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WILD OATS MARKETS, INC.

2006 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AGREEMENT

 

THIS RESTRICTED STOCK UNIT AGREEMENT (the "Agreement") ismade effective as of _______________, 20__ (the "Effective Date"), between WildOats Markets, Inc., a Delaware corporation (together with its Affiliated Corporationsexcept where the context requires otherwise, the "Company"), and("Grantee").

 

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RECITALS

 

1. On ____________, 20__, the Board of Directors of the Companyauthorized the award of incentives relating to the Company’s common stock to beissued under the Wild Oats Markets, Inc. 2006 Equity Incentive Plan (the "Plan")to specified Employees. 

 

2. The purposes of the incentives are to reward each designatedEmployee for past service rendered to the Company and/or to provide an incentive for newor continued service with the Company, increase shareholder value, and advance theinterests of shareholders. 

 

3. This Agreement sets forth the terms and conditions approved by theCommittee applicable to the award and issuance of Restricted Stock Units (the"Units") to Grantee under the Plan. Unless otherwise defined herein, capitalizedterms used in this Agreement shall have the meanings set forth in the Plan. 

 

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AGREEMENT

 

1. **Grant of Units**. Pursuant to the Plan and subject tothe terms and conditions of this Agreement, the Company hereby grants to the Grantee______ Units effective as of ____________, 20__ (the "Effective Date"). EachUnit represents the right to receive one share of Stock at the time provided in thisAgreement.

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2. **Consideration**. The Committee hereby issues this awardin consideration of Grantee’s performance of past services to the Company, which havecontributed to the success of the Company and/or as an incentive for new or continuedservice as an Employee with the Company and its Affiliates.

 

3. **Transferability; Restrictions and Forfeiture**. TheUnits may not be sold, assigned, transferred by gift or otherwise, pledged, hypothecated,or otherwise disposed of, by operation of law or otherwise, and shall be subject toforfeiture in accordance with the provisions of Section 6 below, until Grantee becomesvested in the Units in accordance with Section 5. Upon vesting, the restrictions in thisSection 3 shall lapse, the Units shall no longer be subject to forfeiture, and Grantee maytransfer shares of Units in accordance with applicable securities laws.

 

4. **Vesting; Lapse of Restrictions**. Except as providedotherwise in this Agreement, the Units shall vest only during Grantee’s ContinuousStatus as an Employee of the Company or an Affiliate from the Effective Date through thedates described below, and the restrictions set forth in Section 3 shall lapse in theirentirety, as follows:

 

(a) As of ___________, 2____, the restrictions set forth in Section 3shall lapse as to __________ Units (__% of the Units );

 

(b) As of ___________, 2____, the restrictions set forth in Section 3shall lapse as to __________ Units (__% of the Units );

 

(c) As of ___________, 2____, the restrictions set forth in Section 3shall lapse as to __________ Units (__% of the Units);

 

(d) As of ___________, 2____, the restrictions set forth in Section 3shall lapse as to __________ all remaining Units; and

 

(e) If at any time the number of Units covered by the Vested andExercisable portion of this Paragraph includes a fractional share, the number of Units asto which the Agreement shall be actually Vested and Exercised shall be rounded down to anext whole share of Stock.

 

5. **Payment for Units, Delivery of Stock Certificates**.When the Units become payable, they shall be settled in shares of stock. The Units shallbecome payable on the fifth (5th) anniversary of the Effective Date (the"Payment Date") unless provided otherwise in this Agreement. Notwithstanding thepreceding sentence, in the case of shares that have vested upon death or termination ofemployment on account of Disability, the Payment Date is the date of death or terminationof employment on account of Disability. Subject to the provisions of Section 7 below,Stock certificates (the "Certificates") evidencing the Stock shall be issued tothe Grantee as of the Payment Date and registered in the Grantee’s name on therecords of the Company. Subject to and conditioned on the satisfaction of any withholdingobligations, the Certificates shall be delivered to the Grantee as soon as practicableafter the Payment Date. Notwithstanding the foregoing, if, at the time that payment is dueunder this Section 4, the Company’s deduction for compensation payable to theGrantee is subject to the restrictions of Section 162(m) of the Internal Revenue Codeof 1986, as amended ("Section 162(m)"), payment shall not be made until theCompany’s deduction for the compensation attributable to the payment is not limitedby Section 162(m).

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6. **Dividend Equivalents**. The Grantee shall be entitled toreceive cash payments (referred to as dividend equivalents) equal to any cash dividendsand other distributions paid in cash with respect to a corresponding number of shares ofStock covered by the Units.

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7. **Adjustments to the Units**. The Units granted under thisAgreement shall be adjudicated under Section 11 of the Plan if necessary for changes inthe stock of the Company.

 

8. **Reorganization and Change in Control**.

 

(a) **Full Vesting; Termination; Assumption or Substitution**.Upon the occurrence of a Change in Control (as defined in Section 9(b) of the Plan), theUnits shall become fully vested and payable regardless of whether all conditions forvesting relating to length of service have been satisfied and without regard to anydeferral elections. The Committee may also provide for the assumption or substitution ofthe Units by the surviving entity and make any other provision for the Units as theCommittee deems appropriate in its sole discretion.

 

(b) **Assumption or Substitution**. The Company, or thesuccessor or purchaser, as the case may be, may make adequate provision for the assumptionof the Units or the substitution of new Units for the outstanding Units on termscomparable to the terms of this Agreement.

 

9. **Withholding**. Upon the award, vesting, and/or paymentof any number of the Units, the Grantee shall make appropriate arrangements with theCompany to make payment to the Company of the amount required to be withheld underapplicable federal, state, local, and other tax laws (collectively, "WithholdingTaxes"). The Grantee may elect to pay such Withholding Taxes in cash by delivering tothe Company a check payable to the order of the Company. If the Withholding Taxes arise onor after the date the Units become payable, the Grantee may, in addition to the methodsdescribed in the preceding sentence, elect to pay such Withholding Taxes (a) by selling aportion of the Stock then payable under this Agreement if otherwise permitted by thisAgreement or (b) as permitted by Section 11(d) of the Plan and as otherwise permittedby this Agreement, by having the Company withhold from the shares otherwise payable anddeliverable to the Grantee a number of shares having a Fair Market Value equal to theamount of the minimum required Withholding Taxes, or such lesser amount as the Grantee mayelect. In such case, the value of the shares to be withheld shall be based on the FairMarket Value of the shares on the date the amount of Withholding Taxes is determined (the"Tax Date"). The Grantee must make an irrevocable election of the manner ofpayment of the Withholding Taxes no later that fourteen (14) calendar days prior to theTax Date; provided however, if the Grantee is subject to Section 16(b) of the SecuritiesExchange Act of 1934, the election shall be made in accordance with the requirements ofRule 16b-3. If, on and after the time the Units become payable, the Grantee has not madearrangements satisfactory to the Company to pay the Withholding Taxes, the Company shallwithhold from the shares, a number of shares having a Fair Market Value equal to theamount required to pay the Withholding Taxes. The value of the shares to be withheld shallbe based on the Fair Market Value of the shares on the Tax Date. The Company shall notdeliver any shares of Stock unless and until the Grantee has delivered to the Company, orhas made arrangements satisfactory to the Company to provide fully for, the requiredWithholding Taxes. The amount of cash dividend equivalents pursuant to Section 5shall be subject to Withholding Taxes applicable to wages.

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10. **Restriction on Transferability**. Units, whether or notvested, may not be sold, assigned, transferred by gift or otherwise, pledged orhypothecated, or otherwise disposed of, by operation of law or otherwise at any time. Anyattempt to do so shall be null and void.

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11. **No Rights as a Stockholder**. The Grantee shall have novoting or any other rights as a stockholder of the Company with respect to the Units. Uponpayment of the Units and the transfer of shares of Stock to the Grantee, the Grantee shallhave all of the rights of a stockholder of the Company. The Grantee’s right toreceive Stock under this Agreement shall be no greater than the right of any unsecuredgeneral creditor of the Company.

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12. **Miscellaneous**.

 

(a) **Notices**. Any notice required or permitted to be givenunder this Agreement shall be in writing and shall be given by first class registered orcertified mail, postage prepaid, or by personal delivery to the appropriate party,addressed:

 

(i) If to the Company, to Wild Oats Markets, Inc., Attention: Corporate    Secretary, 3375 Mitchell Lane, Boulder, CO 80301-2294, or at such other address as may    have been furnished to the Grantee in writing by the Company; or

(ii) If to the Grantee, to the Grantee at Wild Oats Markets, Inc.,    Attention: Corporate Secretary, 3375 Mitchell Lane, Boulder, CO 80301-2294, or at other    address as may have been furnished to the Company by the Grantee. 

Any such notice shall be deemed to have been given as of the second dayafter deposit in the United States mails, postage prepaid, properly addressed as set forthabove, in the case of mailed notice, or as of the date delivered in the case of personaldelivery.

 

(b) **Certificates**. Stock may be delivered electronicallyor in the form of certificates in the discretion of the Company. Any references tocertificates herein are deemed to include electronic delivery of securities.

 

(c) **Amendment**. Except as provided herein, this Agreementmay not be amended or otherwise modified unless evidenced in writing and signed by theCompany and the Grantee. Notwithstanding the foregoing, this Agreement may be amended inthe sole discretion of the Committee by a writing that states specifically that it isamending this Agreement if a copy of the amendment is delivered to the Grantee; provided,however, that no amendment may adversely affect the rights of the Grantee without theGrantee’s written consent. Without limiting the foregoing, the Committee reserves theright to change, by written notice to the Grantee, the provisions of the Units in any waythat it may deem necessary or advisable to implement the purposes of the grant and thisAgreement as a result of any change in applicable laws and regulations or any future law,regulation, ruling, or judicial decision, provided that any such change shall beapplicable only to such Units that are then subject to the restrictions provided in thisAgreement.

 

(d) **Defined Terms**. Capitalized terms shall have themeaning set forth in the Plan or herein, as the case may be.

 

(e) **Construction; Severability**. The section headingscontained herein are for reference purposes only and shall not in any way affect themeaning or interpretation of this Agreement. The invalidity or unenforceability of anyprovision of this Agreement shall not affect the validity or enforceability of any otherprovision of this Agreement, and each other provision of this Agreement shall be severableand enforceable to the extent permitted by law.

 

(f) **Waiver**. Any provision contained in this Agreement maybe waived, either generally or in any particular instance, by the Committee appointedunder the Plan, but only to the extent permitted under the Plan.

 

(g) **Binding Effect**. This Agreement shall be binding uponand inure to the benefit of the Company and the Grantee and their respective heirs,executors, administrators, legal representatives, successors and assigns.

 

(h) **Rights to Employment**. Nothing contained in thisAgreement shall be construed as giving the Grantee any right to be retained in the employof the Company and this Agreement is limited solely to governing the rights andobligations of the Grantee with respect to the Units.

 

(i) **Governing Law**. This Agreement shall be governed byand construed in accordance with the laws of the State of Delaware.

 

 

 

 

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

 

 

**WILD OATS MARKETS, INC.**

 

 

By ___________________________________________

_____________________________

 

 

**GRANTEE**

 

 

_______________________________________________

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