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THIS IS A LEGAL DOCUMENT. YOU ARE ENCOURAGED TO CONSULT WITH  AN ATTORNEY BEFORE SIGNING THIS DOCUMENT.

 
**SEVERANCE AGREEMENT AND RELEASE OF CLAIMS**
This Severance Agreement and Release of Claims (the "Agreement") isbetween Wild Oats Markets, Inc. ("Company") and James W. Lee("Employee").
**Agreement**
For good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Company and the Employee hereby agree as follows:

1. Termination of Employment. Effective August 30, 2001 (the"Effective Date"), Employee agrees that Employee's employment withthe Company is hereby terminated, and Employee further resigns from any and allofficer or director positions held by the Employee with the Company or any ofits subsidiaries, effective as of the Effective Date. The Company agrees thatthe Employee's termination shall be treated as a resignation and retirement inthe event a current or prospective employer of the Employee requests areference.

2. Continuation of Salary and Benefits. (a) Salary Continuance.Subject to Employee's compliance with the terms and conditions set forth inthis Agreement, Company agrees to pay the Employee a continuation of theEmployee's salary (the "Severance Pay") for a period of one year,commencing on September 1, 2001 and ending on August 31, 2002 (the"Severance Period"). The Severance Pay will be paid in equal paymentson the same payroll schedule under which the Company pays its employees. Subjectto Paragraph 3 below, the first payment will be made on the next regularlyscheduled pay day for the Company which occurs after August 30, 2001. Employeeto receive benefit payout on next regularly pay period following signing ofAgreement.

(b) Medical Benefits Continuance. The Company will continue medicalbenefits for the Employee for the Severance Period, including medical, lifeinsurance, dental and vision plans, but excluding short and long term disabilitybenefits.
(c) Deferred Compensation Plan. Barring prohibitions imposed by theCompany's deferred compensation plan, the Company will allow the Employee tomaintain the balance of his deferred compensation plan account in the plan untilJanuary 1, 2002, at which time the Company shall distribute the balance of theaccount to the Employee. The Employee shall not be entitled to make furthercontributions to such account after the Effective Date.
(d) Discount Card. The Employee will not be entitled to continued useof the employee discount benefit.
(d)  Company Vehicle. The Employee will be entitled to thecontinued use of the company vehicle currently in Employee's possession duringthe Severance Period. The Company will continue to pay the cost to insure thevehicle during the Severance Period.
(e)  Options. (i) Employee acknowledges that certain employees ofthe Company (including Employee) are currently under a blackout and unable totrade Company stock for an unspecified period of time (the "BlackoutPeriod"). The Company agrees to lift the Blackout Period for Employee onNovember 15, 2001. Company further agrees to extend the period of time in whichEmployee may exercise Employee's vested stock options to March 15, 2002 (the"Option Expiration Date"). If such options are not exercised withinsuch time frame, all of Employee's vested stock options will expire on theOption Expiration Date. Employee acknowledges that vesting of his stock optionsceased as of August 30, 2001.
3. Conditions to Commencement of Severance Pay. In order for theEmployee to receive the Severance Pay, the Employee must comply with all of thefollowing conditions. At the Company's election, failure to comply with anycondition will result in a delay in, or termination of, any right to receiveSeverance Pay:
(a)  The Employee shall return, within **7 days****after signing thisAgreement**, all equipment, tools, phones, computers, keys and proprietaryinformation (including financials, price lists, vendor lists, manuals andstrategic planning documents), in Employee's possession, including the itemslisted on Attachment A to this Agreement. Change to acknowledgement of allequipment. All items shall be returned in accordance with the Equipment andCredit Card Information Sheet enclosed with this Agreement. **All computerfiles must remain intact on all computer equipment returned.**
(b)  If the Employee has a Company credit card, within **7 days afterthe date the Employee signs this Agreement,**the Employee must arrange forpayment of outstanding charges in accordance with the Equipment and Credit CardInformation Sheet enclosed.

Failure to comply with (a) or (b) may result in withholding or termination ofSeverance Pay, or the Company may elect to deduct any unpaid bills, costs ofequipment, personal credit card charges or any business expenses for whichreports have not been submitted from the Employee's Severance Pay.

4. Conditions to Continued Receipt of Severance Pay. In order for theEmployee to continue to receive Severance Pay, the Employee MUST comply with thefollowing conditions during the Severance Period:

(a) The Employee will not disparage or otherwise discredit the Company orallyor in writing.

(b) The Employee will not solicit, for him/herself or on behalf of a thirdparty, either directly or indirectly, any currently employed employee of theCompany to leave the Company's employ.

(c) The Employee will not discuss the terms of this Agreement with any thirdparty other than the Employee's spouse, family or legal or financial advisors.In the event the Employee is required by law to discuss or disclose any of theterms, the Employee must provide the Company with prompt written notice prior todisclosure to the third party to allow the Company sufficient time to contestthe pending disclosure.
5.  Company Obligations. The Company agrees that (a) the followingofficers of the Company, Perry Odak, Bruce Bowman, Steve Kaczynski, Freya Brier,Terry Maloy and Peter Williams (the "OCEO") will not disparage orotherwise discredit the Employee orally or in writing, and (b) the OCEO will notdiscuss the terms of this Agreement with any third party other than the Company'slegal or financial advisors or as may be necessary. Employee acknowledges thatthe Company may be required to file a copy of this Agreement as an exhibit toits public filings under the laws, rules and regulations of the Securities andExchange Commission.
6. Rehire. The Employee agrees that the Employee shall not apply forrehire by the Company, and the Company's refusal to hire shall not be deemedto be discriminatory conduct on the part of the Company.

7. Confidentiality. The Employee acknowledges that he/she has beenprovided with, and has created for the Company, certain confidentialinformation, both written and oral, including, but not limited to, trade secretsand other information related to the Company's practices in marketing,pricing, operations, advertising, promotions, merchandising, selling anddistributing, price lists, vendor lists, customer lists, know-how, strategicplanning and financial information, collectively referred to herein as"Confidential Information", by the Company. The Employee agrees thatthe Employee will not disclose such information, orally or in writing, to anythird party except to the extent such disclosure is required by law, in whichcase the Employee will provide the Company with prompt written notice of thedisclosure request to allow the Company sufficient time to contest the pendingdisclosure.

8. Release of Claims. By signing this Agreement without revocation,the Employee and his/her heirs and assigns hereby agree to **release andforever discharge** the Company, its officers, directors, employees, agentsand representatives from any and all actions, causes of action, suits, damagesand claims, whether known or unknown, which the Employee ever had, now has, ormay have against the Company for any matter relating to his/her employment ortermination from employment to the date hereof. The Employee also agrees thathe/she is legally waiving and releasing any rights the Employee may have had onor before the date of this Agreement regarding his/her employment andtermination from employment with the Company, including those rights relating toage, gender, race, disability or religion, under the numerous laws andregulations regulating employment, including, without limitation, the AgeDiscrimination in Employment Act of 1967, the Civil Rights Acts of 1866, 1871,1964 and 1991; the Employee Retirement Income Security Act; the Equal Pay Act;the Fair Labor Standards Act; the National Labor Relations Act; the OccupationalSafety and Health Act; the Older Workers Benefit Protection Act of 1990; theConsolidated Omnibus Budget Reconciliation Act; the Rehabilitation Act of 1973;the Colorado Anti-Discrimination in Employment Act or any similar act of anyother state; the Family Medical Leave Act, as well as other statutes and lawsthat may apply. Notwithstanding the foregoing, the Employee does not waive anyrights conferred by statute to elect COBRA benefits or to apply and receiveunemployment benefits. The Employee represents that the Employee has not filedany claims with any governmental agencies or any civil suits relating to his/heremployment with the Company or his/her termination of employment with theCompany.

9. Non-Competition. (a) Restrictions. In consideration for theseverance specified above, during the Severance Period, the Employee will notdirectly or indirectly, on the Employee's own account or as an employee,consultant, partner, owner, officer, director or stockholder of any other firm,partnership or corporation, conduct, engage in, be connected with, have anyinterest in or aid or assist Whole Foods Markets, Inc., or its affiliates orsubsidiaries or any other natural foods grocery chain which is a competitor ofthe Company, or its affiliates or subsidiaries, nor will the Employee in any waydirectly or indirectly, solicit, divert, take away or interfere with any of thebusiness customers, trade or personnel of the Employer; nor will the Employeeinterfere with the suppliers, manufacturers, distributors, wholesalers or othersuch companies with which the Employer transacts business; provided, however,nothing contained herein shall prevent the Employee from engaging in employmentwith a conventional grocery chain, so long as Employee is not involved in thenatural foods operations of such conventional operator, or prevent Employee fromowning shares of stock of any such type of corporation, the shares of which arepublicly traded on a nationally recognized stock exchange.

(b) Geographic Limitation. The geographic limitationwithin which the Employee shall not compete as set forth in paragraph (a) ofthis covenant not to compete is within the continental United States or suchlesser geographic area deemed enforceable by a court of competent jurisdiction.

(c) Acknowledgments. The Employee hereby acknowledgesthat the terms of this covenant not to compete is a minimum period of time andthat the area of restriction is reasonable and necessary in order to protect theEmployer.

(d) Remedies. The Employee further agrees that damages cannotreasonably compensate the Employer in the event of a violation of this covenantand that it would be difficult to ascertain the lost profits which would besuffered and that, by reason thereof, injunctive relief would be essential forthe protection of the Employer. Accordingly, the Employee hereby agrees andconsents that in the event of any such breach or violation, the Employer mayobtain such injunctive relief in order to prevent a continued violation of theterms of this Agreement. The Employee, therefore, agrees that the Employer mayobtain a temporary restraining order and temporary and permanent injunctionsagainst the Employee from any court of competent jurisdiction in the State ofColorado without necessity of the posting of a bond or other security. Theforegoing shall not limit the Employer in the pursuit of other remedies it mayhave, including damages.

10. Cooperation. (a) The Employee agrees to cooperate with theCompany, as requested, to effect a transition of his/her responsibilities andjob-related information and to ensure that the Company is aware of all mattersbeing handled by the Employee.

(b) The Employee agrees, upon reasonable notice, to furnish information andassistance to the Company as may be required in connection with any legal orquasi-legal proceeding, including any external or internal investigation,involving the Company, its subsidiaries or affiliates, or in which any of themis, or may become, a party. After the Severance Period, or if during SeverancePeriod the assistance is for a period longer than 10 days, the Company will paythe Employee for the time spent in providing assistance with proceedings for areasonable consulting fee not to exceed the Employee's effective hourly wageon the Effective Date.

11. Miscellaneous. (a) This Agreement will be interpreted, construedand governed by the laws of the State of Colorado, and the Employee agrees toaccept jurisdiction and venue for any claims or actions in Boulder County,Colorado. (b) If any provision or clause of this Agreement is held to be invalidby a court of competent jurisdiction, the invalid provision will be severed fromthis Agreement, but such invalidity will not affect the validity orenforceability of any other provision, and the balance of the Agreement willremain in full force and effect.(c) In the event of deathby the Employee during the Severance Period, the right to receive Severance Pay,but not medical insurance coverage, will inure to the benefit of the Employee'sheirs, successors or assigns. (d) The Employee agrees and acknowledges that ifthe Employee breaches any portion of this Agreement, the Company has a right tooffset amounts due to the Company against Severance Pay or terminate any furtherSeverance Pay. (e) The Employee acknowledges that the damages the Company maysuffer for breach of this Agreement may be irreparable, and in any event wouldbe difficult, if not impossible, to ascertain, and agrees that the Company willhave the right to an injunction or other available equitable relief in any courtof competent jurisdiction, enjoining any threatened or actual breach. Theexistence of a right to an injunction or other available equitable relief willnot preclude the Company from pursuing any other rights and remedies at law orin equity which it may have, including the right to seek recovery of damages.The Employee hereby waives the claim or defense that the Company has an adequateremedy at law or has not been or is not being irreparably injured by the breachof the Agreement, and also waives any requirement that a bond be posted in orderto bring an action for injunctive relief or declaratory judgment.
10. Expiration of Offer; Right to Revoke Agreement. (a) **TheEmployee has 21 days from the day the Employee receives this Agreement to decidewhether or not to sign it. The Employee acknowledges receipt of this Agreementon November 7, 2001. The Employee may waive some or all of the 21-day period.This offer will expire if the Agreement is not signed and postmarked within 21days (November 28, 2001).**
(b) If the Employee signs the Agreement, he/she has **7 days****aftersigning this Agreement** to revoke it for any reason. This Agreement will notbe effective or enforceable until 7 days after the date the Employee signs it.Severance Pay will not be paid until the next pay period after the expiration ofthe 7-day period. Revocation must be in writing and hand-delivered or mailed tothe Company, postmarked within the **7-day period**, and addressed to: AngieSuarez, Wild Oats Markets, Inc., 3375 Mitchell Lane, Boulder, CO 80301.
**The Employee hereby acknowledges that the Employee has been advised inwriting to consult with an attorney before signing this Agreement and theEmployee has either consulted with an attorney before signing this Agreement orthe Employee has willingly and knowingly waived his/her right to speak with anattorney prior to signing this Agreement. The Employee fully understands thisAgreement and agrees to its terms.****COMPANY:                                      EMPLOYEE:

Wild Oats Markets, Inc.       Agreed to and signed, this14th day of November, 2001

 

By:  /s/ Freya R.Brier            /s/ James W. Lee                                       Signature
 

 
** 

ATTACHMENT A

 

TO SEVERANCE AGREEMENT AND RELEASE OF CLAIMS**
 

.

 

Name: Jim W. Lee

Address:

Weeks of Severance: 52 weeks

Equipment:

Cell Phone: Returned

Pager: Returned

Laptop: N/A

Camera: N/A

Co. Credit Card: Returned

Keys: Returned

Discount Card: Returned

 **