith, 
in the condition, value or marketability of the Collateral or in the 
financial condition of the Borrower.

     Section 8.10 LITIGATION.  The commencement of any litigation or 
proceeding which may reasonably be expected, in the good faith determination 
of the Lender, to materially and adversely affect the ability of the Borrower 
to perform its obligations under the Loan Documents, which has not been 
dismissed within 120 days after filing.

     Section 8.11 JUDGMENTS. The entry of a final judgment against the Borrower
in excess of $250,000 which shall not be discharged or execution thereon stayed
pending appeal or, in the event of such stay, such judgment shall not be
discharged immediately after such stay expires.

          Section 8.12 ERISA.  Any ERISA Event shall have occurred with 
respect to a Plan and, thirty days after notice thereof shall have been given 
to the Borrower by the Lender or the Administrative Agent (i) such ERISA Event 
shall still exist and (ii) in the case of an ERISA Event described in clauses 
(a), (e), (f), (i) and (j) of the definition of ERISA Event, the sum (determined
as of the date of occurrence of such ERISA Event) of the insufficiency of such 
Plan and the Insufficiency of any and all other Plans with respect to which an 
ERISA Event shall have occurred and then exist is equal to or greater than 
$1,200,000.

     Section 8.13 SECURITY INTEREST.  Borrower shall grant or permit the
manufacturer, supplier, vendor or distributor of any of Borrower's Inventory or
any other Party to have any


                                     35
<PAGE>

security interest in any of Borrower's Inventory, including, without 
limitation, any purchase money security interest.

     Section 8.14 QUALIFIED OPTION.  The auditor's opinion accompanying the 
audited financial statements provided by the Borrower pursuant to Section 6.7 
shall contain any qualifications not acceptable to the Administrative Agent 
in its reasonable discretion.

                                      ARTICLE IX
                                           
                                       REMEDIES
                                           
     Section 9.1 RIGHT TO ACCELERATE.  Upon the occurrence of any Event of 
Default and at any time thereafter during the continuance thereof, the Lender 
shall be under no further obligation to make Advances of the Loan hereunder 
or take any other action with respect to this Agreement, and all amounts 
advanced under the Loan shall, at the option of the Lender, bear interest 
from the date of such Event of Default at the Default Rate of interest.  Upon 
the occurrence of an Event of Default, the Loan with all accrued interest and 
other amounts payable hereunder, shall, at the option of the Lender during 
the continuance of such Event of Default, become immediately due and payable 
without presentment, demand, protest or other notice of any kind, all of 
which are expressly waived by the Borrower.  Except as set forth in the 
preceding sentence, the Lender may declare a default under all other Loan 
Documents, and the Administrative Agent or the Lender (as applicable) may 
proceed with every remedy available at law or in equity or provided for 
herein or in any other Loan Documents, and all expenses incurred by the 
Lender or the Administrative Agent (including, but not limited to, reasonable 
attorneys' fees and disbursements) in connection with any remedy shall be 
deemed Obligations of the Borrower to the Lender and a part of the 
Obligations owed by the Borrower to the Lender hereunder.

     Section 9.2 NO WAIVER; REMEDIES CUMULATIVE.  No delay or failure of the 
Lender or the Administrative Agent in the exercise of any right or remedy 
provided for hereunder shall be deemed a waiver of the right by the Lender or 
the Administrative Agent, and no exercise or partial exercise or waiver of 
any right or remedy shall be deemed a waiver of any further exercise of such 
right or remedy or of any other right or remedy that the Lender or the 
Administrative Agent may have.  The enforcement of any rights of the Lender 
or the Administrative Agent as to any security for the Loan shall not affect 
the rights of the Lender to enforce payment of the Loan and to recover 
judgment for any portion thereof remaining unpaid.  The rights and remedies 
herein expressed are cumulative and not exclusive of any right or remedy that 
the Lender or the Administrative Agent shall otherwise have.


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<PAGE>

                                      ARTICLE X
                                           
                               THE ADMINISTRATIVE AGENT
                                           
          Section 10.1 APPOINTMENT.  The Lender hereby irrevocably designates 
and appoints the Administrative Agent as its agent under this Agreement and 
the other Loan Documents, and irrevocably authorizes the Administrative Agent 
as the agent for such Lender, to take such action on its behalf under the 
provisions of this Agreement and the other Loan Documents and to exercise 
such powers and perform such duties as are expressly delegated to the 
Administrative Agent by the terms of this Agreement and the other Loan 
Documents, together with such other powers as are reasonably incidental 
thereto.  Notwithstanding any provision to the contrary contained elsewhere 
in this Agreement, the Administrative Agent shall not have any duties or 
responsibilities, except those expressly set forth herein, or any fiduciary 
relationship with the Lender, and no implied covenants, functions, 
responsibilities, duties, obligations or liabilities shall be read into this 
Agreement or any other Loan Document or otherwise exist against the 
Administrative Agent.

          Section 10.2 DELEGATION OF DUTIES.  The Administrative Agent may 
execute any of its duties under this Agreement and the other Loan Documents 
by or through agents or attorneys-in-fact and shall be entitled to rely on 
advice of counsel concerning all matters pertaining to such duties.  The 
Administrative Agent shall not be responsible to the Lender for the 
negligence or misconduct of any agents or attorneys-in-fact selected by them, 
provided that the Administrative Agent selects such agent or attorney-in-fact 
with reasonable care.

          Section 10.3 EXCULPATORY PROVISIONS.  Neither the Administrative 
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact 
or affiliates shall be (a) liable to Lender for any action lawfully taken or 
omitted to be taken by it or such Person or entity under or in connection with 
this Agreement or any other Loan Document (except for its or such Person's or 
entity's own gross negligence or willful misconduct), or (b) responsible in any 
manner to the Lender for any recitals, statements, representations or warranties
made by Borrower or any representative thereof or any other Person contained in 
this Agreement or any other Loan Document or in any certificate, report, 
statement or other document referred to or provided for in, or received by the 
Administrative Agent under or in connection with this Agreement or any other 
Loan Document or for the value, validity, effectiveness, genuineness, 
enforceability or sufficiency of this Agreement or the Note or any other Loan 
Document or for any failure of Borrower to perform its obligations hereunder or 
thereunder.  The Administrative Agent shall not be under any obligation to the 
Lender to ascertain or to inquire as to the observance or performance of any of 
the agreements contained in, or conditions of, this Agreement or any other Loan 
Document, or to inspect the properties, books or records of the Borrower.

     Section 10.4 RELIANCE BY THE ADMINISTRATIVE AGENT.  The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
(a) any writing, resolution, notice,


                                     37
<PAGE>

consent, certificate, affidavit, letter, telecopy or telex message, statement, 
order or other document or conversation believed by it to be genuine and 
correct and to have been signed, sent or made by the proper Person or Persons, 
(b) advice and statements of legal counsel (including, without limitation, 
counsel to the Borrower), (c) independent accountants and (d) other experts 
selected by the Administrative Agent.  The Administrative Agent shall be 
fully justified in failing or refusing to take any action under this 
Agreement or any other Loan Document unless it shall first receive such 
advice or concurrence of the Lender (except as otherwise expressly provided 
herein) as it deems appropriate or it shall first be indemnified to its 
satisfaction by the Lender against any and all liability and expense which 
may be incurred by it by reason of taking or continuing to take any such 
action.  The Administrative Agent shall in all cases be fully protected in 
acting, or in refraining from acting, under this Agreement and the Note and 
the other Loan Documents in accordance with a request of the Lender (except 
as otherwise expressly provided herein), and such request and any action 
taken or failure to act pursuant thereto shall be binding upon all the Lender 
and all future holders of the Note.

          Section 10.5 INDEMNIFICATION.  The Lender agrees to indemnify the 
Administrative Agent in its capacity as such (to the extent not reimbursed by 
the Borrower and without limiting the obligation of the Borrower to do so), 
from and against any and all liabilities, obligations, losses, damages, 
penalties, actions, judgments, suits, costs, expenses or disbursements of any 
kind whatsoever which may at any time (including, without limitation, at any 
time following the payment of the Note) be imposed on, incurred by or 
asserted against the Administrative Agent in any way relating to or arising 
out of this Agreement, any of the other Loan Documents or the transactions 
contemplated hereby or thereby or any action taken or omitted the 
Administrative Agent under or in connection with any of the foregoing; 
PROVIDED THAT the Lender shall not be liable for the payment of any portion 
of such liabilities, obligations, losses, damages, penalties, actions, 
judgments, suits, costs, expenses or disbursements resulting solely from the 
Administrative Agent's gross negligence or willful misconduct.  The 
agreements in this subsection shall survive the payment of the Note and all 
other amounts payable hereunder.

     Section 10.6 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.  The 
Administrative Agent and its affiliates may participate in the Loan and make 
loans to, accept deposits from and generally engage in any kind of business 
with Borrower as though it was not an Administrative Agent, hereunder and 
under the other Loan Documents.


                                    38
<PAGE>

                              ARTICLE XI
                                           
                       RIGHTS AND DUTIES OF LENDER
                                           
     Section 11.1 ASSIGNMENTS AND PARTICIPATIONS. The Lender shall be 
entitled at any time, and from time to time, to grant a participation 
interest in portions of its interest in the Loan provided that the Lender 
shall continue to act on behalf of itself and all participants hereunder and 
such participants' interests in the Loan and the Loan Documents shall be 
confined solely to the contractual relationship between the Lender and its 
participants and such participants shall not be deemed a direct Lender 
hereunder, or to sell an assignment of the Loan; provided, however, that no 
such participation or sale of an assignment (other than the first three such 
participations) shall result in any additional expense to the Borrower or 
shall alter any of the rights or obligations of the Borrower hereunder. The 
Borrower acknowledges that the Lender intends to sell participating interests 
in the Loan and the Loan Documents and may sell an assignment of the Loan and 
agrees to cooperate with the Lender in the sale of any such participating 
interests or assignment.

          Section 11.2 RELIANCE UPON ATTORNEYS.  The Lender and the 
Administrative Agent may rely upon advice received from time to time from 
attorneys, experienced as bank counsel, and any action taken by the Lender or 
the Administrative Agent upon the basis (if any such advice shall be deemed 
to be reasonable.

     Section 11.3 ACCEPTANCE AND CONSENT BY THE LENDER.  Unless otherwise 
indicated herein, the phrases "acceptable to the Lender," and "as the Lender 
may require" or other similar phrases used in this Agreement, shall mean 
acceptable to the Lender, in its sole and absolute discretion and as the 
Lender, may require in its sole and absolute discretion.  In addition, any 
consent by or other action required by the Lender or the Administrative Agent 
hereunder or under any other Loan Document or any discretion to be rendered 
by the Lender or the Administrative Agent hereunder or under any other Loan 
Document shall be in the Lender's or the Administrative Agent's sole and 
absolute discretion unless otherwise indicated.

                                 ARTICLE XII
                                        
                                MISCELLANEOUS
                                         
         Section 12.1 COMMUNICATION.

               (a) Any notice, request, demand, consent, approval or other 
communication required or permitted hereunder to be given by the Borrower to 
the Lender or the Administrative Agent shall be in writing and shall be 
deemed to have been given when personally delivered, when delivered if by 
overnight delivery service or three days after having


                                   39
<PAGE>

been mailed by United States registered or certified mail, return receipt 
requested, postage prepaid, addressed to the Lender or the Administrative 
Agent at the address adjacent to such party's name on the signature page 
hereto.

               (b) Any notice, request, demand, consent, approval or other 
communication required or permitted hereunder to be given to the Borrower 
shall be deemed to have been given when personally delivered, when delivered 
if sent by overnight delivery service, or three days after having been mailed 
by United States registered or certified mail, return receipt requested, 
postage prepaid, addressed to the Borrower at the address adjacent to 
Borrower's name on the signature page hereto.

               (c) Any party may change its address for purposes of receipt 
of any such communication by giving ten (10) days' prior written notice of 
such change to the other parties in the manner above prescribed.

     Section 12.2 SEVERABILITY.  In the event any provision of this Agreement 
or any other Loan Document shall be held invalid or unenforceable by any 
court of competent jurisdiction, such holding shall not invalidate or render 
unenforceable any other provision hereof or thereof, nor affect the validity 
or enforceability of such provision in any other jurisdiction.

     Section 12.3 WAIVERS.  No course of dealing on the part of any Lender or 
the Administrative Agent, or the officers, employees, consultants or agents 
thereof, nor any failure or delay by the Lender or the Administrative Agent 
with respect to exercising any right, remedy, power or privilege under any 
Loan Document or at law or in equity shall operate as a waiver thereof, nor 
shall a single or partial exercise thereof preclude any other or further 
exercise or the exercise of any other right, remedy, power or privilege.  No 
waiver or consent shall be effective unless the same shall be in writing and 
signed by the Lender, and then such waiver or consent shall be effective only 
in the specific instance and for the specific purpose for which given.  No 
notice to or demand on the Borrower in any case shall entitle the Borrower to 
any other or further notice or demand in similar or other circumstances.

         Section 12.4 CUMULATIVE RIGHTS.  The enforcement of any rights of 
the Lender as to any security for the Loan shall not affect the Lender's 
rights to enforce payment of the Loan and to recover judgment for any portion 
thereof remaining unpaid.  The rights and remedies herein expressed are 
cumulative and not exclusive of any right or remedy that the Lender, shall 
otherwise have.

     Section 12.5 RIGHT OF SETOFF.  The Borrower hereby confirms the Lender's 
rights of banker's lien and setoff and nothing in this Agreement, or any 
other Loan Document shall be deemed a waiver, limitation or prohibition of 
such right of banker's lien or setoff.


                                    40
<PAGE>

      Section 12.6 COLORADO LAW.  The substantive law of Colorado shall govern 
all the terms, conditions and interpretations of the Loan, this Agreement and 
all other Loan Documents.

     Section 12.7 VENUE AND JURISDICTION.  In the event of litigation concerning
the Loan, this Agreement or any other Loan Documents, the parties hereto agree
that the exclusive venue and place of jurisdiction shall be the State of
Colorado, City and County of Denver, including the United States District Court
for the District of Colorado.

     Section 12.8 ASSIGNMENT.  The Borrower may not assign any of its rights 
hereunder without the prior written consent of the Lender.  Any assignment 
without such consent shall be void and shall constitute a default hereunder. 
Subject to Section 11.1, the Lender may sell, assign, transfer or grant 
participations in all or any part of the Loan without the prior written 
consent of the Borrower.

     Section 12.9 SUCCESSORS AND ASSIGNS.  This Agreement shall be binding 
upon, and shall inure to the benefit of and be enforceable by, the Borrower 
the Administrative Agent and the Lender and their respective successors and 
assigns.

     Section 12.10 HEADINGS.  The paragraph headings herein are for 
convenience only and shall not affect the construction hereof.

     Section 12.11 THIRD-PARTY BENEFICIARY.  This Agreement and all 
instruments, documents or agreements executed pursuant hereto are not 
intended to benefit any person other than the Borrower and the Lender.

     Section 12.12 ENTIRE AGREEMENT.  This Agreement and the other Loan 
Documents contain the entire agreement between the Borrower, the Lender and 
the Administrative Agent with respect to the subject matter contained herein 
and therein, and supersede and cancel any prior agreement or understanding, 
oral or written, with respect to such subject matter.

     Section 12.13 CONFLICT.  In the event of a conflict between the terms, 
covenants and conditions stated herein and those stated in any other Loan 
Document, this Agreement shall govern.


                                   41
<PAGE>

      Section 12.14  SURVIVAL OF REPRESENTATION AND WARRANTIES.  All 
representations and warranties contained in this Agreement or made in writing 
by or on behalf of the Borrower in connection with the actions contemplated 
hereby shall survive the execution and delivery of this Agreement and of the 
Note, regardless of any investigation at any time made by the Lender or on 
any of their behalf. All statements contained in any certificate or other 
instruments delivered by or on behalf of the Borrower hereunder or in 
connection with the transactions contemplated hereby shall be deemed 
representations and warranties of the Borrower hereunder.

     Section 12.15 EXECUTED COUNTERPARTS.  This Agreement may be executed in 
any number of counterparts, each of which shall be an original, but all of 
which together shall constitute one agreement.

     Section 12.16 WAIVER OF JURY TRIAL.  The Borrower, the Lender and the 
Administrative Agent hereby waive any right either may have to a jury trial 
in the event of litigation concerning the Loan, this Agreement, or any other 
Loan Document.

     Section 12.17 NO ORAL AGREEMENTS. This document and all other documents 
relating hereto constitute a credit agreement under C.R.S. Section 38-10-101 
et seq. which represents the final agreement between the parties and may not 
be contradicted by evidence of prior, contemporaneous, or subsequent oral 
agreement between the parties.


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<PAGE>

      Section 12.18 AMENDMENTS.  This Agreement may be amended only by a 
written agreement executed by the Borrower, the Lender and the Administrative 
Agent.

                                      BORROWER:
                                           
                                      ULTIMATE ELECTRONICS, INC. a
                                      Delaware corporation
                                      By: /s/ David J. Workman
                                          --------------------------------
                                          David J. Workman, President


                                      By: /s/ Alan Kessock
                                          --------------------------------
                                          Alan Kessock, Vice President,
                                          Finance and Administration

                                       321A W. 84th Avenue
                                       Thornton, Colorado 80221
                                           
                                       LENDER:
                                           
                                       NORWEST BANK COLORADO, NATIONAL
                                       ASSOCIATION, a National Banking
                                       Association


                                       By: /s/ Karen I. Hardy
                                           -------------------------------
                                           Karen I. Hardy, Vice President
                                           1740 Broadway
                                           Denver, Colorado 80274-8673
                                           Attention: Karen I. Hardy


                                       ADMINISTRATIVE AGENT:

                                       NORWEST BUSINESS CREDIT, INC.,
                                       a Minnesota corporation


                                       By: /s/ David Larsen
                                           -------------------------------
                                           David Larsen, Vice President
                                           1740 Broadway
                                           Denver, Colorado 80274-8625


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