Document:

Brier Severance Agreement

 

 

SEVERANCE AGREEMENT

 

 

THIS AGREEMENT, dated November 7, 2002, is made by and between Wild Oats Markets, Inc.,
a Delaware corporation (the "Company"), and Freya Brier (the
"Executive").

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

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

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

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

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

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

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

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

5.    Compensation Other Than Severance Benefits.

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

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

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

6.    Severance Benefits.

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

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

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

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

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

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

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

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

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

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

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

7.    Termination Procedures and Compensation During Dispute.

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

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

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

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

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

9.    Restrictive Covenants

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

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

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

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

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

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

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

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

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

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

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

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

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

10.    Successors; Binding Agreement.

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

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

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

  
To the Company:

    Wild Oats Markets, Inc

    3375 Mitchell Lane

    Boulder, CO 80301

    Attention: Chief Executive Officer

    With a copy to: General Counsel

  

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

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

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

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

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

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

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

  

	"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
            Section 12 of the Exchange Act.
	"Auditor" shall have the meaning set forth in Section 6.2 hereof.
	"Base Amount" shall have the meaning set forth in section 280G(b)(3) of the
            Code.
	"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
            Exchange Act.
	"Board" shall mean the Board of Directors of the Company.
	"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.
	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:

	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 
	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;
	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
	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.

          	"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
            time.
	"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)).
	"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.
	"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.
	"Date of Termination" shall have the meaning set forth in Section 7.2 hereof.
	"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.
	"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from
            time to time.
	"Excise Tax" shall mean any excise tax imposed under section 4999 of the Code.
	"Executive" shall mean the individual named in the first paragraph of this
            Agreement.
	"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:

	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;
	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;
	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;
	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;
	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;
	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
	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.

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

          	"Notice of Termination" shall have the meaning set forth in Section 7.1
            hereof.
	"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.
	"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:

	the Company enters into an agreement, the consummation of which would result in the
              occurrence of a Change in Control;
	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;
	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
	the Board adopts a resolution to the effect that, for purposes of this Agreement, a
              Potential Change in Control has occurred. 

          	"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.
	"Severance Benefits" shall have the meaning set forth in Section 6.1 hereof.
	"Tax Counsel" shall have the meaning set forth in Section 6.2 hereof.
	"Term" shall mean the period of time described in Section 2 hereof (including
            any extension, continuation or termination described therein).
	"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/ Perry D. Odak

                    Name: Perry D. Odak

                    Title: President

                    
                      
                         

                         

                         

                      

                    

                    /s/ Freya Brier

                    Freya Brier

                    Address:

                    1045 Kalmia Avenue

                    Boulder, CO 80304Dunlap Severance Agreement

 

 

SEVERANCE AGREEMENT

 

 

THIS AGREEMENT, dated November 7, 2002, is made by and between Wild Oats Markets, Inc.,
a Delaware corporation (the "Company"), and Edward F. Dunlap (the
"Executive").

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

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

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

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

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

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

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

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

5.    Compensation Other Than Severance Benefits.

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

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

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

6.    Severance Benefits.

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

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

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

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

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

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

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

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

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

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

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

7.    Termination Procedures and Compensation During Dispute.

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

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

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

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

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

9.    Restrictive Covenants

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

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

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

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

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

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

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

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

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

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

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

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

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

10.    Successors; Binding Agreement.

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

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

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

    
      
To the Company:

        Wild Oats Markets, Inc

        3375 Mitchell Lane

        Boulder, CO 80301

        Attention: Chief Executive Officer

        With a copy to: General Counsel

      
    

  

12.    Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or of any lack of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent time. This
Agreement supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have been made by either
party; provided, however, that this Agreement shall supersede the agreement
dated as of December 17, 2001 between the Company and the Executive (as modified by the
Assignment and Assumption of Employment Agreement effective June 29, 2002) 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, either by
the Company other than for Cause or by the Executive for Good Reason. The validity,
interpretation, construction and performance of this Agreement shall be governed by the
laws of the State of Colorado. All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the Executive has
agreed. The obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the expiration of the
Term (including, without limitation, those under Sections 6, 7 and 9 hereof) shall survive
such expiration.

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

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

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

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

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

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

    
      

	"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
                Section 12 of the Exchange Act.
	"Auditor" shall have the meaning set forth in Section 6.2 hereof.
	"Base Amount" shall have the meaning set forth in section 280G(b)(3) of the
                Code.
	"Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
                Exchange Act.
	"Board" shall mean the Board of Directors of the Company.
	"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.
	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:

	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 
	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;
	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
	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.

              	"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
                time.
	"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)).
	"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.
	"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.
	"Date of Termination" shall have the meaning set forth in Section 7.2 hereof.
	"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.
	"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from
                time to time.
	"Excise Tax" shall mean any excise tax imposed under section 4999 of the Code.
	"Executive" shall mean the individual named in the first paragraph of this
                Agreement.
	"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:

	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;
	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;
	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;
	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;
	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;
	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
	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.

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

              	"Notice of Termination" shall have the meaning set forth in Section 7.1
                hereof.
	"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.
	"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:

	the Company enters into an agreement, the consummation of which would result in the
                  occurrence of a Change in Control;
	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;
	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
	the Board adopts a resolution to the effect that, for purposes of this Agreement, a
                  Potential Change in Control has occurred. 

              	"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.
	"Severance Benefits" shall have the meaning set forth in Section 6.1 hereof.
	"Tax Counsel" shall have the meaning set forth in Section 6.2 hereof.
	"Term" shall mean the period of time described in Section 2 hereof (including
                any extension, continuation or termination described therein).
	"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/ Perry D. Odak

                    Name: Perry D. Odak

                    Title: President

                    
                      
                         

                         

                         

                      

                    

                    /s/ Edward F. Dunlap

                    Edward F. Dunlap

                    Address:

                    3375 Mitchell Lane

                    Boulder, CO 80301

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