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                              EMPLOYMENT AGREEMENT


            This AGREEMENT, dated as of June 16, 1997 is entered into by and
between Celestial Seasonings, Inc., a Delaware corporation (the "Company") and
Stephen B. Hughes ("Executive").

                              TERMS AND CONDITIONS

            In consideration of the respective covenants and agreements of the
parties contained in this Agreement, the parties agree as follows:

            1.    EMPLOYMENT SERVICES.  The Company hereby agrees to employ
Executive, and Executive hereby agrees to perform services for the Company, on
the terms and conditions set forth in this Agreement.  During the Employment
Period (as defined below), the Company and Executive agree that Executive will
serve as Chief Executive Officer and President of the Company, and Executive
will perform such duties as are customarily performed by chief executive
officers as the Board of Directors of the Company (the "Board") may from time to
time direct (the "Employment Services").  Executive shall report to the Board or
a committee of the Board, as determined by the Board.  Executive shall carry out
his duties faithfully, consistent with his fiduciary duties and to the best of
his ability, and shall comply with the Board's established policies, procedures
and rules and with all applicable laws, rules and regulations.  The Employment
Services shall commence on June 16, 1997 and terminate as provided in Section 6
(the "Employment Period").

            2.    PERFORMANCE.  Executive shall devote substantially all of his
time and efforts to the performance of his duties as specified in Section 1, and
Executive will not engage in any other business (whether or not pursued for
profit, gain or other advantage) or take any other positions which would, in the
aggregate, require any substantial portion of his time and attention.  Nothing
in this Section shall be construed as preventing Executive from (a) investing
his personal assets in businesses which do not compete with the Company or any
of its Affiliates (defined for purposes of this Agreement as any of the
Company s present or future, direct or indirect, majority-owned subsidiaries) in
such form or manner as will not require any services on the part of Executive in
the operation or the affairs of the companies in which such investments are made
and in which his participation is solely that of an investor, or (b) purchasing
securities in any corporation whose securities are publicly traded, provided
that such purchase shall not result in his collectively owning beneficially at
any time three percent (3%) or more of the equity securities of any corporation

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engaged in a business that competes with the Company or any of its Affiliates,
or (c) serving as a member of the board of directors of other companies.

            3.    COMPENSATION.  During the Employment Period, the Company will
pay Executive for his Employment Services a base salary at the annual rate of
$295,000 during calendar year 1997, and $315,000 commencing January 1, 1998
("Base Salary"), payable in installments in accordance with the Company s
policies.  The Base Salary shall be reviewed annually, commencing during the
Company's 1998 - 1999 fiscal year, and may be increased from time to time, by
the Compensation Committee of the Board.  In addition, Executive shall be
eligible to participate in a bonus program on terms and conditions set by the
Compensation Committee of the Board and agreed to by Executive, with a target
bonus of 50% of Base Salary and a maximum bonus of 100% of Base Salary. 
Executive shall receive (i) nonqualified stock options to purchase 215,000
shares of the Company's common stock, par value $.01 per share, at an exercise
price equal to the closing price of the Company's common stock on the NASDAQ
National Market on the first day of the Employment Period, and (ii) a grant of
15,000 restricted shares.  Such options will vest, and restrictions lapse, at
20% after the first year and 20% annually thereafter.  Such options and
restrictions will be evidenced by the two option agreements and the restricted
stock agreement attached hereto as Exhibits A, B and C.  Subject to the sole
discretion of the Board and the Board's Compensation Committee, Executive shall
be eligible for additional grants of options commencing 24 months after the date
of this Agreement.  The Company may withhold from any amounts payable to
Executive such federal, state or local taxes as may be required to be withheld
pursuant to any applicable law or regulation and any amounts required to be
withheld in connection with Executive's receipt of stock based compensation or
participation in benefit plans.

            4.    REIMBURSEMENT FOR EXPENSES.  The Company agrees to pay
reasonable out-of-pocket expenses incurred by Executive in furtherance of or in
connection with the business of the Company and in accordance with the Company's
policies.  If such expenses are paid in the first instance by Executive, the
Company will arrange for Executive's reimbursement upon receipt of appropriate
vouchers and receipts in accordance with the Company's policies.

            5.    BENEFITS.  

            (a)   Executive shall be entitled to receive all fringe benefits
offered by the Company, on the same basis as made available to senior executives
of the Company during the Employment Period.  Such fringe benefits shall include
participation in any hospitalization, dental, medical insurance or other benefit
policies or plans maintained for their employees by the Company, and such other
benefits as may from time to time be made available to Executive.  In addition,
the Company shall provide Executive with a leased automobile, subject to a

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maximum expense of $7500.  Executive shall receive a $250,000 life insurance
policy in addition to the Company s standard life insurance coverage.  Executive
shall be entitled to four (4) weeks of paid vacation at any time during the
first year of the Employment Period and will accrue four (4) weeks of paid
vacation during each succeeding full year of the Employment Period.  Executive
may carry over up to four (4) weeks of vacation from one year to the next. 
Company policies, restrictions or limitations applicable to fringe benefits
available to the Company's employees shall not apply to Executive to the extent
such policies, restrictions or limitations conflict with the terms of this
Agreement. 

            (b)   In connection with Executive's relocation from Florida to
Colorado, the Company will reimburse Executive in cash for (i) the reasonable
costs of moving Executive s household goods and automobile(s), (ii) reasonable
travel expenses incurred by Executive and his family, (iii) up to sixty (60)
days of temporary housing, subject to increase by the Compensation Committee of
the Board if deemed justified, in the Committee s sole discretion, (iv) up to
two house hunting trips not to exceed seven (7) calendar days per trip, (v)
closing costs and points of up to 2.25% in connection with the purchase of a new
house in Colorado, and (vi) transfer taxes and documentary fees in connection
with Executive's sale of his home in Florida not to exceed 0.7% of the sale
price.  If Executive purchases a new home in Colorado prior to sale of
Executive s home in Florida, the Company will provide Executive with an interest
free loan of up to $1,500,000 to be used for the purchase of the home in
Colorado, secured, if requested by Executive or the Company, by Executive's home
in Florida and payable upon the earlier of sale of Executive s home in Florida
or 18 months after the closing of the purchase in Colorado.  Executive
acknowledges and understands that the Company will not be obligated to reimburse
Executive for any real estate commissions paid in connection with Executive's
sale of his home in Florida.

            6.    TERMINATION OF EMPLOYMENT PERIOD.

            (a)   The Employment Period will continue until the earlier of (i)
the second anniversary of the date of this Agreement, (ii) Executive's death,
(iii) Executive's  Disability  (as defined in Section 7 of this Agreement),
(iv) Executive's termination by the Board for "Cause" (as defined in Section 7
of this Agreement) or (v) 30 days after Executive gives notice that he desires
to terminate the Employment Period, provided, however, that following the second
anniversary of the date of this Agreement, this Agreement shall automatically be
extended for one year periods unless either the Company or Executive gives
written notice, at least 90 days prior to the end of any scheduled term of this
Agreement, of its or his desire not to so extend this Agreement.  If the Company
terminates the Employment Period without Cause, Executive shall be entitled to
the severance payments and benefits set forth in Section 7 as liquidated damages
for such action.

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            (b)   If  either (i) the Company shall terminate Executive for Cause
or (ii) Executive shall resign for Good Reason (as defined in Section 7), then
any such termination shall be communicated by written notice to the other party
to this Agreement.  Any such notice shall specify (i) the effective Termination
Date (as defined below), which shall not be more than 30 days after the date the
notice is delivered; and (ii) in reasonable detail the facts and circumstances
underlying a determination that the termination is for Cause or for Good Reason,
as the case may be.  If within 15 days after any notice is given, the party
receiving such notice notifies the other party that a good faith dispute exists
concerning the characterization of the termination, the Termination Date shall
be the date on which such dispute is finally resolved either by written
agreement of the parties or by a final arbitration or by a final judicial
determination.  Notwithstanding the pendency of any such dispute, until such
dispute is finally resolved, the Company shall continue Executive and his
dependents as participants, on the same basis as before the Termination Date, in
all medical, dental and any other health insurance and similar benefit plans of
the Company in which he and they participated when the notice giving rise to the
dispute was given.  Benefits provided under this Section 6 are in addition to
all other amounts due under Section 7 of this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.

            7.    SEVERANCE PROVISIONS.

            (a)   As used in this Agreement, the following terms shall be
defined as follows:

                  (i)   Prior to a Change of Control, "Cause" shall mean
      Executive's refusal or failure to perform his obligations under this
      Agreement; acts or omissions by Executive constituting gross neglect or
      dereliction of his duties; dishonesty or fraud by Executive in connection
      with any dealings with the Board or the Company's Affiliates; dishonesty
      or fraud by Executive that is materially injurious to the Company or its
      Affiliates; a conviction of any criminal violation involving dishonesty,
      fraud or breach of trust or any felony;  other acts or omissions by
      Executive which are materially injurious to the Company or any of its
      Affiliates; or Executive's reaching any mandatory retirement age of at
      least 70 which may be established by the Company for all senior
      executives.  Following a Change of Control,  Cause  shall mean Executive's
      conviction of any criminal violation involving dishonesty, fraud or breach
      of trust or any felony, Executive's willful engagement in gross misconduct
      in the performance of his duties that materially and adversely affects the
      financial condition of the Company, or Executive's reaching any mandatory
      retirement age of at least 70 which may be established by the Company for
      all senior executives.

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                  (ii)  "Change of Control" shall mean an event involving the
      Company of a nature that would be required to be reported in response to
      Item 5(f) of Schedule 14A of Regulation 14A promulgated under the
      Securities Exchange Act of 1934, as amended ("Exchange Act"), whether or
      not the Company is then subject to such reporting requirement; provided
      that, without limiting the generality of the foregoing, such an event
      shall be deemed to have occurred if:

                        (A)   there shall be consummated a Disposition
                        Transaction;

                        (B)   the stockholders of the Company approve any plan
            or proposal for the liquidation or dissolution of the Company;

                        (C)   as a result of, or in connection with, any cash
            tender offer, exchange offer, merger or other business combination,
            sale of assets or Substantial Stock Accumulation, the members of the
            Board immediately prior to the first public announcement relating to
            such event shall thereafter cease to constitute a majority of the
            Board; or

                        (D)   as a result of, or in connection with, any proxy
            or consent solicitation or contested election, one or more members
            of the Board are elected in opposition to the nominees of the Board.

                  (iii) "Disability" shall be deemed to occur if Executive, by
      reason of physical or mental incapacity, becomes unable to perform his
      normal duties for more than 180 days in the aggregate (excluding
      infrequent and temporary absence due to ordinary transitory illness)
      during any 12-month period.

                  (iv) "Disposition Transaction" shall mean (A) any
      consolidation or merger of the Company in which the Company is not the
      surviving or continuing corporation or pursuant to which shares of the
      Company's common stock would be converted into cash, securities or other
      property, other than a merger of the Company in which the holders of the
      Company's common stock immediately prior to the merger have (directly or
      indirectly) at least an 80% ownership interest in the outstanding common
      stock of the surviving corporation immediately after the merger, (B) the
      acquisition by any person of a majority of the outstanding voting
      securities of the Company in a single transaction or series of related
      transactions, or (C) any sale, lease, exchange or other transfer (in one
      transaction or a series of related transactions) of all, or substantially
      all, of the assets of the Company.

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                  (v)   "Good Reason" shall mean the occurrence, following a
      Change of Control, of any one of the following events without Executive's
      consent:

                        (A)   the Company assigns Executive to any duties
            substantially inconsistent with his position, duties,
            responsibilities, status or reporting responsibility with the
            Company immediately prior to the Change of Control, or  assigns
            Executive to a position that does not provide Executive with
            substantially the same or better compensation, status,
            responsibilities and duties as Executive enjoyed immediately prior
            to the Change of Control;

                        (B)   the Company reduces the amount of Executive's Base
            Salary as in effect as of the date of the Change of Control or as
            the same may be increased thereafter from time to time, except for
            across-the-board salary reductions similarly affecting all senior
            executives of the Company;

                        (C)   the Company fails to pay Executive an annual bonus
            consistent with past practices and such bonuses are paid to any
            other senior executives of the Company;

                        (D)   the Company modifies either the proportion of
            Executive's annual bonus that is based upon the Company's financial
            performance for the preceding year or the percentage of Executive's
            annual bonus attributable to the performance levels;  

                        (E)   the Company changes the location at which
            Executive is employed by more than 50 miles from the location at
            which Executive is employed as of the date of this Agreement; or

                        (F)   the Company breaches this Agreement in any
            material respect, including without limitation failing to obtain a
            succession agreement from any successor to assume and agree to
            perform this Agreement, as contemplated by this Agreement. 

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                  (vi)  "Reemployment" shall mean the Executive's being employed
      (including self employment) by a person other than the Company or its
      Affiliates.

                  (vii) A  Substantial Stock Accumulation  shall be deemed to
      have occurred when any "person" or "group" (as such terms are used in
      Section 13(d) and 14(d) of the Exchange Act), is or becomes, after the
      date of this Agreement, the "Beneficial Owner" (as defined in Rule 13d-3
      under the Exchange Act), directly or indirectly, of securities of the
      Company representing 25% or more of the combined voting power of the
      Company's then outstanding voting securities.

                  (viii)      "Termination Date" shall mean the date Executive
      ceases to be employed by the Company.

            (b)   Subject to the conditions set forth in this Agreement, if
either (i) the Company shall terminate Executive without Cause (other than by
reason of death, Disability, or following the expiration of this Agreement by
its terms) or (ii) Executive shall resign following a Change of Control for Good
Reason, then the Company shall make the following payments to Executive within
15 days after the Termination Date (in the case of (i) and (ii) below) and
provide the following benefits to Executive after the Termination Date (in the
case of (iii), (iv), (v) , (vi) and (vii) below), subject in each case to any
applicable payroll or other taxes required to be withheld:

                  (i)   The Company shall pay Executive a lump sum amount in
      cash equal to two (2) times Executive's Base Salary at the Termination
      Date, plus two (2) times Executive s average bonus during the two years
      immediately preceding the Termination Date.

                  (ii)  The Company shall pay Executive a lump sum amount in
      cash equal to accrued but unpaid salary and bonus through the Termination
      Date, and unpaid salary with respect to any vacation days accrued but not
      taken as of the Termination Date.

                  (iii) The Company shall continue to provide Executive medical,
      dental and any other health insurance, life insurance, accidental death
      and dismemberment insurance and disability protection on terms no less
      favorable to Executive and his dependents covered thereby (including with
      respect to any costs borne by Executive) than the greater of (i) the
      coverage provided on the date of the Change of Control or (ii) the
      coverage provided by Company immediately prior to the Termination Date. 
      Such benefits shall be provided for the period beginning on the
      Termination Date and ending on the first to occur of (i) the date of
      Executive's Reemployment in a position providing substantially the same or

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      greater benefits as Executive's assignment with the Company on the
      Termination Date, or (ii) the second anniversary of the Termination Date.

                  (iv)  The Company shall pay to Executive a lump sum amount in
      cash equal to the unvested portion of the Company's contributions to
      Executive's account under any of the Company's plans that are "qualified"
      under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
      "Code"), to which the Company makes contributions to employee accounts in
      effect as of the Termination Date (the "Plans"), plus an amount in cash
      equal to two (2) times an amount equal to the amount of the Company's
      annual contribution on behalf of Executive pursuant to the Plans as in
      effect on the date of the Change of Control or the Termination Date,
      whichever is greater.  For purposes of this Section, the Company's
      matching contributions to the Plans shall be deemed to be at the maximum
      percentage contribution to which Executive could be entitled under the
      Plans.

                  In addition, within 15 days after the Termination Date,
      Executive shall be paid in cash an amount equal to the Company's matching
      contributions determined pursuant to the Plans as in effect on the date of
      the Change of Control or the Termination Date, whichever is greater, which
      would have accrued to the benefit of Executive had he continued his
      participation in, and elected to make the maximum contributions under, the
      Plans for the period of 24 months from the Termination Date or until
      December 31 of the year in which Executive would reach age 65, whichever
      is the shorter period.  The benefits received by Executive pursuant to
      this Section are in addition to any benefits that were vested prior to the
      Termination Date in accordance with the terms of the Plans.

                  (v)   Within 15 days after the Termination Date, the Company
      shall pay to Executive (i) an amount in cash equal to the vested and
      unvested amounts that have been credited to Executive's account or
      accounts under any deferred compensation plan that the Company maintains
      for its employees as of the Termination Date whether or not then vested,
      plus (ii) an amount equal to the total amount required to be, or actually,
      credited to Executive's account, including interest equivalents, for the
      year in which the Termination Date occurs.

                  (vi)  Within 15 days after the Termination Date, Company shall
      select and engage at Company's expense a nationally recognized executive
      placement firm reasonably satisfactory to Executive to provide
      outplacement consulting services to Executive until the first to occur of
      the date of Executive's Reemployment and the second anniversary of the
      Termination Date.

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                  (vii) Simultaneously within the Termination Date, the Company
      shall accelerate the vesting of any unvested stock options, up to a total
      of 115,000 options, and eliminate restrictions on any restricted stock, up
      to a total of 10,000 shares (as such numbers are appropriately adjusted by
      the Board to reflect any stock splits, stock dividends and similar
      transactions).

            (c)   Executive is not required to seek other employment or
otherwise mitigate the amount of any payments to be made by the Company pursuant
to this Agreement.  Except as otherwise provided in this Agreement, the amount
of any payments or other benefits provided for in this Agreement shall not be
reduced by any compensation earned by Executive as the result of Reemployment
after the Termination Date, or otherwise.

            8.    CONFIDENTIALITY AND PROPRIETARY RIGHTS.

            (a)   Executive recognizes and acknowledges that the Company and its
Affiliates' trade secrets and proprietary information and procedures, as they
may exist from time to time, are valuable, special and unique assets of the
Company and its Affiliates' business, access to and knowledge of which are
essential to the performance of Executive's duties hereunder.  Executive agrees
to hold as the Company and its Affiliates' property, all memoranda, books,
papers, letters, formulas and other data, and all copies thereof and therefrom,
in any way relating to the Company and its Affiliates' business and affairs,
whether made by him or otherwise coming into his possession, and on termination
of his employment, or on demand of the Company or any of its Affiliates, at any
time, to deliver the same to the Company or any of its Affiliates.

            (b)   Executive hereby agrees he will not at any time during his
employment or thereafter disclose to any third party (other than in the ordinary
course of business of the Company or any of its Affiliates) or use for the
benefit of himself or any third party any Confidential Information (as such term
is defined in Section 8(d) below) without prior written authorization of the
Company or one of its Affiliates.

            (c)   Executive hereby sells, transfers and assigns to the Company
all of his entire right, title and interest to the Proprietary Rights (as such
term is defined in Section 8(e) below) and agrees to promptly take all action
and sign and deliver all instruments as the Company or any of its Affiliates may
require at any time hereafter  (i) to vest or perfect in the Company and its
successors, assigns and nominees all right, title and interest in and to the
Proprietary Rights;  (ii) to assist the Company or any of its Affiliates in
filing or prosecuting any application for registration, in Executive's name, the
Company's name, the name of any of its Affiliates or any other name, in any
country, for any patent, trademark, service mark, copyright, mask work or other

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registration on the Proprietary Rights, or any modification, reissue, division,
continuation, revival or extension thereof; or  (iii) in conducting any legal or
administrative proceedings for securing, protecting or enforcing any of the
foregoing or otherwise relating to the Proprietary Rights.  Executive further
agrees to disclose to the Company or any of its Affiliates promptly all
information, details and data pertaining to the Proprietary Rights to the extent
such information, details or data are not presently known to the Company or any
of its Affiliates.

            (d)   As used in this Agreement, "Confidential Information" shall
mean information which is not generally known to the public in the form
available to Executive and which was or is used, developed or obtained by the
Company or any of its Affiliates relating to the business of the Company or any
of its Affiliates, or research and development, including, but not limited to,
all client or customer lists, marketing strategies and techniques, trade
secrets, engineering or other know-how or other information pertaining to the
financial condition, business, research and development or prospects of the
Company or any of its Affiliates.

            (e)   As used in this Agreement "Proprietary Rights" shall mean any
and all inventions, discoveries, research, engineering methods, systems,
formulas, designs, mask works, copyrights, software, data, processes, products,
projects, improvements and developments all whether or not published,
confidential, protected or susceptible of protection by patent, trademark,
service mark, copyright or other form of legal protection and whether or not any
attempt has been made to secure such protection, which were made, conceived or
reduced to practice at any time after the date of this Agreement by Executive or
by any other employee or consultant of the Company or any of its Affiliates, in
whole or in part at the expense of, on the premises of, with the assistance of
the employees or consultants of, with the equipment or supplies of, or with the
equipment or supplies of the employees or consultants of, the Company or any of
its Affiliates, and any and all other Confidential Information.

            9.    NON-COMPETITION AND NON-SOLICITATION AGREEMENT.

            (a)   In consideration of the Company's agreements as set forth in
this Agreement, Executive agrees that during his employment and for a period of
two (2) years thereafter (provided, however, that such two year period shall be
extended by any period during which Executive is in violation of this Section
9), he will not in any way, directly or indirectly, except in the proper
exercise of his employment pursuant to this Agreement: 

                  (i)   engage in, represent, furnish consultant services to, be
      employed by, or have any interest (whether as owner, principal, director,
      officer, partner, agent, consultant, stockholder, or otherwise) in any

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      business which (A) engages in the sale and manufacture of tea products or
      herbal supplement products; or (B) otherwise engages in a Significant
      Business (as defined below).  Such restrictions shall apply in the
      specific geographic and customer markets served by the Company or any of
      its Affiliates at any time during, or upon termination of, Executive's
      employment (which shall include but not be limited to the United States). 
      This Section 9(a)(i) shall not prevent Executive from owning up to three
      percent (3%) of the outstanding stock of any publicly traded company which
      competes with the Company provided Executive does not participate in the
      business of such entity;

                  (ii)  (A) solicit, offer employment to, otherwise attempt to
      hire, or assist in the hiring of any employee of the Company or any of its
      Affiliates, (B) encourage, induce, assist, or assist others in inducing
      any such person to terminate his or her employment with the Company or any
      of its Affiliates, or (C) in any way interfere with the relationship
      between the Company or any of its Affiliates and their employees; or

                  (iii) (A) contact or solicit, or direct or assist others to
      contact or solicit, for the purpose of promoting any person's or entity's
      attempt to compete with the Company or any of its Affiliates, in any
      business carried on by the Company or any of its Affiliates during
      Executive's employment, any customers, suppliers or other business
      associates of the Company or any of its Affiliates that were existing or
      identified prospective customers, suppliers or associates during
      Executive's employment, or (B) otherwise interfere in any way in the
      relationships between the Company or any of its Affiliates and their
      customers, suppliers and business associates.

                                  PAGE 25   

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            (b)   For purposes of this Agreement, a "Significant Business" shall
be a business similar to those engaged in or proposed to be engaged in at any
time during the Employment Period by the Company or any of its Affiliates;
provided, however, that (x) a business engaged in by the Company shall not be
deemed to be a Significant Business unless such business has accounted for at
least 5% of the Company's net sales during any of the Company's last four
quarterly periods, and (y) a business in which the Company is proposed to be
engaged shall not be deemed a Significant Business unless the Company has
expended at least $1 million in connection with such proposed business prior to
the Termination Date and the Company continues to actively pursue such proposed
business following the Termination Date; provided, however, that following the
expiration of 12 months from the Termination Date such proposed business shall
not be deemed a Significant Business unless such business has accounted for at
least 2% of the Company's net sales during any of the Company's last four
quarterly periods.  The provisions of Section 9(a)(i)(B) above shall not
prohibit Executive from engaging in, representing, furnishing consultant
services to, being employed by, or having any interest in any business (a
 Permitted Business ) provided (i) Significant Businesses account for less than
5% of the Permitted Business' net sales during each of the Permitted Business' 
last four quarterly periods, and (ii) Executive's responsibilities with the
Permitted Business do not require him to devote a significant portion of his
time to the supervision, development or promotion of one or more Significant
Businesses.

            (c)   Executive agrees that this covenant is reasonable with respect
to its duration, geographic area and scope.  It is the desire and intent of the
parties that the provisions of this Section 9 shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought.  Accordingly, if any particular
portion of this Section 9 shall be adjudicated to be invalid or unenforceable,
this Section 9 shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of this Section 9 in the particular jurisdiction in
which such adjudication is made.

            (d)   Nothing in this Section 9 shall reduce or abrogate Executive's
obligations under Section 1 hereof during the Employment Period.

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            10.   BENEFITS VALUATION AND LIMITATION.

            (a)   Promptly following any Termination Date, and as of that date,
the Company will notify Executive of the itemized and aggregate cash value of
the payments and benefits, as determined under Section 280G of the Code,
received or to be received by Executive in connection with the termination of
his employment (whether payable pursuant to the terms of this Agreement or
otherwise).  At the same time, the Company shall advise Executive of the portion
of such payments or benefits which constitute parachute payments within the
meaning of the Code and which may subject Executive to the payment of excise
taxes pursuant to Section 4999 of the Code and the expected amount of such taxes
(such payments or benefits being hereinafter referred to as "Parachute
Payments").

            (b)   Notwithstanding the provisions of Sections 6 and 7 of this
Agreement, if all or any portion of the payments or benefits provided under this
Agreement either alone or together with other payments or benefits which
Executive receives or is entitled to receive from the Company and any of its
subsidiaries, would constitute Parachute Payments, then such payments or
benefits provided to Executive by the Company and its subsidiaries (whether
under this Agreement or otherwise) shall be reduced to the extent necessary so
that no portion thereof shall be subject to the excise tax imposed by Section
4999 of the Code; but only if, by reason of such reduction, Executive's net
after-tax economic benefit shall exceed the net after-tax economic benefit to
Executive if such reduction were not made.

            (c)   If (i) all or any portion of the payments or benefits provided
under this Agreement either alone or together with other payments or benefits
which Executive receives or is entitled to receive from the Company and any of
its subsidiaries, would constitute Parachute Payments, (ii) the reduction of
such payment and benefits pursuant to Section 10(b) of this Agreement would not
provide Executive with a greater net after-tax economic benefit than if such
reduction were not made, and (iii) the termination of Executive's employment
relates to a Change of Control, then the Company shall increase the amount of
such payments and benefits to the extent necessary to provide Executive with a
net after-tax economic benefit equal to an amount Executive would have received
(after the payment of federal and state income taxes by Executive) had no excise
taxes on such payments and benefits been imposed pursuant to Section 4999 of the
Code (the "Gross-Up Allowance").

                                 PAGE 27


<PAGE>
            (d)   For purposes of this Section 10, Executive's base amount, the
present value of the Parachute Payments, the amount of the excise tax and all
other matters falling within the purview of Section 280G of the Code shall be
determined by the Company's independent auditors in accordance with the
principles of Section 280G of the Code and based upon the advice of tax counsel
selected by the Company, which tax counsel shall be reasonably satisfactory to
Executive.  All calculations provided in this Section 10 shall be made at the
Company's expense.

            (e)   As a result of the uncertainty in the application of Section
4999 of the Code at the time of the determination by the Company's independent
auditors under this Agreement, it is possible that a portion of the Gross-Up
Allowance which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made under
this Agreement.  In the event that the Company exhausts its remedies pursuant to
Section 10(f) of this Agreement and Executive thereafter is required to make a
payment of any excise tax, such auditors shall determine the amount of the
Underpayment that has occurred, and any such Underpayment shall be promptly paid
by the Company to or for the benefit of Executive.

            (f)   Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Allowance.  Such notification shall be given as soon
as practicable but no later than ten (10) business days after Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid.  Executive
shall not pay such claim prior to the expiration of the thirty (30) day period
following the date on which Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due).  If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:

                  (i)   give the Company any information reasonably requested by
      the Company relating to such claim;

                  (ii)  take such action in connection with contesting such
      claim as the Company shall reasonably request in writing from time to
      time, including, without limitation, accepting legal representation with
      respect to such claim by tax counsel selected by the Company, which tax
      counsel shall be reasonably acceptable to Executive;

                  (iii) cooperate with the Company in good faith in order to
      effectively contest such claim; and

                  (iv)  permit the Company to participate in any proceedings
      relating to such claim;

                                   PAGE 28

<PAGE>
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any excise tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.  Without limitation on the foregoing provisions
of this Section 10(f), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
reasonably determine; provided, however, that if the Company directs Executive
to pay such claim and sue for a refund, the Company shall advance the amount of
such payment to Executive, on an interest-free basis, and shall indemnify and
hold Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and provided, further, that if Executive is required to extend the
statute of limitations to enable the Company to contest such claim, Executive
may limit this extension solely to such contested amount.  The Company's control
of the contest shall be limited to issues with respect to which a Gross-up
Allowance would be payable under this Agreement, and Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.

            (g)   If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 10(f) of this Agreement, Executive becomes
entitled to receive any refund with respect to such claim, Executive shall
(subject to the Company complying with the requirements of Section 10(f) of this
Agreement) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto).  If,
after the receipt by Executive of an amount advanced by the Company pursuant to
Section 10(f) of this Agreement, a determination is made that Executive shall
not be entitled to any refund with respect to such claim and the Company does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of forty (40) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid, and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-up
Allowance required to be paid.

                                 PAGE 29

<PAGE>
            11.   FURTHER ASSISTANCE.  During the Employment Period and
thereafter, Executive will not make any disclosure, issue any public statements
or otherwise cause to be disclosed any information which is designed, intended
or might reasonably be anticipated to discourage suppliers or customers of the
Company or any of its Affiliates or otherwise have a negative impact or adverse
effect on the Company or any of its Affiliates.  Following termination of the
Employment Period, Executive will provide, at the Company's expense, assistance
reasonably requested by the Company in connection with actions taken by
Executive during the Employment Period, including but not limited to assistance
in connection with any lawsuits or other claims against the Company arising from
events during the Employment Period.
            
            12.   COMPLETE AGREEMENT.  This Agreement, those documents expressly
referred to herein and other documents executed by the parties of even date
embody the complete agreement between the parties in respect to the matters set
forth in this Agreement, and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.  The provisions herein
shall be regarded as divisible, and if any of such provisions or any part
thereof are declared invalid or unenforceable, the validity and enforceability
of the remainder of such provisions or parts thereof and the applicability
thereof shall not be affected thereby.

            13.   COUNTERPARTS.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

            14.   SUCCESSORS AND ASSIGNS.  This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive, the Company and
their respective successors and assigns; provided that in no event shall
Executive's obligations under this Agreement be delegated or transferred by
Executive, nor shall Executive's rights be subject to encumbrance or to the
claims of Executive's creditors.  Without limiting the foregoing, Executive's
right to receive payments under this Agreement shall not be assignable or
transferable, whether by pledge, creation of a security interest or otherwise,
other than a transfer by his will or trust or by the laws of descent or
distribution, and in the event of any attempted assignment or transfer contrary
to this Section the Company shall have no liability to pay any amount so
attempted to be assigned or transferred. This Agreement is for the sole benefit
of the parties hereto and shall not create any rights in third parties other
than the Company's Affiliates.  The Company shall require any proposed successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance reasonably satisfactory to Executive, to
expressly assume and agree to perform this Agreement in the same manner and to

                                  PAGE 30

<PAGE>
the same extent that the Company would be required to perform it if no such
succession had taken place, concurrent with the execution of a definitive
agreement with the Company to engage in any such transaction

            15.   REMEDIES.   The Company will be entitled to enforce its rights
under this Agreement specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights to which it may
be entitled.  Executive agrees and acknowledges that money damages may not be an
adequate remedy for breach of the provisions of this Agreement and that the
Company may in its sole discretion apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.

            16.   REPRESENTATIONS AND WARRANTIES OF EXECUTIVE.    Executive
represents and warrants that he has full power and authority to enter into this
Agreement and to perform his obligations hereunder.  This Agreement constitutes
the valid and legally binding obligation of Executive, enforceable in accordance
with its terms and conditions.  The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (a) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate modify
of cancel or require any notice under any contract, lease, sublease, license,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other obligation or liability
to which Executive is a party or by which he is bound or to which any of his
assets is subject (including but not limited to employment, nondisclosure and
confidentiality agreements) or (b) violate any statute, regulation, rule,
judgment, order, decree or other restriction of any government, government
agency or court to which Executive is subject.

            17.   CHOICE OF LAW.  All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the internal
law, and not the law of conflicts, of the State of Colorado.

            18.   MODIFICATIONS AND WAIVERS.  No provision of this Agreement may
be modified, altered or amended except by an instrument in writing executed by
the parties hereto.  No waiver by any party hereto of any breach by any other
party hereto of any term or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar terms or
provisions at the time or at any prior or subsequent time.

            19.   HEADINGS.  The headings contained herein are solely for the
purpose of reference, are not part of this Agreement and shall not in any way
affect the meaning or interpretation of this Agreement.

                                PAGE 31

<PAGE>
            20.   NOTICES.  Except as otherwise expressly set forth in this
Agreement, all notices, requests and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be given (and, except as otherwise provided in this Agreement,
shall be deemed to have been duly given if so given) in person, by cable,
telegram, facsimile transmission, mailed by first class registered or certified
mail, postage, prepaid or sent by overnight courier to the parties at the
following addresses (or such other address as shall be furnished in writing by
like notice, provided, however, that notice of change of address shall be
effective only upon receipt):

            Notices to Executive
                  Stephen B. Hughes
                  10. S. Sandy Hook Road
                  Sarasota, Florida 34242

                  With a copy to:
                  Stephen M. Feldhaus
                  Fulbright & Jaworski
                  801 Pennsylvania Avenue NW
                  Washington DC 20024
                  
            Notices to the Company:
                  Celestial Seasonings, Inc.
                  4600 Sleepytime Drive
                  Boulder, Colorado 80301
                  
                  With a copy to:
                  Thomas R. Stephens
                  Bartlit Beck Herman Palenchar & Scott
                  511 Sixteenth Street, Suite 700
                  Denver, Colorado 80202
            
            21.   EXPENSES.  Each party will pay its own expenses in connection
with this Agreement and the performance of the transactions and obligations
contemplated by this Agreement, provided, however, that the Company will
reimburse Executive for reasonable attorneys  fees in connection with the
negotiation of this Agreement.  In the event that either party files an action
against the other in any court to collect, enforce, protect or preserve its
rights under this Agreement, the prevailing party in such action shall be
entitled to receive reimbursement from such other party of all reasonable costs
and expenses, including attorneys' fees, which such prevailing party incurred in
prosecuting or defending such action, as the case may be.

                                 PAGE 32

<PAGE>
            21.   UNSECURED OBLIGATION.  All rights of Executive and Executive's
spouse or other beneficiary under this Agreement shall at all times be entirely
unfunded and no provision shall at any time be made with respect to segregating
assets of the Company or payment of any amounts due hereunder.  Neither
Executive nor his spouse or other beneficiary shall have any interest in or
rights against any specific assets of the Company, and Executive and his spouse
or other beneficiary shall have only the rights of a general unsecured creditor
of the Company.

            22.   EXECUTIVE'S PURCHASE OF COMMON STOCK.  Executive agrees that
within 12 months of the date of this Agreement, he will purchase, in open market
or privately negotiated transactions in accordance with the Company s trading
policies, at least 5,000 shares of the Company's common stock.


            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the day and year first above written.


STEPHEN B. HUGHES


______________________________



CELESTIAL SEASONINGS, INC.



By:______________________________
Its:______________________________   



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                                  PAGE 33