Document:

Exhibit 10.6

WILD OATS MARKETS, INC.

 

ROBERT DIMOND EQUITY INCENTIVE PLAN

 

 

1. PURPOSES

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

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

 

2. DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

3. ADMINISTRATION

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

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

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

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

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

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

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

 

4. SHARES SUBJECT TO THE PLAN

(a) Subject to the provisions of Section 12 relating to adjustments upon changes in
stock, the stock that may be issued pursuant to Stock Awards shall not exceed in the
aggregate 100,000 shares of the Common Stock. If any Stock Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been exercised in full
(or vested in the case of Restricted Stock), the stock not acquired under such Stock Award
shall cease to be subject to the Plan.

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

 

5. ELIGIBILITY

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

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

 

6. OPTION PROVISIONS

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

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

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

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

In the case of any deferred payment arrangement, interest shall be payable at least
annually and shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any amounts other
than amounts stated to be interest under the deferred payment arrangement.

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

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

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

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

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

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

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

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

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

7. RESERVED

8. CANCELLATION AND RE-GRANT OF OPTIONS

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

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

 

9. COVENANTS OF THE COMPANY

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

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

 

10. USE OF PROCEEDS FROM STOCK

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

 

11. MISCELLANEOUS

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

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

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

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

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

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

 

12. ADJUSTMENTS UPON CHANGES IN STOCK

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

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

 

13. AMENDMENT OF THE PLAN AND STOCK AWARDS

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

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

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

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

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

 

14. TERMINATION OR SUSPENSION OF THE PLAN

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

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

 

15. EFFECTIVE DATE OF PLAN.

This Plan shall become effective on April 28, 2005.

 

 

 

WILD OATS MARKETS, INC.

 

 

By: /s/ Freya R. Brier

Freya R. Brier, Senior Vice President

 

 

WILD OATS MARKETS, INC.

NON-QUALIFIED STOCK OPTION

OPTION AGREEMENT

Robert Dimond, Optionee:

 

Wild Oats Markets, Inc. (the "Company"), pursuant to the Robert Dimond Equity
Incentive Plan (the "Plan"), has this day granted to you, the optionee named
above ("Optionee"), options (the "Options") to purchase shares of the
common stock of the Company ("Common Stock"). The Options are not intended to
qualify and will not be treated as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").

The details of your Options are as follows:

1. SHARES; VESTING. (a) The total number of shares of Common Stock subject to the
Options are 100,000 options.

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

NUMBER OF SHARES (INSTALLMENT)

DATE OF EARLIEST EXERCISE (VESTING)

2. EXERCISE PRICE; PAYMENT. (a) The exercise price of the Options is $10.00 per share,
being not less than eighty five percent (85%) of the fair market value of the Common Stock
on the date of grant of the Options.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

Dated the ___ day of ____________, 2002.

Very truly yours,

WILD OATS MARKETS, INC.

 

By ___________________________________

Duly authorized on behalf of the Board of Directors

The undersigned:

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

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

 

 

___________________________________________________

Optionee

 

Address: ___________________________________________

___________________________________________

 

ATTACHMENTS:

Attachment 1 – Robert Dimond Equity Incentive Plan

Attachment 2 – Form of Notice of Exercise

 

NOTICE OF EXERCISE

 

 

Date of Exercise

Wild Oats Markets, Inc.

3375 Mitchell Lane

Boulder, CO 80301

Ladies and Gentlemen:

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

 

 

Type of option (check one)
                   Incentive
                           Nonstatutory

Stock option dated:

Number of shares as to which

option is exercised:

Certificates to be issued in

name of: _____________________

Total exercise price: $

Cash payment delivered herewith: $

 

By this exercise, I agree (i) to provide such additional documents as you may require
pursuant to the terms of the Robert Dimond Equity Incentive Plan, (ii) to provide for the
payment by me to you (in the manner designated by you) of your withholding obligation, if
any, relating to the exercise of this option.

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

 

Very truly yours,

_________________________________Exhibit 10.7

 

 

SEVERANCE AGREEMENT

 

THIS AGREEMENT, dated May 9, 2005, is made by and between Wild Oats Markets, Inc., a
Delaware corporation (the "Company"), and Robert Dimond (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 excess shall
constitute a loan by the Company to the Executive, payable on 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; provided, however, that this
Agreement shall supersede the letter agreement dated as of April 26, 2005 between the
Company and the Executive only with respect to provisions contained therein the subject
matter of which is the termination of the Executive's employment with the Company on or
following a Change in Control. Severance granted hereunder shall be in lieu of and not in
addition to any severance payments provided for under the letter agreement in the event of
termination of the Executive’s employment without Cause as the result of a Change of
Control. 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 the City of
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:  Senior Vice President

 

 

 

/s/ Robert Dimond

EXECUTIVE

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