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WILD OATS MARKETS, INC.

GARY RAWLINGS EQUITY INCENTIVE PLAN

 

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1. PURPOSES

(a) The purpose of the Plan is to induce Gary Rawlings ("Executive" or"Optionee") to enter into an employment arrangement with Wild Oats Markets, Inc.as Vice President, Marketing, and pursuant to which the Executive may be given anopportunity to benefit from increases in value of the common stock of the Company("Common Stock") through the granting of Nonstatutory Stock Options.

(b) All Options shall be Nonstatutory Stock Options at the time of grant, and in suchform as issued pursuant to Section 6, and a separate certificate or certificates will beissued for shares purchased on exercise of each Option.

 

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2. DEFINITIONS

(a) "AFFILIATE" means any parent corporation or subsidiary corporation,whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f)respectively, of the Code.

(b) "BOARD" means the Board of Directors of the Company.

(c) "CODE" means the Internal Revenue Code of 1986, as amended.

(d) "COMMITTEE" means a Committee appointed by the Board in accordance withsubsection 3(c) of the Plan.

(e) "COMPANY" means Wild Oats Markets, Inc. a Delaware corporation.

(f) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means theemployment or relationship as a Director or Consultant is not interrupted or terminated.The Board, in its sole discretion, may determine whether Continuous Status as an Employee,Director or Consultant shall be considered interrupted in the case of: (i) any leave ofabsence approved by the Board, including sick leave, military leave, or any other personalleave; or (ii) transfers between locations of the Company or between the Company,Affiliates or their successors.

(g) "DIRECTOR" means a member of the Board.

(h) "EMPLOYEE" means any person, including Officers and Directors, employedby the Company or any Affiliate of the Company. Neither service as a Director nor paymentof a director's fee by the Company shall be sufficient to constitute"employment" by the Company.

(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

(j) "FAIR MARKET VALUE" means, as of any date, the value of the Common Stockof the Company determined as follows:

(1) If the Common Stock is listed on any established stock exchange, or traded on the    Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of    Common Stock shall be the closing sales price for such stock (or the closing bid, if no    sales were reported) as quoted on such exchange or market (or the exchange or market with    the greatest volume of trading in Common Stock) on the last market trading day prior to    the day of determination, as reported in the Wall Street Journal or such other source as    the Board deems reliable;

(2) In the absence of such markets for the Common Stock, the Fair Market Value shall be    determined in good faith by the Board.

(k) "INCENTIVE STOCK OPTION" means an Option intended to qualify as anincentive stock option within the meaning of Section 422 of the Code and the regulationspromulgated thereunder.

(l) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as anIncentive Stock Option.

(m) "OFFICER" means a person who is an officer of the Company within themeaning of Section 16 of the Exchange Act and the rules and regulations promulgatedthereunder.

(n) "OPTION" means a stock option granted pursuant to the Plan.

(o) "OPTION AGREEMENT" means a written agreement between the Company and anOptionee evidencing the terms and conditions of an individual Option grant. Each OptionAgreement shall be subject to the terms and conditions of the Plan.

(p) "OPTIONEE" means a person to whom an Option is granted pursuant to thePlan.

(q) "PLAN" means this Wild Oats Markets, Inc. 1996 Equity Incentive Plan.

(r) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor toRule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(s) "STOCK AWARD" means any right granted under the Plan, including anyOption.

(t) "STOCK AWARD AGREEMENT" means a written agreement between the Company anda holder of a Stock Award evidencing the terms and conditions of an individual Stock Awardgrant. Each Stock Award Agreement shall be subject to the terms and conditions of thePlan.

 

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3. ADMINISTRATION

(a) The Plan shall be administered by the Board unless and until the Board delegatesadministration to a Committee, as provided in subsection 3(c).

(b) The Board shall have the power, subject to, and within the limitations of, theexpress provisions of the Plan:

(1) To determine when and how each Stock Award shall be granted; whether a Stock Award    will be an Incentive Stock Option or a Nonstatutory Stock Option.

(2) To construe and interpret the Plan and Stock Awards granted under it, and to    establish, amend and revoke rules and regulations for its administration. The Board, in    the exercise of this power, may correct any defect, omission or inconsistency in the Plan    or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or    expedient to make the Plan fully effective.

(3) To amend the Plan or a Stock Award as provided in Section 13.

(4) Generally, to exercise such powers and to perform such acts as the Board deems    necessary or expedient to promote the best interests of the Company which are not in    conflict with the provisions of the Plan.

(c) The Board may delegate administration of the Plan to a committee or committees("Committee") of one or more members of the Board. In the discretion of theBoard, a Committee may consist solely of two or more Outside Directors, in accordance withCode Section 162(m), or solely of two or more Non-Employee Directors, in accordance withRule 16(b)-3. If administration is delegated to a Committee, the Committee shall have, inconnection with the administration of the Plan, the powers theretofore possessed by theBoard (and references in this Plan to the Board shall thereafter be to the Committee),subject, however, to such resolutions, not inconsistent with the provisions of the Plan,as may be adopted from time to time by the Board. The Board may abolish the Committee atany time and revest in the Board the administration of the Plan.

 

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4. SHARES SUBJECT TO THE PLAN

(a) Subject to the provisions of Section 12 relating to adjustments upon changes instock, the stock that may be issued pursuant to Stock Awards shall not exceed in theaggregate 40,000 shares of the Common Stock. If any Stock Award shall for any reasonexpire or otherwise terminate, in whole or in part, without having been exercised in full(or vested in the case of Restricted Stock), the stock not acquired under such Stock Awardshall cease to be subject to the Plan.

(b) The stock subject to the Plan may be unissued shares or reacquired shares, boughton the market or otherwise.

 

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5. ELIGIBILITY

(a) Stock Awards other than Incentive Stock Options may be granted only to Employees,Directors or Consultants.

(b) Subject to the provisions of Section 12 relating to adjustments upon changes instock, no person shall be eligible to be granted Options covering more than one hundredthousand (100,000) shares of the Common Stock in any calendar year. This subsection 5(c)shall not apply until (i) the earliest of: (A) the first material modification of the Plan(including any increase to the number of shares reserved for issuance under the Plan inaccordance with Section 4); (B) the issuance of all of the shares of Common Stock reservedfor issuance under the Plan; (C) the expiration of the Plan; or (ii) such other daterequired by Section 162(m) of the Code and the rules and regulations promulgatedthereunder.

 

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6. OPTION PROVISIONS

Each Option shall be in such form and shall contain such terms and conditions as theBoard shall deem appropriate. The provisions of separate Options need not be identical,but each Option shall include (through incorporation of provisions hereof by reference inthe Option or otherwise) the substance of each of the following provisions:

(a) TERM. No Option shall be exercisable after the expiration of ten (10) years fromthe date it was granted.

(b) PRICE. The exercise price of each Nonstatutory Stock Option shall be not less thaneighty-five percent (85%) of the Fair Market Value of the stock subject to the Option onthe date the Option is granted. Notwithstanding the foregoing, an Option may be grantedwith an exercise price lower than that set forth in the preceding sentence if such Optionis granted pursuant to an assumption or substitution for another option in a mannersatisfying the provisions of Section 424(a) of the Code.

(c) CONSIDERATION. The purchase price of stock acquired pursuant to an Option shall bepaid, to the extent permitted by applicable statutes and regulations, either (i) in cashat the time the Option is exercised, or (ii) at the discretion of the Board or theCommittee, at the time of the Common Stock is issued pursuant to the exercise, (A) bydelivery to the Company of other Common Stock of the Company, (B) according to a deferredpayment or other arrangement (which may include, without limiting the generality of theforegoing, the use of other Common Stock of the Company) with the person to whom theOption is granted or to whom the Option is transferred pursuant to subsection 6(d), or (C)in any other form of legal consideration that may be acceptable to the Board.

In the case of any deferred payment arrangement, interest shall be payable at leastannually and shall be charged at the minimum rate of interest necessary to avoid thetreatment as interest, under any applicable provisions of the Code, of any amounts otherthan amounts stated to be interest under the deferred payment arrangement.

(d) TRANSFERABILITY. A Nonstatutory Stock Option may be transferred to the extentprovided in the Option Agreement; provided that if the Option Agreement does not expresslypermit the transfer of a Nonstatutory Stock Option, the Nonstatutory Stock Option shallnot be transferable except by will, by the laws of descent and distribution or pursuant toa domestic relations order satisfying the requirements of Rule 16b-3 and shall beexercisable during the lifetime of the person to whom the Option is granted only by suchperson or any transferee pursuant to a domestic relations order. Notwithstanding theforegoing, the person to whom the Option is granted may, by delivering written notice tothe Company, in a form satisfactory to the Company, designate a third party who, in theevent of the death of the Optionee, shall thereafter be entitled to exercise the Option.

(e) VESTING. The total number of shares of stock subject to an Option may, but neednot, be allotted in periodic installments (which may, but need not, be equal). The OptionAgreement may provide that from time to time during each of such installment periods, theOption may become exercisable ("vest") with respect to some or all of the sharesallotted to that period, and may be exercised with respect to some or all of the sharesallotted to such period and/or any prior period as to which the Option became vested butwas not fully exercised. The Option may be subject to such other terms and conditions onthe time or times when it may be exercised (which may be based on performance or othercriteria) as the Board may deem appropriate. The provisions of this subsection 6(e) aresubject to any Option provisions governing the minimum number of shares as to which anOption may be exercised.

(f) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT. In the eventan Optionee's Continuous Status as an Employee, Director or Consultant terminates (otherthan upon the Optionee's death or disability), the Optionee may exercise his or her Option(to the extent that the Optionee was entitled to exercise it at the date of termination)but only within such period of time ending on the earlier of (i) the date thirty (30) daysafter the termination of the Optionee's Continuous Status as an Employee, Director orConsultant (or such longer or shorter period specified in the Option Agreement), or (ii)the expiration of the term of the Option as set forth in the Option Agreement. If, aftertermination, the Optionee does not exercise his or her Option within the time specified inthe Option Agreement, the Option shall terminate, and the shares covered by such Optionshall revert to and again become available for issuance under the Plan. 

An Optionee's Option Agreement may also provide that if the exercise of the Optionfollowing the termination of the Optionee's Continuous Status as an Employee, Director, orConsultant (other than upon the Optionee's death or disability) would result in liabilityunder Section 16(b) of the Exchange Act, then the Option shall terminate on the earlier of(i) the expiration of the term of the Option set forth in the Option Agreement, or (ii)the tenth (10th) day after the last date on which such exercise would result in suchliability under Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreementmay also provide that if the exercise of the Option following the termination of theOptionee's Continuous Status as an Employee, Director or Consultant (other than upon theOptionee's death or disability) would be prohibited at any time solely because theissuance of shares would violate the registration requirements under the Act, then theOption shall terminate on the earlier of (i) the expiration of the term of the Option setforth in the first paragraph of this subsection 6(f), or (ii) the expiration of a periodof thirty (30) days after the termination of the Optionee's Continuous Status as anEmployee, Director or Consultant during which the exercise of the Option would not be inviolation of such registration requirements.

(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as anEmployee, Director or Consultant terminates as a result of the Optionee's disability, theOptionee may exercise his or her Option (to the extent that the Optionee was entitled toexercise it at the date of termination), but only within such period of time ending on theearlier of (i) the date six (6) months following such termination (or such longer orshorter period specified in the Option Agreement), or (ii) the expiration of the term ofthe Option as set forth in the Option Agreement. If, at the date of termination, theOptionee is not entitled to exercise his or her entire Option, the shares covered by theunexercisable portion of the Option shall revert to and again become available forissuance under the Plan. If, after termination, the Optionee does not exercise his or herOption within the time specified herein, the Option shall terminate, and the sharescovered by such Option shall revert to and again become available for issuance under thePlan.

(h) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or within aperiod specified in the Option after the termination of, the Optionee's Continuous Statusas an Employee, Director or Consultant, the Option may be exercised (to the extent theOptionee was entitled to exercise the Option at the date of death) by the Optionee'sestate, by a person who acquired the right to exercise the Option by bequest orinheritance or by a person designated to exercise the option upon the Optionee's deathpursuant to subsection 6(d), but only within the period ending on the earlier of (i) thedate twelve (12) months following the date of death (or such longer or shorter periodspecified in the Option Agreement), or (ii) the expiration of the term of such Option asset forth in the Option Agreement. If, at the time of death, the Optionee was not entitledto exercise his or her entire Option, the shares covered by the unexercisable portion ofthe Option shall revert to and again become available for issuance under the Plan. If,after death, the Option is not exercised within the time specified herein, the Optionshall terminate, and the shares covered by such Option shall revert to and again becomeavailable for issuance under the Plan.

(i) EARLY EXERCISE. The Option may, but need not, include a provision whereby theOptionee may elect at any time while an Employee, Director or Consultant to exercise theOption as to any part or all of the shares subject to the Option prior to the full vestingof the Option. Any unvested shares so purchased may be subject to a repurchase right infavor of the Company or to any other restriction the Board determines to be appropriate.

(j) RE-LOAD OPTIONS. Without in any way limiting the authority of the Board orCommittee to make or not to make grants of Options hereunder, the Board or Committee shallhave the authority (but not an obligation) to include as part of any Option Agreement aprovision entitling the Optionee to a further Option (a "Re-Load Option") in theevent the Optionee exercises the Option evidenced by the Option agreement, in whole or inpart, by surrendering other shares of Common Stock in accordance with this Plan and theterms and conditions of the Option Agreement. Any such Re-Load Option (i) shall be for anumber of shares equal to the number of shares surrendered as part or all of the exerciseprice of such Option; (ii) shall have an expiration date which is the same as theexpiration date of the Option the exercise of which gave rise to such Re-Load Option; and(iii) shall have an exercise price which is equal to one hundred percent (100%) of theFair Market Value of the Common Stock subject to the Re-Load Option on the date ofexercise of the original Option.

Any such Re-Load Option shall be a Nonstatutory Stock Option. There shall be no Re-LoadOptions on a Re-Load Option. Any such Re-Load Option shall be subject to the availabilityof sufficient shares under subsection 4(a) and shall be subject to such other terms andconditions as the Board or Committee may determine which are not inconsistent with theexpress provisions of the Plan regarding the terms of Options.

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7. RESERVED

8. CANCELLATION AND RE-GRANT OF OPTIONS

(a) The Board or the Committee shall have the authority to effect, at any time and fromtime to time, (i) the repricing of any outstanding Options under the Plan and/or (ii) withthe consent of any adversely affected holders of Options, the cancellation of anyoutstanding Options under the Plan and the grant in substitution therefor of new Optionsunder the Plan covering the same or different numbers of shares of stock, but having anexercise price per share not less than eighty-five percent (85%) of the Fair Market Valuefor a Nonstatutory Stock Option. Notwithstanding the foregoing, the Board or the Committeemay grant an Option with an exercise price lower than that set forth above if such Optionis granted as part of a transaction to which section 424(a) of the Code applies.

(b) Shares subject to an Option canceled under this Section 8 shall continue to becounted against the maximum award of Options permitted to be granted pursuant tosubsection 5(c) of the Plan. The repricing of an Option under this Section 7, resulting ina reduction of the exercise price, shall be deemed to be a cancellation of the originalOption and the grant of a substitute Option; in the event of such repricing, both theoriginal and the substituted Options shall be counted against the maximum awards ofOptions permitted to be granted pursuant to subsection 5(c) of the Plan. The provisions ofthis subsection 8(b) shall be applicable only to the extent required by Section 162(m) ofthe Code.

 

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9. COVENANTS OF THE COMPANY

(a) During the terms of the Stock Awards, the Company shall keep available at all timesthe number of shares of stock required to satisfy such Stock Awards.

(b) The Company shall seek to obtain from each regulatory commission or agency havingjurisdiction over the Plan such authority as may be required to issue and sell sharesunder Stock Awards; provided, however, that this undertaking shall not require the Companyto register under the Securities Act of 1933, as amended (the "Securities Act")either the Plan, any Stock Award or any stock issued or issuable pursuant to any suchStock Award. If, after reasonable efforts, the Company is unable to obtain from any suchregulatory commission or agency the authority which counsel for the Company deemsnecessary for the lawful issuance and sale of stock under the Plan, the Company shall berelieved from any liability for failure to issue and sell stock upon exercise of suchStock Awards unless and until such authority is obtained.

 

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10. USE OF PROCEEDS FROM STOCK

Proceeds from the sale of stock pursuant to Stock Awards shall constitute general fundsof the Company.

 

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11. MISCELLANEOUS

(a) The Board shall have the power to accelerate the time at which a Stock Award mayfirst be exercised or the time during which a Stock Award or any part thereof will vestpursuant to subsection 6(e) or 7(d), notwithstanding the provisions in the Stock Awardstating the time at which it may first be exercised or the time during which it will vest.

(b) Neither an Employee, Director nor a Consultant nor any person to whom a Stock Awardis transferred in accordance with the Plan shall be deemed to be the holder of, or to haveany of the rights of a holder with respect to, any shares subject to such Stock Awardunless and until such person has satisfied all requirements for exercise of the StockAward pursuant to its terms.

(c) Nothing in the Plan or any instrument executed or Stock Award granted pursuantthereto shall confer upon any Employee, Consultant or other holder of Stock Awards anyright to continue in the employ of the Company or any Affiliate or to continue serving asa Consultant and Director, or shall affect the right of the Company or any Affiliate toterminate the employment of any Employee with or without notice and with or without cause,or the right to terminate the relationship of any Consultant pursuant to the terms of suchConsultant's agreement with the Company or Affiliate or service as a Director pursuant tothe Company's By-laws.

(d) To the extent that the aggregate Fair Market Value (determined at the time ofgrant) of stock with respect to which Incentive Stock Options are exercisable for thefirst time by any Optionee during any calendar year under all plans of the Company and itsAffiliates exceeds one hundred thousand dollars ($100,000), the Options or portionsthereof which exceed such limit (according to the order in which they were granted) shallbe treated as Nonstatutory Stock Options.

(e) The Company may require any person to whom a Stock Award is granted, or any personto whom a Stock Award is transferred in accordance with the Plan, as a condition ofexercising or acquiring stock under any Stock Award, (1) to give written assurancessatisfactory to the Company as to such person's knowledge and experience in financial andbusiness matters and/or to employ a purchaser representative reasonably satisfactory tothe Company who is knowledgeable and experienced in financial and business matters, andthat he or she is capable of evaluating, alone or together with the purchaserrepresentative, the merits and risks of exercising the Stock Award; and (2) to givewritten assurances satisfactory to the Company stating that such person is acquiring thestock subject to the Stock Award for such person's own account and not with any presentintention of selling or otherwise distributing the stock. The foregoing requirements, andany assurances given pursuant to such requirements, shall be inoperative if (i) theissuance of the shares upon the exercise or acquisition of stock under the Stock Award hasbeen registered under a then currently effective registration statement under theSecurities Act, or (ii) as to any particular requirement, a determination is made bycounsel for the Company that such requirement need not be met in the circumstances underthe then applicable securities laws. The Company may, upon advice of counsel to theCompany, place legends on stock certificates issued under the Plan as such counsel deemsnecessary or appropriate in order to comply with applicable securities laws, including,but not limited to, legends restricting the transfer of the stock.

(f) To the extent provided by the terms of a Stock Award Agreement, the person to whoma Stock Award is granted may satisfy any federal, state or local tax withholdingobligation relating to the exercise or acquisition of stock under a Stock Award by any ofthe following means or by a combination of such means: (1) tendering a cash payment; (2)authorizing the Company to withhold shares from the shares of the Common Stock otherwiseissuable to the participant as a result of the exercise or acquisition of stock under theStock Award; or (3) delivering to the Company owned and unencumbered shares of the CommonStock of the Company.

 

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12. ADJUSTMENTS UPON CHANGES IN STOCK

(a) If any change is made in the stock subject to the Plan, or subject to any StockAward, without the receipt of consideration by the Company (through merger, consolidation,reorganization, recapitalization, reincorporation, stock dividend, dividend in propertyother than cash, stock split, liquidating dividend, combination of shares, exchange ofshares, change in corporate structure or other transaction not involving the receipt ofconsideration by the Company), the Plan will be appropriately adjusted in the class(es)and maximum number of shares subject to the Plan pursuant to subsection 4(a) and themaximum number of shares subject to award to any person during any calendar year pursuantto subsection 5(d), and the outstanding Stock Awards will be appropriately adjusted in theclass(es) and number of shares and price per share of stock subject to such outstandingStock Awards. Such adjustments shall be made by the Board or the Committee, thedetermination of which shall be final, binding and conclusive. (The conversion of anyconvertible securities of the Company shall not be treated as a "transaction notinvolving the receipt of consideration by the Company".)

(b) In the event of: (1) a dissolution, liquidation or sale of substantially all of theassets of the Company; (2) a merger or consolidation in which the Company is not thesurviving corporation; or (3) a reverse merger in which the Company is the survivingcorporation but the shares of the Company's common stock outstanding immediately precedingthe merger are converted by virtue of the merger into other property, whether in the formof securities, cash or otherwise, then to the extent permitted by applicable law: (i) anysurviving corporation or an Affiliate of such surviving corporation shall assume any StockAwards outstanding under the Plan or shall substitute similar Stock Awards for thoseoutstanding under the Plan, or (ii) such Stock Awards shall continue in full force andeffect. In the event any surviving corporation and its Affiliates refuse to assume orcontinue such Stock Awards, or to substitute similar options for those outstanding underthe Plan, then, with respect to Stock Awards held by persons then performing services asEmployees, Directors or Consultants, the time during which such Stock Awards may beexercised shall be accelerated and the Stock Awards terminated if not exercised prior tosuch event.

 

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13. AMENDMENT OF THE PLAN AND STOCK AWARDS

(a) The Board at any time, and from time to time, may amend the Plan. However, exceptas provided in Section 12 relating to adjustments upon changes in stock, no amendmentshall be effective unless approved by the stockholders of the Company to the extentstockholder approval is necessary for the Plan to satisfy the requirements of Section 422of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.

(b) The Board may in its sole discretion submit any other amendment to the Plan forstockholder approval, including, but not limited to, amendments to the Plan intended tosatisfy the requirements of Section 162(m) of the Code and the regulations thereunderregarding the exclusion of performance-based compensation from the limit on corporatedeductibility of compensation paid to certain executive officers.

(c) It is expressly contemplated that the Board may amend the Plan in any respect theBoard deems necessary or advisable to provide the Executive with the maximum benefitsprovided or to be provided under the provisions of the Code and the regulationspromulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/orIncentive Stock Options granted under it into compliance therewith.

(d) Rights and obligations under any Stock Award granted before amendment of the Planshall not be impaired by any amendment of the Plan unless (i) the Company requests theconsent of the person to whom the Stock Award was granted and (ii) such person consents inwriting.

(e) The Board at any time, and from time to time, may amend the terms of any one ormore Stock Award; provided, however, that the rights and obligations under any Stock Awardshall not be impaired by any such amendment unless (i) the Company requests the consent ofthe person to whom the Stock Award was granted and (ii) such person consents in writing.

 

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14. TERMINATION OR SUSPENSION OF THE PLAN

(a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated,the Plan shall terminate ten (10) years from the date the Plan is adopted by the Board orapproved by the stockholders of the Company, whichever is earlier. No Stock Awards may begranted under the Plan while the Plan is suspended or after it is terminated.

(b) Rights and obligations under any Stock Award granted while the Plan is in effectshall not be impaired by suspension or termination of the Plan, except with the consent ofthe person to whom the Stock Award was granted.

 

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15. EFFECTIVE DATE OF PLAN.

This Plan shall become effective on November 24, 2003.

 

 

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WILD OATS MARKETS, INC.

NON-QUALIFIED STOCK OPTION

OPTION AGREEMENT

GARY RAWLINGS, Optionee:

 

Wild Oats Markets, Inc. (the "Company"), pursuant to the Gary Rawlings EquityIncentive Plan (the "Plan"), has this day granted to you, the optionee namedabove ("Optionee"), options (the "Options") to purchase shares of thecommon stock of the Company ("Common Stock"). The Options are not intended toqualify and will not be treated as an "incentive stock option" within themeaning of Section 422 of the Internal Revenue Code of 1986, as amended (the"Code").

The details of your Options are as follows:

1. SHARES; VESTING. (a) The total number of shares of Common Stock subject tothe Options are ____________________________

(a) Subject to the conditions stated herein, the Option shall be exercisable withrespect to each installment shown below on or after the date of vesting applicable to suchinstallment; provided, however, that should Optionee's employment terminate for"cause" this option shall be terminated and canceled immediately and shall notbe exercisable for any number of shares. For purposes of this option, "cause"shall mean misconduct including, but not limited to, criminal acts involving moralturpitude or dishonesty.

NUMBER OF SHARES (INSTALLMENT)

DATE OF EARLIEST EXERCISE (VESTING)

2. EXERCISE PRICE; PAYMENT. (a) The exercise price of the Options is $_______per share, being not less than eighty five percent (85%) of the fair market value of theCommon Stock on the date of grant of the Options.

(a) Payment of the exercise price per share is due in full in cash (including check)upon exercise of all or any part of each installment which has become exercisable by you.

(b) Notwithstanding the foregoing, the Options may be exercised pursuant to a programdeveloped under Regulation T as promulgated by the Federal Reserve Board which results inthe receipt of cash (or check) by the Company prior to the issuance of Common Stock.

3. WHOLE SHARES. The Options may not be exercised for any number of shares whichwould require the issuance of anything other than whole shares.

4. REGISTERED STOCK. Notwithstanding anything to the contrary contained herein,the Options may not be exercised unless the shares issuable upon exercise of the Optionsare then registered under the Act or, if such shares are not then so registered, theCompany has determined that such exercise and issuance would be exempt from theregistration requirements of the Act.

5. TERM; TERMINATION. (a) The term of the Options commence on the date hereofand, unless sooner terminated as set forth below or in the Plan, terminates ten (10) yearsfrom the date of grant. In no event may the Options be exercised on or after the date onwhich they terminate. 

(b) The Options shall terminate prior to the expiration of its term 30 days after thetermination of your employment with the Company for any reason or for no reason, otherthan cause as defined above, unless:

(i) such termination of employment is due to your permanent and total disability    (within the meaning of Section 422(c)(6) of the Code), in which event the option shall    terminate on the earlier of the termination date set forth above or six (6) months    following such termination of employment; or

(ii) such termination of employment is due to your death, in which event the option    shall terminate on the earlier of the termination date set forth above or twelve (12)    months after your death; or

(iii) during any part of such thirty (30) days period the option is not exercisable    solely because of the condition set forth in Section 4 above, in which event the Options    shall not terminate until the earlier of the termination date set forth above or until    they shall have been exercisable for an aggregate period of thirty (30) days after the    termination of employment.

The Options may be exercised on or after the termination of employment only as to thatnumber of vested shares as to which they were exercisable on the date of termination ofemployment under the provisions of Section 1 of this Option Agreement.

6. METHOD OF EXERCISE. (a) The Options may be exercised by delivering a noticeof exercise (in the form attached hereto as Attachment 2) together with the exercise priceto the Secretary of the Company, or to such other person as the Company may designate,during regular business hours, together with such additional documents as the Company maythen require pursuant to the Plan. In the event of a "cashless exercise", youmay exercise the Options by providing such documentation to the brokerage firm retained bythe Company to administer cashless exercises as such brokerage firm may require.

(b) By exercising the Options you agree that the Company may require you to enter anarrangement providing for the payment by you to the Company of any tax withholdingobligation of the Company arising by reason of (i) the exercise of the Options; (ii) thelapse of any substantial risk of forfeiture to which the shares are subject at the time ofexercise; or (iii) the disposition of shares acquired upon such exercise.

7. TRANSFERABILITY. The Options are not transferable, except by will or by thelaws of descent and distribution, and are exercisable during your life only by you.

8. NOTICES. Any notices provided for in this Option Agreement shall be given inwriting and shall be deemed effectively given upon receipt or, in the case of noticesdelivered by the Company to you, five days after deposit in the United States mail,postage prepaid, addressed to you at the address specified below or at such other addressas you hereafter designate by written notice to the Company.

9. CONFLICT. The Options is subject to all the provisions of the Plan, a copy ofwhich is attached hereto and its provisions are hereby made a part of this option,including without limitation the provisions of the Plan relating to option provisions, andis further subject to all interpretations, amendments, rules and regulations which mayfrom time to time be promulgated and adopted pursuant to the Plan. In the event of anyconflict between the provisions of this option and those of the Plan, the provisions ofthe Plan shall control. If the parties hereto shall have any conflict regarding the termsof the Options, the interpretation of the Company's Compensation Committee shall prevail.

Dated the ___ day of ____________, 2003.

Very truly yours,

WILD OATS MARKETS, INC.

 

By ___________________________________

Duly authorized on behalf of the Board of Directors

The undersigned:

(a) Acknowledges receipt of the foregoing option and the attachments referenced thereinand understands that all rights and liabilities with respect to the Options are set forthin this option agreement and the Plan; and

(b) Acknowledges that as of the date of grant of the Options, this option agreementsets forth the entire understanding between the undersigned optionee and the Company andits affiliates regarding the Options which are the subject hereof, and supersedes allprior oral and written agreements on that subject. 

 

 

___________________________________________________

Optionee

 

Address: ___________________________________________

___________________________________________

 

ATTACHMENTS:

Attachment 1 – Gary Rawlings Equity Incentive Plan

Attachment 2 – Form of Notice of Exercise

 

** 
NOTICE OF EXERCISE

 

 

Date of Exercise

Wild Oats Markets, Inc.

3375 Mitchell Lane

Boulder, CO 80301

Ladies and Gentlemen:

This constitutes notice under my stock option that I elect to purchase the number ofshares for the price set forth below.

 

 

Type of option (check one) Incentive Nonstatutory

Stock option dated:

Number of shares as to which

option is exercised:

Certificates to be issued in

name of: _____________________

Total exercise price: $

Cash payment delivered herewith: $

 

By this exercise, I agree (i) to provide such additional documents as you may requirepursuant to the terms of the Wild Oats Markets, Inc. Gary Rawlings Equity Incentive Plan,(ii) to provide for the payment by me to you (in the manner designated by you) of yourwithholding obligation, if any, relating to the exercise of this option.

I further acknowledge that all certificates representing any of the Shares subject tothe provisions of the Option shall have endorsed thereon appropriate legends reflectingthe foregoing limitations, as well as any legends reflecting restrictions pursuant to theCompany's Articles of Incorporation, Bylaws and/or applicable securities laws.

 

Very truly yours,

_________________________________

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