SEVERANCE AGREEMENT
THIS AGREEMENT, dated July 27, 2005, is made by and between Wild Oats Markets, Inc., a Delaware corporation (the "Company"), and Xxxxxx Xxxxxxx (the "Executive").
WHEREAS, the Company considers it essential to the best interests of its stockholders to
xxxxxx 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, 2005; provided, however, that commencing on
January 1, 2006 and each January 1 thereafter, the Term shall automatically be extended
for one additional year unless, not later than September 30 of the preceding year, the
Company or the Executive shall have given notice not to extend the Term; and further
provided, however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in which such
Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive's covenants set forth in
Section 4 hereof, the Company agrees, under the conditions described herein, to pay the
Executive the Severance Benefits and the other payments and benefits described herein.
Except as provided in Section 10.1 hereof, no Severance Benefits shall be payable under
this Agreement unless there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term. This
Agreement shall not be construed as creating an express or implied contract of employment
and, except as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control during the
Term, the Executive will remain in the employ of the Company until the earliest of (i) a
date which is six (6) months from the date of such Potential Change in Control, (ii) the
date of a Change in Control, (iii) the date of termination by the Executive of the
Executive's employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Benefits.
5.1 Following a Change in Control and during the Term, during any period that the
Executive fails to perform the Executive's full-time duties with the Company as a result
of incapacity due to physical or mental illness, the Company shall pay the Executive's
full salary to the Executive at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the Company during
such period (other than any disability plan), until the Executive's employment is
terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the Executive's full salary to the
Executive through the Date of Termination at the rate in effect immediately prior to the
Date of Termination or, if higher, the rate in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date of Termination under
the terms of the Company's compensation and benefit plans, programs or arrangements as in
effect immediately prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive the Executive's normal
post-termination compensation and benefits as such payments become due. Such
post-termination compensation and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements as in effect immediately prior to the Date of Termination
or, if more favorable to the Executive, as in effect immediately prior to the occurrence
of the first event or circumstance constituting Good Reason.
6. Severance Benefits.
6.1 Subject to Section 9 below, if the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason, then the
Company shall pay the Executive the amounts, and provide the Executive the benefits,
described in this Section 6.1 ("Severance Benefits") and the payment referred to
in Section 6.2, in addition to any payments and benefits to which the Executive is
entitled under Section 5 hereof. For purposes of this Agreement, the Executive's
employment shall be deemed to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason, if (i) the Executive's
employment is terminated by the Company without Cause prior to a Change in Control
(whether or not a Change in Control ever occurs) and such termination was at the request
or direction of a Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control, (ii) the Executive terminates
his employment for Good Reason prior to a Change in Control (whether or not a Change in
Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Person, or (iii) the Executive's employment is terminated
by the Company without Cause or by the Executive for Good Reason and such termination or
the circumstance or event which constitutes Good Reason is otherwise in connection with or
in anticipation of a Change in Control (whether or not a Change in Control ever occurs).
For purposes of any determination regarding the applicability of the immediately preceding
sentence, any position taken by the Executive shall be presumed to be correct unless the
Company establishes to the Committee by clear and convincing evidence that such position
is not correct. The Executive shall not be entitled to receive any Severance Benefits
under this Agreement under any circumstances other than those set forth in this paragraph.
(A) In lieu of any further salary payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance benefit otherwise payable to the
Executive, the Company shall pay to the Executive a lump sum severance payment, in cash,
equal to two times the sum of (i) the Executive's base salary as in effect immediately
prior to the Date of Termination or, if higher, in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, and (ii) the average
annual bonus earned by the Executive pursuant to any discretionary annual bonus or
incentive plan maintained by the Company in respect of the two fiscal years ending
immediately prior to the fiscal year in which occurs the Date of Termination or, if the
Executive has not been eligible for at least two annual bonuses as of the Date of
Termination, the bonus earned by the Executive in respect of the fiscal year immediately
prior to the fiscal year in which occurs the Date of Termination.
(B) For the twenty-four (24) month period immediately following the Date of Termination,
the Company shall arrange to provide the Executive and his dependents life, disability,
accident and health insurance benefits substantially similar to those provided to the
Executive and his dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his dependents immediately
prior to the first occurrence of an event or circumstance constituting Good Reason, at no
greater cost to the Executive than the cost to the Executive immediately prior to such
date or occurrence; provided, however, that, unless the Executive consents to a different
method (after taking into account the effect of such method on the calculation of
"parachute payments" pursuant to Section 6.2 hereof), such health insurance
benefits shall be provided through a third-party insurer. Benefits otherwise receivable by
the Executive pursuant to this Section 6.1(B) shall be reduced to the extent benefits of
the same type are received by or made available to the Executive during the twenty-four
(24) month period following the Executive's termination of employment (and any such
benefits received by or made available to the Executive shall be reported to the Company
by the Executive); provided, however, that the Company shall reimburse the Executive for
the excess, if any, of the cost of such benefits to the Executive over such cost
immediately prior to the Date of Termination or, if more favorable to the Executive, the
first occurrence of an event or circumstance constituting Good Reason.
(C) Notwithstanding any provision of any annual or long-term incentive plan to the
contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the
sum of (i) any unpaid incentive compensation which has been allocated or awarded to the
Executive for a completed fiscal year or other measuring period preceding the Date of
Termination under any such plan and which, as of the Date of Termination, is contingent
only upon the continued employment of the Executive to a subsequent date, and (ii) a pro
rata portion to the Date of Termination of the aggregate value of all contingent incentive
compensation awards to the Executive for all then uncompleted periods under any such plan,
calculated as to each such award by multiplying the award that the Executive would have
earned on the last day of the performance award period, assuming the achievement, at the
target level of the individual and corporate performance goals established with respect to
such award, if the Company's incentive compensation plan has such a concept, or, if not,
at a level commensurate with the Executive's position at the Company and the incentive
compensation awards paid to similarly situated executives of the Company, by the fraction
obtained by dividing the number of full months and any fractional portion of a month
during such performance award period through the Date of Termination by the total number
of months contained in such performance award period.
(D) In addition to the benefits to which the Executive is entitled under each DC Pension
Plan, the Company shall pay the Executive a lump sum amount, in cash, equal to the sum of
(i) the amount that would have been contributed thereto by the Company on the Executive's
behalf during the two years immediately following the Date of Termination, determined (x)
as if the Executive made the maximum permissible contributions thereto during such period,
(y) as if the Executive earned compensation during such period at a rate equal to the
Executive's compensation (as defined in the DC Pension Plan) during the twelve (12) months
immediately preceding the Date of Termination or, if higher, during the twelve months
immediately prior to the first occurrence of an event or circumstance constituting Good
Reason, and (z) without regard to any amendment to the DC Pension Plan made subsequent to
a Change in Control and on or prior to the Date of Termination, which amendment adversely
affects in any manner the computation of benefits thereunder, and (ii) the excess, if any,
of (x) the Executive's account balance under the DC Pension Plan as of the Date of
Termination over (y) the portion of such account balance that is nonforfeitable under the
terms of the DC Pension Plan.
(E) Each option to acquire common stock of the Company granted under a Company incentive
plan or other arrangement that is held by the Executive on the Date of Termination shall,
as of such date, vest and become immediately exercisable in full.
6.2 (A) Subject to Section 9 below, whether or not the Executive becomes entitled to the
Severance Benefits, if any of the payments or benefits received or to be received by the
Executive in connection with a Change in Control or the Executive's termination of
employment (whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in a Change in Control or
any Person affiliated with the Company or such Person) (all such payments and benefits,
excluding the Gross-Up Payment, being hereinafter referred to as the "Total
Payments") will be subject to the Excise Tax, the Company shall pay to the Executive
an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and any federal,
state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, and
after taking into account the phase out of itemized deductions and personal exemptions
attributable to the Gross-Up Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be
treated as "parachute payments" (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the accounting firm which was, immediately
prior to the Change in Control, the Company's independent auditor (the
"Auditor"), such payments or benefits (in whole or in part) do not constitute
parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all
"excess parachute payments" within the meaning of section 280G(b)(l) of the Code
shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred
payment or benefit shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the Date of Termination
(or if there is no Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 6.2), net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, the Executive shall
repay to the Company, within five (5) business days following the time that the amount of
such reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income and employment taxes
imposed on the Gross-Up Payment being repaid by the Executive), to the extent that such
repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in
the Executive's taxable income and wages for purposes of federal, state and local income
and employment taxes. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including by reason of
any payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive with
respect to such excess) within five (5) business days following the time that the amount
of such excess is finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to the Total
Payments.
6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and in
Section 6.2 hereof shall be made not later than the fifth day following the Date of
Termination (or if there is no Date of Termination, then the date on which the Gross-Up
Payment is calculated for purposes of Section 6.2 hereof); provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith by the
Executive or, in the case of payments under Section 6.2 hereof, in accordance with Section
6.2 hereof, of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest on the
unpaid remainder (or on all such payments to the extent the Company fails to make such
payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the fifth (5th) business day
after demand by the Company. At the time that payments are made under this Agreement, the
Company shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive fifty percent (50%) all legal fees and expenses incurred by the Executive in disputing in good faith any issue hereunder relating to the termination of the Executive's employment, in seeking in good faith to obtain or enforce any benefit or right provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive's written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. Within five (5) business days following the final resolution and any such dispute, attempted enforcement or tax proceeding, either (i) the Company shall pay to the Executive the remaining fifty percent (50%) of such fees and expenses not previously paid to the Executive, if the Executive prevails on at least one material issue in such dispute, attempted enforcement or tax proceeding or (ii) the Executive shall repay to the Company the fifty percent (50%) of such fees and expenses previously paid to the Executive, if the Executive does not prevail on at least one material issue in such dispute, attempted enforcement or tax proceeding.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and during the Term, any purported
termination of the Executive's employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party
hereto in accordance with Section 11 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of conduct set
forth in clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect to any purported
termination of the Executive's employment after a Change in Control and during the Term,
shall mean (i) if the Executive's employment is terminated for Disability, thirty (30)
days after Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive's duties during such thirty (30)
day period), and (ii) if the Executive's employment is terminated for any other reason,
the date specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive, shall not be less than
fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice
of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as determined
without regard to this Section 7.3), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on which the Term ends or
(ii) the date on which the dispute is finally resolved, either by mutual written agreement
of the parties or by a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided, however, that
the Date of Termination shall be extended by a notice of dispute given by the Executive
only if such notice is given in good faith and the Executive pursues the resolution of
such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs following a Change in
Control and during the Term and the Date of Termination is extended in accordance with
Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation
in effect when the notice giving rise to the dispute was given (including, but not limited
to, salary) and continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving rise to
the dispute was given, until the Date of Termination, as determined in accordance with
Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's employment with the Company
terminates during the Term, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company pursuant
to Section 6 hereof or Section 7.4 hereof. Further, except as specifically provided in
Section 6.1(B) hereof, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
9. Restrictive Covenants
The Executive agrees that restrictions on his activities during and after his employment
are necessary to protect the goodwill, Confidential Information and other legitimate
interests of the Company and its Subsidiaries, and that the agreed restrictions set forth
below will not deprive the Executive of the ability to earn a livelihood:
(A) While the Executive is in the employment of the Company and, if the Executive is
entitled to benefits under Section 6.1 hereof upon termination of employment, for a period
of twenty-four (24) months after such termination of employment (the "Non-Competition
Period"), the Executive shall not, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, compete with the business
of the Company or any of its Subsidiaries within a twenty (20) mile radius of any location
where the Company operates a retail store at the date of termination of employment, or at
which the Company has entered into a letter of intent or similar commitment for or entered
into obligations relating to the opening of a retail store to be opened within the period
of this covenant. Specifically, but without limiting the foregoing, the Executive agrees
not to engage in any manner in any activity that is directly or indirectly competitive
with the business of the Company or any of its Subsidiaries as conducted or which has been
proposed by management within six months prior to termination of the Executive's
employment. Restricted activity also includes without limitation accepting employment or a
consulting position with any person who is, or at any time within twelve (12) months prior
to termination of the Executive's employment has been, a licensee of the Company or any of
its Subsidiaries. For the purposes of this Section 9, the business of the Company and its
Subsidiaries shall mean retail operations for the sale of natural and organic foods,
including groceries, meat, seafood, dairy and frozen products and produce, as well as
natural vitamins, supplements, homeopathic remedies and body care products.
(B) The Executive agrees that during the Non-Competition Period or in connection with any termination of employment pursuant to which the Executive is entitled to benefits under Section 6.1, the Executive will not, either directly or through any agent or employee, Solicit any employee of the Company or any of its Subsidiaries to terminate his or her relationship with the Company or any of its Subsidiaries or to apply for or accept employment with any enterprise competitive with the business of the Company, or Solicit any customer, supplier, licensee or vendor of the Company or any of its Subsidiaries to terminate or materially modify its relationship with them, or, in the case of a customer, to conduct with any person any business or activity which such customer conducts or could conduct with the Company or any of its Subsidiaries.
(C) The Executive and the Company further agree that following any termination of the
Executive's employment pursuant to which the Executive is entitled to benefits under
Section 6.1, (i) the Executive shall not make statements or representations, otherwise
communicate, directly or indirectly, in writing, orally, or otherwise, or take any action
which may, directly, or indirectly, disparage or be damaging to the Company or any if its
Subsidiaries or affiliates or their respective former or current officers, directors,
employees, advisors, businesses or reputations, (ii) the Company shall instruct its Board
members and senior management to not make statements or representations, otherwise
communicate, directly, or indirectly, in writing, orally or otherwise, or take any action
which may, directly, or indirectly, disparage or be damaging to the Executive or his
reputation. The Executive and the Company further agree that, in the event the Executive's
employment with the Company is terminated other than by the Company for Cause or as a
result of the Executive's death, the Executive and the Company shall refer to the
Executive's departure as a "resignation" in any press release or other external
announcement or communication concerning the Executive's departure from the Company.
Nothing in this paragraph is intended to undermine any obligations the Executive or the
Company may have to comply with applicable law, or prohibit the Executive or the Company
from providing truthful testimony or information pursuant to subpoena, court order,
discovery demand or similar legal process, or truthfully responding to lawful inquiries by
any governmental or regulatory entity.
(D) The provisions of this Section 9 shall not be deemed to preclude the Executive from
employment or engagement during the Non-Competition Period following termination of
employment hereunder (i) in a business engaged in retail sales, provided such employment
or engagement does not otherwise violate the provisions of this Section 9, or (ii) by a
corporation, some of the activities of which are competitive with the business of the
Company, if the Executive's activities do not relate to such competitive business, and
nothing contained in this Section 9 shall be deemed to prohibit the Executive, during the
Non-Competition Period following termination of employment hereunder, from acquiring or
holding, solely as an investment, publicly traded securities of any competitor corporation
so long as such securities do not, in the aggregate, constitute more than 3% of the
outstanding voting securities of such corporation.
(E) The Executive acknowledges that the Company and its Subsidiaries continually develop
Confidential Information, that the Executive may develop Confidential Information for the
Company or its Subsidiaries and that the Executive may learn of Confidential Information
during the course of his employment under this Agreement. The Executive will comply with
the policies and procedures of the Company and its Subsidiaries for protecting
Confidential Information and shall never disclose to any person (except as required by
applicable law or legal process or for the proper performance of his duties and
responsibilities to the Company and its Subsidiaries, or in connection with any litigation
between the Company and the Executive (provided that the Company shall be afforded a
reasonable opportunity in each case to obtain a protective order)), or use for his own
benefit or gain, any Confidential Information obtained by the Executive incident to his
employment or other association with the Company or any of its Subsidiaries. The Executive
understands that this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination. All documents, records, tapes and other
media of every kind and description relating to the business, present or otherwise, of the
Company or its Subsidiaries and any copies, in whole or in part, thereof (the
"Documents"), whether or not prepared by the Executive, shall be the sole and
exclusive property of the Company and its Subsidiaries. The Executive shall safeguard all
Documents and shall surrender to the Company at the time his employment terminates, or at
such earlier time or times as the Board or its designee may specify, all Documents then in
the Executive's possession or control.
(F) Without limiting the foregoing, it is understood that the Company shall not be
obligated to make any of the payments or to provide for any of the benefits specified in
Sections 6.1 and 6.2 hereof, and shall be entitled to recoup the pro rata portion of any
such payments and of the value of any such benefits previously provided to the Executive
in the event of a material breach by the Executive of the provisions of this Section 9
(such pro ration to be determined as a fraction, the numerator of which is the number of
days from such breach to the second anniversary of the date on which the Executive
terminates employment and the denominator of which is 730), which breach continues without
having been cured within 15 days after written notice to the Executive specifying the
breach in reasonable detail.
(G) The Executive and the Company agree that in the event the Executive seeks a reference
from the Company in connection with any future or prospective employment, the Company's
response to any such reference inquiry shall be limited to and consistent with the
following: start and end dates of employment, position(s) held and last salary.
For purposes of this Section 9, the following definitions shall apply:
(I) "Confidential Information" means any and all information of the Company and
its Subsidiaries that is not generally known by others with whom they compete or do
business, or with whom they plan to compete or do business and any and all information not
readily available to the public, which, if disclosed by the Company or its Subsidiaries
could reasonably be of benefit to such person or business in competing with or doing
business with the Company. Confidential Information includes without limitation such
information relating to (1) the development, research, testing, manufacturing, store
operational processes, marketing and financial activities, including costs, profits and
sales, of the Company and its Subsidiaries, (2) the Products and all formulas therefor,
(3) the costs, sources of supply, financial performance and strategic plans of the Company
and its Subsidiaries, (4) the identity and special needs of the customers and suppliers of
the Company and its Subsidiaries and (5) the people and organizations with whom the
Company and its Subsidiaries have business relationships and those relationships.
Confidential Information also includes comparable information that the Company or any of
its Subsidiaries have received belonging to others or which was received by the Company or
any of its Subsidiaries with an agreement by the Company that it would not be disclosed.
Confidential Information does not include information which (i) is or becomes available to
the public generally (other than as a result of a disclosure by the Executive), (ii) was
within the Executive's possession prior to the date hereof or prior to its being furnished
to the Executive by or on behalf of the Company, provided that the source of such
information was not bound by a confidentiality agreement with or other contractual, legal
or fiduciary obligation of confidentiality to the Company or any other party with respect
to such information, (iii) becomes available to the Executive on a non-confidential basis
from a source other than the Company, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary obligation of
confidentiality to the Company or any other party with respect to such information, or
(iv) was independently developed the Executive without reference to the Confidential
Information.
(II) "Products" mean all products planned, researched, developed, tested, manufactured, sold, licensed, leased or otherwise distributed or put into use by the Company or any of its Subsidiaries, together with all services provided to third parties or planned by the Company or any of its Subsidiaries, during the Executive's service; as used herein, "planned" refers to a Product or service which the Company has decided to introduce within six months from the date as of which such term is applied.
(III) "Subsidiary" means any corporation or other business organization of which
the securities having a majority of the normal voting power in electing the board of
directors or similar governing body of such entity are, at the time of determination,
owned by the Company directly or indirectly through one or more Subsidiaries.
(IV) "Solicit" means any direct or indirect communication of any kind
whatsoever, regardless of by whom initiated, inviting, advising, encouraging or requesting
any person or entity, in any manner, with respect to any action.
10. Successors; Binding Agreement.
10.1 In addition to any obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of
the Company to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this Agreement and shall
entitle the Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after a Change in Control, except that, for
purposes of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
10.2 This Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to the executors, personal representatives or administrators of the
Executive's estate.
11. Notices. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed, if to the Executive, to the address inserted below the
Executive's signature on the final page hereof and, if to the Company, to the address set
forth below, or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Company:
Wild Oats Markets, Inc
0000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
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 the City of Boulder, Colorado
in accordance with the rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth in this Agreement shall apply.
If the Executive chooses to settle any dispute or controversy by arbitration, judgment may
be entered on the arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to seek
specific performance of the Executive's right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection with this
Agreement.
15.3 The Executive acknowledges that he has carefully read and considered all the terms
and conditions of this Agreement, including the restraints imposed upon him pursuant to
Section 9 hereof. The Executive agrees that said restraints are necessary for the
reasonable and proper protection of the Company and its Subsidiaries and that each and
every one of the restraints is reasonable in respect to subject matter, length of time and
geographic area. The Executive further acknowledges that, were he to breach any of the
covenants contained in Section 9 hereof, the damage to the Company would be irreparable.
The Executive therefore agrees that the Company, in addition to any other remedies
available to it, and notwithstanding any provision of this Agreement to the contrary,
shall be entitled to seek preliminary and permanent injunctive relief against any breach
or threatened breach by the Executive of any of said covenants, without having to post
bond. The parties further agree that, in the event that any provisions of Section 9 hereof
shall be determined by any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a time, too large a geographic area or too great a
range of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
16. Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in section 280G(b)(3) of the
Code.
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's employment shall
mean (i) the willful and continued failure by the Executive to substantially perform the
Executive's duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination for Good Reason by the Executive
pursuant to Section 7.1 hereof) that has not been cured within 30 days after a written
demand for substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the Executive
has not substantially performed the Executive's duties, or (ii) the willful engaging by
the Executive in conduct which is demonstrably and materially injurious to the Company or
its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act, was in the best
interest of the Company and (y) in the event of a dispute concerning the application of
this provision, no claim by the Company that Cause exists shall be given effect unless the
Company establishes to the Committee by clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates) representing 31% or more
of the combined voting power of the Company's then outstanding securities, excluding any
Person who becomes such a Beneficial Owner in connection with a Non-Control Merger (as
defined in paragraph (III) below); or
(II) the following individuals cease for any reason to constitute a majority of the number
of directors then serving: individuals who, on the date hereof, constitute the Board and
any new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended; or;
(III) there is consummated a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other corporation, other than a merger or
consolidation (a "Non-Control Merger") immediately following which the
individuals who comprise the Board immediately prior thereto constitute at least a
majority of the board of directors of the Company, the entity surviving such merger or
consolidation or any parent thereof; or
(IV) the stockholders of the Company approve a plan of complete liquidation or dissolution
of the Company or there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the Company's assets immediately
following which the individuals who comprise the Board immediately prior thereto
constitute at least a majority of the board of directors of the entity to which such
assets are sold or disposed or any parent thereof.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of integrated
transactions immediately following which the record holders of the common stock of the
Company immediately prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns all or
substantially all of the assets of the Company immediately following such transaction or
series of transactions.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than three in number)
who, on the date six months before a Change in Control, constitute the Compensation
Committee of the Board, plus (ii) in the event that fewer than three individuals are
available from the group specified in clause (i) above for any reason, such individuals as
may be appointed by the individual or individuals so available (including for this purpose
any individual or individuals previously so appointed under this clause (ii)).
(J) "Company" shall mean Wild Oats Markets, Inc., a Delaware corporation and,
except in determining under Section 15(G) hereof whether or not any Change in Control of
the Company has occurred, shall include any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
(K) "DC Pension Plan" shall mean any tax-qualified, supplemental or excess
defined contribution plan maintained by the Company and any other defined contribution
plan or agreement entered into between the Executive and the Company.
(L) "Date of Termination" shall have the meaning set forth in Section 7.2
hereof.
(M) "Disability" shall be deemed the reason for the termination by the Company
of the Executive's employment, if, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from the full-time
performance of the Executive's duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice of Termination for Disability,
and, within thirty (30) days after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the Executive's duties.
(N) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
(O) "Excise Tax" shall mean any excise tax imposed under section 4999 of the
Code.
(P) "Executive" shall mean the individual named in the first paragraph of this
Agreement.
(Q) "Good Reason" for termination by the Executive of the Executive's employment
shall mean the occurrence (without the Executive's express written consent) after any
Change in Control, or prior to a Change in Control under the circumstances described in
clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all
references in paragraphs (I) through (VII) below to a "Change in Control" as
references to a "Potential Change in Control"), of any one of the following acts
by the Company, or failures by the Company to act, unless, (x) in the case of any act or
failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
to act is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof or (y) in the case of first act or failure to act
following a Change in Control and described in paragraph (IV) below, such act or failure
to act is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties materially and adversely inconsistent
with the Executive's status as a senior executive officer of the Company or a substantial
adverse alteration in the nature or status of the Executive's responsibilities from those
in effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual base salary as in effect on the
date hereof or as the same may be increased from time to time;
(III) the relocation of the Executive's principal place of employment to a location more
than 25 miles from the Executive's principal place of employment immediately prior to the
Change in Control or the Company's requiring the Executive to be based anywhere other than
such principal place of employment (or permitted relocation thereof) except for required
travel on the Company's business to an extent substantially consistent with the
Executive's present business travel obligations;
(IV) the failure by the Company to pay to the Executive any portion of the Executive's
current compensation or to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company, within seven (7) days
of the date such compensation is due;
(V) the failure by the Company to continue in effect any compensation plan in which the
Executive participates immediately prior to the Change in Control which is material to the
Executive's total compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the failure by
the Company to continue the Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the Executive's participation
relative to other participants, as existed immediately prior to the Change in Control;
(VI) the failure by the Company to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and accident, or disability plans in
which the Executive was participating immediately prior to the Change in Control, the
taking of any other action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control, or the failure by the
Company to provide the Executive with the number of paid vacation days to which the
Executive is entitled on the basis of years of service with the Company in accordance with
the Company's normal vacation policy in effect at the time of the Change in Control; or
(VII) any purported termination of the Executive's employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for
purposes of this Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or mental illness. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason, any claim by the
Executive that Good Reason exists shall be presumed to be correct unless the Company
establishes to the Committee by clear and convincing evidence that Good Reason does not
exist.
"Gross-Up Payment" shall have the meaning set forth in Section 6.2 hereof.
(T) "Notice of Termination" shall have the meaning set forth in Section 7.1
hereof.
(U) "Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its Affiliates,
(iii) an underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of stock of the
Company.
(V) "Potential Change in Control" shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing 15% or more of either the then outstanding shares of common stock
of the Company or the combined voting power of the Company's then outstanding securities
(not including in the securities beneficially owned by such Person any securities acquired
directly from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(W) "Retirement" shall be deemed the reason for the termination by the Executive
of the Executive's employment if such employment is terminated in accordance with the
Company's retirement policy, including early retirement, generally applicable to its
salaried employees.
(X) "Severance Benefits" shall have the meaning set forth in Section 6.1 hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section 6.2 hereof.
(Z) "Term" shall mean the period of time described in Section 2 hereof
(including any extension, continuation or termination described therein).
(AA) "Total Payments" shall mean those payments so described in Section 6.2
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
WILD OATS MARKETS, INC.
By: /s/ Xxxxx Xxxxx
Name: Xxxxx Xxxxx
Title: Sr. V.P.
/s/ Xxx Xxxxxxx
EXECUTIVE
Address:
________________________
________________________
(Please print carefully)
