Document:

Williams Severance Agreement

 

 

SEVERANCE AGREEMENT

 

 

THIS AGREEMENT, dated November 7, 2002, is made by and between Wild Oats Markets, Inc.,
a Delaware corporation (the "Company"), and Peter Williams (the
"Executive").

WHEREAS, the Company considers it essential to the best interests of its stockholders
to foster the continued employment of key management personnel; and

WHEREAS, the Board recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control exists and that such possibility, and
the uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company and its
stockholders; and

WHEREAS, the Board has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the Company's
management, including the Executive, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a Change in
Control;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as follows: 

1.    Defined Terms. The definitions
of capitalized terms used in this Agreement are provided in the last Section hereof.

2.    Term of Agreement. The Term of this Agreement shall
commence on the date hereof and shall continue in effect through December 31, 2004; provided,
however, that commencing on January 1, 2003 and each January 1 thereafter, the Term
shall automatically be extended for one additional year unless, not later than September
30 of the preceding year, the Company or the Executive shall have given notice not to
extend the Term; and further provided, however, that if a Change in
Control shall have occurred during the Term, the Term shall expire no earlier than
twenty-four (24) months beyond the month in which such Change in Control occurred.

3.    Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the conditions
described herein, to pay the Executive the Severance Benefits and the other payments and
benefits described herein. Except as provided in Section 10.1 hereof, no Severance
Benefits shall be payable under this Agreement unless there shall have been (or, under the
terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive's employment with the Company following a Change in Control
and during the Term. This Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive shall not have any right to be retained in the
employ of the Company.

4.    The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the Term, the Executive will remain in the employ of the Company until
the earliest of (i) a date which is six (6) months from the date of such Potential Change
in Control, (ii) the date of a Change in Control, (iii) the date of termination by the
Executive of the Executive's employment for Good Reason or by reason of death, Disability
or Retirement, or (iv) the termination by the Company of the Executive's employment for
any reason.

5.    Compensation Other Than Severance Benefits.

5.1    Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive's full-time duties with the
Company as a result of incapacity due to physical or mental illness, the Company shall pay
the Executive's full salary to the Executive at the rate in effect at the commencement of
any such period, together with all compensation and benefits payable to the Executive
under the terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period (other than any disability plan), until the Executive's
employment is terminated by the Company for Disability.

5.2    If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the Executive's
full salary to the Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the rate in effect immediately
prior to the first occurrence of an event or circumstance constituting Good Reason,
together with all compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.

5.3    If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the Executive
the Executive's normal post-termination compensation and benefits as such payments become
due. Such post-termination compensation and benefits shall be determined under, and paid
in accordance with, the Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of Termination
or, if more favorable to the Executive, as in effect immediately prior to the occurrence
of the first event or circumstance constituting Good Reason.

6.    Severance Benefits.

6.1    Subject to Section 9 below, if the Executive's employment is
terminated following a Change in Control and during the Term, other than (A) by the
Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without
Good Reason, then the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Benefits") and
the payment referred to in Section 6.2, in addition to any payments and benefits to which
the Executive is entitled under Section 5 hereof. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated following a Change in
Control by the Company without Cause or by the Executive with Good Reason, if (i) the
Executive's employment is terminated by the Company without Cause prior to a Change in
Control (whether or not a Change in Control ever occurs) and such termination was at the
request or direction of a Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control, (ii) the Executive terminates
his employment for Good Reason prior to a Change in Control (whether or not a Change in
Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Person, or (iii) the Executive's employment is terminated
by the Company without Cause or by the Executive for Good Reason and such termination or
the circumstance or event which constitutes Good Reason is otherwise in connection with or
in anticipation of a Change in Control (whether or not a Change in Control ever occurs).
For purposes of any determination regarding the applicability of the immediately preceding
sentence, any position taken by the Executive shall be presumed to be correct unless the
Company establishes to the Committee by clear and convincing evidence that such position
is not correct. The Executive shall not be entitled to receive any Severance Benefits
under this Agreement under any circumstances other than those set forth in this paragraph.

(A)    In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the Executive a lump sum
severance payment, in cash, equal to two times the sum of (i) the Executive's base salary
as in effect immediately prior to the Date of Termination or, if higher, in effect
immediately prior to the first occurrence of an event or circumstance constituting Good
Reason, and (ii) the average annual bonus earned by the Executive pursuant to any
discretionary annual bonus or incentive plan maintained by the Company in respect of the
two fiscal years ending immediately prior to the fiscal year in which occurs the Date of
Termination or, if the Executive has not been eligible for at least two annual bonuses as
of the Date of Termination, the bonus earned by the Executive in respect of the fiscal
year immediately prior to the fiscal year in which occurs the Date of Termination.

(B)    For the twenty-four (24) month period immediately following the
Date of Termination, the Company shall arrange to provide the Executive and his dependents
life, disability, accident and health insurance benefits substantially similar to those
provided to the Executive and his dependents immediately prior to the Date of Termination
or, if more favorable to the Executive, those provided to the Executive and his dependents
immediately prior to the first occurrence of an event or circumstance constituting Good
Reason, at no greater cost to the Executive than the cost to the Executive immediately
prior to such date or occurrence; provided, however, that, unless the
Executive consents to a different method (after taking into account the effect of such
method on the calculation of "parachute payments" pursuant to Section 6.2
hereof), such health insurance benefits shall be provided through a third-party insurer.
Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be
reduced to the extent benefits of the same type are received by or made available to the
Executive during the twenty-four (24) month period following the Executive's termination
of employment (and any such benefits received by or made available to the Executive shall
be reported to the Company by the Executive); provided, however, that the
Company shall reimburse the Executive for the excess, if any, of the cost of such benefits
to the Executive over such cost immediately prior to the Date of Termination or, if more
favorable to the Executive, the first occurrence of an event or circumstance constituting
Good Reason. 

(C)    Notwithstanding any provision of any annual or long-term
incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount,
in cash, equal to the sum of (i) any unpaid incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal year or other measuring
period preceding the Date of Termination under any such plan and which, as of the Date of
Termination, is contingent only upon the continued employment of the Executive to a
subsequent date, and (ii) a pro rata portion to the Date of Termination of the aggregate
value of all contingent incentive compensation awards to the Executive for all then
uncompleted periods under any such plan, calculated as to each such award by multiplying
the award that the Executive would have earned on the last day of the performance award
period, assuming the achievement, at the target level of the individual and corporate
performance goals established with respect to such award, if the Company's incentive
compensation plan has such a concept, or, if not, at a level commensurate with the
Executive's position at the Company and the incentive compensation awards paid to
similarly situated executives of the Company, by the fraction obtained by dividing the
number of full months and any fractional portion of a month during such performance award
period through the Date of Termination by the total number of months contained in such
performance award period. 

(D)    In addition to the benefits to which the Executive is entitled
under each DC Pension Plan, the Company shall pay the Executive a lump sum amount, in
cash, equal to the sum of (i) the amount that would have been contributed thereto by the
Company on the Executive's behalf during the two years immediately following the Date of
Termination, determined (x) as if the Executive made the maximum permissible contributions
thereto during such period, (y) as if the Executive earned compensation during such period
at a rate equal to the Executive's compensation (as defined in the DC Pension Plan) during
the twelve (12) months immediately preceding the Date of Termination or, if higher, during
the twelve months immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, and (z) without regard to any amendment to the DC Pension Plan
made subsequent to a Change in Control and on or prior to the Date of Termination, which
amendment adversely affects in any manner the computation of benefits thereunder, and (ii)
the excess, if any, of (x) the Executive's account balance under the DC Pension Plan as of
the Date of Termination over (y) the portion of such account balance that is
nonforfeitable under the terms of the DC Pension Plan.

(E)    Each option to acquire common stock of the Company granted under
a Company incentive plan or other arrangement that is held by the Executive on the Date of
Termination shall, as of such date, vest and become immediately exercisable in full.

6.2    (A)    Subject to Section 9 below, whether or not
the Executive becomes entitled to the Severance Benefits, if any of the payments or
benefits received or to be received by the Executive in connection with a Change in
Control or the Executive's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any Person
whose actions result in a Change in Control or any Person affiliated with the Company or
such Person) (all such payments and benefits, excluding the Gross-Up Payment, being
hereinafter referred to as the "Total Payments") will be subject to the Excise
Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Total Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, and after taking into account the phase
out of itemized deductions and personal exemptions attributable to the Gross-Up Payment,
shall be equal to the Total Payments.

(B)    For purposes of determining whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total
Payments shall be treated as "parachute payments" (within the meaning of section
280G(b)(2) of the Code) unless, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to the Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company's independent auditor (the
"Auditor"), such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all
"excess parachute payments" within the meaning of section 280G(b)(l) of the Code
shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the Date of Termination
(or if there is no Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 6.2), net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local taxes.

(C)    In the event that the Excise Tax is finally determined to be less
than the amount taken into account hereunder in calculating the Gross-Up Payment, the
Executive shall repay to the Company, within five (5) business days following the time
that the amount of such reduction in the Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and employment
taxes imposed on the Gross-Up Payment being repaid by the Executive), to the extent that
such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction
in the Executive's taxable income and wages for purposes of federal, state and local
income and employment taxes. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive with
respect to such excess) within five (5) business days following the time that the amount
of such excess is finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to the Total
Payments.

6.3    The payments provided in subsections (A), (C) and (D) of Section
6.1 hereof and in Section 6.2 hereof shall be made not later than the fifth day following
the Date of Termination (or if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of Section 6.2 hereof); provided, however,
that if the amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined in good
faith by the Executive or, in the case of payments under Section 6.2 hereof, in accordance
with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such payments (together with interest on
the unpaid remainder (or on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such amount shall be
repaid by the Executive to the Company no later than the fifth (5th) business day after
demand by the Company. At the time that payments are made under this Agreement, the
Company shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).

6.4    The Company also shall pay to the Executive fifty percent (50%)
all legal fees and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking in good
faith to obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the application
of section 4999 of the Code to any payment or benefit provided hereunder. Such payments
shall be made within five (5) business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require. Within five (5) business days following the final
resolution and any such dispute, attempted enforcement or tax proceeding, either (i) the
Company shall pay to the Executive the remaining fifty percent (50%) of such fees and
expenses not previously paid to the Executive, if the Executive prevails on at least one
material issue in such dispute, attempted enforcement or tax proceeding or (ii) the
Executive shall repay to the Company the fifty percent (50%) of such fees and expenses
previously paid to the Executive, if the Executive does not prevail on at least one
material issue in such dispute, attempted enforcement or tax proceeding.

7.    Termination Procedures and Compensation During Dispute.

7.1    Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section 11 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. Further, a
Notice of Termination for Cause is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire membership of
the Board at a meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive was guilty of conduct
set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.

7.2    Date of Termination. "Date of Termination,"
with respect to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of Termination (which, in the case
of a termination by the Company, shall not be less than thirty (30) days (except in the
case of a termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).

7.3    Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until the earlier of (i) the date
on which the Term ends or (ii) the date on which the dispute is finally resolved, either
by mutual written agreement of the parties or by a final judgment, order or decree of an
arbitrator or a court of competent jurisdiction (which is not appealable or with respect
to which the time for appeal therefrom has expired and no appeal has been perfected); provided,
however, that the Date of Termination shall be extended by a notice of dispute
given by the Executive only if such notice is given in good faith and the Executive
pursues the resolution of such dispute with reasonable diligence.

7.4    Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and continue the Executive as a
participant in all compensation, benefit and insurance plans in which the Executive was
participating when the notice giving rise to the dispute was given, until the Date of
Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other than
those due under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.

8.    No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof.
Further, except as specifically provided in Section 6.1(B) hereof, the amount of any
payment or benefit provided for in this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to the Company,
or otherwise.

9.    Restrictive Covenants

The Executive agrees that restrictions on his activities during and after his
employment are necessary to protect the goodwill, Confidential Information and other
legitimate interests of the Company and its Subsidiaries, and that the agreed restrictions
set forth below will not deprive the Executive of the ability to earn a livelihood:

(A)    While the Executive is in the employment of the Company and, if
the Executive is entitled to benefits under Section 6.1 hereof upon termination of
employment, for a period of twenty-four (24) months after such termination of employment
(the "Non-Competition Period"), the Executive shall not, directly or indirectly,
whether as owner, partner, investor, consultant, agent, employee, co-venturer or
otherwise, compete with the business of the Company or any of its Subsidiaries within a
twenty (20) mile radius of any location where the Company operates a retail store at the
date of termination of employment, or at which the Company has entered into a letter of
intent or similar commitment for or entered into obligations relating to the opening of a
retail store to be opened within the period of this covenant. Specifically, but without
limiting the foregoing, the Executive agrees not to engage in any manner in any activity
that is directly or indirectly competitive with the business of the Company or any of its
Subsidiaries as conducted or which has been proposed by management within six months prior
to termination of the Executive's employment. Restricted activity also includes without
limitation accepting employment or a consulting position with any person who is, or at any
time within twelve (12) months prior to termination of the Executive's employment has
been, a licensee of the Company or any of its Subsidiaries. For the purposes of this
Section 9, the business of the Company and its Subsidiaries shall mean retail operations
for the sale of natural and organic foods, including groceries, meat, seafood, dairy and
frozen products and produce, as well as natural vitamins, supplements, homeopathic
remedies and body care products. 

(B)    The Executive agrees that during the Non-Competition Period or in
connection with any termination of employment pursuant to which the Executive is entitled
to benefits under Section 6.1, the Executive will not, either directly or through any
agent or employee, Solicit any employee of the Company or any of its Subsidiaries to
terminate his or her relationship with the Company or any of its Subsidiaries or to apply
for or accept employment with any enterprise competitive with the business of the Company,
or Solicit any customer, supplier, licensee or vendor of the Company or any of its
Subsidiaries to terminate or materially modify its relationship with them, or, in the case
of a customer, to conduct with any person any business or activity which such customer
conducts or could conduct with the Company or any of its Subsidiaries. 

(C)    The Executive and the Company further agree that following any
termination of the Executive's employment pursuant to which the Executive is entitled to
benefits under Section 6.1, (i) the Executive shall not make statements or
representations, otherwise communicate, directly or indirectly, in writing, orally, or
otherwise, or take any action which may, directly, or indirectly, disparage or be damaging
to the Company or any if its Subsidiaries or affiliates or their respective former or
current officers, directors, employees, advisors, businesses or reputations, (ii) the
Company shall instruct its Board members and senior management to not make statements or
representations, otherwise communicate, directly, or indirectly, in writing, orally or
otherwise, or take any action which may, directly, or indirectly, disparage or be damaging
to the Executive or his reputation. The Executive and the Company further agree that, in
the event the Executive's employment with the Company is terminated other than by the
Company for Cause or as a result of the Executive's death, the Executive and the Company
shall refer to the Executive's departure as a "resignation" in any press release
or other external announcement or communication concerning the Executive's departure from
the Company. Nothing in this paragraph is intended to undermine any obligations the
Executive or the Company may have to comply with applicable law, or prohibit the Executive
or the Company from providing truthful testimony or information pursuant to subpoena,
court order, discovery demand or similar legal process, or truthfully responding to lawful
inquiries by any governmental or regulatory entity.

(D)    The provisions of this Section 9 shall not be deemed to preclude
the Executive from employment or engagement during the Non-Competition Period following
termination of employment hereunder (i) in a business engaged in retail sales, provided
such employment or engagement does not otherwise violate the provisions of this Section 9,
or (ii) by a corporation, some of the activities of which are competitive with the
business of the Company, if the Executive's activities do not relate to such competitive
business, and nothing contained in this Section 9 shall be deemed to prohibit the
Executive, during the Non-Competition Period following termination of employment
hereunder, from acquiring or holding, solely as an investment, publicly traded securities
of any competitor corporation so long as such securities do not, in the aggregate,
constitute more than 3% of the outstanding voting securities of such corporation.

(E)    The Executive acknowledges that the Company and its Subsidiaries
continually develop Confidential Information, that the Executive may develop Confidential
Information for the Company or its Subsidiaries and that the Executive may learn of
Confidential Information during the course of his employment under this Agreement. The
Executive will comply with the policies and procedures of the Company and its Subsidiaries
for protecting Confidential Information and shall never disclose to any person (except as
required by applicable law or legal process or for the proper performance of his duties
and responsibilities to the Company and its Subsidiaries, or in connection with any
litigation between the Company and the Executive (provided that the Company shall be
afforded a reasonable opportunity in each case to obtain a protective order)), or use for
his own benefit or gain, any Confidential Information obtained by the Executive incident
to his employment or other association with the Company or any of its Subsidiaries. The
Executive understands that this restriction shall continue to apply after his employment
terminates, regardless of the reason for such termination. All documents, records, tapes
and other media of every kind and description relating to the business, present or
otherwise, of the Company or its Subsidiaries and any copies, in whole or in part, thereof
(the "Documents"), whether or not prepared by the Executive, shall be the sole
and exclusive property of the Company and its Subsidiaries. The Executive shall safeguard
all Documents and shall surrender to the Company at the time his employment terminates, or
at such earlier time or times as the Board or its designee may specify, all Documents then
in the Executive's possession or control.

(F)    Without limiting the foregoing, it is understood that the Company
shall not be obligated to make any of the payments or to provide for any of the benefits
specified in Sections 6.1 and 6.2 hereof, and shall be entitled to recoup the pro rata
portion of any such payments and of the value of any such benefits previously provided to
the Executive in the event of a material breach by the Executive of the provisions of this
Section 9 (such pro ration to be determined as a fraction, the numerator of which is the
number of days from such breach to the second anniversary of the date on which the
Executive terminates employment and the denominator of which is 730), which breach
continues without having been cured within 15 days after written notice to the Executive
specifying the breach in reasonable detail. 

(G)    The Executive and the Company agree that in the event the
Executive seeks a reference from the Company in connection with any future or prospective
employment, the Company's response to any such reference inquiry shall be limited to and
consistent with the following: start and end dates of employment, position(s) held and
last salary.

For purposes of this Section 9, the following definitions shall apply:

(I)    "Confidential Information" means any and all
information of the Company and its Subsidiaries that is not generally known by others with
whom they compete or do business, or with whom they plan to compete or do business and any
and all information not readily available to the public, which, if disclosed by the
Company or its Subsidiaries could reasonably be of benefit to such person or business in
competing with or doing business with the Company. Confidential Information includes
without limitation such information relating to (1) the development, research, testing,
manufacturing, store operational processes, marketing and financial activities, including
costs, profits and sales, of the Company and its Subsidiaries, (2) the Products and all
formulas therefor, (3) the costs, sources of supply, financial performance and strategic
plans of the Company and its Subsidiaries, (4) the identity and special needs of the
customers and suppliers of the Company and its Subsidiaries and (5) the people and
organizations with whom the Company and its Subsidiaries have business relationships and
those relationships. Confidential Information also includes comparable information that
the Company or any of its Subsidiaries have received belonging to others or which was
received by the Company or any of its Subsidiaries with an agreement by the Company that
it would not be disclosed. Confidential Information does not include information which (i)
is or becomes available to the public generally (other than as a result of a disclosure by
the Executive), (ii) was within the Executive's possession prior to the date hereof or
prior to its being furnished to the Executive by or on behalf of the Company, provided
that the source of such information was not bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to the Company or any
other party with respect to such information, (iii) becomes available to the Executive on
a non-confidential basis from a source other than the Company, provided that such source
is not bound by a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect to such
information, or (iv) was independently developed the Executive without reference to the
Confidential Information.

(II)    "Products" mean all products planned, researched,
developed, tested, manufactured, sold, licensed, leased or otherwise distributed or put
into use by the Company or any of its Subsidiaries, together with all services provided to
third parties or planned by the Company or any of its Subsidiaries, during the Executive's
service; as used herein, "planned" refers to a Product or service which the
Company has decided to introduce within six months from the date as of which such term is
applied.

(III)    "Subsidiary" means any corporation or other business
organization of which the securities having a majority of the normal voting power in
electing the board of directors or similar governing body of such entity are, at the time
of determination, owned by the Company directly or indirectly through one or more
Subsidiaries.

(IV)    "Solicit" means any direct or indirect communication
of any kind whatsoever, regardless of by whom initiated, inviting, advising, encouraging
or requesting any person or entity, in any manner, with respect to any action.

10.    Successors; Binding Agreement.

10.1    In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform it if
no such succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in the same
amount and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason after a Change in
Control, except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.

10.2    This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall die while
any amount would still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or administrators
of the Executive's estate.

11.    Notices. For the purpose of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the
address inserted below the Executive's signature on the final page hereof and, if to the
Company, to the address set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:

    
      
To the Company:

        Wild Oats Markets, Inc

        3375 Mitchell Lane

        Boulder, CO 80301

        Attention: Chief Executive Officer

        With a copy to: General Counsel

      
    

  

12.    Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or of any lack of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent time. This
Agreement supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have been made by either
party. The validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Colorado. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor provisions to such
sections. Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total performance after
the expiration of the Term (including, without limitation, those under Sections 6, 7 and 9
hereof) shall survive such expiration.

13.    Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

14.    Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

15.    Settlement of Disputes; Arbitration. 15.1 All claims
by the Executive for benefits under this Agreement shall be directed to and determined by
the Committee and shall be in writing. Any denial by the Committee of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall set forth
the specific reasons for the denial and the specific provisions of this Agreement relied
upon. The Committee shall afford a reasonable opportunity to the Executive for a review of
the decision denying a claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.

15.2 Any further dispute or controversy arising under or in connection with this
Agreement may, at the Executive's option, be settled by arbitration in Boulder, Colorado
in accordance with the rules of the American Arbitration Association then in effect; provided,
however, that the evidentiary standards set forth in this Agreement shall apply. If
the Executive chooses to settle any dispute or controversy by arbitration, judgment may be
entered on the arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to seek
specific performance of the Executive's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection with this
Agreement.

15.3 The Executive acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon him pursuant to
Section 9 hereof. The Executive agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Subsidiaries and that each and
every one of the restraints is reasonable in respect to subject matter, length of time and
geographic area. The Executive further acknowledges that, were he to breach any of the
covenants contained in Section 9 hereof, the damage to the Company would be irreparable.
The Executive therefore agrees that the Company, in addition to any other remedies
available to it, and notwithstanding any provision of this Agreement to the contrary,
shall be entitled to seek preliminary and permanent injunctive relief against any breach
or threatened breach by the Executive of any of said covenants, without having to post
bond. The parties further agree that, in the event that any provisions of Section 9 hereof
shall be determined by any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a time, too large a geographic area or too great a
range of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.

16.    Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:

    
      

	"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
                Section 12 of the Exchange Act.
	"Auditor" shall have the meaning set forth in Section 6.2 hereof.
	"Base Amount" shall have the meaning set forth in section 280G(b)(3) of the
                Code.
	"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
                Exchange Act.
	"Board" shall mean the Board of Directors of the Company.
	"Cause" for termination by the Company of the Executive's employment shall
                mean (i) the willful and continued failure by the Executive to substantially perform the
                Executive's duties with the Company (other than any such failure resulting from the
                Executive's incapacity due to physical or mental illness or any such actual or anticipated
                failure after the issuance of a Notice of Termination for Good Reason by the Executive
                pursuant to Section 7.1 hereof) that has not been cured within 30 days after a written
                demand for substantial performance is delivered to the Executive by the Board, which
                demand specifically identifies the manner in which the Board believes that the Executive
                has not substantially performed the Executive's duties, or (ii) the willful engaging by
                the Executive in conduct which is demonstrably and materially injurious to the Company or
                its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this
                definition, (x) no act, or failure to act, on the Executive's part shall be deemed
                "willful" unless done, or omitted to be done, by the Executive not in good faith
                and without reasonable belief that the Executive's act, or failure to act, was in the best
                interest of the Company and (y) in the event of a dispute concerning the application of
                this provision, no claim by the Company that Cause exists shall be given effect unless the
                Company establishes to the Committee by clear and convincing evidence that Cause exists.
	A "Change in Control" shall be deemed to have occurred if the event set forth
                in any one of the following paragraphs shall have occurred:

	any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
                  the Company (not including in the securities beneficially owned by such Person any
                  securities acquired directly from the Company or its Affiliates) representing 31% or more
                  of the combined voting power of the Company's then outstanding securities, excluding any
                  Person who becomes such a Beneficial Owner in connection with a Non-Control Merger (as
                  defined in paragraph (III) below); or 
	the following individuals cease for any reason to constitute a majority of the number of
                  directors then serving: individuals who, on the date hereof, constitute the Board and any
                  new director (other than a director whose initial assumption of office is in connection
                  with an actual or threatened election contest, including but not limited to a consent
                  solicitation, relating to the election of directors of the Company) whose appointment or
                  election by the Board or nomination for election by the Company's stockholders was
                  approved or recommended by a vote of at least two-thirds (2/3) of the directors then still
                  in office who either were directors on the date hereof or whose appointment, election or
                  nomination for election was previously so approved or recommended; or;
	there is consummated a merger or consolidation of the Company or any direct or indirect
                  subsidiary of the Company with any other corporation, other than a merger or consolidation
                  (a "Non-Control Merger") immediately following which the individuals who
                  comprise the Board immediately prior thereto constitute at least a majority of the board
                  of directors of the Company, the entity surviving such merger or consolidation or any
                  parent thereof; or
	the stockholders of the Company approve a plan of complete liquidation or dissolution of
                  the Company or there is consummated an agreement for the sale or disposition by the
                  Company of all or substantially all of the Company's assets, other than a sale or
                  disposition by the Company of all or substantially all of the Company's assets immediately
                  following which the individuals who comprise the Board immediately prior thereto
                  constitute at least a majority of the board of directors of the entity to which such
                  assets are sold or disposed or any parent thereof.

              Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
              have occurred by virtue of the consummation of any transaction or series of integrated
              transactions immediately following which the record holders of the common stock of the
              Company immediately prior to such transaction or series of transactions continue to have
              substantially the same proportionate ownership in an entity which owns all or
              substantially all of the assets of the Company immediately following such transaction or
              series of transactions.

              	"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
                time.
	"Committee" shall mean (i) the individuals (not fewer than three in number)
                who, on the date six months before a Change in Control, constitute the Compensation
                Committee of the Board, plus (ii) in the event that fewer than three individuals are
                available from the group specified in clause (i) above for any reason, such individuals as
                may be appointed by the individual or individuals so available (including for this purpose
                any individual or individuals previously so appointed under this clause (ii)).
	"Company" shall mean Wild Oats Markets, Inc., a Delaware corporation and,
                except in determining under Section 15(G) hereof whether or not any Change in Control of
                the Company has occurred, shall include any successor to its business and/or assets which
                assumes and agrees to perform this Agreement by operation of law, or otherwise.
	"DC Pension Plan" shall mean any tax-qualified, supplemental or excess defined
                contribution plan maintained by the Company and any other defined contribution plan or
                agreement entered into between the Executive and the Company.
	"Date of Termination" shall have the meaning set forth in Section 7.2 hereof.
	"Disability" shall be deemed the reason for the termination by the Company of
                the Executive's employment, if, as a result of the Executive's incapacity due to physical
                or mental illness, the Executive shall have been absent from the full-time performance of
                the Executive's duties with the Company for a period of six (6) consecutive months, the
                Company shall have given the Executive a Notice of Termination for Disability, and, within
                thirty (30) days after such Notice of Termination is given, the Executive shall not have
                returned to the full-time performance of the Executive's duties.
	"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from
                time to time.
	"Excise Tax" shall mean any excise tax imposed under section 4999 of the Code.
	"Executive" shall mean the individual named in the first paragraph of this
                Agreement.
	"Good Reason" for termination by the Executive of the Executive's employment
                shall mean the occurrence (without the Executive's express written consent) after any
                Change in Control, or prior to a Change in Control under the circumstances described in
                clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all
                references in paragraphs (I) through (VII) below to a "Change in Control" as
                references to a "Potential Change in Control"), of any one of the following acts
                by the Company, or failures by the Company to act, unless, (x) in the case of any act or
                failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
                to act is corrected prior to the Date of Termination specified in the Notice of
                Termination given in respect thereof or (y) in the case of first act or failure to act
                following a Change in Control and described in paragraph (IV) below, such act or failure
                to act is corrected prior to the Date of Termination specified in the Notice of
                Termination given in respect thereof:

	the assignment to the Executive of any duties materially and adversely inconsistent with
                  the Executive's status as a senior executive officer of the Company or a substantial
                  adverse alteration in the nature or status of the Executive's responsibilities from those
                  in effect immediately prior to the Change in Control;
	a reduction by the Company in the Executive's annual base salary as in effect on the
                  date hereof or as the same may be increased from time to time;
	the relocation of the Executive's principal place of employment to a location more than
                  25 miles from the Executive's principal place of employment immediately prior to the
                  Change in Control or the Company's requiring the Executive to be based anywhere other than
                  such principal place of employment (or permitted relocation thereof) except for required
                  travel on the Company's business to an extent substantially consistent with the
                  Executive's present business travel obligations;
	the failure by the Company to pay to the Executive any portion of the Executive's
                  current compensation or to pay to the Executive any portion of an installment of deferred
                  compensation under any deferred compensation program of the Company, within seven (7) days
                  of the date such compensation is due;
	the failure by the Company to continue in effect any compensation plan in which the
                  Executive participates immediately prior to the Change in Control which is material to the
                  Executive's total compensation, unless an equitable arrangement (embodied in an ongoing
                  substitute or alternative plan) has been made with respect to such plan, or the failure by
                  the Company to continue the Executive's participation therein (or in such substitute or
                  alternative plan) on a basis not materially less favorable, both in terms of the amount or
                  timing of payment of benefits provided and the level of the Executive's participation
                  relative to other participants, as existed immediately prior to the Change in Control;
	the failure by the Company to continue to provide the Executive with benefits
                  substantially similar to those enjoyed by the Executive under any of the Company's
                  pension, savings, life insurance, medical, health and accident, or disability plans in
                  which the Executive was participating immediately prior to the Change in Control, the
                  taking of any other action by the Company which would directly or indirectly materially
                  reduce any of such benefits or deprive the Executive of any material fringe benefit
                  enjoyed by the Executive at the time of the Change in Control, or the failure by the
                  Company to provide the Executive with the number of paid vacation days to which the
                  Executive is entitled on the basis of years of service with the Company in accordance with
                  the Company's normal vacation policy in effect at the time of the Change in Control; or
	any purported termination of the Executive's employment which is not effected pursuant
                  to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes
                  of this Agreement, no such purported termination shall be effective.

              The Executive's right to terminate the Executive's employment for Good Reason shall not
              be affected by the Executive's incapacity due to physical or mental illness. The
              Executive's continued employment shall not constitute consent to, or a waiver of rights
              with respect to, any act or failure to act constituting Good Reason hereunder.

              For purposes of any determination regarding the existence of Good Reason, any claim by
              the Executive that Good Reason exists shall be presumed to be correct unless the Company
              establishes to the Committee by clear and convincing evidence that Good Reason does not
              exist.

              "Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof.

              	"Notice of Termination" shall have the meaning set forth in Section 7.1
                hereof.
	"Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act,
                as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not
                include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
                holding securities under an employee benefit plan of the Company or any of its Affiliates,
                (iii) an underwriter temporarily holding securities pursuant to an offering of such
                securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of
                the Company in substantially the same proportions as their ownership of stock of the
                Company.
	"Potential Change in Control" shall be deemed to have occurred if the event
                set forth in any one of the following paragraphs shall have occurred:

	the Company enters into an agreement, the consummation of which would result in the
                  occurrence of a Change in Control;
	the Company or any Person publicly announces an intention to take or to consider taking
                  actions which, if consummated, would constitute a Change in Control;
	any Person becomes the Beneficial Owner, directly or indirectly, of securities of the
                  Company representing 15% or more of either the then outstanding shares of common stock of
                  the Company or the combined voting power of the Company's then outstanding securities (not
                  including in the securities beneficially owned by such Person any securities acquired
                  directly from the Company or its affiliates); or
	the Board adopts a resolution to the effect that, for purposes of this Agreement, a
                  Potential Change in Control has occurred. 

              	"Retirement" shall be deemed the reason for the termination by the Executive
                of the Executive's employment if such employment is terminated in accordance with the
                Company's retirement policy, including early retirement, generally applicable to its
                salaried employees.
	"Severance Benefits" shall have the meaning set forth in Section 6.1 hereof.
	"Tax Counsel" shall have the meaning set forth in Section 6.2 hereof.
	"Term" shall mean the period of time described in Section 2 hereof (including
                any extension, continuation or termination described therein).
	"Total Payments" shall mean those payments so described in Section 6.2 hereof.

  

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

 

  
    
      
        
          
            
              
                
                  
                    Wild Oats Markets, Inc.

                    By: /s/ Perry D. Odak

                    Name: Perry D. Odak

                    Title: President

                    
                      
                         

                         

                         

                      

                    

                    /s/ Peter Williams 

                    Peter Williams

                    Address:

                    3275 W. 149th Ct.

                    Bloomfield, CO 80020Second Amended Credit Agreement

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

 

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

 

RECITALS

     A.     The
Borrower and the Administrative Agent are parties to that certain Amended and Restated
Credit Agreement (the "Prior Credit Agreement"), dated as of August 1,
2000, by and among, inter alia, (1) the Borrower; (2) each of the financial
institutions parties thereto as lenders (the "Prior Lenders"); and (3)
the Administrative Agent, as amended by that certain Amendment No. 1 to Amended and
Restated Credit Agreement, dated as of October 17, 2001, as further amended by that
certain Amendment No. 2 to Amended and Restated Credit Agreement, dated as of November 12,
2001, as further amended by that certain Amendment No. 3 to Amended and Restated Credit
Agreement, dated as of December 14, 2001 and as further amended by that certain Amendment
No. 4 to Amended and Restated Credit Agreement, dated as of July 26, 2002.

     B.     Pursuant
to the Prior Credit Agreement, the Prior Lenders (and the Swing Line Lender (as defined in
the Prior Credit Agreement), in the case of clause (iii) of this Recital B) have
made available to the Borrower a term loan, revolving loan and swing line loan credit
facility (the "Prior Credit Facility"), of which $36,959,375.34 is
outstanding thereunder as of February 26, 2003.

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

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

     E.     The
Lenders are willing to purchase from the Prior Lenders the Prior Loans, and the
Administrative Agent and the Lenders are willing to immediately thereafter amend and
restate the Prior Credit Agreement to provide the Borrower with such amended and restated
credit facility upon the terms and subject to the conditions set forth herein; for
convenience the Prior Credit Agreement is being amended and restated with the
understanding that the collateral securing the obligations of the Borrower and the other
Loan Parties under the Prior Credit Agreement and the Prior Credit Documents for all
purposes will continue to secure the obligations of the Borrower and the other Loan
Parties arising under this Agreement and the other Credit Documents.

 

AGREEMENT

     NOW, THEREFORE, in consideration of
the above Recitals and the mutual covenants herein contained, the parties hereto hereby
agree as follows:

  
    
      
        
          
            ARTICLE I.      INTERPRETATION.

            
          

        

      

    

  

     1.01.     Definitions.
Unless otherwise indicated in this Agreement or any other Credit Document, each term set
forth below, when used in this Agreement or any other Credit Document, shall have the
respective meaning given to that term below or in the provision of this Agreement or other
document, instrument or agreement referenced below.

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

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

     "Acquisition-Related
Indebtedness" shall mean:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     "Cash Equivalents"
shall mean:

          (a)     Direct
obligations of, or obligations the principal and interest on which are unconditionally
guaranteed or insured by, the United States of America or obligations of any agency of the
United States of America to the extent such obligations are backed by the full faith and
credit of the United States of America, in each case maturing within one year from the
date of acquisition thereof;

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

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

          (d)     Repurchase
obligations with a term of not more than 30 days for underlying securities of the types
described in clause (a) above entered into with any bank meeting the qualifications
specified in clause (b) above at the time of acquisition thereof;

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

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

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

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

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

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

          (c)     any
Person or two or more Persons acting in concert shall have acquired by contract or
otherwise, or shall have entered into a contract or arrangement that results in such
Person or Persons exercising, directly or indirectly, a controlling influence over the
management or policies of the Borrower, or control over the Equity Securities of the
Borrower entitled to vote for members of the board of directors or equivalent governing
body of the Borrower on a fully-diluted basis representing 35% or more of the combined
voting power of such securities; provided however, that notwithstanding the
provisions of this clause (c), any contract or arrangement to which the Borrower is a
party (i) providing solely for the acquisition of control upon or after consummation of a
Reorganization Plan or (ii) that provides for or is conditioned upon payment in full in
cash of all Obligations shall not be deemed to be a "Change of Control"; or

          (d)     there
shall occur a "change in control" (or term of like import) as defined in any
document governing Indebtedness of the Borrower in excess of $20,000,000 which gives the
holders of such Indebtedness the right to accelerate or otherwise require payment or
purchase of such Indebtedness prior to the maturity date thereof.

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

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

     "Collateral" shall
mean all present and future real and personal property of the Borrower and the Guarantors
(other than Excluded Collateral and any real property with a fair market value less than
$1,000,000 (including the value of any improvements thereon)) and including without
limitation the Pledged Collateral, the Leasehold Collateral and all property in which the
Administrative Agent or any Lender has or hereafter acquires a Lien to secure the
Obligations. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     "EBITDAR" shall
mean, with respect to any fiscal period, EBITDA for that fiscal period plus Rental
Expense of the Borrower and its Subsidiaries for that fiscal period (determined on a
consolidated basis without duplication).

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

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

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

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

     "Environmental Laws"
shall mean the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.; the
Comprehensive Environment Response, Compensation and Liability Act of 1980 (including the
Superfund Amendments and Reauthorization Act of 1986, "CERCLA"), 42 U.S.C.
Section 9601 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq.; the Occupational Safety and Health Act, 29 U.S.C. Section 651;
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et
seq.; the Mine Safety and Health Act of 1977, 30 U.S.C. Section 801 et seq.;
the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all other
Governmental Rules relating to the protection of the environment, including all
Governmental Rules pertaining to the reporting, licensing, permitting, transportation,
storage, disposal, investigation or remediation of emissions, discharges, releases, or
threatened releases of Hazardous Materials into the air, surface water, groundwater, or
land, or relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transportation or handling of Hazardous Materials.

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

     "ERISA" shall mean
the Employee Retirement Income Security Act of 1974.

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

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

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

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

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

     "Excluded Collateral"
shall mean the following: (a) all now existing or hereinafter created leaseholds interests
of the Borrower or any Subsidiary of the Borrower which are not, as of the Closing Date,
subject to the Leasehold Mortgages, (b) Store Deposit Accounts so long as all 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 99 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 Permitted Liens and any Liens contained in a
Control Account Agreement (if any) pertaining to such concentration account, and
(c) Net Cash Issuance Proceeds with respect to the issuance by the Borrower of Equity
Securities on September 4, 2002, and any account where such Net Cash Issuance
Proceeds may at any time be maintained and not commingled with other funds of the
Borrower.

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

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

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

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

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

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

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

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

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

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

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

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

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

     "GAAP" shall mean
generally accepted accounting principles and practices as in effect in the United States
of America from time to time and applied as set forth in Section 1.02.

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

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

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

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

     "Guarantor" shall
mean each direct or indirect Domestic Subsidiary of the Borrower which executes the
Guaranty or an Instrument of Joinder thereto.

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

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

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

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

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

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

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

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

     "Indebtedness" of
any Person shall mean, without duplication:

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

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

          (c)     All
obligations of such Person under conditional sale or other title retention agreements with
respect to property acquired by such Person (to the extent of the value of such property
if the rights and remedies of the seller or the Lender under such agreement in the event
of default are limited solely to repossession or sale of such property);

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

          (e)     All
Synthetic Lease Obligations of such Person;

          (f)     All
obligations of such Person, contingent or otherwise, under or with respect to Surety
Instruments;

          (g)     All
net obligations of such Person, contingent or otherwise, under or with respect to Rate
Contracts; provided, that the amount of Indebtedness of the type referred to in
this clause (g) of any Person shall be zero unless and until such Indebtedness shall be
terminated, in which case the amount of such Indebtedness shall be the then termination
payment, if any, due thereunder by such Person;

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

          (i)     All
obligations of other Persons of the types described in clauses (a) - (h) above to the
extent secured by (or for which any holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien in any property (including accounts
and contract rights) of such Person, even though such Person has not assumed or become
liable for the payment of such obligations; provided, however, that, for
purposes of determining the amount of any Indebtedness of the type described in this
clause, if recourse with respect to such Indebtedness is limited to specific property
financed with such Indebtedness, the amount of such Indebtedness shall be limited to the
fair market value (determined on a basis reasonably acceptable to the Administrative Agent
and the Borrower) of such property or the principal amount of such Indebtedness, whichever
is less.

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

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

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

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

     "Investment" of
any Person shall mean any loan or advance of funds by such Person to any other Person
(other than advances to employees of such Person for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business), any purchase or
other acquisition of any Equity Securities or Indebtedness of any other Person, any
capital contribution by such Person to or any other investment by such Person in any other
Person (including any Guaranty Obligations of such Person and any indebtedness of such
Person of the type described in clause (h) of the definition of "Indebtedness"
on behalf of any other Person); provided, however, that Investments shall
not include (a) accounts receivable or other indebtedness owed by customers of such Person
which are current assets and arose from sales of inventory in the ordinary course of such
Person’s business, or (b) prepaid expenses of such Person incurred and prepaid in the
ordinary course of business.

     "IRC" shall mean
the Internal Revenue Code of 1986.

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

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

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

     "L/C Issuer" shall
mean Wells Fargo in its capacity as issuer of Letters of Credit hereunder, or any
successor issuer of Letters of Credit hereunder.

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

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

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

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

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

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

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

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

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

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

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

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

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

     "Lien" shall mean,
with respect to any property, any security interest, mortgage, pledge, lien, charge or
other encumbrance in, of, or on such property or the income therefrom, including, without
limitation, the interest of a vendor or lessor under a conditional sale agreement, Capital
Lease or other title retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar instrument under the UCC
or comparable law of any jurisdiction.

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

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

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

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

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

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

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

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

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

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

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

     "Net Cash Issuance Proceeds"
shall mean, with respect to the issuance of any Equity Securities by the Borrower or any
of its Subsidiaries, the Cash proceeds received by or for the account of the 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 the Borrower, (b) professional
fees, disbursements and other expenses actually paid in connection therewith and (c) all
taxes paid or payable by any Loan Party in connection with such issuance.

     "Net Income" shall
mean with respect to any fiscal period, the net income of the Loan Parties determined in
accordance with GAAP, consistently applied.

     "Net Proceeds"
shall mean, with respect to any sale of any asset or property by any Person, the aggregate
consideration received by such Person from such sale less the sum of (i) the
actual amount of the fees and commissions payable to Persons other than such Person or any
Affiliate of such Person, the reasonable legal expenses and other costs and expenses
directly related to such sale that are to be paid by such Person, (ii) the amount of
any indebtedness (other than the Obligations) which is secured by such asset and is
required to be repaid or prepaid by such Person as a result of such sale and (iii) all
taxes paid or payable by any Loan Party as a result of such sale.

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

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

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

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

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

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

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

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

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

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

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

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

     "Notice of Revolving Loan
Interest Period Selection" shall have the meaning given to that term in Section
2.01(e).

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

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

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

     "PBGC" shall mean
the Pension Benefit Guaranty Corporation.

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

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

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

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

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

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

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

     "Pricing Grid"
shall mean:

	

	Tier
	Leverage Ratio
	Applicable Margin for LIBOR Loans
    (bps)
	Applicable Margin for Base Rate
    Loans (bps)
	Commitment Fee (bps)
	Letter of Credit

    Fee (bps)

	1
	< 2.75
	125.0
	0.0
	25.0
	100.0

	2
	> 2.75 < 3.00
	150.0
	25.0
	25.0
	100.0

	3
	> 3.00 < 3.25
	175.0
	50.0
	37.5
	110.0

	4
	> 3.25 < 3.50
	200.0
	75.0
	37.5
	110.0

	5
	> 3.50
	225.0
	100.0
	50.0
	115.0

 

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

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

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

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

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

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

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

     "Proportionate Share"
shall mean

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

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

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

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

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

     "Rental Expense"
shall mean, with respect to any Person and as of the last day of any period, the 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
such period by that Person to a lessor or renter of property as lease payments or rent,
including maintenance and administrative fees, insurance and amounts for taxes paid or
payable to the landlord (excluding rent under Capital Leases that are treated as Interest
Expense) calculated in accordance with GAAP.

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

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

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

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

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

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

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

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

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

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

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

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

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

     "Stockholders’ Equity"
shall mean, as of each date of determination and with respect to the Borrower, the
consolidated stockholders’ equity of the 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" shall mean
a retail natural foods or specialty grocery store or supermarket, vitamin store, or other
similar type of establishment operated by the Borrower and/or any other Loan Party (a)
that has gross square footage in excess of 3,500 or (b) with respect to which the Borrower
or any other applicable Loan Party 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 other Loan Party or (ii) in debt service (to include principal and interest) if such
supermarket, store or other establishment is owned in fee by the Borrower or such other
Loan Party. Any real property used by the Borrower or any other Loan Party primarily for
storage, food preparation, general or administrative office, warehouse or distribution
purposes will not be deemed a "Store".

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

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

     "Subsidiary" of
any Person shall mean (a) any corporation of which more than 50% of the issued and
outstanding Equity Securities having ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether at the time capital stock
of any other class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries, (b) any partnership, joint
venture, limited liability company or other association of which more than 50% of the
equity interest having the power to vote, direct or control the management of such
partnership, joint venture or other association is at the time owned and controlled by
such Person, by such Person and one or more of the other Subsidiaries or by one or more of
such Person’s other Subsidiaries or (c) any other Person included in the
Financial Statements of such Person on a consolidated basis. Unless otherwise indicated in
this Agreement, "Subsidiary" shall mean a Subsidiary of the Borrower.

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

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

     "Swing Line" shall
mean the revolving credit facility made available by the Swing Line Lender pursuant to Section
2.03.

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

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

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

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

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

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

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

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

     "Synthetic Lease Principal
Component" shall mean, with respect to any Person for any period, the portion of
rent (exclusive of the Synthetic Lease Interest Component) paid or payable (without
duplication) for such period under Synthetic Leases of such Person that would be treated
as principal in accordance with Financial Accounting Standards Board Statement No. 13
if such Synthetic Leases were treated as capital leases under GAAP.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     1.10.     References.

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

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

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

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

     1.11.     Other
Interpretive Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement or any other
Credit Document shall refer to this Agreement or such other Credit Document, as the case
may be, as a whole and not to any particular provision of this Agreement or such other
Credit Document, as the case may be. The words "include" and
"including" and words of similar import when used in this Agreement or any other
Credit Document shall not be construed to be limiting or exclusive. In the event of any
inconsistency between the terms of this Agreement and the terms of any other Credit
Document, the terms of this Agreement shall govern.

  
    
      
        
          
            ARTICLE II.      CREDIT FACILITIES.

          

        

      

    

  

     2.01.     Revolving
Loan Facility.

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

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

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

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

               (iii)     If
the requested Revolving Loan Borrowing is to consist of LIBOR Loans, the initial Interest
Periods selected by the Borrower for such LIBOR Loans in accordance with Section
2.01(e); and

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

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

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

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

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

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

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

               (i)     The
Revolving Loan Borrowing which is to be converted;

               (ii)     The
Type of Revolving Loan Borrowing into which such Revolving Loan Borrowing is to be
converted;

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

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

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

          (e)     LIBOR
Loan Interest Periods.

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

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

          (f)     Scheduled
Revolving Loan Payments. The Borrower shall repay the principal amount of the
Revolving Loans on the Maturity Date. The Borrower shall pay accrued interest on the
unpaid principal amount of each Revolving Loan in arrears (i) in the case of a Base
Rate Loan, on the last Business Day of each month, (ii) in the case of a LIBOR Loan,
on the last day of each Interest Period therefor (and, if any such Interest Period is
longer than three (3) months, every three (3) months after the first day of such Interest
Period); and (iii) in the case of all Revolving Loans, upon prepayment (to the extent
thereof) and at maturity.

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

          (h)     Extension
of Maturity Date. On or before the last Business Day which is six (6) months prior to
the three-year anniversary date of this Agreement, the Borrower may, provided that no
Default or Event of Default shall have occurred and be continuing, request that the
Lenders extend the Maturity Date for one, but only one, additional one-year period. The
Borrower shall request such extension by appropriately completing, executing and
delivering to the Administrative Agent a written request in the form of Exhibit K
(an "Extension Request") and attaching thereto updated Projections of the
Borrower and its Subsidiaries for such one-year period. The Borrower understands that this
Section 2.01(h) is included in this Agreement for the Borrower’s convenience
in requesting an extension and acknowledges that neither the Administrative Agent nor any
other Lender has promised (either expressly or implicitly), or has any obligation or
commitment, to extend the Maturity Date at any time. The Administrative Agent shall
promptly mail to each Lender three (3) copies of the Extension Request received by the
Administrative Agent. If a Lender, in its sole and absolute discretion, consents to any
Extension Request, such Lender shall evidence such consent by executing and returning two
(2) copies of the Extension Request to the Administrative Agent not later than the last
Business Day which is five (5) months prior to the Maturity Date. Any failure by any
Lender so to execute and return an Extension Request shall be deemed a denial thereof. If
the Borrower delivers an Extension Request to the Administrative Agent pursuant to the
first sentence of this Section 2.01(h), then not later than the last Business Day
which is four (4) months prior to the Maturity Date, the Administrative Agent shall notify
the Borrower in writing whether (i) the Administrative Agent has received a copy of the
Extension Request executed by each Lender, in which case the definition of "Maturity
Date" set forth in Section 1.01 shall be deemed extended for a period of one
year as of the date of such written notice from the Administrative Agent to the Borrower,
or (ii) the Administrative Agent has not received a copy of the Extension Request executed
by each Lender, in which case such Extension Request shall be deemed denied. The
Administrative Agent shall deliver to the Borrower, with each written notice under clause
(i) of the preceding sentence which notifies the Borrower that the Administrative Agent
has received an Extension Request executed by each Lender, a copy of the Extension Request
so executed by each Lender.

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

     The effectiveness of any such
extension is further subject to the satisfaction of the following conditions: (i) in the
case of a Commitment increase by an Increasing Lender, that the Borrower and such
Increasing Lender shall have entered into a Commitment Increase Agreement, and such
Commitment Increase Agreement shall have been delivered to the Administrative Agent; (ii)
in the case of an accession hereto by an Assignee Lender, that the parties thereto shall
have entered into an Assignment Agreement, and such Assignment Agreement shall have been
delivered to the Administrative Agent; and (iii) that any fees and other amounts payable
to any Increasing Lender or Assignee Lender in connection with such increase or accession
shall have been paid. Upon the effectiveness of any Commitment Increase Agreement, the
Commitment(s), the outstanding aggregate principal amount of the Increasing Lender’s
Proportionate Share of Revolving Loans and the L/C Obligations be increased in the amount
set forth in the Commitment Increase Agreement, and upon the effectiveness of any
Assignment Agreement, the Assignee Lender party thereto shall be and become a party hereto
and shall constitute a Lender hereunder with the rights and obligations of a Lender under
the Credit Documents (each such date of effectiveness, an "Increased Commitment
Date"). Effective on each Increased Commitment Date, the Proportionate Shares of
Revolving Loans and L/C Obligations then existing and held by each Lender shall be
adjusted to reflect any such changes in such Lender’s Proportionate Share. Each
Non-Continuing Lender having Revolving Loans or L/C Obligations or a Commitment then
outstanding shall be deemed to have assigned, without recourse, to any Increasing Lenders
increasing their Commitments and any Assignee Lenders, such Non-Continuing Lender’s
Proportionate Share of such outstanding Revolving Loans and L/C Obligations and Commitment
as shall be necessary to effectuate such adjustment. Each Increasing Lender and Assignee
Lender shall be deemed to have assumed such Proportionate Share of Revolving Loans and L/C
Obligations and Commitment. Additionally, promptly following the Increased Commitment Date
for a Commitment increase, the Administrative Agent shall cause Schedule I to be
modified to accurately reflect the Commitments and Proportionate Shares of the Lenders,
whereupon such amended Schedule I shall be substituted for the pre-existing Schedule
I, be deemed a part of this Agreement without any further action or consent of any
party and be promptly distributed to each Lender and the Borrower by the Administrative
Agent. Additionally, the Administrative Agent shall promptly notify each Increasing Lender
and Assingee Lender of the amount of any funding obligations under this Section 2.01(h).

     2.02.     Letters
of Credit.

          (a)     The
Letter of Credit Commitment.

               (i)     On
the terms and subject to the conditions set forth herein, (A) the L/C Issuer agrees,
in reliance upon the agreements of the other Lenders set forth in this Section 2.02,
(1) from time to time on any Business Day during the period from the Closing Date
until 30 days prior to the Maturity Date, to issue Letters of Credit in Dollars for the
account of the Borrower, and to amend or renew Letters of Credit previously issued by it,
in accordance with subsection (b) below, and (2) to honor drafts under Letters
of Credit; and (B) the Lenders severally agree to participate in Letters of Credit
issued for the account of the Borrower; provided that the L/C Issuer shall not be
obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no
Lender shall be obligated to participate in, any Letter of Credit if as of the date of
such L/C Credit Extension, (x) the Effective Amount of all Revolving Loans, Swing
Line Loans and L/C Obligations would exceed the Total Commitment on such date,
(y) the aggregate Effective Amount of the Revolving Loans of any Lender, plus
such Lender’s Proportionate Share of the Effective Amount of all L/C Obligations, plus
such Lender’s Proportionate Share of the Effective Amount of all Swing Line Loans
would exceed such Lender’s Commitment, or (z) the Effective Amount of the L/C
Obligations would exceed the Letter of Credit Sublimit. Within the foregoing limits, and
subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters
of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing
period, obtain Letters of Credit to replace Letters of Credit that have expired or that
have been drawn upon and reimbursed. All Prior Letters of Credit shall be deemed to have
been issued pursuant hereto, and from and after the Closing Date shall be subject to and
governed by the terms and conditions hereof, including without limitation Section 8.14.

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

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

                    (B)     subject
to Section 2.02(b)(iii), the expiry date of such requested Letter of Credit would
occur more than twelve months after the date of issuance or last renewal, unless the
Required Lenders have approved such expiry date;

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

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

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

               (iii)     The
L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) the L/C
Issuer would have no obligation at such time to issue such Letter of Credit in its amended
form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not
accept the proposed amendment to such Letter of Credit.

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

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

               (ii)     Promptly
after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the
Administrative Agent (by telephone or in writing) that the Administrative Agent has
received a copy of such Letter of Credit Application from the Borrower and, if not, the
L/C Issuer will provide the Administrative Agent with a copy thereof. Upon receipt by the
L/C Issuer of confirmation from the Administrative Agent that the requested issuance or
amendment is permitted in accordance with the terms hereof, then, subject to the terms and
conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit
for the account of the Borrower or enter into the applicable amendment, as the case may
be, in each case in accordance with the L/C Issuer’s usual and customary business
practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the L/C
Issuer a participation in such Letter of Credit and any related L/C Obligations and L/C
Borrowings in an amount equal to the product of such Lender’s Proportionate Share times
the amount of such Letter of Credit.

               (iii)     If
the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer
shall agree to issue a Letter of Credit that has automatic renewal provisions (each, an
"Evergreen Letter of Credit"); provided that any such Evergreen
Letter of Credit must permit the L/C Issuer to prevent any such renewal at least once in
each twelve-month period (commencing with the date of issuance of such Letter of Credit)
by giving notice to the beneficiary thereof and the Borrower on a date (the "Nonrenewal
Notice Date") that is not later than 30 days prior to the expiration of such
twelve-month period. Unless otherwise directed by the L/C Issuer, the Borrower shall not
be required to make a specific request to the L/C Issuer for any such renewal. Once an
Evergreen Letter of Credit has been issued, the Lenders shall be deemed to have authorized
(but may not require) the L/C Issuer to permit the renewal of such Letter of Credit at any
time to a date not later than the Maturity Date; provided, however, that the
L/C Issuer shall not permit any such renewal if (A) the L/C Issuer would have no
obligation at such time to issue such Letter of Credit in its renewed form under the terms
hereof, or (B) it has received notice (which may be by telephone or in writing) on or
before the Business Day immediately preceding the Nonrenewal Notice Date (1) from the
Administrative Agent that the Required Lenders have elected not to permit such renewal or
(2) from the Administrative Agent, any Lender or the Borrower that one or more of the
applicable conditions specified in Section 3.02 is not then satisfied.
Notwithstanding anything to the contrary contained herein, the L/C Issuer shall have no
obligation to permit the renewal of any Evergreen Letter of Credit at any time.

                         (iv)     Promptly
after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an
advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also
deliver to the Borrower and the Administrative Agent a true and complete copy of such
Letter of Credit or amendment.

          (c)     Drawings
and Reimbursements; Funding of Participations.

               (i)     Upon
any drawing under any Letter of Credit, the L/C Issuer shall notify the Borrower and the
Administrative Agent of the amount to be paid by the L/C Issuer as a result of such
drawing and the date on which payment is to be made by the L/C Issuer to the beneficiary
of such Letter of Credit in respect of such drawing. Not later than 12:00 noon, on the
date of any payment by the L/C Issuer under a Letter of Credit (each such date, an "Honor
Date"), the Borrower shall reimburse the L/C Issuer through the Administrative
Agent in an amount equal to the amount of such drawing. If the Borrower fails to so
reimburse the L/C Issuer by such time, the Administrative Agent shall promptly notify each
Lender of the Honor Date, the amount of the unreimbursed drawing (the "Unreimbursed
Amount"), and such Lender’s Proportionate Share thereof. In such event, the
Borrower shall be deemed to have requested a Revolving Loan Borrowing of Base Rate Loans
to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without
regard to the minimum and multiples specified in Section 2.01 for the principal
amount of Base Rate Loans, but subject to the amount of the unutilized portion of the
Total Commitment and the conditions set forth in Section 3.02 (other than the
delivery of a Notice of Revolving Loan Borrowing). Any notice given by the L/C Issuer or
the Administrative Agent pursuant to this Section 2.02(c)(i) may be given by
telephone if immediately confirmed in writing; provided, that the lack of such an
immediate confirmation shall not affect the conclusiveness or binding effect of such
notice.

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

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

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

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

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

          (d)     Repayment
of Participations.

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

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

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

               (i)     any
lack of validity or enforceability of such Letter of Credit, this Agreement, or any other
agreement or instrument relating thereto;

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

               (iii)     any
amendment or waiver of or any consent to departure from the Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto, with the consent of the
Borrower;

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

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

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

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

               (viii)     the
solvency or financial responsibility of any party issuing any documents in connection with
a Letter of Credit;

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

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

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

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

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

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

          (g)     Cash
Collateral and Back-Up Letters of Credit. Upon the request of the Administrative
Agent, (i) if the L/C Issuer has honored any full or partial drawing request under
any Letter of Credit and such drawing has resulted in an L/C Borrowing that has not been
repaid as provided herein, or (ii) if, as of the Maturity Date, any Letter of Credit
may for any reason remain outstanding and partially or wholly undrawn, the Borrower shall
promptly (x) Cash Collateralize the Obligations in an amount equal to 103% of the then
Effective Amount of the L/C Obligations, or (y) obtain a letter of credit (a "Back-Up
Letter of Credit") issued for the benefit of the L/C Issuer by a bank or other
financial institution acceptable to the L/C Issuer in its sole but reasonable discretion
in an amount at least equal to the Effective Amount of the L/C Obligations. The Borrower
hereby grants to the Administrative Agent, for the benefit of the L/C Issuer and the
Lenders, a Lien on all cash and deposit account balances described in the definition of
"Cash Collateralize" as security for the Obligations. Cash collateral shall be
maintained in blocked deposit accounts at Wells Fargo or other institutions reasonably
satisfactory to it. Other than any interest earned on the investment of such deposits
pursuant to the immediately succeeding sentence, which investments shall be made at the
risk and expense of the Borrower, such deposits shall not bear interest. If requested in
writing by the Borrower at the time cash collateral is delivered to the Administrative
Agent pursuant to this Section 2.02(g), such cash collateral shall be invested by
the Administrative Agent, in its reasonable discretion, in Cash Equivalents and applied by
the Administrative Agent to reimburse the L/C Issuer for L/C Borrowings for which it has
not been reimbursed. The Lien held by the Administrative Agent in such cash collateral to
secure the Obligations shall be released, or the Back-up Letter of Credit shall be
terminated, as applicable, upon the satisfaction of each of the following conditions:
(a) no Letters of Credit shall be outstanding as of the Maturity Date, (b) all
L/C Obligations shall have been repaid in full and (c) no Default shall have occurred
and be continuing.

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

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

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

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

     2.03.     Swing
Line.

          (a)     The
Swing Line. On the terms and subject to the conditions set forth herein, the Swing
Line Lender agrees to make loans (each such loan, a "Swing Line Loan") in
Dollars to the Borrower from time to time on any Business Day during the period from the
Closing Date to the Maturity Date in an aggregate amount not to exceed at any time
outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such
Swing Line Loans, when aggregated with the Effective Amount of Revolving Loans of the
Swing Line Lender in its capacity as a Lender of Revolving Loans, may exceed the amount of
such Lender’s Commitment; provided, however, that after giving effect
to any Swing Line Loan, (i) the aggregate Effective Amount of all Revolving Loans,
Swing Line Loans and L/C Obligations on the date of the proposed Swing Line Borrowing
shall not exceed the Total Commitment on such date, and (ii) the aggregate Effective
Amount of the Revolving Loans of any Lender, plus such Lender’s Proportionate
Share of the Effective Amount of all L/C Obligations, plus such Lender’s
Proportionate Share of the Effective Amount of all Swing Line Loans shall not exceed such
Lender’s Commitment, and provided further, that the Swing Line Lender
shall not make any Swing Line Loan to refinance an outstanding Swing Line Loan. Within the
foregoing limits, and subject to the other terms and conditions hereof, the Borrower may
borrow under this Section 2.03, prepay under Section 2.06, and reborrow
under this Section 2.03. Each Swing Line Loan shall be a Base Rate Loan.
Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and
hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a
risk participation in such Swing Line Loan in an amount equal to the product of such
Lender’s Proportionate Share times the amount of such Swing Line Loan.

          (b)     Borrowing
Procedures. Each Swing Line Borrowing shall be made upon the Borrower’s
irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be
given by telephone. Each such notice must be received by the Swing Line Lender and the
Administrative Agent not later than 10:00 a.m., on the requested borrowing date, and
shall specify (i) the amount to be borrowed, which amount shall be a minimum of
$100,000, and (ii) the requested borrowing date, which shall be a Business Day. Each
such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and
the Administrative Agent of a written Notice of Swing Line Borrowing, appropriately
completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by
the Swing Line Lender of any telephonic Notice of Swing Line Borrowing, the Swing Line
Lender will confirm with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has also received such Notice of Swing Line Borrowing and, if not,
the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of
the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in
writing) from the Administrative Agent (including at the request of any Lender) prior to
12:00 noon, on the date of the proposed Swing Line Borrowing (A) directing the
Swing Line Lender not to make such Swing Line Loan as a result of the limitations set
forth in the first proviso to the first sentence of Section 2.03(a), or
(B) that one or more of the applicable conditions specified in Section 3.02
is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line
Lender will, not later than 2:00 p.m., on the borrowing date specified in such Notice
of Swing Line Borrowing, make the amount of its Swing Line Loan available to the Borrower
at its office by crediting the account of the Borrower on the books of the Swing Line
Lender in immediately available funds.

          (c)     Refinancing
of Swing Line Loans.

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

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

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

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

          (d)     Repayment
of Participations.

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

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

          (e)     Interest
for Account of Swing Line Lender. Each Swing Line Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a rate per
annum equal to the Base Rate plus the Applicable Margin for Base Rate Loans.
The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the
Swing Line Loans. Until each Lender funds its Base Rate Loan or participation pursuant to
this Section 2.03 to refinance such Lender’s Proportionate Share of any
Swing Line Loan, interest in respect of such Proportionate Share shall be solely for the
account of the Swing Line Lender. The Borrower shall pay accrued interest on the unpaid
principal amount of each Swing Line Loan at the end of each month, upon prepayment (to the
extent thereof) and at maturity.

          (f)     Repayment
of Swing Line Loans. The Swing Line Loans shall be payable no later than the Maturity
Date.

          (g)     Payments
in Respect of Swing Line Loans. The Borrower shall make all payments of principal and
interest in respect of the Swing Line Loans directly to the Administrative Agent, who will
then, in turn, distribute such amounts to the Swing Line Lender in accordance with Section
2.09(a)(ii).

     2.04.     Amount
Limitations, Commitment Reductions, Etc.

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

          (b)     Increase
in Total Commitment.

               (i)     Provided
that no Default or Event of Default has occurred and is continuing, upon written notice to
the Administrative Agent (which shall promptly notify the Lenders), and subject to Section
2.04(b)(iii) below, the Borrower may (A) at any time prior to the Maturity Date,
request an increase in the Total Commitment up to an aggregate amount of One Hundred Ten
Million Dollars ($110,000,000) and (B) on a one-time basis, at any time after an increase
pursuant to subclause (A) of this clause (i) and prior to the second
anniversary of the Closing Date, request an increase in the Total Commitment up to an
aggregate amount of One Hundred Thirty Five Million Dollars ($135,000,000). At the time of
sending such written notice, the Borrower (in consultation with the Administrative Agent)
shall specify the time period within which each Lender is requested to respond (which
shall in no event be less than ten (10) Business Days from the date of delivery of such
notice to the Lenders). Each Lender shall notify the Administrative Agent within such time
period whether or not it agrees to increase its Commitment and, if so, whether by an
amount equal to, greater than, or less than its Proportionate Share of such requested
increase. Any Lender not responding within such time period shall be deemed to have
declined to increase its Commitment. The Administrative Agent shall notify the Borrower
and each Lender of the Lenders’ responses to each request made hereunder. To achieve
the full amount of a requested increase, the Borrower may also invite additional Eligible
Assignees to become Lenders pursuant to a joinder agreement in form and substance
reasonably satisfactory to the Administrative Agent and its counsel.

               (ii)     If
the Total Commitment is increased in accordance with this Section 2.04(b), the
Administrative Agent and the Borrower shall determine the effective date (the "Increase
Effective Date") and the final allocation of such increase. The Administrative
Agent shall promptly notify the Borrower and the Lenders of the final allocation of such
increase and the Increase Effective Date. As a condition precedent to such increase, the
Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated
as of the Increase Effective Date (in sufficient copies for each Lender) signed by a
Responsible Officer of such Loan Party (i) certifying and attaching the resolutions
adopted by such Loan Party approving or consenting to such increase, and, (ii) in the case
of the Borrower, including a Compliance Certificate demonstrating pro forma
compliance with the financial covenants contained in Section 5.03 after giving
effect to such increase and (iii) certifying that, before and after giving effect to such
increase, the representations and warranties contained in Section 4.01 are true and
correct in all material respects on and as of the Increase Effective Date (except for
representations and warranties expressly made as of a specified date, which shall be true
and correct in all material respects as of such date) and no Default or Event of Default
has occurred and is continuing. The Borrower shall deliver new or amended Revolving Loan
Notes reflecting the increased Commitment of any Lender holding or requesting a Revolving
Loan Note. The Administrative Agent shall distribute an amended Schedule I (which
shall be deemed incorporated into this Agreement), to reflect any changes therein
resulting from such increase. The Borrower shall prepay any Revolving Loans outstanding on
the Increase Effective Date (and pay any additional amounts required pursuant to Section
2.13) to the extent necessary to keep the outstanding Revolving Loans ratable with any
revised Proportionate Shares arising from any nonratable increase in the Commitments
hereunder.

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

               (iv)     This
Section 2.04(b) shall supersede any provisions in Section 8.04 to the
contrary.

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

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

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

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

          (e)     Mandatory
Reduction or Termination of Commitments.

               (i)     The
Total Commitment shall be automatically and permanently reduced by an amount equal to the
maximum amount that would be required to be applied as a mandatory prepayment of the Swing
Line Loans and the Revolving Loans pursuant to Section 2.06(c)(iii) if the
Effective Amount of such Loans was then equal to the amount of such Commitment (but
without regard to the actual usage of such Commitment), such reduction to be effective on
the date of the required prepayment.

               (ii)     The
Total Commitment shall be automatically and permanently reduced to zero on the Maturity
Date.

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

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

     2.05.     Fees.

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

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

     2.06.     Prepayments.

          (a)     Terms
of All Prepayments. Upon the prepayment of any Loan (whether such prepayment is an
optional prepayment under Section 2.06(b), a mandatory prepayment required by Section
2.06(c) or a mandatory prepayment required by any other provision of this Agreement or
the other Credit Documents, including a prepayment upon acceleration), the Borrower shall
pay to the Administrative Agent for the account of the Lenders that made such Loan
(i) all accrued interest and fees to the date of such prepayment on the amount
prepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan on a day other
than the last day of an Interest Period for such LIBOR Loan, all amounts payable to such
Lender pursuant to Section 2.13.

          (b)     Optional
Prepayments.

               (i)     Other
than prepaying Swing Line Loans (which shall be governed by clause (ii) below), at
its option the Borrower may, upon one (1) Business Day’s notice to the Administrative
Agent in the case of Base Rate Loans or three (3) Business Days’ notice to the
Administrative Agent in the case of LIBOR Loans, prepay the Loans in any Borrowing in
part, without premium or penalty (except, in the case of LIBOR Loans, as set forth in Section
2.13), in a minimum principal amount of (A) $500,000 and integral multiples of
$100,000 in excess thereof for Base Rate Loans and (B) $1,000,000 and integral multiples
of $100,000 in excess thereof for LIBOR Loans, or in whole. Each such notice shall specify
the date and amount of such prepayment. If such notice is given by the Borrower, the
Borrower shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein. If no Default has occurred and is
continuing, all prepayments under this Section 2.06(b) which are applied to reduce
the principal amount of the Loans shall be applied to the Loans as directed by the
Borrower. If the Borrower fails to direct the application of any such principal
prepayments or if a Default has occurred and is continuing, such principal prepayments
shall be applied first to the Swing Line Loans until paid in full, second to the Revolving
Loans until paid in full and finally to Cash Collateralize the Obligations in an amount
equal to the Effective Amount of the L/C Obligations and shall in each case, to the extent
possible, be first applied to prepay Base Rate Loans and then if any funds remain, to
prepay LIBOR Loans.

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

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

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

               (ii)     The
Borrower shall repay each Swing Line Loan on the earlier of the Maturity Date or such
other date as specified in Section 2.03.

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

               (iv)     The
Borrower shall deliver to the Administrative Agent, at the time of each prepayment
required under this Section 2.06(c), (A) a certificate signed by a Responsible
Officer of the Borrower setting forth in reasonable detail the calculation of the amount
of such prepayment and (B) to the extent practicable, at least three days prior
written notice of such prepayment. Each notice of prepayment shall specify the prepayment
date and the Type and principal amount of each Loan (or portion thereof) to be prepaid. In
the event that the Borrower shall subsequently determine that the actual amount was
greater than the amount set forth in such certificate, the Borrower shall promptly make an
additional prepayment of the Loans (and/or, if applicable, the Commitments shall be
permanently reduced) in an amount equal to the amount of such excess, and the Borrower
shall concurrently therewith deliver to the Administrative Agent a certificate signed by a
Responsible Officer of the Borrower demonstrating the derivation of the additional amount
resulting in such excess.

     2.07.     Other
Payment Terms.

          (a)     Place
and Manner. All payments to be made by the Borrower under this Agreement or any other
Credit Document shall be made without condition or deduction for any counterclaim,
defense, recoupment or setoff. The Borrower shall make all payments due to each Lender or
the Administrative Agent under this Agreement or any other Credit Document by payments to
the Administrative Agent at the Administrative Agent’s office located at the address
specified in Section 8.01, with each payment due to a Lender to be for the account
of such Lender and such Lender’s Applicable Lending Office. The Borrower shall make
all payments under this Agreement or any other Credit Document in lawful money of the
United States of America and in same day or immediately available funds not later than
12:00 noon on the date due. The Administrative Agent shall promptly disburse to each
Lender each payment received by the Administrative Agent for the account of such Lender. 

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

          (c)     Late
Payments. If any amount required to be paid by the Borrower under this Agreement or
the other Credit Documents (including principal or interest payable on any Loan, any L/C
Borrowing, any fee or other amount) remains unpaid after such amount is due, the Borrower
shall pay interest on the aggregate, outstanding balance of such amount from the date due
until such amount is paid in full at a per annum rate (such rate, the "Late
Fee Rate") equal to the Base Rate plus the Applicable Margin for Base Rate Loans
plus two percent (2.00%), such rate to change from time to time as the Base Rate shall
change; provided, however, that nothing in this Section 2.07(c) shall
require the Borrower to pay interest at the Late Fee Rate while the Borrower is otherwise
paying interest at two percent (2.00%) above the Applicable Margin as a result of the
continuation of an Event of Default and as set forth in the definition of "Applicable
Margin".

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

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

     2.08.     Loan
Accounts; Notes.

          (a)     Loan
Accounts. The obligation of the Borrower to repay the Loans made to it by each Lender
and to pay interest thereon at the rates provided herein shall be evidenced by an account
or accounts maintained by such Lender on its books (individually, a "Loan Account"),
except that any Lender may request that its Loans be evidenced by a note or notes pursuant
to Section 2.08(b) and Section 2.08(c). Each Lender shall record in its Loan
Accounts (i) the date and amount of each Loan made by such Lender, (ii) the
interest rates applicable to each such Loan and the effective dates of all changes
thereto, (iii) the Interest Period for each LIBOR Loan, (iv) the date and amount
of each principal and interest payment on each Loan and (v) such other information as
such Lender may determine is necessary for the computation of principal and interest
payable to it by the Borrower hereunder; provided, however, that any failure
by a Lender to make, or any error by any Lender in making, any such notation shall not
affect the Borrower’s Obligations. The Loan Accounts shall constitute prima facie
evidence of the matters noted therein (in the absence of manifest error). In addition to
the Loan Accounts, each Lender and the Administrative Agent shall maintain in accordance
with its usual practice accounts or records evidencing the purchases and sales by such
Lender of participations in Letters of Credit and Swing Line Loans. In the event of any
conflict between the accounts and records maintained by the Administrative Agent and the
accounts and records of any Lender in respect of such matters, the accounts and records of
the Administrative Agent shall control.

          (b)     Revolving
Loan Notes. If any Lender so requests, such Lender’s Revolving Loans shall be
evidenced by a promissory note in the form of Exhibit E (individually, a
"Revolving Loan Note") which note shall be (i) payable to the order
of such Lender, (ii) in the amount of such Lender’s Commitment, (iii) dated
the Closing Date and (iv) otherwise appropriately completed. The Borrower authorizes
each Lender to record on the schedule annexed to such Lender’s Revolving Loan Note
the date and amount of each Revolving Loan made by such Lender and of each payment or
prepayment of principal thereon made by the Borrower, and agrees that all such notations
shall constitute prima facie evidence of the matters noted (in the absence of
manifest error); provided, however, that any failure by a Lender to make, or
any error by any Lender in making, any such notation shall not affect the Borrower’s
Obligations. The Borrower further authorizes each Lender to attach to and make a part of
such Lender’s Revolving Loan Note continuations of the schedule attached thereto as
necessary.

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

     2.09.     Loan
Funding.

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

          (b)     Lender
Failure to Fund. Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Revolving Loan Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s Proportionate Share of such
Revolving Loan Borrowing, the Administrative Agent shall be entitled to assume that such
Lender has made or will make such portion available to the Administrative Agent on the
date of such Revolving Loan Borrowing in accordance with Section 2.09(a), and the
Administrative Agent may on such date, in reliance upon such assumption, disburse or
otherwise credit to the Borrower a corresponding amount. If any Lender does not make the
amount of its such Lender’s Proportionate Share of any Revolving Loan Borrowing
available to the Administrative Agent on or prior to the date of such Revolving Loan
Borrowing, such Lender shall pay to the Administrative Agent, on demand, interest which
shall accrue on such amount from the date of such Revolving Loan Borrowing until such
amount is paid to the Administrative Agent at rates equal to (i) the daily Federal
Funds Rate during the period from the date of such Revolving Loan Borrowing through the
third Business Day thereafter and (ii) the rate applicable to Base Rate Loans
thereafter. A certificate of the Administrative Agent submitted to any Lender with respect
to any amount owing by such Lender under this Section 2.09(b) shall constitute prima
facie evidence of such amount. If the amount of any Lender’s Proportionate Share
of any Revolving Loan Borrowing is not paid to the Administrative Agent by such Lender
within three (3) Business Days after the date of such Revolving Loan Borrowing, the
Borrower shall repay such amount to the Administrative Agent, on demand, together with
interest thereon, for each day from the date such amount was disbursed to the Borrower
until the date such amount is repaid to the Administrative Agent, at the interest rate
applicable at the time to the Loans comprising such Revolving Loan Borrowing.

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

     2.10.     Pro
Rata Treatment.

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

               (i)     Each
Revolving Loan Borrowing and reduction of the Total Commitment shall be made or shared
among the Lenders pro rata according to their respective Proportionate Shares;

               (ii)     Each
payment of principal on Loans in any Borrowing shall be shared among the Lenders which
made or funded the Loans in such Borrowing pro rata according to the respective
unpaid principal amounts of such Loans then owed to such Lenders;

               (iii)     Each
payment of interest on Loans in any Borrowing shall be shared among the Lenders which made
or funded the Loans in such Borrowing pro rata according to (A) the respective
unpaid principal amounts of such Loans so made or funded by such Lenders and (B) the
dates on which such Lenders so made or funded such Loans;

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

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

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

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

     2.11.     Change
of Circumstances.

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

          (b)     Illegality.
If, after the date of this Agreement, the adoption of any Governmental Rule, any change in
any Governmental Rule or the application or requirements thereof (whether such change
occurs in accordance with the terms of such Governmental Rule as enacted, as a result of
amendment or otherwise), any change in the interpretation or administration of any
Governmental Rule by any Governmental Authority, or compliance by any Lender with any
request or directive (whether or not having the force of law) of any Governmental
Authority (a "Change of Law") shall make it unlawful or impossible for
any Lender to make or maintain any LIBOR Loan, such Lender shall immediately notify the
Administrative Agent and the Borrower of such Change of Law. Upon receipt of such notice,
(i) Borrower’s right to request the making of, conversion to or a new Interest
Period for LIBOR Loans shall be terminated, and (ii) the Borrower shall, at the
request of such Lender, either (A) pursuant to Section 2.01(d), convert any
such then outstanding LIBOR Loans into Base Rate Loans at the end of the current Interest
Period for such LIBOR Loans or (B) immediately repay or convert any such LIBOR Loans
if such Lender shall notify the Borrower that such Lender may not lawfully continue to
fund and maintain such LIBOR Loans. Any conversion or prepayment of LIBOR Loans made
pursuant to the preceding sentence prior to the last day of an Interest Period for such
LIBOR Loans shall be deemed a prepayment thereof for purposes of Section 2.13.
After any Lender notifies the Administrative Agent and the Borrower of such a Change of
Law and until such Lender notifies the Administrative Agent and the Borrower that it is no
longer unlawful or impossible for such Lender to make or maintain a LIBOR Loan, all
Revolving Loans of such Lender shall be Base Rate Loans.

          (c)     Increased
Costs. If, after the date of this Agreement, any Change of Law (except for a Change of
Law with respect to withholding taxes, which shall be governed solely and exclusively by Section
2.12):

               (i)     Shall
subject any Lender to any tax, duty or other charge with respect to any LIBOR Loan, or
shall change the basis of taxation of payments by the Borrower to any Lender on such LIBOR
Loan or in respect to such LIBOR Loan under this Agreement (except taxes based on or
measured by the overall net income of any Lender imposed by its jurisdiction of
incorporation or the jurisdiction in which its principal executive office is located or in
which it is otherwise doing business or any political subdivision or taxing authority
thereof or therein (other than a jurisdiction in which it is deemed to be doing business
solely as a result of its having executed, delivered or performed its obligations or
received a payment under, or enforced, any Credit Document);

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

               (iii)     Shall
impose on any Lender any other condition related to any LIBOR Loan or such Lender’s
Commitments;

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

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

          (e)     Mitigation.
Any Lender which becomes aware of (i) any Change of Law which will make it unlawful
or impossible for such Lender to make or maintain any LIBOR Loan or (ii) any Change
of Law or other event or condition which will obligate the Borrower to pay any amount
pursuant to Section 2.11(c) or Section 2.11(d) shall notify the Borrower and
the Administrative Agent thereof as promptly as practical. If any Lender has given notice
of any such Change of Law or other event or condition and thereafter becomes aware that
such Change of Law or other event or condition has ceased to exist, such Lender shall
notify the Borrower and the Administrative Agent thereof as promptly as practical. Each
Lender affected by any Change of Law which makes it unlawful or impossible for such Lender
to make or maintain any LIBOR Loan or to which the Borrower is obligated to pay any amount
pursuant to Section 2.11(c) or Section 2.11(d) shall use reasonable
commercial efforts (including changing the jurisdiction of its Applicable Lending Office
or assigning its rights and obligations hereunder to another of its offices, branches or
Affiliates) to avoid the effect of such Change of Law or to avoid or materially reduce any
amounts which the Borrower is obligated to pay pursuant to Section 2.11(c) or Section
2.11(d) if, in the reasonable opinion of such Lender, such efforts would not be
disadvantageous to such Lender or contrary to such Lender’s normal banking practices.

     2.12.     Taxes
on Payments.

          (a)     Payments
Free of Taxes. Except as otherwise provided in this Section 2.12, all payments
made by the Borrower under this Agreement and the other Credit Documents shall be made
free and clear of, and without deduction or withholding for or on account of, any present
or future income, stamp, documentary or other taxes, any duties, or any other levies,
imposts, charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority (except net income taxes,
franchise taxes and taxes on capital in lieu of net income taxes (other than taxes in the
nature of withholding taxes) imposed on the Administrative Agent or any Lender by its
jurisdiction of incorporation or the jurisdiction in which its Applicable Lending Office
is located or in which it is otherwise doing business or any political subdivision or
taxing authority thereof or therein (other than a jurisdiction in which it is deemed to be
doing business solely as a result of its having executed, delivered or performed its
obligations or received a payment under, or enforced, any Credit Document)) (all such
non-excluded taxes, duties, levies, imposts, charges, fees, deductions and withholdings
being hereinafter called "Taxes"). If any Taxes are required to be
withheld from any amounts payable to the Administrative Agent or any Lender hereunder or
under the other Credit Documents, the amounts so payable to the Administrative Agent or
such Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and the other
Credit Documents; provided, however, that the Borrower shall not be required
to increase any such amounts payable to any Lender or the Administrative Agent with
respect to any taxes (i) that result from such Lender’s or the Administrative
Agent’s failure to comply with the requirements of Section 2.12(b), gross
negligence or willful misconduct or (ii) imposed at the time the Person becomes a party to
this Agreement, or in the case of an Assignment, designation of a new Applicable Lending
Office (other than pursuant to Sections 2.11(e) or 2.12(c)), or appointment of a
successor Administrative Agent, the effective date thereof, except to the extent such
Person’s predecessor in interest (or the Lender’s prior Applicable Lending
Office, as the case may be) was entitled to such amounts. Whenever any Taxes are payable
by the Borrower, as promptly as practicable thereafter, the Borrower shall send to the
Administrative Agent for its own account or for the account of such Lender, as the case
may be, a certified copy of an original official receipt received by the Borrower showing
payment thereof. Subject to Section 2.12(b), if the Borrower fails to pay any Taxes
when due to the appropriate taxing authority or fails to remit to the Administrative Agent
the required receipts or other required documentary evidence, the Borrower shall indemnify
the Administrative Agent and the relevant Lender(s) for any Taxes, interest or penalties
that may become payable by the Administrative Agent or such Lender as a result of any such
failure. The indemnification provided in the immediately preceding sentence shall be made
within 30 days after the Administrative Agent or the relevant Lender, as the case may be,
makes written demand for it. Such written demand shall include a certificate setting forth
in reasonable detail the basis and calculation of such amount. Such certificate shall be
presumed to be correct in the absence of manifest error. The obligations of the Borrower
under this Section 2.12(a) shall survive the payment and performance of the
Obligations and the termination of this Agreement.

          (b)     Withholding
Exemption Certificates. On or prior to (i) the date of the initial Borrowing or
issuance of a Letter of Credit or, if such date does not occur within thirty (30) days
after the date of this Agreement, by the end of such 30-day period, or (ii) in the case of
a designation of a new lending office (other than pursuant to Section 2.12(c) or Section
2.11(e)) or appointment of a successor Administrative Agent, the effective date
thereof, each Lender and successor Administrative Agent which is not organized under the
laws of the United States or a state thereof shall deliver to the Borrower and the
Administrative Agent as appropriate two duly completed copies of United States Internal
Revenue Service Form W-8BEN or W-8ECI (and/or other applicable forms or certifications),
as the case may be, certifying in each case that such Person is entitled to receive
payments under this Agreement and other Credit Documents without deduction or withholding
of any United States federal income taxes. Each such Person further agrees to promptly
notify the Borrower and the Administrative Agent (as appropriate) of any change of
circumstances (including any change in any treaty, law or regulation) which would prevent
such Person from receiving payments hereunder without any deduction or withholding of such
taxes. On or before the date that any certificate or other form delivered by such Person
under this Section 2.12(b) expires or becomes obsolete or inaccurate or after the
occurrence of any event requiring a change in the most recent such certificate or form
previously delivered by such Person, such Person Agrees (to the extent it is entitled to
do so) to deliver to the Borrower and the Administrative Agent (as appropriate) a new
certificate or form, certifying that such Person is entitled to receive payments under
this Agreement without deduction or withholding of such Taxes or subject to withholding of
Taxes at a reduced rate. Each Lender, Assignee Lender and Administrative Agent that is a
United States person, as defined in section 7701(a)(30) of the IRC (other than Persons
that the Borrower may treat as otherwise exempt from United States backup withholding
tax), shall deliver at the time(s) and in the manner(s) described above with respect to
the other forms, to the Borrower and the Administrative Agent (as applicable), properly
completed and duly executed United States Internal Revenue Service Form W-9 and/or other
forms and certification, certifying that such Person is exempt from United States backup
withholding tax on payments made hereunder. If any such Person fails to provide to the
Borrower or the Administrative Agent (as appropriate) pursuant to this Section 2.12(b)
(or, in the case of an Assignee Lender, Section 8.05(c)) any certificates or other
evidence required by such provision to establish that such is Person, at the time it
becomes a Lender, Assignee Lender or successor Administrative Agent hereunder, entitled to
receive payments under this Agreement without deduction or withholding of any United
States federal income taxes, such Person shall not be entitled to any indemnification
under Section 2.12(a) for any Taxes imposed on such Person primarily as a result of
such failure.

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

          (d)     Payments
on After-Tax Basis. Any payment that the Borrower shall be required to make to or for
the account of the Administrative Agent or any Lender with respect to any Tax that is
subject to indemnification under this Section 2.12 shall be paid on an After-Tax
Basis. If the Administrative Agent or the relevant Lender, as applicable, shall actually
realize any saving (as determined in its good faith discretion) of any Tax (by way of
credit (including any foreign tax credit), deduction, exclusion from income or otherwise)
by reason of any amount with respect to which the Borrower has indemnified such Person
pursuant to this Section 2.12, and such Tax saving was not taken into account in
determining the amount payable by the Borrower on account of such indemnification, such
Person shall pay to the Borrower, so long as no Event of Default shall have occurred and
be continuing, within 30 days after such Person shall have actually realized such Tax
saving, the amount of such saving (minus any detriment), together with the amount of any
Tax saving resulting from any payment pursuant to this sentence; provided that the
Borrower shall not be entitled to receive an amount in excess of all amounts previously
paid by the Borrower pursuant to this Section 2.12, to such Person (less the
aggregate amount of all prior payments by such Person to the Borrower under this Section
2.12(d)) (but any excess amount described in this proviso shall reduce pro tanto any
amount that the Borrower is subsequently obligated to pay to such Person pursuant to this Section
2.12), and provided further that any amount otherwise due to the Borrower
pursuant to this sentence shall not be paid to the extent of any payment or indemnity then
due and owing from the Borrower to such Person (and any amount not so paid shall become
payable at such time and to such extent as the Borrower shall have made such payments). If
it is later determined that the Administrative Agent or the relevant Lender, as
applicable, was not entitled to such Tax saving, the portion of such tax saving that is
repaid, recaptured or disallowed will be treated as Taxes for which the Borrower must
indemnify pursuant to this Section 2.12. Notwithstanding the foregoing, each
Administrative Agent or the relevant Lender, as applicable, shall have sole control over
positions taken with respect to its tax returns and filings.

          (e)     Tax
Returns. Nothing contained in this Section 2.12 shall require the
Administrative Agent or any Lender to make available any of its tax returns (or any other
information relating to its taxes which it deems to be confidential).

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

          (a)     $250;
plus

          (b)     the
amount, if any, by which (i) the additional interest would have accrued on the amount
prepaid or not borrowed at the LIBOR Rate plus the Applicable Margin if that amount had
remained or been outstanding through the last day of the applicable Interest Period
exceeds (ii) the interest that the Lender could recover by placing such amount on deposit
in the Designated Eurodollar Market for a period beginning on the date of the prepayment
or failure to borrow and ending on the last day of the applicable Interest Period (or, if
no deposit rate quotation is available for such period, for the most comparable period for
which a deposit rate quotation may be obtained); plus

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

     Each Lender’s determination of
the amount of any prepayment fee payable under this Section 2.13 shall be
conclusive in the absence of manifest error. The obligations of the Borrower under this Section
2.13 shall survive the payment and performance of the Obligations and the termination
of this Agreement.

     2.14.     Security.

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

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

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

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

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

     2.15.     Replacement
of the Lenders. If (a) any Lender shall become a Defaulting Lender more than one
(1) time in a period of twelve (12) consecutive months, (b) any Lender shall continue
as a Defaulting Lender for more than five (5) Business Days at any time, (c) suspend
its obligation to make or maintain LIBOR Loans pursuant to Section 2.11(b) for
a reason which is not applicable to any other Lender or (d) any Lender shall demand
any payment under Section 2.11(c), 2.11(d) or 2.12(a) for a reason
which is not applicable to any other Lender, then the Administrative Agent may (or upon
the written request of the Borrower, shall) replace such Lender (the "affected
Lender"), or cause such affected Lender to be replaced, with another lender (the
"replacement Lender") satisfying the requirements of an Assignee Lender
under Section 8.05(c), by having the affected Lender sell and assign all of its
rights and obligations under this Agreement and the other Credit Documents (including for
purposes of this Section 2.15, participations in L/C Obligations and in Swing Line
Loans) to the replacement Lender pursuant to Section 8.05(c); provided, however,
that if the Borrower seeks to exercise such right, it must do so within sixty (60) days
after it first knows or should have known of the occurrence of the event or events giving
rise to such right, and neither the Administrative Agent nor any Lender shall have any
obligation to identify or locate a replacement Lender for the Borrower (it being expressly
agreed that in such circumstances it is the Borrower’s obligation to identify or
locate a replacement Lender that is reasonably acceptable to the Administrative Agent).
Upon receipt by any affected Lender of a written notice from the Administrative Agent
stating that the Administrative Agent is exercising the replacement right set forth in
this Section 2.15, such affected Lender shall sell and assign all of its
rights and obligations under this Agreement and the other Credit Documents (including for
purposes of this Section 2.15, participations in L/C Obligations and in Swing Line
Loans) to the replacement Lender pursuant to an Assignment Agreement and Section
8.05(c) for a purchase price equal to the sum of the principal amount of the affected
Lender’s Loans so sold and assigned, all accrued and unpaid interest thereon and its
ratable share of all fees to which it is entitled.

  
    
      
        
          
            ARTICLE III.      CONDITIONS
            PRECEDENT.

          

        

      

    

  

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

          (a)     Principal
Credit Documents.

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

               (ii)     A
Revolving Loan Note payable to each Lender requesting such a note, each duly executed by
the Borrower;

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

               (iv)     The
Guaranty, duly executed by each Guarantor;

               (v)     The
Security Agreement, duly executed by the Administrative Agent and each Loan Party party
thereto; and

               (vi)     The
Pledge Agreement, duly executed by the Administrative Agent and each Loan Party party
thereto.

          (b)     Borrower
Organizational Documents.

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

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

          (c)     Other
Loan Parties Organizational Documents.

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

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

          (d)     Financial
Statements, Financial Condition, Etc. 

               (i)     A
copy of the unaudited Financial Statements of the Loan Parties for the Fiscal Quarter
ended September 28, 2002, certified by the chief financial officer or treasurer of
the Borrower to present fairly the financial condition, results of operations and other
information reflected therein and to have been prepared in accordance with GAAP (subject
to normal year-end audit adjustments and the absence of footnotes); 

               (ii)     A
copy of the audited consolidated Financial Statements of the Borrower for the Fiscal Year
ended December 29, 2001, prepared by PricewaterhouseCoopers and a copy of the
unqualified opinion delivered by such accountants in connection with such Financial
Statements; 

               (iii)     A
Solvency Certificate in the form of Exhibit M dated the Closing Date and executed
by the chief financial officer or treasurer of the Borrower; 

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

               (v)     A
copy of the budget and projected Financial Statements of the Loan Parties by Fiscal Year
for each of the Fiscal Years through the Maturity Date, including, in each case, projected
balance sheets, statements of income and retained earnings and statements of cash flow of
the Loan Parties, all in reasonable detail and in any event to include (i) projected
Capital Expenditures, (ii) quarterly projections of the Borrower’s compliance
with each of the covenants set forth in Section 5.03 of this Agreement and (iii) a
brief description of the following assumptions used in preparation of the foregoing:
projected store openings, closings, remodels, new store models by category (i.e., format
of store), interest rate assumptions and such other mutually agreed upon assumptions, if
any (collectively, the "Projections").

          (e)     Collateral
Documents.

               (i)     The
Collateral Certificate, duly executed by the Borrower;

               (ii)     Such
UCC financing statements and fixture filings (appropriately completed) shall have been
filed in such jurisdictions as the Administrative Agent may request to perfect the Liens
granted to the Administrative Agent in this Agreement, the Security Documents and the
other Credit Documents; 

               (iii)     Such
UCC termination statements (appropriately completed and executed) shall have been filed in
such jurisdictions as the Administrative Agent may request to terminate any financing
statement evidencing Liens of other Persons in the Collateral which are prior to the Liens
granted to the Administrative Agent in this Agreement, the Security Documents and the
other Credit Documents, except for any such prior Liens which are expressly permitted by
this Agreement to be prior; 

               (iv)     UCC
search certificates from the jurisdictions in which UCC financing statements are to be
filed pursuant to subsection (e)(ii) above and jurisdictions in which any Loan
Party had assets prior to July 1, 2001 reflecting no other financing statements or filings
which evidence Liens of other Persons in the Collateral which are prior to the Liens
granted to the Administrative Agent in this Agreement, the Security Documents and the
other Credit Documents, except for any such prior Liens (a) which are expressly permitted
by this Agreement to be prior or (b) for which the Administrative Agent has received a
termination statement pursuant to subsection (e)(iii) above;

               (v)
      Control Account Agreements with respect to each Deposit
Account of a Loan Party (other than Deposit Accounts constituting Excluded Collateral) not
already subject to the Administrative Agent’s first priority perfected Lien, each
duly executed by the Administrative Agent, the applicable Loan Party and the Depositary
Bank thereto;

               (vi)     The
stock certificates representing (A) all of the Equity Securities of each Subsidiary (other
than Tax Preferred Subsidiaries) of the Borrower and each Guarantor and (B) all of the
outstanding non-voting Equity Securities and 65% of the outstanding voting Equity
Securities of each Tax Preferred Subsidiary of the Borrower and each Guarantor, in each
case pledged to the Administrative Agent pursuant to the Pledge Agreement, together with
undated stock powers duly executed by the registered holder of such Equity Securities in
blank and attached thereto;

               (vii)     A
control agreement for each securities account at which any Loan Party maintains a
securities account not already subject to the Administrative Agent’s first priority
perfected Lien, each appropriately completed, duly executed by such Loan Party, and the
Administrative Agent and acknowledged by the securities intermediary to which addressed;

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

               (ix)     Evidence
satisfactory to the Administrative Agent that the Leasehold Mortgages previously have
been, or are in the process of being, duly recorded in the appropriate jurisdictions.

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

          (g)     Other
Items.

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

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

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

               (iv)     There
shall not have occurred any event or circumstance that constitutes a Material Adverse
Effect;

               (v)     No
material disruption of or a material adverse change in conditions in the financial,
banking or capital markets shall have occurred since December 11, 2002 which Wells Fargo,
in its sole discretion, deems material in connection with its ability to syndicate the
Commitments and the Loans;

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

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

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

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

                    (B)          No
Default has occurred and is continuing as of such date;

               (ix)     All
fees and reasonable expenses payable to the Administrative Agent and the Lenders on or
prior to the Closing Date (including all fees payable to the Administrative Agent pursuant
to the Administrative Agent’s Fee Letter) shall have been paid, to the extent
invoiced prior to the Closing Date; 

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

               (xi)     Each
Loan Party shall have obtained all Governmental Authorizations and all consents of other
Persons, in each case that are necessary to have been obtained prior to the Closing Date
in connection with this Agreement the transactions herein and the continued operation of
the business conducted by the Loan Parties in substantially the same manner as conducted
prior to the Closing Date. Each such Governmental Authorization or consent shall be in
full force and effect, except in a case where the failure to obtain or maintain a
Governmental Authorization or consent, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. All applicable waiting periods
shall have expired without any action being taken or threatened by any competent authority
that would restrain, prevent or otherwise impose adverse conditions on this Agreement, the
transactions contemplated by the Credit Documents or the financing thereof. No action,
request for stay, petition for review or rehearing, reconsideration, or appeal with
respect to any of the foregoing shall be pending, and the time for any applicable
Governmental Authority to take action to set aside its consent on its own motion shall
have expired.

     3.02.     Conditions
Precedent to each Credit Event. The occurrence of each Credit Event (including the
initial Borrowing) is subject to the further conditions that:

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

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

               (i)     No
Default has occurred and is continuing or will result from such Credit Event; 

               (ii)     This
Agreement, the Security Agreement, the Pledge Agreement and the Guaranty are in full force
and effect;

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

               (iv)     With
respect to any Credit Event that constitutes (A) the making of any Loan (including a Swing
Line Loan), (B) the issuance of a Letter of Credit or (C) the making of an L/C Credit
Extension, the representations and warranties of the Loan Parties set forth in Article IV
and in the other Credit Documents are true and correct in all material respects as if made
on such date (except for representations and warranties expressly made as of a specified
date, which shall be true and correct in all material respects as of such date).

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

     3.03.     Covenant
to Deliver. The Borrower agrees (not as a condition but as a covenant) to deliver to
the Administrative Agent each item required to be delivered to the Administrative Agent as
a condition to the occurrence of any Credit Event if such Credit Event occurs. The
Borrower expressly agrees that the occurrence of any such Credit Event prior to the
receipt by the Administrative Agent of any such item shall not constitute a waiver by the
Administrative Agent or any Lender of the Borrower’s obligation to deliver such item.

  
    
      
        
          
            ARTICLE IV.      REPRESENTATIONS AND
            WARRANTIES.

          

        

      

    

  

     4.01.     Representations
and Warranties. In order to induce the Administrative Agent and the Lenders to enter
into this Agreement, the Borrower hereby represents and warrants to the Administrative
Agent and the Lenders as follows:

          (a)     Due
Incorporation, Qualification, etc. Each Loan Party (i) is a corporation, partnership
or limited liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or formation; (ii) has the power and
authority to own, lease and operate its properties and carry on its business as now
conducted; and (iii) is duly qualified, licensed to do business and in good standing as a
foreign corporation, partnership or limited liability company, as applicable, in each
jurisdiction where its ownership, lease or operation of property or the conduct of its
business requires such qualification or license except where the failure to be so
qualified or licensed is not reasonably likely to have a Material Adverse Effect.

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

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

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

          (e)     Approvals.

               (i)     No
consent, approval, order or authorization of, or registration, declaration or filing with,
any Governmental Authority or other Person (including, without limitation, the
shareholders of any Person) is required to be obtained prior to or as a condition
precedent to the execution and delivery of the Credit Documents executed by any Loan Party
or the performance or consummation of the transactions contemplated thereby, except for
(A) those consents, approvals, orders, authorizations, registrations, declarations or
filings which have been made or obtained and are in full force and effect or the failure
of which to obtain is not reasonably likely to have a Material Adverse Effect, and (B)
filings and recordings in respect of the Liens created pursuant to the Security Documents.

               (ii)     All
Governmental Authorizations have been duly obtained and are in full force and effect
without any known conflict with the rights of others and free from any unduly burdensome
restrictions, except as is not reasonably likely to have a Material Adverse Effect. No
Loan Party has received any written notice or other written communications from any
Governmental Authority regarding (i) any revocation, withdrawal, suspension,
termination or modification of, or the imposition of any material conditions with respect
to, any Governmental Authorization, or (ii) any other limitations on the conduct of
business by any Loan Party, in each case that is reasonably likely to have a Material
Adverse Effect.

               (iii)     No
Governmental Authorization is required for either (x) the pledge or grant by any Loan
Party as applicable of the Liens purported to be created in favor of the Administrative
Agent in connection herewith or any other Credit Document or (y) the exercise by the
Administrative Agent of any rights or remedies in respect of any Collateral (whether
specifically granted or created pursuant to any of the Security Documents or created or
provided for by any Governmental Rule), except for (1) such Governmental
Authorizations that have been obtained and are in full force and effect and fully
disclosed to Administrative Agent in writing, and (2) filings or recordings
contemplated in connection with this Agreement or any Security Document.

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

          (g)     Litigation.
Except for (a) any matter fully covered as to subject matter and amount (subject to
applicable deductibles and retentions) by insurance for which the insurance carrier has
not asserted lack of subject matter coverage or reserved its right to do so, (b) any
matter, or series of related matters, involving a claim against the Borrower or any of its
Subsidiaries of less than $2,500,000, (c) matters of an administrative nature not
involving a claim or charge against the Borrower or any of its Subsidiaries and (d)
matters set forth in Schedule 4.01(g), there are no actions, suits, proceedings or
investigations pending as to which the Borrower or any of its Subsidiaries have been
served or have received notice or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries or any Property of any of
them before any Governmental Authority that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect.

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

          (i)     Financial
Statements. The audited Financial Statements delivered to the Administrative Agent
fairly present in all material respects the financial conditions, results of operations
and changes in financial position of the Loan Parties, and the unaudited balance sheet and
statements of operations delivered to the Administrative Agent fairly present in all
material respects the financial conditions, results of operations and changes in financial
position of the Loan Parties, in each case as of the date thereof and for the period
covered thereby. All such Financial Statements (i) are in accordance with the books and
records of the Loan Parties, which have been maintained in accordance with good business
practice, and (ii) have been prepared in conformity with GAAP (subject, in the case of any
unaudited Financial Statements, to changes resulting from audit and normal year-end
adjustments and the absence of footnotes). No Loan Party has any Contingent Obligations,
liability for taxes or other outstanding obligations which, in any such case, are material
in the aggregate, except as disclosed in the audited Financial Statements dated December
29, 2001, furnished by the Borrower to the Administrative Agent prior to the date hereof,
or in the Financial Statements delivered to the Administrative Agent pursuant to clause
(i) or (ii) of Section 5.01(a) or in the other documents delivered by the Borrower
hereunder and that, in any such case, are material in relation to the business,
operations, properties, assets, condition (financial or otherwise) or prospects of the
Borrower individually or the Borrower and the other Loan Parties taken as a whole.

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

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

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

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

          (n)     Employee
Benefit Plans.

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

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

               (iii)     Except
as set forth on Schedule 4.01(n), none of the Borrower and the ERISA Affiliates
contributes to or has any material contingent obligations to any Multiemployer Plan. None
of the Borrower and the ERISA Affiliates has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a
sale of assets described in Section 4204 of ERISA. None of the Borrower and the ERISA
Affiliates has been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of Section 4241 or Section 4245 of ERISA or that any
Multiemployer Plan intends to terminate or has been terminated under Section 4041A of
ERISA.

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

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

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

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

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

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

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

          (v)     Accuracy
of Information Furnished.

               (i)     The
Credit Documents and the other certificates, statements and information (excluding
projections) furnished by the Loan Parties to the Administrative Agent and the Lenders in
connection with the Credit Documents and the transactions contemplated thereby, taken as a
whole, do not contain any untrue statement of a material fact and do not omit to state any
material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. All Projections furnished by the Loan Parties
to the Administrative Agent and the Lenders in connection with the Credit Documents and
the transactions contemplated thereby have been based upon reasonable assumptions and
represent, as of their respective dates of presentations, the Loan Parties’ best
estimates of the future performance of the Loan Parties (it being understood that such
Projections are subject to significant contingencies and uncertainties, many of which are
beyond the control of any Loan Party, and nothing in this Section 4.01(v) shall be
construed as a representation or covenant that the Projections in fact will be achieved). 

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

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

          (y)     Policies
of Insurance. All insurance maintained by the Loan Parties has not been terminated and
is in full force and effect, and each of the Loan Parties has taken all action required to
be taken as of the date of this Agreement to keep unimpaired its rights thereunder.

  
    
      
        
          
            ARTICLE V.      COVENANTS.

          

        

      

    

  

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

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

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

               (ii)     As
soon as available and in no event later than one hundred twenty (120) days after the close
of each Fiscal Year of the Borrower, (A) copies of the audited Financial Statements
of the Borrower and its Subsidiaries (prepared on a consolidated and, at any time during
which the Borrower has any Material Subsidiaries, consolidating, basis) for such
Fiscal Year, audited by PricewaterhouseCoopers or any other firm of independent certified
public accountants reasonably acceptable to the Administrative Agent, and (B) copies
of the unqualified opinions (or opinions containing such qualifications as to events or
conditions that the Administrative Agent and the Required Lenders have agreed in writing
could not reasonably be expected to result in a Material Adverse Effect) and, to the
extent delivered, management letters delivered by such accountants in connection with all
such Financial Statements;

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

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

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

                    (A)          As
soon as practicable after the end of each Fiscal Quarter, and in any event no later than
the last day of the immediately succeeding calendar month, a quarterly comparable store
sales report prepared with respect to the portion of the Fiscal Year ended with such
Fiscal Quarter, which report shall contain a listing of Stores owned and/or operated by
the 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)          To
the Administrative Agent only, promptly after the Administrative Agent’s reasonable
request therefor, copies of each monthly account statement (showing account balance and
monthly account activity) for all deposit and investment accounts of the Borrower and its
Subsidiaries that are included as part of the Collateral;

 

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

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

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

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

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

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

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

               (xii)     As
soon as possible and in no event later than thirty (30) days after the receipt thereof by
the Borrower or any of its Subsidiaries, a copy of any notice, summons, citations or other
written communications concerning any actual, alleged, suspected or threatened material
violation of any Environmental Law, or any material liability of the Borrower or any of
its Subsidiaries for Environmental Damages;

               (xiii)     To
the Administrative Agent only, as soon as practicable, and in any event within five (5)
Business Days after a Responsible Officer of the Borrower becomes aware of the 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) Business Days after such telephonic
notice, written notice again specifying the nature and period of existence thereof and
specifying what action the Borrower is taking or proposes to take with respect thereto;
and

               (xiv)     Such
other instruments, agreements, certificates, statements, documents and information
relating to any material adverse change in the operations or condition (financial or
otherwise) of the Borrower or its Subsidiaries, and compliance by the Borrower with the
terms of this Agreement and the other Credit Documents as the Administrative Agent may
from time to time reasonably request.

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

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

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

          (d)     Insurance.
The Loan Parties shall:

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

               (ii)     Furnish
to any Lender, as soon as practicable after such Lender’s written request, copies of
all such insurance policies;

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

               (iv)     Obtain
and maintain endorsements reasonably acceptable to the Administrative Agent for such
insurance naming the Administrative Agent as an additional insured and as lender’s
loss payee; 

 

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

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

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

          (g)     General
Business Operations. Each of the Loan Parties shall (i) subject to Section
5.02(d), preserve and maintain its corporate, partnership or limited liability company
existence and all of its rights, privileges and franchises reasonably necessary to the
conduct of its business, (ii) conduct its business activities in compliance with all
Requirements of Law and Contractual Obligations applicable to such Person and
(iii) keep all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted, except, in each case, where any failure is
not reasonably likely to have a Material Adverse Effect. The Borrower shall maintain its
chief executive office and principal place of business in the United States of America and
shall not change its jurisdiction of formation except upon not less than fifteen (15) days
prior written notice to the Administrative Agent.

          (h)     Compliance
with Laws. Each Loan Party shall comply with the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority (including, without
limitation, all Environmental Laws), noncompliance with which could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect.

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

          (j)     Change
in Management. If Perry Odak ceases to hold the office of Chief Executive Officer (or,
if there then is no such office or occupant of such office, the office of President) of
the Borrower, the 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) Business Days) notify the Borrower
whether such proposed successor is or is not reasonably acceptable to the Required
Lenders. A determination by the Required Lenders that a proposed successor is not
reasonably acceptable shall be made solely on grounds that are reasonable from the
standpoint of a lender to the Borrower.

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

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

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

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

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

               (i)     Indebtedness
of the Loan Parties under the Credit Documents; 

               (ii)     Indebtedness
of the Loan Parties listed in Schedule 5.02(a) and existing on the date of
this Agreement; 

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

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

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

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

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

               (viii)     Guaranty
Obligations of any Loan Party in respect of Permitted Indebtedness of any wholly-owned
Subsidiary;

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

               (x)     Acquisition-Related
Indebtedness in an aggregate principal amount not exceeding $10,000,000 at any one time
outstanding;

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

               (xii)     Indebtedness
consisting of Capital Leases, or Indebtedness otherwise incurred to finance the purchase
or construction of property (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
property), or to refinance any such Indebtedness, in each case entered into after the
Closing Date, provided that the principal amount of such Indebtedness outstanding at any
one time does not exceed $5,000,000 in the aggregate;

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

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

               (xv)     without
duplication, Indebtedness constituting Investments otherwise permitted pursuant to Section
5.02(e); and

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

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

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

               (i)     Liens
and Negative Pledges in favor of the Administrative Agent or any Lender securing the
Obligations; 

               (ii)     Liens
or Negative Pledges listed in Schedule 5.02(b) and existing on the date of this
Agreement; 

               (iii)     Liens
for taxes or other Governmental Charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided that adequate reserves for the
payment thereof have been established in accordance with GAAP; 

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

               (v)     Deposits
under workers’ compensation, self insurance, unemployment insurance and social
security laws or to secure the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or to secure statutory obligations of surety or
appeal bonds or to secure indemnity, performance or other similar bonds in the ordinary
course of business; 

               (vi)     Zoning
restrictions, easements, encroachments, protrusions, rights-of-way, title irregularities
and other similar encumbrances, which alone or in the aggregate are not substantial in
amount and, with respect to property that is owned in fee simple, do not materially
detract from the value of the property subject thereto and adversely interfere with the
ordinary conduct of the business of any Loan Party; 

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

               (viii)     Judgment
Liens, provided that such Liens do not constitute an Event of Default under Section
6.01(h);

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

               (x)     Liens
arising in connection with leases or subleases granted by the Borrower or any of its
Subsidiaries to any other Person in the ordinary course of business;

               (xi)     Liens
on patents, trademarks, trade names, service marks, copyrights, trade secrets or other
intellectual property to the extent such Liens arise from the granting of licenses thereto
granted by the Borrower or any of its Subsidiaries to any other Person in the ordinary
course of business; 

               (xii)     Liens
securing payment of Indebtedness of the type permitted and described in Section
5.02(a)(xii), provided that such Indebtedness otherwise complies with Section
5.02(a)(xii);

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

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

               (xv)     Liens
arising out of conditional sale, title retention, consignment or similar arrangements for
the sale of goods by the Borrower or any of its Subsidiaries in the ordinary course of
business;

               (xvi)     Liens
permitted as set forth in the definition of "Permitted Insurance Premium
Indebtedness";

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

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

               (xix)     Negative
Pledges existing by reason of customary provisions restricting assignments, subletting or
other transfers contained in leases, licenses and similar agreements entered into in the
ordinary course of business;

               (xx)     Negative
Pledges applicable to any Subsidiary acquired after the Closing Date if such restrictions
and conditions existed at the time such Subsidiary was acquired, were not created in
anticipation of such acquisition and apply solely to such acquired Subsidiary; and

               (xxi)     Negative
Pledges contained in agreements evidencing Indebtedness permitted by Section
5.02(a)(xii) that impose restrictions on the property so acquired;

 

provided, however, that the foregoing exceptions shall
not permit any Lien in any Equity Securities issued by any Loan Party and pledged to the
Administrative Agent by any Loan Party, except for Liens in favor of the Administrative
Agent securing the Obligations.

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

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

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

               (iii)     Sales
by the Loan Parties of surplus, damaged, worn or obsolete assets in the ordinary course of
their businesses for not less than fair market value (or, if for less than fair market
value, is in connection with the assignment by such Loan Party of one or more lease
obligations by which it is bound), provided that no Default shall have occurred and be
continuing, and the abandonment or other sale of intellectual property that is, in the
reasonable judgment of the Borrower, no longer economically practicable to maintain or
useful in the conduct of the business of the Borrower and its Subsidiaries taken as a
whole; 

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

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

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

               (vii)     Licenses
and sublicenses by the Borrower or any of its Subsidiaries of software, intellectual
property and other general intangibles in the ordinary course of business and which do not
materially interfere with the ordinary conduct of business of the Borrower or any such
Subsidiary;

               (viii)     The
Borrower and its Subsidiaries may sell Cash Equivalents in the ordinary course of
business;

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

               (x)     The
granting of Permitted Liens;

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

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

               (xiii)     Investments
permitted under Section 5.02(e); and

               (xiv)     Sales
or other dispositions the proceeds of which are applied to the prepayment of the Loans and
otherwise as set forth in Section 2.06(c).

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

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

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

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

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

                    (A)          No
Default has occurred and is continuing on the date of, or will result after giving effect
to, any such Acquisition; and 

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

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

                    (A)          No
Default has occurred and is continuing on the date of, or will result after giving effect
to, any such Acquisition; and 

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

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

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

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

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

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

               (v)     Investments
in securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such trade
creditors or customers or in settlement of delinquent or overdue accounts in the ordinary
course of business;

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

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

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

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

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

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

               (xii)     The
Borrower and its Subsidiaries may enter into and perform its obligations under Lender Rate
Contracts to the extent permitted by Section 5.02(a);

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

               (xiv)     Investments
permitted by Section 5.02(d);

               (xv)     Deposit
accounts; and

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

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

               (i)     Any
Subsidiary of the Borrower may pay dividends on its Equity Securities to the Borrower or
any wholly owned Subsidiary of the Borrower;

               (ii)     The
Borrower may purchase fractional shares of its capital stock arising out of stock
dividends, splits or combinations or business combinations;

               (iii)     The
Borrower may make payments or distributions to dissenting stockholders pursuant to
applicable law;

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

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

 

provided, that in no event shall the aggregate amount of
Distributions made by the Borrower during any Fiscal Year of the Borrower exceed the Net
Income of the Loan Parties for the most recently ended Fiscal Year of the Borrower, unless
such distributions are for payment of taxes by an upper-tier entity with respect to a
lower-tier entity.

          (g)     Change
in Business. No Loan Party shall engage (excluding any Investments permitted
hereunder), either directly or indirectly through Affiliates, in any business
substantially different from the business of the Borrower as of the Closing Date and
businesses related, ancillary or complementary thereto, it being understood that such
business consists of the manufacture, wholesale distribution and retail sale of natural
foods, vitamins, supplements and personal care items (and related grocery and other
products).

          (h)     Payments
of Indebtedness, Etc. No Loan Party shall (i) prepay, redeem, purchase, defease
or otherwise satisfy in any manner prior to the scheduled payment thereof any Indebtedness
(other than the Obligations, refinancing of Indebtedness to the extent permitted pursuant
to Section 5.02(a), or repayment of Indebtedness of any Subsidiary of the Borrower
owed to any Loan Party); (ii) amend, modify or otherwise change the terms of any
document, instrument or agreement evidencing Indebtedness (other than the Obligations to
the extent set forth in this Agreement) so as to accelerate the scheduled payment thereof;
(iii) amend, modify or otherwise change any of the subordination or other provisions
of any document, instrument or agreement evidencing subordinated Indebtedness in a manner
which adversely affects the material rights of the Administrative Agent and the Lenders;
or (iv) make any payment in contravention of any Subordination Agreement (if any) or not
otherwise permitted pursuant to the definition of Permitted Subordinated Indebtedness.

          (i)     ERISA.

               (i)     No
Loan Party shall (A) adopt or institute any Employee Benefit Plan that is an employee
pension benefit plan within the meaning of Section 3(2) of ERISA, (B) take any action
which will result in the partial or complete withdrawal, within the meanings of sections
4203 and 4205 of ERISA, from a Multiemployer Plan, (C) engage or permit any Person to
engage in any transaction prohibited by section 406 of ERISA or section 4975 of the IRC
involving any Employee Benefit Plan or Multiemployer Plan which would subject the Borrower
or any ERISA Affiliate to any tax, penalty or other liability including a liability to
indemnify, (D) incur or allow to exist any accumulated funding deficiency (within the
meaning of section 412 of the IRC or section 302 of ERISA), (E) fail to make full
payment when due of all amounts due as contributions to any Employee Benefit Plan or
Multiemployer Plan, (F) fail to comply with the requirements of section 4980B of the
IRC or Part 6 of Title I(B) of ERISA, or (G) adopt any amendment to any Employee
Benefit Plan which would require the posting of security pursuant to section 401(a)(29) of
the IRC, where singly or cumulatively, any of the above would be reasonably likely to have
a Material Adverse Effect. 

               (ii)     No
Loan Party shall (A) engage in any transaction prohibited by any Governmental Rule
applicable to any Foreign Plan, (B) fail to make full payment when due of all amounts
due as contributions to any Foreign Plan or (C) otherwise fail to comply with the
requirements of any Governmental Rule applicable to any Foreign Plan, where singly or
cumulatively, any of the above would be reasonably likely to have a Material Adverse
Effect.

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

          (k)     Accounting
Changes. No Loan Party shall change (i) its Fiscal Year or (ii) its
accounting practices except as required by GAAP or any Governmental Rule applicable to
such Loan Party.

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

               (i)     No
Loan Party shall agree to amend, modify, supplement or replace any document, instrument or
agreement executed in connection with Permitted Subordinated Indebtedness in any respect
that would adversely affect in any material respect any right or interest of the Lenders
or any Loan Party’s ability to pay and perform the Obligations.

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

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

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

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

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

 

	Period
	Adjusted Leverage Ratio

	Closing Date to and including
    September 25, 2004
	3.75:1.00

	September 26, 2004 and any time
    thereafter
	3.50:1.00

          (b)     Fixed
Charge Coverage Ratio. The Borrower shall not permit the Fixed Charge Coverage Ratio
as at the end of any Fiscal Quarter to be less than the following for the respective
periods set forth below:

 

	Period
	Fixed Charge Coverage Ratio

	Closing Date to and including
    April 2, 2005
	1.10:1.00

	April 3, 2005 and any time
    thereafter
	1.20:1.00

          (c)     Stockholders’
Equity. The Borrower shall not permit Stockholders’ Equity on any date (such date
to be referred to herein as a "Determination Date") which occurs after
the Closing Date (such date to be referred to herein as the "Base Date")
to be less than the sum (the "Minimum Shareholders’ Equity Amount")
on such Determination Date of the following:

               (i)     $125,000,000;
plus

               (ii)     Seventy-five
percent (75%) of the cumulative sum of the Borrower’s quarterly Net Income (ignoring
any quarterly losses) for each Fiscal Quarter of the Borrower after the Base Date through
and including the Fiscal Quarter ending on the Determination Date; plus

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

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

 

	Period
	Maximum

	Any Fiscal Quarter
	[CONFIDENTIAL]**

	Fiscal Year 2003
	[CONFIDENTIAL]**

	Fiscal Year 2004
	[CONFIDENTIAL] **

	Fiscal Year 2005 and each Fiscal
    Year thereafter
	[CONFIDENTIAL] **

 

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

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

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

	Fiscal Year
	Maximum Amount

	2003
	[CONFIDENTIAL] **

	2004
	[CONFIDENTIAL] **

	2005 and each Fiscal Year
    thereafter
	[CONFIDENTIAL] **

 

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

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

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

 

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

 

  
    
      
        
          
            ARTICLE VI.      DEFAULT.

          

        

      

    

  

     6.01.     Events
of Default. The occurrence or existence of any one or more of the following shall
constitute an "Event of Default" hereunder:

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

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

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

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

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

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

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

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

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

          (j)     Security
Documents. Any Lien intended to be created by any Security Document, (i) with respect
to Collateral (other than Equity Securities) having a value in excess of $1,500,000 or
(ii) with respect to Collateral consisting of Equity Securities, shall at any time be
invalidated, subordinated or otherwise cease to be in full force and effect, for whatever
reason (other than in accordance with its terms or by reason of a release of Collateral in
accordance with the terms hereof or thereof or the satisfaction in full of the Obligations
in accordance with the terms hereof), or any security interest purported to be created by
any Security Document shall (other than in accordance with its terms or by reason of
action by the Administrative Agent or any Lender or a release of Collateral in accordance
with the terms hereof or thereof or the satisfaction in full of the Obligations in
accordance with the terms hereof) cease to be, or shall be asserted by any Loan Party not
to be, a valid, first priority (except as expressly otherwise provided in this Agreement
or such Security Document) perfected Lien in (x) Collateral (other than Equity Securities)
covered thereby if such Collateral has a value in excess of $1,500,000 or (y) Collateral
covered thereby consisting of Equity Securities; or

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

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

          (m)     Involuntary
Dissolution or Split Up. Any order, judgment or decree shall be entered against the
Borrower decreeing its involuntary dissolution or split up and such order shall remain
undischarged and unstayed for a period in excess of sixty (60) days; or

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

     6.02.     Remedies.
At any time after the occurrence and during the continuance of any Event of Default (other
than an Event of Default referred to in Section 6.01(f) or 6.01(g), the
Administrative Agent may or shall, upon instructions from the Required Lenders, by written
notice to the Borrower, (a) terminate the Commitments, any obligation of the L/C
Issuer to make L/C Credit Extensions and the obligations of the Lenders to make Loans,
(b) require that the Borrower Cash Collateralize the Obligations in an amount equal
to 103% of the then Effective Amount of the L/C Obligations or obtain a Back-Up Letter of
Credit in an amount at least equal to the Effective Amount of the L/C Obligations; and/or
(c) declare all or any portion of the outstanding Obligations payable by the Borrower
to be immediately due and payable without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived, anything contained herein or in the
Notes to the contrary notwithstanding. Upon the occurrence or existence of any Event of
Default described in Section 6.01(f) or 6.01(g), immediately and without
notice, (1) the Commitments, any obligation of the L/C Issuer to make L/C Credit
Extensions and the obligations of the Lenders to make Loans shall automatically terminate,
(2) the obligation of the Borrower to Cash Collateralize the Obligations in an amount
equal to 103% of the then Effective Amount of the L/C Obligations or to obtain a Back-Up
Letter of Credit in an amount at least equal to the Effective Amount of the L/C
Obligations shall automatically become effective and (3) all outstanding Obligations
payable by the Borrower hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes to the contrary
notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence
of any Event of Default, the Administrative Agent may exercise any other right, power or
remedy available to it under any of the Credit Documents or otherwise by law, either by
suit in equity or by action at law, or both.

  
    
      
        
          
            ARTICLE VII.      THE
            ADMINISTRATIVE AGENT, ETC..

          

        

      

    

  

     7.01.     Appointment,
Powers and Immunities

          (a)     Each
Lender hereby appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the other Credit Documents with such powers as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Credit Documents,
together with such other powers as are reasonably incidental thereto. Each Lender hereby
authorizes the Administrative Agent to take such action on its behalf under the provisions
of this Agreement and the other Credit Documents and to exercise such powers as are set
forth herein or therein, together with such other powers as are reasonably incidental
thereto. The Administrative Agent shall not have any duties or responsibilities except
those expressly set forth in this Agreement or in any other Credit Document, be a trustee
for any Lender or have any fiduciary duty to any Lender. Notwithstanding anything to the
contrary contained herein the Administrative Agent shall not be required to take any
action which is contrary to this Agreement or any other Credit Document or any applicable
Governmental Rule. Neither the Administrative Agent nor any Lender shall be responsible to
any other Lender for any recitals, statements, representations or warranties made by any
Loan Party contained in this Agreement or in any other Credit Document, for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Credit Document or for any failure by any Loan Party to perform its obligations
hereunder or thereunder. The Administrative Agent may employ agents and attorneys-in-fact
and shall not be responsible to any Lender for the negligence or misconduct of any such
agents or attorneys-in-fact selected by it with reasonable care. Neither the
Administrative Agent nor any of its directors, officers, employees, agents or advisors
shall be responsible to any Lender for any action taken or omitted to be taken by it or
them hereunder or under any other Credit Document or in connection herewith or therewith,
except for its or their own gross negligence or willful misconduct. Except as otherwise
provided under this Agreement, the Administrative Agent shall take such action with
respect to the Credit Documents as shall be directed by the Required Lenders. 

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

     7.02.     Reliance
by the Administrative Agent. The Administrative Agent shall be entitled to rely upon
any certificate, notice or other document (including any cable, telegram, facsimile or
telex) believed by it in good faith to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the Administrative
Agent with reasonable care. As to any other matters not expressly provided for by this
Agreement, the Administrative Agent shall not be required to take any action or exercise
any discretion, but shall be required to act or to refrain from acting upon instructions
of the Required Lenders and shall in all cases be fully protected by the Lenders in
acting, or in refraining from acting, hereunder or under any other Credit Document in
accordance with the instructions of the Required Lenders, and such instructions of the
Required Lenders and any action taken or failure to act pursuant thereto shall be binding
on all of the Lenders. 

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

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

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

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

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

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

  
    
      
        
          
            ARTICLE VIII.      MISCELLANEOUS.

          

        

      

    

  

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

     The Administrative Agent, 

  
    the L/C Issuer and the 

    Swing Line Lender:     
         Wells Fargo Bank, National Association

  

  
    
      
        
          
            C7301-031

            1740 Broadway

            Denver, CO 80274

            Attention: Yevette Conrad, Loan Specialist 

            Tel. No.: (303) 863-5460

          

        

      

    

  

  
    
      
        
          
            Fax No.: (303) 863-5531

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

            The Borrower:      Wild Oats Markets,
            Inc. 

            3375 Mitchell Lane

            Boulder, CO 80301

            Attention: Chief Financial Officer

            Tel. No. (720) 562-4702

            Fax No. (303) 402-9920

            E-Mail: edunlap@wildoats.com

            with a copy to:

            Wild Oats Markets, Inc. 

            3375 Mitchell Lane

            Boulder, CO 80301

            Attention: General Counsel

            Tel. No. (720) 562-4822

            Fax No. (303) 402-9920

            E-Mail: fbrier@wildoats.com

          

        

      

    

  

 

 

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

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

     8.03.     Indemnification.
To the fullest extent permitted by law, the Borrower agrees to protect, indemnify, defend
and hold harmless the Administrative Agent, the L/C Issuer, the Swing Line Lender, the
Lenders and their Affiliates and their respective directors, officers, employees, agents,
trustees and advisors (collectively, "Indemnitees") on an After-Tax Basis
from and against any and all liabilities, losses, damages or expenses of any kind or
nature and from any suits, claims or demands (including in respect of or for reasonable
attorney’s fees and other expenses) arising on account of or in connection with any
matter or thing or action or failure to act by Indemnitees, or any of them, arising out of
or relating to (a) the Credit Documents or any transaction contemplated thereby,
including without limitation any use by the Borrower of any proceeds of the Loans or the
Letters of Credit (but excluding amounts relating to taxes, which shall be governed solely
and exclusively by Section 2.12), provided, however, that nothing
herein shall preclude payments of any amounts that are required to be paid on an After-Tax
Basis, (b) any Environmental Damages, and (c) any claims for brokerage fees or
commissions in connection with the Credit Documents or any transaction contemplated
thereby; provided, however, that the Borrower shall in no event be liable
for any of the foregoing to the extent they arise from any Indemnitee’s gross
negligence or willful misconduct. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that the Administrative Agent or any Lender believes is covered
by this indemnity, the Administrative Agent or such Lender shall give the Borrower notice
of the matter and an opportunity to defend it, at the Borrower’s sole cost and
expense, with legal counsel reasonably satisfactory to the Administrative Agent or such
Lender, as the case may be. The Administrative Agent or such Lender may also require
Borrower to defend the matter. Any failure or delay of the Administrative Agent or any
Lender to notify Borrower of any such suit, claim or demand shall not relieve the Borrower
of its obligations under this Section 8.03 but shall reduce such obligations to the
extent of any increase in those obligations caused solely by any such failure or delay
which is unreasonable. The obligations of the Borrower under this Section 8.03
shall survive the payment and performance of the Obligations and the termination of this
Agreement.

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

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

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

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

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

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

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

     8.05.     Successors
and Assigns.

          (a)     Binding
Effect. This Agreement and the other Credit Documents shall be binding upon and inure
to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders
of the Notes and their respective successors and permitted assigns, except that no Loan
Party may assign or transfer any of its rights or obligations under any Credit Document
without the prior written consent of the Administrative Agent and each Lender.

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

          (c)     Assignments.
Any Lender may, with the prior written consent of the Administrative Agent (such consent
not to be unreasonably withheld), sell and assign to any Lender or any Eligible Assignee
(individually, an "Assignee Lender") all or a portion of its rights and
obligations under this Agreement and the other Credit Documents (including for purposes of
this subsection (c), participations in L/C Obligations and in Swing Line Loans) (such a
sale and assignment to be referred to herein as an "Assignment") pursuant
to an assignment agreement in substantially the form of Exhibit J (an "Assignment
Agreement"), executed by each Assignee Lender and such assignor Lender (an "Assignor
Lender") and delivered to the Administrative Agent for its acceptance and
recording in the Register; provided, however, that:

               (i)     Each
Assignee Lender shall provide appropriate assurances and indemnities (which may include
letters of credit) to the L/C Issuer and the Swing Line Lender as each may reasonably
require with respect to any continuing obligation to purchase participation interests in
any L/C Obligations or any Swing Line Loans then outstanding;

               (ii)     Without
the written consent of the Administrative Agent and, if no Default has occurred and is
continuing, the Borrower (which consent of the Administrative Agent and the Borrower shall
not be unreasonably withheld or delayed), no Lender may make any Assignment to any
Assignee Lender which is not, immediately prior to such Assignment, a Lender hereunder or
an Affiliate thereof; 

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

               (iv)     Without
the written consent of the Administrative Agent and, if no Default has occurred and is
continuing, the Borrower (which consent of the Administrative Agent and the Borrower shall
not be unreasonably withheld or delayed), no Lender may make any Assignment which does not
assign and delegate an equal pro rata interest in such Lender’s Loans, Commitments
and all other rights, duties and obligations of such Lender under this Agreement and the
other Credit Documents.

Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective Date determined pursuant to
such Assignment Agreement, (A) each Assignee Lender thereunder shall be a Lender
hereunder with a Commitment and Loans as set forth on Attachment 1 to such Assignment
Agreement and shall have the rights, duties and obligations of such a Lender under this
Agreement and the other Credit Documents, and (B) the Assignor Lender thereunder
shall be a Lender with a Commitment and Loans as set forth on Attachment 1 to such
Assignment Agreement or, if the Commitment and Loans of the Assignor Lender have been
reduced to $0, the Assignor Lender shall cease to be a Lender and to have any obligation
to make any Loan; provided, however, that any such Assignor Lender which
ceases to be a Lender shall continue to be entitled to the benefits of any provision of
this Agreement which by its terms survives the termination of this Agreement. Each
Assignment Agreement shall be deemed to amend Schedule I to the extent, and only to
the extent, necessary to reflect the addition of each Assignee Lender, the deletion of
each Assignor Lender which reduces its Commitment and Loans to $0 and the resulting
adjustment of Commitment and Loans arising from the purchase by each Assignee Lender of
all or a portion of the rights and obligations of an Assignor Lender under this Agreement
and the other Credit Documents. On or prior to the Assignment Effective Date determined
pursuant to each Assignment Agreement, Borrower, at its own expense, shall execute and
deliver to the Administrative Agent, in exchange for the surrendered Revolving Loan Note,
if any, of the Assignor Lender thereunder, a new Revolving Loan Note to the order of each
Assignee Lender thereunder that requests such a note (with each new Revolving Loan Note to
be in an amount equal to the Commitment assumed by such Assignee Lender) and, if the
Assignor Lender is continuing as a Lender hereunder, a new Revolving Loan Note to the
order of the Assignor Lender if so requested by such Assignor Lender (with the new
Revolving Loan Note to be in an amount equal to the Commitment retained by it). Each such
new Revolving Loan Note shall be dated the Closing Date, and each such new Revolving Loan
Note shall otherwise be in the form of the Revolving Loan Note replaced thereby. The
Revolving Loan Notes surrendered by the Assignor Lender shall be returned by the
Administrative Agent to the Borrower marked "Replaced". Each Assignee Lender
which was not previously a Lender hereunder and which is not incorporated under the laws
of the United States or a state thereof shall, on or prior to the date of becoming a
Lender, deliver to the Borrower and the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form W-8BEN, W-8ECI or W-9 (or other applicable
forms or certifications), as the case may be, certifying in each case that such Lender is
entitled to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes.

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

          (d)     Register.
The Administrative Agent shall maintain at its address referred to in Section 8.01
a copy of each Assignment Agreement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the Commitments or Loans
of each Lender from time to time, and no Assignment shall be effective unless entered in
the Register, in accordance with the requirements of Treasury Regulations section
5f.103-1. The Administrative Agent shall be the agent of the Borrower for purposes of
keeping the Register. The entries in the Register shall be conclusive in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the Loans recorded therein
for all purposes of this Agreement. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon reasonable prior
notice.

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

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

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

          (h)     Assignments
by Wells Fargo. Notwithstanding any provision in this Section 8.05 to the
contrary, no Assignment by Wells Fargo shall be subject to the requirements set forth in
clauses (i), (ii), (iii) and (iv) of the proviso of Section 8.05(c) until the
syndication of the Commitments and the Loans has been successfully completed (as
determined by Wells Fargo in its sole discretion), and no registration or processing fee
shall be payable in connection with any such Assignment by Wells Fargo.

     8.06.     Setoff;
Security Interest.

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

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

     8.07.     No
Third Party Rights. Nothing expressed in or to be implied from this Agreement is
intended to give, or shall be construed to give, any Person, other than the parties hereto
and their permitted successors and assigns hereunder, any benefit or legal or equitable
right, remedy or claim under or by virtue of this Agreement or under or by virtue of any
provision herein. 

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

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

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

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

     8.12.     Consent
to Jurisdiction. Each party to this Agreement irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of Colorado and the courts of the United States of
America located in the District of Colorado and agrees that any legal action, suit or
proceeding arising out of or relating to this Agreement or any of the other Credit
Documents may be brought against such party in any such courts. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be conclusive
and may be enforced in any other jurisdiction by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the judgment, or in any other
manner provided by law. Nothing in this Section 8.12 shall affect the right of any
party to this Agreement to commence legal proceedings or otherwise sue any other party to
this Agreement in any other appropriate jurisdiction, or concurrently in more than one
jurisdiction, or to serve process, pleadings and other papers upon any other party to this
Agreement in any manner authorized by the laws of any such jurisdiction. Each party to
this Agreement agrees that process served either personally or by registered mail shall,
to the extent permitted by law, constitutes adequate service of process in any such suit.
Each party to this Agreement irrevocably waives to the fullest extent permitted by
applicable law (a) any objection which it may have now or in the future to the laying of
the venue of any such action, suit or proceeding in any court referred to in the first
sentence above; (b) any claim that any such action, suit or proceeding has been brought in
an inconvenient forum; (c) its right of removal of any matter commenced by any other party
in the courts of the State of Colorado to any court of the United States of America; (d)
any immunity which it or its assets may have in respect of its obligations under this
Agreement or any other Credit Document from any suit, execution, attachment (whether
provisional or final, in aid of execution, before judgment or otherwise) or other legal
process; and (e) any right it may have to require the moving party in any suit, action or
proceeding brought in any of the courts referred to above arising out of or in connection
with this Agreement or any other Credit Document to post security for the costs of the
Borrower or to post a bond or to take similar action.

     8.13.     Arbitration.

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

          (b)     Governing
Rules. Any arbitration proceeding will (i) proceed in a location in Colorado selected
by the American Arbitration Association ("AAA"); (ii) be governed by the
Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any
conflicting choice of law provision in any of the documents between the parties; and (iii)
be conducted by the AAA, or such other administrator as the parties shall mutually agree
upon, in accordance with the AAA’s commercial dispute resolution procedures, unless
the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in accordance
with the AAA’s optional procedures for large, complex commercial disputes (the
commercial dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If
there is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to submit to
arbitration following a demand by any other party shall bear all costs and expenses
incurred by such other party in compelling arbitration of any dispute. Nothing contained
herein shall be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. 91 or any similar applicable state law.

          (c)     No
Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement
does not limit the right of any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or proceeds of
collateral such as setoff or repossession; or (iii) obtain provisional or ancillary
remedies such as replevin, injunctive relief, attachment or the appointment of a receiver,
before during or after the pendency of any arbitration proceeding. This exclusion does not
constitute a waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of the
actions detailed in clauses (i), (ii) and (iii) of this Section 8.13(c).

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

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

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

          (g)     Payment
Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of
the arbitration proceeding.

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

     8.14.     Termination
of Prior Credit Agreement. Upon the execution and delivery of this Agreement, the
Prior Credit Agreement shall terminate save for those provisions therein which are
expressed or intended to survive the termination thereof. Immediately prior to the Closing
Date, all loans outstanding under the Prior Credit Agreement shall be purchased by the
Lenders hereunder from the Prior Lenders and shall be deemed to be Revolving Loans made by
each of the Lenders under this Agreement (and all accrued and unpaid interest thereon
shall begin to accrue interest at the rates set forth in this Agreement), and all Prior
Letters of Credit shall be deemed to be Letters of Credit issued and outstanding under
this Agreement (and all accrued unpaid fees thereon shall begin to accrue at the rates set
forth in this Agreement). To effectuate the foregoing, immediately prior to the Closing
Date the Administrative Agent shall calculate the Proportionate Share of each Lender in
each Revolving Loan outstanding under the Prior Credit Agreement. Based upon such
calculation, each Lender shall purchase from the Prior Lenders or sell to the other
Lenders such shares in the outstanding Revolving Loans as the Administrative Agent
determines is necessary to cause each Lender to hold Revolving Loans in a principal amount
equal to such Lender’s Proportionate Share. On and after the Closing Date, this
Agreement and the other Credit Documents shall amend, restate and supercede in their
entirety and replace the Prior Credit Agreement and the Prior Credit Documents (other than
the Leasehold Mortgages, any UCC filings and any filings made with the U.S. Patent and
Trademark Office evidencing the Administrative Agent’s continuing Lien on and
security interest in any of the Collateral); provided, however, that the
execution and delivery of this Agreement and the other Credit Documents shall not (a)
operate as a waiver of any right, power or remedy of the Prior Lenders under the Prior
Credit Agreement and the other Prior Credit Documents, except to the extent expressly
waived in this Agreement and the other Credit Documents, or (b) extinguish, impair or
constitute a novation of any obligations of the Borrower or the Guarantors under the Prior
Credit Agreement or the Prior Credit Documents except to the extent any such obligation is
actually satisfied by a Borrower or a Guarantor thereunder. Promptly upon the closing of
this Agreement and the receipt by the Lenders of its Notes, such Lenders that were also
Prior Lenders under the Prior Credit Agreement shall return to the Borrower any Notes
delivered to such Prior Lender in connection with the Prior Credit Agreement marked
"cancelled".

 

[The first signature page follows.]

 

 

 

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

  
    
      
        
          
            
              
                
                  BORROWER: 

                  WILD OATS MARKETS, INC.,

                  a Delaware corporation

                   

                   

                  By: /s/ Freya R. Brier 

                  Name: Freya R. Brier 

                  Title:     Vice President, Legal 

                

              

            

          

        

      

    

  

     

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

                  WELLS FARGO BANK, NATIONAL ASSOCIATION

                   

                  By: 

                  Name: 

                  Title: 

                

              

            

          

        

      

    

  

     

  
    
      
        
          
            
              
                
                  THE LENDERS:

                   

                  WELLS FARGO BANK, NATIONAL ASSOCIATION

                   

                  By: 

                  Name: 

                  Title: 

                   

                   

                  U.S. BANK NATIONAL ASSOCIATION

                   

                  By: 

                  Name: 

                  Title: 

                   

                  VECTRA BANK COLORADO N.A.

                   

                  By: 

                  Name: 

                  Title: 

                   

                

              

            

          

        

      

    

  

     

 

 

SCHEDULE I

THE LENDERS

 

PART A

LENDERS’ COMMITMENTS AND PROPORTIONATE SHARES

	Lender
	Commitment
	Proportionate Share

	Wells Fargo Bank,
    National Association
	$45,000,000
	60.0%

	U.S. Bank National
    Association
	$15,000,000
	20.0%

	Vectra Bank Colorado
    N.A.
	$15,000,000
	20.0%

 

 

 

 

SCHEDULE I

 

PART B

LENDERS’ ADDRESSES, ETC.

WELLS FARGO BANK, NATIONAL ASSOCIATION

Address for Notices:

Wells Fargo Bank, National Association

C7301-031

1740 Broadway

Denver, CO 80274

Attention: Yevette Conrad, Loan Specialist 

Tel. No.: (303) 863-5460

Fax No.: (303) 863-5531

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

Wiring Instructions:

Bank:               Wells
Fargo Bank, National Association

City,
State:          San Francisco,
CA          

ABA
Number:          121000248                         

Payee
Name:          SYNDIC/WFBCORP/Wild Oats
Markets, Inc.          

Account Number:
     4081-656894                         

Reference:          Wild
Oats Markets, Inc. 

 

 

 

U.S. BANK NATIONAL ASSOCIATION

Address for Notices:

Commercial Loan Servicing Department

U.S. Bank National Association

555 S.W. Oak Street, PL-7

Portland, OR 97204

Attn: Lennie Regalado, Participation Specialist

Tel. No.: (503) 275-4560

Fax No.: (503) 275-5428

E-Mail: lennie.regalado@usbank.com

Wiring Instructions:

Bank:               U.S.
Bank National Association

City, State,
Zip:     Portland, Oregon
97204          

ABA
Number:          123-000-220                         

Account
Name:     Commercial Loan Servicing
West          

Account Number:
     00340012160600                         

Reference:          Wild
Oats Markets, Inc. 

Attention:          Lennie
Regalado, Participation Specialist

 

 

 

VECTRA BANK COLORADO N.A.

 

Address for Notices:

 

Vectra Bank Colorado N.A.

2000 S. Colorado Blvd. 2-1200

Denver, CO 80222

Attn: Karla Proffit

Tel. No.: (720) 847-7792

Fax No.: (720) 947-7760

E-Mail.: KPROFFIT@VECTRABANK.COM

 

Wiring Instructions:

 

Bank:               Vectra
Bank Colorado N.A.

City,
State:          Denver, Colorado

ABA
Number:          102003154

Account
Number:     6966001586

Ref:               Wild
Oats Markets, Inc.     

 

 

 

 

DOCSSF1:652592.12 confidential

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