e10vq

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J4/njfPQN8KGcWX421q4tdVOV8TvBBkM2CJdTnD85RlcRfR99t4tLHV1BAzhu65v Zqr27MVho4tc80HCZxKCDw== 0000950123-10-046339.txt : 20100507 0000950123-10-046339.hdr.sgml : 20100507 20100507155008 ACCESSION NUMBER: 0000950123-10-046339 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20100404 FILED AS OF DATE: 20100507 DATE AS OF CHANGE: 20100507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Caribou Coffee Company, Inc. CENTRAL INDEX KEY: 0001332602 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING & DRINKING PLACES [5810] IRS NUMBER: 411731219 STATE OF INCORPORATION: MN FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51535 FILM NUMBER: 10812339 BUSINESS ADDRESS: STREET 1: 3900 LAKEBREEZE AVENUE CITY: BROOKLYN CENTER STATE: MN ZIP: 55429 BUSINESS PHONE: 763-592-2200 MAIL ADDRESS: STREET 1: 3900 LAKEBREEZE AVENUE CITY: BROOKLYN CENTER STATE: MN ZIP: 55429 10-Q 1 c57994e10vq.htm FORM 10-Q e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		For the quarterly period ended April 4, 2010.

or


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 000-51535

CARIBOU COFFEE COMPANY, INC.

(Exact Name of Registrant as Specified in Its Charter)


Minnesota (State or other jurisdiction of incorporation or organization)		41-1731219 (I.R.S. Employer Identification No.)

3900 Lakebreeze Avenue North Brooklyn Center, Minnesota (Address of principal executive offices)		55429 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (763) 592-2200

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer o	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

On May 6, 2010, 20,014,155 shares of Registrant’s $0.01 par value common stock were outstanding.

CARIBOU COFFEE COMPANY, INC.

FORM 10-Q

For the Thirteen Week Period Ended April 4, 2010

Table of Contents


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements			3
Condensed Consolidated Statements of Operations			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statement of Changes in Equity			5
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3. Quantitative and Qualitative Disclosures About Market Risk			23
Item 4T. Controls and Procedures			23

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			24
Item 1A. Risk Factors			24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			24
Item 3. Defaults Upon Senior Securities			24
Item 4. Submission of Matters to a Vote of Security Holders			24
Item 5. Other Information			24
Item 6. Exhibits			25
Signature			26
EX-10.14
EX-10.15
EX-31.1
EX-31.2
EX-32.1
EX-32.2

See accompanying notes.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Thirteen Weeks Ended
	April 4,			March 29,
	2010			2009
	(In thousands, except for per share amounts)
	(Unaudited)
Coffeehouse sales	$	55,597		$	52,864
Commercial and franchise sales		11,454			7,516

Total net sales		67,051			60,380
Cost of sales and related occupancy costs		31,399			26,252
Operating expenses		24,962			23,405
Depreciation and amortization		3,145			3,741
General and administrative expenses		6,509			6,606

Operating income		1,036			376
Other income (expense):
Interest income		5			—
Interest expense		(106	)		(58	)

Income before benefit from income taxes		935			318
Benefit from income taxes		157			101

Net income		1,092			419
Less: Net income attributable to noncontrolling interest		54			73

Net Income attributable to Caribou Coffee Company, Inc	$	1,038		$	346

Basic net income attributable to Caribou Coffee Company, Inc. common shareholders per share	$	0.05		$	0.02

Diluted net income (loss) attributable to Caribou Coffee Company, Inc. common shareholders per share	$	0.05		$	0.02

Basic weighted average number of shares outstanding		19,509			19,371

Diluted weighted average number of shares outstanding		20,313			19,526

See accompanying notes.

CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)

CONDENSED CONSOLIDATED BALANCE SHEETS


	April 4,			January 3,
	2010			2010
	In thousands, except per share amounts
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	17,728		$	23,578
Accounts receivable (net of allowance for doubtful accounts of $20 and $3 at April 4, 2010 and January 3, 2010, respectively)		6,599			5,887
Other receivables (net of allowance for doubtful accounts of $134 and $128 at April 4, 2010 and January 3, 2010, respectively)		1,306			1,268
Income tax receivable		204			193
Inventories		18,900			13,278
Prepaid expenses and other current assets		1,310			1,546

Total current assets		46,047			45,750
Property and equipment, net of accumulated depreciation and amortization		44,323			47,135
Restricted cash		604			605
Other assets		519			237

Total assets	$	91,493		$	93,727


LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	10,328		$	9,042
Accrued compensation		5,104			6,296
Accrued expenses		6,908			7,563
Deferred revenue		6,558			8,747

Total current liabilities		28,898			31,648

Asset retirement liability		1,139			1,120
Deferred rent liability		7,415			7,955
Deferred revenue		2,072			2,072
Income tax liability		10			156

Total long term liabilities		10,636			11,303

Equity:
Caribou Coffee Company, Inc. Shareholders’ equity:
Preferred stock, par value $.01, 20,000 shares authorized; no shares issued and outstanding		—			—
Common stock, par value $.01, 200,000 shares authorized; 20,014 and 19,814 shares issued and outstanding at April 4, 2010 and January 3, 2010, respectively		200			198
Additional paid-in capital		126,974			126,770
Accumulated comprehensive loss		(25	)		(7	)
Accumulated deficit		(75,303	)		(76,341	)

Total Caribou Coffee Company, Inc. shareholders’ equity		51,846			50,620
Noncontrolling interest		113			156

Total equity		51,959			50,776

Total liabilities and equity	$	91,493		$	93,727

See accompanying notes.

CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
(in thousands)


	Common Stock					Additional						Accumulated
	Number of					Paid-In			Noncontrolling			Other			Accumulated
	Shares			Amount		Capital			Interest			Comprehensive Loss			Deficit			Equity
Balance, January 3, 2010		19,814		$	198	$	126,770		$	156		$	(7	)	$	(76,341	)	$	50,776
Net income		—			—		—			54			—			1,038			1,092
Changes in fair value of derivative financial instruments		—			—		—			—			(18	)		—			(18	)


Comprehensive income																		$	1,074

Share based compensation		—			—		251			—			—			—			251
Options exercised		5			—		28			—			—			—			28
Restricted shares issued, net of cancellations		205			2		(2	)		—			—			—			—
Distribution of noncontrolling interest		—			—		—			(97	)		—			—			(97	)
Stock repurchase		(10	)		—		(73	)		—			—			—			(73	)

Balance, April 4, 2010		20,014		$	200	$	126,974		$	113		$	(25	)	$	(75,303	)	$	51,959

See accompanying notes.

CARIBOU COFFEE COMPANY, INC. AND AFFILIATES
(A Majority Owned Subsidiary of Caribou Holding Company Limited)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Thirteen Weeks Ended
	April 4, 2010			March 29, 2009
	(In thousands)
	(Unaudited)
Operating activities
Net income attributable to Caribou Coffee Company, Inc.	$	1,038		$	346
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization		3,628			4,294
Amortization of deferred financing fees		71			29
Noncontrolling interest		54			73
Stock-based compensation		251			265
Other		22			(9	)
Changes in operating assets and liabilities:
Accounts receivable and other receivables		(761	)		521
Inventories		(5,622	)		386
Prepaid expenses and other assets		73			27
Accounts payable		1,286			375
Accrued expenses and other liabilities		(2,598	)		(3,619	)
Deferred revenue		(2,189	)		(2,714	)

Net cash used by operating activities		(4,747	)		(26	)
Investing activities
Payments for property and equipment		(772	)		(195	)
Proceeds from the disposal of property		—			17

Net cash used in investing activities		(772	)		(178	)
Financing activities
Distribution of noncontrolling interest		(97	)		—
Purchase of noncontrolling interest		—			(105	)
Issuance of common stock		28			—
Payment of debt financing fees		(189	)		—
Stock repurchase		(73	)		—

Net cash used by financing activities		(331	)		(105	)

Decrease in cash and cash equivalents		(5,850	)		(309	)
Cash and cash equivalents at beginning of period		23,578			11,060

Cash and cash equivalents at end of period	$	17,728		$	10,751


Supplemental disclosure of cash flow information
Noncash financing and investing transactions:

Accrual for leasehold improvements, furniture and equipment	$	162		$	—

See accompanying notes.

CARIBOU COFFEE COMPANY, INC. AND AFFILIATES

(A Majority Owned Subsidiary of Caribou Holding Company Limited)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The “Company” and “Caribou” refer to Caribou Coffee Company, Inc. and its affiliates, collectively.

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, these statements include all adjustments considered necessary for the fair presentation of all interim periods reported herein. All adjustments are of a normal recurring nature unless otherwise disclosed. Management believes that the disclosures made are adequate for a fair presentation of the Company’s results of operations, financial position and cash flows. These condensed consolidated financial statements should be read in conjunction with the year-end consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K (File No. 000-51535).

Principles of Consolidation

The Company’s condensed consolidated financial statements include the accounts of Caribou Coffee Company, Inc., affiliates that it controls and a third party finance company (which exists for purposes of the Company’s revolving credit facility, as described in the Company’s Annual Report on Form 10-K) where the Company is the primary beneficiary in a variable interest entity. The affiliates are Caribou MSP Airport, a partnership in which the Company owns a 49% interest and that operates six coffeehouses, and Caribou Coffee Development Company, Inc., a licensor of Caribou Coffee branded coffeehouses. The Company controls the daily operations of Caribou Coffee Development Company, Inc. and accordingly consolidates their results of operations. The Company provided a loan to its partner in Caribou MSP Airport for all of the partner’s equity contribution to the venture. Consequently, the Company bears all the risk of loss but does not control all decisions that may have a significant effect on the success of the venture. Therefore, the Company consolidates the Caribou MSP Airport, as it is the primary beneficiary in this variable interest entity. All material intercompany balances and transactions between Caribou Coffee Company, Inc., Caribou MSP Airport and Caribou Coffee Development Company, Inc. and the third party finance company have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements.

Fiscal Year End

The Company’s fiscal year ends on the Sunday falling nearest to December 31. Each fiscal year consists of four 13-week quarters in a 52-week year and three 13-week quarters and one 14-week fourth quarter in a 53-week year. Fiscal year 2009 included 53 weeks. Each fiscal quarter reported herein consists of two four-week months and one five-week month.

The Company’s sales are somewhat seasonal, with the fourth quarter accounting for the highest sales volumes. Operating results for the thirteen week period ended April 4, 2010 are not necessarily indicative of future results that may be expected for the year ending January 2, 2011.

2. Summary of Significant Accounting Policies

Revenue Recognition

The Company recognizes retail coffeehouse sales for products and services when payment is tendered at the point of sale. Sales tax collected from customers is presented net of amounts expected to be remitted to various tax jurisdictions. Accordingly, sales taxes have no effect on the Company’s reported net sales in the accompanying statements of operations.

Revenue from the sale of products to commercial, franchise or on-line customers is recognized when ownership and price risk of the products are legally transferred to the customer, which is generally upon the shipment of goods. Revenues include any applicable shipping and handling costs invoiced to the customer, and the expense of such shipping and handling costs is included in cost of sales.

The Company sells stored value cards of various denominations. Cash receipts related to stored value card sales are deferred when initially received and revenue is recognized when the card is redeemed and the related products are delivered to the customer. Such amounts are classified as a current liability on the Company’s condensed consolidated balance sheets. The Company will honor all stored value cards presented for payment; however, the Company has determined that the likelihood of redemption is remote for certain card balances due to long periods of inactivity. In these circumstances, to the extent management determines there is no requirement for remitting balances to government agencies under unclaimed property laws, card and certificate balances may be recognized in the consolidated statements of operations. The Company uses the redemption recognition method and recognizes the estimated value of abandoned cards as a percentage of every stored value card redeemed and includes the amount in coffeehouse sales. Such amounts represent the Company’s experience regarding unused balances related to stored value cards redeemed. The Company excludes stored value card balances sold in jurisdictions which require remittance of unused balances to government agencies under unclaimed property laws.

Territory development fees and initial franchise fees are recognized upon substantial performance of services for a new territory or coffeehouse, which is generally upon the opening of a new coffeehouse. Royalties based upon a percentage of reported sales are recognized on a monthly basis when earned. Cash payments received in advance for territory development fees or initial franchise fees are recorded as deferred revenue until earned.

All revenues are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and rebates. The Company periodically participates in trade-promotion programs such as shelf price reductions and consumer coupon programs that require the Company to estimate and accrue the expected cost of such programs. Coupons are recognized as a liability when distributed based upon expected consumer redemptions. The Company maintains liabilities based on historical experience and management’s judgment at the end of each period for the estimated expenses incurred, but unpaid for these programs

Operating Leases and Rent Expense

Certain of the Company’s lease agreements provide for scheduled rent increases during the lease term or for rental payments commencing at a date other than the date of initial occupancy. Rent expense is recorded on a straight-line basis over the initial lease term and renewal periods that are reasonably assured. The difference between rent expense and rent paid is recorded as deferred rent and is included in “accrued expenses” and “deferred rent liability” in the consolidated balance sheets. Contingent rents, including those based on a percentage of retail sales over stated levels, and rental payment increases based on a contingent future event are accrued over the respective contingency periods when the achievement of such targets or events are deemed to be probable by the Company.

3. Recent Accounting Pronouncements

In June 2009, the FASB issued guidance which amends certain ASC concepts related to consolidation of variable interest entities. Among other accounting and disclosure requirements, this guidance replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity.

The Company adopted this guidance on January 4, 2010. The adoption of this guidance did not have a material impact on its financial statements.

4. Derivative Financial Instruments

The Company evaluates various strategies in managing its exposure to market-based risks, such as entering into hedging transactions to manage its exposure to fluctuating dairy commodity prices.

The Company records all derivatives on the condensed consolidated balance sheets at fair value. For those cash flow hedges that have been designated and qualify as an effective accounting hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income (“OCI”) and subsequently reclassified into net earnings when the hedged exposure affects net income. For those cash flow hedges that are not designated or do not qualify as an effective accounting hedge, the entire derivative gain or loss is recorded in earnings as incurred.

As of both April 4, 2010 and January 3, 2010, the Company had accumulated net derivative losses of less than $0.1 million in OCI and in accrued expenses, all of which pertains to derivatives designated as cash flow hedging instruments that will be realized within 12 months and will also continue to experience fair value changes before affecting earnings. Based on notional amounts, as of April 4, 2010 the Company had dairy commodity futures contracts representing approximately three hundred thousand gallons. The Company’s cash flow derivative instruments contain credit-risk-related contingent features. At April 4, 2010, the Company has no collateral posted related to these contingent features.

For those derivatives designated as cash flow hedging instruments, a loss of less that $0.1 million was reclassified in to earnings for the thirteen week period ended April 4, 2010. There were no derivatives designated as hedging instruments during the 13 week period ended March 29, 2009.

During the thirteen week period ended March 29, 2009, the Company recognized $0.2 million in gains related to commodity hedges not designated as hedging instruments. During the thirteen weeks ended April 4, 2010, the Company did not have any commodity hedges not designated as hedging instruments. The recognized losses related to commodity hedges not designated as hedging instruments and commodity hedges designated as hedging instruments are recorded in the condensed consolidated statements of operations as costs of goods sold and related occupancy expenses.

5. Fair Value Measurements

Generally Accepted Accounting Principles define fair value, establish a framework for measuring fair value, and establish a fair value hierarchy that prioritizes the inputs used to measure fair value:

•

Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.

•

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•

Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

The following table presents the financial assets and liabilities measured at fair value on a recurring basis as of April 4, 2010 (in thousands):


	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	17,728	$	17,728	$	—	$	—
Liabilities:
Derivatives	$	25	$	25	$	—	$	—

The following table presents the financial assets and liabilities measured at fair value on a recurring basis as of January 3, 2010 (in thousands):


	Total		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	23,578	$	23,578	$	—	$	—
Liabilities:
Derivatives	$	7	$	7	$	—	$	—

Cash and cash equivalents include cash held at FDIC-insured financial institutions and highly liquid money market funds. The fair value of cash equivalents is determined using quoted market prices in active markets for identical assets, thus they are considered to be Level 1 instruments.

Derivative assets consist of commodity futures contracts. Where applicable, the Company uses quoted prices in an active market for identical derivative assets and liabilities that are traded in exchanges. These derivative assets are included in Level 1.

6. Inventories

Inventories consist of the following (in thousands):


	April 4,		January 3,
	2010		2010
Coffee	$	10,702	$	5,615
Other merchandise held for sale		3,913		4,029
Supplies		4,285		3,634

	$	18,900	$	13,278

At April 4, 2010 and January 3, 2010, the Company had committed to fixed price purchase commitments, primarily for green coffee, aggregating approximately $31.4 million and $15.1 million, respectively. These fixed price contracts are for less than one year.

7. Equity and Stock Based Compensation

The Company maintains stock compensation plans, which provide for the granting of non-qualified stock options and restricted stock to officers and key employees and certain non-employees. Stock options have been granted at prices equal to the fair market values as of the dates of grant. Options and restricted stock generally vest over four years and options generally expire ten years from the grant date. Stock-based compensation expense for the thirteen weeks ended April 4, 2010 and March 29, 2009 was approximately $0.3 million in both periods and is included in general and administrative expenses in the condensed consolidated statements of operations.

Stock option activity during the period indicated is as follows (in thousands, except per share and life data):


				Weighted		Weighted
	Number of			Average		Average
	Shares			Exercise Price		Contract Life
Outstanding, January 3, 2010		1,696		$	4.27	7.54 Yrs
Granted		—		$	—
Exercised		(5	)	$	5.72
Forfeited		(26	)	$	6.09

Outstanding, April 4, 2010		1,665		$	4.23	7.31 Yrs


Options vested at April 4, 2010		795		$	6.10	6.22 Yrs

Restricted Stock activity during the period indicated is as follows (in thousands, except per share and life data):


				Weighted		Weighted
	Number of			Average Grant Date		Average
	Shares			Fair Value		Contract Life
Outstanding, January 3, 2010		300		$	5.83
Granted		215		$	7.07
Forfeited		(9	)	$	8.15

Outstanding, April 4, 2010		506		$	6.31	3.31 Yrs

8. Income Taxes

The Company recognized a tax benefit of $0.2 million and $0.1 million during the thirteen weeks ended April 4, 2010 and March 29, 2009, respectively. After consideration of all evidence, both positive and negative, management has recorded a valuation allowance against its deferred income tax assets at April 4, 2010 due to the uncertainty of realizing such deferred income tax assets.

9. Net Income (Loss) Per Share

Basic and diluted net income attributable to Caribou Coffee Company, Inc. common shareholders per share for the thirteen week periods ended April 4, 2010 and March 29, 2009, were as follows (in thousands, except per share data):


	Thirteen Weeks Ended
	April 4,		March 29,
	2010		2009
Net income attributable to Caribou Coffee Company, Inc.	$	1,038	$	346

Weighted average common shares outstanding — basic		19,509		19,371
Dilutive impact of stock-based compensation		804		155

Weighted average common shares outstanding — dilutive		20,313		19,526

Basic net income per share	$	0.05	$	0.02
Diluted net income per share	$	0.05	$	0.02

For the thirteen week periods ended April 4, 2010 and March 29, 2009, 0.3 million and 2.0 million stock options, respectively, were excluded from the calculation of shares applicable to diluted net income (loss) per share because their inclusion would have been anti-dilutive.

10. Master Franchise Agreement

In November 2004, the Company entered into a Master Franchise Agreement with a franchisee. The agreement provides the franchisee the right to develop, subfranchise or operate 250 Caribou Coffee coffeehouses in 12 Middle Eastern countries. The Agreement expires in November 2012 and provides for certain renewal options.

In connection with the agreement, the franchisee paid the Company a nonrefundable deposit aggregating $3.3 million. In addition to the deposit, the franchisee is obligated to pay the Company $20 thousand per franchised/subfranchised coffeehouse (initial franchise fee) opened for the first 100 Caribou Coffee Coffeehouses and $15 thousand for each additional franchised/subfranchised coffeehouse opened (after the first 100). The agreement provides for $5 thousand of the initial deposit received by the Company to be applied against the initial franchise fee as discussed herein. Monthly royalty payments ranging from 3%-5% of gross sales are also due to the Company.

As of April 4, 2010 and January 3, 2010, the Company included $2.1 million and $2.0 million, respectively, of the deposit in long term liabilities as deferred revenue and $0.6 million and $0.5 million, respectively, in current liabilities as deferred revenue on its balance sheet. The initial deposit will be amortized into income on a pro rata

basis along with the initial franchise fee payments received in connection with the execution of the franchise or subfranchise agreements at the time of the coffeehouse opening. The current portion of deferred revenue represents the franchise fees for the coffeehouses estimated to be opened during the subsequent twelve months per the development schedule in the Master Franchise Agreement. At April 4, 2010, there were 67 coffeehouses operating under this Agreement. The franchisee and certain owners of the franchisee also own indirect interests in Caribou Holding Company Limited.

11. Revolving Credit Facility

On February 19, 2010, the Company entered into a sale leaseback arrangement with a third party finance company whereby from time to time the Company sells equipment to the finance company, and, immediately following the sale, it leases back all of the equipment it sold to such third party. The Company does not recognize any gain or loss on the sale of the assets. The maximum amount of equipment the Company can sell and leaseback is $15.0 million, with an option for an additional $10.0 million. The agreement expires on February 19, 2013. Annual rent payable under the lease arrangement is equal to the amount outstanding under the lease financing arrangement multiplied by the applicable Federal Funds effective rate plus a specified margin or the lenders prime rate plus a specified margin.

The finance company funds its obligations under the lease financing arrangement through a revolving credit facility that it entered into with a commercial lender also on February 19, 2010. The terms of the revolving credit facility are economically equivalent to the lease financing arrangement such that the amount of rent payments and unpaid acquisition costs under the lease financing arrangement are at all times equal to the interest and principal under the revolving credit facility. The Company consolidates the third party finance company as the Company is the primary beneficiary in a variable interest entity due to the terms and provisions of the lease financing arrangement. Accordingly, the Company’s condensed consolidated balance sheets include all assets and liabilities of the third party finance company under the captions property and equipment and revolving credit facility, respectively. The Company’s condensed consolidated statements of operations include all the operations of the finance company including all interest expense related to the revolving credit facility. Notwithstanding this presentation, the Company’s obligations are limited to its obligations under the lease financing arrangement and the Company has no obligations under the revolving credit facility. The third party finance company was established solely for the purpose of facilitating the Company’s sale leaseback arrangement. The finance company does not have any other assets or liabilities or income and expense other than those associated with the revolving credit facility. At April 4, 2010 there was no property and equipment leased under this arrangement. The lease financing arrangement has been structured to be consistent with Shari’ah principles.

Both the lease financing arrangement and the revolving credit facility above were entered into on February 19, 2010. Simultaneously, the Company terminated a similar lease financing arrangement and revolving credit facility with a different commercial lender. Upon termination of old lease financing arrangement and revolving credit facility, the Company wrote off $0.1 million in deferred financing fees and capitalized $0.3 million in deferred financing fees related to the new lease arrangement and revolving credit facility, which will be amortized over the three year life of the agreements.

The terms of the sale leaseback agreement contain certain financial covenants and limitations on the amount used for expansion activities based on leverage ratios and interest coverage ratios of the Company. The Company is liable for 0.5% commitment fee on any unused portion of the facility. There are no amounts outstanding under the new facility at April 4, 2010 or under the previous facility at January 3, 2010.

Unamortized deferred financing fees capitalized on the balance sheet totaled $0.3 million and $0.1 million as of April 4, 2010 and January 3, 2010 respectively. Interest payable under the new revolving credit facility is equal to the amount outstanding under the facility multiplied by the applicable LIBOR rate plus a specified margin.

12. Commitments and Contingencies

Standards Act, or the Minnesota FLSA, the federal FLSA and state common law. The suit primarily alleged that the Company misclassified its retail coffeehouse managers as exempt from the overtime provisions of the Minnesota FLSA and the federal FLSA and that these managers are therefore entitled to overtime compensation for each week in which they worked more than 40 hours from May 2002 to the present with respect to the claims under the federal FLSA and for weeks in which they worked more than 48 hours from May 2003 to the present with respect to the claims under the Minnesota FLSA. Plaintiffs sought payment of allegedly owed and unpaid overtime compensation, liquidated damages, interest and among other things, attorney’s fees and costs.

On February 1, 2008, the Company entered into a Stipulation of Settlement (the “Stipulation”) to settle the lawsuit. The Stipulation provides for a gross settlement payment of $2.7 million, plus the employer’s share of payroll taxes. A partial settlement payment of $1.8 million was made in the first quarter of 2008 and the final settlement payment of $1.0 million was made in the first quarter of 2009.

In addition, from time to time, the Company becomes involved in certain legal proceedings in the ordinary course of business. The Company does not believe that any such ordinary course legal proceedings to which it is currently a party will have a material adverse effect on its financial position or results of operations.

13. Segment Reporting

Segment information is prepared on the same basis that the Company’s management reviews financial information for decision making purposes. The Company has three reportable operating segments: retail coffeehouses, commercial and franchise. “Unallocated corporate” includes expenses pertaining to corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. All of the segment sales are from external customers.

Retail Coffeehouses

The Company’s retail segment operated 413 company-owned coffeehouses located in 16 states and the District of Columbia, as of April 4, 2010. The coffeehouses offer customers high-quality gourmet coffee and espresso-based beverages, specialty teas, baked goods, whole bean coffee, branded merchandise and related products.

Commercial

The commercial segment sells high-quality gourmet whole and ground coffee to grocery stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment venues, college campuses and on-line customers.

Franchise

The franchise segment sells franchises to operate Caribou Coffee brand coffeehouses to domestic and international franchisees. As of April 4, 2010, there were 123 franchised coffeehouses in U.S and international markets.

The tables below present information by operating segment for the thirteen weeks ended April 4, 2010 and March 29, 2009 (in thousands):

Thirteen weeks ended April 4, 2010


							Unallocated
	Retail Coffeehouses		Commercial		Franchise		Corporate			Total

Total net sales	$	55,597	$	8,987	$	2,467	$	—		$	67,051
Costs of sales and related occupancy costs		23,575		6,294		1,530		—			31,399
Operating expenses		23,681		979		302		—			24,962
Depreciation and amortization		3,129		13		3		—			3,145
General and administrative expenses		1,847		—		—		4,662			6,509

Operating income (loss)	$	3,365	$	1,701	$	632	$	(4,662	)		1,036

Identifiable assets	$	35,962	$	184	$	61	$	8,116		$	44,323
Net capital expenditures	$	576	$	—	$	57	$	193		$	826

Thirteen weeks ended March 29, 2009


							Unallocated
	Retail Coffeehouses		Commercial		Franchise		Corporate			Total

Total net sales	$	52,864	$	5,704	$	1,812	$	—		$	60,380
Costs of sales and related occupancy costs		21,700		3,513		1,039		—			26,252
Operating expenses		22,397		700		325		(17	)		23,405
Depreciation and amortization		3,730		10		1		—			3,741
General and administrative expenses		1,965		—		—		4,641			6,606

Operating (loss) income	$	3,072	$	1,481	$	447	$	(4,624	)	$	376

Identifiable assets	$	47,158	$	120	$	11	$	8,914		$	56,203
Net capital expenditures	$	67	$	—	$	—	$	124		$	191

All of the Company’s assets are located in the United States, and approximately 1% of the Company’s consolidated sales come from outside the United States. No customer accounts for 10% or more of the Company’s sales.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information in this Management’s Discussion and Analysis section should be read in conjunction with the unaudited condensed consolidated financial statements and the notes included in Item 1 of Part I of this Form 10-Q and the audited consolidated financial statements and notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended January 3, 2010 contained in the our Form 10-K (File No. [000-51535]).

FORWARD-LOOKING STATEMENTS

Certain statements in this report and other written or oral statements made by or on behalf of Caribou Coffee are “forward-looking statements” within the meaning of the federal securities laws. Statements regarding future events and developments and our future performance, as well as management’s current expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. These forward-looking statements are subject to a number of risks and uncertainties. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: fluctuations in quarterly and annual results, incurrence of net losses, adverse effects of management focusing on implementation of a growth strategy, failure to develop and maintain the Caribou Coffee brand and other factors disclosed in the our filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report.

Overview

We are the second largest company-owned gourmet coffeehouse operator in the United States based on the number of coffeehouses. As of April 4, 2010, we had 536 retail locations, including 123 franchised. Our coffeehouses are located in 19 states, the District of Columbia and international markets. We focus on offering our customers high-quality gourmet coffee and espresso-based beverages, as well as specialty teas, baked goods, whole bean coffee, branded merchandise and related products. Additionally, we sell our high-quality whole bean and ground coffee to grocery stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment venues, college campuses and on-line customers. We focus on creating a unique experience for customers through a combination of high-quality products, a comfortable and welcoming coffeehouse environment and customer service.

We will continue our efforts to increase comparable coffeehouse sales, including increasing brand awareness through marketing efforts and introducing new products and promotions. As our comparable coffeehouse sales increase, we expect our operating margins at those coffeehouses to improve as we expect to have greater ability to leverage our fixed expense.

We intend to strategically expand our coffeehouse locations in our existing markets. Our goal is to expand our concept into a nationally recognized brand in the United States by opening new company-operated coffeehouses and partnering with qualified developers to open franchised coffeehouses while adding select international locations through franchising.

Critical Accounting Policies

The preparation of our financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the periods presented. Our Annual Report on Form 10-K for the fiscal year ended January 3, 2010, (File No. [000-51535]) includes a summary of the critical accounting policies we believe are the most important to aid in understanding our financial condition and results of operations. We believe those critical accounting policies are significant or involve additional management judgment due to the sensitivity of the methods, assumptions, and estimates necessary in determining the related asset and liability amounts.

Fiscal Periods

Our fiscal year ends on the Sunday falling nearest to December 31. Each fiscal year consists of four 13-week quarters in a 52-week year and three 13-week quarters and one 14-week fourth quarter in a 53-week year. Fiscal year 2009 included 53 weeks. Each fiscal quarter reported herein will consist of two four-week months and one five-week month.

Our sales are somewhat seasonal, with the fourth quarter accounting for the highest sales volumes. Operating results for the thirteen week period ended April 4, 2010 are not necessarily indicative of future results that may be expected for the year ending January 2, 2011.

Thirteen Weeks Ended April 4, 2010 vs. Thirteen Weeks Ended March 29, 2009

Results of Operations

The following table presents the consolidated statements of operations as well as the percentage relationship to total net sales of items included in our consolidated statement of operations:


	Thirteen Weeks Ended									Thirteen Weeks Ended
	April 4,			March 29,						April 4,			March 29,
	2010			2009			%			2010			2009
	(In thousands)						Change			As a % of total net sales
Statement of Operations Data:
Net sales:
Coffeehouse	$	55,597		$	52,864			5.2	%		82.9	%		87.6	%
Commercial and franchise		11,454			7,516			52.4	%		17.1	%		12.4	%

Total net sales		67,051			60,380			11.0	%		100.0	%		100.0	%
Cost of sales and related occupancy costs		31,399			26,252			19.6	%		46.8	%		43.5	%
Operating expenses		24,962			23,405			6.7	%		37.2	%		38.8	%
Depreciation and amortization		3,145			3,741			(15.9	)%		4.7	%		6.2	%
General and administrative expenses		6,509			6,606			(1.5	)%		9.7	%		10.9	%

Operating income		1,036			376			175.5	%		1.5	%		0.6	%
Other income (expense):
Interest income		5			—			—	%		—	%		—	%
Interest expense		(106	)		(58	)		82.8	%		(0.1	)%		(0.1	)%

Income before benefit from income taxes and noncontrolling interest		935			318			194.0	%		1.4	%		0.5	%
Benefit from income taxes		157			101			55.4	%		0.2	%		(0.2	)%

Net income		1,092			419			160.6	%		1.6	%		0.7	%
Less: Net income attributable to noncontrolling interest		54			73			(26.0	)%		0.1	%		0.1	%

Net income attributable to Caribou Coffee Company, Inc.	$	1,038		$	346			200.0	%		1.5	%		0.6	%

Net Sales

Net sales increased $6.7 million, or 11%, to $67.1 million in the first thirteen weeks of 2010 from $60.4 million in the first thirteen weeks of 2009. Each of our business segments contributed significantly to our consolidated revenue growth. Coffeehouse net sales increased $2.7 million, or 5.2%, to $55.6 million in the first thirteen weeks of 2010 from $52.9 million in the first thirteen weeks of 2009. Commercial and franchise sales increased by $3.9 million, or 52%, to $11.4 million for the first thirteen weeks of 2010 from $7.5 million for the first thirteen weeks of 2009. Commercial segment sales grew by $3.3 million or 58%, based on increased sales to existing customers, primarily do to distribution growth achieved during the second half of 2009. Franchise sales grew by $0.7 million or 36% primarily due to new franchise and license locations added in the second half of last year, as well as international product sales related to new store development pipeline fill.

Costs and Expenses

Cost of sales and related occupancy costs. Cost of sales and related occupancy costs increased $5.1 million, or 19.6%, to $31.4 million in the first thirteen weeks of 2010, from $26.3 million in the first thirteen weeks of 2009, primarily due to higher sales. On a dollar basis, this growth was attributable to increased volume across each of our operating segments. As a percentage of total net sales, cost of sales and related occupancy costs increased to 46.8% in the first thirteen weeks of 2010 from 43.5% in the first thirteen weeks of 2009. The increase as a percentage of sales was due to an overall mix change with a higher percentage of sales coming from the commercial and franchise segments. In addition, we invested in higher levels of trade promotional programs in our commercial segment and invested in higher quality product platforms launched in our retail coffeehouse segment.

Operating expenses. Operating expenses increased $1.6 million, or 6.7%, to $25.0 million in the first thirteen weeks of fiscal 2010, from $23.4 million in the first thirteen weeks of 2009. On a dollar basis, this increase was primarily driven by an increase in variable expenses related to our increase in sales volume, as well as a $1.1 million increase in marketing and product management initiatives as compared to the comparable quarter of the prior year. Operating expenses as a percentage of total net sales decreased to 37.2% in the first thirteen weeks of 2010 from 38.8% in the first thirteen weeks of 2009 as we were able to gain leverage on these categories from our increase in sales, particularly in labor costs needed to support our operating sements.

Depreciation and amortization. Depreciation and amortization decreased $0.6 million, or 15.9%, to $3.1 million in the first thirteen weeks of 2010, from $3.7 million in the first thirteen weeks of 2009. As a percentage of total net sales, depreciation and amortization was 4.7% in the first thirteen weeks of 2010, compared to 6.2% in the first thirteen weeks of 2009. This decrease in dollars is due to a lower depreciable asset base from reduced capital spending in 2009 and the first quarter of 2010, and the decrease as a percent of sales is due to better leverage from our increasing sales volume.

General and administrative expenses. General and administrative expenses remained relatively flat at $6.5 million and $6.6 million in the first thirteen weeks of fiscal 2010 and 2009, respectively.

Interest income. Interest income increased slightly in the first thirteen weeks of 2010, as compared to the first thirteen weeks of 2009 due to more cash on hand in 2010.

Interest expense. Interest expense remained relatively flat at $0.1 million for both the first thirteen weeks of 2010 and 2009. We had no outstanding borrowings during the first thirteen weeks of 2010 or 2009.

Operating Segments

Segment information is prepared on the same basis that our management reviews financial information for decision making purposes. We have three reportable operating segments: retail, commercial and franchise. “Unallocated corporate” includes expenses pertaining to corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. The following tables summarize our results of operations by segment for the first thirteen weeks of fiscal 2010 and 2009.

Retail Coffeehouses


	Thirteen Weeks Ended							Thirteen Weeks Ended
	April 4,		March 29,					April 4,			March 29,
	2010		2009					2010			2009
	(In thousands)				% Change				As a % of coffeehouse sales
Coffeehouse sales	$	55,597	$	52,864		5.2	%		100.0	%		100.0	%
Costs of sales and related occupancy costs		23,575		21,700		8.6	%		42.4	%		41.1	%
Operating expenses		23,681		22,397		5.7	%		42.6	%		42.4	%
Depreciation and amortization		3,129		3,730		(16.1	)%		5.6	%		7.1	%
General and administrative expenses		1,847		1,965		(6.0	)%		3.3	%		3.7	%

Operating income	$	3,365	$	3,072		9.5	%		6.1	%		5.8	%

The retail segment operates company-owned coffeehouses. As of April 4, 2010, there were 413 company-owned coffeehouses in 16 states and the District of Columbia.

Coffeehouse sales

Coffeehouse sales increased $2.7 million, or 5.2%, to $55.6 million in the first thirteen weeks of 2010 from $52.9 million in the first thirteen weeks of 2009. This increase is attributable to a 5.2% increase in comparable coffeehouse sales in the first thirteen weeks of 2010 as compared to the same period in 2009. The increase in comparable coffeehouse sales was driven by increased traffic in our coffeehouses and a higher average guest check, primarily due to higher food sales, attributable to the launch of hot cereal in our coffeehouses.

Costs and Expenses

Cost of sales and related occupancy costs. Cost of sales and related occupancy costs increased $1.9 million, or 8.6%, to $23.6 million in the first thirteen weeks of 2010, from $21.7 million for the first thirteen weeks of 2009. The increase in total dollars was driven primarily by increase cost of goods related to our 5.2% growth in comparable coffeehouse sales. Cost of sales and related occupancy costs as a percentage of coffeehouse net sales increased to 42.4% for the first thirteen weeks of 2010 from 41.1% for the first thirteen weeks of 2009. The increase was primarily due to a shift to higher quality product platforms launched in our retail coffeehouse segment, particularly shifting from a powder based chocolate ingredient to real, all natural chocolate in all of our chocolate based beverages.

Operating expenses. Operating expenses increased $1.3 million, or 5.7%, to $23.7 million for the first thirteen weeks of 2010, from $22.4 million for the first thirteen weeks of 2009. On a dollar basis, this increase was due to an increase in variable expenses, such as supplies and credit card fees related to our 5.2% increase in comparable coffeehouses sales, as well as $1.0 million in incremental spending on marketing and product management initiatives in the retail coffeehouse segment, when compared to the prior year. As a percentage of coffeehouse net sales, operating expenses increased to 42.6% in the first thirteen weeks of 2010 from 42.4% in the first thirteen weeks of 2009. This increase is primarily attributable to a year over year increase in marketing and product management initiatives, which offset efficiencies gained in other operating expenses, such as coffeehouse labor.

Depreciation and amortization. Depreciation and amortization decreased $0.6 million, or 16.1%, to $3.1 million for the first thirteen weeks of 2010, from $3.7 million for the first thirteen weeks of 2009. This decrease is due to our lower depreciable asset base due to lower levels of capital spending in 2009 and the first quarter of 2010.

General and administrative expenses. General and administrative expenses decreased $0.1 million, or 6.0%, to $1.8 million for the first thirteen weeks of 2010 from $1.9 million for the first thirteen weeks of 2009. The decrease was primarily due to lower payroll related costs in our retail coffeehouse field support and multi-unit management teams.

Commercial


	Thirteen Weeks Ended							Thirteen Weeks Ended
	April 4,		March 29,					April 4,			March 29,
	2010		2009					2010			2009
	(In thousands)				% Change			As a % of commercial sales
Sales	$	8,987	$	5,704		57.6	%		100.0	%		100.0	%
Costs of sales and related occupancy costs		6,294		3,513		79.2	%		70.0	%		61.6	%
Operating expenses		979		700		39.9	%		10.9	%		12.3	%
Depreciation and amortization		13		10		30.0	%		0.1	%		0.2	%

Operating income	$	1,701	$	1,481		14.9	%		18.9	%		26.0	%

The commercial segment sells high-quality gourmet whole bean and ground coffee to grocery stores, mass merchandisers, office coffee providers, airlines, hotels, sports and entertainment venues, college campuses and on-line customers.

Sales

Sales increased $3.3 million, or 57.6%, to $9.0 million in the first thirteen weeks of 2010, from $5.7 million in the first thirteen weeks of 2009. This increase is primarily attributable to the incremental sales to existing grocery stores, club stores and mass merchandisers, in which Caribou handles sales and distribution, as well as increased sales to and Keurig Incorporated, an industry leader in single cup brewing technology. The increase in sales to Caribou managed accounts was primarily driven by increased distribution gained in the second half of 2009. At the beginning of 2010, Caribou Coffee was found in over forty states and in seven thousand stores through our Caribou managed sales channel. We did not experience large new customer door growth in the first quarter of 2010. The increase in sales to Keurig has primarily been driven by an increased sales and penetration of Keurig single-cup brewing machines.

Costs and Expenses

Cost of sales and related occupancy costs. Cost of sales and related occupancy costs increased $2.8 million, or 79.2%, to $6.3 million for the first thirteen weeks of 2010, from $3.5 million for the first thirteen weeks of 2009. On a dollar basis, this increase in cost of sales was primarily related to the 58% increase in sales volume in this segment. As a percentage of sales, cost of sales and related occupancy costs increased to 70.0% for the first thirteen weeks of 2010, from 61.6% for the first thirteen weeks of 2009. The increase in cost of sales and related occupancy costs as a percentage of sales was due to increased investment in trade promotions and allowances. We have increased these programs as a method to support the brand through increased distribution as well as increased trial and awareness from a consumer standpoint.

Operating expenses. Operating expenses increased $0.3 million, or 39.9%, to $1.0 million for the first thirteen weeks of 2010, from $0.7 million for the first thirteen weeks of 2009. The increase is attributable to higher labor, marketing, and other operating costs as we invest in our team and infrastructure to support our growing commercial segment. As a percentage of sales, operating expenses decreased to 10.9% in the first thirteen weeks of 2010 from 12.3% in the first thirteen weeks of 2009 due to leverage on higher sales.

Franchise


	Thirteen Weeks Ended							Thirteen Weeks Ended
	April 4,		March 29,					April 4,			March 29,
	2010		2009					2010			2009
	(In thousands)				% Change			As a % of franchise sales
Sales	$	2,467	$	1,812		36.1	%		100.0	%		100.0	%
Costs of sales and related occupancy costs		1,530		1,039		47.3	%		62.0	%		57.3	%
Operating expenses		302		325		(7.1	)%		12.2	%		17.9	%
Depreciation and amortization		3		1		200.0	%		0.1	%		0.1	%

Operating income	$	632	$	447		41.4	%		25.6	%		24.7	%

Sales

Sales increased $0.7 million, or 36.1%, to $2.5 million in the first thirteen weeks of 2010, from $1.8 million in the first thirteen weeks of 2009 primarily due to higher product sales to our franchisees, especially internationally, due to product pipeline fill for new stores to be opened in 2010.

Costs and Expenses

Cost of sales and related occupancy costs. Cost of sales and related occupancy costs increased $0.5 million, or 47.3%, to $1.5 million for the first thirteen weeks of 2010, from $1.0 million for the first thirteen weeks of 2009. As a percentage of sales, cost of sales and related occupancy costs increased to 62.0% for the first thirteen weeks of 2010, from 57.3% for the first thirteen weeks of 2009. The increase in cost of sales and related occupancy costs as a percentage of sales was primarily due to a change in revenue mix in the franchise segment, as a greate portion of sales were product sales.

Operating expenses. Operating expenses remained flat at $0.3 million for the first thirteen weeks of 2010 compared to the first thirteen weeks of 2009. Operating expenses in this segment are primarily related to labor, travel, and other administrative costs.

Unallocated Corporate


	Thirteen Weeks Ended									Thirteen Weeks Ended
	April 4,			March 29,						April 4,			March 29,
	2010			2009						2010			2009
	(In thousands)						% Change			As a % of total net sales
Operating expenses	$	—		$	(17	)		(100.0	)%		—	%		—	%
General and administrative expenses		4,662			4,641			0.5	%		6.9	%		7.7	%

Operating loss	$	(4,662	)	$	(4,624	)		0.8	%		6.9	%		7.7	%

General and administrative expenses. General and administrative expenses remained relatively flat at $4.6 million for the first thirteen weeks of 2010 and 2009. As a percentage of total net sales, general and administrative expenses decreased to 6.9% in the first thirteen weeks of 2010, from 7.7% in the first thirteen weeks of 2009, due to leveraging of higher sales.

Liquidity and Capital Resources

The following table summarizes our cash flow activity and should be read in conjunction with the Condensed Consolidated Statements of Cash Flows:


	Thirteen Weeks Ended
	April 4,			March 29,			Increase /
	2010			2009			(Decrease)
				(In thousands)

Net cash used by operating activities	$	(4,747	)	$	(26	)	$	(4,721	)
Net cash used in investing activities		(772	)		(178	)		(594	)
Net cash used by financing activities		(331	)		(105	)		(226	)

Net change in cash and cash equivalents	$	(5,850	)	$	(309	)	$	(5,541	)

Cash and cash equivalents as of April 4, 2010 were $17.7 million, compared to cash and cash equivalents of $23.6 million as of January 3, 2010. Generally, our principal requirements for cash are capital expenditures and funding operations. Capital expenditures included maintenance and remodeling of existing coffeehouses, general and administrative expenditures for items like management information systems and costs for new production equipment. Currently our requirements for capital have been funded through cash flow from operations.

Net cash used by operating activities for the first thirteen weeks of 2010 was $4.7 million compared to net cash used in operating activities of $0.0 million for the first thirteen weeks of 2009. The $4.7 million decrease in cash used by operating activities was the result of cash used in working capital, primarily inventory as we build inventory levels to support our growing business, particularly in our commercial business.

Net cash used in investing activities during the first thirteen weeks of 2010 was $0.8 million, compared to net cash used in investing activities of $0.2 million for the first thirteen weeks of 2009. The increase in capital expenditures was primarily for equipment in our support center facility.

Net cash used by financing activities for the first thirteen weeks of 2010 was $0.3 million compared to net cash used by financing activities of $0.1 million for the first thirteen weeks of 2009. The increase in financing cash used is due to the costs associated with our new credit facility. In Q1 of 2010 we announced that our board of directors had authorized up to $10 million in a share repurchase program. In the first thirteen weeks of 2010 we repurchased approximately 10,000 shares at a weighted average market price of $7.30 per share.

Our future capital requirements and the adequacy of available funds will depend on many factors, including the pace of our expansion, real estate markets, the availability of suitable site locations and the nature of the arrangements negotiated with landlords for new coffeehouses as well as lease termination costs associated with existing underperforming coffeehouse leases. Expenses associated with the lease terminations for existing underperforming coffeehouse leases are variable from coffeehouse to coffeehouse and are dependent upon the amount of time left on the lease, local real estate market conditions, as well as other factors. We expect capital expenditures for fiscal 2010 to be in the range of $15 to $20 million. We believe that our current liquidity and cash flow from operations will provide sufficient liquidity to fund our operations for at least 12 months.

Off-Balance Sheet Arrangements

Other than our coffeehouse leases, we do not have any off-balance sheet arrangements. As of April 4, 2010, we were committed to fixed and price-to-be-fixed green coffee purchase contracts with deliveries expected through December 2011. We only contract for green coffee expected to be used in the normal course of business. We believe, based on relationships established with our suppliers in the past, the risk of non-delivery on such purchase commitments is remote.

Recent Accounting Pronouncements

Key Financial Metrics

We review our operations based on both financial and non-financial metrics. Among the key financial metrics upon which management focuses in reviewing our performance are comparable coffeehouse net sales, EBITDA (a non-GAAP measure), cash flow from operations before general and administrative expenses, general and administrative expenses and capital expenditures. Among the key non-financial metrics upon which management focuses in reviewing performance are the number of new coffeehouse openings, average check and transaction count.

The following table sets forth non-GAAP metrics and operating data that do not otherwise appear in our consolidated financial statements as of and for the thirteen weeks ended April 4, 2010 and March 29, 2009:


	Thirteen Weeks Ended
	April 4, 2010			March 29, 2009
	(In thousands, except operating data)
Non-GAAP Metrics:
EBITDA(1)	$	4,610		$	4,597

Operating Data:
Percentage change in comparable coffeehouse net sales(2)		5.2	%		(5.0	)%
Company-Owned:
Coffeehouses open at beginning of period		413			414
Coffeehouses opened during the period		—			—
Coffeehouses closed during the period		—			—

Coffeehouses open at end of period:
Total Company-Owned		413			414
Franchised:
Coffeehouses opened at beginning of period		121			97
Coffeehouses opened during the period		2			6
Coffeehouses closed during the period		—			(2	)

Coffeehouses open at end of period:
Total Franchised		123			101

Total coffeehouses open at end of period		536			515


(1)		See reconciliation and discussion of non-GAAP measures which follow at the end of this section.

(2)		Percentage change in comparable coffeehouse net sales compares the net sales of coffeehouses during a fiscal period to the net sales from the same coffeehouses for the equivalent period in the prior year. A coffeehouse is included in this calculation beginning in its thirteenth full fiscal month of operations. A closed coffeehouse is included in the calculation for each full month that the coffeehouse was open in both fiscal periods. Franchised coffeehouses are not included in the comparable coffeehouse net sales calculations.

EBITDA is equal to net income (loss) excluding: (a) interest expense; (b) interest income; (c) depreciation and amortization; and (d) income taxes.

We believe EBITDA is useful to investors in evaluating our operating performance for the following reason:

•

Our coffeehouse leases are generally short-term (5-10 years), and we must depreciate all of the cost associated with those leases on a straight-line basis over the initial lease term, excluding renewal options (unless such renewal periods are reasonably assured at the inception of the lease). We opened a net 210 company-owned coffeehouses from the beginning of fiscal 2003 through the end of the first thirteen weeks of 2010. As a result, we believe depreciation expense is disproportionately large when compared to the sales from a significant percentage of our coffeehouses that are in their initial years of operations. Also, many of the assets being depreciated have actual useful lives that exceed the initial lease term, excluding renewal options. Consequently, we believe that adjusting for depreciation and amortization is useful for evaluating the operating performance of our coffeehouses.

Our management uses EBITDA:

	•		As a measurement of operating performance because it assists us in comparing our operating performance on a consistent basis, as it removes the impact of items not directly resulting from our coffeehouse operations;

	•		For planning purposes, including the preparation of our internal annual operating budget;

	•		To evaluate our capacity to incur and service debt, fund capital expenditures and expand our business.

EBITDA as calculated by us is not necessarily comparable to similarly titled measures used by other companies. In addition, EBITDA: (a) does not represent net income or cash flows from operating activities as defined by GAAP; (b) is not necessarily indicative of cash available to fund our cash flow needs; and (c) should not be considered an alternative to net income, operating income, cash flows from operating activities or our other financial information as determined under GAAP.


	Thirteen Weeks Ended
	April 4, 2010			March 29, 2009
	(Thousands)
Net income attributable to Caribou Coffee Company, Inc.	$	1,038		$	346
Interest expense		106			58
Interest income		(5	)		—
Depreciation and amortization(1)		3,628			4,294
Benefit from income taxes		(157	)		(101	)

EBITDA	$	4,610		$	4,597


(1)		Includes depreciation and amortization associated with our headquarters and roasting facility that are categorized as general and administrative expenses and cost of sales and related occupancy costs on our statement of operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risks.

Not applicable.

Item 4T. Controls and Procedures.

We carried out an evaluation, under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and the operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective, as of April 4, 2010, in ensuring that material information relating to us required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. There were no changes in our internal control over financial reporting during the quarter ended April 4,

2010, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

On July 26, 2005, three of the Company’s former employees filed a lawsuit against us in the State of Minnesota District Court for Hennepin County seeking monetary and equitable relief from us under the Minnesota Fair Labor Standards Act, or the Minnesota FLSA, the federal FLSA and state common law. The suit primarily alleged that the Company misclassified its retail coffeehouse managers as exempt from the overtime provisions of the Minnesota FLSA and the federal FLSA and that these managers are therefore entitled to overtime compensation for each week in which they worked more than 40 hours from May 2002 to the present with respect to the claims under the federal FLSA and for weeks in which they worked more than 48 hours from May 2003 to the present with respect to the claims under the Minnesota FLSA. Plaintiffs sought payment of allegedly owed and unpaid overtime compensation, liquidated damages, interest and among other things, attorney’s fees and costs.

Item 1A. Risk Factors.

There have been no material changes from the risk factors disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended January 3, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

Not applicable.

Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Reserved.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.


3.1*		Form of Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement of Form S-1/A filed August 25, 2005).

3.2*		Form of Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement of Form S-1/A filed August 25, 2005).

4.1*		Form of Registrant’s Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement of Form S-1/A filed September 6, 2005).

10.14		Lease and License Financing and Purchase Option Agreement between Caribou Coffee Company Inc. and Arabica Funding, Inc., dated February 19, 2010.

10.15		Credit Agreement among Arabica Funding, Inc., as Borrower, and Wells Fargo Bank, N.A., as Administrative Agent, dated as of February 19, 2010.

31.1		Certification Pursuant to Rule 13a — 14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification Pursuant to Rule 13a — 14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S. C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification Pursuant to 18 U.S. C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Asterisk (*) indicates exhibit previously filed with the Securities and Exchange Commission as indicated in parentheses.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	CARIBOU COFFEE COMPANY, INC.
	By:	/s/ Michael Tattersfield
		Michael Tattersfield
		Chief Executive Officer and President

Date: May 6, 2010

EX-10.14 2 c57994exv10w14.htm EX-10.14 exv10w14

Exhibit 10.14

Execution Version

LEASE AND LICENSE FINANCING
AND PURCHASE OPTION AGREEMENT

between

ARABICA FUNDING, INC.

and

CARIBOU COFFEE COMPANY, INC.

February 19, 2010

TABLE OF CONTENTS


	*Page*
SECTION 1. Definitions		2
SECTION 2. Agreement for Lease, License and Purchase Option Financing; Covenant of Quiet Enjoyment		19
SECTION 3. Delivery and Acceptance of Assets		20
SECTION 4. Term		20
SECTION 5. End of Term Delivery of Assets		20
SECTION 6. Payments		21
SECTION 7. Net Lease and License		21
SECTION 8. Arabica’s Title; Grant of Security Interest		22
SECTION 9. Use of Assets; Compliance with Laws		22
SECTION 10. Maintenance and Repair of the Equipment		22
SECTION 11. Replacement of Parts; Alterations; Modifications and Additions		23
SECTION 12. Taxes.		23
SECTION 13. Assignment, Sublease, Sublicense or other Transfer		25
SECTION 14. Event of Loss; Obsolete and Worn Out Equipment		26
SECTION 15. Insurance		27
SECTION 16. Illegality		27
SECTION 17. General Indemnity		27
SECTION 18. Disclaimer		29
SECTION 19. Representations and Warranties		29
SECTION 20. Financial Covenants		36
SECTION 21. Affirmative Covenants		36
SECTION 22. Negative Covenants		42
SECTION 23. Events of Default		46
SECTION 24. Remedies Upon Default		48
SECTION 25. Arabica’s Right to Perform for the Company		49
SECTION 26. Further Assurances		49
SECTION 27. Transaction Costs, Fees and Expenses		49
SECTION 28. Notices		49
SECTION 29. Call Option		50
SECTION 30. Put Option		51
SECTION 31. Arabica Agents, Nominees or Representatives		51
SECTION 32. Miscellaneous		51
SECTION 33. Payments, Set-Off and Subordination		52
SECTION 34. Waiver of Jury Trial		52
SECTION 35. Effect on Prior Agreement		53


Schedules

1	-	Quarterly Dates
1(i)	-	Financial Statements
2(a)	-	Equipment and Intangible Assets
3	-	Registration or Licensing Exceptions
6(a)	-	Rent
19(i)	-	Intellectual Property Exceptions
19(o)	-	Capital Stock of Restricted Group
19(p)	-	Environmental Exceptions
19(r)(i)	-	UCC Filing Jurisdictions
19(r)(ii)	-	Real Property; Leasehold Interests
19(t)	-	Stores and Material Agreements
19(u)(i)	-	Indebtedness to Remain Outstanding
19(u)(ii)	-	Liens to Remain Outstanding
22(g)(ii)	-	Existing Investments
22(i)	-	Affiliate Agreements

Exhibits

A	-	Form of Compliance Certificate
B	-	Form of Supplement
C	-	Form of Subsidiary Certificate

LEASE AND LICENSE FINANCING
AND PURCHASE OPTION AGREEMENT

THIS LEASE AND LICENSE FINANCING AND PURCHASE OPTION AGREEMENT (as supplemented, amended, modified, restated or replaced from time to time, this “Agreement”), dated as of February 19, 2010 is made by and between ARABICA FUNDING, INC., a Delaware corporation (“Arabica”) and CARIBOU COFFEE COMPANY, INC., a Minnesota corporation (the “Company”).

WHEREAS, Arabica and the Company are parties to that certain Second Amended and Restated Asset Purchase Agreement, dated as of June 29, 2004 (the “2004 Asset Purchase Agreement”), pursuant to which the Company has sold to Arabica from time to time certain tangible and intangible assets identified therein; and

WHEREAS, Arabica and the Company are parties to that certain Second Amended and Restated Lease and License Financing and Purchase Option Agreement, dated as of June 29, 2004 (the “2004 Agreement”), relating to tangible and intangible assets purchased by Arabica pursuant to the 2004 Asset Purchase Agreement;

WHEREAS, pursuant to the 2004 Agreement, Arabica has leased and licensed such tangible and intangible assets to the Company;

WHEREAS, pursuant to the 2004 Agreement and that certain Second Amended and Restated Call Option Letter, dated as of June 29, 2004 (the “2004 Call Option Letter”), Arabica has granted to the Company an option to purchase such tangible and intangible assets on the terms therein specified;

WHEREAS, pursuant to the 2004 Agreement and that certain Second Amended and Restated Put Option Letter, dated as of June 29, 2004 (the “2004 Put Option Letter”), the Company has granted to Arabica the right to require the Company to purchase such tangible and intangible assets on the terms therein specified;

WHEREAS, Arabica and the Company propose to enter into the Asset Purchase Agreement (as defined herein) in substitution for, and in replacement of, the 2004 Asset Purchase Agreement;

WHEREAS, pursuant to the Asset Purchase Agreement, the Company may propose to sell additional tangible and intangible assets from time to time to Arabica and may seek to have Arabica purchase such assets and thereafter lease and license such assets to the Company hereunder;

WHEREAS, Arabica and the Company propose to enter into this Agreement to permit the leasing and licensing of such additional assets to the Company, and this Agreement is intended to be a substitute for, and to replace, the 2004 Agreement;

WHEREAS, Arabica and the Company propose to enter into the Call Option Letter and the Put Option Letter (each as defined herein) and to make such additional assets subject thereto, as applicable, and the Call Option Letter and Put Option Letter are intended to be substitutes for, and to replace, the 2004 Call Option Letter and the 2004 Put Option Letter, respectively;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Arabica and the Company agree, as of the date hereof, to enter into this Agreement as a substitute for, and to replace, the 2004 Agreement, as herein provided.

SECTION 1. Definitions.

(a) Unless the context otherwise requires, the following capitalized terms shall have the following meanings for all purposes of this Agreement and shall be equally applicable to both the singular and the plural forms of the terms herein defined:

“Acquisition Cost” means the acquisition cost amount specified in the notice of offer executed from time to time in connection with the Asset Purchase Agreement (subject to reduction as a result of any payment of Acquisition Cost hereunder, under the Call Option Letter or under the Put Option Letter), which sum shall not exceed at any time the Reference Amount.

“Acquisition Target” means any Person or any division of a Person the outstanding Capital Stock or the assets of which are proposed to be acquired by the Company or any Wholly-Owned Subsidiary Guarantor in connection with a Permitted Acquisition.

“Acquisition Transaction” means any acquisition of all or substantially all of the assets or Capital Stock of any Person or any division thereof.

“Administrative Services Agreement” means the Management Agreement, dated as of December, 2000, between Arabica and Global Securitization Services, LLC, a Delaware limited liability company, as in effect on the Commencement Date.

“Affiliate” means as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“Applicable Margin” means at any time, for purposes of determining the Rental Rate by reference to the Base Rate, one and one-quarter (1.25%) percent per annum and for purposes of determining the Rental Rate by reference to the Eurodollar Rate, two and three-quarters (2.75%) percent per annum.

“Asset Purchase Agreement” means that certain Asset Purchase Agreement, dated as of the date hereof, between the Company and Arabica.

“Assets” means the Equipment and the Intangible Assets.

“Available Amount” means on any day the amount by which the Reference Amount exceeds the unpaid Acquisition Cost on such day.

“Bank Products” any one or more of the following financial products or accommodations provided from time to time by the Reference Bank or any of its affiliates to the Company or any of its Subsidiaries: (i) products under Swap Agreements and similar interest rate hedging arrangements, (ii) credit cards, (iii) credit card processing services, (iv) debit cards, (v) stored value cards, (vi) purchase cards (including so-called “procurement cards” or “P-cards”), or (vii) cash management or related services including treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements. For

- 2 -

purposes of clarification, it is the intention of the Restricted Group not to enter into Bank Products or other financing transactions or obligations that are not acceptable under Islamic Shari’ah principles.

“Base Rate” means for any day, the cost to Arabica of funding itself in relation to this Agreement at such times when the Eurodollar Rate is unavailable or Arabica determines that the Eurodollar Rate does not accurately reflect the cost of its funding. Such cost to Arabica of funding itself shall correspond to a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate as of the close of business on the immediately preceding Business Day plus 1.5%, (b) the rate of interest in effect for such day as publicly announced from time to time by the Reference Bank as its “opening prime rate” and (c) the Eurodollar Base Rate determined for a one month period plus 1.5% commencing on such date or, if such date is not a Business Day, on the immediately preceding Business Day. The “opening prime rate” is a rate set by the Reference Bank based upon various factors including the Reference Bank’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Reference Bank shall take effect at the opening of business on the day specified in the public announcement of such change.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, provided, that with respect to notices and determinations in connection with, and payments in respect of, Rent when the Rental Rate component thereof is determined based on the Eurodollar Rate, such day is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market.

“Call Option” shall have the meaning given to such term in the Call Option Letter.

“Call Option Letter” shall mean that certain Call Option Letter, dated the date hereof, issued by Arabica to the Company.

“Capital Expenditures” means, for any period, the aggregate of all amounts expended or financed for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including maintenance expenditures, build-out and new store expenditures, Pre-Opening Expenses and other replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries.

“Capitalized Lease Obligations” means, as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Cash Equivalents” means investments in checking or other similar current accounts with banks or trust companies organized under the laws of the United States or any state thereof that have capital and surplus of at least $500,000,000 and that are insured by the Federal Deposit Insurance Corporation.

“Change in Control” means for any reason:

- 3 -

(i) Holdings shall own of record less than 51% of the issued and outstanding Capital Stock or voting power of the Company; or the Persons who own all of the Capital Stock of Holdings on the date hereof having the ordinary voting power to elect the Board of Directors of Holdings shall cease to own at least 65% of such Capital Stock;

(ii) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), excluding the holders of Capital Stock of Holdings and the Company, respectively, on the date of this Agreement, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d) 5 under the Exchange Act), directly or indirectly, of more than 25% of the outstanding Capital Stock or voting power of Holdings or the Company;

(iii) during any period of 12 consecutive months, commencing after the date of this Agreement, Continuing Directors shall cease for any reason other than death or disability to constitute a majority of the directors of Holdings then in office;

(iv) the Company shall cease to own of record and beneficially 100% of the issued and outstanding Capital Stock and voting power in each Person that is as of the date hereof, or at any time hereafter becomes, a Wholly-Owned Subsidiary of the Company unless otherwise permitted under the Lease/Purchase Documents);

(v) GSS Holdings, Inc. or a corporate service company (or an affiliate thereof) or a charitable trust (any such corporate service company, affiliate or charitable trust to be reasonably acceptable to Arabica) shall cease to own of record and beneficially 100% of the issued and outstanding Capital Stock and voting power of Arabica on a fully diluted basis, or any member of the Board of Directors of Arabica shall cease to be an Independent Director; or

(vi) any Specified Change of Control shall occur.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Coffeehouse Level EBITDA Margin” means the “Coffeehouse Level EBITDA Margin” for the Company and its Subsidiaries, calculated in the manner set forth on the financial statements attached as Schedule 1(i).

“Coffeehouse Level Sales” means the “Coffeehouse Level Sales” for the Company and its Subsidiaries, calculated in the manner set forth on the financial statements attached as Schedule 1(i).

“Collateral” means all property now owned or hereafter acquired by any member of the Restricted Group, upon which a Lien is purported to be created by any Security Document.

“Commencement Date” means the date of this Agreement.

“Commonly Controlled Entity” means an entity, whether or not incorporated, that is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group that includes the Company, as applicable, and that is treated as a single employer under Section 414 of the Code.

- 4 -

“Company Guarantee and Security Agreement” means the Company Guarantee and Security Agreement, dated as of the date hereof, among the Company, Holdings, each of their respective Subsidiaries and Arabica.

“Company Leasehold Mortgage” means the Leasehold Mortgage by the Company in favor of Arabica covering the Headquarters Building, in form and substance reasonably satisfactory to Arabica.

“Company Security Documents” means each of the Company Guarantee and Security Agreement, the Company Leasehold Mortgage (when and if executed), any Mortgage, Leasehold Security Document, and Intellectual Property Security Agreement and all other security documents from time to time delivered to Arabica to secure the obligations of the Company under this Agreement and the other Lease/Purchase Documents.

“Compliance Certificate” means a certificate duly executed by a Responsible Officer, substantially in the form of Exhibit A.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) the provision for Federal, state, local and foreign income taxes payable, (b) Consolidated Financing Expense, (c) depreciation and amortization expense (including amortization of debt acquisition cost), (d) Pre-Opening Expenses, and (e) other non-recurring expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period (in each case of or by the Company and its Subsidiaries for such period), and minus the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, local and foreign income tax credits, and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Company and its Subsidiaries for such period).

“Consolidated EBITDAR” means, for any period, the sum of (a) Consolidated EBITDA for such period, plus (b) Consolidated Rental Expense for the Company and its Subsidiaries for such period, in each case determined on a consolidated basis in accordance with GAAP.

“Consolidated Financing Expense” means, for any period, the total financing expense (including that attributable to Capital Lease Obligations and excluding amortization of debt acquisition cost) of the Company and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Company and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Swap Agreements in respect of financing rates to the extent such net costs are allocable to such period in accordance with GAAP). For purposes of this Agreement, as to the Company and its Subsidiaries, Consolidated Financing Expense shall include the Obligations. For purposes of clarification, it is the intention of the Restricted Group not to incur any Consolidated Financing Expense or other financial obligations that are not acceptable under Islamic Shari’ah principles.

“Consolidated Funded Indebtedness” means without duplication with respect to the Company and its Subsidiaries, all Indebtedness of the Company and its Subsidiaries with respect to any of the following: (i) the principal amount of money borrowed (whether recourse or non-recourse), including all amounts payable in connection therewith, (ii) obligations evidenced by a bond, debenture, note or other like written obligation to pay money, (iii) Capital Lease Obligations, (iv) obligations under conditional sales or other title retention agreements or secured by any Lien, (v) the aggregate face amount of any letters of credit or similar instruments (including reimbursement obligations with respect thereto), (vi) the deferred unpaid purchase price of property or services, except trade payables, accrued expenses and other similar liabilities incurred in the ordinary course of business, (vii) Indebtedness relating to Swap

- 5 -

Agreements, (viii) Indebtedness relating to sale-leaseback obligations, (ix) all obligations of such Person under take or pay or similar arrangements or under commodities agreements, (x) Disqualified Stock, (xi) the principal portion of all obligations of such Person under synthetic leases, (xii) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer, (xiii) the outstanding attributed principal amount under any securitization transaction of such Person, (xiv) all obligations that are immediately due and payable out of proceeds of or production from property now or hereafter acquired by such Person and (xv) all Guarantee Obligations of such Person in respect of any or all of the foregoing; in each case determined on a consolidated basis in accordance with GAAP. The aggregate amount of Consolidated Funded Indebtedness at any time shall include all accrued amounts which have become due and payable but has not been paid (whether or not capitalized) and the accreted amount of any debt issued with original issue discount. For purposes of this Agreement, as to the Company and its Subsidiaries, Consolidated Funded Indebtedness shall include the Obligations. For purposes of clarification, it is the intention of the Restricted Group not to incur any Consolidated Funded Indebtedness or other financial obligations that are not acceptable under Islamic Shari’ah principles.

“Consolidated Net Income” means, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Company) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Company or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Company to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Lease/Purchase Document) or Requirement of Law applicable to such Subsidiary.

“Consolidated Rental Expense” means, for any period, all obligations in respect of base and contingent rent expensed during such period under any rental agreements or leases of real or personal property (other than amounts owed to Arabica under the Lease/Purchase Documents), excluding tenant allowance amortization, all determined on a consolidated basis in accordance with GAAP.

“Consolidated Senior Leverage Ratio” shall have the meaning given such term in Section 20(a).

“Continuing Directors” means the directors of Holdings on the Commencement Date, and each other director, if, in each case, such other director’s nomination for election to the board of directors of Holdings is recommended by at least two thirds of the then Continuing Directors.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Control Investment Affiliate” means, as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Default” means any of the events specified in Section 23, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

- 6 -

“Disposition” means, with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof, excluding any such dispositions constituting the leasing or licensing of property pursuant to the Lease/Purchase Documents. The terms “Dispose” and “Disposed of” shall have correlative meanings.

“Disqualified Stock” means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in either case at the option of the holder thereof) or otherwise (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (c) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Disqualified Stock, on or prior to, in the case of clause (a), (b) or (c), the date that is 91 days after the date Final Rent Payment Date, provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Stock in cash upon the occurrence of an “Asset Sale” or “Change of Control” (or similar terms having the same meaning) occurring prior to the date that is 91 days after the Final Rent Payment Date shall not constitute Disqualified Stock if:

(x) the “asset sale” or “change of control” provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms of this Agreement; and

(y) any such requirement only becomes operative after compliance with such terms of this Agreement and the other Lease/Purchase Documents.

“Dollars” and “$” means dollars in lawful currency of the United States.

“Domestic Subsidiary” means with respect to any Person, any Subsidiary of such Person other than a Foreign Subsidiary.

“Effective Date” means, as to the Assets identified on Schedule 2(a) hereto, the Commencement Date and, as to any Assets identified in a Supplement, the date of such Supplement.

“Environmental Laws” means any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.

“Equipment” means the equipment and other tangible assets described in Schedule 2(a) hereto and any other items of Equipment made subject to this Agreement by the execution and delivery of a Supplement, and all items of equipment and other assets (including without limitation replacement Parts) which may from time to time be incorporated in such equipment or other assets described in Schedule 2(a) or subsequently made subject to this Agreement.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Eurocurrency Reserve Requirements” means, for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal amount) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred

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to as “Eurocurrency Liabilities” in Regulation D of the Board of Governors of the Federal Reserve System) maintained by a member bank of the Federal Reserve System.

“Eurodollar Base Rate” means with respect to each day during each Rent Period in which the Rental Rate is determined with reference to the Eurodollar Rate, the rate of interest, rounded upward to the nearest whole multiple of one-sixteenth of one percent (0.0625%), quoted by the Reference Bank, from Reuters LIBOR01 Screen or any successor thereto, as the London Inter-Bank Offered Rate for deposits in Dollars for a one month period, subject to availability, at approximately 9:00 a.m. California time on the date two (2) Business Days prior to the beginning of such Rent Period.

“Eurodollar Rate” means with respect to each day during each Rent Period in which the Rental Rate is determined with reference to the Eurodollar Rate, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

Eurodollar Base Rate

1.00 — Eurocurrency Reserve Requirements

“Event of Default” shall have the meaning given such term in Section 23.

“Event of Loss” means (i) the occurrence of any one or more of the following events with respect to two-thirds or more of the Equipment: (A) loss of such Equipment or of the use thereof due to theft or disappearance during the Term, (B) destruction, damage beyond repair, or rendition of such Equipment unfit for normal use for any reason whatsoever either permanently or for longer than a commercially reasonable period of time, (C) any damage to such Equipment which results in an insurance settlement with respect to such Equipment on the basis of a total loss, or (D) the permanent condemnation, confiscation, seizure, or requisition of use or title to any Equipment by any governmental authority under the power of eminent domain or otherwise; or (ii) the enforcement and foreclosure by final, unappealable judicial determination, of any Lien created solely by Arabica through no action, inaction or fault of the Company (other than Permitted Liens in favor of Arabica) on two-thirds or more of the Assets, the result of which is to permanently deprive the Company of the use of such Assets.

“Federal Funds Effective Rate” means for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Reference Bank from three federal funds brokers of recognized standing selected by it.

“Final Rent Payment Date” means February 19, 2013.

“Foreign Subsidiary” means with respect to any Person, any Subsidiary of such Person that is not organized or existing under the laws of the United States of America, any state thereof, the District of Columbia or any territory thereof.

“GAAP” means generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 20, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 19(a). In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Company and Arabica agree to enter into

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negotiations in order to amend such provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Company’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Company and Arabica, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners).

“Guarantee Obligation” means, as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) 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 (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined in good faith by such Person.

“Guarantors” means Holdings and the Subsidiary Guarantors.

“Headquarters Building” means the premises located at 3900 Lakebreeze Avenue North, Brooklyn Center, MN 55429.

“Headquarters Lease” means that certain commercial lease dated as of September 5, 2003 between Twin Lakes III LLC and the Company, as amended or supplemented from time to time covering the Headquarters Building.

“Hedging Agreement” means any commodity swap or other agreement designed to protect against fluctuations in the price of coffee or coffee-related products. For purposes of clarification, it is the

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intention of the Restricted Group not to enter into Hedging Agreements or other financing transactions that are not acceptable under Islamic Shari’ah principles.

“Holdings” means Caribou Holding Company Limited, a Cayman Islands limited liability company.

“Improvement” has the meaning given to such term in Section 11.

“Indebtedness” means of any Person at any date all obligations, contingent or otherwise, that should be classified on such Person’s balance sheet as liabilities or to which reference should be made by footnote, in each case in accordance with GAAP, including, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables, accrued expenses and other similar liabilities incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements (including reimbursement obligations thereunder), (g) the maximum redemption price of all Disqualified Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 23(e) only, all obligations of such Person in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. For purposes of this Agreement, as to the Company and its Subsidiaries, Indebtedness shall, without duplication, include any and all amounts due (or required to be due) from time to time by the Company to Arabica hereunder. For purposes of clarification, it is the intention of the Restricted Group not to incur any Indebtedness or other financial obligations that are not acceptable under Islamic Shari’ah principles.

“Indemnified Party” shall have the meaning given to such term in Section 17(a).

“Independent Director” means, with respect to Arabica, an individual who has not been (or was not) at the time of such individual’s appointment, and may not have been at any time during the preceding five years (a) an equityholder of, or an officer, director (other than with respect to such Independent Director’s service as a director of Arabica), employee, supplier (other than GSS Holdings, Inc., a Delaware corporation, and its Affiliates as a supplier of services pursuant to the Administrative Services Agreement) or customer of Arabica or its Affiliates, (b) a Person controlling any such equityholder, supplier or customer, or (c) a member of the immediate family of any such equityholder, officer, director, employee, supplier or customer or any other equityholder of Arabica. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of Arabica, whether through ownership of voting securities, by contract or otherwise.

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“Insolvency” means, with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. “Insolvent” has a corresponding meaning.

“Intangible Assets” means all assets described in Schedule 2(a) hereto and any other intangible asset made subject to this Agreement by the execution and delivery of a Supplement, including any accretion of, or attribution of additional rights to, any such assets.

“Intellectual Property” means all rights, priorities and privileges relating to intellectual property, whether arising under the United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“Intellectual Property Security Agreement” shall have the meaning given to such term in the Company Guarantee and Security Agreement.

“Late Payment Rate” means a rate equal to the Rental Rate plus 2% (or, if an Event of Default under Section 23(a) shall have occurred and then be continuing, 3%).

“Lease/Purchase Documents” means the Asset Purchase Agreement, this Agreement, the Supplemental Agreement, the Put Option Letter, the Call Option Letter, the Tax Matters Agreement, the Company Guarantee and Security Agreement, Company Leasehold Mortgage (when and if executed) and each other document, instrument or certificate delivered by Holdings and its Subsidiaries in connection with any of the foregoing.

“Leasehold Security Document” means a landlord consent and waiver (and, if the applicable member of the Restricted Group holds its leasehold interest in the relevant real property pursuant to a recorded instrument (in complete or memorandum form), a leasehold assignment or leasehold mortgage), as may be required by Arabica, in form and substance reasonably satisfactory to Arabica.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

“Major Maintenance” has the meaning given to such term in Section 10.

“Margin Stock” has the meaning specified in Section 19(k).

“Material Adverse Effect” means a material adverse effect on (a) the business, property, operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, (b) the validity or enforceability of the material terms of this Agreement or any of the other Lease/Purchase Documents, (c) the material rights or remedies of Arabica hereunder or thereunder or (d) the ability of Holdings, the Company, any of their Subsidiaries to fulfill their material obligations hereunder or thereunder.

“Materials of Environmental Concern” means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

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“Mortgage” shall have the meaning given to such term in Section 21(i)(ii).

“Multiemployer Plan” means a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds” means (i) in connection with any Asset Sale or Recovery Event, the proceeds thereof in the form of cash and cash equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys’ fees, accountants’ fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Company Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (ii) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

“New Store” means any Store not previously in existence at a location, provided that a relocation of any Store within the same building, strip mall or retail mall shall not be considered a New Store. Notwithstanding the foregoing provision, the definition of New Store shall at all times be consistent with the Company’s reporting of the opening of new Stores in all financial statements and reports that any member of the Restricted Group makes to, or files with, the SEC or provides to the holders of any class of its debt securities or public equity securities.

“New Store Commitment” means an enforceable obligation of the Company or any of its Subsidiaries to lease, acquire, develop or open a New Store.

“New York UCC” means the Uniform Commercial Code as from time to time in effect in the State of New York.

“Non-Excluded Taxes” shall have the meaning given such term in Section 12(a).

“Obligations” means any and all obligations and liabilities of the Company to Arabica, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, (i) this Agreement, any other Lease/Purchase Document or any other document made, delivered or given in connection herewith or therewith, and (ii) any obligations and liabilities to the Reference Bank or any of its affiliates relating to Bank Products; in each case whether on account of Rent, Supplemental Payments, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees, charges and disbursements of counsel to Arabica that are required to be paid by the Company pursuant hereto).

“Ordinary Maintenance” shall have the meaning given to such term in Section 10.

“Organizational Documents” means the corporate documents including, without limitation, the rules and provision of law or the charter documents or by-laws or shareholder agreements of any member of the Restricted Group.

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“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Lease/Purchase Document.

“Parts” means all appliances, parts, instruments, appurtenances, accessories and miscellaneous property of whatever nature that may from time to time be incorporated or installed in or attached to or otherwise made part of the Equipment.

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

“Permitted Acquisition” means an Acquisition Transaction by the Company or a Wholly-Owned Subsidiary Guarantor, subject to the fulfillment of the following conditions:

(i) the Company (a) shall have obtained the prior written approval of Arabica, provided that no approval shall be required if, after giving effect to the consummation of such Acquisition Transaction, the aggregate Total Purchase Price for all Acquisition Transactions does not exceed $2,500,000 during any fiscal year, and (b) shall have delivered to Arabica such documentation, financial statements, and other documents or information as Arabica may request;

(ii) Target EBITDA of the Acquisition Target for its most recently ended four fiscal quarters shall exceed $1.00;

(iii) all assets and properties acquired in connection with any such Acquisition Transaction shall be free and clear of any Liens other than Permitted Liens;

(iv) as a result of the Acquisition Transaction, any new Subsidiary must be a Wholly-Owned Subsidiary Guarantor, and the Restricted Group shall have complied with all applicable provisions hereof and of the other Lease/Purchase Documents, including the execution and delivery of such additional agreements, instruments, certificates, opinions and other papers as Arabica may reasonably require;

(v) no Default or Event of Default shall have occurred and be continuing at the time of, or shall reasonably be expected to result from, such Acquisition Transaction;

(vi) without limiting the generality of the foregoing, after giving effect to such Acquisition Transaction, the Company shall be in compliance with the provisions of Section 20, calculated on a pro forma basis after giving effect to the Acquisition Transaction; and

(vii) such Acquisition Transaction shall have been approved by the board of directors (or equivalent body) of the Acquisition Target.

“Permitted Liens” means:

(i) Liens in favor of Arabica under the Lease/Purchase Documents;

(ii) Liens for taxes, fees, assessments and other governmental charges to the extent that payment of the same may be postponed or is not required in accordance with the provisions of the Lease/Purchase Documents;

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(iii) landlord’s and lessors’ Liens in respect of rent not in default or Liens in respect of pledges or deposits under worker’s compensation, unemployment insurance, social security laws, or similar legislation (other than ERISA) or in connection with appeal and similar bonds incidental to litigation; mechanics’, laborers’ and materialmen’s and similar Liens, if the obligations secured by such Liens are not then delinquent or are released by appropriate statutory release bonds; Liens securing the performance of bids, tenders, contracts (other than for the payment of money); Liens in favor of the Reference Bank in the nature of cash collateral securing obligations described in, and permitted under, Section 22(a)(vi); and statutory obligations incidental to the conduct of its business and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the operation of its business;

(iv) judgment Liens that shall not have been in existence for a period of longer than 30 days after the creation thereof or, if a stay of execution shall have been obtained, for a period longer than 30 days after the expiration of such stay;

(v) Liens in respect of Capital Lease Obligations and purchase money obligations incurred within 90 days of purchase which in the aggregate do not secure Indebtedness in excess of $1,000,000 (of which not more than $500,000 may consist of existing capital leases) for new tangible personal property, other than inventory, used in the business of the Company and its Subsidiaries, provided that any such Liens shall not extend to property and assets not financed by such capital lease or purchase money obligation and shall not secure Indebtedness greater than the lesser of the cost or fair market value of such tangible personal property so acquired;

(vi) easements, rights of way, restrictions and other similar Liens relating to real property and not interfering in a material way with the ordinary conduct of business of the Company and its Subsidiaries or the value of such real property; and

(vii) Liens of assignments, subleases, licenses, sublicenses or other transfers of the Company’s and its Subsidiaries’ rights or assets, in each case to the extent permitted pursuant to Section 13.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Plan” means, at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledged Stock” means the Capital Stock pledged to Arabica pursuant to the Company Security Documents.

“Pre-Opening Expenses” means expenses incurred by any member of the Restricted Group prior to the opening to the general public of a Store for business, determined in accordance with GAAP.

“Projections” shall have the meaning given such term in Section 21(b)(iii).

“Properties” shall have the meaning given such term in Section 19(p)(i).

“Put Option” shall have the meaning given such term in the Put Option Letter.

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“Put Option Letter” means that certain Put Option Letter, dated the date hereof, issued by the Company to Arabica.

“Qualified Investments” means (i) existing investments and, with Arabica’s prior written consent (such consent not to be unreasonably withheld), additional investments in Caribou MSP Airport, a Minnesota joint venture, (ii) existing and additional investments in Caribou Acquisition Company, Inc., Caribou on Piedmont, Inc. and Caribou Coffee Development Company, (iii) investments in Wholly-Owned Subsidiaries formed, with the consent of Arabica, after the date hereof, and (iv) Cash Equivalents.

“Quarterly Dates” means the dates set forth on Schedule 1 and the last day of each fiscal quarter of the Company thereafter.

“Recovery Event” means any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any member of the Restricted Group, or any receipt by any member of the Restricted Group of any amount as a refund of any Tax or Other Tax.

“Reference Amount” means on any day an amount equal to $15,000,000 (or $25,000,000, if so increased by Arabica and the Company pursuant to an amendment to this Agreement) as such amount may be reduced from time to time as follows: the Company shall have the right, upon not less than three Business Days’ notice to Arabica, to reduce the Reference Amount by any amount at least equal to $1,000,000, or a whole multiple thereof (or any amount which would have the effect of reducing the Reference Amount to zero); provided that no such reduction of the Reference Amount shall be permitted if, after giving effect thereto and to any payments under the Call Option Letter made on the effective date thereof, the unpaid Acquisition Cost would exceed the Reference Amount as so reduced; provided further that any such reduction shall be in an amount equal to, and shall reduce permanently the Reference Amount then in effect.

“Reference Bank” means Wells Fargo Bank, N.A., or any successor thereto.

“Reference Period” means each period of four consecutive fiscal quarters of the Company ending on each Quarterly Date on or after the Commencement Date.

“Registered Holder” shall have the meaning given such term in Section 13(b).

“Regulation U” means Regulation U (12 CFR Part 221) of the Board as in effect from time to time.

“Reinvestment Deferred Amount” means with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any member of the Restricted Group in connection therewith that, as a result of the delivery of a Reinvestment Notice, are not used for purposes of funding the Recovery Event Purchase Price (as defined in the Put Option Letter) upon exercise by Arabica of its Recovery Event Option (as defined in the Put Option Letter).

“Reinvestment Event” means any Recovery Event in respect of which the Company has delivered a Reinvestment Notice.

“Reinvestment Notice” means a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Company (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of a Recovery Event to acquire or repair assets useful in its business.

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“Rent” means the amounts payable during the Term pursuant to Section 6 of this Agreement and Schedule 6(a).

“Rent Payment Date” means each Quarterly Date occurring on or prior to the Final Rent Payment Date, and the Final Rent Payment Date.

“Rent Period” means the period commencing on the Commencement Date and ending on the first Rent Payment Date occurring after the date hereof, and thereafter the consecutive periods commencing on each Rent Payment Date and ending on the next occurring Rent Payment Date, provided that:

(i) the first Rent Period for any Assets that are added to this Agreement pursuant to a Supplement will commence on the effective date of such Supplement and end on the next occurring Rent Payment Date;

(ii) any Rent Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Rent Period shall end on the immediately preceding Business Day;

(iii) any Rent Period that begins on the last Business Day of a calendar month (or on a day for which there is not a numerically corresponding day in the calendar month at the end of such Rent Period) shall, subject to clause (iv) below, end on the last Business Day of a calendar month; and

(iv) any Rent Period that would otherwise end after the Final Rent Payment Date shall end on the Final Rent Payment Date.

“Rental Rate” shall have the meaning given to such term in Section 1(b) of Schedule 6(a).

“Reorganization” means with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, ..30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

“Replacement” shall have the meaning given to such term in Section 11.

“Required Alteration” shall have the meaning given to such term in Section 11.

“Requirement of Law” means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, 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.

“Responsible Officer” means the chief executive officer, president, chief financial officer or treasurer of the Company, but in any event, with respect to financial matters, the chief financial officer of the Company.

“Restricted Group” means the Company, each of its Subsidiaries and Holdings, each of which is referred to as a “member” of the Restricted Group.

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“Restricted Payments” means any distribution or payment of cash or property, or both, directly or indirectly to the holder of any Capital Stock or to any Affiliates of any such holder for any reason whatsoever, including without limitation, salaries, loans, debt repayment, consulting fees, management fees, expense reimbursements and dividends, distributions, put, call or redemption payments and any other payments in respect of such Capital Stock; provided, however, that Restricted Payments shall not include reasonable and customary salaries paid to employees of the Company or any of its Subsidiaries for actual services rendered and reimbursements of bona fide out of pocket business expenses made to such employees and to other holders of any equity interest of the Company.

“SEC” means the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

“Single Employer Plan” means any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.

“Solvent” means, when used with respect to any Person, means that, as of any date of determination, (i) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (ii) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (iii) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (iv) such Person will be able to pay its debts as they mature. For purposes of this definition, (x) “debt” means liability on a “claim”, and (y) “claim” means any (I) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (II) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Specified Change of Control” means a “Change of Control” (or any other defined term having a similar purpose) as defined in any organizational document of Holdings or any agreement relating to the Capital Stock of Holdings or the Company.

“Specified Foreign Jurisdiction” means any country other than the United States in which the Company’s annual revenues or profits (excluding revenues and profits derived from franchising and similar licensing agreements or mail-order business) exceed $500,000.

“Store” means any store, kiosk, or other retail unit, including without limitation, any New Store, which is owned or controlled directly or indirectly by the Company or any of its Subsidiaries.

“Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. For purposes of clarification, as of the date hereof, Caribou MSP Airport, a Minnesota joint venture, shall not be considered to be a Subsidiary of the Company or Holdings. Notwithstanding anything in this Agreement to the contrary, Caribou Coffee Charitable

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Foundation, a Minnesota not-for-profit corporation, shall not be deemed a Subsidiary of the Company so long as it maintains its not-for-profit status and is not consolidated on the Company’s financial statements.

“Subsidiary Guarantor” means each Domestic Subsidiary of the Company.

“Supplement” has the meaning specified in Section 2(b).

“Supplemental Agreement” means that certain Supplemental Agreement, dated as of the date hereof, between Arabica and the Company.

“Supplemental Payments” means all amounts, liabilities and obligations which the Company assumes or agrees to pay hereunder to Arabica, including without limitation indemnity payments, but excluding payments of Rent and payments made under the Call Option Letter or the Put Option Letter.

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions. For purposes of clarification, it is the intention of the Restricted Group not to enter into Swap Agreements or other financing transactions that are not acceptable under Islamic Shari’ah principles.

“Target EBITDA” means, for any period, as to an Acquisition Target (or consolidated, combined or related group of Acquisition Targets), net income for such period plus, without duplication and to the extent reflected as a charge in the statement of such net income for such period, the sum of (a) income tax expense, (b) interest expense, and (c) depreciation and amortization expense, all calculated in accordance with generally accepted accounting principles consistently applied.

“Tax” shall have the meaning given such term in Section 12.

“Tax Matters Agreement” means that certain Tax Matters Agreement, dated as of the date hereof, between Arabica and the Company.

“Term” shall have the meaning given to such term in Section 4.

“Third Rent Component” shall have the meaning given such term in Section 1(c) of Schedule 6(a).

“Third Rent Component Rate” means one-half (0.50%) percent per annum.

“Total Purchase Price” means with respect to any Acquisition Transaction, all cash and non-cash consideration, including without limitation the amount of Indebtedness assumed by the buyer and the amount of Indebtedness evidenced by notes issued by the buyer to the seller, the maximum amount payable in connection with any deferred purchase price obligation (including without limitation any earn-out obligation) and the value of any Capital Stock of the buyer issued to the seller in connection with such Acquisition Transaction.

“2004 Agreement” has the meaning specified in the recitals to this Agreement.

“2004 Call Option Letter” has the meaning specified in the recitals to this Agreement.

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“2004 Put Option Letter” has the meaning specified in the recitals to this Agreement.

“United States” means the United States of America.

“Wholly-Owned Subsidiary” means as to any Person, any other Person all of the Capital Stock of which (other than directors’ qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.

“Wholly-Owned Subsidiary Guarantor” means any Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Company.

(b) As used herein and in the other Lease/Purchase Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any member of the Restricted Group not defined in Section 1(a) and accounting terms partly defined in Section 1(a), to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time and (vi) references to the “knowledge” of any member of the Restricted Group shall refer to the actual knowledge of the senior management personnel of such member of the Restricted Group.

(c) The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2. Agreement for Lease, License and Purchase Option Financing; Covenant of Quiet Enjoyment.

(a) Subject to, and upon all of the terms and conditions of this Agreement, Arabica hereby provides a lease, license and purchase option finance facility to the Company for the Assets by leasing to the Company each item of Equipment identified on Schedule 2(a) hereto or subsequently made subject to this Agreement pursuant to a Supplement, licensing to the Company each Intangible Asset identified on Schedule 2(a) hereto or subsequently made subject to this Agreement pursuant to a Supplement, and granting to the Company options to purchase the Assets, and the Company hereby accepts such facility by leasing from Arabica each item of the Equipment and by licensing from Arabica each item of the Intangible Assets from and including the applicable Effective Date for the duration of the Term and by granting to Arabica the right to require the Company to purchase the Assets.

(b) Arabica and the Company may from time to time agree to add to this Agreement additional items of Equipment and Intangible Assets to be leased and licensed hereunder, and to be subject to the Company’s purchase option and Arabica’s right to require the Company to purchase, by the execution and delivery of a supplement in substantially the form of Exhibit B hereto (each, a “Supplement”). From and after the Effective Date of a Supplement, the items of Equipment identified therein will constitute items

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of Equipment hereunder and the Intangible Assets identified therein will constitute Intangible Assets hereunder, subject as to each to all of the terms and conditions of this Agreement, the Call Option Letter, the Put Option Letter, the Supplemental Agreement and the Tax Matters Agreement.

(c) Provided that no Event of Default has occurred and is continuing, Arabica agrees that it shall not interfere with the Company’s quiet enjoyment and use of the Assets during the Term.

SECTION 3. Delivery and Acceptance of Assets. The Company has inspected the Equipment and all documentation and indicia representing the Intangible Assets and, as of the applicable Effective Date, shall be deemed (i) to have unconditionally and irrevocably accepted the Assets for all purposes of this Agreement, (ii) to have acknowledged and agreed that, as between Arabica and the Company, (A) each item of Equipment has been inspected to the Company’s satisfaction, is in good operating order, repair and condition, and is of a size, design, capacity and manufacture acceptable to the Company, (B) all documentation and indicia representing the Assets have been inspected to the Company’s satisfaction and are of the form and type acceptable to the Company, (C) except as noted on Schedule 3, each Asset is duly registered with and/or certified or licensed by any governmental entity which is charged with such registration or with issuing such certificates or licenses, (D) the Company is satisfied that each Asset is suitable for its intended purpose, (E) Arabica, with respect to each Asset, has made no warranty, expressed or implied, other than as expressly set forth herein and (F) the Company has unconditionally accepted each Asset under this Agreement, and (iii) to have waived any defect or other proper objection to any Asset.

SECTION 4. Term. The term for the lease and license of the Assets hereunder (the “Term”) shall commence, and the Rent shall commence to accrue, as to any Assets, on the Effective Date applicable to such Assets and, unless sooner terminated by Arabica pursuant to Section 24 or upon an Event of Loss, or pursuant to the Put Option Letter or the Call Option Letter, shall end on the Final Rent Payment Date; provided, however, that notwithstanding the termination, as to any Assets, of the term of the lease and license provided hereunder, all other obligations of the Company hereunder and under the other Lease/Purchase Documents and all other rights of Arabica hereunder and under the other Lease/Purchase Documents shall continue in full force and effect until all Rent accruing prior to such termination, Supplemental Payments and other amounts due and payable by the Company have been indefeasibly paid in full in cash. The Company shall not have the right to terminate this Agreement prior to the Final Rent Payment Date without the prior written consent of Arabica.

SECTION 5. End of Term Delivery of Assets. If the Company shall not have elected to purchase the Assets pursuant to the Call Option, or title shall not have automatically reverted to the Company pursuant to the last sentence of this Section 5, or Arabica shall not have required the Company to purchase the Assets pursuant to the Put Option, then at the end of the term of this Agreement the Company shall deliver, at the Company’s expense, all Assets to Arabica (or to a third party designated by Arabica) at a location or locations within the continental United States as specified in writing by Arabica or such third party. At the time of such return to Arabica or delivery to the third party, each item of Equipment (and each Part or component thereof) shall be in good operating order, and in the repair and condition as when originally delivered to the Company, ordinary wear and tear from proper use thereof excepted, and refurbished where necessary. In addition, each Asset shall (i) be in accordance and compliance with any and all statutes, laws, ordinances, rules and regulations of any federal, state or local governmental body, agency or authority applicable to the use and operation of such item of Asset and (ii) be free and clear of all Liens, other than those granted or placed thereon by Arabica. Notwithstanding the foregoing, upon the indefeasible payment at the end of the Term, in full and in cash, of all Rent, including any unpaid Acquisition Cost, Supplemental Payments and other amounts due and payable by the

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Company under the Lease/Purchase Documents, title to the Assets shall automatically revert to the Company.

SECTION 6. Payments.

(a) The Company shall pay Rent to Arabica in accordance with this Section 6 and Schedule 6(a). Rent shall be paid with respect to each Rent Period in the amounts and on the Rent Payment Dates specified in Schedule 6(a). Unless otherwise specified in Schedule 6(a), Rent for each Rent Period is due and payable in arrears and in full on each Rent Payment Date. Unless otherwise agreed, the Company shall pay Rent without deduction or set-off and without prior notice or demand from Arabica. All payments to be made by the Company hereunder or under any of the other Lease/Purchase Documents shall be made in Dollars by wire transfer and in immediately available funds directly to the account of Arabica specified on the signature page hereof.

(b) The Company hereby undertakes that it shall pay to Arabica, upon demand, to the extent permitted by applicable law, a late fee on any Rent, Supplemental Payment or other amount payable under this Agreement or any of the other Lease/Purchase Documents to which the Company is a party that is not paid when due, for any period for which any of the same is overdue (without regard to any grace period) at a rate per annum equal to the Late Payment Rate. Payment or acceptance of the late fee provided for in this Section 6(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Arabica.

(c) The parties hereto acknowledge and agree that each Supplemental Payment and each payment under the other documents entered into in connection with this Agreement shall be integral to this Agreement.

SECTION 7. Net Lease and License. Except as otherwise specifically provided herein, this Agreement is a net lease and license, and the Company acknowledges and agrees that the Company’s obligations hereunder, including without limitation its obligation to pay all Rent, Supplemental Payments and other amounts payable hereunder or under any of the other Lease/Purchase Documents, shall be absolute and unconditional under any and all circumstances and shall be paid without notice or demand and without any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment whatsoever, including without limitation any abatement, reduction, diminution, setoff, defense, counterclaim or recoupment due or alleged to be due to, or by reason of, any past, present or future claims which the Company may have against Arabica, any Registered Holder, or the manufacturer or producer of any item of the Assets, any Part or unit or component of the Equipment, or any other Person for any reason whatsoever. Except to the extent expressly provided herein, and without in any manner limiting the generality of the foregoing sentence, the obligations and liabilities of the Company hereunder shall in no way be released, discharged or otherwise affected for any reason, including without limitation (i) any defect in any item of the Equipment, any Part or unit or component of the Equipment, or the condition, design, operation or fitness for use thereof; (ii) any defect in any Asset; (iii) abandonment, salvage, scrapping or destruction of, any item of the Assets, or any Part or unit or component of the Equipment; (iv) any Liens or rights of others with respect to any item of the Assets, or any Part or unit or component of the Equipment (unless the enforcement of such Lien results in an Event of Loss as described in clause (ii) of the definition of Event of Loss); (v) any prohibition or interruption of or other restriction against the Company’s use, operation or possession of any item of the Assets, or any Part or unit or component of the Equipment for any reason whatsoever, or any interference with such use, operation or possession by any Person; (vi) any other indebtedness or liability, howsoever and whenever arising, of Arabica or of any Registered Holder or of the Company to any other Person; (vii) any insolvency, bankruptcy or similar proceedings by or against Arabica, any Registered Holder, any Subsidiary of the Company or any guarantor of the Company’s obligations; or (viii) any other reason whatsoever, whether similar or

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dissimilar to any of the foregoing, any present or future law to the contrary notwithstanding; it being the intention of the parties hereto that the Rent and other amounts payable by Company hereunder shall continue to be payable in all events and in the manner and at the times herein provided, without notice or demand, unless the obligation to pay the same shall be terminated pursuant to the express provisions of this Agreement.

SECTION 8. Arabica’s Title; Grant of Security Interest.

(a) With the exception of those Assets purchased by the Company upon its exercise of the Call Option or upon Arabica’s exercise of the Put Option or upon payment by the Company of all Rent and other amounts due on the Final Rent Payment Date, (i) title to each item of the Assets shall at all times remain in Arabica and (ii) at no time during the Term shall title to any Asset become vested in the Company.

(b) Without prejudice, and in addition to Section 8(a), and notwithstanding anything to the contrary, this Agreement is to be treated as a security agreement under New York UCC (and the Uniform Commercial Code of any other state whose laws may govern the perfection and priority of a security interest in any of the Assets), and the Company hereby grants to Arabica a security interest in the Assets and all proceeds thereof as collateral security for the payment and performance of the Obligations.

SECTION 9. Use of Assets; Compliance with Laws. The Company agrees that (i) each item of the Assets will be used only for purposes or operations in the ordinary course of its business and (ii) each item of the Equipment will be used and operated only in the manner set forth in, and in accordance with, the terms, conditions and provisions of the insurance policy or policies providing the coverages specified in Section 15. In no event shall the Company use or operate any Asset, or knowingly permit any Asset to be used or operated, for any purpose for which such Asset is not designed or reasonably suitable, or in any fashion that may reasonably subject such Asset to any Liens, other than Permitted Liens, or (as to Equipment) in any area excluded from coverage by any such insurance policy or policies. The Company further agrees that each Asset will be used and operated in the conduct of the Company’s business and in compliance with all statutes, laws, ordinances, rules and regulations of any federal, state, local or foreign government or governmental authority having jurisdiction with respect to the use, operation, maintenance and condition of such Asset (including without limitation all zoning, environmental protection, pollution, sanitary and safety laws). The Company will not load, use, operate, or store any Asset, or knowingly permit the loading, using, operating or storing of any Asset, in a negligent manner or otherwise in violation of this Agreement or (as to Equipment) so as to void any of the insurance coverages specified in Section 15 respecting any Equipment. The Company shall procure and maintain in effect all licenses, certificates, permits, approvals and consents required by federal, state, local or foreign laws or by any governmental body, agency or authority, in connection with the delivery, use, operation, maintenance and condition of each Asset. The Assets will at all times be and remain in the control of the Company except as the Company’s relinquishment of control of an Asset is specifically permitted by this Agreement and except while an Asset is undergoing maintenance. To the extent that any applicable law requires the licensing or certification of an operator of any item of the Equipment, each such operator shall be duly licensed and currently certificated and qualified to operate such item of Equipment and authorized by the terms of (and in accordance with the provisions and requirements of) the insurance policy or policies providing the coverages specified in Section 15 hereof.

SECTION 10. Maintenance and Repair of the Equipment.

(a) The Company agrees, at its own cost and expense, to be responsible for the performance of all Ordinary Maintenance required by the Equipment. The term “Ordinary Maintenance” shall mean all repair, replacement and maintenance required in the ordinary and regular course of the Company’s

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business and operations to keep, repair, maintain and preserve the Equipment in good order and operating condition, and in compliance with such maintenance and repair standards and procedures as are set forth in the manufacturer’s manuals pertaining to the Equipment, and as otherwise may be required to enforce warranty claims against each vendor and manufacturer of each item of Equipment, and in compliance with the maintenance and repair standards of the Company for similar equipment and with prudent industry standards and with all requirements of law applicable to the maintenance and condition of the Equipment.

(b) Arabica shall be obligated to perform or cause to be performed all Major Maintenance required by the Equipment. Arabica has entered into the Supplemental Agreement with the Company, under which the Company has agreed to perform or cause to be performed all Major Maintenance required by the Equipment, and Arabica and the Company have agreed on the amount to be paid by Arabica to the Company in reimbursement of the costs incurred by the Company in performing or causing to be performed such Major Maintenance. The term “Major Maintenance” shall mean all repair, replacement and maintenance required by the Equipment and not constituting Ordinary Maintenance.

SECTION 11. Replacement of Parts; Alterations; Modifications and Additions. In case any Part, component or unit of the Equipment is required to be altered or modified, or any equipment or appliance on any item of Equipment is required to be altered, added, replaced or modified, in either case in order to comply with applicable laws, regulations, requirements or rules (“Required Alteration”), Arabica shall be obligated to make or cause to be made such Required Alteration. Arabica has entered into the Supplemental Agreement with the Company, under which the Company has agreed to make or cause to be made such Required Alterations, and Arabica and the Company have agreed on the amount to be paid by Arabica to the Company in reimbursement of the costs incurred by the Company in making or causing to be made such Required Alterations. Such Required Alterations shall immediately be and become part of the Equipment and subject to the terms of this Agreement, and title thereto shall vest in Arabica. All Parts, equipment and appliances incorporated or installed in or attached to any item of Equipment in connection with servicing, repairing, maintaining and overhauling any item of Equipment pursuant to the requirements of Sections 10 or 11 hereof (“Replacement”) shall be considered accessions to such item of Equipment and shall immediately, without further act, be and become part of the Equipment, and title thereto shall vest in Arabica. The Company may, without the prior written consent of Arabica, affix or install any accessory, equipment or device on the Equipment or make any improvement or addition thereto other than a Required Alteration or Replacement (“Improvement”); provided, that, (i) a nonremovable Improvement may be made to the Equipment only if such Improvement does not reduce the value of the Equipment and (ii) any other Improvement may be made to the Equipment only if such Improvement is readily removable without causing damage to the Equipment or impairing the value, utility or condition the Equipment would have had if such Improvement had not been so affixed or installed. Nonremovable Improvements shall be considered accessions to the Equipment and shall immediately without further act, be and become part of the Equipment, and title thereto shall vest in Arabica. At the time title to any replacement Part, equipment or appliance has become vested in Arabica pursuant to the provisions of this Section 11, title to the part, equipment or appliance replaced thereby shall thereupon vest in the Company and Arabica shall be deemed to have released any Lien thereon and any interest therein.

SECTION 12. Taxes.

(a) All payments made by the Company under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (any of the foregoing, a “Tax”), excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on Arabica

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or any Registered Holder as a result of a present or former connection between Arabica or any Registered Holder and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from Arabica or any Registered Holder having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Lease/Purchase Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded Taxes”) or Other Taxes are required to be withheld from any amounts payable to Arabica or any Registered Holder hereunder, the amounts so payable to Arabica or any Registered Holder shall be increased to the extent necessary to yield to Arabica or any Registered Holder (after payment of all Non-Excluded Taxes and Other Taxes) Rent or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Company shall not be required to increase any such amounts payable to Arabica or any Registered Holder with respect to any Non-Excluded Taxes (i) that are attributable to Arabica’s or such Registered Holder’s failure to comply with the requirements of subsection (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to a Registered Holder at the time such Registered Holder becomes a party to this Agreement, except to the extent that such Registered Holder’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Company with respect to such Non-Excluded Taxes pursuant to this paragraph.

(b) In addition, the Company shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Company, as promptly as possible thereafter the Company shall send to Arabica or the relevant Registered Holder, as applicable, a certified copy of an original official receipt received by the Company showing payment thereof. If the Company fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to Arabica or such Registered Holder the required receipts or other required documentary evidence, the Company shall indemnify Arabica or such Registered Holder for any incremental taxes, interest or penalties that may become payable by Arabica or such Registered Holder as a result of any such failure.

(d) Any Registered Holder that is not a “U.S. Person” as defined in Section 7701(a)(30) of the Code (a “Non U.S. Person”) shall deliver to the Company two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non U.S. Person claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement in form and substance reasonably satisfactory to Arabica and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non U.S. Person claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Company under this Agreement and the other Lease/Purchase Documents. Such forms shall be delivered to the Company by such Non U.S. Person on or before the date it becomes a party to this Agreement or becomes a Registered Holder. In addition, such Non U.S. Person shall deliver to the Company such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non U.S. Person. Such Non-U.S. Person shall promptly notify the Company at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Company (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, such Non U.S. Person shall not be required to deliver any form pursuant to this subsection that such Non U.S. Person is not legally able to deliver.

(e) A Registered Holder that is entitled to an exemption from or reduction of non-U.S. withholding tax under United States law or any treaty to which the United States is a party, with respect to payments under this Agreement shall deliver to the Company (with a copy to Arabica), at the time or

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times prescribed by applicable law or reasonably requested by the Company, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Registered Holder is legally entitled to complete, execute and deliver such documentation and in such Registered Holder’s judgment such completion, execution or submission would not materially prejudice the legal position of such Registered Holder.

(f) If Arabica or any Registered Holder determines, in its sole discretion, that it has received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by the Company or with respect to which the Company has paid additional amounts pursuant to this Section 12, it shall pay over such refund to the Company (but only to the extent of indemnity payments made, or additional amounts paid, by the Company under this Section 12 with respect to the Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of Arabica or such Registered Holder and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Company, upon the request of Arabica or such Registered Holder, agrees to repay the amount paid over to the Company (plus any amounts imposed by the relevant Governmental Authority) to Arabica or such Registered Holder in the event Arabica or such Registered Holder is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require Arabica or such Registered Holder to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Company or any other Person. Any interest received by the Company as a result of any such refund will be donated by the Company to charity.

(g) The agreements in this Section shall survive the termination of this Agreement and the payment of Rent and all other amounts payable hereunder.

SECTION 13. Assignment, Sublease, Sublicense or other Transfer.

(a) Assignment, Sublease, Sublicense or Other Transfer by the Company. Arabica hereby gives its written consent to the Company to sublicense on a non-exclusive basis (provided that the rights retained by the Company in respect thereof may be subject to territorial exclusivity rights of the franchisee or licensee), either indirectly through one or more Subsidiaries of the Company or directly, to franchisees or similar licensees, the Company’s owned or licensed-in Intellectual Property to (i) promote and operate retail locations selling the same or similar products, including beverages, food, whole beans and ground coffee, and merchandise, as those sold at the Company’s own retail locations and (ii) promote and sell whole beans and ground coffee and other products through institutional trade channels . Except as provided in the previous sentence, the Company will not, without the prior written consent of Arabica, assign, sublease, sublicense or otherwise transfer its rights or obligations with respect to any of the Assets or hereunder, and any attempted assignment, sublease, sublicense or other transfer by the Company without such Arabica consent shall be null and void. With respect to any sublease or sublicense for which Arabica provides its written consent, no such sublease or sublicense by the Company will reduce any of the obligations of the Company hereunder or the rights of Arabica hereunder, and all of the obligations of the Company hereunder shall be and remain primary and shall continue in full force and effect as the obligations of a principal and not of a guarantor or surety. The Company shall furnish to Arabica not later than the effective date of such sublease or sublicense (i) in respect of Assets other than Intellectual Property, new insurance certificates from the Company’s insurance broker, in form and substance satisfactory to Arabica, indicating compliance with the insurance provisions of this Agreement and (ii) an officer’s certificate from the Company naming the sublessee or sublicensee and specifying the address for the sublessee or sublicensee’s principal place of business. The Company shall, and shall cause such sublessee or sublicensee to, execute and deliver such instruments to the appropriate Person for filing and to deliver copies of the same to Arabica (including sublease or sublicense agreements and Uniform Commercial Code financing statements) as may be requested by Arabica in connection with any such

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sublease or sublicense. Without limiting the foregoing, the Company shall be entitled (without the consent of Arabica) to sublease any of the Assets to any Subsidiary or Affiliate and, in connection therewith, to transfer the location of any such Asset to the premises of such Subsidiary or Affiliate. The Company shall provide Arabica with advance written notice of any such sublease. Any sublease of any of the Assets to any Subsidiary or Affiliate of the Company shall be subject to the agreement of such Affiliate or Subsidiary to acknowledge that Arabica holds title to such Assets. Any permitted assignment by the Company pursuant to this Section 13(a) shall (A) be subject to the rights of Arabica under the Put Option Letter and (B) include an assignment by the Company of the Supplemental Agreement, the Put Option Letter, the Call Option Letter and any other agreement between Arabica and the Company relating to the Assets, this Agreement or the foregoing letters and agreements, to the same assignee, and an assumption by such assignee of the obligations of the Company thereunder, and Arabica consents to such assignment and assumption of the Supplemental Agreement, the Put Option Letter, the Call Option Letter and such other agreements.

(b) Assignments By Arabica. Subject to the prior written consent of the Company, which consent may not be unreasonably withheld (unless a Default has occurred and is continuing, in which case no such consent shall be required), Arabica may at any time sell or transfer all, but not less than all, of Arabica’s right, title and interest in and to the Assets and, in connection therewith, sell, assign and transfer all, but not less than all, of Arabica’s right, title and interest in, to and under this Agreement (each assignee in such circumstances and each Person for whom any such Person may act, either directly or indirectly, being a “Registered Holder”), and may, without the consent of the Company, and at its sole discretion, collaterally assign to any Person all or any of its rights hereunder or under any Lease/Purchase Document. Any permitted assignment by Arabica pursuant to this Section 13(b) shall (i) be subject to the rights of the Company under the Call Option Letter and (ii) include an assignment by Arabica of the Supplemental Agreement, the Put Option Letter and the Call Option Letter to the same Registered Holder, and an assumption by such Registered Holder of the obligations of Arabica thereunder, and the Company consents to such assignment and assumption of the Supplemental Agreement, the Put Option Letter and the Call Option Letter.

SECTION 14. Event of Loss; Obsolete and Worn Out Equipment.

(a) Termination Upon Event of Loss. Upon the occurrence of an Event of Loss, the Company shall give prompt notice thereof to Arabica and the lease and license of the Assets hereunder shall terminate immediately, and all Rent shall cease to accrue with respect to all of the Assets, provided that Arabica shall be entitled to the payment specified in Section 14(b) with respect to the Assets; and provided, further, however, that notwithstanding such termination of the lease, license and purchase option financing provided hereunder, the obligations of the Company hereunder and under the other Lease/Purchase Documents and the rights of Arabica hereunder and under the other Lease/Purchase Documents shall continue in full force and effect until all Rent, Supplemental Payments and other amounts payable by the Company hereunder or under any of the other Lease/Purchase Documents have been indefeasibly paid in full in cash. Not later than five Business Days after the occurrence of an Event of Loss, the Company shall pay the Rent applicable to such Assets to the date of such Event of Loss.

(b) Event of Loss Payments. Pursuant to the Supplemental Agreement, all insurance and other payments resulting from an Event of Loss in relation to the Assets to which the Company is entitled shall be paid or remitted by the Company to Arabica. Upon such payment, the unpaid Acquisition Cost previously attributable to the Assets shall be deemed to have been paid in full.

(c) Application of Payments Not Relating to an Event of Loss. Any payments (including without limitation insurance proceeds) received at any time by Arabica or the Company from any insurer, governmental authority or other party with respect to any condemnation, confiscation, theft or seizure of,

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or requisition of title to or use of, or loss or damage to, any item of the Equipment not constituting an Event of Loss, will be applied directly in payment of repairs or for replacement of property in accordance with the provisions of Sections 10 and 11 hereof, if not already paid by the Company, or if already paid by the Company and if no Default or Event of Default shall have occurred and be continuing, shall be applied to reimburse the Company for such payment. If an Event of Default shall have occurred and is continuing, any such payment shall be applied to the unpaid Acquisition Cost of the Assets.

SECTION 15. Insurance.

(a) Coverage — Property Damage. Arabica shall be responsible for maintaining or causing to be maintained property damage insurance coverage (including, without limitation, so-called “all perils” coverage at the greater of replacement value or Acquisition Cost) for the Equipment. Arabica shall satisfy this obligation by entering into the Supplemental Agreement.

(b) Coverage — Liability and Other. The Company shall maintain (i) comprehensive general public liability insurance, including “broad form” liability coverage blanket contractual, personal injury, property damage and loss of use of property of others, (ii) fidelity insurance and (iii) such other insurance with respect to the Equipment in such amounts and against such insurable hazards as is usually carried by the Company.

(c) Insurance Policies. All insurance required to be maintained by or on behalf of the Company or any other member of the Restricted Group pursuant to this Agreement and the other Lease/Purchase Documents shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days (10 days for non payment of premiums) after receipt by Arabica of written notice thereof, (ii) provide that Arabica’s interest will be insured regardless of any breach or violation of the underlying policies by the Company or such other member of the Restricted Group or any other Person, (iii) name Arabica and its successors and assigns as loss payee pursuant to a loss payable endorsement issued in favor of and delivered to Arabica and (iv) be reasonably satisfactory in all other respects to Arabica. If the Company or any member of the Restricted Group fails to provide or cause to be provided such insurance, Arabica, in its sole discretion, may provide such insurance and charge the cost to the Company and any member of the Restricted Group.

SECTION 16. Illegality. Where the introduction of any law, order, regulation or official directive or any change in the interpretation or application thereof makes it unlawful for Arabica or the Company to give effect to its respective obligations under this Agreement or the Supplemental Agreement, then each party shall notify the other of such change in circumstances and, in consultation with the other party, use all reasonable efforts to avoid the effects of such introduction, variation or change. If the affected party determines in good faith that it is unable, within any period which the relevant introduction, variation or change may allow, to avoid the effects of the same, then the Put Option may be exercised by Arabica in accordance with Section 2 of the Put Option Letter.

SECTION 17. General Indemnity.

(a) The Company hereby assumes liability for, and does hereby agree, whether or not any of the transactions contemplated hereby are consummated, to indemnify, protect, save, defend, exonerate, pay and hold harmless Arabica, each Registered Holder, each Person claiming by or through any Registered Holder, and each of their respective officers, directors, stockholders, successors, assigns, agents and servants, and any beneficiaries of any of the foregoing (each such party may be referred to herein as an “Indemnified Party”) on a net after-tax basis (at the then highest marginal federal and applicable state, local and foreign income tax rates) from and against any and all obligations, fees, liabilities, losses, interest, damages, punitive damages, penalties, fines, claims, demands, actions, suits, judgments,

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investigations, proceedings, costs and expenses, including without limitation reasonable legal fees and expenses (including without limitation such legal fees and expenses or disbursements of any kind or nature whatsoever incurred in connection with the execution, delivery, performance and enforcement of this Agreement and the other Lease/Purchase Documents, or any amendment, supplement or modification of, or any waiver or consent in connection thereof and any agreement related to the foregoing), of every kind and nature whatsoever imposed on, incurred by, or asserted against any Indemnified Party, in any way relating to or arising out of the Assets or the performance by Arabica or any Indemnified Party of its obligations hereunder, under any agreement related hereto or under any guaranty or the Company Security Documents relating to the obligations of the Company hereunder, except as otherwise provided herein, or (i) the manufacture, construction, ordering, purchase, acceptance or rejection, ownership, delivery, leasing, re-leasing, subleasing, licensing, re-licensing, sublicensing, possession, use, operation, maintenance, storage, registration or re-registration, titling or re-titling, licensing or re-licensing, documentation, removal, return, sale (including without limitation sale by an Indemnified Party to the Company pursuant to the terms hereof) or other applications or dispositions thereof, including without limitation any of such as may arise from (A) loss or damage to any property or death or injury to any Person, (B) patent or latent defects in the Assets (whether or not discoverable by the Company or any Indemnified Party), (C) any claims based on strict liability in tort or otherwise, (D) any claims based on patent, trademark or copyright infringement attributable to the use, possession or operation of the Assets by the Company, and (E) any claims based on liability arising under any applicable environmental or noise or pollution control law or regulation, (ii) any failure on the part of the Company to perform or comply with any of the terms of this Agreement or any document, instrument, agreement or contract entered into in relation hereto or otherwise in relation to the Assets but excluding any claim based upon any failure on the part of an Indemnified Party to comply with its obligations under this Agreement or any document, instrument, agreement or contract entered into by such Indemnified Party in relation hereto or otherwise in relation to the Assets or (iii) any claims, encumbrances, security interests, liens or legal processes regarding such Indemnified Party’s title to or interest in the Assets attributable to the Company’s use of the Assets. The Company shall not be required to indemnify any Indemnified Party for any claims resulting from acts which would constitute the willful misconduct or gross negligence of such Indemnified Party. The Company shall give each Indemnified Party prompt notice of any occurrence, event or condition known to the Company as a consequence of which any Indemnified Party is or is reasonably likely to be entitled to indemnification hereunder.

(b) The indemnification provided in this Section 17 shall specifically apply to and include claims or actions brought by or on behalf of employees of the Company and the Company hereby expressly waives, as against any Indemnified Party, any immunity to which the Company may otherwise be entitled under any industrial or worker’s compensation laws. The Company shall promptly upon request of any such Indemnified Party (but in any event within 30 days of such request) reimburse such Indemnified Party for amounts expended by it in connection with any of the foregoing or pay such amounts directly. The Company shall be subrogated to an Indemnified Party’s rights in any matter with respect to which the Company has actually reimbursed such Indemnified Party for amounts expended by it or has actually paid such amounts directly pursuant to this Section 17. If any action, suit or proceeding is brought against any Indemnified Party in connection with any claim indemnified against hereunder, such Indemnified Party will, after receipt of notice of the commencement of such action, suit or proceeding, notify the Company thereof, enclosing a copy of all papers served upon such Indemnified Party. The Company may, and upon such Indemnified Party’s request will, at the Company’s expense, resist and defend such action, suit or proceeding, or cause the same to be resisted or defended by counsel selected by the Company and reasonably satisfactory to such Indemnified Party and in the event of any failure by the Company to do so, the Company shall pay all costs and expenses (including without limitation reasonable attorney’s fees and expenses) incurred by such Indemnified Party in connection with such action, suit or proceeding. The provisions of this Section 17, and all of the indemnities and the obligations of the Company under this

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Section 17, shall apply to the Assets and each component thereof and shall apply from the date of the execution of this Agreement and shall survive the expiration or earlier termination of this Agreement and all documents, instruments, agreements and contracts entered into in relation hereto or otherwise in relation to the Assets or any component of the Assets and are expressly made for the benefit of, and shall be enforceable by, each Indemnified Party.

(c) All amounts due under this Section 17 shall be payable not later than 10 days after written demand therefor. Demands for payments pursuant to this Section 17 shall be submitted to Timothy Hennessy (Telephone No. 763-592-2222) (Telecopy No. 612-359-2730) or to such other Person or address as may be hereafter designated by the Company in a written notice to Company. The agreements in this Section 17 shall survive payment of all Obligations hereunder.

SECTION 18. Disclaimer. ARABICA, NOT BEING A SELLER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE IN EFFECT IN ANY APPLICABLE JURISDICTION AND FOR THE PURPOSES OF SUCH CODE), OR A SELLER’S AGENT, AND INASMUCH AS THE COMPANY HAS ACCEPTED DELIVERY OF THE ASSETS AFTER SATISFYING ITSELF AS TO THE CONDITION, QUALITY, FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE OF SUCH ASSETS, HEREBY EXPRESSLY DISCLAIMS AND MAKES TO THE COMPANY OR ANY SUBSIDIARY OR AFFILIATE OF THE COMPANY NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO: THE FITNESS FOR USE, DESIGN OR CONDITION OF THE ASSETS; THE QUALITY OR CAPACITY OF THE ASSETS; THE WORKMANSHIP OF THE ASSETS; THAT THE ASSETS WILL SATISFY THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO, AND ANY GUARANTY OR WARRANTY AGAINST PATENT INFRINGEMENT OR LATENT DEFECTS, IT BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN ARABICA AND THE COMPANY OR ANY SUBSIDIARY OR AFFILIATE OF THE COMPANY, ARE TO BE BORNE BY THE COMPANY. ARABICA IS NOT RESPONSIBLE FOR ANY DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGE TO OR LOSSES RESULTING FROM THE INSTALLATION, OPERATION OR USE OF THE ASSETS OR ANY PRODUCTS MANUFACTURED THEREBY. ARABICA HEREBY ASSIGNS TO THE COMPANY ALL ASSIGNABLE WARRANTIES MADE BY THE SUPPLIER TO ARABICA FOR AND DURING THE TERM OF THIS AGREEMENT AND THE COMPANY AGREES TO RESOLVE ALL SUCH CLAIMS DIRECTLY WITH THE SUPPLIER. ARABICA SHALL COOPERATE FULLY WITH THE COMPANY WITH RESPECT TO THE RESOLUTION OF SUCH CLAIMS, IN GOOD FAITH AND BY APPROPRIATE PROCEEDINGS AT THE COMPANY’S EXPENSE. ANY SUCH CLAIM SHALL NOT AFFECT IN ANY MANNER THE UNCONDITIONAL OBLIGATION OF THE COMPANY TO MAKE RENT AND OTHER PAYMENTS HEREUNDER. So long and only so long as an Event of Default shall not have occurred and be continuing, and so long and only so long as any of the Assets shall be subject to this Agreement and the Company shall be entitled to possession of the Assets hereunder, Arabica authorizes the Company, at the Company’s sole expense, to assert for Arabica’s account, all rights and powers of Arabica under any manufacturer’s, vendor’s or dealer’s warranty on any item of Assets; provided, however, that the Company shall indemnify, protect, save, defend and hold harmless Arabica from and against any and all claims, and all costs, expenses, damages, losses and liabilities incurred or suffered by Arabica in connection therewith, as a result of, or incident to, any action by the Company pursuant to the foregoing authorization.

SECTION 19. Representations and Warranties. In order to induce Arabica to enter into this Agreement and to lease and license the Assets to the Company hereunder, the Company hereby confirms (i) the representations and warranties of each member of the Restricted Group set forth in the other

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Lease/Purchase Documents (which are incorporated by reference herein) and (ii) the following representations and warranties (which representations and warranties assume the leasing and licensing to the Company of Assets existing on the Commencement Date and shall survive the execution and delivery of this Agreement and the leasing and licensing of such Assets):

(a) Financial Condition. The audited consolidated balance sheets of the Company and its Subsidiaries as at December 28, 2008, and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by and accompanied by an unqualified report from Ernst & Young LLP, present fairly the consolidated financial condition of the Company and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Company and its Subsidiaries as at December 28, 2009 and the related unaudited consolidated statements of income and cash flows for the twelve-month period ended on such date, present fairly the consolidated financial condition of the Company as at such date, and the consolidated results of its operations and its consolidated cash flows for the twelve-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). No member of the Restricted Group has any material Guarantee Obligations, contingent liabilities, liabilities for taxes, or any long-term leases (other than pursuant to the Lease/Purchase Documents) or unusual forward or long-term commitments, including any rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from December 28, 2008 to and including the date hereof there has been no Disposition by any member of the Restricted Group of any material part of its business or property. No subordinated Indebtedness of any member of the Restricted Group is outstanding as of the date hereof.

(b) No Change. Since December 28, 2008, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

(c) Existence; Compliance with Law. Each member of the Restricted Group (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

(d) Power; Authorization; Enforceable Obligations. Each member of the Restricted Group has the power and authority, and the legal right, to execute, deliver and perform the Lease/Purchase Documents to which it is a party. Each member of the Restricted Group has taken all necessary organizational action to authorize the execution, delivery and performance of the Lease/Purchase Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of any of the Lease/Purchase Documents. Each Lease/Purchase Document has been duly executed and delivered on behalf of each member of the Restricted Group party thereto and constitutes the legal, valid and binding obligation of such member of the Restricted Group, enforceable against each such member in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

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(e) No Legal Bar. The execution, delivery and performance of the Lease/Purchase Documents will not violate in any material respect any Requirement of Law or any Contractual Obligation of any member of the Restricted Group and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Lease/Purchase Documents). There are no Requirements of Law or Contractual Obligations applicable to any member of the Restricted Group that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

(f) Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of any member of the Restricted Group, threatened by or against any member of the Restricted Group or against any of their respective properties or revenues (a) with respect to any of the Lease/Purchase Documents or any of the transactions contemplated hereby or thereby, or (b) that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(g) No Default. No member of the Restricted Group is in default under or with respect to any of its Contractual Obligations in any respect that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

(h) Ownership of Property; Liens. Each member of the Restricted Group has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except for Permitted Liens.

(i) Intellectual Property. Except as otherwise described on Schedule 19(i), (a) Arabica owns all service marks used by the Company and its Subsidiaries in their business and (b) each member of the Restricted Group owns, or is licensed to use, all other Intellectual Property necessary for the conduct of its business as currently conducted. Except as otherwise described on Schedule 19(i), no material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does any member of the Restricted Group have knowledge of any valid basis for any such claim. The use of Intellectual Property by each member of the Restricted Group does not infringe on the rights of any Person except for instances which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as provided in Schedule 19(i), no interest in any of the Intellectual Property has been licensed by any member of the Restricted Group to any other Person (except for licenses permitted pursuant to Section 13).

(j) Taxes. Each member of the Restricted Group has filed or caused to be filed all federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant member of the Restricted Group; no tax Lien has been filed, and, to the knowledge of the members of the Restricted Group, no claim is being asserted, with respect to any such tax, fee or other charge. No member of the Restricted Group has executed any waiver having the effect of extending any applicable statute of limitations in respect of tax liabilities.

(k) Federal Regulations. No portion of any amount paid to any member of the Restricted Group under the Lease/Purchase Documents will be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time

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hereafter in effect or for any purpose that violates the provisions of Regulations T, U or X of the Board. If requested by Arabica, the Company will furnish to Arabica a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.

(l) Labor Matters. (a) There are no collective bargaining agreements or other labor contracts covering any member of the Restricted Group; (b) to the knowledge of the members of the Restricted Group, no union or other labor organization is seeking to organize, or to be recognized as bargaining representative for, a bargaining unit of employees of any member of the Restricted Group; (c) there is no material labor dispute pending or threatened against or affecting any member of the Restricted Group; (d) there has not been, during the five year period prior to the date hereof, any material labor dispute against or affecting any member of the Restricted Group, other than employee grievances arising in the ordinary course of business which are not, in the aggregate, material; and (e) each member of the Restricted Group has complied in all material respects with (or corrected in full any prior noncompliance) and is in material compliance with the provisions of the Fair Labor Standards Act of 1938, as amended, and regulations thereunder.

(m) ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Company nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

(n) Investment Company Act; Other Regulations. No member of the Restricted Group is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. No member of the Restricted Group is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

(o) Subsidiaries; Capital Stock. Except as disclosed to Arabica in writing from time to time after the Commencement Date:

(i) Holdings has only the Subsidiaries set forth on, and the authorized, issued and outstanding Capital Stock of each member of the Restricted Group is as set forth on, Schedule 19(o), (ii) the Capital Stock of each member of the Restricted Group are duly authorized, validly issued, fully paid and nonassessable, and (iii) the Capital Stock of each of Holdings and each Subsidiary of the Company are owned beneficially and of record by the Persons set forth on Schedule 19(o), free and clear of all Liens.

(ii) Except as set forth on Schedule 19(o), no member of the Restricted Group has issued any securities convertible into, or options or warrants for, any common or preferred equity

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securities thereof and there are no agreements, voting trusts or understandings binding upon any member of the Restricted Group with respect to the voting securities of any member of the Restricted Group or affecting in any manner the sale, pledge, assignment or other disposition thereof, including any right of first refusal, option, redemption, call or other right with respect thereto, whether similar or dissimilar to any of the foregoing.

(p) Environmental Matters. Except as disclosed on Schedule 19(p) and as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(i) the facilities and properties owned, leased or operated by any member of the Restricted Group (the “Properties”) do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;

(ii) no member of the Restricted Group has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by any member of the Restricted Group (the “Business”), nor does any member of the Restricted Group have knowledge or reason to believe that any such notice will be received or is being threatened;

(iii) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;

(iv) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the members of the Restricted Group, threatened, under any Environmental Law to which any member of the Restricted Group is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;

(v) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any member of the Restricted Group in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;

(vi) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and

(vii) no member of the Restricted Group has assumed any liability of any other Person under Environmental Laws.

(q) Accuracy of Information, etc. No statement or information contained in this Agreement, any other Lease/Purchase Document, or any other document, certificate or statement furnished by or on behalf

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of the Company or any of its Subsidiaries to Arabica or any Registered Holder, for use in connection with the transactions contemplated by this Agreement or the other Lease/Purchase Documents, contains any untrue statement of a material fact or omits any material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Company to be reasonable at the time made, it being recognized that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. No member of the Restricted Group has knowledge of any fact that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Lease/Purchase Documents or in any other documents, certificates and statements furnished to Arabica or any Registered Holder for use in connection with the transaction contemplated hereby and by the other Lease/Purchase Documents.

(r) Company Security Documents, Real Property.

(i) Each Company Security Document is effective to create in favor of Arabica a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Company Security Documents, when stock certificates representing such Pledged Stock are delivered to Arabica, and in the case of the other Collateral described in the Company Security Documents, when financing statements and other filings specified on Schedule 19(r)(ii) in appropriate form are filed in the offices specified on Schedule 19(r)(i), each Company Security Document shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the members of the Restricted Group in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the applicable Security Document), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Permitted Liens).

(ii) Schedule 19(r)(ii) lists, as of the Commencement Date, each parcel of owned real property and each leasehold interest in real property held by the members of the Restricted Group.

(s) Solvency. Each member of the Restricted Group is, and after giving effect to this Agreement and the other Lease/Purchase Documents, and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent.

(t) Stores; Material Agreements. Schedule 19(t) accurately and completely lists all Stores owned or operated by the Company or any of its Subsidiaries (with the owner and operator and address of each Store listed thereon) and all material agreements (including all real estate leases) to which any member of the Restricted Group is a party. Each of the material agreements listed on Schedule 19(t) is in full force and effect and constitutes the legally valid and binding obligation of the Company or its Subsidiary, as the case may be, identified thereon as being a party to such agreement and, to the knowledge of the Restricted Group, the other parties thereto, enforceable against each of them in accordance with its respective terms. No member of the Restricted Group is in violation under any material agreements, where such violations in the aggregate could reasonably be expected to have a Material Adverse Effect. To the knowledge of the members of the Restricted Group, except as disclosed in Schedule 19(t), third parties to any material agreements are not in material violation thereof to the extent that such violations in the aggregate could reasonably be expected to have a Material Adverse Effect.

(u) Indebtedness Outstanding.

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(i) Set forth on Schedule 19(u)(i) hereto is a list and description of all Indebtedness of any member of the Restricted Group that will be outstanding immediately after the Commencement Date.

(ii) Set forth on Schedule 19(u)(ii) hereto is a list and description of all Liens of any member of the Restricted Group that will be outstanding immediately after the Commencement Date.

(v) Anti-Terrorism Laws.

(i) No member of the Restricted Group and, to the knowledge of the Restricted Group, no Affiliate of any member of the Restricted Group, is in violation of any United States laws applicable to such member of the Restricted Group or such Affiliate relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

(ii) No member of the Restricted Group and, to the knowledge of any member of the Restricted Group, no Affiliate of any member of the Restricted Group is any of the following:

(A) a Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(B) a Person or entity owned or controlled by, or acting for or on behalf of, any Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(C) a Person or entity with which any party is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(D) a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(E) a Person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list.

(iii) No member of the Restricted Group and, to the knowledge of any member of the Restricted Group, no Affiliate of any member of the Restricted Group (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (ii) above, (B) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (C) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(iv) No Person is acting for any member of the Restricted Group or any Affiliate of any thereof as a broker or other agent acting or benefiting in any capacity in connection with this Agreement.

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(w) Use of Proceeds. The Company shall use the sale proceeds received under the Asset Purchase Agreement for the acquisition and/or construction of new facilities, operating facility upgrades, working capital and other general corporate purposes.

(x) Regulation H. No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

SECTION 20. Financial Covenants. The Company covenants and agrees that until all Rent and other amounts payable hereunder and under the Lease/Purchase Documents have been indefeasibly paid in full in cash:

(a) Maximum Senior Leverage Ratio. The Company will not cause or permit the ratio (the “Consolidated Senior Leverage Ratio“) of the Consolidated Funded Indebtedness of the Company and its Subsidiaries at December 28, 2009 and at any Quarterly Date thereafter to the Consolidated EBITDA of the Company for the Reference Period ending on such Quarterly Date to be greater than 1.50:1.00.

(b) Minimum Interest Coverage Ratio. The Company will not cause or permit the ratio of (i) the Consolidated EBITDAR of the Company for each Reference Period ending on any Quarterly Date to (ii) the sum of Consolidated Financing Expense plus Consolidated Rental Expense of the Company and its Subsidiaries for such Reference Period to be less than 1.35:1.00.

(c) Maximum Capital Expenditures. The Company will not cause or permit the aggregate amount of Capital Expenditures made by the Company and its Subsidiaries in any fiscal year to exceed the sum of (A) $30,000,000 minus (B) the aggregate amount of Restricted Payments made pursuant to Section 22(f)(iii) of this Agreement during such fiscal year that is in excess of $5,000,000.

(d) New Store Commitments. The Company shall not enter into any New Store Commitment if at such time (i) the Coffeehouse Level EBITDA Margin for the most recently completed Reference Period for which financial statements have been delivered pursuant to Section 21(a)(ii) is less than 15% of Coffeehouse Level Sales for such Reference Period, or (ii) the aggregate Available Amount is less than (A) the budgeted amount of Capital Expenditures for outstanding New Store Commitments (including the New Store Commitment in question, and assuming that the budgeted amount of Capital Expenditures for any New Store Commitment for which a Capital Expenditure budget has not been determined is $300,000), less (2) the aggregate amount of Capital Expenditures made toward New Store Commitments prior to the opening of each such New Store.

SECTION 21. Affirmative Covenants. The Company covenants and agrees that until all Rent and other amounts payable hereunder and under the Lease/Purchase Documents have been indefeasibly paid in full in cash:

(a) Financial Reporting. The Company will furnish to Arabica the following financial statements, each of which shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP:

(i) as soon as available, but in any event within 90 days after the end of each fiscal year a copy of the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or

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qualification arising out of the scope of the audit, by Ernst & Young or other independent certified public accountants of nationally recognized standing;

(ii) as soon as available, but in any event not later than 45 days after the end of each quarterly period of each fiscal year, the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and, in each case, the related unaudited consolidated statements of income for such quarter and statements of income and cash flows for the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and

(iii) as soon as available, but in any event not later than 30 days after the end of each month occurring during each fiscal year (other than the last month of each fiscal quarter), the unaudited consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income for such month and statements of income and cash flows for the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).

(b) Certificates; Other Information. The Company will furnish to Arabica:

(i) concurrently with the delivery of the financial statements referred to in Section 21(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

(ii) concurrently with the delivery of the financial statements pursuant to Sections 21(a)(i) and 21(a)(ii): (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s knowledge, the Company and each of its Subsidiaries, during such period, have observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Lease/Purchase Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (ii) a Store by Store report and a Market report, (iii) a Compliance Certificate, (iv) to the extent not previously disclosed to Arabica, a description of any change in the jurisdiction of organization of any member of the Restricted Group and a list of any Intellectual Property or other property as to which action is required under Section 21(i) hereof, in each case acquired by any member of the Restricted Group since the date of the most recent report delivered pursuant to this clause (iv), and (v) a list of all third party locations where any Equipment is located in connection of the sale of inventory in the ordinary course of the Company’s business including the approximate aggregate book value of such Equipment; provided however that, the information specified in clause (v) of this Section 21(b)(ii) shall only be required to be provided concurrently with the delivery of the quarterly financial statements for the second and fourth fiscal quarters of each fiscal year pursuant to Section 21(a)(ii);

(iii) as soon as available, and in any event no later than 30 days prior to the beginning of each fiscal year of the Company, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Company and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying

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assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect;

(iv) within 45 days after the end of each fiscal quarter, a narrative discussion and analysis of the financial condition and results of operations of the Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year;

(v) no later than 10 Business Days (or, in the case of amendments or supplements to this Agreement and the other Lease/Purchase Documents effected solely to facilitate the sale and leaseback of additional Assets hereunder and thereunder, three Business Days) prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Lease/Purchase Documents;

(vi) within five days after the same are sent, copies of all financial statements and reports that any member of the Restricted Group send to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that any member of the Restricted Group may make to, or file with, the SEC;

(vii) as soon as available, but in any event no later than 20 days after the Commencement Date, all certificates representing the shares of the Pledged Stock, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof; and

(viii) as soon as available, but in any event no later than 20 days after the Commencement Date, using best efforts, an amendment to the Lease of Retail Space dated May 25, 1993, as amended, by and between the Company and Brookfield LD DB Inc., in form and substance reasonably acceptable to Arabica; and

(ix) promptly, such additional financial and other information as Arabica may from time to time reasonably request.

(c) Payment of Obligations. Each member of the Restricted Group will pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company or any of its Subsidiaries, when relevant.

(d) Maintenance of Existence; Compliance; Conduct of Business. Each member of the Restricted Group will (i) preserve, renew and keep in full force and effect its organizational existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (ii) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect; (iii) maintain and keep in full force and effect all material licenses and permits necessary to the proper conduct of its business; and (iv) remain or engage in the business of (A) owning,

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operating and promoting, directly or indirectly (including through licensees and franchisees), the Stores and other retail locations wherever located selling the same or similar products, including beverages, food, whole beans and ground coffee, and merchandise, as those currently sold by the Company and its Subsidiaries through the Stores or otherwise and (B) selling and promoting, directly or indirectly (including through licensees or franchisees), whole beans and ground coffee and other products through institutional trade channels, and in no other business.

(e) Maintenance of Property; Insurance. Subject to Sections 10, 11 and 15, each member of the Restricted Group will (a) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property as required under the Company Security Documents and, without limiting the provisions thereof, in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.

(f) Inspection of Property; Books and Records; Discussions. Each member of the Restricted Group will (a) keep proper books of records and account in which full, true and correct entries in conformity with GAAP (in respect of the Company and its Subsidiaries only) and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of Arabica or its designees to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of members of the Company and its Subsidiaries with officers and employees of members of the Restricted Group and with their independent certified public accountants. Upon receipt of Arabica’s notice requesting to inspect certain Equipment or other Assets or books and records, such member of the Restricted Group shall promptly notify Arabica of the location thereof and shall make all necessary arrangements to facilitate the inspection. Without limiting the foregoing, Arabica may conduct up to four (4) commercial credit examinations of the Company and its Subsidiaries per year so long as no Event of Default exists, and during any period when an Event of Default is continuing, as many commercial credit examinations of the Company and its Subsidiaries as it reasonably deems necessary. One such examination per year while no Event of Default has occurred and is continuing, and all such examinations during the continuance of any Event of Default, shall be all at the expense of the Company.

(g) Notices. Promptly give notice to Arabica of:

(i) the occurrence of any Default or Event of Default;

(ii) any (A) default or event of default under any Contractual Obligation of any member of the Restricted Group, or (B) litigation, investigation or proceeding that may exist at any time between any member of the Restricted Group and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

(iii) any litigation or proceeding affecting any member of the Restricted Group, (A) in which the amount involved that is not covered by insurance is $1,000,000 or more, (B) in which injunctive or similar relief is sought or (C) which relates to any Lease/Purchase Document or any agreement relating thereto;

(iv) the following events, as soon as possible and in any event within 30 days after any member of the Restricted Group, knows or has reason to know thereof: (A) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a

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Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (B) the institution of proceedings or the taking of any other action by the PBGC, the Company or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan;

(v) no more than five Business Days after becoming aware of any investigative proceedings by a Governmental Authority commenced or threatened against any member of the Restricted Group regarding any potential violation of Environmental Laws, any spill, release, discharge or disposal of any Materials of Environmental Concern or any event required to be reported to any such Governmental Authority, written notice thereof and of the action being proposed to be taken with respect thereto;

(vi) any development or event that has had or could reasonably be expected to have a Material Adverse Effect; and

(vii) promptly, and in any event within five days after receipt thereof by any member of the Restricted Group, copies of each notice or other correspondence received from the SEC concerning any investigation or possible investigation or other inquiry by the SEC regarding financial or other operational results of any member of the Restricted Group.

Each notice pursuant to this Section 21(g) shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Company or any of its Subsidiaries, as relevant, proposes to take with respect thereto.

(h) Environmental Laws.

(i) Each member of the Restricted Group will comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.

(ii) Each member of the Restricted Group conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws.

(i) Additional Collateral, Etc.

(i) With respect to any property acquired after the Commencement Date by any member of the Restricted Group that is not a Foreign Subsidiary (other than (x) any property described in paragraph (ii) or (iii) below, (y) any property listed in clause (v) of the definition of “Permitted Liens” and (z) any Intellectual Property, to the extent of any filings required outside of the United States (unless such filings are in a Specified Foreign Jurisdiction)) as to which Arabica does not have a perfected Lien, promptly (and not less frequently than quarterly, in the case of any Collateral constituting Intellectual Property) (A) execute and deliver to Arabica such amendments to the Security Documents or such other documents (including any Leasehold Security Document) as Arabica deems necessary or advisable to grant to Arabica a security interest in such property and (B) take all actions necessary or advisable to grant to Arabica a

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perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Company Security Documents or by law or as may reasonably be requested by Arabica in respect of such property.

(ii) With respect to any fee interest in any real property having a value (together with improvements thereon) of at least $250,000 acquired after the Commencement Date by any member of the Restricted Group that is not a Foreign Subsidiary, promptly (A) execute and deliver a first priority mortgage reasonably satisfactory to Arabica (each, a “Mortgage”), in favor of Arabica covering such real property, (B) if requested by Arabica, provide Arabica and any Registered Holders with (1) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by Arabica) as well as a current ALTA survey thereof, together with a surveyor’s certificate and (2) any consents or estoppels reasonably deemed necessary or advisable by Arabica in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to Arabica and (C) if requested by Arabica, deliver to Arabica legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to Arabica.

(iii) With respect to any new Subsidiary created or acquired after the Commencement Date by any member of the Restricted Group, promptly (A) execute and deliver to Arabica such amendments to the Company Security Documents as Arabica deems necessary or advisable to grant to Arabica a perfected first priority security interest in (1) 100% of the Capital Stock of any such new Domestic Subsidiary that is owned by any member of the Restricted Group, and (2) 65% of the Capital Stock of any such new Foreign Subsidiary that is owned by any member of the Restricted Group, (B) deliver to Arabica the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant member or members of the Restricted Group, (C) if such new Subsidiary is a Domestic Subsidiary cause such new Subsidiary (a) to become a party to the Company Guarantee and Security Agreement, (b) to take such actions necessary or advisable to grant to Arabica a perfected first priority security interest in the Collateral described in the Company Security Documents with respect to such new Domestic Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Company Security Documents or by law or as may reasonably be requested by Arabica (other than in respect of property listed in clause (v) of the definition of “Permitted Liens” and Intellectual Property, to the extent of any filings required outside of the United States and the European Union) and (c) to deliver to Arabica a certificate of such Domestic Subsidiary, substantially in the form of Exhibit C, with appropriate insertions and attachments, and (D) if requested by Arabica, deliver to Arabica legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to Arabica.

(iv) Promptly upon any member of the Restricted Group undertaking any business or operations in any Specified Foreign Jurisdiction (other than entering into agreements with franchisees and similar licensees in any such jurisdiction and other than in respect of property subject to a Lien expressly permitted by clause (e) of the definition of “Permitted Liens”) notify Arabica thereof and, if reasonably requested by Arabica, promptly furnish to Arabica an opinion of counsel, such opinion and such counsel to be reasonably satisfactory to Arabica, as to the satisfaction of the requirements of subsections (i) through (iii) above.

(j) Leasehold Security Documents. On or prior to the Commencement Date, the Company shall deliver to Arabica (i) an estoppel certificate executed by its landlord as contemplated by Section 20.2 of

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the Headquarters Lease, and (ii) a landlord consent executed by its landlord under the Headquarters Lease; with each of (i) and (ii) in form and substance reasonably satisfactory to Arabica. Promptly upon the written request of Arabica (i) the Company shall execute and deliver to Arabica the Company Leasehold Mortgage and shall use reasonable efforts to cause the owner of the Headquarters Building to consent thereto in writing, (ii) after the occurrence and during the continuance of an Event of Default, the Company shall, and shall cause the landlord under each other lease of real property to which any member of the Restricted Group is a party as lessee, and such lessee, to execute and deliver a landlord consent in form and substance reasonably satisfactory to Arabica, and (iii) the Company shall, and shall cause any bailee, consignee or warehouseman with respect to any site where Collateral of the Company or any member of the Restricted Group is stored or located, and such member of the Restricted Group, to execute and deliver a bailee, warehouseman’s or similar waiver in form and substance reasonably satisfactory to Arabica.

(k) Accounting System. The Company and its Subsidiaries will maintain an accurate system of accounting in accordance with GAAP. Neither the Company nor its Subsidiaries will change its fiscal year from the fiscal year accounting used in the preparation of the financial statements referred to in Section 19(a).

(l) Further Assurance. From time to time hereafter, the Company will execute and deliver, or cause to be executed and delivered, such additional instruments, certificates and documents, and take all such actions, as Arabica shall reasonably request for the purpose of implementing or effectuating the provisions of the Lease/Purchase Documents and upon the exercise by Arabica of any power, right, privilege or remedy pursuant to the Lease/Purchase Documents which requires any consent, approval, registration, qualification or authorization of any Governmental Authority or instrumentality, exercise and deliver, or cause to be executed and delivered, all applications, certifications, instruments and other documents and papers that Arabica may be so required to obtain.

(m) Use of Proceeds. The Company shall use the sale proceeds received under the Asset Purchase Agreement for the acquisition and/or construction of new facilities, operating facility upgrades, working capital and other general corporate purposes.

(n) Accounts. The Company shall cause at least seventy (70%) percent of the Company’s total number of Stores located in the United States to utilize the Reference Bank for their primary cash management functions and shall cause all of the Company’s and its Wholly-Owned Subsidiaries’ operating accounts to be maintained with the Reference Bank. If Arabica shall so request, the Company shall take, or cause to be taken, any action deemed necessary by Arabica to obtain and maintain “control” (as defined in the Uniform Commercial Code as in effect in any applicable jurisdiction) of each deposit account, securities account or other account of the Company and/or any of its Wholly-Owned Subsidiaries, including without limitation, the delivery of control agreements in form and substance satisfactory to Arabica.

SECTION 22. Negative Covenants. The Company covenants and agrees that until all Rent and other amounts payable hereunder and under the Lease/Purchase Documents have been indefeasibly paid in full in cash:

(a) Indebtedness; Contingent Liabilities. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, create, issue, incur, assume, suffer, or become liable with respect to any Consolidated Funded Indebtedness except:

(i) Consolidated Funded Indebtedness of the Company and its Subsidiaries hereunder and under the other Lease/Purchase Documents;

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(ii) without limiting clause (iv) of this Section 22(a), Indebtedness of the Company and its Subsidiaries in the amounts existing on the date hereof and described in Schedule 19(u)(i) (but no re-financings, renewals or extensions thereof without Arabica’s prior written consent);

(iii) Guarantee Obligations of the Company and its Subsidiaries in respect of endorsements of negotiable instruments for collections in the ordinary course of business;

(iv) without limiting clause (ii) of this Section 22(a), Capital Lease Obligations and purchase money Indebtedness of the Company and its Subsidiaries not exceeding $1,000,000 (of which not more than $500,000 may consist of existing Capital Lease Obligations) in the aggregate, in each case secured by Permitted Liens described in clause (v) of the definition of “Permitted Liens”;

(v) unsecured Consolidated Funded Indebtedness of the Subsidiaries of the Company to the Company, evidenced by intercompany notes pledged and delivered to Arabica pursuant to the Security Agreement; and

(vi) reimbursement obligations (both contingent and otherwise) in respect of letters of credit (which for the avoidance of doubt are not, and shall not constitute, Letters of Credit) issued by the Reference Bank on behalf of the Company and its Subsidiaries to support leases of real property entered into by the Company and its Subsidiaries, provided that such contingent and other obligations incurred on and after the Commencement Date (A) shall not exceed at any time an aggregate amount of $1,000,000, (B) shall be subject to the credit approval of the Reference Bank, and (C) shall be evidenced by documentation in form and substance satisfactory to the Reference Bank.

(b) Liens. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, create, incur, assume or suffer to exist any Liens upon any of its property, whether now owned or hereafter acquired, except for Permitted Liens. Without limitation of the foregoing, the Company covenants and agrees that it will not enter into (and will not suffer or permit any of its Wholly-Owned Subsidiaries to enter into) any agreement or understanding (each, a “Restrictive Agreement”) with any Person other than Arabica or the Reference Bank which could prohibit or restrict in any manner the right of the Company or any such Wholly-Owned Subsidiary to grant to Arabica or to the Reference Bank any Lien on any of its Intellectual Property arising under laws other than those of the United States, whether such Intellectual Property is now owned or hereafter acquired. The Company represents and warrants that, at the Commencement Date, neither the Company nor any such Wholly-Owned Subsidiary is party to any such Restrictive Agreement.

(c) Disposition of Assets, Etc. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its properties, assets, rights, licenses or franchises to any Person, except for (i) the sale by the Company of assets from time to time to Arabica, and leaseback thereof from Arabica, pursuant to this Agreement and the other Lease/Purchase Documents; (ii) the disposition of inventory in the ordinary course of business (which dispositions may be made free from the Liens of the Lease/Purchase Documents), (iii) the disposition in the ordinary course of business, without replacement, of equipment which is obsolete or no longer needed in the conduct of its business and the disposition and replacement in the ordinary course of business of equipment or other tangible personal property with other equipment of at least equal utility and value, (iv) the disposition in the ordinary course of business in any year of equipment or other tangible personal property having an aggregate value of not more than $1,000,000 and (v) provided no Default or Event of Default shall have occurred and be continuing or would result therefrom, transfers of cash and Cash Equivalents to Caribou

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Coffee Charitable Foundation in an aggregate amount not to exceed $250,000 from and after the date of this Agreement.

(d) Amendment to Organizational Documents. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, permit or suffer any amendment of its Organizational Documents which could materially and adversely affect its financial condition or adversely affect the rights of Arabica hereunder or under the Lease/Purchase Documents or of any party providing financing to Arabica (it being expressly agreed that the inclusion in such charter documents of any provision similar to those set forth in Section 102(b)(2) of Title 8 of the Delaware General Corporation Law is prohibited under this Section).

(e) Mergers; Consolidations; Issuance of Securities; Etc. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, dissolve, liquidate, merge or consolidate into or with any other Person; provided that any Wholly-Owned Subsidiary of the Company may merge into the Company or any Wholly-Owned Subsidiary Guarantor so long as the Company or such Wholly-Owned Subsidiary Guarantor, as the case may be, is the surviving entity of such merger. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, issue or sell or permit to be issued any additional Capital Stock, except pursuant to its stock option plan as in effect as of the date hereof.

(f) Restricted Payments. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, directly or indirectly declare, order, pay or make any Restricted Payment or set aside any sum or property therefore except as follows:

(i) the Subsidiaries of the Company may (A) pay dividends and make distributions to the Company and (B) repay indebtedness owed to the Company;

(ii) the Subsidiaries of the Company may make distributions to the Company to enable the Company to pay as and when due amounts owed from time to time hereunder and under the other Lease/Purchase Documents; and

(iii) the Company may repurchase shares of its Capital Stock and/or pay dividends to Holdings, provided (A) no Default or Event of Default shall have occurred and be continuing at the time of such payment or would result therefrom, (B) the Company and its Subsidiaries will be in pro forma compliance with the financial covenants set forth in Section 20 of this Agreement as of the most recently ended period for which financial statements were delivered pursuant to Section 21(a) of this Agreement on a pro forma basis both before and after giving effect to any Restricted Payments made hereunder as if such Restricted Payments were made on the last day of such period, (C) the aggregate amount of Restricted Payments made hereunder from and after the Commencement Date shall not exceed (i) $10,000,000 in the aggregate during any fiscal year, and (ii) $20,000,000 in the aggregate during the term of this Agreement, (D) in the event that the aggregate amount of the Restricted Payments made hereunder shall exceed $5,000,000 in any fiscal year, the aggregate amount of Capital Expenditures permitted under this Agreement in such fiscal year shall be reduced by the amount of such excess, and (E) the Coffeehouse Level EBITDA Margin for the most recently completed Reference Period for which financial statements have been delivered pursuant to Section 21(a)(ii) of this Agreement must be 15% or greater of Coffeehouse Level Sales for such Reference Period.

(g) Investments, Loans and Acquisitions. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, (i) purchase or acquire any Indebtedness or Capital Stock of any other Person, (ii) acquire all or substantially all of the assets, or any division, of any Person, (iii) make any loan, advance or extension of credit to, or contribution to the capital of, or other investment in, any other

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Person, (iv) purchase any real estate for sale or investment, (v) purchase any commodities futures contracts, (vi) form any Subsidiary, or (vii) make any commitment or acquisition of any option or enter into any other arrangement for the purpose of making any of the foregoing investments, loans or acquisitions (the foregoing, “Investments”), except the following:

(i) Qualified Investments;

(ii) the existing investments referred to in Schedule 22(g)(ii);

(iii) Hedging Agreements in connection with bona fide hedging transactions in the ordinary course of business;

(iv) loans from the Company to its Wholly-Owned Subsidiary Guarantors that are evidenced by intercompany notes that are pledged and delivered to Arabica pursuant to the Security Agreement;

(v) other Investments, including Permitted Acquisitions, in an aggregate amount not exceeding $2,500,000 in any fiscal year, provided that at the time of any Investment no Default or Event of Default shall have occurred and be continuing.

(h) Sale and Leaseback. Except as contemplated by this Agreement and the other Lease/Purchase Documents, the Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any of its property acquired prior to the date of this Agreement in order to lease such property or lease other property that it intends to use for substantially the same purpose as such property being sold or transferred.

(i) Transaction with Affiliates. The Company will not, and will not permit any of its Wholly-Owned Subsidiaries to, enter, directly or indirectly, into any purchase, sale, lease or other transaction with any Affiliate, except in the ordinary course of business and on terms that are no less favorable to the Company or its Wholly-Owned Subsidiary, as applicable, than those which could be obtained at the time in a comparable arm’s length transaction with any Person who is not an Affiliate. The Company will not, and will not permit any of its Wholly Owned Subsidiaries to, incur Indebtedness to any Affiliate except as permitted under Section 22(a) of this Agreement. All transactions of the Company and its Wholly-Owned Subsidiaries with Affiliates existing on the date of this Agreement are described on Schedule 22(i) hereto.

(j) ERISA. The Company will not permit any Plan maintained by the Company and its Subsidiaries to (i) engage in any “prohibited transaction” (as defined in Section 4975 of the Code), (ii) incur an “accumulated funding deficiency” (as defined in Section 302 of ERISA), or (iii) terminate (or suffer to be terminated) any Plan in a manner that could result in the imposition of a Lien on the assets of any member of the Restricted Group pursuant to Section 4068 of ERISA.

(k) Amendment of Certain Agreements. The Company will not, and will not permit any member of the Restricted Group to, amend or modify any of its organizational documents or any of the Lease/Purchase Documents without the prior written consent of Arabica, which will not be unreasonably withheld or delayed. The Company will not, and will not permit any of its Wholly Owned Subsidiaries to, amend any material agreement if the same would be reasonably likely to result in a Material Adverse Effect.

(l) Margin Stock. The Company will not, and will not permit its Wholly-Owned Subsidiaries to, use or permit the use of any of the proceeds of any amounts received by it under the Lease/Purchase

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Documents, directly or indirectly, for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry, any Margin Stock or for any other purpose which might constitute a “purpose credit” within the meaning of Regulation U, or cause this Agreement to violate Regulation T, U or X of the Board or the Securities Exchange Act of 1934, as amended, or any rules or regulations promulgated under such statutes.

(m) Negative Pledges, Etc. The Company will not, and will not permit its Wholly-Owned Subsidiaries to, enter into any agreement, amendment or arrangement (excluding this Agreement or any other Lease/Purchase Document) prohibiting or restricting (i) it from amending or otherwise modifying this Agreement or any other Lease/Purchase Document, (ii) the creation or assumption of any Liens upon its properties, revenues or assets, whether now owned or hereafter acquired, or (iii) the ability of any Subsidiary to make any payment or distribution, directly or indirectly, to the Company. The Company will not, and will not permit its Wholly-Owned Subsidiaries to, renew or enter into any material agreement without using commercially reasonable efforts to obtain the written consents of such third parties necessary to effect the collateral assignments thereof and grants of security interests therein in accordance with the Lease Purchase Documents.

SECTION 23. Events of Default. Any of the following events shall constitute an “Event of Default” (whether any such event shall be voluntary or involuntary, or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) The Company shall fail to pay any Rent or amount payable under Sections 29 or 30 when due in accordance with the terms hereof; or any expense or other Supplemental Payment within three days of the date when due in accordance with the terms hereof; or

(b) any representation or warranty made or deemed made by any member of the Restricted Group herein or in any other Lease/Purchase Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Lease/Purchase Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or

(c) The Company (i) shall default in the observance or performance of any agreement contained in Sections 21(b)(v), (vi), (vii) or (viii), 21(d), 21(e), 21(f) or 21(g) or Section 22 hereof, or in Section 4 of the Supplemental Agreement, or any member of the Restricted Group shall default in the observance or performance of any agreement contained in Sections 5.2 or 5.5 of the Company Guarantee and Security Agreement, or (ii) shall default in the observance or performance of any agreement contained in Section 21(a) or Sections 21(b)(i), (ii), (iii), (iv) or (ix) hereof and such default shall continue unremedied for a period of 5 days;

(d) Any member of the Restricted Group shall default in the observance or performance of any other agreement contained in this Agreement or any other Lease/Purchase Document to which it is a party (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Company from Arabica; or

(e) (i) any member of the Restricted Group shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding any payment under the Lease/Purchase Document) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or

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contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $500,000; or

(f) (i) any member of the Restricted Group shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any member of the Restricted Group shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any member of the Restricted Group any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any member of the Restricted Group any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any member of the Restricted Group shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any member of the Restricted Group shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(g) Any member of the Restricted Group or any Commonly Controlled Entity shall fail to pay when due an amount or amount that it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA and which, together with all such amounts, exceeds $500,000 in the aggregate; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by any member of the Restricted Group, any Commonly Controlled Entity, any plan administrator or any combination of the foregoing; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or

(h) one or more judgments or decrees shall be entered against any member of the Restricted Group involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or

(i) any of the Company Security Documents or any of the Lease/Purchase Documents shall cease, for any reason, to be in full force and effect, or any member or Affiliate of any member of the Restricted Group shall so assert, or any Lien created by any of the Company Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby, or any member or Affiliate of any member of the Restricted Group shall so assert; or

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(j) the guarantee contained in Section 2 of the Company Guarantee and Security Agreement shall cease, for any reason, to be in full force and effect or any member or Affiliate of any member of the Restricted Group shall so assert; or

(k) a Change of Control shall occur; or

(l) Holdings shall (i) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Company, (ii) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (x) nonconsensual obligations imposed by operation of law, (y) obligations pursuant to the Lease/Purchase Documents to which it is a party and (z) obligations with respect to its Capital Stock, or (iii) own, lease, manage or otherwise operate any properties or assets other than the ownership of shares of Capital Stock of the Company.

SECTION 24. Remedies Upon Default.

(a) Upon the occurrence of any Event of Default, Arabica may undertake one or more of the following actions: (i) exercise the Put Option and require the Company to purchase, and upon such exercise the Company shall be obligated to purchase and pay for the Assets in accordance with the terms of the Put Option Letter, (ii) terminate as to some or all of the Assets the lease, license and purchase option financing provided hereunder, (iii) exercise all or any of its rights under any of the Lease/Purchase Documents and the Collateral provided to it thereunder, (iv) exercise any and all rights available to Arabica at law or in equity, and proceed to protect and enforce Arabica’s rights by any action at law, in equity or other appropriate proceeding. In the event that Arabica shall apply for the appointment of, or the taking of possession by, a trustee, receiver or liquidator of the Company or any Store or of any other similar official to hold or liquidate all or any substantial part of the properties or assets of the Company or any Store following the occurrence of a default in payment of any amount owed hereunder and following any applicable notice or cure period, the Company hereby consents, and will cause each of its Wholly-Owned Subsidiaries to consent, to such appointment and taking of possession and agrees to execute and deliver any and all documents requested by Arabica relating thereto (whether by joining in a petition for the voluntary appointment of, or entering no contest to a petition for the appointment of, such an official or otherwise, as appropriate under applicable law).

(b) Without limiting the foregoing, upon the occurrence and during the continuance of an Event of Default hereunder, whether or not Arabica has taken any of the actions set forth in (a) above, Arabica may require, at its option: (i) the Company to use its reasonable commercial efforts to obtain an absolute assignment in form and substance reasonably satisfactory to Arabica of all of the right, title and interest of the Company and its Wholly-Owned Subsidiaries in their respective real estate leases (provided any such assignment shall be subject to the condition that Arabica shall sublease the covered premises back to the Company or its Subsidiary, as applicable, on the same terms as the assigned lease), (ii) the Company and Caribou to cause its Wholly-Owned Subsidiaries to use reasonable commercial efforts to obtain real estate leasehold mortgages in form and substance reasonably satisfactory to Arabica with respect to each of the real estate leaseholds of the Company and its Wholly-Owned Subsidiaries (in the event absolute assignments are not required pursuant to clause (i) immediately above) and/or (iii) the Company and its Wholly-Owned Subsidiaries to enter into agency account agreements with respect to each of their respective deposit and other accounts in form and substance similar to the form attached to the Company Guarantee and Security Agreement and otherwise reasonably satisfactory to Arabica, requiring all of such depository banks to sweep such accounts daily and wire such funds into a concentration account pledged to Arabica.

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(c) In addition, the Company shall be liable for all Rent accrued through the date of termination hereof or, if Arabica exercises the Put Option, through the Exercise Price Payment Date (as defined in the Put Option Letter), and any and all Supplemental Payments and other amounts due hereunder and under any of the other Lease/Purchase Documents before or after any termination hereof, including all costs and expenses (including without limitation reasonable attorney’s fees and disbursements) incurred by reason of the occurrence of any Event of Default or the exercise of Arabica’s remedies with respect thereto.

(d) No failure to exercise and no delay in exercising, on the part of Arabica or any Registered Holder, any right, remedy, power or privilege hereunder or under the other Lease/Purchase Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. To the extent permitted by applicable law, the Company, for itself and on behalf of its Wholly Owned Subsidiaries, hereby waives any rights now or hereafter conferred by statute or otherwise which may require Arabica to sell the Assets in mitigation of Arabica’s damages or otherwise to limit or modify any of Arabica’s rights or remedies under this Section 24.

SECTION 25. Arabica’s Right to Perform for the Company. If the Company fails to make any Supplemental Payment required to be made by it hereunder or fails to perform or comply with any of its agreements contained herein, Arabica may itself make such payment or perform or comply with such agreement, and the amount of such payment and the amount of the expenses of Arabica incurred in connection with such payment or the performance of or compliance with such agreement, as the case may be, together with an amount thereon computed at the Late Payment Rate in accordance with Section 6(b), shall, if not paid by the Company to Arabica on demand, be deemed a Supplemental Payment hereunder; provided, however, that no such payment, performance or compliance by Arabica shall be deemed to cure any Event of Default hereunder.

SECTION 26. Further Assurances. Arabica and the Company agree to cooperate in good faith and to execute and deliver such documents and further assurances consistent with and in clarification of the characterization and intent of the parties with respect to this Agreement, the Supplemental Agreement, the Put Option Letter and the Call Option Letter.

SECTION 27. Transaction Costs, Fees and Expenses. The Company shall pay promptly all out-of-pocket costs, fees and expenses of Arabica and its agents and representatives in connection with the negotiation, preparation, execution, delivery, administration and enforcement of this Agreement and any of the Lease/Purchase Documents (and all amendments, modifications and supplements hereto and thereto) and any agreements or instruments entered into or executed in connection herewith, including without limitation all costs, fees and expenses of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or credit or other examinations conducted in connection with the Obligations or any collateral therefor, and if all such expenses are not paid within five Business Days after demand therefor, in addition to the amount of such expenses, a late fee computed pursuant to Section 6(b) shall be payable.

SECTION 28. Notices. All notices provided for or required under the terms and provisions hereof shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed (i) if to Arabica or the Company, at their

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respective addresses as set forth on the signature page hereof or at such other address as either of them shall, from time to time, designate in writing to the other, and (ii) if to any Registered Holder, to the address of such Registered Holder as such Registered Holder shall designate, from time to time, in writing to Arabica and the Company.

SECTION 29. Call Option.

(a) Company Call Option. Provided the Company has paid all Rent, all Supplemental Payments and all other amounts then due hereunder or under any of the other Lease/Purchase Documents, the Company shall have the right and option to purchase, pursuant to the Call Option Letter, all, or a pro rata portion of all, of the Assets from Arabica on any Rent Payment Date occurring after the first anniversary of the date hereof for an aggregate price of $10.00, payable in connection with each such purchase, plus the other amounts specified in the Call Option Letter. The Company shall notify Arabica of its exercise of the Call Option not less than thirty (30) days prior to the Rent Payment Date on which the purchase is to be effected, any such notice to be irrevocable and to be provided in accordance with the terms of the Call Option Letter. If the Company exercises the Call Option under this Section 29(a), Arabica undertakes to sell the Assets to the Company at such price and on the terms and conditions provided herein and in the Call Option Letter. The Call Option may be utilized on more than one Rent Payment Date.

(b) Settlement Terms. In the event that the Company purchases the Assets from Arabica pursuant to Section 29(a) above and the Call Option Letter, Arabica and the Company hereby agree that the following provisions shall apply:

(i) Representations and Warranties of the Company. The Company shall represent, warrant, covenant and agree with Arabica as of the date of any sale of the Assets by Arabica to the Company, except where specific reference is made to another date or dates, that:

(A) The Company has the full right, power and authority to purchase such Assets from Arabica as provided in this Agreement and to carry out the Company’s obligations under this Agreement (as such pertain to the sale of such Assets), and all requisite action necessary to authorize the Company to enter into the purchase of the Assets and to carry out the Company’s obligations with respect thereto has been, or on or before the date of any sale of the Assets to the Company, will have been, taken;

(B) The Company acknowledges that:

(1) The Company is purchasing the Assets, and the Assets shall be conveyed and transferred to the Company, “HAVING BEEN INSPECTED TO THE SATISFACTION OF CARIBOU, AS-IS, WHERE-IS, AND WITH ALL FAULTS AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY RECOURSE OR WARRANTIES, REPRESENTATIONS, COVENANTS OR GUARANTEES, EXPRESSED OR IMPLIED, OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF ARABICA”; provided, that Arabica shall represent that there are no Liens on the Assets which have arisen because of Arabica’s action or inaction. The Company acknowledges that it has not relied, and is not relying, on any information, document, sales brochure, or other literature, sketch, projection, pro forma, statement, representation, guarantee, or warranty (whether express or implied, or oral or written, or material or immaterial) that may have been given by, or made by, or on behalf of, Arabica;

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(2) The Company shall not be entitled to, and shall not rely on, Arabica or Arabica’s agents as to (a) the quality, nature, adequacy, or physical condition of the Assets; or (b) the quality of any labor or materials relating in any way to the Assets;

(3) EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISO IN SUBPARAGRAPH (1) ABOVE (WITH RESPECT TO VOLUNTARILY INCURRED LIENS), ARABICA HAS NOT, DOES NOT, AND WILL NOT, WITH RESPECT TO THE ASSETS, MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING BUT NOT IN ANY WAY LIMITED TO, ANY WARRANTY OF CONDITION, MERCHANTABILITY, HABITABILITY, OR FITNESS FOR A PARTICULAR USE, OR WITH RESPECT TO THE VALUE, PROFITABILITY, OR MARKETABILITY OF THE ASSETS; and

(4) Without in any way limiting the generality of the preceding subparagraphs (1) through (3), the Company specifically acknowledges and agrees that the Company hereby waives, releases, and discharges any claim the Company has, might have had, or may have against Arabica with respect to the condition of the Assets, patent or latent, the actual or potential income or profits to be derived from the Assets, and any other state of facts which exists with respect to such Assets.

(ii) Survival Beyond Closing. The representations and warranties of the Company contained in this Agreement as set forth in Section 29(b)(i) shall survive the closing of the sale of the Assets to the Company.

(iii) Seller. At the sale of any Assets to the Company, Arabica shall deliver or cause to be delivered to the Company, at the Company’s sole cost and expense, a bill of sale of such Assets, duly executed by Arabica.

(iv) Payment. On the closing date of the sale, the Company shall pay $10 to Arabica plus the other amounts required to be paid pursuant to the Call Option Letter.

SECTION 30. Put Option. Upon the occurrence of any event specified in Sections 1, 2, 3, 4, 5, 6 or 7 of the Put Option Letter, Arabica may exercise the Put Option and require the Company to purchase, and upon such exercise the Company shall be obligated to purchase and pay for, Assets in accordance with the terms of the Put Option Letter.

SECTION 31. Arabica Agents, Nominees or Representatives. In fulfilling any of its obligations or exercising any of its rights under this Agreement, the Supplemental Agreement, the Put Option Letter, the Call Option Letter or any agreement entered into in connection herewith, Arabica may designate and utilize an agent, nominee or representative, which shall, unless otherwise indicated by Arabica, have right and authority to act on behalf of Arabica.

SECTION 32. Miscellaneous. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating or diminishing Arabica’s rights under the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or

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render unenforceable such provision in any other jurisdiction. No term or provision of this Agreement may be amended, altered, waived, discharged or terminated orally, but only by an instrument in writing signed by a duly authorized officer of the party against which the enforcement of the amendment, alteration, waiver, discharge or termination is sought. A waiver on any one occasion shall not be construed as a waiver on a future occasion. All of the covenants, conditions and obligations contained in this Agreement shall be binding upon and shall inure to the benefit of the respective successors and assigns of Arabica and (subject to the restrictions of Section 13(a) hereof) the Company. This Agreement may be executed in as many counterparts as shall be determined by the parties hereto when so executed, each such counterpart shall be binding on both parties hereto, notwithstanding that both parties are not signatories to the same counterpart. This Agreement and each related instrument, document, agreement and certificate collectively constitute the entire agreement of Arabica and the Company with respect to the financing of the Assets, and cancel and supersede any and all prior oral or written understandings with respect thereto. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING WITHOUT LIMITATION ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN OR OTHER REVIEW SOUGHT FROM THE AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THE COMPANY’S OR ANY OF ITS WHOLLY-OWNED SUBSIDIARIES’ OBLIGATIONS UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY LEASE/PURCHASE DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, AND EXPRESSLY WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE IN ANY OF SUCH COURTS.

SECTION 33. Payments, Set-Off and Subordination.

(a) If any payment hereunder is due and payable on a day that is not a Business Day, such payment shall be due and payable in the next preceding Business Day.

(b) Upon the occurrence and during the continuance of any Event of Default, Arabica is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time owing by Arabica to or for the credit or the account of the Company against any and all of the Obligations now or hereafter existing hereunder or under any Lease/Purchase Document.

(c) The Company acknowledges that Arabica is financed with financing provided by a credit provider and that the Assets and the Company’s rights under this Agreement and the other Lease/Purchase Documents and the lease, license and purchase option financing and other transactions contemplated hereunder are subject and subordinate to the Lien on the Assets granted by Arabica to such credit provider. The Company further acknowledges that the Obligations are secured by a Lien granted by the Company to Arabica, pursuant to this Agreement and the Lease/Purchase Documents, on the Assets and the other assets of the Company not leased and licensed hereunder.

SECTION 34. Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR THE

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RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 34 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENT ENTERED INTO IN CONNECTION WITH THIS AGREEMENT. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

SECTION 35. Effect on Prior Agreement. The terms of this Agreement shall substitute for and replace the terms of the 2004 Agreement without constituting a novation thereof. The respective rights of Company and Arabica with respect to any transactions under the 2004 Agreement shall not in any circumstance be terminated, extinguished or discharged hereby but shall hereafter be governed by the terms of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.


	ARABICA FUNDING, INC.
	By
		Name:
		Title:

	Address c/o Global Securitization Services, LLC 68 South Service Road, Suite 120 Melville, NY 11747 CARIBOU COFFEE COMPANY, INC.
	By
		Name:
		Title:

	Address 3900 Lakebreeze Avenue North Brooklyn Center, MN 55429

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SCHEDULE 6(a)

RENT

SECTION 1. Rent Calculation Methodology. The Company hereby agrees to pay Rent to Arabica according the following methodology:

	(a)		The Rent shall be paid in installments payable on each Rent Payment Date, each of which shall be in an amount equal to the aggregate of (i) the Rental Rate (as defined below) for the Rent Period ending on such Rent Payment Date, calculated in accordance with Section 1(b), below, plus (ii) the Third Rent Component computed in accordance with Section 1(c) below, plus (iii) the amount of $100,000, plus (iv) the amount of $6,000, plus (v) on each Rent Payment Date that occurs on the last day of the second fiscal quarter of the Company only, the amount of $35,000, provided that the Rent payable on the Final Rent Payment Date shall equal the foregoing aggregate amount plus the unpaid Acquisition Cost.

	(b)		The Rental Rate (the “*Rental Rate*”) payable on any Rent Payment Date shall be an amount (determined by the Company) equal to the sum of:

	(i)		the Primary Rate Component, which shall apply to Assets that are subject to this Agreement on the first day of a Rent Period, and which equals the product of (A) the aggregate unpaid Acquisition Cost of such Assets multiplied by (B) the Eurodollar Rate applicable to such Rent Period plus the Applicable Margin multiplied by (C) a fraction equal to the number of days in such Rent Period divided by 360, plus

	(ii)		the Additional Rate Component, which shall apply to Assets that are added to this Agreement during such Rent Period pursuant to a Supplement, and which equals the product of (A) the Acquisition Cost of such Assets multiplied by (B) the Eurodollar Rate applicable to the period from the date such Assets are added to this Agreement to the end of such Rent Period, plus the Applicable Margin multiplied by (C) a fraction equal to the number of days from the date such Assets are added to this Agreement to the end of such Rent Period divided by 360. The Additional Rate Component shall be computed for each group of Assets added to this Agreement during a Rent Period.

	(c)		The “*Third Rent Component*” referenced in Section 1(a)(ii) of this Schedule shall be determined for each day during a Rent Period and shall equal the product of (i) the Reference Amount on such day, multiplied by (ii) the Third Rent Component Rate, multiplied by (iii) a fraction the numerator of which is one and the denominator of which is 360.

	(d)		Arabica and the Company agree that the amount set out in clause (iii) of Section 1(a) of this Schedule represents the initial estimate of the cost that will be incurred by Arabica during each Rent Period to obtain or cause to be obtained property insurance for the Equipment and to perform or cause to be performed Major Maintenance and Required Alterations for the Equipment. Arabica and the Company agree that, except as otherwise provided in this Schedule 6(a), any change in any component of the Rent, including such estimated cost, shall be subject to the written agreement of Arabica and the Company, and

that any such change shall apply only to Rent Periods commencing after the date of such agreement.

SECTION 2. Supplemental Payments. The Company agrees to pay Arabica all Supplemental Payments promptly as the same shall become due and owing.

SECTION 3. Method of Payment; Full Recourse. If the date that the Rent is due is other than a Business Day, the Rent otherwise payable on such date shall be computed to, and shall be payable on, the next succeeding Business Day unless such next succeeding Business Day occurs in the next calendar month, in which case the Rent shall be payable on the next preceding Business Day. All Rent payments required to be made by the Company to Arabica hereunder shall be made in immediately available funds and in Dollars to an account of Arabica specified by Arabica. In the event of any assignment to a Registered Holder pursuant to Section 13 of the Agreement, all payments which are assigned to such Registered Holder shall be paid in the same manner specified herein for payments to Arabica at such address as shall be designated by such Registered Holder. Time is of the essence in connection with the payment of Rent. The obligation of the Company to pay Rent, Supplemental Payments and all other amounts payable under the Agreement, this Schedule 6(a), the Put Option Letter and the Call Option Letter shall be full recourse obligations of the Company. Arabica and the Company agree, for income tax purposes, that the obligation of the Company to pay the component of the Rent specified in Section 1(a)(iv), above, shall be offset and discharged, dollar-for-dollar, by the obligation of Arabica to pay amounts to the Company pursuant to the Supplemental Agreement.

SECTION 4. Increased Costs.

(a) Arabica shall promptly notify the Company and Arabica of each determination of any Rental Rate hereunder and the effective date thereof. Any change in the Rental Rate resulting from a change in the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the first day of the Rent Period next succeeding the day on which such change becomes effective. The Company also agrees to pay to Arabica on the last day of such next occurring Rent Period an amount, calculated by Arabica, intended to compensate Arabica for any increased costs, reduction in income or additional expense resulting from such change in the Eurocurrency Reserve Requirements for the period from the effective date thereof to the beginning of such next occurring Rent Period (and may include the cost of deferring payment of such amount by the Company until the last day of such next occurring Rent Period). Arabica shall provide the Company with a statement of its calculation of such increased cost, reduction in income or additional expense and of its increased Applicable Margin, which statement shall be prima facie evidence of the correctness of such calculation, absent manifest error.

(b) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by Arabica with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof shall:

	(i)		increase the cost to, or impose an additional cost on, Arabica as a result of Arabica performing its obligations under the Agreement; and/or

	(ii)		reduce the amount payable or the effective return to Arabica pursuant to the Agreement; and/or

	(iii)		reduce the rate of return of Arabica on its overall capital by reason of a change in the manner in which it is required to allocate capital resources to its obligations pursuant to the Agreement or the Supplemental Agreement; and/or

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(iv)

require Arabica to make a payment or forego a return on or calculated by reference to any amount received or receivable by it under the Agreement,

then, in any such case, Arabica shall promptly notify the Company (with a copy to Arabica) of the event by reason of which it has become so entitled. Commencing with the next occurring Rent Period, Arabica may increase the Applicable Margin by an amount necessary to compensate Arabica for the amount of such increase in cost, reduction in income or additional expense. Such increased Applicable Margin shall apply for so long as such increased cost, reduction in income or additional expense is incurred by Arabica, and Arabica agrees to notify the Company when such increased cost, reduction income or additional expense is no longer applicable. The Company also agrees to pay on the last day of such next occurring Rent Period an amount, calculated by Arabica, intended to compensate Arabica for such increased cost, reduction in income or additional expense for the period from the date of the initial incurrence of such cost, reduction or expense by Arabica to the beginning of such next occurring Rent Period (and may include the cost of deferring payment of such amount by the Company until the last day of such next occurring Rent Period). Arabica shall provide the Company with a statement of its calculation of such increased cost, reduction in income or additional expense and of its increased Applicable Margin, which statement shall be prima facie evidence of the correctness of such calculation, absent manifest error.

Notwithstanding the foregoing, unless the Company consents, Arabica shall not be entitled to adjust the Rental Rate or collect from the Company any other payments, reimbursements or compensation pursuant to this Section 4 as a result of any increase in the cost to Arabica of performing or causing to be performed any Major Maintenance or Required Alterations pursuant to the Agreement, or maintaining or causing to be maintained property damage insurance coverage for the Equipment pursuant to the Agreement.

SECTION 5. Payments Before End of Rent Period. If the Company for any reason makes any payment of Rent on any day other than the last day of the applicable Rent Period, or if payment under the Call Option or the Put Option is made on a day other than the last day of a Rent Period, the Company shall pay to Arabica a make whole payment pursuant to the following formula:


		L =		(R - T) x P x D

				360

		L =		amount payable to Arabica

		R =		Rental Rate (excluding the Applicable Margin)

		T =		effective interest rate per annum at which any readily marketable bond
				or other obligation of the United States, selected at Arabica’s sole
				discretion, maturing on or near the last day of the then applicable
				Rent Period and in approximately the same amount as such amount of
				Rent can be purchased by Arabica on the day of such payment of Rent prepaid

		P =		the amount of Rent prepaid

		D =		the number of days remaining in the Rent Period as of the date of such
				payment

-3-

The Company shall pay such amount on the last day of the next occurring Rent Period, unless the Company is purchasing all of the Assets pursuant to the Call Option or the Put Option, in which case such amount shall be paid on the date of such payment. Arabica shall, on or prior to the first date of such next occurring Rent Period or such date of payment, as applicable, present to the Company a statement setting forth Arabica’s calculation of such amount pursuant hereto, which statement shall be deemed true and correct absent manifest error.

SECTION 6. Funding. If and whenever, at any time, Arabica notifies the Company that adequate and fair means do not exist for ascertaining the Eurodollar Rate under this Agreement and/or for calculating the Rental Rate under this Agreement, then Arabica shall give notice (a “Eurodollar Notice”) thereof to the Company. From and after the date specified in such Eurodollar Notice (which shall be the last day of the current Rent Period), the Rental Rate shall be computed using the Base Rate as may be established by Arabica from time to time in accordance with this Agreement and notified to the Company prior to the beginning of each Rent Period (and prior to each time that additional Assets are added to this Agreement pursuant to a Supplement). Utilization of the Base Rate shall continue until Arabica provides notice to the Company that the circumstances giving rise to the Eurodollar Notice have terminated and it is again in a position to calculate the Rental Rate based on the Eurodollar Rate.

-4-

EX-10.15 3 c57994exv10w15.htm EX-10.15 exv10w15

Exhibit 10.15

$15,000,000

CREDIT AGREEMENT

among

ARABICA FUNDING, INC., as the Borrower

and

WELLS FARGO BANK, N.A., as Administrative Agent

Dated as of February 19, 2010

TABLE OF CONTENTS


		Page
SECTION 1.	DEFINITIONS	1
1.1	Defined Terms	1
1.2	Other Definitional Provisions	20
SECTION 2.	AMOUNT AND TERMS OF COMMITMENTS	20
2.1	Revolving Commitments	20
2.2	Procedure for Borrowing	22
2.3	Commitment Fees, etc.	22
2.4	Termination or Reduction of Revolving Commitments	22
2.5	Optional Prepayments	22
2.6	Mandatory Prepayments and Commitment Reductions	23
2.7	Continuation of Loans	23
2.8	Limitations on Eurodollar Tranches	24
2.9	Interest Rates and Payment Dates	24
2.10	Computation of Interest and Fees	24
2.11	Inability to Determine Interest Rate	24
2.12	Pro Rata Treatment and Payments	25
2.13	Requirements of Law	26
2.14	Taxes	27
2.15	Payments Before End of Interest Period	29
2.16	Change of Lending Office	30
SECTION 3.	LETTERS OF CREDIT	30
3.1	L/C Commitment	30
3.2	Procedure for Issuance of Letter of Credit	31
3.3	Fees and Other Charges	31
3.4	L/C Participations	31
3.5	Reimbursement Obligation of the Borrower	32
3.6	Obligations Absolute	32
3.7	Letter of Credit Payments	33
3.8	Applications	33
SECTION 4.	REPRESENTATIONS AND WARRANTIES	33
4.1	Financial Condition	33
4.2	No Change	34
4.3	Existence; Compliance with Law	34
4.4	Power; Authorization; Enforceable Obligations	34
4.5	No Legal Bar	34
4.6	Litigation	35
4.7	No Default	35
4.8	Ownership of Property; Liens	35
4.9	Intellectual Property	35
4.10	Taxes	35
4.11	Federal Regulations	35
4.12	Labor Matters	36
4.13	ERISA	36
4.14	Investment Company Act; Other Regulations	36
4.15	Subsidiaries; Capital Stock	36
4.16	Use of Proceeds	37
4.17	Environmental Matters	37

-i-

TABLE OF CONTENTS
(continued)


		Page
4.18	Accuracy of Information, etc.	38
4.19	Security Documents; Real Property	38
4.20	Solvency	39
4.21	Intentionally Omitted	39
4.22	Regulation H	39
4.23	Certain Documents	39
4.24	Stores; Material Agreements	39
4.25	Indebtedness Outstanding	39
4.26	Anti-Terrorism Laws	39
4.27	Special Purpose Entity	40
SECTION 5.	CONDITIONS PRECEDENT	43
5.1	Conditions to Initial Extension of Credit	43
5.2	Conditions to Each Extension of Credit	45
SECTION 6.	AFFIRMATIVE COVENANTS	45
6.1	Financial Statements	45
6.2	Certificates; Other Information	46
6.3	Payment of Obligations	48
6.4	Maintenance of Existence; Compliance; Conduct of Business	48
6.5	Maintenance of Property; Insurance	48
6.6	Inspection of Property; Books and Records; Discussions	48
6.7	Notices	48
6.8	Environmental Laws	49
6.9	Special Purpose Covenants	49
6.10	Additional Collateral, etc.	49
6.11	Lease/Purchase Documents	51
6.12	Leasehold Security Documents	51
6.13	Accounting System	52
6.14	Further Assurance	52
6.15	Accounts	52
SECTION 7.	NEGATIVE COVENANTS	52
7.1	Financial Condition Covenants; New Stores	52
7.2	Indebtedness	53
7.3	Liens	53
7.4	Fundamental Changes	53
7.5	Issuance of Stock	53
7.6	Restricted Payments	53
7.7	Capital Expenditures	54
7.8	Investments	54
7.9	Intentionally Omitted	54
7.10	Transactions	54
7.11	ERISA	54
7.12	Amendment of Certain Agreements	54
7.13	Margin Stock	54
7.14	Negative Pledges, Etc.	54
SECTION 8.	EVENTS OF DEFAULT	54
SECTION 9.	THE ADMINISTRATIVE AGENT	57
9.1	Appointment	57

-ii-

TABLE OF CONTENTS
(continued)


		Page
9.2	Delegation of Duties	58
9.3	Exculpatory Provisions	58
9.4	Reliance by Administrative Agent	58
9.5	Notice of Default	59
9.6	Non-Reliance on Agents and Other Lenders	59
9.7	Indemnification	59
9.8	Administrative Agent in Its Individual Capacity	60
9.9	Successor Administrative Agent	60
9.10	Administrative Agent May File Proofs of Claim	60
9.11	Other Agents; Arrangers and Managers	61
SECTION 10.	MISCELLANEOUS	61
10.1	Amendments and Waivers	61
10.2	Notices	62
10.3	No Waiver; Cumulative Remedies	64
10.4	Survival of Representations and Warranties	64
10.5	Payment of Expenses and Taxes	64
10.6	Successors and Assigns; Participations and Assignments	65
10.7	Adjustments; Set-off	68
10.8	Counterparts	69
10.9	Severability	69
10.10	Integration	69
10.11	Governing Law	69
10.12	Submission To Jurisdiction; Waivers	69
10.13	Acknowledgements	70
10.14	Releases of Guarantees and Liens	70
10.15	WAIVERS OF JURY TRIAL	70

-iii-


SCHEDULES:
1.1A		Commitments
1.1B		Real Property
1.1C		Quarterly Dates
4.4		Consents, Authorizations, Filings and Notices
4.9		Intellectual Property
4.15		Subsidiaries
4.17		Environmental Matters
4.19(a)		UCC Filing Jurisdictions
4.24		Stores and Material Agreements
4.25(a)		Indebtedness to be Paid
4.25(b)		Liens to be Terminated
4.25(c)		Liens to Remain Outstanding
EXHIBITS:
1(a)		Form of Asset Purchase Agreement
1(b)		Form of Master Lease
1(c)		Form of Supplemental Agreement
1(d)		Form of Put Option Letter
1(e)		Form of Call Option Letter
1(f)		Form of Tax Matters Agreement
1(g)		Form of Company Guarantee and Security Agreement
1(h)		Financial Statements
A		Form of Borrower Security Agreement
B		Form of Collateral Assignment
C		Form of Securities Pledge Agreement
D		Form of Compliance Certificate
E		Form of Closing Certificate
F		Form of Assignment and Assumption
G		Forms of Legal Opinions of Dorsey & Whitney LLP
H		Form of Exemption Certificate

-iv-

CREDIT AGREEMENT (this “Agreement”), dated as of February 19, 2010, among ARABICA FUNDING, INC., a Delaware corporation (the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (the “Lenders”), and WELLS FARGO BANK, N.A., as administrative agent.

The parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.

“Additional Commitment Request”: as defined in Section 2.1(c).

“Additional Lender Supplement”: as defined in Section 2.1(c).

“Administrative Agent”: Wells Fargo, as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors.

“Administrative Services Agreement”: the Management Agreement, dated as of December, 2001, between the Borrower and the Global Securitization Services, LLC, a Delaware limited liability company, as in effect on the Closing Date.

“Affiliate”: as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

“Agent Party”: as defined in Section 9.3.

“Aggregate Exposure”: with respect to any Lender at any time, an amount equal to the amount of such Lender’s Revolving Commitment at such time or, if the Revolving Commitments have been terminated, the amount of such Lender’s Revolving Extensions of Credit then outstanding.

“Aggregate Exposure Percentage”: with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.

“Agreement”: as defined in the preamble hereto.

“Applicable Margin”: at any time, in respect of Base Rate Loans, one and one-quarter (1.25%) percent per annum and in respect of Eurodollar Loans, two and three-quarters (2.75%) percent per annum.

“Application”: an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit.

“Approved Fund”: as defined in Section 10.6(b).

“Arranger”: Wells Fargo Bank, N.A., as sole lead arranger for the Facility.

“Asset Purchase Agreement”: the Asset Purchase Agreement dated on or about the date hereof between the Borrower and the Company, substantially in the form of Exhibit 1(a).

“Asset Sale”: any Disposition of property or series of related Dispositions of property to a Person that is not a member of the Restricted Group that yields gross proceeds to any member of the Restricted Group (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds), when aggregated with the proceeds of all other such non-excluded Dispositions during the twelve-month period ending on the date of such Asset Sale, in excess of $5,000,000.

“Assignee”: as defined in Section 10.6(b).

“Assignment and Assumption”: an Assignment and Assumption, substantially in the form of Exhibit F.

“Assignor”: as defined in Section 10.6(c).

“Available Revolving Commitment”: as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender’s Revolving Commitment then in effect over (b) such Lender’s Revolving Extensions of Credit then outstanding.

“Bank Products”: any one or more of the following financial products or accommodations provided from time to time by Wells Fargo or any of its affiliates: (i) products under Swap Agreements or similar interest rate hedging arrangements, (ii) credit cards, (iii) credit card processing services, (iv) debit cards, (v) stored value cards, (vi) purchase cards (including so-called “procurement cards” or “P-cards”), or (vii) cash management or related services including treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements.

“Base Rate”: for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate as of the close of business on the immediately preceding Business Day plus 1.5%, (b) the rate of interest in effect for such day as publicly announced from time to time by the Reference Lender as its “opening prime rate” and (c) the Eurodollar Base Rate determined for a one month period plus 1.5% commencing on such date or, if such date is not a Business Day, on the immediately preceding Business Day. The “opening prime rate” is a rate set by the Reference Lender based upon various factors including the Reference Lender’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by the Reference Lender shall take effect at the opening of business on the day specified in the public announcement of such change.

“Base Rate Loan”: any Loan bearing interest based upon the Base Rate, which Loan shall be made and continued solely during such time as Eurodollar Loans are unavailable or otherwise prohibited to be made, as more particularly described in Section 2.11.

“Benefitted Lender”: as defined in Section 10.7(a).

-2-

“Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor).

“Borrower”: as defined in the preamble hereto.

“Borrower Security Agreement”: the Borrower Security Agreement to be executed and delivered by the Borrower, substantially in the form of Exhibit A.

“Borrowing Date”: any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.

“Business”: as defined in Section 4.17(b).

“Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, provided, that with respect to notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, such day is also a day for trading by and between banks in Dollar deposits in the interbank eurodollar market.

“Call Option Letter”: the Call Option Letter dated on or about the date hereof issued by the Borrower to the Company, substantially in the form of Exhibit 1(e).

“Capital Expenditures”: for any period, the aggregate of all amounts expended or financed for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including maintenance expenditures, build-out and new store expenditures, Pre-Opening Expenses and other replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries.

“Capital Lease Obligations”: as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“Capital Stock”: any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Cash Equivalents”: (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor’s Ratings Services (“S&P”) or P-1 by Moody’s Investors Service, Inc. (“Moody’s”), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the

-3-

requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) money market mutual or similar funds that invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; or (h) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Change in Control”: for any reason:

(a) (i) Holdings shall own of record less than 51% of the issued and outstanding Capital Stock or voting power of the Company; or (ii) the Persons who own all of the Capital Stock of Holdings on the Closing Date having the ordinary voting power to elect the Board of Directors of Holdings shall cease to own at least 65% of such Capital Stock;

(b) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), excluding the holders of Capital Stock of Holdings and the Company, respectively, on the Closing Date, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 25% of the outstanding Capital Stock or voting power of Holdings or the Company;

(c) during any period of 12 consecutive months, commencing after the date of this Agreement, Continuing Directors shall cease for any reason other than death or disability to constitute a majority of the directors of Holdings then in office;

(d) the Company shall cease to own of record and beneficially 100% of the issued and outstanding Capital Stock and voting power in each Person that is as of the date hereof, or at any time after the date hereof becomes, a Wholly-Owned Subsidiary of the Company (unless otherwise permitted under the Lease/Purchase Documents);

(e) GSS Holdings, Inc. (“GSS”) or a corporate service company (or an affiliate thereof) or a charitable trust (any such corporate service company, affiliate or charitable trust to be reasonably acceptable to the Required Lenders) shall cease to own of record and beneficially 100% of the issued and outstanding Capital Stock and voting power of the Borrower on a fully diluted basis, or any member of the Board of Directors of the Borrower shall cease to be an Independent Director; or

(f) any Specified Change of Control shall occur.

“CLO”: as defined in Section 10.6(b).

“Closing Date” means the date of this Agreement.

“Code”: the Internal Revenue Code of 1986, as amended from time to time.

-4-

“Coffeehouse Level EBITDA Margin”: the “Coffeehouse Level EBITDA Margin” for the Company and its Subsidiaries, calculated in the manner set forth on the financial statements attached as Exhibit 1(h).

“Coffeehouse Level Sales”: the “Coffeehouse Level Sales” for the Company and its Subsidiaries, calculated in the manner set forth on the financial statements attached as Exhibit 1(h).

“Collateral”: all property, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

“Collateral Assignment”: the Collateral Assignment to be executed and delivered by the Borrower, substantially in the form of Exhibit B.

“Commitment Fee Rate”: one-half (0.50%) percent per annum.

“Commonly Controlled Entity”: an entity, whether or not incorporated, that is under common control with the Borrower or the Company within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower or the Company, as applicable, and that is treated as a single employer under Section 414 of the Code.

“Company”: Caribou Coffee Company, Inc., a Minnesota corporation.

“Company Guarantee and Security Agreement”: the Company Guarantee and Security Agreement dated as of the date hereof among the Company, Holdings, each of their respective Subsidiaries and the Borrower, substantially in the form of Exhibit 1(g).

“Company Leasehold Mortgage”: a Leasehold Mortgage by the Company in favor of the Borrower and relating to the Headquarters Building, in form and substance reasonably satisfactory to the Administrative Agent.

“Company Security Documents”: each of the Company Guarantee and Security Agreement, the Company Leasehold Mortgage, each Mortgage, Leasehold Security Document, and Intellectual Property Security Agreement and all other security documents from time to time delivered to the Borrower to secure the obligations of the Company under the Lease/Purchase Documents.

“Compliance Certificate”: a certificate duly executed by an appropriate officer of the Borrower, such officer to be reasonably acceptable to the Administrative Agent, substantially in the form of Exhibit D.

“Conduit Lender”: any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.13, 2.14 or 10.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Revolving Commitment.

-5-

“Consolidated EBITDA”: for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) the provision for Federal, state, local and foreign income taxes payable, (b) Consolidated Interest Expense, (c) depreciation and amortization expense (including amortization of debt acquisition cost), (d) Pre-Opening Expenses, and (e) other non-recurring expenses reducing such Consolidated Net Income which do not represent a cash item in such period or any future period (in each case of or by the Company and its Subsidiaries for such period), and minus the following to the extent included in calculating such Consolidated Net Income: (i) Federal, state, local and foreign income tax credits, and (ii) all non-cash items increasing Consolidated Net Income (in each case of or by the Company and its Subsidiaries for such period).

“Consolidated EBITDAR”: for any period, the sum of (a) Consolidated EBITDA for such period, plus (b) Consolidated Rental Expense for the Company and its Subsidiaries for such period, in each case determined on a consolidated basis in accordance with GAAP.

“Consolidated Funded Indebtedness”: without duplication with respect to any Person, all Indebtedness of such Person and its Subsidiaries with respect to any of the following: (i) the principal amount of money borrowed (whether recourse or non-recourse), including principal, interest and premiums, (ii) obligations evidenced by a bond, debenture, note or other like written obligation to pay money, (iii) Capital Lease Obligations, (iv) obligations under conditional sales or other title retention agreements or secured by any Lien, (v) the aggregate face amount of any letters of credit or similar instruments (including reimbursement obligations with respect thereto), (vi) the deferred unpaid purchase price of property or services, except trade payables, accrued expenses and other similar liabilities incurred in the ordinary course of business, (vii) Indebtedness relating to Swap Agreements, (viii) Indebtedness relating to sale-leaseback obligations, (ix) all obligations of such Person under take-or-pay or similar arrangements or under commodities agreements, (x) Disqualified Stock, (xi) the principal portion of all obligations of such Person under synthetic leases, (xii) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer, (xiii) the outstanding attributed principal amount under any securitization transaction of such Person, (xiv) all obligations that are immediately due and payable out of proceeds of or production from property now or hereafter acquired by such Person and (xv) all Guarantee Obligations of such Person in respect of any or all of the foregoing; in each case determined on a consolidated basis in accordance with GAAP. The aggregate amount of Consolidated Funded Indebtedness at any time shall include all accrued interest which has become due and payable but has not been paid (whether or not capitalized) and the accreted amount of any debt issued with original issue discount. For purposes of this Agreement, as to the Company, Consolidated Funded Indebtedness shall include the Obligations, but shall exclude any and all amounts payable by any member of the Restricted Group other than the Borrower to the Borrower under the Lease/Purchase Documents.

“Consolidated Interest Expense”: for any period, the total interest expense (including that attributable to Capital Lease Obligations and excluding amortization of debt acquisition cost) of the Company and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Company and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Swap Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP). For purposes of this Agreement, as to the Company and its Subsidiaries, Consolidated Interest Expense shall include the Obligations, but shall exclude all amounts payable by any member of the Restricted Group other than the Borrower to the Borrower under the Lease/Purchase Documents.

-6-

“Consolidated Net Income”: for any period, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with the Company or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Company) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Company or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Company to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

“Consolidated Rental Expense”: for any period, all obligations in respect of base and contingent rent expensed during such period under any rental agreements or leases of real or personal property (other than amounts owed to the Borrower under the Lease/Purchase Documents), excluding tenant allowance amortization, all determined on a consolidated basis in accordance with GAAP.

“Consolidated Senior Leverage Ratio”: as defined in Section 7.1(a).

“Continuing Directors”: the directors of Holdings on the Closing Date, and each other director, if, in each case, such other director’s nomination for election to the board of directors of Holdings is recommended by at least two-thirds of the then Continuing Directors.

“Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Control Investment Affiliate”: as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Default”: any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Disposition”: with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof, excluding any such dispositions constituting the leasing or licensing of property pursuant to the Lease/Purchase Documents. The terms “Dispose” and “Disposed of” shall have correlative meanings.

“Disqualified Stock”: means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, in either case at the option of the holder thereof) or otherwise (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (c) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Disqualified Stock, on or prior to, in the case of clause (a), (b) or (c), the date that is 91 days after the date Revolving Termination Date, provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to

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require such Person to purchase or redeem such Capital Stock in cash upon the occurrence of an “Asset Sale” or “Change of Control” (or similar terms having the same meaning) occurring prior to the date that is 91 days after the Revolving Termination Date shall not constitute Disqualified Stock if:

(x) the “asset sale” or “change of control” provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the terms applicable to the Loans; and

(y) any such requirement only becomes operative after compliance with such terms applicable to the Loans, including the prepayment of any Loans.

“Dollars” and “$”: dollars in lawful currency of the United States.

“Domestic Subsidiary”: with respect to any Person, any Subsidiary of such Person other than a Foreign Subsidiary.

“Environmental Laws”: any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.

“ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time.

“Eurocurrency Reserve Requirements”: for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.

“Eurodollar Base Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate of interest, rounded upward to the nearest whole multiple of one-sixteenth of one percent (0.0625%), quoted by the Reference Lender, from Reuters LIBOR01 Screen or any successor thereto, as the London Inter-Bank Offered Rate for deposits in Dollars for a one month period, subject to availability, at approximately 9:00 a.m. California time on the date two (2) Business Days prior to the beginning of such Interest Period.

“Eurodollar Loans”: any Loan that bears interest at a rate based upon the Eurodollar Rate.

“Eurodollar Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):


		Eurodollar Base Rate

		1.00 — Eurocurrency Reserve Requirements

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“Eurodollar Tranche”: all Eurodollar Loans under a particular Facility the then-current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

“Event of Default”: any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

“Facility”: the Revolving Commitments and the extensions of credit made thereunder.

“Federal Funds Effective Rate”: for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Wells Fargo from three federal funds brokers of recognized standing selected by it.

“Fee Payment Date”: (a) each Quarterly Date and (b) the last day of the Revolving Commitment Period.

“Foreign Subsidiary”: with respect to any Person, any Subsidiary of such Person that is not organized or existing under the laws of the United States of America, any state thereof, the District of Columbia or any territory thereof.

“Funding Office”: the office of the Administrative Agent specified in Section 10.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.

“GAAP”: generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 4.1. In the event that any “Accounting Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement (and to effect corresponding amendments to the Lease/Purchase Documents) so as to reflect equitably such Accounting Changes with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders (and such corresponding amendments have been made to the Lease/Purchase Documents), all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. “Accounting Changes” refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.

“Governmental Authority”: any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners).

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“Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) 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 (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.

“Guarantors”: Holdings and the Subsidiary Guarantors.

“Headquarters Building”: the premises located at 3900 Lakebreeze Avenue North, Brooklyn Center, MN 55429.

“Headquarters Lease”: that certain commercial lease dated as of September 5, 2003 between Twin Lakes III LLC and the Company, as amended or supplemented from time to time covering the Headquarters Building.

“Holdings”: Caribou Holding Company Limited, a Cayman Islands limited liability company.

“Incremental Lender”: as defined in Section 2.1(d).

“Indebtedness”: of any Person at any date all obligations, contingent or otherwise, that should be classified on such Person’s balance sheet as liabilities or to which reference should be made by footnote, in each case in accordance with GAAP, including, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables, accrued expenses and other similar liabilities incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements (including reimbursement obligations thereunder), (g) the maximum redemption price of all Disqualified Stock of such Person, (h) all

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Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 8(e) only, all obligations of such Person in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. For purposes of this Agreement, as to the Company and its Subsidiaries, Indebtedness shall, without duplication, include any and all amounts due or required to be due) from time to time by the Borrower to the Administrative Agent and Lenders hereunder, but shall exclude any and all amounts due (or required to be due) from time to time to the Borrower by the Company or any of its Subsidiaries under the Lease/Purchase Documents.

“Indebtedness to be Paid”: as defined in Section 4.25(a).

“Independent Director”: with respect to the Borrower, an individual who has not been (or was not) at the time of such individual’s appointment, and may not have been at any time during the five years preceding such individual’s appointment (a) an equityholder of, or an officer, director (other than with respect to such Independent Director’s service as a director of the Borrower), employee, supplier (other than the Securities Pledgor and its Affiliates as a supplier of services pursuant to the Administrative Services Agreement) or customer of, the Borrower, the Company or any of their respective Affiliates, (b) a Person controlling any such equityholder, supplier or customer, or (c) a member of the immediate family of any such equityholder, officer, director, employee, supplier or customer or any other equityholder of the Borrower or the Company. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Borrower, whether through ownership of voting securities, by contract or otherwise.

“Insolvency”: with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. “Insolvent” has a corresponding meaning.

“Intellectual Property”: all rights, priorities and privileges relating to intellectual property, whether arising under the United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“Intellectual Property Security Agreement”: as defined in the Borrower Security Agreement and the Company Guarantee and Security Agreement.

“Interest Payment Date”: as to any Loan, (a) each Quarterly Date to occur while such Loan is outstanding and the final maturity date of such Loan and (b) the date of any repayment or prepayment made in respect thereof.

“Interest Period”: With respect to each Loan, the period commencing on the date of the making of or conversion to such Loan and ending on the next occurring Quarterly Date and, thereafter, each period from one Quarterly Date to the next Quarterly Date, provided that, in each case:

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(a) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the next calendar month, in which case such Interest Period shall end on the immediately preceding Business Day;

(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is not a numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Business Day of a calendar month; and

(c) any Interest Period that would otherwise end after the maturity date for a Loan shall end on the maturity date for such Loan.

“Issuing Lender”: Wells Fargo, in its capacity as issuer of any Letter of Credit.

“L/C Commitment”: $5,000,000.

“L/C Obligations”: at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit that have not then been reimbursed pursuant to Section 3.5.

“L/C Participants”: all of the Lenders other than the Issuing Lender.

“Lease/Purchase Documents”: the Asset Purchase Agreement, the Master Lease, the Supplemental Agreement, the Put Option Letter, the Call Option Letter, the Tax Matters Agreement, the Company Guarantee and Security Agreement, the Company Leasehold Mortgage (when and if executed) and each other document, instrument or certificate delivered by Holdings and its Subsidiaries in connection with any of the foregoing.

“Lease/Purchase Transactions”: the transactions contemplated by the Lease/Purchase Documents.

“Leasehold Mortgage Assignment”: the leasehold mortgage assignment to be executed and delivered by the Borrower, if required under Section 21(j) of the Master Lease, and relating to the Company Leasehold Mortgage, in form and substance reasonably satisfactory to the Administrative Agent.

“Leasehold Security Document”: a landlord consent and waiver (and, if the applicable member of the Restricted Group holds its leasehold interest in the relevant real property pursuant to a recorded instrument (in complete or memorandum form), a leasehold assignment or leasehold mortgage), as may be required by the Administrative Agent or the Required Lenders, in form and substance reasonably satisfactory to the Administrative Agent.

“Lenders”: as defined in the preamble hereto; provided, that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit Lender.

“Letters of Credit”: as defined in Section 3.1(a).

“Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

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“Liens to be Terminated”: as defined in Section 4.25(b).

“Loan Documents”: this Agreement, the Security Documents, the Notes and each other document, agreement, instrument or certificate delivered by any Loan Party in connection herewith or therewith.

“Loans” or “Revolving Loans”: as defined in Section 2.1(a).

“Loan Parties”: each member of the Restricted Group or Affiliate thereof that is a party to a Loan Document.

“Major Decision”: any decision of or on behalf of the Borrower to: (i) engage in any business or activity other than as set forth in this Agreement; (ii) voluntarily dissolve or liquidate, in whole or in part; (iii) consolidate or merge with or into any other Person; (iv) convey or transfer its properties and assets to any other Person prior to the indefeasible payment in full of all Obligations, except as expressly permitted hereunder; (v) terminate any of the Lease/Purchase Documents or amend any of the same in a way adverse to the Administrative Agent and the Lenders; 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, including, but not limited to, the federal Bankruptcy Code, or seek the appointment of a trustee, receiver, liquidator, custodian, examiner or other similar official of it or any substantial part of its property, or consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or make a general assignment for the benefit of creditors, or fail generally to pay its debts as they become due, or take any action to authorize any of the foregoing.

“Master Lease”: the Lease and License Financing and Purchase Option Agreement dated on or about the date hereof between the Borrower and the Company, substantially in the form of Exhibit 1(b).

“Material Adverse Effect”: a material adverse effect on (a) the business, property, operations or condition (financial or otherwise) of the Borrower or of the Company and its Subsidiaries taken as a whole, (b) the validity or enforceability of the material terms of this Agreement or any of the other Transaction Documents, (c) the material rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder or (d) the ability of Holdings, the Company, any of their Subsidiaries or the Borrower to fulfill their material obligations hereunder or thereunder.

“Materials of Environmental Concern”: any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

“Mortgage”: as defined in Section 6.10.

“Multiemployer Plan”: a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Cash Proceeds”: (a) in connection with any Asset Sale or Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of

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attorneys’ fees, accountants’ fees, investment banking fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document or Company Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

“New Lender”: as defined in Section 2.1(c).

“New Store”: any Store not previously in existence at a location, provided that a relocation of any Store within the same building, strip mall or retail mall shall not be considered a New Store. Notwithstanding the foregoing provision, the definition of New Store shall at all times be consistent with the Company’s reporting of the opening of new Stores in all financial statements and reports that any member of the Restricted Group makes to, or files with, the SEC or provides to the holders of any class of its debt securities or public equity securities.

“New Store Commitment”: an enforceable obligation of the Company or any of its Subsidiaries to lease, acquire, develop or open a New Store.

“Non-Excluded Taxes”: as defined in Section 2.14(a ).

“Non-U.S. Lender”: as defined in Section 2.14(d).

“Notes”: any promissory notes evidencing Loans.

“Obligations”: the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, (i) this Agreement, any other Loan Document, the Letters of Credit or any other document made, delivered or given in connection herewith or therewith, and (ii) any obligations and liabilities of the Borrower or any other member of the Restricted Group to Wells Fargo or any of its affiliates relating to Bank Products; in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto).

“Original Credit Facilities”: collectively, (a) the credit facility established pursuant to the Credit Agreement, dated as of April 25, 2001, among the Borrower, Fleet National Bank, as Administrative Agent, and the Lenders party thereto, together with the Working Capital Facility and the Caribou Lease/Purchase Documents (each as defined therein), and (b) the credit facility established pursuant to the Credit Agreement, dated as of June 29, 2004, among the Borrower, Bank of America, N.A., as successor-by merger to Fleet National Bank, as Administrative Agent, and the Lenders party thereto, together with Lease/Purchase Documents (as defined therein).

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“Other Taxes”: any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Participant”: as defined in Section 10.6(c).

“PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

“Permitted Acquisition”: as defined in the Master Lease.

“Permitted Liens”:

(a) Liens in favor of the Administrative Agent or any Lender under the Loan Documents and Liens in favor of the Borrower under the Lease/Purchase Documents (collaterally assigned to the Administrative Agent under the Loan Documents);

(b) with respect to the Company and its Subsidiaries, Liens for taxes, fees, assessments and other governmental charges to the extent that payment of the same may be postponed or is not required in accordance with the provisions of the Lease/Purchase Documents;

(c) with respect to the Company and its Subsidiaries, landlord’s and lessors’ Liens in respect of rent not in default or liens in respect of pledges or deposits under worker’s compensation, unemployment insurance, social security laws, or similar legislation (other than ERISA) or in connection with appeal and similar bonds incidental to litigation; mechanics’, laborers’ and materialmen’s and similar Liens, if the obligations secured by such Liens are not then delinquent or are released by appropriate statutory release bonds; Liens securing the performance of bids, tenders, contracts (other than for the payment of money); and statutory obligations incidental to the conduct of its business and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the operation of its business;

(d) with respect to the Company and its Subsidiaries, judgment Liens that shall not have been in existence for a period of longer than 30 days after the creation thereof or, if a stay of execution shall have been obtained, for a period longer than 30 days after the expiration of such stay;

(e) with respect to the Company and its Subsidiaries, Liens in respect of Capital Lease Obligations and purchase money obligations incurred within 90 days of purchase which in the aggregate do not secure Indebtedness in excess of $1,000,000 (of which not more than $500,000 may consist of existing capital leases) for new tangible personal property other than inventory used in their business, provided that any such Liens shall not extend to property and assets not financed by such capital Lease or purchase money obligation and shall not secure Indebtedness greater than the lesser of the cost or fair market value of such tangible personal property so acquired;

(f) with respect to the Company and its Subsidiaries, easements, rights of way, restrictions and other similar Liens relating to real property and not interfering in a material way with the ordinary conduct of their business or the value of such real property;

(g) with respect to the Company and its Subsidiaries, Liens of assignments, subleases, licenses, sublicenses or other transfers of the Company’s and its Subsidiaries’ rights or assets, in each case to the extent permitted pursuant to Section 13 of the Master Lease; and

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(h) with respect to the Company and its Subsidiaries, Liens in favor of Wells Fargo in the nature of cash collateral securing letters of credit to the extent permitted to Section 22(a)(vi) of the Master Lease.

“Person”: an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Plan”: at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower, the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledged Stock”: the Capital Stock (i) pledged by the Securities Pledgor to the Administrative Agent for the benefit of the Lenders pursuant to the Securities Pledge Agreement and (ii) pledged to the Borrower pursuant to the Company Security Documents and collaterally assigned to the Administrative Agent for the benefit of the Lenders pursuant to the Security Documents, as the case may be.

“Pre-Opening Expenses”: expenses incurred by any member of the Restricted Group prior to the opening to the general public of a Store for business, determined in accordance with GAAP.

“Projections”: as defined in Section 6.2(c).

“Properties”: as defined in Section 4.17(a).

“Put Option Letter”: the Put Option Letter issued by the Company to the Borrower dated on or about the date hereof, substantially in the form of Exhibit 1(d).

“Quarterly Dates”: the dates set forth on Schedule 1.1C and the last day of each fiscal quarter of the Company thereafter.

“Recovery Event”: any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any member of the Restricted Group, or any receipt by any member of the Restricted Group of any amount as a refund of any Tax or Other Tax.

“Reference Lender”: Wells Fargo.

“Reference Period”: each period of four consecutive fiscal quarters of the Company ending on each Quarterly Date on or after the Closing Date.

“Register”: as defined in Section 10.6(b).

“Regulation U”: Regulation U (12 CFR Part 221) of the Board as in effect from time to time.

“Reimbursement Obligation”: the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit.

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“Reinvestment Deferred Amount”: with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any member of the Restricted Group in connection therewith that are not applied to prepay the Loans or reduce the Revolving Commitments pursuant to Section 2.6(a) as a result of the delivery of a Reinvestment Notice.

“Reinvestment Event”: any Recovery Event in respect of which the Company has delivered a Reinvestment Notice.

“Reinvestment Notice”: a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Company (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of a Recovery Event to acquire or repair assets useful in its business.

“Reinvestment Prepayment Amount”: with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to acquire or repair assets useful in the Company’s business.

“Reinvestment Prepayment Date”: with respect to any Reinvestment Event, the earlier of (a) the date occurring 270 days after such Reinvestment Event and (b) the date on which the Company shall have determined not to, or shall have otherwise ceased to, acquire or repair assets useful in the Company’s business with all or any portion of the relevant Reinvestment Deferred Amount.

“Reorganization”: with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, ..29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

“Required Lenders”: Lenders holding in the aggregate at least 51% of the Revolving Commitments at such time (or if such Revolving Commitments have been terminated, 51% of the Revolving Extensions of Credit).

“Requirement of Law”: as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, 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.

“Responsible Officer”: the chief executive officer, president, chief financial officer or treasurer of the Company, but in any event, with respect to financial matters, the chief financial officer of the Company.

“Restricted Group”: the Company, each of its Subsidiaries, Holdings and the Borrower, each of which is referred to as a “member” of the Restricted Group.

“Revolving Commitment”: as to any Lender, the obligation of such Lender, if any, to make Revolving Loans and participate in Letters of Credit in an aggregate principal and/or face amount not to exceed the amount set forth under the heading “Revolving Commitment” opposite such Lender’s name on Schedule 1.1A or in the Assignment and Assumption or Additional Lender Supplement pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to

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the terms hereof. The amount of the Total Revolving Commitments as of the Closing Date is $15,000,000.

“Revolving Commitment Period”: the period from and including the Closing Date to the Revolving Termination Date.

“Revolving Extensions of Credit”: as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans held by such Lender then outstanding and (b) such Lender’s Revolving Percentage of the L/C Obligations then outstanding.

“Revolving Percentage”: as to any Lender at any time, the percentage which such Lender’s Revolving Commitment then constitutes of the Total Revolving Commitments or, at any time after the Revolving Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender’s Revolving Loans then outstanding constitutes of the aggregate principal amount of all Revolving Loans then outstanding, provided, that, in the event that the Revolving Loans are paid in full prior to the reduction to zero of the Total Revolving Extensions of Credit, the Revolving Percentages shall be determined in a manner designed to ensure that the other outstanding Revolving Extensions of Credit shall be held by the Revolving Lenders on a comparable basis.

“Revolving Termination Date”: February 19, 2013.

“SEC”: the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

“Securities Pledge Agreement”: the Securities Pledge Agreement to be executed and delivered by the Securities Pledgor as of the Closing Date, substantially in the form of Exhibit C.

“Securities Pledgor”: GSS Holdings, Inc., a Delaware corporation.

“Security Documents”: the Borrower Security Agreement, each Leasehold Security Document, the Leasehold Mortgage Assignment, each assignment of any Mortgage, the Securities Pledge Agreement, the Collateral Assignment and all other security documents from time to time delivered to the Administrative Agent to secure the obligations and liabilities of any Loan Party under any Loan Document or any Person under any Lease/Purchase Document.

“Single Employer Plan”: any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.

“Solvent”: when used with respect to any Person, means that, as of any date of determination, (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives

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rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Specified Change of Control”: a “Change of Control” (or any other defined term having a similar purpose) as defined in any organizational document of Holdings or any agreement relating to the Capital Stock of Holdings or the Company.

“Specified Foreign Jurisdiction”: any country other than the United States in which the Company’s annual revenues or profits (excluding revenues and profits derived from franchising and similar licensing agreements or mail-order business) exceed $500,000.

“Store”: any store, kiosk, or other retail unit, including without limitation, any New Store, which is owned or controlled directly or indirectly by the Company or any of its Subsidiaries.

“Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. As of the date of this Agreement, Caribou MSP Airport, a Minnesota joint venture, is not a Subsidiary of the Company or Holdings. Notwithstanding anything to the contrary in this Agreement, Caribou Coffee Charitable Foundation, a Minnesota not-for-profit corporation, shall not be deemed a Subsidiary of the Company so long as it retains its not-for-profit status and is not consolidated on the Company’s financial statements.

“Subsidiary Guarantor”: each Domestic Subsidiary of the Borrower.

“Supplemental Agreement”: the Supplemental Agreement between the Borrower and the Company dated on or about the date hereof, substantially in the form of Exhibit 1(c).

“Swap Agreement”: any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions.

“Tax”: as defined in Section 2.14.

“Tax Matters Agreement”: the Tax Matters Agreement between the Borrower and the Company dated on or about the date hereof, substantially in the form of Exhibit 1(f).

“Total Revolving Commitments”: at any time, the aggregate amount of the Revolving Commitments then in effect.

“Total Revolving Extensions of Credit”: at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving Lenders outstanding at such time.

“Transaction Documents”: the Loan Documents and the Lease/Purchase Documents.

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“Transferee”: any Assignee or Participant.

“Type”: as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan.

“United States”: the United States of America.

“Wells Fargo”: Wells Fargo Bank, N.A., or any successor acting as Administrative Agent.

“Wholly Owned Subsidiary”: as to any Person, any other Person all of the Capital Stock of which (other than directors’ qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.

“Wholly Owned Subsidiary Guarantor”: any Subsidiary Guarantor that is a Wholly Owned Subsidiary of the Company.

1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any member of the Restricted Group not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time and (vi) references to the “knowledge” of any Loan Party shall refer to the actual knowledge of the senior management personnel of such Loan Party.

(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

2.1 Revolving Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans (the “Loans” or the “Revolving Loans”) to the Borrower from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender’s Revolving Percentage of the L/C Obligations then outstanding, does not exceed the amount of such Lender’s Revolving Commitment. During the Revolving Commitment Period the Borrower may use the Revolving Commitments by

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borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Loans shall be Eurodollar Loans unless, pursuant to the terms hereof, the Loans are required to be Base Rate Loans.

(b) The Borrower shall repay all outstanding Revolving Loans on the Revolving Termination Date.

(c) The Borrower may, at its sole expense and effort and with the consent of the Administrative Agent, on one occasion only, request: (i) one or more Lenders to increase (in the sole and absolute discretion of each such Lender) the amount of their respective Revolving Commitments or (ii) another lending institution reasonably acceptable to the Administrative Agent (each, a “New Lender”) to become a Lender and extend a Revolving Commitment hereunder (each such Lender and any New Lender being herein referred to as a “Proposed Lender”). To request an increase pursuant to this Section 2.1(c), the Borrower shall submit to the Administrative Agent a request (an “Additional Commitment Request”), in form and substance reasonably satisfactory to the Administrative Agent, signed by the Borrower, which shall be irrevocable and shall specify, as the case may be: (x) each such Proposed Lender and the amount of the proposed increase in its Revolving Commitment or (y) the identity of, and proposed Revolving Commitment for any New Lender. At the request of the Administrative Agent, the Borrower shall cause any New Lender to complete and deliver to the Administrative Agent an administrative questionnaire in the Administrative Agent’s form. Promptly following receipt of any Additional Commitment Request, the Administrative Agent shall advise each Lender of the details thereof. Upon the approval of the terms of the Additional Commitment Request by the Administrative Agent, (A) each such Proposed Lender which shall then be an existing Lender shall have its Revolving Commitment increased by the amount set forth in such request, or (B) the New Lender shall be and become a Lender hereunder having a Revolving Commitment equal to the amount set forth therefor in such request, provided that in each such case: (1) immediately before and after giving effect thereto, no Default or Event of Default shall or would exist, (2) each such Proposed Lender shall have executed and delivered to the Administrative Agent a supplement to this Agreement providing for its increased Revolving Commitment or its Revolving Commitment, as applicable, in form satisfactory to the Administrative Agent (an “Additional Lender Supplement”), (3) only one New Lender, with a Revolving Commitment of up to and including $10,000,000, may become a Lender under this subsection (c), (4) the maximum aggregate amount of increased or new Revolving Commitments that may be effected pursuant to this subsection (c) shall be $10,000,000, (5) no such request may be submitted or effected after any optional reduction of the Revolving Commitments pursuant to Section 2.4 and (6) it shall be a condition precedent to the effectiveness of any increased or new Revolving Commitment that the Lease/Purchase Documents shall have been amended or modified in a manner reasonably satisfactory to the Administrative Agent.

(d) Simultaneously with any increase in the aggregate amount of the Revolving Commitments under subsection (c) above, each Proposed Lender then becoming a Lender or increasing its Revolving Commitment hereunder (each, an “Incremental Lender”) shall, to the extent necessary, purchase from each other Lender, and each other Lender shall sell to each Incremental Lender, in each case at par and without representation, warranty, or recourse (in accordance with and subject to the restrictions contained in Section 10.6), such principal amount of the Revolving Extensions of Credit of such other Lender, together with all accrued and unpaid interest thereon, as will result, after giving effect to such transaction, in each Lender’s percentage of Revolving Extensions of Credit outstanding being equal to such Lender’s Revolving Percentage, provided that each such assignor Lender shall have received (to the extent of the interests, rights and obligations assigned) payment of the outstanding principal amount of its Loans, accrued interest thereon, accrued fees, commissions and all other amounts payable to it under the Loan Documents from the applicable assignee Lenders (to the extent of such

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outstanding principal and accrued interest, fees and commissions) or the Borrower (in the case of all other amounts).

2.2 Procedure for Borrowing. The Borrower may borrow under the Revolving Commitments during the Revolving Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 11:00 A.M., Boston time, three Business Days prior to the requested Borrowing Date), specifying (a) the amount of each borrowing and (b) the requested Borrowing Date. Each borrowing under the Revolving Commitments shall be in an amount equal to $1,000,000 or a whole multiple of $500,000 in excess thereof (or, if the aggregate Available Revolving Commitments are less, such lesser amount). Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Revolving Lender will make the amount of its pro rata share (in accordance with their respective Revolving Percentages) of each borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, Boston time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Revolving Lenders and in like funds as received by the Administrative Agent.

2.3 Commitment Fees, etc. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender in accordance with its Revolving Percentage, a commitment fee for the period from and including the Closing Date to the last day of the Revolving Commitment Period, computed at the Commitment Fee Rate on the amount of the Total Revolving Commitments in effect (regardless of usage)on the due date of each such payment, payable monthly in advance on the first Business Day of each calendar month, commencing on the first such date to occur after the date hereof.

(b) The Borrower agrees to pay to the Administrative Agent and the Arranger (and hereby assumes the obligation to pay) the fees in the amounts and on the dates set forth in that certain fee letter dated on or about the date hereof.

2.4 Termination or Reduction of Revolving Commitments. The Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, to terminate the Revolving Commitments or, from time to time, to reduce the amount of the Revolving Commitments; provided that no such termination or reduction of Revolving Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Total Revolving Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Commitments then in effect.

2.5 Optional Prepayments. The Borrower may at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent no later than 11:00 A.M., Boston time, three Business Days prior thereto, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurodollar Loans or Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.15. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid. Partial

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prepayments of Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof.

2.6 Mandatory Prepayments and Commitment Reductions. (a) On any date on which (i) the outstanding Revolving Extensions of Credit exceed the aggregate Revolving Commitments, (ii) any member of the Restricted Group shall receive Net Cash Proceeds from a Recovery Event, provided that five (5) Business Days shall have elapsed without a Reinvestment Notice being delivered to the Administrative Agent in respect thereof, (iii) any Indebtedness other than Indebtedness permitted under Section 22(a) of the Master Lease shall be issued or incurred by any member of the Restricted Group, or (iv) any member of the Restricted Group shall receive Net Cash Proceeds from any Asset Sale, the Borrower will apply 100% of the amount of such excess in the case of clause (i), 50% of such Net Cash Proceeds in the case of clause (ii), 100% of such Net Cash Proceeds in the case of clause (iii), and 80% of such Net Cash Proceeds in the case of clause (iv), to repay Loans and, to the extent of any such amount remaining after repayment of all outstanding Loans (because of outstanding L/C Obligations), replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent. On each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Loans, replacement of outstanding Letters of Credit and collateralization of L/C Obligations as set forth in the first sentence of this subsection (a).

(b) Amounts to be applied in connection with Revolving Commitment reductions made pursuant to subsection (c) below shall be applied to reduce permanently the Revolving Commitments unless the Required Lenders waive the same in accordance with Section 10.1. Any such reduction of the Revolving Commitments shall be accompanied by prepayment of the Revolving Loans to the extent, if any, that the Total Revolving Extensions of Credit exceed the amount of the Total Revolving Commitments as so reduced, provided that if the aggregate principal amount of Revolving Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent.

(c) The Revolving Commitments shall be reduced in the manner specified in clause (b) above automatically and without further act by any Person on any date on which the Reference Amount (as defined in the Master Lease) is reduced pursuant to the definition thereof.

(d) The application of any prepayment pursuant to this Section 2.6 shall be made, first, to Base Rate Loans and, second, to Eurodollar Loans. Each prepayment of the Loans under this Section 2.6 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid and any amounts due under Section 2.15.

2.7 Continuation of Loans. Each Loan shall automatically be continued as a Eurodollar Loan upon the expiration of the then current Interest Period with respect thereto having an Interest Period of the same length as the then current Interest Period in accordance with the applicable provisions of the definition of the term “Interest Period” set forth in Section 1.1, provided that no Eurodollar Loan may be continued as such when any Event of Default has occurred and is continuing (with any such Loan to be converted into a Base Rate Loan at the expiration of the applicable Interest Period), and provided, further, that if such continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to Loans having an Interest Period of one month.

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2.8 Limitations on Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings shall be in such amounts that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole multiple of $250,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall be outstanding at any one time.

2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin.

(b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin.

(c) If any Event of Default shall have occurred and be continuing, all outstanding Obligations (whether or not overdue) shall bear interest at a rate per annum equal to the rate then applicable to Eurodollar Loans plus 2% (or, if an Event of Default under Section 8(a) shall then be continuing, 3%) during the continuance of such Event of Default (both before and after judgment).

(d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.

2.10 Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall promptly notify the Borrower and the relevant Lenders of each determination of any interest rate hereunder and the effective date thereof. Any change in the interest rate on a Loan resulting from a change in the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the first day of the Interest Period next succeeding the day on which such change becomes effective. The Borrower also agrees to pay to the Lenders on the last day of such next occurring Interest Period an amount, calculated by the Administrative Agent, intended to compensate such Lender for such change in the Eurocurrency Reserve Requirements for the period from the effective date thereof to the beginning of such next occurring Interest Period (and may include the cost of deferring payment of such amount by the Borrower until the last day of such next occurring Interest Period). The Administrative Agent shall provide the Borrower with a statement of its calculation of such increased cost, reduction in income or additional expense and of its increased Applicable Margin, which statement shall be prima facie evidence of the correctness of such calculation, absent manifest error.

(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error.

2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:

(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or

(b) the Administrative Agent or any Lender shall have determined in good faith (which determination shall be binding and conclusive) that:

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(i) the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lender of making or maintaining its Loans during such Interest Period, or

(ii) the making or continuation of a Eurodollar Loan has been made impracticable or unlawful by (1) the occurrence of a contingency that materially and adversely affects the London interbank market for U.S. dollar deposits or (2) compliance by the Administrative Agent or any Lender in good faith with any applicable law or governmental regulation, guideline or order or interpretation or change thereof by any Governmental Authority charged with the interpretation or administration thereof or with any request or directive of any such Governmental Authority (whether or not having the force of law);

the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans and (y) any outstanding Eurodollar Loans under the relevant Facility shall be converted, on the last day of the then-current Interest Period (or on such earlier date as may be necessary in order to comply with applicable Requirements of Law), to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such.

2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Revolving Percentages of the Lenders.

(b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Loans then held by the Lenders.

(c) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, Boston time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension. The Borrower hereby irrevocably authorizes the Administrative Agent to debit any of Borrower’s accounts held with the Reference Bank (any of the foregoing, a “Borrower Account”), or if the funds therein are insufficient, to advance to a Borrower Account as a Revolving Loan that is a Base Rate Loan and simultaneously debit such Borrower Account, a sum sufficient to pay when due all scheduled payments of principal and all interest accrued on the Obligations and to pay when due all costs, fees and expenses at any time owed by the Borrower to the Administrative Agent, the Lenders and/or the Issuing Lender.

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(d) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon, at a rate equal to the greater of (i) the Federal Funds Effective Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender’s share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days after such Borrowing Date, the Administrative Agent shall also be entitled to recover or demand such amount with interest thereon at the rate per annum applicable to Base Rate Loans from the Borrower. Nothing herein shall be deemed to limit the rights of the Borrower against the defaulting Lender.

(e) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower.

2.13 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

(i) shall subject the Administrative Agent or any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any Application or any Eurodollar Loan made by it, or change the basis of taxation of payments to the Administrative Agent or such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.14 and changes in the rate of tax on the overall net income of any Lender);

(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of the Administrative Agent or such Lender that is not otherwise included in the determination of the Eurodollar Rate; or

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(iii) shall impose on the Administrative Agent or such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, such Lender shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. Commencing with the next occurring Interest Period, the affected Lender may increase the Applicable Margin on the Loan or Loans or other Obligations of such Lender by an amount necessary to compensate such Lender for the amount of such increase in cost, reduction in income or additional expense. Such increased Applicable Margin shall apply for so long as such increased cost, reduction in income or additional expense is incurred by such Lender, and such Lender agrees to notify the Borrower when such increased cost, reduction income or additional expense is no longer applicable. The Borrower also agrees to pay on the last day of such next occurring Interest Period an amount, calculated by such Lender, intended to compensate such Lender for such increased cost, reduction in income or additional expense for the period from the date of the initial incurrence of such cost, reduction or expense by such Lender to the beginning of such next occurring Interest Period (and may include the cost of deferring payment of such amount by the Borrower until the last day of such next occurring Interest Period). Such Lender shall provide the Borrower with a statement of its calculation of such increased cost, reduction in income or additional expense and of its increased Applicable Margin, which statement shall be prima facie evidence of the correctness of such calculation, absent manifest error.

(b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written notice thereof, commencing with the next occurring Interest Period, the affected Lender may increase the Applicable Margin on the Loan or Loans and other Obligations of such Lender by an amount necessary to compensate such Lender for the amount of reduction of return on capital. Such increased Applicable Margin shall apply for so long as such reduction in return on capital is incurred by such Lender, and such Lender agrees to notify the Borrower when such reduction in return on capital is no longer applicable. The Borrower also agrees to pay on the last day of such next occurring Interest Period an amount, calculated by such Lender, intended to compensate such Lender for such reduction in return on capital for the period from the date of the initial occurrence of such reduction in return on capital by such Lender to the beginning of such next occurring Interest Period (and may include the cost of deferring payment of such amount by the Borrower until the last day of such next occurring Interest Period). Such Lender shall provide the Borrower with a statement of its calculation of such reduction in return on capital and of its increased Applicable Margin, which statement shall be prima facie evidence of the correctness of such calculation, absent manifest error.

(c) The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

2.14 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or

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hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (any of the foregoing, a “Tax”), excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded Taxes”) or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, 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 Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender’s failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.

(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other 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 Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure.

(d) Each Lender (or Transferee) that is not a “U.S. Person” as defined in Section 7701(a)(30) of the Code (a “Non-U.S. Lender”) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement substantially in the form of Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered to the Borrower and the Administrative Agent by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver to the Borrower and the Administrative Agent such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this

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paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.

(e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s judgment such completion, execution or submission would not materially prejudice the legal position of such Lender.

(f) If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.14, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.14 with respect to the Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

(g) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

2.15 Payments Before End of Interest Period. If the Borrower for any reason makes any payment or prepayment of principal with respect to any Eurodollar Loan on any day other than the last day of the applicable Interest Period, or fails to borrow, continue or convert to a Eurodollar Loan after giving a Loan request, or if any Eurodollar Loan is accelerated pursuant to Section 8, the Borrower shall pay to the Administrative Agent for the account of the Lenders a makewhole payment pursuant to the following formula:

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			L =			(R — T) x P x D
						360

			L =			amount payable to the Administrative Agent for the account of the Lenders

			R =			interest rate on such Loan (excluding the Applicable Margin)

			T =			effective interest rate per annum at which any readily marketable bond or other obligation of the United States, selected at the Administrative Agent’s sole discretion, maturing on or near the last day of the then applicable Interest Period and in approximately the same amount as such Loan can be purchased by the Lenders on the day of such payment of principal or failure to borrow, continue or convert

			P =			the amount of principal prepaid or the amount of the requested Loan

			D =			the number of days remaining in the Interest Period as of the date of such payment or the number of days of the requested Interest Period

The Borrower shall pay such amount on the last day of the next occurring Interest Period, unless the Borrower is prepaying the Loans, in which case such amount shall be paid on the date of such prepayment. The Administrative Agent shall, on or prior to the first date of such next occurring Interest Period or such date of prepayment, as applicable, present to the Borrower a statement setting forth the Administrative Agent’s calculation of such amount pursuant hereto, which statement shall be deemed true and correct absent manifest error.

2.16 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.13 or 2.14(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.13 or 2.14(a).

SECTION 3. LETTERS OF CREDIT

3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Revolving Lenders set forth in Section 3.4(a), agrees to issue letters of credit (“Letters of Credit”) for the account of the Borrower on any Business Day during the Revolving Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Revolving Commitments would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date that is five Business Days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above). Each Letter of Credit shall be issued to support obligations of Company incurred in the ordinary course of its business. It shall be a condition precedent to the obligation of the Issuing Lender to

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issue each Letter of Credit that the Lease/Purchase Documents shall have been amended, if necessary, to (i) provide a method for the Company to utilize such Letter of Credit,(ii) ensure that the Borrower will remain in compliance with Section 7.1(d, and (iii) make such other changes (including, without limitation, to provide for the funding of cash collateral upon the occurrence of an Event of Default as and when required by Section 8 hereof), in each case in a manner acceptable to the Administrative Agent.

(b) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

3.2 Procedure for Issuance of Letter of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit (including the amount thereof).

3.3 Fees and Other Charges. (a) The Borrower will pay a fee on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Facility, shared ratably among the Revolving Lenders and payable quarterly in arrears on each Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the Issuing Lender for its own account a fronting fee of 0.25% per annum on the undrawn and unexpired amount of each issued and outstanding Letter of Credit, payable quarterly in arrears on each Fee Payment Date after the issuance date.

(b) In addition to the foregoing fees, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit.

3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions set forth below, for such L/C Participant’s own account and risk an undivided interest equal to such L/C Participant’s Revolving Percentage in the Issuing Lender’s obligations and rights under and in respect of each Letter of Credit and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for notices specified herein

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an amount equal to such L/C Participant’s Revolving Percentage of the amount of such draft, or any part thereof, that is not so reimbursed.

(b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.4(a) is not made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.

(c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it.

3.5 Reimbursement Obligation of the Borrower. If any draft is paid under any Letter of Credit, the Borrower shall reimburse the Issuing Lender for the amount of (a) the draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment, not later than 12:00 Noon, Boston time, on (i) the Business Day that the Borrower receives notice of such draft, if such notice is received on such day prior to 10:00 A.M., Boston time, or (ii) if clause (i) above does not apply, the Business Day immediately following the day that the Borrower receives such notice. Each such payment shall be made to the Issuing Lender at its address for notices referred to herein in Dollars and in immediately available funds. Interest shall be payable on any such amounts from the date on which the relevant draft is paid until payment in full at the rate set forth in (x) Section 2.9(b), until the Business Day next succeeding the date of the relevant notice, and (y) thereafter, Section 2.9(c).

3.6 Obligations Absolute. The Borrower’s obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower’s Reimbursement Obligations under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Lender shall not be

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liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Issuing Lender. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower.

3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.

3.8 Applications. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.

SECTION 4. REPRESENTATIONS AND WARRANTIES

To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to the Administrative Agent and each Lender (and has caused the Company to represent and warrant to the Borrower) that:

4.1 Financial Condition. The audited consolidated balance sheets of the Borrower, the Company and its Subsidiaries as at December 28, 2008, and the related consolidated statements of income and cash flows for the fiscal year ended on such date, reported on by and accompanied by an unqualified report from Ernst & Young LLP, present fairly the consolidated financial condition of the Borrower, the Company and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower, the Company and its Subsidiaries as at January 3, 2010, and the related unaudited consolidated statements of income and cash flows for the twelve-month period ended on such date, present fairly the consolidated financial condition of the Borrower, the Company and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the twelve-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). No member of the Restricted Group has any material Guarantee Obligations, contingent liabilities or liabilities for taxes, or any long-term leases (other than pursuant to the Lease/Purchase Documents) or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from December 28, 2008 to and including the date hereof there has been no Disposition by any member of the Restricted Group of any material part of its business or property. No subordinated Indebtedness of any member of the Restricted Group is outstanding as of the date hereof.

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4.2 No Change. Since December 28, 2008, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

4.3 Existence; Compliance with Law. Each member of the Restricted Group (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

4.4 Power; Authorization; Enforceable Obligations. Each member of the Restricted Group has the power and authority, and the legal right, to execute, deliver and perform the Transaction Documents to which it is a party, to enter into amendments to the Lease/Purchase Documents as and when contemplated hereby and, in the case of the Borrower, to obtain extensions of credit hereunder. Each member of the Restricted Group has taken all necessary organizational action to authorize the execution, delivery and performance of the Transaction Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Lease/Purchase Transactions and the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Transaction Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 4.19. Each Transaction Document has been duly executed and delivered on behalf of each member of the Restricted Group party thereto. This Agreement constitutes, and each other Transaction Document upon execution will constitute, a legal, valid and binding obligation of each member of the Restricted Group party thereto, enforceable against each such member in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

4.5 No Legal Bar. The execution, delivery and performance of this Agreement and the other Transaction Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate in any material respect any Requirement of Law or any Contractual Obligation of any member of the Restricted Group and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents and the Company Security Documents). There are no Requirements of Law or Contractual Obligations applicable to any member of the Restricted Group that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

4.6 Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Loan Parties, threatened by or against any member of the Restricted Group or against any of their respective properties or revenues (a) with respect to any of the Transaction Documents or any of the transactions contemplated hereby or thereby, or (b) that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

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4.7 No Default. No member of the Restricted Group is in default under or with respect to any of its Contractual Obligations in any respect that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

4.8 Ownership of Property; Liens. Each member of the Restricted Group has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except for Permitted Liens.

4.9 Intellectual Property. Except as otherwise described on Schedule 4.9, (a) the Borrower owns all service marks used by the Company or any of its Subsidiaries in their business and (b) each member of the Restricted Group owns, or is licensed to use, all other Intellectual Property necessary for the conduct of its business as currently conducted. Except as otherwise described on Schedule 4.9, no material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does any Loan Party have knowledge of any valid basis for any such claim. The use of Intellectual Property by each member of the Restricted Group does not infringe on the rights of any Person except for instances which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as provided in Schedule 4.9, no interest in any of the Intellectual Property has been licensed by any member of the Restricted Group to any other Person (except for licenses among the Company and its Subsidiaries, licenses permitted pursuant to Section 13 of the Master Lease, and the Borrower’s license thereof to the Company under the Lease/Purchase Documents and the Borrower’s collateral assignment thereof to the Administrative Agent).

4.10 Taxes. Each member of the Restricted Group has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant member of the Restricted Group); no tax Lien has been filed, and, to the knowledge of the Loan Parties, no claim is being asserted, with respect to any such tax, fee or other charge. No member of the Restricted Group has executed any waiver having the effect of extending any applicable statute of limitations in respect of tax liabilities.

4.11 Federal Regulations. No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for “buying” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of Regulations T, U or X of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.

4.12 Labor Matters. (a) There are no collective bargaining agreements or other labor contracts covering any member of the Restricted Group; (b) to the knowledge of the Loan Parties, no union or other labor organization is seeking to organize, or to be recognized as bargaining representative for, a bargaining unit of employees of any member of the Restricted Group; (c) there is no material labor dispute pending or threatened against or affecting any member of the Restricted Group; (d) there has not been, during the five year period prior to the date hereof, any material labor dispute against or affecting

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any member of the Restricted Group, other than employee grievances arising in the ordinary course of business which are not, in the aggregate, material; and (e) each of the members of the Restricted Group has complied in all material respects with (or corrected in full any prior noncompliance) and is in material compliance with the provisions of the Fair Labor Standards Act of 1938, as amended, and regulations thereunder.

4.13 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower, the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower, the Company nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

4.14 Investment Company Act; Other Regulations. No Loan Party is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

4.15 Subsidiaries; Capital Stock. Except as disclosed to the Administrative Agent by the Borrower in writing from time to time after the Closing Date:

(a) (i) Holdings has only the Subsidiaries set forth on, and the authorized, issued and outstanding Capital Stock of each of Holdings, the Company and its Subsidiaries and the Borrower is as set forth on, Schedule 4.15, (ii) the Capital Stock of each of Holdings, the Company and each of its Subsidiaries and the Borrower are duly authorized, validly issued, fully paid and nonassessable, and (iii) the Capital Stock of each of Holdings, each Subsidiary of the Company, and of the Borrower are owned beneficially and of record by the Persons set forth on Schedule 4.15, free and clear of all Liens. The Borrower has no Subsidiaries.

(b) Except as set forth on Schedule 4.15, no member of the Restricted Group has issued any securities convertible into, or options or warrants for, any common or preferred equity securities thereof and there are no agreements, voting trusts or understandings binding upon any member of the Restricted Group with respect to the voting securities of any member of the Restricted Group or affecting in any manner the sale, pledge, assignment or other disposition thereof, including any right of first refusal, option, redemption, call or other right with respect thereto, whether similar or dissimilar to any of the foregoing.

4.16 Use of Proceeds. The proceeds of the Loans on the Closing Date shall be used to refinance the Indebtedness to be Paid and to pay related fees and expenses. The proceeds of the Loans made after the Closing Date, and the Letters of Credit, shall be used for working capital and other general

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corporate purposes, including purchasing assets from the Company and its Subsidiaries under the Asset Purchase Agreement, in the case of Loans, or to purchase goods used by, or secure the obligations of, the Company and its Subsidiaries, in the case of the Letters of Credit.

4.17 Environmental Matters. Except as disclosed on Schedule 4.17 and as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(a) the facilities and properties owned, leased or operated by any member of the Restricted Group (the “Properties”) do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;

(b) no member of the Restricted Group has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by any member of the Restricted Group (the “Business”), nor does any Loan Party have knowledge or reason to believe that any such notice will be received or is being threatened;

(c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;

(d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Loan Parties, threatened, under any Environmental Law to which any member of the Restricted Group is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;

(e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any member of the Restricted Group in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;

(f) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and

(g) no member of the Restricted Group has assumed any liability of any other Person under Environmental Laws.

4.18 Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document or any other document, certificate or statement furnished by or on behalf of any Loan Party to the Administrative Agent, the Arranger or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contains any untrue statement of a material fact or omits any material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial

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information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Company to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. As of the date hereof, the representations and warranties contained in the Lease/Purchase Documentation are true and correct in all material respects. No Loan Party has knowledge of any fact that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.

4.19 Security Documents; Real Property. (a) Each Security Document is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Security Documents (including Pledged Stock pledged to the Borrower under the Company Security Documents and collaterally assigned by the Borrower to the Administrative Agent for the benefit of the Lenders pursuant to the Security Documents), when stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Security Documents (including other Collateral pledged to the Borrower under the Company Security Documents and collaterally assigned by the Borrower to the Administrative Agent for the benefit of the Lenders pursuant to the Security Documents), when financing statements and other filings specified on Schedule 4.19(a) in appropriate form are filed in the offices specified on Schedule 4.19(a), each Security Document shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the applicable Security Document), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Permitted Liens). Holdings has registered the Administrative Agent’s security interest in its Capital Stock in the Company in its registry of mortgages and charges.

(b) Each Company Security Document is effective to create in favor of the Borrower a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Company Security Documents, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the case of the other Collateral described in the Company Security Documents, when financing statements and other filings specified on Schedule 4.19(a) in appropriate form are filed in the offices specified on Schedule 4.19(a), each Company Security Document shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the applicable Security Document), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Permitted Liens).

(c) Schedule 1.1B lists, as of the Closing Date, each parcel of owned real property and each leasehold interest in real property held by the Borrower or by the Company or any of its Subsidiaries.

4.20 Solvency. Each Loan Party is, and after giving effect to this Agreement and the other Transaction Documents, and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent.

4.21 Intentionally Omitted.

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4.22 Regulation H. No Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

4.23 Certain Documents. The Borrower has delivered to the Administrative Agent a complete and correct copy of the Lease/Purchase Documents, including any amendments, supplements or modifications with respect to any of the foregoing. There are no agreements or documents relating to the subject matter of the Lease/Purchase Documents other than the Lease/Purchase Documents.

4.24 Stores; Material Agreements. Schedule 4.24 accurately and completely lists all Stores owned or operated by the Company or any of its Subsidiaries (with the owner and operator and address of each Store listed thereon) and all material agreements (including all real estate leases) to which any member of the Restricted Group is a party. Each of the material agreements listed on Schedule 4.24 is in full force and effect and constitutes the legally valid and binding obligation of the Company or its Subsidiary, as the case may be, identified thereon as being a party to such agreement and, to the knowledge of the Loan Parties, the other parties thereto, enforceable against each of them in accordance with its respective terms. No member of the Restricted Group is in violation under any material agreements, where such violations in the aggregate could reasonably be expected to have a Material Adverse Effect. To the knowledge of the Loan Parties, except as disclosed in Schedule 4.24, third parties to any material agreements are not in material violation thereof to the extent that such violations in the aggregate could reasonably be expected to have a Material Adverse Effect.

4.25 Indebtedness Outstanding.

(a) Set forth on Schedule 4.25(a) hereto is a list and description of all Indebtedness of any member of the Restricted Group that will be repaid, defeased, transferred or otherwise terminated on or prior to the closing hereunder (the “Indebtedness to Be Paid”).

(b) Set forth on Schedule 4.25(b) hereto is a list and description of all Liens of any member of the Restricted Group that will be repaid, defeased, transferred or otherwise terminated on or prior to the closing hereunder (the “Liens to be Terminated”).

(c) Set forth on Schedule 4.25(c) hereto is a list and description of all Liens of any member of the Restricted Group (other than the Liens of the Loan Documents) that will be outstanding immediately after the closing hereunder.

4.26 Anti-Terrorism Laws.

(a) No member of the Restricted Group and, to the knowledge of any of the Loan Parties, no Affiliate of any member of the Restricted Group, is in violation of any laws applicable to such member of the Restricted Group or such Affiliate relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

(b) No member of the Restricted Group and, to the knowledge of any of the Loan Parties, no Affiliate of any member of the Restricted Group, is any of the following:

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(i) a Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(ii) a Person or entity owned or controlled by, or acting for or on behalf of, any Person or entity that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv) a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(v) a Person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list.

(c) No member of the Restricted Group and, to the knowledge of any Loan Party, no Affiliate of any member of the Restricted Group, (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (b) above, (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(d) No Person is acting for any member of the Restricted Group or any Affiliate of any thereof as a broker or other agent acting or benefitting in any capacity in connection with the Loans.

4.27 Special Purpose Entity.

(a) Except as specifically permitted in this Agreement and in connection with the Original Credit Facilities, the Borrower has not (i) entered into any transaction of acquisition (except as provided in the Lease/Purchase Documents), merger, consolidation or amalgamation, or taken any action to liquidate, wind up or dissolve itself, nor has it suffered any liquidation or dissolution, in whole or in part, or (ii) created any Subsidiaries, or acquired by purchase or otherwise all or substantially all the business or assets (except as provided in the Lease/Purchase Documents) of, or stock or other evidences of beneficial ownership of, or made any investment in, any Person, or (iii) made any material change in its present method of conducting business or (iv) amended the terms of its organizational documents or taken any action that might cause it to become insolvent;

(b) the Borrower has not contemplated and is not contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws, or the liquidation of all or a major portion of its assets or property, and the Borrower has no knowledge of any Person contemplating the filing of any such petition against it;

(c) the Borrower has not become obligated for, or otherwise held out its credit or assets as being available to satisfy obligations of, any other Person;

(d) the Borrower was organized for the sole purpose of buying from and leasing back assets to the Company; other than in connection with the Original Credit Facilities, the Borrower has not

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during its existence, and will not, engage in any business unrelated to such activities and will conduct and operate its business as presently conducted and operated;

(e) the Borrower will maintain an arm’s length relationship with the sole shareholder or any Affiliate of the Borrower and the Borrower has not entered into, and will not enter into, any contract or agreement with such shareholder or any Affiliate of the Borrower, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arms-length basis with unrelated third parties;

(f) the Borrower has not incurred, and will not incur, any Indebtedness or material liabilities, secured or unsecured, direct or contingent (including any Guarantee Obligation), other than under the Original Credit Facilities (which, with respect to the Original Credit Facility described in clause (a) of the definition thereof, has been discharged prior to the date hereof, and with respect to the Original Credit Facility described in clause (b) of the definition thereof, will be discharged at the closing hereunder) and other than the Indebtedness permitted hereunder; the Borrower has not granted, and will not grant, any Lien except for Liens under the Original Credit Facilities (which, with respect to the Original Credit Facility described in clause (a) of the definition thereof, has been discharged prior to the date hereof, and with respect to the Original Credit Facility described in clause (b) of the definition thereof, will be discharged at or substantially contemporaneous with the closing hereunder) and except in favor of the Administrative Agent;

(g) except as specifically permitted in this Agreement or as provided in the Lease/Purchase Documents, and except for activities pursuant to the Original Credit Facilities, the Borrower has not made, nor will it make, any loans or advances to any other Person (including any Affiliate) or buy or hold evidence of any Indebtedness issued by any other Person (other than Investments permitted hereunder). Except as specifically permitted in this Agreement and except for activities pursuant to the Original Credit Facilities, the Borrower has not and will not pledge its assets for the benefit of any other Person;

(h) the Borrower has always been, is, and will be solvent and will pay its debts and liabilities from its own assets as the same shall become due; the Borrower has maintained, maintains and will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

(i) the Borrower has maintained and will maintain its own separate books and records and bank accounts, which are and will be, in each case separate and apart from those of any other Person;

(j) the Borrower has been, is and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other Person (including any Affiliate thereof), has maintained and utilized and shall maintain and utilize separate stationery, invoices and checks bearing its own name, has otherwise conducted and shall otherwise conduct its business and own its assets in its own name, and has and shall correct any known misunderstanding regarding its separate identity;

(k) subject to the requirements of the Tax Matters Agreement (and, in respect of matters prior to the closing hereunder, the respective tax matters agreements entered into in connection with the Original Credit Facilities), the Borrower has and will maintain separate financial statements showing its assets and liabilities separate and apart from those of any other Person, not have its assets listed on the financial statements of another, and will file its own tax returns;

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(l) the Borrower has not sought nor will it seek the dissolution or winding up, in whole or in part, of the Borrower;

(m) the Borrower has not commingled, and will not commingle, its funds or other assets with those of any Affiliate or other Person;

(n) the Borrower has not maintained, and will not maintain, its assets in such a manner making it costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or any other Person and, if requested by the Administrative Agent to do so after an Event of Default, will cause its assets leased to any other Person to be identified clearly thereon as owned by the Borrower;

(o) the Borrower will not do any act which would make it impossible to carry on the ordinary business of the Borrower;

(p) the Borrower has not, and will not, file or consent to the filing of a petition for bankruptcy, reorganization, assignment for the benefit of creditors or similar proceeding under any federal or state bankruptcy, insolvency, reorganization or other similar law with respect to the Borrower, or seek or consent to the appointment of a receiver, liquidator, conservator, assignee, trustee, sequestrator, custodian or any other similar official of Borrower or a substantial part of the property of the Borrower, or admit in writing the inability of Borrower to pay its debts generally as they become due, or, except as expressly permitted under this Agreement, engage in transactions with Affiliates, or take or induce any other entity to take any action in furtherance of any of the foregoing actions, without the unanimous consent of its board of directors;

(q) the Borrower has observed and will observe all corporate formalities;

(r) the Borrower has not acquired, and will not acquire, the obligations or securities of any of its partners, Affiliates, members or shareholders, as applicable;

(s) the Borrower has not paid, and shall not pay, for any overhead or other expenses of any other Person;

(t) the Borrower has complied at all times with each of the representations and warranties contained in this Section;

(u) the Borrower shall at all times have only Independent Directors, whose vote shall be required in connection with all Major Decisions of the Borrower; and

(v) the Borrower’s Certificate of Incorporation conforms in all material respects to the provisions of this Section 4.27.

SECTION 5. CONDITIONS PRECEDENT

5.1 Conditions to Initial Extension of Credit. The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date, of the following conditions precedent:

(a) Credit Agreement; Loan Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by the Administrative Agent, the Borrower and each

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Person listed on Schedule 1.1A, (ii) the Borrower Security Agreement, executed and delivered by the Borrower, (iii) the Collateral Assignment, executed and delivered by the Borrower, (iv) the Securities Pledge Agreement, executed and delivered by the Borrower and the Securities Pledgor, (v) each Intellectual Property Security Agreement required to be executed and delivered by each Loan Party that owns any Intellectual Property Collateral and (vi) each Leasehold Security Document required by the Administrative Agent to be delivered on the Closing Date.

(b) Lease/Purchase Documents; Indebtedness to be Paid.

(i) The Asset Purchase Agreement, the Master Lease, the Supplemental Agreement, the Put Option Letter, the Call Option Letter, the Tax Matters Agreement and the Company Guarantee and Security Agreement shall have been executed and delivered by the parties thereto. The Administrative Agent shall have received a true, correct and complete copy of each such document, certified to the reasonable satisfaction of the Administrative Agent and satisfactory to the Lenders in all respects.

(ii) The Administrative Agent shall have received evidence satisfactory to the Lenders that the Indebtedness to be Paid shall have been paid in full and that any related credit, loan or similar agreements, together with any related guarantees and other documentation, shall have been terminated, and arrangements satisfactory to the Lenders shall have been made for the termination of all Liens to be Terminated, including without limitation all Liens granted in connection with the Indebtedness to be Paid.

(c) Equity Arrangements. The Lenders shall be satisfied in all respects with the terms of the Capital Stock of the Restricted Group.

(d) Financial Statements. The Administrative Agent shall have received (i) the financial statements referred to in Section 4.1, (ii) financial statements for the twelve-month period ended December 28, 2009 demonstrating that Consolidated EBITDA of the Company for such period shall have equaled at least $20,000,000, and (iii) satisfactory projections for the Company and its Subsidiaries through the 2013 fiscal year.

(e) Approvals. All governmental and material third party approvals necessary in connection with the Lease/Purchase Transactions, the continuing operations of the members of the Restricted Group and the transactions contemplated hereby shall have been obtained and be in full force and effect.

(f) Lien Searches. The Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where each of the Loan Parties are organized and where real property assets of the Loan Parties are located, and such search shall reveal no liens on any of the assets of the Loan Parties except for liens permitted by Section 7.3 or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Administrative Agent.

(g) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date.

(h) Closing Certificate; Certified Certificate of Incorporation; Good Standing Certificates. The Administrative Agent shall have received (i) a certificate of each Loan Party and of the Securities Pledgor, dated the Closing Date, substantially in the form of Exhibit E, with appropriate

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insertions and attachments, including the certificate of incorporation of each Loan Party that is a corporation and the Securities Pledgor certified by the relevant authority of the jurisdiction of organization of such Loan Party or the Securities Pledgor, as applicable, and (ii) a long form good standing certificate for each Loan Party and for the Securities Pledgor, in each case from its jurisdiction of organization and each jurisdiction where it is required to be qualified as a foreign Person.

(i) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions:

(i) legal opinions of Dorsey & Whitney LLP, substantially in the form of Exhibit G ; and

(ii) the legal opinion of such other special and local counsel as may be required by the Administrative Agent.

Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.

(j) Pledged Stock; Stock Powers; Pledged Notes. The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Security Documents and the Company Security Documents, together with an undated stock power (in form and substance reasonably acceptable to the Administrative Agent) for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Administrative Agent pursuant to the Security Documents and the Company Security Documents endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.

(k) Filings, Registrations and Recordings. Each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under 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 perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall be in proper form for filing, registration or recordation.

(l) Solvency Certificate. The Administrative Agent shall have received a satisfactory solvency certificate from the chief financial officer of each of Holdings, the Borrower and the Company that shall document the solvency of the Borrower, Holdings and the Company, respectively, and each of their respective Subsidiaries after giving effect to the transactions contemplated hereby.

(m) Insurance. The Administrative Agent shall have received insurance certificates satisfying the requirements of the Security Documents and the Company Security Documents.

(n) Headquarters Lease. The Administrative Agent shall have received (i) a certificate executed by the landlord as contemplated under Section 20.2 of the Headquarters Lease, and (ii) a landlord consent executed by such landlord; each in form and substance reasonably satisfactory to the Administrative Agent.

5.2 Conditions to Each Extension of Credit. The agreement of each Lender to make any extension of credit requested to be made by it on any date (including its initial extension of credit) is subject to the satisfaction of the following conditions precedent:

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(a) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Transaction Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date, including as to the absence of any material adverse change.

(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

(c) Lease/Purchase Documents. The Borrower shall have delivered to the Administrative Agent a certificate issued by the Company under the Lease/Purchase Documents, confirming that the representations and warranties of the Company and its Subsidiaries under the Lease/Purchase Documents are true and correct in all material respects, that no Event of Default exists thereunder, that the Lease/Purchase Documents are in full force and effect, and that amendments thereto have been executed and delivered, in form and substance satisfactory to the Administrative Agent, which include provision for payments due thereunder (including without limitation, a notice of offer and a bill of sale establishing the requisite Acquisition Cost (as defined in the Master Lease) in form and substance reasonably satisfactory to the Administrative Agent) from the Company to the Borrower in amounts and on such dates sufficient to cover in full principal, interest and other amounts due from the Borrower to the Administrative Agent (after giving effect to the requested Credit Extension) and the Lenders hereunder as and when due.

(d) Other Documents. The Administrative Agent shall have received such other supporting documents and certificates as it may reasonably request.

Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.2 and, on the Closing Date, Section 5.1 have been satisfied.

SECTION 6. AFFIRMATIVE COVENANTS

The Borrower hereby agrees that, so long as the Revolving Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall:

6.1 Financial Statements. Furnish to the Administrative Agent and each Lender:

(a) as soon as available, but in any event within 90 days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the Borrower, the Company and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, by Ernst & Young or other independent certified public accountants of nationally recognized standing;

(b) as soon as available, but in any event not later than 45 days after the end of each quarterly period of each fiscal year, the unaudited consolidated balance sheet of the Borrower, the Company and its consolidated Subsidiaries as at the end of such quarter and, in each case, the related unaudited consolidated statements of income for such quarter and statements of income and cash flows for the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative

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form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and

(c) as soon as available, but in any event not later than 30 days after the end of each month occurring during each fiscal year (other than the last month of each fiscal quarter), the unaudited consolidated balance sheets of the Company and its consolidated Subsidiaries as at the end of such month and the related unaudited consolidated statements of income for such month and statements of income and cash flows for the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).

All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and (x) in accordance with GAAP and (y) in accordance with GAAP, but treating the Obligations of the Borrower hereunder as Consolidated Funded Indebtedness of the Company and not including as Consolidated Funded Indebtedness of any of the Company’s obligations under the Lease/Purchase Documents, in each case applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods.

6.2 Certificates; Other Information. Furnish to the Administrative Agent and each Lender (or, in the case of clause (g), to the New York office of counsel to the Administrative Agent, and in the case of clause (i), to the relevant Lender):

(a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

(b) Concurrently with the delivery of the financial statements pursuant to Section 6.1(a) and (b): (i)(A) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer’s knowledge, each of Holdings and each of its Subsidiaries during such period has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Transaction Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any “Default” or “Event of Default” (each as defined in the Master Lease) except as specified in such certificate, and (B) a certificate of appropriate officer of the Borrower, such officer to be reasonably acceptable to the Administrative Agent, stating that to the best of such officer’s knowledge, each of the Borrower and the Securities Pledgor during such period has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Transaction Documents to which it is a party to be observed, performed or satisfied by it, and that such officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate, (ii) a Store by Store report and a Market report, (iii) a Compliance Certificate, (iv) to the extent not previously disclosed to the Administrative Agent, a description of any change in the jurisdiction of organization of any Loan Party and a list of any Intellectual Property or other property as to which action is required under Section 6.10 hereof, in each case acquired by any Loan Party since the date of the most recent report delivered pursuant to this clause (iv), (v) the applicable compliance certificate required to be delivered under the Master Lease, and (vi) a list of all third party locations where any Equipment (as defined in the Master Lease) is located in connection of the sale of inventory in the ordinary course of the Company’s business including the approximate aggregate book value of such Equipment; provided however that, the information specified in clause (vi) of this Section 6.2(b) shall only be required to be

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provided concurrently with the delivery of the quarterly financial statements for the second and fourth fiscal quarters of each fiscal year pursuant to Section 6.1(b);

(c) as soon as available, and in any event no later than 30 days prior to the beginning of each fiscal year of the Company, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Company and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such fiscal year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect;

(d) within 45 days after the end of each fiscal quarter, a narrative discussion and analysis of the financial condition and results of operations of the Company and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year;

(e) no later than 10 Business Days (or, in the case of amendments or supplements to the Lease/Purchase Documents effected solely to facilitate borrowings of Revolving Loans hereunder, three Business Days) prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Lease/Purchase Documents;

(f) within five days after the same are sent, copies of all financial statements and reports that any member of the Restricted Group sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that any member of the Restricted Group may make to, or file with, the SEC;

(g) as soon as available, but in any event no later than 20 days after the Closing Date, all certificates representing the shares of Capital Stock pledged pursuant to the Security Documents and the Company Security Documents, together with an undated stock power (in form and substance reasonably acceptable to the Administrative Agent) for each such certificate executed in blank by a duly authorized officer of the pledgor thereof, to the New York office of counsel to the Administrative Agent;

(h) as soon as available, but in any event no later than 20 days after the Closing Date, using best efforts, an amendment to the Lease of Retail Space dated May 25, 1993, as amended, by and between the Company and Brookfield LD DB Inc., in form and substance reasonably acceptable to the Administrative Agent; and

(i) promptly, such additional financial and other information as any Lender may from time to time reasonably request.

6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant member of the Restricted Group, and pay and perform its obligations under the Administrative Services Agreement.

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6.4 Maintenance of Existence; Compliance; Conduct of Business. (a) Preserve, renew and keep in full force and effect its organizational existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business; (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect; (c) maintain and keep in full force and effect all material licenses and permits necessary to the proper conduct of its business; and (d) remain or engage in the business of owning the equipment and tangible and intangible personal property (and if requested by the Administrative Agent after an Event of Default, the real estate leaseholds) used by the Company and its Subsidiaries in the conduct of their business, and in no other business.

6.5 Maintenance of Property; Insurance. (a) Keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property as required under the Security Documents and, without limiting the provisions thereof, in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.

6.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the members of the Restricted Group with officers and employees of the members of the Restricted Group and with their independent certified public accountants. Without limiting the foregoing, the Administrative Agent and the Lenders may conduct up to four (4) commercial credit examinations of the Borrower per year so long as no Event of Default exists and, during any period when an Event of Default is continuing, as many commercial credit examinations of the Borrower as they reasonably deem necessary. One such examination per year while no Event of Default has occurred and is continuing, and all such examinations during the continuance of any Event of Default, shall be all at the expense of the Borrower.

6.7 Notices. Promptly give notice to the Administrative Agent and each Lender of:

(a) the occurrence of any Default or Event of Default;

(b) any (i) default or event of default under any Contractual Obligation of any member of the Restricted Group or (ii) litigation, investigation or proceeding that may exist at any time between any member of the Restricted Group and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

(c) any litigation or proceeding affecting any member of the Restricted Group (i) in which the amount involved that is not covered by insurance is $1,000,000 or more, (ii) in which injunctive or similar relief is sought or (iii) which relates to any Loan Document;

(d) the following events, as soon as possible and in any event within 30 days after any Loan Party knows or has reason to know thereof: (i) the occurrence of any Reportable Event with

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respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC, the Borrower, the Company or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan;

(e) no more than five Business Days after becoming aware of any investigative proceedings by a Governmental Authority commenced or threatened against any member of the Restricted Group regarding any potential violation of Environmental Laws, any spill, release, discharge or disposal of any Hazardous Material or any event required to be reported to any such Governmental Authority, written notice thereof and of the action being proposed to be taken with respect thereto;

(f) any development or event that has had or could reasonably be expected to have a Material Adverse Effect;

(g) promptly, and in any event within five days after receipt thereof by any member of the Restricted Group, copies of each notice or other correspondence received from the SEC concerning any investigation or possible investigation or other inquiry by the SEC regarding financial or other operational results of any member of the Restricted Group; and

(h) promptly, and in any event within five days after receipt or delivery thereof by the Borrower, copies of each notice or request delivered by the Borrower or received from any member of the Restricted Group by the Borrower pursuant to the Master Lease and any other Lease/Purchase Documents.

Each notice pursuant to this Section 6.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant member of the Restricted Group proposes to take with respect thereto.

6.8 Environmental Laws. (a) Comply in all material respects with, and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.

(b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws.

6.9 Special Purpose Covenants. The Borrower shall cause the representations and warranties set forth in Section 4.27 to be true and correct at all times.

6.10 Additional Collateral, etc. (a) With respect to any property acquired after the Closing Date by any member of the Restricted Group that is not a Foreign Subsidiary (other than (x) any property described in paragraph (b) or (c) below, (y) any property subject to a Lien expressly permitted by clause (e) of the definition of “Permitted Liens” or (z) any Intellectual Property, to the extent of any filings required outside of the United States (unless such filings are in a Specified Foreign Jurisdiction)) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (and not less frequently than quarterly, in the case of any Collateral constituting Intellectual

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Property) (i) execute and deliver to the Administrative Agent such amendments to the Security Documents and the Company Security Documents or such other documents (including any Leasehold Security Document) as the Administrative Agent deems necessary or advisable to grant to the Borrower, and to the Administrative Agent, for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Borrower, and to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Security Documents, by the Company Security Documents or by law or as may reasonably be requested by the Administrative Agent.

(b) With respect to any fee interest in any real property having a value (together with improvements thereon) of at least $250,000 acquired after the Closing Date by any member of the Restricted Group that is not a Foreign Subsidiary, promptly (i) execute and deliver a first priority mortgage reasonably satisfactory to the Required Lenders (each, a “Mortgage”), in favor of the Borrower (assigned so as to grant to the Administrative Agent, for the benefit of the Lenders, the benefit thereof) covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor’s certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

(c) With respect to any new Subsidiary created or acquired after the Closing Date by any member of the Restricted Group, promptly (i) execute and deliver to the Administrative Agent such amendments to the Security Documents and the Company Security Documents as the Administrative Agent deems necessary or advisable to grant to the Borrower, and to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in (A) 100% of the Capital Stock of any such new Domestic Subsidiary that is owned by any member of the Restricted Group, and (B) 65% of the Capital Stock of any such new Foreign Subsidiary that is owned by any member of the Restricted Group, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant member or members of the Restricted Group, (iii) if such new Subsidiary is a Domestic Subsidiary, cause such new Subsidiary (A) to become a party to the Company Guarantee and Security Agreement, (B) to take such actions necessary or advisable to grant to the Borrower, and to the Administrative Agent for the benefit of the Lenders, a perfected first priority security interest in the Collateral described in the Security Documents with respect to such new Domestic Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Security Documents, the Company Security Documents or by law or as may reasonably be requested by the Administrative Agent (other than (x) any property subject to a Lien expressly permitted by clause (e) of the definition of “Permitted Liens” or (y) any Intellectual Property, to the extent of any filings required outside of the United States or the European Union) and (C) to deliver to the Administrative Agent a certificate of such Domestic Subsidiary, substantially in the form of Exhibit E, with appropriate insertions and attachments, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

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(d) Promptly upon any member of the Restricted Group undertaking any business or operations in any Specified Foreign Jurisdiction (other than entering into agreements with franchisees and similar licensees in any such jurisdiction and other than in respect of property subject to a Lien expressly permitted by clause (e) of the definition of “Permitted Liens”) notify the Administrative Agent thereof and, if reasonably requested by the Administrative Agent, promptly furnish to the Administrative Agent an opinion of counsel, such opinion and such counsel to be reasonably satisfactory to the Administrative Agent, as to the satisfaction of the requirements of subsections (a) through (c) above.

6.11 Lease/Purchase Documents. The Borrower will include and maintain in the Lease/Purchase Documents at all times provisions in form and substance acceptable to the Required Lenders. The Borrower will diligently enforce the Lease/Purchase Documents, and, promptly after written notices or requests are provided by the Administrative Agent pursuant hereto, provide corresponding notices or requests to the Company and other members of the Restricted Group (with copies to the Administrative Agent) from time to time pursuant to the Lease/Purchase Documents to enable the Restricted Group to comply with the terms of this Agreement and the terms of the Lease/Purchase Documents, as applicable. Except as provided in the last sentence of this Section 6.11, the Borrower will not amend the Lease/Purchase Documents without the prior written consent of the Required Lenders. The Borrower will at all times require that all payments under the Lease/Purchase Documents be paid to an account in the name of the Borrower at Wells Fargo in which the Administrative Agent shall have a first priority perfected security interest, and the Borrower shall not be entitled to withdraw any funds therefrom without the Administrative Agent’s prior written consent, except that the Borrower may make payments from such account to the Administrative Agent in satisfaction of the Obligations as they become due. The Borrower shall amend the Lease/Purchase Documents prior to the making of any Credit Extension hereunder to provide for payments by the Company due thereunder to cover in full (a) as and when due, any and all principal, interest, Reimbursement Obligations, fees and other amounts due from the Borrower from time to time hereunder, and (b) prior to the Borrower’s required payment of the same under the Lease/Purchase Documents, any and all payments required to be paid from time to time by the Borrower under the Lease/Purchase Documents.

6.12 Leasehold Security Documents. Promptly upon the written request of the Administrative Agent, the Borrower will use its reasonable efforts to (a) cause the Company to execute and deliver to the Borrower the Company Leasehold Mortgage (whereupon the Borrower shall assign the Company Leasehold Mortgage to the Administrative Agent pursuant to the Leasehold Mortgage Assignment) and shall use reasonable efforts to cause the owner of the Headquarters Building to consent thereto in writing, together with an opinion of counsel, such consent and opinion of counsel to be reasonably satisfactory to the Administrative Agent, (b) after the occurrence and during the continuance of an Event of Default, cause the landlord under each other lease of real property to which any member of the Restricted Group is a party as lessee, and such lessee, to execute and deliver a landlord consent in form and substance reasonably satisfactory to the Administrative Agent, and (c) cause any bailee, consignee or warehouseman with respect to any site where Collateral of any member of the Restricted Group is stored or located, and such member of the Restricted Group, to execute and deliver a bailee, warehouseman’s or similar waiver in form and substance reasonably satisfactory to the Administrative Agent.

6.13 Accounting System. The Borrower will maintain an accurate system of accounting in accordance with GAAP. The Borrower will not change its fiscal year from the fiscal year accounting used in the preparation of the financial statements referred to in Section 4.1.

6.14 Further Assurance. From time to time hereafter, the Borrower will execute and deliver, or cause to be executed and delivered, such additional instruments, certificates and documents,

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and take all such actions, as the Administrative Agent or any Lender shall reasonably request for the purpose of implementing or effectuating the provisions of the Transaction Documents and upon the exercise by the Administrative Agent of any power, right, privilege or remedy pursuant to the Transaction Documents which requires any consent, approval, registration, qualification or authorization of any Governmental Authority or instrumentality, exercise and deliver, or cause to be executed and delivered, all applications, certifications, instruments and other documents and papers that the Administrative Agent may be so required to obtain.

6.15 Accounts. The Borrower shall cause at least seventy (70%) percent of the Company’s total number of Stores located in the United States to utilize a Lender for their primary cash management functions and shall cause all of the Borrower’s, the Company’s and its Subsidiaries’ operating accounts to be maintained with a Lender. If (i) at any time there shall be more than one Lender hereunder, or (ii) the Administrative Agent shall so request, then the Borrower shall take, or cause to be taken, any action deemed necessary by the Administrative Agent for the Administrative Agent to obtain and maintain “control” (as defined in the Uniform Commercial Code in any applicable jurisdiction) of each deposit account, securities account or other account of the Borrower, the Company and/or any Subsidiary Guarantor, including without limitation, the delivery of control agreements in form and substance satisfactory to the Administrative Agent.

SECTION 7. NEGATIVE COVENANTS

7.1 Financial Condition Covenants; New Stores.

(a) Maximum Senior Leverage Ratio. Permit the ratio (the “Consolidated Senior Leverage Ratio”) of the Consolidated Funded Indebtedness of the Company and its Subsidiaries at December 28, 2009 and at each Quarterly Date thereafter to the Consolidated EBITDA of the Company for the Reference Period ending on such Quarterly Date to be greater than 1.50:1.00.

(b) Minimum Interest Coverage Ratio. Permit the ratio of (i) the Consolidated EBITDAR of the Company for each Reference Period ending on any Quarterly Date to (ii) the sum of Consolidated Interest Expense plus Consolidated Rental Expense of the Company and its Subsidiaries for such Reference Period to be less than 1.35:1.00.

(i) Make any Capital Expenditures, except to purchase and lease back assets of the Company and its Subsidiaries in connection with Loans hereunder (limited in purchase price to the amount of such Revolving Loans) pursuant to the Lease/Purchase Documents.

(ii) Permit the Capital Expenditures made by the Company and its Subsidiaries in any fiscal year to exceed the sum of (A) $30,000,000 minus (B) the aggregate amount of Restricted Payments made pursuant to Section 22(f)(iii) of the Master Lease during such fiscal year that is in excess of $5,000,000.

(d) Minimum Rental Payments. Permit the Lease/Purchase Documents not to provide at all times for rental and other payments from the Company under the Lease/Purchase

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Documents in amounts sufficient to cover all of the Obligations and all of its operating and other expenses, in each case on or prior to the dates when such Obligations and expenses become due and payable.

(e) New Store Commitments. Permit the Company to enter into any New Store Commitment if at such time (A) the Coffeehouse Level EBITDA Margin for the most recently completed Reference Period for which financial statements have been delivered pursuant to Section 6.1(b) is less than 15% of Coffeehouse Level Sales for such Reference Period, or (B) the aggregate Available Revolving Commitments of all Lenders are less than (1) the budgeted amount of Capital Expenditures for outstanding New Store Commitments (including the New Store Commitment in question, and assuming that the budgeted amount of Capital Expenditures for any New Store Commitment for which a Capital Expenditure budget has not been determined is $300,000), less (2) the aggregate amount of Capital Expenditures made toward New Store Commitments prior to the opening of each such New Store.

7.2 Indebtedness. Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except Indebtedness to the Administrative Agent or any Lender pursuant to any Loan Document.

7.3 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except for Permitted Liens. Without limitation of the foregoing, the Borrower covenants and agrees that it will not enter into (and will not suffer or permit any of its Subsidiaries to enter into) any agreement or understanding (each, a “Restrictive Agreement”) with any Person other than the Administrative Agent which could prohibit or restrict in any manner the right of the Borrower or any such Subsidiary to grant to the Administrative Agent any Lien on any of its Intellectual Property arising under laws other than those of the United States, whether such Intellectual Property is now owned or hereafter acquired. The Borrower represents and warrants that, at the date of this Agreement, neither the Borrower nor any such Subsidiary is party to any such Restrictive Agreement.

7.4 Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of any of its property or business (other than pursuant to the Lease/Purchase Documents).

7.5 Issuance of Stock. Issue or sell any shares of its Capital Stock to any Person.

7.6 Restricted Payments. Except to the extent required under the Administrative Services Agreement, make any distribution or payment of cash, property, or obligations, or both, directly or indirectly to the holder of any Capital Stock or to any Affiliate of any such holder for any reason whatsoever, including without limitation, salaries, loans, debt repayment, consulting fees, management fees, expense reimbursements and dividends, distributions, put, call or redemption payments and any other payments in respect of such Capital Stock; provided, however, that distributions and payments restricted by this Section 7.6 shall not include reasonable and customary salaries paid to employees of the Company or any of its Subsidiaries for actual services rendered and reimbursements of bona fide out of pocket business expenses made to such employees and to other holders of any equity interest of the Company.

7.7 Capital Expenditures. Make or commit to make any Capital Expenditure other than pursuant to the Lease/Purchase Documents.

7.8 Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other

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debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, “Investments”), except for investments in Cash Equivalents and Investments under the Lease/Purchase Documents.

7.9 Intentionally Omitted.

7.10 Transactions. Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Person, other than pursuant to the Transaction Documents and the Administrative Services Agreement.

7.11 ERISA. Maintain any Plan.

7.12 Amendment of Certain Agreements. Amend or modify or permit the amendment or modification of any organizational document, any of the Lease/Purchase Documents (except as required under the last sentence of Section 6.11), or grant any consent, waiver or approval thereunder, without the prior written consent of the Required Lenders, which will not be unreasonably withheld or delayed. The Borrower will grant consents, waivers or approvals under the Lease/Purchase Documents as and when directed to do so by the Administrative Agent if the same is necessary or advisable, in the determination of the Administrative Agent or the Required Lenders, to effectuate the purposes of the Loan Documents. The Borrower will not amend any material agreement if the same would be reasonably likely to result in a Material Adverse Effect.

7.13 Margin Stock. Use or permit the use of any of the proceeds of the Credit Extensions, directly or indirectly, for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry, any Margin Stock or for any other purpose which might constitute a “purpose credit” within the meaning of Regulation U, or cause this Agreement to violate Regulation T, U or X of the Board or the Securities Exchange Act of 1934, as amended, or any rules or regulations promulgated under such statutes.

7.14 Negative Pledges, Etc. (a) Enter into any agreement, amendment or arrangement (excluding this Agreement or any other Transaction Document) prohibiting or restricting (i) it from amending or otherwise modifying this Agreement or any other Loan Document, or (ii) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired or (b) renew or enter into any material agreement without using commercially reasonable efforts to obtain the written consents of such third parties necessary to effect the collateral assignments thereof and grants of security interests therein in accordance with the Security Documents.

SECTION 8. EVENTS OF DEFAULT

If any of the following events shall occur and be continuing:

(a) the Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation or fail to pay any other amount payable hereunder or under any other Loan Document within three days after any such interest or other amount becomes due in accordance with the terms hereof; or

(b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other

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statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or

(c) any Loan Party (i) shall default in the observance or performance of any agreement contained in Sections 6.2(e), (f), (g) or (h), 6.4, 6.5, 6.6, 6.7, 6.9, 6.11 or 7 of this Agreement or Sections 5.2 or 5.5 of the Borrower Security Agreement, or (ii) shall default in the observance or performance of any agreement contained in Sections 6.1 or 6.2(a), (b), (c), (d) or (i) of this Agreement and such default shall continue unremedied for a period of 5 days after notice to the Borrower from the Administrative Agent or the Required Lenders or any Loan Party obtaining knowledge of the same, whichever is earlier; or

(d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Administrative Agent or the Required Lenders or any Loan Party obtaining knowledge of the same, whichever is earlier; or

(e) (i) any member of the Restricted Group shall (A) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (B) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (C) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (A), (B) or (C) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (A), (B) and (C) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $500,000, or (ii) any Event of Default (as defined in any of the Lease/Purchase Documents) shall occur; or

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of the Restricted Group shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any member of the Restricted Group shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(g) any member of the Restricted Group or any Commonly Controlled Entity shall fail to pay when due an amount or amount that it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA and which, together with all such amounts, exceeds $500,000 in the aggregate; or notice of intent to terminate a Plan or Plans shall be filed under Title IV of ERISA by any member of the Restricted Group, any Commonly Controlled Entity, any plan administrator or any combination of the foregoing; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any such Plan or Plans must be terminated; or

(i) any of the Security Documents or any of the Lease/Purchase Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby, or any such Person shall so assert; or

(j) the guarantee contained in Section 2 of the Company Guarantee and Security Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or

(k) a Change of Control shall occur; or

(l) Holdings shall (i) conduct, transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any business or operations other than those incidental to its ownership of the Capital Stock of the Company, (ii) incur, create, assume or suffer to exist any Indebtedness or other liabilities or financial obligations, except (x) nonconsensual obligations imposed by operation of law, (y) obligations pursuant to the Loan Documents to which it is a party and (z) obligations with respect to its Capital Stock, or (iii) own, lease, manage or otherwise operate any properties or assets other than the ownership of shares of Capital Stock of the Company;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Revolving Commitments shall immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Revolving Commitments to be terminated forthwith, whereupon the Revolving Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans (with accrued interest thereon)

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and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to 105% of the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.

Whether or not the Administrative Agent has taken any of the actions set forth above, the Administrative Agent may, and at the direction of the Required Lenders, shall, require: (i) the Borrower to require the Company to use reasonable commercial efforts to obtain an absolute assignment in form and substance reasonably satisfactory to the Administrative Agent from the Company and its Subsidiaries of all of the Company’s and its Subsidiaries’ right, title and interest in their respective real estate leases, and subject to the conditions that, in connection with any such assignment, the Borrower shall sublease the covered premises back to the Company on the same terms as the assigned lease, (ii) the Borrower to require the Company and its Subsidiaries to use commercially reasonable efforts to obtain real estate leasehold mortgages in form and substance reasonably satisfactory to the Administrative Agent with respect to each of its real estate leaseholds (in the event the absolute assignments are not required pursuant to clause (i) immediately above), or (iii) the Borrower to obtain from the Company and its Subsidiaries agency account agreements with respect to each of their respective deposit and other accounts in form and substance similar to the form attached to the Borrower Security Agreement and otherwise satisfactory to the Administrative Agent, requiring all of such depository banks to sweep such accounts daily and wire such funds into a concentration account pledged to the Agent (as collateral assignee of the Borrower) at the Administrative Agent.

SECTION 9. THE ADMINISTRATIVE AGENT

9.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Loan Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender or any other Person, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term

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is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

9.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates (collectively, and including the Administrative Agent in its capacity as such, the “Agent Parties”) shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders, any participant or other Person for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. No Agent Party shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.

9.4 Reliance by Administrative Agent.

(a) The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, e-mail, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

(b) For purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or

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approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender, the Borrower or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and 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 or Event of Default as it shall deem advisable in the best interests of the Lenders.

9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that no Agent Party has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent Party to any Lender, including whether any Agent Parties have disclosed material information in their possession. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent Party or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates, and all Requirements of Law applicable to it and its affiliates, and made its own decision to make its Loans hereunder and enter into and perform this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent Party or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of any Agent Party.

9.7 Indemnification. Each of the Lenders, on a ratable basis, agree to indemnify and defend each Agent Party (to the extent not reimbursed by the Loan Parties and without limiting the obligation of any Loan Party to do so), on the date on which indemnification is sought under this Section, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent Party in any way relating to or arising out of, the Revolving Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent Party under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent Party’s gross negligence or willful misconduct; provided,

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however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

9.8 Administrative Agent in Its Individual Capacity. Wells Fargo and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though it were not the Administrative Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Wells Fargo or its affiliates may receive information regarding any Loan Party or its affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, Wells Fargo shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include Wells Fargo in its individual capacity.

9.9 Successor Administrative Agent. Wells Fargo may resign as Administrative Agent upon 30 days’ notice to the Lenders and the Borrower. If Wells Fargo shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring or removed Administrative Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.

9.10 Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on any Person) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations or Guarantee Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent hereunder) allowed in such judicial proceeding; and

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(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent hereunder and under the other Loan Documents.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

9.11 Other Agents; Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book runner,” “lead manager,” “arranger,” “lead arranger” or “co-arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than, in the case of such Lenders, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Person. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

SECTION 10. MISCELLANEOUS

10.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall

(i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder (except (x) in connection with the waiver of applicability of any post-default increase in interest rates and (y) that any amendment or modification of defined terms used in the financial covenants in this Agreement shall not constitute a reduction in the rate of interest or fees for purposes of this clause (i)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender’s Revolving Commitment or amend, modify or eliminate Section 2.12(a), in each case without the written consent of all of the Lenders directly affected thereby;

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(ii) eliminate or reduce the voting rights of any Lender under this Section 10.1 without the written consent of such Lender;

(iii) reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Guarantors from their obligations under the Company Guarantee and Security Agreement, in each case without the written consent of all Lenders directly affected thereby;

(iv) amend, modify, eliminate or waive any provision of Section 9 without the written consent of Wells Fargo;

(v) amend, modify, eliminate or waive any provision of Section 3 without the written consent of the Issuing Lender; or

(vi) contractually subordinate any of the Administrative Agent’s Liens or amend, modify or eliminate any of the provisions of Section 10.6 to permit any Loan Party or any Affiliate of a Loan Party to become an Assignee, in each case without the written consent of all Lenders directly affected thereby.

Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:


Borrower:		Arabica Funding, Inc.
		c/o Global Securitization Services, LLC
		68 South Service Road, Suite 120
		Melville, NY 11747
		Attention: Mr. Bernard J. Angelo
		Telecopy: (212) 302-8767
		Telephone: (631) 930-7202

		with a copy (which shall not constitute notice) to

		Caribou Coffee Company, Inc.
		3900 Lakebreeze Avenue North
		Brooklyn Center, MN 55429

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		Attention: Timothy Hennessy, Chief Financial Officer
		Telecopy: (612) 359-2730
		Telephone: (763) 592-2222

		and

		Caribou Coffee Company, Inc.
		3900 Lakebreeze Avenue North
		Brooklyn Center, MN 55429
		Attention: Dan Lee, General Counsel
		Telecopy: (612) 359-2730
		Telephone: (763) 592-2456

		with a copy (which shall not constitute notice) to:

		Dorsey & Whitney LLP
		50 South Sixth Street, Suite 1500
		Minneapolis, MN 55402
		Attention: Elizabeth Buckingham, Esq.
		Telecopy: (612) 340-8856
		Telephone: (612) 343-2178
Administrative Agent:

For borrowing and		Wells Fargo Bank, N.A., as Administrative Agent
prepayment notices:		5938 Priestly Drive, Suite 200
		Carlsbad, CA 92008
		Attention: Luis Victorio
		Telecopy: (760) 918-2727
		Telephone: (760) 918-2700

For all other notices:		Wells Fargo Bank, N.A., as Administrative Agent
		Loan Administration
		5938 Priestly Drive, Suite 200
		Carlsbad, CA 92008
		Attention: Henry Li, Relationship Manager
		Telecopy: (760) 918-2727
		Telephone: (760) 918-2700

		with a copy (which shall not constitute notice) to:

		Susan E. Siebert, Esq.
		Edwards Angell Palmer & Dodge LLP
		111 Huntington Avenue
		Boston, MA 02199
		Telecopy: (617) 227-4420
		Telephone: (617) 951-2220

provided that any notice, request or demand to or upon the Administrative Agent or any Lender shall not be effective until received.

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Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.

10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Administrative Agent and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the reasonable fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees, affiliates, agents, participants and controlling persons (each, an “Indemnitee”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, investigations, proceedings, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any member of the Restricted Group or any of the Properties and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Loan Party

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under any Loan Document (all the foregoing in this clause (d), collectively, the “Indemnified Liabilities”), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or a breach of such Indemnitee’s obligations (or those of the relevant related Person) under this Agreement or the other Loan Documents. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. All amounts due under this Section 10.5 shall be payable not later than 10 days after written demand therefor. Demands for payments pursuant to this Section 10.5 shall be submitted to Timothy Hennessy (Telephone No. 763-592-2222) (Telecopy No. 612-359-2730), at the address of the Borrower set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section 10.5 shall survive repayment of the Loans and all other amounts payable hereunder. If any Indemnitee makes any payment to any other Indemnitee with respect to an Indemnified Liability as to which Borrower was required to indemnify the Indemnitee receiving such payment, the Indemnitee making such payment is entitled to be indemnified and reimbursed by Borrower with respect thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNITEE WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNITEE OR OF ANY OTHER PERSON.

10.6 Successors and Assigns; Participations and Assignments. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, an affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default has occurred and is continuing, any other Person; and

(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment to an Assignee that is a Lender immediately prior to giving effect to such assignment, except in the case of an assignment of a Revolving Commitment to an Assignee that does not already have a Revolving Commitment.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s

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Revolving Commitments or Loans under any Facility, the amount of the Revolving Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower, the Company and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower or the Company shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any;

(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500;

(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire; and

(D) in the case of an assignment to a CLO (as defined below), the assigning Lender shall retain the sole right to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents, provided that the Assignment and Assumption between such Lender and such CLO may provide that such Lender will not, without the consent of such CLO, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 10.1 and (2) directly affects such CLO.

For the purposes of this Section 10.6, the terms “Approved Fund” and “CLO” have the following meanings:

“Approved Fund” means (a) a CLO and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an affiliate of such investment advisor.

“CLO” means any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an affiliate of such Lender.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 10.5). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 10.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

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(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee’s completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Revolving Commitments and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Lender and the other Lenders 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 a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 10.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.7(b) as though it were a Lender, provided such Participant shall be subject to Section 10.7(a) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.14 unless such Participant complies with Section 2.14(d).

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security

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interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.

(e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.

(f) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower or the Administrative Agent and without regard to the limitations set forth in Section 10.6(b). Each of the Borrower, each Lender and the Administrative Agent hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

10.7 Adjustments; Set-off. (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender, if any Lender (a “Benefitted Lender”) shall receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.

10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart

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hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

10.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

10.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

10.11 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

10.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

10.13 Acknowledgements. The Borrower hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

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(b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.

10.14 Releases of Guarantees and Liens. (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 10.1) to take any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document or that has been consented to in accordance with Section 10.1 or (ii) under the circumstances described in paragraph (b) below.

(b) At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents shall have been paid in full, the Revolving Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Loan Party under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person.

10.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

****Signature Page Follows****

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.


	ARABICA FUNDING, INC.
	By:
		Name:
		Title:

	WELLS FARGO BANK, N.A., as Administrative Agent and as a Lender
	By:
		Name:
		Title:

EX-31.1 4 c57994exv31w1.htm EX-31.1 exv31w1

EXHIBIT 31.1

CERTIFICATION

I, Michael Tattersfield, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Caribou Coffee Company, Inc.

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 6, 2010



	/s/ Michael Tattersfield
	Michael Tattersfield
	Chief Executive Officer and President

EX-31.2 5 c57994exv31w2.htm EX-31.2 exv31w2

EXHIBIT 31.2

CERTIFICATION

I, Timothy J. Hennessy, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Caribou Coffee Company, Inc.

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

May 6, 2010



	/s/ Timothy J. Hennessy
	Timothy J. Hennessy
	Chief Financial Officer

EX-32.1 6 c57994exv32w1.htm EX-32.1 exv32w1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Caribou Coffee Company, Inc. (the “Company”) on Form 10-Q for the quarter ended April 4, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Tattersfield, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 6, 2010



	/s/ Michael Tattersfield
	Michael Tattersfield
	Chief Executive Officer and President

EX-32.2 7 c57994exv32w2.htm EX-32.2 exv32w2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Caribou Coffee Company, Inc. (the “Company”) on Form 10-Q for the quarter ended April 4, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy J. Hennessy, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 6, 2010



	/s/ Timothy J. Hennessy
	Timothy J. Hennessy
	Chief Financial Officer

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