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Prepared by MERRILL CORPORATION

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Exhibit 10.16    
  

 
 

COMMERCIAL LEASE    
  

	 
	 	 
	 	 

	Date:	 	as of April 1, 2001
	

Between:	
 	

McLAIN-RUBIN REALTY COMPANY II, L.L.C.,
	 	 	a Delaware limited liability company	 	("Landlord")
	 	 	38207 Northeast Gerber Road
	 	 	Yacolt, WA 98675
	

And:	
 	

WESTERN POWER & EQUIPMENT CORP.,
	 	 	an Oregon corporation	 	("Western Power" or "Tenant")
	 	 	6407-B N.E. 117th Avenue
	 	 	Vancouver, Washington 98662

    Subject
to the terms and conditions of this Lease, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the real property described on Exhibit A hereto (which by
this reference is made a part hereof), together with all improvements now and hereafter situated on said land (said land, together with such improvements, being hereinafter referred to as the
"Premises"). The Premises are located at 6407-B N.E. 117th Avenue, Vancouver, Washington. 

    The
parties hereto, for themselves, their heirs, administrators, executors, successors and assigns, hereby covenant and agree as follows: 

    Section 1.  Occupancy  

    1.1  Term.  The term of this Lease (hereinafter referred to as the "Term") shall commence on the date
(the "Commencement Date") on which Landlord acquires fee title to the Premises, and continue through, and expire on, March 31, 2006 (the "Expiration Date"), unless sooner terminated as hereinafter
provided. 

    1.2  Possession.  Tenant's right to possession of the Premises, and its obligations under this Lease,
shall commence on the Commencement Date. If the Commencement Date does not fall on the first day of the month, Rent (as hereinafter defined) for the first month under this Lease shall be prorated
accordingly, and shall be due on the Commencement Date. 

    Section 2.  Rent  

    2.1  Base Rent.  Tenant covenants and agrees to pay to Landlord an annual base rent (the "Base Rent"), in
equal monthly installments, in advance, without demand, deduction or set off, at such place as may be designated by Landlord, on the first day of each month throughout the Term of this Lease, $98,400
per year ($8,200 per month). 

    2.2  Additional Rent.  All taxes, insurance costs, utility charges, maintenance costs, repair charges and
other sums that Tenant is required to pay pursuant to this Lease to Landlord or third parties, shall be "additional rent." For the purposes of this Lease, Base Rent and additional rent are sometimes
collectively referred to as "Rent." 

    Section 3.  Use of the Premises  

    3.1  Permitted Use.  The Premises shall be used for general office use, and for any other lawful purpose,
subject to the applicable provisions of this Lease. 

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    3.2  Restrictions on Use.  In connection with the use of the Premises, Tenant shall: 

    (a) Comply with all applicable laws and regulations of any public authority having jurisdiction over the Premises and
the use thereof, and correct, at Tenant's own expense, any failure of compliance created through Tenant's fault or by reason of Tenant's use; 

    (b) Refrain from any activity that would make it impossible to insure the Premises against casualty, would permanently
increase the insurance rate, or would prevent Landlord from taking advantage of any ruling allowing Landlord to obtain reduced premium rates for long-term fire insurance policies, unless Tenant pays
the additional cost of the insurance; 

    (c) Refrain from any use that would be reasonably offensive to other tenants or owners or users of neighboring premises
or that would tend to create a nuisance or damage the reputation of the Premises; 

    (d) Refrain from loading the electrical system or floors beyond the point considered safe by a competent engineer or
architect reasonably selected by Landlord; and 

    (e) Subject to Section 3.3, refrain from making any marks on or attaching any additional sign, insignia, antenna,
aerial, satellite dish or other device to the exterior or interior walls, windows, or roof of the Premises without the written consent of Landlord, which shall not be unreasonably withheld or delayed. 

    3.3  Signage.  Tenant will be responsible for providing its own signage. Tenant will obtain Landlord's
prior approval of the design, size, color, materials, and other details of the sign face, which approval shall not be unreasonably withheld or delayed. Landlord acknowledges that Tenant already has
signage on the Premises and hereby consents to such signage. 

    3.4  Hazardous Substances.  

    (a) Definitions. For purposes of this Section, the term "Hazardous Substance" means any substance, material or waste,
including oil or petroleum products or their derivatives, solvents, PCB's, explosive
substances, asbestos, radioactive materials or waste, and any other toxic, ignitable, reactive, corrosive, contaminating or pollution materials which are now or in the future subject to any
governmental regulation; the term Hazardous Substance Laws" means all federal, state and local laws, ordinances, regulations and standards relating to the use, analysis, production, storage, sale,
release, discharge, disposal or transportation of any Hazardous Substance. 

    (b) Tenant Compliance With Hazardous Substance Laws. Neither Tenant or its officers, employees, agents, invitees,
sublessees or assigns shall cause or permit any Hazardous Substance to be spilled, leaked, disposed of, or otherwise released or discharged on or under the Premises, or cause any Hazardous Substance
to be spilled, leaked, disposed of, or otherwise released or discharged on or under any property adjacent to the Premises. Tenant may use or otherwise handle on the Premises only those Hazardous
Substances (hereinafter referred to as "Ordinary Hazardous Substances") typically used or sold in the prudent and safe operation of the business specified in Section 3.1. Tenant may store such
Hazardous Substances on the Premises only in quantities necessary to satisfy Tenant's reasonably anticipated needs. Tenant shall comply with all Hazardous Substance Laws and exercise care in the use,
handling, storage and transportation of Hazardous Substances and shall take all possible measures consistent with the practicable operation of its business to minimize the quantity and toxicity of
Hazardous Substances used, handled, transported or stored on the Premises. Upon the expiration or termination of this Lease, Tenant shall remove from the Premises all Hazardous Substances stored there
by Tenant or its sublessees or assigns. 

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    (c) Indemnification by Tenant. Tenant shall indemnify, defend, and hold Landlord harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, or losses which arise during or after the Term as a result of contamination by Hazardous Substances as a result of Tenant's use or activities
or the use or activities of Tenant's officers, employees, agents, invitees, sublessees or assigns. This indemnification of Landlord by Tenant shall include, without limitation, all costs incurred in
connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state, or local governmental agency or political subdivision because
of Hazardous Substances present in the soil and ground water on or under the Premises. 

    (d) Indemnification by Landlord. Landlord shall indemnify, defend, and hold Tenant harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, or losses which arise during or after the Term as a result of contamination by Hazardous Substances that exist on or before the date of this
Lease or as a result of Landlord's use or activities on the Premises or the use or activities of Landlord's officers, employees, agents, invitees, or assignees on the Premises. This indemnification of
Tenant by Landlord shall include, without limitation, all costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any
federal, state, or local governmental agency or political subdivision because of Hazardous Substances present in the soil and ground water on or under the Premises. 

    (e) Notification. Each party shall give written notice to the other within three (3) business days after the date on
which the party learns or first has reason to believe that: 

    (1) there
has or will come to be located on or about the Premises any Hazardous Substance (other than Ordinary Hazardous Substances); 

    (2) a
release, discharge or emission of a Hazardous Substance has occurred on or about the Premises; 

    (3) an
enforcement, cleanup, removal or other governmental or regulatory action has been threatened or commenced against the party or with respect to the Premises
pursuant to any Hazardous Substance Laws; 

    (4) a
claim has been made or threatened by any person or entity against the party or the Premises on account of an alleged loss or bodily injury claimed to result from
the alleged presence or release on the Premises of a Hazardous Substance; or 

    (5) a
report, notice, or complaint has been made to or filed with a governmental agency concerning the presence, use or disposal of any Hazardous Substance on the
Premises. Any such notice shall be accompanied by copies of any such claim, report, complaint, notice, warning or other communication that is in the possession of or is reasonably available to the
party. 

    (f)  Cleanup Activity.

    (1) If
during the Term any remedial action is necessary to clean up any environmental contamination of the Premises (the "Cleanup Activity") to which Tenant's
indemnification of Landlord in Section 3.4(c) applies, Tenant shall proceed with reasonable diligence to complete the Cleanup Activity as promptly as possible in compliance with all Hazardous
Substance Laws. If after written notice from Landlord, Tenant fails to proceed with reasonable diligence to complete the Cleanup Activity, Landlord shall have the right, but not the obligation, to
carry out the Cleanup Activity, and to recover all of the costs and expenses thereof from Tenant. The rights and obligations of the parties set forth in this Section 3.4(f) shall be in addition to
those rights and obligations set forth elsewhere in this Lease. 

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    (2) Except as set forth in Section 3.4(f)(1), if any other Cleanup Activity is necessary, Landlord shall proceed with reasonable diligence to complete the Cleanup
Activity as promptly as possible in
compliance with all Hazardous Substance Laws. If Landlord fails to proceed with reasonable diligence to complete the Cleanup Activity, Tenant shall have the right, but not the obligation, to carry out
the Cleanup Activity, and to recover all of the costs and expenses thereof from Landlord as a set off against payment of rent under this Lease. The rights and obligations of the parties set forth in
this Section 3.4(f) shall be in addition to those rights and obligations set forth elsewhere in this Lease. 

    (g) Phase I Report. Within thirty (30) days prior to after the expiration or sooner termination of the Term, Tenant, at
its expense, shall cause a so-called "Phase I" environmental inspection to be performed and a report in respect thereof to be prepared and delivered to both Landlord and Tenant to determine whether
any Cleanup Activity is required, Landlord and Tenant agreeing that the responsibility for the Cleanup Activity shall be determined by the preceding provisions of this Section. 

    (h) Survival. The parties obligations under this Section 3.4 shall survive the expiration or earlier termination of this
Lease. 

    Section 4.  Repairs and Maintenance  

    4.1  Tenant's Obligations.  Tenant shall repair and maintain the entire Premises to the extent necessary
to preserve the Premises in good working order and condition, including but not limited to providing regularly scheduled maintenance and replacement (if necessary) of the heating and air conditioning
system, and making structural repairs. Tenant's repair obligation shall include, but not be limited to, the repair of any damage to exterior building siding and internal walls of the Premises caused
by moving furniture, fixtures and equipment in and out of the Premises. Tenant shall have the roof maintained yearly by a qualified roof contractor. 

    4.2  Repairs to Comply with Laws.  All repairs, alterations and other improvements on or to the Premises
that are required by any governmental authority having jurisdiction over the Premises or the use thereof shall be performed by Tenant at its sole cost and expense. 

    4.3  Reimbursement for Repairs Assumed.  If Tenant fails or refuses to make the repairs that are required
by this Section in a timely manner, Landlord may (but shall not be obligated to) make the repairs and charge the actual costs of repairs to Tenant. Such expenditures by Landlord shall be charged to
Tenant as additional rent and shall be reimbursed by Tenant within ten (10) days after Landlord's demand therefor. Except in an emergency creating an immediate risk of personal injury or property
damage, Landlord may not perform repairs which are the obligation of Tenant and charge Tenant for the resulting expense, unless at least ten (10) days before work is commenced Tenant is given notice
in writing outlining with reasonable particularity the repairs required, and Tenant fails within that time to initiate such repairs in good faith. 

    4.4  Inspection of Premises.  Landlord shall have the right to inspect the Premises at any reasonable
time or times, and upon reasonable prior (written or oral) notice, to determine the necessity of repair. 

    4.5  Landlord's Obligations.  Landlord shall be responsible for the structural integrity of the Premises
including floors, ceilings, roof, exterior walls, and foundation. However, Tenant shall be responsible for all maintenance and repairs to roof, walls, and foundations including maintenance and repairs
for normal wear and tear and conditions caused by or attributable to Tenant's activities on the Premises. 

    Section 5.  Alterations  

    5.1  Alterations Prohibited.  Tenant shall make no improvements or alterations to the Premises without
first obtaining Landlord's written consent, which consent shall not be 

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unreasonably withheld or delayed. All alterations shall be made according to architectural designs and plans, construction drawings and specifications approved by Landlord, which approval shall not be
unreasonably withheld or delayed, and in a good and workmanlike manner, and in compliance with applicable laws and building codes. As used herein, "alterations" includes the exterior installation of
transmitters and receivers (e.g., satellite dishes) and related wiring, cables, and conduit. All approved improvements and alterations shall be made at Tenant's sole expense and Tenant shall keep the
Premises free from any lien arising out of work performed pursuant to this Section. In the event any such lien is filed against the Premises by any person claiming by, through or under Tenant, Tenant
shall, within fifteen (15) days after Landlord's demand therefor, at Tenant's expense, either cause such lien to be removed from the record or furnish a bond in form and amount and issued by a surety
reasonably satisfactory to Landlord, indemnifying the Landlord against all liability relating to such lien. Provided that such bond has been furnished to Landlord, Tenant, at its sole cost and expense
may contest, by appropriate proceedings conducted in good faith and with due diligence, any lien, encumbrance or charge against the Premises arising from work done or materials provided to and for
Tenant, providing that such contest is conducted in a manner that does not cause any risk that Landlord's interest in the Premises will be foreclosed for nonpayment. 

    5.2  Ownership and Removal of Alterations.  All approved improvements and alterations made to the
Premises by Tenant during the Term, other than Tenant's trade fixtures, shall be the property of Landlord when installed unless the applicable Landlord's consent provides otherwise. Upon expiration of
the Term or earlier termination under this Lease, Tenant's trade fixtures shall be removed by Tenant and the Premises restored to its condition prior to installation if the applicable consent so
requires. 

    Section 6.  Insurance; Indemnification; Subrogation  

    6.1  Liability Insurance.  Tenant shall procure, and thereafter maintain during the Term, the following
insurance at Tenant's cost: commercial general liability policy (occurrence version) in a responsible company with coverage for bodily injury and property damage liability with a general aggregate
limit of not less than $1,000,000 for injury to one person, $3,000,000 for injury to two or more persons in one
occurrence. Such insurance shall cover all risks arising directly or indirectly out of Tenant's activities on, or any condition of, the Premises. Such insurance shall protect Tenant against the claims
of Landlord on account of the obligations assumed by Tenant under Section 6.3, and shall name Landlord as an additional insured. Certificates evidencing such insurance and bearing endorsements
requiring 10 days' written notice to Landlord prior to any change or cancellation shall be furnished to Landlord prior to Tenant's occupancy of the Premises. 

    6.2  Property Insurance.  Tenant shall, at Tenant's expense, keep the Premises insured against loss or
damage resulting from perils covered by what is commonly referred to as "all risk" coverage insurance (but excluding earthquake and flood) for the full insurable replacement cost (guaranteed
replacement). All premiums on said policy(s) shall be paid by Tenant. The policy(s) or a certificate thereof signed by the insurer shall be delivered to Landlord within five (5) days after the
issuance and/or renewal of the policy(s) to the Tenant. Each policy shall name Landlord as an additional insured, and shall provide that such policy(s) may not be amended or canceled without thirty
(30) days' prior written notice to Landlord. If Tenant fails to obtain the above required insurance, Landlord may, but shall not be required to procure such insurance and charge the cost to Tenant as
additional rent, payable on demand. Tenant shall carry similar insurance insuring the property of Tenant on the property against such risks. Tenant shall also carry earthquake insurance on the
Premises at Tenant's sole expense. 

    6.3  Indemnification.  Except as set forth in Section 3.4(d), Tenant shall indemnify and hold Landlord
harmless from and against any and all third-party claims, loss or liability for accident, injury or damage to persons or property arising from or in connection with, Tenant's possession, operation,
use, or occupation of the Premises. In case any action or proceeding is brought against Landlord and such claim is a claim from which Tenant is obligated to indemnify Landlord pursuant to this
Section, Tenant, upon notice from Landlord, shall resist and defend such action or proceeding (by counsel reasonably satisfactory to Landlord). Landlord and Landlord's agents shall have no liability
to Tenant for any injury, loss, or damage caused by third parties or by any condition of the Premises, except to the extent caused by Landlord's negligence or breach of any of Landlord's covenants
contained in this Lease. 

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    6.4  Waiver of Subrogation.  Neither party, nor its officers, directors, employees, agents or invitees,
nor, in the case of Tenant, subtenants, shall be liable to the other party or to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage to any
building, structure or other tangible property, when such loss is caused by any of the perils which are or could be insured against under a standard policy of full replacement cost insurance for fire,
theft and all risk coverage, or losses under workers' compensation laws and benefits, even though such loss or damage might have been occasioned by the negligence of such party, its agents or
employees (Landlord and Tenant agreeing that the preceding clause shall not apply, however, to any damages causes by intentionally wrongful actions or omissions of such party); provided, however, that
if, by reason of the foregoing waiver, either party shall be unable to obtain any such insurance, such waiver shall be deemed not to have been made by such party and, provided further, that if either
party shall be unable to obtain any such insurance without the payment of an additional premium therefor, then, unless the party claiming the benefit of such waiver shall agree to pay such party for
the cost of such additional premium within thirty (30) days after notice setting forth such requirement and the amount of the additional premium, such waiver shall be of no force and effect between
such party and such claiming party. Each party shall use reasonable efforts to obtain such insurance from a company that does not charge an additional premium or, if that is not possible, one that
charges the lowest additional premium. Each party shall give the other party notice at any time when it is unable to obtain insurance with such a waiver of subrogation without the payment of an
additional premium and the foregoing waiver shall be effective until thirty (30) days after notice is given. Notwithstanding anything contained herein, Landlord is not obligated under this Lease to
insure the Premises. 

    Section 7.  Taxes; Utilities  

    7.1  Property Taxes.  Tenant shall pay as due all taxes on its personal property located on the Premises.
Tenant shall pay as due all real property taxes levied against the Premises. As used herein, real property taxes includes any fee or charge relating to the ownership, use, or rental of the Premises,
other than taxes on the net income of Landlord or Tenant. 

    7.2  Special Assessments.  If an assessment for a public improvement is made against the Premises, Tenant
shall pay such assessment. Landlord shall take all appropriate action to cause such assessment to be paid in the maximum number of installments permitted by law, statute or ordinance (if such option
for installment payments is available to Landlord), in which case all installments coming due during the Lease term shall be treated the same as general property taxes pursuant to section 7.1. 

    7.3  Contest of Taxes.  Tenant shall be permitted to contest the amount of any tax or assessment as long
as such contest is conducted in a manner that does not cause any risk that Landlord's interest in the Premises will be foreclosed for nonpayment. 

    7.4  Proration of Taxes.  Tenant's share of real property taxes for the years in which this Lease
commences or terminates shall be prorated based on the portion of the tax year that this Lease is in effect. 

    7.5  New Charges or Fees.  If a new charge or fee relating to the ownership or use of the Premises or the
receipt of rental therefrom or in lieu of property taxes is assessed or imposed, then, to the extent permitted by law, Tenant shall pay such charge or fee. Tenant, however, shall have no obligation to
pay any income, profits, or franchise tax levied on the net income derived by Landlord from this Lease. 

    7.6  Payment of Utilities Charges.  Tenant shall pay when due all charges for services and utilities
incurred in connection with the use, occupancy, operation, and maintenance of the Premises, including, but not limited to, charges for fuel, water, gas, electricity, sewage disposal, power,
refrigeration, air conditioning, telephone, and janitorial services. 

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    Section 8.  Damage and Destruction  

    8.1  Damaged Premises.  Tenant shall give immediate notice to Landlord in the event of any damage or
destruction affecting the Premises. Subject to the provisions of this Section, Tenant shall immediately proceed to restore the Premises using the proceeds of insurance carried pursuant to Section 6 of
this Lease and any insurance proceeds available from Landlord's insurance. Restoration shall be performed according to architectural designs, plans and construction drawings and specifications
approved in advance by Landlord, which approval shall not be unreasonably withheld or delayed. 

    8.2  Damage or Destruction Late in Term.  If within one year before the end of the lease term the
Premises are destroyed or damaged such that the cost of repair exceeds 50% of the value of the structure before the destruction or damage, Tenant may elect to terminate this Lease as of the date of
the damage or destruction by giving notice to Landlord in writing not more than 45 days following the date of destruction or damage. In such event all rights and obligations of the parties shall cease
as of the date of termination, and Tenant shall be entitled to the reimbursement of any prepaid amounts paid by Tenant and attributable to what would have otherwise been the unexpired Term. Tenant
shall surrender possession of the Premises within a reasonable time after such written notice is given, and assign any insurance proceeds paid on account of such damage to Landlord. If Tenant does not
elect to terminate, Tenant shall proceed to restore the Premises to substantially the same form as prior to the damage or destruction using the proceeds of insurance carried pursuant to Section 6 of
this Lease and any insurance proceeds available from Landlord's insurance. Work shall be commenced as soon as reasonably possible and thereafter shall proceed without interruption except for work
stoppages on account of labor disputes and other matters beyond Tenant's reasonable control. 

    8.3  Rent Abatement.  To the extent that the Premises are rendered untenantable as a result of a fire or
other casualty, the Rent shall not be abated or reduced in any way. 

    8.4  Personal Property.  All personal property in said Premises shall be at the risk of Tenant. Except to
the extent caused by the negligent or intentional acts of Landlord, Landlord or Landlord's agents shall not be liable for any damage either to person or property, sustained by Tenant or others, caused
by any defects now in said Premises or hereafter occurring therein, or any part or appurtenance thereof, caused by being out of repair, or caused by the bursting or leaking of water, gas, sewer or
steam pipes. 

    Section 9.  Eminent Domain  

    9.1  Partial Taking.  If a portion of the Premises is condemned and Section 9.2 does not apply, this
Lease shall continue on the following terms: 

    (a) The parties shall be entitled to share in the condemnation proceeds in proportion to the values of their respective
interests in the Premises. Tenant's right to participate in the condemnation proceeds shall be limited to the value of its leasehold interest and the depreciated value of any improvements and
alterations constructed on the Premises at the Tenant's sole expense subsequent to the Commencement Date. 

    (b) Landlord shall proceed as soon as reasonably possible to make such repairs and alterations to the Premises as are
necessary to restore the remaining Premises to a condition as comparable as reasonably practicable to that existing at the time of the condemnation. 

    (c) After the date on which title vests in the condemning authority or an earlier date on which alterations or repairs
are commenced by Landlord to restore the balance of the Premises in anticipation of taking, the Base Rent shall be reduced in proportion to the reduction in value of the Premises as an economic unit
on account of the partial taking. If the 

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parties are unable to agree on the amount of the reduction of Base Rent, the amount shall be determined by arbitration in the manner provided in Section 17. 

    9.2  Total Taking.  If a condemning authority takes all of the Premises or a portion which Landlord and
Tenant agree is sufficient to render the remaining Premises reasonably unsuitable for the use that Tenant was then making of the Premises, this Lease shall terminate as of the date the title vests in
the
condemning authorities. The parties shall be entitled to share in the condemnation proceeds in proportion to the values of their respective interests in the Premises. 

    9.3  Sale in Lieu of Condemnation.  Sale of all or part of the Premises to a purchaser with the power of
eminent domain in the face of a threat or probability of the exercise of the power shall be treated for the purposes of this Section 9 as a taking by condemnation. 

    Section 10.  Liens  

    10.1  Except with respect to activities for which Landlord is responsible, Tenant shall pay as due all claims for work
done on and for services rendered or material furnished to the Premises, and shall keep the Premises free from any liens. If Tenant fails to pay any such claims or to discharge any lien, Landlord may
do so and collect the cost as additional rent. Any amount so added shall bear interest at the Interest Rate (as hereinafter defined) from the date expended by Landlord and shall be payable on demand.
Such action by Landlord shall not constitute a waiver of any right or remedy which Landlord may have on account of Tenant's default. For the purposes of this Lease "Interest Rate" shall mean three
(3%) percent per annum over the then prime rate of interest established by Citibank, N.A. (or any successor thereto), adjusted daily, but in no event in excess of the maximum lawful rate of interest
permitted by applicable law. 

    10.2  Tenant may withhold payment of any claim in connection with a good-faith dispute over the obligation to pay, as
long as Landlord's interest in the Premises will not be foreclosed for nonpayment. If a lien is filed as a result of nonpayment, Tenant shall, within ten (10) days after knowledge of the filing,
secure the discharge of the lien or deposit with Landlord cash or sufficient corporate surety bond or other surety satisfactory to Landlord in an amount sufficient to discharge the lien plus any
costs, attorney fees, and other charges that could reasonably accrue as a result of a foreclosure or sale under the lien. 

    Section 11.  Quiet Enjoyment; Mortgage Priority  

    11.1  Landlord's Warranty.  Landlord warrants that it is the owner of the Premises and has the right to
lease them free of all encumbrances, except for the encumbrances (the "Permitted Encumbrances") set forth on Exhibit B hereto (which by this reference is made a part hereof) and except as expressly
set forth in Section 11.2 below. Landlord will defend Tenant's right to quiet enjoyment of the Premises from the lawful claims of all persons during the Term. Tenant hereby acknowledges and agrees
that this Lease, and the leasehold estate created hereby, are subject and subordinate to all of the Permitted Encumbrances. 

    11.2  Mortgage Priority.  This lease is and shall be prior to all mortgages or deeds of trust
(collectively, "Fee Mortgages") recorded after the date of this lease and affecting Landlord's interest in the Premises. However, if any lender holding a Fee Mortgage requires that this Lease be
subordinate to the Fee Mortgage in question, then Tenant agrees that this Lease shall be subordinate to such Fee
Mortgage if the holder thereof agrees in writing with Tenant that as long as Tenant performs its obligations under this Lease no foreclosure, deed given in lieu of foreclosure, or sale pursuant to the
terms of such Fee Mortgage, or other steps or procedures taken under such Fee Mortgage shall affect Tenant's rights under this Lease. If the foregoing condition is met, Tenant shall execute the
written agreement and any other documents required by the holder of such Fee Mortgage to accomplish the purposes of this paragraph. If the Premises are sold as a result of foreclosure of any Fee
Mortgage thereon, or otherwise transferred by Landlord or any successor, Tenant shall attorn to the purchaser or transferee. 

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    11.3  Estoppel Certificate.  Either party will, within 20 days after notice from the other, execute and
deliver to the other party a certificate stating whether or not this Lease has been modified and is in full force and effect and specifying any modifications or alleged breaches by the other party.
The certificate shall also state the amount of monthly Base Rent, the dates to which Base Rent and any other Rent payments have been paid in advance, and the amount of any security deposit or prepaid
Rent. Failure to deliver the certificate within the specified time shall be conclusive upon the party from whom the certificate was requested that this Lease is in full force and effect and has not
been modified except as represented in the notice requesting the certificate. 

    Section 12.  Assignment and Subletting.  

    12.1  Landlord hereby agrees that Tenant may assign this Lease or sublease all or a portion of the Premises in writing
to any other party, with the prior written consent of Landlord, provided that: 

    (1) Landlord
shall have the right to pre-approve each and every proposed subtenant and assignee, which approval shall not be unreasonably withheld or delayed. 

    (2) Any
attempt by Tenant to assign, transfer, or sublet without Landlord's prior written consent shall be void and shall constitute a material default by Tenant. 

    (3) Regardless
of Landlord's consent to an assignment or sublease, Tenant shall not be released from any of its obligations and liabilities under this Lease, except as
may be set forth in Landlord's written consent. 

    (4) Landlord's
acceptance of Rent from any other person or entity pending a determination of whether to consent to an assignment or sublease shall not constitute a
waiver of Landlord's right to approve or disapprove such assignment or sublease. 

    (5) A
default by an assignee, sublessee, or transferee shall constitute a default by Tenant and in the event of such default, Landlord may proceed directly against
Tenant. 

    (6) Tenant
shall grant to Landlord a security interest in all of its right, title and interest in all rents and income from an assignment or sublease to secure the
payment of Rent owed under this Lease. 

    (7) Tenant
shall pay all reasonable costs and fees incurred by Landlord in connection with evaluating whether to give its consent and/or in giving its consent to a
proposed assignment or sublease, including attorneys', architects', engineers' and consultants' fees, not to exceed $2500. 

    12.2  Notwithstanding any provision to the contrary, Tenant may assign this Lease or sublet all or part of the Premises,
without Landlord's approval, to a parent corporation, any subsidiary, any affiliate, any partnership, limited liability company or other business entity where Tenant or any affiliate of Tenant is the
managing or general partner, manager or the equivalent, as the case may be, or in connection with a merger, acquisition, reorganization or consolidation of Tenant, or in connection with the sale or
transfer of all or substantially all of Tenant's (or its parent's or affiliates') stock or assets. The term "affiliate" as used herein shall mean any entity in which Tenant or its parent corporation
holds fifty percent (50%) or more of the ownership interests. Notwithstanding a transfer pursuant to this Section 12.2, Tenant shall not be released from liability under this Lease upon the assignment
or subletting of all or part of the Premises to such parent corporation, subsidiary, affiliate, partnership, limited liability company or other business entity. 

    Section 13.  Default  

9

 

    The
following shall be events of default: 

    13.1  Default in Rent.  Failure of Tenant to pay any installment of Rent within ten (10) days after
written notice by Landlord specifying the nature of the default with reasonable particularity. 

    13.2  Default in other covenants.  Failure of Tenant to comply with any other term or condition or
fulfill any other obligation of this Lease within 20 days after written notice by Landlord specifying the nature of the default with reasonable particularity. If the default is of such a nature that
it cannot be completely remedied within the 20-day period, an event of default shall not have occurred if Tenant
begins correction of the default within the 20-day period and thereafter proceeds with reasonable diligence and in good faith to effect the remedy as soon as practicable. 

    13.3  Insolvency.  Insolvency of Tenant; an assignment by Tenant for the benefit of creditors; the filing
by Tenant of a voluntary petition in bankruptcy; an adjudication that Tenant is bankrupt or the appointment of a receiver of the properties of Tenant; or the filing of any involuntary petition of
bankruptcy and failure of Tenant to secure a dismissal of the petition within 90 days after filing shall constitute a default. If Tenant consists of two or more individuals or business entities, the
events of default specified in this Section 13.3 shall apply to each individual unless within ten (10) days after an event of default occurs, the remaining individuals produce evidence satisfactory to
Landlord that they have unconditionally acquired the interest of the one causing the default. If this Lease has been assigned, the events of default so specified shall apply only with respect to
Tenant and to the one then exercising the rights of Tenant under this Lease. 

    13.4  Abandonment.  Failure of Tenant for thirty (30) days or more to occupy the Premises for one or more
of the purposes permitted under this Lease, unless such failure is excused under other provisions of this Lease. 

    Section 14.  Remedies on Default  

    14.1  Termination.  In the event of a default, the Lease may be terminated at the option of Landlord by
written notice to Tenant. Whether or not the Lease is terminated by the election of Landlord or otherwise, Landlord shall be entitled to recover damages from Tenant for the default, and Landlord may
reenter, take possession of the Premises, and remove any persons or property by legal action and without having accepted a surrender. 

    14.2  Reletting.  Following reentry or abandonment, Landlord may relet the Premises and in that
connection may make any suitable alterations or refurbish the Premises, or both, or change the character or use of the Premises, but Landlord shall not be required to relet for any use or purpose
other than that specified in this Lease or which Landlord may reasonably consider injurious to the Premises, or to any tenant that Landlord may reasonably consider objectionable. Landlord may relet
all or part of the Premises, alone or in conjunction with other properties, for a term longer or shorter than the term of this Lease, upon any reasonable terms and conditions, including the granting
of reasonable rent-free occupancy or other rent concession. 

    14.3  Remedies.  In the event of material breach or default under the terms of this Lease, either party
shall have all rights and remedies available to them under law or equity in the State of Washington and/or City of Kent. 

    14.4  Landlord's Right to Cure Defaults.  If Tenant fails to perform any obligation under this Lease,
Landlord shall have the option to do so after 30 days' written notice to Tenant. All of Landlords
expenditures to correct the default shall be reimbursed by Tenant on demand with interest at the Interest Rate from the date of expenditure by Landlord. Such action by Landlord shall not waive any
other remedies available to Landlord because of the default. 

10

 

    14.5  Remedies Cumulative.  The foregoing remedies shall be in addition to and shall not exclude any
other remedy available to Landlord under applicable law. 

    Section 15.  Surrender at Expiration  

    15.1  Condition of Premises.  Subject to the provisions of Section 8 herein, upon expiration of the Term
or earlier termination on account of default, Tenant shall deliver all keys to Landlord and surrender the Premises in first class condition, reasonable wear and tear excepted. Tenant shall clean and
replace as necessary carpets and flooring. Tenant shall also clean and paint interior and exterior of building. Improvements and alterations constructed by Tenant with permission from Landlord shall
not be removed, or the Premises restored to the original condition, unless the terms of permission for the improvement or alteration so require. 

    15.2  Fixtures  

    (a) All fixtures placed upon the Premises during the Term, other than Tenant's trade fixtures, shall, at Landlord's
option, become the property of Landlord. Tenant's trade fixtures include, without limitation, air compressors in shop area (but excluding air lines that are attached to the walls and overhead bridge
cranes and hoists attached to the shop ceiling or otherwise attached to the walls or floors of the shop area), and those additional trade fixtures placed on the Premises during the Term. If Landlord's
applicable consent referenced in Section 5 so requires, Tenant shall remove any or all fixtures placed upon the Premises by the Tenant that would otherwise remain the property of Landlord, and shall
repair any physical damage resulting from the removal. If Tenant fails to remove such fixtures, Landlord may do so and charge the cost to Tenant with interest at the Interest Rate from the date of
expenditure. 

    (b) Prior to expiration or other termination of the Term, Tenant shall remove all furnishings, furniture, and trade
fixtures that remain its property and repair any damage to the Premises caused by such removal. If Tenant fails to do so, this shall be an abandonment of the property, and Landlord may retain the
property and all rights of Tenant with respect to it shall cease or, by notice in writing given to Tenant within 20 days after removal was required, Landlord may elect to hold Tenant to its obligation
of removal. If Landlord elects to require Tenant to remove, Landlord may effect a removal and place the property in public storage for Tenant's account. Tenant shall be liable to Landlord for the cost
of removal, transportation to storage, and storage, with interest at the Interest Rate on all such expenses from the date of expenditure by Landlord. 

    15.3  Holdover  

    (a) If Tenant does not vacate the Premises at the time required, Landlord shall have the option to treat Tenant as a
tenant from month-to-month, subject to all of the provisions of this Lease except the provisions for term and renewal and at a rental rate equal to $30,000.00 per month, or to eject Tenant from the
Premises and recover damages caused by wrongful holdover. Failure of Tenant to remove fixtures, furniture, furnishings, or trade fixtures that Tenant is required to remove under this Lease shall
constitute a failure to vacate to which this Section shall apply if the property not removed will substantially interfere with occupancy of the Premises by another tenant or with occupancy by Landlord
for any purpose including preparation for a new tenant. 

    (b) If a month-to-month tenancy results from a holdover by Tenant under this Section 15.3, the tenancy shall be
terminable at the end of any monthly rental period on written notice from Landlord given not less than ten (10) days prior to the termination date which shall be specified in the notice. Tenant waives
any notice that would otherwise be provided by law with respect to a month-to-month tenancy. 

11

 

    Section 16.  Miscellaneous  

    16.1  Nonwaiver.  Waiver by either party of strict performance of any provision of this Lease shall not
be a waiver of or prejudice to the party's right to require strict performance of the same provision in the future or of any other provision. 

    16.2  Attorney Fees.  If suit or action is instituted in connection with any controversy arising out of
this Lease, the prevailing party shall be entitled to recover in addition to costs such sum as the court may adjudge reasonable as attorney fees at trial, on petition for review, and on appeal. 

    16.3  Notices.  Except as otherwise expressly permitted in this Lease, all notices, demands, approvals,
consents, requests and other communications which under the terms of this Lease, or under any statute, must or may be given or made by the parties hereto, must be in writing, and must be made either
(i) by depositing such notice in registered or certified mail of the United States of America, return receipt requested, or (ii) by delivering such notice by a commercial courier, which courier
provides for delivery with receipt guaranteed, addressed to each party at the addresses set forth on the first page of this Lease. All notices, demands, approvals, consents, requests and other
communications shall be deemed to have been delivered (i) if mailed as provided for in this Paragraph, on the date which is three (3) business days after mailing or (ii) if sent by commercial courier,
on the date which is one (1) business day after dispatching. Either party may designate by notice in writing given in the manner herein specified a new or other address to which such notice, demand,
approval, consent,
request and other communication shall thereafter be so given or made. Notwithstanding the foregoing all Rent statements, bills and invoices may be given by regular mail. 

    16.4  Exculpation.  Tenant shall look solely to the estate and property of Landlord in the Premises
(including Landlord's rights to the rents, profits, insurance proceeds and condemnation awards related thereto), for the satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money by Landlord in the event of any default or breach by Landlord with respect to any of the terms, covenants and conditions of this Lease to be observed
and/or performed by Landlord, and no other property or assets of Landlord (or of any direct or indirect, disclosed or undisclosed, partner, member, shareholder, officer, director, employee or
principal in or of Landlord) shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this Lease, the relationship of
Landlord and Tenant hereunder, or Tenant's use and occupancy of the Premises. 

    16.5  Succession.  Subject to the above-stated limitations on transfer of Tenant's interest, this Lease
shall be binding on and inure to the benefit of the parties and their respective successors and assigns, heirs, executors and administrators. 

12

  

    16.6  Recordation.  Landlord shall execute and acknowledge a memorandum of this lease in a form suitable
for recording, and Tenant may record the memorandum. 

    16.7  Entry for Inspection.  Landlord shall have the right to enter upon the Premises upon reasonable
advance notice to determine Tenant's compliance with this Lease, to make repairs to the Premises which it expressly has the right to make under this Lease, or to show the Premises to any prospective
tenant or purchaser, and in addition shall have the right, at any time during the last six (6) months of the term of this Lease, to place and maintain upon the Premises notices for leasing or selling
of the Premises. 

    16.8  Interest on Rent and other Charges.  Any rent or other payment required of Tenant by this Lease
shall, if not paid within ten (10) days after it is due, bear interest at the Interest Rate from the due date until paid. In addition, if Tenant fails to make any rent or other payment required by
this Lease to be paid to Landlord within ten (10) days after it is due, Landlord shall impose a late charge of five cents ($.05) per dollar of the overdue payment to reimburse Landlord for the costs
of collecting the overdue payment. Tenant shall pay the late charge upon demand by Landlord. Landlord may levy and collect a late charge in addition to all other remedies available for Tenant's
default, and collection of a late charge shall not waive the breach caused by the late payment. 

    16.9  Proration of Rent.  In the event of commencement or termination of this Lease at a time other than
the beginning or end of one of the specified rental periods, then the Rent shall be prorated as of the date of commencement or termination and in the event of termination for reasons other than
default, all pre paid Rent shall be refunded to Tenant or paid on its account. 

    16.10  Time of Essence.  Time is of the essence of the performance of each of Tenant's and Landlord's
obligations under this Lease. 

    Section 17.  Arbitration  

    17.1  Any dispute arising out of or relating to this Lease that cannot be resolved by good faith negotiations between
the parties shall be submitted to the American Arbitration Association in Portland, Oregon ("AAA") for final and binding arbitration pursuant to AAA's rules and procedures. The substantive and
procedural law of the State of Washington shall govern this Lease and the mediation and arbitration proceedings. All statutes of limitation which would otherwise be applicable will apply to the
arbitration proceedings. There will be one arbitrator agreed upon by the parties or, if not agreed, selected by the AAA. The arbitrator shall conduct an arbitration hearing within ninety (90)
days after the arbitration demand is received by the AAA. The arbitrator shall issue a written award within fourteen (14) days after the hearing. 

    17.2  The arbitrator may award damages, injunctive relief and/or any other relief available in law or equity under
Washington law. The prevailing party in the arbitration shall be entitled to an award of costs and reasonable attorneys' fees in addition to any other award or relief granted. The arbitration award
shall be final and may be reduced in judgment in any court of competent jurisdiction. 

    17.3  Absent fraud, collusion or willful misconduct by the arbitrator, the award will be final, and judgment may be
entered in any court having jurisdiction thereof. The arbitrator may award injunctive relief or any other remedy available from a judge, including the joinder of parties or consolidation of this
arbitration with any other involving common issues of law or fact or which may promote judicial economy, and may award attorneys' fees and costs to the prevailing party but will not have the power to
award punitive or exemplary damages. 

    17.4  If AAA is no longer in existence at the time of any dispute subject to this Section 17, the parties agree to use
an alternative arbitration service using substantially similar rules and procedures. 

13

 

    IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed as of the day and year first herein written. 

	 
	 	 
	 	 

	 	Landlord:	 	McLAIN-RUBIN REALTY COMPANY II, L.L.C.,
	 	 	 	 	a Delaware limited liability company
	

 	
 	

By:	
 	

 
	 	 	Its:	 	 
	 	

Tenant:	
 	
WESTERN POWER & EQUIPMENT CORP.,
	 	 	 	 	an Oregon corporation
	

 	
 	

By:	
 	

 
	 	 	Its:	 	 
	

STATE OF WASHINGTON	
)	

 	
 	

 
	 	) ss.	 	 	 
	County of	)	 	 	 

    I
certify that I know or have satisfactory evidence that                  is the person who appeared before me, and said person acknowledged that said person
signed this instrument,
on oath stated that said person was authorized to execute the instrument, and acknowledged it as the Manager of McLain-Rubin Realty Company II, L.L.C., a Delaware limited liability company, to be the
free and voluntary act of such company for the uses and purposes mentioned in the instrument. 

    Dated
this      day of April, 2001. 

	 
	 	 

	 	 	(Signature of Notary)
	

 	
 	

(Legibly print or Stamp Name of Notary)
	

 	
 	

Notary Public in and for the state of Washington, residing at
	

 	
 	

My Appointment Expires

	 
	 	 
	 	 
	 
	STATE OF WASHINGTON	)	 	 	 	 
	 	) ss.	 	 	 	 
	County of	)	 	 	 	 

    I
certify that I know or have satisfactory evidence that                  is the person who appeared before me, and said person acknowledged that said person
signed this instrument,
on oath stated that said person was authorized to execute the instrument, and acknowledged it as the                  

14

 

of Western Power & Equipment Corp., an Oregon corporation, to be the free and voluntary act of such company for the uses and purposes mentioned in the instrument. 

    Dated
this      day of April, 2001. 

	 
	 	 

	 	 	(Signature of Notary)
	

 	
 	

(Legibly print or Stamp Name of Notary)
	

 	
 	

Notary Public in and for the state of Washington,
	 	 	residing at
	

 	
 	

My Appointment Expires

15

 
 
 

EXHIBIT A
  Description of Real Property    
  

    Commonly known as 6407-B N.E. 117th Avenue, Vancouver, WA 98662. 

16

 
 
 

EXHIBIT B
  Permitted Encumbrances    
  

17

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Exhibit 10.16

COMMERCIAL LEASE

EXHIBIT A Description of Real Property

EXHIBIT B Permitted EncumbrancesPrepared by MERRILL CORPORATION

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AMENDMENT NO. 1 TO AMENDED
  AND RESTATED CREDIT AGREEMENT    
  

    This Amendment No. 1 to Amended and Restated Credit Agreement (this "Amendment") is entered into with reference to the Amended and Restated Credit
Agreement dated as of August 1, 2000 (the "Credit Agreement") among Wild Oats Markets, Inc. ("Borrower"), the Lenders party thereto, and Wells Fargo Bank, National Association, as
Administrative Agent. Capitalized terms used but not defined herein are used with the meanings set forth for those terms in the Credit Agreement. Section references herein relate to the Credit
Agreement unless otherwise stated. 

    Borrower,
the Administrative Agent and each of the Lenders agree as follows: 

    1.  Section 1.1—Definitions.  

    (a) Revised Defined Terms. The definitions of "Amortization Date," "Applicable Alternate Base Rate Margin," "Applicable
Eurodollar Rate Margin," "Change in Management," "EBITDA," "EBITDAR," "Eurodollar Period," "Fixed Charge Coverage Ratio," "Funded Debt Ratio," "Investment," "Line A Commitment," "Loan Documents,"
"Obligations" and "Subsidiary Guarantors" in Section 1.1 are amended and restated to read in full as follows: 

    "Amortization Date" means, with respect to the Line B Commitment, March 31, 2002 and each Quarterly Payment Date thereafter
through the Line B Maturity Date. 

    "Applicable Alternate Base Rate Margin" means, as of any date of determination, the interest rate margin set forth below (expressed in
basis points per annum) opposite the period during which such date of determination occurs: 

	Period
 
	 	Margin

	Restructure Date through and including December 31, 2001	 	225
	January 1, 2002 through and including June 30, 2002	 	275
	July 1, 2002 through and including December 31, 2002	 	325
	January 1, 2003 and thereafter	 	375

    "Applicable Eurodollar Rate Margin" means, as of any date of determination, the interest rate margin set forth below (expressed in
basis points per annum) opposite the period during which such date of determination occurs: 

	Period
 
	 	Margin

	Restructure Date through and including December 31, 2001	 	375
	January 1, 2002 through and including June 30, 2002	 	425
	July 1, 2002 through and including December 31, 2002	 	475
	January 1, 2003 and thereafter	 	525

    "Change in Management" means the cessation for any reason of Perry Odak 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) of Borrower and the failure of Borrower to appoint a successor acceptable to the Requisite Lenders within the ninety
(90) day period following such cessation. If Mr. Odak ceases to hold the office set forth in the preceding sentence, Borrower shall notify the Administrative Agent of the proposed
successor as soon as practicable and the Administrative Agent shall (after consultation with the Lenders) promptly (and in any event within ten (10) Banking Days) notify Borrower whether such
proposed successor is or is not acceptable to the Requisite Lenders. A determination by the Requisite Lenders that a proposed successor is not acceptable shall be made solely on grounds that are
reasonable from the standpoint of a lender to Borrower. If the Administrative Agent has not notified Borrower 

  
within ten (10) Banking Days whether a proposed successor is or is not acceptable, then the ninety (90) day period within which the successor must be appointed shall be extended until
the date that is five (5) Banking Days after the Administrative Agent so notifies Borrower. 

    "EBITDA" means, with respect to any fiscal period, the sum of (a) Net Income for
that period, plus (b) any non-operating non-recurring loss reflected in such Net Income, minus  (c) any non-operating non-recurring gain reflected
in such Net Income, plus (d) Interest
Expense of Borrower and its Subsidiaries for that period, plus (e) the aggregate amount of provisions for federal, state, local and foreign taxes
on or measured by income of Borrower and its Subsidiaries for that period (whether or not payable during that period), minus (f) the aggregate
amount of tax benefits included in the calculation of Net Income for that period, plus (g) depreciation, amortization and all other
non-cash expenses (including any write-down in, or reserve against, the book value of assets) of Borrower and its Subsidiaries
for that period, minus (h) the aggregate amount deducted during such fiscal period from Borrower's Restructuring Charge Reserve as a result of
one or more cash payments made by Borrower and its Subsidiaries (net of any cash received by Borrower and its Subsidiaries with respect to or otherwise
relating to any such payment made by Borrower and/or any of its Subsidiaries), in each case as determined in accordance with GAAP, consistently applied, and, in the case of items  (d), (e), and (g), only to the extent deducted in the
determination of Net Income for that period. 

    "EBITDAR" means, with respect to any fiscal period, EBITDA for that fiscal period plus  Rental Expense of Borrower and its Subsidiaries for that fiscal period.

    "Eurodollar Period" means, as to each Eurodollar Rate Loan, the period commencing on the date specified by Borrower pursuant to  Section 2.1(c) and ending
1 month (or, with the written consent of all of the Lenders, any other period) thereafter, as specified by
Borrower in the applicable Request for Loan; provided that: 

    (a) The
first day of any Eurodollar Period shall be a Eurodollar Banking Day; 

    (b) Any
Eurodollar Period that would otherwise end on a day that is not a Eurodollar Banking Day shall be extended to the immediately succeeding Eurodollar Banking Day
unless such Eurodollar Banking Day falls in another calendar month, in which case such Eurodollar Period shall end on the immediately preceding Eurodollar Banking Day; 

    (c) Borrower
may not specify a Eurodollar Period with respect to a Line B Loan that extends beyond the next Amortization Date applicable thereto unless the aggregate
principal amount of the Eurodollar Loans that are Line B Loans having a Eurodollar Period ending after such Amortization Date does not exceed the outstanding amount of Line B Loans (after giving
effect to the Line B Commitment Amortization Amount to be paid on such Amortization Date); 

    (d) No
Eurodollar Period with respect to a Line A Loan shall extend beyond the Line A Maturity Date; and 

    (e) No
Eurodollar Period with respect to a Line B Loan shall extend beyond the Line B Maturity Date. 

    "Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of  (a) Annualized EBITDAR as of that date to
(b) Annualized Fixed Charges as of that date;  provided that if Borrower or any of its Subsidiaries has made an Acquisition during the Rolling Period ended on that date, such
ratio shall be
calculated as if the Acquisition had been made on the first day of such Rolling Period, taking into account the results of operations and fixed 

  
charge obligations of the Acquired Company that was the subject of the Acquisition for purposes of calculating Annualized EBITDAR and Annualized Fixed Charges  adjusted, however, to exclude as an expense
in the calculation of Annualized EBITDAR any expense item that has been eliminated as a result of the
Acquisition and not replaced by Borrower and/or its Subsidiaries (excluding expense reductions attributed to or contemplated by general increases in
efficiency, scale of operations, discounts or more favorable inventory and merchandising purchasing terms, etc.). 

    "Funded Debt Ratio" means, as of the last day of each Fiscal Quarter, the ratio of  (a) the sum of (i) all
Indebtedness of Borrower and its Subsidiaries on that date plus  (ii) the Aggregate Effective Amount of all Standby Letters of Credit outstanding on that date to
(b) Annualized
EBITDA as of that date; provided that if Borrower or any of its Subsidiaries has made an Acquisition during the Rolling Period ended on that date, such
ratio shall be calculated as if the Acquisition had been made on the first day of such Rolling Period, taking into account the results of operations of the Acquired Company that was the subject of the
Acquisition for purposes of calculating Indebtedness and Annualized EBITDA adjusted, however, to exclude as an expense in the calculation of Annualized
EBITDA any expense item that has been eliminated as a result of the Acquisition and not replaced by Borrower and/or its Subsidiaries (excluding expense
reductions attributed to or contemplated by general increases in efficiency, scale of operations, discounts or more favorable inventory and merchandising purchasing terms, etc.). 

    "Investment" means, when used in connection with any Person, any investment by or of that Person, whether by means of purchase or other
acquisition of stock or other securities of any other Person or by means of a loan, advance creating a debt (excluding, in the case of Borrower and its
Subsidiaries, trade and other advances made in the ordinary course of business in accordance with Borrower's standard trade terms (such standard trade terms being described on  Annex 1 to the First
Amendment)), capital contribution, guaranty or other debt or equity participation or interest in any other Person,  including any partnership and joint venture interests of such Person. The amount of any
Investment shall be the amount actually invested
(minus any return of capital with respect to such Investment
which has actually been received in Cash or has been converted into Cash), without adjustment for subsequent increases or decreases in the value of such Investment. Notwithstanding the foregoing,
Borrower's receipt of a promissory note or other written evidence of indebtedness from a Person in connection with such Person's purchase of equity securities from Borrower shall not be deemed to be
an Investment by Borrower in such Person. 

    "Line A Commitment" means, subject to Sections 2.5 and  2.6, $86,176,470.59. The respective Pro Rata Shares of the
Lenders with respect to the Line A Commitment are set forth in  Schedule 1.1. 

    "Loan Documents" means, collectively, this Agreement, the Notes, the Subsidiary Guaranty, the Collateral Documents, any Approved
Interest Rate Protection Agreement, any Subordination Agreement, any Landlord Consent and any other agreement of any type or nature hereafter executed and delivered by (a) Borrower or any
Subsidiary of Borrower, (b) any subordinated creditor or (c) and landlord, in each case, to or in favor of the Administrative Agent or to or in favor of any Lender in any way relating to
or in furtherance of this Agreement, in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated, extended or supplanted. 

    "Obligations" means all present and future obligations of every kind or nature of Borrower and its Subsidiaries at any time and from
time to time owed to the Administrative Agent or the Lenders or any one or more of them, under any one or more of the Loan 

  
Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including obligations of performance as well as obligations of payment, and
including interest that accrues after the commencement of any proceeding under any Debtor Relief Law by or against Borrower or any of its Subsidiaries. 

    "Subsidiary Guarantor" means each Subsidiary of Borrower other than Exempt
Subsidiaries. 

    (b) New Defined Terms. Section 1.1 is amended by adding the
following definitions in the appropriate alphabetical location: 

    "Annualized EBITDA" means, as of the last day of: 

    (a) the
Fiscal Quarter ending September 29, 2001, EBITDA for the three Fiscal Quarter period ending on such date multiplied by 4/3; and 

    (b) the
Fiscal Quarter ending December 29, 2001 and each Fiscal Quarter thereafter, EBITDA for the Rolling Period ending on such date. 

    "Annualized EBITDAR" means, as of the last day of: 

    (a) the
Fiscal Quarter ending September 29, 2001, EBITDAR for the three Fiscal Quarter period ending on such date multiplied by 4/3; and 

    (b) the
Fiscal Quarter ended December 29, 2001 and each Fiscal Quarter thereafter, EBITDAR for the Rolling Period ending on such date. 

    "Annualized Fixed Charges" means, as of the last day of: 

    (a) the
Fiscal Quarter ending September 29, 2001, Fixed Charges for the three Fiscal Quarter period ending on such date multiplied by 4/3; and 

    (b) the
Fiscal Quarter ending December 29, 2001 and each Fiscal Quarter thereafter, Fixed Charges for the Rolling Period ending on such date. 

    "Capital Expenditure" means (a) any expenditure by Borrower or any of its Subsidiaries for fixed or capital assets which, in
accordance with GAAP, would be classified as a capital expenditure in the financial statements of Borrower and its Subsidiaries including any amount
that is required to be treated as an asset subject to a Capital Lease Obligation and whether such expenditure relates to the maintenance, relocation, remodel or new construction of any Store or
otherwise, and (b) to the extent not covered by clause (a), with respect to any Acquisition, the aggregate amount of consideration paid by
Borrower and/or its Subsidiaries in connection therewith, including (but without duplication): 

    (i)  the
aggregate amount of Cash paid, the aggregate liabilities incurred and payable to the seller and/or its Affiliates, and the aggregate fair market value of
noncash Property delivered by Borrower and/or its Subsidiaries in connection with such Acquisition; and 

    (ii) the
aggregate amount of Indebtedness and other liabilities of any Acquired Company (or of the seller(s) thereof) that is either assumed by Borrower and/or its
Subsidiaries in connection with, or is retained by an Acquired Company where the ownership interest in such Acquired Company is acquired in whole or in part (to the extent acquired by Borrower or any
Subsidiary) by Borrower or any Subsidiary following, such Acquisition; 

 

but
in any event excluding (A) equity securities issued by Borrower in connection with such Acquisition and (B) Permitted Subordinated Indebtedness issued or otherwise incurred by
Borrower and/or any of its Subsidiaries in connection with such Acquisition. 

    "Collateral" means all of the collateral covered by the Collateral Documents. 

    "Collateral Documents" means, collectively, the Security Agreement, each Control Account Agreement, each Leasehold Mortgage, the Pledge
Agreement and any other security agreement, pledge agreement, deed of trust, mortgage, notice to or acknowledgment of a registrar or depositary institution, control agreement or other collateral
security agreement executed and delivered by Borrower or any of its Subsidiaries (and executed by any third party whose signature is necessary) to secure the Obligations. 

    "Control Account Agreement" shall have the meaning specified for such term in the Security Agreement. 

    "Equity Achievement" means the raising by Borrower of new equity that results in Borrower receiving not less than $30,000,000 in Net
Cash Issuance Proceeds. 

    "Excluded Collateral" means the following: (a) the leasehold interests of Borrower or any Subsidiary of Borrower which, pursuant
to Section 5.14, are not required to be encumbered, (b) Store Deposit Accounts so long as Borrower or any applicable Subsidiary has used
reasonable commercial efforts to ensure that all collected funds 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 109 Stores shall be electronically transferred on a daily basis to a concentration or other account
upon which the Administrative Agent has a first priority perfected Lien subject only to Liens permitted by Section 6.8 and any Liens contained in
the Control Account Agreement (if any) pertaining to such concentration account, and (c) the proceeds received by Borrower with respect to any issuance by Borrower of equity securities and any
account where such proceeds may at any time be maintained and not commingled with other funds of Borrower. 

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

    "First Amendment" means that certain Amendment No. 1 to Amended and Restated Credit Agreement dated as of October 17,
2001 between Borrower and the Administrative Agent. 

    "Fiscal Month" means any month of any Fiscal Quarter consistent with GAAP. 

    "Fixed Charges" means, with respect to any fiscal period, the sum of  (a) Interest Expense of Borrower and its Subsidiaries for such fiscal period plus (b) Rental Expense of Borrower
and its Subsidiaries for such fiscal period plus (c) scheduled principal payments (or principal components, in the case of Capital Lease
Obligations) paid or payable on Indebtedness of Borrower and its Subsidiaries during that fiscal period. 

    "Foreign Subsidiary" means a Subsidiary of Borrower organized under the Laws of a country other than  the United States of America or under the Laws of a territory (but
not a State) of the United States of America (including  Puerto Rico, Guam and the U.S. Virgin Islands). 

    "Gilliland/Cook Creditors" means, collectively, Michael C. Gilliland, Elizabeth C. Cook and any successor holder of all or any part of
the Gilliland/Cook Indebtedness. 

    "Gilliland/Cook Indebtedness" means the Indebtedness owing by Borrower to the Gilliland/Cook Creditors pursuant to the terms of the
Gilliland/Cook Loan Documents. 

  
    "Gilliland/Cook Loan Documents" means that certain promissory note dated as of January 5, 2001 executed by Borrower to the order
of the Gilliland/Cook Creditors together with all schedules, exhibits, amendments and modifications thereto, any and all material agreements, instruments and other documents relating to such
promissory note. 

    "Landlord Consent" shall have the meaning specified for such term in  Section 5.14. 

    "Leasehold Mortgage" means a leasehold mortgage or deed of trust, as applicable, substantially in the form of  Exhibit K or otherwise in form reasonably acceptable
to the Administrative Agent, covering the leasehold interest of Borrower or one of its
Subsidiaries (other than Exempt Subsidiaries) in real
Property, either as originally executed or as it may from time to time be supplemented, modified, amended, restated, extended or supplanted. 

    "Net Cash Issuance Proceeds" means, with respect to the issuance of any equity security by Borrower or any of its Subsidiaries, the
Cash proceeds received by or for the account of Borrower or such Subsidiaries in consideration of such issuance net of (a) underwriting discounts
and commissions actually paid to any Person not an Affiliate of Borrower and (b) professional fees and disbursements actually paid in connection therewith. 

    "Net Sales" means, with respect to Borrower and its Subsidiaries and for any period of determination, the gross sales of Borrower and
its Subsidiaries for such period less actual coupon and employee and other discounts for such period. 

    "New Lease" means a lease or similar agreement entered into by Borrower and/or any of its Subsidiaries with respect to a New Store or
contemplated New Store. Any lease or similar agreement for a location at which Borrower or any of its Subsidiaries operated a Store immediately prior to the execution of such lease or similar
agreement shall not constitute a New Lease. 

    "New Store" means any Store that becomes part of the operations of Borrower and its Subsidiaries subsequent to the Restructure Date,
whether such Store becomes part of such operations as a result of an Acquisition, direct purchase, construction and buildout, relocation, or otherwise. 

    "New Store Capital Expenditure" means any Capital Expenditure made by Borrower or any of its Subsidiaries in connection with the
acquisition (whether by purchase or otherwise), development, construction and/or relocation of any New Store; provided,  however, that Capital Expenditures
made in connection with the maintenance, revitalization, remodeling or renovation of any Store, shall not constitute
a "New Store Capital Expenditure." 

    "Non-New Store Capital Expenditure" means any Capital Expenditure made by Borrower or any of its Subsidiaries  other than New Store Capital Expenditures. 

    "Permitted Subordinated Indebtedness" means all Indebtedness of Borrower and/or any of its Subsidiaries, the payment of which is
subordinated to Borrower's and/or such Subsidiaries' obligations in respect of the Obligations, provided that (i) such subordinated Indebtedness
accrues interest at a market rate of interest deemed acceptable by Borrower for such subordinated Indebtedness at the time of issuance thereof, (ii) such Subordinated Indebtedness is created
under agreements or instruments that do not, as reasonably determined by the Administrative Agent and the Requisite Lenders, (A) impose covenants on Borrower and its Subsidiaries,
(B) contain a definition of change of control or change in management or (C) contain events of default and other provisions, in each case materially more restrictive than the covenants
imposed in, the change of control and change in management
definitions used in and the events of default and other provisions contained in this Agreement, (iii) the documents evidencing such Subordinated Indebtedness provide that 

  
(x) no scheduled principal payments are due on such subordinated Indebtedness on any date prior to six (6) months following the later of the Line A Maturity Date and the Line B Maturity
Date (the "Principal Commencement Date") except that if such Subordinated Indebtedness is Seller Indebtedness, the documents evidencing such Seller
Indebtedness may provide for periodic principal payments prior to the Principal Commencement Date so long as such principal payments do not exceed $500,000 in the aggregate during any Fiscal Year
ending on or before December 27, 2003 and provided such documents provide that Borrower and/or any applicable Subsidiary shall not be required to
make any principal payment on such Seller Indebtedness if, after giving effect thereto, the Fixed Charge Coverage Ratio, as of the Fiscal Quarter during which such payment is made and, on a pro forma
basis for any of the three (3) immediately succeeding Fiscal Quarters, would be less than 1.25 to 1.00 or the ratio required to be maintained pursuant to  Section 6.12, whichever is more
stringent, (y) no payment (whether of principal or interest) thereof shall be accepted and/or retained by
the holder of such Indebtedness at any time that an Event of Default shall remain in effect and (z) if an "event of default" shall have occurred with respect to such Indebtedness as a result of
either a cross-default to this Agreement or a failure of Borrower and/or any applicable Subsidiary to make any payment of such Indebtedness at any time that an Event of Default shall remain in effect
(each, a "Junior Debt Default"), and the Lenders (or Requisite Lenders, as the case may be) waive the Event of Default giving rise to such Junior Debt Default, then such holder shall be deemed to have
also waived the Junior Debt Default, (iv) such Subordinated Indebtedness is (and shall at all times remain) unsecured (except for Seller
Indebtedness, which may be secured to the extent provided in Section 6.9(d)(ii)), and (v) such Subordinated Indebtedness does not by its
terms require the maintenance or achievement of any financial performance standards more restrictive than those contained herein, as reasonably determined by the Administrative Agent and the Requisite
Lenders. 

    "Pledge Agreement" means the pledge agreement, substantially in the form of  Exhibit L, to be executed and delivered pursuant to the First Amendment by Borrower and
Wild Oats Financial, Inc., either as originally
executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. 

    "Pledged Collateral" means (a) subject to clause (b) below, the
certificates evidencing all of the shares of capital stock or other equity interests now or hereafter held by (or for the benefit of) Borrower or any of its Subsidiaries in all Subsidiaries of
Borrower, (b) 65% of the shares of capital stock or other equity interests now or hereafter held by (or for the benefit of) Borrower or any of its Subsidiaries in all Tax Preferred
Subsidiaries, and (c) any other "Pledged Collateral" (as such term is used and defined in the Pledge Agreement). 

    "Rental Expense" means, with respect to any Person and as of the last day of any fiscal period, the aggregate amount (after taking into
account Cash payments received by such Person from subtenants, concessionaires, licensees or similar Persons) paid or payable (without duplication) for that fiscal period
by that Person to a lessor or renter of Property as lease payments or rent (excluding rent under Capital Lease Obligations that is treated as Interest
Expense) in accordance with GAAP. 

    "Restructure Date" means the Banking Day on which all of the conditions to the effectiveness of the First Amendment are satisfied (or
waived in writing by the Administrative Agent acting with the consent of all of the Lenders). 

    "Restructure Date New Leases" means, collectively, the New Leases in effect on the Restructure Date (as specified in  Annex 16 to the First Amendment) with respect to
which Borrower or one of its Subsidiaries intends to open a New Store unless any such Restructure Date
New Lease is subsequently terminated. 

  

    "Restructure Date Stores" means, collectively, all Stores open and operating as of the Restructure Date (other
than any such Stores operated by Exempt Subsidiaries). 

    "Restructuring Charge Reserve" means, as of any date of determination, the aggregate amounts for accrued acceleration recognition of
severance, Rental Expense and/or lease defeasance costs shown on Borrower's most recently delivered consolidated balance sheet established in connection with non-recurring,
non-operating losses and/or restructuring and asset impairment charges of Borrower and its Subsidiaries. As of the Restructure Date, the Restructuring Charge Reserve is $39,050,954.00. 

    "Rolling Period" means any period of four consecutive Fiscal Quarters except that for
purposes of the computation of the Fixed Charge Coverage Ratio and the Funded Debt Ratio as of the Fiscal Quarter ending September 29, 2001, Rolling Period shall mean the three consecutive
Fiscal Quarter period ending on such date. 

    "Security Agreement" means the security agreement, substantially in the form of  Exhibit M, to be executed and delivered pursuant to the First Amendment by Borrower
and its Subsidiaries (other than  Exempt Subsidiaries), either as originally executed or as it may from time to time be supplemented, modified, amended, extended or supplanted. 

    "Seller Indebtedness" means Indebtedness incurred (or otherwise assumed) by Borrower and/or any of its Subsidiaries in connection with
a permitted Acquisition as to all or a portion of the purchase price for such Acquisition. 

    "Stockholders' Equity" means, as of any date of determination and with respect to Borrower, the consolidated stockholders' equity of
Borrower and its Subsidiaries as of that date determined in accordance with GAAP; provided that there shall be excluded from the computation of
Stockholders' Equity the amount of any unrealized gain or loss in accumulated other comprehensive income as a result of accounting for derivative and hedging activities in accordance with Financial
Accounting Standards No. 133 and provided further that Stockholders' Equity shall not include any amount attributable to Disqualified Stock. 

    "Store" means a retail natural foods or specialty grocery store or supermarket, vitamin store, or other similar type of establishment
operated by Borrower and/or any of its Subsidiaries (a) that has gross square footage in excess of 3,500 or (b) with respect to which Borrower or any applicable Subsidiary has an
obligation to pay more than $50,000 during any calendar year (i) in rental expense (whether in
connection with an operating lease or a capital lease), if such supermarket, store or other establishment is leased by Borrower or such Subsidiary or (ii) in debt service (to include principal
and interest) if such supermarket, store or other establishment is owned in fee by Borrower or such Subsidiary. Any real property used by Borrower or any of its Subsidiaries primarily for storage,
general or administrative office, warehouse or distribution purposes will not be deemed a "Store". 

    "Store Deposit Account" means a deposit account maintained by Borrower or a Subsidiary of Borrower at a financial institution in
connection with, and in close geographic proximity to, a Store (or a group of Stores in the same city) for the purpose of facilitating such Store (or Stores) day-to-day
operations. Store Deposit Accounts shall not include any account maintained with any Lender or any concentration account, controlled disbursement account, investment account or similar account. 

    "Subordination Agreement" means any agreement, instrument or other document executed by Borrower or any of its Subsidiaries with or in
favor of a subordinated lender, pursuant to which Borrower or such Subsidiary subordinates its Indebtedness owing to such subordinated lender in right of payment to the Obligations on terms and
conditions that satisfy the definition of Permitted Subordinated Indebtedness. 

  
    "Tax Preferred Subsidiary" means a Subsidiary of Borrower (or any of its Subsidiaries) that is (a) a corporation that is foreign
(within the meaning of paragraphs (3), (4), (5) and (9) of Section 7701(a) of the Code) and (b) is a controlled foreign corporation (within the meaning of
Section 957(a) of the Code) with respect to which Borrower (or any corporation which in addition to Borrower is a member of an affiliated group, within the meaning of
Section 1504(a) of the Code, for which a consolidated return is filed pursuant to Section 1501 of the Code) is a United States shareholder within the meaning of
Section 951(b) of the Code. 

    "Year-to-Date Net Income" means, as of the last day of any Fiscal Quarter, Net Income for the
year-to-date fiscal period ending as of such date. 

    (c) Deleted Defined Terms. Section 1.1 is amended by deleting the
following definitions in their entirety: "Adjusted EBITDA," "Applicable Pricing Level," "Pricing Certificate," "Pricing Period," and "Proforma EBITDA." 

    2.  Section 2.4(a)—Letters of Credit.  

    (a) Section 2.4(a) is amended as follows: 

    (a) The
reference to "$10,000,000" in subsection (ii) thereof is replaced with a reference to "$5,000,000"; and 

    (b) The
last sentence is amended and restated to read in full as follows: 

Unless
all the Lenders otherwise consent in a writing delivered to the Administrative Agent, the term of any Letter of Credit shall not extend beyond the Line A Maturity Date, and no Letter of Credit
issued on or after the Restructure Date shall exceed one (1) year or contain an "evergreen" (i.e., automatic renewal) feature. 

    3.  Section 2.7—Voluntary Increases to
Commitments.  Section 2.7 is deleted in its entirety and replaced with the following: 

    2.7 [Reserved].

    4.  Section 2.9—Swing Line.  Section 2.9  is amended as follows: 

    (a) Clause (c) of Section 2.9(a) is amended and restated
to read in full as follows: 

    (c) without
the consent of all of the Lenders, no Swing Line Loan may be made during the continuance of an Event of Default if written notice of such Event of Default
shall have been provided Swing Line Lender by the Administrative Agent or a Lender sufficiently in advance of the making of such Swing Line Loan and/or 

    (b) The
first sentence of Section 2.9(b) is amended and restated to read in full as follows: 

Swing
Line Loans shall bear interest at a fluctuating rate per annum equal to the Alternate Base Rate plus the Applicable Alternate Base Rate Margin  plus 0.50%
(50 basis points). 

    (c) Clause (iii) of Section 2.9(d) is amended and restated
to read in full as follows: 

    (iii) any
Swing Line Loan made (absent the consent of all of the Lenders) during the continuation of an Event of Default if written notice of such Event of Default
shall have been provided Swing Line Lender by the Administrative Agent or a Lender sufficiently in advance of the making of such Swing Line Loan. 

    5.  Section 2.10—Collateral.  The following new  Section 2.10 is added to the Credit Agreement: 

    2.10 Collateral. The Obligations shall be secured by a first priority (subject  to Liens permitted by Section 6.8)
perfected Lien on the Collateral pursuant to the Collateral Documents;  provided, 

   however, that each Leasehold Mortgage and other real Property mortgage executed in connection with this Agreement shall secure only those Obligations specified
therein to be so
secured. The Obligations shall not be secured by the Excluded Collateral. 

    6.  Section 3.1—Principal and Interest.  Section 3.1  is amended as follows: 

    (a) The
first sentence of Section 3.1(b) is amended and restated to read in full as follows: 

Interest
accrued on each Alternate Base Rate Loan shall be due and payable on the first Banking Day of each calendar month. 

    (b) Section 3.1(c) is amended and restated to read in full as follows: 

    (c) Interest
accrued on each Eurodollar Rate Loan shall be due and payable on the last day of the related Eurodollar Period. Except as otherwise provided in  Section 3.9, the unpaid principal amount of any
Eurodollar Rate Loan shall bear interest at a rate per annum equal to the Eurodollar Rate for
that Eurodollar Rate Loan plus the Applicable Eurodollar Rate Margin. 

    (c) The
following new subsection (f) is added to  Section 3.1: 

    (f)  If
Borrower pays (or causes to be paid) all or any part of the principal portion of the Gilliland/Cook Indebtedness from funds other than funds raised through the
issuance of equity securities, Borrower shall pay to the Administrative Agent, concurrently with such payment to the Gilliland/Cook Creditors, for the ratable accounts of the Lenders in accordance
with their Pro Rata Shares of the Line B Loans, an amount equal to the principal payment made to the Gilliland/Cook Creditors. Any such payment made in accordance with the foregoing shall be applied
to principal coming due on the Line B Notes in the inverse order of maturity. 

    7.  Section 3.4—Agency Fees.  Section 3.4  is amended and restated to read in full as follows: 

    3.4 Agency Fees. Borrower shall pay to the Administrative Agent the periodic agency fees as heretofore agreed upon by
letter agreement dated July 31, 2000 (as amended on October 17, 2001), between Borrower and the Administrative Agent on the dates and in the amounts specified in such amended letter
agreement. The agency fees paid to the Administrative Agent are solely for its own account and are not refundable in whole or in part. 

    8.  Section 3.5—Commitment Fee.  The first sentence of  Section 3.5 is amended and restated to read in full as follows: 

From
the Restructure Date through the Line A Maturity Date, Borrower shall pay to the Administrative Agent, for the ratable accounts of the Lenders pro rata according to their Pro Rata Share of the
Line A Commitment, a commitment fee equal to 0.25% (25 basis points) per annum times the average daily amount by which the Line A Commitment exceeds the  sum of (a) the aggregate daily principal Indebtedness evidenced by the Line A Notes plus  (b) the Aggregate Effective Amount of all outstanding Letters of Credit plus
(c) the aggregate daily Swing Line
Outstandings. 

    9.  Section 3.6(b)—Letter of Credit
Fees.  Section 3.6(b) is amended and restated to read in full as follows: 

    (b) concurrently
with the issuance of each Standby Letter of Credit and on each anniversary of such issuance, to the Administrative Agent for the ratable account of the
Lenders in accordance with their Pro Rata Share of the Line A Commitment, a standby letter of credit fee in an amount equal to the Applicable Standby Letter of Credit Fee Rate as of the date of such
issuance or 

  
anniversary thereof times the face amount of such Standby Letter of Credit, which the Administrative Agent shall promptly pay to the Lenders; and 

    10.  Section 3.9—Late Payments and Default
Rate.  Section 3.9 is amended and restated to read in full as follows: 

    3.9 Late Payments and Default Rate. If any installment of principal or interest or any fee or cost or other amount
payable under any Loan Document to the Administrative Agent or any Lender is not paid when due, it shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the  sum of the Alternate Base Rate plus the Applicable Alternate Base Rate Margin  plus 2% (the "Default Rate"), to the fullest extent permitted by applicable
Laws. Upon (a) the occurrence of any Event of Default arising under
Sections 9.1(a), (b), (i) or (j) or (b) ten (10) Banking Days following the occurrence of any other Event of Default, and in
any such circumstance so long as such Event of Default remains in effect (and whether or not the Obligations have been accelerated), at the option of the Requisite Lenders, Borrower shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by Law) on the amount of all outstanding Obligations, at the Default Rate, to the fullest extent permitted by Law. Accrued
and unpaid interest on past due amounts (including interest on past due interest) shall be compounded monthly, on the last day of each calendar month,
to the fullest extent permitted by applicable Laws. 

    11.  Section 4.2—Authority; Compliance With Other Agreements and Instruments and Government
Regulations.  The lead-in clause of Section 4.2 is amended and restated to read in full as
follows: 

The
execution, delivery and performance by Borrower and its Subsidiaries of the Loan Documents to which it is a Party have been duly authorized by all necessary corporate action, and do not and will
not: 

    12.  Section 4.3—No Governmental Approvals
Required.  Section 4.3 is amended and restated to read in full as follows: 

    4.3 No Governmental Approvals Required. Except as previously obtained or
made, no authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any Governmental Agency is or will be required to authorize or permit under
applicable Laws the execution, delivery and performance by Borrower and each of Borrower's Subsidiaries of the Loan Documents to which it is a Party. 

    13.  Section 4.4—Subsidiaries.  The second sentence of  Section 4.4(a) is amended and restated to read in full as follows: 

Schedule 4.4 hereto correctly specifies which of the Subsidiaries of Borrower are Exempt Subsidiaries and, in each such instance, whether as a
result of being a Tax Preferred Subsidiary or an Inactive Subsidiary (or both). 

    14.  Section 4.7—Title to and Location of Property.  The following sentence is
added to the end of Section 4.7: 

Except for, without duplication, (a) motor vehicles, (b) laptop and other personal computers, pagers, cell phones and other information
technology equipment having a fair market value (in the aggregate) of less than $250,000 and (c) other Property having a fair market value (in the aggregate) of less than $100,000, all Property
of Borrower and its Subsidiaries is located at one of the locations described in Schedule 4.7A, which schedule sets forth (a) all Store
locations and any other locations (including office, warehouse and other space) of Borrower and its Subsidiaries where any Property of Borrower or any of its Subsidiaries is located and (b) all
deposit (whether a demand, time, savings, passbook or similar account) and investment accounts of Borrower and its 

  
Subsidiaries, identifying such accounts by account number, type, location of depositary institution, and applicable owner thereof. 

    15.  Section 4.8—Intangible Assets.  The following two sentences are added to the end
of Section 4.8 of the Credit Agreement: 

Except
as described in Schedule 4.8, in the enforcement of its rights as a secured creditor, the Administrative Agent (or any applicable Lender)
will not be required to own or otherwise possess the right to use any patent, trademark, copyright or other intellectual property, or any license to use the same, in order to sell any inventory of
Borrower or any of its Subsidiaries after the occurrence of an Event of Default. Schedule 4.8 sets forth all material patents, patent
applications, trademarks, trade names and trade styles (i.e., "doing business as" designations) (i) used by Borrower or any of its Subsidiaries
on the Restructure Date or (ii) otherwise owned by Borrower or any of its Subsidiaries. 

    16.  Section 4.11—Binding Obligations.  Section 4.11  is amended and restated to read in full as follows: 

    4.11 Binding Obligations. Each of the Loan Documents to which Borrower or any of its Subsidiaries is a Party will, when
executed and delivered by Borrower or such Subsidiary, constitute the legal, valid and binding obligation of Borrower or such Subsidiary, enforceable against Borrower or such Subsidiary in accordance
with its terms, except as enforcement may be limited by Debtor Relief Laws or equitable principles relating to the granting of specific performance and
other equitable remedies as a matter of judicial discretion. 

    17.  Section 4.20—Security Interests.  The following new  Section 4.20 is added to the Credit Agreement: 

    4.20 Security Interests. Upon the execution and delivery of the Security Agreement, the Security Agreement will create a
valid first priority security interest in the Collateral described therein securing the Obligations (subject only to Liens permitted by  Section 6.8) and all actions necessary to perfect the
security interests so created, other than  filing of the UCC-1 financing statements delivered to the Administrative Agent pursuant to the First Amendment with the appropriate Governmental Agency, have
been
taken and completed. Upon the execution and delivery of any Control Account Agreement by the depositary institution party thereto and Borrower or any applicable Subsidiary, such Control Account
Agreement will create a valid first priority security interest in the Collateral described therein (subject only to Liens permitted by the terms of such Control Account Agreement and Liens permitted
by Section 6.8) securing the Obligations and all actions necessary to perfect the security interests so created will have been taken and
completed. Upon the execution and delivery of the Pledge Agreement and delivery of the Pledged Collateral (and, to the extent applicable, duly endorsed (in blank) for transfer or accompanied by
appropriate executed stock powers (or the equivalent)), the Pledge Agreement will create a valid first priority security interest in the Pledged Collateral described therein and upon delivery of the
applicable Pledged Collateral to the Administrative Agent all action necessary to perfect the security interests so created will have been taken and completed. Upon the execution and delivery of the
Leasehold Mortgages which are to be delivered on the Restructure Date and the recordation thereof with the appropriate Governmental Agencies in the jurisdictions in which the Collateral therein
described is located, to the best of Borrower's knowledge, all action necessary to create an enforceable Lien under such mortgages shall have been taken and completed. 

    18.  Section 4.21—Landlord Consents.  The following new  Section 4.21 is added to the Credit Agreement: 

    4.21 Landlord Consents. As of the Restructure Date, the Landlord Consents executed and delivered to the Administrative
Agent pertain to leasehold interests that generated not less than 

  
forty percent (40%) of the Net Sales of Borrower and its Subsidiaries (excluding Exempt Subsidiaries) earned from the operations of Restructure Date
Stores (other than Stores operated by Exempt Subsidiaries) during the three (3) Fiscal Months immediately preceding the Restructure Date. 

    19.  Section 5.4—Maintenance of Insurance.  Section 5.4  is amended and restated to read in full as follows: 

    5.4 Maintenance of Insurance.

    (a) Maintain
insurance on all insurable tangible Property against fire (including extended coverage), casualty
(including workmen's compensation) and such other hazards in such amounts and with such deductibles as reasonably acceptable to the Administrative Agent
and with insurers rated "A" or better by "A.M. Best's Insurance Reports" or as reasonably acceptable to the Administrative Agent, but in any event not more than customarily maintained by companies in
the same or similar lines of business as Borrower and its Subsidiaries. Prior to the Restructure Date, Borrower shall furnish the Administrative Agent with a schedule of all such insurance prepared by
its insurance broker, and certificates of insurance with respect thereto (including the text of the lender's loss payable endorsement in favor of the
Administrative Agent required below), or such other evidence of insurance as the Administrative Agent may reasonably require. Borrower shall furnish the Administrative Agent with a copy of each
applicable policy within thirty (30) days after the Restructure Date. In the event Borrower fails to procure or cause to be procured any such insurance or fails to timely pay or cause to be
paid the premium(s) on any such insurance, the Administrative Agent may, at Borrower's expense, do so for Borrower but Borrower shall continue to be liable for procurement of (and payment for) any
such insurance from and after such action by the Administrative Agent. All such property insurance policies shall contain a standard or similar lender's loss payable clause issued in favor of the
Administrative Agent (on behalf of the Lenders) indicating that the Administrative Agent is a lender loss payee, under which, during the occurrence and continuation of a Default or Event of Default,
all losses thereunder shall be paid to the Administrative Agent (on behalf of the Lenders) as the Administrative Agent's interests may appear. Such policies shall expressly provide that the requisite
insurance cannot be altered or canceled without thirty (30) days' prior written notice to the Administrative Agent unless, as of September 30, 2002 (or any date thereafter that any such
policy is to be renewed or replaced), Borrower is unable to obtain, at a commercially reasonable rate, any such policy with the foregoing described non-alteration,
non-cancellation without 30-days' notice provision. In addition, such policies shall insure the Administrative Agent notwithstanding the act or neglect of Borrower or any of
its Subsidiaries. Borrower hereby appoints the Administrative Agent as its attorney-in-fact, exercisable at the Administrative Agent's option only during the occurrence and
continuance of an Event of Default, and only to the extent the Obligations are outstanding, to endorse any check which may be payable to Borrower and to file proofs of loss with respect to any
insurance claims, in order to collect the proceeds of such insurance and any amount or amounts collected by the Administrative Agent pursuant to the provisions of this paragraph may be applied by the
Administrative Agent to the Obligations. Borrower further covenants that all insurance premiums due and owing under its current casualty policies have been paid. Borrower also agrees to notify the
Administrative Agent, as soon as practicable, upon any receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy. 

  

    (b) Maintain,
and deliver to the Administrative Agent upon the Administrative Agent's request evidence of, public liability, products liability and business
interruption insurance in such amounts as are reasonably acceptable to the Administrative Agent, but in any event not more than are customary for companies in the same or similar businesses located in
the same or similar area. All general liability, auto and umbrella insurance policies shall contain standard additional insured clauses naming the Administrative Agent (on behalf of itself and the
Lenders) as an additional insured. The foregoing insurance shall be obtained from such insurers which are rated "A" or better by "A.M. Best's Insurance Reports" or as are reasonably acceptable to the
Administrative Agent. Such liability policies shall expressly provide that the requisite insurance cannot be altered or canceled without thirty (30) days' prior written notice to the
Administrative Agent. 

    20.  Section 5.11—Future Subsidiaries; Additional Security
Documentation.  Section 5.11 is amended and restated to read in full as follows: 

    5.11 Future Subsidiaries; Additional Security Documentation. Cause (a) each Subsidiary
(other than an Exempt Subsidiary) formed or acquired after the Restructure Date, and each Exempt Subsidiary which at any time ceases to be an Exempt
Subsidiary, to execute and deliver an appropriate joinder to the Subsidiary Guaranty, (b) each Subsidiary (other than a Tax Preferred Subsidiary)
formed or acquired after the Restructure Date to execute and deliver, if applicable, an appropriate joinder to the Pledge Agreement and such financing statements with respect thereto reasonably
acceptable to the Administrative Agent, and (c) each Subsidiary (other than an Exempt Subsidiary) formed or acquired after the Restructure Date,
and each Exempt Subsidiary which at any time ceases to be an Exempt Subsidiary, to execute and deliver (i) an appropriate joinder to the Security Agreement and, if applicable, one or more
Control Account Agreements, and (ii) such other agreements, mortgages, deeds of trust, financing statements, Landlord Consents and other documents, together with an opinion of counsel from
counsel and in form and substance reasonably acceptable to the Administrative Agent. Borrower and its Subsidiaries (other than Tax Preferred
Subsidiaries) shall pledge to the Administrative Agent pursuant to the Pledge Agreement (A) except as provided in  clause (B) below, all of the
capital stock or other equity interests of any Subsidiary of Borrower formed or acquired after the Restructure Date
and (B) 65% of the capital stock or other equity interests of any Tax Preferred Subsidiary formed or acquired after the Restructure Date. In addition to the foregoing, Borrower and its
Subsidiaries (other than Tax Preferred Subsidiaries) shall cause such documents and instruments as may be reasonably requested by the Administrative
Agent from time to time to be executed and delivered and do such further acts and things as reasonably may be required in order for the Administrative Agent to obtain a fully perfected first priority
Lien on all Property of Borrower and such Subsidiaries other than the Excluded Collateral, subject to Liens permitted by  Section 6.8. Without in any
way limiting the foregoing, Borrower shall, and shall cause each applicable Subsidiary to, deliver to the
Administrative Agent on or before November 30, 2001, Control Account Agreements as required by Section 5 of the Security Agreement and, in any event, sufficient to cause Borrower and its
applicable Subsidiaries to be in compliance with the requirements of the definition of Excluded Collateral (i.e., that the only deposit and investment
accounts with respect to which no Control Account Agreement shall have been delivered as of such date will qualify as Excluded Collateral). 

    21.  Section 5.14—Leasehold Mortgages.  The following new  Section 5.14 is added to the Credit Agreement: 

    5.14 Leasehold Mortgages.

    (a) General Obligation to Deliver Leasehold Mortgages. With respect to Borrower and its Subsidiaries
(other than Exempt Subsidiaries), enter into a Leasehold Mortgage in form and substance reasonably satisfactory to the Administrative Agent covering
each leasehold interest 

  
of Borrower and its Subsidiaries (other than Exempt Subsidiaries) with respect to all real Property leased by Borrower and such Subsidiaries
(other than general office space and premises having less than 3,500 gross square footage) and deliver to the Administrative Agent owner/landlord
consents (each, a "Landlord Consent") in form and substance reasonably satisfactory to the Administrative Agent with respect to each such Leasehold Mortgage. Without in any way limiting the generality
of the foregoing, Borrower shall, and shall cause each applicable Subsidiary to, deliver to the Administrative Agent, within five (5) Banking Days of the Administrative Agent's delivery thereof
to Borrower, a Leasehold Mortgage relating to each of the Stores specified in Annex 16 to the First Amendment as the "Restructure Date Leasehold
Mortgage Locations", to the extent no such Leasehold Mortgage is executed and delivered to the Administrative Agent as of the Restructure Date. 

    (b) Exceptions to General Obligation to Provide Leasehold Mortgages. Notwithstanding the provisions of  Section 5.14(a), in the event that the applicable lease with
respect to a leasehold interest (other than  the Restructure Date Leasehold Mortgage Locations) to be encumbered pursuant to Section 5.14(a) provides
that the
landlord's consent to such encumbrance is required and, after using commercially reasonable efforts, Borrower is unable to obtain such consent, no Leasehold Mortgage shall be required with respect to
such leasehold interest provided that Leasehold Mortgages (and corresponding Landlord Consents, if required by the terms of the applicable lease), in
each case in form and substance reasonably satisfactory to the Administrative Agent, shall have been executed and delivered to the Administrative Agent (a) on or before February 1, 2002,
with respect to Restructure Date Stores generating not less than fifty-one percent (51%) of the Net Sales of Borrower and its Subsidiaries (excluding  Exempt Subsidiaries) during the three
(3) Fiscal Month period immediately preceding the Restructure Date, (b) at all times from and after February 1, 2002,
with respect to Stores (including Restructure Date Stores and New Stores (including New Stores opened
pursuant to the Restructure Date New Leases)) generating not less than forty-four percent (44%) of the Net Sales of Borrower and its Subsidiaries (excluding  Exempt Subsidiaries) during the three
(3) Fiscal Month period immediately preceding any date of determination, and (c) with respect to all
New Stores (other than New Stores owned by Tax Preferred Subsidiaries and New Stores opened pursuant to the Restructure Date New
Leases). Notwithstanding the foregoing, if, after using commercially reasonable efforts, Borrower is unable to provide a Landlord Consent to the Administrative Agent for any applicable Store or with
respect to any other applicable real Property, the Administrative Agent shall have the right, but not the obligation, at Borrower's reasonable cost and expense, to attempt to obtain such Landlord
Consent from the applicable party and Borrower shall cooperate with the Administrative Agent in connection
with any such attempt to obtain such Landlord Consent. If the Administrative Agent elects to attempt to obtain a Landlord Consent, Borrower shall be entitled to participate in any negotiations or
other discussions between the Administrative Agent and the applicable landlord and, if the Administrative Agent (or its counsel) intends to deliver any written document
(including correspondence and draft Landlord Consents) to any applicable landlord, the Administrative Agent shall provide Borrower a reasonable
opportunity to review and comment on such written document prior to the delivery thereof to the applicable landlord. Notwithstanding the foregoing, the Administrative Agent shall not have the right to
commence an action (or bring suit) against any landlord for delivery of a Landlord Consent without the consent of Borrower. As used in this  Section 5.14, "commercially reasonable efforts" shall not
require Borrower to commence suit against or pay any material sum or to deliver any
other material consideration to any landlord refusing to provide an acceptable consent to any proposed Leasehold Mortgage. 

 

    22.  Section 6.1—Payment of Certain
Obligations.  Section 6.1 is amended and restated to read in full as follows: 

    6.1 Payment of Certain Obligations. 

    (a) With
respect to Permitted Subordinated Indebtedness, pay any (i) principal (including sinking fund payments)  other than principal payments permitted
pursuant to clause (iii)(x) of the definition of
Permitted Subordinated Indebtedness, or any other amount (other than, subject to clause (ii)  below, scheduled interest payments) with respect to any
such Indebtedness, or purchase or redeem (or offer to purchase or redeem) any such Indebtedness, or deposit any monies,
securities or other Property with any trustee or other Person to provide assurance that the principal or any portion thereof of any such Indebtedness will be paid when due or otherwise to provide for
the defeasance of any such Indebtedness, or (ii) scheduled interest on any such Indebtedness if the payment thereof is then prohibited under the terms of the subordination provisions governing
such Indebtedness; or 

    (b) With
respect to the Gilliland/Cook Indebtedness, unless paid from funds arising from the issuance of equity securities, pay any principal amount or any other amount
(other than scheduled interest payments that do not exceed 9.00% per annum) with respect to such Indebtedness unless Borrower complies in all respects
with Section 3.1(f); or 

    (c) With
respect to Indebtedness which does not consist of Permitted Subordinated Indebtedness or the Gilliland/Cook Indebtedness, make any payment of principal or
interest on any such Indebtedness prior to the date when due and payable, or amend the terms of any such Indebtedness to accelerate the date upon which any principal or interest thereof is due and
payable, except the Indebtedness evidenced by the Notes, if a Default or Event of Default then exists or would result therefrom. 

    23.  Section 6.4—Acquisitions.  Section 6.4  is amended and restated to read in full as follows: 

    6.4 Acquisitions. Make any Acquisition, except (a) Acquisitions
of a Person engaged in the business of manufacture, wholesale distribution and retail sale of natural or gourmet foods, vitamins, supplements and personal care items (and related grocery and other
products), (b) Acquisitions of a Person engaged in another business provided that the purchase price for any such Acquisition shall not exceed
$1,000,000, and (c) Acquisitions where the net monies or other consideration for such Acquisitions is in favor of Borrower and/or its Subsidiaries; provided  that in any case no Default or Event of
Default then exists or would result therefrom. 

    24.  Section 6.5—Distributions.  Section 6.5(a)  is amended and restated to read in full as follows: 

    (a) Distributions
by any Subsidiary of Borrower to Borrower or any Wholly-Owned Subsidiary that is not an Exempt Subsidiary; 

    25.  Section 6.8—Liens and Negative
Pledges.  Section 6.8(e) is amended and restated to read in full as follows: 

    (e) Liens
(i) on Property acquired by Borrower or any of its Subsidiaries that were in existence at the time of the acquisition of such Property and were not
created in contemplation of such acquisition or (ii) permitted by Section 6.9(d)(ii); 

    26.  Section 6.9—Indebtedness and Guaranty
Obligations.  Section 6.9 is amended as follows: 

    (a) Section 6.9(c) is amended and restated to read in full as follows: 

    (c) Indebtedness
and Guaranty Obligations owed to Borrower or any of its Subsidiaries that are not Exempt Subsidiaries; 

 

    (b) Section 6.9(d) is amended and restated to read in full as follows: 

    (d) (i) Indebtedness
of an Acquired Company (A) that is the subject of an Acquisition made on or before August 1, 2000 which is either unsecured or
is secured solely by a Lien permitted by Section 6.8(e) or (B) that is the subject of an Acquisition made after August 1, 2000
which is owed to a Person that is not the seller of the Acquired Company, or an Affiliate of such seller, that is either unsecured or is secured solely by a Lien permitted by  Section 6.8(e) and
which, to the extent in excess of $5,000,000 in the aggregate for all such Acquisition-related Indebtedness, qualifies as
Permitted Subordinated Indebtedness (other than the requirement that such Indebtedness be unsecured), and (ii) Seller Indebtedness in connection
with an Acquisition made after August 1, 2000 that is either unsecured or is secured solely by a Lien on the Property (other than common stock or
other equity interests) acquired by Borrower or any Subsidiary pursuant to such Acquisition; provided that the aggregate principal Indebtedness
permitted by this clause (ii) shall not at any time exceed $10,000,000 and provided further that
that portion of the Indebtedness permitted by this clause (ii) which is in excess of $5,000,000 qualifies as Permitted Subordinated Indebtedness
(other than the requirement that such Indebtedness be unsecured); 

    (c) Section 6.9(e) is amended and restated to read in full as follows: 

    (e) Without
duplication with Indebtedness permitted under Section 6.9(g), Indebtedness consisting of Capital
Lease Obligations, or Indebtedness (including the Gilliland/Cook Indebtedness) otherwise incurred to finance the purchase or construction of capital
assets (which shall be deemed to exist if the Indebtedness is incurred at or within 90 days before or after the purchase or construction of the capital asset), or to refinance any such
Indebtedness, provided that the principal amount of such Indebtedness incurred in any fiscal period commencing on the date such Indebtedness is
initially incurred and ending on the last day of the third full Fiscal Quarter ending thereafter does not exceed $2,000,000 in the aggregate; 

    (d) Section 6.9(h) is amended by replacing the period at the end of such section with ";"; and 

    (e) The
following new Sections 6.9(i) and (j) are added to the
Credit Agreement: 

    (i)  the
Gilliland/Cook Indebtedness, provided that (A) the aggregate principal amount of such Indebtedness at
all times prior to the date when all of the Obligations shall have been indefeasibly paid and performed in full does not exceed $2,000,000 (excluding  any payment-in-kind interest) and (B) such
Indebtedness shall be included as Indebtedness subject to the limitations specified in
Section 6.9(e) for the fiscal period commencing on the date of its initial incurrence (i.e.,
January 5, 2001) and ending on December 29, 2001; and 

    (j)  Permitted
Subordinated Indebtedness, including Indebtedness permitted pursuant to Sections 6.9(d)(i)(B) and  6.9(d)(ii) that qualifies as Permitted Subordinated
Indebtedness, provided that the aggregate principal
amount of such Indebtedness at all times prior to the date when all of the Obligations shall have been indefeasibly paid and performed in full does not exceed $32,500,000, excluding any
payment-in-kind interest; provided further that on the date any of such Indebtedness is incurred, (i) no Default or Event
of Default shall have occurred and remain in effect and (ii) after giving effect thereto, (A) no Default or Event of Default would immediately result therefrom and (B) on a
proforma basis (based on Borrower's then most current financial statements and/or projections), Borrower is projected to be in compliance with Sections 6.11  and 6.12
for each of the Fiscal Quarters ending thereafter through the Line B Maturity Date. 

 

    27.  Section 6.11—Funded Debt Ratio.  Section 6.11  is amended and restated to read in full as follows: 

    6.11 Funded Debt Ratio. Permit the Funded Debt Ratio, as of the last day of any Fiscal Quarter, to be greater than the
ratio set forth below opposite such Fiscal Quarter: 

	Fiscal Quarter
 
	 	Ratio

	September 29, 2001	 	6.35 to 1.00
	December 29, 2001	 	7.70 to 1.00
	March 30, 2002	 	7.30 to 1.00
	June 29, 2002	 	5.40 to 1.00
	September 28, 2002	 	4.10 to 1.00
	December 28, 2002	 	3.05 to 1.00
	March 29, 2003	 	2.55 to 1.00
	June 28, 2003 and all Fiscal Quarters ending thereafter	 	2.20 to 1.00

    28.  Section 6.12—Fixed Charge Coverage
Ratio.  Section 6.12 is amended and restated to read in full as follows: 

    6.12 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio, as of the last day of any Fiscal Quarter, to
be less than the ratio set forth below opposite such Fiscal Quarter: 

	Fiscal Quarter
 
	 	Ratio

	September 29, 2001	 	1.00 to 1.00
	December 29, 2001	 	1.00 to 1.00
	March 30, 2002	 	1.00 to 1.00
	June 29, 2002	 	1.10 to 1.00
	September 28, 2002	 	1.15 to 1.00
	December 28, 2002	 	1.25 to 1.00
	March 29, 2003	 	1.35 to 1.00
	June 28, 2003 and all Fiscal Quarters ending thereafter	 	1.45 to 1.00

    29.  Section 6.13—Minimum Year-to-Date Net
Income.  Section 6.13 is amended and restated to read in full as follows: 

    6.13 Minimum Year-to-Date Net Income. Permit Year-to-Date Net Income, as
of the last day of any Fiscal Quarter beginning with the Fiscal Quarter ending March 30, 2002, to be less than $1.00. 

    30.  Section 6.14—Stockholders' Equity.  Section 6.14  is amended and restated to read in full as follows: 

    6.14 Stockholders' Equity. Permit Stockholders' Equity, as of (a) September 29, 2001, to be less than
$110,125,000, (b) October 27, 2001, to be less than $108,375,000, (c) November 24, 2001, to be less than $106,175,000, (d) December 29, 2001, to be less than
$103,605,000, and (e) the last day of any Fiscal Month thereafter, to be less than the sum of (i) $103,605,000,  plus (ii) 90% of Net Income
in each Fiscal Quarter ending after December 29, 2001 (with no deduction for a net loss in any such Fiscal
Quarter)  plus (c) 100% of the proceeds of any issuance by Borrower of equity securities (except to
employees or former employees of Borrower pursuant to an employee stock option plan or employee stock purchase plan maintained by Borrower) after the Restructure Date;  provided, however, that if the Equity Achievement occurs, Stockholders' Equity will thereafter be tested
on a Fiscal Quarter basis (rather than on a Fiscal Month basis as set forth above). 

 

    31.  Section 6.15—Investments.  Section 6.15  is amended as follows: 

    (a) Section 6.15(a) is amended and restated to read in full as follows: 

    (a) Investments
in existence on the Restructure Date and disclosed on Schedule 6.15; 

    (b) Section 6.15(e) is amended and restated to read in full as follows: 

    (e) Investments
of Borrower in any Wholly-Owned Subsidiary and Investments of any such Subsidiary in another Wholly-Owned Subsidiary, provided  that the aggregate amount of such Investments made after the Restructure
Date in Exempt Subsidiaries and Foreign Subsidiaries that are not Exempt Subsidiaries does not exceed
at any time $500,000 (exclusive of Investments of Net Cash Issuance Proceeds made in Exempt Subsidiaries for the acquisition and/or development of New
Stores) and provided further that each such Subsidiary shall have executed and delivered to the Administrative Agent, all such Collateral Documents,
joinders to Collateral Documents and the Subsidiary Guaranty, and such other documents and instruments as may be reasonably required by the Administrative Agent pursuant to  Sections 5.11 and
5.14, as, and to the extent, applicable. 

    32.  Section 6.17—Capital Expenditures.  The following new  Section 6.17 is added to the Credit Agreement: 

    6.17 Capital Expenditures. 

    (a) Non-New Store Capital Expenditures. Make or incur any Non-New Store Capital Expenditure in
any Fiscal Quarter, commencing with the Fiscal Quarter ending December 29, 2001, if to do so would result in the aggregate of all Non-New Store Capital Expenditures made or incurred
during the Rolling Period in which such Fiscal Quarter occurs to exceed the percentage of Net Sales of Borrower and its
Subsidiaries during such Rolling Period set forth below opposite such Fiscal Quarter, tested as of the last day of any Fiscal Quarter: 

	Fiscal Quarter
 
	 	Maximum

Percentage
	 
	December 29, 2001	 	1.65	%
	March 30, 2002	 	1.90	%
	June 29, 2002	 	1.90	%
	September 28, 2002	 	1.90	%
	December 28, 2002	 	1.90	%
	March 29, 2003 and all Fiscal Quarters thereafter	 	2.00	%;

provided, however, that in no event shall the aggregate cumulative amount of Non-New Store
Capital Expenditures made or incurred during any applicable measurement period commencing on December 30, 2001 and ending on any date of determination (which shall be the last day of each
Fiscal Quarter ending after December 29, 2001) (any such measurement period being referred to herein as a "Test Period"), exceed the difference between  (a) EBITDAR for such Test Period
less (b) Fixed Charges paid or payable during such Test Period. 

    (b) New Store Capital Expenditures. Make or incur any New Store Capital Expenditure during any Fiscal Quarter ending
after September 29, 2001 if to do so would cumulatively result in the aggregate of all New Store Capital Expenditures made or incurred from and after 

  
September 30, 2001, tested as of the last day of any Fiscal Quarter, to exceed the amount set forth below opposite such Fiscal Quarter: 

	Fiscal Quarter
 
	 	Cumulative Maximum

New Store Capital Expenditures
	 
	December 29, 2001	 	$	1,000,000	 
	March 30, 2002	 	$	2,250,000	 
	June 29, 2002	 	$	3,125,000	 
	September 28, 2002	 	$	3,230,000	 
	December 28, 2002	 	$	4,750,000	 
	March 29, 2003	 	$	9,312,259	 
	June 28, 2003	 	$	16,000,000	;

provided, however, that if the Equity Achievement occurs, the amounts specified above for the Fiscal
Quarter in which the Equity Achievement occurs and each Fiscal Quarter thereafter shall be increased by the amount of Net Cash Issuance Proceeds received by Borrower in the Equity Achievement  less the
amount of any Net Cash Issuance Proceeds used to pay all or any part of the Gilliland/Cook Indebtedness. 

    (c) Reduction in Permitted New Store Capital Expenditures. Notwithstanding the foregoing, in the event Borrower repays
all or any part of the Gilliland/Cook Indebtedness from funds other than funds raised through the issuance of equity securities, the amounts specified in subsection (b)  above for the Fiscal Quarter
in which such repayment occurs and each Fiscal Quarter thereafter shall be decreased by an amount equal to twice the amount of such payment. 

    33.  Section 6.18—New Leases.  The following new  Section 6.18 is added to the Credit Agreement: 

    6.18 New Leases. Enter into (or purport to enter into) any New Lease after the Restructure Date  except that Borrower and its Subsidiaries may enter into (a) one New
Lease if (i) any of the Restructure Date New Leases is terminated in
its entirety, with no continuing obligation on the part of Borrower or any of its Subsidiaries and (ii) Borrower has provided the Administrative Agent evidence, reasonably satisfactory to the
Administrative Agent, that the aggregate out-of-pocket costs and expenses incurred by Borrower and its Subsidiary in connection with the construction and development of the
location relating to such Restructure Date New Lease and the termination of such Restructure Date New Lease did not (or will not) exceed $250,000 and (iii) no Default or Event of Default shall
have occurred and remain in effect on the date Borrower enters into such New Lease, and (b) other New Leases so long as (i) as of the last day of each Fiscal Quarter specified below, the
aggregate number of all New Leases
entered into from and after the Restructure Date shall not exceed the figure specified opposite such date, and (ii) no Default or Event of Default shall have occurred and remain in effect on
the date Borrower enters into any such New Lease: 

	Fiscal Quarter
 
	 	Maximum Cumulative

Number of New Leases
	 
	December 29, 2001	 	0	 
	March 30, 2002	 	1	 
	June 29, 2002	 	1	 
	September 28, 2002	 	2	 
	December 28, 2002	 	3	 
	March 29, 2003	 	4	 
	June 28, 2003 and thereafter	 	5	;

 

provided, however, that if the Equity Achievement occurs, Borrower may enter into, without duplication,
(A) one additional New Lease plus (B) other additional New Leases provided that the aggregate assumed construction obligations and
pre-opening expenses (discussed below) under such other additional New Leases do not exceed the Net Cash Issuance Proceeds received by Borrower in the Equity Achievement  less, as of any date of
determination, (1) the amount of such Net Cash Issuance Proceeds used by Borrower and its Subsidiaries to purchase
completed (or near-completed Stores) or used in connection with one or more Acquisitions, the result of which increases the Store-count of Borrower and its Subsidiaries and (2) the
amount of such Net Cash Issuance Proceeds used by Borrower to pay all or any portion of the Gilliland/Cook Indebtedness. For purposes of this Section, the assumed construction obligation and
pre-opening expense in the buildout and opening of a Store operated as a Wild Oats supermarket shall be $4,000,000; the assumed construction obligation and pre-opening expense
in the buildout and opening of any other type of Store (e.g., a Henry's supermarket) shall be $2,225,000. In addition, for purposes of calculating
compliance with this Section, any lease for a Store acquired by Borrower or any of its Subsidiaries (each, an "Acquired Store") after the Restructure Date shall constitute a New Lease until such time
as such Acquired Store is closed and all rent and other payment obligations relating thereto are fully defeased, provided that at the time of its
acquisition, such Acquired Store was designated by Borrower or such Subsidiary in a writing to the Administrative Agent as a Store to be closed within six (6) months of its acquisition and such
Acquired Store is so permanently closed within such 6-month period from Borrower's or such Subsidiary's acquisition thereof. 

    34.  Section 6.19—Change in Location of Chief Executive Offices, Jurisdiction of Organization and
Assets.  The following new Section 6.19 is added to the Credit Agreement: 

    6.19 Change in Location of Chief Executive Offices; Jurisdiction of Organization and Assets. Relocate the chief
executive office, or change the jurisdiction of organization, of Borrower or any Subsidiary without first giving the Administrative Agent thirty (30) days' prior written notice of any
relocation or change. Borrower shall not move, not shall it permit any Subsidiary to move, any of its respective Property (other than (a) motor
vehicles, (b) laptop and other personal computers, pagers, cell phones and other information technology equipment that does not have a fair market value (in the aggregate) greater than $250,000
and (c) other Property that does not have a fair market value (in the aggregate) greater than $100,000) to a jurisdiction other than any one of
the jurisdictions identified in Schedule 6.19 without first giving the Administrative Agent ten (10) calendar days' prior written
notice of any such proposed relocation, other than to the extent that any such Property has been sold pursuant to a sale in the ordinary course of
business permitted hereunder. Despite the foregoing, other than Investments permitted under  Section 6.15, neither Borrower nor any of its domestic
Subsidiaries shall move or relocate any portion of its respective Property having a fair
market value (as reasonably determined by the Administrative Agent) in excess of $500,000 in the aggregate to any foreign jurisdiction (whether or not specified in  Schedule 6.19) without the prior
written consent of the Requisite Lenders. 

    35.  Section 6.20—Deposit and Investment Accounts.  The following new  Section 6.20 is added to the Credit Agreement: 

    6.20 Deposit and Investment Accounts. Open and thereafter maintain any deposit or investment account,  other than the accounts specified in Schedule 4.7A, without giving the Administrative Agent
(a) twenty (20) days prior written notice of the opening of any such account that is to be included as Collateral and (b) with respect to any account that will qualify as Excluded
Collateral, written notice of the opening of such account within five (5) Banking Days after such opening. 

 
    36.  Section 7.1—Financial and Business
Information.  Section 7.1 is amended as follows: 

    (a) The
lead-in clause of Section 7.1 is amended and restated to read in full as follows: 

    7.1 Financial and Business Information. So long as any Advance remains unpaid, or any other Obligation remains unpaid,
or any portion of the Commitments remains in force, Borrower shall, unless the Administrative Agent (with the written approval of the Requisite Lenders) otherwise consents, at Borrower's sole expense,
deliver to the Administrative Agent and, unless specified otherwise, to each Lender, the following (which delivery may be accomplished by facsimile transmission or electronic mail
(other than with respect to the manually-signed Compliance Certificates referred to in  Section 7.2)): 

    (b) Section 7.1(a) is amended and restated to read in full as follows: 

    (a)(i)  As
soon as practicable after the end of each Fiscal Month, and in any event no later than the last day of the immediately succeeding calendar month
(other than with respect to the third Fiscal Month in any Fiscal Quarter, for which Borrower shall have until the corresponding Fiscal Quarter-ending
financial statements are due to be delivered to the Administrative Agent and the Lenders), the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such Fiscal Month and the
consolidated statements of operations and cash flows for such Fiscal Month, and the portion of the Fiscal Year ended with such Fiscal Month, all in reasonable detail. Such financial statements shall
be accompanied by a spreadsheet update report in substantially the same form as spreadsheets supplied by Borrower to the Lenders prior to the Restructure Date, and shall be certified by the chief
financial officer of Borrower as fairly presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with GAAP (other than footnote
disclosures), consistently applied, as at such date and for such periods, subject only to normal quarter-end and year-end accruals and audit adjustments; 

    (ii) As
soon as practicable after the end of each Fiscal Month, and in any event no later than the last day of the immediately succeeding calendar month, a monthly
comparable store sales report prepared with respect to the portion of the Fiscal Year ended with such Fiscal Month, which report shall contain the following information: (A) a listing of Stores
owned and/or operated by 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) the percentage year over year sales increase or decrease for all stores reflected on the report on an aggregate basis. Upon the request of any Lender, such reports shall be
provided on a store "format" basis; and 

    (iii) To
the Administrative Agent only, promptly after the same are delivered to Borrower and/or its Subsidiaries, copies of each monthly account statement (showing
account balance and monthly account activity) for all deposit and investment accounts of Borrower and its Subsidiaries that are included as part of the Collateral, and promptly (and in any event
within five (5) Banking Days after the Administrative Agent's request therefor) copies of account statements for any deposit, investment or other account that constitutes Excluded Collateral. 

The
Lenders agree that the financial statements/reports provided pursuant to subsections (a)(i) and (a)(ii)  above shall not be used by the Lenders to declare
an Event of Default as to the financial covenants set forth in  Sections 6.11, 6.12 or 6.13. 

    (c) Section 7.1(b) is amended and restated to read in full as follows: 

    (b) As
soon as practicable, and in any event within 45 days after the end of each Fiscal Quarter (other than with
respect to the fourth Fiscal Quarter in any Fiscal Year, for which Borrower shall have 95 days), the consolidated balance sheet of Borrower and its Subsidiaries 

  
as at the end of such Fiscal Quarter and the consolidated statements of operations and cash flows for such Fiscal Quarter, and the portion of the Fiscal Year ended with such Fiscal Quarter, all in
reasonable detail. Such financial statements shall include a comparison to the same Fiscal Quarter of the prior Fiscal Year and shall be certified by the chief financial officer of Borrower as fairly
presenting the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with GAAP (other than footnote disclosures), consistently applied, as at such
date and for such periods, subject only to normal year-end accruals and audit adjustments; 

    (d) Section 7.1(c) is amended by replacing the reference to "120 days" therein with a reference to
"95 days"; and 

    (e) Section 7.1(d) is amended and restated to read in full as follows: 

    (d) Annually,
as soon as practicable, and in any event not later than thirty (30) days before the commencement of each Fiscal Year, a budget and projection by
Fiscal Month for that Fiscal Year and all subsequent periods up to the later of the Line A Maturity Date and the Line B Maturity Date and by Fiscal Quarter for each of the first four Fiscal Quarters
following the Line A Maturity Date, including each of the following, in reasonable detail: (i) projected consolidated balance sheets, statements
of operations and statements of cash flow of Borrower and its Subsidiaries, (ii) the projected
ratios and, whether or not Borrower and its Subsidiaries are projected to be in compliance, other numeric compliance by Borrower and its Subsidiaries with each of the covenants identified in the form
of Compliance Certificate attached hereto as Exhibit B, and (iii) a description of the following assumptions used in the preparation of
such projections: projected store openings, closings, remodels, new store models by category (i.e., format of store), interest rate assumptions
consistent with this Agreement, anticipated Non-New Store Capital Expenditures and New Store Capital Expenditures, and such other mutually agreed upon assumptions, if any; 

    (f)  Section 7.1(e) is amended and restated to read in full as follows: 

    (e) Promptly
after request by the Administrative Agent or any Lender (and if such request is made prior to the delivery thereof to Borrower or any of its Subsidiaries,
promptly after delivery to Borrower or such Subsidiary), copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the
board of directors) of Borrower by independent accountants in connection with the accounts or books of Borrower or any of its Subsidiaries, or any audit of any of them, not otherwise required to be
delivered to the Administrative Agent pursuant to other provisions of this Section 7.1. 

    (g) Sections 7.1(h) and (j). Sections 7.1(h) and (j)  are amended by deleting the word "Promptly" at the beginning thereof and replacing it with the
phrase "To the Administrative Agent only, promptly". 

    (h) Section 7.1(i). Section 7.1(i) is amended and restated
to read in full as follows: 

    (i)  To
the Administrative Agent only, as soon as practicable, and in any event within two (2) Banking Days after a Senior Officer of Borrower becomes aware of
the existence of any condition or event which constitutes a Default or Event of Default, telephonic notice specifying the nature and period of existence thereof, and, to the Administrative Agent and
each of the Lenders, no more than two (2) Banking Days after such telephonic notice, written notice again specifying the nature and period of existence thereof and specifying what action
Borrower is taking or proposes to take with respect thereto; 

 

    (i)  Section 7.1(k). Section 7.1(k) is amended and
restated to read in full as follows: 

    (k) To
the party or parties requesting same, such other data and information as from time to time may be reasonably requested by the Administrative Agent or any Lender. 

    37.  Section 7.2—Compliance Certificates.  Section 7.2  is amended and restated to read in full as follows: 

    7.2 Compliance Certificates. So long as any Advance remains unpaid, or any other Obligation remains unpaid or
unperformed, or any portion of the Commitments remains outstanding, Borrower shall, at Borrower's sole expense, deliver to the Administrative Agent and each Lender (with one manually-signed original
delivered to the Administrative Agent) concurrently with the financial statements required pursuant to Sections 7.1(a),  7.1(b)(i) and 7.1(c), a Compliance Certificate signed by a Senior Officer of Borrower showing
calculations of the covenants listed therein which are tested as of the end of the applicable fiscal period. 

    38.  Section 7.3—Revisions to Schedules.  The following new  Section 7.3 is added to the Credit Agreement: 

    7.3 Revisions or Updates to Schedules. Should any of the information or disclosures provided on any of the Schedules
originally attached hereto become outdated or incorrect in any material respect, Borrower promptly shall provide to the Administrative Agent such revisions or updates to such Schedule(s) as may be
necessary or appropriate to update or correct such Schedule(s); provided that no such revisions or updates to any Schedule(s) shall be deemed to have
cured any breach of warranty or representation resulting from the inaccuracy or incompleteness of any such Schedule(s) at the time any such Schedule was delivered to the Administrative Agent and the
Lenders. 

    39.  Section 8.2—Advances.  Section 8.2(b)  is amended and restated to read in full as follows: 

    (b) [Reserved].

    40.  Section 9.1—Events of Default.  Section 9.1  is amended as follows: 

    (a) Subsection (e) is amended and restated to read in full as follows: 

    (e) Borrower
or any other Party fails to perform or observe any other covenant or agreement (not specified in clause (a), (b),
(c) or (d) above) contained in any Loan Document on its part to be performed or observed within twenty (20) Banking Days after the giving of notice by the
Administrative Agent on behalf of the Requisite Lenders of such Default or, if such Default is not reasonably susceptible of cure within such period, within such longer period as is reasonably
necessary to effect a cure so long as Borrower or such Party continues to diligently pursue cure of such Default but not in any event in excess of forty (40) Banking Days;  provided, however, that with respect to the Leasehold Mortgages only, no Event of Default shall occur
hereunder as a result of Borrower's or any other
Party's failure to perform or observe such other covenants or agreements set forth in the Leasehold Mortgages so long as, at any date of determination, no such failure shall have occurred and remain
in effect (i.e., Borrower and its Subsidiaries shall be in full compliance) with respect to Leasehold Mortgages encumbering Stores generating not less
than forty-four percent (44%) of the Net Sales of Borrower and its Subsidiaries (excluding Exempt Subsidiaries) during the three
(3) Fiscal Month period immediately preceding such date of determination; or 

    (b) Subsection (h) is amended and restated to read in full as follows: 

    (h)(i)  the
Subsidiary Guaranty for any reason shall cease to be in full force and effect (other than in accordance with its terms or, with respect to any particular
Subsidiary Guarantor, as a result of the merger of such Subsidiary Guarantor into and with Borrower or 

  
any other Subsidiary Guarantor or as a result of a dissolution of such Subsidiary Guarantor permitted hereunder), or any Subsidiary Guarantor shall deny in writing that it has any further liability
under the Subsidiary Guaranty (other than as a result of the discharge of such Subsidiary Guarantor in accordance with the terms of the Loan Documents); 

    (ii) (A) any
Lien purported to be created by any Collateral Document with respect to Collateral having a fair market value (as reasonably determined by the
Administrative Agent) in excess of $100,000 shall cease to be (subject to the notice and cure period set forth below) a valid, perfected, first priority (except  as otherwise expressly provided in this
Agreement or such Collateral Document) in the Property covered thereby, except to the
extent that any such loss of perfection or priority results from (1) the sale or other disposition of the applicable Collateral in a transaction permitted by any Loan Document, (2) any
action taken by the Administrative Agent to release any such Lien in compliance with the provisions of this Agreement or any other Loan Document, (3) the Administrative Agent's failure to
properly file (x) Uniform Commercial Code financing statements or comparable filings delivered to it for filing under the Collateral Documents or (y) Uniform Commercial Code
continuation statements or comparable filings necessary to maintain perfection or (4) the failure of the Administrative Agent to maintain possession of certificates representing securities
pledged and delivered to it under the Pledge Agreement, and any such failure is not cured by a substitute filing or delivery of substitute Collateral within ten (10) days after notice from the
Administrative Agent to Borrower, or (B) Borrower or any applicable Subsidiary shall assert that any Lien purported to be created by any Collateral Document is not a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement or such Collateral Document) Lien in the Property covered thereby and Borrower or
such Subsidiary fails to execute and deliver such documents and/or take such action to remedy the circumstance giving rise to such assertion within ten (10) days of the making of such
assertion; or 

    (iii) any
Party denies in writing that it has any further liability or obligation under any Loan Document to which it is a party, or purports to revoke, terminate or
rescind the same, or, in the case of a Party to (or the beneficiary of) any Subordination Agreement, asserts in writing that such Permitted
Subordinated Indebtedness is not subordinated to the Obligations in accordance with its terms and Borrower or the applicable Subsidiary of Borrower does not, within five (5) days following
receipt of notice of such assertion, deny in writing such assertion and at all times after such assertion contest any attempt by such holder to take action based on such assertion. 

    (c) Subsection (k) is amended and restated to read in full as follows: 

    (k) The
occurrence of a "Default" (as such term is or may hereafter be specifically defined in any Leasehold Mortgage) or "Event of Default" (as such term is or may
hereafter be specifically defined in any other Loan Document) under any other Loan Document, provided,  however, that with respect to the Leasehold
Mortgages only, no Event of Default shall occur hereunder as a result of any Default under one or more
Leasehold Mortgages so long as, at any date of determination, no Default shall have occurred and remain in effect with respect to Leasehold Mortgages encumbering Stores generating not less than
forty-four percent (44%) of the Net Sales of Borrower and its Subsidiaries (excluding Exempt Subsidiaries) during the three
(3) Fiscal Month period immediately preceding such date of determination; or 

    (d) Existing
subsection (m) specifying that an Event of Default shall in certain circumstances arise as a result
of a Material Adverse Effect is deleted. 

 

    41.  Section 11.3—Costs and Expenses.  Section 11.3  is amended and restated to read in full as follows: 

    11.3 Costs and Expenses. Borrower agrees to pay within seven (7) Banking Days after demand, accompanied by an
invoice therefor, all reasonable, out-of-pocket expenses (except in the case of the Administrative Agent's allocated
in-house counsel costs described below, which shall not be required to be "out-of-pocket") of the Administrative Agent (including  the reasonable fees and out-of-pocket expenses of counsel to the
Administrative Agent (including reasonable allocated costs of in-house
counsel employed by the Administrative Agent) and of local counsel, if any, who may be retained by counsel to the Administrative Agent) in connection with 

    (a) the
negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby
(or thereby) are consummated; 

    (b) the
filing, recording, refiling or rerecording of any Loan Document or any Uniform Commercial Code financing statements relating thereto and all amendments,
supplements, amendments and restatements and other modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or
rerecorded by the terms hereof or the terms of any Loan Document; 

    (c) the
preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document; and 

    (d) the
preparation of any information or response required with respect to any investigative request or inquiry, approval, findings of suitability or any other
response or communication involving a Governmental Agency arising out of this Agreement, any other Loan Document or any Obligation evidenced and secured by the Loan Documents or the participation in
any public or investigatory hearing or meeting. 

Borrower
further agrees to pay, and to save the Administrative Agent, the Issuing Lender and the Lenders harmless from all liability for, any stamp and similar taxes that may be payable in connection
with the execution or delivery of this Agreement, the credit extensions made hereunder, or the issuance of the Notes, the Letters of Credit or any other Loan Document. Borrower also agrees to
reimburse the Administrative Agent and, after the occurrence and during the continuance of an Event of Default, the Issuing Lender and each Lender upon demand for all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and legal expenses of counsel and fees and expenses of consultants
to the Administrative Agent, the Issuing Lender and the Lenders incurred by the Administrative Agent, the Issuing Lender or such Lenders in connection with (i) the negotiation of any
restructuring or "work-out" with Borrower whether or not consummated, of any Obligations (provided that Borrower's reimbursement obligations
for legal fees and expenses in connection with the restructure evidenced by the First Amendment shall be limited to the reasonable attorneys' fees and legal expenses of outside counsel to, and
reasonable allocated costs of in-house counsel for, the Administrative Agent only), (ii) the enforcement or attempted enforcement of any Obligations and any matter related thereto
and (c) any bankruptcy of Borrower or any of its Subsidiaries. Any amount payable to the Administrative Agent or any Lender under this  Section 11.3
shall bear interest from the seventh Banking Day following the date of demand, if
not then paid, for payment at the Default Rate. 

 

    42.  Section 11.26—Engagement of Financial Consultant/Advisor.  The following new  Section 11.26 is added to the Credit Agreement:

    11.26  Engagement of Financial Consultant/Advisor. Without limitation on any other similar rights of the Administrative
Agent and the Lenders in this Agreement, upon the occurrence of any Event of Default
after the Restructure Date, the Administrative Agent (on behalf of the Lenders), acting at the direction of the Requisite Lenders, shall have the right, but not the obligation, to engage, at
Borrower's expense, a third-party consultant/advisor for the purpose of, among other things, (a) monitoring, evaluating and advising the Administrative Agent and the Lenders with respect to
Borrower's and its Subsidiaries' operations, accounting systems and financial information provided to the Lenders and (b) conducting periodic inspections of the assets of Borrower and its
Subsidiaries and audits of Borrower's and its Subsidiaries' books and records. In the event the Administrative Agent intends to engage such a consultant/advisor, the Administrative Agent shall provide
to Borrower a list containing not less than three such consultants/advisors from which Borrower shall have the right to choose the consultant/advisor to be so engaged and in connection with making
such choice, Borrower shall be permitted to contact each such consultant/advisor to obtain the qualifications, affiliations and proposed fees of such consultant/advisor. Borrower shall, and shall
cause each of its Subsidiaries, to cooperate in all reasonable respects with any such consultant/advisor (and its agents) in order to accomplish the aforementioned purposes. Such cooperation shall
include, without limitation, providing access to any and all books and records, accounting personnel, auditors (both internal and external) and property locations, in each case, of Borrower and each
of its Subsidiaries. 

    43.  Section 11.27—Release of Collateral.  The following new  Section 11.27 is added to the Credit Agreement: 

    11.27  Release of Collateral. Without limiting the provisions of any other Loan Document, upon any sale or other
transfer by Borrower or any applicable Subsidiary of any Collateral that is permitted under the Loan Documents to any Person that is not (and following such sale or transfer will not, pursuant to the
Loan Documents, be required to be) a Party to any Collateral Document, or, upon the effectiveness of any written consent to the release of the Lien granted pursuant to any applicable Collateral
Document pursuant to Section 11.2, the Administrative Agent shall promptly execute and deliver to Borrower or such Subsidiary, at Borrower's or
such Subsidiary's expense, all documents that Borrower or such Subsidiary shall reasonably request to terminate, release or reconvey such Lien. Any execution and delivery of documents pursuant to this  Section 11.27
shall be without recourse to or warranty by the Administrative Agent.
 

    44.  Exhibit B.  Exhibit B to the Credit
Agreement is replaced in its entirety by Exhibit B attached hereto as Annex 2. 

    45.  Exhibit G.  Exhibit G to the Credit
Agreement is deleted in its entirety. 

    46.  Exhibit H.  Exhibit H to the Credit
Agreement is replaced in its entirety by Exhibit H attached hereto as Annex 3. 

    47.  Exhibit I.  Exhibit I to the Credit
Agreement is replaced in its entirety by Exhibit I attached hereto as Annex 4. 

    48.  Exhibits K, L and M.  The forms of Leasehold Mortgage, Pledge Agreement and Security Agreement
attached to this Amendment as Annexes 5, 6 and 7, respectively, are added to the Credit Agreement as Exhibits K, L and
M, respectively. 

    49.  Schedule 1.1.  Schedule 1.1 (Lender
Commitments) is replaced in its entirety by Schedule 1.1 attached hereto as Annex 8. 

  
    50.  Schedule 4.4.  Schedule 4.4  (Subsidiaries) is replaced in its entirety by Schedule 4.4 attached hereto as Annex
9. 

    51.  Schedule 4.7.  Schedule 4.7 (Existing
Liens and Rights of Others) is replaced in its entirety by Schedule 4.7 attached hereto as Annex
10. 

    52.  Schedule 4.7A.  Schedule 4.7A  (Location of Property; Accounts) attached hereto as Annex 11, is added to the Credit Agreement immediately after  Schedule 4.7. 

    53.  Schedule 4.8.  Schedule 4.8  (Intangible Assets; Restrictions on Use) attached hereto as Annex 12, is added to the Credit Agreement immediately after  Schedule 4.7A. 

    54.  Schedule 4.10.  Schedule 4.10  (Material Litigation) is replaced in its entirety by Schedule 4.10
attached hereto as Annex
13. 

    55.  Schedule 6.15.  Schedule 6.15  (Existing Investments) is replaced in its entirety by Schedule 6.15
attached hereto as Annex
14. 

    56.  Schedule 6.19.  Schedule 6.19  (Locations of Chief Executive Offices and Assets) attached hereto as Annex
15, is added to the Credit Agreement immediately
after Schedule 6.15. 

    57.  Conditions Precedent.  The effectiveness of this Amendment shall be conditioned upon the
satisfaction of the following conditions precedent: 

    (a) Receipt
by the Administrative Agent of all of the following, each properly executed by an authorized officer of each party thereto and dated as of the date hereof
and each in form and substance satisfactory to the Administrative Agent: 

    (i)  Counterparts
of this Amendment executed by all parties hereto; 

    (ii) Written
consent of the Subsidiary Guarantors in the form of Exhibit A to this Amendment; 

    (iii) the
Security Agreement executed by Borrower and its Subsidiaries (other than Exempt Subsidiaries); 

    (iv) the
Pledge Agreement executed by Borrower and Wild Oats Financial, Inc.; 

    (v) the
Pledged Collateral, together with executed undated stock powers (or the equivalent) relating thereto, endorsed in blank; 

    (vi) such
financing statements on Form UCC-1 executed by Borrower and its Subsidiaries (other than  Exempt Subsidiaries) with respect to the Collateral Documents as the Administrative Agent may reasonably
request; 

    (vii) to
the extent the form thereof shall have been provided to Borrower by the Administrative Agent, a Leasehold Mortgage executed by Borrower or any applicable
Subsidiary with respect to any of the real Property locations identified on Annex 16 attached hereto as the "Restructure Date Leasehold Mortgage
Locations", in each case, appropriately notarized and otherwise in form suitable for recordation with the appropriate Governmental Agency; 

    (viii)  Landlord
Consents pertaining to each of the real Property locations identified on Annex 16 attached hereto as
the "Restructure Date Leasehold Mortgage Locations" from the owners/lessors of such real Property locations; 

    (ix) a
general release executed by each of Borrower's Subsidiaries in form substantially similar to the provisions of Section 59  hereof; 

  
    (x) with respect to Borrower and each of its Subsidiaries (other than Exempt Subsidiaries), such documentation as the
Administrative Agent may reasonably require to establish the due organization, valid existence and good standing of Borrower and such Subsidiaries, their qualification to engage in business in each
material jurisdiction in which they are engaged in business or required to be so qualified, their authority to execute, deliver and perform the Loan Documents to which they are a Party, the identity,
authority and capacity of each Responsible Official thereof authorized to act on its behalf, including certified copies of articles of incorporation and
amendments thereto, bylaws and amendments thereto, certificates of good standing, certificates of corporate resolutions, incumbency certificates, and the like; 

    (xi) evidence
of the insurance policies required by Section 5.4 (as amended hereby), together with such
endorsements as are necessary to show the Administrative Agent as sole loss payee and an additional insured, as applicable, thereunder; 

    (xii) Certificate
signed by a Responsible Official of Borrower certifying that attached thereto is a true and correct copy of each of the Gilliland/Cook Loan Documents; 

    (xiii)  written
legal opinions of (A) Freya Brier, general counsel to Borrower, and (B) Holme Roberts & Owen LLP, special counsel to Borrower,
substantially in the forms of Annex 17 and Annex 18 hereto, respectively, together with copies of all
factual certificates and legal opinions, if any, delivered to either such counsel in connection with either such opinion upon which either such counsel has relied; and 

    (xiv)  such
other assurances, certificates, documents or consents as the Administrative Agent or the Requisite Lenders reasonably may require, as may be notified to
Borrower at least two (2) Banking Days prior to the Restructure Date. 

    (b) Receipt
by the Administrative Agent, for the ratable accounts of the Lenders party to the Credit Agreement on the Restructure Date pro rata according to their Pro
Rata Share of the Commitments, of a restructure/amendment fee in the amount of $625,000. The foregoing fee paid to each Lender is solely for its account and is non-refundable. 

    (c) Borrower
shall have paid to the Administrative Agent the agency fees payable pursuant to Section 3.4 (as
amended hereby). 

    (d) Borrower
shall have paid to the Administrative Agent, for the accounts of the Administrative Agent and the Lenders, as applicable, an amount necessary to reimburse
the Administrative Agent and the Lenders for all legal fees (including reasonable outside counsel fees and the reasonably allocated costs of
in-house counsel for the Administrative Agent) incurred in connection with the restructure of the credit facilities provided to Borrower pursuant to the Credit Agreement in the amount
invoiced to Borrower on or before the Restructure Date. 

    58.  Certain Waivers by Lenders.  Upon satisfaction of the conditions precedent set forth in  Section 57 of this Amendment, the Lenders will be
deemed to have waived (a) all rights to withhold future funding of Advances pursuant to  Section 8.2(b) based on the position that the restructuring charges taken by Borrower in Fiscal Year
2000 and in the first two Fiscal Quarters of
2001 constituted a Material Adverse Effect, (b) any and all "Existing Defaults" and (c) any other Events of Default that may have occurred prior to the Restructure Date which are of a
non-material nature and which could not reasonably be expected to have been known to Borrower after the exercise of reasonable inquiry and diligence. As used herein, the term "Existing
Defaults" shall mean the events and/or circumstances specified in Section A of Annex 19 hereto (whether such events and/or circumstances actually
constituted a Default or Event of Default). 

  

    59.  General Release.  In consideration of the Lenders' consent to this Amendment and of the benefits
provided to Borrower under the terms and provisions hereof, Borrower hereby agrees as follows ("General Release"): 

    (a) Borrower,
for itself and on behalf of its successors and assigns, does hereby release, acquit and forever discharge each of the Lenders, the Issuing Lender and the
Administrative Agent, including without limitation, all of their respective predecessors in interest, and all of the Lenders', the Issuing Lender's and the Administrative Agent's past and present
officers, directors, attorneys, affiliates, (each, a "Releasee" and collectively, the "Releasees"), of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of
contract, breaches of duty or of any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action, defenses, offsets, debts, sums of money, accounts, compensation, contracts,
controversies, promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated,
each as though fully set forth herein at length (each, a "Released Claim" and collectively, the "Released Claims"), that Borrower now has or may acquire as of the later of (i) the date that
this Amendment becomes effective through the satisfaction (or waiver by the Lenders) of all conditions to this Amendment or (ii) the date that Borrower has executed and delivered this Amendment
to the Administrative Agent (hereafter, the "Release Date"), including without limitation, those Released Claims in any way arising out of, connected with or related to any and all prior credit
accommodations, if any, provided by the Lenders, or any of the Lenders' predecessors in interest, to Borrower and any agreements, notes or documents of any kind related thereto, or the transactions
contemplated thereby or hereby, or any other agreement or document referred to herein or therein. 

    (b) Borrower
hereby acknowledges, represents and warrants to the Lenders, the Issuing Lender and the Administrative Agent that it agrees to assume the risk of any and
all unknown, unanticipated or misunderstood defenses and Released Claims which are released by the provisions of this General Release in favor of the Lenders, the Issuing Lender and the Administrative
Agent and the other Releasees, and Borrower hereby waives and releases all rights and benefits which it might otherwise have under any State or local Laws with regard to the release of such unknown,
unanticipated or misunderstood defenses and Released Claims. 

    (c) Each
Person signing this Amendment on behalf of Borrower acknowledges that he or she has read each of the provisions of this General Release. Each such Person fully
understands that this General Release has important legal consequences and each such Person realizes that he/she is releasing any and all Released Claims that Borrower may have as of the Release Date
as set forth above. Borrower hereby acknowledges that it has had an opportunity to obtain a lawyer's advice concerning the legal consequences of each of the provisions of this General Release. 

    (d) Borrower
hereby specifically acknowledges and agrees that: (i) none of the provisions of this General Release shall be construed as or constitute an
admission of any liability on the part of any Lender, the Issuing Lender, the Administrative Agent, or any of the other Releasees; (ii) the provisions of this General Release shall constitute
an absolute bar to any Released Claim of any kind, whether any such Released Claim is based on contract, tort, warranty, mistake or any other theory, whether legal, statutory or equitable; and
(iii) any attempt to assert a Released Claim barred by the provisions of this General Release shall subject Borrower to the provisions of applicable Law setting forth the remedies for the
bringing of groundless, frivolous or baseless claims or causes of action. 

    60.  Representations and Warranties.  Borrower makes the following representations and warranties to the
Administrative Agent and each Lender as of the date hereof, which representations and 

  
warranties shall survive the execution, termination or expiration of this Amendment and shall continue in full force and effect until the full and final satisfaction and discharge of all Obligations: 

    (a) Reaffirmation of Prior Representations and Warranties. Except to the extent set forth in Section B of  Annex 19 hereto, Borrower hereby reaffirms and restates as of
the date hereof, all of the representations and warranties made by Borrower in the Credit
Agreement and the other Loan Documents, except (i) to the extent such representations and warranties specifically relate to an earlier date, in
which event such representations and warranties were true as of such earlier date, and (ii) to the extent such representations and warranties are amended by this Amendment, in which case
Borrower makes each of such amended representations and warranties as of the date hereof. 

    (b) No Default. After giving effect to this Amendment, no Default or Event of Default has occurred and remains
continuing under any of the Loan Documents. 

    (c) Subsidiary Guarantors; Exempt Subsidiaries. All Subsidiaries of Borrower in existence as of the date hereof
(other than Exempt Subsidiaries) are parties to the Subsidiary Guaranty. As of the date hereof, Wild Oats of Massachusetts, Inc., Wild Oats
Markets Canada, Inc. and Alfalfa's Canada, Inc. are the only Exempt Subsidiaries. 

    (d) Landlord Consents. As of the Restructure Date, Borrower has delivered (or caused to be delivered) to the
Administrative Agent Landlord Consents pertaining to leasehold interests in Restructure Date Stores that have generated not less than forty percent (40%) of the revenue of Borrower and its
Subsidiaries (excluding Exempt Subsidiaries) during the three (3) Fiscal Months immediately preceding the Restructure Date. 

    61.  Confirmation.  In all other respects, the terms of the Credit Agreement and the other Loan Documents
are hereby confirmed. 

    62.  Governing Law.  This Amendment shall be governed by, and construed and enforced in accordance with,
the Laws of Colorado applicable to contracts made and performed in Colorado. 

[signature
pages follow] 

  
    IN WITNESS WHEREOF, Borrower, the Administrative Agent and the Lenders have executed this Amendment as of October 17, 2001 by their duly authorized representatives. 

	 	 	WILD OATS MARKETS, INC.
	

 	
 	
By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]
	

 	
 	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]
	

 	
 	
BANK ONE, NA, as a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]
	

 	
 	
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH, as a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]
	

 	
 	
HARRIS TRUST & SAVINGS BANK, as a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]

 

	

 	
 	
KEYBANK NATIONAL ASSOCIATION, as a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]
	

 	
 	
U.S. BANK NATIONAL ASSOCIATION, as a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	 	
 [Printed Name and Title]

 

 
 

Exhibit A to Amendment
  
    CONSENT OF SUBSIDIARY GUARANTORS    
  

    Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of August 1, 2000 among Wild Oats Markets, Inc.
("Borrower"), the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent (as heretofore amended, the "Credit Agreement"). 

    Each
of the undersigned Subsidiary Guarantors hereby consents to Amendment No. 1 to Amended and Restated Credit Agreement in the form executed by Borrower, consents to the
release of Wild Oats Markets Canada, Inc. and Alfalfa's Canada, Inc. from any and all obligations under the Subsidiary Guaranty, and confirms that the Subsidiary Guaranty to which it is
a party remains in full force and effect. 

Dated:
As of October 17, 2001 

	"Subsidiary Guarantors"	 	 	 
	
WILD MARKS, INC.	
 	

SPARKY, INC.
	

By:	

 	
 	

By:	

 
	 	
	 	 	

	

 	

 [Printed Name and Title]	

 	

 	

 [Printed Name and Title]
	
WILD OATS FINANCIAL, INC.	
 	

WILD OATS OF TEXAS, INC.
	
By:	

 	
 	

By:	

 
	 	
	 	 	

	

 	

 [Printed Name and Title]	

 	

 	

 [Printed Name and Title]

 

 
 

INDEX OF ANNEXES
  TO AMENDMENT NO. 1    
  

	Annex
 
	 	Description

	1	 	Standard Trade Terms
	2	 	Revised Exhibit B (Compliance Certificate)
	3	 	Revised Exhibit H (Request for Letter of Credit)
	4	 	Revised Exhibit I (Request for Loan)
	5	 	New Exhibit K (Leasehold Mortgage)
	6	 	New Exhibit L (Pledge Agreement)
	7	 	New Exhibit M (Security Agreement)
	8	 	Revised Schedule 1.1
	9	 	Revised Schedule 4.4
	10	 	Revised Schedule 4.7
	11	 	New Schedule 4.7A
	12	 	New Schedule 4.8
	13	 	Revised Schedule 4.10
	14	 	Revised Schedule 6.15
	15	 	New Schedule 6.19
	16	 	Restructure Date Leasehold Mortgage Locations; Restructure Date New Leases
	17	 	Legal Opinion—Freya Brier
	18	 	Legal Opinion—Holme Roberts & Owen LLP
	19	 	Existing Defaults; Exceptions to Representations and Warranties

QuickLinks

AMENDMENT NO. 1 TO AMENDED AND RESTATED CREDIT AGREEMENT

Exhibit A to Amendment CONSENT OF SUBSIDIARY GUARANTORS

INDEX OF ANNEXES TO AMENDMENT NO. 1

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