** 
***CONFIDENTIAL TREATMENT REQUESTED**

ATTACHMENT 2 

Attached to March 10, 2004 Letter to the Securities and ExchangeCommission

AGREEMENT FOR DISTRIBUTION OF PRODUCTS

 

This Agreement for Distribution of Products, dated January 9, 2004, isbetween Wild Oats Market, Inc. ("WO") and United Natural Foods, Inc. and itssubsidiaries and affiliates (collectively "UNFI"). 

RECITALS

A. WO operates certain retail supermarket stores in the United Stateswhich are primarily engaged in the sale of natural and organic products (the"Stores"). 

 

B. The parties desire to enter into an agreement pursuant to which UNFIshall provide, sell and distribute to WO, its Stores and wholesale locations, and WO shallbuy, the goods and services specified below on the terms set forth below.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged, the parties agree as follows:

1. Agreement Term. (a) The Agreement shall have an initial termof five years (the "Term") commencing as of the date hereof (the"Commencement Date").

(b) After the expiration of the initial Term, the Term shall beautomatically renewed for successive two-year periods unless either party gives notice tothe other not less than 180 days prior to the end of the initial or any renewal Term. 

2. Distribution Arrangement. (a) Commencing April 1, 2004 (the"Effective Date"), UNFI shall be the primary wholesale distributor to WO of WOselected (i) specialty grocery items, (ii) natural and organic packaged grocery products,(iii) frozen products (including certain grocery and meat), (iv) bulk products, (v)vitamins, supplements, body care and other health and beauty aid products and (vi) dairyproducts (but excluding produce, meat, seafood, cheese, food service products, mercantileand other categories not specifically identified above) either (A) not purchased directlyfrom manufacturers or (B) for which WO currently does not have an existing contractualobligation to purchase which continues after the Effective Date (the"Products"), for all WO Stores, and all such new Stores acquired or opened by WOduring the Term, subject to the limitations set forth below. Produce and alcoholicbeverages are not included in Products for the purposes of this Agreement.

(b) "Primary" for purposes of this Agreement shall be definedas purchasing from UNFI and its affiliates (i) a minimum of **[CONFIDENTIAL]**(1) inProducts and (ii) a majority, in the aggregate by region, of the Natural and OrganicProducts carried by the Stores (as defined in the Product Standards set forth on **ExhibitA**attached hereto) purchased in the various categories under 2(a) above, with (i) and(ii) calculated inclusive of orders for Products that are out of stock, during each12-month period of the Term, commencing as of the Effective Date. 

 

 
(1)  Confidential treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(c) WO will purchase, and UNFI will sell Products at net prices,quantities and upon the other terms and conditions set forth herein. 

 

3. Products. (a) *Authorized List.*(a) WO has provided toUNFI an Authorized Product List ("APL"), DC by DC, which, as modified from timeto time, will be the complete list of the only Products authorized to be distributed tothe Stores by UNFI. WO shall have the obligation to purchase, on a monthly basis, not lessthan (i) **[CONFIDENTIAL]**(2) per DC for grocery, chilled and frozen Products, and(ii) **[CONFIDENTIAL]**(3) cases per DC for repack, health and beauty Products(including all body care Products) and vitamins, minerals, supplements and homeopathicremedies (the "Velocity Requirement") of each Product on the APL which iscarried by UNFI solely for distribution to WO Stores, exclusive of Private Label Products(the "Exclusive Products"). Notwithstanding the foregoing, the parties agreethat the Velocity Requirement for Products purchased by WO from the New Oxford, PA andChesterfield, NH DCs shall be established by the parties six months after the EffectiveDate, based upon a review of WO’s purchasing volumes and Product velocities duringthe first six months’ purchasing from such DCs. Calculation whether a Product meetsthe Velocity Requirement shall include all orders placed by WO, including those not filledas a result of manufacturer or UNFI out-of-stocks ("OOS").

(b) WO shall have final determination of items on the APL; provided,however, that the following Products shall not be included within the APL withoutUNFI’s consent, not to be unreasonably withheld, conditioned or delayed: (i) Productsthat do not meet the product standards set forth on **Exhibit A**(the "ProductStandards"); or (ii) SKUs of Exclusive Products and WO Private Label in excess of **[CONFIDENTIAL]**(4)(the "Exclusive/PL Product SKU limit"). 

(c) *APL Additions and Deletions*. 

(i) WO may require the addition of Products to the APL upon written    notice to UNFI specifying the Products to be added, the Stores designated to purchase such    Products and the estimated weekly purchases of the Products by the designated Stores;    provided, however, that Products will not be added to the APL without UNFI’s consent,    not to be unreasonably withheld: (i) if the Products do not meet the Product Standards;    (ii) if the Exclusive/PL Product SKU limit will be exceeded; and (iii) until adequate    inventory of the Product shall be available in all UNFI servicing divisions, as determined    by UNFI, based on the estimated weekly purchases provided by WO. At the time WO gives    notice to UNFI adding Products to the APL, UNFI shall notify WO if the added Products will    be Exclusive Products. Notwithstanding the foregoing, all Products identified for addition    to the APL that do not require consent pursuant to the criteria set forth above shall be    added to the APL within 21 days after receipt of written notice of their addition from WO.    If UNFI does not have such new Products available for distribution to WO Stores within 21    days after addition to the APL for other than Force Majeure events, WO may include orders    of the new Products for purposes of the calculation under Section 14 (Out of Stock    Calculation) below and such other obligations of UNFI hereunder regarding delivery of    Products. 

 

(2) Confidential treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.

(3)*  Ibid.*
(4)*  Ibid.*
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(ii) WO shall designate those Stores to purchase any item added to the    APL in the notice described in (c)(i) above. 

(iii) **[CONFIDENTIAL]**(5),:

(1) **[CONFIDENTIAL]**(6), or

(2) **[CONFIDENTIAL]**(7), 

WO shall have no obligation to purchase any of the foregoing Products    which are deleted from the APL at UNFI’s request for reasons other than a failure of    such Products to meet the Velocity Requirement, unless WO agrees to such purchase.

(iv) If either party requests deletion from the APL of any Product and    the other party agrees to deletion of such item, there shall be a 60-day notice period,    after agreement of the parties as to deletion, prior to the actual deletion of the Product    from the APL. Unless the deletion is made by UNFI for Products failing to meet the    Velocity Requirement or because of excessive manufacturer OOS (as determined by UNFI based    upon historic information), the requesting party shall indemnify the other party from the    costs of the return to the manufacturer or failure to pay by the manufacturer of: (A) any    bill backs (manufacturer direct rebate) or charge back issued by UNFI (contribution by the    manufacturer to any ad costs, funds or campaigns for such Product); (B) coupons or rain    checks issued by manufacturer or WO or UNFI; and (C) store credits (credits for damaged    goods, out of stock Product, demonstration costs agreed to by the manufacturer) issued for    the deleted Product; provided that, so long as the deleted Product is not an Exclusive    Product, if the deleted Products are sold, or a sale is arranged, within 90 days to    another customer, then the requesting party shall not have any indemnification or    reimbursement obligation as specifically enumerated above under this Section 3(c)(iv) for    the items identified above related to those deleted Products that have been sold. 

 

(5)  Confidential treatment has been requested for the    redacted portion. The confidential, redacted portions have been filed separately with the    SEC.

(6)** *Ibid*
(7)*  Ibid.*
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(d) *Private Label Products.*

(i) **[CONFIDENTIAL]**(8)****
(ii) UNFI will carry any WO Private Label Products requested by WO,    provided that each WO Private Label Product sells well enough to turn one inventory turn:    (A) **[CONFIDENTIAL]**(9) for Products which are imported from outside of the    continental United States, and (B) **[CONFIDENTIAL]**(10) for Products which are    shipped from manufacturers within the continental United States. At the end of the    inventory turn periods specified in (A) and (B) above, UNFI shall notify WO of the amount    of inventory of any Product not meeting the turn periods, and **[CONFIDENTIAL]**(11).    WO shall use its best efforts to sell through inventory remaining beyond the turn periods    within **CONFIDENTIAL]**(12) after the end of the applicable turn period (the    "Sell Through Period") or may elect to have the inventory "plussed    out" (shipped) to the Stores on a logistics schedule supplied by WO. If inventory not    moving within the turn periods remains in the DCs for more than **[CONFIDENTIAL]**(13)    after the end of the turn periods,**[CONFIDENTIAL]**(14). To the extent a Private    Label Product does not sell within the foregoing turn periods, the parties shall review    the Product on a case-by-case basis, and shall mutually determine whether to remove it    from the APL. UNFI shall hold the inventories of WO Private Label in the three DCs listed    on **Exhibit C** hereto, and in additional DCs as Private Label Product velocity may    warrant. "WO Private Label Products" shall mean those products that Wild Oats    offers from time to time in its Stores under Wild Oats’ proprietary labels (including    "Wild Oats", "Henry’s", "Sun Harvest" and such other    tradenames or marks used by WO from time to time). UNFI covenants not to sell, and to take    commercially reasonable efforts to prevent the sale of any WO Private Label Products by    UNFI to any distribution network, stores, or persons not approved in advance by WO. UNFI    agrees to fully cooperate with WO in any investigation and litigation originated by WO    over such unauthorized sales. UNFI shall bear the cost of retrieval of any WO Private    Label Product sold in unauthorized sales by UNFI. 

4. Pricing. (a) *Pricing of Products.* Commencing as of theCommencement Date, during the Term the UNFI pricing for Products shall be as follows:

 

(i) As to all Products other than WO Private Label Products, **[CONFIDENTIAL]**(15);    and 

 

(8)  Confidential treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.

(9)  *Ibid.*
(10)  *Ibid.*
(11)  I*bid.*
(12)  *Ibid.*
(13)  *Ibid.*
(14)  *Ibid.*
(15)  *Ibid.*

** 
***CONFIDENTIAL TREATMENT REQUESTED**

 

(ii) As to WO Private Label Products, **[CONFIDENTIAL]**(16)

(b) At the end of each of WO’s fiscal quarters, **[CONFIDENTIAL]**(17)****
(iii) For purposes of this Agreement, "Cost" shall be    defined as **[CONFIDENTIAL]** (18)

(iv) In the event of a partial Fiscal Quarter based on the Commencement    Date or remaining at the end of the term hereof (whether by early termination or normal    expiration of the term of this Agreement), the Quarterly Run Rate Volume shall be pro    rated based on the percentage of the Fiscal Quarter at the Commencement Date or remaining    at the end of the term of the Agreement. 

(v) If there has been a Force Majeure event during any Fiscal Quarter    that materially affects WO’s ability to purchase or UNFI’s ability to sell    Products, the Quarterly Run Rate Volume shall not be reduced, but the **[CONFIDENTIAL]**(19)    minimum purchase level referenced under Section 2(b) above for any calendar year shall be    reduced by an amount based on the purchases from those Stores impacted by the Force    Majeure event from other distributors, or estimated purchases in the event the Stores are    unable to operate and the length of time that the Force Majeure event continues to disrupt    operations at such Stores or DCs. 

 

(c) *Modification of Pricing. 
(i) The parties agree to meet semiannually to review the freight    delivery charges to the Stores as set forth in **Exhibit E**and, upon mutual agreement    based on a modification in freight charges, shall modify the inbound freight charges as a    component of Product cost.

(ii) UNFI may only increase the prices for Products referenced in this    Section 4 if there is an actual per item price increase from the manufacturer. Price    increases shall only be effective after **[CONFIDENTIAL]**(20) electronic notification    to WO. UNFI shall reduce or increase the prices for Products if there is an actual per    item price decrease or increase, as applicable, from the manufacturer in accordance with    manufacturer deal periods. Price decreases shall be effective within **[CONFIDENTIAL]**(21)****from the reduction in pricing by the manufacturer to UNFI. All published vendor deals    (advertised to wholesalers and retailers), pricing and promotional discounts, will be    passed dollar for dollar directly to WO as and when received by UNFI as a reduction in    pricing subject to vendor performance requirements being met. Notwithstanding the    foregoing, UNFI’s or WO’s new item set up discounts and policies will be    mutually supported. 

 

(16)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.

(17)  *Ibid.*
(18)  *Ibid.*
(19)  *Ibid.*
(20)  *Ibid.*
(21)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(iii) WO may negotiate scan downs or off-invoice receiving allowances    with manufacturers pursuant to which WO receives a rebate from the manufacturer based upon    actual sales of goods. **[CONFIDENTIAL]**(22)**.** The total number of scan-downs    per month that can be negotiated by WO shall not exceed **[CONFIDENTIAL]**(23). The    payment shall be accompanied by a copy of the manufacturer bill back documents sent to the    manufacturer as part of the scan down or off-invoice arrangement.

(d) *Freight Costs to the Stores. 
(i) WO shall pay a freight charge for delivery of Product from each    UNFI distribution center to the Stores. The freight charge shall be a percentage, as set    forth on **Exhibit E** to this Agreement, of Product Cost. Freight will be shown    separately on each Product invoice from the cost of the Product delivered. WO shall be    under no obligation to pay higher net freight costs that result from UNFI’s election    to close any distribution centers that were operating on the date of this Agreement, and    any increase in freight charges resulting from such closure or reassignment of more Stores    to other DCs shall be the responsibility of UNFI. In the event that federal or state    regulations regarding hours of service for drivers are implemented that result in    substantial increases in freight costs over those costs represented by the percentages set    forth on **Exhibit E**, the parties shall review the actual costs and make such    adjustments to **Exhibit E** to cover the incremental cost increases allocated to    WO’s business as a result of such implementation.

(ii) In the event that fuel costs average in excess of **[CONFIDENTIAL]**(24)    over the prior three-month period, UNFI shall be entitled to charge WO a surcharge for    fuel used in delivery of Product equal to the actual average and **[CONFIDENTIAL]**(25),    and such surcharge shall be charged for the following three-month period as set forth on **Exhibit    F** attached hereto.

(e) *Inclusions of Items on Invoices.*WO shall send its suggestedspecific Storeretail pricing for the Products to UNFI in amutually agreeable format at mutually agreed times. UNFI will print such pricing on allappropriate WO documents. The mechanics of such arrangement are set forth in**Exhibit G**attached to this Agreement. Each invoice from UNFI for Product delivered to the Storesshall show the cost of the item per unit specified, the freight costs and, to the extentUNFI’s computer systems may include such information, the retail price at which WOsells the Product and margin received at such price, as reflected in WO’s data. UNFIshall have no liability to WO hereunder for loss arising out of errors in WO’s data. 

(22)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.

(23)  *Ibid.*
(24)  *Ibid.*
(25)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(f) *Conflict with Purchase Orders and Other Documents.* The termsand conditions of the Agreement shall govern any purchase order and shall supersede anyadditional or contrary terms set forth in any WO purchase order or any UNFI acceptance,confirmation, invoice or other similar document.

(g) *Cross-Dock Billing.*UNFI will, from time to time, and basedon UNFI space availability, ship non-APL Product, for pallet and shipper displays only, ona cross-dock basis (as opposed to "bill to, ship to") for WO. UNFI shall chargeWO **[CONFIDENTIAL]**(26) shipped on a cross-dock basis, and **[CONFIDENTIAL]**(27).UNFI shall not unreasonably withhold its consent to cross-dock arrangements established byWO, based on space availability per DC. WO shall give UNFI 45-day prior notice of anyproposed cross-dock arrangement. Within 15 days prior to the actual shipment pursuant tothe cross dock arrangement, WO shall provide the weight, volume and pallet count of thecross-docked Products per Store. All cross-docked Products received from the manufacturershall be accompanied by a bill of lading, shall identify that the shipment is for WO, andshall identify the Store to which the Product is to be shipped. UNFI shall deliver thecross-docked Products on the next scheduled shipment to the Store, space permitting but,as to Wild Oats Stores only (not as to Henry’s or Sun Harvest Stores) shall not shipcross-docked Products in the first week of any WO promotional period. 

 

5. Placement of Personnel and Equipment. (a) *On SitePersonnel*. UNFI shall commit to providing, at its cost, the following personnel at WOHeadquarters in Boulder, Colorado, during the Term of this Agreement: **[CONFIDENTIAL]**(28).In addition, UNFI will provide **[CONFIDENTIAL]**(29).

(b) *Transition Personnel*. As part of the transition ofdistribution purchasing from WO’s current primary distributor to UNFI, UNFI and WOrecognize that certain existing shelf tags for certain items on the APL must be replaced. **[CONFIDENTIAL]**(30).The timetable for the completion of all retagging, and the process by which retagging willproceed, will occur over a nine-month period on a timetable mutually agreeable to theparties. 

(c) *Replacement of Personnel*. All personnel supplied by UNFIunder (a) and (b) above shall be reasonably satisfactory to WO. If WO requests thereplacement of any UNFI personnel for any non-discriminatory reason, UNFI shall usecommercially reasonable efforts to promptly replace such individuals with new, competentpersonnel reasonably satisfactory to WO.

(26)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC*.*
(27)  *Ibid.*
(28)  *Ibid.*
(29)  *Ibid.*
(30)  *Ibid*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(d) *Electronic Ordering Equipment*. As part of the retaggingprocess of existing Stores, UNFI shall loan to each Store three electronic store orderunits, and shall train all department managers, the scanning coordinator and thedesignated person for order placement at Store level on the use of the equipment. Uponfull implementation of WO’s backdoor receiving project, WO shall return to UNFI twoof the three electronic ordering units provided by UNFI at each Store. Any malfunctioningunits shall be repaired or replaced, at UNFI’s sole election, within 72 hours afterUNFI’s receipt of notification by WO, provided that WO shall provide UNFI withspecific information as to any malfunctioning. WO shall be responsible for malfunctioningcaused by the gross negligence of WO employees. UNFI shall provide three, or more based onStore size if requested by WO, units to each new Store, and shall train the aforesaid newStore personnel in the use of the equipment, within 21 days prior to the opening of thenew Store; provided that WO shall have given UNFI 90 days’ prior written notice ofnew Store openings to facilitate the programming of the equipment and the training ofpersonnel and WO makes such personnel available to UNFI at mutually agreed upon dates,times and places. WO is currently testing and plans to implement in the future a new ordertaking technology as part of its back door receiving program. 

(e) **[CONFIDENTIAL]**(31) 

6. Product Quantity: (a) *Quantities.* UNFI agrees to sellto WO and supply WO with APL Products, throughout the Term of the Agreement, in thequantities ordered by WO in its sole discretion. The parties have established two **[CONFIDENTIAL]**(32)  minimum order quantities for each Store based on Store volume, frequency ofdelivery, etc., as set forth on **Exhibit H** attached hereto. The parties shall reviewthe schedule semi-annually and shall move Stores’ minimum order quantities from oneorder quantity category to the other based on market conditions and competitive impacts.WO may be charged a **[CONFIDENTIAL]**(33) charge for deliveries not meeting theminimum order requirement size.

(b) *Shipment of Booked Orders.*If WO has (i) pre-orderedspecified quantities of Product for a promotional event and has given UNFI 45 days notice,or (ii) completed a forward buy negotiation with a manufacturer for Product meeting therequirements set forth in (c) below, and UNFI has accepted the orders, UNFI shall deliverthe booked quantities of Products to the WO Stores per WO’s Product orders. Forinventory not falling within the definitions of (i) and (ii) above, if UNFI has stockingissues, UNFI will ship all customers on an equal first come, first serve basis. 

(c) **[CONFIDENTIAL]**(34) . 

 

(31)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC*.*
(32)  *Ibid.*
(33)  *Ibid.*
(34)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

7. UNFI Covenants Concerning Facilities; Delivery Standards.

(a) *Standards for Facilities.*UNFI warrants and covenants thatall UNFI participating distribution centers will be maintained and operated in allmaterial respects in accordance with UNFI warehousing and delivery standards, which willbe available for review upon request by WO. WO may inspect the physical plant of anydistribution center during normal business hours upon reasonable advance notice to thedesignated UNFI personnel, but shall not impair or impede the business operations of thecenter. With WO’s consent, not to be unreasonably withheld, UNFI shall have the rightto move service for groups of Stores from one facility to another, provided the newfacility has the ability to adequately service the Stores, UNFI has given WO at least 60days notice of the proposed modification and obtained WO’s consent, such move shallnot result in an incremental increase in cost to WO, and the parties have had theopportunity to prepare and implement a plan for transition to the new DC.

(b) *Covenants for Delivery.*UNFI shall:

(i) receive and process WO orders only from the WO Stores or designated    home office personnel and no other WO personnel or manufacturers, brokers or other third    parties. Notwithstanding anything to the contrary, UNFI shall be entitled to rely upon the    list of authorized persons in accepting orders from personnel identifying themselves as on    such list. If orders are transmitted by MSI, then UNFI may rely upon orders received from    a Store; and

(ii) at UNFI’s election, transport ordered Product on UNFI fleet    or WO approved carriers to individual Stores. UNFI shall comply with any regional or    national, as applicable, limitations or guidelines regarding deliveries (e.g., municipal,    residential or property owner imposed restrictions on delivery hours, parking of trucks,    unacceptable levels of noise in residential areas, etc.) of which WO has provided notice. 

(iii) maintain adequate stock at each DC to meet WO Store requirements    on an individual store basis **[CONFIDENTIAL]**(35).

(c) *Delivery Windows*. **Exhibit I** sets forth the followinginformation per Store: (a) estimated shipment volumes per delivery location; (b)municipal, residential or property owner imposed restrictions on delivery hours, parkingof trucks, delivery routes, curfews, noise ordinances, lease covenants, neighborhoodcovenants and operating hours. In the event of changes in these restrictions, WO shallprovide updated information and the parties shall evaluate such information and make suchscheduling changes as necessary to comply with any restrictions so imposed. UNFI willapply its routing system to prepare a routing and constraint analysis, taking intoaccount, in order of priority, (a) Store delivery restrictions such as curfews,ordinances, neighborhood covenants, landlord regulations, (b) WO desired delivery times,(c) UNFI’s route departure schedule, (d) UNFI warehouse and transportation operatingconstraints such as shift schedules. The routing schedule

(35)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC*.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(the "Delivery Schedule") adopted based on the routing andconstraint analysis will define the following: (1) each Store’s days of delivery perweek, (2) the hours of the delivery window for each store delivery, (3) delivery days anddelivery windows per day for special promotional events, and (4) delivery days anddelivery windows for holiday week shipments. After the initial development of the DeliverySchedule, a designated WO employee and UNFI will meet monthly, if requested by WO or UNFI,or quarterly, if no monthly meetings are held, to review the Schedule and make anynecessary modifications. **[CONFIDENTIAL]**(36). 

 

(d) *Code Date Policy; Inventory Management.*Products shall bedistributed to WO Stores in compliance with the Code Date Policy attached as **Exhibit J**to this Agreement related to the minimum number of days prior to expiration of the finalcode date, for perishable Products, under which such Products will be accepted upondelivery to the Stores. Product delivered with less than the minimum code date shall bedeemed an out-of-stock for purposes of performance hereunder. UNFI agrees to deliver allProduct (including WO Exclusive and Private Label Product) on a "first-in,first-out" inventory management basis, to ensure proper inventory turns and maximizeavailable Product Code Dates.

 

(e) *Quality Standards.* Products will be delivered palletized andshrink-wrapped and meet WO's Quality Standards as to damage, rodent or insect presence,and other quality standards attached as **Exhibit K** to this Agreement. The partieswill comply with the mutually agreeable pallet exchange program described on **Exhibit L**.In the event that any Product is recalled or withdrawn (the "Recalled Product"),UNFI will use its personnel (or a third party retrieval service if UNFI reasonablybelieves the recall or withdrawal will be achieved faster, at less expense or moreefficient) to remove any Recalled Product from the WO Stores and shall dispose of orreturn any Recalled Products as required. In addition to the foregoing responsibilities,UNFI shall use its reasonable commercial efforts to cooperate with WO in removing theRecalled Product that UNFI has delivered from the WO Stores and replenishing the Storewith replacement Products.

 

(f) *Store Receiving.* All Product shipments by UNFI to the Storesmust be evidenced by an invoice, in the form attached hereto as **Exhibit G.**Shipments of Product shall be acknowledged as received by execution by Store personnel ofthe delivered invoice (a copy of which shall be left with the Store). WO will not beresponsible for paying any invoice for a shipment not complying with the foregoingconditions of receipt. 

 

(g) *Passage of Title and Risk of Loss*. Title and risk of lossshall pass upon delivery to WO Stores when delivered by UNFI fleet. Risk of loss upondelivery by independent carriers shall be governed by such arrangements as are madebetween UNFI, WO and the independent carrier at the time of shipment.

(36)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC*..*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

8. Certain Wild Oats Ordering Responsibilities. (a) WO shallplace phone orders only by designated WO personnel. To enable timely delivery of Products,WO shall place orders in a timely manner in accordance with **Exhibit M**. WO shallgive UNFI a minimum 45-day written lead time on promotion orders. No third party orderswill be honored by UNFI.

(b) The parties agree to establish an electronic data interchangecapability ("EDI")between WO and UNFI in a mutually agreed upon format byDecember 31, 2004. The EDI shall be used both for the placement of orders and the movementof other data used in the ordering and payment for Products. 

(c) The average minimum order size for each Store delivery shall be asset forth on **Exhibit H** per Store per placed order (inclusive of OOS and PrivateLabel Product, whether caused by the manufacturer, UNFI or promotional OOS, that isordered but not delivered). Any order placed of less than the minimum order size shallincur **[CONFIDENTIAL]**(37)**.**

(d) To the extent that WO forecasts Product sales for a WO promotion(other than WO Private Label promotions), and the Stores do not order the aggregate amountforecasted to UNFI, then within **[CONFIDENTIAL]**(38) following completion of thepromotion, UNFI shall notify WO of the amount of promotional Product remaining ininventory, and shall commence charging WO a pallet charge of **[CONFIDENTIAL]**(39) forany of such inventory remaining at the DCs on the **[CONFIDENTIAL]**(40) aftercompletion of the promotion. WO shall use its best efforts to sell through the remainingpromotional inventory within **[CONFIDENTIAL]**(41) after completion of the promotionor may elect to have the inventory "plussed out" (shipped) to the Stores on alogistics schedule supplied by WO. If promotional inventory remains in the DCs for morethan **[CONFIDENTIAL]**(42) after the completion of the promotion, **[CONFIDENTIAL]**(43)**.**The foregoing shall not apply to purchases of "Wild Buys" as defined in Section6(c) above. 

9. Promotional and Marketing Funds. UNFI will assist WO in thesolicitation of vendor funding for new and remodeled Stores and acquired Stores (except asand to the extent excluded under Section 2 above) at levels requested by WO, unless suchlevels are deemed unreasonable by UNFI. 

(37)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.

(38)  *Ibid.*
(39)  *Ibid.*
(40)  *Ibid.*
(41)  *Ibid.*

(42)  *Ibid.*
(43)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

10. Hold Harmless.

(a) *UNFI Indemnity*. It is expressly understood and agreed thatWO shall not be liable for, and UNFI shall hold WO harmless from, any obligations, claims,demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities ofany kind or nature to a person not a party to this Agreement ("Third Party")arising out of or in connection with this Agreement caused by UNFI’s negligence,willful misconduct or contractual breach, including but not limited to any costs,expenses, court costs and reasonable attorneys’ fees incurred by WO by reason of anydefense to any claims or lawsuits to which WO has been named a party.

(b) *WO Indemnity.*It is expressly understood and agreed thatUNFI shall not be liable for and WO shall hold UNFI harmless from any obligations, claims,demands, losses, costs, damages, suits, judgments, penalties, expenses and liabilities ofany kind or nature to a Third Party arising out of or in connection with this Agreementcaused by WO’s negligence, willful misconduct or contractual breach, including butnot limited to any costs, expenses, court costs and reasonable attorneys’ feesincurred by the UNFI by reason of any defense to any claims or lawsuits to which UNFI hasbeen named a party. WO agrees to indemnify UNFI for any loss, cost or damage resultingfrom any claim brought against UNFI by TOL and relating to WO’s termination of adistribution agreement with TOL.

 

(c) *Third Person Claims.* Promptly after a party has receivednotice of or has actual knowledge of any claim against it covered by Section 10 by a ThirdParty or the commencement of any action or proceeding by a Third Person with respect toany such claim, such party (sometimes referred to as the "Indemnitee") shallgive the other party (sometimes referred to as the "Indemnitor") written noticeof such claim or commencement of such action or proceeding; provided, however, that thefailure to give such notice will not affect the right to indemnification hereunder withrespect to such claim, action or proceeding, except to the extent that the other party hasbeen actually prejudiced as a result of such failure. If the Indemnitor has notified theIndemnitee within thirty (30) days from the receipt of the foregoing notice that it wishesto defend against the claim by the Third Person, then the Indemnitor shall have the rightto assume and control the defense of the claim by appropriate proceedings with counselreasonably acceptable to Indemnitee, provided that the assumption of such defense by theIndemnitor shall constitute an acknowledgment of the obligation to indemnify theIndemnitee hereunder. The Indemnitee may participate in the defense, at its sole expense,of any such claim for which the Indemnitor shall have assumed the defense pursuant to thepreceding sentence, provided, however, that counsel for the Indemnitor shall act as leadcounsel in all matters pertaining to the defense or settlement of such claims, suit orproceeding other than claims that in Indemnitee’s reasonable judgment could have amaterial and adverse effect on Indemnitee’s business apart from the payment of moneydamages. The Indemnitee shall be entitled to indemnification for the reasonable fees andexpenses of its counsel for any period during which the Indemnitor has not assumed thedefense of any claim. The Indemnitor may not settle any claim without obtaining a releasefor the benefit of the Indemnitee, unless the consent of the Indemnitee is obtained. 

 

(d) *Product Liability.*UNFI acknowledges that it generallyobtains indemnification agreements from the various manufacturers, vendors or distributorsof the Products or other items being sold to WO by UNFI under this Agreement. UNFI agreesto indemnify and hold harmless WO for any liability arising from Products sold to WO byUNFI, without regard to any negligence by UNFI related to such Products. UNFI’sobligation to indemnify WO for any liability arising from any Products sold to WO shallexist regardless of the existence or nonexistence of any such indemnification agreementsfrom Product manufacturers. 

 

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(e) *Insurance.*UNFI agrees that all material properties andrisks of UNFI shall at all times be covered by valid and currently effective insurancepolicies or binders of insurance or programs of self-insurance in such types and amountsas are consistent with customary practices and standards of UNFI and the industry, but inno event less than $2 million aggregate general liability coverage. WO shall be named asan additional insured and certificates of insurance evidencing the renewal of insuranceshall be delivered by UNFI to WO from time to time. WO agrees that all material propertiesand risks of WO and any third party providing transportation services to WO shall at alltimes be covered by valid and currently effective insurance policies or binders ofinsurance or programs of self-insurance in such types and amounts as are consistent withcustomary practices and standards of companies engaged in businesses and operationssimilar to those of WO.

11. **[CONFIDENTIAL]**(44)

12. Audits. (a) *General.* WO and its independent auditorswill have the right to perform the following audits of UNFI’s compliance with theterms of the Agreement:

(i) Financial – WO sales data, WO cost data, WO promotions data,    and WO discounts, **[CONFIDENTIAL]**(45)**;**
(ii) Quality Assurance - audits of distribution facilities and    transportation equipment;

(iii) Freight - freight costs, rates, transportation costs;

(iv) Vendors – invoices from vendors to UNFI.

(b) *Cost of Audit*: All audits will be performed at WO’scost, using auditors of its choice, unless any audit of financial compliance discloses anaggregate over-billing to WO or an aggregate underreporting by UNFI under the terms of theAgreement of **[CONFIDENTIAL]**(46) of the total billed/reported, in which case UNFIshall reimburse WO for the reasonable cost of the audit. If any audit shows anyoverpayment by WO or an underreported amount by UNFI, UNFI shall promptly refund anyover-billed amount or credit any underreported amount to WO, plus interest at the rate of1% per month from the earliest date of error until paid. WO shall provide UNFI promptlywith copies of all audits before any adjustment may occur. If any audit shows anyunder-payment by WO or an over-reported amount to WO, WO shall promptly refund thedeficiency or overpayment to UNFI, plus interest at 1% per month from the earliest date oferror until paid. Any audit may be done by an audit of a statistically significantsampling of the data being audited, in accordance with generally recognized auditingpractices, and such sampling shall be deemed representative of all data in that category. 

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(44)  Confidential treatment has been requested for the redacted portion. Theconfidential, redacted portions have been filed separately with the SEC.

(45)  *Ibid.*
(46)  *Ibid.*

(c) *Cooperation.*UNFI shall cooperate with WO and its auditorsin the performance of all audits by delivering such documents and other information, andmaking its personnel and facilities available for inspection, as WO shall reasonablyrequest. WO shall provide to UNFI a list of all information required to perform its audit.WO agrees to maintain as confidential any information obtained during any audit regardingany other customer or vendor of UNFI, unless required to disclose such information bysubpoena, by process of law, or by rules or regulations of any governmental agency whichmay require disclosure of information, but only upon first promptly notifying UNFI of suchrequirement and permitting reasonable opportunity to UNFI to seek a protective order. Anydisclosure which, in the legal opinion of outside counsel is nevertheless necessary, shallbe made only to the extent necessary and WO shall use its best efforts to obtainconfidential treatment of the information. 

 

(d) Any audit under this Section or payments made by UNFI to WO inconnection with any audit shall not affect WO’s right to terminate the Agreement, andrights to audit shall survive termination of this Agreement.

(e) In the event of a dispute as to the amount of any adjustmentrequired as a result of any audit, the parties shall use their best reasonable efforts toreach agreement within 15 days, and, failing such agreement, either party may submit thedispute to a nationally recognized accounting firm (the "Auditor"), selectedupon mutual agreement of the parties, which shall resolve the dispute within 30 days or assoon thereafter as reasonably practicable. The decision of the Auditor shall be final andbinding on the parties. The cost and expense of the Auditor shall be paid one-half by eachparty. The parties shall make available to the Auditor all relevant books, records andmaterial reasonably requested by the Auditor.

 
 

13. Compliance with Laws*.* (a) Each party covenants andagrees during that it will fully comply with all applicable laws, ordinances, regulations,licenses and permits of or issued by any federal, state or local government entity, agencyor instrumentality applicable to its responsibilities hereunder. UNFIagrees that it shall comply with all certification procedures and regulations. Each partyshall promptly notify the other party after it becomes aware of any material adverseproposed law, regulation or order that, to its knowledge, may or does conflict with theparties’ obligations under this Agreement. The parties will then use reasonableefforts to promptly decide whether a change may be made to the terms of this Agreement toeliminate any such conflict or impracticability.

 

(b) *Organic Documentation*. In connection with any organicProducts, UNFI shall take all such actions as required by any federally recognizedcertifying organization (or as required by law) in order for such Products to be certifiedas organic, including, without limitation, the maintenance of any required documentationand the taking of the necessary precautions to prevent product compromise. UNFI shallprovide all documentation relating to the foregoing to WO at WO’s request.

 
 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

14. **[CONFIDENTIAL]**(47)
 

15. Payment Terms. (a) WO shall pay for all Product purchases,subject to deductions for amounts owed by UNFI to WO hereunder, by wire transfer ofimmediately available funds to UNFI within **[CONFIDENTIAL]**(48) from the date of theUNFI invoice, which is dated no earlier than the date the Product is shipped to the Store(and a copy of such invoice accompanies the Product). In the event receipt of a shipmentis substantially delayed (delay of 24 hours or greater), payment shall be due **[CONFIDENTIAL]**(49)following actual receipt of the shipment. Invoices shall be on a Store by Store basis. Afinance charge of **[CONFIDENTIAL]**(50) monthly on any delinquent balance not paidwithin **[CONFIDENTIAL]**(51) may be assessed monthly. 

 

(b) If UNFI fails to make any payment due hereunder, after 10days’ prior written notice by WO by the due date specified by WO, and provided thatUNFI has not given WO notice of a good faith dispute with the amount due by the due date,WO may, at its election, deduct or offset from any invoice owed to UNFI, those amounts duefrom UNFI under this Agreement as a reimbursement, payment or credit. WO shall notify UNFIat the time of payment of the deduction or offset.

 

(c) All monetary obligations under this Agreement will survivetermination of the Agreement.

 

(d) **[CONFIDENTIAL]**(52)**.**
 

16. Credits. 

(a) *Product Credit.* WO or its Stores may email notification, inaccordance with UNFI’s standard notification process, of credits for damaged Product,miss-picks of goods not on the APL and for short-dated/out-of-code Product received ondelivery from UNFI in accordance to WO Code Date Policy attached as **Exhibit J**hereto, provided the total amount of the credit per Store is $25 or greater. The cost ofmiss-picks received at Store level of Products on the APL shall be debited to WO, assumingWO can use the Products based on the quantity delivered and remaining code dates on suchProducts. UNFI and WO shall discuss the disposition of miss-picks.

(47)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC*.*
(48)  *Ibid.*
(49)  *Ibid.*
(50)  *Ibid.*
(51)  *Ibid.*
(52)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(b) *Shortage Credit*. UNFI will credit WO **[CONFIDENTIAL]**(53)****for delivery shortages, calculated on Total Purchases by each Store on a monthlybasis, which will be deducted through a credit memo by UNFI issued to each WO Store on amonthly basis. UNFI shall audit shortage levels on a quarterly basis using its internalaudit teams, and shall provide the results thereof to WO each quarter. If UNFI’saudit shows a lesser or greater than **[CONFIDENTIAL]**(54) shortage, then the creditshall be decreased or increased, accordingly, to the level shown by audit, effectiveimmediately. The shortage credit shall also be adjusted immediately in the event that anyWO audit shows a lower or higher shortage. WO may audit at any time, provided that changesto the shortage credit shall be effected not more frequently than quarterly. WO shallprovide a report to UNFI on the results of WO’s audits with the notice of adjustment.Both parties shall audit using audit procedures to be mutually agreed to after good faithnegotiation within 60 days after execution of this Agreement. Any disputes regarding auditresults shall be resolved using the procedures set forth in Section 12(e) above.

 

(c) *Processing of Credits.* UNFI agrees that it shall receive andprocess credit requests within five business days from receipt of the request from WO byemail. WO agrees that it will provide notice of credits to UNFI within 48 hours of Productreceipt.

 

17. Termination Provisions. (a) Either party may terminate thisAgreement at the end of any initial or renewal term upon **[CONFIDENTIAL]**(55) or moreprior written notice.

 

(b) WO may terminate the Agreement on immediate written notice (unlessotherwise provided below) for cause if:

 

(i) UNFI fails to make any payment, credit, rebate or other remittance    of monetary consideration provided for herein on the date due, other than as to payments    regarding which UNFI has given WO notice of good faith dispute, and fails to remedy any    delinquent payment, credit, rebate or other remittance within fifteen business days after    notice thereof from WO (which failure to cure shall be an event of default), or if such    breach occurs more than twice in any calendar year (in which case, for such second breach    WO may elect not to provide a cure period);

(ii) **[CONFIDENTIAL]** (56)

(iii) UNFI breaches any other non-monetary obligations under the    Agreement not specifically referenced above in this Section, and fails to cure such breach    after 30 days’ prior written notice of breach; 

(53)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.

(54)  *Ibid.*
(55)  *Ibid.*
(56)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(iv) The results of any audit conducted by WO or UNFI of any data    points set forth the Agreement prove deliberate fraud or gross misconduct of UNFI of a    nature that is material in either dollar amounts or percentages to total amounts or to the    operational units affected, or that could reasonably result in a material impact to the    reputation or operational performance of WO. WO may also terminate if it is determined by    any regulatory agency, or UNFI publicly announces that any certification given by officers    of UNFI relating to internal controls or fraud were materially incorrect. UNFI agrees that    notwithstanding the amount of any fraud discovered, UNFI will take prompt steps to rectify    any damage caused by the fraud and will implement controls designed to deter such fraud in    the future; 

(v) Regulatory violations by UNFI where the violations or the    corrective action required materially and adversely affect the continued ability of UNFI    to perform all or any material portion of the Agreement;

(vi) UNFI **[CONFIDENTIAL]**(57), and UNFI has failed to remedy **[CONFIDENTIAL]**(58),    of breach by WO; provided, however, that UNFI shall not be entitled to a cure period upon    the second breach of this provision in any running 12-month period and WO may, upon notice    to UNFI of such second breach, immediately terminate this Agreement on a nationwide or    regional basis;

(vii) The quality of service provided by UNFI is below the level as    required herein, and UNFI has failed to remedy service problems within 30 days after    written notice of breach by WO. For purposes hereof, quality of service issues shall    include, but not be limited to, the following:

(A) UNFI is unable, after 10 days’ written notice and opportunity        to cure, to meet regional or national, as applicable, delivery windows to the Stores as        set forth in this Agreement, including on **Exhibit I** attached hereto, as such may be        amended by mutual agreement of the parties from time to time, including but not limited to        hours and days of delivery, delivery routes, condition of Products, or execution of        invoices at the Store, provided it has been given reasonable advance notice of any unusual        requirements; or

(B) Products delivered by UNFI fail to meet the quality standards and        specifications set forth herein, including Code Date policies, temperature control limits        or arrive in damaged, infested, or adulterated conditions, or the BNRs as shown by an        audit by either party exceed **[CONFIDENTIAL]**(59).

 

(57)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC*.*
(58)  *Ibid.*
(59)  *Ibid.*
 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

Notwithstanding the foregoing, WO shall not have the right to terminatethe Agreement for cause if noncompliance by UNFI with any of the foregoing results fromintentional sabotage by WO employees, Force Majeure events (as defined below), or thenegligent or intentional acts or omissions of WO. Nothing herein shall prohibit WO fromceasing to purchase Products under Section 2 above without notifying UNFI of a breachhereunder.

 

(c) UNFI may terminate the Agreement for cause on immediate writtennotice if:

 

(i) WO fails to make any payment, credit, rebate or other remittance of    monetary consideration provided for herein on the date due, other than payments regarding    which WO has given UNFI notice of a good faith dispute, and fails to remedy any delinquent    payment within five business days after notice thereof from UNFI (which failure to cure    shall be an event of default), or if such breach occurs more than twice in any given    calendar year;

 

(ii) Regulatory violations by WO where the violations or the corrective    action required materially and adversely affect the continued ability of WO to perform    under the Agreement beyond 30 days; 

(iii) WO fails to purchase **[CONFIDENTIAL]**(60) during the Term    hereof, commencing as of the Effective Date) during the Term of this Agreement, other than    where such failure is caused by Force Majeure or UNFI or manufacturer OOS; and

(iv) WO materially breaches any other non-monetary obligations under    the Agreement not specifically referenced above in this Section, and fails to cure such    breach after 30 days’ prior written notice of breach; 

(v) The results of any audit conducted by UNFI of any data points set    forth the Agreement prove deliberate fraud or gross misconduct of WOof    a nature that is material in either dollar amounts or percentages to total amounts or to    the operational units affected, or that could reasonably result in a material impact to    the reputation or operational performance of WO. UNFI agrees that notwithstanding the    amount of any fraud discovered, UNFI will take prompt steps to rectify any damage caused    by the fraud and will implement controls designed to deter such fraud in the future. UNFI    may also terminate if it is determined by any regulatory agency, or WO publicly announces    that any certification given by officers of WO relating to internal controls or fraud were    materially incorrect. 

(d) Not earlier than **[CONFIDENTIAL]**(61), UNFI may give WO noticethat UNFI **[CONFIDENTIAL]**(62) from the business relationship evidenced by this

(60)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.**
(61)  *Ibid.*
(62)  *Ibid.*
*****CONFIDENTIAL TREATMENT REQUESTED**

 

 

Agreement. The parties shall then negotiate in good faith, **[CONFIDENTIAL]**(63)following WO’s receipt of such notice, such modifications of this Agreement as may benecessary to allow UNFI **[CONFIDENTIAL]**(64). If after, **[CONFIDENTIAL]**(65) theparties are unable to reach agreement on modifications sufficient to allow UNFI **[CONFIDENTIAL]**(66),then UNFI may give WO notice of termination of this Agreement **[CONFIDENTIAL]**(67)after WO’s receipt of the termination notice. Such termination right shall not bedeemed a default hereunder. **[CONFIDENTIAL]**(68).

 

(e) Notwithstanding anything to the contrary in this Agreement, thefollowing will apply in a Force Majeure event:

 

(i) If the Force Majeure event affects, for a period of at least 10    consecutive days, in any material manner the operations in any DC or any region served    primarily by one DC, as the case may be, of the party who is not claiming the benefit of    the Force Majeure provision (the "Non-Affected Party"), then the Non-Affected    Party may on written notice to the Affected Party suspend its obligations hereunder    (including without limitation Section 2(a)), other than the payment of sums due unless the    Force Majeure event relates to the operation of the banking system, with respect to such    DC or region until such time that the Affected Party is able to resume its obligations in    full with respect to such DC or region. The parties agree that **[CONFIDENTIAL]**(69)    of Buyer. 

(ii) In the event that Force Majeure continues for more than 60    consecutive days, and the Affected Party has not provided an acceptable alternative remedy    to fully mitigate the disruption, the Non-Affected Party may terminate the Agreement or    Definitive Agreement as to the DC or region affected by the Force Majeure event, on 30    days written notice to the Affected Party provided that the Force Majeure event exists on    the date of the notice of termination.

18. Representations and Warranties of UNFI. UNFI represents andwarrants to WO as follows, and such representations and warranties shall survive theCommencement Date: 

 

(a) *Corporate Organization and Authority.* UNFI (i) is acorporation duly organized, validly existing and in good standing under the laws of theState of Delaware, and is authorized to transact business in each State in which suchauthority is required by law; and (ii) has the corporate power and authority to own andoperate its properties and to carry on its business as now conducted and as proposed to beconducted.

 

(63)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.**
(64)  *Ibid.*
(65)  *Ibid.*
(66)  *Ibid.*
(67)  *Ibid.*
(68)  *.Ibid.*
(69)  *Ibid.*

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(b) *Authorization.*UNFI has the corporate power and authority toexecute, deliver and perform its obligations under this Agreement and has taken allnecessary corporate action to authorize its execution, delivery and performance of thisAgreement. This Agreement has been duly executed and delivered on behalf of UNFI andconstitutes the legal, valid and binding obligation of UNFI, enforceable in accordancewith its terms, except as enforceability may be limited by applicable bankruptcy,insolvency, reorganization or other similar laws affecting creditors’ rightsgenerally and by general equitable principles (regardless of whether the issue ofenforceability is considered in a proceeding in equity or at law).

 

(c) *No Consents; Conflicts*. No consent, authorization by,approval of or other action by, and no notice to, or filing or registration with, anygovernmental authority, agency, regulatory body, lender, lessor, franchisee or otherperson is required for the execution, delivery or performance of this Agreement by UNFI,other than those that have been obtained and are in full force and effect. The execution,delivery and performance of this Agreement will not result (with or without due notice orlapse of time or both) in any violation or breach of any provision of the charter orby-laws of UNFI, any judgment, decree or order to which UNFI is a party or by which it isbound, any indenture, mortgage or other agreement or instrument to which UNFI is a partyor by which it is bound or any statute, rule or regulation applicable to UNFI.

 

(d) *Sufficient Personnelto Perform Obligations*. UNFIrepresents that as of the execution of this Agreement, UNFI has sufficient personnel withadequate training and expertise to perform its obligations as contemplated hereunder inthe time frames contemplated herein.

 

(e) *National Organic Standards.*UNFI represents that it hasadequate processes and systems in place, and has adequately educated its personnel, tocomply with all federal, state and local regulations relating to handling and labeling oforganic products, including but not limited to the National Organic Standards aspromulgated by the U.S. Department of Agriculture and as such applies to UNFI as a handleror processor of organic foods. UNFI acknowledges that WO has placed substantial relianceon UNFI to handle various foods for human consumption so as to not invalidate any"organic" designation of such foods.

 

(f) *Computer Systems*. As of the date of this Agreement, UNFI hasproper security safeguards in place to ensure the confidentiality of all of WO’s dataas contained in UNFI’s computer systems. All such systems will perform withoutmaterial defect or error in compliance with the performance standards set forth in thisAgreement. UNFI has a disaster recovery program in place to ensure that, in the event of acatastrophic destruction of any portion of UNFI’s computer systems, wherever located,UNFI will be able to recover all necessary data to continue to perform its obligationshereunder in substantially the time frames contemplated herein.

 

(g) *Facilities’ Condition and Capacity*. All of the DCsparticipating in this Agreement will be maintained and operated in accordance with UNFIwarehousing and delivery standards. Such facilities have the operational systems requiredto support the obligations of UNFI as set forth in this Agreement, and all such
*****CONFIDENTIAL TREATMENT REQUESTED**

 

 

facilities have adequate capacity to order, store and deliver Productsin accordance with the terms of this Agreement and in the amounts contemplated by WO. Allthe DCs participating in this Agreement shall have sufficient security measures in placeprior to receipt of Products for WO to ensure that such Products are not tampered with oradulterated in any manner, and that all such Products shall be maintained at temperaturesand other storage conditions necessary to preserve the freshness and integrity of theProducts.

 

(h) *Ownership of UNFI*. No entity constituting a competitor toWO, which for purposes of this paragraph includes all conventional and natural foodgrocery store chains, owns more than a 5% equity interest in UNFI. No such entity has anyrights to purchase, through warrants, options, rights of first refusal, preemptive rightsor any other legal right or obligation, any equity interest in UNFI which, together withany existing interest, would aggregate more than 5% if fully exercised (other thanpurchases made on the open market).

 

(i) *Litigation*. There is no pending nor, to UNFI’sknowledge, threatened litigation, governmental action, action for injunctive or otherequitable relief or other threatened or outstanding claims of any nature which couldreasonably (i) interfere with UNFI’s performance of its obligations hereunder, or(ii) have a material or detrimental impact on UNFI’s assets or operations as suchexist as of the Effective Date.

 

(j) *Information Provided to Auditors.*All information that shallbe provided by UNFI to auditors retained by WO shall be provided in the format in whichsuch information is maintained in the normal course of UNFI’s business, and toUNFI’s knowledge, all such information shall be true and correct in all materialrespects, except as otherwise disclosed to WO and the auditors at the time of disclosure.

 

19. Representations and Warranties of WO. WO hereby representsand warrants to UNFI as follows, and such representations and warranties shall survive theCommencement Date: 

 

(a) *Corporate Organization and Authority*. WO (i) is acorporation duly organized, validly existing and in good standing under the laws of theState of Delaware; and (ii) has the corporate power and authority to own and operate itsproperties and to carry on its business as now conducted and as proposed to be conducted.

 

(b) *Authorization.* WO has the corporate power and authority toexecute, deliver and perform its obligations under this Agreement and has taken allnecessary corporate action to authorize its execution, delivery and performance of thisAgreement. This Agreement has been duly executed and delivered on behalf of WO andconstitutes the legal, valid and binding obligation of WO, enforceable in accordance withits terms except as enforceability may be limited by applicable bankruptcy, insolvency,reorganization or other similar laws affecting creditors’ rights generally and bygeneral equitable principles (regardless of whether the issue of enforceability isconsidered in a proceeding in equity or at law). 

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(c) *No Consents; Conflicts*. No consent, authorization by,approval of or other action by, and no notice to, or filing or registration with, anygovernmental authority, agency, regulatory body, lender, lessor, franchisee or otherperson is required for the execution, delivery or performance of this Agreement by WO,other than those that have been obtained and are in full force and effect. The execution,delivery and performance of this Agreement will not result in (with or without due noticeor lapse of time or both) any violation or breach of any provision of the charter orby-laws of WO, any judgment, decree or order to which WO is a party or by which it isbound, any indenture, mortgage or other agreement.

(d) *Litigation*. There is no pending nor, to WO’s knowledge,threatened litigation, governmental action, action for injunctive or other equitablerelief or other threatened or outstanding claims of any nature which could reasonably (i)interfere with WO’s performance of its obligations hereunder, or (ii) have a materialdetrimental impact on WO’s assets or operations as such exist as of the EffectiveDate.

 

(e) *Computer Systems*. As of the date of this Agreement, WO hasproper security safeguards in place to ensure the confidentiality of all of UNFI’sdata as contained in WO’s computer systems. All such systems will perform withoutmaterial defect or error in compliance with the performance standards set forth in thisAgreement. WO has a disaster recovery program in place to ensure that, in the event of acatastrophic destruction of any portion of WO’s computer systems, wherever located,WO will be able to recover all necessary data to continue to perform its obligationshereunder in substantially the time frames contemplated herein.

 

(f) *Sufficient Personnel to Perform Obligations.* As of theexecution of this Agreement, WO has sufficient personnel to perform its obligations ascontemplated hereunder in timeframes contemplated herein.

 

(g) *Ownership of WO*. No entity constituting a competitor toUNFI, which for purposes of this paragraph includes other distributors with gross revenuesof more than $100 million, owns more than a 5% equity interest in WO. No such entity hasany rights to purchase, through warrants, options, rights of first refusal, preemptiverights or any other legal right or obligation, any equity interest in WO which, togetherwith any existing interest, would aggregate more than 5% if fully exercised (other thanpurchases made on the open market).

 
 

20. Binding Effect. This Agreement is a binding obligationbetween the parties hereto for the sale by UNFI and purchase by WO for the Productsreferenced at the prices and other terms set out in or referenced herein, and may beenforced by either party in accordance with its terms. This Agreement supersedes allprevious agreements between the parties.

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

21. Miscellaneous. (a) *Force Majeure.*"ForceMajeure" events shall be events beyond the reasonable control of a party (and notthrough the fault or negligence of such party) that make timely performance of anobligation not possible. Without limiting the generality of the foregoing, vehiclebreakdowns due to a party’s failure to properly maintain a vehicle, or inclementweather not of unusual severity or in which vehicles similar to those of the partyclaiming Force Majeure are traveling, do not constitute Force Majeure events. A ForceMajeure event is not reasonably foreseeable with the exercise of reasonable care, noravoidable through the payment of nonmaterial additional sums. In the event of a ForceMajeure, the party so affected shall give prompt written notice to the other party of thecause and shall take whatever reasonable steps are necessary to relieve the effect of suchcause as rapidly as possible. No finance charge will be assessed on either party for latepayments due to Force Majeure events.

(b) *Governing Law, etc.*Each of the parties hereto irrevocablywaives all rights to a trial by jury with respect to any dispute relating to thisAgreement, the subject matter hereof or the entering into or termination of this Agreement(a "Dispute")**.**This Agreement and all actions related hereto shall begoverned by, and any dispute shall be resolved in accordance with, the laws of the Stateof Colorado, excluding its internal choice of law principles.

 

In the event of any Dispute, such Dispute, if not resolved promptly inthe ordinary course between representatives of the parties, shall be submitted forsettlement negotiation between the Chief Executive Officer of UNFI and Chief ExecutiveOfficer of WO, and if such procedure does not resolve such Dispute within 30 days after arequest for such settlement negotiation to the other party, then and only then shall allsuch Disputes be resolved exclusively by the process of litigation in accordance with thisSection. The parties agree that all disputes shall be brought either in Federal DistrictCourt for the Southern District of New York, and if Federal District Court is notavailable to the parties because of a lack of diversity jurisdiction, then in the SupremeCourt for the State of New York, County of New York.

(c) *Recovery of Fees and Costs.*In the event of a dispute, theprevailing party shall be entitled to recovery of reasonable attorneys’ fees andcosts (including costs of appeal).

(d) *Confidentiality.*The parties to this Agreement shallmaintain as confidential the specific terms hereof ("Confidential Information"),and shall not disclose such terms to any third party (other than to its own outside legal,accounting, insurance or financial advisors as necessary) without the other party’sprior written consent. "Confidential Information" about a party learned underthis Agreement shall not be used during or after the term of this Agreement except inconnection
*****CONFIDENTIAL TREATMENT REQUESTED**

 

 

with the party’s obligations hereunder, and without limiting theforegoing, such information as to WO may not be used by UNFI in connection with themarketing, distribution or sale of UNFI’s products other than to WO. The term"Confidential Information" shall include computer software, source code, objectcode, hardware configurations and all other information relating to a party, its businessand prospects, learned by the other party or disclosed by such party from time to time tothe other party in any manner, whether orally, visually or in tangible form (including,without limitation, documents, devices and computer readable media) and all copies,improvements, derivatives and designs thereof, created by either party whether owned by orlicensed to such party. The term "Confidential Information" shall also be deemedto include all notes, analyses, compilations, studies, interpretations or other documentsprepared by a party that contain, reflect or are based upon the information furnished tosuch party by the other party pursuant hereto. Confidential Information shall not includeany information that:

(i) was in a party’s possession prior to disclosure by the other    party hereunder, provided such information is not known by such party to be subject to    another confidentiality agreement with or secrecy obligation to the other party;

(ii) was generally known in the grocery industry    at the time of disclosure to a party hereunder, or becomes so generally known after such    disclosure, through no act of such party;

(iii) has come into the possession of a party from a third party who is    not known by such party to be under any obligation to the other party to maintain the    confidentiality of such information; or

(iv) was independently developed by a party without the use of any    Confidential Information of the other party, to the extent that such independent    development is reasonably established by such first party to the other party.

Notwithstanding the foregoing, nothing hereinshall prevent the filing of a copy of this Agreement as an exhibit to any filing requiredby an regulatory agency having jurisdiction over either party, provided that a partyrequired to file a copy hereof shall notify the other party of the filing and request anduse its best efforts to obtain confidential treatment of all financial terms of thisAgreement prior to the filing thereof. In addition, either party may disclose the terms ofthis Agreement pursuant to a valid subpoena, provided such party gives the other partyreasonable prior notice of the service of any subpoena to permit the other party to seek aprotective order, and seeks confidential treatment of all financial terms hereof.
The parties acknowledge and agree that the non-breaching party’sremedy at law is inadequate in the event of any breach or threatened breach by the otherparty of its agreements set forth in this Section. In the event of such breach orthreatened breach, in addition to any other remedy which may be available to thenon-breaching party, the non-breaching party shall be entitled to seek, without posting abond, preliminary or permanent injunctive and/or other equitable relief restraining thebreaching party, or any of its agents or employees, from breaching or acting in any mannerinconsistent with the conduct or performance required by this Section.

 

(e) *Amendment; Assignment.*This Agreement may not be amended ormodified except by an instrument in writing signed by an authorized officer of each party.It is agreed that neither party shall transfer or assign this Agreement or any part hereofor any right arising hereunder, by operation of law or otherwise, without the
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prior written consent of the other, which consent will not beunreasonably withheld. A party may reasonably withhold its consent if, in such party'sgood faith judgment, the proposed assignee: (i) does not have sufficient financialresources or assets to perform its obligations under the Agreement; (ii) does not havesufficient experience or expertise in the distribution and supply of food products in thecase of an assignment by UNFI or its direct or indirect parent, or grocery retail businessin the case of an assignment by WO, unless the existing operations management personnelprior to the assignment remain in control of the daily operations of the assignor aftersuch assignment; (iii) is engaged in the same business as the non-assigning party; (iv)does not deliver its written commitment to carry out the Agreement at the same level ofbusiness being conducted by the assigning party immediately prior to the proposedassignment; or (v) is a competitor of the non-assigning party. This Agreement shall beassigned to and binding upon any purchaser of all or substantially all of the assets ofeither party hereto. 

 

In the event a party requests such consent to such a transfer, suchparty shall meet with the other party to provide any information reasonably requested bythe other party regarding the proposed transferee. Any purported assignment withoutconsent shall be void and of no force or effect or, at the other party’s option,shall terminate this Agreement. Subject to the foregoing, this Agreement shall be bindingon the respective parties and their permitted successors and assigns.

**CONFIDENTIAL]**(70).

(f) *Entire Agreement; Survival*. This Agreement (and anydocuments referred to herein or therein) represents the entire agreement and understandingof the parties with respect to the matters set forth herein, and there are norepresentations, warranties or conditions or agreements (other than implementing invoices,purchase orders and the like necessary to implement this Agreement) not contained herein(or in any documents not referred to herein) that constitute any part hereof or that arebeing relied upon by any party hereunder. Notwithstanding any termination of thisAgreement, all claims arising prior to such termination for any breach of or for anyamount due under this Agreement (excluding any such claims that have been satisfied,waived or released prior to such termination) under this Agreement, shall survive suchtermination, and in addition, the following sections shall survive any such termination:10, 12 (for not more than 120 days following termination), 14(b), 15, 16, 21(b) – (d), (f), (g), (i), (j).

* 
(g) Severability. If any provision of this Agreement is held by acourt of competent jurisdiction to be invalid, void, or unenforceable, the remainingprovisions shall nevertheless continue in full force without being impaired or invalidatedin any way.

 

(h) *Publicity.* Both parties shall agree on a joint initial pressrelease on the entering into of this Agreement; provided, however, that either party mayissue releases as deemed necessary by their respective securities counsel under applicablelaws governing the release of information.

 

(70)  Confidential treatment has been requested for the redacted portion.The confidential, redacted portions have been filed separately with the SEC.**

 
*****CONFIDENTIAL TREATMENT REQUESTED**

 

(i) *Notices.*Any notices to be given by either party to theother shall be in writing by personal delivery or by mail, registered or certified,postage prepaid with return receipt requested, or by facsimile (only with receiptconfirmed). Notices shall be addressed to the parties at the addresses set forth below orto such other address as shall have been so notified to the other party in accordance withthis Section. Notices to UNFI shall be addressed to: Steve Townsend, UNFI, 260 Lake Road,Dayville, CT 06241, FAX: 860-779-0746, with a copy, which shall not constitute notice, toE. Colby Cameron, Esq., Cameron & Mittleman LLP, 56 Exchange Terrace, Providence, RI02903, FAX: 401-331-5787. Notices to WO shall be addressed to: Chief Executive Officer,Wild Oats Markets, Inc., 3375 Mitchell Lane, Boulder, CO 80301-2244, Fax: (303) 402-9920,with a copy to Freya Brier, Esq., General Counsel, Wild Oats Markets, Inc., 3375 MitchellLane, Boulder, CO 80301-2244, FAX: (303) 440-7316.

 

(j) *No Third Party Beneficiaries .*Nothing in this Agreement,whether expressed or implied, is intended to confer on any person other than the partiesto this Agreement or their respective successors or permitted assigns, any rights,remedies, obligations or liabilities.

(k) *Alliance.*WO and UNFI agree that an objective of the partiesis to establish during the Term of this Agreement, a mutually supportive alliance withrespect to the Products and the unified supply chain management concept relating to thepurchase and sale of the Products which is embodied in the Agreement.

 

(l) *Authority*. WO and UNFI each represent and warrant to theother that the individual executing this Agreement has full authority to execute thisAgreement, and when executed this Agreement is a binding obligation of the party.

 

(m) *Expenses.* Except as otherwise provided herein, all costs andexpenses (including legal and accounting fees) incurred in connection with this Agreementand the transactions contemplated hereby shall be borne by the party incurring suchexpense.

 

(n) *Independent Contractors.*In all matters relating to thisAgreement both parties shall be acting solely as independent contractors and shall besolely responsible for the acts of their respective employees, contractors and agents.Employees, agents or contractors of one party shall not be considered employees, agents orcontractors of the other party.

 
 

(o) *Titles and Headings; Counterparts; Facsimile Signature.* Thetitles and headings to Sections herein are inserted for the convenience of reference onlyand are not intended to be a part of or to affect the meaning or interpretation of thisAgreement. This Agreement may be executed in one or more counterparts, all of which willbe considered one and the same agreement, and will become a binding agreement when one ormore counterparts have been signed by each party and delivered to the other party.Facsimile signatures shall be deemed original signatures for purposes of execution of thisdocument.

 
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(p) *Negotiation of Agreement,*Each party and its counsel havecooperated in the drafting and preparation of this Agreement and the documents referred toherein, and any drafts relating thereto shall be deemed the work product of the partiesand may not be construed against any party by reason of its preparation. Any rule of lawor any legal decision that would require interpretation of any ambiguities in thisAgreement against the party that drafted it is of no application and is hereby expresslywaived.

Executed as of the date first set forth above.

 WILD OATS MARKETS, INC.UNITED NATURAL FOODS, INC. 
By: Freya Brier, Vice President, Legal  
By: Steve Townsend, President
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