Clark Severance Agreement, Exhibit 10.2



Exhibit 10.2


 


SEVERANCE AGREEMENT


 


 


THIS AGREEMENT, dated June 2, 2003, is made by and between Wild Oats Markets, Inc., a
Delaware corporation (the "Company"), and David Clark (the
"Executive").


WHEREAS, the Company considers it essential to the best interests of its stockholders
to foster the continued employment of key management personnel; and


WHEREAS, the Board recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control exists and that such possibility, and
the uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company and its
stockholders; and


WHEREAS, the Board has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the Company's
management, including the Executive, to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a Change in
Control;


NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as follows: 


1.  Defined Terms. The definitions of
capitalized terms used in this Agreement are provided in the last Section hereof.



2.  Term of Agreement. The Term of this Agreement shall commence on the
date hereof and shall continue in effect through December 31, 2004; provided, however,
that commencing on January 1, 2003 and each January 1 thereafter, the Term shall
automatically be extended for one additional year unless, not later than September 30 of
the preceding year, the Company or the Executive shall have given notice not to extend the
Term; and further provided, however, that if a Change in Control
shall have occurred during the Term, the Term shall expire no earlier than twenty-four
(24) months beyond the month in which such Change in Control occurred.



3.  Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under the conditions described herein, to
pay the Executive the Severance Benefits and the other payments and benefits described
herein. Except as provided in Section 10.1 hereof, no Severance Benefits shall be payable
under this Agreement unless there shall have been (or, under the terms of the second
sentence of Section 6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and during the Term.
This Agreement shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and the
Company, the Executive shall not have any right to be retained in the employ of the
Company.



4.  The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change in Control
during the Term, the Executive will remain in the employ of the Company until the earliest
of (i) a date which is six (6) months from the date of such Potential Change in Control,
(ii) the date of a Change in Control, (iii) the date of termination by the Executive of
the Executive's employment for Good Reason or by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the Executive's employment for any
reason.



5.  Compensation Other Than Severance Benefits.



  5.1  Following a Change in Control and during the Term, during any period that the
  Executive fails to perform the Executive's full-time duties with the Company as a result
  of incapacity due to physical or mental illness, the Company shall pay the Executive's
  full salary to the Executive at the rate in effect at the commencement of any such period,
  together with all compensation and benefits payable to the Executive under the terms of
  any compensation or benefit plan, program or arrangement maintained by the Company during
  such period (other than any disability plan), until the Executive's employment is
  terminated by the Company for Disability.





  5.2  If the Executive's employment shall be terminated for any reason following a
  Change in Control and during the Term, the Company shall pay the Executive's full salary
  to the Executive through the Date of Termination at the rate in effect immediately prior
  to the Date of Termination or, if higher, the rate in effect immediately prior to the
  first occurrence of an event or circumstance constituting Good Reason, together with all
  compensation and benefits payable to the Executive through the Date of Termination under
  the terms of the Company's compensation and benefit plans, programs or arrangements as in
  effect immediately prior to the Date of Termination or, if more favorable to the
  Executive, as in effect immediately prior to the first occurrence of an event or
  circumstance constituting Good Reason.





  5.3  If the Executive's employment shall be terminated for any reason following a
  Change in Control and during the Term, the Company shall pay to the Executive the
  Executive's normal post-termination compensation and benefits as such payments become due.
  Such post-termination compensation and benefits shall be determined under, and paid in
  accordance with, the Company's retirement, insurance and other compensation or benefit
  plans, programs and arrangements as in effect immediately prior to the Date of Termination
  or, if more favorable to the Executive, as in effect immediately prior to the occurrence
  of the first event or circumstance constituting Good Reason.





6.  Severance Benefits.



  6.1  Subject to Section 9 below, if the Executive's employment is terminated
  following a Change in Control and during the Term, other than (A) by the Company for
  Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason,
  then the Company shall pay the Executive the amounts, and provide the Executive the
  benefits, described in this Section 6.1 ("Severance Benefits") and the payment
  referred to in Section 6.2, in addition to any payments and benefits to which the
  Executive is entitled under Section 5 hereof. For purposes of this Agreement, the
  Executive's employment shall be deemed to have been terminated following a Change in
  Control by the Company without Cause or by the Executive with Good Reason, if (i) the
  Executive's employment is terminated by the Company without Cause prior to a Change in
  Control (whether or not a Change in Control ever occurs) and such termination was at the
  request or direction of a Person who has entered into an agreement with the Company the
  consummation of which would constitute a Change in Control, (ii) the Executive terminates
  his employment for Good Reason prior to a Change in Control (whether or not a Change in
  Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at
  the request or direction of such Person, or (iii) the Executive's employment is terminated
  by the Company without Cause or by the Executive for Good Reason and such termination or
  the circumstance or event which constitutes Good Reason is otherwise in connection with or
  in anticipation of a Change in Control (whether or not a Change in Control ever occurs).
  For purposes of any determination regarding the applicability of the immediately preceding
  sentence, any position taken by the Executive shall be presumed to be correct unless the
  Company establishes to the Committee by clear and convincing evidence that such position
  is not correct. The Executive shall not be entitled to receive any Severance Benefits
  under this Agreement under any circumstances other than those set forth in this paragraph.





  
    (A)  In lieu of any further salary payments to the Executive for periods
    subsequent to the Date of Termination and in lieu of any severance benefit otherwise
    payable to the Executive, the Company shall pay to the Executive a lump sum severance
    payment, in cash, equal to two times the sum of (i) the Executive's base salary as in
    effect immediately prior to the Date of Termination or, if higher, in effect immediately
    prior to the first occurrence of an event or circumstance constituting Good Reason, and
    (ii) the average annual bonus earned by the Executive pursuant to any discretionary annual
    bonus or incentive plan maintained by the Company in respect of the two fiscal years
    ending immediately prior to the fiscal year in which occurs the Date of Termination or, if
    the Executive has not been eligible for at least two annual bonuses as of the Date of
    Termination, the bonus earned by the Executive in respect of the fiscal year immediately
    prior to the fiscal year in which occurs the Date of Termination.

  





  
    (B)  For the twenty-four (24) month period immediately following the Date of
    Termination, the Company shall arrange to provide the Executive and his dependents life,
    disability, accident and health insurance benefits substantially similar to those provided
    to the Executive and his dependents immediately prior to the Date of Termination or, if
    more favorable to the Executive, those provided to the Executive and his dependents
    immediately prior to the first occurrence of an event or circumstance constituting Good
    Reason, at no greater cost to the Executive than the cost to the Executive immediately
    prior to such date or occurrence; provided, however, that, unless the
    Executive consents to a different method (after taking into account the effect of such
    method on the calculation of "parachute payments" pursuant to Section 6.2
    hereof), such health insurance benefits shall be provided through a third-party insurer.
    Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be
    reduced to the extent benefits of the same type are received by or made available to the
    Executive during the twenty-four (24) month period following the Executive's termination
    of employment (and any such benefits received by or made available to the Executive shall
    be reported to the Company by the Executive); provided, however, that the
    Company shall reimburse the Executive for the excess, if any, of the cost of such benefits
    to the Executive over such cost immediately prior to the Date of Termination or, if more
    favorable to the Executive, the first occurrence of an event or circumstance constituting
    Good Reason. 

  





  
    (C)  Notwithstanding any provision of any annual or long-term incentive plan to
    the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to
    the sum of (i) any unpaid incentive compensation which has been allocated or awarded to
    the Executive for a completed fiscal year or other measuring period preceding the Date of
    Termination under any such plan and which, as of the Date of Termination, is contingent
    only upon the continued employment of the Executive to a subsequent date, and (ii) a pro
    rata portion to the Date of Termination of the aggregate value of all contingent incentive
    compensation awards to the Executive for all then uncompleted periods under any such plan,
    calculated as to each such award by multiplying the award that the Executive would have
    earned on the last day of the performance award period, assuming the achievement, at the
    target level of the individual and corporate performance goals established with respect to
    such award, if the Company's incentive compensation plan has such a concept, or, if not,
    at a level commensurate with the Executive's position at the Company and the incentive
    compensation awards paid to similarly situated executives of the Company, by the fraction
    obtained by dividing the number of full months and any fractional portion of a month
    during such performance award period through the Date of Termination by the total number
    of months contained in such performance award period. 

  





  
    (D)  In addition to the benefits to which the Executive is entitled under each DC
    Pension Plan, the Company shall pay the Executive a lump sum amount, in cash, equal to the
    sum of (i) the amount that would have been contributed thereto by the Company on the
    Executive's behalf during the two years immediately following the Date of Termination,
    determined (x) as if the Executive made the maximum permissible contributions thereto
    during such period, (y) as if the Executive earned compensation during such period at a
    rate equal to the Executive's compensation (as defined in the DC Pension Plan) during the
    twelve (12) months immediately preceding the Date of Termination or, if higher, during the
    twelve months immediately prior to the first occurrence of an event or circumstance
    constituting Good Reason, and (z) without regard to any amendment to the DC Pension Plan
    made subsequent to a Change in Control and on or prior to the Date of Termination, which
    amendment adversely affects in any manner the computation of benefits thereunder, and (ii)
    the excess, if any, of (x) the Executive's account balance under the DC Pension Plan as of
    the Date of Termination over (y) the portion of such account balance that is
    nonforfeitable under the terms of the DC Pension Plan.

  





  
    (E)  Each option to acquire common stock of the Company granted under a Company
    incentive plan or other arrangement that is held by the Executive on the Date of
    Termination shall, as of such date, vest and become immediately exercisable in full.

  





  6.2  (A)  Subject to Section 9 below, whether or not the Executive becomes
  entitled to the Severance Benefits, if any of the payments or benefits received or to be
  received by the Executive in connection with a Change in Control or the Executive's
  termination of employment (whether pursuant to the terms of this Agreement or any other
  plan, arrangement or agreement with the Company, any Person whose actions result in a
  Change in Control or any Person affiliated with the Company or such Person) (all such
  payments and benefits, excluding the Gross-Up Payment, being hereinafter referred to as
  the "Total Payments") will be subject to the Excise Tax, the Company shall pay
  to the Executive an additional amount (the "Gross-Up Payment") such that the net
  amount retained by the Executive, after deduction of any Excise Tax on the Total Payments
  and any federal, state and local income and employment taxes and Excise Tax upon the
  Gross-Up Payment, and after taking into account the phase out of itemized deductions and
  personal exemptions attributable to the Gross-Up Payment, shall be equal to the Total
  Payments.





  
    (B)  For purposes of determining whether any of the Total Payments will be subject
    to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall
    be treated as "parachute payments" (within the meaning of section 280G(b)(2) of
    the Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
    acceptable to the Executive and selected by the accounting firm which was, immediately
    prior to the Change in Control, the Company's independent auditor (the
    "Auditor"), such payments or benefits (in whole or in part) do not constitute
    parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all
    "excess parachute payments" within the meaning of section 280G(b)(l) of the Code
    shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such
    excess parachute payments (in whole or in part) represent reasonable compensation for
    services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
    excess of the Base Amount allocable to such reasonable compensation, or are otherwise not
    subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
    payment or benefit shall be determined by the Auditor in accordance with the principles of
    sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
    Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest
    marginal rate of federal income taxation in the calendar year in which the Gross-Up
    Payment is to be made and state and local income taxes at the highest marginal rate of
    taxation in the state and locality of the Executive's residence on the Date of Termination
    (or if there is no Date of Termination, then the date on which the Gross-Up Payment is
    calculated for purposes of this Section 6.2), net of the maximum reduction in federal
    income taxes which could be obtained from deduction of such state and local taxes.

  





  
    (C)  In the event that the Excise Tax is finally determined to be less than the
    amount taken into account hereunder in calculating the Gross-Up Payment, the Executive
    shall repay to the Company, within five (5) business days following the time that the
    amount of such reduction in the Excise Tax is finally determined, the portion of the
    Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment
    attributable to the Excise Tax and federal, state and local income and employment taxes
    imposed on the Gross-Up Payment being repaid by the Executive), to the extent that such
    repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in
    the Executive's taxable income and wages for purposes of federal, state and local income
    and employment taxes. In the event that the Excise Tax is determined to exceed the amount
    taken into account hereunder in calculating the Gross-Up Payment (including by reason of
    any payment the existence or amount of which cannot be determined at the time of the
    Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of
    such excess (plus any interest, penalties or additions payable by the Executive with
    respect to such excess) within five (5) business days following the time that the amount
    of such excess is finally determined. The Executive and the Company shall each reasonably
    cooperate with the other in connection with any administrative or judicial proceedings
    concerning the existence or amount of liability for Excise Tax with respect to the Total
    Payments.

  





  6.3  The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof
  and in Section 6.2 hereof shall be made not later than the fifth day following the Date of
  Termination (or if there is no Date of Termination, then the date on which the Gross-Up
  Payment is calculated for purposes of Section 6.2 hereof); provided, however,
  that if the amounts of such payments cannot be finally determined on or before such day,
  the Company shall pay to the Executive on such day an estimate, as determined in good
  faith by the Executive or, in the case of payments under Section 6.2 hereof, in accordance
  with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is
  clearly entitled and shall pay the remainder of such payments (together with interest on
  the unpaid remainder (or on all such payments to the extent the Company fails to make such
  payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as
  soon as the amount thereof can be determined but in no event later than the thirtieth
  (30th) day after the Date of Termination. In the event that the amount of the estimated
  payments exceeds the amount subsequently determined to have been due, such amount shall be
  repaid by the Executive to the Company no later than the fifth (5th) business day after
  demand by the Company. At the time that payments are made under this Agreement, the
  Company shall provide the Executive with a written statement setting forth the manner in
  which such payments were calculated and the basis for such calculations including, without
  limitation, any opinions or other advice the Company has received from Tax Counsel, the
  Auditor or other advisors or consultants (and any such opinions or advice which are in
  writing shall be attached to the statement).





  6.4  The Company also shall pay to the Executive fifty percent (50%) all legal
  fees and expenses incurred by the Executive in disputing in good faith any issue hereunder
  relating to the termination of the Executive's employment, in seeking in good faith to
  obtain or enforce any benefit or right provided by this Agreement or in connection with
  any tax audit or proceeding to the extent attributable to the application of section 4999
  of the Code to any payment or benefit provided hereunder. Such payments shall be made
  within five (5) business days after delivery of the Executive's written requests for
  payment accompanied with such evidence of fees and expenses incurred as the Company
  reasonably may require. Within five (5) business days following the final resolution and
  any such dispute, attempted enforcement or tax proceeding, either (i) the Company shall
  pay to the Executive the remaining fifty percent (50%) of such fees and expenses not
  previously paid to the Executive, if the Executive prevails on at least one material issue
  in such dispute, attempted enforcement or tax proceeding or (ii) the Executive shall repay
  to the Company the fifty percent (50%) of such fees and expenses previously paid to the
  Executive, if the Executive does not prevail on at least one material issue in such
  dispute, attempted enforcement or tax proceeding.





7.  Termination Procedures and Compensation During Dispute.



  7.1  Notice of Termination. After a Change in Control and during the
  Term, any purported termination of the Executive's employment (other than by reason of
  death) shall be communicated by written Notice of Termination from one party hereto to the
  other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a
  "Notice of Termination" shall mean a notice which shall indicate the specific
  termination provision in this Agreement relied upon and shall set forth in reasonable
  detail the facts and circumstances claimed to provide a basis for termination of the
  Executive's employment under the provision so indicated. Further, a Notice of Termination
  for Cause is required to include a copy of a resolution duly adopted by the affirmative
  vote of not less than three-quarters (3/4) of the entire membership of the Board at a
  meeting of the Board which was called and held for the purpose of considering such
  termination (after reasonable notice to the Executive and an opportunity for the
  Executive, together with the Executive's counsel, to be heard before the Board) finding
  that, in the good faith opinion of the Board, the Executive was guilty of conduct set
  forth in clause (i) or (ii) of the definition of Cause herein, and specifying the
  particulars thereof in detail.





  7.2  Date of Termination. "Date of Termination," with
  respect to any purported termination of the Executive's employment after a Change in
  Control and during the Term, shall mean (i) if the Executive's employment is terminated
  for Disability, thirty (30) days after Notice of Termination is given (provided that the
  Executive shall not have returned to the full-time performance of the Executive's duties
  during such thirty (30) day period), and (ii) if the Executive's employment is terminated
  for any other reason, the date specified in the Notice of Termination (which, in the case
  of a termination by the Company, shall not be less than thirty (30) days (except in the
  case of a termination for Cause) and, in the case of a termination by the Executive, shall
  not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the
  date such Notice of Termination is given).





  7.3  Dispute Concerning Termination. If within fifteen (15) days
  after any Notice of Termination is given, or, if later, prior to the Date of Termination
  (as determined without regard to this Section 7.3), the party receiving such Notice of
  Termination notifies the other party that a dispute exists concerning the termination, the
  Date of Termination shall be extended until the earlier of (i) the date on which the Term
  ends or (ii) the date on which the dispute is finally resolved, either by mutual written
  agreement of the parties or by a final judgment, order or decree of an arbitrator or a
  court of competent jurisdiction (which is not appealable or with respect to which the time
  for appeal therefrom has expired and no appeal has been perfected); provided, however,
  that the Date of Termination shall be extended by a notice of dispute given by the
  Executive only if such notice is given in good faith and the Executive pursues the
  resolution of such dispute with reasonable diligence.





  7.4  Compensation During Dispute. If a purported termination occurs
  following a Change in Control and during the Term and the Date of Termination is extended
  in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the
  full compensation in effect when the notice giving rise to the dispute was given
  (including, but not limited to, salary) and continue the Executive as a participant in all
  compensation, benefit and insurance plans in which the Executive was participating when
  the notice giving rise to the dispute was given, until the Date of Termination, as
  determined in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are
  in addition to all other amounts due under this Agreement (other than those due under
  Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under
  this Agreement.





8.  No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not required to
seek other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof. Further,
except as specifically provided in Section 6.1(B) hereof, the amount of any payment or
benefit provided for in this Agreement shall not be reduced by any compensation earned by
the Executive as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to the Company, or
otherwise.



9.  Restrictive Covenants



The Executive agrees that restrictions on his activities during and after his
employment are necessary to protect the goodwill, Confidential Information and other
legitimate interests of the Company and its Subsidiaries, and that the agreed restrictions
set forth below will not deprive the Executive of the ability to earn a livelihood:



  
    (A)  While the Executive is in the employment of the Company and, if the Executive
    is entitled to benefits under Section 6.1 hereof upon termination of employment, for a
    period of twenty-four (24) months after such termination of employment (the
    "Non-Competition Period"), the Executive shall not, directly or indirectly,
    whether as owner, partner, investor, consultant, agent, employee, co-venturer or
    otherwise, compete with the business of the Company or any of its Subsidiaries within a
    twenty (20) mile radius of any location where the Company operates a retail store at the
    date of termination of employment, or at which the Company has entered into a letter of
    intent or similar commitment for or entered into obligations relating to the opening of a
    retail store to be opened within the period of this covenant. Specifically, but without
    limiting the foregoing, the Executive agrees not to engage in any manner in any activity
    that is directly or indirectly competitive with the business of the Company or any of its
    Subsidiaries as conducted or which has been proposed by management within six months prior
    to termination of the Executive's employment. Restricted activity also includes without
    limitation accepting employment or a consulting position with any person who is, or at any
    time within twelve (12) months prior to termination of the Executive's employment has
    been, a licensee of the Company or any of its Subsidiaries. For the purposes of this
    Section 9, the business of the Company and its Subsidiaries shall mean retail operations
    for the sale of natural and organic foods, including groceries, meat, seafood, dairy and
    frozen products and produce, as well as natural vitamins, supplements, homeopathic
    remedies and body care products. 

  





  
    (B)  The Executive agrees that during the Non-Competition Period or in connection
    with any termination of employment pursuant to which the Executive is entitled to benefits
    under Section 6.1, the Executive will not, either directly or through any agent or
    employee, Solicit any employee of the Company or any of its Subsidiaries to terminate his
    or her relationship with the Company or any of its Subsidiaries or to apply for or accept
    employment with any enterprise competitive with the business of the Company, or Solicit
    any customer, supplier, licensee or vendor of the Company or any of its Subsidiaries to
    terminate or materially modify its relationship with them, or, in the case of a customer,
    to conduct with any person any business or activity which such customer conducts or could
    conduct with the Company or any of its Subsidiaries. 

  





  
    (C)  The Executive and the Company further agree that following any termination of
    the Executive's employment pursuant to which the Executive is entitled to benefits under
    Section 6.1, (i) the Executive shall not make statements or representations, otherwise
    communicate, directly or indirectly, in writing, orally, or otherwise, or take any action
    which may, directly, or indirectly, disparage or be damaging to the Company or any if its
    Subsidiaries or affiliates or their respective former or current officers, directors,
    employees, advisors, businesses or reputations, (ii) the Company shall instruct its Board
    members and senior management to not make statements or representations, otherwise
    communicate, directly, or indirectly, in writing, orally or otherwise, or take any action
    which may, directly, or indirectly, disparage or be damaging to the Executive or his
    reputation. The Executive and the Company further agree that, in the event the Executive's
    employment with the Company is terminated other than by the Company for Cause or as a
    result of the Executive's death, the Executive and the Company shall refer to the
    Executive's departure as a "resignation" in any press release or other external
    announcement or communication concerning the Executive's departure from the Company.
    Nothing in this paragraph is intended to undermine any obligations the Executive or the
    Company may have to comply with applicable law, or prohibit the Executive or the Company
    from providing truthful testimony or information pursuant to subpoena, court order,
    discovery demand or similar legal process, or truthfully responding to lawful inquiries by
    any governmental or regulatory entity.

  





  
    (D)  The provisions of this Section 9 shall not be deemed to preclude the
    Executive from employment or engagement during the Non-Competition Period following
    termination of employment hereunder (i) in a business engaged in retail sales, provided
    such employment or engagement does not otherwise violate the provisions of this Section 9,
    or (ii) by a corporation, some of the activities of which are competitive with the
    business of the Company, if the Executive's activities do not relate to such competitive
    business, and nothing contained in this Section 9 shall be deemed to prohibit the
    Executive, during the Non-Competition Period following termination of employment
    hereunder, from acquiring or holding, solely as an investment, publicly traded securities
    of any competitor corporation so long as such securities do not, in the aggregate,
    constitute more than 3% of the outstanding voting securities of such corporation.

  





  
    (E)  The Executive acknowledges that the Company and its Subsidiaries continually
    develop Confidential Information, that the Executive may develop Confidential Information
    for the Company or its Subsidiaries and that the Executive may learn of Confidential
    Information during the course of his employment under this Agreement. The Executive will
    comply with the policies and procedures of the Company and its Subsidiaries for protecting
    Confidential Information and shall never disclose to any person (except as required by
    applicable law or legal process or for the proper performance of his duties and
    responsibilities to the Company and its Subsidiaries, or in connection with any litigation
    between the Company and the Executive (provided that the Company shall be afforded a
    reasonable opportunity in each case to obtain a protective order)), or use for his own
    benefit or gain, any Confidential Information obtained by the Executive incident to his
    employment or other association with the Company or any of its Subsidiaries. The Executive
    understands that this restriction shall continue to apply after his employment terminates,
    regardless of the reason for such termination. All documents, records, tapes and other
    media of every kind and description relating to the business, present or otherwise, of the
    Company or its Subsidiaries and any copies, in whole or in part, thereof (the
    "Documents"), whether or not prepared by the Executive, shall be the sole and
    exclusive property of the Company and its Subsidiaries. The Executive shall safeguard all
    Documents and shall surrender to the Company at the time his employment terminates, or at
    such earlier time or times as the Board or its designee may specify, all Documents then in
    the Executive's possession or control.

  





  
    (F)  Without limiting the foregoing, it is understood that the Company shall not
    be obligated to make any of the payments or to provide for any of the benefits specified
    in Sections 6.1 and 6.2 hereof, and shall be entitled to recoup the pro rata portion of
    any such payments and of the value of any such benefits previously provided to the
    Executive in the event of a material breach by the Executive of the provisions of this
    Section 9 (such pro ration to be determined as a fraction, the numerator of which is the
    number of days from such breach to the second anniversary of the date on which the
    Executive terminates employment and the denominator of which is 730), which breach
    continues without having been cured within 15 days after written notice to the Executive
    specifying the breach in reasonable detail. 

  





  
    (G)  The Executive and the Company agree that in the event the Executive seeks a
    reference from the Company in connection with any future or prospective employment, the
    Company's response to any such reference inquiry shall be limited to and consistent with
    the following: start and end dates of employment, position(s) held and last salary.

  





  
    For purposes of this Section 9, the following definitions shall apply:

  





  
    
      (I)  "Confidential Information" means any and all information of the
      Company and its Subsidiaries that is not generally known by others with whom they compete
      or do business, or with whom they plan to compete or do business and any and all
      information not readily available to the public, which, if disclosed by the Company or its
      Subsidiaries could reasonably be of benefit to such person or business in competing with
      or doing business with the Company. Confidential Information includes without limitation
      such information relating to (1) the development, research, testing, manufacturing, store
      operational processes, marketing and financial activities, including costs, profits and
      sales, of the Company and its Subsidiaries, (2) the Products and all formulas therefor,
      (3) the costs, sources of supply, financial performance and strategic plans of the Company
      and its Subsidiaries, (4) the identity and special needs of the customers and suppliers of
      the Company and its Subsidiaries and (5) the people and organizations with whom the
      Company and its Subsidiaries have business relationships and those relationships.
      Confidential Information also includes comparable information that the Company or any of
      its Subsidiaries have received belonging to others or which was received by the Company or
      any of its Subsidiaries with an agreement by the Company that it would not be disclosed.
      Confidential Information does not include information which (i) is or becomes available to
      the public generally (other than as a result of a disclosure by the Executive), (ii) was
      within the Executive's possession prior to the date hereof or prior to its being furnished
      to the Executive by or on behalf of the Company, provided that the source of such
      information was not bound by a confidentiality agreement with or other contractual, legal
      or fiduciary obligation of confidentiality to the Company or any other party with respect
      to such information, (iii) becomes available to the Executive on a non-confidential basis
      from a source other than the Company, provided that such source is not bound by a
      confidentiality agreement with or other contractual, legal or fiduciary obligation of
      confidentiality to the Company or any other party with respect to such information, or
      (iv) was independently developed the Executive without reference to the Confidential
      Information.

    

  





  
    
      (II)  "Products" mean all products planned, researched, developed,
      tested, manufactured, sold, licensed, leased or otherwise distributed or put into use by
      the Company or any of its Subsidiaries, together with all services provided to third
      parties or planned by the Company or any of its Subsidiaries, during the Executive's
      service; as used herein, "planned" refers to a Product or service which the
      Company has decided to introduce within six months from the date as of which such term is
      applied.

    

  





  
    
      (III)  "Subsidiary" means any corporation or other business organization
      of which the securities having a majority of the normal voting power in electing the board
      of directors or similar governing body of such entity are, at the time of determination,
      owned by the Company directly or indirectly through one or more Subsidiaries.

    

  





  
    
      (IV)  "Solicit" means any direct or indirect communication of any kind
      whatsoever, regardless of by whom initiated, inviting, advising, encouraging or requesting
      any person or entity, in any manner, with respect to any action.

    

  





10.  Successors; Binding Agreement.



  10.1  In addition to any obligations imposed by law upon any successor to the
  Company, the Company will require any 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 to expressly assume and agree to perform this Agreement in the same
  manner and to the same extent that the Company would be required to perform it if no such
  succession had taken place. Failure of the Company to obtain such assumption and agreement
  prior to the effectiveness of any such succession shall be a breach of this Agreement and
  shall entitle the Executive to compensation from the Company in the same amount and on the
  same terms as the Executive would be entitled to hereunder if the Executive were to
  terminate the Executive's employment for Good Reason after a Change in Control, except
  that, for purposes of implementing the foregoing, the date on which any such succession
  becomes effective shall be deemed the Date of Termination.





  10.2  This Agreement shall inure to the benefit of and be enforceable by the
  Executive's personal or legal representatives, executors, administrators, successors,
  heirs, distributees, devisees and legatees. If the Executive shall die while any amount
  would still be payable to the Executive hereunder (other than amounts which, by their
  terms, terminate upon the death of the Executive) if the Executive had continued to live,
  all such amounts, unless otherwise provided herein, shall be paid in accordance with the
  terms of this Agreement to the executors, personal representatives or administrators of
  the Executive's estate.





11.  Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be deemed to
have been duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed, if to the Executive, to the address
inserted below the Executive's signature on the final page hereof and, if to the Company,
to the address set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:




    
      
To the Company:

        Wild Oats Markets, Inc

        3375 Mitchell Lane

        Boulder, CO 80301

        Attention: Chief Executive Officer

        With a copy to: General Counsel

      
    

  




12.  Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the other party
hereto of, or of any lack of compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. This Agreement
supersedes any other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by either party. The
validity, interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Colorado. All references to sections of the Exchange Act or
the Code shall be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the Executive
has agreed. The obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the expiration of the
Term (including, without limitation, those under Sections 6, 7 and 9 hereof) shall survive
such expiration.



13.  Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.



14.  Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which together
will constitute one and the same instrument.



15.  Settlement of Disputes; Arbitration. 15.1 All claims by the
Executive for benefits under this Agreement shall be directed to and determined by the
Committee and shall be in writing. Any denial by the Committee of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall set forth
the specific reasons for the denial and the specific provisions of this Agreement relied
upon. The Committee shall afford a reasonable opportunity to the Executive for a review of
the decision denying a claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.



  15.2 Any further dispute or controversy arising under or in connection with this
  Agreement may, at the Executive's option, be settled by arbitration in Boulder, Colorado
  in accordance with the rules of the American Arbitration Association then in effect; provided,
  however, that the evidentiary standards set forth in this Agreement shall apply. If
  the Executive chooses to settle any dispute or controversy by arbitration, judgment may be
  entered on the arbitrator's award in any court having jurisdiction. Notwithstanding any
  provision of this Agreement to the contrary, the Executive shall be entitled to seek
  specific performance of the Executive's right to be paid until the Date of Termination
  during the pendency of any dispute or controversy arising under or in connection with this
  Agreement.





  15.3 The Executive acknowledges that he has carefully read and considered all the terms
  and conditions of this Agreement, including the restraints imposed upon him pursuant to
  Section 9 hereof. The Executive agrees that said restraints are necessary for the
  reasonable and proper protection of the Company and its Subsidiaries and that each and
  every one of the restraints is reasonable in respect to subject matter, length of time and
  geographic area. The Executive further acknowledges that, were he to breach any of the
  covenants contained in Section 9 hereof, the damage to the Company would be irreparable.
  The Executive therefore agrees that the Company, in addition to any other remedies
  available to it, and notwithstanding any provision of this Agreement to the contrary,
  shall be entitled to seek preliminary and permanent injunctive relief against any breach
  or threatened breach by the Executive of any of said covenants, without having to post
  bond. The parties further agree that, in the event that any provisions of Section 9 hereof
  shall be determined by any court of competent jurisdiction to be unenforceable by reason
  of its being extended over too great a time, too large a geographic area or too great a
  range of activities, such provision shall be deemed to be modified to permit its
  enforcement to the maximum extent permitted by law.





16.  Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:



  (A)  "Affiliate" shall have the meaning set forth in Rule 12b-2
  promulgated under Section 12 of the Exchange Act.





  (B)  "Auditor" shall have the meaning set forth in Section 6.2 hereof.





  (C)  "Base Amount" shall have the meaning set forth in section
  280G(b)(3) of the Code.





  (D)  "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
  under the Exchange Act.





  (E)  "Board" shall mean the Board of Directors of the Company.





  (F)  "Cause" for termination by the Company of the Executive's
  employment shall mean (i) the willful and continued failure by the Executive to
  substantially perform the Executive's duties with the Company (other than any such failure
  resulting from the Executive's incapacity due to physical or mental illness or any such
  actual or anticipated failure after the issuance of a Notice of Termination for Good
  Reason by the Executive pursuant to Section 7.1 hereof) that has not been cured within 30
  days after a written demand for substantial performance is delivered to the Executive by
  the Board, which demand specifically identifies the manner in which the Board believes
  that the Executive has not substantially performed the Executive's duties, or (ii) the
  willful engaging by the Executive in conduct which is demonstrably and materially
  injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of
  clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the Executive's
  part shall be deemed "willful" unless done, or omitted to be done, by the
  Executive not in good faith and without reasonable belief that the Executive's act, or
  failure to act, was in the best interest of the Company and (y) in the event of a dispute
  concerning the application of this provision, no claim by the Company that Cause exists
  shall be given effect unless the Company establishes to the Committee by clear and
  convincing evidence that Cause exists.





  (G)  A "Change in Control" shall be deemed to have occurred if the event
  set forth in any one of the following paragraphs shall have occurred:





  
    (I)  any Person is or becomes the Beneficial Owner, directly or indirectly, of
    securities of the Company (not including in the securities beneficially owned by such
    Person any securities acquired directly from the Company or its Affiliates) representing
    31% or more of the combined voting power of the Company's then outstanding securities,
    excluding any Person who becomes such a Beneficial Owner in connection with a Non-Control
    Merger (as defined in paragraph (III) below); or 

  





  
    (II)  the following individuals cease for any reason to constitute a majority of
    the number of directors then serving: individuals who, on the date hereof, constitute the
    Board and any new director (other than a director whose initial assumption of office is in
    connection with an actual or threatened election contest, including but not limited to a
    consent solicitation, relating to the election of directors of the Company) whose
    appointment or election by the Board or nomination for election by the Company's
    stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the
    directors then still in office who either were directors on the date hereof or whose
    appointment, election or nomination for election was previously so approved or
    recommended; or;

  





  
    (III)  there is consummated a merger or consolidation of the Company or any direct
    or indirect subsidiary of the Company with any other corporation, other than a merger or
    consolidation (a "Non-Control Merger") immediately following which the
    individuals who comprise the Board immediately prior thereto constitute at least a
    majority of the board of directors of the Company, the entity surviving such merger or
    consolidation or any parent thereof; or

  





  
    (IV)  the stockholders of the Company approve a plan of complete liquidation or
    dissolution of the Company or there is consummated an agreement for the sale or
    disposition by the Company of all or substantially all of the Company's assets, other than
    a sale or disposition by the Company of all or substantially all of the Company's assets
    immediately following which the individuals who comprise the Board immediately prior
    thereto constitute at least a majority of the board of directors of the entity to which
    such assets are sold or disposed or any parent thereof.

  





  Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
  have occurred by virtue of the consummation of any transaction or series of integrated
  transactions immediately following which the record holders of the common stock of the
  Company immediately prior to such transaction or series of transactions continue to have
  substantially the same proportionate ownership in an entity which owns all or
  substantially all of the assets of the Company immediately following such transaction or
  series of transactions.






    
      



 

            
          
        
      
    

  




  (H)  "Code" shall mean the Internal Revenue Code of 1986, as amended
  from time to time.





  (I)  "Committee" shall mean (i) the individuals (not fewer than three in
  number) who, on the date six months before a Change in Control, constitute the
  Compensation Committee of the Board, plus (ii) in the event that fewer than three
  individuals are available from the group specified in clause (i) above for any reason,
  such individuals as may be appointed by the individual or individuals so available
  (including for this purpose any individual or individuals previously so appointed under
  this clause (ii)).





  (J)  "Company" shall mean Wild Oats Markets, Inc., a Delaware
  corporation and, except in determining under Section 15(G) hereof whether or not any
  Change in Control of the Company has occurred, shall include any successor to its business
  and/or assets which assumes and agrees to perform this Agreement by operation of law, or
  otherwise.





  (K)  "DC Pension Plan" shall mean any tax-qualified, supplemental or
  excess defined contribution plan maintained by the Company and any other defined
  contribution plan or agreement entered into between the Executive and the Company.





  (L)  "Date of Termination" shall have the meaning set forth in Section
  7.2 hereof.





  (M)  "Disability" shall be deemed the reason for the termination by the
  Company of the Executive's employment, if, as a result of the Executive's incapacity due
  to physical or mental illness, the Executive shall have been absent from the full-time
  performance of the Executive's duties with the Company for a period of six (6) consecutive
  months, the Company shall have given the Executive a Notice of Termination for Disability,
  and, within thirty (30) days after such Notice of Termination is given, the Executive
  shall not have returned to the full-time performance of the Executive's duties.





  (N)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
  amended from time to time.





  (O)  "Excise Tax" shall mean any excise tax imposed under section 4999
  of the Code.





  (P)  "Executive" shall mean the individual named in the first paragraph
  of this Agreement.





  (Q)  "Good Reason" for termination by the Executive of the Executive's
  employment shall mean the occurrence (without the Executive's express written consent)
  after any Change in Control, or prior to a Change in Control under the circumstances
  described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating
  all references in paragraphs (I) through (VII) below to a "Change in Control" as
  references to a "Potential Change in Control"), of any one of the following acts
  by the Company, or failures by the Company to act, unless, (x) in the case of any act or
  failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
  to act is corrected prior to the Date of Termination specified in the Notice of
  Termination given in respect thereof or (y) in the case of first act or failure to act
  following a Change in Control and described in paragraph (IV) below, such act or failure
  to act is corrected prior to the Date of Termination specified in the Notice of
  Termination given in respect thereof:





  
    (I)  the assignment to the Executive of any duties materially and adversely
    inconsistent with the Executive's status as a senior executive officer of the Company or a
    substantial adverse alteration in the nature or status of the Executive's responsibilities
    from those in effect immediately prior to the Change in Control;

  





  
    (II)  a reduction by the Company in the Executive's annual base salary as in
    effect on the date hereof or as the same may be increased from time to time;

  





  
    (III)  the relocation of the Executive's principal place of employment to a
    location more than 25 miles from the Executive's principal place of employment immediately
    prior to the Change in Control or the Company's requiring the Executive to be based
    anywhere other than such principal place of employment (or permitted relocation thereof)
    except for required travel on the Company's business to an extent substantially consistent
    with the Executive's present business travel obligations;

  





  
    (IV)  the failure by the Company to pay to the Executive any portion of the
    Executive's current compensation or to pay to the Executive any portion of an installment
    of deferred compensation under any deferred compensation program of the Company, within
    seven (7) days of the date such compensation is due;

  





  
    (V)  the failure by the Company to continue in effect any compensation plan in
    which the Executive participates immediately prior to the Change in Control which is
    material to the Executive's total compensation, unless an equitable arrangement (embodied
    in an ongoing substitute or alternative plan) has been made with respect to such plan, or
    the failure by the Company to continue the Executive's participation therein (or in such
    substitute or alternative plan) on a basis not materially less favorable, both in terms of
    the amount or timing of payment of benefits provided and the level of the Executive's
    participation relative to other participants, as existed immediately prior to the Change
    in Control;

  





  
    (VI)  the failure by the Company to continue to provide the Executive with
    benefits substantially similar to those enjoyed by the Executive under any of the
    Company's pension, savings, life insurance, medical, health and accident, or disability
    plans in which the Executive was participating immediately prior to the Change in Control,
    the taking of any other action by the Company which would directly or indirectly
    materially reduce any of such benefits or deprive the Executive of any material fringe
    benefit enjoyed by the Executive at the time of the Change in Control, or the failure by
    the Company to provide the Executive with the number of paid vacation days to which the
    Executive is entitled on the basis of years of service with the Company in accordance with
    the Company's normal vacation policy in effect at the time of the Change in Control; or

  





  
    (VII)  any purported termination of the Executive's employment which is not
    effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1
    hereof; for purposes of this Agreement, no such purported termination shall be effective.

  





  The Executive's right to terminate the Executive's employment for Good Reason shall not
  be affected by the Executive's incapacity due to physical or mental illness. The
  Executive's continued employment shall not constitute consent to, or a waiver of rights
  with respect to, any act or failure to act constituting Good Reason hereunder.





  For purposes of any determination regarding the existence of Good Reason, any claim by
  the Executive that Good Reason exists shall be presumed to be correct unless the Company
  establishes to the Committee by clear and convincing evidence that Good Reason does not
  exist.





  (S)  "Gross-Up Payment" shall have the meaning set forth in Section 6.2
  hereof.





  (T)  "Notice of Termination" shall have the meaning set forth in Section
  7.1 hereof.





  (U)  "Person" shall have the meaning given in Section 3(a)(9) of the
  Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such
  term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other
  fiduciary holding securities under an employee benefit plan of the Company or any of its
  Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of
  such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders
  of the Company in substantially the same proportions as their ownership of stock of the
  Company.





  (V)  "Potential Change in Control" shall be deemed to have occurred if
  the event set forth in any one of the following paragraphs shall have occurred:





  
    (I)  the Company enters into an agreement, the consummation of which would result
    in the occurrence of a Change in Control;

  





  
    (II)  the Company or any Person publicly announces an intention to take or to
    consider taking actions which, if consummated, would constitute a Change in Control;

  





  
    (III)  any Person becomes the Beneficial Owner, directly or indirectly, of
    securities of the Company representing 15% or more of either the then outstanding shares
    of common stock of the Company or the combined voting power of the Company's then
    outstanding securities (not including in the securities beneficially owned by such Person
    any securities acquired directly from the Company or its affiliates); or

  





  
    (IV)  the Board adopts a resolution to the effect that, for purposes of this
    Agreement, a Potential Change in Control has occurred. 

  





  (W)  "Retirement" shall be deemed the reason for the termination by the
  Executive of the Executive's employment if such employment is terminated in accordance
  with the Company's retirement policy, including early retirement, generally applicable to
  its salaried employees.





  (X)  "Severance Benefits" shall have the meaning set forth in Section
  6.1 hereof.





  (Y)  "Tax Counsel" shall have the meaning set forth in Section 6.2
  hereof.





  (Z)  "Term" shall mean the period of time described in Section 2 hereof
  (including any extension, continuation or termination described therein).





  (AA)  "Total Payments" shall mean those payments so described in Section
  6.2 hereof.




IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.


 



  
    
      
        
          
            
              
                
                  
                    
                      
                         

                      

                    

                  

                

              

            

          

        

      

    

    Wild Oats Markets, Inc.

    By: /s/ Freya R. Brier

    Name: Freya R. Brier

    Title: V.P., Legal

     

     

     

    By: /s/ David Clark

    Address: 1916 Cambridge Way

    Edmond, OK 73013