**SECOND AMENDED AND RESTATED CREDIT AGREEMENT**

 

     THIS SECOND AMENDED AND RESTATEDCREDIT AGREEMENT, dated as of February 26, 2003 (this "Agreement"),is entered into by and among: (1) WILD OATS MARKETS, INC., a Delaware corporation(the "Borrower"); (2) each of the financial institutions from timeto time listed in Schedule I hereto (each a "Lender", andcollectively, the "Lenders"); and (3) WELLS FARGO BANK, NATIONALASSOCIATION, a national banking association, as administrative agent for the Lenders (insuch capacity, the "Administrative Agent"), L/C Issuer and Swing LineLender.     

** 
RECITALS

     A.     TheBorrower and the Administrative Agent are parties to that certain Amended and RestatedCredit Agreement (the "Prior Credit Agreement"), dated as of August 1,2000, by and among, interalia, (1) the Borrower; (2) each of the financialinstitutions parties thereto as lenders (the "Prior Lenders"); and (3)the Administrative Agent, as amended by that certain Amendment No. 1 to Amended andRestated Credit Agreement, dated as of October 17, 2001, as further amended by thatcertain Amendment No. 2 to Amended and Restated Credit Agreement, dated as of November 12,2001, as further amended by that certain Amendment No. 3 to Amended and Restated CreditAgreement, dated as of December 14, 2001 and as further amended by that certain AmendmentNo. 4 to Amended and Restated Credit Agreement, dated as of July 26, 2002.

     B.     Pursuantto the Prior Credit Agreement, the Prior Lenders (and the Swing Line Lender (as defined inthe Prior Credit Agreement), in the case of clause (iii) of this Recital B) havemade available to the Borrower a term loan, revolving loan and swing line loan creditfacility (the "Prior Credit Facility"), of which $36,959,375.34 isoutstanding thereunder as of February 26, 2003.

     C.     Inaddition, pursuant to the Prior Credit Agreement, the Issuing Lender (as defined in thePrior Credit Agreement) has issued for the account of the Borrower the standby letters ofcredit described on Schedule II to this Agreement (collectively, the "PriorLetters of Credit"), of which $4,058,990.00 is issued and outstanding as ofFebruary 26, 2003.

     D.     TheBorrower has requested (i) that the Prior Lenders sell and assign to the Lenders, and theLenders purchase and assume from the Prior Lenders, each of the Prior Lenders’proportionate shares of the loans made by such Prior Lenders under the Prior CreditFacility (such loans, collectively, the "Prior Loans") and (ii)immediately after the purchase of such Prior Loans by the Lenders from the Prior Lenders,that the Administrative Agent and the Lenders amend and restate the Prior Credit Agreementand related documents (collectively, the "Prior Credit Documents") tomake available to the Borrower an amended and restated credit facility to (i) amend andrestate the obligations of the Borrower with respect to the Prior Loans and (ii) provideadditional financing for the Borrower’s working capital and general corporatepurposes. In connection therewith, the Borrower has also requested that the Prior Lettersof Credit become "Letters of Credit" issued and outstanding hereunder.

     E.     TheLenders are willing to purchase from the Prior Lenders the Prior Loans, and theAdministrative Agent and the Lenders are willing to immediately thereafter amend andrestate the Prior Credit Agreement to provide the Borrower with such amended and restatedcredit facility upon the terms and subject to the conditions set forth herein; forconvenience the Prior Credit Agreement is being amended and restated with theunderstanding that the collateral securing the obligations of the Borrower and the otherLoan Parties under the Prior Credit Agreement and the Prior Credit Documents for allpurposes will continue to secure the obligations of the Borrower and the other LoanParties arising under this Agreement and the other Credit Documents.

** 
AGREEMENT

     NOW, THEREFORE, in consideration ofthe above Recitals and the mutual covenants herein contained, the parties hereto herebyagree as follows:
**ARTICLE I.      INTERPRETATION.**
     1.01.     Definitions.Unless otherwise indicated in this Agreement or any other Credit Document, each term setforth below, when used in this Agreement or any other Credit Document, shall have therespective meaning given to that term below or in the provision of this Agreement or otherdocument, instrument or agreement referenced below.

     "Acquired Company"shall mean the Person whose assets or Equity Securities are the subject of an Acquisition.

     "Acquisition"shall mean any transaction, or any series of related transactions, consummated after theClosing Date, by which the Borrower and/or any of the other Loan Parties directly orindirectly (a) acquires any ongoing business or all or substantially all of the assets ofany Person engaged in any ongoing business, whether through purchase of assets, merger orotherwise; (b) acquires control of the Equity Securities of a Person engaged in an ongoingbusiness representing more than 50% of the total voting power for the election ofdirectors or other governing position if the business affairs of such Person are managedby a board of directors or other governing body; or (c) acquires control of more than 50%of the ownership interest in any partnership, joint venture, limited liability company,business trust or other Person engaged in an ongoing business that is not managed by aboard of directors or other governing body.

     "Acquisition-RelatedIndebtedness" shall mean:

          (a)     Indebtednessof an Acquired Company that is owed to a Person that is not the seller of the AcquiredCompany, or an Affiliate of such seller and that is either unsecured or is secured solelyby a Permitted Lien described in Section 5.02(b)(vii), (ix) or (xx); or

          (b)     SellerIndebtedness that is owed to a Person that is not the seller of the Acquired Company, oran Affiliate of such seller and that is either unsecured or is secured solely by aPermitted Lien described in Section 5.02(b)(vii).

     "Adjusted Leverage Ratio"shall mean, as of any date of determination, the ratio of (a) the sum of (i) Average TotalFunded Debt as of that date plus (ii) six (6) times Net Rents for the four FiscalQuarter period most recently ended, to (b) EBITDAR for the four Fiscal Quarterperiod most recently ended (excluding (i) any Executive Contract Expense for such periodand (ii) Rental Expense for such period not otherwise constituting Net Rents). 

     "Administrative Agent"shall have the meaning given to that term in clause (3) of the introductory paragraph.

     "AdministrativeAgent’s Fee Letter" shall mean the letter agreement dated as of December 11,2002,****between the Borrower and the Administrative Agent regarding certain feespayable by the Borrower to the Administrative Agent.

     "Affiliate" shallmean, with respect to any Person, (a) each Person that, directly or indirectly, owns orcontrols, whether beneficially or as a trustee, guardian or other fiduciary, ten percent(10%) or more of any class of Equity Securities of such Person, (b) each Person thatcontrols, is controlled by or is under common control with such Person or any Affiliate ofsuch Person or (c) each of such Person’s officers, directors, joint venturers andpartners; provided, however, that in no case shall the Administrative Agentor any Lender be deemed to be an Affiliate of the Borrower or any of its Subsidiaries forpurposes of this Agreement. For the purpose of this definition, "control" of aPerson shall mean the possession, directly or indirectly, of the power to direct or causethe direction of its management or policies, whether through the ownership of votingsecurities, by contract or otherwise.

     "After-Tax Basis"means, with respect to any payment received or deemed to have been received by any Personunder Section 2.12, the amount of such payment (the "base payment")supplemented by a further payment (the "additional payment") to that Person sothat the sum of the base payment plus the additional payment shall, after deduction of theamount of all taxes required to be paid by such Person in respect of the receipt oraccrual of the base payment and the additional payment (taking into account any currentcredits or deductions arising therefrom and the timing thereof), be equal to the basepayment. Such calculations shall be made on the basis of the amounts of such taxesactually required to be paid by or on behalf of the recipient.

     "Agreement" shallhave the meaning given to that term in the introductory paragraph.

     "Applicable Lending Office"shall mean, with respect to any Lender, (a) in the case of its Base Rate Loans, itsDomestic Lending Office, and (b) in the case of its LIBOR Loans, its Eurodollar LendingOffice.

     "Applicable Margin"shall mean, with respect to each Loan, the *per annum* margin which is determinedpursuant to the Pricing Grid and added to the Base Rate or LIBOR Rate, as the case may be,for such Loan; provided, however, that each Applicable Margin determinedpursuant to the Pricing Grid shall, at the election of the Required Lenders, be increasedby two percent (2.00%) on the date an Event of Default occurs and shall continue at suchincreased rate unless and until such Event of Default is waived in accordance with thisAgreement. The Applicable Margin shall be determined and, as applicable, shall change asprovided in the Pricing Grid.

     "Assignee Lender"shall have the meaning given to that term in Section 8.05(c).

     "Assignment" shallhave the meaning given to that term in Section 8.05(c).

     "Assignment Agreement"shall have the meaning given to that term in Section 8.05(c).

     "Assignment Effective Date"shall have, with respect to each Assignment Agreement, the meaning set forth therein.

     "Assignor Lender"shall have the meaning given to that term in Section 8.05(c).

     "Average Total Funded Debt"shall mean, as of the end of any Fiscal Quarter, the average Fiscal Month end balance ofTotal Funded Debt for such Fiscal Quarter.

     "Back-Up Letter of Credit"shall have the meaning given to that term in Section 2.02(g).

     "Base Rate" shallmean, on any day, the greater of (a) the Prime Rate in effect on such date and (b) theFederal Funds Rate for such day plus one-half percent (0.50%).

     "Base Rate Loan"shall mean, at any time, a Revolving Loan which then bears interest as provided in clause(i) of Section 2.01(c).

     "Borrower" shallhave the meaning given to that term in clause (1) of the introductory paragraph.

     "Borrowing" shallmean a Revolving Loan Borrowing or a Swing Line Borrowing, as the context may require.

     "Business Day"shall mean any day on which (a) commercial banks are not authorized or required to closein San Francisco, California, New York, New York or Denver, Colorado, and (b) if suchBusiness Day is related to a LIBOR Loan, dealings in Dollar deposits are carried out inthe London Eurodollar Market.

     "Canadian Dollars"shall mean the lawful currency of Canada.

     "Capital AdequacyRequirement" shall have the meaning given to that term in Section 2.11(d).

     "Capital Expenditure"shall mean any expenditure by the Borrower or any of its Subsidiaries for fixed or capitalassets which, in accordance with GAAP, would be classified as a capital expenditure in thefinancial statements of the Borrower and its Subsidiaries including any amount that isrequired to be treated as an asset subject to a Capital Lease and whether such expenditurerelates to the maintenance, relocation, remodel or new construction of any Store orotherwise but in any event "Capital Expenditures" shall not include expendituresto the extent they consist of (i) Equity Securities issued by any Loan Party, (ii) NetCash Issuance Proceeds, (iii) net insurance or condemnation proceeds, (iv) proceeds ofasset sales made in accordance with this Agreement and (v) amounts expended in connectionwith Acquisitions permitted by Section 5.02(d).

     "Capital Leases"shall mean any and all lease obligations that, in accordance with GAAP, are required to becapitalized on the books of a lessee.

     "Cash" shall mean,when used in connection with any Person, all monetary and non-monetary items owned by thatPerson that are treated as cash in accordance with GAAP.

     "Cash Collateralize"shall mean to pledge and deposit with or deliver to the Administrative Agent, for thebenefit of the L/C Issuer and the Lenders, as collateral for the Obligations, cash ordeposit account balances in an amount equal to the L/C Obligations pursuant todocumentation in form and substance satisfactory to the Administrative Agent and the L/CIssuer (which documents are hereby consented to by the Lenders). Derivatives of such termshall have a corresponding meaning.

     "Cash Equivalents"shall mean:

          (a)     Directobligations of, or obligations the principal and interest on which are unconditionallyguaranteed or insured by, the United States of America or obligations of any agency of theUnited States of America to the extent such obligations are backed by the full faith andcredit of the United States of America, in each case maturing within one year from thedate of acquisition thereof;

          (b)     timedeposits, certificates of deposit or bankers’ acceptances, in each case maturingwithin one year from the date of acquisition thereof and issued by a commercial bank ortrust company organized under the laws of the United States of America or a state thereofor that is a Lender, provided that (i) such deposits are denominated in Dollars orCanadian Dollars and (ii) such bank or trust company has capital, surplus andundivided profits of not less than $100,000,000 at the time of acquisition thereof;

          (c)     Openmarket commercial paper maturing within 270 days from the date of acquisition thereofissued by a corporation organized under the laws of the United States of America or astate thereof, provided such commercial paper is rated at least A-1 (or its equivalent) byStandard and Poor’s Ratings Group or P-1 (or its equivalent) by Moody’sInvestors Service, Inc. at the time of acquisition thereof;

          (d)     Repurchaseobligations with a term of not more than 30 days for underlying securities of the typesdescribed in clause (a) above entered into with any bank meeting the qualificationsspecified in clause (b) above at the time of acquisition thereof;

          (e)     Securitieswith a maturities of one year or less from the date of acquisition issued or fullyguaranteed by any state or commonwealth of the United States of America, or by anypolitical subdivision or taxing authority thereof and rated at least Aa (or itsequivalent) by Moody’s Investor Service, Inc. or AA (or its equivalent) by Standardand Poor’s Rating Group; and

          (f)     Investmentsin money market or mutual funds that invest exclusively in the foregoing items. 

     "Change in Management"shall mean the cessation for any reason of Perry Odak to hold the office of ChiefExecutive Officer (or, if there then is no such office or occupant of such office, theoffice of President) of the Borrower and the failure of the Borrower to appoint asuccessor reasonably acceptable to the Required Lenders within the one-hundred twenty(120) day period following such cessation; provided, however, that suchone-hundred twenty (120) day period shall be extended by the number of days in the periodbeginning on the day that the Borrower has notified the Administrative Agent of a proposedsuccessor pursuant to Section 5.01(k) and ending on the day upon which theAdministrative Agent has notified the Borrower whether such proposed successor isreasonably acceptable to the Required Lenders.

     "Change of Control"shall mean an event or series of events by which:

          (a)     any"person" or "group" (as such terms are used in Sections 13(d) and14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan ofthe Borrower or its Subsidiaries, and any person or entity acting in its capacity astrustee, agent or other fiduciary or administrator of any such plan) becomes the"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under theSecurities Exchange Act of 1934, directly or indirectly, of 35% or more of the combinedvoting power of the Equity Securities of the Borrower entitled to vote for members of theboard of directors or equivalent governing body of the Borrower on a fully-diluted basis;

          (b)     atany time after the Closing Date, a majority of the members of the board of directors orother equivalent governing body of the Borrower cease to be composed of individuals (i)who were members of that board or equivalent governing body on the Closing Date, (ii)whose election or nomination to that board or equivalent governing body was approved orratified by individuals referred to in clause (i) above constituting at the time of suchelection or nomination at least a majority of that board or equivalent governing body, or(iii) whose election or nomination to that board or other equivalent governing body wasapproved or ratified by individuals referred to in clauses (i) and (ii) above constitutingat the time of such election or nomination at least a majority of that board or equivalentgoverning body (excluding, in the case of both clause (ii) and clause (iii), anyindividual whose initial nomination for, or assumption of office as, a member of thatboard or equivalent governing body occurs as a result of an actual or threatenedsolicitation of proxies or consents for the election or removal of one or more directorsby any person or group other than a solicitation for the election of one or more directorsby or on behalf of the board of directors);

          (c)     anyPerson or two or more Persons acting in concert shall have acquired by contract orotherwise, or shall have entered into a contract or arrangement that results in suchPerson or Persons exercising, directly or indirectly, a controlling influence over themanagement or policies of the Borrower, or control over the Equity Securities of theBorrower entitled to vote for members of the board of directors or equivalent governingbody of the Borrower on a fully-diluted basis representing 35% or more of the combinedvoting power of such securities; providedhowever, that notwithstanding theprovisions of this clause (c), any contract or arrangement to which the Borrower is aparty (i) providing solely for the acquisition of control upon or after consummation of aReorganization Plan or (ii) that provides for or is conditioned upon payment in full incash of all Obligations shall not be deemed to be a "Change of Control"; or

          (d)     thereshall occur a "change in control" (or term of like import) as defined in anydocument governing Indebtedness of the Borrower in excess of $20,000,000 which gives theholders of such Indebtedness the right to accelerate or otherwise require payment orpurchase of such Indebtedness prior to the maturity date thereof.

     "Change of Law"shall have the meaning given to that term in Section 2.11(b).

     "Closing Date"shall mean the date, not later than February 26, 2003, designated by the Borrower inthe initial Notice of Borrowing as the date for the initial Borrowing or the date for theinitial issuance of a Letter of Credit (including the deemed issuance of a Prior Letter ofCredit hereunder).

     "Collateral" shallmean all present and future real and personal property of the Borrower and the Guarantors(other than Excluded Collateral and any real property with a fair market value less than$1,000,000 (including the value of any improvements thereon)) and including withoutlimitation the Pledged Collateral, the Leasehold Collateral and all property in which theAdministrative Agent or any Lender has or hereafter acquires a Lien to secure theObligations. 

     "Collateral Certificate"shall mean a Collateral Certificate in the form of Exhibit L, appropriatelycompleted and duly executed by the Borrower.

     "Commitment Fee Percentage"shall mean, with respect to the Commitments at any time, the per annum percentage which isused to calculate Commitment Fees for such Commitments. The Commitment Fee Percentagesshall be determined as provided in the Pricing Grid and may change for each FiscalQuarter.

     "Commitment Fees"shall have the meaning given to that term in Section 2.05(b).

     "Commitment IncreaseAgreement" shall have the meaning given to that term in Section 2.01(h).

     "Commitments"shall mean, with respect to each Lender, the Dollar amount set forth under the caption"Commitment" opposite such Lender’s name on Part A of Schedule I,or, if changed, such Dollar amount as may be set forth for such Lender in the Register.

     "Compliance Certificate"shall have the meaning given to that term in Section 5.01(a)(iii).

     "Contingent Obligation"shall mean, with respect to any Person, (a) any Guaranty Obligation of that Person; and(b) any direct or indirect obligation or liability, contingent or otherwise, of thatPerson (i) in respect of any Surety Instrument issued for the account of that Person or asto which that Person is otherwise liable for reimbursement of drawings or payments, (ii)consisting of required cash contributions of that Person as a partner or joint venturer inany partnership or joint venture, (iii) to purchase any materials, supplies or otherproperty from, or to obtain the services of, another Person if the relevant contract orother related document or obligation requires that payment for such materials, supplies orother property, or for such services, shall be made regardless of whether delivery of suchmaterials, supplies or other property is ever made or tendered, or such services are everperformed or tendered, or (iv) in respect to any Rate Contract that is not entered into inconnection with a bona fide hedging operation that provides offsetting benefits to suchPerson. The amount of any Contingent Obligation shall (subject, in the case of GuarantyObligations, to the last sentence of the definition of "Guaranty Obligation") bedeemed equal to the maximum reasonably anticipated liability in respect thereof, andshall, with respect to item (b)(iv) of this definition be marked to market on a currentbasis.

     "Contractual Obligation"of any Person shall mean any binding and enforceable indenture, note, lease, loanagreement, security, deed of trust, mortgage, security agreement, guaranty, instrument,contract, agreement or other form of contractual obligation or undertaking to which suchPerson is a party or by which such Person or any of its property is bound.

     "Control Account Agreement"shall have the meaning given to such term in the Security Agreement.

     "Corporate Headquarters"shall mean the real property that the Borrower leases and uses as its corporateheadquarters from time to time. As of the Closing Date, the Corporate Headquarters arelocated at 3375 Mitchell Lane, Boulder, Colorado 80301.

     "Credit Documents"shall mean and include (a) this Agreement, the Notes, the Guaranty, the SecurityDocuments, each Instrument of Joinder, each Subordination Agreement (if any), each Letterof Credit Application, each Notice of Borrowing, each Notice of Revolving Loan InterestPeriod Selection, each Notice of Revolving Loan Conversion, each Compliance Certificate,each Lender Rate Contract, the Collateral Certificate and the Administrative Agent’sFee Letter; (b) all other documents, instruments and agreements delivered to theAdministrative Agent or any Lender pursuant to Section 3.01; and (c) all otherdocuments, instruments and agreements delivered by any Loan Party to the AdministrativeAgent or any Lender in connection with this Agreement or any other Credit Document on orafter the date of this Agreement.

     "Credit Event"shall mean (a) the making of any Loan (including a Swing Line Loan), (b) the issuance of aLetter of Credit, (c) the making of an L/C Credit Extension, (d) the conversion of anyLoan into a LIBOR Loan or (e) the selection of a new Interest Period for any LIBOR Loan.

     "Debtor Relief Laws"shall mean the Bankruptcy Code of the United States of America, and all other applicableliquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership,insolvency, reorganization, or similar debtor relief Governmental Rules from time to timein effect affecting the rights of creditors generally.

     "Default" shallmean an Event of Default or any event or circumstance not yet constituting an Event ofDefault which, with the giving of any notice or the lapse of any period of time or both,would become an Event of Default.

     "Defaulting Lender"shall mean a Lender which has failed to fund its portion of any Borrowing which it isrequired to fund under this Agreement and has continued in such failure for three (3)Business Days.

     "Deficiency" shallhave the meaning given to that term in Section 2.01(h).

     "Deposit Account"shall have the meaning given to that term in Article 9 of the UCC.

     "Depositary Bank"shall mean any bank or other financial institution where a Loan Party maintains a DepositAccount.

     "Designated Asset SaleProceeds" shall mean, for any Fiscal Year of the Borrower, the Net Proceedspayable to the Loan Parties from the sale of assets during such Fiscal Year, other thanany sale permitted by clauses (i) or (iv) through (xiii) of Section 5.02(c).

     "Designated EurodollarMarket" shall mean, with respect to any LIBOR Loan, the London Eurodollar Market.**

     "Disqualified Stock"shall mean any capital stock, warrants, options or other rights to acquire capital stock(but excluding any debt security which is convertible, or exchangeable, for capitalstock), which, by its terms (or by the terms of any security into which it is convertibleor for which it is exchangeable), or upon the happening of any event, matures or ismandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or isredeemable at the option of the holder thereof, in whole or in part, on or prior to theMaturity Date.

     "Distributions"shall mean dividends (in cash, property or obligations) on, or other payments ordistributions on account of, or the setting apart of money for a sinking or otheranalogous fund for, or the purchase, redemption, retirement or other acquisition of, anyshares of any class of stock of any Loan Party or of any warrants, options or other rightsto acquire the same (or to make any payments to any Person, such as "phantomstock" payments, where the amount is calculated with reference to the fair market orequity value of any Loan Party), but excluding dividends payable solely in shares ofcommon stock of any Loan Party.

     "Dollars" and"$" shall mean the lawful currency of the United States of America and,in relation to any payment under this Agreement, same day or immediately available funds.

     "Domestic Lending Office"shall mean, with respect to any Lender, (a) initially, its office designated as such in ScheduleI (or, in the case of any Lender which becomes a Lender by an assignment pursuant to Section8.05(c), its office designated as such in the applicable Assignment Agreement) and (b)subsequently, such other office or offices as such Lender may designate to theAdministrative Agent as the office at which such Lender’s Base Rate Loans willthereafter be maintained and for the account of which all payments of principal of, andinterest on, such Lender’s Base Rate Loans will thereafter be made.

     "Domestic Subsidiary"shall mean each direct or indirect Subsidiary of the Borrower which is organized under thelaws of the United States of America or any state thereof.

     "EBITDA" shallmean, for any period, the sum of the following items of the Loan Parties (determined on aconsolidated basis without duplication): (a) Net Income after tax for such period,(b) Interest Expense for such period, (c) depreciation and amortization for suchperiod, (d) all other non-cash items (less non-cash gains) for such period,(e) income tax expense for such period, (f) all extraordinary items, and (g)nonrecurring expenses and charges of the Loan Parties related to the closing of thisAgreement; provided, however, that in the event any Loan Party makes anAcquisition of a Subsidiary during such period permitted under the Credit Documents,EBITDA for such period shall be calculated on a *pro forma* basis, based on theactual results of such acquired Subsidiary as if such Acquisition had occurred on thefirst day of such period.

     "EBITDAR" shallmean, with respect to any fiscal period, EBITDA for that fiscal period plus RentalExpense of the Borrower and its Subsidiaries for that fiscal period (determined on aconsolidated basis without duplication).

     "Effective Amount"shall mean (i) with respect to Revolving Loans and Swing Line Loans on any date, theaggregate outstanding principal amount thereof after giving effect to any borrowings andprepayments or repayments of Revolving Loans and Swing Line Loans, as the case may be,occurring on such date; and (ii) with respect to any L/C Obligations on any date, theamount of such L/C Obligations on such date after giving effect to any L/C CreditExtension occurring on such date and any other changes in the aggregate amount of the L/CObligations as of such date, including as a result of any reimbursements of outstandingunpaid drawings under any Letters of Credit or any reductions in the maximum amountavailable for drawing under Letters of Credit taking effect on such date.

     "Eligible Assignee"shall mean a Person which is (a) a commercial bank organized under the laws of theUnited States of America, or any state thereof, and having a combined capital and surplusof at least $100,000,000, (b) a commercial bank organized under the laws of any othercountry which is a member of the Organization for Economic Cooperation and Development(the "OECD"), or a political subdivision of any such country, and havinga combined capital and surplus of at least $100,000,000, provided that such bank is actingthrough a branch or agency located in the country in which it is organized or anothercountry which is also a member of the OECD, or (c) a Person that is primarily engagedin the business of commercial banking and that is (i) a Subsidiary of a Lender,(ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) aPerson of which a Lender is a Subsidiary.

     "Employee Benefit Plan"shall mean any employee benefit plan within the meaning of section 3(3) of ERISAmaintained or contributed to by the Borrower or any ERISA Affiliate, other than aMultiemployer Plan.

     "Environmental Damages"shall mean all claims, judgments, damages, losses, penalties, liabilities (includingstrict liability), costs and expenses, including costs of investigation, remediation,defense, settlement and reasonable attorneys’ fees and consultants’ fees, thatare incurred at any time as a result of the existence of any Hazardous Material upon,about or beneath any real property owned or occupied by the Borrower or any other LoanParty or migrating or threatening to migrate to or from any such real property, or arisingfrom any investigation, proceeding or remediation of any location at which the Borrower orany other Loan Party or any predecessors to the Borrower’s or any other LoanParty’s operations are alleged to have directly or indirectly disposed of HazardousMaterials or arising in any manner whatsoever out of any violation of Environmental Laws.

     "Environmental Laws"shall mean the Clean Air Act, 42 U.S.C. Section 7401 etseq.; the FederalWater Pollution Control Act, 33 U.S.C. Section 1251 etseq.; the ResourceConservation and Recovery Act of 1976, 42 U.S.C. Section 6901 etseq.; theComprehensive Environment Response, Compensation and Liability Act of 1980 (including theSuperfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 U.S.C.Section 9601 etseq.; the Toxic Substances Control Act, 15 U.S.C. Section2601 etseq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651;the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 etseq.; the Mine Safety and Health Act of 1977, 30 U.S.C. Section 801 etseq.;the Safe Drinking Water Act, 42 U.S.C. Section 300f etseq.; and all otherGovernmental Rules relating to the protection of the environment, including allGovernmental Rules pertaining to the reporting, licensing, permitting, transportation,storage, disposal, investigation or remediation of emissions, discharges, releases, orthreatened releases of Hazardous Materials into the air, surface water, groundwater, orland, or relating to the manufacture, processing, distribution, use, treatment, storage,disposal, transportation or handling of Hazardous Materials.

     "Equity Securities"of any Person shall mean (a) any common stock, preferred stock, participations,shares, partnership interests, limited liability company interests or other equityinterests in and of such Person (regardless of how designated and whether or not voting ornon-voting) and (b) any warrants, options or other rights to acquire any of theforegoing.

     "ERISA" shall meanthe Employee Retirement Income Security Act of 1974.

     "ERISA Affiliate"shall mean any Person which is treated as a single employer with the Borrower underSection 414 of the IRC.

     "Eurodollar Lending Office"shall mean, with respect to any Lender, (a) initially, its office designated as suchin Schedule I (or, in the case of any Lender which becomes a Lender by anassignment pursuant to Section 8.05(c), its office designated as such in theapplicable Assignment Agreement) and (b) subsequently, such other office or officesas such Lender may designate to the Administrative Agent as the office at which suchLender’s LIBOR Loans will thereafter be maintained and for the account of which allpayments of principal of, and interest on, such Lender’s LIBOR Loans will thereafterbe made.

     "Eurodollar Market"shall mean a regular established market located outside the United States of America byand among banks for the solicitation, offer and acceptance of Dollar deposits in suchbanks.

     "Event of Default"shall have the meaning given to that term in Section 6.01.

     "Evergreen Letter of Credit"shall have the meaning given to that term in Section 2.02(b).

     "Excluded Collateral"shall mean the following: (a) all now existing or hereinafter created leaseholds interestsof the Borrower or any Subsidiary of the Borrower which are not, as of the Closing Date,subject to the Leasehold Mortgages, (b) Store Deposit Accounts so long as all collectedfunds deposited in such Store Deposit Accounts in excess of the sum of (i) $500,000 plus(ii) $5,000 for each Store in excess of 99 Stores shall be electronically transferred on adaily basis to a concentration or other account upon which the Administrative Agent has afirst priority perfected Lien subject only to Permitted Liens and any Liens contained in aControl Account Agreement (if any) pertaining to such concentration account, and(c) Net Cash Issuance Proceeds with respect to the issuance by the Borrower of EquitySecurities on September 4, 2002, and any account where such Net Cash IssuanceProceeds may at any time be maintained and not commingled with other funds of theBorrower.

     "Executive Contract Expense"shall mean the one-time expense or charge, in the form of a bonus (not to exceed an amountequal to then outstanding principal balance of the Executive Note, plus accrued interestthereon), relating to the forgiveness of all or any portion of the indebtedness arisingunder the Executive Note.

     "Executive Note"shall mean that certain Promissory Note dated as of March 6, 2001 made by Perry D. Odak infavor of the Borrower in the principal amount of Nine Million Two Hundred Eighty-SevenThousand Two Hundred Thirty Dollars and Fifteen Cents ($9,287,230.15) and incurred inconnection with Mr. Odak’s employment contract with the Borrower.

     "Exempt Subsidiary"shall mean (a) a Tax Preferred Subsidiary or (b) an Inactive Subsidiary.

     "Federal Funds Rate"shall mean, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%)equal to the weighted average of the rates on overnight Federal funds transactions withmembers of the Federal Reserve System arranged by Federal funds brokers on such day, aspublished by the Federal Reserve Bank on the Business Day next succeeding such day; provided,that (a) if such day is not a Business Day, the Federal Funds Rate for such day shallbe such rate on such transactions on the next preceding Business Day as so published onthe next succeeding Business Day, and (b) if no such rate is so published on suchnext succeeding Business Day, the Federal Funds Rate for such day shall be the averagerate charged to Wells Fargo on such day on such transactions as determined by theAdministrative Agent.

     "Federal Reserve Board"shall mean the Board of Governors of the Federal Reserve System.

     "Financial Statements"shall mean, with respect to any accounting period for any Person, statements of income,retained earnings, shareholders’ equity or partners’ capital and cash flows ofsuch Person for such period, and a balance sheet of such Person as of the end of suchperiod, setting forth in each case in comparative form figures for the correspondingperiod in the preceding fiscal year if such period is less than a full fiscal year or, ifsuch period is a full fiscal year, corresponding figures from the preceding annual auditedfinancial statements, all prepared in reasonable detail and in accordance with GAAP.

     "Fiscal Month"shall mean any month of any Fiscal Quarter consistent with GAAP.

     "Fiscal Quarter"shall mean the fiscal quarter of the Borrower consisting of 13 or 14 weeks ending on orabout each March 31, June 30, September 30 and December 31.

     "Fiscal Year"shall mean the fiscal year of the Borrower consisting of 52 or 53 weeks ending on theSaturday nearest each December 31.

     "Fixed Charge CoverageRatio" shall mean, as of any date of determination, the ratio of (a) EBITDAR forthe four Fiscal Quarter period most recently ended (excluding any Executive ContractExpense for such period) minus Maintenance Capital Expenditures made by the LoanParties during such period minus taxes paid in cash by the Loan Parties during suchperiod to (b) Fixed Charges for the four Fiscal Quarter period most recently ended.

     "Fixed Charges"shall mean, for any period, the sum, for the Loan Parties (determined on a consolidatedbasis without duplication in accordance with GAAP), of the following items: (a) InterestExpense for such period, plus (b) Rental Expense for such period, plus (c)scheduled payments (including at maturity) of principal on Indebtedness (other thanPermitted Insurance Premium Indebtedness), to the extent actually paid during such period(excluding (i) for all periods through Borrower’s Fiscal Quarter ending September,2003, amounts outstanding under the Prior Credit Agreement, and (ii) amounts outstandingunder this Agreement that would otherwise be due twelve (12) months prior to the MaturityDate), plus (d) the portion of payments, other than optional payments, made underCapital Leases that should be treated as payment of principal in accordance with GAAP, tothe extent actually paid in cash during such period, plus (e) the Synthetic LeasePrincipal Component, to the extent actually paid during such period.

     "Foreign Plan"shall mean any employee benefit plan maintained by the Borrower or any of its Subsidiarieswhich is mandated or governed by any Governmental Rule of any Governmental Authority otherthan the United States of America.

     "Foreign Subsidiary"shall mean each direct or indirect Subsidiary of the Borrower which is organized in ajurisdiction other than the United States of America or any state thereof.

     "GAAP" shall meangenerally accepted accounting principles and practices as in effect in the United Statesof America from time to time and applied as set forth in Section 1.02.

     "Governmental Authority"shall mean any domestic or foreign national, state or local government, any politicalsubdivision thereof, any department, agency, authority or bureau of any of the foregoing,or any other entity exercising executive, legislative, judicial, regulatory oradministrative functions of or pertaining to government, including, without limitation,the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Comptroller ofthe Currency, any central bank or any comparable authority.

     "Governmental Authorization"shall mean any permit, license, registration, approval, finding of suitability,authorization, plan, directive, order, consent, exemption, waiver, consent order orconsent decree of or from, or notice to, action by or filing with, any GovernmentalAuthority.

     "Governmental Charges"shall mean, with respect to any Person, all levies, assessments, fees, claims or othercharges imposed by any Governmental Authority upon such Person or any of its property orotherwise payable by such Person.

     "Governmental Rule"shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment,decree, directive, guidelines, policy or similar form of decision of any GovernmentalAuthority.

     "Guarantor" shallmean each direct or indirect Domestic Subsidiary of the Borrower which executes theGuaranty or an Instrument of Joinder thereto.

     "Guaranty" shallmean the Second Amended and Restated Subsidiary Guaranty to be executed by theBorrower’s Domestic Subsidiaries (other than Exempt Subsidiaries) in favor of theAdministrative Agent, substantially in the form of Exhibit G, as the same may befrom time to time be supplemented, modified, amended, extended or supplanted.

     "Guaranty Obligation"shall mean, with respect to any Person, any direct or indirect liability of that Personwith respect to any Indebtedness, lease, or dividend (the "primary obligations")of another Person (the "primary obligor"), including any obligation of thatPerson, whether or not contingent, (a) to purchase, repurchase or otherwise acquiresuch primary obligations or any property constituting direct or indirect securitytherefor, or (b) to advance or provide funds (i) for the payment or discharge ofany such primary obligation, or (ii) to maintain working capital or equity capital ofthe primary obligor or otherwise to maintain the net worth or solvency or any balancesheet item, level of income or financial condition of the primary obligor, or (c) topurchase property, securities or services primarily for the purpose of assuring the ownerof any such primary obligation of the ability of the primary obligor to make payment ofsuch primary obligation, or (d) otherwise to assure or hold harmless the holder ofany such primary obligation against loss in respect thereof. The amount of any GuarantyObligation shall be deemed equal to the stated or determinable amount of the primaryobligation in respect of which such Guaranty Obligation is made or, if not stated or ifindeterminable, the maximum liability in respect thereof.

     "Hazardous Materials"shall mean all pollutants, contaminants and other materials, substances and wastes whichare classified or regulated as "hazardous," "toxic" or similardescriptions under any Environmental Law.

     "Honor Date" shallhave the meaning given to that term in Section 2.02(c)(i).

     "Inactive Subsidiary"shall mean a Subsidiary of the Borrower that (a) is not engaged in any active or passivebusiness and (b) holds total assets of $100,000 or less.

     "Increase Effective Date"shall have the meaning given to that term in Section 2.04(b)(ii).

     "Increased Commitment Date"shall have the meaning given to that term in Section 2.01(h).

     "Increasing Lender"shall have the meaning given to that term in Section 2.01(h).

     "Indebtedness" ofany Person shall mean, without duplication:

          (a)     Allobligations of such Person evidenced by notes, bonds, debentures or other similarinstruments and all other obligations of such Person for borrowed money (includingobligations to repurchase receivables and other assets sold with recourse);

          (b)     Allobligations of such Person for the deferred purchase price of property or services(including obligations under letters of credit and other credit facilities which secure orfinance such purchase price);

          (c)     Allobligations of such Person under conditional sale or other title retention agreements withrespect to property acquired by such Person (to the extent of the value of such propertyif the rights and remedies of the seller or the Lender under such agreement in the eventof default are limited solely to repossession or sale of such property);

          (d)     Allobligations of such Person as lessee under or with respect to Capital Leases;

          (e)     AllSynthetic Lease Obligations of such Person;

          (f)     Allobligations of such Person, contingent or otherwise, under or with respect to SuretyInstruments;

          (g)     Allnet obligations of such Person, contingent or otherwise, under or with respect to RateContracts; provided, that the amount of Indebtedness of the type referred to inthis clause (g) of any Person shall be zero unless and until such Indebtedness shall beterminated, in which case the amount of such Indebtedness shall be the then terminationpayment, if any, due thereunder by such Person;

          (h)     AllGuaranty Obligations of such Person with respect to the obligations of other Persons ofthe types described in clauses (a) - (g) above and all other Contingent Obligations ofsuch Person; and

          (i)     Allobligations of other Persons of the types described in clauses (a) - (h) above to theextent secured by (or for which any holder of such obligations has an existing right,contingent or otherwise, to be secured by) any Lien in any property (including accountsand contract rights) of such Person, even though such Person has not assumed or becomeliable for the payment of such obligations; provided, however, that, forpurposes of determining the amount of any Indebtedness of the type described in thisclause, if recourse with respect to such Indebtedness is limited to specific propertyfinanced with such Indebtedness, the amount of such Indebtedness shall be limited to thefair market value (determined on a basis reasonably acceptable to the Administrative Agentand the Borrower) of such property or the principal amount of such Indebtedness, whicheveris less.

     "Instrument of Joinder"shall mean an instrument of joinder executed by each Subsidiary that becomes a party tothe Guaranty, Pledge Agreement or Security Agreement, as applicable, subsequent to theClosing Date.

     "Intangible Assets"shall mean assets that are considered to be intangible assets under GAAP, includingcustomer lists, goodwill, computer software, copyrights, trade names, trade marks,patents, unamortized deferred charges, unamortized debt discount and capitalized researchand development costs.

     "Interest Expense"shall mean, for any period, the sum, for the Loan Parties (determined on a consolidatedbasis without duplication in accordance with GAAP), of the following: (a) all interest,fees, charges and related expenses payable during such period to any Person in connectionwith Indebtedness or the deferred purchase price of assets that is treated as interest inaccordance with GAAP, plus (b) the portion of rent actually paid during such periodunder Capital Leases that should be treated as interest in accordance with GAAP, plus(c) the Synthetic Lease Interest Component for such period, plus (d) the netamounts payable (or minus the net amounts receivable) under Rate Contracts accrued duringsuch period (whether or not actually paid or received during such period).

     "Interest Period"shall mean, with respect to any LIBOR Loan, the time periods selected by the Borrowerpursuant to Section 2.01(b) or Section 2.01(d) which commences on the firstday of such Loan or the effective date of any conversion and ends on the last day of suchtime period, and thereafter, each subsequent time period selected by the Borrower pursuantto Section 2.01(e) which commences on the last day of the immediatelypreceding time period and ends on the last day of that time period.

     "Investment" ofany Person shall mean any loan or advance of funds by such Person to any other Person(other than advances to employees of such Person for moving and travel expenses, drawingaccounts and similar expenditures in the ordinary course of business), any purchase orother acquisition of any Equity Securities or Indebtedness of any other Person, anycapital contribution by such Person to or any other investment by such Person in any otherPerson (including any Guaranty Obligations of such Person and any indebtedness of suchPerson of the type described in clause (h) of the definition of "Indebtedness"on behalf of any other Person); provided, however, that Investments shallnot include (a) accounts receivable or other indebtedness owed by customers of such Personwhich are current assets and arose from sales of inventory in the ordinary course of suchPerson’s business, or (b) prepaid expenses of such Person incurred and prepaid in theordinary course of business.

     "IRC" shall meanthe Internal Revenue Code of 1986.

     "L/C Advance"shall mean, with respect to each Lender, such Lender’s participation in any L/CBorrowing in accordance with its Proportionate Share.

     "L/C Borrowing"shall mean an extension of credit resulting from a drawing under any Letter of Creditwhich has not been reimbursed on the date when made or refinanced as a Revolving LoanBorrowing.

     "L/C Credit Extension"shall mean, with respect to any Letter of Credit, the issuance thereof or extension of theexpiry date thereof, or the renewal or increase of the amount thereof.

     "L/C Issuer" shallmean Wells Fargo in its capacity as issuer of Letters of Credit hereunder, or anysuccessor issuer of Letters of Credit hereunder.

     "L/C Obligations"shall mean, as at any date of determination, the aggregate undrawn face amount of alloutstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts,including all L/C Borrowings.

     "Landlord Consent"shall mean, collectively, the owner/landlord consents previously delivered to theAdministrative Agent in connection with the Prior Credit Agreement and pertaining to theLeasehold Mortgages.

     "Leasehold Collateral"shall mean the Borrower’s or any Subsidiary’s leasehold interests in each of theStores listed in Part C of Schedule 4.01(h) hereto.

     "Leasehold Mortgages"shall mean, collectively, each leasehold mortgage or deed of trust, as applicable,previously executed by the Borrower and its Domestic Subsidiaries (other than ExemptSubsidiaries) in connection with the Prior Credit Agreement and covering the LeaseholdCollateral.

     "Lender Rate Contract(s)"shall mean one or more Rate Contracts with respect to the Indebtedness evidenced by thisAgreement between the Borrower and one or more of the Lenders, on terms acceptable to theBorrower and that Lender or Lenders. Each Lender Rate Contract shall be a Credit Documentand shall be secured by the Liens created by the Security Documents to the extent setforth in Section 2.14(a).

     "Lenders" shallhave the meaning given to that term in clause (2) of the introductory paragraph andincludes the L/C Issuer and the Swing Line Lender (unless the context otherwise requires).

     "Letter of Credit"shall mean any standby letter of credit issued hereunder to secure an obligation of theBorrower which is or relates solely to the payment of money.

     "Letter of CreditApplication" shall mean an application and agreement for the issuance oramendment of a letter of credit in the form from time to time in use by the L/C Issuer.

     "Letter of Credit Fee"shall mean, with respect to each Letter of Credit, the *per annum* fee which isdetermined pursuant to the Pricing Grid.

     "Letter of Credit Sublimit"shall mean an amount equal to the lesser of (a) the Total Commitment and (b) Ten MillionDollars ($10,000,000). The Letter of Credit Sublimit is part of, and not in addition to,the Total Commitment.

     "Leverage Ratio"shall mean, as of any date of determination, the ratio of (a) the sum of (i) Average TotalFunded Debt as of that date plus (ii) six (6) times total Rental Expenses for thefour Fiscal Quarter period most recently ended, to (b) EBITDAR for the four Fiscal Quarterperiod most recently ended.

     "LIBOR Loan" shallmean, at any time, a Revolving Loan which then bears interest as provided in clause (ii)of Section 2.01(c).

     "LIBOR Rate" shallmean, with respect to any Interest Period for the LIBOR Loans in any Revolving LoanBorrowing consisting of LIBOR Loans, a rate *per annum* equal to the quotient(rounded upward if necessary to the nearest 1/16 of one percent) of (a) the rate *perannum* appearing on the Telerate Page 3750 (or any successor publication) on the secondBusiness Day prior to the first day of such Interest Period at or about 11:00 a.m.****(Londontime) (for delivery on the first day of such Interest Period) for a term comparable tosuch Interest Period, divided by (b) one minus the Reserve Requirement for suchLoans in effect from time to time. If for any reason rates are not available as providedin clause (a) of the preceding sentence, the rate to be used in clause (a) shall be, atthe Administrative Agent’s discretion, (i) the rate *per annum* at which Dollardeposits are offered to the Administrative Agent in the Designated Eurodollar Market or(ii) the rate at which Dollar deposits are offered to the Administrative Agent in, or bythe Administrative Agent to major banks in, any offshore interbank eurodollar marketselected by the Administrative Agent, in each case on the second Business Day prior to thecommencement of such Interest Period at or about 10:00 a.m. (for delivery on the first dayof such Interest Period) for a term comparable to such Interest Period and in an amountapproximately equal to the amount of the Loan to be made or funded by the AdministrativeAgent as part of such Borrowing. The LIBOR Rate shall be adjusted automatically as to allLIBOR Loans then outstanding as of the effective date of any change in the ReserveRequirement.

     "Lien" shall mean,with respect to any property, any security interest, mortgage, pledge, lien, charge orother encumbrance in, of, or on such property or the income therefrom, including, withoutlimitation, the interest of a vendor or lessor under a conditional sale agreement, CapitalLease or other title retention agreement, or any agreement to provide any of theforegoing, and the filing of any financing statement or similar instrument under the UCCor comparable law of any jurisdiction.

     "Loan" shall meana Revolving Loan or a Swing Line Loan.

     "Loan Account"shall have the meaning given to that term in Section 2.08(a).

     "Loan Parties"shall mean, collectively, the Borrower and each Guarantor.

     "Maintenance CapitalExpenditures" shall mean Capital Expenditures other than expenditures related tothe construction and opening of any New Store.

     "Margin Stock"shall have the meaning given to that term in Regulation U issued by the Federal ReserveBoard.

     "Material Adverse Effect"shall mean a material adverse effect on (a) the business, assets, financialcondition, performance or prospects of the Loan Parties, taken as a whole; (b) theability of the Borrower individually or of the Borrower and the other Loan Parties takenas a whole to pay or perform the Obligations in accordance with the terms of thisAgreement and the other Credit Documents; (c) the rights and remedies of theAdministrative Agent or any Lender under this Agreement, the other Credit Documents or anyrelated document, instrument or agreement taken as a whole; (d) the value of theCollateral, the Administrative Agent’s or any Lender’s security interest in amaterial portion of the Collateral or the perfection or priority of such securityinterests, or (e) the validity of any of the Credit Documents.

     "Material Subsidiary"shall mean any Subsidiary of the Borrower which, in any Fiscal Year, has Net Income equalto or greater than 10% of the total Net Income of the Borrower and all of its Subsidiariesfor such Fiscal Year.

     "Maturity" or maturity"shall mean, with respect to any Loan, interest, fee or other amount payable by theBorrower under this Agreement or the other Credit Documents, the date such Loan, interest,fee or other amount becomes due, whether upon the stated maturity or due date, uponacceleration or otherwise.

     "Maturity Date"shall mean February 26, 2006 or such later date as extended pursuant to Section 2.01(h).

     "Multiemployer Plan"shall mean any multiemployer plan within the meaning of section 3(37) of ERISAmaintained or contributed to by the Borrower or any ERISA Affiliate.

     "Negative Pledge"shall mean a Contractual Obligation which contains a covenant binding on the Borrower orany of its Subsidiaries that prohibits Liens on any of its property, other than (a) anysuch covenant contained in a Contractual Obligation granting or relating to a particularLien which affects only the property that is the subject of such Lien, (b) any suchcovenant contained in a Contractual Obligation relating to a particular property whichaffects only such property and (c) any such covenant that does not apply to Liens securingthe Obligations.

     "Net Cash Issuance Proceeds"shall mean, with respect to the issuance of any Equity Securities by the Borrower or anyof its Subsidiaries, the Cash proceeds received by or for the account of the Borrower orsuch Subsidiaries in consideration of such issuance net of (a) underwriting discounts andcommissions actually paid to any Person not an Affiliate of the Borrower, (b) professionalfees, disbursements and other expenses actually paid in connection therewith and (c) alltaxes paid or payable by any Loan Party in connection with such issuance.

     "Net Income" shallmean with respect to any fiscal period, the net income of the Loan Parties determined inaccordance with GAAP, consistently applied.

     "Net Proceeds"shall mean, with respect to any sale of any asset or property by any Person, the aggregateconsideration received by such Person from such sale less the sum of (i) theactual amount of the fees and commissions payable to Persons other than such Person or anyAffiliate of such Person, the reasonable legal expenses and other costs and expensesdirectly related to such sale that are to be paid by such Person, (ii) the amount ofany indebtedness (other than the Obligations) which is secured by such asset and isrequired to be repaid or prepaid by such Person as a result of such sale and (iii) alltaxes paid or payable by any Loan Party as a result of such sale.

     "Net Rents"shall mean, for any period, the sum, for the Loan Parties (determined on a consolidatedbasis without duplication in accordance with GAAP), of the following: (a) all RentalExpense payable during such period minus (b) the sum of (i) Rental Expense on theCorporate Headquarters payable during such period, plus (ii) Rental Expense payableduring such period on Stores identified on Schedule 1.01 for which any Loan Partyhas a leasehold obligation but which Stores are no longer occupied by any Loan Party as ofthe Closing Date, plus (iii) Rental Expense on the Store located at 2421 Broadway,New York, New York 10024-1706 payable during such period, plus (iv) Rental Expenseon the Store located at 18040 Culver Drive, Irvine, California 92714 payable during suchperiod, plus (v) Rental Expense on Stores vacated from time to time as a result ofrelocation payable during such period in an aggregate amount not to exceed $2,000,000 forsuch period; provided that for purposes of calculating Net Rents, the determinationof whether or not a Store has been vacated as a result of a relocation shall be made bythe Administrative Agent in its reasonable discretion, plus (vi) Rental Expensepayable during such period under lease agreements in effect on the Closing Date withrespect to properties identified on Schedule 1.01 and attributable to real propertyspace adjacent to a Store for which any Loan Party has a leasehold obligation but whichspace is not occupied by any Loan Party; provided that the Borrower is usingcommercially reasonable efforts to sublease such real property space, plus (vii)Support Facility Rents. 

     "New Lease" shallmean a lease or similar agreement entered into by Borrower and/or any of the other LoanParties with respect to a New Store or contemplated New Store; provided, however,that none of the following shall constitute a "New Lease:

          (a)     anylease or similar agreement for a location at which the Borrower or any of the other LoanParties operated a Store immediately prior to the execution of such lease or similaragreement;

          (b)     anylease executed by the Borrower or any other Loan Party in connection with the proposedopening of a New Store that is subsequently terminated, so long as (i) any obligation ofthe Borrower or such Loan Party to pay consideration to any party as part of such leasetermination does not exceed $300,000 and (ii) prior to such termination, the Borrower orsuch Loan Party has not made any material expenditures with respect to the opening of suchproposed New Store; or

          (c)     anylease executed by the Borrower or any other Loan Party in connection with the relocationof a Store to a site within geographic proximity to the original Store site, so long asthe Borrower’s or such other Loan Party’s obligations with respect to the leasefor the original Store site shall have been terminated or assumed in full and the Borroweror such Loan Party shall have no further liability therefor.

     "New Store" shallmean any Store that becomes part of the operations of the Borrower and/or any of the otherLoan Parties subsequent to the Closing Date, whether such Store becomes part of suchoperations as a result of an Acquisition, direct purchase, construction and buildout,relocation, or otherwise; provided, however, that a "New Store"shall not include any Store acquired pursuant to an Acquisition permitted under Section5.02(d) and subsequently closed (and the lease terminated) within one year from thedate of such Acquisition.

     "Non-Continuing Lender"shall have the meaning given to that term in Section 2.01(h).

     "Nonrenewal Notice Date"shall have the meaning given to that term in Section 2.02(b)(iii).

     "Note" shall meana Revolving Loan Note or a Swing Line Note.

     "Notice of Borrowing"shall mean a Notice of Revolving Loan Borrowing or a Notice of Swing Line Borrowing.

     "Notice of Revolving LoanBorrowing" shall have the meaning given to that term in Section 2.01(b).

     "Notice of Revolving LoanConversion" shall have the meaning given to that term in Section 2.01(d).

     "Notice of Revolving LoanInterest Period Selection" shall have the meaning given to that term in Section2.01(e).

     "Notice of Swing LineBorrowing" shall mean a notice of a Swing Line Borrowing pursuant to Section2.03(b), which, if in writing, shall be substantially in the form of Exhibit D.

     "Obligations"shall mean and include all loans, advances, debts, liabilities and obligations, howsoeverarising, owed by the Borrower and its Subsidiaries to the Administrative Agent or anyLender of every kind and description (whether or not evidenced by any note or instrumentand whether or not for the payment of money), direct or indirect, absolute or contingent,due or to become due, now existing or hereafter arising pursuant to the terms of thisAgreement or any of the other Credit Documents, including without limitation all interest(including interest that accrues after the commencement of any bankruptcy or otherinsolvency proceeding by or against the Borrower), fees, charges, expenses,attorneys’ fees and accountants’ fees chargeable to and payable by the Borrowerhereunder and thereunder.

     "Participant"shall have the meaning given to that term in Section 8.05(b).

     "PBGC" shall meanthe Pension Benefit Guaranty Corporation.

     "Permitted Indebtedness"shall have the meaning given to that term in Section 5.02(a).

     "Permitted InsurancePremium Indebtedness" shall mean Indebtedness incurred by the Borrower or any ofits Subsidiaries to finance the payment of insurance premiums, provided that (a) theaggregate outstanding principal amount of such Indebtedness does not exceed $5,000,000 atany time, (b) such Indebtedness is incurred pursuant to (or is otherwise evidenced by) awritten agreement between the Borrower or such Subsidiary and a Person regularly engagedin the business of financing insurance premiums payable by corporate entities (each, a"Premium Finance Agreement"), (c) the scheduled term of any suchIndebtedness from the date of its incurrence does not exceed twelve (12) months, and (d)if secured, the Lien securing any such Indebtedness is (i) expressly limited to the right,title and interest of the Borrower or such Subsidiary in and to the applicable insurancepolicy (or policies) and any money that may at any time be due the Borrower or suchSubsidiary under such policy (or policies) (x) as a result of a loss that reduces theunearned premiums, (y) as a return of the premium for such policy (or policies) or (z) asa dividend which becomes payable to the Borrower or such Subsidiary in connection withsuch policy (or policies) and (ii) by its terms (whether set forth in the Premium FinanceAgreement or otherwise) expressly subject and subordinate to the interests (and Liens) ofany applicable mortgagee of the Borrower or such Subsidiary and/or the loss payee of suchpolicy (or policies).

     "Permitted Liens"shall have the meaning given to that term in Section 5.02(b).

     "Permitted SubordinatedIndebtedness" shall mean all Indebtedness of the Loan Parties that is unsecuredand that is subordinated to the prior payment in full in cash (including the CashCollateralization of all outstanding Letters of Credit) of all Obligations under thisAgreement and the other Credit Documents (including, without limitation, interest(including interest accruing after the filing of a petition seeking relief under anyDebtor Relief Law), fees and expenses (including reasonable attorneys’ fees)) on thefollowing terms as confirmed by the Administrative Agent upon review of the underlyingdebt documents: (a) such Indebtedness does not require scheduled principal payments priorto three years and six months from the Closing Date; (b) such Indebtedness does not matureless than three years and six months from the Closing Date; (c) such Indebtedness does notcontain any mandatory prepayment or redemption provisions prior to three years and sixmonths from the date of issuance or contain any sinking fund requirements other than inthe event of a Change of Control or transfer of substantially all of the LoanParties’ assets or operations; provided, however, that in the event of any suchmandatory prepayment or redemption, no payments may be made to the holders thereof unlessthe Obligations have first been indefeasibly repaid in full; (d) such Indebtednessprovides that it may only be accelerated on the condition that no payments may be made tothe holders thereof unless the Obligations have first been indefeasibly repaid in full;(e) in the Administrative Agent’s reasonable opinion, the covenants, events ofdefault and other provisions of such Indebtedness are not more restrictive than thecovenants, events of default and other provisions contained in this Agreement and, in thecase of financial covenants, are at least 20% less restrictive than the financialcovenants contained in Section 5.03; and (f) in the Administrative Agent’sreasonable opinion, such Indebtedness contains (i) customary blockage provisions (e.g., nopayment of principal, interest or other amounts if (A) one or more of the Loan Parties hasfiled a petition seeking relief under any Debtor Relief Law, (B) an Event of Default ofthe type contained in Section 6.01(a) has occurred and (C) any other Event ofDefault under Section 6.01 has occurred in which case the Lenders shall be entitledto prohibit all payments on such Indebtedness for a period of not less than 180 days),(ii) customary turnover provisions (i.e., that all payments received at a time nototherwise permitted shall be turned over to the Administrative Agent on behalf of theLenders and applied to reduce the outstanding Obligations) and (iii) customary bankruptcyprovisions.

     "Person" shallmean and include an individual, a partnership, a corporation (including a business trust),a joint stock company, an unincorporated association, a limited liability company, a jointventure, a trust or other entity or a Governmental Authority.

     "Pledge Agreement"shall mean the Amended and Restated Pledge Agreement to be initially entered into amongthe Administrative Agent and the Borrower and Wild Oats Financial, Inc., substantially inthe form of Exhibit H, as the same may be from time to time be supplemented,modified, amended, extended or supplanted.

     "Pledged Collateral"shall have the meaning given to that term in the Pledge Agreement.

     "Pricing Grid"shall mean:

Tier
Leverage Ratio
Applicable Margin for LIBOR Loans    (bps)
Applicable Margin for Base Rate    Loans (bps)
Commitment Fee (bps)
Letter of Credit    Fee (bps)
1
< 2.75
125.0
0.0
25.0
100.0
2
> 2.75 < 3.00
150.0
25.0
25.0
100.0
3
> 3.00 < 3.25
175.0
50.0
37.5
110.0
4
> 3.25 < 3.50
200.0
75.0
37.5
110.0
5
> 3.50
225.0
100.0
50.0
115.0
 

     Any increase or decrease in theApplicable Margin resulting from a change in the Leverage Ratio shall become effective asof the fifth (5th) day following the final day by which a Compliance Certificate isrequired to be delivered pursuant to Section 5.01(a) (regardless of whenactually delivered); provided, however, that if the Borrower fails todeliver a Compliance Certificate for a Fiscal Quarter when due in accordance with suchSection, then Tier 5 shall apply as of the fifth (5th) day following such failure.The Applicable Margin in effect from the Closing Date until the first day of the FiscalQuarter following the Borrower’s delivery of its Compliance Certificate for the firstFiscal Quarter period subsequent to the Closing Date shall be determined based upon Tier5.

     "Prime Rate" shallmean the *per annum* rate at any time the rate of interest most recently announcedwithin Wells Fargo at its principal office in San Francisco, California as its PrimeRate, with the understanding that Wells Fargo’s Prime Rate is one of its base ratesand serves as the basis upon which effective rates of interest are calculated for thoseloans making reference thereto, and is evidenced by the recording thereof after itsannouncement in such internal publication or publications as Wells Fargo may designate.Any change in the Base Rate resulting from a change in the Prime Rate shall becomeeffective on the Business Day on which each change in the Prime Rate occurs.

     "Prior Credit Agreement"shall have the meaning given to that term in Recital A.

     "Prior Credit Documents"shall have the meaning given to that term in Recital D.

     "Prior Lenders"shall have the meaning given to that term in Recital A.

     "Prior Letters of Credit"shall have the meaning given to that term in Recital C.

     "Projections"shall have the meaning given to that term in Section 3.01(d)(v).

     "Proportionate Share"shall mean

          (a)     Withrespect to any Lender at any time prior to the Maturity Date, the ratio (expressed as apercentage rounded to the eighth digit to the right of the decimal point) of (i) suchLender’s Commitment at such time to (ii) the Total Commitment at such time;and

          (b)     Withrespect to any Lender at any time after the Maturity Date, the ratio (expressed as apercentage rounded to the eighth digit to the right of the decimal point) of (i) thesum of (A) the aggregate Effective Amount of such Lender’s Revolving Loans, (B)the amount of such Lender’s participation in the Effective Amount of all L/CObligations, and (C) the amount of such Lender’s participation in the aggregateEffective Amount of all Swing Line Loans to (ii) the sum of (A) theaggregate Effective Amount of all Revolving Loans and Swing Line Loans and (B) theEffective Amount of all L/C Obligations.

     The initial Proportionate Share ofeach Lender is set forth under the caption "Proportionate Share" opposite suchLender’s name on Part A of Schedule I.

     "Rate Contracts"shall mean swap agreements (as that term is defined in Section 101 of the FederalBankruptcy Reform Act of 1978, as amended) and any other agreements or arrangementsdesigned to provide protection against fluctuations in interest or currency exchangerates.

     "Register" shallhave the meaning given to that term in Section 8.05(d).

     "Rental Expense"shall mean, with respect to any Person and as of the last day of any period, the aggregateamount (after taking into account Cash payments received by such Person from subtenants,concessionaires, licensees or similar Persons) paid or payable (without duplication) forsuch period by that Person to a lessor or renter of property as lease payments or rent,including maintenance and administrative fees, insurance and amounts for taxes paid orpayable to the landlord (excluding rent under Capital Leases that are treated as InterestExpense) calculated in accordance with GAAP.

     "Reorganization Plan"shall mean any plan of reorganization by a debtor in proceedings commenced under anyDebtor Relief Laws.

     "Reportable Event"shall have the meaning given to that term in ERISA and applicable regulations thereunder.

     "Required Lenders"shall mean, at any time, the Lenders whose Proportionate Shares then equal or exceed 51%,except at any time any Lender is a Defaulting Lender. At any time any Lender is aDefaulting Lender, all Defaulting Lenders shall be excluded in determining "RequiredLenders", and "Required Lenders" shall mean non-Defaulting Lenders havingtotal Proportionate Shares equaling or exceeding 51% of the total Proportionate Shares ofall non-Defaulting Lenders. Notwithstanding the foregoing, in no event shall RequiredLenders consist of fewer than two non-Defaulting Lenders at any time at which there shallbe at least two non-Defaulting Lenders party to this Agreement.

     "Requirement of Law"applicable to any Person shall mean (a) the Articles or Certificate of Incorporationand By-laws, Partnership Agreement or other organizational or governing documents of suchPerson, (b) any Governmental Rule applicable to such Person, (c) any license,permit, approval or other authorization granted by any Governmental Authority to or forthe benefit of such Person or (d) any judgment, decision or determination of anyGovernmental Authority or arbitrator, in each case applicable to or binding upon suchPerson or any of its property or to which such Person or any of its property is subject.

     "Reserve Requirement"shall mean, with respect to any day in an Interest Period for a LIBOR Loan, the aggregateof the reserve requirement rates (expressed as a decimal) in effect on such day foreurocurrency funding (currently referred to as "Eurocurrency liabilities" inRegulation D of the Federal Reserve Board) maintained by a member bank of the FederalReserve System. As used herein, the term "reserve requirement" shall include,without limitation, any basic, supplemental or emergency reserve requirements imposed onany Lender by any Governmental Authority.

     "Responsible Officer"shall mean the president, vice president of legal, chief financial officer, treasurer orassistant treasurer of any Loan Party. Any document delivered hereunder that is signed bya Responsible Officer of a Loan Party shall be conclusively presumed to have beenauthorized by all necessary corporate, partnership and/or other action on the part of suchLoan Party and such Responsible Officer shall be conclusively presumed to have acted onbehalf of such Loan Party.

     "Revolving Loan"shall have the meaning given to that term in Section 2.01(a).

     "Revolving Loan Borrowing"shall mean a borrowing by the Borrower consisting of the Revolving Loans made by each ofthe Lenders on the same date and of the same Type pursuant to a single Notice of RevolvingLoan Borrowing.

     "Revolving Loan Note"shall have the meaning given to that term in Section 2.08(b).

     "Security Agreement"shall mean the Amended and Restated Security Agreement to be entered into among theAdministrative Agent and the Borrower and its Domestic Subsidiaries (other than ExemptSubsidiaries), substantially in the form of Exhibit I, as the same may be from timeto time be supplemented, modified, amended, extended or supplanted.

     "Security Documents"shall mean and include the Security Agreement, the Pledge Agreement, each LeaseholdMortgage, any Landlord Consents and all other instruments, agreements, certificates anddocuments (including UCC financing statements and fixture filings and Landlord Consents)delivered to the Administrative Agent or any Lender in connection with any Collateral orto secure the Obligations.

     "Seller Indebtedness"shall mean Indebtedness incurred (or otherwise assumed) by the Borrower and/or any of itsSubsidiaries in connection with an Acquisition as to all or a portion of the purchaseprice for such Acquisition.

     "Solvent" shallmean, with respect to any Person on any date, that on such date (a) the fair value ofthe property of such Person is greater than the fair value of the liabilities (includingcontingent, subordinated, matured and unliquidated liabilities) of such Person,(b) the present fair saleable value of the assets of such Person is greater than theamount that will be required to pay the probable liability of such Person on its debts asthey become absolute and matured and (c) such Person does not intend to, and does notbelieve that it will, incur debts or liabilities beyond such Person’s ability to payas such debts and liabilities mature. For purposes of this definition, the amount of anycontingent liability at any time shall be computed as the amount that, in light of all ofthe facts and circumstances existing at such time, represents that amount that can bereasonably be expected to become an actual or matured liability.

     "Stockholders’ Equity"shall mean, as of each date of determination and with respect to the Borrower, theconsolidated stockholders’ equity of the Borrower and its Subsidiaries as of thatdate determined in accordance with GAAP; provided that there shall be excluded from thecomputation of Stockholders’ Equity the amount of any unrealized gain or loss inaccumulated other comprehensive income as a result of accounting for derivative andhedging activities in accordance with Financial Accounting Standards No. 133, and providedfurther that Stockholders’ Equity shall not include any amount attributable toDisqualified Stock.

     "Store" shall meana retail natural foods or specialty grocery store or supermarket, vitamin store, or othersimilar type of establishment operated by the Borrower and/or any other Loan Party (a)that has gross square footage in excess of 3,500 or (b) with respect to which the Borroweror any other applicable Loan Party has an obligation to pay more than $50,000 during anycalendar year (i) in Rental Expense (whether in connection with an operating lease or aCapital Lease), if such supermarket, store or other establishment is leased by Borrower orsuch other Loan Party or (ii) in debt service (to include principal and interest) if suchsupermarket, store or other establishment is owned in fee by the Borrower or such otherLoan Party. Any real property used by the Borrower or any other Loan Party primarily forstorage, food preparation, general or administrative office, warehouse or distributionpurposes will not be deemed a "Store".

     "Store Deposit Account"shall mean a Deposit Account maintained by the Borrower or a Subsidiary of the Borrower ata financial institution in connection with a Store (or a group of Stores in the same city)for the purpose of facilitating such Store’s (or Stores’) day-to-day operations."Store Deposit Accounts" shall not include any account maintained with anyLender or any concentration account, controlled disbursement account, investment accountor similar account.

     "Subordination Agreement"shall mean each subordination agreement (if any) relating to Indebtedness incurred under Section5.02(a)(xi), which subordination agreement shall contain substantially those termsdescribed in the definition of "Permitted Subordinated Indebtedness."

     "Subsidiary" ofany Person shall mean (a) any corporation of which more than 50% of the issued andoutstanding Equity Securities having ordinary voting power to elect a majority of theboard of directors of such corporation (irrespective of whether at the time capital stockof any other class or classes of such corporation shall or might have voting power uponthe occurrence of any contingency) is at the time directly or indirectly owned orcontrolled by such Person, by such Person and one or more of its other Subsidiaries or byone or more of such Person’s other Subsidiaries, (b) any partnership, jointventure, limited liability company or other association of which more than 50% of theequity interest having the power to vote, direct or control the management of suchpartnership, joint venture or other association is at the time owned and controlled bysuch Person, by such Person and one or more of the other Subsidiaries or by one or more ofsuch Person’s other Subsidiaries or (c) any other Person included in theFinancial Statements of such Person on a consolidated basis. Unless otherwise indicated inthis Agreement, "Subsidiary" shall mean a Subsidiary of the Borrower.

     "Support Facility Rents"shall mean Rental Expenses incurred by the Borrower or its Subsidiaries with respect toregional warehouses, food preparation facilities, commissaries and other non-retailfacilities operated and/or utilized by the Borrower or its Subsidiaries in connection withtheir day-to-day operations.

     "Surety Instruments"shall mean all letters of credit (including standby and commercial), banker’sacceptances, bank guaranties, shipside bonds, surety bonds and similar instruments.

     "Swing Line" shallmean the revolving credit facility made available by the Swing Line Lender pursuant to Section2.03.

     "Swing Line Borrowing"shall mean a borrowing of a Swing Line Loan.

     "Swing Line Lender"shall mean Wells Fargo in its capacity as provider of Swing Line Loans, or any successorswing line lender hereunder.

     "Swing Line Loan"shall mean the meaning specified in Section 2.03(a).

     "Swing Line Note"shall have the meaning given to that term in Section 2.08(c).

     "Swing Line Sublimit"shall mean an amount equal to the lesser of (a) Twenty Million Dollars ($20,000,000)****and (b) the Total Commitment. The Swing Line Sublimit is part of, and not inaddition to, the Total Commitment.

     "Synthetic Lease"shall mean each arrangement, however described, under which the obligor accounts for itsinterest in the property covered thereby under GAAP as lessee of a lease which is not acapital lease and accounts for its interest in the property covered thereby for Federalincome tax purposes as the owner.

     "Synthetic Lease InterestComponent" shall mean, with respect to any Person for any period, the portion ofrent paid or payable (without duplication) for such period under Synthetic Leases of suchPerson that would be treated as interest in accordance with Financial Accounting StandardsBoard Statement No. 13 if such Synthetic Leases were treated as capital leases underGAAP.

     "Synthetic Lease Obligation"shall mean, as to any Person with respect to any Synthetic Lease at any time ofdetermination, the amount of the liability of such Person in respect of such SyntheticLease that would (if such lease was required to be classified and accounted for as acapital lease on a balance sheet of such Person in accordance with GAAP) be required to becapitalized on the balance sheet of such Person at such time.

     "Synthetic Lease PrincipalComponent" shall mean, with respect to any Person for any period, the portion ofrent (exclusive of the Synthetic Lease Interest Component) paid or payable (withoutduplication) for such period under Synthetic Leases of such Person that would be treatedas principal in accordance with Financial Accounting Standards Board Statement No. 13if such Synthetic Leases were treated as capital leases under GAAP.

     "Taxes" shall havethe meaning given to such term in Section 2.12(a).

     "Tax Preferred Subsidiary"shall mean a Subsidiary of the Borrower (or any of its Subsidiaries) that is (a)(i) acorporation that is foreign (within the meanings of paragraphs (3), (4), (5) and (9) ofSection 7701(a) of the IRC) and (ii) is a controlled foreign corporation (within themeaning of Section 957(a) of the IRC) with respect to which the Borrower (or anycorporation which in addition to the Borrower is a member of an affiliated group, withinthe meaning of Section 1504(a) of the IRC, for which a consolidated return is filedpursuant to Section 1501 of the IRC) is a United States shareholder within the meaning ofSection 951(b) of the IRC or (b) a corporation that is domestic (within the meanings ofthe aforementioned paragraphs of Section 7701 of the IRC) and whose only asset(s)consist(s) of the stock of one or more corporations described in clauses (a)(i) and (ii)of this definition.

     "Termination Value"shall mean, in respect of any one or more Rate Contracts, after taking into account theeffect of any legally enforceable netting agreement relating to such Rate Contracts, (a)for any date on or after the date such Rate Contracts have been closed out and terminationvalue(s) determined in accordance therewith, such termination value(s), and (b) for anydate prior to the date referenced in clause (a) the amount(s) determined as themark-to-market value(s) for such Rate Contracts, as determined by the Administrative Agentbased upon one or more mid-market or other readily available quotations provided by anyrecognized dealer in such Rate Contracts which may include any Lender.

     "Total Commitment"shall mean, at any time, Seventy-Five Million Dollars ($75,000,000) or, if such amount isreduced pursuant to Sections 2.04(c), (d) or (e) or increased pursuant to**Section2.04(b),**the amount to which so reduced or increased (as applicable) and ineffect at such time.

     "Total Funded Debt"shall mean all obligations of the Loan Parties described in clauses (a), (b), (c),(d), (e), (f), (h) and (i) of the definition of "Indebtedness", but in any eventexcluding trade accounts payable and Permitted Insurance Premium Indebtedness, determinedon a consolidated basis without duplication.

     "Type" shall mean,with respect to any Loan or Borrowing at any time, the classification of such Loan orBorrowing by the type of interest rate it then bears, whether an interest rate based uponthe Base Rate or the LIBOR Rate.

     "UCC" shall meanthe Uniform Commercial Code as enacted in the State of Colorado.

     "Unreimbursed Amount"has the meaning set forth in Section 2.02(c)(i).

     "Unused Commitment"shall mean, at any time, the remainder of (a) the Total Commitment at such time minus(b) the sum of the Effective Amount of all Revolving Loans and the Effective Amountof all L/C Obligations outstanding at such time.

     "Wells Fargo"shall mean Wells Fargo Bank, National Association.

     1.02.     GAAP.Unless otherwise indicated in this Agreement or any other Credit Document, all accountingterms used in this Agreement or any other Credit Document shall be construed, and allaccounting and financial computations hereunder or thereunder shall be computed, inaccordance with GAAP. If GAAP changes during the term of this Agreement such that anycovenants contained herein would then be calculated in a different manner or withdifferent components, the Borrower, the Lenders and the Administrative Agent agree tonegotiate in good faith to amend this Agreement in such respects as are necessary toconform those covenants as criteria for evaluating the Borrower’s financial conditionto substantially the same criteria as were effective prior to such change in GAAP; provided,however, that, until the Borrower, the Lenders and the Administrative Agent soamend this Agreement, all such covenants shall be calculated in accordance with GAAP as ineffect immediately prior to such change.

     1.03.     Headings.The table of contents, captions and section headings appearing in this Agreement areincluded solely for convenience of reference and are not intended to affect theinterpretation of any provision of this Agreement.

     1.04.     PluralTerms. All terms defined in this Agreement or any other Credit Document in thesingular form shall have comparable meanings when used in the plural form and vice versa.

     1.05.     Time.All references in this Agreement and each of the other Credit Documents to a time of dayshall mean Denver, Colorado time, unless otherwise indicated.

     1.06.     GoverningLaw. Unless otherwise expressly provided in any Credit Document, this Agreement andeach of the other Credit Documents shall be governed by and construed in accordance withthe laws of the State of Colorado without reference to conflicts of law rules.

     1.07.     Construction.This Agreement is the result of negotiations among, and has been reviewed by, theBorrower, the Lenders, the Administrative Agent and their respective counsel. Accordingly,this Agreement shall be deemed to be the product of all parties hereto, and no ambiguityshall be construed in favor of or against the Borrower, any Lender or the AdministrativeAgent.

     1.08.     EntireAgreement. This Agreement and each of the other Credit Documents, taken together,constitute and contain the entire agreement of the Borrower, the Lenders and theAdministrative Agent and supersede any and all prior agreements, negotiations,correspondence, understandings and communications among the parties, whether written ororal, respecting the subject matter hereof (including the commitment letter dated as ofDecember 11, 2002 between the Borrower and the Administrative Agent but excluding theAdministrative Agent’s Fee Letter).

     1.09.     Calculationof Interest and Fees. All calculations of interest and fees under this Agreement andthe other Credit Documents for any period (a) shall include the first day of suchperiod and exclude the last day of such period and (b) shall be calculated on thebasis of a year of 360 days for actual days elapsed.

     1.10.     References.

          (a)     Referencesin this Agreement to "Recitals," "Sections," "Paragraphs,""Exhibits" and "Schedules" are to recitals, sections, paragraphs,exhibits and schedules herein and hereto unless otherwise indicated.

          (b)     Referencesin this Agreement or any other Credit Document to any document, instrument or agreement(i) shall include all exhibits, schedules and other attachments thereto,(ii) shall include all documents, instruments or agreements issued or executed inreplacement thereof if such replacement is permitted hereby, and (iii) shall meansuch document, instrument or agreement, or replacement or predecessor thereto, as amended,modified and supplemented from time to time and in effect at any given time if suchamendment, modification or supplement is permitted hereby.

          (c)     Referencesin this Agreement or any other Credit Document to any Governmental Rule (i) shallinclude any successor Governmental Rule, (ii) shall include all rules and regulationspromulgated under such Governmental Rule (or any successor Governmental Rule), and(iii) shall mean such Governmental Rule (or successor Governmental Rule) and suchrules and regulations, as amended, modified, codified or reenacted from time to time andin effect at any given time.

          (d)     Referencesin this Agreement or any other Credit Document to any Person in a particular capacity(i) shall include any successors to and permitted assigns of such Person in thatcapacity and (ii) shall exclude such Person individually or in any other capacity.

     1.11.     OtherInterpretive Provisions. The words "hereof," "herein" and"hereunder" and words of similar import when used in this Agreement or any otherCredit Document shall refer to this Agreement or such other Credit Document, as the casemay be, as a whole and not to any particular provision of this Agreement or such otherCredit Document, as the case may be. The words "include" and"including" and words of similar import when used in this Agreement or any otherCredit Document shall not be construed to be limiting or exclusive. In the event of anyinconsistency between the terms of this Agreement and the terms of any other CreditDocument, the terms of this Agreement shall govern.
**ARTICLE II.      CREDIT FACILITIES.

     2.01.     RevolvingLoan Facility.

          (a)     RevolvingLoan Availability. On the terms and subject to the conditions of this Agreement, eachLender severally agrees to advance to the Borrower from time to time during the periodbeginning on the Closing Date and ending on the Maturity Date such loans in Dollars as theBorrower may request under this Section 2.01 (individually, a "RevolvingLoan"); provided, however, that (i) the sum of (A) theEffective Amount of all Revolving Loans made by such Lender at any time outstanding and(B) such Lender’s Proportionate Share of the Effective Amount of all L/CObligations and all Swing Line Loans at any time outstanding shall not exceed suchLender’s Commitment at such time and (ii) the aggregate Effective Amount of allRevolving Loans, Swing Line Loans and L/C Obligations on the date of the proposedRevolving Loan Borrowing shall not exceed the Total Commitment on such date. All RevolvingLoans shall be made on a *pro rata* basis by the Lenders in accordance with theirrespective Proportionate Shares, with each Revolving Loan Borrowing to be comprised of aRevolving Loan by each Lender equal to such Lender’s Proportionate Share of suchRevolving Loan Borrowing. Except as otherwise provided herein, the Borrower may borrow,repay and reborrow Revolving Loans until the Maturity Date. All loans outstanding as ofthe Closing Date under the Prior Credit Agreement shall be deemed to be Revolving Loansmade under this Agreement and from and after the Closing Date shall be subject to andgoverned by the terms and conditions hereof, including without limitation Section 8.14.

          (b)     Noticeof Revolving Loan Borrowing. The Borrower shall request each Revolving Loan Borrowingby delivering to the Administrative Agent an irrevocable written notice in the form of Exhibit A,duly executed by a Responsible Officer of the Borrower and appropriately completed (a"Notice of Revolving Loan Borrowing"), which specifies, among otherthings:

               (i)     Theprincipal amount of the requested Revolving Loan Borrowing, which shall be in the amountof (A) $500,000****or an integral multiple of $100,000****in excess thereofin the case of a Revolving Loan Borrowing consisting of Base Rate Loans; or(B) $1,000,000****or an integral multiple of $100,000 in excess thereof in thecase of a Revolving Loan Borrowing consisting of LIBOR Loans;

               (ii)     Whetherthe requested Revolving Loan Borrowing is to consist of Base Rate Loans or LIBOR Loans;

               (iii)     Ifthe requested Revolving Loan Borrowing is to consist of LIBOR Loans, the initial InterestPeriods selected by the Borrower for such LIBOR Loans in accordance with Section2.01(e); and

               (iv)     Thedate of the requested Revolving Loan Borrowing, which shall be a Business Day.

The Borrower shall give each Notice of Revolving Loan Borrowingto the Administrative Agent not later than 10:00 a.m. at least three (3) Business Daysbefore the date of the requested Revolving Loan Borrowing in the case of a Revolving LoanBorrowing consisting of LIBOR Loans and not later than 10:00 a.m. at least one (1)Business Day before the date of the requested Revolving Loan Borrowing in the case of aRevolving Loan Borrowing consisting of Base Rate Loans. Each Notice of Revolving LoanBorrowing shall be delivered by first-class mail or facsimile to the Administrative Agentat the office or facsimile number specified in Section 8.01. The Borrower mayprovide the Administrative Agent with telephonic notice of its intention to submit aNotice of Revolving Loan Borrowing; provided, however, that no Notice ofRevolving Loan Borrowing shall be deemed effective until received by first-class mail orfacsimile in accordance with the immediately preceding sentence. The Administrative Agentshall promptly notify each Lender of the contents of each Notice of Revolving LoanBorrowing and of the amount and Type of (and, if applicable, the Interest Period for) theRevolving Loan to be made by such Lender as part of the requested Revolving LoanBorrowing.

          (c)     RevolvingLoan Interest Rates. The Borrower shall pay interest on the unpaid principal amount ofeach Revolving Loan from the date of such Revolving Loan until paid in full, at one of thefollowing rates *per annum*:

               (i)     Duringsuch periods as such Revolving Loan is a Base Rate Loan, at a rate *per annum* equalto the Base Rate plus the Applicable Margin therefor, such rate to change from timeto time as the Applicable Margin or Base Rate shall change; and

               (ii)     Duringsuch periods as such Revolving Loan is a LIBOR Loan, at a rate *per annum* equal atall times during each Interest Period for such LIBOR Loan to the LIBOR Rate for suchInterest Period plus the Applicable Margin therefor, such rate to change from timeto time during such Interest Period as the Applicable Margin shall change.

All Revolving Loans in each Revolving Loan Borrowing shall, atany given time prior to maturity, bear interest at one, and only one, of the above rates.The number of Revolving Loan Borrowings consisting of LIBOR Loans shall not exceed seven(7) at any time.

          (d)     Conversionof Revolving Loans. Subject to Section 2.13, the Borrower may convert anyRevolving Loan Borrowing from one Type of Revolving Loan Borrowing to the other Type; provided,however, that no Base Rate Loan may be converted into a LIBOR Loan during thecontinuance of an Event of Default. The Borrower shall request such a conversion by anirrevocable written notice to the Administrative Agent in the form of Exhibit B,duly executed by a Responsible Officer of the Borrower and appropriately completed (a"Notice of Revolving Loan Conversion"), which specifies, among otherthings:

               (i)     TheRevolving Loan Borrowing which is to be converted;

               (ii)     TheType of Revolving Loan Borrowing into which such Revolving Loan Borrowing is to beconverted;

               (iii)     Ifsuch Revolving Loan Borrowing is to be converted into a Revolving Loan Borrowingconsisting of LIBOR Loans, the initial Interest Period selected by the Borrower for suchLIBOR Loans in accordance with Section 2.01(e); and

               (iv)     Thedate of the requested conversion, which shall be a Business Day.

The Borrower shall give each Notice of Revolving Loan Conversionto the Administrative Agent not later than 10:00 a.m. at least three (3) BusinessDays before the date of the requested conversion. Each Notice of Revolving Loan Conversionshall be delivered by first-class mail or facsimile to the Administrative Agent at theoffice or to the facsimile number specified in Section 8.01. The Borrower mayprovide the Administrative Agent with telephonic notice of its intention to submit aNotice of Revolving Loan Conversion; provided, however, that no Notice ofRevolving Loan Conversion shall be deemed effective until received by first-class mail orfacsimile in accordance with the immediately preceding sentence. The Administrative Agentshall promptly notify each Lender of the contents of each Notice of Revolving LoanConversion.

          (e)     LIBORLoan Interest Periods.

               (i)     Theinitial and each subsequent Interest Period selected by the Borrower for a Revolving LoanBorrowing consisting of LIBOR Loans shall be one (1), two (2), three (3) or six (6)months; provided, however, that (A) any Interest Period which wouldotherwise end on a day which is not a Business Day shall be extended to the nextsucceeding Business Day unless such next Business Day falls in another calendar month, inwhich case such Interest Period shall end on the immediately preceding Business Day;(B) any Interest Period which begins on the last Business Day of a calendar month (oron a day for which there is no numerically corresponding day in the calendar month at theend of such Interest Period) shall end on the last Business Day of a calendar month; and(C) no Interest Period shall end after the Maturity Date.

               (ii)     TheBorrower shall notify the Administrative Agent by an irrevocable written notice in theform of Exhibit C, duly executed by a Responsible Officer of the Borrower andappropriately completed (a "Notice of Revolving Loan Interest Period Selection"),not later than 10:00 a.m. at least three (3) Business Days prior to the last day of eachInterest Period for a Revolving Loan Borrowing consisting of LIBOR Loans of the InterestPeriod selected by the Borrower for the next succeeding Interest Period for such LIBORLoans; provided, however, that no LIBOR Loan shall be continued for anadditional Interest Period after the occurrence and during the continuance of an Event ofDefault. Each Notice of Revolving Loan Interest Period Selection shall be given byfirst-class mail or facsimile to the office or the facsimile number specified in Section 8.01.The Borrower may provide the Administrative Agent with telephonic notice of its intentionto submit a Notice of Revolving Loan Interest Period Selection; provided, however,that no Notice of Revolving Loan Interest Period Selection shall be deemed effective untilreceived by first-class mail or facsimile in accordance with the immediately precedingsentence. If (A) the Borrower fails to notify the Administrative Agent of the nextInterest Period for a Revolving Loan Borrowing consisting of LIBOR Loans in accordancewith this Section 2.01(e) or (B) an Event of Default has occurred and iscontinuing on the last date of an Interest Period for any LIBOR Loan, such LIBOR Loan(s)shall automatically convert to Base Rate Loan(s) on the last day of the current InterestPeriod therefor unless such LIBOR Loan(s) are repaid as provided herein.

          (f)     ScheduledRevolving Loan Payments. The Borrower shall repay the principal amount of theRevolving Loans on the Maturity Date. The Borrower shall pay accrued interest on theunpaid principal amount of each Revolving Loan in arrears (i) in the case of a BaseRate Loan, on the last Business Day of each month, (ii) in the case of a LIBOR Loan,on the last day of each Interest Period therefor (and, if any such Interest Period islonger than three (3) months, every three (3) months after the first day of such InterestPeriod); and (iii) in the case of all Revolving Loans, upon prepayment (to the extentthereof) and at maturity.

          (g)     Purpose.The Borrower shall use the proceeds of the Revolving Loans (i) to refinance existingIndebtedness of the Borrower, (ii) to pay fees and expenses incurred by the Borrowerin connection with the transactions contemplated hereby and (iii) to provide for theworking capital and general corporate purpose needs (including Acquisitions permittedhereunder and New Store development) of the Borrower.

          (h)     Extensionof Maturity Date. On or before the last Business Day which is six (6) months prior tothe three-year anniversary date of this Agreement, the Borrower may, provided that noDefault or Event of Default shall have occurred and be continuing, request that theLenders extend the Maturity Date for one, but only one, additional one-year period. TheBorrower shall request such extension by appropriately completing, executing anddelivering to the Administrative Agent a written request in the form of Exhibit K(an "Extension Request") and attaching thereto updated Projections of theBorrower and its Subsidiaries for such one-year period. The Borrower understands that thisSection 2.01(h) is included in this Agreement for the Borrower’s conveniencein requesting an extension and acknowledges that neither the Administrative Agent nor anyother Lender has promised (either expressly or implicitly), or has any obligation orcommitment, to extend the Maturity Date at any time. The Administrative Agent shallpromptly mail to each Lender three (3) copies of the Extension Request received by theAdministrative Agent. If a Lender, in its sole and absolute discretion, consents to anyExtension Request, such Lender shall evidence such consent by executing and returning two(2) copies of the Extension Request to the Administrative Agent not later than the lastBusiness Day which is five (5) months prior to the Maturity Date. Any failure by anyLender so to execute and return an Extension Request shall be deemed a denial thereof. Ifthe Borrower delivers an Extension Request to the Administrative Agent pursuant to thefirst sentence of this Section 2.01(h), then not later than the last Business Daywhich is four (4) months prior to the Maturity Date, the Administrative Agent shall notifythe Borrower in writing whether (i) the Administrative Agent has received a copy of theExtension Request executed by each Lender, in which case the definition of "MaturityDate" set forth in Section 1.01 shall be deemed extended for a period of oneyear as of the date of such written notice from the Administrative Agent to the Borrower,or (ii) the Administrative Agent has not received a copy of the Extension Request executedby each Lender, in which case such Extension Request shall be deemed denied. TheAdministrative Agent shall deliver to the Borrower, with each written notice under clause(i) of the preceding sentence which notifies the Borrower that the Administrative Agenthas received an Extension Request executed by each Lender, a copy of the Extension Requestso executed by each Lender.

     If less than all the Lenders shallagree to such Extension Request, the extension contemplated in this Section 2.01(h)may nonetheless occur with respect to the consenting Lenders; provided that any suchextension shall be conditioned upon (x) payment in full to each Lender not extending (eacha "Non-Continuing Lender") of all amounts owing to such Lender withrespect to its Commitment and its Proportionate Share of any outstanding Revolving Loansand L/C Obligations, (y) termination (or assumption) of such Lender’s Commitment, and(z) the exact aggregate amount (the "Deficiency") of then existingCommitments for each Non-Continuing Lender shall be accounted for in any one or anycombination of the following: (i) an increase in the Commitment of one or more Lendersparty to this Agreement (each such Lender increasing its Commitment, an "IncreasingLender") pursuant to a Commitment Increase Agreement in form and substancesatisfactory to the Administrative Agent and its counsel (a "Commitment IncreaseAgreement") and as more fully described below, (ii) the addition of one or moreAssignee Lenders as a party to this Agreement, in each case pursuant to an AssignmentAgreement as set forth in Section 8.05(c) and as more fully described below, and/or(iii) the Commitments shall be reduced by an amount equal to that portion of theDeficiency not otherwise accounted for pursuant to clauses (i) or (ii) above, effective asof the Increased Commitment Date (as defined below). The Administrative Agent shall notifythe Borrower and each of the Lenders as to the new Maturity Date or that such extensionshall not occur, as the case may be. 

     The effectiveness of any suchextension is further subject to the satisfaction of the following conditions: (i) in thecase of a Commitment increase by an Increasing Lender, that the Borrower and suchIncreasing Lender shall have entered into a Commitment Increase Agreement, and suchCommitment Increase Agreement shall have been delivered to the Administrative Agent; (ii)in the case of an accession hereto by an Assignee Lender, that the parties thereto shallhave entered into an Assignment Agreement, and such Assignment Agreement shall have beendelivered to the Administrative Agent; and (iii) that any fees and other amounts payableto any Increasing Lender or Assignee Lender in connection with such increase or accessionshall have been paid. Upon the effectiveness of any Commitment Increase Agreement, theCommitment(s), the outstanding aggregate principal amount of the Increasing Lender’sProportionate Share of Revolving Loans and the L/C Obligations be increased in the amountset forth in the Commitment Increase Agreement, and upon the effectiveness of anyAssignment Agreement, the Assignee Lender party thereto shall be and become a party heretoand shall constitute a Lender hereunder with the rights and obligations of a Lender underthe Credit Documents (each such date of effectiveness, an "Increased CommitmentDate"). Effective on each Increased Commitment Date, the Proportionate Shares ofRevolving Loans and L/C Obligations then existing and held by each Lender shall beadjusted to reflect any such changes in such Lender’s Proportionate Share. EachNon-Continuing Lender having Revolving Loans or L/C Obligations or a Commitment thenoutstanding shall be deemed to have assigned, without recourse, to any Increasing Lendersincreasing their Commitments and any Assignee Lenders, such Non-Continuing Lender’sProportionate Share of such outstanding Revolving Loans and L/C Obligations and Commitmentas shall be necessary to effectuate such adjustment. Each Increasing Lender and AssigneeLender shall be deemed to have assumed such Proportionate Share of Revolving Loans and L/CObligations and Commitment. Additionally, promptly following the Increased Commitment Datefor a Commitment increase, the Administrative Agent shall cause Schedule I to bemodified to accurately reflect the Commitments and Proportionate Shares of the Lenders,whereupon such amended Schedule I shall be substituted for the pre-existing ScheduleI, be deemed a part of this Agreement without any further action or consent of anyparty and be promptly distributed to each Lender and the Borrower by the AdministrativeAgent. Additionally, the Administrative Agent shall promptly notify each Increasing Lenderand Assingee Lender of the amount of any funding obligations under this Section 2.01(h).

     2.02.     Lettersof Credit.

          (a)     TheLetter of Credit Commitment.

               (i)     Onthe terms and subject to the conditions set forth herein, (A) the L/C Issuer agrees,in reliance upon the agreements of the other Lenders set forth in this Section 2.02,(1) from time to time on any Business Day during the period from the Closing Dateuntil 30 days prior to the Maturity Date, to issue Letters of Credit in Dollars for theaccount of the Borrower, and to amend or renew Letters of Credit previously issued by it,in accordance with subsection (b) below, and (2) to honor drafts under Lettersof Credit; and (B) the Lenders severally agree to participate in Letters of Creditissued for the account of the Borrower; provided that the L/C Issuer shall not beobligated to make any L/C Credit Extension with respect to any Letter of Credit, and noLender shall be obligated to participate in, any Letter of Credit if as of the date ofsuch L/C Credit Extension, (x) the Effective Amount of all Revolving Loans, SwingLine Loans and L/C Obligations would exceed the Total Commitment on such date,(y) the aggregate Effective Amount of the Revolving Loans of any Lender, plussuch Lender’s Proportionate Share of the Effective Amount of all L/C Obligations, plussuch Lender’s Proportionate Share of the Effective Amount of all Swing Line Loanswould exceed such Lender’s Commitment, or (z) the Effective Amount of the L/CObligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, andsubject to the terms and conditions hereof, the Borrower’s ability to obtain Lettersof Credit shall be fully revolving, and accordingly the Borrower may, during the foregoingperiod, obtain Letters of Credit to replace Letters of Credit that have expired or thathave been drawn upon and reimbursed. All Prior Letters of Credit shall be deemed to havebeen issued pursuant hereto, and from and after the Closing Date shall be subject to andgoverned by the terms and conditions hereof, including without limitation Section 8.14.

               (ii)     TheL/C Issuer shall be under no obligation to issue any Letter of Credit if:

                    (A)     anyorder, judgment or decree of any Governmental Authority or arbitrator shall by its termspurport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or anyRequirement of Law applicable to the L/C Issuer or any request or directive (whether ornot having the force of law) from any Governmental Authority with jurisdiction over theL/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance ofletters of credit generally or such Letter of Credit in particular or shall impose uponthe L/C Issuer with respect to such Letter of Credit any restriction, reserve or capitalrequirement (for which the L/C Issuer is not otherwise compensated hereunder) not ineffect on the Closing Date, or shall impose upon the L/C Issuer any unreimbursed loss,cost or expense (other than an income tax) which was not applicable on the Closing Dateand which the L/C Issuer in good faith deems material to it;

                    (B)     subjectto Section 2.02(b)(iii), the expiry date of such requested Letter of Credit wouldoccur more than twelve months after the date of issuance or last renewal, unless theRequired Lenders have approved such expiry date;

                    (C)     theexpiry date of such requested Letter of Credit would occur after the Maturity Date, unlessall the Lenders have approved such expiry date;

                    (D)     theissuance of such Letter of Credit would violate one or more policies of the L/C Issuer; or

                    (E)     suchLetter of Credit is denominated in a currency other than Dollars.

               (iii)     TheL/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/CIssuer would have no obligation at such time to issue such Letter of Credit in its amendedform under the terms hereof, or (B) the beneficiary of such Letter of Credit does notaccept the proposed amendment to such Letter of Credit.

          (b)     Proceduresfor Issuance and Amendment of Letters of Credit; Evergreen Letters of Credit.

               (i)     EachLetter of Credit shall be issued or amended, as the case may be, upon the request of theBorrower delivered to the L/C Issuer (with a copy to the Administrative Agent) in the formof a Letter of Credit Application, appropriately completed and signed by a ResponsibleOfficer of the Borrower. Such Letter of Credit Application must be received by the L/CIssuer and the Administrative Agent not later than 12:00 noon, at least three BusinessDays (or such later date and time as the L/C Issuer may agree in a particular instance inits sole discretion) prior to the proposed issuance date or date of amendment, as the casemay be. In the case of a request for an initial issuance of a Letter of Credit, suchLetter of Credit Application shall specify in form and detail reasonably satisfactory tothe L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit(which date shall be a Business Day); (B) the amount thereof; (C) the expirydate thereof; (D) the name and address of the beneficiary thereof; (E) thedocuments to be presented by such beneficiary in case of any drawing thereunder;(F) the full text of any certificate to be presented by such beneficiary in case ofany drawing thereunder; and (G) such other matters as the L/C Issuer may reasonablyrequire. In the case of a request for an amendment of any outstanding Letter of Credit,such Letter of Credit Application shall specify in form and detail reasonably satisfactoryto the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed dateof amendment thereof (which date shall be a Business Day); (C) the nature of theproposed amendment; and (D) such other matters as the L/C Issuer may reasonably require.

               (ii)     Promptlyafter receipt of any Letter of Credit Application, the L/C Issuer will confirm with theAdministrative Agent (by telephone or in writing) that the Administrative Agent hasreceived a copy of such Letter of Credit Application from the Borrower and, if not, theL/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by theL/C Issuer of confirmation from the Administrative Agent that the requested issuance oramendment is permitted in accordance with the terms hereof, then, subject to the terms andconditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Creditfor the account of the Borrower or enter into the applicable amendment, as the case maybe, in each case in accordance with the L/C Issuer’s usual and customary businesspractices. Immediately upon the issuance of each Letter of Credit, each Lender shall bedeemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/CIssuer a participation in such Letter of Credit and any related L/C Obligations and L/CBorrowings in an amount equal to the product of such Lender’s Proportionate Share timesthe amount of such Letter of Credit.

               (iii)     Ifthe Borrower so requests in any applicable Letter of Credit Application, the L/C Issuershall agree to issue a Letter of Credit that has automatic renewal provisions (each, an"Evergreen Letter of Credit"); provided that any such EvergreenLetter of Credit must permit the L/C Issuer to prevent any such renewal at least once ineach twelve-month period (commencing with the date of issuance of such Letter of Credit)by giving notice to the beneficiary thereof and the Borrower on a date (the "NonrenewalNotice Date") that is not later than 30 days prior to the expiration of suchtwelve-month period. Unless otherwise directed by the L/C Issuer, the Borrower shall notbe required to make a specific request to the L/C Issuer for any such renewal. Once anEvergreen Letter of Credit has been issued, the Lenders shall be deemed to have authorized(but may not require) the L/C Issuer to permit the renewal of such Letter of Credit at anytime to a date not later than the Maturity Date; provided, however, that theL/C Issuer shall not permit any such renewal if (A) the L/C Issuer would have noobligation at such time to issue such Letter of Credit in its renewed form under the termshereof, or (B) it has received notice (which may be by telephone or in writing) on orbefore the Business Day immediately preceding the Nonrenewal Notice Date (1) from theAdministrative Agent that the Required Lenders have elected not to permit such renewal or(2) from the Administrative Agent, any Lender or the Borrower that one or more of theapplicable conditions specified in Section 3.02 is not then satisfied.Notwithstanding anything to the contrary contained herein, the L/C Issuer shall have noobligation to permit the renewal of any Evergreen Letter of Credit at any time.

                         (iv)     Promptlyafter its delivery of any Letter of Credit or any amendment to a Letter of Credit to anadvising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will alsodeliver to the Borrower and the Administrative Agent a true and complete copy of suchLetter of Credit or amendment.

          (c)     Drawingsand Reimbursements; Funding of Participations.

               (i)     Uponany drawing under any Letter of Credit, the L/C Issuer shall notify the Borrower and theAdministrative Agent of the amount to be paid by the L/C Issuer as a result of suchdrawing and the date on which payment is to be made by the L/C Issuer to the beneficiaryof such Letter of Credit in respect of such drawing. Not later than 12:00 noon, on thedate of any payment by the L/C Issuer under a Letter of Credit (each such date, an "HonorDate"), the Borrower shall reimburse the L/C Issuer through the AdministrativeAgent in an amount equal to the amount of such drawing. If the Borrower fails to soreimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify eachLender of the Honor Date, the amount of the unreimbursed drawing (the "UnreimbursedAmount"), and such Lender’s Proportionate Share thereof. In such event, theBorrower shall be deemed to have requested a Revolving Loan Borrowing of Base Rate Loansto be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, withoutregard to the minimum and multiples specified in Section 2.01 for the principalamount of Base Rate Loans, but subject to the amount of the unutilized portion of theTotal Commitment and the conditions set forth in Section 3.02 (other than thedelivery of a Notice of Revolving Loan Borrowing). Any notice given by the L/C Issuer orthe Administrative Agent pursuant to this Section 2.02(c)(i) may be given bytelephone if immediately confirmed in writing; provided, that the lack of such animmediate confirmation shall not affect the conclusiveness or binding effect of suchnotice.

               (ii)     EachLender (including the Lender acting as L/C Issuer) shall upon any notice pursuant to Section2.02(c)(i) make funds available to the Administrative Agent for the account of the L/CIssuer at the Administrative Agent’s Office in an amount equal to its ProportionateShare of the Unreimbursed Amount not later than 2:00 p.m. on the Business Day specified insuch notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.02(c)(iii),each Lender that so makes funds available shall be deemed to have made a Base Rate Loan tothe Borrower in such amount. The Administrative Agent shall remit the funds so received tothe L/C Issuer.

               (iii)     Withrespect to any Unreimbursed Amount that is not fully refinanced by a Revolving LoanBorrowing because the conditions set forth in Section 3.02 cannot be satisfied orfor any other reason, the Borrower shall be deemed to have incurred from the L/C Issuer anL/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, whichL/C Borrowing shall be due and payable on demand (together with interest) and shall bearinterest at the rate applicable to Revolving Loans upon the occurrence and during thecontinuance of an Event of Default. In such event, each Lender’s payment to theAdministrative Agent for the account of the L/C Issuer pursuant to Section 2.02(c)(ii)shall be deemed payment in respect of its participation in such L/C Borrowing and shallconstitute an L/C Advance from such Lender in satisfaction of its participation obligationunder this Section 2.02.

               (iv)     Untileach Lender funds its Revolving Loan or L/C Advance pursuant to this Section 2.02(c)to reimburse the L/C Issuer for any amount drawn under any Letter of Credit, interest inrespect of such Lender’s Proportionate Share of such amount shall be solely for theaccount of the L/C Issuer.

               (v)     EachLender’s obligation to make Revolving Loans or L/C Advances to reimburse the L/CIssuer for amounts drawn under Letters of Credit, as contemplated by this Section2.02(c), shall be absolute and unconditional and shall not be affected by anycircumstance, including (A) any set-off, counterclaim, recoupment, defense or otherright which such Lender may have against the L/C Issuer, the Borrower or any other Personfor any reason whatsoever; (B) the occurrence or continuance of a Default or Event ofDefault, or (C) any other occurrence, event or condition, whether or not similar toany of the foregoing. Any such reimbursement shall not relieve or otherwise impair theobligation of the Borrower to reimburse the L/C Issuer for the amount of any payment madeby the L/C Issuer under any Letter of Credit, together with interest as provided herein.

               (vi)     Ifany Lender fails to make available to the Administrative Agent for the account of the L/CIssuer any amount required to be paid by such Lender pursuant to the foregoing provisionsof this Section 2.02(c) by the time specified in Section 2.02(c)(ii), theL/C Issuer shall be entitled to recover from such Lender (acting through theAdministrative Agent), on demand, such amount with interest thereon for the period fromthe date such payment is required to the date on which such payment is immediatelyavailable to the L/C Issuer at a rate per annum equal to the Federal Funds Rate from timeto time in effect. A certificate of the L/C Issuer submitted to any Lender (through theAdministrative Agent) with respect to any amounts owing under this clause (vi) shall beconclusive absent manifest error.

          (d)     Repaymentof Participations.

               (i)     Atany time after the L/C Issuer has made a payment under any Letter of Credit and hasreceived from any Lender such Lender’s L/C Advance in respect of such payment inaccordance with Section 2.02(c), if the Administrative Agent receives for theaccount of the L/C Issuer any payment related to such Letter of Credit (whether directlyfrom the Borrower or otherwise, including proceeds of Cash Collateral applied thereto bythe Administrative Agent), or any payment of interest thereon, the Administrative Agentwill distribute to such Lender its Proportionate Share thereof in the same funds as thosereceived by the Administrative Agent.

               (ii)     Ifany payment received by the Administrative Agent for the account of the L/C Issuerpursuant to Section 2.02(c)(i) is required to be returned, each Lender shall pay tothe Administrative Agent for the account of the L/C Issuer its Proportionate Share thereofon demand of the Administrative Agent, plus interest thereon from the date of such demandto the date such amount is returned by such Lender, at a rate per annum equal to theFederal Funds Rate from time to time in effect.

          (e)     ObligationsAbsolute. The obligation of the Borrower to reimburse the L/C Issuer for each drawingunder each Letter of Credit, and to repay each L/C Borrowing and each drawing under aLetter of Credit that is refinanced by a Borrowing of Revolving Loans, shall be absolute,unconditional and irrevocable, and shall be paid strictly in accordance with the terms ofthis Agreement under all circumstances, including the following:

               (i)     anylack of validity or enforceability of such Letter of Credit, this Agreement, or any otheragreement or instrument relating thereto;

               (ii)     theexistence of any claim, counterclaim, set-off, defense or other right that the Borrowermay have at any time against any beneficiary or any transferee of such Letter of Credit(or any Person for whom any such beneficiary or any such transferee may be acting), theL/C Issuer or any other Person, whether in connection with this Agreement, thetransactions contemplated hereby or by such Letter of Credit or any agreement orinstrument relating thereto, or any unrelated transaction;

               (iii)     anyamendment or waiver of or any consent to departure from the Letter of Credit, thisAgreement, or any other agreement or instrument relating thereto, with the consent of theBorrower;

               (iv)     anydraft, demand, certificate or other document presented under such Letter of Credit provingto be forged, fraudulent, invalid or insufficient in any respect or any statement thereinbeing untrue or inaccurate in any respect; or any loss or delay in the transmission orotherwise of any document required in order to make a drawing under such Letter of Credit;

               (v)     anypayment by the L/C Issuer under such Letter of Credit against presentation of a draft orcertificate that does not strictly comply with the terms of such Letter of Credit; or anypayment made by the L/C Issuer under such Letter of Credit to any Person purporting to bea trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors,liquidator, receiver or other representative of or successor to any beneficiary or anytransferee of such Letter of Credit, including any arising in connection with anyproceeding under any Debtor Relief Law;

               (vi)     theexistence, character, quality, quantity, condition, packing, value or delivery of anyproperty purported to be represented by documents presented in connection with any Letterof Credit or any difference between any such property and the character, quality,quantity, condition, or value of such Property as described in such documents;

               (vii)     thetime, place, manner, order or contents of shipments or deliveries of property as describedin documents presented in connection with any Letter of Credit or the existence, natureand extent of any insurance relative thereto;

               (viii)     thesolvency or financial responsibility of any party issuing any documents in connection witha Letter of Credit;

               (ix)     anyfailure or delay in notice of shipments or arrival of any property;

               (x)     anyerror in the transmission of any message relating to a Letter of Credit not caused by theL/C Issuer, or any delay or interruption in any such message;

               (xi)     anyerror, neglect or default of any correspondent of the L/C Issuer in connection with aLetter of Credit;

               (xii)     anyconsequence arising from acts of God, war, insurrection, civil unrest, disturbances, labordisputes, emergency conditions or other causes beyond the control of the L/C Issuer;

               (xiii)     anyother circumstance or happening whatsoever, whether or not similar to any of theforegoing, including any other circumstance that might otherwise constitute a defenseavailable to, or a discharge of, the Borrower.

          (f)     Roleof L/C Issuer. Each of the Borrower and the Lenders agrees that, in paying any drawingunder a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain anydocument (other than any sight draft, certificates and documents expressly required by theLetter of Credit) or to ascertain or inquire as to the validity or accuracy of any suchdocument or the authority of the Person executing or delivering any such document. Neitherthe Administrative Agent nor the L/C Issuer nor any of their respective affiliates,directors, officers, employees, agents or advisors nor any of the correspondents,participants or assignees of the L/C Issuer shall be liable to any Lender for (i) anyaction taken or omitted in connection herewith at the request or with the approval of theLenders or the Required Lenders, as applicable; (ii) any action taken or omitted inthe absence of gross negligence or willful misconduct; or (iii) the due execution,effectiveness, validity or enforceability of any document or instrument related to anyLetter of Credit or Letter of Credit Application. The Borrower hereby assume all risks ofthe acts or omissions of any beneficiary or transferee with respect to its use of anyLetter of Credit; provided, however, that this assumption is not intendedto, and shall not, preclude the Borrower’s pursuing such rights and remedies as itmay have against the beneficiary or transferee at law or under any other agreement.Neither the Administrative Agent nor the L/C Issuer nor any of their respectiveaffiliates, directors, officers, employees, agents or advisors nor any of thecorrespondents, participants or assignees of the L/C Issuer shall be liable or responsiblefor any of the matters described in clauses (i) through (xiii) of Section 2.02(e); provided,however, that anything in such clauses to the contrary notwithstanding, theBorrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to theBorrower, to the extent, but only to the extent, of any direct, as opposed toconsequential or exemplary, damages suffered by the Borrower which the Borrower proveswere caused by the L/C Issuer’s willful misconduct or gross negligence or the L/CIssuer’s willful failure to pay under any Letter of Credit after the presentation toit by the beneficiary of a sight draft and certificate(s) strictly complying with theterms and conditions of a Letter of Credit. In furtherance and not in limitation of theforegoing, the L/C Issuer may accept documents that appear on their face to be in order,without responsibility for further investigation, regardless of any notice or informationto the contrary, and the L/C Issuer shall not be responsible for the validity orsufficiency of any instrument transferring or assigning or purporting to transfer orassign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, inwhole or in part, which may prove to be invalid or ineffective for any reason.

          (g)     CashCollateral and Back-Up Letters of Credit. Upon the request of the AdministrativeAgent, (i) if the L/C Issuer has honored any full or partial drawing request underany Letter of Credit and such drawing has resulted in an L/C Borrowing that has not beenrepaid as provided herein, or (ii) if, as of the Maturity Date, any Letter of Creditmay for any reason remain outstanding and partially or wholly undrawn, the Borrower shallpromptly (x) Cash Collateralize the Obligations in an amount equal to 103% of the thenEffective Amount of the L/C Obligations, or (y) obtain a letter of credit (a "Back-UpLetter of Credit") issued for the benefit of the L/C Issuer by a bank or otherfinancial institution acceptable to the L/C Issuer in its sole but reasonable discretionin an amount at least equal to the Effective Amount of the L/C Obligations. The Borrowerhereby grants to the Administrative Agent, for the benefit of the L/C Issuer and theLenders, a Lien on all cash and deposit account balances described in the definition of"Cash Collateralize" as security for the Obligations. Cash collateral shall bemaintained in blocked deposit accounts at Wells Fargo or other institutions reasonablysatisfactory to it. Other than any interest earned on the investment of such depositspursuant to the immediately succeeding sentence, which investments shall be made at therisk and expense of the Borrower, such deposits shall not bear interest. If requested inwriting by the Borrower at the time cash collateral is delivered to the AdministrativeAgent pursuant to this Section 2.02(g), such cash collateral shall be invested bythe Administrative Agent, in its reasonable discretion, in Cash Equivalents and applied bythe Administrative Agent to reimburse the L/C Issuer for L/C Borrowings for which it hasnot been reimbursed. The Lien held by the Administrative Agent in such cash collateral tosecure the Obligations shall be released, or the Back-up Letter of Credit shall beterminated, as applicable, upon the satisfaction of each of the following conditions:(a) no Letters of Credit shall be outstanding as of the Maturity Date, (b) allL/C Obligations shall have been repaid in full and (c) no Default shall have occurredand be continuing.

          (h)     Applicabilityof ISP98. Unless otherwise expressly agreed by the L/C Issuer and the Borrower when aLetter of Credit is issued (including any such agreement applicable to an Existing Letterof Credit), the rules of the "International Standby Practices 1998" published bythe Institute of International Banking Law & Practice (or such later version thereofas may be in effect at the time of issuance) shall apply to each Letter of Credit.

          (i)     Letterof Credit Fees. The Borrower shall pay to the Administrative Agent for the account ofeach Lender in accordance with its Proportionate Share a Letter of Credit fee for eachLetter of Credit equal to the Letter of Credit Fee times the actual daily maximumamount available to be drawn under each such Letter of Credit. Such fee for each Letter ofCredit shall be due and payable in arrears on the last Business Day of each March, June,September and December, commencing with the first such date to occur after the issuance ofsuch Letter of Credit, and on the Maturity Date. If there is any change in the Letter ofCredit Fee during any quarter, the actual daily amount of each Letter of Credit shall becomputed and multiplied by the Letter of Credit Fee separately for each period during suchquarter that such Letter of Credit Fee was in effect. 

          (j)     FrontingFee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shallpay directly to the L/C Issuer for its own account a fronting fee in an amount withrespect to each Letter of Credit equal to the greater of (i) 1/4 of 1% of the amountof such Letter of Credit and (ii) $500, due and payable upon each L/C CreditExtension with respect to such Letter of Credit; provided, that in the case of anincrease in the amount of a Letter of Credit after the issuance thereof, such fronting feeshall be payable only on the increased amount thereof. In addition, the Borrower shall paydirectly to the L/C Issuer for its own account the customary issuance, presentation,amendment and other processing fees, and other standard costs and charges, of the L/CIssuer relating to letters of credit as from time to time in effect. Such fees and chargesare due and payable within five (5) Business Days after receipt by the Borrower of aninvoice therefor and are nonrefundable.

          (k)     Conflictwith Letter of Credit Application. In the event of any conflict between the termshereof and the terms of any Letter of Credit Application, the terms hereof shall control.

     2.03.     SwingLine.

          (a)     TheSwing Line. On the terms and subject to the conditions set forth herein, the SwingLine Lender agrees to make loans (each such loan, a "Swing Line Loan") inDollars to the Borrower from time to time on any Business Day during the period from theClosing Date to the Maturity Date in an aggregate amount not to exceed at any timeoutstanding the amount of the Swing Line Sublimit, notwithstanding the fact that suchSwing Line Loans, when aggregated with the Effective Amount of Revolving Loans of theSwing Line Lender in its capacity as a Lender of Revolving Loans, may exceed the amount ofsuch Lender’s Commitment; provided, however, that after giving effectto any Swing Line Loan, (i) the aggregate Effective Amount of all Revolving Loans,Swing Line Loans and L/C Obligations on the date of the proposed Swing Line Borrowingshall not exceed the Total Commitment on such date, and (ii) the aggregate EffectiveAmount of the Revolving Loans of any Lender, plus such Lender’s ProportionateShare of the Effective Amount of all L/C Obligations, plus such Lender’sProportionate Share of the Effective Amount of all Swing Line Loans shall not exceed suchLender’s Commitment, and providedfurther, that the Swing Line Lendershall not make any Swing Line Loan to refinance an outstanding Swing Line Loan. Within theforegoing limits, and subject to the other terms and conditions hereof, the Borrower mayborrow under this Section 2.03, prepay under Section 2.06, and reborrowunder this Section 2.03. Each Swing Line Loan shall be a Base Rate Loan.Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, andhereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender arisk participation in such Swing Line Loan in an amount equal to the product of suchLender’s Proportionate Share times the amount of such Swing Line Loan.

          (b)     BorrowingProcedures. Each Swing Line Borrowing shall be made upon the Borrower’sirrevocable notice to the Swing Line Lender and the Administrative Agent, which may begiven by telephone. Each such notice must be received by the Swing Line Lender and theAdministrative Agent not later than 10:00 a.m., on the requested borrowing date, andshall specify (i) the amount to be borrowed, which amount shall be a minimum of$100,000, and (ii) the requested borrowing date, which shall be a Business Day. Eachsuch telephonic notice must be confirmed promptly by delivery to the Swing Line Lender andthe Administrative Agent of a written Notice of Swing Line Borrowing, appropriatelycompleted and signed by a Responsible Officer of the Borrower. Promptly after receipt bythe Swing Line Lender of any telephonic Notice of Swing Line Borrowing, the Swing LineLender will confirm with the Administrative Agent (by telephone or in writing) that theAdministrative Agent has also received such Notice of Swing Line Borrowing and, if not,the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) ofthe contents thereof. Unless the Swing Line Lender has received notice (by telephone or inwriting) from the Administrative Agent (including at the request of any Lender) prior to12:00 noon, on the date of the proposed Swing Line Borrowing (A) directing theSwing Line Lender not to make such Swing Line Loan as a result of the limitations setforth in the first proviso to the first sentence of Section 2.03(a), or(B) that one or more of the applicable conditions specified in Section 3.02is not then satisfied, then, subject to the terms and conditions hereof, the Swing LineLender will, not later than 2:00 p.m., on the borrowing date specified in such Noticeof Swing Line Borrowing, make the amount of its Swing Line Loan available to the Borrowerat its office by crediting the account of the Borrower on the books of the Swing LineLender in immediately available funds.

          (c)     Refinancingof Swing Line Loans.

               (i)     Inthe event that the Effective Amount of all Swing Line Loans exceeds $500,000 on ten (10)consecutive Business Days, then on the next Business Day (unless****the Borrower hasrepaid the Swing Line Loans as provided herein or made other arrangements acceptable tothe Swing Line Lender to reduce the Effective Amount of all Swing Line Loans below$500,000), the Borrower shall request a Revolving Loan Borrowing pursuant to Section2.01(b) sufficient to reduce the Effective Amount of all Swing Line Loans below$500,000. In addition, upon any demand for payment of the Effective Amount of all SwingLine Loans by the Swing Line Lender (unless the Borrower has repaid the Swing Line Loansas provided herein or made other arrangements acceptable to the Swing Line Lender toreduce the Effective Amount of the Swing Line Loans to $0), the Borrower shall request aRevolving Loan Borrowing pursuant to Section 2.01(b) sufficient to repay all SwingLine Loans (and, for this purpose, Section 2.01(b)(i) shall not apply). In eachcase, the Administrative Agent shall automatically provide the proceeds of the responsiveRevolving Loans made by each Lender to the Swing Line Lender (which the Swing Line Lendershall then apply to the Effective Amount of the Swing Line Loans). In the event that theBorrower fails to request a Revolving Loan Borrowing within the time specified by Section2.01(b) on any such date, the Administrative Agent may, but is not required to,without notice to or the consent of the Borrower, cause Base Rate Loans to be made by theLenders in amounts which are sufficient to reduce the Effective Amount of the Swing LineLoans as required above. The proceeds of such Base Rate Loans shall be paid directly tothe Swing Line Lender for application to the Effective Amount of the Swing Line Loans.

               (ii)     Iffor any reason any Revolving Loan Borrowing cannot be requested in accordance with Section2.03(c)(i) or any Swing Line Loan cannot be refinanced by such a Revolving LoanBorrowing, the Notice of Revolving Loan Borrowing submitted by the Swing Line Lender shallbe deemed to be a request by the Swing Line Lender that each of the Lenders fund itsparticipation in the relevant Swing Line Loan and each Lender’s payment to theAdministrative Agent for the account of the Swing Line Lender pursuant to Section2.03(c)(i) shall be deemed payment in respect of such participation.

               (iii)     Ifany Lender fails to make available to the Administrative Agent for the account of theSwing Line Lender any amount required to be paid by such Lender pursuant to the foregoingprovisions of this Section 2.03(c) by the time specified in Section 2.03(c)(i),the Swing Line Lender shall be entitled to recover from such Lender (acting through theAdministrative Agent), on demand, such amount with interest thereon for the period fromthe date such payment is required to the date on which such payment is immediatelyavailable to the Swing Line Lender at a rate per annum equal to the Federal Funds Ratefrom time to time in effect. A certificate of the Swing Line Lender submitted to anyLender (through the Administrative Agent) with respect to any amounts owing under thisclause (iii) shall be conclusive absent manifest error.

               (iv)     EachLender’s obligation to make Revolving Loans or to purchase and fund participations inSwing Line Loans pursuant to this Section 2.03(c) shall be absolute andunconditional and shall not be affected by any circumstance, including (A) anyset-off, counterclaim, recoupment, defense or other right which such Lender may haveagainst the Swing Line Lender, the Borrower or any other Person for any reason whatsoever,(B) the occurrence or continuance of a Default or Event of Default, or (C) anyother occurrence, event or condition, whether or not similar to any of the foregoing. Anysuch purchase of participations shall not relieve or otherwise impair the obligation ofthe Borrower to repay Swing Line Loans, together with interest as provided herein.

          (d)     Repaymentof Participations.

               (i)     Atany time after any Lender has purchased and funded a participation in a Swing Line Loan,if the Swing Line Lender receives any payment on account of such Swing Line Loan, theSwing Line Lender will distribute to such Lender its Proportionate Share of such payment(appropriately adjusted, in the case of interest payments, to reflect the period of timeduring which such Lender’s participation was outstanding and funded) in the samefunds as those received by the Swing Line Lender.

               (ii)     Ifany payment received by the Swing Line Lender in respect of principal or interest on anySwing Line Loan is required to be returned by the Swing Line Lender, each Lender shall payto the Swing Line Lender its Proportionate Share thereof on demand of the AdministrativeAgent, plus interest thereon from the date of such demand to the date such amount isreturned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agentwill make such demand upon the request of the Swing Line Lender.

          (e)     Interestfor Account of Swing Line Lender. Each Swing Line Loan shall bear interest on theoutstanding principal amount thereof from the applicable borrowing date at a rate *perannum* equal to the Base Rate plus the Applicable Margin for Base Rate Loans.The Swing Line Lender shall be responsible for invoicing the Borrower for interest on theSwing Line Loans. Until each Lender funds its Base Rate Loan or participation pursuant tothis Section 2.03 to refinance such Lender’s Proportionate Share of anySwing Line Loan, interest in respect of such Proportionate Share shall be solely for theaccount of the Swing Line Lender. The Borrower shall pay accrued interest on the unpaidprincipal amount of each Swing Line Loan at the end of each month, upon prepayment (to theextent thereof) and at maturity.

          (f)     Repaymentof Swing Line Loans. The Swing Line Loans shall be payable no later than the MaturityDate.

          (g)     Paymentsin Respect of Swing Line Loans. The Borrower shall make all payments of principal andinterest in respect of the Swing Line Loans directly to the Administrative Agent, who willthen, in turn, distribute such amounts to the Swing Line Lender in accordance with Section2.09(a)(ii).

     2.04.     AmountLimitations, Commitment Reductions, Etc.

          (a)     TotalCommitment. The Effective Amount of all Revolving Loans, L/C Obligations and SwingLine Loans outstanding at any time shall not exceed the Total Commitment at such time.

          (b)     Increasein Total Commitment.

               (i)     Providedthat no Default or Event of Default has occurred and is continuing, upon written notice tothe Administrative Agent (which shall promptly notify the Lenders), and subject to Section2.04(b)(iii) below, the Borrower may (A) at any time prior to the Maturity Date,request an increase in the Total Commitment up to an aggregate amount of One Hundred TenMillion Dollars ($110,000,000) and (B) on a one-time basis, at any time after an increasepursuant to subclause (A) of this clause (i) and prior to the secondanniversary of the Closing Date, request an increase in the Total Commitment up to anaggregate amount of One Hundred Thirty Five Million Dollars ($135,000,000). At the time ofsending such written notice, the Borrower (in consultation with the Administrative Agent)shall specify the time period within which each Lender is requested to respond (whichshall in no event be less than ten (10) Business Days from the date of delivery of suchnotice to the Lenders). Each Lender shall notify the Administrative Agent within such timeperiod whether or not it agrees to increase its Commitment and, if so, whether by anamount equal to, greater than, or less than its Proportionate Share of such requestedincrease. Any Lender not responding within such time period shall be deemed to havedeclined to increase its Commitment. The Administrative Agent shall notify the Borrowerand each Lender of the Lenders’ responses to each request made hereunder. To achievethe full amount of a requested increase, the Borrower may also invite additional EligibleAssignees to become Lenders pursuant to a joinder agreement in form and substancereasonably satisfactory to the Administrative Agent and its counsel.

               (ii)     Ifthe Total Commitment is increased in accordance with this Section 2.04(b), theAdministrative Agent and the Borrower shall determine the effective date (the "IncreaseEffective Date") and the final allocation of such increase. The AdministrativeAgent shall promptly notify the Borrower and the Lenders of the final allocation of suchincrease and the Increase Effective Date. As a condition precedent to such increase, theBorrower shall deliver to the Administrative Agent a certificate of each Loan Party datedas of the Increase Effective Date (in sufficient copies for each Lender) signed by aResponsible Officer of such Loan Party (i) certifying and attaching the resolutionsadopted by such Loan Party approving or consenting to such increase, and, (ii) in the caseof the Borrower, including a Compliance Certificate demonstrating *pro forma*compliance with the financial covenants contained in Section 5.03 after givingeffect to such increase and (iii) certifying that, before and after giving effect to suchincrease, the representations and warranties contained in Section 4.01 are true andcorrect in all material respects on and as of the Increase Effective Date (except forrepresentations and warranties expressly made as of a specified date, which shall be trueand correct in all material respects as of such date) and no Default or Event of Defaulthas occurred and is continuing. The Borrower shall deliver new or amended Revolving LoanNotes reflecting the increased Commitment of any Lender holding or requesting a RevolvingLoan Note. The Administrative Agent shall distribute an amended Schedule I (whichshall be deemed incorporated into this Agreement), to reflect any changes thereinresulting from such increase. The Borrower shall prepay any Revolving Loans outstanding onthe Increase Effective Date (and pay any additional amounts required pursuant to Section2.13) to the extent necessary to keep the outstanding Revolving Loans ratable with anyrevised Proportionate Shares arising from any nonratable increase in the Commitmentshereunder.

               (iii)     Inconnection with any increase in the Total Commitment pursuant to this Section 2.04(b),the Borrower shall amend, or cause to be amended, each Leasehold Mortgage that contains aprovision stating that the maximum amount secured thereunder is less than the amount ofsuch increased Total Commitment to reflect in such Leasehold Mortgage the increase in theTotal Commitment and the Revolving Loan Notes; provided, however, that theBorrower shall only be required to use commercially reasonable efforts to obtain aLandlord Consent with respect to any such amendment to a Leasehold Mortgage.

               (iv)     ThisSection 2.04(b) shall supersede any provisions in Section 8.04 to thecontrary.

          (c)     Borrower’sOptional Reduction or Cancellation of Commitments. The Borrower may, upon five (5)Business Days written notice to the Administrative Agent, permanently reduce the TotalCommitment in aggregate principal amounts in integral multiples of $1,000,000 but not lessthan $5,000,000 or cancel the Total Commitment in its entirety; provided, however,that:

               (i)     TheBorrower may not reduce the Total Commitment prior to the Maturity Date, if, after givingeffect to such reduction, the Effective Amount of all Revolving Loans, L/C Obligations andSwing Line Loans then outstanding would exceed the Total Commitment; and

               (ii)     TheBorrower may not cancel the Total Commitment prior to the Maturity Date, if, after givingeffect to such cancellation, any Revolving Loans, Letters of Credit, L/C Obligations(other than L/C Obligations that have been Cash Collateralized or are supported by aBack-Up Letter of Credit as set forth in Section 2.02(g)), or Swing Line Loanswould then remain outstanding.

          (d)     RequiredLenders’ Optional Reduction of Commitments. Following the occurrence of a Changein Management, the Required Lenders may in their sole and absolute discretion elect,during the thirty (30) day period immediately subsequent to the later of (a) suchoccurrence or (b) the earlier of (i) receipt of the Borrower’s written notice to theAdministrative Agent of such occurrence or (ii) if no such notice has been received by theAdministrative Agent, the date upon which the Administrative Agent has actual knowledgethereof, to permanently reduce the Total Commitment by an amount equal to the TotalCommitment minus the Effective Amount of the Revolving Loans, Swing Line Loans andL/C Obligations at such time, in which case the Total Commitment shall be so reducedeffective on the date which is sixty (60) days subsequent to written notice from theAdministrative Agent to the Borrower thereof.

          (e)     MandatoryReduction or Termination of Commitments.

               (i)     TheTotal Commitment shall be automatically and permanently reduced by an amount equal to themaximum amount that would be required to be applied as a mandatory prepayment of the SwingLine Loans and the Revolving Loans pursuant to Section 2.06(c)(iii) if theEffective Amount of such Loans was then equal to the amount of such Commitment (butwithout regard to the actual usage of such Commitment), such reduction to be effective onthe date of the required prepayment.

               (ii)     TheTotal Commitment shall be automatically and permanently reduced to zero on the MaturityDate.

               (iii)     If,at any time, the Borrower is required to make any mandatory prepayment of the Loanspursuant to Sections 2.06(c)(iii), then the Total Commitment shall be automaticallyand permanently reduced by the amount of such mandatory prepayment of the Loans.

          (f)     Effectof Commitment Reductions. From the effective date of any reduction of the TotalCommitment, the Commitment Fees payable pursuant to Section 2.05(b) shall becomputed on the basis of the Total Commitment as so reduced. Once reduced or cancelled,the Total Commitment may not be increased or reinstated without the prior written consentof all Lenders. Any reduction of the Total Commitment pursuant to Section 2.04(c), (d)or (e) shall be applied (i) ratably to reduce each Lender’s Commitment inaccordance with clause (i) of Section 2.10(a) and (ii) to reduce the Swing LineSublimit by the percentage obtained by multiplying 100 by a fraction, the numerator ofwhich is the amount of such reduction of the Total Commitment and the denominator of whichis the amount of the Total Commitment immediately prior to such reduction.

     2.05.     Fees.

          (a)     AdministrativeAgent’s Fee. The Borrower shall pay to the Administrative Agent, for its ownaccount, agent’s fees and other compensation in the amounts and at the times setforth in the Administrative Agent’s Fee Letter.

          (b)     CommitmentFees. The Borrower shall pay to the Administrative Agent, for the ratable benefit ofthe Lenders as provided in clause (v) of Section 2.10(a), commitment fees(collectively, the "Commitment Fees") equal to the Commitment FeePercentage of the daily average Unused Commitment for the period beginning on the date ofthis Agreement and ending on the Maturity Date (or if the Total Commitment is cancelled ona date prior to the Maturity Date, on such prior date). The Borrower shall pay theCommitment Fees in arrears on the last day in each March, June, September and December(commencing March 31, 2003) and on the Maturity Date (or if the Total Commitment iscancelled on a date prior to the Maturity Date, on such prior date).

     2.06.     Prepayments.

          (a)     Termsof All Prepayments. Upon the prepayment of any Loan (whether such prepayment is anoptional prepayment under Section 2.06(b), a mandatory prepayment required by Section2.06(c) or a mandatory prepayment required by any other provision of this Agreement orthe other Credit Documents, including a prepayment upon acceleration), the Borrower shallpay to the Administrative Agent for the account of the Lenders that made such Loan(i) all accrued interest and fees to the date of such prepayment on the amountprepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan on a day otherthan the last day of an Interest Period for such LIBOR Loan, all amounts payable to suchLender pursuant to Section 2.13.

          (b)     OptionalPrepayments.

               (i)     Otherthan prepaying Swing Line Loans (which shall be governed by clause (ii) below), atits option the Borrower may, upon one (1) Business Day’s notice to the AdministrativeAgent in the case of Base Rate Loans or three (3) Business Days’ notice to theAdministrative Agent in the case of LIBOR Loans, prepay the Loans in any Borrowing inpart, without premium or penalty (except, in the case of LIBOR Loans, as set forth in Section2.13), in a minimum principal amount of (A) $500,000 and integral multiples of$100,000 in excess thereof for Base Rate Loans and (B) $1,000,000 and integral multiplesof $100,000 in excess thereof for LIBOR Loans, or in whole. Each such notice shall specifythe date and amount of such prepayment. If such notice is given by the Borrower, theBorrower shall make such prepayment and the payment amount specified in such notice shallbe due and payable on the date specified therein. If no Default has occurred and iscontinuing, all prepayments under this Section 2.06(b) which are applied to reducethe principal amount of the Loans shall be applied to the Loans as directed by theBorrower. If the Borrower fails to direct the application of any such principalprepayments or if a Default has occurred and is continuing, such principal prepaymentsshall be applied first to the Swing Line Loans until paid in full, second to the RevolvingLoans until paid in full and finally to Cash Collateralize the Obligations in an amountequal to the Effective Amount of the L/C Obligations and shall in each case, to the extentpossible, be first applied to prepay Base Rate Loans and then if any funds remain, toprepay LIBOR Loans.

               (ii)     Atits option, the Borrower may, upon notice to the Swing Line Lender (with a copy to theAdministrative Agent), at any time or from time to time, voluntarily prepay Swing LineLoans in whole or in part without premium or penalty; provided, that (A) suchnotice must be received by the Swing Line Lender and the Administrative Agent not laterthan 2:00 p.m. on the date of the prepayment, and (B) any such prepayment shallbe in a minimum principal amount of $100,000. Each such notice shall specify the date andamount of such prepayment. If such notice is given by the Borrower, the Borrower shallmake such prepayment and the payment amount specified in such notice shall be due andpayable on the date specified therein.

          (c)     MandatoryPrepayments. The Borrower shall prepay the Loans as follows:

               (i)     If,at any time, the Effective Amount of all Revolving Loans, Swing Line Loans and L/CObligations then outstanding exceeds the Total Commitment at such time, the Borrower shallimmediately (A) prepay the Swing Line Loans to the extent Swing Line Loans are thenoutstanding, (B) then prepay the Revolving Loans to the extent Revolving Loans arethen outstanding and (C) otherwise, Cash Collateralize the Obligations in an amountequal to the then Effective Amount of the L/C Obligations, in an aggregate principalamount equal to such excess.

               (ii)     TheBorrower shall repay each Swing Line Loan on the earlier of the Maturity Date or suchother date as specified in Section 2.03.

               (iii)     Ifat any time the aggregate cumulative amount of Designated Asset Sale Proceeds exceeds$10,000,000 in any Fiscal Year, the Borrower shall, promptly after the receipt ofDesignated Asset Sale Proceeds resulting in such an excess or an increase in such anexcess (any such Designated Asset Sale Proceeds, "Excess Proceeds"),(A) prepay the Swing Line Loans to the extent Swing Line Loans are then outstanding,(B) then prepay the Revolving Loans to the extent Revolving Loans are thenoutstanding and (C) otherwise, Cash Collateralize the Obligations in an amount equalto the then Effective Amount of the L/C Obligations, in an aggregate principal amountequal to such Excess Proceeds. Notwithstanding the foregoing, so long as no Default shallthen exist or would result therefrom, the Borrower shall not be required to make aprepayment pursuant to this clause (iii) with respect to any sale if the Borrower(x) on or before the last day (such day, the "Identification Deadline")of the Fiscal Quarter immediately following the Fiscal Quarter during which a saleresulting in any Excess Proceeds occurs, identifies related or replacement assets or otherassets useful in the Borrower’s business (such assets, "IdentifiedReplacement Assets") by delivering to the Administrative Agent a written noticesetting forth in reasonable detail a description of such Identified Replacement Assets andthe amount of the Excess Proceeds to be allocated toward the purchase thereof and (y)reinvests all or any portion of such Excess Proceeds in such Identified Replacement Assetson or before the last day (such day, the "Reinvestment Deadline") of thesecond Fiscal Quarter following the Fiscal Quarter during which the identificationdescribed in part (x) of this clause (iii) was completed; provided, however,that if any portion of such Excess Proceeds is not allocated toward the purchase ofIdentified Replacement Assets on or before the Identification Deadline, or if any portionof such Excess Proceeds is not in fact reinvested in such Identified Replacement Assets onor before the Reinvestment Deadline as set forth in this clause (iii), such portionof such Excess Proceeds shall be applied on the last day of such period as a mandatoryprepayment as provided in the first sentence of this clause (iii).

               (iv)     TheBorrower shall deliver to the Administrative Agent, at the time of each prepaymentrequired under this Section 2.06(c), (A) a certificate signed by a ResponsibleOfficer of the Borrower setting forth in reasonable detail the calculation of the amountof such prepayment and (B) to the extent practicable, at least three days priorwritten notice of such prepayment. Each notice of prepayment shall specify the prepaymentdate and the Type and principal amount of each Loan (or portion thereof) to be prepaid. Inthe event that the Borrower shall subsequently determine that the actual amount wasgreater than the amount set forth in such certificate, the Borrower shall promptly make anadditional prepayment of the Loans (and/or, if applicable, the Commitments shall bepermanently reduced) in an amount equal to the amount of such excess, and the Borrowershall concurrently therewith deliver to the Administrative Agent a certificate signed by aResponsible Officer of the Borrower demonstrating the derivation of the additional amountresulting in such excess.

     2.07.     OtherPayment Terms.

          (a)     Placeand Manner. All payments to be made by the Borrower under this Agreement or any otherCredit Document shall be made without condition or deduction for any counterclaim,defense, recoupment or setoff. The Borrower shall make all payments due to each Lender orthe Administrative Agent under this Agreement or any other Credit Document by payments tothe Administrative Agent at the Administrative Agent’s office located at the addressspecified in Section 8.01, with each payment due to a Lender to be for the accountof such Lender and such Lender’s Applicable Lending Office. The Borrower shall makeall payments under this Agreement or any other Credit Document in lawful money of theUnited States of America and in same day or immediately available funds not later than12:00 noon on the date due. The Administrative Agent shall promptly disburse to eachLender each payment received by the Administrative Agent for the account of such Lender. 

          (b)     Date.Whenever any payment due hereunder shall fall due on a day other than a Business Day, suchpayment shall be made on the next succeeding Business Day, and such extension of timeshall be included in the computation of interest or fees, as the case may be.

          (c)     LatePayments. If any amount required to be paid by the Borrower under this Agreement orthe other Credit Documents (including principal or interest payable on any Loan, any L/CBorrowing, any fee or other amount) remains unpaid after such amount is due, the Borrowershall pay interest on the aggregate, outstanding balance of such amount from the date dueuntil such amount is paid in full at a *per annum* rate (such rate, the "LateFee Rate") equal to the Base Rate plus the Applicable Margin for Base Rate Loansplus two percent (2.00%), such rate to change from time to time as the Base Rate shallchange; provided, however, that nothing in this Section 2.07(c) shallrequire the Borrower to pay interest at the Late Fee Rate while the Borrower is otherwisepaying interest at two percent (2.00%) above the Applicable Margin as a result of thecontinuation of an Event of Default and as set forth in the definition of "ApplicableMargin".

          (d)     Applicationof Payments. If at any time insufficient funds are received by and available to theAdministrative Agent to pay fully all amounts of principal, L/C Borrowings, interest andfees then due hereunder, such funds shall be applied first to unpaid fees, costs andexpenses then due and payable under this Agreement or the other Credit Documents, secondto accrued interest then due and payable under this Agreement or the other CreditDocuments and finally to reduce the principal amount of outstanding Swing Line Loans,Revolving Loans and L/C Borrowings.

          (e)     Failureto Pay the Administrative Agent. Unless the Administrative Agent shall have receivednotice from the Borrower at least one (1) Business Day prior to the date on which anypayment is due to the Lenders hereunder that the Borrower will not make such payment infull, the Administrative Agent shall be entitled to assume that the Borrower has made orwill make such payment in full to the Administrative Agent on such date and theAdministrative Agent may, in reliance upon such assumption, cause to be paid to theLenders on such due date an amount equal to the amount then due such Lenders. If and tothe extent the Borrower shall not have so made such payment in full to the AdministrativeAgent, each such Lender shall repay to the Administrative Agent forthwith on demand suchamount distributed to such Lender together with interest thereon, for each day from thedate such amount is distributed to such Lender until the date such Lender repays suchamount to the Administrative Agent, at a *per annum* rate equal to (i) theFederal Funds Rate for the first three (3) days and (ii) the rate applicable to BaseRate Loans thereafter. A certificate of the Administrative Agent submitted to any Lenderwith respect to any amount owing by such Lender under this Section 2.07(e) shallconstitute *prima facie* evidence of such amount.

     2.08.     LoanAccounts; Notes.

          (a)     LoanAccounts. The obligation of the Borrower to repay the Loans made to it by each Lenderand to pay interest thereon at the rates provided herein shall be evidenced by an accountor accounts maintained by such Lender on its books (individually, a "Loan Account"),except that any Lender may request that its Loans be evidenced by a note or notes pursuantto Section 2.08(b) and Section 2.08(c). Each Lender shall record in its LoanAccounts (i) the date and amount of each Loan made by such Lender, (ii) theinterest rates applicable to each such Loan and the effective dates of all changesthereto, (iii) the Interest Period for each LIBOR Loan, (iv) the date and amountof each principal and interest payment on each Loan and (v) such other information assuch Lender may determine is necessary for the computation of principal and interestpayable to it by the Borrower hereunder; provided, however, that any failureby a Lender to make, or any error by any Lender in making, any such notation shall notaffect the Borrower’s Obligations. The Loan Accounts shall constitute *prima facie*evidence of the matters noted therein (in the absence of manifest error). In addition tothe Loan Accounts, each Lender and the Administrative Agent shall maintain in accordancewith its usual practice accounts or records evidencing the purchases and sales by suchLender of participations in Letters of Credit and Swing Line Loans. In the event of anyconflict between the accounts and records maintained by the Administrative Agent and theaccounts and records of any Lender in respect of such matters, the accounts and records ofthe Administrative Agent shall control.

          (b)     RevolvingLoan Notes. If any Lender so requests, such Lender’s Revolving Loans shall beevidenced by a promissory note in the form of Exhibit E (individually, a"Revolving Loan Note") which note shall be (i) payable to the orderof such Lender, (ii) in the amount of such Lender’s Commitment, (iii) datedthe Closing Date and (iv) otherwise appropriately completed. The Borrower authorizeseach Lender to record on the schedule annexed to such Lender’s Revolving Loan Notethe date and amount of each Revolving Loan made by such Lender and of each payment orprepayment of principal thereon made by the Borrower, and agrees that all such notationsshall constitute *prima facie* evidence of the matters noted (in the absence ofmanifest error); provided, however, that any failure by a Lender to make, orany error by any Lender in making, any such notation shall not affect the Borrower’sObligations. The Borrower further authorizes each Lender to attach to and make a part ofsuch Lender’s Revolving Loan Note continuations of the schedule attached thereto asnecessary.

          (c)     SwingLine Notes. The Swing Line Lender’s Swing Line Loans shall be evidenced by apromissory note in the form of Exhibit F (individually, a "Swing LineNote") which note shall be (i) payable to the order of the Swing LineLender, (ii) in the principal amount of the Swing Line Sublimit, (iii) dated theClosing Date and (iv) otherwise appropriately completed.

     2.09.     LoanFunding.

          (a)     LenderFunding and Disbursement to Borrower. Each Lender shall, before 12:00 noon on thedate of each Revolving Loan Borrowing, make available to the Administrative Agent at theAdministrative Agent’s office specified in Section 8.01, in same day orimmediately available funds, such Lender’s Proportionate Share of such Revolving LoanBorrowing. After the Administrative Agent’s receipt of such funds and uponsatisfaction of the applicable conditions set forth in Section 3.02 (and, if suchRevolving Loan Borrowing is the initial Credit Extension, Section 3.01), theAdministrative Agent shall promptly make all funds so received available to the Borrowerin like funds as received by the Administrative Agent either by (i) crediting theaccount of the Borrower on the books of Wells Fargo with the amount of such funds or(ii) wire transfer of such funds, in each case in accordance with instructionsprovided to the Administrative Agent by the Borrower; provided, however,that if, on the date of the Revolving Loan Borrowing there are Swing Line Loans and/or L/CBorrowings outstanding, then the proceeds of such Revolving Loan Borrowing shall beapplied, first, to the payment in full of any such L/C Borrowings, second,to the payment in full of any such Swing Line Loans, and third, to the Borrower asprovided above.

          (b)     LenderFailure to Fund. Unless the Administrative Agent shall have received notice from aLender prior to the date of any Revolving Loan Borrowing that such Lender will not makeavailable to the Administrative Agent such Lender’s Proportionate Share of suchRevolving Loan Borrowing, the Administrative Agent shall be entitled to assume that suchLender has made or will make such portion available to the Administrative Agent on thedate of such Revolving Loan Borrowing in accordance with Section 2.09(a), and theAdministrative Agent may on such date, in reliance upon such assumption, disburse orotherwise credit to the Borrower a corresponding amount. If any Lender does not make theamount of its such Lender’s Proportionate Share of any Revolving Loan Borrowingavailable to the Administrative Agent on or prior to the date of such Revolving LoanBorrowing, such Lender shall pay to the Administrative Agent, on demand, interest whichshall accrue on such amount from the date of such Revolving Loan Borrowing until suchamount is paid to the Administrative Agent at rates equal to (i) the daily FederalFunds Rate during the period from the date of such Revolving Loan Borrowing through thethird Business Day thereafter and (ii) the rate applicable to Base Rate Loansthereafter. A certificate of the Administrative Agent submitted to any Lender with respectto any amount owing by such Lender under this Section 2.09(b) shall constitute *primafacie* evidence of such amount. If the amount of any Lender’s Proportionate Shareof any Revolving Loan Borrowing is not paid to the Administrative Agent by such Lenderwithin three (3) Business Days after the date of such Revolving Loan Borrowing, theBorrower shall repay such amount to the Administrative Agent, on demand, together withinterest thereon, for each day from the date such amount was disbursed to the Borroweruntil the date such amount is repaid to the Administrative Agent, at the interest rateapplicable at the time to the Loans comprising such Revolving Loan Borrowing.

          (c)     Lenders’Obligations Several. The failure of any Lender to make the Loan to be made by it aspart of any Revolving Loan Borrowing or to fund participations in Letters of Credit andSwing Line Loans shall not relieve any other Lender of its obligation hereunder to makeits Loan as part of such Revolving Loan Borrowing or fund its participations in Letters ofCredit and Swing Line Loans, but no Lender shall be obligated in any way to make any Loanor fund any participation in Letters of Credit or Swing Line Loans which another Lenderhas failed or refused to make or otherwise be in any way responsible for the failure orrefusal of any other Lender to make any Loan required to be made by such other Lender onthe date of any Revolving Loan Borrowing or to fund any participation required to befunded by such other Lender.

     2.10.     ProRata Treatment.

          (a)     Borrowings,Commitment Reductions, Etc. Except as otherwise provided herein:

               (i)     EachRevolving Loan Borrowing and reduction of the Total Commitment shall be made or sharedamong the Lenders *pro rata* according to their respective Proportionate Shares;

               (ii)     Eachpayment of principal on Loans in any Borrowing shall be shared among the Lenders whichmade or funded the Loans in such Borrowing *pro rata* according to the respectiveunpaid principal amounts of such Loans then owed to such Lenders;

               (iii)     Eachpayment of interest on Loans in any Borrowing shall be shared among the Lenders which madeor funded the Loans in such Borrowing *pro rata* according to (A) the respectiveunpaid principal amounts of such Loans so made or funded by such Lenders and (B) thedates on which such Lenders so made or funded such Loans;

               (iv)     Eachpayment of Commitment Fees and fees pursuant to Section 2.05(b) shall be sharedamong the Lenders (except for Defaulting Lenders) *pro rata* according to(A) their respective Proportionate Shares and (B) in the case of each Lenderwhich becomes a Lender hereunder after the date hereof, the date upon which such Lender sobecame a Lender;

               (v)     Eachpayment of interest (other than interest on Loans) and fees (other than Commitment Fees)shall be shared among the Lenders and the Administrative Agent owed the amount upon whichsuch interest accrues *pro rata* according to (A) the respective amounts so owedsuch Lenders and the Administrative Agent and (B) the dates on which such amountsbecame owing to such Lenders and the Administrative Agent; and

               (vi)     Allother payments under this Agreement and the other Credit Documents shall be for thebenefit of the Person or Persons specified.

          (b)     Sharingof Payments, Etc. If any Lender shall obtain any payment (whether voluntary,involuntary, through the exercise of any right of setoff, or otherwise) on account of theLoans made by it, or the participations in L/C Obligations or in Swing Line Loans held byit, in excess of its ratable share of payments on account of the Loans and the L/CObligations obtained by all Lenders entitled to such payments, such Lender shall forthwithpurchase from the other Lenders such participations in the Loans and/or participations inL/C Obligations or in Swing Line Loans as shall be necessary to cause such purchasingLender to share the excess payment ratably with each of them; provided, however,that if all or any portion of such excess payment is thereafter recovered from suchpurchasing Lender, such purchase shall be rescinded and each other Lender shall repay tothe purchasing Lender the purchase price to the extent of such recovery together with anamount equal to such other Lender’s ratable share (according to the proportion of(i) the amount of such other Lender’s required repayment to (ii) the totalamount so recovered from the purchasing Lender) of any interest or other amount paid orpayable by the purchasing Lender in respect of the total amount so recovered. The Borroweragrees that any Lender so purchasing a participation from another Lender pursuant to this Section2.10(b) may, to the fullest extent permitted by law, exercise all its rights ofpayment (including the right of setoff) with respect to such participation as fully as ifsuch Lender were the direct creditor of the Borrower in the amount of such participation.

     2.11.     Changeof Circumstances.

          (a)     Inabilityto Determine Rates. If, on or before the first day of any Interest Period for anyLIBOR Loan, (i) any Lender shall advise the Administrative Agent that the LIBOR Ratefor such Interest Period cannot be adequately and reasonably determined due to theunavailability of funds in or other circumstances affecting the London interbank market or(ii) the Required Lenders shall advise the Administrative Agent that the rate ofinterest for such Loan does not adequately and fairly reflect the cost to the RequiredLenders of making or maintaining such LIBOR Loan, the Administrative Agent shallimmediately give notice of such condition to the Borrower and the other Lenders. After thegiving of any such notice and until the Administrative Agent shall otherwise notify theBorrower that the circumstances giving rise to such condition no longer exist,Borrower’s right to request the making of, conversion to or a new Interest Period forLIBOR Loans shall be suspended. Any LIBOR Loans outstanding at the commencement of anysuch suspension shall be converted at the end of the then current Interest Period for suchLIBOR Loans into Base Rate Loans unless such suspension has then ended.

          (b)     Illegality.If, after the date of this Agreement, the adoption of any Governmental Rule, any change inany Governmental Rule or the application or requirements thereof (whether such changeoccurs in accordance with the terms of such Governmental Rule as enacted, as a result ofamendment or otherwise), any change in the interpretation or administration of anyGovernmental Rule by any Governmental Authority, or compliance by any Lender with anyrequest or directive (whether or not having the force of law) of any GovernmentalAuthority (a "Change of Law") shall make it unlawful or impossible forany Lender to make or maintain any LIBOR Loan, such Lender shall immediately notify theAdministrative Agent and the Borrower of such Change of Law. Upon receipt of such notice,(i) Borrower’s right to request the making of, conversion to or a new InterestPeriod for LIBOR Loans shall be terminated, and (ii) the Borrower shall, at therequest of such Lender, either (A) pursuant to Section 2.01(d), convert anysuch then outstanding LIBOR Loans into Base Rate Loans at the end of the current InterestPeriod for such LIBOR Loans or (B) immediately repay or convert any such LIBOR Loansif such Lender shall notify the Borrower that such Lender may not lawfully continue tofund and maintain such LIBOR Loans. Any conversion or prepayment of LIBOR Loans madepursuant to the preceding sentence prior to the last day of an Interest Period for suchLIBOR Loans shall be deemed a prepayment thereof for purposes of Section 2.13.After any Lender notifies the Administrative Agent and the Borrower of such a Change ofLaw and until such Lender notifies the Administrative Agent and the Borrower that it is nolonger unlawful or impossible for such Lender to make or maintain a LIBOR Loan, allRevolving Loans of such Lender shall be Base Rate Loans.

          (c)     IncreasedCosts. If, after the date of this Agreement, any Change of Law (except for a Change ofLaw with respect to withholding taxes, which shall be governed solely and exclusively by Section2.12):

               (i)     Shallsubject any Lender to any tax, duty or other charge with respect to any LIBOR Loan, orshall change the basis of taxation of payments by the Borrower to any Lender on such LIBORLoan or in respect to such LIBOR Loan under this Agreement (except taxes based on ormeasured by the overall net income of any Lender imposed by its jurisdiction ofincorporation or the jurisdiction in which its principal executive office is located or inwhich it is otherwise doing business or any political subdivision or taxing authoritythereof or therein (other than a jurisdiction in which it is deemed to be doing businesssolely as a result of its having executed, delivered or performed its obligations orreceived a payment under, or enforced, any Credit Document);

               (ii)     Shallimpose, modify or hold applicable any reserve (excluding any Reserve Requirement or otherreserve to the extent included in the calculation of the LIBOR Rate for any Loans),special deposit or similar requirement against assets held by, deposits or otherliabilities in or for the account of, advances or loans by, or any other acquisition offunds by any Lender for any LIBOR Loan; or

               (iii)     Shallimpose on any Lender any other condition related to any LIBOR Loan or such Lender’sCommitments;

and the effect of any of the foregoing is to increase the cost tosuch Lender of making, renewing, or maintaining any such LIBOR Loan or its Commitments orto reduce any amount receivable by such Lender hereunder; then the Borrower shall fromtime to time, within five (5) Business Days after the Borrower receives the certificatereferred to in the following sentence from such Lender, pay to such Lender additionalamounts sufficient to reimburse such Lender for such increased costs or to compensate suchLender for such reduced amounts. A certificate setting forth in reasonable detail theamount of such increased costs or reduced amounts, submitted by such Lender to theBorrower shall be conclusive absent manifest error; provided, that the Borrowershall not be required to compensate a Lender pursuant to this Section 2.11(c) forany increased costs or reductions unless the Borrower receives such a certificate within180 days after such costs or reductions are incurred or realized. Amounts paid by theBorrower to any Lender pursuant to this Section 2.11(c) based on increased coststhat otherwise constitute taxes shall be without duplication of amounts that the Borroweris otherwise required to pay such Lender pursuant to Section 2.12(a). Theobligations of the Borrower under this Section 2.11(c) shall survive the paymentand performance of the Obligations and the termination of this Agreement. 

          (d)     CapitalRequirements. If, after the date of this Agreement, any Lender determines that(i) any Change of Law affects the amount of capital required or expected to bemaintained by such Lender or any Person controlling such Lender (a "CapitalAdequacy Requirement") and (ii) the amount of capital maintained by suchLender or such Person which is attributable to or based upon the Loans, the Letters ofCredit, the Commitments or this Agreement must be increased as a result of such CapitalAdequacy Requirement (taking into account such Lender’s or such Person’spolicies with respect to capital adequacy), the Borrower shall pay to such Lender or suchPerson, within five (5) Business Days after the Borrower receives the certificate referredto in the following sentence from such Lender, such amounts as such Lender or such Personshall determine are necessary to compensate such Lender or such Person for the increasedcosts to such Lender or such Person of such increased capital. A certificate setting forthin reasonable detail the amount of such increased costs, submitted by any Lender to theBorrower shall be conclusive absent manifest error; provided, that the Borrowershall not be required to compensate a Lender pursuant to this Section 2.11(d) forany increased costs unless the Borrower receives such a certificate within 180 days aftersuch costs are incurred or realized. The obligations of the Borrower under this Section2.11(d) shall survive the payment and performance of the Obligations and thetermination of this Agreement.

          (e)     Mitigation.Any Lender which becomes aware of (i) any Change of Law which will make it unlawfulor impossible for such Lender to make or maintain any LIBOR Loan or (ii) any Changeof Law or other event or condition which will obligate the Borrower to pay any amountpursuant to Section 2.11(c) or Section 2.11(d) shall notify the Borrower andthe Administrative Agent thereof as promptly as practical. If any Lender has given noticeof any such Change of Law or other event or condition and thereafter becomes aware thatsuch Change of Law or other event or condition has ceased to exist, such Lender shallnotify the Borrower and the Administrative Agent thereof as promptly as practical. EachLender affected by any Change of Law which makes it unlawful or impossible for such Lenderto make or maintain any LIBOR Loan or to which the Borrower is obligated to pay any amountpursuant to Section 2.11(c) or Section 2.11(d) shall use reasonablecommercial efforts (including changing the jurisdiction of its Applicable Lending Officeor assigning its rights and obligations hereunder to another of its offices, branches orAffiliates) to avoid the effect of such Change of Law or to avoid or materially reduce anyamounts which the Borrower is obligated to pay pursuant to Section 2.11(c) or Section2.11(d) if, in the reasonable opinion of such Lender, such efforts would not bedisadvantageous to such Lender or contrary to such Lender’s normal banking practices.

     2.12.     Taxeson Payments.

          (a)     PaymentsFree of Taxes. Except as otherwise provided in this Section 2.12, all paymentsmade by the Borrower under this Agreement and the other Credit Documents shall be madefree and clear of, and without deduction or withholding for or on account of, any presentor future income, stamp, documentary or other taxes, any duties, or any other levies,imposts, charges, fees, deductions or withholdings, now or hereafter imposed, levied,collected, withheld or assessed by any Governmental Authority (except net income taxes,franchise taxes and taxes on capital in lieu of net income taxes (other than taxes in thenature of withholding taxes) imposed on the Administrative Agent or any Lender by itsjurisdiction of incorporation or the jurisdiction in which its Applicable Lending Officeis located or in which it is otherwise doing business or any political subdivision ortaxing authority thereof or therein (other than a jurisdiction in which it is deemed to bedoing business solely as a result of its having executed, delivered or performed itsobligations or received a payment under, or enforced, any Credit Document)) (all suchnon-excluded taxes, duties, levies, imposts, charges, fees, deductions and withholdingsbeing hereinafter called "Taxes"). If any Taxes are required to bewithheld from any amounts payable to the Administrative Agent or any Lender hereunder orunder the other Credit Documents, the amounts so payable to the Administrative Agent orsuch Lender shall be increased to the extent necessary to yield to the AdministrativeAgent or such Lender (after payment of all Taxes) interest or any such other amountspayable hereunder at the rates or in the amounts specified in this Agreement and the otherCredit Documents; provided, however, that the Borrower shall not be requiredto increase any such amounts payable to any Lender or the Administrative Agent withrespect to any taxes (i) that result from such Lender’s or the AdministrativeAgent’s failure to comply with the requirements of Section 2.12(b), grossnegligence or willful misconduct or (ii) imposed at the time the Person becomes a party tothis Agreement, or in the case of an Assignment, designation of a new Applicable LendingOffice (other than pursuant to Sections 2.11(e) or 2.12(c)), or appointment of asuccessor Administrative Agent, the effective date thereof, except to the extent suchPerson’s predecessor in interest (or the Lender’s prior Applicable LendingOffice, as the case may be) was entitled to such amounts. Whenever any Taxes are payableby the Borrower, as promptly as practicable thereafter, the Borrower shall send to theAdministrative Agent for its own account or for the account of such Lender, as the casemay be, a certified copy of an original official receipt received by the Borrower showingpayment thereof. Subject to Section 2.12(b), if the Borrower fails to pay any Taxeswhen due to the appropriate taxing authority or fails to remit to the Administrative Agentthe required receipts or other required documentary evidence, the Borrower shall indemnifythe Administrative Agent and the relevant Lender(s) for any Taxes, interest or penaltiesthat may become payable by the Administrative Agent or such Lender as a result of any suchfailure. The indemnification provided in the immediately preceding sentence shall be madewithin 30 days after the Administrative Agent or the relevant Lender, as the case may be,makes written demand for it. Such written demand shall include a certificate setting forthin reasonable detail the basis and calculation of such amount. Such certificate shall bepresumed to be correct in the absence of manifest error. The obligations of the Borrowerunder this Section 2.12(a) shall survive the payment and performance of theObligations and the termination of this Agreement.

          (b)     WithholdingExemption Certificates. On or prior to (i) the date of the initial Borrowing orissuance of a Letter of Credit or, if such date does not occur within thirty (30) daysafter the date of this Agreement, by the end of such 30-day period, or (ii) in the case ofa designation of a new lending office (other than pursuant to Section 2.12(c) or Section2.11(e)) or appointment of a successor Administrative Agent, the effective datethereof, each Lender and successor Administrative Agent which is not organized under thelaws of the United States or a state thereof shall deliver to the Borrower and theAdministrative Agent as appropriate two duly completed copies of United States InternalRevenue Service Form W-8BEN or W-8ECI (and/or other applicable forms or certifications),as the case may be, certifying in each case that such Person is entitled to receivepayments under this Agreement and other Credit Documents without deduction or withholdingof any United States federal income taxes. Each such Person further agrees to promptlynotify the Borrower and the Administrative Agent (as appropriate) of any change ofcircumstances (including any change in any treaty, law or regulation) which would preventsuch Person from receiving payments hereunder without any deduction or withholding of suchtaxes. On or before the date that any certificate or other form delivered by such Personunder this Section 2.12(b) expires or becomes obsolete or inaccurate or after theoccurrence of any event requiring a change in the most recent such certificate or formpreviously delivered by such Person, such Person Agrees (to the extent it is entitled todo so) to deliver to the Borrower and the Administrative Agent (as appropriate) a newcertificate or form, certifying that such Person is entitled to receive payments underthis Agreement without deduction or withholding of such Taxes or subject to withholding ofTaxes at a reduced rate. Each Lender, Assignee Lender and Administrative Agent that is aUnited States person, as defined in section 7701(a)(30) of the IRC (other than Personsthat the Borrower may treat as otherwise exempt from United States backup withholdingtax), shall deliver at the time(s) and in the manner(s) described above with respect tothe other forms, to the Borrower and the Administrative Agent (as applicable), properlycompleted and duly executed United States Internal Revenue Service Form W-9 and/or otherforms and certification, certifying that such Person is exempt from United States backupwithholding tax on payments made hereunder. If any such Person fails to provide to theBorrower or the Administrative Agent (as appropriate) pursuant to this Section 2.12(b)(or, in the case of an Assignee Lender, Section 8.05(c)) any certificates or otherevidence required by such provision to establish that such is Person, at the time itbecomes a Lender, Assignee Lender or successor Administrative Agent hereunder, entitled toreceive payments under this Agreement without deduction or withholding of any UnitedStates federal income taxes, such Person shall not be entitled to any indemnificationunder Section 2.12(a) for any Taxes imposed on such Person primarily as a result ofsuch failure.

          (c)     Mitigation.If the Administrative Agent or any Lender claims any additional amounts to be payable toit pursuant to this Section 2.12, such Person shall use reasonable commercialefforts to file any certificate or document requested in writing by the Borrower(including copies of Internal Revenue Service Form W-8BEN or W-8ECI (or other applicableforms and certifications) (but only to the extent it is legally entitled and eligible tofurnish such forms and certifications) reflecting a reduced rate of withholding or tochange the jurisdiction of its Applicable Lending Office if the making of such a filing orsuch change in the jurisdiction of its Applicable Lending Office would avoid the need foror materially reduce the amount of any such additional amounts which may thereafter accrueand if, in the reasonable opinion of such Person, in the case of a change in thejurisdiction of its Applicable Lending Office, such change would not be disadvantageous tosuch Person or contrary to such Person’s normal banking practices; provided, however,that the Borrower shall indemnify the Administrative Agent and any Lender for any cost incomplying with the obligations under this Section 2.12(c).

          (d)     Paymentson After-Tax Basis. Any payment that the Borrower shall be required to make to or forthe account of the Administrative Agent or any Lender with respect to any Tax that issubject to indemnification under this Section 2.12 shall be paid on an After-TaxBasis. If the Administrative Agent or the relevant Lender, as applicable, shall actuallyrealize any saving (as determined in its good faith discretion) of any Tax (by way ofcredit (including any foreign tax credit), deduction, exclusion from income or otherwise)by reason of any amount with respect to which the Borrower has indemnified such Personpursuant to this Section 2.12, and such Tax saving was not taken into account indetermining the amount payable by the Borrower on account of such indemnification, suchPerson shall pay to the Borrower, so long as no Event of Default shall have occurred andbe continuing, within 30 days after such Person shall have actually realized such Taxsaving, the amount of such saving (minus any detriment), together with the amount of anyTax saving resulting from any payment pursuant to this sentence; provided that theBorrower shall not be entitled to receive an amount in excess of all amounts previouslypaid by the Borrower pursuant to this Section 2.12, to such Person (less theaggregate amount of all prior payments by such Person to the Borrower under this Section2.12(d)) (but any excess amount described in this proviso shall reduce pro tanto anyamount that the Borrower is subsequently obligated to pay to such Person pursuant to this Section2.12), and provided further that any amount otherwise due to the Borrowerpursuant to this sentence shall not be paid to the extent of any payment or indemnity thendue and owing from the Borrower to such Person (and any amount not so paid shall becomepayable at such time and to such extent as the Borrower shall have made such payments). Ifit is later determined that the Administrative Agent or the relevant Lender, asapplicable, was not entitled to such Tax saving, the portion of such tax saving that isrepaid, recaptured or disallowed will be treated as Taxes for which the Borrower mustindemnify pursuant to this Section 2.12. Notwithstanding the foregoing, eachAdministrative Agent or the relevant Lender, as applicable, shall have sole control overpositions taken with respect to its tax returns and filings.

          (e)     TaxReturns. Nothing contained in this Section 2.12 shall require theAdministrative Agent or any Lender to make available any of its tax returns (or any otherinformation relating to its taxes which it deems to be confidential).

     2.13.     FundingLoss Indemnification. (a) Upon payment or prepayment of any LIBOR Loan on a day otherthan the last day in the applicable Interest Period (whether voluntarily, involuntarily,by reason of acceleration, or otherwise), or upon the failure of the Borrower (for areason other than the breach by a Lender of its obligation pursuant to Section 2.01(a))to borrow on the date or in the amount specified for a LIBOR Loan in any Notice ofRevolving Loan Borrowing, the Borrower shall pay to the appropriate Lender within five (5)Business Days after demand a prepayment fee or failure to borrow fee, as the case may be(determined as though 100% of the LIBOR Loan had been funded in the Designated EurodollarMarket) equal to the sum of

          (a)     $250;plus

          (b)     theamount, if any, by which (i) the additional interest would have accrued on the amountprepaid or not borrowed at the LIBOR Rate plus the Applicable Margin if that amount hadremained or been outstanding through the last day of the applicable Interest Periodexceeds (ii) the interest that the Lender could recover by placing such amount on depositin the Designated Eurodollar Market for a period beginning on the date of the prepaymentor failure to borrow and ending on the last day of the applicable Interest Period (or, ifno deposit rate quotation is available for such period, for the most comparable period forwhich a deposit rate quotation may be obtained); plus

          (c)     allout-of-pocket expenses incurred by the Lender reasonably attributable to such payment,prepayment or failure to borrow.

     Each Lender’s determination ofthe amount of any prepayment fee payable under this Section 2.13 shall beconclusive in the absence of manifest error. The obligations of the Borrower under this Section2.13 shall survive the payment and performance of the Obligations and the terminationof this Agreement.

     2.14.     Security.

          (a)     SecurityDocuments. The Loans, together with all other Obligations, shall be secured by theLiens created by the Security Documents. So long as the terms thereof are in compliancewith this Agreement, each Lender Rate Contract shall be secured by the Lien of theSecurity Documents (a) on a *pari passu* basis to the extent of the associatedTermination Value, and (b) to the extent of any excess, on a basis which is in allrespects subordinated to all other Obligations.

          (b)     FurtherAssurances. The Borrower shall deliver, and shall cause each Guarantor to deliver, tothe Administrative Agent such additional mortgages, deeds of trust, security agreements,pledge agreements, lessor consents and estoppels (containing appropriate mortgagee andlender protection language) and other instruments, agreements, certificates, opinions anddocuments (including UCC financing statements and fixture filings and landlord waivers) asthe Administrative Agent may reasonably request to:

               (i)     Grant,perfect, maintain, protect and evidence security interests in favor of the AdministrativeAgent, for the benefit of the Administrative Agent and the Lenders, in any or all presentand future real and personal property (other than Excluded Collateral and any realproperty with a fair market value less than $1,000,000 (including the value of anyimprovements thereon)) of the Borrower and the Guarantors prior to the Liens or otherinterests of any Person, except for Permitted Liens; and

               (ii)     Otherwiseestablish, maintain and protect the rights provided to the Administrative Agent, for thebenefit of the Administrative Agents and the Lenders, pursuant to the Security Documents.

The Borrower shall fully cooperate with the Administrative Agentand the Lenders and perform all additional acts reasonably requested by the AdministrativeAgent or any Lender to effect the purposes of this Section 2.14.

     2.15.     Replacementof the Lenders. If (a) any Lender shall become a Defaulting Lender more than one(1) time in a period of twelve (12) consecutive months, (b) any Lender shall continueas a Defaulting Lender for more than five (5) Business Days at any time, (c) suspendits obligation to make or maintain LIBOR Loans pursuant to Section 2.11(b) fora reason which is not applicable to any other Lender or (d) any Lender shall demandany payment under Section 2.11(c), 2.11(d) or 2.12(a) for a reasonwhich is not applicable to any other Lender, then the Administrative Agent may (or uponthe written request of the Borrower, shall) replace such Lender (the "affectedLender"), or cause such affected Lender to be replaced, with another lender (the"replacement Lender") satisfying the requirements of an Assignee Lenderunder Section 8.05(c), by having the affected Lender sell and assign all of itsrights and obligations under this Agreement and the other Credit Documents (including forpurposes of this Section 2.15, participations in L/C Obligations and in Swing LineLoans) to the replacement Lender pursuant to Section 8.05(c); provided, however,that if the Borrower seeks to exercise such right, it must do so within sixty (60) daysafter it first knows or should have known of the occurrence of the event or events givingrise to such right, and neither the Administrative Agent nor any Lender shall have anyobligation to identify or locate a replacement Lender for the Borrower (it being expresslyagreed that in such circumstances it is the Borrower’s obligation to identify orlocate a replacement Lender that is reasonably acceptable to the Administrative Agent).Upon receipt by any affected Lender of a written notice from the Administrative Agentstating that the Administrative Agent is exercising the replacement right set forth inthis Section 2.15, such affected Lender shall sell and assign all of itsrights and obligations under this Agreement and the other Credit Documents (including forpurposes of this Section 2.15, participations in L/C Obligations and in Swing LineLoans) to the replacement Lender pursuant to an Assignment Agreement and Section8.05(c) for a purchase price equal to the sum of the principal amount of the affectedLender’s Loans so sold and assigned, all accrued and unpaid interest thereon and itsratable share of all fees to which it is entitled.
**ARTICLE III.      CONDITIONS            PRECEDENT.

     3.01.     InitialConditions Precedent. The obligations of the Lenders to make the Loans comprising theinitial Borrowing or to issue the initial Letter of Credit (including the deemed issuanceof a Prior Letter of Credit hereunder) are subject to receipt by the Administrative Agent,on or prior to the Closing Date, of each item listed below, each in form and substancesatisfactory to the Administrative Agent and each Lender, and, to the extent applicable,with sufficient copies for the Administrative Agent and each Lender:

          (a)     PrincipalCredit Documents.

               (i)     ThisAgreement, duly executed by the Borrower, each Lender and the Administrative Agent;

               (ii)     ARevolving Loan Note payable to each Lender requesting such a note, each duly executed bythe Borrower;

               (iii)     ASwing Line Note payable to the Swing Line Lender in the principal amount of the Swing LineSublimit, duly executed by the Borrower;

               (iv)     TheGuaranty, duly executed by each Guarantor;

               (v)     TheSecurity Agreement, duly executed by the Administrative Agent and each Loan Party partythereto; and

               (vi)     ThePledge Agreement, duly executed by the Administrative Agent and each Loan Party partythereto.

          (b)     BorrowerOrganizational Documents.

               (i)     Acertificate of good standing (or comparable certificate) for the Borrower, certified as ofa recent date prior to the Closing Date by the Secretary of State of the State ofDelaware;

               (ii)     Acertificate of the Secretary or an Assistant Secretary (or comparable officer) of theBorrower, dated the Closing Date, certifying (a) that attached thereto is a true andcorrect copy of the certificate of incorporation of the Borrower as in effect on theClosing Date; (b) that attached thereto is a true and correct copy of the bylaws of theBorrower as in effect on the Closing Date; (c) that attached thereto are true andcorrect copies of resolutions duly adopted by the board of directors of the Borrower (orother comparable enabling action) and continuing in effect, which authorize the execution,delivery and performance by the Borrower of the Credit Documents to be executed by theBorrower and the consummation of the transactions contemplated thereby; (d) thatthere are no proceedings for the dissolution or liquidation of the Borrower; and (e) theincumbency, signatures and authority of the officers of the Borrower authorized toexecute, deliver and perform this Agreement, the other Credit Documents and all otherdocuments, instruments or agreements related thereto executed or to be executed by theBorrower.

          (c)     OtherLoan Parties Organizational Documents.

               (i)     Acertificate of good standing (or comparable certificate) for each Loan Party (other thanthe Borrower), certified as of a recent date prior to the Closing Date by the Secretary ofState (or comparable public official) of its state of incorporation or formation;

               (ii)     Acertificate of the Secretary or an Assistant Secretary (or comparable officer) of eachLoan Party (other than the Borrower), dated the Closing Date, certifying (a)  thatattached thereto is a true and correct copy of the certificate of incorporation, articlesof incorporation, certificate of limited partnership, articles of organization orcomparable document of such Loan Party as in effect on the Closing Date; (b) that attachedthereto is a true and correct copy of the bylaws, partnership agreement, limited liabilitycompany agreement or comparable document of such Loan Party as in effect on the ClosingDate; (c) that attached thereto are true and correct copies of resolutions dulyadopted by the board of directors or other governing body of such Loan Party (or othercomparable enabling action) and continuing in effect, which authorize the execution,delivery and performance by such Loan Party of the Credit Documents to be executed by suchLoan Party and the consummation of the transactions contemplated thereby; (d) thatthere are no proceedings for the dissolution or liquidation of such Loan Party; and (e)the incumbency, signatures and authority of the officers of such Loan Party authorized toexecute, deliver and perform the Credit Documents to be executed by such Loan Party.

          (d)     FinancialStatements, Financial Condition, Etc.

               (i)     Acopy of the unaudited Financial Statements of the Loan Parties for the Fiscal Quarterended September 28, 2002, certified by the****chief financial officer or treasurer ofthe Borrower to present fairly the financial condition, results of operations and otherinformation reflected therein and to have been prepared in accordance with GAAP (subjectto normal year-end audit adjustments and the absence of footnotes); 

               (ii)     Acopy of the audited consolidated Financial Statements of the Borrower for the Fiscal Yearended December 29, 2001, prepared by****PricewaterhouseCoopers and a copy of theunqualified opinion delivered by such accountants in connection with such FinancialStatements; 

               (iii)     ASolvency Certificate in the form of Exhibit M dated the Closing Date and executedby the chief financial officer or treasurer of the Borrower;****

               (iv)     Acopy of the most recently completed annual report (Form 5500 Series) filed with theInternal Revenue Service with respect to each Employee Benefit Plan of the Borrower andits Subsidiaries, certified as complete and accurate by Advisors Trust Company;****and

               (v)     Acopy of the budget and projected Financial Statements of the Loan Parties by Fiscal Yearfor each of the Fiscal Years through the Maturity Date, including, in each case, projectedbalance sheets, statements of income and retained earnings and statements of cash flow ofthe Loan Parties, all in reasonable detail and in any event to include (i) projectedCapital Expenditures, (ii) quarterly projections of the Borrower’s compliancewith each of the covenants set forth in Section 5.03 of this Agreement and (iii) abrief description of the following assumptions used in preparation of the foregoing:projected store openings, closings, remodels, new store models by category (i.e., formatof store), interest rate assumptions and such other mutually agreed upon assumptions, ifany (collectively, the "Projections").

          (e)     CollateralDocuments.

               (i)     TheCollateral Certificate, duly executed by the Borrower;

               (ii)     SuchUCC financing statements and fixture filings (appropriately completed) shall have beenfiled in such jurisdictions as the Administrative Agent may request to perfect the Liensgranted to the Administrative Agent in this Agreement, the Security Documents and theother Credit Documents; 

               (iii)     SuchUCC termination statements (appropriately completed and executed) shall have been filed insuch jurisdictions as the Administrative Agent may request to terminate any financingstatement evidencing Liens of other Persons in the Collateral which are prior to the Liensgranted to the Administrative Agent in this Agreement, the Security Documents and theother Credit Documents, except for any such prior Liens which are expressly permitted bythis Agreement to be prior; 

               (iv)     UCCsearch certificates from the jurisdictions in which UCC financing statements are to befiled pursuant to subsection (e)(ii) above and jurisdictions in which any LoanParty had assets prior to July 1, 2001 reflecting no other financing statements or filingswhich evidence Liens of other Persons in the Collateral which are prior to the Liensgranted to the Administrative Agent in this Agreement, the Security Documents and theother Credit Documents, except for any such prior Liens (a) which are expressly permittedby this Agreement to be prior or (b) for which the Administrative Agent has received atermination statement pursuant to subsection (e)(iii) above;

               (v)      Control Account Agreements with respect to each DepositAccount of a Loan Party (other than Deposit Accounts constituting Excluded Collateral) notalready subject to the Administrative Agent’s first priority perfected Lien, eachduly executed by the Administrative Agent, the applicable Loan Party and the DepositaryBank thereto;

               (vi)     Thestock certificates representing (A) all of the Equity Securities of each Subsidiary (otherthan Tax Preferred Subsidiaries) of the Borrower and each Guarantor and (B) all of theoutstanding non-voting Equity Securities and 65% of the outstanding voting EquitySecurities of each Tax Preferred Subsidiary of the Borrower and each Guarantor, in eachcase pledged to the Administrative Agent pursuant to the Pledge Agreement, together withundated stock powers duly executed by the registered holder of such Equity Securities inblank and attached thereto;

               (vii)     Acontrol agreement for each securities account at which any Loan Party maintains asecurities account not already subject to the Administrative Agent’s first priorityperfected Lien, each appropriately completed, duly executed by such Loan Party, and theAdministrative Agent and acknowledged by the securities intermediary to which addressed;****

               (viii)     Appropriatedocuments for filing with the United States Patent and Trademark Office and all otherfilings necessary to perfect the security interests granted to the Administrative Agent bythe Security Documents, all appropriately completed and duly executed by each Loan Party(as applicable) and, where appropriate, notarized; and

               (ix)     Evidencesatisfactory to the Administrative Agent that the Leasehold Mortgages previously havebeen, or are in the process of being, duly recorded in the appropriate jurisdictions.

          (f)     Opinions.Favorable written opinions from (i) Holme Roberts & Owen LLP, special Colorado counselfor the Loan Parties, and (ii) Freya R. Brier, Esq., general counsel to the Borrower, ineach case dated the Closing Date, addressed to the Administrative Agent for the benefit ofthe Administrative Agent and the Lenders and covering such legal matters as theAdministrative Agent may reasonably request and otherwise in form and substance reasonablysatisfactory to the Administrative Agent.

          (g)     OtherItems.

               (i)     Aduly completed and timely delivered Notice of Revolving Loan Borrowing; 

               (ii)     Originalcertificates of insurance, loss payable and mortgagee endorsements naming theAdministrative Agent as mortgagee, loss payee and additional insured, as required by Section 5.01(d)of this Agreement;

               (iii)     Evidencethat all existing Indebtedness of the Loan Parties has been or concurrently with theClosing Date is being repaid in full (other than Indebtedness described on Schedule 5.02(a));

               (iv)     Thereshall not have occurred any event or circumstance that constitutes a Material AdverseEffect;

               (v)     Nomaterial disruption of or a material adverse change in conditions in the financial,banking or capital markets shall have occurred since December 11, 2002 which Wells Fargo,in its sole discretion, deems material in connection with its ability to syndicate theCommitments and the Loans;

               (vi)     Thereshall not exist any pending or threatened action, suit, investigation or proceeding,which, if adversely determined, could constitute a Material Adverse Effect;

               (vii)     Copiesof all Rate Contracts to which the Borrower or any of its Subsidiaries is a party;

               (viii)     Acertificate of the president or chief financial officer of the Borrower, addressed to theAdministrative Agent and dated the Closing Date, certifying that:

                    (A)          Therepresentations and warranties set forth in Article IV and in the other CreditDocuments are true and correct in all material respects as of such date (except for suchrepresentations and warranties made as of a specified date, which shall be true andcorrect in all material respects as of such date); and 

                    (B)          NoDefault has occurred and is continuing as of such date;

               (ix)     Allfees and reasonable expenses payable to the Administrative Agent and the Lenders on orprior to the Closing Date (including all fees payable to the Administrative Agent pursuantto the Administrative Agent’s Fee Letter) shall have been paid, to the extentinvoiced prior to the Closing Date; 

               (x)     Allreasonable fees and expenses of counsel to the Administrative Agent through the ClosingDate shall have been paid, to the extent invoiced prior to the Closing Date; and 

               (xi)     EachLoan Party shall have obtained all Governmental Authorizations and all consents of otherPersons, in each case that are necessary to have been obtained prior to the Closing Datein connection with this Agreement the transactions herein and the continued operation ofthe business conducted by the Loan Parties in substantially the same manner as conductedprior to the Closing Date. Each such Governmental Authorization or consent shall be infull force and effect, except in a case where the failure to obtain or maintain aGovernmental Authorization or consent, either individually or in the aggregate, could notreasonably be expected to have a Material Adverse Effect. All applicable waiting periodsshall have expired without any action being taken or threatened by any competent authoritythat would restrain, prevent or otherwise impose adverse conditions on this Agreement, thetransactions contemplated by the Credit Documents or the financing thereof. No action,request for stay, petition for review or rehearing, reconsideration, or appeal withrespect to any of the foregoing shall be pending, and the time for any applicableGovernmental Authority to take action to set aside its consent on its own motion shallhave expired.

     3.02.     ConditionsPrecedent to each Credit Event. The occurrence of each Credit Event (including theinitial****Borrowing) is subject to the further conditions that:

          (a)     TheBorrower shall have delivered to the Administrative Agent and, if applicable, the L/CIssuer or the Swing Line Lender, the Notice of Borrowing, Letter of Credit Application,Notice of Revolving Loan Conversion or Notice of Revolving Loan Interest Period Selection,as the case may be, for such Credit Event in accordance with this Agreement; and

          (b)     Onthe date such Credit Event is to occur and after giving effect to such Credit Event, thefollowing shall be true and correct:

               (i)     NoDefault has occurred and is continuing or will result from such Credit Event; 

               (ii)     ThisAgreement, the Security Agreement, the Pledge Agreement and the Guaranty are in full forceand effect;

               (iii)     Theaggregate principal amount of the Revolving Loans together with the aggregate amount ofall Letter of Credit Obligations shall not exceed the Total Commitment; and

               (iv)     Withrespect to any Credit Event that constitutes (A) the making of any Loan (including a SwingLine Loan), (B) the issuance of a Letter of Credit or (C) the making of an L/C CreditExtension, the representations and warranties of the Loan Parties set forth in Article IVand in the other Credit Documents are true and correct in all material respects as if madeon such date (except for representations and warranties expressly made as of a specifieddate, which shall be true and correct in all material respects as of such date).

     The submission by the Borrower tothe Administrative Agent of each Notice of Borrowing, each Letter of Credit Application,each Notice of Revolving Loan Conversion (other than a notice for a conversion to a BaseRate Loan) and each Notice of Revolving Loan Interest Period Selection, as applicable tosuch Credit Event, shall be deemed to be a representation and warranty by the Borrowerthat each of the statements set forth above in this Section 3.02(b) is true andcorrect as of the date of such notice.

     3.03.     Covenantto Deliver. The Borrower agrees (not as a condition but as a covenant) to deliver tothe Administrative Agent each item required to be delivered to the Administrative Agent asa condition to the occurrence of any Credit Event if such Credit Event occurs. TheBorrower expressly agrees that the occurrence of any such Credit Event prior to thereceipt by the Administrative Agent of any such item shall not constitute a waiver by theAdministrative Agent or any Lender of the Borrower’s obligation to deliver such item.
**ARTICLE IV.      REPRESENTATIONS AND            WARRANTIES.

     4.01.     Representationsand Warranties. In order to induce the Administrative Agent and the Lenders to enterinto this Agreement, the Borrower hereby represents and warrants to the AdministrativeAgent and the Lenders as follows:

          (a)     DueIncorporation, Qualification, etc. Each Loan Party (i) is a corporation, partnershipor limited liability company duly organized, validly existing and in good standing underthe laws of its jurisdiction of incorporation or formation; (ii) has the power andauthority to own, lease and operate its properties and carry on its business as nowconducted; and (iii) is duly qualified, licensed to do business and in good standing as aforeign corporation, partnership or limited liability company, as applicable, in eachjurisdiction where its ownership, lease or operation of property or the conduct of itsbusiness requires such qualification or license except where the failure to be soqualified or licensed is not reasonably likely to have a Material Adverse Effect.

          (b)     Authority.The execution, delivery and performance by each Loan Party of each Credit Documentexecuted, or to be executed, by such Loan Party and the consummation of the transactionscontemplated thereby (i) are within the power of such Loan Party and (ii) have been dulyauthorized by all necessary actions on the part of such Loan Party.

          (c)     Enforceability.Each Credit Document executed, or to be executed, by each Loan Party has been, or will be,duly executed and delivered by such Loan Party and constitutes, or will constitute, alegal, valid and binding obligation of such Loan Party, enforceable against such LoanParty in accordance with its terms, except as limited by bankruptcy, insolvency or otherlaws of general application relating to or affecting the enforcement of creditors’rights generally and general principles of equity.

          (d)     Non-Contravention.The execution and delivery by each Loan Party of the Credit Documents executed by suchLoan Party and the performance and consummation of the transactions contemplated therebydo not (i) violate any Requirement of Law applicable to such Loan Party;(ii) violate any provision of, or result in the breach or the acceleration of, orentitle any other Person to accelerate (whether after the giving of notice or lapse oftime or both), any Contractual Obligation of such Loan Party; (iii) result in thecreation or imposition of any Lien (or the obligation to create or impose any Lien) uponany property, asset or revenue of such Loan Party (except such Liens as may be created infavor of the Administrative Agent for the benefit of itself and the Lenders pursuant tothis Agreement or the other Credit Documents) or (iv) violate any applicableprovision of any existing law, rule, regulation, order, writ, injunction or decree of anycourt or Governmental Authority to which it is subject, except, with respect to each ofthe foregoing, that which is not reasonably likely to have a Material Adverse Effect.

          (e)     Approvals.

               (i)     Noconsent, approval, order or authorization of, or registration, declaration or filing with,any Governmental Authority or other Person (including, without limitation, theshareholders of any Person) is required to be obtained prior to or as a conditionprecedent to the execution and delivery of the Credit Documents executed by any Loan Partyor the performance or consummation of the transactions contemplated thereby, except for(A) those consents, approvals, orders, authorizations, registrations, declarations orfilings which have been made or obtained and are in full force and effect or the failureof which to obtain is not reasonably likely to have a Material Adverse Effect, and (B)filings and recordings in respect of the Liens created pursuant to the Security Documents.

               (ii)     AllGovernmental Authorizations have been duly obtained and are in full force and effectwithout any known conflict with the rights of others and free from any unduly burdensomerestrictions, except as is not reasonably likely to have a Material Adverse Effect. NoLoan Party has received any written notice or other written communications from anyGovernmental Authority regarding (i) any revocation, withdrawal, suspension,termination or modification of, or the imposition of any material conditions with respectto, any Governmental Authorization, or (ii) any other limitations on the conduct ofbusiness by any Loan Party, in each case that is reasonably likely to have a MaterialAdverse Effect.

               (iii)     NoGovernmental Authorization is required for either (x) the pledge or grant by any LoanParty as applicable of the Liens purported to be created in favor of the AdministrativeAgent in connection herewith or any other Credit Document or (y) the exercise by theAdministrative Agent of any rights or remedies in respect of any Collateral (whetherspecifically granted or created pursuant to any of the Security Documents or created orprovided for by any Governmental Rule), except for (1) such GovernmentalAuthorizations that have been obtained and are in full force and effect and fullydisclosed to Administrative Agent in writing, and (2) filings or recordingscontemplated in connection with this Agreement or any Security Document.

          (f)     NoViolation or Default. No Loan Party is in violation of or in default with respect to(i) any Requirement of Law applicable to such Person or (ii) any ContractualObligation of such Person (nor is there any waiver in effect which, if not in effect,would result in such a violation or default), where, in each case, such violation ordefault is reasonably likely to have a Material Adverse Effect. Without limiting thegenerality of the foregoing, no Loan Party (A) has violated any Environmental Laws,(B) has any liability under any Environmental Laws or (C) has received notice orother communication of an investigation or is under investigation by any GovernmentalAuthority having authority to enforce Environmental Laws where, in each case, suchviolation, liability or notice is reasonably likely to have a Material Adverse Effect. NoDefault has occurred and is continuing.

          (g)     Litigation.Except for (a) any matter fully covered as to subject matter and amount (subject toapplicable deductibles and retentions) by insurance for which the insurance carrier hasnot asserted lack of subject matter coverage or reserved its right to do so, (b) anymatter, or series of related matters, involving a claim against the Borrower or any of itsSubsidiaries of less than $2,500,000, (c) matters of an administrative nature notinvolving a claim or charge against the Borrower or any of its Subsidiaries and (d)matters set forth in Schedule 4.01(g), there are no actions, suits, proceedings orinvestigations pending as to which the Borrower or any of its Subsidiaries have beenserved or have received notice or, to the best knowledge of the Borrower, threatenedagainst or affecting the Borrower or any of its Subsidiaries or any Property of any ofthem before any Governmental Authority that, individually or in the aggregate, isreasonably likely to have a Material Adverse Effect.

          (h)     Title;Possession Under Leases. Set forth in Part A of Schedule 4.01(h) is a completelist of all real property owned by the Borrower or any of its Subsidiaries as of theClosing Date, with the owner of such property, the location of such property, a briefdescription of such property. Set forth in Part B of Schedule 4.01(h) is a completelist of all real property leased by the Borrower or any of its Subsidiaries as lessee orsublessee as of the Closing Date, with the lessee or sublessee of such property, thelocation of such property, a brief description of such property, the owner of suchproperty and the date and title of and parties to the lease for such property (includingall amendments thereof), other than leased facilities with a term of less than one yearand a square footage of less than 5,000 feet. Set forth in Part C of Schedule 4.01(h)is a list of each of the Stores in which the Borrower has a leasehold interest that hasbeen pledged as of the Closing Date to secure its Obligations under the Prior CreditAgreement. The Borrower and its Subsidiaries (i) own and have good and marketable title(without regard to minor defects of title) to the real property referred to in Part A of Schedule4.01(h), (ii) have valid leasehold interests in the real property referred to in PartsB and C of Schedule 4.01(h), (iii) own and have good title (without regard to minordefects of title) to all their other respective properties and assets which are materialto the business of the Borrower and its Subsidiaries taken as a whole, as reflected in themost recent Financial Statements delivered to the Administrative Agent (except thoseassets and properties disposed of since the date of such Financial Statements incompliance with this Agreement) and (iv) own and have good title (without regard to minordefects of title) to all respective properties and assets acquired by the Borrower and itsSubsidiaries since such date which are material to the business of the Borrower and itsSubsidiaries taken as a whole (except those assets and properties disposed of incompliance with this Agreement). Such assets and properties are subject to no Lien, exceptfor Permitted Liens. Each of the Borrower and its Subsidiaries enjoys peaceful andundisturbed possession under all leases, except for any failure to enjoy such possessionwhich (alone or in the aggregate with any other such failures) is not reasonably likely tohave a Material Adverse Effect.

          (i)     FinancialStatements. The audited Financial Statements delivered to the Administrative Agentfairly present in all material respects the financial conditions, results of operationsand changes in financial position of the Loan Parties, and the unaudited balance sheet andstatements of operations delivered to the Administrative Agent fairly present in allmaterial respects the financial conditions, results of operations and changes in financialposition of the Loan Parties, in each case as of the date thereof and for the periodcovered thereby. All such Financial Statements (i) are in accordance with the books andrecords of the Loan Parties, which have been maintained in accordance with good businesspractice, and (ii) have been prepared in conformity with GAAP (subject, in the case of anyunaudited Financial Statements, to changes resulting from audit and normal year-endadjustments and the absence of footnotes). No Loan Party has any Contingent Obligations,liability for taxes or other outstanding obligations which, in any such case, are materialin the aggregate, except as disclosed in the audited Financial Statements dated December29, 2001, furnished by the Borrower to the Administrative Agent prior to the date hereof,or in the Financial Statements delivered to the Administrative Agent pursuant to clause(i) or (ii) of Section 5.01(a) or in the other documents delivered by the Borrowerhereunder and that, in any such case, are material in relation to the business,operations, properties, assets, condition (financial or otherwise) or prospects of theBorrower individually or the Borrower and the other Loan Parties taken as a whole.

          (j)     Projections.As of the Closing Date, subject to the disclosure on Schedule 4.01(j), theassumptions set forth in the Projections are reasonable and consistent with each other andwith all facts known to the Borrower, and the Projections are reasonably based on suchassumptions (it being understood that such Projections are subject to significantcontingencies and uncertainties, many of which are beyond the control of any Loan Party,and nothing in this Section 4.01(j) shall be construed as a representation orcovenant that the Projections in fact will be achieved).

          (k)     Creation,Perfection and Priority of Liens. As of the Closing Date, (i) the execution anddelivery of the Security Documents by the Loan Parties, together with the filing of anyUCC financing statements and the recording of the U.S. Patent and Trademark Office filingsdelivered to the Administrative Agent for filing and recording, and the recording of anyLeasehold Mortgages delivered to the Administrative Agent for recording (but not yetrecorded), are effective to create in favor of the Administrative Agent for the benefit ofitself and the Lenders, as security for the Obligations, a valid and perfected firstpriority Lien on all of the Collateral as of the Closing Date (subject only to PermittedLiens), and (ii) except for the filing of any UCC financing statements and the recordingof the U.S. Patent and Trademark Office filings delivered to the Administrative Agent forfiling and recording, the recording of any Leasehold Mortgages delivered to theAdministrative Agent for recording (but not yet recorded) and the execution of controlagreements relating to Deposit Accounts and securities accounts that constitute Collateral(to the extent not executed on or prior to the Closing Date), all filings and otheractions necessary or desirable to perfect and maintain the perfection and first prioritystatus of such Liens have been duly made or taken and remain in full force and effect.

          (l)     EquitySecurities. All outstanding Equity Securities of the Loan Parties are duly authorized,validly issued, fully paid and non-assessable. Except as issued under (i) the Wild OatsMarkets, Inc. 1996 Equity Incentive Plan, (ii) the Wild Oats Markets, Inc. 2001Non-officer/Non-director Stock Option Plan, (iii) the Bruce Bowman Equity Incentive Plan,(iv) the Edward Dunlap Equity Incentive Plan, (v) the Stephen Kaczynski Equity IncentivePlan and (vi) the Terry Maloy Equity Incentive Plan, there are no outstandingsubscriptions, options, conversion rights, warrants or other agreements or commitments ofany nature whatsoever (firm or conditional) obligating the Loan Parties to issue, deliveror sell, or cause to be issued, delivered or sold, any additional Equity Securities of theLoan Parties, or obligating the Loan Parties to grant, extend or enter into any suchagreement or commitment. All Equity Securities of the Loan Parties have been offered andsold in compliance with all federal and state securities laws and all other Requirementsof Law, except where any failure to comply is not reasonably likely to have a MaterialAdverse Effect.

          (m)     NoAgreements to Sell Assets; Etc. No Loan Party has any legal obligation, absolute orcontingent, to any Person to sell a material portion of the assets of the Borrower or anyof its Subsidiaries (except as permitted by Section 5.02(c)), or to effect anymerger, consolidation or other reorganization of the Borrower or any of its Subsidiaries(except as permitted by Section 5.02(d)) or to enter into any agreement withrespect thereto.

          (n)     EmployeeBenefit Plans.

               (i)     Basedupon the latest valuation of each Employee Benefit Plan that the Borrower or any ERISAAffiliate maintains or contributes to, or has any obligation under (which occurred withintwelve months of the date of this representation), the aggregate benefit liabilities ofsuch plan within the meaning of Section 4001 of ERISA did not exceed the aggregatevalue of the assets of such plan. Neither the Borrower nor any ERISA Affiliate has anyliability with respect to any post-retirement benefit under any Employee Benefit Planwhich is a welfare plan (as defined in section 3(1) of ERISA), other than liability forhealth plan continuation coverage described in Part 6 of Title I(B) of ERISA, whichliability for health plan contribution coverage is not reasonably likely to have aMaterial Adverse Effect. 

               (ii)     EachEmployee Benefit Plan complies, in both form and operation, in all material respects, withits terms, ERISA and the IRC, and no condition exists or event has occurred with respectto any such plan which would result in the incurrence by the Borrower or any ERISAAffiliate of any material liability, fine or penalty. Each Employee Benefit Plan, relatedtrust agreement, arrangement and commitment of the Borrower or any ERISA Affiliate islegally valid and binding and in full force and effect, except as could not reasonably beexpected to result in a Material Adverse Effect. No Employee Benefit Plan is being auditedor investigated by any government agency or is subject to any pending or threatened claimor suit which could reasonably be expected to result in a Material Adverse Effect. None ofthe Borrower and the ERISA Affiliates nor any fiduciary of any Employee Benefit Plan hasengaged in a prohibited transaction under section 406 of ERISA or section 4975 of the IRC.

               (iii)     Exceptas set forth on Schedule 4.01(n), none of the Borrower and the ERISA Affiliatescontributes to or has any material contingent obligations to any Multiemployer Plan. Noneof the Borrower and the ERISA Affiliates has incurred any material liability (includingsecondary liability) to any Multiemployer Plan as a result of a complete or partialwithdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of asale of assets described in Section 4204 of ERISA. None of the Borrower and the ERISAAffiliates has been notified that any Multiemployer Plan is in reorganization or insolventunder and within the meaning of Section 4241 or Section 4245 of ERISA or that anyMultiemployer Plan intends to terminate or has been terminated under Section 4041A ofERISA.

          (o)     OtherRegulations. No Loan Party is subject to regulation under the Investment Company Actof 1940, the Public Utility Holding Company Act of 1935, the Federal Power Act, theInterstate Commerce Act or any state public utilities code.

          (p)     Trademarksand Other Rights. The Loan Parties own, license or otherwise have the full right touse, under validly existing agreements, all material patents, licenses, trademarks, tradenames, trade secrets, service marks, copyrights and all rights with respect thereto, whichare required to conduct their businesses as now conducted, except where the failure toown, license or otherwise have the full right to use could not reasonably be expected toresult in a Material Adverse Effect.

          (q)     GovernmentalCharges. The Loan Parties have filed or caused to be filed all material tax returnswhich are required to be filed by them. The Loan Parties have paid, or made provision forthe payment of, all material taxes and other Governmental Charges which have or may havebecome due pursuant to said returns or otherwise and all other indebtedness, except suchGovernmental Charges or indebtedness, if any, which are being contested in good faith andas to which adequate reserves (determined in accordance with GAAP) have been provided. 

          (r)     MarginStock. No Loan Party owns any Margin Stock which, in the aggregate, would constitute asubstantial part of the assets of such Loan Party, and no proceeds of any Loan will beused to purchase or carry, directly or indirectly, any Margin Stock or to extend credit,directly or indirectly, to any Person for the purpose of purchasing or carrying any MarginStock.

          (s)     Subsidiaries,Etc.Schedule 4.01(s) (as supplemented by the Borrower quarterly, but only tothe extent of any changes in the information contained therein, in a written notice to theAdministrative Agent) sets forth each of the Subsidiaries of the Borrower, itsjurisdiction of organization, the classes of its Equity Securities, the number of sharesof each such class issued and outstanding, the percentages of shares of each such classowned directly or indirectly by the Borrower and whether the Borrower owns such sharesdirectly or, if not, the Subsidiary of the Borrower that owns such shares and the numberof shares and percentages of shares of each such class owned directly or indirectly by theBorrower. Schedule 4.01(s) correctly sets forth which of the Subsidiaries of theBorrower are Exempt Subsidiaries.

          (t)     Solvency,Etc. The Borrower individually and the Loan Parties taken as a whole are Solvent and,after the execution and delivery of the Credit Documents and the consummation of thetransactions contemplated thereby, will be Solvent.

          (u)     NoMaterial Adverse Effect. Since September 28, 2002, no event has occurred and nocondition exists that has caused a Material Adverse Effect.

          (v)     Accuracyof Information Furnished.

               (i)     TheCredit Documents and the other certificates, statements and information (excludingprojections) furnished by the Loan Parties to the Administrative Agent and the Lenders inconnection with the Credit Documents and the transactions contemplated thereby, taken as awhole, do not contain any untrue statement of a material fact and do not omit to state anymaterial fact necessary to make the statements therein, in light of the circumstancesunder which they were made, not misleading. All Projections furnished by the Loan Partiesto the Administrative Agent and the Lenders in connection with the Credit Documents andthe transactions contemplated thereby have been based upon reasonable assumptions andrepresent, as of their respective dates of presentations, the Loan Parties’ bestestimates of the future performance of the Loan Parties (it being understood that suchProjections are subject to significant contingencies and uncertainties, many of which arebeyond the control of any Loan Party, and nothing in this Section 4.01(v) shall beconstrued as a representation or covenant that the Projections in fact will be achieved). 

          (w)     LandlordConsents. As of the Closing Date, each Landlord Consent is in full force and effectand has not been rescinded or disputed by the landlord party thereto.

          (x)     BrokerageCommissions. No person is entitled to receive any brokerage commission, finder’sfee or similar fee or payment in connection with the extensions of credit contemplated bythis Agreement as a result of any agreement entered into by any Loan Party. No brokerageor other fee, commission or compensation is to be paid by the Lenders with respect to theextensions of credit contemplated hereby as a result of any agreement entered into by theBorrower, and the Borrower agrees to indemnify the Administrative Agent and the Lendersagainst any such claims for brokerage fees or commissions and to pay all expensesincluding, without limitation, reasonable attorney’s fees incurred by the Lenders inconnection with the defense of any action or proceeding brought to collect any suchbrokerage fees or commissions.

          (y)     Policiesof Insurance. All insurance maintained by the Loan Parties has not been terminated andis in full force and effect, and each of the Loan Parties has taken all action required tobe taken as of the date of this Agreement to keep unimpaired its rights thereunder.
**ARTICLE V.      COVENANTS.

     5.01.     AffirmativeCovenants. Until the termination of this Agreement and the satisfaction in full by theBorrower of all Obligations (other than inchoate indemnity obligations), the Borrower willcomply, and will cause compliance by the other Loan Parties, with the followingaffirmative covenants, unless the Required Lenders shall otherwise consent in writing:

          (a)     FinancialStatements, Reports, etc. The Borrower shall furnish to the Administrative Agent andeach Lender the following, each in such form and such detail as the Administrative Agentor the Required Lenders shall reasonably request:

               (i)     Assoon as available and in no event later than forty-five (45) days after the last day ofeach of the first three Fiscal Quarters of each Fiscal Year of the Borrower, a copy of theFinancial Statements of the Borrower and its Subsidiaries (prepared on a consolidated and,at any time during which the Borrower has any Material Subsidiaries, consolidating, basis)for such Fiscal Quarter and for the Fiscal Year to date, certified by a ResponsibleOfficer of the Borrower to present fairly in all material respects the financialcondition, results of operations and other information reflected therein and to have beenprepared in accordance with GAAP (subject to normal year-end audit adjustments and theabsence of footnotes);

               (ii)     Assoon as available and in no event later than one hundred twenty (120) days after the closeof each Fiscal Year of the Borrower, (A) copies of the audited Financial Statementsof the Borrower and its Subsidiaries (prepared on a consolidated and, at any time duringwhich the Borrower has any****Material Subsidiaries, consolidating, basis) for suchFiscal Year, audited by PricewaterhouseCoopers or any other firm of independent certifiedpublic accountants reasonably acceptable to the Administrative Agent, and (B) copiesof the unqualified opinions (or opinions containing such qualifications as to events orconditions that the Administrative Agent and the Required Lenders have agreed in writingcould not reasonably be expected to result in a Material Adverse Effect) and, to theextent delivered, management letters delivered by such accountants in connection with allsuch Financial Statements;

               (iii)     Assoon as available and in any event within 45 days after the end of each Fiscal Quarter(including the end of each Fiscal Year), a compliance certificate of executed by aResponsible Officer of the Borrower in substantially the form of Exhibit N (a"Compliance Certificate") which (A) states that no Default hasoccurred and is continuing, or, if any such Default has occurred and is continuing, astatement as to the nature thereof and what action Borrower proposes to take with respectthereto and (B) sets forth in reasonable detail, as of the last day of the mostrecently ended Fiscal Quarter or Fiscal Year (as the case may be), the calculation of thefinancial ratios and tests provided in Section 5.03 to the extent compliance withsuch financial ratios and tests is required to be tested as of the end of the applicableaccounting period;

               (iv)     Assoon as available, and in any event not later than forty-five (45) days following the endof each Fiscal Year of the Borrower, the Projections of the Loan Parties for the nextFiscal Year (prepared on a consolidated and, at any time during which the Borrower has any****Material Subsidiaries, consolidating, basis), including, in each case, projectedbalance sheets, statements of income and retained earnings and statements of cash flow ofthe Loan Parties, all in reasonable detail, in form reasonably satisfactory to theAdministrative Agent and in any event to include projected Capital Expenditures andquarterly projections of the Borrower’s compliance with each of the covenants setforth in Section 5.03 of this Agreement;

               (v)     Thefollowing information with respect to the Borrower and its Subsidiaries:

                    (A)          Assoon as practicable after the end of each Fiscal Quarter, and in any event no later thanthe last day of the immediately succeeding calendar month, a quarterly comparable storesales report prepared with respect to the portion of the Fiscal Year ended with suchFiscal Quarter, which report shall contain a listing of Stores owned and/or operated bythe Borrower and its Subsidiaries during such period (including currently existing Stores,Store relocations and acquired Stores) opened and operating for 13 months or longer; and

                    (B)          Tothe Administrative Agent only, promptly after the Administrative Agent’s reasonablerequest therefor, copies of each monthly account statement (showing account balance andmonthly account activity) for all deposit and investment accounts of the Borrower and itsSubsidiaries that are included as part of the Collateral;

 
provided, however, that the Lenders agree that thefinancial statements/reports provided pursuant to Sections 5.01(a)(iv) and5.01(a)(v)(A) and (B) above shall not be used by the Lenders to declare an Event ofDefault as to the financial covenants set forth in Section 5.03.

               (vi)     Onor before the date the next Compliance Certificate is required to be delivered by theBorrower, copies of each annual report, proxy or financial statement or other report orcommunication sent to the stockholders of the Borrower, and copies of all annual, regular,periodic and special reports (including without limitation reports submitted in connectionwith the filing of any Form 10-K or 10-Q by the Borrower) and registration statementswhich the Borrower may file or be required to file with the Securities and ExchangeCommission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,and not otherwise required to be delivered to the Lenders pursuant to other provisions ofthis Section 5.01(a);

               (vii)     Assoon as possible and in no event later than five (5) Business Days after any ResponsibleOfficer of any Loan Party knows of the occurrence or existence of (A) any ReportableEvent under any Employee Benefit Plan or Multiemployer Plan, (B) any actuallitigation, suits, claims or disputes against the Borrower or any of its Subsidiariesinvolving potential monetary damages payable by any Loan Party of $5,000,000 or more(alone or in the aggregate), or (C) any other event or condition which is reasonablylikely to have a Material Adverse Effect, the statement of a Responsible Officer of theBorrower setting forth details of such event or condition and the action which theBorrower proposes to take with respect thereto;

               (viii)     Assoon as available and in no event later than five (5) Business Days after they are filed,copies of all IRS Form 5500 reports for all Employee Benefit Plans required to file suchform;

               (ix)     Promptlyafter request by the Administrative Agent, copies of any other material report or othermaterial document not otherwise described in this Section 5.01(a) that was filed bythe Borrower with any Governmental Authority;

               (x)     Assoon as possible and in no event later than five (5) Business Days after the occurrence ofany event or circumstance that would require a prepayment pursuant to Section 2.06(c)(iii),the statement of a Responsible Officer of the Borrower setting forth the details thereof;

               (xi)     Assoon as possible and in no event later than ten (10) Business Days after the establishmentor acquisition by the Borrower or any of its Subsidiaries of any new Subsidiary or any newEquity Securities of any existing Subsidiary, written notice thereof;

               (xii)     Assoon as possible and in no event later than thirty (30) days after the receipt thereof bythe Borrower or any of its Subsidiaries, a copy of any notice, summons, citations or otherwritten communications concerning any actual, alleged, suspected or threatened materialviolation of any Environmental Law, or any material liability of the Borrower or any ofits Subsidiaries for Environmental Damages;

               (xiii)     Tothe Administrative Agent only, as soon as practicable, and in any event within five (5)Business Days after a Responsible Officer of the Borrower becomes aware of the existenceof any condition or event which constitutes a Default or Event of Default, telephonicnotice specifying the nature and period of existence thereof, and, to the AdministrativeAgent and each of the Lenders, no more than two (2) Business Days after such telephonicnotice, written notice again specifying the nature and period of existence thereof andspecifying what action the Borrower is taking or proposes to take with respect thereto;and

               (xiv)     Suchother instruments, agreements, certificates, statements, documents and informationrelating to any material adverse change in the operations or condition (financial orotherwise) of the Borrower or its Subsidiaries, and compliance by the Borrower with theterms of this Agreement and the other Credit Documents as the Administrative Agent mayfrom time to time reasonably request.

Reports required to be delivered pursuant to Sections5.01(a)(i), (ii) and (iv) may be delivered electronically and if so, shall be deemedto have been delivered on the date on which the Borrower posts such reports prior to 5:00p.m., electronically on IntraLinks/IntraAgency or other relevant website to which theAdministrative Agent and the Lenders have access (whether a commercial, third-partywebsite or whether sponsored by the Administrative Agent) or by electronic mail to theAdministrative Agent; provided, however, that: (1) the Borrower shalldeliver paper copies of such reports to the Administrative Agent and the Lenders uponwritten request therefor; (2) the Borrower shall notify (which may be by facsimile orelectronic mail) the Administrative Agent of the posting of any such reports and provideto the Administrative Agent by electronic mail versions (i.e. soft copies) of such reportsupon written request therefor; (3) the Borrower shall reimburse the Administrative Agentfor all costs and expenses incurred by the Administrative Agent in creating andmaintaining such IntraLinks/IntraAgency or other relevant website in accordance with Section8.02; and (4) in every instance the Borrower shall provide to the Administrative Agentpaper copies of the Compliance Certificates required pursuant to Section 5.01(a)(iii).

          (b)     Booksand Records. The Loan Parties shall at all times keep proper books of record andaccount in which full, true and correct entries in all material respects and sufficient toprepare financial statements in accordance with GAAP shall be made.

          (c)     Inspections.The Loan Parties shall permit the Administrative Agent and each Lender, or any agent orrepresentative thereof, upon reasonable notice and during normal business hours, to visitand inspect any of the properties and offices of the Loan Parties, to conduct audits ofany or all of the Collateral at the Borrower’s expense, to examine the books andrecords of the Loan Parties and make copies thereof, and to discuss the affairs, financesand business of the Loan Parties with, and to be advised as to the same by, theirofficers, auditors and accountants, all at such times and intervals as the AdministrativeAgent or any Lender may reasonably request. Notwithstanding the foregoing, (i) so long asno Default has occurred and is continuing, such visits and inspections by theAdministrative Agent and the Lenders must be coordinated with the Administrative Agent andthe other Lenders so as to limit the aggregate number of all such visits and inspectionsto not more than four (4) visits during each Fiscal Year, and (ii) no Loan Party will berequired to disclose, permit the inspection, examination or making of extracts, ordiscussion of, any document, information or other matter that (A) constitutesnon-financial trade secrets, (B) in respect of which disclosure to the AdministrativeAgent or any Lender (or its designated representative) is then prohibited by law or Section8.10 or (C) is subject to attorney-client or similar privilege or constitutes attorneywork product.

          (d)     Insurance.The Loan Parties shall:

               (i)     Carryand maintain insurance during the term of this Agreement of the types and in the amountsand with such deductibles as is customarily carried from time to time by others engaged insubstantially the same business of the same size as such Person and operating in the samegeographic area as such Person, including, but not limited to, fire, public liability,products liability, property damage, worker’s compensation and business interruptioninsurance;

               (ii)     Furnishto any Lender, as soon as practicable after such Lender’s written request, copies ofall such insurance policies;

               (iii)     Carryand maintain each policy for such insurance with (A) a company which is rated A orbetter by A.M. Best and Company at the time such policy is placed and at the time of eachannual renewal thereof or (B) any other insurer which is reasonably satisfactory tothe Administrative Agent; and

               (iv)     Obtainand maintain endorsements reasonably acceptable to the Administrative Agent for suchinsurance naming the Administrative Agent as an additional insured and as lender’sloss payee; 

 
provided, however, that if any Loan Party shall failto maintain insurance in accordance with this Section 5.01(d), or if any Loan Partyshall fail to provide the required endorsements with respect thereto, the AdministrativeAgent, after written notice and a reasonable opportunity to cure (if available), shallhave the right (but shall be under no obligation) to procure such insurance and theBorrower agrees to reimburse the Administrative Agent for all documented costs andexpenses of procuring such insurance; provided further, that the insurancedescribed in this Section 5.01(d) shall contain a provision stating that it isnon-cancellable without 30-days prior written notice to the Administrative Agent.

          (e)     GovernmentalCharges . Each Loan Party shall promptly pay and discharge when due all taxes andother Governmental Charges prior to the date upon which penalties accrue thereon which, ifunpaid, is reasonably likely to have a Material Adverse Effect, except such taxes andother Governmental Charges as may in good faith be contested or disputed, or for whicharrangements for deferred payment have been made, provided that in each such caseappropriate reserves are maintained to the reasonable satisfaction of the AdministrativeAgent.

          (f)     Useof Proceeds. The Borrower shall use the proceeds of the Loans only for the respectivepurposes set forth in Section 2.01(g). The Borrower shall not use any part of theproceeds of any Loan, directly or indirectly, for the purpose of purchasing or carryingany Margin Stock or for the purpose of purchasing or carrying or trading in any securitiesunder such circumstances as to involve the Borrower, any Lender or the AdministrativeAgent in a violation of Regulations T, U or X issued by the Federal Reserve Board. 

          (g)     GeneralBusiness Operations. Each of the Loan Parties shall (i) subject to Section5.02(d), preserve and maintain its corporate, partnership or limited liability companyexistence and all of its rights, privileges and franchises reasonably necessary to theconduct of its business, (ii) conduct its business activities in compliance with allRequirements of Law and Contractual Obligations applicable to such Person and(iii) keep all property useful and necessary in its business in good working orderand condition, ordinary wear and tear excepted, except, in each case, where any failure isnot reasonably likely to have a Material Adverse Effect. The Borrower shall maintain itschief executive office and principal place of business in the United States of America andshall not change its jurisdiction of formation except upon not less than fifteen (15) daysprior written notice to the Administrative Agent.

          (h)     Compliancewith Laws. Each Loan Party shall comply with the requirements of all applicable laws,rules, regulations and orders of any Governmental Authority (including, withoutlimitation, all Environmental Laws), noncompliance with which could reasonably be expectedto have, individually or in the aggregate, a Material Adverse Effect.

          (i)     NewSubsidiaries. With respect to (x) any new direct or indirect Subsidiary of any LoanParty formed or acquired after the Closing Date (such a Subsidiary, a "NewSubsidiary"), and (y) any Exempt Subsidiary that at any time ceases to be anExempt Subsidiary (such a Subsidiary, a "Newly Eligible Subsidiary"), theBorrower shall, at its own expense, promptly, and in any event within thirty (30) BusinessDays after the formation, acquisition or loss of exempt status of such New Subsidiary orNewly Eligible Subsidiary (i) notify the Administrative Agent of such event,(ii) with respect to any New Subsidiary, amend or supplement the Security Documentsas appropriate in light of such event to pledge to the Administrative Agent for thebenefit of itself and the Lenders (A) if not a Tax Preferred Subsidiary, 100% of theEquity Securities of such New Subsidiary owned by a Loan Party and (B) if a Tax PreferredSubsidiary, 100% of the non-voting Equity Securities and 65% of the voting EquitySecurities of such New Subsidiary owned by a Loan Party and execute and deliver alldocuments or instruments required thereunder or appropriate to perfect the securityinterest created thereby, (iii) deliver to the Administrative Agent all stockcertificates and other instruments added to the Collateral thereby free and clear of allLiens, accompanied by undated stock powers or other instruments of transfer executed inblank, (iv) cause each such New Subsidiary that is not an Exempt Subsidiary and eachNewly Eligible Subsidiary to execute and become a party to the Guaranty, (v) causeeach such New Subsidiary that is not an Exempt Subsidiary and each such Newly EligibleSubsidiary to execute and become a party to the Security Agreement and the PledgeAgreement, and (vi) cause each document (including, as applicable, each SecurityDocument, each deed of trust or mortgage with respect to real property owned by such NewSubsidiary or Newly Eligible Subsidiary in fee simple, each UCC financing statement andeach filing with respect to intellectual property owned by such New Subsidiary or NewlyEligible Subsidiary) required by law or reasonably requested by the Administrative Agentto be filed, registered or recorded in order to create in favor of the AdministrativeAgent for the benefit of the Lenders a valid, legal and perfected first-priority securityinterest in and lien on the Collateral subject to the Security Documents to be so filed,registered or recorded and evidence thereof delivered to the Administrative Agent.

          (j)     Changein Management. If Perry Odak ceases to hold the office of Chief Executive Officer (or,if there then is no such office or occupant of such office, the office of President) ofthe Borrower, the Borrower shall notify the Administrative Agent of the proposed successoras soon as practicable and the Administrative Agent shall (after consultation with theLenders) promptly (and in any event within ten (10) Business Days) notify the Borrowerwhether such proposed successor is or is not reasonably acceptable to the RequiredLenders. A determination by the Required Lenders that a proposed successor is notreasonably acceptable shall be made solely on grounds that are reasonable from thestandpoint of a lender to the Borrower.

          (k)     CertainPost Closing Matters. Not later than March 31, 2003, the Borrower shall have deliveredto the Administrative Agent the following items, each in form and substance reasonablysatisfactory to the Administrative Agent and each Lender, and with sufficient copies for,the Administrative Agent and each Lender:

               (i)     Afavorable written opinion from Texas counsel for Wild Oats of Texas, Inc., addressed tothe Administrative Agent for the benefit of the Administrative Agent and the Lenders,covering the perfection by filing of the Administrative Agent’s security interest inthe personal property assets of Wild Oats of Texas, Inc.; and

               (ii)     Afavorable written opinion from Nevada counsel for each of Wild Marks, Inc., Sparky, Inc.and Wild Oats Financial, Inc., addressed to the Administrative Agent for the benefit ofthe Administrative Agent and the Lenders, covering the perfection by filing of theAdministrative Agent’s security interest in the personal property assets of each suchLoan Party.

     5.02.     NegativeCovenants. Until the termination of this Agreement and the satisfaction in full by theBorrower of all Obligations (other than inchoate indemnity obligations), the Borrower willcomply, and will cause compliance by the other Loan Parties, with the following negativecovenants, unless the Required Lenders shall otherwise consent in writing:

          (a)     Indebtedness.None of the Loan Parties shall create, incur, assume or permit to exist any Indebtednessexcept for the following ("Permitted Indebtedness"): 

               (i)     Indebtednessof the Loan Parties under the Credit Documents; 

               (ii)     Indebtednessof the Loan Parties listed in Schedule 5.02(a) and existing on the date ofthis Agreement; 

               (iii)     Indebtednessof the Loan Parties arising from the endorsement of instruments for collection in theordinary course of their businesses; 

               (iv)     Indebtednessof the Loan Parties for trade accounts payable, provided that (A) such accounts arisein the ordinary course of business and (B) no material part of any such account ismore than ninety (90) days past due (unless subject to a bona fide dispute and for whichadequate reserves have been established);

     (v)     Indebtednessof the Loan Parties under Lender Rate Contracts entered into with respect to the Loans,provided that (A) all such Lender Rate Contracts are entered into in connection withbona fide hedging operations and not for speculation and (B) the aggregate notionalprincipal amount under all such Rate Contracts does not exceed the Effective Amount of theLoans at any time; 

               (vi)     Indebtednessof the Loan Parties under initial or successive refinancings of any Indebtedness permittedby clauses (ii), (iii) or (iv) above or clause (x) below, provided that(A) the principal amount of any such refinancing does not exceed the principal amountof the Indebtedness being refinanced and (B) the material terms and provisions of anysuch refinancing (including maturity, redemption, prepayment, default and subordinationprovisions) are no less favorable to the Lenders than the Indebtedness being refinanced;

               (vii)     Indebtednessof the Loan Parties with respect to workers’ compensation claims, self-insuranceobligations, Permitted Insurance Premium Indebtedness, surety, appeal, indemnity,performance, or other similar bonds in the ordinary course of business (including suretyor similar bonds issued in connection with the stay of a proceeding of the type describedin Section 6.01(h));

               (viii)     GuarantyObligations of any Loan Party in respect of Permitted Indebtedness of any wholly-ownedSubsidiary;

               (ix)     Indebtednessof any Loan Party to any other Loan Party that is not an Exempt Subsidiary andIndebtedness of any Exempt Subsidiary to any Loan Party;

               (x)     Acquisition-RelatedIndebtedness in an aggregate principal amount not exceeding $10,000,000 at any one timeoutstanding;

               (xi)     PermittedSubordinated Indebtedness in an aggregate principal amount not exceeding $35,000,000(excluding "payment in kind" interest) at any one time outstanding;

               (xii)     Indebtednessconsisting of Capital Leases, or Indebtedness otherwise incurred to finance the purchaseor construction of property (which shall be deemed to exist if the Indebtedness isincurred at or within 90 days before or after the purchase or construction of theproperty), or to refinance any such Indebtedness, in each case entered into after theClosing Date, provided that the principal amount of such Indebtedness outstanding at anyone time does not exceed $5,000,000 in the aggregate;

               (xiii)     Indebtednessincurred by any Loan Party arising from agreements providing for indemnification,adjustment of purchase price or similar obligations, or from guaranties or letters ofcredit, surety bonds or performance bonds securing the performance of any Loan Partypursuant to such agreements, in connection with Acquisitions permitted hereunder orpermitted dispositions or sales of any business, assets or Subsidiary of the Borrower orany of its Subsidiaries;

               (xiv)     Indebtednessarising from the honoring by a bank or other financial institution of a check, draft orsimilar instrument drawn against insufficient funds in the ordinary course of business,provided that such Indebtedness is extinguished within five (5) Business Days of itsincurrence;

               (xv)     withoutduplication, Indebtedness constituting Investments otherwise permitted pursuant to Section5.02(e); and

               (xvi)     otherIndebtedness not to exceed $1 million in the aggregate at any one time.

For purposes of determining compliance with this Section5.02(a), in the event that an item of Indebtedness meets the criteria of more than oneof the types of Indebtedness described in the above clauses, the Administrative Agent, inconsultation with the Borrower, shall classify such item of Indebtedness and will includethe amount and type of such Indebtedness in only one of such clauses.

          (b)     Liensand Negative Pledges. No Loan Party shall create, incur, assume or permit to exist anyLien or Negative Pledge on or with respect to any of its assets or property of anycharacter, whether now owned or hereafter acquired, except for the following ("PermittedLiens"):

               (i)     Liensand Negative Pledges in favor of the Administrative Agent or any Lender securing theObligations; 

               (ii)     Liensor Negative Pledges listed in Schedule 5.02(b) and existing on the date of thisAgreement; 

               (iii)     Liensfor taxes or other Governmental Charges not at the time delinquent or thereafter payablewithout penalty or being contested in good faith, provided that adequate reserves for thepayment thereof have been established in accordance with GAAP; 

               (iv)     Liensof carriers, warehousemen, mechanics, materialmen, vendors, and landlords and othersimilar Liens imposed by law or Contractual Obligations documenting such relationships andincurred in the ordinary course of business for sums which are not overdue more than sixty(60) days or are being contested in good faith, provided that adequate reserves for thepayment thereof have been established in accordance with GAAP; 

               (v)     Depositsunder workers’ compensation, self insurance, unemployment insurance and socialsecurity laws or to secure the performance of bids, tenders, contracts (other than for therepayment of borrowed money) or leases, or to secure statutory obligations of surety orappeal bonds or to secure indemnity, performance or other similar bonds in the ordinarycourse of business; 

               (vi)     Zoningrestrictions, easements, encroachments, protrusions, rights-of-way, title irregularitiesand other similar encumbrances, which alone or in the aggregate are not substantial inamount and, with respect to property that is owned in fee simple, do not materiallydetract from the value of the property subject thereto and adversely interfere with theordinary conduct of the business of any Loan Party; 

               (vii)     Lienson any property or assets acquired, or on the property or assets of any Persons acquired,by any Loan Party after the date of this Agreement pursuant to Section 5.02(d),provided that (A) such Liens exist at the time such property or assets or suchPersons are so acquired and (B) such Liens were not created in contemplation of suchacquisitions;

               (viii)     JudgmentLiens, provided that such Liens do not constitute an Event of Default under Section6.01(h);

               (ix)     Liensarising in connection with Acquisition-Related Indebtedness, provided that suchIndebtedness otherwise complies with Section 5.02(a)(x);

               (x)     Liensarising in connection with leases or subleases granted by the Borrower or any of itsSubsidiaries to any other Person in the ordinary course of business;

               (xi)     Lienson patents, trademarks, trade names, service marks, copyrights, trade secrets or otherintellectual property to the extent such Liens arise from the granting of licenses theretogranted by the Borrower or any of its Subsidiaries to any other Person in the ordinarycourse of business; 

               (xii)     Lienssecuring payment of Indebtedness of the type permitted and described in Section5.02(a)(xii), provided that such Indebtedness otherwise complies with Section5.02(a)(xii);

               (xiii)     Lienssolely on any cash earnest money deposits made by the Borrower or any of its Subsidiariesin connection with any letter of intent or purchase agreement permitted hereunder;

               (xiv)     Liensin favor of customs and revenue authorities arising as a matter of law to secure paymentof customs duties in connection with the importation of goods;

               (xv)     Liensarising out of conditional sale, title retention, consignment or similar arrangements forthe sale of goods by the Borrower or any of its Subsidiaries in the ordinary course ofbusiness;

               (xvi)     Lienspermitted as set forth in the definition of "Permitted Insurance PremiumIndebtedness";

               (xvii)     bankers’Liens, rights of setoff and other similar Liens existing solely with respect to cash andCash Equivalents on deposit in one or more accounts maintained by Borrower or any of itsSubsidiaries, in each case granted in the ordinary course of business in favor of the bankor banks with which such accounts are maintained, securing amounts owing to such bank withrespect to cash management and operating account arrangements, including those involvingpooled accounts and netting arrangements;

               (xviii)     Liensincurred in connection with the extension, renewal or refinancing of the Indebtednesssecured by the Liens described in clause (ii) or (ix) above, provided that any extension,renewal or replacement Lien (A) is limited to the property covered by the existing Lienand (B) secures Indebtedness which is no greater in amount and has material terms taken asa whole no less favorable to the Lenders than the Indebtedness secured by the existingLien; 

               (xix)     NegativePledges existing by reason of customary provisions restricting assignments, subletting orother transfers contained in leases, licenses and similar agreements entered into in theordinary course of business;

               (xx)     NegativePledges applicable to any Subsidiary acquired after the Closing Date if such restrictionsand conditions existed at the time such Subsidiary was acquired, were not created inanticipation of such acquisition and apply solely to such acquired Subsidiary; and

               (xxi)     NegativePledges contained in agreements evidencing Indebtedness permitted by Section5.02(a)(xii) that impose restrictions on the property so acquired;

 
provided, however, that the foregoing exceptions shallnot permit any Lien in any Equity Securities issued by any Loan Party and pledged to theAdministrative Agent by any Loan Party, except for Liens in favor of the AdministrativeAgent securing the Obligations.

          (c)     AssetDispositions. No Loan Party shall sell, lease, transfer or otherwise dispose of any ofits assets or property, whether now owned or hereafter acquired, except for the following:

               (i)     Salesby the Loan Parties of inventory in the ordinary course of their businesses; 

               (ii)     Salesof assets in connection with the assignment or subleasing of leasehold interests or theclosures and sale of any Store or group of Stores, provided that the total fair marketvalue of such assets does not exceed $5,000,000 in any Fiscal Year;

               (iii)     Salesby the Loan Parties of surplus, damaged, worn or obsolete assets in the ordinary course oftheir businesses for not less than fair market value (or, if for less than fair marketvalue, is in connection with the assignment by such Loan Party of one or more leaseobligations by which it is bound), provided that no Default shall have occurred and becontinuing, and the abandonment or other sale of intellectual property that is, in thereasonable judgment of the Borrower, no longer economically practicable to maintain oruseful in the conduct of the business of the Borrower and its Subsidiaries taken as awhole; 

               (iv)     Salesor other dispositions by any Loan Party of Investments permitted by Section 5.02(e)for not less than fair market value, provided that no Default shall have occurred and becontinuing; 

               (v)     Salesor other dispositions of assets and property by a Loan Party to any other Loan Party, orby any Exempt Subsidiary to any Loan Party;

               (vi)     Salesor other dispositions of assets and property by any Loan Party to any Exempt Subsidiary ora Foreign Subsidiary, provided that the terms of any such sales or other dispositions byor to the selling Loan Party are terms which are no less favorable to the selling LoanParty than would prevail in the market for similar transactions between unaffiliatedparties dealing at arm’s length;

               (vii)     Licensesand sublicenses by the Borrower or any of its Subsidiaries of software, intellectualproperty and other general intangibles in the ordinary course of business and which do notmaterially interfere with the ordinary conduct of business of the Borrower or any suchSubsidiary;

               (viii)     TheBorrower and its Subsidiaries may sell Cash Equivalents in the ordinary course ofbusiness;

               (ix)     Thesurrender or waiver of litigation rights or settlement, release or surrender of tort orother litigation claims of any kind;

               (x)     Thegranting of Permitted Liens;

               (xi)     Transfersof condemned property to the respective Governmental Authority that have condemned thesame (whether by deed in lieu of condemnation or otherwise), and transfers of propertiesthat have been subject to a casualty to the respective insurer of such property or itsdesignee as part of an insurance settlement;

               (xii)     Sales,assignments, transfers or dispositions of defaulted accounts in the ordinary course ofbusiness for the purposes of collection;

               (xiii)     Investmentspermitted under Section 5.02(e); and

               (xiv)     Salesor other dispositions the proceeds of which are applied to the prepayment of the Loans andotherwise as set forth in Section 2.06(c).

          (d)     Mergers,Acquisitions, Etc. No Loan Party shall consolidate with or merge into any other Personor permit any other Person to merge into it (other than solely to change the jurisdictionof incorporation or organization or pursuant to an Acquisition permitted hereunder (butonly to the extent done in compliance with the applicable provisions of the SecurityAgreement)), establish any new Subsidiary (unless such new Subsidiary (other than anExempt Subsidiary) becomes a Loan Party hereunder), or make any Acquisition, except forthe following:

               (i)     theBorrower and the other Loan Parties****may merge with each other, provided that(A) no Default will result after giving effect to any such merger and (B) in anysuch merger involving the Borrower, the Borrower is the surviving Person; 

               (ii)     anySubsidiary of the Borrower may be merged with or into any Loan Party, or be liquidated,wound up or dissolved, or all or any part of its business, property or assets may beconveyed, sold, leased, transferred or otherwise disposed of, in one transaction or aseries of transactions, to any o Loan Party, provided that no Default will result aftergiving effect to any such merger;

               (iii)     anyExempt Subsidiary or any Foreign Subsidiary may be merged with or into any other ExemptSubsidiary or any other Foreign Subsidiary, or be liquidated, wound up or dissolved, orall or any part of its business, property or assets may be conveyed, sold, leased,transferred or otherwise disposed of, in one transaction or a series of transactions, toany other Exempt Subsidiary or any other Foreign Subsidiary, provided that no Default willresult after giving effect to any such merger;

               (iv)     Acquisitionsof any Person engaged in the business of manufacture, distribution or retail sale ofnatural or gourmet foods, vitamins, supplements or personal care items (and relatedgrocery and other products) provided that:

                    (A)          NoDefault has occurred and is continuing on the date of, or will result after giving effectto, any such Acquisition; and 

                    (B)          Theaggregate consideration paid by the Loan Parties for all such Acquisitions (excludingconsideration consisting of the Equity Securities of the Borrower or its Subsidiaries orof Net Cash Issuance Proceeds) paid in any Fiscal Year does not exceed $5,000,000; and

               (v)     Acquisitionsby any Loan Party of any Person as a new Subsidiary or of all or substantially all of theassets of any Person engaged in a type of business other than the type described in clause(iv) above provided that:

                    (A)          NoDefault has occurred and is continuing on the date of, or will result after giving effectto, any such Acquisition; and 

                    (B)          Theaggregate consideration paid by the Loan Parties for all such Acquisitions (excludingconsideration consisting of the Equity Securities of the Borrower or its Subsidiaries orof Net Cash Issuance Proceeds) paid in any Fiscal Year does not exceed in the aggregate$1,000,000.

          (e)     Investments.None of the Loan Parties shall make any Investment except for Investments in thefollowing:

               (i)     Investmentsby the Loan Parties in cash and Cash Equivalents;

               (ii)     Investmentslisted in Schedule 5.02(e) existing on the date of this Agreement; 

               (iii)     Subjectto Section 5.02(k), Investments by the Borrower in any wholly-owned Subsidiary andInvestments of any such Subsidiary in another wholly-owned Subsidiary; provided, however,that the aggregate amount of such Investments after the Closing Date in ExemptSubsidiaries and Foreign Subsidiaries that are not Exempt Subsidiaries shall not exceed$1,000,000 and provided further that each such Subsidiary (other than any ExemptSubsidiary or any Foreign Subsidiary) shall have executed and become a party to theSecurity Documents and the Guaranty, and such other documents and instruments as may bereasonably required by the Administrative Agent pursuant to Sections 2.14, as, andto the extent, applicable;

               (iv)     Investmentsby any Exempt Subsidiary in any Loan Party and Investments by any Foreign Subsidiary inany Loan Party;

               (v)     Investmentsin securities of trade creditors or customers received pursuant to any plan ofreorganization or similar arrangement upon the bankruptcy or insolvency of such tradecreditors or customers or in settlement of delinquent or overdue accounts in the ordinarycourse of business;

               (vi)     Investmentsmade by any Loan Party as a result of consideration received in connection with an assetsale made in compliance with Section 5.02(c);

               (vii)     Investmentspermitted as Capital Expenditures pursuant to Section 5.03(e);

               (viii)     Investmentsowned by a Person acquired in an Acquisition permitted hereunder;

               (ix)     Investmentsin the nature of pledges or deposits with respect to leases or utilities provided to thirdparties in the ordinary course of business;

               (x)     IntercompanyIndebtedness to the extent permitted under Section 5.02(a);

               (xi)     Investmentsconsisting of loans to employees, officers and directors in the ordinary course ofbusiness in an aggregate amount not exceeding $500,000****at any one time outstanding(excluding loans outstanding as of the Closing Date identified on Schedule 5.02(e));

               (xii)     TheBorrower and its Subsidiaries may enter into and perform its obligations under Lender RateContracts to the extent permitted by Section 5.02(a);

               (xiii)     Commission,entertainment, relocation, payroll, travel and similar advances to cover matters that areexpected at the time of such advances ultimately to be treated as expenses for accountingpurposes and that are made in the ordinary course of business;

               (xiv)     Investmentspermitted by Section 5.02(d);

               (xv)     Depositaccounts; and

               (xvi)     OtherInvestments in an aggregate amount not to exceed $7,500,000 invested at any time.

          (f)     Dividends,Redemptions, Etc. No Loan Party shall make any Distributions or set apart any sum forany such purpose, except as follows:

               (i)     AnySubsidiary of the Borrower may pay dividends on its Equity Securities to the Borrower orany wholly owned Subsidiary of the Borrower;

               (ii)     TheBorrower may purchase fractional shares of its capital stock arising out of stockdividends, splits or combinations or business combinations;

               (iii)     TheBorrower may make payments or distributions to dissenting stockholders pursuant toapplicable law;

               (iv)     TheBorrower may repurchase shares of capital stock owned by Perry D. Odak in an aggregateamount not to exceed, during the term of this Agreement, the outstanding principal amountof the Executive Note (plus any interest accrued thereon), so long as (A) theconsideration given by the Borrower for such shares consists only of a non-cash chargerelated to the forgiveness of all or any portion of the indebtedness arising under theExecutive Note or (B) such repurchase is otherwise permitted by clause (v) below;and

               (v)     Inaddition to the foregoing, the Borrower may purchase shares of its capital stock from anyshareholder (including Perry D. Odak) with cash and Permitted Subordinated Indebtedness inan amount not to exceed $5,000,000 during any Fiscal Year, provided that after givingeffect to the making of each such purchase, the Borrower is in compliance with Section5.03(c) and no Default has occurred and is continuing on the date of, or would resultafter giving effect to, any such purchase;

 
provided, that in no event shall the aggregate amount ofDistributions made by the Borrower during any Fiscal Year of the Borrower exceed the NetIncome of the Loan Parties for the most recently ended Fiscal Year of the Borrower, unlesssuch distributions are for payment of taxes by an upper-tier entity with respect to alower-tier entity.

          (g)     Changein Business. No Loan Party shall engage (excluding any Investments permittedhereunder), either directly or indirectly through Affiliates, in any businesssubstantially different from the business of the Borrower as of the Closing Date andbusinesses related, ancillary or complementary thereto, it being understood that suchbusiness consists of the manufacture, wholesale distribution and retail sale of naturalfoods, vitamins, supplements and personal care items (and related grocery and otherproducts).

          (h)     Paymentsof Indebtedness, Etc. No Loan Party shall (i) prepay, redeem, purchase, defeaseor otherwise satisfy in any manner prior to the scheduled payment thereof any Indebtedness(other than the Obligations, refinancing of Indebtedness to the extent permitted pursuantto Section 5.02(a), or repayment of Indebtedness of any Subsidiary of the Borrowerowed to any Loan Party); (ii) amend, modify or otherwise change the terms of anydocument, instrument or agreement evidencing Indebtedness (other than the Obligations tothe extent set forth in this Agreement) so as to accelerate the scheduled payment thereof;(iii) amend, modify or otherwise change any of the subordination or other provisionsof any document, instrument or agreement evidencing subordinated Indebtedness in a mannerwhich adversely affects the material rights of the Administrative Agent and the Lenders;or (iv) make any payment in contravention of any Subordination Agreement (if any) or nototherwise permitted pursuant to the definition of Permitted Subordinated Indebtedness.

          (i)     ERISA.

               (i)     NoLoan Party shall (A) adopt or institute any Employee Benefit Plan that is an employeepension benefit plan within the meaning of Section 3(2) of ERISA, (B) take any actionwhich will result in the partial or complete withdrawal, within the meanings of sections4203 and 4205 of ERISA, from a Multiemployer Plan, (C) engage or permit any Person toengage in any transaction prohibited by section 406 of ERISA or section 4975 of the IRCinvolving any Employee Benefit Plan or Multiemployer Plan which would subject the Borroweror any ERISA Affiliate to any tax, penalty or other liability including a liability toindemnify, (D) incur or allow to exist any accumulated funding deficiency (within themeaning of section 412 of the IRC or section 302 of ERISA), (E) fail to make fullpayment when due of all amounts due as contributions to any Employee Benefit Plan orMultiemployer Plan, (F) fail to comply with the requirements of section 4980B of theIRC or Part 6 of Title I(B) of ERISA, or (G) adopt any amendment to any EmployeeBenefit Plan which would require the posting of security pursuant to section 401(a)(29) ofthe IRC, where singly or cumulatively, any of the above would be reasonably likely to havea Material Adverse Effect. 

               (ii)     NoLoan Party shall (A) engage in any transaction prohibited by any Governmental Ruleapplicable to any Foreign Plan, (B) fail to make full payment when due of all amountsdue as contributions to any Foreign Plan or (C) otherwise fail to comply with therequirements of any Governmental Rule applicable to any Foreign Plan, where singly orcumulatively, any of the above would be reasonably likely to have a Material AdverseEffect.

          (j)     TransactionsWith Affiliates. Except as set forth on Schedule 5.02(j), no Loan Party shallenter into any Contractual Obligation with any Affiliate (other than any other Loan Party)or engage in any other transaction with any Affiliate except upon terms at least asfavorable to such Loan Party as an arms-length transaction with unaffiliated Persons,unless such transaction is otherwise permitted hereunder (excluding compensation andindemnifications arrangements and benefit plans for officers, directors and otheremployees of the Borrower and its Subsidiaries entered into or maintained or establishedin the ordinary course of business).

          (k)     AccountingChanges. No Loan Party shall change (i) its Fiscal Year or (ii) itsaccounting practices except as required by GAAP or any Governmental Rule applicable tosuch Loan Party.

          (l)     Amendmentsof Agreements Related to Permitted Subordinated Indebtedness; Amendments of Certificate ofIncorporation or Bylaws.

               (i)     NoLoan Party shall agree to amend, modify, supplement or replace any document, instrument oragreement executed in connection with Permitted Subordinated Indebtedness in any respectthat would adversely affect in any material respect any right or interest of the Lendersor any Loan Party’s ability to pay and perform the Obligations.

               (ii)     TheBorrower shall not permit its certificate of incorporation or bylaws to be amended,modified, supplemented or replaced in any respect that would adversely affect in anymaterial respect any right or interest of the Lenders or the Borrower’s ability topay and perform the Obligations. 

          (m)     Limitationon Consolidated Tax Liability. No Loan Party shall pay federal income taxes relatingto the taxable income of any Subsidiary or Affiliate of the Borrower which is not a LoanParty in excess of the amount of federal income taxes such Loan Party would pay ifreporting as a separate entity, unless such Loan Party is fully reimbursed by suchSubsidiary or Affiliate of the Borrower on or before the payment of such taxes.

          (n)     RestrictiveAgreements. No Loan Party shall agree to any restriction or limitation (other than asset forth in this Agreement) on the making of Distributions or the transferring of assetfrom any Subsidiary to the Borrower other than restrictions (i) imposed on a Subsidiaryand existing at the time it became a Subsidiary if such restrictions were not created inconnection with or in anticipation of the transaction or series of transactions pursuantto which such Subsidiary became a Subsidiary or was acquired by any Loan Party and only tothe extent applying to such Subsidiary; (ii) under any agreement, instrument or contractaffecting property or a Person at the time such property or Person was acquired by anyLoan Party, so long as such restriction relates solely to the property or Person soacquired and was not created in connection with or in anticipation of such acquisition;(iii) under or in connection with any joint venture agreements, partnership agreement,stock sale agreements and other similar agreements; provided that (A) any suchagreements are entered into in the ordinary course of business and in good faith, and (B)such restrictions are reasonably customary for such agreements.

     5.03.     FinancialCovenants. Until the termination of this Agreement and the satisfaction in full by theBorrower of all Obligations (other than inchoate indemnity obligations), the Borrower willcomply, and will cause compliance, with the following financial covenants, unless theRequired Lenders shall otherwise consent in writing:

          (a)     AdjustedLeverage Ratio. The Borrower shall not permit the Adjusted Leverage Ratio as at theend of any Fiscal Quarter to be greater than the following for the respective periods setforth below:

 

Period
Adjusted Leverage Ratio
Closing Date to and including    September 25, 2004
3.75:1.00
September 26, 2004 and any time    thereafter
3.50:1.00
          (b)     FixedCharge Coverage Ratio. The Borrower shall not permit the Fixed Charge Coverage Ratioas at the end of any Fiscal Quarter to be less than the following for the respectiveperiods set forth below:

 

Period
Fixed Charge Coverage Ratio
Closing Date to and including    April 2, 2005
1.10:1.00
April 3, 2005 and any time    thereafter
1.20:1.00
          (c)     Stockholders’Equity. The Borrower shall not permit Stockholders’ Equity on any date (such dateto be referred to herein as a "Determination Date") which occurs afterthe Closing Date (such date to be referred to herein as the "Base Date")to be less than the sum (the "Minimum Shareholders’ Equity Amount")on such Determination Date of the following:

               (i)     $125,000,000;plus

               (ii)     Seventy-fivepercent (75%) of the cumulative sum of the Borrower’s quarterly Net Income (ignoringany quarterly losses) for each Fiscal Quarter of the Borrower after the Base Date throughand including the Fiscal Quarter ending on the Determination Date; plus

               (iii)     Onehundred percent (100%) of the Net Cash Issuance Proceeds raised for each Fiscal Quarter ofthe Borrower after the Base Date through and including the Fiscal Quarter ending on theDetermination Date.

          (d)     NewLeases. The Borrower shall not permit the aggregate amount of New Leases for NewStores (excluding relocations of existing Stores) entered into by the Loan Parties to begreater than the following amounts for the respective periods set forth below:

 

Period
Maximum
Any Fiscal Quarter**[CONFIDENTIAL]**
Fiscal Year 2003**[CONFIDENTIAL]**
Fiscal Year 2004**[CONFIDENTIAL] **
Fiscal Year 2005 and each Fiscal    Year thereafter**[CONFIDENTIAL] **
** 
** Confidential Treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.

Notwithstanding the foregoing, the Borrower may utilize Net CashIssuance Proceeds to finance additional New Leases not otherwise permitted pursuant tothis Section 5.03(d), and for purposes of determining the "cost"associated with entering into such additional new Leases, the deemed cost for enteringinto new Leases for Stores using the "natural foods supermarket" format shall be$2,700,000, and the deemed cost for entering into new Leases for Stores using the"farmers’ market" format shall be $2,000,000.

          (e)     CapitalExpenditures. The Borrower shall not permit the aggregate amount of CapitalExpenditures made by the Loan Parties in any Fiscal Year to be greater than the followingamounts for the respective Fiscal Years set forth below:

Fiscal Year
Maximum Amount
2003**[CONFIDENTIAL] **
2004**[CONFIDENTIAL] **
2005 and each Fiscal Year    thereafter**[CONFIDENTIAL] **
** 
** Confidential Treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.

provided, however, that to the extent the maximumamount of Capital Expenditures for any Fiscal Year (such Fiscal Year, a "Base Year"),as set forth above, exceeds the actual Capital Expenditures made by the Loan Parties forsuch Base Year, the Loan Parties shall be allowed to carry forward and add to the maximumamount of permissible Capital Expenditures for the immediately following Fiscal Year anamount equal to the lesser of (i) the excess of the maximum amount of Capital Expendituresfor such Base Year over the actual Capital Expenditures made for such Base Year and (ii)20% of the maximum amount of Capital Expenditures for such Base Year.

          (f)     TotalNew Growth. The Borrower shall not permit the total number of Stores in existence atany time during any Fiscal Year to exceed an amount (rounded to the nearest whole number)equal to **[CONFIDENTIAL]****% of the number of Stores in existence as of the end ofthe immediately preceding Fiscal Year.

** 
** Confidential Treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.

 
**ARTICLE VI.      DEFAULT.

     6.01.     Eventsof Default. The occurrence or existence of any one or more of the following shallconstitute an "Event of Default" hereunder:

          (a)     Non-Payment.The Borrower shall (i) fail to pay when due any principal of any Loan or any L/CObligation or, (ii) fail to pay within five (5) Business Days after the same becomesdue, any interest, fees or other amounts payable under the terms of this Agreement or anyof the other Credit Document within seven (7) Business Days after the same becomes due; or

          (b)     SpecificDefaults. (i) The Borrower shall fail to observe or perform any covenant, obligation,condition or agreement set forth in Section 5.01(d), Section 5.01(g)(i),Section 5.02 or Section 5.03 or (ii) any Loan Party shall fail to observe orperform any covenant, obligation, condition or agreement set forth in Section 2 of theSecurity Agreement, Section 4(c) of the Security Agreement, Section 8(i) or(ii) of the Pledge Agreement, Section 15 of the Pledge Agreement or Section16 of the Pledge Agreement; or

          (c)     OtherDefaults. (i) The Borrower shall fail to observe or perform any covenant, obligation,condition or agreement set forth in Section 5.01(a) and such failure shall continuefor five (5) days, (ii) any Loan Party shall fail to observe or perform any covenant,obligation, condition or agreement contained in Section 4(p) of the Security Agreement,and such failure shall continue for ten (10) days beyond any grace period applicablethereto, (iii) any Loan Party shall fail to pay any amounts payable under the terms of theSecurity Agreement, the Pledge Agreement or the Guaranty, as applicable, within seven (7)Business Days after the same becomes due, or (iv) any Loan Party shall fail to observe orperform any other covenant, obligation, condition or agreement contained in this Agreementor any other Credit Document and such failure shall continue for thirty (30) days (whichsuch thirty (30) day period shall be deemed to run concurrently with, and not in additionto, any other grace period provided for any such covenant, obligation, condition oragreement) after the earlier of (A) any Loan Party’s written acknowledgement ofsuch failure and (B) the Administrative Agent’s written notice to the Borrowerof such failure; or

          (d)     Representationsand Warranties. Any representation, warranty, certificate, information or otherstatement (financial or otherwise) made or furnished by or on behalf of any Loan Party tothe Administrative Agent or any Lender in or in connection with this Agreement or any ofthe other Credit Documents, or as an inducement to the Administrative Agent or any Lenderto enter into this Agreement, shall be false, incorrect, incomplete or misleading in anymaterial respect when made or furnished; or 

          (e)     Cross-Default.(i) Any Loan Party shall fail to make any payment on account of any Indebtedness orContingent Obligation of such Person (other than the Obligations) when due (whether atscheduled maturity, by required prepayment, upon acceleration or otherwise) and suchfailure shall continue beyond any period of grace provided with respect thereto, if theamount of such Indebtedness or Contingent Obligation exceeds $5,000,000 or the effect ofsuch failure is to cause, or permit the holder or holders thereof to cause, Indebtednessand/or Contingent Obligations of any Loan Party (other than the Obligations) in anaggregate amount exceeding $5,000,000 to become redeemable, due, liquidated or otherwisepayable (whether at scheduled maturity, by required prepayment, upon acceleration orotherwise) and/or to be secured by cash collateral or (ii) any Loan Party shall otherwisefail to observe or perform any agreement, term or condition contained in any agreement orinstrument relating to any Indebtedness or Contingent Obligation of such Person (otherthan the Obligations) in an aggregate amount exceeding $5,000,000, or any other eventshall occur or condition shall exist, if the effect of such failure, event or condition isto cause, or permit the holder or holders thereof to cause, Indebtedness and/or ContingentObligations of any Loan Party (other than the Obligations) in an aggregate amountexceeding $5,000,000 to become redeemable, due, liquidated or otherwise payable (whetherat scheduled maturity, by required prepayment, upon acceleration or otherwise) and/or tobe secured by cash collateral; or

          (f)     Insolvency;Voluntary Proceedings. Any Loan Party shall (i) apply for or consent to theappointment of a receiver, trustee, liquidator or custodian of itself or of all or asubstantial part of its property, (ii) be unable, or admit in writing its inability,to pay its debts generally as they mature, (iii) make a general assignment for thebenefit of its or any of its creditors, (iv) except as permitted hereunder, bedissolved or liquidated in full or in part, (v) become insolvent (as such term may bedefined or interpreted under any applicable statute), or (vi) commence a voluntarycase or other proceeding seeking liquidation, reorganization or other relief with respectto itself or its debts under any bankruptcy, insolvency or other similar law now orhereafter in effect or consent to any such relief or to the appointment of or takingpossession of its property by any official in an involuntary case or other proceedingcommenced against it; or 

          (g)     InvoluntaryProceedings. Proceedings for the appointment of a receiver, trustee, liquidator orcustodian of any Loan Party or of all or a substantial part of the property thereof, or aninvoluntary case or other proceedings seeking liquidation, reorganization or other reliefwith respect to any Loan Party or the debts thereof under any bankruptcy, insolvency orother similar law now or hereafter in effect shall be commenced and an order for reliefentered or such proceeding shall not be dismissed or discharged within ninety (90) days ofcommencement; or 

          (h)     Judgments.(i) One or more judgments, orders, decrees or arbitration awards requiring any Loan Partyto pay an aggregate amount of $3,000,000 or more (exclusive of amounts covered byinsurance issued by an insurer not an Affiliate of the Borrower and otherwise satisfyingthe requirements set forth in Section 5.01(d)) shall be rendered against any LoanParty in connection with any single or related series of transactions, incidents orcircumstances and the same shall not be (A) satisfied, vacated or stayed for a period often (10) consecutive days or (B) appealed within the shorter of forty-five (45) days orthe time period during which such an appeal is required to be brought; or (ii) anyjudgment, writ, assessment, warrant of attachment, tax lien (other than for taxes not yetdue and payable or which are being contested in good faith, by appropriate proceedings andfor which adequate reserves have been provided in accordance with GAAP) or execution orsimilar process shall be issued or levied against a substantial part of the property ofany Loan Party and the same shall not be released, stayed, vacated or otherwise dismissedwithin sixty (60) days after issue or levy; or

          (i)     CreditDocuments. Any Credit Document or any material term thereof shall cease to be (otherthan in accordance with its terms or by reason of a release of Collateral in accordancewith the terms hereof or thereof or the satisfaction in full of the Obligations inaccordance with the terms hereof) or be asserted by any Loan Party not to be, a legal,valid and binding obligation of such Loan Party enforceable in accordance with its terms,and with respect to any material term ceasing to be a legal, valid and binding obligation,is not cured within thirty (30) days thereafter; or

          (j)     SecurityDocuments. Any Lien intended to be created by any Security Document, (i) with respectto Collateral (other than Equity Securities) having a value in excess of $1,500,000 or(ii) with respect to Collateral consisting of Equity Securities, shall at any time beinvalidated, subordinated or otherwise cease to be in full force and effect, for whateverreason (other than in accordance with its terms or by reason of a release of Collateral inaccordance with the terms hereof or thereof or the satisfaction in full of the Obligationsin accordance with the terms hereof), or any security interest purported to be created byany Security Document shall (other than in accordance with its terms or by reason ofaction by the Administrative Agent or any Lender or a release of Collateral in accordancewith the terms hereof or thereof or the satisfaction in full of the Obligations inaccordance with the terms hereof) cease to be, or shall be asserted by any Loan Party notto be, a valid, first priority (except as expressly otherwise provided in this Agreementor such Security Document) perfected Lien in (x) Collateral (other than Equity Securities)covered thereby if such Collateral has a value in excess of $1,500,000 or (y) Collateralcovered thereby consisting of Equity Securities; or

          (k)     EmployeeBenefit Plans. The termination of any Employee Benefit Plan by the PBGC with unfundedliabilities in excess of $3,000,000, or any Employee Benefit Plan shall be terminatedwithin the meaning of Title IV of ERISA; or 

          (l)     Changeof Control. Any Change of Control shall occur; or 

          (m)     InvoluntaryDissolution or Split Up. Any order, judgment or decree shall be entered against theBorrower decreeing its involuntary dissolution or split up and such order shall remainundischarged and unstayed for a period in excess of sixty (60) days; or

          (n)     LenderRate Contracts. The occurrence of any event of default, beyond any applicable graceperiod, under any Lender Rate Contract and the effect of such event of default is to causeIndebtedness in an aggregate amount exceeding $1,000,000 to become due and payable.

     6.02.     Remedies.At any time after the occurrence and during the continuance of any Event of Default (otherthan an Event of Default referred to in Section 6.01(f) or 6.01(g), theAdministrative Agent may or shall, upon instructions from the Required Lenders, by writtennotice to the Borrower, (a) terminate the Commitments, any obligation of the L/CIssuer to make L/C Credit Extensions and the obligations of the Lenders to make Loans,(b) require that the Borrower Cash Collateralize the Obligations in an amount equalto 103% of the then Effective Amount of the L/C Obligations or obtain a Back-Up Letter ofCredit in an amount at least equal to the Effective Amount of the L/C Obligations; and/or(c) declare all or any portion of the outstanding Obligations payable by the Borrowerto be immediately due and payable without presentment, demand, protest or any other noticeof any kind, all of which are hereby expressly waived, anything contained herein or in theNotes to the contrary notwithstanding. Upon the occurrence or existence of any Event ofDefault described in Section 6.01(f) or 6.01(g), immediately and withoutnotice, (1) the Commitments, any obligation of the L/C Issuer to make L/C CreditExtensions and the obligations of the Lenders to make Loans shall automatically terminate,(2) the obligation of the Borrower to Cash Collateralize the Obligations in an amountequal to 103% of the then Effective Amount of the L/C Obligations or to obtain a Back-UpLetter of Credit in an amount at least equal to the Effective Amount of the L/CObligations shall automatically become effective and (3) all outstanding Obligationspayable by the Borrower hereunder shall automatically become immediately due and payable,without presentment, demand, protest or any other notice of any kind, all of which arehereby expressly waived, anything contained herein or in the Notes to the contrarynotwithstanding. In addition to the foregoing remedies, upon the occurrence or existenceof any Event of Default, the Administrative Agent may exercise any other right, power orremedy available to it under any of the Credit Documents or otherwise by law, either bysuit in equity or by action at law, or both.
**ARTICLE VII.      THE            ADMINISTRATIVE AGENT, ETC..

     7.01.     Appointment,Powers and Immunities

          (a)     EachLender hereby appoints and authorizes the Administrative Agent to act as its agenthereunder and under the other Credit Documents with such powers as are expressly delegatedto the Administrative Agent by the terms of this Agreement and the other Credit Documents,together with such other powers as are reasonably incidental thereto. Each Lender herebyauthorizes the Administrative Agent to take such action on its behalf under the provisionsof this Agreement and the other Credit Documents and to exercise such powers as are setforth herein or therein, together with such other powers as are reasonably incidentalthereto. The Administrative Agent shall not have any duties or responsibilities exceptthose expressly set forth in this Agreement or in any other Credit Document, be a trusteefor any Lender or have any fiduciary duty to any Lender. Notwithstanding anything to thecontrary contained herein the Administrative Agent shall not be required to take anyaction which is contrary to this Agreement or any other Credit Document or any applicableGovernmental Rule. Neither the Administrative Agent nor any Lender shall be responsible toany other Lender for any recitals, statements, representations or warranties made by anyLoan Party contained in this Agreement or in any other Credit Document, for the value,validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement orany other Credit Document or for any failure by any Loan Party to perform its obligationshereunder or thereunder. The Administrative Agent may employ agents and attorneys-in-factand shall not be responsible to any Lender for the negligence or misconduct of any suchagents or attorneys-in-fact selected by it with reasonable care. Neither theAdministrative Agent nor any of its directors, officers, employees, agents or advisorsshall be responsible to any Lender for any action taken or omitted to be taken by it orthem hereunder or under any other Credit Document or in connection herewith or therewith,except for its or their own gross negligence or willful misconduct. Except as otherwiseprovided under this Agreement, the Administrative Agent shall take such action withrespect to the Credit Documents as shall be directed by the Required Lenders. 

          (b)     TheL/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issuedby it and the documents associated therewith until such time (and except for so long) asthe Administrative Agent may agree at the request of the Required Lenders to act for theL/C Issuer with respect thereto; provided, however, that the L/C Issuershall have all of the benefits and immunities (i) provided to the AdministrativeAgent in this Article VII with respect to any acts taken or omissions suffered bythe L/C Issuer in connection with Letters of Credit issued by it or proposed to be issuedby it and the application and agreements for letters of credit pertaining to the Lettersof Credit as fully as if the term "Administrative Agent" as used in this ArticleVII included the L/C Issuer with respect to such acts or omissions, and (ii) asadditionally provided herein with respect to the L/C Issuer.

     7.02.     Relianceby the Administrative Agent. The Administrative Agent shall be entitled to rely uponany certificate, notice or other document (including any cable, telegram, facsimile ortelex) believed by it in good faith to be genuine and correct and to have been signed orsent by or on behalf of the proper Person or Persons, and upon advice and statements oflegal counsel, independent accountants and other experts selected by the AdministrativeAgent with reasonable care. As to any other matters not expressly provided for by thisAgreement, the Administrative Agent shall not be required to take any action or exerciseany discretion, but shall be required to act or to refrain from acting upon instructionsof the Required Lenders and shall in all cases be fully protected by the Lenders inacting, or in refraining from acting, hereunder or under any other Credit Document inaccordance with the instructions of the Required Lenders, and such instructions of theRequired Lenders and any action taken or failure to act pursuant thereto shall be bindingon all of the Lenders. 

     7.03.     Defaults.The Administrative Agent shall not be deemed to have knowledge or notice of the occurrenceof any Default unless the Administrative Agent has received a written notice from a Lenderor Borrower, referring to this Agreement, describing such Default and stating that suchnotice is a "Notice of Default". If the Administrative Agent receives such anotice of the occurrence of a Default, the Administrative Agent shall give prompt noticethereof to the Lenders. The Administrative Agent shall take such action with respect tosuch Default as shall be reasonably directed by the Required Lenders; provided, however,that until the Administrative Agent shall have received such directions, theAdministrative Agent may (but shall not be obligated to) take such action, or refrain fromtaking such action, with respect to such Default as it shall deem advisable in the bestinterest of the Lenders. Notwithstanding anything in the contrary contained herein, theorder and manner in which the Lenders’ rights and remedies are to be exercised(including, without limitation, the enforcement by any Lender of its Note) shall bedetermined by the Required Lenders in their sole discretion.

     7.04.     Indemnification.Without limiting the Obligations of the Borrower hereunder, each Lender agrees toindemnify the Administrative Agent, ratably in accordance with its Proportionate Share,for any and all liabilities, obligations, losses, damages, penalties, actions, judgments,suits, costs, expenses or disbursements of any kind or nature whatsoever which may at anytime be imposed on, incurred by or asserted against the Administrative Agent in any wayrelating to or arising out of this Agreement or any documents contemplated by or referredto herein or therein or the transactions contemplated hereby or thereby or the enforcementof any of the terms hereof or thereof; provided, however, that no Lendershall be liable for any of the foregoing to the extent they arise from the AdministrativeAgent’s gross negligence or willful misconduct. The Administrative Agent shall befully justified in refusing to take or in continuing to take any action hereunder unlessit shall first be indemnified to its satisfaction by the Lenders against any and allliability and expense which may be incurred by it by reason of taking or continuing totake any such action. The obligations of each Lender under this Section 7.04 shallsurvive the payment and performance of the Obligations, the termination of this Agreementand any Lender ceasing to be a party to this Agreement (with respect to events whichoccurred prior to the time such Lender ceased to be a Lender hereunder). 

     7.05.     Non-Reliance.Each Lender represents that it has, independently and without reliance on theAdministrative Agent, or any other Lender, and based on such documents and information asit has deemed appropriate, made its own appraisal of the business, prospects, management,financial condition and affairs of the Loan Parties and its own decision to enter intothis Agreement and agrees that it will, independently and without reliance upon theAdministrative Agent or any other Lender, and based on such documents and information asit shall deem appropriate at the time, continue to make its own appraisals and decisionsin taking or not taking action under this Agreement. Neither the Administrative Agent norany of its affiliates nor any of their respective directors, officers, employees, agentsor advisors shall (a) be required to keep any Lender informed as to the performanceor observance by any Loan Party of the obligations under this Agreement or any otherdocument referred to or provided for herein or to make inquiry of, or to inspect theproperties or books of any Loan Party; (b) have any duty or responsibility to provideany Lender with any credit or other information concerning any Loan Party which may comeinto the possession of the Administrative Agent, except for notices, reports and otherdocuments and information expressly required to be furnished to the Lenders by theAdministrative Agent hereunder; or (c) be responsible to any Lender for (i) anyrecital, statement, representation or warranty made by any Loan Party or any officer,employee or agent of any Loan Party in this Agreement or in any of the other CreditDocuments, (ii) the value, validity, effectiveness, genuineness, enforceability orsufficiency of this Agreement or any Credit Document, (iii) the value or sufficiencyof the Collateral or the validity or perfection of any of the liens or security interestsintended to be created by the Credit Documents, or (iv) any failure by any Loan Partyto perform its obligations under this Agreement or any other Credit Document. 

     7.06.     Resignationor Removal of the Administrative Agent. The Administrative Agent may resign at anytime by giving thirty (30) days prior written notice thereof to the Borrower and theLenders, and the Administrative Agent may be removed at any time with or without cause bythe Required Lenders. Upon any such resignation or removal, the Required Lenders shallhave the right to appoint a successor Administrative Agent, which successor AdministrativeAgent, if not a Lender, shall be reasonably acceptable to the Borrower; provided, however,that the Borrower shall have no right to approve a successor Administrative Agent if aDefault has occurred and is continuing. Upon the acceptance of any appointment as theAdministrative Agent hereunder by a successor Administrative Agent, such successorAdministrative Agent shall thereupon succeed to and become vested with all the rights,powers, privileges and duties of the retiring Administrative Agent, and the retiringAdministrative Agent shall be discharged from the duties and obligations thereafterarising hereunder. After any retiring Administrative Agent’s resignation or removalhereunder as the Administrative Agent, the provisions of this Article VIIshall continue in effect for its benefit in respect of any actions taken or omitted to betaken by it while it was acting as the Administrative Agent. Notwithstanding theforegoing, however, Wells Fargo may not be removed as Administrative Agent at the requestof the Required Lenders unless Wells Fargo shall also simultaneously be replaced and fullyreleased as "L/C Issuer" and "Swing Line Lender" hereunder pursuant todocumentation in form and substance reasonably satisfactory to Wells Fargo.

     7.07.     Authorization.The Administrative Agent is hereby authorized by the Lenders to execute and deliver suchdocuments, instruments and agreements as the Administrative Agent may deem necessary torelease any Collateral which the Borrower or any other Loan Party is permitted to sell,lease or otherwise transfer pursuant to the terms of the Credit Documents.

     7.08.     TheAdministrative Agent in its Individual Capacity. The Administrative Agent and itsaffiliates may make loans to, issue letters of credit for the account of, accept depositsfrom and generally engage in any kind of banking or other business with the any Loan Partyand its Affiliates as though the Administrative Agent were not the Administrative Agent,L/C Issuer or Swing Line Lender hereunder. With respect to Loans, if any, made by theAdministrative Agent in its capacity as a Lender, the Administrative Agent in its capacityas a Lender shall have the same rights and powers under this Agreement and the otherCredit Documents as any other Lender and may exercise the same as though it were not theAdministrative Agent, L/C Issuer or Swing Line Lender, and the terms "Lender" or"Lenders" shall include the Administrative Agent in its capacity as a Lender. 
**ARTICLE VIII.      MISCELLANEOUS.

     8.01.     Notices.Except as otherwise provided herein, all notices, requests, demands, consents,instructions or other communications to or upon the Borrower, any Lender or theAdministrative Agent under this Agreement or the other Credit Documents shall be inwriting and faxed, mailed or delivered, if to the Borrower or to the Administrative Agent,the L/C Issuer or the Swing Line Lender, at its respective facsimile number or mailingaddress set forth below or, if to any Lender, at the mailing address or facsimile numberspecified for such Lender in Part B of Schedule I (or to such otherfacsimile number or mailing address for any party as indicated in any notice given by thatparty to the other parties). All such notices and communications shall be effective (a)when sent by an overnight courier service of recognized standing, on the second BusinessDay following the deposit with such service; (b) when mailed, first class postageprepaid and addressed as aforesaid through the United States Postal Service, upon receipt;(c) when delivered by hand, upon delivery; and****(d) when sent by facsimiletransmission, upon confirmation of receipt; provided, however, that anynotice delivered to the Administrative Agent, the L/C Issuer or the Swing Line Lenderunder Article II shall not be effective until actually received by such Person.

     The Administrative Agent, 

the L/C Issuer and the 

Swing Line Lender:              Wells Fargo Bank, National Association

C7301-031

1740 Broadway

Denver, CO 80274

Attention: Yevette Conrad, Loan Specialist 

Tel. No.: (303) 863-5460

Fax No.: (303) 863-5531

E-Mail: Yevette.M.Conrad@wellsfargo.com

The Borrower:      Wild Oats Markets,            Inc. 

3375 Mitchell Lane

Boulder, CO 80301

Attention: Chief Financial Officer

Tel. No. (720) 562-4702

Fax No. (303) 402-9920
**E-Mail: edunlap@wildoats.com

with a copy to:

Wild Oats Markets, Inc. 

3375 Mitchell Lane

Boulder, CO 80301

Attention: General Counsel

Tel. No. (720) 562-4822

Fax No. (303) 402-9920
**E-Mail: fbrier@wildoats.com

 

 

Each Notice of Borrowing, Notice of Revolving Loan Conversion andNotice of Revolving Loan Interest Period Selection shall be given by the Borrower to theAdministrative Agent’s office located at the address referred to above during theAdministrative Agent’s normal business hours. In any case where this Agreementauthorizes notices, requests, demands or other communications by the Borrower to theAdministrative Agent or any Lender to be made by telephone or facsimile, theAdministrative Agent or any Lender may conclusively presume that anyone purporting to be aperson designated in any incumbency certificate or other similar document received by theAdministrative Agent or a Lender is such a person.

     8.02.     Expenses.The Borrower shall pay on demand, whether or not any Credit Event occurs hereunder,(a) all reasonable and documented out-of-pocket fees and expenses, includingreasonable attorneys’ fees and expenses, incurred by the Administrative Agent inconnection with the syndication of the facilities provided hereunder, the preparation,negotiation, execution and delivery of, and the exercise of its duties under, thisAgreement and the other Credit Documents, and the preparation, negotiation, execution anddelivery of amendments and waivers hereunder and thereunder and (b) after a Default,all reasonable fees and expenses (which such fees and expenses shall be set forth in awritten request sent by the Administrative Agent to each Grantor), including reasonableattorneys’ fees and expenses, incurred by the Administrative Agent and the Lenders inthe enforcement or attempted enforcement of any of the Obligations or in preserving any ofthe Administrative Agent’s or the Lenders’ rights and remedies (including,without limitation, all such fees and expenses incurred in connection with any"workout" or restructuring affecting the Credit Documents or the Obligations orany bankruptcy or similar proceeding involving any Loan Party). As used herein, the term"attorneys’ fees and expenses" shall include, without limitation, allocablecosts and expenses of the Administrative Agent’s and, in the case of clause (b)above, the Lenders’ in-house legal counsel and staff. The obligations of the Borrowerunder this Section 8.02 shall survive the payment and performance of theObligations and the termination of this Agreement.

     8.03.     Indemnification.To the fullest extent permitted by law, the Borrower agrees to protect, indemnify, defendand hold harmless the Administrative Agent, the L/C Issuer, the Swing Line Lender, theLenders and their Affiliates and their respective directors, officers, employees, agents,trustees and advisors (collectively, "Indemnitees") on an After-Tax Basisfrom and against any and all liabilities, losses, damages or expenses of any kind ornature and from any suits, claims or demands (including in respect of or for reasonableattorney’s fees and other expenses) arising on account of or in connection with anymatter or thing or action or failure to act by Indemnitees, or any of them, arising out ofor relating to (a) the Credit Documents or any transaction contemplated thereby,including without limitation any use by the Borrower of any proceeds of the Loans or theLetters of Credit (but excluding amounts relating to taxes, which shall be governed solelyand exclusively by Section 2.12), provided, however, that nothingherein shall preclude payments of any amounts that are required to be paid on an After-TaxBasis, (b) any Environmental Damages, and (c) any claims for brokerage fees orcommissions in connection with the Credit Documents or any transaction contemplatedthereby; provided, however, that the Borrower shall in no event be liablefor any of the foregoing to the extent they arise from any Indemnitee’s grossnegligence or willful misconduct. Upon receiving knowledge of any suit, claim or demandasserted by a third party that the Administrative Agent or any Lender believes is coveredby this indemnity, the Administrative Agent or such Lender shall give the Borrower noticeof the matter and an opportunity to defend it, at the Borrower’s sole cost andexpense, with legal counsel reasonably satisfactory to the Administrative Agent or suchLender, as the case may be. The Administrative Agent or such Lender may also requireBorrower to defend the matter. Any failure or delay of the Administrative Agent or anyLender to notify Borrower of any such suit, claim or demand shall not relieve the Borrowerof its obligations under this Section 8.03 but shall reduce such obligations to theextent of any increase in those obligations caused solely by any such failure or delaywhich is unreasonable. The obligations of the Borrower under this Section 8.03shall survive the payment and performance of the Obligations and the termination of thisAgreement.

     8.04.     Waivers;Amendments. Any term, covenant, agreement or condition of this Agreement or any otherCredit Document may be amended or waived, and any consent under this Agreement or anyother Credit Document may be given, if such amendment, waiver or consent is in writing andis signed by the Borrower and the Required Lenders (or the Administrative Agent on behalfof the Required Lenders with the written approval of the Required Lenders); provided,however, that:

          (a)     Anyamendment, waiver or consent which would (i) increase the Total Commitment (except for anyincrease made in accordance with Section 2.04(b)), (ii) extend the Maturity Date,(iii) reduce the principal of or interest on any Loan or L/C Borrowing or any fees orother amounts payable for the account of the Lenders hereunder, (iv) extend any date fixedfor any payment of the principal of or interest on any Loans or any fees or other amountspayable for the account of the Lenders, (v) amend this Section 8.04, (vi) amend thedefinition of Required Lenders or (vii) release any Guarantor that constitutes a MaterialSubsidiary or any substantial part of the Collateral, except for any release in connectionwith a sale or other disposition of Collateral authorized by Section 5.02(c), mustbe in writing and signed or approved in writing by all Lenders;

          (b)     Anyamendment, waiver or consent which increases or decreases the Proportionate Share of anyLender must be in writing and signed by such Lender; 

          (c)     Anyamendment, waiver or consent which affects the rights or duties of the Swing Line Lenderunder this Agreement must be in writing and signed by the Swing Line Lender;

          (d)     Anyamendment, waiver or consent which affects the rights or duties of the L/C Issuer underthis Agreement or any Letter of Credit Application relating to any Letter of Credit issuedor to be issued by it must be in writing and signed by the L/C Issuer; and

          (e)     Anyamendment, waiver or consent which affects the rights or obligations of the AdministrativeAgent must be in writing and signed by the Administrative Agent.

No failure or delay by the Administrative Agent or any Lender inexercising any right under this Agreement or any other Credit Document shall operate as awaiver thereof or of any other right hereunder or thereunder nor shall any single orpartial exercise of any such right preclude any other further exercise thereof or of anyother right hereunder or thereunder. Unless otherwise specified in such waiver or consent,a waiver or consent given hereunder shall be effective only in the specific instance andfor the specific purpose for which given.

     8.05.     Successorsand Assigns.

          (a)     BindingEffect. This Agreement and the other Credit Documents shall be binding upon and inureto the benefit of the Borrower, the Lenders, the Administrative Agent, all future holdersof the Notes and their respective successors and permitted assigns, except that no LoanParty may assign or transfer any of its rights or obligations under any Credit Documentwithout the prior written consent of the Administrative Agent and each Lender.

          (b)     Participations.Any Lender may, without notice to or consent of the Borrower, at any time sell to one ormore banks or other financial institutions ("Participants") participatinginterests in any Loan owing to such Lender, any Note held by such Lender, any Commitmentof such Lender or any other interest of such Lender under this Agreement and the otherCredit Documents (including for purposes of this subsection (b), participations in L/CObligations and in Swing Line Loans). In the event of any such sale by a Lender ofparticipating interests, such Lender’s obligations under this Agreement shall remainunchanged, such Lender shall remain solely responsible for the performance thereof, suchLender shall remain the holder of its Notes for all purposes under this Agreement and theBorrower and the Administrative Agent shall continue to deal solely and directly with suchLender in connection with such Lender’s rights and obligations under this Agreement.Any agreement pursuant to which any such sale is effected may require the selling Lenderto obtain the consent of the Participant in order for such Lender to agree in writing toany amendment, waiver or consent of a type specified in clause (i), (ii), (iii), (iv) or(vii) of Section 8.04(a) but may not otherwise require the selling Lender toobtain the consent of such Participant to any other amendment, waiver or consenthereunder. The Borrower agrees that if amounts outstanding under this Agreement and theother Credit Documents are not paid when due (whether upon acceleration or otherwise),each Participant shall, to the fullest extent permitted by law, be deemed to have theright of setoff in respect of its participating interest in amounts owing under thisAgreement and any other Credit Documents to the same extent as if the amount of itsparticipating interest were owing directly to it as a Lender under this Agreement or anyother Credit Documents; provided, however, that (i) no Participantshall exercise any rights under this sentence without the consent of the AdministrativeAgent, (ii) no Participant shall have any rights under this sentence or Section2.12 which are greater than those of the selling Lender and (iii) such rights ofsetoff shall be subject to the obligation of such Participant to share the payment soobtained with all of the Lenders as provided in Section 2.10(b). The Borrower alsoagrees that any Lender which has transferred any participating interest in its Commitmentor Loans shall, notwithstanding any such transfer, be entitled to the full benefitsaccorded such Lender under Sections 2.11, 2.12 and 2.13, as if suchLender had not made such transfer.

          (c)     Assignments.Any Lender may, with the prior written consent of the Administrative Agent (such consentnot to be unreasonably withheld), sell and assign to any Lender or any Eligible Assignee(individually, an "Assignee Lender") all or a portion of its rights andobligations under this Agreement and the other Credit Documents (including for purposes ofthis subsection (c), participations in L/C Obligations and in Swing Line Loans) (such asale and assignment to be referred to herein as an "Assignment") pursuantto an assignment agreement in substantially the form of Exhibit J (an "AssignmentAgreement"), executed by each Assignee Lender and such assignor Lender (an "AssignorLender") and delivered to the Administrative Agent for its acceptance andrecording in the Register; provided, however, that:

               (i)     EachAssignee Lender shall provide appropriate assurances and indemnities (which may includeletters of credit) to the L/C Issuer and the Swing Line Lender as each may reasonablyrequire with respect to any continuing obligation to purchase participation interests inany L/C Obligations or any Swing Line Loans then outstanding;

               (ii)     Withoutthe written consent of the Administrative Agent and, if no Default has occurred and iscontinuing, the Borrower (which consent of the Administrative Agent and the Borrower shallnot be unreasonably withheld or delayed), no Lender may make any Assignment to anyAssignee Lender which is not, immediately prior to such Assignment, a Lender hereunder oran Affiliate thereof; 

               (iii)     Withoutthe written consent of the Administrative Agent and, if no Default has occurred and iscontinuing, the Borrower (which consents shall not be unreasonably withheld or delayed),no Lender may make any Assignment to any Assignee Lender if, after giving effect to suchAssignment, the Commitment or Loans of such Lender or such Assignee Lender would be lessthan Five Million Dollars ($5,000,000) (except that a Lender may make an Assignment whichreduces its Commitment or Loans to zero without the written consent of the Borrower andthe Administrative Agent); and

               (iv)     Withoutthe written consent of the Administrative Agent and, if no Default has occurred and iscontinuing, the Borrower (which consent of the Administrative Agent and the Borrower shallnot be unreasonably withheld or delayed), no Lender may make any Assignment which does notassign and delegate an equal pro rata interest in such Lender’s Loans, Commitmentsand all other rights, duties and obligations of such Lender under this Agreement and theother Credit Documents.

Upon such execution, delivery, acceptance and recording of eachAssignment Agreement, from and after the Assignment Effective Date determined pursuant tosuch Assignment Agreement, (A) each Assignee Lender thereunder shall be a Lenderhereunder with a Commitment and Loans as set forth on Attachment 1 to such AssignmentAgreement and shall have the rights, duties and obligations of such a Lender under thisAgreement and the other Credit Documents, and (B) the Assignor Lender thereundershall be a Lender with a Commitment and Loans as set forth on Attachment 1 to suchAssignment Agreement or, if the Commitment and Loans of the Assignor Lender have beenreduced to $0, the Assignor Lender shall cease to be a Lender and to have any obligationto make any Loan; provided, however, that any such Assignor Lender whichceases to be a Lender shall continue to be entitled to the benefits of any provision ofthis Agreement which by its terms survives the termination of this Agreement. EachAssignment Agreement shall be deemed to amend Schedule I to the extent, and only tothe extent, necessary to reflect the addition of each Assignee Lender, the deletion ofeach Assignor Lender which reduces its Commitment and Loans to $0 and the resultingadjustment of Commitment and Loans arising from the purchase by each Assignee Lender ofall or a portion of the rights and obligations of an Assignor Lender under this Agreementand the other Credit Documents. On or prior to the Assignment Effective Date determinedpursuant to each Assignment Agreement, Borrower, at its own expense, shall execute anddeliver to the Administrative Agent, in exchange for the surrendered Revolving Loan Note,if any, of the Assignor Lender thereunder, a new Revolving Loan Note to the order of eachAssignee Lender thereunder that requests such a note (with each new Revolving Loan Note tobe in an amount equal to the Commitment assumed by such Assignee Lender) and, if theAssignor Lender is continuing as a Lender hereunder, a new Revolving Loan Note to theorder of the Assignor Lender if so requested by such Assignor Lender (with the newRevolving Loan Note to be in an amount equal to the Commitment retained by it). Each suchnew Revolving Loan Note shall be dated the Closing Date, and each such new Revolving LoanNote shall otherwise be in the form of the Revolving Loan Note replaced thereby. TheRevolving Loan Notes surrendered by the Assignor Lender shall be returned by theAdministrative Agent to the Borrower marked "Replaced". Each Assignee Lenderwhich was not previously a Lender hereunder and which is not incorporated under the lawsof the United States or a state thereof shall, on or prior to the date of becoming aLender, deliver to the Borrower and the Administrative Agent two duly completed copies ofUnited States Internal Revenue Service Form W-8BEN, W-8ECI or W-9 (or other applicableforms or certifications), as the case may be, certifying in each case that such Lender isentitled to receive payments under this Agreement without deduction or withholding of anyUnited States federal income taxes.

Notwithstanding anything to the contrary contained herein, if atany time Wells Fargo assigns all of its Commitments and Loans pursuant to subsection (c)above, Wells Fargo may, (i) upon 30 days’ notice to the Borrower and the Lenders,resign as L/C Issuer and/or (ii) upon five Business Days’ notice to the Borrower,terminate the Swing Line. In the event of any such resignation as L/C Issuer ortermination of the Swing Line, the Borrower shall be entitled to appoint from among theLenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however,that no failure by the Borrower to appoint any such successor shall affect the resignationof Wells Fargo as L/C Issuer or the termination of the Swing Line, as the case may be.Wells Fargo shall retain all the rights and obligations of the L/C Issuer hereunder withrespect to all Letters of Credit outstanding as of the effective date of its resignationas L/C Issuer and all L/C Obligations with respect thereto (including the right to requirethe Lenders to make Base Rate Revolving Loans or fund participations in UnreimbursedAmounts pursuant to Section 2.03(c)). If Wells Fargo terminates the Swing Line, itshall retain all the rights of the Swing Line Lender provided for hereunder with respectto Swing Line Loans made by it and outstanding as of the effective date of suchtermination, including the right to require the Lenders to make Base Rate Revolving Loansor fund participations in outstanding Swing Line Loans pursuant to Section 2.03(c).

          (d)     Register.The Administrative Agent shall maintain at its address referred to in Section 8.01a copy of each Assignment Agreement delivered to it and a register (the "Register")for the recordation of the names and addresses of the Lenders and the Commitments or Loansof each Lender from time to time, and no Assignment shall be effective unless entered inthe Register, in accordance with the requirements of Treasury Regulations section5f.103-1. The Administrative Agent shall be the agent of the Borrower for purposes ofkeeping the Register. The entries in the Register shall be conclusive in the absence ofmanifest error, and the Borrower, the Administrative Agent and the Lenders may treat eachPerson whose name is recorded in the Register as the owner of the Loans recorded thereinfor all purposes of this Agreement. The Register shall be available for inspection by theBorrower or any Lender at any reasonable time and from time to time upon reasonable priornotice.

          (e)     Registration.Upon its receipt of an Assignment Agreement executed by an Assignor Lender and an AssigneeLender (and, to the extent required by Section 8.05(c), by the Borrower andthe Administrative Agent) together with payment to the Administrative Agent by AssignorLender of a registration and processing fee of $3,500, the Administrative Agent shall(i) promptly accept such Assignment Agreement and (ii) on the AssignmentEffective Date determined pursuant thereto record the information contained therein in theRegister and give notice of such acceptance and recordation to the Lenders and Borrower.The Administrative Agent may, from time to time at its election, prepare and deliver tothe Lenders and the Borrower a revised Schedule I reflecting the names, addressesand respective Commitments or Loans of all Lenders then parties hereto. 

          (f)     Confidentiality.Subject to Section 8.10, the Administrative Agent and the Lenders may disclose theCredit Documents and any financial or other information relating to the Borrower and itsSubsidiaries to each other or to any potential Participant or Assignee Lender. 

          (g)     Pledgesto Federal Reserve Banks. Notwithstanding any other provision of this Agreement, anyLender may at any time assign all or a portion of its rights under this Agreement and theother Credit Documents to a Federal Reserve Bank. No such assignment shall relieve theassigning Lender from its obligations under this Agreement and the other Credit Documents.

          (h)     Assignmentsby Wells Fargo. Notwithstanding any provision in this Section 8.05 to thecontrary, no Assignment by Wells Fargo shall be subject to the requirements set forth inclauses (i), (ii), (iii) and (iv) of the proviso of Section 8.05(c) until thesyndication of the Commitments and the Loans has been successfully completed (asdetermined by Wells Fargo in its sole discretion), and no registration or processing feeshall be payable in connection with any such Assignment by Wells Fargo.

     8.06.     Setoff;Security Interest.

          (a)     Setoff.In addition to any rights and remedies of the Lenders provided by law, each Lender shallhave the right, with the prior consent of the Administrative Agent but without priornotice to or consent of the Borrower, any such notice and consent being expressly waivedby the Borrower to the extent permitted by applicable law, upon the occurrence and duringthe continuance of an Event of Default, to set-off and apply against the Obligations anyamount owing from such Lender to the Borrower. The aforesaid right of set-off may beexercised by such Lender against the Borrower or against any trustee in bankruptcy, debtorin possession, assignee for the benefit of creditors, receiver or execution, judgment orattachment creditor of the Borrower or against anyone else claiming through or against theBorrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit ofcreditors, receiver, or execution, judgment or attachment creditor, notwithstanding thefact that such right of set-off may not have been exercised by such Lender at any priortime. Each Lender agrees promptly to notify the Borrower after any such set-off andapplication made by such Lender; provided, that the failure to give such noticeshall not affect the validity of such set-off and application.

          (b)     SecurityInterest. As security for the Obligations, the Borrower hereby grants to theAdministrative Agent and each Lender, for the benefit of the Administrative Agent and theLenders, a continuing security interest in any and all deposit accounts or moneys of theBorrower now or hereafter maintained with such Lender as security for the Obligations.Each Lender shall have all of the rights of a secured party with respect to such securityinterest.

     8.07.     NoThird Party Rights. Nothing expressed in or to be implied from this Agreement isintended to give, or shall be construed to give, any Person, other than the parties heretoand their permitted successors and assigns hereunder, any benefit or legal or equitableright, remedy or claim under or by virtue of this Agreement or under or by virtue of anyprovision herein. 

     8.08.     PartialInvalidity. If at any time any provision of this Agreement is or becomes illegal,invalid or unenforceable in any respect under the law or any jurisdiction, neither thelegality, validity or enforceability of the remaining provisions of this Agreement nor thelegality, validity or enforceability of such provision under the law of any otherjurisdiction shall in any way be affected or impaired thereby. 

     8.09.     JuryTrial. EACH OF THE PARTIES TO THIS AGREEMENT, TO THE FULLEST EXTENT PERMITTED BYAPPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUERELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TOTHIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT. 

     8.10.     Confidentiality.Neither any Lender nor the Administrative Agent shall disclose to any Person anyinformation with respect to any Loan Party which is furnished pursuant to this Agreementor under the other Credit Documents, except that any Lender or the Administrative Agentmay disclose any such information (a) to its own directors, officers, employees, auditors,counsel and other advisors and to its Affiliates (it being understood that the Persons towhom such disclosure is made will be informed of the confidential nature of suchinformation and instructed to keep such information confidential); (b) to any other Lenderor the Administrative Agent; (c) which is otherwise available to the public other than asa result of a breach of this Section 8.10; (d) if required or appropriate in any report,statement or testimony submitted to any Governmental Authority having or claiming to havejurisdiction over such Lender or the Administrative Agent; (e) if required in response toany summons or subpoena; (f) in connection with any enforcement by the Lenders and theAdministrative Agent of their rights under this Agreement or the other Credit Documents orany litigation among the parties relating to the Credit Documents or the transactionscontemplated thereby; (g) to comply with any Requirement of Law applicable to such Lenderor the Administrative Agent; (h) to any Assignee Lender or Participant or any prospectiveAssignee Lender or Participant, provided that such Assignee Lender or Participant orprospective Assignee Lender or Participant agrees to be bound by this Section 8.10;or (i) otherwise with the prior consent of such Loan Party; provided, however,that unless specifically prohibited by applicable law or court order, each Lender and theAdministrative Agent shall make reasonable efforts to notify the Borrower of any requestby any Governmental Authority or representative thereof (other than any such request inconnection with any examination of the financial condition or other routine examination ofsuch Lender by such Governmental Authority) for disclosure of any non-public informationprior to disclosure of such information and shall assist the Borrower, at its cost, inobtaining such confidentiality or protective orders as the Borrower may seek; provided,further, that any disclosure made in violation of this Agreement shall not affectthe obligations of the Loan Parties under this Agreement and the other Credit Documents.

     8.11.     Counterparts.This Agreement may be executed in any number of identical counterparts, any set of whichsigned by all the parties hereto shall be deemed to constitute a complete, executedoriginal for all purposes. Transmission by telecopier of an executed counterpart of thisAgreement shall be deemed to constitute due and sufficient delivery of such counterpart.

     8.12.     Consentto Jurisdiction. Each party to this Agreement irrevocably submits to the non-exclusivejurisdiction of the courts of the State of Colorado and the courts of the United States ofAmerica located in the District of Colorado and agrees that any legal action, suit orproceeding arising out of or relating to this Agreement or any of the other CreditDocuments may be brought against such party in any such courts. Each of the parties heretoagrees that a final judgment in any such action, suit or proceeding shall be conclusiveand may be enforced in any other jurisdiction by suit on the judgment, a certified orexemplified copy of which shall be conclusive evidence of the judgment, or in any othermanner provided by law. Nothing in this Section 8.12 shall affect the right of anyparty to this Agreement to commence legal proceedings or otherwise sue any other party tothis Agreement in any other appropriate jurisdiction, or concurrently in more than onejurisdiction, or to serve process, pleadings and other papers upon any other party to thisAgreement in any manner authorized by the laws of any such jurisdiction. Each party tothis Agreement agrees that process served either personally or by registered mail shall,to the extent permitted by law, constitutes adequate service of process in any such suit.Each party to this Agreement irrevocably waives to the fullest extent permitted byapplicable law (a) any objection which it may have now or in the future to the laying ofthe venue of any such action, suit or proceeding in any court referred to in the firstsentence above; (b) any claim that any such action, suit or proceeding has been brought inan inconvenient forum; (c) its right of removal of any matter commenced by any other partyin the courts of the State of Colorado to any court of the United States of America; (d)any immunity which it or its assets may have in respect of its obligations under thisAgreement or any other Credit Document from any suit, execution, attachment (whetherprovisional or final, in aid of execution, before judgment or otherwise) or other legalprocess; and (e) any right it may have to require the moving party in any suit, action orproceeding brought in any of the courts referred to above arising out of or in connectionwith this Agreement or any other Credit Document to post security for the costs of theBorrower or to post a bond or to take similar action.

     8.13.     Arbitration.

          (a)     Arbitration.The parties hereto agree, upon demand by any party, to submit to binding arbitration allclaims, disputes and controversies between or among them (and their respective employees,officers, directors, attorneys, and other agents), whether in tort, contract or otherwisearising out of or relating to in any way (i) the Loans and related Credit Documents whichare the subject of this Agreement and its negotiation, execution, collateralization,administration, repayment, modification, extension, substitution, formation, inducement,enforcement, default or termination, or (ii) requests for additional credit.

          (b)     GoverningRules. Any arbitration proceeding will (i) proceed in a location in Colorado selectedby the American Arbitration Association ("AAA"); (ii) be governed by theFederal Arbitration Act (Title 9 of the United States Code), notwithstanding anyconflicting choice of law provision in any of the documents between the parties; and (iii)be conducted by the AAA, or such other administrator as the parties shall mutually agreeupon, in accordance with the AAA’s commercial dispute resolution procedures, unlessthe claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest,arbitration fees and costs in which case the arbitration shall be conducted in accordancewith the AAA’s optional procedures for large, complex commercial disputes (thecommercial dispute resolution procedures or the optional procedures for large, complexcommercial disputes to be referred to, as applicable, as the "Rules"). Ifthere is any inconsistency between the terms hereof and the Rules, the terms andprocedures set forth herein shall control. Any party who fails or refuses to submit toarbitration following a demand by any other party shall bear all costs and expensesincurred by such other party in compelling arbitration of any dispute. Nothing containedherein shall be deemed to be a waiver by any party that is a bank of the protectionsafforded to it under 12 U.S.C. 91 or any similar applicable state law.

          (c)     NoWaiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirementdoes not limit the right of any party to (i) foreclose against real or personal propertycollateral; (ii) exercise self-help remedies relating to collateral or proceeds ofcollateral such as setoff or repossession; or (iii) obtain provisional or ancillaryremedies such as replevin, injunctive relief, attachment or the appointment of a receiver,before during or after the pendency of any arbitration proceeding. This exclusion does notconstitute a waiver of the right or obligation of any party to submit any dispute toarbitration or reference hereunder, including those arising from the exercise of theactions detailed in clauses (i), (ii) and (iii) of this Section 8.13(c).

          (d)     ArbitratorQualifications and Powers. Any arbitration proceeding in which the amount incontroversy is $5,000,000.00 or less will be decided by a single arbitrator selectedaccording to the Rules, and who shall not render an award of greater than $5,000,000.00.Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided bymajority vote of a panel of three arbitrators; provided however, that all threearbitrators must actively participate in all hearings and deliberations. The arbitratorwill be a neutral attorney licensed in the State of Colorado or a neutral retired judge ofthe state or federal judiciary of Colorado, in either case with a minimum of ten yearsexperience in the substantive law applicable to the subject matter of the dispute to bearbitrated. The arbitrator will determine whether or not an issue is arbitratable and willgive effect to the statutes of limitation in determining any claim. In any arbitrationproceeding the arbitrator will decide (by documents only or with a hearing at thearbitrator’s discretion) any pre-hearing motions which are similar to motions todismiss for failure to state a claim or motions for summary adjudication. The arbitratorshall resolve all disputes in accordance with the substantive law of Colorado and maygrant any remedy or relief that a court of such state could order or grant within thescope hereof and such ancillary relief as is necessary to make effective any award. Thearbitrator shall also have the power to award recovery of all costs and fees, to imposesanctions and to take such other action as the arbitrator deems necessary to the sameextent a judge could pursuant to the Federal Rules of Civil Procedure, the Colorado Rulesof Civil Procedure or other applicable law. Judgment upon the award rendered by thearbitrator may be entered in any court having jurisdiction. The institution andmaintenance of an action for judicial relief or pursuit of a provisional or ancillaryremedy shall not constitute a waiver of the right of any party, including the plaintiff,to submit the controversy or claim to arbitration if any other party contests such actionfor judicial relief.

          (e)     Discovery.In any arbitration proceeding discovery will be permitted in accordance with the Rules.All discovery shall be expressly limited to matters directly relevant to the dispute beingarbitrated and must be completed no later than 20 days before the hearing date and within180 days of the filing of the dispute with the AAA. Any requests for an extension of thediscovery periods, or any discovery disputes, will be subject to final determination bythe arbitrator upon a showing that the request for discovery is essential for the party'spresentation and that no alternative means for obtaining information is available.

          (f)     ClassProceedings and Consolidations. The resolution of any dispute arising pursuant to theterms of this Agreement shall be determined by a separate arbitration proceeding and suchdispute shall not be consolidated with other disputes or included in any class proceeding.

          (g)     PaymentOf Arbitration Costs And Fees. The arbitrator shall award all costs and expenses ofthe arbitration proceeding.

          (h)     Miscellaneous.To the maximum extent practicable, the AAA, the arbitrators and the parties shall take allaction required to conclude any arbitration proceeding within 180 days of the filing ofthe dispute with the AAA. No arbitrator or other party to an arbitration proceeding maydisclose the existence, content or results thereof, except for disclosures of informationby a party required in the ordinary course of its business or by applicable law orregulation. If more than one agreement for arbitration by or between the partiespotentially applies to a dispute, the arbitration provision most directly related to theCredit Documents or the subject matter of the dispute shall control. The arbitrationprovisions set forth in this Section 8.13 shall survive termination, amendment orexpiration of any of the Credit Documents or any relationship between the parties.

     8.14.     Terminationof Prior Credit Agreement. Upon the execution and delivery of this Agreement, thePrior Credit Agreement shall terminate save for those provisions therein which areexpressed or intended to survive the termination thereof. Immediately prior to the ClosingDate, all loans outstanding under the Prior Credit Agreement shall be purchased by theLenders hereunder from the Prior Lenders and shall be deemed to be Revolving Loans made byeach of the Lenders under this Agreement (and all accrued and unpaid interest thereonshall begin to accrue interest at the rates set forth in this Agreement), and all PriorLetters of Credit shall be deemed to be Letters of Credit issued and outstanding underthis Agreement (and all accrued unpaid fees thereon shall begin to accrue at the rates setforth in this Agreement). To effectuate the foregoing, immediately prior to the ClosingDate the Administrative Agent shall calculate the Proportionate Share of each Lender ineach Revolving Loan outstanding under the Prior Credit Agreement. Based upon suchcalculation, each Lender shall purchase from the Prior Lenders or sell to the otherLenders such shares in the outstanding Revolving Loans as the Administrative Agentdetermines is necessary to cause each Lender to hold Revolving Loans in a principal amountequal to such Lender’s Proportionate Share. On and after the Closing Date, thisAgreement and the other Credit Documents shall amend, restate and supercede in theirentirety and replace the Prior Credit Agreement and the Prior Credit Documents (other thanthe Leasehold Mortgages, any UCC filings and any filings made with the U.S. Patent andTrademark Office evidencing the Administrative Agent’s continuing Lien on andsecurity interest in any of the Collateral); provided, however, that theexecution and delivery of this Agreement and the other Credit Documents shall not (a)operate as a waiver of any right, power or remedy of the Prior Lenders under the PriorCredit Agreement and the other Prior Credit Documents, except to the extent expresslywaived in this Agreement and the other Credit Documents, or (b) extinguish, impair orconstitute a novation of any obligations of the Borrower or the Guarantors under the PriorCredit Agreement or the Prior Credit Documents except to the extent any such obligation isactually satisfied by a Borrower or a Guarantor thereunder. Promptly upon the closing ofthis Agreement and the receipt by the Lenders of its Notes, such Lenders that were alsoPrior Lenders under the Prior Credit Agreement shall return to the Borrower any Notesdelivered to such Prior Lender in connection with the Prior Credit Agreement marked"cancelled".

** 
[The first signature page follows.**]**

 

 

 

     IN WITNESS WHEREOF, the Borrower,the Lenders, the Administrative Agent, the L/C Issuer and the Swing Line Lender havecaused this Agreement to be executed as of the day and year first above written.
**BORROWER: 

WILD OATS MARKETS, INC.,**
a Delaware corporation

 

 

By: /s/ Freya R. Brier 
Name: Freya R. Brier 
Title:     Vice President, Legal 

     
**ADMINISTRATIVE AGENT, L/C ISSUER AND SWING LINE LENDER:

WELLS FARGO BANK, NATIONAL ASSOCIATION**
 

By: 
Name: 
Title: 

     
**THE LENDERS:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION**
 

By: 
Name: 
Title: 
 

 
**U.S. BANK NATIONAL ASSOCIATION**
 

By: 
Name: 
Title: 
 
**VECTRA BANK COLORADO N.A.**
 

By: 
Name: 
Title: 
 

     

 

** 
SCHEDULE I

THE LENDERS

 
PART A

LENDERS’ COMMITMENTS AND PROPORTIONATE SHARES

Lender
Commitment
Proportionate Share
Wells Fargo Bank,    National Association
$45,000,000
60.0%
U.S. Bank National    Association
$15,000,000
20.0%
Vectra Bank Colorado    N.A.
$15,000,000
20.0%
** 
 

 

** 
SCHEDULE I

 
PART B

LENDERS’ ADDRESSES, ETC.

WELLS FARGO BANK, NATIONAL ASSOCIATION

Address for Notices:

Wells Fargo Bank, National Association

C7301-031

1740 Broadway

Denver, CO 80274

Attention: Yevette Conrad, Loan Specialist 

Tel. No.: (303) 863-5460

Fax No.: (303) 863-5531

E-Mail: Yevette.M.Conrad@wellsfargo.com

Wiring Instructions:

Bank:               WellsFargo Bank, National Association

City,State:          San Francisco,CA          

ABANumber:          121000248                         

PayeeName:          SYNDIC/WFBCORP/Wild OatsMarkets, Inc.          

Account Number:     4081-656894                         

Reference:**          **WildOats Markets, Inc. 

 

** 
 

U.S. BANK NATIONAL ASSOCIATION

Address for Notices:

Commercial Loan Servicing Department

U.S. Bank National Association

555 S.W. Oak Street, PL-7

Portland, OR 97204

Attn: Lennie Regalado, Participation Specialist

Tel. No.: (503) 275-4560

Fax No.: (503) 275-5428

E-Mail: lennie.regalado@usbank.com

Wiring Instructions:

Bank:               U.S.Bank National Association

City, State,Zip:     Portland, Oregon97204          

ABANumber:          123-000-220                         

AccountName:     Commercial Loan ServicingWest          

Account Number:     00340012160600                         

Reference:**          **WildOats Markets, Inc. 

Attention:          LennieRegalado, Participation Specialist

 

 

** 
VECTRA BANK COLORADO N.A.

 

Address for Notices:

 

Vectra Bank Colorado N.A.

2000 S. Colorado Blvd. 2-1200

Denver, CO 80222

Attn: Karla Proffit

Tel. No.: (720) 847-7792

Fax No.: (720) 947-7760

E-Mail.: KPROFFIT@VECTRABANK.COM

 

Wiring Instructions:

 

Bank:               VectraBank Colorado N.A.

City,State:          Denver, Colorado

ABANumber:          102003154

AccountNumber:     6966001586

Ref:               WildOats Markets, Inc.     

 
 

 

 
DOCSSF1:652592.12 confidential******************************************************