GLACIER WATER SERVICES INC
CREDIT FACILITY WITH TOKAI BANK OF CALIFORNIA
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>CREDIT FACILITY WITH TOKAI BANK OF CALIFORNIA
<TEXT>

<PAGE>

[LOGO OF TOKAI BANK]
                                                                    EXHIBIT 10.7
                           REVOLVING LOAN AGREEMENT

THIS REVOLVING LOAN AGREEMENT ("Agreement") is made as of June 23, 2000 by and
between GW SERVICES, INC., a California corporation ("GW") and GLACIER WATER
SERVICES, INC., a Delaware corporation ("Glacier"), (collectively "Borrower"),
and TOKAI BANK OF CALIFORNIA, a California banking corporation ("Lender").

A. Borrower has applied to Lender for a loan in the principal amount of TEN
   MILLION AND 00/100THS DOLLARS ($10,000,000.00).

B. Lender has agreed to make the loan to Borrower upon the terms and conditions
   hereof.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:

   DEFINITIONS AND INTERPRETATIONS.

   For purposes of this Agreement, the following terms shall have the following
   meanings:

   1.1  Definitions. The definitions set forth in the Recitals are incorporated
        -----------
        herein by reference.

        "Advance" shall mean any advance of Loan Proceeds by the Lender under
        the Revolving Loan.

        "Agreement" shall mean this Revolving Loan Agreement, either as
        originally executed or as it may from time to time be supplemented,
        modified, or amended.

        "Affiliate" shall mean any person or business entity, directly or
        indirectly, related to, in control of, controlled by or under the common
        control of Borrower, or of a successor thereof, whether through merger,
        consolidation, transfer of assets or otherwise.

        "Assets" shall have the meaning usually given that term in accordance
        with GAAP, but shall exclude sums due to Borrower from Affiliates (other
        than subsidiaries).

        "Business Day" shall mean a day of the year on which banks are not
        required or authorized to close in California.

        "Compensating Balances" shall mean the average balances in the
        Borrower's non-interest bearing account with Lender during the
        applicable period less the sum of float, reserves and balances required
        to cover service charges to maintain the account. These amounts will be
        computed in accordance with customary Lender practices which may change
        from time to time.

        "Contingent Liabilities" shall mean all contingent liabilities as
        determined and computed in accordance with GAAP.

        "Cross Default" shall mean as described in the Note(s).

        "Current Assets" shall mean all current assets as determined and
        computed in accordance with GAAP (excluding loans to officers and
        employees).

        "Current Liabilities" shall mean all current liabilities as determined
        and computed in accordance with GAAP.

                                 Page 1 of 16
<PAGE>

"ERISA" shall mean the Employee Retirement Income Security Act of 1974 as the
same may be amended from time to time, and, unless the context otherwise
requires, the regulations thereunder.

"Event of Default" shall mean any of those events specified in Section 5 hereof.

"Financial Statements" means balance sheets, income statements, reconciliation
of capital structure, statements of sources and applications of funds together
with appropriate notes and footnotes in accordance with GAAP. Financial
Statements provided Lender in accordance with this Agreement shall be reviewed.

"Financing Statement" shall mean a financing statement (Form UCC-1) given by
Borrower to Lender covering the FF&E and all other personal property and/or
fixtures owned by Borrower.

"GAAP" shall mean generally accepted accounting principles consistently applied
and maintained throughout the period indicated and consistent with the prior
financial practice of Borrower except for changes mandated by the Financial
Accounting Standards Board or any similar accounting authority of comparable
standing.

"Government Agency" or "Government Agency" shall mean any federal, state or
local governmental or quasi-governmental agency, authority, board, bureau,
commission department, instrumentality or public body, court administrative
tribunal, or public utility.

"Insurance Policies" shall mean any of the policies of insurance specified in
Section 4.1 hereof.

"Laws" shall mean, collectively, all federal, state and local laws, rules,
regulations, ordinances, and codes.

"Liabilities" shall have the meaning usually given that term in accordance
with GAAP.

"Loan" shall mean the loan described in Section 3 of this Agreement in the
principal amount of TEN MILLION AND 00/100THS DOLLARS ($10,000,000.00).

"Loan Documents" shall mean the Note, Security Agreement, Financing Statement,
this Agreement, and such other documents as Lender may require Borrower to give
to Lender as evidence of and/or security for the Loan.

"Loan Proceeds" shall mean all funds advanced by Lender as a Loan to Borrower
under this Agreement.

"Maturity Date" shall mean November 1, 2001.

"Net Profit" shall have the meaning usually given that term in accordance with
GAAP.

"Note" shall mean the Revolving Promissory Note(s) of Borrower payable to the
order of Lender, evidencing the Loan.

"Organizational Documents" shall mean:

(a)  Borrower's Articles of Incorporation.

(b)  An affidavit of Borrower signed by an officer of Borrower, where
     applicable, in form and substance satisfactory to Lender affirming the
     authority of Borrower to borrow the



                                 Page 2 of 16

<PAGE>

        Loan and enter into the Loan Documents, and affirming the names and
        signatures of all officers of Borrower authorized to execute documents
        in connection with the Loans.

     "PBGC" means the Pension Benefit Guaranty Corporation or any successor
     established under ERISA.

     "Person" shall mean an individual, corporation, partnership, joint venture,
     trust or unincorporated organization or a Government Agency.

     "Plan" means an employee benefit plan or other plan maintained for
     employees of Borrower and covered by Title IV of ERISA.

     "Prime Rate" shall mean Lender's Prime Rate which is the rate announced
     from time to time by Lender to be the Prime Rate as reflected in the books
     and records of Lender. The Prime Rate may vary from time to time and the
     interest rate shall automatically change on the same day the Prime Rate
     changes.

     "Property" shall mean the property or properties on which the Borrower
     maintains its offices and conducts its business.

     "Security Agreement" shall mean Commercial Security Agreement of even date
     herewith executed by Borrower in favor of Lender.

     "Tangible Net Worth" shall mean the excess of Assets over Liabilities,
     excluding, however, from the determination of Assets: (i) all assets that
     would be classified as intangible assets under GAAP, including without
     limitation, goodwill (whether representing the excess of cost over book
     value of assets acquired or otherwise), negative goodwill, patents,
     trademarks, trade names, copyrights, franchises and deferred charges
     (including, without limitation, unamortized debt discount and expense,
     organization costs and research and development costs); and (ii)
     subordinated debt.

     "Working Capital" shall mean the existence of Current Assets, excluding
     LIFO reserves, over Current Liabilities as those terms are understood in
     accordance with GAAP.

1.2  Accounting Terms. All accounting terms not specifically defined herein
     ----------------
     shall be construed in accordance with GAAP consistent with those applied in
     the preparation of the Financial Statements referred to in Section 4.14 and
     all financial data submitted pursuant to this Agreement shall be prepared
     in accordance with such principles.

1.3  Use of Defined Terms. Any defined terms used in the plural shall include
     --------------------
     the singular and such terms shall encompass all members of the relevant
     class.

1.4  Schedules And Exhibits. All schedules and exhibits to this Agreement,
     ----------------------
     either as originally existing or as the same may from time to time be
     supplemented, modified or amended, are incorporated herein by reference.

1.5  References. Any reference to this Agreement or any other document
     ----------
     shall include such document both as originally executed and as it may from
     time to time be supplemented and modified. References herein to Paragraphs,
     Sections and Exhibits shall be construed as references to this Agreement
     unless a different document is named.

1.6  Other Terms. The term "document" is used in its broadest sense and
     -----------
     encompasses agreements, certificates, opinions, consents, instruments and
     other written material of every kind. The terms "including" and "include"
     shall mean "including (include), without limitation."

                                 Page 3 of 16
<PAGE>

2.  REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
    ----------------------------------------------

    Borrower hereby represents and warrants to Lender as of the date of this
    Agreement, the date the Loan Proceeds are disbursed to Borrower, and each
    and every date during the existence of the Loan, or any portion thereof, as
    the context admits or requires, that:

    2.1  Borrower's Capacity. GW is, and shall continue to be a corporation duly
         --------------------
         organized and existing under the Laws of the State of California, and
         Glacier is and shall continue to be a corporation duly organized and
         existing under the Laws of the State of Delaware and Borrower is duly
         qualified to do business in any state in which the nature of its
         business requires it to be so qualified.

    2.2  Validity Of Loan Documents. The Loan Documents are and shall continue
         ---------------------------
         to be in all respects valid and binding upon Borrower according to
         their terms, subject to all Laws, including equitable principles,
         insolvency laws, and other matters applying to creditors generally;
         provided, however, that the implementation of such Laws do not and will
         not affect the ultimate realization of the security afforded thereby.
         The execution and delivery by Borrower of and the performance by
         Borrower of all its obligations under the Loan Documents have been
         duly authorized by all necessary action and do not and will not:

         (a)  Require any consent or approval not heretofore obtained or any
              other person holding any interest or entitled to receive any
              interest issued or to be issued by Borrower or otherwise;

         (b)  Violate any provision of the Organizational Documents or other
              agreements to which Borrower is bound;

         (c)  Result in or require the creation or imposition of any mortgage,
              deed of trust, pledge, lien, security interest, claim, charge,
              right of others or other encumbrance of any nature (other than
              under the Loan Documents) upon or with respect to any property now
              owned or leased or hereafter acquired by Borrower;

         (d)  Violate any provision of any Laws, or of any order, writ
              judgment, injunction, decree, determination, or award;

         (e)  Result in a breach of or constitute a default under, cause or
              permit the acceleration of any obligation owed under, or require
              any consent under any indenture or loan or credit agreement or any
              other agreement lease, or instrument to which Borrower is a party
              or by which Borrower or any property of Borrower is bound or
              affected.

    2.3  Borrower Not in Default Or Violation. Borrower is not in default under
         -------------------------------------
         or in violation of any Laws, order writ, judgment, injunction, decree,
         determination or award. Borrower is not in default under any
         obligation, agreement, instrument loan, or indenture, whether to Lender
         or otherwise, or any lease. No event has occurred and is continuing, or
         would result from the making of the Loans or an Advance, which
         constitutes an Event of Default, or would constitute an Event of
         Default but for the requirement that notice be given or time elapse or
         both.

    2.4  No Governmental Approvals Required. Borrower does not require any
         -----------------------------------
         authorization, consent, approval, order, license, exemption from, or
         filing, registration, or qualification with, any Governmental Agency in
         connection with the execution and delivery by Borrower, and the
         performance by Borrower, of all or any of its obligations under, the
         Loan Documents, except that filing and/or recording with Governmental
         Agencies may be required to perfect liens, security interest, or other
         charges or encumbrances granted Lender by Borrower.

                                 Page 4 of 16







<PAGE>

2.5   Tax Liability. Borrower has filed and shall file all tax returns (federal,
      --------------
      state, and local) required to be filed and has paid and shall pay all
      taxes shown thereon to be due and all property taxes due, including
      interest and penalties, if any.

2.6   Financial Statements. All financial statements, information and other data
      ---------------------
      which have been and which may hereafter be submitted by Borrower to Lender
      are true, accurate and correct and have been and will be prepared in
      accordance with generally accepted accounting principles consistently
      applied and accurately represent the financial condition of Borrower and,
      as applicable, the other information disclosed therein. Since the most
      recent submission of any such financial statement, information or other
      data to Lender, the Borrower represents and warrants that no material
      adverse change in the financial condition or operations of the Borrower
      has occurred which has not been fully disclosed to Lender in writing.

2.7   Pending Litigation. There are no actions, suits, or proceedings pending,
      -------------------
      or to the knowledge of Borrower threatened, against or affecting the
      Borrower, or involving the validity or enforceability of any of the Loan
      Documents or the priority of the lien thereof, at Law or in equity, or
      before or by any Governmental Agency, except actions, suits and
      proceedings that are fully covered by insurance or which, if adversely
      determined, would not substantially impair the ability of Borrower to
      perform each and every one of its obligations under and by virtue of the
      Loan Documents; and Borrower is not in default with respect to any order,
      writ, injunction, decree or demand of any court or any Governmental
      Agency.

2.8   Violation Of Laws. Borrower has no knowledge of any violations or
      -----------------
      notices of violations of any Laws relating to the Property.

2.9   Compliance With Zoning Ordinances And Environmental Laws. Borrower does
      --------------------------------------------------------
      not presently, and will not in the future, use, store, manufacture,
      generate, transport to or from, or dispose of any toxic substances,
      hazardous materials, hazardous wastes, radioactive materials, flammable
      explosives or related material on or in connection with the Property or
      the business of Borrower on the Property. Borrower does not presently, and
      will not in the future, permit any lessee on the Property to use, store,
      manufacture, generate, transport to or from, or dispose of any toxic
      substances, hazardous materials, hazardous waste, radioactive materials,
      flammable explosives, related material on or in connection with the
      Property or the business on the Property. ("Toxic substances," "hazardous
      materials" and "hazardous waste" shall include, but not be limited to,
      such substances, materials and wastes which are or become regulated under
      applicable Laws or which are classified as hazardous or toxic under
      applicable Laws.) Borrower shall not seek, make or consent to any change
      in the zoning, conditions of use, or any other applicable land use
      permits, approvals or regulations pertaining to the Property, or any
      portion thereof, which would constitute a violation of the warranties and
      representations herein contained, or would otherwise impair the ability of
      Borrower to complete construction of any improvements now underway
      constituting the Property, or would change the nature of the use or
      occupancy of the Property.

2.10  Compliance With ERISA. Borrower does not and shall not maintain any
      ---------------------
      employee benefit plan or other plan maintained for employees of Borrower
      which is or might be deemed to be covered by Title IV or ERISA, except
      plans that are or shall be in compliance with all applicable provisions of
      ERISA. No Reportable Event has occurred or is continuing with respect to
      any Plan.

2.11  Solvency. Borrower is and shall continue to be able to pay its debts as
      ---------
      they mature and the realizable value of its Assets is, and at all times
      that it may have obligations hereunder shall continue to be, sufficient to
      satisfy any and all obligations hereunder.

                                 Page 5 of 16
<PAGE>

    2.12  Principal Place of Business.   The principal place of business of
          ---------------------------
          Borrower is, and will continue to be as set forth under Section 7.11
          of this Agreement. In the event that Borrower hereafter intends to
          move its principal place of business, it shall first give at least
          thirty (30) days prior written notice to Lender of its intention so to
          move, the date that such move is anticipated, and its new address. No
          later than ten (10) days after commencement of the move by Borrower,
          Borrower will deliver such new Financing Statements (on Form UCC-1),
          Continuation Statements (on Form UCC-2) or other instruments as Lender
          may require.

    2.13  Permits.   Borrower possesses all licenses, permits, franchises,
          -------
          patents, copyrights, trademarks, and trade names, or rights thereto,
          that are necessary to conduct its business substantially as now
          conducted and as presently proposed to be conducted, and Borrower is
          not in material violation of any valid rights of others with respect
          to any of the foregoing.

3.  THE LOAN.
    --------

    3.1  The Loan.  Lender agrees, on the terms and conditions hereinafter set
         --------
         forth, to make Advances to Borrower in aggregate principal amounts
         outstanding at any time not to exceed TEN MILLION AND 00/100 DOLLARS
         (10,000,000.00). Borrower may borrow, reborrow, repay, or prepay
         pursuant to this Section.

    3.2  Note.  The Loan(s) shall be evidence by the Note.  Each Advance made by
         ----
         Lender and all payments under the Loans shall be evidenced and recorded
         by Lender upon Loan Records, which recordation shall be prima facie
         evidence of such Advance and payment; provided, however, that the
         failure by Lender to make any such recordation shall not limit or
         otherwise affect the obligation of Borrower hereunder or under the
         Note.

    3.3  Interest.  Interest on the outstanding principal balance under the
         --------
         Note shall accrue at the rate provided for in the Note and shall be
         paid as provided for in the Note.

    3.4  Use of Proceeds.  The Loan Proceeds shall be used by Borrower for
         ---------------
         working capital and capital expenditures.

    3.5  Conditions Precendent to Loan.  The obligation of Lender to make the
         -----------------------------
         Loan is subject to and expressly conditioned upon the following:

         (a)  Borrower, at its sole expense, shall deliver to Lender, at its
              office in Los Angeles, California, on or before the date of the
              first Advance the following, in form and substance satisfactory to
              the Lender, in Lender's sole opinion and judgement:

              (i)     The Note;
              (ii)    The Security Agreement;
              (iii)   The Financing Statement;
              (iv)    This Agreement;
              (v)     The Loan Disbursement Instructions;
              (vi)    The Agreement to Furnish Insurance;
              (vii)   The Corporate Resolution to Borrow;
              (viii)  The Insurance Policies;
              (ix)    Such additional assignments, agreements, certificates,
                      reports, approvals, instruments, documents, financing
                      statements, consents, and opinions as lender may
                      reasonably request.

         (b)  Review and approval by Lender, its counsel, or both, of true and
              correct copies of Borrower's Organizational Documents, matters
              affecting the Property, and all other Loan Documents:

                                 Page 6 of 16
<PAGE>

               (c)  Review and approval by Lender of true and correct copies of
                    Financial Statements of Borrower:

               (d)  No suit, action, or other proceeding of material consequence
                    shall be pending or threatened which seeks to restrain or
                    prohibit the consummation of the transactions contemplated
                    by this Agreement, or to obtain damages or other relief in
                    connection therewith.

           3.6  Limitations On Advances And Payments
                ------------------------------------

               (a)  The Loan Proceeds shall be disbursed in accordance with the
                    provisions of Section 3.4 above:

               (b)  The Note may be prepaid as provided for in the Note;

               (c)  Payments shall be as provided for in the Note:

               (d)  Borrower hereby authorizes Lender, if and to the extent any
                    payment of principal or interest or sum otherwise due
                    hereunder is not promptly made pursuant to the Note, and to
                    the extent of any obligation of Borrower to Lender under
                    this Agreement or any other agreement, to charge against any
                    account of Borrower with Lender an amount equal to part or
                    all of the principal costs and expenses, and accrued
                    interest from time to time due and payable to Lender under
                    the Note or otherwise. Lender is under no obligation to
                    charge such past due payments against any account of
                    Borrower, but may elect to do so in Lender's sole and
                    absolute opinion and judgement:

               (e)  If, with respect to the Loan there is, due to either (i) the
                    introduction of or any change (including, without
                    limitation, any change by way of imposition or increase of
                    reserve requirements) in any Law or regulation or in the
                    interpretation thereof, or (ii) the compliance by Lender
                    with any guidelines or request from any central bank or
                    other governmental authority (whether or not having the
                    force of Law), any increase in the cost of Lender of
                    agreeing to make or making, funding or maintaining such
                    Loan, then Borrower shall from time to time, upon demand by
                    Lender, pay to Lender additional amounts sufficient to
                    indemnify Lender against such increased costs. A certificate
                    as to the amount of such increased costs submitted to
                    Borrower by Lender shall be prima facie evidence of the
                    increased costs, and shall be immediately due and payable
                    upon demand.

           3.7  Security.  The Loan shall be secured by the following, in each
                --------
                case, subject only to the Permitted Encumbrances

               (a)  The Security Agreement.

4  BORROWER'S COVENANTS
   --------------------

   In addition to anything else herein stated, Borrower agrees:

           4.1  Insurance.  To obtain and at all times maintain hazard and
                ---------
                liability insurance in amount, form and issued by a company or
                companies satisfactory to Lender. The insurance is to include
                business interruption, boiler and machinery and glass insurance.
                Lender is to be a loss payable payee under the hazard insurance
                and an additional insured under said liability insurance. Said
                liability insurance is to include, but not be limited to
                workman's compensation and employers liability insurance. All
                policies or a certificate acceptable to Lender shall be
                delivered to Lender together with evidence of payment of premium
                thereon and an agreement to give Lender at least thirty (30)
                Business Days prior notice of any material changes, termination,
                or expiration of the policies. All insurance policies provided

                                 Page 7 of 16




<PAGE>

    under any lease with tenants of the Property shall be assigned to Lender as
    additional security.

4.2 Right Of Entry. Lender and lender's employees or agents shall have the right
    --------------
    at all times to enter upon Borrowers premises for whatever purpose Lender
    deems appropriate, including, without limitation inspection of the premises
    and the posting of such notices and other written or printed material
    thereon as Lender may deem appropriate or desirable.

4.3 Lender May Examine Books and Records. Lender shall have the right, from
    ------------------------------------
    time to time, acting by and through its employees or agents, to examine the
    books, records, and accounting data of Borrower, and to make extracts
    therefrom or copies thereof. Borrower shall promptly make such books,
    records, and accounting data available to Lender, as stated above, upon
    written request and upon like request shall promptly advise Lender in
    writing, of the location of such books, records, and accounting data.

4.4 No Automatic Set-Off. The existence of any deposit account with Lender
    --------------------
    and/or the fact of any sum or sums being on deposit in said account shall in
    no way constitute as set-off against or be deemed to compensate the
    obligation of the Loan or any payment or performance due under this
    Agreement or any of the other Loan Documents, unless and until the Lender,
    by affirmative action shall so apply said account or any portion thereof and
    then only to the extent thereof so designated by Lender.

4.5 Payment Of Taxes. Borrower shall pay and discharge all taxes, assessments,
    ----------------
    and governmental charges or levies imposed upon Borrower or upon its income
    or profits, or upon any properties belonging to it prior to the date on
    which penalties attach thereto, and all lawful claims which, if unpaid might
    become a lien or charge of a material nature upon any of its properties,
    provided that Borrower shall not be required to pay any such tax,
    assessment, charge, levy or claim which is being contested in good faith and
    by proper proceedings if it maintains adequate reserves with respect
    thereto.

4.6 Preservation Of Existence. Borrower, if other than a natural person, will,
    -------------------------
    so long as Borrower remains obligated on the Loan, do all things necessary
    to preserve and keep in full force and effect its organizational status, and
    will comply with all Laws, orders and decrees of any Governmental Agency or
    court applicable to Borrower or in the Project.

4.7 Compliance With Laws And Contracts. Borrower shall comply with the
    ----------------------------------
    requirements of all applicable Laws and orders of any Governmental Agency,
    provided that if Borrower has not so complied by the date prescribed in any
    such Law or order, regulation. Borrower shall comply therewith by the date
    set forth in any order of the Governmental Agency charged with the
    enforcement of such Law, rule or regulation if such date is later, and
    comply with all contracts, agreements, indentures or instruments by which it
    is bound.

4.8 Maintenance Of Properties. Borrower shall use its best efforts to maintain
    -------------------------
    and preserve, or cause to be maintained and preserved, all of its
    properties, necessary or useful in the proper conduct of its business,
    including such as may be under lease, in good working order and condition,
    ordinary wear and tear excepted.

4.9 Debt Service Coverage Ratio. Borrower shall maintain a debt Service Coverage
    ---------------------------
    Ratio of not less than 1.50:1.0. For purposes of this section, the term
    "Debt Service Coverage Ratio" shall mean the ratio of the combined
    annualized earnings before interest, taxes, depreciation, amortization and
    other non-cash expense (plus or minus) derived from realized gains or losses
    from investment divided by the sum of current portion maturities of long
    term debts and/or capital lease obligations plus annualized interest expense
    as those terms are understood in accordance with GAAP.

                                 Page 8 of 16












<PAGE>

4.10   Minimum Liquidity.  Glacier shall maintain at all times a minimum
       -----------------
       liquidity of not less than $2,000,000.00. For purpose of this section,
       the term "Liquidity" shall mean cash and marketable securities, excluding
       margined marketable securities or pledged cash. The liquidity shall be
       monitored by Lender on a quarterly basis.

4.12   Limitation On Advances and Investment.  Borrower shall not make or permit
       -------------------------------------
       to exist any advances or loans to, or any investments in, any person,
       and shall not assume or incur any contingent obligation or liability,
       as guarantor or otherwise, with respect to the obligations of any
       person, whether by contributions to capital, purchase of stock,
       securities or other evidences of indebtedness or otherwise, except as
       provided for herein.

4.13   Limitation On Disposition of Assets.  Except for Assets or properties
       -----------------------------------
       sold, leased or otherwise disposed of in the ordinary course of business,
       and the sale or leasing of properties or Assets of less than
       $25,000,000.00 in the aggregate. Borrower shall not convey, sell, lease
       or otherwise dispose of properties or Assets without the prior written
       content of the Lender which consent shall not be unreasonably withheld.

4.14   Tangible Net Worth.  Borrower shall maintain a minimum effective Tangible
       ------------------
       Net Worth including subordinated debt at all times of not less than
       $60,000,000.00. Starting January 2, 2001, the effective Tangible Net
       Worth including subordinated debt shall be not less than $50,000,000.00.

4.15   Operating Profit.  Borrower shall reflect operating profit on the
       ----------------
       year-to-date basis for the period ending June 30, 2001, and thereafter.

4.16   Reporting Requirements.  So long as Borrower shall have any obligation to
       ----------------------
       Lender under this Agreement. Borrower shall deliver to the Lender the
       following financial statements and reports:

       (a)  As soon as available and in any event within five (5) days after
            Borrower knows or should reasonably have known of the commencement
            of any legal action against it, except actions seeking money
            judgment that are fully insured or bonded, a report of the
            commencement of such action containing a statement signed by the
            chief financial officer of Borrower setting forth details of such
            legal action and any action Borrower proposes to take with respect
            thereto;

       (b)  Within five (5) days of the occurrence of any Event of Default or
            event which, with the giving of notice or lapse of time, or both,
            would constitute an Event of Default, a report regarding such Event
            of Default or event setting forth details and describing any action
            which Borrower proposes to take with respect thereto, signed by an
            officer of Borrower;

       (c)  Any change in name of Borrower or use of any trade names or trade
            styles not presently used;

       (d)  As soon as available and in any event within one hundred twenty
            (120) days after the end of each fiscal year of Glacier, a copy of
            the Glacier's Financial Statements for such year, in form and
            substance acceptable to Lender;

       (e)  As soon as available and in any event within forty-five (45) days
            after the end of each quarter, complete copies of Form 10-Q
            quarterly report of Glacier, pursuant to Section

                           Page 9 of 16






<PAGE>

          13 or 15(d) of the Securities Exchange Act of 1934, in form and
          substance acceptable to Lender.

     (f)  As soon as available and in any event within one hundred twenty (120)
          days after the end of each fiscal year of Glacier complete copies of
          Form 10-K annual report of Glacier, pursuant to Section 13 for 15(d)
          of the Securities Exchange Act of 1934, in form and substance
          acceptable to lender;

     (g)  As soon as available and in any event within ninety (90) days after
          the end of each fiscal year, a copy of Glacier's annual budget in form
          and substance acceptable to Lender;

     (h)  Within sixty (60) days after the end of each fiscal year, a
          certificated of the president and chief financial officer of the
          Borrower stating that neither such officer has any knowledge that an
          Event of Default or any event which, with notice or lapse of time, or
          both, would constitute an Event of Default, has occurred and is
          continuing, or if, in the opinion of either such officer, an Event of
          Default or such an event has occurred and is continuing, a statement
          as to the nature thereof;

     (i)  Promptly upon receipt thereof, one (1) copy of any other report
          submitted to Borrower by independent accounts in connection with any
          annual, interim or special audit made by them, of the books of
          Borrower;

     (j)  Within five (5) days of (i) any contact from any Governmental Agency
          concerning any environmental protection Laws, including, but not
          limited to, any notice of any proceeding or inquiry with respect to
          the presence of any hazardous waste, toxic substances or hazardous
          materials on the Property or the migration thereof from or to other
          property, (ii) any and all claims made or threatened by any third
          party against or relating to the Property concerning any loss or
          injury resulting from toxic substances, hazardous waste, or hazardous
          materials, or (iii) Borrower's discovery of any occurrence or
          condition on any property adjoining or in the vicinity of the Property
          that could cause the Property, or any part thereof, to be subject to
          any restrictions on the ownership, occupancy, transferability, or loss
          of the Property under any Law. Borrower shall delivery to Lender a
          report regarding such contract and setting forth in detail and
          describing any action which Borrower proposes to take with respect
          thereto, signed by an officer of Borrower;

     (k)  Within five (5) business days of becoming aware of any developments or
          other information which may materially and adversely affect Borrower's
          properties, business, prospects, profits or condition (financial
          otherwise) or Borrower's ability to perform this agreement or the
          other Loan Documents, telephonic or telegraphic notice specifying the
          nature of such development or information and such anticipated effect,
          which shall be promptly confirmed in writing;

     (i)  Such other information respecting the business, properties or the
          condition or operations, financial or otherwise, of Borrower as the
          Lender may from time to time request.

4.17 Transfer. There shall not be, wither voluntarily, involuntarily, or by
     operation of Law, a transfer or sale of real and/or personal property.

                                 Page 10 of 16
<PAGE>

5. EVENTS OF DEFAULT
   -----------------

   An "Event of Default" shall be deemed to have occurred hereunder if:

   5.1 Default Under Loan Documents. Borrower shall fail to pay principal or
       ----------------------------
       interest, or both, when due under the terms of the Notes, or Borrower
       shall fail to perform or observe any term, covenant, or agreement
       contained in this Agreement or in any of the other Loan Documents, which
       failure may be cured by the payment of money, and, in any of such events,
       such failure shall continue for a period of ten (10) days from the date
       such payment or performance was due; or Borrower shall fail to perform
       or observe any term, covenant or agreement contained in this agreement or
       in any of the other Loan Documents, which failure cannot be cured by the
       payment of money and such failure shall continue for a period of fifteen
       (15) days after the Lender shall have given written notice to Borrower
       specifying such default; or

   5.2 Breach Of Warranty. Any warranties or representations made or agreed to
       ------------------
       be made in this Agreement or in any of the other Loan Documents shall be
       breached in any material respect or shall prove to be false or misleading
       in any respect when made; or

   5.3 Litigation Against Borrower. Any suit shall be filed against Borrower,
       ---------------------------
       which, if adversely determined, could substantially impair the ability of
       Borrower to perform any or all of its obligations under and by virtue of
       this agreement or any of the other Loan Documents, unless Borrower's
       counsel furnishes to Lender its opinion, to the satisfaction of Lender
       and Lenders counsel, that, in its judgment the suit is essentially
       without merit; or

   5.4 Levy Upon Property. A levy shall be made on the Property under any
       ------------------
       process and such levy shall not be bonded over or shall continue unstayed
       for thirty (30) days or more; or

   5.5 Acceleration Of Other Debts. Borrower does, or omits to do, any act, or
       ---------------------------
       any event occurs, as a result of which any material obligation of
       Borrower, whether or not arising hereunder and/or relating to or
       affecting the Property or Borrower's ability to perform hereunder, may be
       declared immediately due and payable by the holder thereof; or

   5.6 Bankruptcy. Borrower shall fail to pay its debts as they become due, or
       ----------
       shall make an assignment for the benefit of its creditors, or shall
       admit, in writing, its inability to pay its debts as they become due, or
       shall file a petition under any chapter of the Federal Bankruptcy Code or
       any similar law, now or hereafter existing, or shall become "insolvent"
       as that term is generally defined under the Federal Bankruptcy Code, or
       shall in any involuntary bankruptcy case commenced against it file an
       answer admitting insolvency or inability to pay its debts as they become
       due, or shall fail to obtain a dismissal of such case within thirty (30)
       calendar days after its commencement or convert the case from one chapter
       of the Federal Bankruptcy Code to another chapter, or be the subject of
       an order for relief in such bankruptcy case, or be adjudged a bankrupt or
       insolvent, or shall have a custodian, trustee, or receiver appointed for,
       or have any court take jurisdiction of, its properties, or any part
       thereon, in any voluntary or involuntary proceeding, including, but not
       limited to, those for the purpose of reorganization, arrangement,
       dissolution, or liquidation, and such custodian, trustee, or receiver
       shall not be discharged, or such jurisdiction shall not be relinquished,
       vacated, or stayed within thirty (30) days after the appointment; or

   5.7 Borrower Status. Without Lenders prior written consent, Borrower shall be
       ---------------
       liquidated, dissolved, or fail to maintain its status as a going
       concern; or

   5.8 Execution Levy. Execution shall have been levied against the Property in
       --------------
       excess of $1,000,000.00 or any lien creditor shall commence suit to
       enforce a judgment lien against the Property in excess of $1,000,000.00
       and such action or suit shall not have been bonded or shall continue
       unstayed for a period of thirty (30) days or more; or

                                 Page 11 of 16
<PAGE>

   5.9  Attachment.  Any proceeding shall be brought, the object of which is
        ----------
        that any part of the Lender's commitment to make the Advances
        hereunder shall at any time be subject or liable to attachment or levy
        by any creditor of Borrower; or

   5.10 Destruction. Any part or all of the Property in excess of
        -----------
        $1,000,000.00 is materially damaged or destroyed by fire or other
        casualty and the loss shall prove to be inadequately covered by
        insurance actually collected or in the process of collection to restore
        the Property to its condition prior to such fire or other casualty; or

   5.11 Eminent Domain. Any part of all of the Property shall be the subject of
        --------------
        an eminent domain proceeding or a taking adverse to the interest of
        Lender; or

   5.12 Misrepresentation And/Or Non-Disclosure. Borrower has made certain
        ---------------------------------------
        statements and disclosures in order to induce Lender to make the Loan
        and enter into this Agreement, and, in the event Borrower has made
        material misrepresentations or failed to disclose any material fact.
        Lender may treat such misrepresentation or omission as a breach of this
        Agreement. Such action shall not affect any remedies Lender may have for
        such misrepresentation or non-disclosure, as such, or under its Deed of
        Trust for such misrepresentation or concealment; or

   5.13 ERISA. Any of the following events occur or exist with respect to
        -----
        Borrower;

        (a) Any Reportable Event with respect to any Plan;

        (b) The filing under Title IV of ERISA of a notice of intent to
            terminate any Plan or the termination of any Plan;

        (c) Any event or circumstance that might constitute grounds entitling
            the PBGC to institute proceedings for the termination of, or for the
            appointment of a trustee to administrate any Plan, or the
            institution by the PBGC of any such proceeding; or

   5.14 Financial Condition. There shall be any material adverse changes in
        -------------------
        Borrower's financial condition.

6. REMEDIES.
   --------

   6.1  Cease Payment And/Or Accelerate. Upon, or at any time after, the
        -------------------------------
        occurrence of an Event of Default or upon the occurrence of a default in
        any other joint and/or several obligation or obligations of the
        Borrower to Lender, Lender shall have no obligation to make any further
        Advances, all sums disbursed or advanced by Lender and all accrued and
        unpaid interest thereon shall, at the option of Lender, become
        immediately due and payable, and Lender shall be released from any and
        all obligations to Borrower under the terms of this Agreement.

   6.2  Rights And Remedies Non-Exclusive. In addition to the specific rights
        ---------------------------------
        and remedies hereinabove mentioned, Lender shall have the right to avail
        itself of any other rights or remedies to which it may be entitled, at
        Law or in equity, including, but not limited to, the right to realize
        upon any or all of its security, and to do so in any order. Furthermore,
        the rights and remedies set forth above are not exclusive, and Lender
        may avail itself of any individual right or remedy set forth in this
        Agreement, or available at Law or in equity, without utilizing any other
        right or remedy.

                                 Page 12 of 16

<PAGE>

7.   GENERAL CONDITIONS AND MISCELLANEOUS.
     ------------------------------------
     7.1  Nonliability Of Lender.  Borrower acknowledges and agrees that by
          ----------------------
          accepting or approving anything required to be observed, performed,
          fulfilled or given to Lender pursuant to this Agreement or insurance
          policy Lender shall not be deemed to have warranted or represented the
          sufficiency, legality, effectiveness or legal effect of the same, or
          of any term, provision or condition thereof an such acceptance or
          approval thereof shall not be or constitute any warranty or
          representation to anyone with respect thereto by Lender.

     7.2  No Third Parties Benefitted.  This agreement is made for the purpose
          ---------------------------
          of defining and setting forth certain obligations rights, and duties
          of Borrower and Lender in connection with the Loan. It shall be deemed
          a supplement to the Note and the other Loan Documents, and shall not
          be construed as a modification of the Note or other Loan Documents,
          except as provided herein. It is made for the sole protection of
          Borrower and Lender, and Lender's successors and assigns. No other
          person shall have any rights of any nature hereunder or by reason
          hereof or the right to rely hereon.

     7.3  Indemnity By Borrower.  Borrower hereby indemnifies and agrees to hold
          ---------------------
          harmless Lender and its directors, officers, agents and employees
          (individually and collectively the "Indemnitees") from and against:

          (a)  Any and all claims, demands, actions or causes or actions that
               are asserted against any indemnitee by any person if the claim,
               demand, action or cause of action that the person has or asserts
               against Borrower; and

          (b)  Any and all liabilities, losses, costs or expenses (including
               court costs and attorneys' fees) that any indemnitee suffers or
               incurs as a result of the assertion of any claim, demand, action
               or cause of action specified in this Section 7.3.

     7.4  Change In Laws.  In the event of the enactment, after the date of this
          --------------
          Agreement, of any Laws; (a) deducting from the value of property for
          the purpose of taxation of any lien or security interest thereon; (b)
          imposing upon Lender the payment of the whole or any part of the taxes
          or assessments or charges or liens herein required to be paid by
          Borrower. (c) changing in any way the Laws relating to the taxation of
          deeds of trust or mortgages or security agreements, or the interest of
          the mortgagee or secured party in the property covered thereby; or (d)
          the manner of collection of such taxes so as to affect the Deed of
          Trust secured thereby or longer, then, and in any such event.
          Borrower, upon demand by Lender, shall promptly pay such taxes,
          assessments, charges or liens, or reimburse Lender therefor. If
          Borrower shall be prohibited from paying such tax or from reimbursing
          Lender for the amount thereof. Borrower shall execute a modification
          to the Loan Documents which modifications shall increase the interest
          rate payable pursuant to the Note so as to permit Lender to maintain
          its yield as if such tax had not been imposed. If Borrower shall be
          prohibited from executing the above-referenced modifications, Lender
          may, in Lender's sole opinion and judgement, declare the principal of
          all amounts disbursed and owing under the Note, this Agreement, and
          the other Loan Documents (including all obligations secured by this
          Agreement or the other Loan Documents) and all other indebtedness of
          Borrower to Lender, together with interest thereon, to be forthwith
          due and payable, regardless of any other specified maturity or due
          date.

      7.5  Time Is Of The Essence.  Time is of the essence of this Agreement and
           ----------------------
           of each and every provision hereof. The waiver by Lender of any
           breach or breaches hereof shall not be deemed, nor shall the same
           constitute, a waiver of any subsequent breach or breaches.

                                 Page 13 of 16
<PAGE>

7.6  Binding Effect; Assignment. This Agreement shall be binding upon and inure
     --------------------------
     to the benefit of Borrower and Lender and their respective successors and
     assigns, except that Borrower may not assign its rights hereunder or any
     interest herein without the prior written consent of Lender. Lender shall
     have the right to assign its rights under this Agreement or the other Loan
     Documents and to grant participations in the Loan to others, but all
     waivers or abridgments of Borrower's obligations that may be granted from
     time to time by Lender in writing, shall be binding upon such assignees or
     participants.

7.7  Execution in Counterparts. This Agreement and any other Loan Document,
     -------------------------
     except the Note, may be executed in any number of counterparts, and any
     party hereto or thereto may execute any counterpart, each of which, when
     executed and delivered, will be deemed to be an original, and all of which
     counterparts of this Agreement or any other Loan Document, as the case may
     be, taken together will be deemed to be but one and the same instrument.
     The execution of this Agreement or any other Loan Document by any party
     hereto or thereto will not become effective until counterparts hereon or
     thereof, as the case may be, have been executed by all the parties hereto
     or thereto.

7.8  Integration; Amendments; Consents. This Agreement, together with the
     ---------------------------------
     documents referred to herein, constitutes the entire agreement of the
     parties touching upon the subject matter hereof, supersedes any prior
     negotiations or agreements on such matter. No amendment, modification or
     supplement of any provision of this Agreement or any of the other Loan
     Documents shall be effective unless in writing, signed by Lender and
     Borrower; and no waiver of any of Borrower's obligations under this
     Agreement or any of the other Loan Documents or consent to any departure by
     Borrower therefrom shall be effective unless in writing, signed by Lender,
     and then only in the specific instance and for the specific purpose given.

7.9  Costs, Expenses And Taxes.  Borrower shall pay to Lender, on demand:
     -------------------------

     (a)  The reasonable attorneys' fees and out-of-pocket expenses incurred by
          Lender in connection with the negotiation, preparation, execution,
          delivery and administration of the Agreement and any other Loan
          Document and any matter related thereto, including, but not limited
          to, appraisals of the Property;

     (b)  The reasonable costs and expenses of Lender in connection with the
          enforcement of this Agreement and any other Loan Document and any
          matter related thereto, including the reasonable fees and out-of-
          pocket expenses of any legal counsel, independent public accountants,
          and other outside experts retained by Lender; and

     (c)  All costs, expenses, fees, premiums and other charges relating to or
          arising from this Agreement or any of the other Loan Documents or any
          transactions contemplated hereby or thereby or the compliance with any
          of the terms and conditions hereof or thereof, including, but not
          limited to, recording fees, filing fees, credit report fees, release
          or reconveyance fees, title insurance premiums and the cost of realty
          tax service for the term of the Loan.

          All sums paid or expended by Lender under the terms of this Agreement
          shall be considered to be, and shall be, a part of the Loan. All such
          sums, together with all amounts to be paid by Borrower pursuant to
          this Agreement, shall bear interest from the date of expenditure at
          the default rate provided in the Note, shall be secured by the Deed of
          Trust and shall be immediately due and payable by Borrower upon
          demand.

7.10 Survival of Representations And Warranties. All representations and
     ------------------------------------------
     warranties of Borrower contained herein or in any other Loan Document shall
     survive the making of the Loan and the execution and delivery of the Note,
     and are material and have been or will be

                                 Page 14 of 16
<PAGE>

      relied upon by Lender, notwithstanding any investigation made by Lender or
      on behalf of Lender. For the purpose of this Agreement, all statements
      contained in any certificate, agreement. Financial Statement or other
      writing delivered by or on behalf of Borrower pursuant hereto or to any
      other Loan Document or in connection with the transactions contemplated
      hereby or thereby shall be deemed to be representations and warranties of
      Borrower contained herein or in the other Loan Documents, as the case may
      be.

7.11  Notices. All notices, requests, demands, directions, and other
      --------
      communications provided for hereunder and under any other Loan Document (a
      "Notice"), must be in writing and must be mailed, telegraphed, delivered
      or sent by telex, cable or other form of electronic written communication
      to the appropriate party at its respective address set forth below or, as
      to the other parties in accordance with this Section.

      Any notice given by telegram, telex, cable or other form of electronic
      written communication must be confirmed within forty-eight (48) hours by
      letter mailed or delivered to the appropriate party at its respective
      address. If any notice is given by mail, it will be effective three (3)
      calendar days after being deposited in the mails with first-class or air
      mail postage prepaid; if given by telegraph or cable, when delivered to
      the telegraph company with charges prepaid; if given by telex or other
      form of electronic written communication, when sent; or if given by
      personal delivery, when delivered.

      Such notices will be given to the following:

      To Lender:     TOKAI BANK OF CALIFORNIA
                     300 South Grand Avenue, 5th Floor
                     Los Angeles, California 90071
                     Attn: Loan Servicing Department

      To Borrower:   GW SERVICES, INC., and GLACIER WATER SERVICES, INC.
                     2261 Cosmos Court
                     Carlsbad, California 92009

7.12  Further Assurances. Borrower shall, at its sole expense and without
      -------------------
      expense to Lender, do, execute and deliver such further acts and documents
      as Lender from time to time may reasonably require for the purpose of
      assuring and confirming unto Lender the rights hereby created or intended,
      now or hereafter so to be, or for carrying out the intention or
      facilitating the performance of the terms of any Loan Documents, or for
      assuring the validity of any security interest.

7.13  Governing Law.  The Loan shall be deemed to have been made in California
      --------------
      and this Agreement and the other Loan Documents shall be governed by and
      construed and enforced in accordance with the Laws of the State of
      California.

7.14  Severability Of Provisions.  If any provision of this Agreement or of any
      ---------------------------
      of the other Loan Documents is held to be inoperative, unenforceable or
      invalid, such provision shall be inoperative, unenforceable or invalid
      without affecting the remaining provisions; this Agreement and the other
      Loan Documents shall be construed and enforced as if such illegal, invalid
      or unenforceable provision had never comprised a part of this Agreement or
      the other Loan Documents; and to this end the provisions of this Agreement
      and the other Loan Documents are declared to be severable, remaining in
      full force and effect.

7.15  Joint and Several Obligations.  If this Agreement is executed by more
      ------------------------------
      than one person as Borrower, the obligations of each of such persons
      hereunder shall be joint and several obligations.


                                 Page 15 of 16
<PAGE>

     7.16 Construction. Whenever the context of this Agreement requires, the
          ------------
          singular shall include the plural and the masculine gender shall
          include the feminine and/or neuter.

     7.17 Headings. Paragraph and Section headings in this Agreement are
          --------
          included for convenience of reference only and are not part of this
          Agreement for any other purpose.

IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to
be executed on the date first above written.


"LENDER"

TOKAI BANK OF CALIFORNIA
a California banking corporation


By:  /s/ Alonso Munoz
   ------------------------------------
   Alonso Munoz, Regional Vice President/Credit Officer
   Orange County Regional Office


By:  /s/ Anthony Huitrado
   ------------------------------------
   Anthony Huitrado, Assistant Vice President/
   Documentation Team Leader
   Loan Servicing Department


"BORROWER"

GW SERVICES, INC., a
California corporation


By:  /s/ Jerry A. Gordon
   ------------------------------------
Name:  Jerry A. Gordon
     ----------------------------------
Title: President & CEO
     ----------------------------------

By:  /s/ W. David Walters
   ------------------------------------
Name:  W. David Walters
     ----------------------------------
Title: Senior Vice President & CFO
     ----------------------------------


GLACIER WATER SERVICES, INC., a
Delaware corporation


By:  /s/ Jerry A. Gordon
   ------------------------------------
Name:  Jerry A. Gordon
     ----------------------------------
Title: President & CEO
     ----------------------------------

By:  /s/ W. David Walters
   ------------------------------------
Name:  W. David Walters
     ----------------------------------
Title: Senior Vice President & CFO
     ----------------------------------

                                 Page 16 of 16
</TEXT>
</DOCUMENT>
