WellsFargo Bank, National Association OneKaiser Plaza, Suite 850 Oakland,California 94162 WellsFargo Securities, LLC 600California Street, 20th Floor SanFrancisco, CA 94108

Peet’s Coffee & Tea, Inc. (the “Borrower”).  After understanding the corporate organization structure of Peet’s Coffee & Tea, Inc. and its subsidiaries following the Merger, the Lead Arranger may require additional co-borrowers.

Wells Fargo Bank, National Association (“Wells Fargo Bank”) and a syndicate of financial institutions and other entities (each a “Lender” and, collectively, the “Lenders”).

Revolving Credit Facility.  A five-year revolving credit facility in an aggregate principal amount of $40,000,000 (the “Revolving Credit Facility”) (with optional subfacilities for standby letters of credit (each, a “Letter of Credit”) and swingline loans (each, a “Swingline Loan”), each in a maximum amount to be mutually determined and on customary terms and conditions (including with regard to Defaulting or Deteriorating Lenders) with compensation to be agreed).  Letters of Credit will, at the sole discretion of the Issuing Bank, be issued by the Issuing Bank and Swingline Loans will, at the sole discretion of the Swingline Lender, be made available by the Swingline Lender and each Lender will purchase an irrevocable and unconditional participation in each Letter of Credit and Swingline Loan extended.

The proceeds of the Credit Facilities will be used to (a) provide a portion of the financing for the Acquisition and the Refinancing and (b) pay fees, commissions and expenses incurred in connection with the Transactions.  The proceeds of the Revolving Credit Facility will be used to provide for the ongoing working capital and other general corporate purposes of the Borrower and its subsidiaries and the Acquired Company and its subsidiaries; provided that prior to the Merger (i) at all times the Borrower must maintain the aggregate amount of Deposited Proceeds (as defined below) and availability under the Revolving Credit Facility in an amount sufficient to consummate the Acquisition and (ii) in no event shall the outstandings under the Revolving Credit Facility used for working capital and other general corporate purposes exceed $10,000,000. The Borrower shall be required to deposit any Term Loan proceeds advanced on the Closing Date, but not used in connection with the Acquisition on the Closing Date in a separate collateral account maintained at Wells Fargo Bank and such funds shall be used solely for the Acquisition until the day after the Merger occurs (such deposited amount, plus any other amounts voluntarily deposited by the Borrower (including revolving loan proceeds) in such account are referred to herein as the “Deposited Proceeds”). If the Merger does not occur by June 30, 2010, the Term Loan proceeds in such account shall be applied to the Term Loan as a mandatory prepayment.

The date on which the Credit Facilities are closed (the “Closing Date”).

The Revolving Credit Facility will be available on a revolving basis from and after the Closing Date until the Revolving Credit Maturity Date (as defined below). The Term Loan Facility will be available only in a single draw of the full amount of the Term Loan Facility on the Closing Date.

The documentation for the Credit Facilities will include, among other items, a credit agreement, guarantees and appropriate pledge, security, mortgage and other collateral documents (collectively, the “Financing Documentation”), all consistent with this Term Sheet.

The obligations of the Borrower under the Credit Facilities, under any hedging agreements entered into between any Loan Party (as defined below) and any counterparty that is a Lender (or any affiliate thereof) at the time such hedging agreement is executed and under any treasury management arrangements between any Loan Party and a Lender (or any affiliate thereof) will be unconditionally guaranteed, on a joint and several basis, by each existing and subsequently acquired or organized direct and indirect subsidiary of the Borrower (each a “Guarantor”; and such guarantee being referred to herein as a “Guarantee”); provided that (a) the Acquired Company and its subsidiaries shall not be required to become Guarantors prior to the Merger or prior to, or as a condition to, the making of any of the credit extensions used to fund the Acquisition, provided that the Acquired Company and its subsidiaries (to the extent specified herein) shall become Guarantors no later than 10 days after the Merger and (b) Guarantees by foreign subsidiaries will be required only to the extent such Guarantees would not have material adverse tax consequences for the Borrower. All Guarantees shall be guarantees of payment and not of collection.  The Borrower and the Guarantors are herein referred to as the “Loan Parties” and, individually, as a “Loan Party.”

There will be granted to the Administrative Agent, for the benefit of the Lenders, any counterparty to any hedging agreement that is a Lender (or any affiliate thereof) at the time such hedging agreement is executed and any Lender (or any affiliate thereof) with treasury management arrangements with any Loan Party, valid and perfected first priority (subject to exceptions set forth in the Conditions Annex and subject to certain customary exceptions satisfactory to the Administrative Agent and set forth in the Financing Documentation) liens and security interests in all of the following (collectively, the “Collateral”):

All present and future capital stock or other membership, equity, ownership or profit interests (collectively, “Equity Interests”) owned or held by each of the Loan Parties, and 66% of the voting stock (and 100% of the non-voting stock) of all present and future first-tier foreign subsidiaries of any Loan Party (to the extent, and for so long as, the pledge of any greater percentage would have material adverse tax consequences for the Borrower); provided that any first-tier foreign subsidiary that is disregarded for tax purposes shall not be deemed to be a foreign subsidiary;

substantially all of the tangible and intangible properties and assets of the Loan Parties, now owned or hereafter acquired (including, without limitation, all equipment, inventory, accounts, deposit accounts and all other accounts, licenses, contract and other intangible rights, investment property, fixtures, cash, owned real property interests, leased real property interests and intellectual property; and

All such security interests will be created pursuant to, and will comply with, Financing Documentation reasonably satisfactory to the Administrative Agent.  On the Closing Date, such security interests will have become perfected (or arrangements for the perfection thereof reasonably satisfactory to the Administrative Agent will have been made) (subject to exceptions set forth in the Conditions Annex).

The Administrative Agent may, in its reasonable discretion, agree to exclude such other Collateral as is not material to the Collateral taken as a whole to the extent that the burden to the Borrower or relevant Guarantor of delivering such Collateral outweighs the benefits of obtaining such Collateral that would be provided to the Lenders.

The final maturity of the Revolving Credit Facility will occur on the fifth anniversary of the Closing Date (the “Revolving Credit Maturity Date”) and the commitments with respect to the Revolving Credit Facility will automatically terminate on such date. The final maturity of the Term Loan Facility will occur on the fifth anniversary of the Closing Date (the “Term Loan Maturity Date”).

The Term Loan Facility will amortize in equal quarterly installments on the last business day of each fiscal quarter of the Borrower, commencing with the second quarter of FY 2010, in an amount equal to $3,703,703.70, with the then unpaid principal amount due on the Term Loan Maturity Date.

100% of the net cash proceeds of the issuance or incurrence of debt by the Borrower or any of its subsidiaries, subject to baskets and other exceptions to be mutually agreed upon;

25% of the net cash proceeds from any issuance of equity securities of, or from any capital contribution to the Borrower or any of its subsidiaries, subject to exceptions to be mutually agreed upon; and

100% of the net cash proceeds of any asset sale, insurance or condemnation recovery or other asset disposition with a value in excess of $1,000,000 by the Borrower or any of its subsidiaries, subject to baskets and other exceptions to be mutually agreed upon; provided that such proceeds may be reinvested: (i) for any proceeds from any insurance or condemnation recovery with respect to the Borrower’s or the Acquired Company’s roasting facility, within 365 days so long as such reinvestment commences within 180 days and (ii) with respect to all other proceeds under this clause (c), within 180 days, in each case subject to customary reinvestment provisions.

All such mandatory prepayments will be applied first, to prepay outstanding loans under the Term Loan Facility and second, to prepay outstanding loans under the Revolving Credit Facility (with, when no loans are outstanding under the Term Loan Facility, a permanent reduction in the aggregate commitment under the Revolving Credit Facility).  All such mandatory prepayments of the Term Loan Facility will be applied to the remaining scheduled amortization payments on a pro rata basis.

Loans under the Credit Facilities may be prepaid and unused commitments under the Revolving Credit Facility may be reduced at any time, in whole or in part, at the option of the Borrower, upon notice and in minimum principal amounts and in multiples to be agreed upon, without premium or penalty (except LIBOR breakage costs).  Any optional prepayment of the Term Loan Facility will be applied to the remaining scheduled amortization payments on a pro rata basis.

The making of the initial extensions of credit under the Credit Facilities will be subject to satisfaction of the conditions precedent set forth in Section 2 of the Commitment Letter and in the Conditions Annex attached hereto as Annex B.

Each extension of credit under the Credit Facilities for working capital purposes and all other extensions of credit under the Credit Facilities that will not be used to fund the Acquisition will be subject to satisfaction of the following conditions precedent: (a) all of the representations and warranties in the Financing Documentation shall be true and correct in all material respects (except to the extent that such representation and warranty is qualified by materiality) as of the date of such extension of credit, (b) no event of default under the Credit Facilities or unmatured default shall have occurred and be continuing or would result from such extension of credit, (c) no material adverse change in the business, operations, condition (financial or otherwise), assets, liabilities (whether actual or contingent) or prospects of the Borrower and its subsidiaries having occurred since December 31, 2008.

Usual and customary for facilities of this type and such others as may be reasonably requested by the Lead Arranger based on information received after November 1, 2009, including, without limitation, the following (which will be applicable to the Borrower and its subsidiaries and not the Acquired Company or its subsidiaries prior to the Merger): corporate status; financial statements; capital structure; corporate power and authority; no default; no conflict with laws or material agreements; enforceability; absence of material litigation, environmental regulations and liabilities; ERISA; necessary consents and approvals; compliance with all applicable laws and regulations including, without limitation, Regulations T, U and X, Investment Company Act, the Patriot Act, environmental laws and Office of Foreign Assets Control; payment of taxes and other obligations; ownership of properties; intellectual property; liens; insurance; solvency; absence of any material adverse effect; senior debt status; collateral matters including, without limitation, perfection and priority of liens (including an express representation and warranty that after the Merger, the Administrative Agent’s lien on the K-Cup License is a first priority perfected lien); labor matters; material contracts; no burdensome restrictions; and accuracy of disclosure.

Usual and customary for facilities of this type and such others as may be reasonably requested by the Lead Arranger based on information received after November 1, 2009, including, without limitation, the following (which will be applicable to the Borrower and its subsidiaries and not the Acquired Company or its subsidiaries prior to the Merger): use of proceeds; payment of taxes and other indebtedness; continuation of business and maintenance of existence and rights and privileges; maintenance of all material contracts; necessary consents, approvals, licenses (including the K-Cup license) and permits; compliance with laws and regulations (including environmental laws, ERISA and the Patriot Act); maintenance of property and insurance (including hazard and business interruption insurance); maintenance of books and records; right of the Administrative Agent and the Lenders to inspect property and books and records; notices of defaults, litigation and other material events; financial and collateral reporting (including annual audited consolidated and consolidating financial statements within 90 days after the end of each fiscal year (together with the unqualified opinion of Borrower’s independent certified public accountants of recognized national standing acceptable to the Required Lenders) and quarterly unaudited consolidated and consolidating financial statements within 45 days after the end of each quarter (in each case, accompanied by covenant compliance certificates), annual updated budgets and projections within 30 days after the beginning of the applicable fiscal year, the sales and operating profit of each store of the Borrower and its subsidiaries for each quarter within 45 days after the end of such quarter, copies of all SEC and related filings within five days after filing and other information reasonably requested by any Lender); management letters; additional Guarantors and Collateral; other collateral matters; and further assurances (including, without limitation, with respect to security interests in after-acquired property); the Loan Parties shall use commercially reasonable efforts to consummate the Merger as soon as possible and in any event cause the Merger to be consummated no later than June 30, 2010; the Loan Parties shall use commercially reasonable efforts to cause the Acquired Company and its subsidiaries to comply with the terms of the Credit Documents.

Usual and customary for facilities of this type and such others as may be reasonably requested by the Lead Arranger based on information received after November 1, 2009, including, without limitation, the following (which will be applicable to the Borrower and its subsidiaries and not the Acquired Company or its subsidiaries prior to the Merger): limitation on debt; limitation on liens; limitation on negative pledges; limitation on loans, advances, acquisitions and other investments, including with respect to foreign subsidiaries; limitation on dividends, distributions, issuances of equity interests, redemptions and repurchases of equity interests; limitation on fundamental changes and asset sales (including, without limitation, sale-leaseback transactions); limitation on prepayments, redemptions and purchases of subordinated and certain other debt; limitation on transactions with affiliates; limitation on dividend and other payment restrictions affecting subsidiaries; limitation on changes in line of business, fiscal year and accounting practices; limitation on amendment of organizational documents and material contracts; and limitation on capital expenditures.

The credit agreement governing the Credit Facilities will contain the following financial covenants (which, subject to Section 7 of the Fee Letter, will be the only financial covenants):

Maximum Total Leverage Ratio: initially not to exceed 4.25:1.00 at any time with quarterly step downs to be determined (however such step downs to be no more than 0.25 per quarter in 2010) and annual step downs as of the first day of the last fiscal quarter of each year as follows:

“Total Leverage Ratio” means, at any time, (a) Total Funded Debt at such time to (b) EBITDAR for the four fiscal quarter period most recently ended.

“Total Funded Debt” means, at any time, without duplication, the sum of the following with respect to Borrower and its subsidiaries: (a) obligations evidenced by notes, bonds, debentures or similar instruments and obligations for borrowed money including but not limited to senior bank debt and subordinated debt; (b) obligations for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business and not more than 60 days past due and time-based licenses); (c) obligations under conditional sale or other title retention agreements with respect to acquired property; (d) capital lease obligations and all off-balance sheet financing; (e) obligations under or with respect to surety instruments; (f) unfunded pension liabilities; (g) obligations arising under acceptance facilities or under facilities for the discount of accounts receivable; (h) obligations with respect to issued and outstanding letters of credit; (i) contingent obligations; (j) last twelve month (1) operating lease expenses (excluding any operating leases of Diedrich existing as of the Closing Date) and (2) lease rent expenses (including common area maintenance expenses), in each case multiplied by a factor of six; (k) guarantees of the foregoing; and (l) all obligations of the type described above to the extent secured by a lien on any property of any such person, even if such person has not assumed or become liable for the payment of such obligation (to the extent of the greater of such obligation and the value of such property).

“EBITDAR” means, for any period, net income for such period plus, to the extent deducted in determining net income for such period, the sum of the following for such period: (a) extraordinary losses (minus, to the extent added in determining net income for such period, extraordinary gains), (b) interest expense, (c) provisions for income taxes, (d) depreciation and amortization, (e) operating lease expenses (excluding any operating leases of Diedrich existing as of the Closing Date), (f) lease rent expenses (including common area maintenance expenses), (g) to the extent incurred during Q4 2009, Q1 2010 or Q2 2010, costs and expenses incurred in connection with the Transactions (including a stock appreciation payment to the chief financial officer of Diedrich) in an aggregate amount not to exceed $10,000,000 and (h) to the extent incurred during Q4 2009, Q1 2010 or Q2 2010, restructuring costs and expenses in an aggregate amount not to exceed $2,000,000; provided, that the EBITDAR of the Borrower for the fiscal quarter ended December 28, 2008, March 29, 2009, June 28, 2009 and September 27, 2009, was $15,351,000, $13,890,000, $14,521,000 and $13,396,000, respectively and, subject to adjustment as set forth in the following sentence, the EBITDAR of the Acquired Company for the fiscal quarter ended December 10, 2008, March 4, 2009, June 24, 2009 and September 16, 2009, was $-40,000, $2,370,000, $2,418,000 and $1,403,000, respectively.

Notwithstanding the foregoing, the net income and EBITDAR attributable to a non-wholly-owned subsidiary shall only be included in the calculation of EBITDAR at no greater than the lesser of (i) the amount of the EBITDAR of such non-wholly-owned subsidiary times the Borrower’s direct or indirect percentage ownership interest in such non-wholly-owned subsidiary and (ii) the aggregate amount of distributions such non-wholly-owned subsidiary made or could have made to the Borrower or a Guarantor during the applicable period after giving effect to all contractual and legal restrictions applicable to such non-wholly-owned subsidiary; provided that this sentence shall not apply to any non-wholly-owned subsidiary that is a Guarantor and that has pledged collateral as contemplated herein.

Minimum Fixed Charge Coverage Ratio as of the last day of any fiscal quarter: initially 1.25:1.00 with quarterly step ups, beginning March 31, 2011 to be determined and annual step ups as follows:

“Fixed Charge Coverage Ratio” means, as of the last day of any fiscal quarter, (a) EBITDAR for the four quarter period ending thereon plus (without duplication) lease expenses resulting from operating leases of Diedrich existing as of the Closing Date minus provisions for income taxes, distributions and maintenance capital expenditures to (b) interest expense plus scheduled principal payments (including capital leases) plus operating lease expenses plus lease rent expenses (including common area maintenance expenses).

Minimum Adjusted Net Income as of the last day of any fiscal quarter for the four quarter period ending thereon: initially $11,400,000, with quarterly step ups to be determined and annual step ups (or step downs) as follows:

“Adjusted Net Income” means, for any period, net income plus, to the extent deducted in determining net income for such period, the sum of the following for such period: (i) for fiscal year 2010 and each fiscal year thereafter, an add back for amortization of any amortizable intangible assets acquired in the Acquisition (excluding capitalized transaction fees and expenses related to the Acquisition), adjusted for taxes using the applicable tax rate for such period, (ii) to the extent incurred during Q4 2009, Q1 2010 or Q2 2010, costs and expenses incurred in connection with the Transactions (including a stock appreciation payment to the chief financial officer of Diedrich) in an aggregate amount not to exceed $10,000,000 and (iii) to the extent incurred during Q4 2009, Q1 2010 or Q2 2010, restructuring costs and expenses in an aggregate amount not to exceed $2,000,000.

The financial covenants, including for purposes of paragraph (f) of the Conditions Annex, will apply to the Borrower and its subsidiaries on a consolidated basis after giving pro forma effect to the portion of the Transactions consummated during such period or any acquisition or any disposition of business or assets consummated during such period, in each case as if such portion of the Transactions or such transaction occurred on the first day of such period.  Components measured on a four quarter basis shall not be annualized.

Notwithstanding the foregoing, all financial covenants and other financial calculations contained herein shall be calculated without giving effect to any election made by any applicable person to value its financial liabilities or indebtedness at the fair value thereof pursuant to the Statement of Financial Accounting Standards No. 159 (or any similar accounting principle).

The Borrower will obtain interest rate protection from one or more Lenders or others acceptable to the Lead Arranger in respect of not less than 50% of the Term Loan Facility.

Usual and customary for facilities of this type, including, without limitation, the following (which, except as expressly noted below, will not apply to the Acquired Company and its subsidiaries prior to the Merger and certain of which will be subject to materiality thresholds, exceptions and grace or cure periods to be mutually agreed upon): non-payment of obligations; inaccuracy of representation or warranty; non-performance of covenants and obligations; default on other material debt (including hedging agreements); change of control; bankruptcy or insolvency; impairment of security; ERISA; material judgments; actual or asserted invalidity or unenforceability of any Financing Documentation or liens securing obligations under the Financing Documentation; material uninsured loss; termination of the License and Distribution Agreement dated as of July 29, 2003 between Keurig, Incorporated and the Acquired Company as in effect on the date hereof (the “Keurig License Agreement”) (provided that prior to the earlier of the consummation of the Merger and June 30, 2010, such termination shall not permit the Administrative Agent or the Lenders to prevent the Borrower from withdrawing the Deposited Proceeds to the extent necessary to consummate the Merger); and from and after the Merger, any material breach under the Keurig License Agreement that entitles Keurig, Incorporated to terminate the Keurig License Agreement.  

Customary for facilities of this type, including, without limitation, in respect of breakage or redeployment costs incurred in connection with prepayments, cash collateralization for Letters of Credit or Swingline Loans in the event any lender under the Revolving Credit Facility becomes a Defaulting Lender or Deteriorating Lender (as such terms shall be defined in the definitive financing documentation), changes in capital adequacy and capital requirements or their interpretation, illegality, unavailability, reserves without proration or offset and payments free and clear of withholding or other taxes.

The Borrower shall have customary rights to replace a Lender (a) for availing itself of yield maintenance and tax gross up provisions for a reason not applicable to all Lenders, (b) for being a Defaulting Lender (as such term shall be defined in the Financing Documentation), and (c) for being a non-consenting Lender in a scenario where only the consent of the Required Lenders has been obtained but unanimous Lender consent is required.

Revolving Credit Facility:  Subject to the consents described below (which consents will not be unreasonably withheld or delayed), each Lender will be permitted to make assignments to eligible financial institutions in respect of the Revolving Credit Facility in a minimum amount equal to $5,000,000.

Term Loan Facility:  Subject to the consents described below (which consents will not be unreasonably withheld or delayed), each Lender will be permitted to make assignments to eligible financial institutions in respect of the Term Loan Facility in a minimum amount equal to $5,000,000.

Consents:  The consent of the Borrower will be required for any assignment unless (i) an Event of Default has occurred and is continuing, (ii) the assignment is to a Lender or an affiliate of a Lender or (iii) a Successful Syndication (as defined in the Fee Letter) of the Credit Facilities has not occurred.  The consent of the Administrative Agent will be required for any assignment.  The consent of the Issuing Bank and the Swingline Lender will be required for any assignment under the Revolving Credit Facility.  Participations will be subject to customary conditions.

No Assignment or Participation to Certain Persons.  No assignment or participation may be made to natural persons or the Borrower or any of its affiliates or subsidiaries.

On any date of determination, two or more Lenders who collectively hold more than 50% of the outstanding commitments under the Credit Facilities, or if the commitments under Credit Facilities have been terminated, those Lenders who collectively hold more than 50% of the aggregate outstandings under the Credit Facilities (the “Required Lenders”); provided, however, that if any Lender shall be a Defaulting Lender (to be defined in the Financing Documentation) at such time, then the outstanding loans and unfunded commitments under the Credit Facilities of such Defaulting Lender shall be excluded from the determination of Required Lenders.

Amendments and waivers of the provisions of the Financing Documentation will require the approval of the Required Lenders, except that (a) the consent of all Lenders directly adversely affected thereby will be required with respect to (i) increases in the commitment of such Lenders, (ii) reductions of principal, interest or fees, (iii) extensions of scheduled maturities or times for payment and (iv) reductions in the voting percentages and (b) the consent of all Lenders will be required with respect to (i) releases of all or substantially all of the Collateral or of any of the Guarantees (other than in connection with transactions permitted pursuant to the Financing Documentation) and (ii) any increase in the aggregate principal amount of the Credit Facilities.

The Loan Parties will indemnify the Lead Arranger, the Administrative Agent, each of the Lenders and their respective affiliates, partners, directors, officers, agents and advisors and hold them harmless from and against all liabilities, damages, claims, costs, expenses (including reasonable fees, disbursements, settlement costs and other charges of counsel) relating to the Transactions or any transactions related thereto and the Borrower’s use of the loan proceeds or the commitments; provided that such indemnity will not, as to any indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such indemnitee.  This indemnification shall survive and continue for the benefit of all such persons or entities.

The Loan Parties will reimburse the Lead Arranger and the Administrative Agent for all reasonable out-of-pocket costs and expenses in connection with the syndication, negotiation, preparation, due diligence, execution, delivery and administration of the Financing Documentation and any amendment or waiver with respect thereto (including, without limitation, (i) reasonable fees and expenses of counsel, (ii) out of pocket syndication expenses and IntraLinks, The Debt Exchange, Inc. or similar fees, and (iii) expenses incurred in connection with appraisals (including, without limitation, equipment and real estate appraisals), environmental reports and an Agribusiness Consultant’s Report).  The Loan Parties will also pay all documentary taxes of the Lead Arranger, the Administrative Agent and the Lenders.  The Loan Parties will also pay all costs and expenses of the Lead Arranger, the Administrative Agent and the Lenders in connection with the enforcement of any loan documentation for the Credit Facilities, including, without limitation, the legal fees and expenses of each counsel to the Administrative Agent and the Lenders.

This Term Sheet is intended as an outline of certain of the material terms of the Credit Facilities and does not purport to summarize all of the conditions, covenants, representations, warranties and other provisions which would be contained in Financing Documentation for the Credit Facilities; provided that no additional conditions precedent to closing the Credit Facilities will be added and, subject to Section 7 of the Fee Letter, no additional financial covenants will be added.

Interest will be at the Base Rate plus the applicable Interest Margin (as described below).  The “Base Rate” is defined as the highest of (a) the Federal Funds Rate, as published by the Federal Reserve Bank of New York plus 1.50%, (b) the prime commercial lending rate of the Administrative Agent, as established from time to time at its principal U.S. office (which such rate is an index or base rate and will not necessarily be its lowest or best rate charged to its customers or other banks) and (c) the daily LIBOR (as defined below) for a one month Interest Period (as defined below) plus 1.50%.   Interest shall be payable quarterly in arrears and (i) with respect to Base Rate Loans based on the Federal Funds Rate and LIBOR, shall be calculated on the basis of the actual number of days elapsed in a year of 360 days and (ii) with respect to Base Rate Loans based on the prime commercial lending rate of the Administrative Agent, shall be calculated on the basis of the actual number of days elapsed in a year of 365/366 days.  Any loan bearing interest at the Base Rate is referred to herein as a “Base Rate Loan”.

Interest will be determined for periods (“Interest Periods”) of three or six months as selected by the Borrower and will be at an annual rate equal to the London Interbank Offered Rate (“LIBOR”) for the corresponding deposits of U.S. dollars plus the applicable Interest Margin (as described below).  LIBOR will be determined by the Administrative Agent at the start of each Interest Period and, other than in the case of LIBOR used in determining the Base Rate, will be fixed through such period.  Interest will be paid at the end of each Interest Period or, in the case of Interest Periods longer than three months, quarterly, and will be calculated on the basis of the actual number of days elapsed in a year of 360 days.  LIBOR will be adjusted for maximum statutory reserve requirements (if any).  Any loan bearing interest at LIBOR (other than a Base Rate Loan for which interest is determined by reference to LIBOR) is referred to herein as a “LIBOR Rate Loan”.

LIBOR Rate Loans will be made on three business days’ prior notice and, in each case, will be in minimum amounts to be agreed upon.

Swingline loans will bear interest at the Base Rate plus the applicable Interest Margin.

(a) Automatically upon the occurrence and during the continuance of any payment event of default or upon a bankruptcy event of default of the Borrower or any other Loan Party or (b) at the election of the Required Lenders, upon the occurrence and during the continuance of any other event of default, all outstanding principal, fees and other obligations under the Credit Facilities shall bear interest at a rate per annum of four percent (4.00%) in excess of the rate then applicable to such loan or other obligation including the applicable Interest Margin (or if no interest rate is stated, four percent (4.00%) in excess of the Base Rate plus the highest Interest Margin applicable to Base Rate Loans) and shall be payable on demand of the Administrative Agent.

The initial applicable Interest Margin shall be based on the Total Leverage Ratio as of the Closing Date after giving pro forma effect to the Transactions pursuant to the Pricing Grid set forth below until the first calculation date following the receipt by the Administrative Agent and the Lenders of the financial information and related compliance certificate for the first full fiscal quarter ending after the Closing Date.

A commitment fee (the “Commitment Fee”) will accrue on the unused amounts of the commitments under the Revolving Credit Facility.  Swingline loans will, for purposes of the Commitment Fee calculations only, not be deemed to be a utilization of the Revolving Credit Facility.  Such Commitment Fee will initially be based on the Total Leverage Ratio as of the Closing Date after giving pro forma effect to the Transactions pursuant to the Pricing Grid set forth below until the first calculation date following the receipt by the Administrative Agent and the Lenders of the financial information and related compliance certificate for the first full fiscal quarter ending after the Closing Date.  All accrued Commitment Fees will be payable quarterly in arrears (calculated on a 360-day basis) for the account of the Lenders under the Revolving Credit Facility and will accrue from the Closing Date.

The Borrower will pay to the Administrative Agent, for the account of the Lenders under the Revolving Credit Facility, letter of credit participation fees equal to the Interest Margin for LIBOR Rate Loans under the Revolving Credit Facility, in each case, on the undrawn amount of all outstanding letters of credit.  Fronting, issuance, presentation, documentation, amendment, transfer, negotiation and other fees will also be payable by Borrower for the account of the Issuing Bank as determined in accordance with the Issuing Bank’s then current fee policy.

The Lead Arranger and the Administrative Agent will receive such other fees as will have been agreed in a fee letter between them and the Borrower.

The applicable Interest Margins and the Commitment Fee with respect to the Credit Facilities shall be based on the Total Leverage Ratio pursuant to the following grid:

(i) Financing Documentation reflecting and consistent with the terms and conditions set forth herein and otherwise reasonably satisfactory to the Borrower and the Lenders, will have been executed and delivered (including, to the extent applicable, subordination agreements), (ii) the Administrative Agent will have received (A) such customary legal opinions (including, without limitation, opinions of special counsel and local counsel as may be reasonably requested by the Administrative Agent) which such opinions shall permit reliance by permitted assigns of each of the Administrative Agent and the Lenders, (B) flow of funds and organizational documents, (C) notice of loan borrowing and (D) closing documents, certificates (including, but not limited to secretary’s and incumbency certificates), good standing certificates and other instruments as are customary for transactions of this type including, without limitation, a certificate of the chief financial officer of the Borrower as to the solvency of  each of the Borrower individually, Peet’s Operating Company individually, and the Borrower and its subsidiaries on a consolidated basis, in each case after giving effect to the Transactions, (iii) evidence that the Administrative Agent shall have a valid and perfected first priority security interest (subject to certain exceptions to be set forth in the Financing Documentation) in the Collateral (which shall have been executed, delivered and/or in proper form for filing, to the extent applicable, and which shall include: all certificates evidencing pledged capital stock with accompanying executed stock powers, and all promissory notes and similar instruments with accompanying executed allonges/indorsements, UCC and other lien searches, intellectual property filings, title reports and policies (including ALTA indorsements insuring the first priority of the lien subject to customary exceptions), UCC financing statements, deeds of trust or mortgages for fee owned real property, a collateral assignment agreement for all leased real property (it being understood that no landlord consents or real property recordings will be required with respect to such leased real property, margin stock shall not be pledged to the extent the pledge of such margin stock would violate Regulation U and no DMV filings or similar filings will be required for motor vehicles), (iv) there shall not have occurred a Company Material Adverse Effect (as defined in the Acquisition Agreement) as of the Closing Date and the funding of the initial loans, (v) delivery of insurance certificates in compliance with the Financing Documentation (with endorsements naming the Administrative Agent as loss payee and mortgagee and the Administrative Agent and the Lenders as additional insureds and with a lenders loss payable endorsement), (vi) each of the Borrower and the Guarantors shall have obtained all governmental authorizations and board, shareholder and third party consents necessary or advisable to have been obtained prior to the Closing Date in connection with the transactions under the Financing Documentation, and each such governmental authorization or consent shall be in full force and effect except in a case where failure to obtain or maintain any such authorization or consent either individually or in the aggregate could not have a material adverse effect, (vii) all representations and warranties made by the Acquired Company in the Acquisition Agreement shall be true and correct other than any breaches thereof that do not, individually or in the aggregate, relieve the Borrower or Newco from their respective obligations with respect to the initial funding, to accept for exchange and deliver consideration for Shares validly tendered (and not withdrawn) pursuant to the Offer, (viii) the representations and warranties set forth in the Financing Documents of the Borrower and the Guarantors (but not the Acquired Company and its subsidiaries) relating to (A) due formation, organization, existence and good standing, (B) power and authority, (C) due authorization, execution, delivery and enforceability of the Financing Documentation and the Acquisition Agreement, (D) non-contravention with respect to the Financing Documentation, the borrowing of the loans and granting of liens, (E) all approvals and consents with respect to the Financing Documentation, (F) solvency, (G) Federal Reserve Bank margin regulations, (H) the Investment Company Act, (I) no violation or default of the Financing Documentation, (J) financial statements, (K) accuracy of information furnished, (L) foreign assets control and anti-terrorism laws, (M) consummation of transactions under the Financing Documentation in compliance with applicable law and (N) the priority and perfection of the security interest granted in the Collateral securing the Credit Facilities, (ix) no event of default under the Credit Facilities or unmatured default shall have occurred and be continuing or would result from such extension of credit, (x) to the extent applicable, all principal, interest and other amounts outstanding in connection with existing debt for borrowed money of the Loan Parties shall have been paid in full and all liens securing such debt shall be released other than debt for borrowed money in an amount not to exceed $1,000,000 and indebtedness of the Acquired Company and its subsidiaries not to exceed $1,000,000 and (xi) all fees and expenses due to the Lenders, the Lead Arranger, the Administrative Agent and counsel to the Lead Arranger and the Administrative Agent under the Commitment Letter and as otherwise set forth in the Financing Documentation shall have been paid.  The Borrower shall use its commercially reasonable efforts to provide the following items prior to the Closing Date, but in any event shall provide all such items no later than 60 days after the Closing Date: (i) control agreements with respect to each deposit, securities and similar account of the Loan Parties (excluding health care reimbursement accounts and payroll accounts), (ii) surveys, (iii) appraisals (including, without limitation, equipment and real estate appraisals), (iv) environmental reports and (v) an Agribusiness Consultant’s Report.