NATURAL NUTRITION GROUP INC, S-1/A, 1998-07-07

NATURAL NUTRITION GROUP INC
S-1/A, 1998-07-07
FOOD AND KINDRED PRODUCTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 1998

REGISTRATION NO. 333-53501

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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

Amendment No. 1

FORM S-1
REGISTRATION STATEMENT
Under
the Securities Act of 1933
---------------------

NATURAL NUTRITION GROUP, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2000 36-4042454
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
</TABLE>

135 S. LASALLE STREET, SUITE 1134, CHICAGO, ILLINOIS 60603, (312) 578-1110
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

WILLIAM R. VOSS
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
135 S. LASALLE STREET, SUITE 1134, CHICAGO, ILLINOIS 60603, (312) 578-1110
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
KENNETH W. MILLER, ESQ. JOHN D. WATSON, JR., ESQ.
KATTEN MUCHIN & ZAVIS LATHAM & WATKINS
525 WEST MONROE STREET, SUITE 1600 1001 PENNSYLVANIA AVE., N.W., SUITE 1300
CHICAGO, ILLINOIS 60661 WASHINGTON, D.C. 20004
(312) 902-5200 (202) 637-2200
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [ ].

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering: [ ].

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ].

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ].

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ].

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED PROPOSED
TITLE OF EACH CLASS OF TO BE MAXIMUM MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value... 3,795,000(1) $16.00(2) $60,720,000(2) $17,913(3)
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- --------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 495,000 shares to be offered upon exercise of the Underwriters'
over-allotment option.

(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) under the Securities Act of 1933, as amended.

(3) Of this amount, $14,750 was previously paid. The balance of $3,163 is being
paid with this filing.

---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION

JULY 7, 1998

3,300,000 SHARES

NATURAL NUTRITION GROUP LOGO HEALTH VALLEY LOGO
BREADSHOP NATURAL FOODS LOGO

COMMON STOCK

-------------------------------

All of the shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of Natural Nutrition Group, Inc. ("NNG" or the
"Company") offered hereby are being sold by the Company. Prior to this
offering (the "Offering") there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price
will be between $14.00 and $16.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial
public offering price.

Application has been made to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol "NNGI."

-------------------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.

SEE "RISK FACTORS" BEGINNING ON PAGE 9.

-------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
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PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share.................... $ $ $
Total(3)..................... $ $ $
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</TABLE>

(1) See "Underwriting" for information relating to indemnification of
the Underwriters.

(2) Before deducting expenses of the Offering payable by the Company
estimated at $900,000.

(3) The Company has granted the Underwriters a 30-day option to purchase
up to 495,000 additional shares of Common Stock on the same terms
and conditions set forth above solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will
be $ , $ and
$ , respectively. See "Underwriting."

-------------------------------

The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if delivered to and accepted by
them, and subject to the right of the Underwriters to reject any order
in whole or in part. It is anticipated that delivery of the shares of
Common Stock will be made at the offices of BT Alex. Brown Incorporated,
Baltimore, Maryland, on or about , 1998.

-------------------------------

BT ALEX. BROWN ADAMS, HARKNESS & HILL, INC.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 3

[THE INSIDE FRONT AND BACK COVER AND GATEFOLD PAGES OF THE PROSPECTUS CONTAIN
PHOTOGRAPHS OF CERTAIN OF THE COMPANY'S PRODUCTS, A DESCRIPTION OF THE HEALTH
VALLEY LOGO AND A PHOTOGRAPH OF THE COMPANY'S MANUFACTURING FACILITY IN
IRWINDALE, CALIFORNIA]

The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent auditors for each
fiscal year and will make available copies of quarterly reports containing
unaudited financial information for each of the first three quarters of each
fiscal year.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

Health Valley(R) and Breadshop's(R) are registered trademarks of the
Company. The prospectus also includes tradenames and trademarks of companies
other than the Company which are the property of their respective owners.

<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus assumes that (i) the
290-for-1 stock split, to be effected prior to the consummation of the Offering,
has occurred, (ii) the Company's Series A Preferred Stock has been redeemed with
a portion of the net proceeds of the Offering and (iii) the Underwriters'
over-allotment option is not exercised.

The operations of Natural Nutrition Group, Inc. are conducted through its
wholly-owned subsidiary, Health Valley Company ("Health Valley"). Unless the
context otherwise requires, references in this Prospectus to the "Company" or
"NNG" include Natural Nutrition Group, Inc. and Health Valley on and after April
15, 1996. All references to "Health Valley" and the "Predecessor Company" prior
to April 15, 1996 refer to the combined operations of Health Valley Foods, Inc.,
Health Valley Manufacturing Company and their predecessors.

THE COMPANY

The Company is a leading manufacturer and marketer of premium natural and
organic food products in the United States. The Company markets (i) breakfast
cereals and granolas, (ii) granola bars, cereal bars, cookies, crackers and
other baked goods and (iii) canned and instant soups and chilis, as well as
other food products, primarily under its Health Valley(R) and Breadshop's(R)
brands. The Company's branded products are made using only natural ingredients,
without artificial flavors, colors, additives or preservatives. Many of the
Company's products are also made with "organic" ingredients, which are grown
without dependence upon artificial pesticides, chemicals or fertilizers.

The Company currently markets over 200 products and believes it has the
largest market share among marketers of natural food brands for its core product
categories -- breakfast cereals and granolas, baked goods, and soups and chilis.
Representative products of the Company include Health Valley(R) Spicy Vegetarian
Chili, Breadshop's(R) Honey Gone Nuts(R) Cereal, Health Valley(R) Apple Cobbler
Cereal Bars, Health Valley(R) Amazing Apple!(TM) Hot Breakfast Cereal and Health
Valley(R) Soy Moo(R) Non-Dairy Beverage.

The Company's products are sold primarily through natural and specialty
food distributors and ultimately to consumers through natural food retailers,
such as Whole Foods and Wild Oats, conventional grocery retailers, such as Fred
Meyer and Kroger, and other retail channels. The Company estimates that in 1997
approximately 35% of its products were sold in the natural food retail channel,
approximately 50% of its products were sold in the conventional grocery retail
channel and approximately 15% of its products were sold in other retail
channels. In 1997, the Company began to manufacture private label products for
certain of its customers.

The Company manufactures most of its products, unlike many natural food
companies that rely on contract manufacturing. The Company's manufacturing
operations are housed in a modern 150,000 square foot facility located in
Irwindale, California. The Company believes that by manufacturing most of its
products, it is able to better control the cost and quality of its products and
provide better service to its customers. The Company estimates that it is
generally utilizing less than 30% of the Irwindale facility's manufacturing
capacity. As a result, the Company believes significant operating leverage can
be achieved through growth. In addition, the Company's manufacturing capability
has enabled it to produce private label products for retailers, which increases
revenues and may also strengthen its business relationships with certain key
customers.

The natural and organic food market is highly fragmented and includes
several hundred manufacturers and marketers. The Company believes that continued
growth in this market combined with continued consolidation among retailers and
distributors will lead to consolidation among natural and organic food
manufacturers. Accordingly, a key element of the Company's growth strategy is to
pursue strategic acquisitions of natural and organic food companies with
products or brands that strengthen or complement the Company's product lines.
The Company believes that its manufacturing capability, its sophisticated

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<PAGE> 5

information systems and the experience and depth of its management team will
enable the Company to identify and realize synergies in connection with
acquisitions which may give the Company advantages over other potential
acquirors.

NATURAL FOOD MARKET

According to Natural Foods Merchandiser ("NFM"), a leading industry
publication, the market for natural products grew at a rate of 20% between 1995
and 1996 and reached approximately $11.5 billion in 1996. According to NFM, the
organic food market, a segment of the natural products market, also grew at a
rate of 20% between 1995 and 1996 and was estimated at $3.0 billion in 1996. The
Company believes that growth in the natural and organic food market is being
propelled by several factors, including (i) consumers taking charge of their
health and well being through awareness of the link between diet and health and
improved eating habits, (ii) consumer concern over the purity and safety of
foods due to the presence of pesticide residues, artificial ingredients and
other chemicals and (iii) consumer awareness of environmental issues.

In recent years, changes in attitudes and beliefs have led to changes in
dietary habits. For example, from 1980 to 1995, per capita consumption of grains
and fruits -- two food groups of which the United States Department of
Agriculture recommends increased consumption -- grew by 30% and 20%,
respectively.

Demographic trends are also favorable for natural and organic foods. The
number of adults over the age of 35 is increasing rapidly. The U.S. Census
Bureau projects that between 1990 and 2000 the number of adults between the ages
of 35 and 54 will grow by 29% and the number of adults over age 54 will grow by
13%. Since these demographic groups are the most frequent purchasers of the
Company's products, the Company believes the aging population will increase the
number of ultimate consumers of the Company's products.

COMPETITIVE STRENGTHS

The Company believes that its current market position is attributable to
the following competitive strengths:

Strong Brand Name Recognition and Leading Market Shares

The Health Valley(R) and Breadshop's(R) brand names, both of which have
been marketed by the Company and its predecessors for over 25 years, are two of
the leading brand names in the natural and organic food industry. The Company
believes that the Health Valley(R)brand is one of the most recognized natural
and organic food brands in the United States.

The Company believes that it has the leading market share in the natural
food and conventional grocery retail channels in each of its three core product
categories -- (i) breakfast cereals and granolas, (ii) granola bars, cereal
bars, cookies and other baked goods and (iii) canned and instant soups and
chilis -- which accounted for over 90% of the Company's revenues in 1997.

Expertise in Natural and Organic Ingredient Sourcing and Product Development

The Company has significant expertise in the sourcing of natural and
organic food ingredients and in the formulation of innovative natural products.
The Company, together with its predecessors, has been working with natural and
organic formulations, preparations and recipes for over 25 years. The Company
has also developed proprietary techniques which increase shelf life, improve
flavor and enhance the nutritional quality of the Company's food products,
without relying on artificial ingredients or preservatives.

Substantial Infrastructure

brands, develop new products, build its private label and contract manufacturing
businesses and acquire complementary brands which can be manufactured by the
Company without significant capital investment or additional fixed expenses.

Experienced Management Team

The natural and organic food industry is a relatively young industry,
consisting primarily of comparatively small, privately-owned businesses. As a
result, the management of such natural food companies often lacks the training
and experience commonly found in other more mature segments of the food
industry. The Company has recruited an experienced management team to oversee
current operations and will continue to recruit seasoned management to support
future growth and acquisitions. The Company's executive officers are veteran
senior managers with extensive food industry experience. The Company believes
that its larger size relative to most natural food companies enables it to
recruit and retain more highly qualified and specialized management than many of
its competitors.

GROWTH STRATEGY

The Company's objective is to be the leading manufacturer and marketer of
premium branded natural and organic foods. The key elements of the Company's
growth strategy are as follows:

Concentrate on the Growing Natural and Organic Food Market

The natural and organic food market is growing rapidly, and the Company is
concentrating its branded marketing activities exclusively in this market
segment.

Grow the Company's Existing Brands

The Company intends to build upon its leading position in its current core
product categories through internal growth. Both the Health Valley(R) and
Breadshop's(R) brands have been marketed for more than 25 years, fostering
consumer awareness and loyalty and retail availability throughout the United
States. The Company plans to invest in trade and consumer marketing in order to
further increase the awareness and availability of its brands. Building on its
brand equities, the Company believes it can strengthen its position in current
product categories and successfully launch products in new categories.

The Company plans to continue developing new products which appeal to
consumers with respect to taste, nutrition, convenience and environmental
impact. The Company also plans to launch new products for evening meal
consumption, complementing its existing breakfast, lunch and snack products. For
example, in the third quarter of 1998, the Company plans to launch an instant
rice meal positioned to compete in the single serve home meal replacement
market. In addition, the Company plans to introduce new food products that
incorporate ingredients with specific nutritional benefits, or functional foods.

Expand Sales in Grocery Retail Channel

Complementing its ongoing efforts to increase sales in the natural food
retail channel, the Company plans to improve the scope and quality of
conventional grocery retail distribution for its brands. By informing grocery
retailers about natural and organic food markets, consumer profiles and growth
opportunities, the Company will seek to enhance conventional grocers'
understanding of the appeal of natural and organic food products and increase
their commitment to the segment. The Company believes that fostering
understanding and commitment on the part of conventional grocers will result in
improved shelf space and more effective in-store merchandising, which the
Company believes will increase its sales in the conventional grocery retail
channel.

Pursue Strategic Acquisitions

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purchasing, manufacturing and operating expenses. The Company believes the
fragmented nature of the natural food industry offers numerous opportunities to
acquire companies that fit well with the Company's strategy. For example, the
Company recently entered into a non-binding letter of intent to acquire a
natural and organic food company with annual revenues of approximately $5.0
million. See "Business -- Growth Strategy."

Increase Private Label Business

The Company believes its private label sales activities can lead to both
increased revenues and improved relationships with key customers, thereby
improving the market for its branded products. In conventional grocery
retailing, private labels frequently account for 15% to 20% of sales. However,
until recently, there have been very few private label natural food products.
Due to the growth of the natural and organic food market, natural food marketers
have begun to establish private label programs. During 1997, the Company
established a private label division, recruited an experienced private label
sales manager and began developing private label customer relationships and
sales. The Company intends to become the supplier of choice for private label
natural and organic foods in its core product categories.

RISKS ASSOCIATED WITH THE COMPANY AND THE OFFERING

The Common Stock offered hereby involves a high degree of risk. For a
discussion of risks associated with the Company and the Offering, including the
Company's limited operating history, history of net losses and acquisition
strategy, as well as other factors that should be carefully considered by
prospective investors, see "Risk Factors."

---------------------

NNG was incorporated in Delaware in October 1995. NNG acquired Health
Valley in April 1996 and The Bread Shop, Inc. ("Breadshop") in October 1996.
NNG's principal executive offices are located at 135 South LaSalle Street, Suite
1134, Chicago, Illinois 60603 and its telephone number at that address is (312)
578-1110.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company........... 3,300,000 shares
Common Stock to be outstanding after the
Offering.................................... 8,096,964 shares(1)
Use of proceeds............................... For redemption of the Company's Series A Preferred
Stock, repayment of revolving credit and term
indebtedness and general corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol........ NNGI
</TABLE>

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(1) Includes (i) 600,300 shares subject to options which will have vested within
60 days of the consummation of the Offering with a weighted average exercise
price of $0.62 per share and (ii) 40,000 shares subject to options which
will be granted and which will be exercisable on the date of consummation of
the Offering with an exercise price equal to the initial public offering
price. Excludes (i) 115,420 shares subject to unvested options with a
weighted average exercise price of $0.37 per share and (ii) 116,920 shares
subject to options which will be granted, but will not be exercisable, on
the date of consummation of the Offering with an exercise price equal to the
initial public offering price.

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SUMMARY CONSOLIDATED FINANCIAL DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
------------------------- -----------------------------------------------------
JANUARY 1, APRIL 15, THREE MONTHS ENDED
YEAR ENDED 1996 TO 1996 TO YEAR ENDED MARCH 31,
DECEMBER 31, APRIL 15, DECEMBER 31, DECEMBER 31, -----------------------
1995(1) 1996(1) 1996(2) 1997 1997 1998
------------ ---------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $73,351 $18,221 $ 39,942 $ 67,898 $ 16,299 $ 17,568
Cost of sales........................ 53,839 13,897 27,180 42,370 10,627 10,960
------- ------- --------- --------- ---------- ----------
Gross profit......................... 19,512 4,324 12,762 25,528 5,672 6,608
Marketing, selling and distribution
expenses........................... 16,651 5,563 7,177 17,366 3,832 4,891
General and administrative
expenses........................... 6,541 2,937 5,034 5,425 1,241 1,202
Amortization of goodwill and
trademarks......................... -- -- 114 334 83 90
------- ------- --------- --------- ---------- ----------
Operating income (loss).............. (3,680) (4,176) 437 2,403 516 425
Other income(3)...................... 645 169 -- -- -- --
Interest expense, net................ 1,502 476 1,052 1,911 497 458
------- ------- --------- --------- ---------- ----------
Income (loss) before income taxes.... (4,537) (4,483) (615) 492 19 (33)
------- ------- --------- --------- ---------- ----------
Provision (benefit) for income
taxes.............................. 1,137 (1,166) 13 387 17 (25)
------- ------- --------- --------- ---------- ----------
Net income (loss).................... $(5,674) $(3,317) (628) 105 2 (8)
======= =======
Preferred dividends.................. 1,330 2,082 514 571
--------- --------- ---------- ----------
Net loss attributable to common
stockholders....................... $ (1,958) $ (1,977) $ (512) $ (579)
========= ========= ========== ==========
Net loss per common share-
basic and diluted.................. $ (.62) $ (.48) $ (.13) $ (.14)
========= ========= ========== ==========
Weighted average number of common
shares outstanding................. 3,161,737 4,132,491 4,059,903 4,156,664
========= ========= ========== ==========
PRO FORMA STATEMENT OF OPERATIONS
DATA(4):
Income before income taxes........... $ 2,154 $ 333
Provision for income taxes........... $ 1,052 $ 121
--------- ----------
Net income........................... $ 1,102 $ 212
========= ==========
Net income per share................. $ 0.15 $ .03
========= ==========
Pro forma weighted average common
shares outstanding................. 7,432,491 7,456,664
========= ==========
OPERATING AND OTHER DATA:
EBITDA(5)............................ $ 333 $(3,018) $ 2,781 $ 5,848 $ 1,419 $ 1,342
Net cash provided by operating
activities......................... 5,158 1,210 2,312 268 789 2,519
Net cash used in investing
activities......................... (1,616) (115) (43,199) (857) (347) (206)
Net cash provided by (used in)
financing activities............... (3,601) (559) 40,178 277 (754) (2,313)
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED(6)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 1,449 $ 5,588
Plant and equipment......................................... 22,603 18,424
Total assets................................................ 48,317 48,035
Long-term debt.............................................. 17,234 --
Redeemable preferred stock and accrued dividends............ 23,550 --
Total stockholders' equity (deficit)........................ (3,172) 37,572
</TABLE>

(footnotes appear on following page)

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(footnotes from previous page)

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(1) The combined statement of operations data for the year ended December 31,
1995 and the period January 1, 1996 to April 15, 1996 represent the combined
results of Health Valley Foods, Inc. and Health Valley Manufacturing Company
(collectively, the "Predecessor Company") and exclude NNG's operating losses
for the periods, which were not material. The summary consolidated data
include certain reclassification adjustments to conform the presentation of
1995 financial data with that of the Company.

(2) The statement of operations data for the period from April 15, 1996 to
December 31, 1996 represent the results of NNG for the year ended December
31, 1996, together with the results of operations of the Predecessor Company
subsequent to its acquisition on April 15, 1996 and Breadshop subsequent to
its acquisition on October 31, 1996. The operations of NNG for the period
from January 1, 1996 to April 15, 1996 were not material. The results of the
Company are not comparable to those of the Predecessor Company in light of
the changes in the capital structure to fund the acquisitions, which
included the issuance of preferred stock and the incurrence of additional
debt. Additionally, the purchase accounting adjustments related to the
acquisitions changed the cost basis of the Company's fixed assets,
trademarks and resulting goodwill. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- General."

(3) Other income for the years ended December 31, 1995 and 1996 primarily
represents revenues from the sale of cookbooks, which was discontinued in
1996.

(4) The pro forma statement of operations data reflect the elimination of the
preferred dividends and reduction of the net interest expense, and the
related income tax effect, resulting from the use of a portion of the net
proceeds of the Offering to redeem the Series A Preferred Stock and repay
certain indebtedness. See "Use of Proceeds."

(5) EBITDA represents income (loss) before income taxes, interest expense (net
of interest income), depreciation and amortization. EBITDA has been included
because management uses it as a supplementary tool to measure the Company's
ability to generate operating cash flow. Management also uses EBITDA to
establish performance goals and related bonuses for selected Company
employees. EBITDA subsequent to the acquisition of Health Valley on April
15, 1996 reflects the impact of the cost reduction efforts and overall
improved operating results. EBITDA does not represent cash flow from
operations as defined by generally accepted accounting principles and should
not be considered as a substitute for net income as an indicator of the
Company's operating performance or cash flow as a measure of liquidity.
EBITDA as presented may not be comparable to other similarly titled measures
of other companies.

(6) As adjusted (i) for the Offering and the application of the net proceeds
therefrom and (ii) to reflect the $7.3 million in restructuring and other
charges (before a tax benefit of $2.9 million) recorded in the second
quarter of 1998. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Subsequent
Event."

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RISK FACTORS

An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. In addition to the other information contained
in this Prospectus, the following factors should be considered carefully before
purchasing any of the shares of Common Stock offered hereby. This Prospectus
contains certain forward-looking statements that are based on the beliefs of, as
well as assumptions made by and information currently available to, the
Company's management. The words "believe," "anticipate," "intend," "estimate,"
"expect" and similar expressions are intended to identify such forward-looking
statements, but are not the exclusive means of identifying such statements. Such
statements reflect the current views of the Company or its management and are
subject to certain risks, uncertainties and assumptions, including, but not
limited to, those set forth in the following Risk Factors. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, the Company's actual results or performance in 1998 and beyond could
differ materially from those expressed in, or implied by, such forward-looking
statements.

LIMITED OPERATING HISTORY

NNG was formed in late 1995 and, except for activities related to its
search for acquisition candidates, did not conduct operations until its
acquisition of Health Valley in April 1996. Consequently, NNG has a limited
operating history and limited combined historical financial information upon
which investors may base their evaluation of the Company. The disclosures
regarding the Company contained in this Prospectus must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
their early stages of development.

HISTORY OF NET LOSSES

The Company has generated a net loss attributable to common stockholders
for each of the past three fiscal years and the three months ended March 31,
1998 and had an accumulated deficit of $4.6 million at March 31, 1998. There can
be no assurance that the Company will achieve or sustain profitability. Future
results will depend on many factors, including demand for the Company's
products, the level of competition and the ability of management to implement
the Company's growth strategy.

RISKS ASSOCIATED WITH THE COMPANY'S ACQUISITION STRATEGY

A key element of the Company's growth strategy is to pursue strategic
acquisitions of natural and organic food companies with products or brands that
strengthen and complement the Company's product lines. There can be no assurance
that the Company will be able to identify or reach mutually agreeable terms with
acquisition candidates, or that the Company will be able to profitably manage
additional businesses or successfully integrate such additional businesses into
the Company without substantial costs, delays or other problems. NNG has
completed two substantial acquisitions and intends to acquire other natural food
companies whose businesses can be effectively integrated with that of the
Company. The contribution of any acquisition to the Company's future revenues
and profitability, and the realization of economies of scale from any such
acquisition, will depend to a large extent on the Company's ability to integrate
effectively the customer base, operations and personnel of the acquired company,
and there can be no assurance that the Company will be able to do so
successfully.

Acquisitions generally involve numerous other risks, including risks
associated with unanticipated problems, liabilities and contingencies, diversion
of management attention from other business concerns and possible adverse
effects on earnings resulting from increased goodwill amortization, increased
interest costs and the issuance of additional securities. Some or all of these
risks could have a material adverse effect on the Company's operations and
financial performance. In addition, the competition for attractive acquisition
candidates may result in fewer acquisition opportunities being available to the
Company as well as high acquisition prices. There can be no assurance that
businesses acquired in the future will achieve anticipated revenues or earnings.
In addition, the Company may require additional debt or equity financing for
future acquisitions, which may not be available on terms satisfactory to the
Company.

9
<PAGE> 11

EVOLVING CONSUMER PREFERENCES

The Company's business is focused on the manufacturing and marketing of
food products for the natural and organic food markets. The Company is subject
to evolving consumer preferences for these products. There can be no assurance
that demand for the Company's products will continue at current levels or
increase in the future. A significant shift in consumer demand away from the
Company's products or failure to maintain its current market position would have
a material adverse effect on the Company's business, financial condition,
results of operations and cash flows.

DEPENDENCE ON RAW MATERIALS; CERTAIN RISKS ASSOCIATED WITH AGRICULTURAL PRODUCTS

The primary raw materials used in the Company's operations include flours
and grains, vegetables, fruits and fruit fillings. Frequently, the Company
utilizes organically grown ingredients in its products. Although the total
acreage devoted to organically grown crops has increased significantly in recent
years, it remains a relatively small percentage of overall crop land. As a
result, some of the Company's raw materials are available from fewer suppliers
than non-organically grown ingredients. Movement in the price of these raw
materials can have a corresponding impact on finished product costs, and hence,
gross margins. The ability of the Company to pass through increases in costs of
raw materials to its customers is dependent upon competitive conditions in the
various markets in which the Company operates.

To the extent that the Company's business relies, both directly and
indirectly, on the availability of agricultural products, the Company's results
of operations will be subject to certain risks associated with such products.
The market for agricultural products is unpredictable and volatile, and is
affected by numerous factors. The most important of such factors are weather
conditions and patterns, current and projected produce stocks and prices, and
governmental agricultural policies, including those that directly or indirectly
influence the number of acres planted, the mix of crops planted and crop prices.
Any or all of such factors could adversely affect the Company's business,
financial condition, results of operations and cash flows.

COMPETITION

The markets in which the Company competes are highly competitive. Numerous
natural and organic food companies compete with the Company, including The Hain
Food Group, Inc., Barbara's Bakery, Inc. and Fantastic Foods, Inc. The Company
believes that in the natural food sector of the food industry it competes with
more than 500 companies, most of which are small independent companies and none
of which is dominant. The Company's products also compete, from time to time,
with products of larger conventional food companies, such as ConAgra, Inc.'s
Healthy Choice line or Nabisco, Inc.'s SnackWell line. The Company competes with
these companies based upon product quality, taste and appearance, nutrition,
breadth of product offerings, customer service and price. Some of the Company's
competitors have substantially greater financial, marketing and other resources
than the Company. Additional competitors with greater resources than the Company
may enter the industry and compete effectively against the Company. To the
extent that the Company is unable to compete successfully against its existing
and future competitors, its business, operating results and financial condition
would be materially adversely affected. See "Business -- Competition."

RISKS ASSOCIATED WITH GENERAL ECONOMIC CONDITIONS

Natural and organic foods are generally priced at a premium over
conventional foods and certain economic conditions may affect the level of
consumer spending on products offered by the Company. A recession in the general
economy or decline in consumer spending in the natural foods industry could have
a material adverse effect on the Company's business, financial condition,
results of operations and cash flows.

RELIANCE ON INDEPENDENT DISTRIBUTORS AND RETAILERS

The Company distributes its products nationwide to retailers primarily
through independent food distributors. The Company relies to a large extent upon
sales efforts made by or through non-affiliated food distributors and retailers.
For 1997, sales through each of Tree of Life, Inc. and United Natural Foods,
Inc. --
10
<PAGE> 12

two large natural food distributors -- accounted for 14% and 13%, respectively,
of the Company's revenues, and the percentages may increase for the year ending
December 31, 1998. The loss of, or business disruption at, one or more
distributors or retailers may have a material adverse effect on the Company's
business, financial condition, results of operations and cash flows.

TRADEMARKS AND OTHER PROPRIETARY RIGHTS

The Company owns the principal trademarks for its products, including
Health Valley(R) and Breadshop's(R), and owns a number of other trademarks used
on individual products, such as those for Honey Gone Nuts(R), Soy Moo(R) and
Fiber 7(R). The Company believes that such trademarks are important to the
marketing of the Company's products. The Company's recipes and certain
manufacturing processes also constitute proprietary information and are
important to the Company's success and competitive position. Accordingly, the
Company seeks to establish and protect its trademarks, trade secrets and other
proprietary rights. However, the actions taken by the Company may not be
sufficient to prevent imitation of its products by others or to prevent others
from claiming violations of their trademarks, trade secrets and proprietary
rights by the Company. In addition, others may assert rights in the Company's
trademarks and other proprietary rights.

GOVERNMENT REGULATION

The Company's operations are subject to extensive regulation by the United
States Food and Drug Administration ("FDA"), the United States Department of
Agriculture ("USDA") and other state and local authorities regarding the
manufacturing, packaging, storage, distribution and advertising and labeling of
the Company's products. The Company's manufacturing facilities and products are
subject to periodic inspection by federal, state and local authorities. The
Company's advertising is subject to regulation by the Federal Trade Commission
("FTC") pursuant to the Federal Trade Commission Act and regulations issued
thereunder. The Company believes that it is currently in substantial compliance
with all material governmental laws and regulations and maintains all material
permits and licenses relating to its operations. Nevertheless, there can be no
assurance that the Company is in compliance with such laws and regulations or
that it will be able to comply with any future laws and regulations. Failure by
the Company to comply with applicable laws and regulations could subject the
Company to civil remedies, including fines, injunctions, recalls or seizures, as
well as potential criminal sanctions, which could have a material adverse effect
on the Company's business, financial condition, results of operations and cash
flows.

In addition, the USDA has proposed new regulations concerning organic food
production and labeling. Although there is uncertainty as to the final form of
such regulations, there can be no assurance that the adoption of these
regulations would not limit the activities of the Company or significantly
increase the cost of regulatory compliance. See "Business -- Government
Regulation."

RISK OF PRODUCT LIABILITY

The manufacture and sale of food products for human consumption involves
the risk of injury to consumers as a result of tampering by unauthorized third
parties, product contamination or spoilage, including the presence of foreign
objects, substances, chemicals, aflatoxin and other agents, or residues
introduced during the growing, storage, handling or transportation phases. While
the Company is subject to governmental inspection and regulations and believes
its facilities comply in all material respects with all applicable laws and
regulations, there can be no assurance that consumption of the Company's
products will not cause a health-related illness in the future or that the
Company will not be subject to claims or lawsuits relating to such matters. The
Company maintains product liability insurance in an amount which the Company
believes to be adequate and requires that its co-packer maintain product
liability insurance with the Company as a co-insured. However, there can be no
assurance that the Company will not incur claims or liabilities for which it is
not insured or that exceed the amount of its insurance coverage or that the
Company will be able to maintain adequate insurance.

11
<PAGE> 13

SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company's revenues and results of operations fluctuate with the
seasonal demand for certain of its products. The Company's revenues are affected
during the spring and summer months due to decreased sales of its canned and
instant soups and chilis and other hot food products. There can be no assurance
that the Company will be able to adjust its expenses on a short-term basis to
minimize the effect of these fluctuations in revenues.

The Company's quarterly results of operations have fluctuated in the past
and will fluctuate in the future based on many factors in addition to
seasonality. These factors include fluctuations in the general economy,
increased competition, changes in operating expenses, failure to successfully
integrate acquired companies, expenses related to acquisitions, the potential
adverse effect of acquisitions, the size and timing of customer orders, new
product introductions, changes in customer preferences and market acceptance of
new products. Many of these factors are outside the control of the Company. Due
to these and many unforeseen factors, it is likely that in some future quarter
the Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of Common Stock would likely be
materially adversely affected.

DEPENDENCE ON CONTRACT MANUFACTURER FOR CANNED PRODUCTS

The Company currently relies and expects to continue to rely on a single
contract manufacturer, or co-packer, for the production of the Company's canned
soups and chilis, which together accounted for approximately 25% of the
Company's revenues for 1997 and the three months ended March 31, 1998. If the
Company's co-packer were unable or unwilling to produce and ship these products
in a timely manner or to produce sufficient quantities to support demand for
these products, the Company would have to identify and qualify new co-packers.
There can be no assurance that the Company would be able to identify and qualify
new co-packers in a timely manner or that such co-packers would allocate
sufficient capacity to the Company in order to meet its requirements, which
would adversely affect the Company's ability to make timely deliveries of its
products. Any significant delay in shipments of the Company's products would
have a material adverse effect on the Company's business, financial condition,
results of operations and cash flows.

LABOR RELATIONS

Although none of the Company's employees are covered by a collective
bargaining agreement, the Company is currently negotiating with the Bakery,
Confectionary & Tobacco Workers' International Union concerning a collective
bargaining agreement covering the Company's regular production, maintenance and
warehouse employees, who represent approximately 37% of its total employees.
Depending on the outcome of these negotiations, the Company could be subject to
work stoppages and increases in labor costs, either of which could have a
material adverse effect on the Company's business, financial condition, results
of operations and cash flows.

NO DIVIDENDS

The Company has not paid any dividends on its Common Stock to date and does
not anticipate declaring or paying any dividends on its Common Stock in the
foreseeable future. The Company is prohibited from paying dividends under its
existing credit agreement.

DEPENDENCE UPON KEY PERSONNEL

The success of the Company is largely dependent upon the personal efforts
and abilities of its executive officers. The loss of the services of one or more
of its executive officers could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company does not
maintain "key person" life insurance policies covering any of its executive
officers. Other than William R. Voss, the Company's Chief Executive Officer, no
other executive officer has an employment agreement with the Company. See
"Management."

12
<PAGE> 14

CONTROL BY EXISTING STOCKHOLDERS

Upon completion of the Offering, the persons and entities listed under
"Principal Stockholders" will own, in the aggregate, approximately 55.6% of the
Company's outstanding Common Stock. Accordingly, such persons and entities, if
they acted together, would be able to elect all directors and exercise control
over the business, policies and affairs of the Company. This concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of the Company, including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices.
The interests of such persons and entities could conflict with the interests of
the other stockholders of the Company. See "Principal Stockholders."

NO PRIOR MARKET

There has been no public market for the Company's Common Stock prior to
this Offering and there can be no assurance that an active public market will
develop or be sustained after this Offering. The initial public offering price
will be determined by negotiations among the Company and the representatives of
the Underwriters, and may bear no relationship to the price at which the Common
Stock will trade after the Offering. See "Underwriting" for the factors to be
considered in determining the initial public offering price. After the Offering,
the market price of the Common Stock may be subject to significant fluctuations
in response to numerous factors, including variations in the annual or quarterly
financial results of the Company or its competitors, changes by financial
research analysts in their estimates of the earnings of the Company or the
failure of the Company to meet such estimates, conditions in the economy in
general or in the markets in which the Company competes, unfavorable publicity
or changes in applicable laws and regulations (or judicial or administrative
interpretations thereof) affecting the Company or the natural and organic food
industry. From time to time, the stock market experiences significant price and
volume volatility, which may affect the market price of the Common Stock for
reasons unrelated to the Company's performance.

IMMEDIATE AND SUBSTANTIAL DILUTION

The purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
shares of approximately $11.82 per share (assuming an initial public offering
price of $15.00). In the event the Company issues additional Common Stock in the
future, including shares which may be issued in connection with future
acquisitions or upon exercise of outstanding options, purchasers of Common Stock
in this Offering may experience further dilution. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

The market price of the Common Stock could be adversely affected by the
sale of substantial amounts of Common Stock in the market following the
Offering. Upon consummation of the Offering, 4,156,664 shares may be deemed
"restricted securities" as that term is defined under the Securities Act of
1933, as amended (the "Securities Act"). In addition, upon consummation of the
Offering, 1,200,000 shares will be reserved for issuance under the Incentive
Plan and Purchase Plan. Of the currently outstanding options to purchase Common
Stock and options to be granted upon consummation of the Offering, options to
purchase 640,300 shares of Common Stock will be exercisable within 60 days of
the consummation of the Offering, subject to lock-up agreements. See
"Underwriting." Prior to the expiration of the lock-up period, the Company
intends to file a registration statement on Form S-8 covering shares issuable
upon exercise of stock options granted under the Company's stock option plans.
Such shares, upon issuance, will be immediately available for resale (in the
case of holders who are affiliates of the Company, subject to certain
limitations of Rule 144 under the Securities Act), subject to lock-up
agreements. Following the expiration or release of lock-up agreements,
"restricted securities" held by certain stockholders will be available for
public resale in accordance with Rule 144 under the Securities Act. See "Shares
Eligible for Future Sale."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

The Board of Directors of the Company is authorized to issue preferred
stock in one or more series without stockholder action. The members of the Board
of Directors of the Company serve staggered terms. The existence of this
"blank-check" preferred stock and the staggered Board of Directors could render
more difficult or discourage an attempt to obtain control of the Company by
means of a tender offer, merger, proxy contest or otherwise. Certain provisions
of the Delaware General Corporation Law may also discourage takeover attempts
that have not been approved by the Board of Directors. See "Management -- Board
of Directors" and "Description of Capital Stock."

13
<PAGE> 15

HISTORY OF THE COMPANY
FORMATION OF NNG

NNG was formed in 1995 by William R. Voss, an experienced food industry
executive, and Frontenac Company, a Chicago-based private equity firm
specializing in the consumer, health care and technology industries, to acquire
and develop natural and organic food companies. NNG believed that the natural
and organic food industry presented attractive investment opportunities for the
following reasons (i) the market was experiencing rapid growth, (ii) the large
number of small, undercapitalized privately owned companies presented
acquisition opportunities and (iii) economies of scale were achievable through
combining companies and brands. During 1995 and early 1996, NNG's sole activity
was to identify and evaluate acquisition candidates. NNG completed its first
acquisition, the Health Valley acquisition, in April 1996 for a purchase price
of approximately $34 million.

HEALTH VALLEY PRIOR TO ACQUISITION BY NNG

Health Valley commenced operations in 1971. During the 1970s and 1980s,
Health Valley introduced numerous innovative products such as low sodium
products and products made with oat bran and organic ingredients. During that
period, the Health Valley(R) brand developed into one of the leading natural
food brands, especially within the then-emerging natural food retail channel of
distribution. In the late 1980s, Health Valley created a line of fat-free
products which gained mainstream acceptance. In order to accelerate growth,
Health Valley expanded its distribution into mass merchandise and club wholesale
channels in addition to the natural food and grocery retail channels where it
had traditionally sold its products.

Due in large part to the success of its fat-free line, Health Valley's
sales grew rapidly from 1990 to a peak of approximately $123 million in 1993. By
1993, over one-third of Health Valley's total sales were to mass merchandisers
and club wholesalers. In order to handle increasing sales and prepare for future
growth, Health Valley invested approximately $40 million to equip the
manufacturing facility in Irwindale, California with new equipment capable of
handling production far in excess of its requirements at that time. Much of the
cost of acquiring this equipment was financed through debt and capital leases.
Beginning in late 1993 and continuing through early 1996, sales declined as a
result of (i) increased competition in the fat-free segment, (ii) changing
customer preferences from fat-free to low-fat foods and (iii) the reduction or
elimination of Health Valley products sold by some natural food retailers and
conventional grocery retailers due to the lack of differentiation in the
products sold through warehouse clubs. As sales declined, Health Valley became
unprofitable and experienced cash flow problems.

HEALTH VALLEY TURNAROUND

Upon acquiring Health Valley, NNG took immediate steps to eliminate Health
Valley's negative cash flow by implementing cost controls and other measures. By
the end of 1996, the Health Valley business began to generate positive operating
cash flow. Shortly after the acquisition, the Company commenced its search for a
management team to work with William R. Voss in completing the turnaround of the
Health Valley business and in implementing its plan for future growth of the
business. Beginning in June 1996, the Company hired Michael D. de Boom as Senior
Vice President-Operations, Diane J. Beardsley as Senior Vice President and Chief
Financial Officer and William J. Nictakis as Senior Vice President-Sales and
Marketing, as well as additional management personnel. As the Company's
management team was completed, the Company developed plans to grow the Health
Valley business.

During the second half of 1996, NNG redirected the Company's sales focus
away from the mass merchandise and club wholesale channels that accelerated
Health Valley's growth in the early 1990s and towards the natural food and
conventional grocery channels, which NNG believed were the keys to the long-
term development of the Company's brands. In addition, the Company initiated a
comprehensive repositioning of the Health Valley(R) brand.

14
<PAGE> 16

HEALTH VALLEY(R) BRAND REPOSITIONING

When the Company acquired Health Valley in 1996, its products were
positioned primarily as "fat-free," despite the products' numerous other
benefits such as natural and organic ingredients, moderate sodium, high fiber
and natural vitamins. Moreover, in order to make many of its products without
fat, Health Valley sometimes compromised on flavor. Although most of the Health
Valley product packaging clearly indicated that the products were fat-free,
there was no unifying design or color scheme to identify the brand and
communicate its positioning to consumers.

Early in 1997, the Company initiated a comprehensive review of the Health
Valley(R) brand to determine how to best position the brand in the market. As a
result of this review, the Company determined that instead of continuing to
position Health Valley(R) as "America's No. 1 Fat-Free Brand," Health Valley(R)
should be positioned as the leading brand for great tasting, premium natural and
organic foods for people interested in taking charge of their health and well
being.

In support of the new brand positioning, the Company decided to reformulate
certain products to improve taste, appearance and texture and also to redesign
its packaging in order to:

- Unify the brand under a common package design system incorporating
consistent logo placement and treatment, consistent type faces, color
schemes and artwork.

- Emphasize the broad nutritional advantages of Health Valley(R) products
compared with other brands.

- Increase awareness of product quality and taste.

Throughout 1997 and early 1998, the Company directed significant management
attention and research and development effort to the reformulation of its
products in support of the new brand positioning. Additionally, the Company
engaged a leading design firm early in 1997 to develop the package designs for
the Health Valley(R) brand. A design system was approved by the Company in June
1997 and, since then, the Company has been designing and producing the new
packages. As a result of these efforts, the Company began introducing
reformulated and repackaged products in the first half of 1998.

THE BREADSHOP ACQUISITION

In October 1996, the Company acquired Breadshop for a purchase price of
approximately $9 million, which significantly enhanced the Company's market
share in the natural cereal and granola segment of the natural food industry.
Following this acquisition, the Company integrated Breadshop's operations with
those of Health Valley.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,300,000 shares of
Common Stock offered hereby (at an assumed initial public offering price of
$15.00 per share less underwriting discounts and commissions and estimated
offering expenses) are estimated to be approximately $45.1 million ($52.0
million if the Underwriters' over-allotment option is exercised in full). The
net proceeds will be used to (i) redeem all of the outstanding shares of the
Company's Series A Preferred Stock (approximately $23.6 million) and (ii) repay
indebtedness under an existing revolving credit facility and two existing term
loans (Term Loan A and Term Loan B) with LaSalle National Bank ("LaSalle")
(approximately $20.1 million). The remaining $1.4 million will be available for
general corporate purposes. Pending such uses, the net proceeds will be invested
in short-term, interest-bearing, investment grade securities. Certain holders of
the Series A Preferred Stock are affiliates of the Company. See "Certain
Transactions." The borrowings under the LaSalle revolving credit facility and
term loans, which were incurred to finance the acquisitions of Health Valley and
Breadshop, accrue interest, at the Company's option, at either LaSalle's prime
rate plus 0.25% per annum, or the London InterBank Offered Rate (LIBOR) plus
2.50% per annum. The revolving credit facility expires on June 30, 1999 and Term
Loan A and Term Loan B mature on June 30, 2003 and October 31, 2002,
respectively. As of March 31, 1998, the weighted average interest rates for the
revolving credit facility, Term Loan A and Term Loan B were 8.31%, 8.16% and
8.13%, respectively.

15
<PAGE> 17

DIVIDEND POLICY

The Company intends to retain its earnings, if any, to finance the
expansion of its business and for general corporate purposes and therefore does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Any payment of future dividends will be at the discretion of the Board
of Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other factors that the
Company's Board of Directors deems relevant. Additionally, the Company's
existing credit agreement with LaSalle prohibits the Company from paying
dividends and it is likely that future credit agreements will contain a similar
restriction.

DILUTION

The net tangible book deficit of the Company as of March 31, 1998 (after
giving effect to $7.3 million of restructuring and other charges (before a tax
benefit of $2.9 million) recorded in the second quarter of 1998) was
approximately $(21.4 million), or $(5.15) per share of Common Stock. After
giving effect to the sale of the 3,300,000 shares of Common Stock offered hereby
(at an assumed initial public offering price of $15.00 per share less the
underwriting discounts and commissions and estimated offering expenses) and the
application of the net proceeds therefrom, the Company's pro forma net tangible
book value at March 31, 1998 would have been approximately $23.7 million, or
$3.18 per share. This represents an immediate increase in pro forma net tangible
book value of $8.33 per share to existing stockholders and an immediate dilution
of $11.82 per share to new investors purchasing the shares in the Offering. The
following table illustrates this pro forma dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Net tangible book deficit per share before the Offering... $(5.15)
Increase per share attributable to new investors.......... 8.33
------
Pro forma net tangible book value per share after the
Offering.................................................. 3.18
------
Dilution per share to new investors......................... $11.82
======
</TABLE>

The following table summarizes as of March 31, 1998, after giving effect to
the Offering, the number of shares of Common Stock purchased from the Company,
the total consideration paid therefor, and the average price per share paid by
the existing stockholders and by the new investors purchasing shares of Common
Stock in the Offering before deduction of the underwriting discounts and
commissions and estimated offering expenses payable by the Company:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 4,156,664 55.7% $ 1,433,333 2.8% $ 0.34
New investors................ 3,300,000 44.3 49,500,000 97.2 $15.00
--------- ----- ----------- -----
Total.............. 7,456,664 100.0% $50,933,333 100.0%
========= ===== =========== =====
</TABLE>

The above computations assume no exercise of the Underwriters'
over-allotment option and no exercise of options to purchase (i) 600,300 shares
subject to options which will have vested within 60 days of the consummation of
the Offering with a weighted average exercise price of $0.62 per share, (ii)
40,000 shares subject to options which will be granted and which will be
exercisable on the date of consummation of the Offering with an exercise price
equal to the initial public offering price, (iii) 115,420 shares subject to
unvested options with a weighted average exercise price of $0.37 per share and
(iv) 116,920 shares subject to options which will be granted, but will not be
exercisable, on the date of consummation of the Offering with an exercise price
equal to the initial public offering price. To the extent options are exercised,
there will be further dilution to new investors.

16
<PAGE> 18

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1998 and as adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom to redeem all of the
outstanding shares of the Company's Series A Preferred Stock and to repay the
outstanding indebtedness under the LaSalle credit agreement. See "Use of
Proceeds." This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus. See also "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Description of Capital Stock."

<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------
ACTUAL AS ADJUSTED(1)(2)
------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt........................ $ 2,866 $ --
======= =======
Long-term debt, less current maturities..................... $17,234 $ --
Series A Preferred Stock, par value $.001 per share, 35,000
shares authorized; 19,566.667 shares issued and
outstanding, actual; no shares authorized, issued and
outstanding, as adjusted.................................. 23,550 --
Stockholders' equity:
Preferred Stock, par value $.001 per share, 2,000,000
shares authorized; no shares issued and outstanding.... -- --
Common Stock, par value $.001 per share, 50,000,000 shares
authorized; 4,156,664 shares issued and outstanding,
actual; 7,456,664 shares issued and outstanding, as
adjusted............................................... 4 7
Additional paid-in-capital.................................. 1,429 46,561
Accumulated deficit......................................... (4,605) (8,996)
------- -------
Total stockholders' equity (deficit).............. (3,172) 37,572
------- -------
Total capitalization.............................. $37,612 $37,572
======= =======
</TABLE>

(1) Adjustment has been made to reflect $7.3 million in restructuring and other
charges (before a tax benefit of $2.9 million) recorded in the second
quarter of 1998.

(2) Excludes options to purchase (i) 600,300 shares subject to options which
will have vested within 60 days of the consummation of the Offering with a
weighted average exercise price of $0.62 per share, (ii) 40,000 shares
subject to options which will be granted and which will be exercisable on
the date of consummation of the Offering with an exercise price equal to the
initial public offering price, (iii) 115,420 shares subject to unvested
options with a weighted average exercise price of $0.37 per share and (iv)
116,920 shares subject to options which will be granted, but will not be
exercisable on the date of consummation of the Offering, with an exercise
price equal to the initial public offering price.

17
<PAGE> 19

SELECTED CONSOLIDATED FINANCIAL DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The statement of operations data for the year ended December 31, 1995, the
period January 1, 1996 to April 15, 1996, the period April 15, 1996 through
December 31, 1996 and the year ended December 31, 1997 and the balance sheet
data at December 31, 1996 and 1997 are derived from the Consolidated Financial
Statements of the Company and the Predecessor Company, which have been audited
by Deloitte & Touche LLP, independent auditors, and which are contained
elsewhere in this Prospectus. The balance sheet data at December 31, 1995 have
been derived from audited financial statements of the Company which are not
included herein. The statement of operations data for each of the two years
ended December 31, 1994, and the balance sheet data at December 31, 1993 and
1994, are derived from the financial statements of the Company, which have not
been audited. Such unaudited financial statements for 1993 and 1994, along with
the financial data as of March 31, 1998 and for the three months ended March 31,
1997 and 1998, are unaudited but, in the opinion of management, includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data. The results of operations for the three months
ended March 31, 1998 are not necessarily indicative of the results to be
expected for the entire year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality." The selected pro
forma income statement data set forth below are for informational purposes only
and may not necessarily be indicative of the results of operations of the
Company in the future. The following selected financial data should be read in
conjunction with the Company's financial statements and the related notes
thereto, which are included elsewhere in this Prospectus, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
PREDECESSOR COMPANY COMPANY
--------------------------------------------- -----------------------------------------------------
JANUARY 1, APRIL 15, THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1996 TO 1996 TO YEAR ENDED MARCH 31,
-------------------------------- APRIL 15, DECEMBER 31, DECEMBER 31, -----------------------
1993(1) 1994(1) 1995(2) 1996(2) 1996(3) 1997 1997 1998
-------- -------- ---------- ---------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................ $123,418 $105,088 $ 73,351 $ 18,221 $ 39,942 $ 67,898 $ 16,299 $ 17,568
Cost of sales............ 81,071 69,239 53,839 13,897 27,180 42,370 10,627 10,960
-------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit............. 42,347 35,849 19,512 4,324 12,762 25,528 5,672 6,608
Marketing, selling and
distribution
expenses............... 23,968 20,629 16,651 5,563 7,177 17,366 3,832 4,891
General and
administrative
expenses............... 6,259 9,990 6,541 2,937 5,034 5,425 1,241 1,202
Amortization of goodwill
and trademarks......... -- -- -- -- 114 334 83 90
-------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss)................. 12,120 5,230 (3,680) (4,176) 437 2,403 516 425
Other income(4).......... 69 1,581 645 169 -- -- -- --
Interest expense, net.... 1,252 1,291 1,502 476 1,052 1,911 497 458
-------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 10,937 5,520 (4,537) (4,483) (615) 492 19 (33)
-------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Provision (benefit) for
income taxes........... 4,467 2,100 1,137 (1,166) 13 387 17 (25)
-------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........ $ 6,470 $ 3,420 $ (5,674) $ (3,317) (628) 105 2 (8)
======== ======== ========== ==========
Preferred dividends...... 1,330 2,082 514 571
---------- ---------- ---------- ----------
Net loss attributable to
common stockholders.... $ (1,958) $ (1,977) $ (512) $ (579)
========== ========== ========== ==========
Net loss per common share
-- basic and diluted... $ (.62) $ (.48) $ (.13) $ (.14)
========== ========== ========== ==========
Weighted average number
of common shares
outstanding............ 3,161,737 4,132,491 4,059,903 4,156,664
========== ========== ========== ==========
PRO FORMA STATEMENT OF
OPERATIONS DATA(5):
Income before income
taxes.................. $ 2,154 $ 333
Provision for income
taxes.................. 1,052 121
---------- ----------
Net income............... $ 1,102 $ 212
========== ==========
Net income per share..... $ 0.15 $ .03
========== ==========
Pro forma weighted
average common shares
outstanding............ 7,432,491 7,456,664
========== ==========
</TABLE>

18
<PAGE> 20

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
----------------------------------------------- ------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(7)
------- ------- ------- ------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 397 $ 1,525 $(6,764) $ (443) $ 2,347 $ 1,449 $ 5,588
Plant and equipment.............. 21,948 23,858 25,240 26,374 23,358 22,603 18,424
Total assets..................... 43,197 43,421 38,578 53,330 50,212 48,317 48,035
Long-term debt................... 5,761 5,637 5,398 19,304 18,835 17,234 --
Redeemable preferred stock and
accrued dividends.............. 19,997 22,979 23,550 --
Total stockholders' equity
(deficit)...................... 16,938 20,358 13,745 (716) (2,593) (3,172) 37,572
</TABLE>

- ---------------
(1) The combined statement of operations data for the years ended December 31,
1993 and 1994 represent the combined results of the Predecessor Company. The
selected consolidated data include certain reclassification adjustments to
conform the presentation of the 1993 and 1994 financial data with that of
the Company.

(2) The combined statement of operations data for the year ended December 31,
1995 and the period January 1, 1996 to April 15, 1996 represent the combined
results of the Predecessor Company and exclude NNG's operating losses for
the periods, which were not material. The selected consolidated data include
certain reclassification adjustments to conform the presentation of 1995
financial data with that of the Company.

(3) The statement of operations data for the period from April 15, 1996 to
December 31, 1996 represent the results of NNG for the year ended December
31, 1996, together with the results of operations of the Predecessor Company
subsequent to its acquisition on April 15, 1996 and Breadshop subsequent to
its acquisition on October 31, 1996. The operations of NNG for the period
from January 1, 1996 to April 15, 1996 were not material. The results of the
Company are not comparable to those of the Predecessor Company in light of
the changes in the capital structure to fund the acquisitions, which
included the issuance of preferred stock and the incurrence of additional
debt. Additionally, the purchase accounting adjustments related to the
acquisitions changed the cost basis of the Company's fixed assets,
trademarks and resulting goodwill. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- General."

(4) Other income for the years ended December 31, 1993, 1994, 1995 and 1996
primarily represents revenues from the sale of cookbooks, which was
discontinued in 1996.

(5) The pro forma statement of operations data reflect the elimination of the
preferred dividends and reduction of the net interest expense, and the
related income tax effect, resulting from the use of a portion of the net
proceeds of the Offering to redeem the Series A Preferred Stock and repay
certain indebtedness. See "Use of Proceeds."

(6) EBITDA represents income (loss) before income taxes, interest expense (net
of interest income), depreciation and amortization. EBITDA has been included
because management uses it as a supplementary tool to measure the Company's
ability to generate operating cash flow. Management also uses EBITDA to
establish performance goals and related bonuses for selected Company
employees. EBITDA subsequent to the acquisition of Health Valley on April
15, 1996 reflects the impact of the cost reduction efforts and overall
improved operating results. EBITDA does not represent cash flow from
operations as defined by generally accepted accounting principles and should
not be considered as a substitute for net income as an indicator of the
Company's operating performance or cash flow as a measure of liquidity.
EBITDA as presented may not be comparable to other similarly titled measures
of other companies.

(7) As adjusted (i) for the Offering and the application of the net proceeds
therefrom and (ii) to reflect the $7.3 million in restructuring and other
charges (before a tax benefit of $2.9 million) recorded in the second
quarter of 1998. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Subsequent
Event."

19
<PAGE> 21

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto of the Company included elsewhere
in this Prospectus.

GENERAL

NNG was founded in 1995 by current Chairman, Chief Executive Officer and
President William R. Voss and Frontenac Company to acquire and develop natural
and organic food companies. The Company sells natural and organic breakfast
cereals and granolas, baked goods and soups and chilis primarily under its
Health Valley(R) and Breadshop's(R) brands, to natural food and specialty food
distributors and, in certain instances, directly to retailers, including natural
food retailers, grocery chains, and warehouse clubs. The Company operates out of
a modern facility located in Irwindale, California which houses its
manufacturing and administrative functions.

NNG completed its first acquisition, the Health Valley acquisition, in
April 1996. Prior to the acquisition, Health Valley experienced significant
business and financial difficulties. NNG took immediate steps to resolve Health
Valley's difficulties by implementing cost controls and other measures.

The Health Valley acquisition provided NNG with an operating and
manufacturing platform for future acquisitions. NNG's second acquisition, the
Breadshop acquisition, was completed in October 1996. The manufacturing and
distribution operations of Breadshop were integrated into the Company's
Irwindale facility in January 1997. This consolidation produced significant
operating efficiencies in the manufacturing and distribution of Breadshop's
cereal and granola products.

Following these two acquisitions, the Company focused on cost reduction and
efficiency improvements in order to generate funds to support increased
marketing expenditures and investments in the Health Valley(R) and
Breadshop's(R) brands, as well as to service acquisition debt. Cost reduction
initiatives included (i) more efficient purchasing, (ii) the reformulation of
certain products and reengineering of certain packaging and (iii) workforce
reductions.

The following table sets forth certain statement of operations data of the
Company for each of the periods presented and pro forma data for 1996. This
table should be read in conjunction with the financial statements and related
notes thereto appearing elsewhere in the Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
----------------------------- MARCH 31,
1996 -------------------
1995 PRO FORMA 1997 1997 1998
---- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales..................................... $73,351 $58,163 $67,898 $16,299 $17,568
Cost of sales................................. 53,839 41,077 42,370 10,627 10,960
------- ------- ------- ------- -------
Gross profit.................................. 19,512 17,086 25,528 5,672 6,608
Marketing, selling and distribution
expenses.................................... 16,651 12,740 17,366 3,832 4,891
General and administrative expenses........... 6,541 7,971 5,425 1,241 1,202
Amortization of goodwill and trademarks....... -- 114 334 83 90
------- ------- ------- ------- -------
Operating income (loss)....................... (3,680) (3,739) 2,403 516 425
Other income.................................. 645 169 -- -- --
Interest expense, net......................... 1,502 1,528 1,911 497 458
------- ------- ------- ------- -------
Income (loss) before income taxes............. (4,537) (5,098) 492 19 (33)
Provision (benefit) for income taxes.......... 1,137 (1,153) 387 17 (25)
------- ------- ------- ------- -------
Net income (loss)............................. $(5,674) $(3,945) $ 105 $ 2 $ (8)
======= ======= ======= ======= =======
</TABLE>

20
<PAGE> 22

The results of operations data for 1996 set forth in the table above
represent the pro forma combined results of the Predecessor Company for the
period January 1, 1996 to April 15, 1996 and the Company for the year ended
December 31, 1996. The statement includes the pro forma adjustments to reflect
changes in depreciation and interest expense, income tax benefits at statutory
rates and the amortization expense associated with goodwill resulting from the
acquisition. The results of operations for 1995 reflect the results of the
Predecessor Company for 1995. NNG's operating results for 1995 subsequent to its
formation in October 1995 were immaterial. The results of operations for 1995
are not comparable to subsequent periods because they reflect the operation of
Health Valley by prior management before the Health Valley acquisition. In
addition, the results of the Company are not comparable to those of the
Predecessor Company in light of the changes in the capital structure to fund the
acquisitions, which included the issuance of the Series A Preferred Stock and
the incurrence of additional debt. Additionally, the purchase accounting
adjustments related to the acquisitions changed the cost basis of the Company's
fixed assets, trademarks and resulting goodwill.

Sales are reported net of cash discounts and product returns. The Company's
cost of sales consists primarily of raw materials, packaging, labor and overhead
costs. Raw material costs are the single largest component of the cost of sales.
Selling and marketing expenses are comprised of the cost of the Company's sales
force, broker commissions, and promotional and other marketing expenses. As is
customary in the industry, marketing expenses include (i) trade promotions,
which are directed at obtaining retail display support, achieving desired retail
prices and securing retail shelf space, (ii) participation in customers'
advertising and (iii) consumer promotions, which include Company mailings,
nutritional publications and "on-product" promotions. In addition, the
Predecessor Company provided rebates to retail consumers who mailed to the
Company a specified number of proof-of-purchase labels. This rebate program, the
cost of which was included in marketing expenses, was discontinued early in
1996. The Company intends to shift the emphasis of its marketing programs from
"trade push" to "consumer pull." Accordingly, an increasing percentage of
planned marketing expenditures will be directed toward advertising and consumer
promotions, and a decreasing percentage toward promotional programs.

SUBSEQUENT EVENT

In the second quarter of 1998, the Company recorded a $7.3 million charge
to operations (before a tax benefit of $2.9 million) reflecting its decision to
restructure certain operations of the Company in light of revisions in its
business strategies, and for certain litigation in which it is involved.
Approximately $5.3 million was recorded as a restructuring charge comprised of
the following components (i) a $2.1 million noncash charge for the write-off of
the leasehold improvements in the Company's distribution warehouse as a result
of the Company's decision to outsource this function and not renew the lease on
the warehouse, (ii) a $2.1 million noncash charge for the writedown to net
realizable value of certain manufacturing assets which the Company is holding
for sale and other assets whose values have been impaired by the Company's
revised product offering and (iii) a $1.1 million noncash charge for the
writedown of inventory resulting from the Company's decision to accelerate the
introduction of new products and packaging.

A charge of $2.0 million relates to certain litigation with respect to
which the Company entered into an agreement in principle to settle, subject to
final documentation and court approval, during the second quarter of 1998. See
"Business -- Legal Proceedings." It is anticipated that the settlement and
resulting legal expenses will be paid out commencing in the second half of 1998
and continue through the first half of 1999.

The $7.3 million charge to operations has caused defaults under the net
worth, current ratio and fixed charge covenants of the Company's existing credit
agreement with LaSalle, which existing covenant defaults LaSalle has agreed to
waive.

21
<PAGE> 23

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data of the
Company expressed as a percentage of net sales for each of the periods
presented. This table should be read in conjunction with the financial
statements and related notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------- MARCH 31,
1996 -------------
1995 PRO FORMA 1997 1997 1998
----- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PERCENTAGES OF NET SALES:
Net sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales....................................... 73.4 70.6 62.4 65.2 62.4
----- ----- ----- ----- -----
Gross profit........................................ 26.6 29.4 37.6 34.8 37.6
Marketing, selling and distribution expenses........ 22.7 21.9 25.6 23.5 27.9
General and administrative expenses................. 9.0 13.7 8.0 7.6 6.8
Amortization of goodwill and trademarks............. -- 0.2 0.5 0.5 0.5
----- ----- ----- ----- -----
Operating income (loss)............................. (5.1) (6.4) 3.5 3.2 2.4
Other income........................................ 0.8 0.3 -- -- --
Interest expense, net............................... 2.0 2.6 2.8 3.0 2.6
----- ----- ----- ----- -----
Income (loss) before income taxes................... (6.3) (8.7) 0.7 (0.2) (0.2)
Provision (benefit) for income taxes................ 1.6 (2.0) 0.6 0.2 (0.2)
----- ----- ----- ----- -----
Net income (loss)................................... (7.9)% (6.7)% 0.1% -- --
===== ===== ===== ===== =====
</TABLE>

Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997

Net sales for the three months ended March 31, 1998 increased $1.3 million,
or 7.8%, from the comparable period in 1997. Excluding the impact of wholesale
club sales, net sales for the first quarter of 1998 increased $1.7 million, or
11.4%, from the first quarter of 1997. The increase was primarily due to
increased sales in the natural foods channel and private label, which the
Company began to actively pursue in the second half of 1997. The increase in
sales in the natural food channel was substantially attributable to cereal and
canned soup sales which increased primarily due to additional promotional
activities. The approximately $400,000 decline in the wholesale club channel was
due to the Company's decision to increase emphasis on the natural food channel.

The gross margin percentage for the three months ended March 31, 1998
increased 2.8% from 34.8% for the comparable period in 1997, principally due to
the benefits derived from the Company's efforts to reduce material and
manufacturing costs and, to a lesser extent, increased sales volumes which
leveraged fixed costs.

Marketing, selling and distribution expenses as a percentage of net sales
for the three months ended March 31, 1998 increased 4.4% from the comparable
period in 1997, as a result of increased promotional and advertising activities.
These activities increased as the Company began changing its marketing strategy
to lessen emphasis on trade promotions in favor of a multi-faceted program which
includes new packaging, product reformulations to improve taste and nutritional
value, and increased brand advertising including increased participation in
customers' advertising. Implementation of the new marketing strategy is expected
to continue throughout 1998.

General and administrative expenses as a percentage of net sales for the
three months ended March 31, 1998 decreased 0.8% from the comparable period in
1997 as a result of increased sales volumes.

Amortization of goodwill and trademarks as a percentage of net sales for
the three months ended March 31, 1998 was level with the comparable period in
1997, despite an increase in the goodwill resulting from the acquisition of
Health Valley. This increase resulted from the final allocation of the purchase
price of the Health Valley acquisition, which closed in April 1996.

Operating income as a percentage of net sales for the three months ended
March 31, 1998 decreased 0.8% from the comparable period in 1997 primarily
reflecting the factors discussed above.

22
<PAGE> 24

Interest expense for the three months ended March 31, 1998 decreased
$39,000 from the comparable period in 1997 as cash generated by operations
enabled the Company to decrease its outstanding debt.

Due to a pre-tax loss for the three months ended March 31, 1998, the tax
benefit for such period was $25,000 compared to a provision for income taxes of
$17,000 for the comparable period in 1997.

The Company incurred a net loss of $8,000 in the three months ended March
31, 1998 compared to net income of $2,000 for the comparable period in 1997,
primarily reflecting the factors discussed above.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Net sales for 1997 increased $9.7 million, or 16.7%, from 1996. Excluding
wholesale club channel sales, net sales for 1997 increased $12.3 million, or
23.9%, from 1996. This increase was substantially attributable to the inclusion
of a full year of sales of Breadshop's(R) products, which accounted for $10.6
million of the increase, as well as an increase of private label sales of
approximately $923,000. The approximately $2.6 million decline in the wholesale
club channel sales was due to the Company's decision to increase the Company's
emphasis on the natural food channel.

The gross margin percentage for 1997 increased 8.2% from 1996, primarily
due to the benefits derived from the Company's efforts to reduce material and
manufacturing costs and, to a lesser extent, the leveraging of fixed costs
resulting from the relocation of Breadshop's manufacturing operations to the
Company's Irwindale location.

Marketing, selling and distribution expenses as a percentage of net sales
for 1997 increased 3.7% from 1996 due to increased promotional and advertising
activities for the Health Valley(R) brand and the traditionally higher level of
spending in this area by Breadshop, which was acquired in October 1996.

General and administrative expenses as a percentage of net sales for 1997
decreased 5.7% from 1996, as lower general and administrative expenses were
spread over a larger sales base. General and administrative expenses in 1997
were lower partially as a result of the realization of a full year of benefits
associated with a smaller workforce, and the absence of certain nonrecurring
charges included in 1996 associated with Health Valley prior to its acquisition
by NNG.

Amortization of goodwill and trademarks as a percentage of net sales for
1997 increased 0.3% from 1996. The increase was due to the full year impact of
the amortization of the goodwill and trademarks resulting from the Health Valley
acquisition in April 1996 and the Breadshop acquisition in October 1996.

Operating income as a percentage of net sales for 1997 was 3.5% compared to
operating loss as a percentage of net sales of 6.4% in 1996, primarily
reflecting the factors discussed above.

Interest expense for 1997 increased $383,000 from 1996 due to the full year
impact of the debt incurred in connection with the acquisitions of Health Valley
and Breadshop.

The provision for income taxes for 1997 was $387,000 compared to a tax
benefit of $1.2 million in 1996 due to improved operating results. The
non-deductibility of the amortization of goodwill and trademarks for income tax
purposes significantly affected the Company's effective income tax rate.

Net income for 1997 was $105,000 compared to a net loss of $3.9 million in
1996, primarily reflecting the factors discussed above.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Net sales for 1996 decreased $15.2 million, or 20.7%, from 1995, primarily
due to a $13.4 million decrease in sales in the wholesale club channel which was
due to overall decreased consumer demand for fat-free products and the Company's
decision to increase emphasis on the natural food channel.

The gross margin percentage for 1996 increased 2.8% from 1995 primarily due
to cost reductions implemented by the Company and reduced sales to the
lower-margin wholesale club channel.

23
<PAGE> 25

Marketing, selling and distribution expenses as a percentage of net sales
for 1996 decreased 0.8% from 1995 due to the reduction of promotional and
advertising spending subsequent to the Company's acquisition of Health Valley.

General and administrative expenses as a percentage of net sales for 1996
increased 4.7% from 1995, due to higher general and administrative expenses
being spread over a lower sales base. General and administrative expenses were
higher in 1996 partially due to certain nonrecurring charges in 1996 associated
with Health Valley prior to its acquisition by NNG.

Amortization of goodwill and trademarks was $114,000 for 1996. The
amortization is attributable to the goodwill and trademarks resulting from the
acquisitions of Health Valley and Breadshop in 1996.

Operating loss as a percentage of net sales for 1996 increased 1.3% from
1995, primarily reflecting the factors discussed above.

Interest expense for 1996 increased $26,000 from 1995. Although the overall
debt level for 1996 increased $6.9 million from 1995 primarily as a result of
the acquisition of Health Valley and Breadshop in 1996, the impact of the
interest expense was minimized due to the refinancing of debt at lower effective
interest rates.

The income tax benefit of $1.2 million in 1996 compares to a provision for
income tax of $1.1 million in the prior year, due to the lower operating results
for 1996 and the inability of the Predecessor Company to file consolidated
returns prior to the Health Valley acquisition.

Net loss for 1996 was $3.9 million, a decrease of $1.7 million from 1995,
primarily reflecting the factors discussed above.

UNAUDITED QUARTERLY RESULTS

The following table presents unaudited quarterly financial information for
the last three quarters of 1996, 1997 and the first quarter of 1998. This
information has been prepared by the Company on a basis consistent with the
Company's audited financial statements and includes all adjustments (consisting
only of normal recurring adjustments) which management considers necessary for a
fair presentation of the results for such quarters.

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
1996 1997 1998
---------------------------------- --------------------------------------- --------
JUNE 30(1) SEPT. 30 DEC. 31(2) MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31
---------- -------- ---------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $10,141 $13,097 $16,704 $16,299 $15,767 $17,025 $18,807 $17,568
Cost of sales............... 6,822 8,737 11,621 10,627 9,830 10,517 11,396 10,960
------- ------- ------- ------- ------- ------- ------- -------
Gross profit................ 3,319 4,360 5,083 5,672 5,937 6,508 7,411 6,608
Marketing, selling and
distribution.............. 1,876 2,228 3,073 3,832 3,812 4,356 5,366 4,891
General and
administrative............ 1,500 1,653 1,721 1,241 1,371 1,360 1,453 1,202
Amortization................ 6 21 87 83 83 83 85 90
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)..... $ (63) $ 458 $ 202 $ 516 $ 671 $ 709 $ 507 $ 425
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

- ---------------

(1) Includes the results of operations of Health Valley subsequent to its
acquisition in April 1996.

(2) Includes the results of operations of Breadshop subsequent to its
acquisition in October 1996.

SEASONALITY

The Company's historical net sales have exhibited seasonality with the
first and fourth quarters having the highest net sales. These two quarters
reflect higher sales of the Company's instant and canned soups and chilis as
well as other hot food products, as these products are most frequently consumed
during the fall and winter seasons. The Company's quarterly results of
operations have fluctuated in the past and will fluctuate in the future based on
many factors in addition to seasonality. See "Risk Factors -- Seasonality and
Quarterly Fluctuations."

24
<PAGE> 26

LIQUIDITY AND CAPITAL RESOURCES

The Company's net cash provided by operating activities totaled $2.5
million for the three months ended March 31, 1998, compared to $0.8 million for
the three months ended March 31, 1997. The increase of $1.7 million was due to
reductions in net working capital investments. During this period, the Company
was able to reduce inventory levels and accounts receivable through enhanced
collection efforts. Working capital reductions, together with cash generated by
operating activities, during the three months ended March 31, 1998 enabled the
Company to reduce its outstanding debt by $1.6 million during the first quarter
of 1998. Net cash provided by operating activities totaled $0.3 million and $3.5
million for the years ended December 31, 1997 and December 31, 1996,
respectively. The decrease of $3.2 million was attributable to an increase in
net working capital investments, partially offset by the improved performance of
the Company's operations. During 1997, the Company's working capital position
improved by approximately $2.7 million, from a working capital deficit of
$443,000 at December 31, 1996 to working capital of approximately $2.3 million
at December 31, 1997. The improvement in the Company's working capital position
resulted from the cash generated by operating activities which enabled the
Company to fund certain accrued liabilities assumed or incurred in connection
with the acquisitions of Health Valley and Breadshop.

Cash used in investing activities has totalled $0.2 million and $0.3
million for the three months ended March 31, 1998 and 1997, respectively, and
$0.9 million and $43.3 million for the years ended December 31, 1997 and 1996.
Cash used in investing activities in the years ended December 31, 1997 primarily
relates to the completion of the Health Valley and Breadshop acquisitions.
Capital expenditures have totaled approximately $600,000 since the acquisition
of Health Valley in April 1996 through March 31, 1998. Capital expenditures have
been modest due to significant underutilized manufacturing capacity in the
Company's facility acquired as part of the Health Valley acquisition in 1996.
The Company's capital expenditure plan for the remainder of 1998 totals $1.2
million. From the date of acquisition of Health Valley in April 1996 through
March 31, 1998, capital expenditures were partially funded by the sale of
certain excess equipment.

Cash used in financing activities for the three months ended March 31, 1998
and 1997 totaled $2.3 million and $0.8 million, respectively. The increase of
$1.5 million was primarily due to the higher repayments of the Company's
borrowings in 1998. Cash provided by financing activities totalled $0.3 million
and $39.6 million for the years ended December 31, 1997 and 1996, respectively.
The decrease of $39.3 million is primarily due to the issuance in 1996 of $0.9
million of Common Stock and $18.9 million of Series A Preferred Stock and
borrowings of $19.0 million primarily under the Company's term loan facilities
to finance the Health Valley and Breadshop acquisitions.

As a part of its growth strategy, the Company seeks to acquire competing
and complementary natural food brands. The Company believes that its capital
structure following the Offering will enable it to expand its credit facilities
to fund the purchase price of future acquisitions or the operations of any
acquired businesses. There can be no assurance, however, that the Company will
be successful in increasing its credit facilities or that it will obtain such
facilities on terms acceptable to the Company.

The Company's credit agreement with LaSalle presently includes a $6.5
million revolving credit facility of which approximately $4.7 million was
available at March 27, 1998, based on eligible receivables and inventory. The
credit agreement also includes two term loan facilities (Term Loan A and Term
Loan B) which had outstanding borrowings of $10.3 million and $5.7 million,
respectively, as of March 31, 1998. The revolving credit facility expires on
June 30, 1999. Term Loans A and B mature on June 30, 2003 and October 31, 2002,
respectively, and each requires quarterly repayments of principal. All of these
borrowings are secured by all of the Company's assets. Interest on borrowings
under these agreements accrue, at the Company's option, at either LaSalle's
prime rate plus 0.25% per annum, or the London Interbank Offered Rate (LIBOR)
plus 2.5% per annum. As of March 31, 1998, the weighted average interest rate on
the revolving credit facility was 8.31%, and the weighted average interest rates
on Term Loan A and Term Loan B were 8.16% and 8.13%, respectively. The $7.3
million charge to operations has caused defaults under the net worth, current
ratio and fixed charge covenants of this credit agreement with LaSalle, which
existing covenant defaults LaSalle has agreed to waive.

25
<PAGE> 27

The Company intends to redeem all of the outstanding shares of Series A
Preferred Stock with a portion of the proceeds of the Offering. The Company also
intends to use net proceeds of the Offering to repay outstanding borrowings
under the revolving credit facility and term loans.

At December 31, 1997, the Company had a net operating loss carryforward of
approximately $5.2 million for federal income tax purposes. The net operating
loss carried forward principally from the operations of Health Valley prior to
its acquisition by NNG. Subject to certain limitations, the Company expects this
net operating loss carryforward will be available to offset future taxable
income.

The Company believes that the cash flow from operations and borrowings
under the current credit agreement will be sufficient to meet the Company's
presently anticipated working capital needs, for at least the next 12 months.

EFFECT OF INFLATION

Historically, inflation has not had a material effect on the Company, other
than to increase its cost of borrowing. However, the Company cannot predict
accurately the effect of inflation on future operating results. If faced with
increasing raw material prices, the Company would attempt to increase its
selling prices or realize offsetting manufacturing efficiencies. The Company
anticipates, however, that the implementation of any such actions would lag
behind the price increases in the Company's raw material cost.

RECENTLY ISSUED ACCOUNTING STANDARDS

For the fiscal year ending after January 1, 1999, the Company will adopt
SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information and SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits. The Company is reviewing the impact of the adoption of
these pronouncements on its consolidated financial statements.

YEAR 2000

The Year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates that have been
stored as two digits rather than four. On January 1, 2000, any clock or date
recording mechanism, including date sensitive software, which uses only two
digits to represent the year may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in system failures or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices or perform similar
tasks.

The Company has assessed the Year 2000 issue with respect to the software
used by the Company in providing its services and with respect to its
computerized information systems. NNG expects to complete all Year 2000
modifications by the fourth quarter of 1998, leaving adequate time to assess and
correct any significant issues that may materialize. The Company does not
believe that the costs to resolve the Company's Year 2000 issues will be
material to the Company. NNG is also discussing the Year 2000 issue with its
significant customers and suppliers to determine the extent to which the Company
is vulnerable to those third parties' failures to remediate their own Year 2000
issues. The Company is not yet certain as to the extent to which the computer
software and business systems of its customers and suppliers are Year 2000
compliant. Based upon the nature of the Company's business, however, management
believes that the Company is not likely to experience material business
interruption due to the impact of Year 2000 compliance on its customers and
vendors.

26
<PAGE> 28

BUSINESS

GENERAL

NATURAL FOOD MARKET

According to NFM, the market for natural products grew at a rate of 20%
between 1995 and 1996 and reached approximately $11.5 billion in 1996. According
to NFM, the organic food market, a segment of the natural products market, also
grew at a rate of 20% between 1995 and 1996 and was estimated at $3.0 billion in
1996. The Company believes that growth in the natural and organic food market is
being propelled by several factors, including (i) consumers taking charge of
their health and well being through awareness of the link between diet and
health and improved eating habits, (ii) consumer concern over the purity and
safety of foods due to the presence of pesticide residues, artificial
ingredients and other chemicals and (iii) consumer awareness of environmental
issues.
27
<PAGE> 29

Demographic trends are also favorable for natural and organic foods. The
number of adults over the age of 35 is increasing rapidly. The U.S. Census
Bureau projects that between 1990 and 2000 the number of adults between the ages
35 to 54 will grow by 29% and the number of adults over age 54 will grow by 13%.
Since these demographic groups are the most frequent purchasers of the Company's
products, the Company believes the aging population will increase the number of
ultimate consumers of the Company's products.

COMPETITIVE STRENGTHS

The Company believes that its current market position is attributable to
the following competitive strengths:

Strong Brand Name Recognition and Leading Market Shares

The Health Valley(R) and Breadshop's(R) brand names, both of which have
been marketed by the Company and its predecessors for over 25 years, are two of
the leading brand names in the natural and organic food industry. The Company
believes that the Health Valley(R) brand is one of the most recognized natural
or organic food brands in the United States.

Expertise in Natural and Organic Ingredient Sourcing and Product Development

Substantial Infrastructure

NNG operates a modern manufacturing center in Irwindale, California which
the Company estimates is generally operating at less than 30% utilization. In
addition, the Company has sophisticated, scalable information systems capable of
absorbing future growth. The Company believes the combination of excess
manufacturing capacity and scalable information systems creates a significant
opportunity to grow existing brands, develop new products, build its private
label and contract manufacturing businesses and acquire complementary brands
which can be manufactured by the Company without significant capital investment
or additional fixed expenses.

Experienced Management Team

The natural and organic food industry is a relatively young industry
consisting primarily of comparatively small, privately-owned businesses. As a
result, the management of such natural food companies often lacks the training
and experience commonly found in other more mature segments of the food
industry. The Company has recruited an experienced management team to oversee
current operations and will continue to recruit seasoned management to support
future growth and acquisitions. The Company's executive officers are veteran
senior managers with extensive food industry experience. The Company believes
that its larger size

28
<PAGE> 30

relative to most natural food companies enables it to recruit and retain more
highly qualified and specialized management than many of its competitors.

GROWTH STRATEGY

The Company's objective is to be the leading manufacturer and marketer of
premium branded natural and organic foods. The key elements of the Company's
growth strategy are as follows:

Concentrate on the Growing Natural Food Market

The natural and organic food market is growing rapidly, and the Company is
concentrating its branded marketing activities exclusively in this market
segment.

Grow the Company's Existing Brands

Expand Sales in Grocery Retail Channel

Pursue Strategic Acquisitions

A key element of the Company's growth strategy is to pursue strategic
acquisitions of natural and organic food companies with products or brands that
strengthen or complement the Company's product lines. The Company believes such
acquisitions may create opportunities to accelerate sales growth and leverage
purchasing, manufacturing and operating expenses. The Company believes the
fragmented nature of the natural food industry offers numerous opportunities to
acquire companies that fit well with the Company's strategy. For example, the
Company recently entered into a non-binding letter of intent to acquire a
natural and organic food company with annual revenues of approximately $5.0
million. There can be no assurance, however, that the Company will decide to
proceed with this acquisition after completion of due diligence or that this
acquisition can be consummated on terms acceptable to the Company.

Increase Private Label Business

29
<PAGE> 31

been very few private label natural food products. Due to the growth of the
natural and organic food market, natural food marketers have begun to establish
private label programs. During 1997, the Company established a private label
division, recruited an experienced private label sales manager and began
developing private label customer relationships and sales. The Company intends
to become the supplier of choice for private label natural and organic foods in
its core product categories.

PRODUCTS

The Company markets over 200 products under the Health Valley(R) and
Breadshop's(R) brand names and also manufactures products under brand names
owned by private label customers. Examples of the Company's branded products are
set forth in the table below:

<TABLE>
<CAPTION>
CATEGORY BRANDS PRODUCTS
-------- ------ --------
<S> <C> <C>
Cereals and Granola Health) Banana Gone Nuts(TM) Hot Breakfast Cereal
Valley(R Organic Oat Bran Flakes Breakfast
Cereal
Organic Fiber 7(R) Flakes Breakfast
Cereal
Golden Flax Breakfast Cereal
Raisin Cinnamon Granola
Breadshop's(R) Honey Gone Nuts(R) Breakfast Cereal
Baked Goods Health) Moist & Chewy Granola Bars
Valley(R Original Amaranth Graham Crackers
Original Oat Bran Crackers
Breadshop's(R) Animal Crackers
Soups and Chilis Health) Spicy Vegetarian Chili
Valley(R
14 Garden Vegetable Soup
Zesty Black Bean with Rice Instant
Soup
Garden Split Pea with Carrots Instant
Soup
Organic Vegetable Soup
Organic Tomato Soup
Organic Minestrone Soup
</TABLE>

One of the Company's main objectives is to market natural and organic foods
that promote good health. The Health Valley(R) and Breadshop's(R) branded
products are produced without synthetic colors, flavors, sweeteners or
preservatives and use minimally processed ingredients whenever possible. The
Company also uses organic ingredients when available and cost effective. In
general, the Company's branded products are formulated to be high in complex
carbohydrates, low in fat and, where appropriate, to contain soy or other
vegetable, rather than animal, proteins. Whenever possible, the Company uses
unbleached whole grain flours and other minimally processed grains to increase
the fiber and nutritional content of its products.

A majority of the Company's products qualify for the "healthy" designation
in accordance with FDA guidelines. In order to use "healthy" as a description
under federal guidelines, one serving of food product must fulfill the following
criteria:

- Each serving must not contain more than: 3 grams of total fat; 1 gram of
saturated fat; 60 milligrams of cholesterol; and 480 milligrams of sodium

- In addition, each serving must provide at least 10% of the daily value of
at least one of the following nutrients: Vitamin A (500 IU minimum);
Vitamin C (6 milligrams minimum); Iron (1.8 milligrams minimum); Calcium
(100 milligrams minimum); protein (5 grams minimum); or fiber (3 grams
minimum)

30
<PAGE> 32

Health Valley(R) products, in particular, compare favorably with leading
national brands of conventional foods with respect to fat, sodium and fiber,
while having similar caloric content:

<TABLE>
<CAPTION>
NUTRITIONAL LABEL DECLARATIONS(1)
----------------------------------
MAJOR CONVENTIONAL
HEALTH VALLEY FOOD BRANDS(2)
------------- ------------------
<S> <C> <C>
Sodium(mg)
canned soups................................. 220-280 800-1000
canned chili................................. 200 830-1100
instant soups................................ 270-300 450-550
broths....................................... 170 1000
Fat(g)(3)
cereal bars.................................. 0-2 2-3
granola bars................................. 0-3 2-3
Fiber(g)(4)
flaked cereals............................... 4-6 1-2
granolas..................................... 6 4
</TABLE>

- ---------------
(1) Per serving.
(2) Represents a composite of comparable conventional food brands.
(3) Compared to low fat varieties of major conventional food brands.
(4) Without milk or soy beverage.

MARKET POSITION

As the following table illustrates, among natural and organic food
products, the Company's brands hold leading market positions in its three core
product categories.

<TABLE>
<CAPTION>
MARKET RANK (MARKET SHARE)
-------------------------------
NATURAL FOOD GROCERY
DISTRIBUTORS(1) RETAILERS(2)
--------------- ------------
CATEGORY BRANDS 1997 1997
- -------- ------ --------------- ------------
<S> <C> <C> <C>

Health)
Cold breakfast cereals Valley(R #1 (24.8%) #1 (32.2%)

Flakes Breadshop's(R)
Granolas
Puffed cereals

Health)
Baked goods Valley(R #2 (13.8%) N/A(3)
Granola bars
Cereal bars
Cookies

Health)
Canned and instant Valley(R #1 (31.2%) #1 (43.6%)
soups and chilis
Instant soup cups
Instant chili cups
Canned soups
Canned broths
</TABLE>

- ---------------
(1) Based on SPINS Distributor Information from Spence Information Services,
LLC. SPINS Distributor Information is based on actual sales from certain
natural foods distributor warehouses.
(2) Based on ACNielsen ScanTrack: SPINS Natural Track, which is scanner-based
information on sales of natural products in grocery retail outlets. This
data is drawn from ACNielsen's ScanTrack database, a statistically
representative sample of supermarkets across the United States.

(3) The data regarding sales of baked goods through the grocery retail channel
were not purchased by the Company for the full year.

31
<PAGE> 33

NEW PRODUCT INTRODUCTIONS

New products are important in achieving growth in the natural food
industry. Both Health Valley and Breadshop have recently introduced new products
to respond to changes in consumer tastes, increased desire for convenience,
developments in nutrition and competition. Product innovations have ranged from
introducing new flavors of existing products to launching entire lines of
organic products or entering new product categories.

Recently, the Company developed a variety of new products, a number of
which have already been launched in the marketplace or are scheduled to be
launched during 1998. The following table summarizes actual and planned product
introductions for 1997 and 1998:

<TABLE>
<CAPTION>
CALENDAR QUARTER HEALTH VALLEY(R) Breadshop's(R)
---------------- ---------------- --------------
<S> <C> <C>
Fourth Quarter 1997 Hot Breakfast Cereal Cups Flakes 'N Frostin'(TM) Cold Breakfast Cereal
- Banana Gone Nuts(TM) Hot
Breakfast Cereal
- Amazing Apple!(TM) Hot
Breakfast Cereal
- Maple Madness!(TM) Hot
Breakfast Cereal
- Terrific 10-Grain(TM) Hot
Breakfast Cereal
First Quarter 1998 Animal Cookies (bulk package)
Second Quarter 1998 Moist & Chewy Granola Bars Wild Berry Moist & Chewy Granola Bars (bulk
- Peanut Crunch package)
- Dutch Apple
- Wild Berry
Amaranth Animal Cookies
- Original Honey
- Vanilla
Rice Crunchems(TM) Breakfast
Cereal
Banana Gone Nuts(TM) Breakfast
Cereal
Super Size Cereal
- Oat Bran Flakes
- Fiber 7(R) Flakes
- Amaranth Flakes
Third Quarter 1998 Instant Rice Meal Cups Cookie Classics
- Shiitake Mushroom - Oatmeal Chocolate Chip
- Cantonese - Chocolate Chunk
- Thai
Stone Wheat Crackers
- Original
- Cracked Pepper
- Sesame
Canned Soup and Chili
- Chicken Noodle
- Chicken & Rice
- Turkey Chili
- Vegetable Broth
- Mushroom Broth
Fourth Quarter 1998 Corn Crunchems(TM) Breakfast
Cereal
Berries 'n Cream(TM) Breakfast
Cereal
</TABLE>

The Company plans to continue investing in research and development in
order to create products for current and new categories. The Company plans to
direct a growing portion of research and development

32
<PAGE> 34

resources toward the development of evening, main meal products and side dish
products which the Company believes present significant growth opportunities,
particularly for the Health Valley(R) brand.

CUSTOMERS

The Company's primary customers are natural food and specialty food
distributors who purchase the Company's products for their own account for
resale to natural food and grocery retailers. For 1997, sales through each of
Tree of Life, Inc. and United Natural Foods, Inc. -- two large natural food
distributors -- accounted for 14% and 13%, respectively, of the Company's
revenues, and the percentages may increase for the year ending December 31,
1998. The Company also sells its products to conventional grocery retailers and
club wholesalers.

The Company also tracks the ultimate consumers of its products. The Company
possesses a unique, proprietary database which contains the names and addresses
of over 1,000,000 customers who have purchased the Company's products or have
contacted the Company in response to promotions. The Company is exploring
opportunities to utilize this list in marketing its products in the future.

SALES AND MARKETING

The Company markets its products through a combination of consumer
marketing and trade marketing activities.

Consumer Marketing

Historically, the Company relied principally on new products, informative
product packaging and trade promotion activities in order to attract new
consumers and grow its business. In addition, the Company decided in mid-1996 to
discontinue the rebate promotions utilized by Health Valley. During 1997, the
Company initiated the development of new products, reformulated certain existing
products to improve taste and nutritional value and redesigned its packaging. In
addition, the Company began to develop new consumer advertising and promotional
programs. As a result of these activities, the Company plans to launch several
new products under both the Health Valley(R) and Breadshop's(R) brands in 1998,
release newly designed packaging for most of its Health Valley(R) products and
initiate new print and radio advertising campaigns.

Trade Marketing -- Branded Products

The Company employs a direct sales force of approximately 15 salaried
employees who market the Company's Health Valley(R) and Breadshop's(R) products
to distributors and retailers. The Company's sales representatives, either
directly or through commissioned food brokers, obtain distribution and shelf
space for the Company's products and negotiate trade deals, advertisements and
promotions.

Trade Marketing -- Private Label

Since March 1997, the Company has employed a senior sales manager to
develop and maintain private label customer relationships. Since focusing on the
development of private label relationships in 1997, the Company has begun to
manufacture and sell its products under private labels to leading natural food
and conventional grocery retailers as well as to other food marketers. The
Company believes its private label sales activities can lead to increased
revenues and improve the Company's relationships with key customers, thereby
improving the market for its branded products.

MANUFACTURING

All of the Company's baked goods, cereals and granolas, and instant soups
and chilis are produced at its manufacturing facility in Irwindale, California.
The Company's canned chilis and soups and beverages are manufactured to the
Company's own specifications by co-packers. With respect to the Company's canned
chilis and soups, the Company provides the co-packer with all ingredients,
recipes and packaging for the Company's products, and maintains quality control
personnel at the co-packer's facility during all production runs.

33
<PAGE> 35

The Company's bakery operations include five modern baking lines employing
specially-designed ovens capable of producing more than 10,000 twelve-pack cases
per shift. The Company's cereal and meal cup operations include four cereal
production lines and one instant meal cup line capable of producing more than
10,000 twelve-pack cases per shift.

Products are generally manufactured to customer orders. As a result, the
Company is able to minimize its investments in inventories while maintaining
high levels of customer service. The Company estimates that it is generally
utilizing less than 30% of the Irwindale facility's manufacturing capacity.
Accordingly, the Company can substantially increase sales of existing and
similar products without making significant capital investments.

TECHNICAL SERVICES

Research and Development

The Company's research and development team includes nutritionists and food
technologists who develop new products and improve existing products. Research
and development focuses on improving the taste and nutritional value of the
Company's products and reducing the cost of producing such products. Recently,
additional research and development emphasis has been placed upon developing
products that incorporate ingredients with specific nutritional benefits, or
functional foods.

Quality Assurance

Consistency of quality and food safety are of paramount importance to the
Company. Accordingly, the Company purchases packaging and ingredients only from
approved suppliers and inspects raw materials as required to ensure conformance
to specifications. Under the direction of a full-time quality assurance manager,
on line product monitoring as well as post production product testing and
evaluation are also used to help ensure consistent quality and safety. The
Company utilizes both in-house and outside lab testing to support its quality
assurance programs.

INFORMATION SYSTEMS

The Company utilizes sophisticated information systems for operations
management and financial planning and control. Major applications software
includes the Marcam PRISM process manufacturing package and the JD Edwards
financial package, both of which operate on the Company's IBM AS400/B320
hardware. The Company believes that its existing information systems have the
capacity to absorb significant future growth.

COMPETITION

The markets in which the Company is active are highly competitive. Numerous
natural and organic food companies compete with the Company, including The Hain
Food Group, Inc., Barbara's Bakery, Inc. and Fantastic Foods, Inc. The Company
believes that in the natural food sector it competes with over 500 companies,
most of which are small independent companies and none of which is dominant. The
Company's products also compete, from time to time, with products of larger
conventional food companies, such as ConAgra, Inc.'s Healthy Choice line or
Nabisco, Inc.'s SnackWell line. The Company competes with these companies based
upon product quality, taste and appearance, breadth of product offerings,
customer service and price.

The Company differs from many of its natural and organic food competitors
in several respects. First, the Company is substantially larger than most
natural and organic food companies. Second, the Company generally enjoys a
leading market share in its core categories and its sales are concentrated in a
few product categories rather than distributed across many categories. Third,
the Company manufactures the majority of its products, unlike many of its
competitors who use co-packers. Finally, in those instances where the Company
utilizes co-packers, it generally procures the natural and organic ingredients
and the packaging while many other natural food companies rely on co-packers to
procure such materials. The Company believes these differences constitute
competitive advantages in product quality, service levels, working capital
34
<PAGE> 36

utilization, food safety and cost. The Company generally competes with larger
conventional food companies by differentiating its products based on ingredients
and nutrition.

TRADEMARKS AND OTHER PROPRIETARY RIGHTS

The Company owns a number of registered trademarks including the following:
Health Valley(R), Breadshop's(R), Honey Gone Nuts(R), Fiber 7(R) and Soy Moo(R).
Registration of Banana Gone Nuts(TM), Amazing Apple!(TM) and Maple Madness!(TM)
are pending. The Company is not aware of any fact that would have a materially
adverse impact on the continuing use of these trademarks. See "Risk
Factors -- Trademarks." The Company's recipes and certain manufacturing
processes also constitute proprietary information and are important to the
Company's success and competitive position. Accordingly, the Company seeks to
establish and protect its trademarks, trade secrets and other proprietary
rights.

GOVERNMENT REGULATION

The Company's operations are subject to extensive regulation by the FDA,
the USDA and other state and local authorities regarding the processing,
packaging, storage, distribution, advertising and labeling of the Company's
products and environmental compliance. The Company's manufacturing facilities
and products are subject to periodic inspection by federal, state and local
authorities. The Company's advertising is subject to regulation by the FTC
pursuant to the Federal Trade Commission Act and regulations issued thereunder.
The Company believes that it is currently in substantial compliance with all
material governmental laws and regulations and maintains all material permits
and licenses relating to its operations.

The Company has, to its knowledge, complied with all current food labeling
and packaging requirements, including significant labeling requirements that
became effective during 1994. The Company has not experienced any significant
regulatory problems in the past and has not been subject to any material fines
or penalties.

In December 1997, the USDA published proposed regulations to standardize
organic certification requirements as part of the Organic Foods Production Act
which was enacted as part of the 1990 United States Farm Bill. This law will
provide for a minimum federal standard that all organic producers will have to
follow in order for their products to be certified "organic," and will include a
seal to provide consumers with assurance that products sold as "organic" meet
these minimum standards. The USDA comment period ended May 1, 1998 and the
Company, along with other organic food producers, has been lobbying to bring the
proposed standards in line with more rigorous existing standards. Due to the
large number of comments received by the USDA, the Company anticipates that
final regulations will not become effective until sometime after 1999.

EMPLOYEES

As of May 31, 1998, the Company employed 204 regular employees, of which 33
were in administration, 143 were in operations and 28 were in sales, marketing
and customer service. The Company had 134 temporary employees as of the same
date. The number of temporary employees is subject to significant fluctuation
throughout the year as the Company adjusts staffing levels in response to
seasonal and other fluctuations in demand. None of the Company's employees is
covered by a collective bargaining agreement. However, the Company is currently
negotiating with the Bakery, Confectionery & Tobacco Workers' International
Union concerning a collective bargaining agreement covering its production,
maintenance and warehouse employees. The Company believes that its relations
with its employees are good. The Company has a stable and experienced employee
pool with historically low turnover.

PROPERTIES

The Company's Irwindale facility, housing manufacturing, warehouse,
distribution and office space, consists of three leased standard industrial
buildings containing a total of approximately 300,000 square feet. The leases
for the facilities expire in September 1998, with a renewal option for a
five-year period. The rent payments under the renewal option are subject to
negotiation. The Company recently exercised the renewal

35
<PAGE> 37

option with respect to the building which houses its manufacturing facilities
and office space containing a total of approximately 150,000 square feet. The
Company did not exercise the renewal option with respect to the building which
houses its warehouse and distribution facilities as a result of the decision to
outsource this function.

In addition, the Company leases a facility located in Santa Cruz,
California consisting of 52,600 square feet of warehouse, office and
manufacturing space which it acquired with the Breadshop acquisition. The
Company currently uses 2,000 square feet of office space and subleases the
remaining space. The Company intends to vacate and sublease the office space by
July 1998. The lease for this facility expires in March 2000.

The Company also leases a small office in Chicago, Illinois that serves as
NNG's principal executive office.

LEGAL PROCEEDINGS

An action entitled Mary Jo Modica et al. v. Health Valley Foods, Inc. et
al., filed in the circuit court for Tuscaloosa County, Alabama on August 27,
1996 as a small claim, is pending against Health Valley and the Company. This
action was conditionally certified on an ex parte basis as a nationwide class
action; however, the Alabama Supreme Court has recently held that such ex parte
certifications violate applicable Alabama Rules of Civil Procedure and the
Company believes that, upon motion, the conditional class certification will be
removed. The complaint seeks monetary damages and alleges claims based on
misrepresentation in connection with the Predecessor Company's practices
regarding the packaging of certain of its canned products. The complaint alleges
that the Predecessor Company's canned products were packed in tin cans that
contained some lead even though the packaging stated that the cans were
lead-free. None of the claims involves the safety, quality or nutritional
content of the food products manufactured by the Company or the Predecessor
Company. Although the Company believes that the suit lacks merit, the Company
has entered into an agreement in principle to settle this litigation, subject to
final documentation and court approval. See "Management's Discussion and
Analysis of Financial Condition -- Subsequent Event."

In addition, the Company is from time to time involved in litigation in the
ordinary course of its business. The Company is not currently a party to any
litigation which in the opinion of management is likely to have a material
adverse effect on the Company's business, results of operations or financial
condition and cash flows.

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<PAGE> 38

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning the Company's
directors and executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William R. Voss...................... 44 Chairman of the Board, Chief Executive Officer and
President
Diane J. Beardsley................... 43 Senior Vice President, Chief Financial Officer and
Secretary
William J. Nictakis.................. 38 Senior Vice President
Michael D. de Boom................... 52 Senior Vice President
Roger S. McEniry(1)(2)............... 41 Director
David S. Katz(1)..................... 32 Director
Timothy J. Healy(1)(2)............... 50 Director
Lawrence A. Del Santo(2)............. 64 Director
</TABLE>

- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

WILLIAM R. VOSS has been the Chief Executive Officer, President and a
director of the Company since its formation in October 1995. Mr. Voss was
elected Chairman of the Board in April 1996. Prior to joining the Company, Mr.
Voss served as Chief Executive Officer of McCain Foods, a privately owned food
processing company, from July 1993 to August 1995, and prior to such time as
President and Chief Operating Officer of Pilgrim's Pride Corporation, a publicly
traded food processing company. Mr. Voss also served as a principal with Booz,
Allen & Hamilton, a management consulting firm. Mr. Voss received a Master of
Business Administration degree from Stanford University in 1980. Mr. Voss is a
director of Interphase Corporation, a publicly traded corporation.

DIANE J. BEARDSLEY has been Senior Vice President and Chief Financial
Officer of the Company since December 1996. From 1992 until joining the Company,
Ms. Beardsley served as Senior Vice President and Chief Financial Officer of
Leiner Health Products, a vitamin and supplement manufacturer, and held various
accounting and financial positions with Leiner Health Products from 1986 until
being appointed Senior Vice President -- Chief Financial Officer. Ms. Beardsley
was previously the Controller -- Corporate Accounting of Smith International,
Inc., a publicly traded oil and gas equipment manufacturing company. Ms.
Beardsley received a bachelor's degree in Business Administration from
California State University -- Fullerton in 1976 and is a certified public
accountant.

WILLIAM J. NICTAKIS has been Senior Vice President -- Sales and Marketing
of the Company since December 1996. Prior to joining the Company, Mr. Nictakis
served as Vice President -- General Manager of a joint venture between Frito-Lay
Company and Sara Lee Corporation. He served as Frito-Lay Company's Vice
President, Quantum Leap Business Systems from 1995 to 1996 and its Vice
President, UDS Channel Development from 1993 to 1995. Mr. Nictakis received a
Master of Business Administration from the University of Chicago in 1985.

MICHAEL D. DE BOOM has been Senior Vice President -- Operations of the
Company since June 1996. From 1995 until joining the Company, Mr. de Boom served
as Executive Vice President of Distribution, Manufacturing and Product
Development of Harry's Farmers Markets, a grocery retailer. He served as the
Director of Warehouse Operations for H.E.B. Grocery Co. from 1993 through 1995
and its Director of Bakery Manufacturing and Product Development from 1990
through 1993. Mr. de Boom held various food manufacturing and distribution
management positions with Alpha Beta Co., a grocery retailer, from 1971 until
1990.

37
<PAGE> 39

ROGER S. MCENIRY has been a director of the Company since October 1995. Mr.
McEniry is a general partner of Frontenac Company, a private equity investment
firm headquartered in Chicago, which he joined in March 1985. Frontenac Company
is the general partner of Frontenac VI Limited Partnership ("Frontenac VI").
Frontenac VI is a stockholder of the Company.

DAVID S. KATZ has been a director of the Company since October 1995. Mr.
Katz is Vice President of Frontenac Company, which he joined in September 1994.
From 1993 to 1994 he was an executive at the Clipper Group, a New York based
private equity company.

TIMOTHY J. HEALY has been a director of the Company since 1997. Mr. Healy
has served as the Chairman, CEO and President of Select Beverages, Inc., a
privately held beverage bottler, since 1992.

LAWRENCE A. DEL SANTO has been a director of the Company since January
1998. Mr. Del Santo was the Chairman and Chief Executive Officer of The Vons
Companies, Inc. from 1994 until he retired in 1997. From 1992 to 1994, he served
as the Executive Vice President -- Food Stores for American Stores Company.

BOARD OF DIRECTORS

After consummation of the Offering, the Board of Directors of the Company
will consist of five directors divided into three classes with each class
serving for a term of three years. At each annual meeting of stockholders,
directors will be elected by the holders of the Common Stock to succeed those
directors whose terms are expiring. The director whose term will expire in 1999
is David S. Katz; directors whose terms will expire in 2000 are Timothy J. Healy
and Lawrence A. Del Santo; and directors whose terms will expire in 2001 are
William R. Voss and Roger S. McEniry. The Board of Directors has established an
Audit Committee and Compensation Committee and may establish such other
committees as the Board may determine. Directors elected by the Company's
stockholders may be removed only for cause.

DIRECTOR COMPENSATION

Directors who are also employees of the Company or one of its subsidiaries
do not receive compensation for serving as directors. Each director who is not
an employee of the Company or one of its subsidiaries ("Non-Employee Director")
receives an annual retainer of $5,000, a fee of $2,000 for attendance at each
Board of Directors' meeting and $1,000 for attendance at each committee meeting.
Directors are also reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or committees thereof or otherwise incurred
in their capacity as directors. In addition, each Non-Employee Director serving
on the Board of Directors at the closing of the Offering will receive an option
to purchase 10,000 shares of Common Stock. After the Offering, any newly elected
Non-Employee Director will receive an option to purchase 10,000 shares of the
Company's common stock upon becoming a director of the Company. In addition,
each Non-Employee Director will receive an option to purchase 5,000 shares
annually.

38
<PAGE> 40

EXECUTIVE COMPENSATION

The following table sets forth information with respect to the cash
compensation paid by the Company for services rendered during the fiscal year
ended December 31, 1997 to its chief executive officer and the other executive
officers of the Company whose total annual salary and bonus exceeded $100,000
during such period (each, a "Named Executive Officer").

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
-------------------- UNDERLYING COMPENSATION
SALARY($) BONUS($) OPTIONS ($)
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
William R. Voss............................... $300,000 $ -- -- $4,750(1)
Chairman of the Board, Chief Executive
Officer and President
Diane J. Beardsley............................ 180,000 74,246(2) -- --
Senior Vice President and Chief Financial
Officer
William J. Nictakis........................... 225,000 194,718(3) -- --
Senior Vice President -- Sales and Marketing
Michael D. de Boom............................ 150,000 36,872(4) -- 1,125(5)
Senior Vice President -- Operations
</TABLE>

- ---------------
(1) Represents the Company's matching contribution to the Company's 401(k) plan
made on behalf of Mr. Voss.
(2) Includes a signing bonus of $45,000 paid in 1997 in accordance with Ms.
Beardsley's employment offer.
(3) Includes a signing bonus of $89,000 paid in 1997 and a payment of $69,160
for relocation expenses in accordance with Mr. Nictakis' employment offer.
(4) Includes the second and final bonus payment of $12,500 in accordance with
Mr. de Boom's employment offer.
(5) Represents the Company's matching contribution to the Company's 401(k) plan
made on behalf of Mr. de Boom.

OPTION GRANTS IN LAST FISCAL YEAR

No stock options were granted to the Named Executive Officers during the
fiscal year ended December 31, 1997. However, the options referred to below were
granted pursuant to the 1997 Stock Option Plan and formalized by the Board of
Directors in 1997.

OPTION GRANTS IN 1996

The following table sets forth individual grants of stock options made to
the Named Executive Officers during the fiscal year ended December 31, 1996:

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE
SHARES TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM (1)
GRANTED EMPLOYEES IN BASE PRICE ----------------------------
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
---- ---------- ------------- ----------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William R. Voss....... 96,570(2) 35.2% (3) April 15, 2004 --(4) --(4)
Diane J. Beardsley.... 41,760(5) 15.2% $0.34 March 18, 2004 6,264 13,780
William J. Nictakis... 83,520(5) 30.5% $0.34 March 18, 2004 12,528 27,562
Michael D. de Boom.... 41,760(5) 15.2% $0.34 March 18, 2004 6,428 14,616
</TABLE>

- ---------------

(1) In accordance with the rules of the Commission, the hypothetical gains or
"option spreads" that would exist for the respective options are shown.
These gains are based on assumed rates of annual compounded

39
<PAGE> 41

stock price appreciation of 5% and 10% from the date the option was granted
over the full option terms of the options shown. The 5% and 10% assumed
rates of appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of future increases in the
price of its Common Stock. Using the assumed initial public offering price
of $15.00 as the fair market value for this calculation, the hypothetical
gains for Mr. Voss, Ms. Beardsley, Mr. Nictakis and Mr. de Boom, beginning
on the estimated date of consummation of the Offering through the end of
their option terms, would be (i) $1,380,951, $808,474, $1,616,948 and
$808,474, respectively, at a 5% appreciation rate and (ii) $1,959,406,
$1,053,605, $2,107,210 and $1,053,605, respectively, at a 10% appreciation
rate. The exercise price used for Mr. Voss for this calculation was $5.48
per share which would be his exercise price at the end of the term for his
option.

(2) Mr. Voss' options become exercisable in full on the earlier of (i) April 15,
1999, (ii) the consummation of the Offering and (iii) a sale of the Company.

(3) The exercise price for Mr. Voss' options increases over time from $0.34 to
$5.48 per share. If Mr. Voss exercised these options on the date of
consummation of the Offering, the exercise price would be $1.44 per share.

(4) Because the exercise price for Mr. Voss' options increases at an annual rate
in excess of 10%, the potential realizable value (assuming 5% and 10%
appreciation per annum) is zero.

(5) Each of these options is governed by NNG's 1997 Stock Option Plan. These
options become exercisable in three equal annual installments beginning on
the first anniversary of the commencement of such person's employment with
the Company. These options vest in full upon a sale of the Company.

FISCAL YEAR-END OPTION VALUES

The following table sets forth for the Named Executive Officers information
concerning the value of unexercised stock options at December 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
YEAR-END(#) FISCAL YEAR-END(1)($)
------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
William R. Voss................................... 0/96,570 0/569,763
Diane J. Beardsley................................ 13,920/27,840 91,315/182,630
William J. Nictakis............................... 27,840/55,680 182,630/365,261
Michael D. de Boom................................ 13,920/27,840 91,315/182,630
</TABLE>

- ---------------

(1) The value of "in-the-money" options represents the difference between the
exercise price of such option and the fair market value of the stock as of
December 31, 1997. The fair market value of the Common Stock as of that
date, solely for purposes of this calculation and based on certain analysis
undertaken by the Company in issuing options to a non-employee director, is
estimated to be $6.90 per share.

EMPLOYMENT AGREEMENTS

On October 2, 1995, the Company entered into an employment agreement with
William R. Voss, pursuant to which Mr. Voss became the Chief Executive Officer
of the Company. Mr. Voss' employment agreement provides for an annual base
salary of $300,000. In addition, Mr. Voss was granted options to purchase 96,570
shares of Common Stock at an exercise price of between $0.34 and $5.48 per
share, which options become exercisable on the earlier of the consummation of an
initial public offering or April 15, 1999. These options will become exercisable
upon the consummation of the Offering. Unless proper notice of termination is
given, the term of Mr. Voss' employment automatically renews for successive
one-year periods. No other executive officer has an employment agreement with
the Company.

INDEMNIFICATION AGREEMENTS

In addition to the indemnification provisions contained in the Company's
Certificate of Incorporation and By-Laws, the Company has entered into
indemnification agreements with all of its directors and executive
40
<PAGE> 42

officers providing that the Company will indemnify those persons to the fullest
extent permitted by law against claims arising out of their actions as officers
or directors of the Company and will advance expenses of defending claims
against them. The Company believes that indemnification under these agreements
covers at least negligence and gross negligence by the directors and officers,
and requires the Company to advance litigation expenses in the case of actions,
including stockholder derivative actions, subject to the agreement that the
officer or director will repay any advances if it is ultimately determined that
the officer or director is not entitled to indemnification. The Company believes
that these provisions are essential to attracting and retaining qualified
persons as directors and officers.

1997 STOCK OPTION PLAN

In March 1997, the Company adopted its 1997 Stock Option Plan (the "1997
Plan"). The purpose of the 1997 Plan is to provide a means whereby selected
directors, officers, employees and consultants of the Company and its
subsidiaries may be granted options to purchase Common Stock to attract or
retain their services and to provide added incentive to them by encouraging
stock ownership in the Company. Under the 1997 Plan, the Company may issue
either incentive stock options or non-qualified stock options. The 1997 Plan is
administered by the Board of Directors, subject to its ability to delegate its
power under the 1997 Plan to a committee of the Board. The Board has the power
to select individuals to participate in the 1997 Plan, grant options under the
1997 Plan and determine the terms and conditions of the options.

The Company has reserved 222,430 shares of Common Stock for issuance upon
exercise of options governed by the 1997 Plan. The 1997 Plan will remain in
effect until March 2007, unless terminated earlier in connection with certain
mergers, consolidations or other reorganizations. The 1997 Plan may be amended
by the Board of Directors without the consent of the stockholders of the
Company, except that any amendment subject to stockholder approval required by
any federal or state law or regulation shall not become effective until such
approval is obtained. As of June 30, 1998, options to purchase 212,850 shares of
Common Stock were outstanding under the 1997 Plan. The Company does not intend
to grant any additional options under the 1997 Plan.

EMPLOYEE INCENTIVE COMPENSATION PLAN

Prior to the consummation of the Offering, the Board of Directors and the
Company's stockholders are expected to approve the Incentive Plan. The purpose
of the Incentive Plan is to provide directors, officers, employees, consultants
and independent contractors with additional incentives by increasing their
ownership interests in the Company. Individual awards under the Incentive Plan
may take the form of one or more of (i) either incentive stock options ("ISOs")
or non-qualified stock options ("NQSOs") and (ii) restricted stock. The
Compensation Committee will administer the Incentive Plan and generally select
the individuals who will receive awards and the terms and conditions of those
awards.

The Company intends to reserve 800,000 shares of Common Stock for use in
connection with the Incentive Plan. Shares of Common Stock which are
attributable to awards which have expired, terminated or been cancelled or
forfeited are available for issuance or use in connection with future awards.

In connection with the Offering, options to purchase a total of 116,920
shares of Common Stock will be granted to management of the Company pursuant to
the Incentive Plan, including options to purchase 25,000 shares granted to
William R. Voss and options to purchase 13,920 shares granted to Diane J.
Beardsley. These grants will be effective as of the date of consummation of the
Offering and have an exercise price equal to the initial public offering price
and a three-year vesting schedule.

The Incentive Plan will remain in effect until terminated by the Board of
Directors. The Incentive Plan may be amended by the Board of Directors without
the consent of the stockholders of the Company, except that any amendment,
although effective when made, will be subject to stockholder approval if
required by any federal or state law or regulation or by the rules of any stock
exchange or automated quotation system on which the Common Stock may then be
listed or quoted.

41
<PAGE> 43

The Incentive Plan also provides for (i) the automatic grant to each
Non-Employee Director serving at the closing of the Offering of an option to
purchase 10,000 shares of Common Stock and (ii) after the Offering, the
automatic grant to each Non-Employee Director of an option to purchase 10,000
shares upon such person's initial election as a director. In addition, the
Incentive Plan provides for an automatic annual grant to each Non-Employee
Director of an option to purchase 5,000 shares at each annual meeting of
stockholders following the Offering; provided, however, that if the first annual
meeting of stockholders following a person's initial election as a Non-Employee
Director is within three months of the date of such election or appointment,
such person will not be granted an option to purchase 5,000 shares of Common
Stock at such annual meeting. These options will have an exercise price per
share equal to the fair market value of a share of Common Stock at the date of
grant. Options granted under the Plan will expire at the earlier of 10 years
from the date of grant or one year after termination of service as a director.

EMPLOYEE STOCK PURCHASE PLAN

Prior to consummation of the Offering, the Company will adopt the Purchase
Plan, pursuant to which a total of 400,000 shares of Common Stock will be
reserved for issuance. The Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
permits eligible employees of the Company to purchase Common Stock through
payroll deductions with all such deductions credited to an account under the
Purchase Plan. Payroll deductions may not exceed $25,000 for all purchase
periods ending during any Plan Year (as hereinafter defined).

The Purchase Plan operates on a calendar year basis (the "Plan Year"). To
be eligible to participate during a Plan Year, an employee must file all
requisite forms prior to a specified due date known as the "Grant Date."
Generally, the first day of each Plan Year will be the Grant Date and the last
day of each Plan Year will be an Exercise Date (the "Exercise Date"). The
determination of the Grant Date and the Exercise Dates is completely within the
discretion of the Plan Committee. On each Exercise Date, participants' payroll
deductions credited to their accounts will be automatically applied to the
purchase price of Common Stock at a price per share which is the lesser of
eighty-five percent (85%) of the fair market value of the Common Stock on the
Grant Date or on the Exercise Date. Employees may end their participation in the
Purchase Plan at any time during an offering period, and their payroll
deductions to date will be refunded. Participation ends automatically upon
termination of employment with the Company.

Employees are eligible to participate in the Purchase Plan if they are
customarily employed by the Company or a designated subsidiary for at least 20
hours per week and for more than five months in any calendar year. No person
will be able to purchase Common Stock under the Purchase Plan if such person,
immediately after the purchase, would own stock possessing 5% or more of the
total combined voting power or value of all outstanding shares of all classes of
stock of the Company.

RETIREMENT PLAN

The Company has adopted a 401(k) retirement savings plan (the "Retirement
Plan") covering substantially all employees (including the Company's executive
officers) who are 21 and meet minimum length of service requirements. The
Retirement Plan is intended to qualify under Section 401(k) of the Code.

Under the current terms of the Retirement Plan, participants may elect to
defer up to $10,000 of their annual base compensation (subject to limitations
under the Code) and to have such deferred amount contributed to the Retirement
Plan on their behalf. In addition, the Company makes a 50% matching contribution
up to the first 6% of the annual base compensation deferred by a participant.

Salary deferral is fully vested, while the Company's matching contributions
are vested over time with full vesting occurring upon completion of seven years
of service. Benefits under the Retirement Plan generally will be distributed in
the form of a lump sum or installments following the participant's retirement,
death, disability or other termination of employment. Benefits may be
distributed prior to termination of employment under certain limited
circumstances, including hardship.

42
<PAGE> 44

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by (i) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Executive and (iv) all executive
officers and directors as a group.

<TABLE>
<CAPTION>
PERCENTAGE OWNED
-------------------
BEFORE AFTER
NAME SHARES(1) OFFERING OFFERING
- ---- --------- -------- --------
<S> <C> <C> <C>
Frontenac VI Limited Partnership(2)......................... 2,195,998 52.8 29.5
State of Wisconsin Investment Board(3)...................... 1,629,539 39.2 21.9
William R. Voss(4).......................................... 414,221 9.7 5.5
Roger S. McEniry(5)......................................... 2,215,998 53.1 29.6
George Mateljan, Jr.(6)..................................... 304,500 6.8 3.9
David S. Katz............................................... -- -- --
Timothy J. Healy(7)......................................... 14,492 * *
Lawrence A. Del Santo(8).................................... 19,570 * *
Diane J. Beardsley(9)....................................... 13,920 * *
Michael D. de Boom(9)....................................... 27,840 * *
William J. Nictakis(9)...................................... 27,840 * *
All directors and executive officers as a group (8
persons).................................................. 2,733,881 62.5 35.6
</TABLE>

- ---------------

* Less than 1%

(1) Unless otherwise indicated below, the persons in the above table have sole
voting and investment power with respect to all shares owned by them.

(2) The address of Frontenac VI is c/o Frontenac Company, 135 S. LaSalle
Street, Suite 3800, Chicago, Illinois 60604.

(3) The address of the State of Wisconsin Investment Board is 121 East Wilson,
Madison, Wisconsin 53702.

(4) Includes 96,570 shares which may be acquired within 60 days of consummation
of the Offering pursuant to the exercise of stock options held by Mr. Voss.
Mr. Voss' address is c/o Natural Nutrition Group, Inc., 135 S. LaSalle,
Suite 1134, Chicago, Illinois 60603.

(5) Includes (i) 20,000 shares of Common Stock issuable to Frontenac Company
upon the exercise of options which will be granted and which will be
exercisable on the date of consummation of the Offering as a result of Mr.
McEniry's and Mr. Katz' services as directors of the Company and (ii)
2,195,998 shares held by Frontenac VI. Mr. McEniry is a general partner of
Frontenac Company, which is a general partner of Frontenac VI, and, in such
capacity, shares voting and investment power with respect to shares held by
Frontenac VI and Frontenac Company. Under the applicable rules of the
Securities and Exchange Commission, Mr. McEniry may be deemed to
beneficially own the shares of Common Stock held by Frontenac VI and
Frontenac Company. Mr. McEniry disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein.

(6) Includes 304,500 shares which may be acquired within 60 days of the date of
consummation of the Offering pursuant to the exercise of stock options held
by Mr. Mateljan. Mr. Mateljan's address is c/o John A. Calfas, 11601
Wilshire Blvd., Los Angeles, California 90025.

(7) Includes 10,000 shares of Common Stock issuable upon the exercise of
options which will be granted and which will be exercisable on the date of
consummation of the Offering.

(8) Includes 9,570 shares which may be acquired within 60 days of the date of
consummation of the Offering pursuant to the exercise of stock options held
by Mr. Del Santo and an additional 10,000 shares of Common Stock issuable
upon exercise of options which will be granted and which will be
exercisable on the date of consummation of the Offering.

(9) Includes 13,920, 27,840 and 27,840 shares which may be acquired within 60
days of the date of consummation of the Offering pursuant to the exercise
of stock options held by Ms. Beardsley and Messrs. de Boom and Nictakis,
respectively.

43
<PAGE> 45

CERTAIN TRANSACTIONS

NNG was formed in 1995 by William R. Voss and Frontenac Company to acquire
and develop natural and organic food companies. At that time Frontenac VI, a
private equity investment fund of which Frontenac Company is the general
partner, and Mr. Voss purchased 1,305,000 and 145,000 shares of Common Stock,
respectively, for a price of $0.34 per share.

On April 15, 1996, NNG, through a subsidiary, acquired the stock of Health
Valley from George Mateljan, Jr. for approximately $34 million. In connection
with the Health Valley acquisition, Frontenac VI and the State of Wisconsin
Investment Board ("SWIB") purchased 748,136 and 1,523,529 shares of Common
Stock, respectively, for a price of $0.34 per share and 10,751.358 and 7,951.309
shares of Preferred Stock, respectively, for a price of $1,000 per share, and
Mr. Voss purchased 145,000 shares of Common Stock for a price of $0.34 per
share. NNG also entered into an option agreement pursuant to which NNG granted
to Mr. Voss options to purchase 96,570 shares of Common Stock for an exercise
price which increases over time from $0.34 to $5.48 per share.

In connection with the Health Valley acquisition, the Company paid
Frontenac Company a fee of $395,233 for advisory and other services and SWIB a
commitment fee of approximately $85,000.

In connection with the Health Valley acquisition, the Company's Health
Valley subsidiary entered into an option agreement pursuant to which Health
Valley agreed to sell to George Mateljan, Jr. 100 shares of its common stock for
$22,222.22 per share (the "Health Valley Option").

In October 1996, the Company acquired the stock of Breadshop for
approximately $9 million. In connection with the Breadshop acquisition,
Frontenac Company was paid a fee of $100,000 for advisory services. In
connection with the Breadshop acquisition, Frontenac VI loaned the Company
$1,000,000 (the "Frontenac Loan"). On January 28, 1997 Frontenac VI, SWIB and
Timothy J. Healy, a director of the Company, purchased 142,862, 106,009 and
4,492 shares of Common Stock, respectively, for a price of $0.34 per share and
476.25, 353.40 and 23.451 shares of Series A Preferred Stock, respectively, for
a price of $1,000 per share, and Mr. Voss purchased 27,651 shares of Common
Stock for a price of $0.34 per share. The proceeds from the sale of these shares
were used to repay the Frontenac Loan.

In September 1997, in connection with the resolution of all outstanding
issues between the Company and George Mateljan, Jr. relating to the Health
Valley acquisition, $1,793,320 held in escrow was paid to the Company and
$367,878 was paid to Mr. Mateljan. In addition, Mr. Mateljan exchanged the
Health Valley Option for an option to purchase 406,000 shares of Common Stock
and an unspecified number of shares of Series A Preferred Stock of the Company
to be determined based on the number of shares of Series A Preferred Stock
redeemed prior to the exercise of the option. As a result of the redemption of
the Series A Preferred Stock with the proceeds of the Offering, no shares of
Series A Preferred Stock will be issuable upon exercise of this option. The
purchase price for the Common Stock upon exercise of the option held by Mr.
Mateljan is $0.34 per share.

From the Company's inception in October 1995 through April 19, 1997, the
Company paid Frontenac Company fees totalling $100,000 for the services of
Messrs. McEniry and Katz as directors of the Company during that period. Since
April 19, 1997 the Company has paid Frontenac Company a quarterly fee of $25,000
for those services.

COMPANY POLICY

In the future, any transactions with officers, directors and affiliates
will be approved by a majority of the Board, including a majority of the
disinterested members of the Board, and will be made on terms no less favorable
to the Company than could be obtained from unaffiliated third parties.

44
<PAGE> 46

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 50,000,000 shares
of Common Stock, 35,000 shares of Series A Preferred Stock, par value $.001 per
share ("Series A Preferred Stock"), and 2,000,000 shares of preferred stock,
$.01 par value per share ("Preferred Stock"). The 19,566.667 shares of Series A
Preferred Stock which are issued and outstanding will be redeemed with the
proceeds of the Offering.

COMMON STOCK

Of the 50,000,000 shares of Common Stock authorized, 7,456,664 shares will
be outstanding upon consummation of the Offering. Subject to the rights of the
holders of Preferred Stock, the holders of outstanding shares of Common Stock
are entitled to share ratably in dividends declared out of assets legally
available therefor at such time and in such amounts as the Board of Directors
may from time to time lawfully determine. Each holder of Common Stock is
entitled to one vote for each share held. Subject to the rights of holders of
any outstanding Preferred Stock, upon liquidation, dissolution or winding up of
the Company, any assets legally available for distribution to stockholders as
such are to be distributed ratably among the holders of the Common Stock then
outstanding. All shares of Common Stock currently outstanding are, and all
shares of Common Stock offered hereby when duly issued and paid for will be,
fully paid and nonassessable. Shares of Common Stock are not subject to any
redemption provisions and are not convertible into any other securities of the
Company.

The Board of Directors is classified into three classes as nearly equal in
number as possible, with the term of each class expiring on a staggered basis.
See "Management -- Board of Directors." The classification of the Board of
Directors may make it more difficult to change the composition of the Board of
Directors and thereby may discourage or make more difficult an attempt by a
person or group to obtain control of the Company. Cumulative voting for the
election of directors is not permitted, enabling holders of a majority of the
outstanding Common Stock to elect all members of the class of Directors whose
terms are then expiring.

PREFERRED STOCK

As of June 30, 1998, the Company's issued and outstanding Preferred Stock
consisted of 19,566.667 shares of Series A Preferred Stock held by five
stockholders of record. Upon the closing of the Offering, each outstanding share
of Series A Preferred Stock will be redeemed with a portion of the proceeds of
the Offering. The Series A Preferred Stock ranks senior to the Common Stock as
to distributions upon liquidation, dissolution and winding up of the Company.
Except as required by law, the holders of shares of Series A Preferred Stock are
not entitled to vote on matters presented to the stockholders of the
Corporation. Dividends accrue on the outstanding shares of Series A Preferred
Stock at a rate of 10% per annum, compounded quarterly. All accrued and unpaid
dividends must be paid before any dividend or other payment may be made with
respect to the Common Stock. Unless the Series A Preferred Stock is redeemed
prior thereto, the Company is required to redeem 50% of the shares Series A
Preferred Stock on April 15, 2003 and the balance on April 15, 2004 for a price
of $1,000 per share plus all accrued and unpaid dividends. The Company is also
required to redeem all of the shares of Series A Preferred Stock on a sale of
the Company, a change of control or a similar transaction. At the Company's
option, the Company may redeem up to 10,000 shares of Series A Preferred Stock
prior to a public offering of the Company's equity securities and all of the
shares of Series A Preferred Stock after a public offering of the Company's
equity securities. Under certain circumstances, such as breaches of certain
covenants by the Company, the holders of a majority of the shares of Series A
Preferred Stock may require the Company to redeem all of the shares of Series A
Preferred Stock.

The Certificate of Incorporation of the Company authorizes the Board of
Directors to issue, in addition to the Series A Preferred Stock, up to 2,000,000
shares of preferred stock in classes or series and to establish the
designations, preferences, qualifications, limitations or restrictions of any
class or series with respect to, among other things, the rate and nature of
dividends, the price, terms and conditions on which shares may be redeemed, the
terms and conditions for conversion or exchange into any other class or series
of the stock and voting rights. The Company will have authority, without
approval of the holders of Common Stock, to issue preferred stock that has
voting, dividend or liquidation rights superior to the Common Stock and that may

45
<PAGE> 47

adversely affect the rights of holders of Common Stock. The issuance of
preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and could have the effect
of delaying, deferring or preventing a change in control of the Company. The
Company currently has no plans to issue any shares of Preferred Stock.

One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.

CERTAIN PROVISIONS AFFECTING STOCKHOLDERS

Delaware, like many other states, permits a corporation to adopt a number
of measures through amendment of the corporate charter or bylaws or otherwise,
which may have the effect of delaying or deterring any unsolicited takeover
attempts. In addition, Section 203 of the Delaware General Corporation Law
restricts certain "business combinations" with "interested stockholders"
(generally a holder of 15% or more of the Company's voting stock) for three
years following the date that person becomes an interested stockholder. By
delaying or deterring unsolicited takeover attempts, these provisions could
adversely affect prevailing market prices for the Common Stock.

The Company's Certificate of Incorporation contains certain provisions
permitted under the Delaware General Corporation Law relating to the liability
of directors. The provisions eliminate a director's liability to the Company and
its stockholders for monetary damages for a breach of fiduciary duty, except in
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Certificate of Incorporation also
contains provisions obligating the Company to indemnify its directors to the
fullest extent permitted by the Delaware General Corporation Law. The Company
believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.

SHARES ELIGIBLE FOR FUTURE SALE

After the Offering, the Company will have outstanding 7,456,664 shares of
Common Stock. The 3,300,000 shares being sold in the Offering are freely
tradable without restriction unless acquired by affiliates of the Company. None
of the remaining 4,156,664 outstanding shares of Common Stock have been
registered under the Securities Act, which means that they may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act, including
the exemption provided by Rule 144 thereunder. In addition, upon consummation of
the Offering, 1,200,000 shares will be reserved for issuance under the Incentive
Plan and Purchase Plan. Of the currently outstanding options to purchase Common
Stock and options to be granted upon consummation of the Offering, options to
purchase 640,300 shares of Common Stock will be exercisable within 60 days of
the consummation of the Offering, subject to lock-up agreements. See
"Underwriting." Prior to the expiration of the lock-up period, the Company
intends to file a registration statement on Form S-8 covering shares issuable
upon exercise of stock options granted under the Company's stock option plans.
Such shares, upon issuance, will be immediately available for resale (in the
case of holders who are affiliates of the Company, subject to certain
limitations of Rule 144 under the Securities Act), subject to lock-up
agreements. Following the expiration or release of lock-up agreements,
"restricted securities" held by certain stockholders will be available for
public resale in accordance with Rule 144 under the Securities Act.

46
<PAGE> 48

In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of the acquisition of restricted shares of Common
Stock from either the Company or any affiliate of the Company, the acquiror or
subsequent holder thereof may sell, within any three-month period commencing 90
days after the date of the Prospectus relating to the Offering, a number of
shares that does not exceed the greater of one percent of the then outstanding
shares of the Common Stock, or the average weekly trading volume of the Common
Stock on the Nasdaq National Market during the four calendar weeks preceding the
date on which notice of the proposed sale is sent to the Commission. Sales under
Rule 144 are also subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. If two years have elapsed since the later of the date of the
acquisition of restricted shares of Common Stock from the Company or any
affiliate of the Company, a person who is not deemed to have been an affiliate
of the Company at any time for 90 days preceding a sale would be entitled to
sell such shares under Rule 144 without regard to the volume limitations, manner
of sale provisions or notice requirements.

The Company and its officers, directors, present stockholders and option
holders have agreed not to offer, sell, contract to sell or otherwise dispose of
any shares of Common Stock, or any securities convertible into or exercisable or
exchangeable for Common Stock, for a period of 180 days after the date of this
Prospectus without the prior written consent of BT Alex. Brown Incorporated
except for (i) in the case of the Company, Common Stock issued pursuant to any
employee or director plan described herein or in connection with acquisitions
and (ii) in the case of all such holders, the exercise of stock options pursuant
to benefit plans described herein and shares of Common Stock disposed of as bona
fide gifts, subject, in each case, to any remaining portion of the 180-day
period applying to any shares so issued or transferred. In evaluating any
request for a waiver of the 180-day lock-up period, BT Alex. Brown Incorporated
will consider, in accordance with its customary practice, all relevant facts and
circumstances at the time of the request, including, without limitation, the
recent trading market for the Common Stock, the size of the request and, with
respect to a request by the Company to issue additional equity securities, the
purpose of such an issuance.

Sales, or the availability for sale of, substantial amounts of the Common
Stock in the public market could adversely affect prevailing market prices and
the ability of the Company to raise equity capital in the future.

REGISTRATION RIGHTS

The holders of approximately 4,156,664 shares of Common Stock and the
holders of options to purchase 406,000 shares of Common Stock are entitled,
subject to certain conditions, to require the Company to file a registration
statement under the Securities Act of 1933, as amended, covering the sale of
such shares. The Company is obligated to effect two "long form" registrations
(registrations on the Commission's Form S-1 or S-2). There is no limit on the
number of "short form" registrations. In addition, if the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a registration statement on Form S-4 or Form S-8), such holders are entitled to
include their shares of Common Stock therein, except that, among other
conditions, the underwriters of an offering have the right to limit the number
of shares included in such a registration. Pursuant to the terms of its
agreement with such holders, the Company is required to pay the expenses of all
such registrations, except for underwriting discounts and commissions. All such
holders have waived their registration rights with respect to this Offering.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is
ChaseMellon Shareholder Services LLC.

47
<PAGE> 49

UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom BT Alex. Brown Incorporated and Adams, Harkness & Hill, Inc. are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company, the aggregate number of shares of Common Stock set forth opposite
its name below at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Adams, Harkness & Hill, Inc. ...............................
Total............................................. 3,300,000
=========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock offered by this Prospectus (other than those subject to the over-allotment
option described below) if any such shares are purchased. In the event of a
default by the Underwriters, the Underwriting Agreement provides that, in
certain circumstances, the purchase commitments of non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.

The Company has granted to the Underwriters an option, exercisable by the
Representatives during the 30-day period after the date of this Prospectus, to
purchase up to an aggregate of 495,000 shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. The Representatives may exercise such option only
to cover over-allotments in the sale of shares of Common Stock. To the extent
that the Representatives exercise such option, each of the Underwriters will
have a firm commitment, subject to certain conditions, to purchase the same
proportion of such additional shares of Common Stock as the number of shares of
Common Stock to be purchased and offered by such Underwriter in the above table
bears to the total number of shares in the above table.

The Company has been advised by the Representatives that the Underwriters
propose initially to offer the shares of Common Stock to the public at the
offering price set forth on the cover page of this Prospectus, and through the
Representatives to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
Offering, the public offering price and other selling terms may be changed.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

48
<PAGE> 50

Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price of the Common Stock will
be determined after negotiation between the Company and the Representatives.
Among the factors to be considered in such negotiations are prevailing market
conditions, the results of operations of the Company in recent periods, the
market capitalization and stages of development of other companies which the
Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant.

In connection with the Offering, certain persons participating in the
Offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Common Stock. Specifically, the Representatives may bid for and
purchase Common Stock in the open market to stabilize the price of the Common
Stock. The Underwriters may also over-allot the Offering, creating a syndicate
short position, and may bid for and purchase Common Stock in the open market to
cover the syndicate short position. Stabilizing transactions consist of certain
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the Common Stock. The Representatives may also impose a penalty
bid pursuant to which the Representatives may reclaim from any Underwriter or
dealer participating in the Offering the selling concession on shares sold by
them and purchased by the Representatives in stabilizing or short covering
transactions. In addition, the Underwriters may bid for and purchase the Common
Stock in market making transactions. These activities may stabilize or maintain
the market price of the Common Stock above market levels that may otherwise
prevail. The Underwriters are not required to engage in these activities, and
may end these activities at any time. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.

The Underwriters have reserved for sale, at the initial public offering
price, up to 5.0% of the Common Stock offered hereby for employees and directors
of the Company and certain other individuals who have expressed an interest in
purchasing such shares of Common Stock in the Offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the Underwriters to the general public on the same basis as other
shares offered hereby.

The Underwriters have informed the Company that they do not intend to
confirm sales of Common Stock offered hereby for accounts over which they
exercise discretionary authority.

CERTAIN LEGAL MATTERS

The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Katten Muchin & Zavis, Chicago, Illinois. Certain legal
matters will be passed upon for the Underwriters by Latham & Watkins,
Washington, D.C.

EXPERTS

The consolidated financial statements and financial statement schedules of
the Company as of December 31, 1996 and 1997 and for the year ended December 31,
1995 and the period January 1, 1996 through April 15, 1996 (the Predecessor
Company), the period April 16, 1996 through December 31, 1996 and the year ended
December 31, 1997 included in the Registration Statement and this Prospectus
have been audited by Deloitte & Touche LLP, independent accountants, as stated
in their reports appearing herein and elsewhere in the Registration Statement,
and are included in reliance upon the reports of such firm given upon their
authority as experts in auditing and accounting.

49
<PAGE> 51

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (which term shall encompass any and all amendments thereto) under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. Statements contained in this Prospectus
as to the contents of any contract or any other document are not necessarily
complete and in each instance reference is made to the copy of such contract or
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. For further information with
respect to the Company, reference is hereby made to the Registration Statement
and such exhibits and schedules filed as a part thereof, which may be inspected
without charge, at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, 13th
Floor, New York, New York 10048 and at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. The Commission maintains a web site that
contains reports, proxy and information statements regarding registrants that
file electronically with the SEC. The address of this web site is
(http://www.sec.gov). Copies of all or any portion of the Registration Statement
may be obtained from the Public Reference Section of the Commission, upon
payment of the prescribed fees.

50
<PAGE> 52

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Natural Nutrition Group, Inc. (formerly known as Intrepid
Food Holdings, Inc.) and Subsidiaries
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1996,
December 31, 1997 and March 31, 1998 (unaudited)....... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1997, the Combined Statements of
Operations for the year ended December 31, 1995 and the
period from January 1, 1996 to April 15, 1996
(Predecessor Company) and the Consolidated Statements
of Operations for the three months ended March 31, 1997
and 1998 (unaudited)................................... F-4
Consolidated Statements of Stockholders' Deficit for the
years ended December 31, 1996 and 1997, and the three
months ended March 31, 1998 (unaudited)................ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996 and 1997, the Combined Statements of
Cash Flows for the year ended December 31, 1995 and the
period from January 1, 1996 to April 15, 1996
(Predecessor Company) and the Consolidated Statements
of Cash Flows for the three months ended March 31, 1997
and 1998 (unaudited)................................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>

F-1
<PAGE> 53

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Natural Nutrition Group, Inc. (formerly known as Intrepid Food Holdings, Inc.)
and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Natural
Nutrition Group, Inc. (formerly known as Intrepid Food Holdings, Inc.) and
subsidiaries (the Company) as of December 31, 1996 and 1997 (successor company
balance sheets), and the related consolidated statements of operations,
stockholders' deficit and cash flows for the years then ended (successor company
operations) and the combined statements of operations and cash flows for the
year ended December 31, 1995 and the period from January 1, 1996 to April 15,
1996 (Predecessor Company operations). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such successor company financial statements present fairly,
in all material respects, the consolidated financial position of Natural
Nutrition Group, Inc. (formerly known as Intrepid Food Holdings, Inc.) and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for the periods then ended in conformity with
generally accepted accounting principles. Further, in our opinion, the
Predecessor Company combined financial statements referred to above present
fairly, in all material respects, the Predecessor Company's results of
operations and cash flows for the year ended December 31, 1995 and the period
from January 1, 1996 to April 15, 1996 in conformity with generally accepted
accounting principles.

Costa Mesa, California

February 20, 1998

(April 9, 1998 as to Note 7,

July , 1998 as to the effects of

the stock split described in Note 1)

The accompanying consolidated financial statements include the effects of a
stock split of the Company's common stock anticipated to be approved by the
Company's Board of Directors in July 1998, subject to stockholder approval prior
to the closing of the Company's initial public offering. The above opinion is in
the form which will be signed by Deloitte & Touche LLP upon consummation of the
stock split, which is described in Note 1 of the notes to the consolidated
financial statements, and assuming that, from February 20, 1998 to the date of
such stock split, no other events will have occurred that would affect the
accompanying financial statements and notes thereto.

Deloitte & Touche LLP

Costa Mesa, California

July 2, 1998

F-2
<PAGE> 54

NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash........................................................ $ 313 $ 1 $ 1
Accounts receivable (net of allowance for doubtful accounts
of $1,334 (1996), $1,421 (1997) and $1,347 (1998),
respectively)............................................. 3,767 4,009 3,330
Other receivables........................................... 459 187 28
Inventories (Note 4)........................................ 4,985 5,278 4,998
Deferred income taxes (Note 3).............................. 2,741 2,188 2,188
Prepaid expenses and other current assets................... 328 376 310
------- ------- -------
Total current assets............................... 12,593 12,039 10,855
PLANT AND EQUIPMENT, net (Note 5)........................... 26,374 23,358 22,603
INTANGIBLE AND OTHER ASSETS, net (Note 6)................... 14,363 14,815 14,859
------- ------- -------
$53,330 $50,212 $48,317
======= ======= =======

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Bank overdraft.............................................. $ 639 $ 1,315 $ 717
Accounts payable............................................ 2,084 1,474 2,161
Accrued liabilities......................................... 6,358 3,878 3,617
Current portion of long-term debt (Note 7).................. 3,146 2,855 2,866
Current portion of capital lease obligations (Note 8)....... 809 170 45
------- ------- -------
Total current liabilities.......................... 13,036 9,692 9,406
LONG-TERM LIABILITIES:
Long-term debt, net of current portion (Note 7)............. 19,116 18,835 17,234
Deferred income taxes (Note 3).............................. 1,102 1,048 1,048
Other accrued expenses...................................... 607 251 251
Capital lease obligations, net of current portion (Note
8)........................................................ 188
------- ------- -------
Total long-term liabilities........................ 21,013 20,134 18,533
COMMITMENTS AND CONTINGENCIES (Note 9)
MANDATORY REDEMPTION SERIES A PREFERRED STOCK at redemption
value including cumulative dividends in arrears of $1,330,
$3,412 and $3,983 in December 31, 1996 and 1997 and March
31, 1998, respectively; 18,667, 19,567 and 19,567 shares
outstanding in December 31, 1996 and 1997 and March 31,
1998, respectively (Note 10).............................. 19,997 22,979 23,550
STOCKHOLDERS' DEFICIT:
Preferred stock, par value $.001 per share, 2,000,000 shares
authorized, no shares issued and outstanding.............. -- -- --
Common stock, $.001 par value; 65,000 shares authorized at
December 31, 1996 and 1997 and 50,000,000 shares
authorized at March 31, 1998; 3,866,570, 4,156,664 and
4,156,664 shares issued and outstanding at December 31,
1996 and 1997 and March 31, 1998, respectively............ 4 4 4
Additional paid-in capital.................................. 1,329 1,429 1,429
Accumulated deficit......................................... (2,049) (4,026) (4,605)
------- ------- -------
Total stockholders' deficit........................ (716) (2,593) (3,172)
------- ------- -------
$53,330 $50,212 $48,317
======= ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE> 55

NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1
DECEMBER 31, TO APRIL 15, THREE MONTHS ENDED
1995 1996 YEAR ENDED DECEMBER 31, MARCH 31,
(PREDECESSOR (PREDECESSOR ----------------------- -----------------------
COMPANY) COMPANY) 1996 1997 1997 1998
------------ ------------ ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net sales................. $73,351 $18,221 $ 39,942 $ 67,898 $ 16,299 $ 17,568
Cost of sales............. 53,839 13,897 27,180 42,370 10,627 10,960
------- ------- ---------- ---------- ---------- ----------
Gross profit.............. 19,512 4,324 12,762 25,528 5,672 6,608
Operating expenses:
Marketing, selling and
distribution......... 16,651 5,563 7,177 17,366 3,832 4,891
General and
administrative....... 6,541 2,937 5,148 5,759 1,324 1,292
------- ------- ---------- ---------- ---------- ----------
Total operating
expenses...... 23,192 8,500 12,325 23,125 5,156 6,183
------- ------- ---------- ---------- ---------- ----------
Operating income (loss)... (3,680) (4,176) 437 2,403 516 425
Other income.............. 645 169
Interest expense.......... 1,502 476 1,052 1,911 497 458
------- ------- ---------- ---------- ---------- ----------
Income (loss) before
provision (benefit) for
income taxes............ (4,537) (4,483) (615) 492 19 (33)
Provision (benefit) for
income taxes (Note 3)... 1,137 (1,166) 13 387 17 (25)
------- ------- ---------- ---------- ---------- ----------
Net income (loss)......... (5,674) (3,317) (628) 105 2 (8)
Preferred dividends (Note
9)...................... 1,330 2,082 514 571
------- ------- ---------- ---------- ---------- ----------
Net loss attributable to
common stockholders..... $ -- $ -- $ (1,958) $ (1,977) $ (512) $ (579)
======= ======= ========== ========== ========== ==========
Net loss per share --
Basic and Diluted....... $ (.62) $ (.48) $ (.13) $ (.14)
========== ========== ========== ==========
Weighted average number of
common shares
outstanding............. 3,161,737 4,132,491 4,059,967 4,156,664
========== ========== ========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 56

NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997, AND
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995................. 1,450,000 $2 $ 498 $ (91) $ 409
Issuance of common stock on April 12,
1996..................................... 2,416,664 2 831 833
Preferred dividend (Note 10)............... (1,330) (1,330)
Net loss................................... (628) (628)
--------- -- ------ ------- -------
BALANCE, December 31, 1996................. 3,866,664 4 1,329 (2,049) (716)
Issuance of common stock on January 28,
1997..................................... 290,000 100 100
Preferred dividend (Note 10)............... (2,082) (2,082)
Net income................................. 105 105
--------- -- ------ ------- -------
BALANCE, December 31, 1997................. 4,156,664 4 1,429 (4,026) (2,593)
Preferred dividend (Note 10)............... (571) (571)
Net loss................................... (8) (8)
--------- -- ------ ------- -------
BALANCE, March 31, 1998.................... 4,156,664 $4 $1,429 $(4,605) $(3,172)
========= == ====== ======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 57

NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1, THREE MONTHS
DECEMBER 31, TO APRIL 15, YEARS ENDED ENDED
1995 1996 DECEMBER 31, MARCH 31,
(PREDECESSOR (PREDECESSOR ------------------ -----------------
COMPANY) COMPANY) 1996 1997 1997 1998
------------ ------------ -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.......................................... $(5,674) $(3,317) $ (628) $ 105 $ 2 $ (8)
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization............................ 3,368 989 2,344 3,445 903 917
Deferred income taxes.................................... 667 152 (187) 499 148
Gain on sale of plant and equipment...................... (25) (31) (24) (9)
Effect on cash of changes in operating assets and
liabilities, net of effects of acquisitions:
Accounts receivable, net............................... 2,804 1,200 634 (243) (607) 680
Inventories............................................ 2,860 1,899 (333) (292) 432 280
Prepaid expenses and other current assets.............. 214 (1,396) 972 224 (131) 225
Accounts payable....................................... 513 (893) (1,061) (610) (55) 687
Accrued liabilities.................................... 431 2,576 602 (2,836) 106 (262)
------- ------- -------- ------- ------- -------
Net cash (used in) provided by operating
activities......................................... 5,158 1,210 2,312 268 789 2,519
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment............................ (1,602) (108) (62) (446) (192) (60)
Acquisitions, net of cash acquired......................... (43,592)
Proceeds from sale of plant and equipment.................. 49 31 390 350 50
(Increase) decrease in intangible and other assets......... (63) (7) 424 (801) (505) (196)
------- ------- -------- ------- ------- -------
Net cash used in investing activities................ (1,616) (115) (43,199) (857) (347) (206)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving line of credit/bank
overdraft................................................ (932) -- 2,356 3,250 (49) (1,464)
Proceeds from long-term debt............................... 1,234 19,012
Principal payments on long-term debt....................... (3,903) (559) (690) (3,448) (1,180) (849)
Issuance of common stock................................... 833 51 51
Issuance of mandatory redemption preferred stock........... 18,667 424 424
------- ------- -------- ------- ------- -------
Net cash (used in) provided by financing
activities......................................... (3,601) (559) 40,178 277 (754) (2,313)
------- ------- -------- ------- ------- -------
NET (DECREASE) INCREASE IN CASH............................ (59) 536 (709) (312) (312) --
CASH, beginning of period.................................. 64 5 1,022 313 313 1
------- ------- -------- ------- ------- -------
CASH, end of period........................................ $ 5 $ 541 $ 313 $ 1 $ 1 $ 1
======= ======= ======== ======= ======= =======
SUPPLEMENTAL INFORMATION --
Cash paid during the year for:
Interest............................................... $ 1,406 $ 370 $ 1,886 $ 978 $ 275 $ 314
======= ======= ======== ======= ======= =======
Income taxes........................................... $ 28 $ 206 $ 406 $ 4 $ 11 $ --
======= ======= ======== ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of preferred and common stock in exchange for
debt..................................................... $ -- $ 525 $ 525 $ --
======== ======= ======= =======
Mandatory accrued preferred dividends...................... $ 1,330 $ 2,082 $ 514 $ 571
======== ======= ======= =======
Purchase of acquisitions, net of cash acquired:
April 15, 1996 acquisition of Health Valley Company:
Fair value of assets................................... $ 43,462
Goodwill............................................... 4,902
Liabilities assumed.................................... (14,025)
--------
Net cash used to acquire business.................... 34,339
October 31, 1996 acquisition of The Breadshop:
Fair value of assets................................... 2,472
Trademarks............................................. 5,493
Goodwill............................................... 3,519
Liabilities assumed.................................... (2,231)
--------
Net cash used to acquire business.................... 9,253
--------
Net cash used to acquire businesses.................. $ 43,592
========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 58

NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND

THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization -- Natural Nutritional Group, Inc. (formerly known as Intrepid
Food Holdings, Inc.) (NNG or the Company) was incorporated in the State of
Delaware in October 1995 to acquire and develop natural and organic food
companies. In April 1996, NNG acquired the outstanding capital stock of Health
Valley Foods, Inc. and Health Valley Manufacturing Company (Predecessor
Company). In October 1996, the Company acquired The Breadshop, Inc. (Breadshop)
(Note 2).

The Company is a manufacturer and marketer of premium natural and organic
food products in the United States. The Company markets (i) breakfast cereals
and granolas, (ii) granola bars, cereal bars, cookies, crackers and other baked
goods and (iii) canned and instant soups and chilis, as well as other food
products, primarily under its Health Valley(R) and Breadshop's(R) brands.

Basis of Presentation -- The accompanying consolidated statements of
operations and cash flow include the combined activities of the Predecessor
Company for the year ended December 31, 1995 and the period January 1, 1996 to
April 15, 1996 prior to acquisition by the Company. The operations of NNG for
the period October 2, 1995 (inception) to December 31, 1995 were not significant
and have not been included. The results of the Company are not comparable to
those of the Predecessor Company due to the changes in capital structure to fund
the acquisitions, which included the issuance of preferred stock and the
incurrence of additional debt. Additionally, the purchase accounting adjustments
related to the acquisitions changed the cost basis of the Company's fixed
assets, trademarks and resulting goodwill. Certain amounts in the 1996 financial
statements have been reclassified to conform with the 1997 presentation.

Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts and operations of NNG and its subsidiaries. All
material intercompany balances and transactions have been eliminated.

Stock Split -- Immediately prior to the consummation of a public offering
of the Company's Common Stock, the Company effected a 290-for-1 stock split of
its Common Stock. All share and per share amounts included in the accompanying
consolidated financial statements and footnotes have been restated to reflect
the stock split.

Basic and Fully Diluted Per Share Information -- In February 1997, the
Financial Accounting Standards Board (FASB) issued SFAS No. 128, Earnings per
Share, which is effective for financial statements for interim and annual
periods ending after December 15, 1997. SFAS No. 128 redefines earnings per
share under generally accepted accounting principles.

Basic net income (loss) per share is computed using the weighted average
number of common shares outstanding during the periods presented. Diluted net
income (loss) per share is computed using the weighted average number of common
and common equivalent shares outstanding during the periods presented assuming
the exercise of the Company's stock options.

Basic and diluted loss per share is based on the weighted average number of
common shares outstanding. Common stock equivalents were not included in the
computation of Diluted EPS because such inclusion would have been antidilutive
for the years ended December 31, 1996 and 1997 and the three months ended March
31, 1997 and 1998. The Predecessor Company earnings per share data have been
excluded from the statement of operations as such information is not relevant to
the Company's capital structure.

Unaudited Information -- The accompanying consolidated balance sheet as of
March 31, 1998 and the related consolidated statements of operations and cash
flows for the three months ended March 31, 1997 and

F-7
<PAGE> 59
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

March 31, 1998, have been prepared by the Company without audit in accordance
with generally accepted accounting principles for interim financial information
and, in the opinion of management, contain all adjustments consisting only of
normal recurring accruals necessary for a fair presentation of such information.

Inventories -- Inventories are valued at the lower of first-in, first-out
cost (FIFO) or market value.

Plant and Equipment -- Plant and equipment, including capitalized lease
assets, are stated at cost. Depreciation is provided for on the straight-line
method over the lesser of the estimated useful lives of the assets or the lease
term. Amortization of leasehold improvements is based on the lesser of their
estimated useful lives or the terms of the related leases and is calculated
using the straight-line method. Useful lives are as follows:

<TABLE>
<S> <C>
Machinery and equipment..................................... 3 to 20 years
Furniture and fixtures...................................... 3 to 14 years
Leasehold improvements...................................... 5 to 10 years
</TABLE>

Repairs and maintenance are expensed as incurred, whereas significant
improvements, which materially increase values or extend useful lives, are
capitalized and depreciated over the estimated useful lives of the related
assets. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal. Gains or losses resulting from the disposal of assets are charged or
credited to operations as incurred.

Fair Value of Financial Instruments -- The carrying values of accounts
receivable and accounts payable approximate fair value due to the short
maturities of such instruments. The carrying values of term loans approximate
fair value due to the fact that they are based on variable interest rates.

Intangible and Other Assets -- The excess of purchase price over the fair
value of net assets acquired, as well as trademarks related to the Breadshop
acquisition, are included in intangible and other assets and are being amortized
on a straight-line basis over a 40-year period. Accumulated amortization of
intangibles amounted to $113, $447 and $528 at December 31, 1996 and 1997 and
March 31, 1998, respectively.

In 1997, the Company undertook a program to update its packaging designs.
Costs of $420, associated with development of new packaging designs, were
capitalized and will be amortized over three years, beginning with related
product shipments in 1998.

Revenue Recognition -- The Company records revenue at the time the related
products are shipped to the customer.

Customer Concentration -- The Company had significant sales to (a) three
individual retailers who accounted for 13%, 12% and 10% of revenue for the
fiscal year ending December 31, 1995, (b) a significant distributor who
accounted for 14% of revenue for each of 1996 and 1997 and (c) a significant
distributor who accounted for 13% of revenue for 1997. Given the significant
amount of revenues derived from certain customers, collectibility issues arising
from financial difficulties of any of these customers or the loss of any such
customers could have a material adverse effect on the Company's business.

Vendor Concentration -- The Company utilizes a single contract manufacturer
for the production of canned soups and chilis which accounted for approximately
25% of revenues for the years ended December 31, 1995, 1996 and 1997. The
inability of the contract manufacturer to supply the Company with sufficient
product quantities in a timely manner could have a material adverse effect until
alternate sources could be identified or developed.

Customer Rebates -- The Predecessor Company had historically provided a $5
rebate to customers who returned 20 proof-of-purchase labels. Management decided
to discontinue this program during 1996, and a

F-8
<PAGE> 60
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reserve was established to approximate the remaining cost of the program based
on the number of products out at the retail level that reflected this offer.

Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Long-Lived Assets -- In accordance with Statement of Financial Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, the Company periodically evaluates the
recoverability of the net carrying value of plant and equipment and intangible
assets using current and anticipated net income and undiscounted cash flows,
and, if necessary, an impairment is recorded. The Company has recorded no such
impairment in 1995, 1996 and 1997.

Comprehensive Income -- The Company adopted SFAS No. 130, Reporting
Comprehensive Income, on January 1, 1998. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. The Company does not have any
comprehensive income components requiring separate disclosure.

New Accounting Pronouncements -- For the fiscal year beginning January 1,
1999, the Company will adopt SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information and SFAS No. 132, Employers' Disclosures
about Pensions and Other Postretirement Benefits. The Company is reviewing the
impact of the adoption of these pronouncements on its consolidated financial
statements.

Stock-Based Compensation -- The Financial Accounting Standards Board's SFAS
No. 123, Accounting for Stock-Based Compensation, requires expanded disclosures
of stock-based compensation arrangements with employees. The standard defines a
fair value method of accounting for stock options and other equity instruments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service period,
which is usually the vesting period. As permitted by the SFAS No. 123, the
Company has elected to continue to account for such transactions under
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and discloses, in a note to the financial statements, pro forma net
income and earnings per share as if the Company had applied the fair value
method of accounting. The Company will continue to use APB Opinion No. 25 for
measurement and recognition of employee stock-based transactions.

2. ACQUISITIONS

On April 15, 1996, pursuant to a stock purchase agreement, NNG acquired all
of the outstanding capital stock of the Predecessor Company for $34,339, in
cash, including $2,339 in transaction costs. Additionally, pursuant to the stock
purchase agreement the former owner was granted an option to purchase 100 shares
of common stock of Health Valley at $22,222.22 per share. During 1997, this
option was terminated and a new option was issued. The new option enables the
former owner to purchase 406,000 shares of NNG ("Common Stock") at $.34 per
share, and up to an unspecified number of shares of Series A Preferred Stock to
be determined based on the number of shares of Series A Preferred Stock redeemed
prior to the exercise of such option at $1,000 per share.

The acquisition was accounted for using the purchase method. Accordingly,
the purchase price was allocated to assets acquired based on their estimated
fair values. This treatment resulted in approximately $4,903 of cost in excess
of the fair value of net assets acquired. This goodwill is being amortized on a
straight-

F-9
<PAGE> 61
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

line basis over 40 years. Health Valley results of operations have been included
in the accompanying financial statements from the date of acquisition.

On October 31, 1996, the Company completed its acquisition of all of the
outstanding capital stock of Breadshop for $9,253 in cash, including $502 in
transaction costs. The acquisition was accounted for using the purchase method.
Accordingly, the purchase price was allocated to assets acquired based on their
estimated fair values. This treatment resulted in approximately $3,519 of cost
in excess of the fair value of net assets acquired as of October 31, 1996, and a
trademark valuation of $5,493. These amounts are being amortized on a
straight-line basis over 40 years. Breadshop's results have been included in the
accompanying consolidated financial statements from the date of acquisition. The
results of the Company, had Breadshop been acquired as of April 15, 1996 and
included in the accompanying financial statements, would be as follows:

<TABLE>
<S> <C>
Revenues.................................................... $ 45,969
=========
Net loss.................................................... $ (779)
=========
Net loss per share -- basic and diluted..................... $ (.19)
=========
Weighted average number of common shares outstanding........ 4,132,491
=========
</TABLE>

3. INCOME TAXES

In accordance with SFAS No. 109, Accounting for Income Taxes, deferred tax
assets and deferred tax liabilities reflect the tax consequences in future years
of differences between the income tax bases of assets and liabilities and the
corresponding bases used for financial reporting purposes. Measurement of the
deferred items is based on enacted tax laws. In the event the future
consequences of differences between financial reporting bases and tax bases of
the Company's assets and liabilities result in a deferred tax asset, SFAS No.
109 requires an evaluation of the probability of being able to realize the
future benefits indicated by such asset. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some portion
or all of the deferred tax asset will not be realized. The Company's provision
for income taxes for the three months ended March 31, 1997 and March 31, 1998
are based upon estimates of effective rates for the corresponding periods. The
Predecessor Company's income tax benefit for the period January 1, 1996 to April
15, 1996 reflects the future income tax benefit expected to be realized.

Components of the income tax expense (benefit) are as follows at December
31:

<TABLE>
<CAPTION>
1995 1996 1997
------ ---- -----
<S> <C> <C> <C>
Current:
Federal.............................................. $ (634) $ 86 $ --
State................................................ 2 11 3
------ ---- -----
(632) 97 3
Deferred............................................... 1,769 (84) 499
Other.................................................. (115)
------ ---- -----
$1,137 $ 13 $ 387
====== ==== =====
</TABLE>

F-10
<PAGE> 62
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Major components of the Company's deferred taxes at December 31, 1996 and
1997 are as follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Net operating loss carryforwards............................ $ 1,449 $ 2,172
Accruals.................................................... 1,223 197
Reserves.................................................... 325 359
Basis difference in acquired assets......................... (1,954) (1,198)
Depreciation and amortization............................... 452 (787)
AMT credit and carryforwards................................ 32 80
Capitalization of inventory costs........................... 213 63
Other, including state taxes................................ (101) 254
------- -------
$ 1,639 $ 1,140
======= =======
</TABLE>

At December 31, 1997, the Company has available net operating loss (NOL)
carryforwards of approximately $5,186 and $4,030, for federal and California
income taxes, respectively. These NOLs will begin to expire in the Years 2010
and 2000, respectively. The majority of the available NOLs were acquired from
the Predecessor Company in the transactions described in Note 2. The Internal
Revenue Code of 1986, as amended, contains provisions that may limit the
Company's utilization of its NOL carryforward because of the change in ownership
of the Company's stock. The limitation, if any, applies to NOL generated prior
to the change in ownership (prior to April 15, 1996). Management believes that
the limitations, if any, do not have a material impact on the Company's ability
to utilize such net operating losses to offset future earnings.

In connection with the acquisition of the Predecessor Company and Breadshop
by the Company, a tax liability was recorded to reflect the increase in book
basis over tax basis for such net assets acquired. Such amount is included in
noncurrent deferred liabilities.

4. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials..................................... $2,491 $2,457 $2,716
Work-in-progress.................................. 129 237 157
Finished goods.................................... 2,365 2,584 2,125
------ ------ ------
$4,985 $5,278 $4,998
====== ====== ======
</TABLE>

F-11
<PAGE> 63
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PLANT AND EQUIPMENT

Plant and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment.......................... $14,921 $15,135 $15,152
Leasehold improvements........................... 8,994 8,994 8,995
Furniture and fixtures........................... 1,868 2,074 2,066
Assets not in use................................ 2,786 2,437 2,437
------- ------- -------
28,569 28,640 28,650
Less accumulated depreciation.................... (2,195) (5,282) (6,047)
------- ------- -------
$26,374 $23,358 $22,603
======= ======= =======
</TABLE>

6. INTANGIBLE AND OTHER ASSETS

Intangible and other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill......................................... $ 8,498 $ 8,881 $ 8,881
Trademarks....................................... 5,493 5,493 5,493
Other............................................ 521 940 1,136
------- ------- --------
14,512 15,314 15,510
Less accumulated amortization.................... (149) (499) (651)
------- ------- --------
$14,363 $14,815 $ 14,859
======= ======= ========
</TABLE>

7. LONG-TERM DEBT

Debt consists of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revolving line of credit.................................... $ 2,158 $ 4,732
Term Loan A................................................. 12,000 10,700
Term Loan B................................................. 6,500 5,930
Other....................................................... 1,604 328
------- -------
22,262 21,690
Less current portion........................................ (3,146) (2,855)
------- -------
Total long-term debt.............................. $19,116 $18,835
======= =======
</TABLE>

The Company's bank credit agreement consists of a $6.5 million revolving
line of credit facility, and two term loan facilities. The revolving line of
credit facility expires in June 30, 1999, and Health Valley pays an annual
commitment fee of .375% on the unused portion of the revolving credit facility.
The Term Loan A requires quarterly principal payments, which began March 31,
1997 and end June 30, 2003, in increasing amounts, which began at $250 and end
at $575. The Term Loan B requires quarterly principal payments, which began
April 30, 1997 and end October 31, 2002, in increasing amounts, which began at
$160 and end at

F-12
<PAGE> 64
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$380. All of these borrowings are collateralized by substantially all of the
assets of the Company's wholly-owned subsidiary.

Interest on the borrowings under these agreements are at varying rates
based, at the Company's option, on the bank's prime rate plus .25% per annum, or
the London Interbank Offered Rate (LIBOR) plus 2.5% per annum. The borrowings at
prime rates have daily terms, while the LIBOR borrowings have terms of one to
six months. Interest payments are made at the end of the each quarter for prime
rate borrowings, and the end of each respective period for LIBOR borrowings.
Effective December 31, 1997, the interest rate on the revolving line of credit
was 8.75%, the interest rate on term loan A was 8.5%, and the interest rate on
term loan B was 8.75%.

The revolving line of credit facility limits the Company's borrowing, based
on eligible receivable and inventory valuations. The maximum credit available
was $4,844 and $3,680 as of December 26, 1997 and December 27, 1996,
respectively.

The long-term debt agreement contains various restrictive covenants which
include a prohibition on payment of dividends, specified minimum net worth and
current ratio levels, and specific limitations on leverage ratios and capital
expenditure amounts. The agreement also contains a mandatory requirement to make
accelerated payments on the term debt in the event that a significant sale or
disposition of fixed assets occurs. At December 31, 1997, the Company was in
violation of the fixed charge coverage ratio covenant and on April 9, 1998
obtained a waiver from the lender.

Other debt includes notes payable to a financing company, with underlying
fixed assets as collateral, payable in monthly installments ranging from $2 to
$13, bearing interest rates of 8.91% to 11.81%, and maturing between March 1998
and July 2000.

The scheduled repayments of debt are as follows:

<TABLE>
<S> <C>
1998........................................................ $ 2,855
1999........................................................ 7,701
2000........................................................ 3,004
2001........................................................ 3,285
2002........................................................ 3,695
Thereafter.................................................. 1,150
-------
$21,690
=======
</TABLE>

8. CAPITAL LEASE OBLIGATIONS

Obligations under capitalized equipment leases exist for the next year and
are as follows:

<TABLE>
<S> <C>
1998........................................................ $175
Less amounts representing interest.......................... (5)
----
Present value of minimum lease payments..................... $170
====
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases its facilities under the terms of
operating leases. These leases are for terms of five years; the current
obligations extend through September 1998. These leases contain a renewal option
for a five-year period commencing October 1998. The leases also contain
escalation clauses which provide for increases in the monthly payments of up to
5% per annum based on inflationary factors determined by the lessor. Rent
expense related to these leases amounted to $1,513, $812, $1,147, $287 and $287
for the years ended December 31, 1995, 1996 and 1997 and the three months ended
March 31, 1997 and

F-13
<PAGE> 65
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1998, respectively. Future minimum rental payments net of sublease income for
the lease obligations referred to above are $945 for the year ending December
31, 1998.

Contingencies -- The Company is a party to various legal proceedings
arising from the normal course of operations. Although the ultimate disposition
of these proceedings is not determinable, management, based on advice of legal
counsel, does not believe that adverse determinations in any or all of such
proceedings will have a material adverse effect on the Company's financial
position, results of operations and cash flows.

10. MANDATORY REDEMPTION 10% PREFERRED STOCK

The Company's Series A Preferred Stock has a mandatory redemption value of
$9,783 on each of the seventh and eighth anniversary dates from the original
issuance or April 12, 2003 and 2004, respectively, plus any accrued but unpaid
dividends. Dividends on the Series A Preferred Stock are cumulative and accrue
at a 10% annual rate based on a redemption value of $1,000 per share. In the
event of liquidation, dissolution, qualifying sale or merger of the Company,
each holder of Series A Preferred Stock has a liquidation preference equal to
$1,000 per share plus any accrued but unpaid dividends. Subject to certain
limitations, the Company, at its option, may redeem all or part of the
outstanding shares of Series A Preferred Stock at the redemption value plus all
accrued but unpaid dividends. During fiscal year 1997, the Company issued 900
shares of Series A Preferred Stock, liquidation value of $1,000 per share, as
repayment for $900 of debt. As the Series A Preferred Stock has characteristics
similar to debt instruments, the balance of preferred shares have been
classified above shareholders' equity in the financial statements.

11. RETIREMENT PLANS

The Company maintains a defined contribution retirement plan (401(k)
Savings Plan) (the Plan) that covers all eligible employees who elect to
participate. Employees may contribute between 1% and 15% of their earnings under
the Plan, subject to annual limits set by the Internal Revenue Service. The
Company matches 50% of the participant's contributions, up to 3% of each
participant's earnings. In addition, the Company is able to make additional
discretionary contributions. The Company's contributions for the periods ended
December 31, 1995, 1996 and 1997 and March 31, 1997 and 1998 were $197, $103,
$72, $28 and $29, respectively.

12. RELATED-PARTY TRANSACTIONS

Frontenac Company, a private equity firm and the general partner of
Frontenac VI Limited Partnership, provides consulting and financial services to
the Company. Such services include, but are not limited to, addressing issues
related to strategic direction, long-term growth, acquisitions and divestitures,
executive recruitment, and new financings. Two directors of the Company are
affiliates of Frontenac Company.

Fees paid by the Company to Frontenac Company in 1996 include a $395
transaction fee related to the Health Valley acquisition and a $100 transaction
fee related to the Breadshop acquisition. The 10% Convertible Promissory Note
due to Frontenac VI Limited Partnership (Note 6) had accrued interest payable of
$17 as of December 31, 1996. This Note and the related interest was satisfied on
January 31, 1997 through a cash payment of $500 and an additional stock purchase
valued at $526. Expenses incurred by the Company from Frontenac Company for the
years ended December 31, 1996 and 1997 and the three months ended March 31, 1997
and 1998 include Board of Directors fees of $83, $88, $15 and $25, respectively.
The charges incurred in these transactions were substantially the same as
charges which would have been incurred had similar services been provided by
unrelated parties.

F-14
<PAGE> 66
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. OTHER INFORMATION

Accrued expenses and other liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued salaries, vacation and related
benefits....................................... 1,251 897 940
Accrued acquisition expenses..................... 1,732 1,760 1,715
Accrued rebates.................................. 1,970 5 --
Other accrued liabilities........................ 1,405 1,216 962
------ ------ ------
$6,358 $3,878 $3,617
====== ====== ======
</TABLE>

14. STOCK OPTIONS

In January of 1997, the Company amended the Management Option Agreement
(Option Agreement) with its Chairman and President. The Option Agreement granted
options to purchase 96,570 common shares at increasing option prices in excess
of the fair value ($.34 per share) of the stock at the grant date. The options
become fully vested and exercisable on the earlier of: (1) a qualified public
offering or approved sale or (2) on the third anniversary from the date of
grant. The Option Agreement also contains certain antidilution provisions.

In March of 1997, the Company adopted the 1997 Stock Option Plan (the
Option Plan) to provide for and formalize the grant of stock options to key
employees. In connection with the adoption of the Option Plan, the Company
formalized the grant of options for 212,280 shares at $.34 per share to key
employees. These options vest one third on the first anniversary date of
employment subsequent to the date of grant and one third on each of the two
subsequent anniversary dates. Options granted under the Plan will become fully
vested in the event of a fundamental change or stock sale (as defined within the
Plan) of the Company.

At December 31, 1997, 59,610 options were vested and exercisable having a
weighted average exercise of $.34 per share. No options were exercised or
canceled during fiscal year 1997.

The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for the
Plan. No compensation cost has been recognized for the Plan. Had compensation
cost for the Company's plan been determined based on the fair value at the grant
date for awards under those plans consistent with the method of SFAS No. 123,
the Company's net income would have decreased by the pro forma amounts indicated
below at December 31, 1997:

<TABLE>
<S> <C>
Net income:
As reported............................................... $105
Pro forma................................................. $101
</TABLE>

The fair value of stock options formalized in 1997 had a weighted average
fair value of $.06 per share. The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions used for grants in 1997: dividend yield of 0% for all
grants, risk-free rate of 6.68%; expected life of 3 years. Volatility of 0% was
used (as the Company is not a public entity).

F-15
<PAGE> 67
NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SUBSEQUENT EVENT (UNAUDITED)

F-16
<PAGE> 68

- ---------------------------------------------------------
- ---------------------------------------------------------

NO PERSON, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 9
History of the Company................... 14
Use of Proceeds.......................... 15
Dividend Policy.......................... 16
Dilution................................. 16
Capitalization........................... 17
Selected Consolidated Financial Data..... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 20
Business................................. 27
Management............................... 37
Principal Stockholders................... 43
Certain Transactions..................... 44
Description of Capital Stock............. 45
Shares Eligible for Future Sale.......... 46
Underwriting............................. 48
Certain Legal Matters.................... 49
Experts.................................. 49
Additional Information................... 50
Index to Financial Statements............ F-1
</TABLE>

---------------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES OFFERED HEREBY,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------
- ---------------------------------------------------------

3,300,000 SHARES

NATURAL NUTRITION GROUP LOGO

HEALTH VALLEY LOGO

BREADSHOP NATURAL FOODS LOGO

Common Stock

--------------------------
PROSPECTUS
--------------------------

BT ALEX. BROWN

ADAMS, HARKNESS & HILL, INC.
, 1998

- ---------------------------------------------------------
- ---------------------------------------------------------
<PAGE> 69

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting commissions and discounts) payable by the
Company in connection with the issuance and distribution of the Common Stock
pursuant to the Prospectus contained in this Registration Statement. The Company
will pay all of these expenses.

<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT
-----------
<S> <C>
Securities and Exchange Commission registration fee......... $ 17,913
NASD filing fee............................................. 6,572
Nasdaq National Market listing fee.......................... 72,875
Accountants' fees and expenses.............................. 150,000
Blue Sky fees and expenses.................................. 5,000
Legal fees and expenses..................................... 375,000
Transfer Agent and Registrar fees and expenses.............. 10,000
Printing and engraving...................................... 150,000
Miscellaneous expenses...................................... 112,640
--------
Total............................................. $900,000
========
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Second Amended and Restated Certificate of Incorporation
provides that the Company shall, to the fullest extent permitted by Section 145
of the Delaware General Corporation Law, as amended from time to time, indemnify
all persons whom it may indemnify pursuant thereto.

Section 145 of the Delaware General Corporation Law permits a corporation,
under specified circumstances, to indemnify its directors, officers, employees
or agents against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlements actually and reasonably incurred by them in
connection with any action, suit or proceeding brought by third parties by
reason of the fact that they were or are directors, officers, employees, or
agents of the corporation, if such directors, officers, employees or agents
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to be indemnified for such expenses despite such
adjudication of liability.

The Company's Second Amended and Restated Certificate of Incorporation
provides that the Company's directors will not be personally liable to the
Company or its stockholders for monetary damages resulting from breaches of
their fiduciary duty as directors except (i) for any breach of the duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, which
makes directors liable for unlawful dividends or unlawful stock repurchase or
redemptions or (iv) for transactions from which directors derive improper
personal benefit.

II-1
<PAGE> 70

Upon the effectiveness of this Registration Statement the Company will
enter into indemnification agreements with its directors and certain officers.
The form of such agreement is filed as an Exhibit hereto. The Company expects to
have director and officer insurance coverage concurrently with the consummation
of the Offering.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following information reflects the 290-for-1 stock split to be effected
in connection with the consummation of the Offering.

On October 2, 1995, pursuant to a Common Stock Purchase Agreement, the
Registrant issued (i) 145,000 shares of Common Stock to William R. Voss ("Voss")
and (ii) 1,305,000 shares of Common Stock to Frontenac VI Limited Partnership
("Frontenac VI")_. The purchase price for the shares was $0.34 per share.

On April 15, 1996, pursuant to a Stock Purchase Agreement, the Registrant
issued (i) 145,000 shares of Common Stock to Voss, (ii) 748,136 shares of Common
Stock and 10,715.358 shares of Series A Preferred Stock to Frontenac VI and
(iii) 1,523,529 shares of Common Stock and 7,951.31 shares of Series A Preferred
Stock to State of Wisconsin Investment Board ("SWIB"). The purchase price for
the shares was $0.34 per share of Common Stock and $1,000 per share of Series A
Preferred Stock.

On April 15, 1996, pursuant to a Management Stock Option Agreement, the
Company granted to Voss options to purchase 96,570 shares of Common Stock for an
exercise price that increases over time from $0.34 to $5.48 per share.

During 1996, in connection with the commencement of their employment, the
Company granted to each of Terry Sebastian, Michael D. de Boom, Diane J.
Beardsley and William J. Nictakis options to purchase 10,440, 41,760, 41,760 and
83,520 shares of Common Stock, respectively, for an exercise price of $0.34 per
share.

On January 27, 1997, pursuant to a Stock Purchase Agreement, the Registrant
issued (i) 27,651.5 shares of Common Stock to Voss, (ii) 142,862 shares of
Common Stock and 476.25 shares of Series A Preferred Stock to Frontenac VI and
(iii) 106,009.5 shares of Common Stock and 353.40 shares of Series A Preferred
Stock to SWIB. The purchase price for the shares was $0.34 per share of Common
Stock and $1,000 per share of Series A Preferred Stock.

On January 27, 1997, pursuant to a Stock Purchase Agreement, the Registrant
issued 4,492 shares of Common Stock and 23.451 shares of Series A Preferred
Stock to each of Timothy J. Healy, Chance Bahadur and Mark Smith. The purchase
price for the shares was $0.34 per share of Common Stock and $1,000 per share of
Series A Preferred Stock.

During the first quarter of 1997, in connection with commencement of each
of their employment, the Company granted to each of Mark Smith, Kevin Mosley and
Ronald Haughey options to purchase 13,920, 10,440 and 10,440 shares of Common
Stock, respectively, for exercise prices of $0.34 per share. Options to purchase
9,280 shares of Common Stock issued to Mark Smith were subsequently terminated
in connection with the termination of his employment.

On September 30, 1997, pursuant to a Settlement Agreement, the Company
granted to George Mateljan, Jr., the former owner of the Health Valley
companies, options to purchase 406,000 shares of Common Stock for an exercise
price of $0.34 per share and up to 3,082.22 shares of Series A Preferred Stock
for an exercise price of $1,000 per share in exchange for cancellation of
outstanding options to purchase shares of Common Stock of Health Valley Company,
a wholly owned subsidiary of the Company. Mr. Mateljan subsequently transferred
options to purchase 81,200 and 20,300 shares of Common Stock and a corresponding
number of shares of Series A Preferred Stock to John A. Calfas and Wasserstein
Perrella & Co., respectively.

In January 1998, the Company granted to Lawrence A. Del Santo, a
non-employee director, options to purchase 10,150 shares of Common Stock for an
exercise price of $6.90 per share.

II-2
<PAGE> 71

The options issued to Sebastian, de Boom, Beardsley, Nictakis, Smith,
Mosley, Haughey and Del Santo are governed by the Company's 1997 Option Plan.
The grant of options issued prior to the adoption of the 1997 Option Plan was
formalized in March 1997.

No underwriters were involved in any of the transactions described above.
All of the securities issued in the foregoing transactions were issued by the
Registrant in reliance upon the exemption from registration available under
Section 4(2) of the Securities Act, including Regulation D promulgated
thereunder.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<C> <S>
1.1** -- Form of Underwriting Agreement.
2.1* -- Stock Purchase Agreement dated as of March 17, 1996 by
and between George Mateljan, Jr. and Health Valley
Company. Schedules and exhibits to this Stock Purchase
Agreement have not been included herewith, but will be
furnished supplementally to the Commission upon request.
2.2* -- Amendment to Stock Purchase Agreement dated as of April
15, 1996 by and between George Mateljan, Jr. and Health
Valley Company.
2.3* -- Stock Purchase Agreement dated October 16, 1996 by and
between the stockholders of The Bread Shop, Inc. and TBS
Acquisition Corporation. Schedules and exhibits to this
Stock Purchase Agreement have not been included herewith,
but will be furnished supplementally to the Commission
upon request.
3.1* -- Form of Second Amended and Restated Certificate of
Incorporation of the Registrant.
3.2* -- Form of Amended and Restated Bylaws of the Registrant.
4.1 -- Specimen stock certificate representing Common Stock.
5** -- Opinion of Katten Muchin & Zavis as to the legality of
the securities being registered (including consent).
10.1* -- Common Stock Purchase Agreement dated as of October 2,
1995 by and between the Registrant, Frontenac VI Limited
Partnership and William R. Voss.
10.2* -- Employment Agreement dated October 2, 1995 by and between
the Registrant, and William R. Voss.
10.3* -- Amendment No. 1 dated January 28, 1997 to Employment
Agreement by and between the Registrant, and William R.
Voss.
10.4* -- Stock Purchase Agreement dated April 15, 1996 by and
between the Registrant, Frontenac VI Limited Partnership,
State of Wisconsin Investment Board and William R. Voss.
10.5* -- Amended and Restated Credit Agreement dated October 31,
1996 by and between Health Valley Company, TBS
Acquisition Corporation, The Bread Shop and LaSalle
National Bank.
10.6* -- First Amendment to Loan and Security Agreement dated June
1997 by and between Health Valley Company and LaSalle
National Bank.
10.7* -- Second Amendment to Loan and Security Agreement dated
April 1998 by and between Health Valley Company and
LaSalle National Bank.
10.8* -- Stock Purchase Agreement dated as of January 28, 1997 by
and between the Registrant, William R. Voss, Frontenac VI
Limited Partnership and State of Wisconsin Investment
Board.
10.9* -- Amended and Restated Management Option Agreement dated
January 28, 1997 by and between the Registrant, and
William R. Voss.
10.10* -- Stock Purchase Agreement dated as of January 28, 1997 by
and between the Registrant, Timothy J. Healy, Chance
Bahadur and Mark Smith.
10.11* -- Settlement Agreement dated as of September 30, 1997 by
and between Health Valley Company, the Registrant, and
George Mateljan, Jr.
10.12* -- Second Amended and Restated Registration Agreement dated
September 30, 1997 by and between the Registrant, and the
stockholders and option holders named therein.
</TABLE>

II-3
<PAGE> 72

<TABLE>
<C> <S>
10.13 -- Form of Natural Nutrition Group, Inc. Employee Incentive
Compensation Plan.
10.14 -- Form of Natural Nutrition Group, Inc. 1998 Employee Stock
Purchase Plan.
10.15* -- Form of Indemnification Agreement.
10.16* -- Lease Agreement dated August 5, 1988 by and between
CalMat Properties, Inc. and Health Valley Natural Foods,
Inc.
10.17 -- Intrepid Food Holdings, Inc. 1997 Stock Option Plan, as
amended.
10.18* -- Form of Stock Option Agreement for the Intrepid Food
Holdings, Inc. 1997 Stock Option Plan.
11 -- Statement regarding computation of per share earnings.

21* -- Subsidiaries of the Registrant.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Katten Muchin & Zavis (contained in its
opinion to be filed as Exhibit 5 hereto).

24* -- Power of Attorney

27* -- Financial Data Schedule.
99.1 -- Consent of Natural Foods Merchandiser
99.2 -- Consent of Spencer Information Services, Inc.
</TABLE>

- ---------------

* Previously filed

** To be filed by amendment

(b) Financial Statement Schedules.

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Report of Independent Public Accountants.................... S-1
Schedule II -- Valuation and Qualifying Accounts............ S-2
</TABLE>

ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes:

(1) To provide to the Underwriters at the closing specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.

(2) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless, in the opinion of its counsel, the
matter had been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-4
<PAGE> 73

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
and State of Illinois on the 6th day of July, 1998.

Natural Nutrition Group, Inc.

By: /s/ WILLIAM R. VOSS
----------------------------------
William R. Voss
Chairman, Chief Executive Officer
and President

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ WILLIAM R. VOSS Chairman of the Board, Chief July 6, 1998
- ----------------------------------------------------- Executive Officer, and President
William R. Voss (Principal Executive Officer)

* Senior Vice President and Chief July 6, 1998
- ----------------------------------------------------- Financial Officer (Principal
Diane J. Beardsley Accounting Officer)

* Director July 6, 1998
- -----------------------------------------------------
Roger S. McEniry

* Director July 6, 1998
- -----------------------------------------------------
David S. Katz

* Director July 6, 1998
- -----------------------------------------------------
Timothy J. Healy

* Director July 6, 1998
- -----------------------------------------------------
Lawrence A. Del Santo

*By /s/ WILLIAM R. VOSS
-------------------------------------------------
William R. Voss
As Attorney-in-fact
</TABLE>

II-5
<PAGE> 74

INDEPENDENT AUDITORS' REPORT ON SCHEDULE

To the Board of Directors and
Stockholders of Natural Nutrition Group, Inc.
(formerly known as Intrepid Food Holdings, Inc.) and Subsidiaries:

We have audited the financial statements of Natural Nutrition Group, Inc.
as of December 31, 1997 and 1996 (successor company balance sheets) and the
statements of operations and cash flows for the years then ended (successor
company operations) and the statements of operations and cash flows for the
period from January 1, 1996 to April 15, 1996 (predecessor company operations)
and have issued our report thereon dated February 20, 1998 included elsewhere in
this Registration Statement. Our audits also included the financial statement
schedule listed in Item 16 of this Registration Statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Costa Mesa, CA
February 20, 1998
(April 9, 1998 as to Note 7)

S-1
<PAGE> 75

NATURAL NUTRITION GROUP, INC.
(FORMERLY KNOWN AS INTREPID FOOD HOLDINGS, INC.) AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE BALANCE
AT BEGINNING AT END
OF YEAR EXPENSES OTHER DEDUCTIONS OF YEAR
------------ -------- ----- ---------- -------
<S> <C> <C> <C> <C> <C>
Deducted from Assets:
Allowance for doubtful accounts:
1997..................................... $1,334 $312 $ -- $225 $1,421
1996..................................... 25 67 1,242 -- 1,334
1995..................................... 91 22 -- 88 25
Reserve for obsolete inventories:
1997..................................... $ 866 $179 $ -- $596 $ 449
1996..................................... 152 875 25 184 866
1995..................................... 100 252 -- 200 152
</TABLE>

S-2

<PAGE> 1
EXHIBIT 4.1

DESCRIPTION OF SPECIMEN STOCK CERTIFICATE FOR THE COMMON STOCK
OF NATURAL NUTRITION GROUP, INC. (THE "COMPANY")

FACE OF CERTIFICATE:

The front of the specimen stock certificate for the Company's Common
Stock (the "Certificate") contains the name of the Company in the upper center.
Beneath the name of the Company and flush with the left edge of the Certificate
are the words, "INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE." The
Common Stock's CUSIP number (63888Q 10 7) appears flush with the right edge of
the Certificate beneath the name of the Company. The Certificate is signed by
William R. Voss, Chairman and Chief Executive Officer of the Company, and Diane
J. Beardsley, Secretary of the Company. The Company's corporate seal is centered
slightly above the bottom edge of the Certificate. The face of the Certificate
also contains the following language:

This certifies that ____________________ is the record holder of
____________ FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.001 PAR
VALUE PER SHARE, OF NATURAL NUTRITION GROUP, INC. (the "Corporation")
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all the provisions of the Certificate of Incorporation
of the Corporation and all amendments thereto, and to the By-laws of the
Corporation, to all of which the holder hereof by acceptance of this certificate
hereby assents. This certificate is not valid until countersigned and registered
by the Transfer Agent and Registrar.

IN WITNESS WHEREOF the Corporation has caused this certificate to be
signed in facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto.

REVERSE OF CERTIFICATE:

The back of the certificate contains the following language:

The Corporation or its Transfer Agent will furnish to any stockholder
upon request and without charge a statement of (1) all of the voting stock
powers, designations, preferences, and relative, participating, optional or
other rights, if any, or the qualifications, limitations, or the restrictions
thereof, if any, of the shares of each class of stock, including series of
preferred stock, authorized to be issued by the Corporation, (2) the variations
in the relative rights and preferences between the shares of different series
(if more than one) of preferred stock, and (3) the authority of the Board of
Directors to fix and determine the relative rights and preferences of subsequent
series.

The reverse of the Certificate also contains standard stock transfer
instructions.

<PAGE> 1
EXHIBIT 10.13

NATURAL NUTRITION GROUP, INC.

EMPLOYEE INCENTIVE COMPENSATION PLAN

<PAGE> 2
NATURAL NUTRITION GROUP, INC.
EMPLOYEE INCENTIVE COMPENSATION PLAN
TABLE OF CONTENTS

PAGE
----
ARTICLE I

ESTABLISHMENT............................................................. 1
1.1 Purpose................................................. 1

ARTICLE II

DEFINITIONS............................................................... 1

2.1 "Affiliate"............................................. 1
2.2 "Agreement" or "Award Agreement"........................ 1
2.3 "Award.................................................. 1
2.4 "Beneficiary"........................................... 1
2.5 "Board of Directors" or "Board"......................... 2
2.6 "Cause"................................................. 2
2.7 "Change in Control" and "Change in Control
Price" ............................................. 2
2.8 "Code" or "Internal Revenue Code"....................... 2
2.9 "Commission"............................................ 2
2.10 "Committee"............................................. 2
2.11 "Common Stock".......................................... 2
2.12 "Company"............................................... 2
2.13 "Disability"............................................ 2
2.14 "Effective Date"........................................ 3
2.15 "Exchange Act".......................................... 3
2.16 "Extraordinary Termination of Employment"............... 3
2.17 "Fair Market Value"..................................... 3
2.18 "Grant Date"............................................ 3
2.19 "Incentive Stock Option"................................ 3
2.20 "Nonqualified Stock Option"............................. 3
2.21 "Option Period"......................................... 3
2.22 "Option Price".......................................... 3
2.23 "Participant"........................................... 3
2.24 "Plan".................................................. 4
2.25 "Representative"........................................ 4
2.26 "Restricted Stock"...................................... 4
2.27 "Retirement"............................................ 4
2.28 "Rule 16b-3" and "Rule 16a-1(c)(3)"..................... 4
2.29 "Stock Option" or "Option".............................. 4
2.30 "Termination of Employment"............................. 4

<PAGE> 3
PAGE
----
ARTICLE III

ADMINISTRATION............................................................ 5
3.1 Committee Structure and Authority....................... 5
3.2 Delegation of Authority to the President of the
Company........................................... 7

ARTICLE IV

STOCK SUBJECT TO PLAN..................................................... 8
4.1 Number of Shares........................................ 8
4.2 Release of Shares....................................... 8
4.3 Restrictions on Shares.................................. 8
4.4 Stockholder Rights...................................... 8
4.5 Best Efforts To Register................................ 9
4.6 Anti-Dilution........................................... 9

ARTICLE V

ELIGIBILITY............................................................... 10
5.1 Eligibility............................................. 10

ARTICLE VI

STOCK OPTIONS............................................................. 10
6.1 General................................................. 10
6.2 Grant and Exercise...................................... 10
6.3 Terms and Conditions.................................... 10
6.4 Termination by Reason of Death.......................... 13
6.5 Termination by Reason of Disability..................... 13
6.6 Other Termination....................................... 13
6.7 Cashing Out of Option................................... 14
6.8 Formula Grants.......................................... 14

ARTICLE VII

RESTRICTED STOCK.......................................................... 14
7.1 General................................................. 14
7.2 Awards and Certificates................................. 15
7.3 Terms and Conditions.................................... 15

ARTICLE VIII

<PAGE> 4
Page
----

PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN................... 16
8.1 Limited Transfer During Offering........................ 16

ARTICLE IX

CHANGE IN CONTROL PROVISIONS.............................................. 17
9.1 Impact of Event......................................... 17
9.2 Definition of Change in Control......................... 17
9.3 Change in Control Price................................. 19

ARTICLE X

MISCELLANEOUS............................................................. 19
10.1 Amendments and Termination.............................. 19
10.2 Unfunded Status of Plan................................. 20
10.3 Status of Awards Under Code Section 162(m).............. 20
10.4 General Provisions...................................... 20
10.5 Mitigation of Excise Tax................................ 22
10.6 Rights with Respect to Continuance of Employment........ 22
10.7 Awards in Substitution for Awards Granted by Other
Corporations....................................... 22
10.8 Procedure for Adoption.................................. 23
10.9 Procedure for Withdrawal................................ 23
10.10 Delay................................................... 23
10.11 Headings................................................ 23
10.12 Severability............................................ 23
10.13 Successors and Assigns.................................. 23
10.14 Entire Agreement........................................ 23

iii

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NATURAL NUTRITION GROUP, INC.

EMPLOYEE INCENTIVE COMPENSATION PLAN

ARTICLE I

ESTABLISHMENT

1.1 Purpose. The Natural Nutrition Group, Inc. Employee Incentive
Compensation Plan ("Plan") is hereby established by Natural Nutrition Group,
Inc. ("Company"). The purpose of this Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating those persons
selected to participate in this Plan to achieve long-term growth in stockholder
equity in the Company and by retaining the association of those individuals who
are instrumental in achieving this growth. The Plan and the grant of awards
hereunder are expressly conditioned upon the Plan's approval by the stockholders
of the Company. If such approval is not obtained, then this Plan and all Awards
(as defined herein) hereunder shall be null and void ab initio.

ARTICLE II

DEFINITIONS

For purposes of this Plan, the following terms are defined as set forth
below:

2.1 "Affiliate" means any individual, corporation, partnership,
association, limited liability company, joint-stock company, trust,
unincorporated association or other entity (other than the Company) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company including, without
limitation, any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.

2.2 "Agreement" or "Award Agreement" means any agreement entered into
pursuant to this Plan pursuant to which an Award is granted to a Participant.

2.3 "Award" means any Stock Option, Restricted Stock or Award granted
to a Participant under the Plan.

2.4 "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefit specified under the
Plan to the extent permitted. If there is no designated beneficiary, then the
term means the person or persons, trust or trusts entitled by will or the laws
of descent and distribution to receive such benefits.

<PAGE> 6

2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.

2.6 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate a written agreement or arrangement (employment
or otherwise) between the Participant and the Company or an Affiliate for Cause
as defined in such agreement or arrangement, or in the event there is no such
agreement or arrangement or the agreement or arrangement does not define the
term "cause," then Cause shall mean (a) any act or failure to act deemed to
constitute cause under the Company's established practices, policies or
guidelines applicable to the Participant or (b) the Participant's act or
omission constituting gross misconduct with respect to the Company or an
Affiliate in any material respect.

2.7 "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 9.2 and 9.3, respectively.

2.8 "Code" or "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, final Treasury Regulations thereunder and any subsequent
Internal Revenue Code.

2.9 "Commission" means the Securities and Exchange Commission or any
successor agency.

2.10 "Committee" means the person or persons appointed by the Board of
Directors to administer this Plan, as further described herein; provided,
however, the Committee shall consist of directors who are "disinterested"
persons or "non-employees" within the meaning of Rule 16b-3 and each of whom is
an "outside" director under Section 162(m) of the Code.

2.11 "Common Stock" means the shares of the regular voting Common
Stock, $.001 par value per share, whether presently or hereafter issued, and any
other stock or security resulting from adjustment thereof as described
hereinafter or the common stock of any successor to the Company which is
designated for the purpose of this Plan.

2.12 "Company" means Natural Nutrition Group, Inc., a Delaware
corporation, and includes any successor or assignee corporation or corporations
into which the Company may be merged, changed or consolidated; any corporation
for whose securities all or substantially all of the securities of the Company
shall be exchanged; and any assignee of or successor to substantially all of the
assets of the Company.

2.13 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease

<PAGE> 7
contracted, suffered, or incurred, while participating in a criminal offense.
Notwithstanding the foregoing, if the Participant and the Company or an
Affiliate have entered into an employment agreement which defines the term
"Disability" (or a similar term), such definition shall govern for purposes of
determining whether such Participant suffers a Disability for purposes of this
Plan. The determination of Disability shall be made by the Committee. The
determination of Disability for purposes of this Plan shall not be construed to
be an admission of disability for any other purpose.

2.14 "Effective Date" means the date of the closing of the sale of the
Common Stock in connection with the Company's initial public offering pursuant
to a registration statement filed with and declared effective by the Commission.

2.15 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

2.16 "Extraordinary Termination of Employment" means the Termination of
Employment of the Participant due to death, Disability or Retirement.

2.17 "Fair Market Value" means the fair market value of Common Stock,
Awards, or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value per share of Common Stock as of any date shall be the closing
sale price per share reported on a consolidated basis for stock listed on the
principal stock exchange or market on which the Common Stock is traded on the
date as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported.

2.18 "Grant Date" means the date as of which an Award is granted
pursuant to this Plan.

2.19 "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.

2.20 "Nonqualified Stock Option" means an Option to purchase Common
Stock granted under this Plan, the taxation of which is determined pursuant to
Section 83 of the Code.

2.21 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Agreement and Article VI.

2.22 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3.

2.23 "Participant" means a person who satisfies the eligibility
conditions of Article V and to whom an Award has been granted by the Committee
under this Plan, and in the event a Representative is appointed for a
Participant or another person becomes a Representative, then

<PAGE> 8
the term "Participant" shall mean such Representative. The term shall also
include a trust for the benefit of the Participant, a partnership the interest
of which is by or for the benefit of the Participant, the Participant's parents,
spouse or descendants, or a custodian under a uniform gifts to minors act or
similar statute for the benefit of the Participant's descendants, to the extent
permitted by the Committee and not inconsistent with the Rule 16b-3 or the
status of the Option as an Incentive Stock Option to the extent intended.
Notwithstanding the foregoing, the term "Termination of Employment" shall mean
the Termination of Employment of the employee (and other terms intended to refer
solely to the employee shall be interpreted in a manner that is consistent with
such intent).

2.24 "Plan" means this Natural Nutrition Group, Inc. 1998 Employee
Incentive Compensation Plan, as the same may be amended from time to time.

2.25 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.

2.26 "Restricted Stock" means an award of Common Stock under Article
VIII that is subject to certain restrictions and a risk of forfeiture.

2.27 "Retirement" means the Participant's Termination of Employment
after attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.

2.28 "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

2.29 "Stock Option" or "Option" means a right to purchase stock on
specified conditions granted under Article VI.

2.30 "Termination of Employment" means the occurrence of any act or
event whether pursuant to an employment agreement or otherwise that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, consultant, director or employee of the Company or of any
Affiliate, or to be an officer, independent contractor, director or employee of
any entity that provides services to the Company or an Affiliate, including,
without

<PAGE> 9
limitation, death, Disability, dismissal, severance at the election of the
Participant, Retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Affiliates of all businesses
owned or operated by the Company or its Affiliates. With respect to any person
who is not an employee with respect to the Company or an Affiliate, the
Agreement may establish what act or event shall constitute a Termination of
Employment for purposes of this Plan. A transfer of employment from the Company
to an Affiliate, or from an Affiliate to the Company, shall not be a Termination
of Employment, unless expressly determined by the Committee. A Termination of
Employment shall occur with respect to an employee who is employed by an
Affiliate if the Affiliate shall cease to be an Affiliate and the Participant
shall not immediately thereafter become an employee of the Company or an
Affiliate.

In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.

ARTICLE III

ADMINISTRATION

3.1 Committee Structure and Authority. This Plan shall be administered
by the Committee which shall be comprised of one or more persons. The Committee
shall be the Compensation Committee of the Board of Directors, unless such
committee does not exist or the Board establishes a committee whose purpose is
the administration of this Plan. In the absence of an appointment, the Board or
the portion that qualifies as the Committee shall be the Committee. A majority
of the Committee shall constitute a quorum at any meeting thereof (including
telephone conference) and the acts of a majority of the members present, or acts
approved in writing by a majority of the entire Committee without a meeting,
shall be the acts of the Committee for purposes of this Plan. The Committee may
authorize any one or more of its members or an officer of the Company to execute
and deliver documents on behalf of the Committee. This Plan is intended to
qualify for exemption from Section 16(b) of the Exchange Act and to qualify as
performance-based compensation under Section 162(m) of the Code and shall be
interpreted in such a way as to result in such qualification. A member of the
Committee shall not exercise any discretion respecting himself or herself under
this Plan. The Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
Board. The Committee may allocate among one or more of its members, or may
delegate to one or more of its agents, such duties and responsibilities as it
determines.

Among other things, the Committee shall have the authority, (i) subject
to the terms of this Plan, and (ii) subject to the approval of the Board (to the
extent required to qualify an option granted hereunder for exemption under
Section 16(b) of the Exchange Act and as "performance-based compensation" under
Section 162(m) of the Code):

<PAGE> 10
(a) to select those persons to whom Awards may be granted from
time to time;

(b) to determine whether and to what extent Awards are to be
granted hereunder;

(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation; any exercise
acceleration or forfeiture waiver or any performance criteria regarding
any Award and the shares of Common Stock relating thereto);

(e) to adjust the terms and conditions, at any time or from
time to time, of any Award, subject to the limitations of Section 10.1;

(f) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award shall
be deferred;

(g) to determine under what circumstances an Award may be
settled in cash or Common Stock.

(h) to provide for the forms of Agreement to be utilized in
connection with this Plan;

(i) to determine whether a Participant has a Disability or a
Retirement;

(j) to determine what securities law requirements are
applicable to this Plan, Awards, and the issuance of shares of Common
Stock and to require of a Participant that appropriate action be taken
with respect to such requirements;

(k) to cancel, with the consent of the Participant or as
otherwise provided in this Plan or an Agreement, outstanding Awards;

(l) to interpret and make a final determination with respect
to the remaining number of shares of Common Stock available under this
Plan;

(m) to require as a condition of the exercise of an Award or
the issuance or transfer of a certificate of Common Stock, the
withholding from a Participant of the amount of any federal, state or
local taxes as may be necessary in order for the Company or any other
employer to obtain a deduction or as may be otherwise required by law;

<PAGE> 11
(n) to determine whether and with what effect an individual
has incurred a Termination of Employment;

(o) to determine whether the Company or any other person has a
right or obligation to purchase Common Stock from a Participant and, if
so, the terms and conditions on which such Common Stock is to be
purchased;

(p) to determine the restrictions or limitations on the
transfer of Common Stock;

(q) to determine whether an Award is to be adjusted, modified
or purchased, or is to become fully exercisable, under this Plan or the
terms of an Agreement;

(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;

(s) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of this Plan;
and

(t) to appoint and compensate agents, counsel, auditors or
other specialists to aid it in the discharge of its duties.

The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing this Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of this
Plan and any Award issued under this Plan (and any Agreement) and to otherwise
supervise the administration of this Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.

Any determination made by the Committee pursuant to the provisions of
this Plan shall be made in its sole discretion, and in the case of any
determination relating to an Award, may be made at the time of the grant of the
Award or, unless in contravention of any express term of this Plan or an
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of this Plan shall be final and binding on all persons,
including the Company and Participants. Any determination shall not be subject
to de novo review if challenged in court.

3.2 Delegation of Authority to the President of the Company. Unless the
Committee expressly provides otherwise, the Committee's authority, powers,
duties and responsibilities described in items (a), (b), (c), (d), (h) and (r)
of Section 3.1 may be exercised by, and to the extent set forth herein are
hereby delegated to, the President of the Company. Notwithstanding the
foregoing, in no event shall the President grant Awards (a) to any Participant
covering, in the aggregate, in excess of 10,000 shares of Common Stock in any
calendar year or (b) to any executive officer or director of the Company,
pursuant to this Section 3.2.

<PAGE> 12
ARTICLE IV

STOCK SUBJECT TO PLAN

4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock initially reserved and available for
distribution pursuant to Awards under this Plan shall be 800,000 shares of
Common Stock. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.

4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Award, and in its
discretion may include (without limitation) as available for distribution any
shares of Common Stock that have ceased to be subject to an Award, any shares of
Common Stock subject to any Award that are forfeited, any Award that otherwise
terminates without issuance of shares of Common Stock being made to the
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Award including
the satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any shares could not again be available for Awards to a
particular Participant under any applicable law, such shares shall be available
exclusively for Awards to Participants who are not subject to such limitations.

4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Award shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Award Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange
(or other public market) on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Award. The Company may cause any certificate for any share of Common Stock to be
delivered to be properly marked with a legend or other notation reflecting the
limitations on transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any person exercising
an Award to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
of Common Stock in compliance with applicable law or otherwise. Fractional
shares shall not be delivered, but shall be rounded to the next lower whole
number of shares, with appropriate payment made with respect to such fractional
shares.

4.4 Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Award until, after proper
exercise of the Award or other action required, such shares shall have been
recorded on the Company's official stockholder records as having been issued and
transferred. Upon exercise of the Award or any portion thereof, the

<PAGE> 13
Company will have a reasonable time in which to issue the shares, and the
Participant will not be treated as a stockholder for any purpose whatsoever
prior to such issuance. No adjustment shall be made for cash dividends or other
rights for which the record date is prior to the date such shares are recorded
as issued and transferred in the Company's official stockholder records, except
as provided herein or in an Agreement.

4.5 Best Efforts To Register. If there has been an initial public
offering of the Common Stock, the Company will register under the Securities Act
the Common Stock delivered or deliverable pursuant to Awards on Commission Form
S-8 if available to the Company for this purpose (or any successor or alternate
form that is substantially similar to that form to the extent available to
effect such registration), in accordance with the rules and regulations
governing such forms, as soon as such forms are available for registration to
the Company for this purpose. The Company will use its best efforts to cause the
registration statement to become effective as soon as possible and will file
such supplements and amendments to the registration statement as may be
necessary to keep the registration statement in effect until the earliest of (a)
one year following the expiration of the last relevant period of the last Award
outstanding, (b) the date the Company is no longer a reporting company under the
Exchange Act and (c) the date all Participants have disposed of all shares of
Common Stock delivered pursuant to any Award. The Company may delay the
foregoing obligation if the Committee reasonably determines that any such
registration would materially and adversely affect the Company's interests or if
there is no material benefit to Participants.

4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company share
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee may adjust or substitute, as the case may be,
the number of shares of Common Stock available for Awards under this Plan, the
number of shares of Common Stock covered by outstanding Awards, the exercise
price per share of outstanding Awards, and any other characteristics or terms of
the Awards as the Committee shall deem necessary or appropriate to reflect
equitably the effects of such changes to the Participants; provided, however,
that the Committee may limit any such adjustment so as to maintain the
deductibility of the Awards under Section 162(m) of the Code, and that any
fractional shares resulting from such adjustment shall be eliminated by rounding
to the next lower whole number of shares with appropriate payment for such
fractional share as shall reasonably be determined by the Committee.

<PAGE> 14
ARTICLE V

ELIGIBILITY

5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in this Plan and be granted Awards shall be those
persons who are officers, directors, employees or consultants of the Company or
any subsidiary, who shall be in a position, in the opinion of the Committee, to
make contributions to the growth, management, protection and success of the
Company and its subsidiaries. Of those persons described in the preceding
sentence, the Committee may, from time to time, select persons to be granted
Awards and shall determine the terms and conditions with respect thereto. In
making any such selection and in determining the form of the Award, the
Committee may give consideration to the functions and responsibilities of the
person, the person's contributions to the Company and its subsidiaries, the
value of the individual's service to the Company and its subsidiaries and such
other factors deemed relevant by the Committee.

ARTICLE VI

STOCK OPTIONS

6.1 General. The Committee shall have authority to grant Options under
this Plan at any time or from time to time. Stock Options may be granted alone
or in addition to other Awards and may be either Incentive Stock Options or
Non-Qualified Stock Options. An Option shall entitle the Participant to receive
shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with this Plan or an Agreement (the terms and
provisions of which may differ from other Agreements) including without
limitation, payment of the Option Price.

6.2 Grant and Exercise. The grant of a Stock Option shall occur as of
the date the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in this Plan. Such Agreement shall become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Company, any parent corporation of the Company or a subsidiary
(as such terms are defined in Section 424 of the Code) on the Grant date shall
be eligible to be granted an Option which is intended to be and is an Incentive
Stock Option. To the extent that any Stock Option is not designated as an
Incentive Stock Option or even if so designated does not qualify as an Incentive
Stock Option, it shall constitute a Non-Qualified Stock Option.

6.3 Terms and Conditions. Stock Options shall be subject to such terms
and conditions as shall be determined by the Committee, including the following:

<PAGE> 15
(a) Option Period. The Option Period of each Stock Option
shall be fixed by the Committee; provided that no Non-Qualified Stock
Option shall be exercisable more than ten (10) years after the date the
Stock Option is granted. In the case of an Incentive Stock Option, the
Option Period shall not exceed ten (10) years from the date of grant or
five (5) years in the case of an individual who owns more than ten
percent (10%) of the combined voting power of all classes of stock of
the Company, a corporation which is a parent corporation of the Company
or any subsidiary of the Company (each as defined in Section 424 of the
Code). No Option which is intended to be an Incentive Stock Option
shall be granted more than ten (10) years from the date this Plan is
adopted by the Company or the date this Plan is approved by the
stockholders of the Company, whichever is earlier.

(b) Option Price. The Option Price per share of the Common
Stock purchasable under an Option shall be determined by the Committee.
If such Option is intended to qualify as an Incentive Stock Option, the
Option Price per share shall be not less than the Fair Market Value per
share on the date the Option is granted, or where granted to an
individual who owns or who is deemed to own stock possessing more than
ten percent (10%) of the combined voting power of all classes of stock
of the Company, a corporation which is a parent corporation of the
Company or any subsidiary of the Company (each as defined in Section
424 of the Code), not less than one hundred ten percent (110%) of such
Fair Market Value per share.

(c) Exercisability. Subject to Section 9.1, Stock Options
shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment
exercise provisions, in whole or in part. In addition, the Committee
may at any time accelerate the exercisability of any Stock Option. If
the Committee intends that an Option be an Incentive Stock Option, the
Committee shall, in its discretion, provide that the aggregate Fair
Market Value (determined at the Grant Date) of Incentive Stock Option
which is exercisable for the first time during the calendar year shall
not exceed $100,000.

(d) Method of Exercise. Subject to the provisions of this
Article VI, a Participant may exercise Stock Options, in whole or in
part, at any time during the Option Period by the Participant's giving
written notice of exercise on a form provided by the Committee to the
Company specifying the number of shares of Common Stock subject to the
Stock Option to be purchased. Such notice shall be accompanied by
payment in full of the purchase price by cash or check or such other
form of payment as the Company may accept. If approved by the Committee
(including approval at the time of exercise), payment in full or in
part may also be made (i) by delivering Common Stock already owned by
the Participant having a total Fair Market Value on the date of such
delivery equal to the Option Price; (ii) by the execution and delivery
of a note or other evidence of indebtedness (and any security agreement
thereunder) satisfactory to the Committee and permitted in accordance
with Section 6.3(e); (iii) by authorizing the

<PAGE> 16
Company to retain shares of Common Stock which would otherwise be
issuable upon exercise of the Option having a total Fair Market Value
on the date of delivery equal to the Option Price; (iv) by the delivery
of cash or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise or otherwise indicated
an intent to exercise an Option (in accordance with Part 220, Chapter
II, Title 12 of the Code of Federal Regulations); (v) by certifying
ownership of shares of Common Stock owned by the Participant to the
satisfaction of the Committee for later delivery to the Company as
specified by the Company; or (vi) by any combination of the foregoing.
If payment of the Option Price of a Non-Qualified Stock Option is made
in whole or in part in the form of Restricted Stock, the number of
shares of Common Stock to be received upon such exercise equal to the
number of shares of Restricted Stock used for payment of the Option
Price shall be subject to the same forfeiture restrictions or deferral
limitations to which such Restricted Stock was subject, unless
otherwise determined by the Committee. In the case of an Incentive
Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to
the Stock Option may be authorized only at the time the Stock Option is
granted. No shares of Common Stock shall be issued until full payment
therefor, as determined by the Committee, has been made. Subject to any
forfeiture restrictions or deferral limitations that may apply if a
Stock Option is exercised using Restricted Stock, a Participant shall
have all of the rights of a stockholder of the Company holding the
class of Common Stock that is subject to such Stock Option (including,
if applicable, the right to vote the shares and the right to receive
dividends), when the Participant has given written notice of exercise,
has paid in full for such shares and such shares have been recorded on
the Company's official stockholder records as having been issued and
transferred.

(e) Company Loan or Guarantee. Upon the exercise of any
Option and subject to the pertinent Agreement and the discretion of
the Committee, the Company may at the request of the Participant:

(i) lend to the Participant, an amount equal to
such portion of the Option Price as the
Committee may determine; or

(ii) guarantee a loan obtained by the Participant
from a third-party for the purpose of
tendering the Option Price.

The terms and conditions of any loan or guarantee, including the term,
interest rate, whether the loan is with recourse against the
Participant and any security interest thereunder, shall be determined
by the Committee, except that no extension of credit or guarantee shall
obligate the Company for an amount to exceed the lesser of (i) the
aggregate Fair Market Value per share of the Common Stock on the date
of exercise, less the par value of the shares of Common Stock to be
purchased upon the exercise of the Award, and (ii) the amount permitted
under applicable laws or the regulations and rules of the Federal
Reserve Board and any other governmental agency having jurisdiction.

<PAGE> 17
(f) Non-transferability of Options. Except as provided herein
or in an Agreement and then only consistent with the intent that the
Option be an Incentive Stock Option (as applicable), no Stock Option or
interest therein shall be transferable by the Participant other than by
will or by the laws of descent and distribution or by a designation of
beneficiary effective upon the death of the Participant, and all Stock
Options shall be exercisable during the Participant's lifetime only by
the Participant. If and to the extent transferability is permitted by
Rule 16b-3 and except as otherwise provided herein or by an Agreement,
every Option granted hereunder shall be freely transferable, but only
if such transfer does not result in liability under Section 16 of the
Exchange Act to the Participant or other Participants and is consistent
with registration of the Option and sale of Common Stock on Form S-8
(or a successor form) or the Committee's waiver of such condition.

6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of one (1)
year (or such other period or no period as the Committee may specify)
immediately following the date of such death or until the expiration of the
Option Period, whichever period is the shorter.

6.5 Termination by Reason of Disability. Unless otherwise provided in
an Agreement or determined by the Committee, if a Participant incurs a
Termination of Employment due to a Disability, any unexpired and unexercised
Stock Option held by such Participant shall thereafter be fully exercisable by
the Participant for the period of one (1) year (or such other period or no
period as the Committee may specify) immediately following the date of such
Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the foregoing.
In the event of Termination of Employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.

6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death, Disability or with Cause), any
Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser of the ninety (90) day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period. Unless
otherwise provided in an Agreement or determined by the Committee, if the
Participant incurs a Termination of Employment which is either (a) voluntary on
the part of the Participant (and is not due to Retirement) or (b) with Cause,
the Option shall terminate immediately. Unless otherwise provided in an
Agreement or determined by the Committee, the death or Disability of a

<PAGE> 18
Participant after a Termination of Employment otherwise provided herein shall
not extend the exercisability of the time permitted to exercise an Option.

6.7 Cashing Out of Option. On receipt of written notice of exercise,
the Committee may elect to cash out all or part of the portion of any Stock
Option by paying the Participant an amount, in cash or Common Stock, equal to
the excess of the Fair Market Value of the Common Stock that is subject to the
Option over the Option Price times the number of shares of Common Stock subject
to the Option on the effective date of such cash out.

6.8 Formula Grants. Each person who is a non-employee Director on the
Effective Date shall become a Participant and shall be granted an Option to
purchase ten thousand (10,000) shares of Common Stock without further action by
the Board or the Committee. Each non-employee who is subsequently elected or
appointed as a Director shall become a Participant and shall, on his date of
election or appointment, without further action by the Board or the Committee,
be granted an Option to purchase ten thousand (10,000) shares of Common Stock.
Thereafter, on the date of each annual meeting of stockholders of the Company
after which a Participant continues as a non-employee Director, but only with
respect to an annual meeting which is more than three months after the date of
the initial grant of an Option to such Participant under this Section 6.8, such
Participant shall be granted an Option to purchase five thousand (5,000) shares
of Common Stock. Options granted pursuant to this Section 6.8 shall be
exercisable upon such grant and have an Option Price equal to the Fair Market
Value per share on the Grant Date. If the number of shares of Common Stock
available to grant under the Plan on a scheduled date of grant is insufficient
to make all automatic grants required to be made pursuant to the Plan on such
date, then each eligible Director shall receive an Option to purchase a pro rata
number of the remaining shares of Common Stock available under the Plan;
provided further, however, that if such proration results in fractional shares
of Common Stock, then such Option shall be rounded down to the nearest number of
whole shares of Common Stock. If there is no whole number of shares remaining to
be granted, then no grants shall be made under the Plan. Each Option granted
under the Plan shall be evidenced by an Agreement, in a form approved by the
Committee, which shall embody the terms and conditions of such Option and which
shall be subject to the express terms and conditions set forth in the Plan. Such
Agreement shall become effective upon execution by the Participant. Any Option
granted pursuant to this Section 6.8 shall terminate upon the first anniversary
of the date the Participant first ceased to hold the position of Director. Any
Option that is to be granted pursuant to this Section 6.8 to a non-employee
Director who is a partner or employee of Frontenac Company shall be granted to
Frontenac Company in lieu of the grant to such non-employee Director. Any
Option granted to Frontenac Company pursuant to this Section 6.8 shall
terminate upon the first anniversary of the date such non-employee Director
first ceased to hold the position of Director.

ARTICLE VII

RESTRICTED STOCK

7.1 General. The Committee shall have authority to grant Restricted
Stock under this Plan at any time or from time to time. Shares of Restricted
Stock may be awarded either alone or in addition to other Awards granted under
this Plan. The Committee shall determine the persons to whom and the time or
times at which grants of Restricted Stock will be awarded, the

<PAGE> 19
number of shares of Restricted Shares to be awarded to any Participant, the time
or times within which such Awards may be subject to forfeiture and any other
terms and conditions of the Awards. Each Award shall be confirmed by, and be
subject to the terms of, an Agreement. The Committee may condition the grant of
Restricted Stock upon the attainment of specified performance goals by the
Participant or by the Company or an Affiliate (including a division or
department of the Company or an Affiliate) for or within which the Participant
is primarily employed or upon such other factors or criteria as the Committee
shall determine. The provisions of Restricted Stock Awards need not be the same
with respect to any Participant. The purchase price for shares of Restricted
Stock shall be set by the Committee and may be zero.

7.2 Awards and Certificates. Notwithstanding the limitations on
issuance of shares of Common Stock otherwise provided in this Plan, each
Participant receiving an Award of Restricted Stock shall be issued a certificate
in respect of such shares of Restricted Stock. Such certificate shall be
registered in the name of such Participant and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Award as
determined by the Committee. The Committee may require that the certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any Award of Restricted
Stock, the Participant shall have delivered a stock power, endorsed in blank,
relating to the Common Stock covered by such Award.

7.3 Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:

(a) Limitations on Transferability. Subject to the provisions
of this Plan and the Agreement, during a period set by the Committee,
commencing with the date of such Award (the "Restriction Period"), the
Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber any interest in shares of Restricted Stock. Unless
otherwise determined by the Committee, awards of Restricted Stock must
be accepted by a Participant within a period of 60 days (or such
shorter periods as the Committee may specify at grant) after the Grant
Date, by executing a Restricted Stock Agreement and paying whatever
price, if any, is required. The Participant shall not have any rights
with respect to such Award, unless and until such Participant has
executed an agreement evidencing the Award and has delivered a fully
executed copy thereof to the Company, and has otherwise complied with
the applicable terms and conditions of such Award.

(b) Rights. Except as provided in Section 7.3(a), the
Participant shall have, with respect to the shares of Restricted Stock,
all of the rights of a stockholder of the Company holding the class of
Common Stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends. Unless otherwise determined by the Committee and
subject to this Plan, cash dividends on the class of Common Stock that
is the subject of the Restricted Stock shall be automatically deferred
and reinvested in additional Restricted Stock, and dividends on the
class of Common Stock that is the subject of the Restricted Stock
payable in Common

<PAGE> 20
Stock shall be paid in the form of Restricted Stock of the same class
as the Common Stock on which such dividend was paid.

(c) Criteria. Based on service, performance by the Participant
or by the Company or the Affiliate, including any division or
department for which the Participant is employed or such other factors
or criteria as the Committee may determine, the Committee may provide
for the lapse of restrictions in installments and may accelerate the
vesting of all or any part of any Award and waive the restrictions for
all or any part of such Award.

(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability,
the restrictions shall lapse and the Participant shall be fully vested
in the Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and this Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than
death or Disability, all shares of Restricted Stock still subject to
restriction shall be forfeited by the Participant, except the Committee
shall have the discretion to waive in whole or in part any or all
remaining restrictions with respect to any or all of such Participant's
shares of Restricted Stock.

(e) Delivery. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, unlegended certificates for such shares shall be
delivered to the Participant.

(f) Election. A Participant may elect to further defer receipt
of the Restricted Stock for a specified period or until a specified
event, subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must be made one (1) year prior
to completion of the Restriction Period.

ARTICLE VIII

PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THIS PLAN

8.1 Limited Transfer During Offering. In the event there is an
effective registration statement under the Securities Act pursuant to which
shares of Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of an Award.

8.2 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to affirmatively disclose to a
record or beneficial holder of

<PAGE> 21
Common Stock or an Award, and such holder shall have no right to be advised of
any material information regarding the Company or any Affiliate at any time
prior to, upon or in connection with receipt or the exercise of an Award or the
Company's purchase of Common Stock or an Award from such holder in accordance
with the terms hereof.

ARTICLE IX

CHANGE IN CONTROL PROVISIONS

9.1 Impact of Event. Notwithstanding any other provision of this Plan
to the contrary, in the event of a Change in Control (as defined in Section
9.2), the Committee shall have full discretion, notwithstanding anything herein
or in an Agreement to the contrary, to do any or all of the following with
respect to an outstanding Award:

(a) to provide that the Stock Options outstanding as of the
date of the Change in Control which are not then exercisable shall
become fully exercisable to the full extent of the original grant;

(b) to provide that the restrictions and deferral limitations
applicable to any Restricted Stock or other Award shall lapse, and such
Restricted Stock or other Award shall become free of all restrictions
and become fully vested and transferrable to the full extent of the
original grant;

(c) to cause any Award to be cancelled, provided notice of at
least 15 days thereof is provided before the date of cancellation;

(d) to provide that the securities of another entity be
substituted hereunder for the Common Stock and to make equitable
adjustment with respect thereto;

(e) to grant the Participant the right to elect by giving
notice during a set period of time from and after a Change in Control
to surrender all or part of a stock-based Award to the Company and to
receive cash in an amount equal to the amount by the "Change in Control
Price" (as defined in Section 9.3) per share of the Common Stock on the
date of the election exceeds the amount the Participant must pay to
exercise the Award per share of Common Stock under the Award (the
"Spread") multiplied by the number of shares of Common Stock granted
under the Award; and

(f) to take any other action the Committee determines to take.

9.2 Definition of Change in Control. For purposes of this Plan, a
"Change in Control" shall mean the happening of any of the following events:

<PAGE> 22
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of thirty percent (30%) or more of
either (i) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then-outstanding voting securities of the Company entitled
to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of
this subsection (a), the following acquisitions shall not constitute a
Change of Control: (i) any acquisition directly from the Company other
than in connection with the acquisition by the Company or an Affiliate
of a business, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the
Company, (iv) any acquisition by a lender to the Company pursuant to a
debt restructuring of the Company, or (v) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 9.2;

(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board.

(c) Consummation of a reorganization, merger or consolidation
of the Company or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than sixty
percent (60%) of, respectively, the then-outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (ii) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan

<PAGE> 23
(or related trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or indirectly,
thirty percent (30%) or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or

(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company other than to a corporation
which would satisfy the requirements of clauses (i), (ii) or (iii) of
Subsection (c) of this Section 9.2, assuming for this purpose that such
liquidation or dissolution was a Business Combination.

9.3 Change in Control Price. For purposes of this Plan, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
share of Common Stock in any transaction reported on the principal exchange on
which such shares are listed or on Nasdaq during the 60-day period prior to and
including the date of a Change in Control or (b) if the Change in Control is the
result of a tender or exchange offer or a Corporate Transaction, the highest
price per share of Common Stock paid in such tender or exchange offer or a
Corporate Transaction, except that, in the case of Incentive Stock Options, such
price shall be based only on the Fair Market Value of the Common Stock on the
date such Incentive Stock Option is exercised. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Committee.

ARTICLE X

MISCELLANEOUS

10.1 Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
under an Award theretofore granted without the Participant's consent, except
such an amendment (a) made to avoid an expense charge to the Company or an
Affiliate, (b) made to cause the Plan to qualify for the exemption provided by
Rule 16b-3, or (c) made to permit the Company or an Affiliate a deduction under
the Code. In addition, no such amendment shall be made without the approval of
the Company's stockholders to the extent such approval is required by law or
agreement. The Committee may amend, alter or discontinue the terms of any Award
theretofore granted, prospectively or retroactively, on the same conditions and
limitations (and exceptions to limitations) as the Board and further subject to
any approval or limitations the Board may impose.

<PAGE> 24
Notwithstanding anything in the Plan to the contrary, if any right
under this Plan would cause a transaction to be ineligible for pooling of
interest accounting that would, but for the right hereunder, be eligible for
such accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Common Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.

10.2 Unfunded Status of Plan. It is intended that this Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under this Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of this
Plan.

10.3 Status of Awards Under Code Section 162(m). It is the intent of
the Company that Awards granted to persons who are "covered employees" within
the meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any agreement relating to such
an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.

10.4 General Provisions.

(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates for
such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.

(b) No Additional Obligation. Nothing contained in this Plan
shall prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.

(c) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to any Award, the Participant
shall pay to the Company (or other entity identified by the Committee),
or make arrangements satisfactory to the Company or other entity
identified by the Committee regarding the payment of, any Federal,
state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount required in order for the Company
or an Affiliate to obtain a current deduction. To the extent permitted
by the Committee, withholding obligations may be settled with Common
Stock, including Common Stock that is part of the Award that gives rise
to the

<PAGE> 25
withholding requirement provided that any applicable requirements under
Section 16 of the Exchange Act are satisfied. The obligations of the
Company under this Plan shall be conditional on such payment or
arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant. If the Participant disposes
of shares of Common Stock acquired pursuant to an Incentive Stock
Option in any transaction considered to be a disqualifying transaction
under the Code, the Participant must give written notice of such
transfer and the Company shall have the right to deduct any taxes
required by law to be withheld from any amounts otherwise payable to
the Participant.

(d) Reinvestment. The reinvestment of dividends in additional
Restricted Stock at the time of any dividend payment shall only be
permissible if sufficient shares of Common Stock are available for such
reinvestment (taking into account then outstanding Options and other
Awards).

(e) Representation. The Committee shall establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.

(f) Controlling Law. This Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware (other than its law respecting choice
of law). This Plan shall be construed to comply with all applicable
law, and to avoid liability to the Company, an Affiliate or a
Participant, including, without limitation, liability under Section
16(b) of the Exchange Act.

(g) Offset. Any amounts owed to the Company or an Affiliate by
the Participant of whatever nature may be offset by the Company from
the value of any shares of Common Stock, cash or other thing of value
under this Plan or an Agreement to be transferred to the Participant,
and no shares of Common Stock, cash or other thing of value under this
Plan or an Agreement shall be transferred unless and until all disputes
between the Company and the Participant have been fully and finally
resolved and the Participant has waived all claims to such against the
Company or an Affiliate.

(h) Fail-Safe. With respect to persons subject to Section 16
of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or Rule
16a-1(c)(3), as applicable. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the
Committee. Moreover, in the event the Plan does not include a provision
required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated herein, such
provision (other than one relating to eligibility requirements or the
price and amount of Awards) shall be deemed to be incorporated by
reference into the Plan with respect to Participants subject to Section
16.

<PAGE> 26
(i) Right to Capitalize. The grant of an Award shall in no way
affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of
its business or assets.

10.5 Mitigation of Excise Tax. Subject to any other agreement between
the Participant and the Company or an Affiliate, if any payment or right
accruing to a Participant under this Plan (without the application of this
Section 10.5), either alone or together with other payments or rights accruing
to the Participant from the Company or an Affiliate ("Total Payments") would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be reduced to the largest
amount or greatest right that will result in no portion of the amount payable or
right accruing under this Plan being subject to an excise tax under Section 4999
of the Code or being disallowed as a deduction under Section 280G of the Code.
The determination of whether any reduction in the rights or payments under this
Plan is to apply shall be made by the Committee in good faith after consultation
with the Participant, and such determination shall be conclusive and binding on
the Participant. The Participant shall cooperate in good faith with the
Committee in making such determination and providing the necessary information
for this purpose. The foregoing provisions of this Section 10.5 shall apply with
respect to any person only if after reduction for any applicable federal excise
tax imposed by Section 4999 of the Code and federal income tax imposed by the
Code, the Total Payments accruing to such person would be less than the amount
of the Total Payments as reduced, if applicable, under the foregoing provisions
of this Plan and after reduction for only federal income taxes.

10.6 Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual becoming a Participant in this Plan.

10.7 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under this Plan from time to time in substitution for
awards in respect of other plans of other entities. The terms and conditions of
the Awards so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
awards in substitution for which they are granted.

<PAGE> 27
10.8 Procedure for Adoption. Any Affiliate of the Company on the
Effective Date shall be deemed to have adopted this Plan on the Effective Date.
Any other Affiliate of the Company may by resolution of such Affiliate's board
of directors, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, adopt this Plan as of
the date specified in the board resolution.

10.9 Procedure for Withdrawal. Any Affiliate which has adopted this
Plan may, by resolution of the board of directors of such direct or indirect
subsidiary, with the consent of the Board of Directors and subject to such
conditions as may be imposed by the Board of Directors, terminate its adoption
of this Plan.

10.10 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under this Plan or an Agreement to
the extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, whichever is shorter. The Company shall have the right to suspend or
delay any time period described in this Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company. The Committee shall have the discretion to suspend
the application of the provisions of this Plan required solely to comply with
Rule 16b-3 if the Committee shall determine that Rule 16b-3 does not apply to
this Plan.

10.11 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.

10.12 Severability. If any provision of this Plan shall for any reason
be held to be invalid or unenforceable, such invalidity or unenforceability
shall not effect any other provision hereby, and this Plan shall be construed as
if such invalid or unenforceable provision were omitted.

10.13 Successors and Assigns. This Plan shall inure to the benefit of
and be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.

10.14 Entire Agreement. This Plan and the Agreement constitute the
entire agreement with respect to the subject matter hereof and thereof, provided
that in the event of any inconsistency between this Plan and the Agreement, the
terms and conditions of the Agreement shall control.

<PAGE> 28
Effective as of the Effective Date (as defined herein).

NATURAL NUTRITION GROUP, INC.

By:
--------------------------------------
William R. Voss
President and Chief Executive Officer

<PAGE> 1
EXHIBIT 10.14

NATURAL NUTRITION GROUP, INC.

1998 EMPLOYEE STOCK PURCHASE PLAN

INTRODUCTION

The purpose of this Employee Stock Purchase Plan (the "PLAN") is to
benefit Natural Nutrition Group, Inc. (the "CORPORATION") (and its parent or
subsidiaries) by offering eligible employees a favorable opportunity to become
stockholders of the Corporation over a period of years, thereby giving them a
proprietary interest in the growth and prosperity of the Corporation and
encouraging the continuance of their dedicated services with the Corporation (or
its parent or subsidiaries).

Pursuant to this Plan, 400,000 shares of authorized but unissued common
stock of the Corporation may be offered for sale to eligible employees (as
determined under Section 2 of this Plan) through periodic offerings to be made
during the ten-year period commencing October 1, 1998 (the "EFFECTIVE DATE").
The Plan will be implemented by making four (4) offerings annually of the
Corporation's common stock (the "OFFERINGS" and individually, an "OFFERING"),
each Offering beginning on the first day of each calendar quarter and
terminating on the last day of such quarter ("OFFERING PERIOD"). The maximum
number of shares issued in each Offering shall be 20,000 shares (the "MAXIMUM
NUMBER"). In the event that, during any Offering, participating employees become
entitled to purchase a number of shares in excess of the Maximum Number, the
Maximum Number of shares shall be allocated by the Committee (as hereinafter
defined) on a pro rata basis based on each participant's Base Compensation (as
hereinafter defined) earned during the prior Offering Period or, if none, during
the immediately prior fiscal year of the Corporation.

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The Plan is intended to qualify as an Employee Stock Purchase Plan
under Section 423 of the Internal Revenue Code of 1986, as amended (the "CODE"),
and the regulations promulgated thereunder.

1. COMMITTEE. The Plan will be administered by a committee (the
"COMMITTEE") appointed by the Corporation's Board of Directors. The Committee
shall consist of one or more members of the Board of Directors, none of whom
shall be eligible to participate in the Plan. The Committee's interpretations
and decisions with regard thereto shall be final and conclusive.

2. ELIGIBILITY. All employees of the Corporation (and its parent and
subsidiaries) on the first date of any Offering Period (as hereinafter
described) shall be eligible to participate in the Plan, except that the
following classes of employees shall not be eligible:
(a) employees who have been not employed by the Corporation (or
its parent or one of its subsidiaries) for at least one year
prior to the first day of an Offering Period;

(b) employees whose customary employment is for not more than 5
months in any calendar year;

(c) employees who would, immediately after the grant of an option
under the Plan, own Corporation stock possessing 5% or more of
the total combined voting power or value of all classes of
stock of the Corporation (or its parent or subsidiaries);

(d) employees whose customary employment with the Corporation is
20 hours or less per week;

(e) members of the Committee.

In determining an employee's period of employment for purposes of this
Plan, such employee's employment with any business entity, the assets, business,
stock or product line of

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which is acquired by the Corporation (or its parent or one of its subsidiaries)
through purchase, merger or otherwise will be deemed to be employment with the
Corporation. For purposes of subparagraph (c) of this Section 2, the rules of
Section 424(d) of the Code shall apply in determining the stock ownership of an
employee, and stock which the employee may purchase under outstanding options
shall be treated as stock owned by the employee. For purposes of this Plan, a
subsidiary of the Corporation shall mean a "SUBSIDIARY CORPORATION" as defined
in Section 424(f) of the Code, and a parent of the Corporation shall mean a
"PARENT CORPORATION" as defined in section 424(e) of the Code.

3. OFFERINGS. The Corporation will make four (4) annual Offerings to
employees to purchase stock under this Plan. Each Offering Period shall be three
(3) months in duration, during which the amounts of Base Compensation (as
defined below) directed pursuant to Section 4 by an employee (plus the amount of
any dividends received on any shares purchased by the employee under the Plan
while such shares are registered in the name of a custodian, if one is appointed
pursuant to Section 9 hereof) shall constitute the measure by which the
employee's participation in the Offering is based. For all purposes of this
Plan, "BASE COMPENSATION" shall mean cash payments on account of the employee's
employment with the Corporation or its subsidiaries, and shall include regular
wage or salary payments only. Overtime premium, shift pay for Saturday, Sunday
or holiday work, emergency call-in cash payments, bonuses, commissions and all
other non-regular compensation, if any, shall be excluded from Base Compensation
for both salaried and hourly employees.

No employee may be granted an option which permits his rights to
purchase stock under this Plan, and any other stock purchase plan of the
Corporation (and its parent or subsidiaries),

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to accrue at a rate which exceeds $25,000 of the fair market value of such stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time. For purposes of the preceding sentence,
the rules set forth in Section 423(b)(8) of the Code shall apply.

4. PARTICIPATION. Subject to the third sentence of Section 7, an
employee eligible to participate in any Offering may participate in such
Offering by completing and forwarding a payroll deduction authorization form to
the Human Resources Department on or prior to the enrollment date specified by
the Committee for such Offering Period. The form will authorize a regular
payroll deduction from the employee's direct, after-tax Base Compensation, and
must specify the date on which such deduction is to commence, which shall be the
first day of the next Offering Period and may not be retroactive. The form may
also authorize the purchase of additional shares with any dividends received on
any shares purchased by the employee under this Plan while such shares are
registered in the name of a custodian, if one is appointed pursuant to Section 9
hereof.

5. PAYROLL DEDUCTIONS. The Corporation will maintain payroll deduction
accounts for all participating employees. With respect to any Offering made
under this Plan, an employee may authorize a payroll deduction in terms of whole
number percentages from a minimum of 1% up to a maximum of 10% of the gross,
pre-tax Base Compensation an employee receives during the Offering Period.
Notwithstanding the foregoing, in no event may more than $5,000 be deducted from
an employee's Base Compensation for each Offering Period.

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6. DEDUCTION TERMINATIONS. An employee may, at any time, terminate the
employee's payroll deduction by filing a payroll deduction termination form. The
termination will not become effective sooner than the next pay period after
receipt of the form by the Human Resources Department. Upon filing such payroll
deduction termination form, the employee shall also be deemed to have elected a
"WITHDRAWAL OF FUNDS" in accordance with Section 7, below.

7. WITHDRAWAL OF FUNDS. An employee may at any time more than 15 days
prior to the end of an Offering Period, and for any reason, permanently draw out
the balance accumulated in the employee's account for the Offering Period for
which such payroll deduction form is effective and thereby withdraw from
participation in an Offering for the Offering Period. Upon an election in
accordance with this Section 7, all payroll withdrawals for the Offering Period
shall be returned to the employee as soon as administratively practicable and
such employee's option shall be automatically terminated. An employee may
thereafter resume participation again only as of the first day of the next
Offering Period (and/or the first day of each Offering Period thereafter);
provided, however, that an employee who is an officer or director of the
Corporation may not thereafter resume participation in that Offering or
participate in a subsequent Offering until the first day of an Offering Period
which commences at least six months after the date of such withdrawal. Partial
withdrawals will not be permitted.

8. PURCHASE OF SHARES. Each employee participating in any Offering
under this Plan will be granted an option, upon the first day of such Offering
Period, to purchase as many full shares of the Corporation's common stock as can
be purchased by such employee, which shall equal the sum of the following,
divided by the Subscription Price (as hereinafter defined):

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(a) the amount of payroll deduction elected by the employee up to
10% of such employee's gross, pre-tax Base Compensation
received during the specified Offering Period, but not to
exceed $5,000; and

(b) to the extent elected pursuant to Section 4 hereto, the amount
of any dividends received on any shares purchased by the
employee under this Plan while such shares are registered in
the name of a custodian appointed pursuant to Section 9
hereof, if any.

Notwithstanding the foregoing, the maximum number of shares which can be
purchased by an employee during any Offering Period shall not exceed the amount
of payroll deduction elected by the employee for such Offering Period (not to
exceed $5,000) divided by 85% of the fair market value (as defined in Section
11) of the stock on the first day of such Offering Period

9. PURCHASE PRICE OF SHARES. The purchase price for each share
purchased will be 85% of the fair market value (as defined in Section 11) of the
stock at the time the option is exercised, or, if lower, on the first day of the
Offering Period (such price hereinafter referred to as the "SUBSCRIPTION
PRICE"). Each option shall be automatically exercised at the Subscription Price
at the end of the Offering Period. The employee's account shall be charged for
the amount of the purchase price and ownership of such share or shares shall be
appropriately entered in the books of the Corporation. The Committee may appoint
a custodian to accept custody of such shares on behalf of each participating
employee. Upon an employee's request, the employee shall be issued a certificate
for any or all of the shares held by the custodian on his or her behalf by
completing a form approved by the Committee. If no such custodian is appointed,
employees will be issued a certificate for shares as soon as practical after
exercising an option.

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A participating employee may not purchase a share under any Offering
beyond 60 months from the date such option is granted. Any balance remaining in
an employee's payroll deduction account at the end of an Offering Period shall
be returned to such employee as soon as administratively practicable, without
interest.

10. REGISTRATION OF CERTIFICATION. Any certificates issued to an
employee may be registered only in the name of the employee, or, if the employee
so indicates on the employee's payroll deduction authorization form, in the
employee's name jointly with a member of the employee's family, with right of
survivorship.

11. FAIR MARKET VALUE. The "FAIR MARKET VALUE" for any day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Exchange or, if such
shares are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares are listed or admitted to trading or, if the shares are not listed or
admitted to trading on any national securities exchange, the last quoted sale
price on such date or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Automated Quotation System ("NASDAQ") or such
other system then in use, or, if on any such date the shares are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such shares selected
by the Committee. If such prices are not available on

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a given day, then the Committee may use the prices of such stock on the next
preceding trading day for which such prices are available.

12. RIGHTS AS A STOCKHOLDER. None of the rights or privileges of a
stockholder of the Corporation shall exist with respect to shares purchased
under this Plan unless and until a stock certificate with respect to such full
shares shall have been issued to the employee or the custodian, if any, on his
behalf.

13. RIGHTS ON RETIREMENT, DEATH OR TERMINATION OF EMPLOYMENT. In the
event of a participating employee's retirement, death or termination of
employment (other than an authorized leave of absence), no payroll deduction
shall be taken from any pay due and owing to an employee at such time and the
balance in the employee's account shall be paid to the employee or, in the event
of the employee's death, to the employee's estate, as soon as practicable
thereafter. Such employee's option shall be automatically terminated.

14. RIGHTS NOT TRANSFERABLE. Rights under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and, during the employee's lifetime, said rights are
exercisable only by the employee.

15. APPLICATION OF FUNDS. All funds received or held by the Corporation
under this Plan may be used for any corporate purpose, and the Corporation shall
not be obligated to segregate any payroll deductions. No interest shall be
allocated to the payroll deductions credited to an employee's account under the
Plan.

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16. ADJUSTMENT IN CASE OF CHANGES AFFECTING NATURAL NUTRITION GROUP,
INC. STOCK. The number of shares subject to the Plan and to Offerings granted
under the Plan shall be adjusted as follows: (a) in the event that the
Corporation's outstanding common stock is changed by any stock dividend, stock
split or combination of shares, the number of shares subject to the Plan and to
Offerings theretofore granted thereunder shall be proportionately adjusted; (b)
in the event of any merger or consolidation of the Corporation with any other
corporation or corporations, there shall be substituted for each share of
Natural Nutrition Group, Inc. then subject to the Plan, whether or not at the
time subject to outstanding Offerings, the number and kind of shares of common
stock or other securities to which the holders of common stock of the
Corporation will be entitled pursuant to the transaction; and (c) in the event
of any other relevant change in the capitalization of the Corporation, the
Committee shall provide for an equitable adjustment in the number of shares of
Natural Nutrition Group, Inc. common stock subject to the Plan, whether or not
then subject to outstanding Offerings. In the event of any such adjustment, the
Subscription Price(s) per share shall be appropriately adjusted.

17. AMENDMENT OF THE PLAN. The Committee may at any time, or from time
to time, amend this Plan in any respect, except that, without the approval of a
majority of the shares of stock of the Corporation then issued and outstanding
and entitled to vote, no amendment shall be made (i) increasing or decreasing
the number of shares approved for this Plan (other than as provided in Section
16) or (ii) amending provisions governing which employees (or class of
employees) are eligible to receive options under the Plan. Said shareholder
approval must be obtained within 12 months of the amendment's adoption by the
Committee.

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18. TERMINATION OF THE PLAN. This Plan and all rights of employees
under any Offering pursuant to the Plan hereunder shall terminate:

(a) on the day that participating employees become entitled to
purchase a number of shares equal to or greater than the
number of shares remaining available for purchase. If the
number of shares so purchasable is greater than the shares
remaining available, the available shares shall be allocated
by the Committee on a pro rata basis based on each
participant's Base Compensation earned during the prior
Offering Period or, if none, during the immediately prior
fiscal year of the Corporation; or

(b) at any time, at the discretion of the Board of Directors.

No Offering hereunder shall be made which shall extend beyond the ten
year anniversary of the Effective Date. Upon termination of this Plan, all
amounts in the accounts of participating employees shall be returned to such
employees as soon as administratively practicable thereafter, without interest.

19. GOVERNMENTAL REGULATIONS. The Corporation's obligation to
sell and deliver Natural Nutrition Group, Inc. common stock under this Plan
is subject to the approval of any governmental authority required in connection
with the authorization, issuance or sale of such common stock.

Each option shall also be subject to the requirement that, if at any
time the Corporation determines, in its discretion, that the listing,
registration or qualification of the shares subject to the option upon any
securities exchange or under any state or federal law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable by the Corporation.

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20. PURCHASE OF SHARES. Purchase of outstanding shares may be made
pursuant to and on behalf of this Plan, upon such terms as the Corporation may
approve, for delivery under this Plan.

21. SHAREHOLDER APPROVAL. No options shall be exercised or shares
issued hereunder before the Plan shall have been approved by the stockholders of
the Company. Such approval must be obtained within 12 months before or after the
date the Plan is adopted, and shall comply with all applicable laws and the
requirements of Section 423 of the Code.

22. NO EMPLOYMENT RIGHTS. The Plan does not provide any employment
rights to any employee, and it shall not be deemed to interfere in any way with
an employer's right to terminate, or otherwise modify, an employee's employment
at any time.

23. APPLICABLE LAW. The laws of the State of Illinois shall govern all
matters relating to this Plan, except to the extent such laws are superseded by
the laws of the United States.

24. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Securities Exchange Act of 1934, as amended ("SECTION 16"),
shall comply with the applicable provisions of Rule 16b-3. This Plan shall be
deemed to contain, such options shall contain, and the shares issued upon
exercise thereof shall be subject to, such additional conditions and
restrictions as may be required by Rule 16b-3 to qualify for the maximum
exemption from Section 16 with respect to Plan transactions.

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25. PLAN ADMINISTRATION. The Committee shall have full and exclusive
discretionary authority to construe, interpret and apply the terms of the Plan,
to determine eligibility and to adjudicate all disputed claims under the Plan.
All notices or other communications hereunder shall be deemed to have been duly
given when received in the form specified by the Committee at the location, or
by the person, designated by the Committee for the receipt thereof.

IN WITNESS WHEREOF, this Plan is adopted this ___ day of ________,
1998.

NATURAL NUTRITION GROUP, INC.

By:
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William R. Voss, President and
Chief Executive Officer

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EXHIBIT 10.17

INTREPID FOOD HOLDINGS, INC.

1997 STOCK OPTION PLAN

1. Purpose.

The purpose of this 1997 Stock Option Plan (this "Plan") of Intrepid
Food Holdings, Inc., a Delaware corporation (the "Company"), is to provide a
means whereby selected employees, officers and directors of, and consultants to,
the Company and its subsidiaries may be granted options to purchase shares of
Common Stock of the Company, par value $0.001 per share (the "Common Stock"), to
attract or retain the services of such employees, officers, directors and
consultants and to provide added incentive to them by encouraging stock
ownership in the Company. Except where the context otherwise requires, the term
"Company" shall include the parent, if any, and all present and future
subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended or replaced from time to time (the
"Code").

2. Type of Options and Administration.

(a) Types of Options. Options granted pursuant to this Plan shall be
authorized by action of the Board of Directors of the Company (the "Board") (or
a committee designated by the Board as hereinafter provided) and may be either
incentive stock options meeting the requirements of Section 422 of the Code
("Incentive Stock Options") or non-statutory options which are not intended to
meet the requirements of Section 422 of the Code. Those provisions of this Plan
which make express reference to Section 422 of the Code shall apply only to
Incentive Stock Options.

(b) Administration. This Plan will be administered by the Board, whose
construction and interpretation of the terms and provisions of this Plan shall
be final and conclusive. Subject to the terms and conditions expressly set forth
in this Plan, the Board will have the authority, in its sole discretion, to
determine all matters relating to the options to be granted under this Plan,
including, but not limited to, the selection of the individuals to be granted
options, the number of shares of Common Stock to be subject to each option, the
exercise price, the conditions with respect to the vesting or exercisability of
such option and all other terms and conditions of the options, to adopt and
approve the stock option agreements evidencing such options consistent with the
terms of the grant of such options and this Plan, which stock option agreements
need not be identical (even when made simultaneously) and to issue shares of
Common Stock upon exercise of such options as provided in this Plan and the
stock option agreements. In addition, the Board shall have authority, subject to
the express provisions of this Plan, to construe the respective stock option
agreements and this Plan, to prescribe, amend and rescind rules and regulations
relating to this Plan and to make all other determinations in the judgment of
the Board necessary or desirable for the administration of this Plan. The Board
may correct any defect or supply any omission or reconcile any inconsistency in
this Plan or in any stock option agreement in the manner and to the extent it
shall deem expedient to carry this Plan into effect and it shall be the sole and
final judge of such expediency. The Board may, to the full extent permitted by
or consistent with applicable laws or regulations, delegate any or all of its
powers under this Plan to a committee (the "Committee") appointed

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by the Board, and, if the Committee is so appointed, all references to the Board
in this Plan shall mean and relate to such Committee.

From and after the registration of the Common Stock under Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan
will be administered either (i) by the Board, of which all members shall be
"disinterested persons" (as hereinafter defined), or (ii) by a Committee
consisting of two or more directors having full authority to act in the matter,
each of whom shall be a "disinterested person." For the purposes of this Plan, a
director shall be deemed to be a "disinterested person" only if such person
qualifies as a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Exchange Act, or any successor rule ("Rule 16b-3"), as
such term is interpreted from time to time.

(c) Applicability of Rule 16b-3. Those provisions of this Plan which
make express reference to Rule 16b-3 shall apply only to persons that are
required to file reports under Section 16(a) of the Exchange Act (a "Reporting
Person"). Furthermore, until and after such time as the Common Stock is
registered under Section 12 of the Exchange Act, references herein to Rule 16b-3
shall be of no force or effect.

3. Eligibility.

Options may be granted to persons specified by the Board, in its sole
discretion, who are, at the time of grant, employees, officers or directors of,
or consultants to, the Company; provided, however, that Incentive Stock Options
may be granted only to employees of the Company. A person who has been granted
an option may, if he or she is otherwise eligible, be granted additional options
if the Board shall so determine.

4. Stock Subject to Plan.

The stock subject to this Plan shall be the Common Stock presently
authorized but unissued or subsequently acquired by the Company. Subject to
adjustment as provided in Section 15, the maximum number of shares of Common
Stock which may be issued and sold under this Plan is 767 shares. If an option
granted under this Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject to such option shall
again be available for subsequent option grants under this Plan.

5. Forms of Stock Option Agreements.

Options granted under this Plan shall be evidenced by written stock
option agreements in such form or forms not inconsistent with this Plan as may
be approved by the Board from time to time, which stock option agreements shall
contain such terms, conditions, limitations and restrictions as the Board shall
deem advisable and which are not inconsistent with this Plan. Such stock option
agreements may differ among recipients even when made simultaneously. The
provisions of Sections 13, 14, 15, 16, 17, 18, 19 and 20 of this Plan shall be
included in such stock option agreements or incorporated therein by reference.
The grant of an option pursuant to this Plan shall be conditional on the
execution of the applicable stock option agreement by the recipient of such
grant.

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6. Purchase Price.

(a) General. The purchase price per share of Common Stock deliverable
upon the exercise of an option shall be determined by the Board and set forth in
the applicable stock option agreement; provided, however, that the purchase
price per share of Common Stock shall not be less than (i) in the case of an
Incentive Stock Option (other than Incentive Stock Options described in Section
11(b)), 100% of the fair market value of a share of Common Stock, as determined
by the Board, at the time of grant of such option (without regard to any
restriction other than a restriction which, by its terms, will never lapse), and
(ii) in the case of Incentive Stock Options described in Section 11(b), 110% of
such fair market value, as so determined.

(b) Payment of Purchase Price. Options granted under this Plan may
provide for the payment of the exercise price by delivery of cash or a certified
check to the order of the Company in an amount equal to the aggregate exercise
price of such options, or, to the extent provided in the applicable stock option
agreement, (i) by delivery to the Company of shares of Common Stock already
owned by the optionee, which are not subject to any repurchase, forfeiture,
unfulfilled vesting or similar requirements, having a fair market value equal in
amount to the aggregate exercise price of the options being exercised, (ii) by
any other means (including, but not limited to, (A) by delivery of a promissory
note of the optionee payable on such terms as are specified by the Board or (B)
by cancellation of outstanding options of the optionee or withholding shares of
Common Stock issuable to the optionee upon the exercise of such option upon
terms set by the Board, which the Board determines are consistent with the
purpose of this Plan and with applicable laws and regulations (including, but
not limited to, the provisions of Rule 16b-3) or (iii) by any combination of
such methods of payment. The fair market value of any shares of Common Stock or
other non-cash consideration which may be delivered upon exercise of an option
shall be determined by the Board.

7. Option Period.

Each option and all rights with respect thereto shall expire on such
date as shall be set forth in the applicable stock option agreement, except that
(a) in the case of an Incentive Stock Option (other than an Incentive Stock
Option described in Section 11(b)), such date shall not be later than ten years
after the date on which such option is granted, (b) in the case of an Incentive
Stock Option described in Section 11(b), such date shall not be later than five
years after the date on which such option is granted, and (c) in all cases,
options may be subject to earlier termination as provided in this Plan or in the
applicable stock option agreement.

8. Exercise of Options.

Each option granted under this Plan shall become exercisable either in
full or in installments at such time or times and during such period as shall be
set forth in the stock option agreement evidencing such option, subject to the
provisions of this Plan.

9. Nontransferability of Options.

Options granted under this Plan and the rights and privileges conferred
thereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise), other than (a) by will, or (b) by
the applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. Any attempt to transfer, assign,
pledge, hypothecate or

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otherwise dispose of any such option or of any right or privilege conferred
thereby, contrary to this Plan, or the sale or levy or similar process upon the
rights and privileges conferred thereby, shall be void.

10. Effect of Termination of Employment or Other Relationship.

Except as provided in Section 11 with respect to Incentive Stock
Options, and subject to the provisions of this Plan, the Board shall determine
the period of time, if any, during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the stock option agreement evidencing such option.

11. Incentive Stock Options.

Options granted under this Plan which are intended to be Incentive
Stock Options shall be subject to the following additional terms and conditions:

(a) Express Designation. All Incentive Stock Options granted under this
Plan shall, at the time of grant, be specifically designated as such in the
stock option agreement covering such Incentive Stock Options.

(b) 10% Stockholder. If any employee to whom an Incentive Stock Option
is to be granted under this Plan is, at the time of the grant of such option,
the owner of stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d) of the Code), then the
following special provisions shall be applicable to the Incentive Stock Option
granted to such individual:

(i) The purchase price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than 110% of
the fair market value of a share of Common Stock at the time of grant;
and

(ii) the exercise period of such option shall not
exceed five years from the date of grant.

(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under this Plan (and any other incentive stock
option plans of the Company) which are otherwise designated as Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
options, in the aggregate, become exercisable for the first time in any calendar
year for shares of Common Stock with an aggregate fair market value (determined
as of the respective date or dates of grant) in excess of $100,000.

(d) Termination of Employment or Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the optionee
is, and has been continuously since the date of grant of his or her option, in
the employment of the Company, except that:

(i) an Incentive Stock Option may be exercised within
the period of three months after the date the optionee ceases to be an
employee of the Company (or within such lesser period as may be
specified in the applicable option agreement), provided, however, that
the stock option agreement with respect to such option may designate a
longer exercise period

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and if such option is exercised after such three-month period the
exercise of such option shall be treated as the exercise of a
non-statutory option under this Plan;

(ii) if the optionee dies while in the employ of the
Company, or within three months after the optionee ceases to be such an
employee, the Incentive Stock Option may be exercised by the person to
whom it is transferred by will or the laws of descent and distribution
within the period of one year after the date of death (or within such
lesser period as may be specified in the applicable stock option
agreement); and

(iii) if the optionee becomes disabled (within the
meaning of Section 22(e)(3) of the Code or any successor provision
thereto) while in the employ of the Company, the Incentive Stock Option
may be exercised within the period of one year after the date the
optionee ceases to be such an employee because of such disability (or
within such lesser period as may be specified in the applicable stock
option agreement).

For purposes of this Plan and any option granted hereunder, "employment" shall
be defined in accordance with the provisions of Section 1.421-7(h) of the Income
Tax Regulations (or any successor regulations). Notwithstanding the foregoing
provisions, no Incentive Stock Option may be exercised after its expiration
date.

12. Additional Provisions.

(a) Additional Option Provisions. The Board may, in its sole
discretion, include additional provisions in stock option agreements covering
options granted under this Plan and shares of Common Stock issued upon exercise
of such options, including, but not limited to, (i) restrictions on transfer and
disposition, (ii) the grant of registration rights, (iii) repurchase rights,
(iv) commitments to pay cash bonuses, to make, arrange for or guaranty loans or
to transfer other property to optionees upon exercise of options, (v)
restrictions on voting, and (vi) any additional conditions to the issuance of
shares of Common Stock upon the exercise of options, including, without
limitation, the execution of one or more shareholders agreements; provided,
however, that such additional provisions shall not be inconsistent with any
other term or condition of this Plan and such additional provisions shall not
cause any Incentive Stock Option granted under this Plan to fail to qualify as
an Incentive Stock Option within the meaning of Section 422 of the Code.

(b) Acceleration, Extension and Other Matters. The Board of Directors
may, in its sole discretion, (i) accelerate the date or dates on which all or
any particular option or options granted under the Plan may be exercised or (ii)
extend the dates during which all or any particular option or options granted
under the Plan may be exercised; provided, however, that no such extension shall
be permitted if it would cause the Plan to fail to comply with (A) Section 422
of the Code and (B) Rule 16b-3.

13. General Restrictions.

(a) Investment Representations. The Board may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in form and substance satisfactory to the Board in its sole
discretion to the effect that such person is acquiring the Common Stock subject
to the option for his or her own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Board deems necessary or appropriate in its sole discretion in
order to comply with federal and applicable state securities laws, or

<PAGE> 6

with covenants or representations made by the Company in connection with any
public offering of its Common Stock.

(b) Compliance With Securities Laws. Each option shall be subject to
the requirement that if, at any time, counsel to the Company shall determine
that (i) the listing, registration or qualification of the shares subject to
such option upon any securities exchange or under any federal, state or foreign
law, (ii) the consent or approval of any governmental or regulatory body, or
(iii) the disclosure of non-public information or the satisfaction of any other
condition is necessary as a condition of, or in connection with, the issuance or
purchase of shares thereunder, such option may not be exercised, in whole or in
part, unless such listing, registration, qualification, consent or approval,
disclosure or satisfaction of such condition, shall have been effected or
obtained on conditions acceptable to the Board in its sole discretion. Nothing
contained herein shall be deemed to require the Company to apply for or to
obtain such listing, registration, qualification, or approval, to make such
disclosure or to satisfy such condition.

14. Rights as a Stockholder.

The holder of an option shall have no rights as a stockholder with
respect to any shares covered by the option (including, but not limited to, any
rights to receive dividends or distributions with respect to such shares) until
the date of issue of a stock certificate to him or her for such shares. Except
for adjustments pursuant to Section 15, no adjustment or payment shall be made
for dividends, distributions or other rights for which the record date is prior
to the date such stock certificate is issued.

15. Adjustment Provisions for Recapitalizations and Related Transactions.

(a) General. If, as a result of any merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (x) the
maximum number and kind of shares reserved for issuance under this Plan, (y) the
number and kind of shares or other securities subject to any then outstanding
option under this Plan, and (z) the purchase price for each share subject to any
then outstanding option under this Plan, without changing the aggregate purchase
price as to which such option remains exercisable. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this Section 15 if such
adjustment would cause this Plan to fail to comply with (A) Section 422 of the
Code and (B) Rule 16b-3.

(b) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive.

16. Certain Mergers, Consolidations and Other Reorganizations.

(a) General. In the event of a consolidation or merger in which
outstanding shares of Common Stock are exchanged for securities, cash or other
property of any other corporation or entity or in the event of the sale of all
or substantially all of the assets of the Company or in the event of a
liquidation of the Company or in the event of any sale or series of sales of
shares of the Company's

<PAGE> 7

capital stock by the holders thereof which results in any person or entity or
group of affiliated persons or entities (other than the owners of the Company's
capital stock prior to such sale or sales) owning capital stock of the Company
possessing the voting power (under ordinary circumstances) to elect a majority
of the Board, the Board, or the board of directors of any corporation assuming
the obligations of the Company, may, in its sole discretion, take any one or
more of the following actions, as to outstanding options: (i) provide that such
options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation or entity (or an affiliate thereof),
provided, however, that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that (A) all exercisable but unexercised
options will terminate immediately prior to the consummation of such transaction
unless exercised by the optionee within a specified period following the date of
such notice and prior to the consummation of such event or transaction and (B)
all unexercisable options will terminate upon consummation of such event or
transaction, (iii) in the event of a merger or consolidation under the terms of
which holders of the Common Stock of the Company will receive upon consummation
thereof a payment for each share surrendered in the merger or consolidation (the
"Merger Price"), make or provide for a payment to the optionees equal to the
difference between (A) the Merger Price times the number of shares of Common
Stock subject to such outstanding options (to the extent then exercisable at
prices not in excess of the Merger Price) and (B) the aggregate exercise price
of all such outstanding options, in exchange for the termination of such
options, (iv) provide that all or any outstanding options shall become
exercisable in full immediately prior to such event or transaction and shall
cease to be exercisable at any time after such event or transaction, or (v) take
any other action with respect to outstanding options that is not prohibited by
(A) any other term or condition of this Plan, (B) such terms and provisions of
the Exchange Act (and the rules promulgated thereunder) that bear upon this Plan
or the options authorized or granted under it and (C) in the case of Incentive
Stock Options, such terms and provisions of the Code (and the rules promulgated
thereunder) that apply to such Incentive Stock Options.

(b) Substitute Options. The Company may grant options under this Plan
in substitution for options held by employees of another corporation who become
employees of the Company as the result of a merger or consolidation of the
employing corporation with the Company or as a result of the acquisition by the
Company of property or stock of the employing corporation. The Company may
direct that substitute options be granted on such terms and conditions as the
Board considers appropriate in its sole discretion in the circumstances
consistent with the provisions of this Plan.

17. No Special Employment or Relationship Rights.

Nothing contained in this Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
or relationship with the Company or interfere in any way with the right of the
Company at any time to terminate such employment or relationship or to increase
or decrease the compensation of the optionee.

18. Other Employee Benefits.

Except as to plans which by their express terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, but not
limited to, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board.

<PAGE> 8

19. Amendment of this Plan.

(a) The Board may at any time, and from time to time, modify or amend
this Plan in any respect, except that, if at any time the approval of the
stockholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, or Rule 16b-3,
such modification or amendment shall not become effective until such approval is
obtained.

(b) Except as provided in the last sentence of this Section 19(b) and
Sections 15 and 16, the termination or any modification or amendment of this
Plan shall not, without the consent of an optionee, affect his or her rights
under an option previously granted to him or her. With the consent of the
optionee, however, the Board may amend outstanding stock option agreements
between the Company and such optionee in a manner not inconsistent with this
Plan. In addition, the Board shall in any event have the right to amend or
modify (i) the terms and provisions of this Plan and of any outstanding
Incentive Stock Options granted under this Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded Incentive
Stock Options under Section 422 of the Code and (ii) the terms and provisions of
this Plan and of any outstanding option to the extent necessary to ensure the
qualification of this Plan under Rule 16b-3.

20. Withholding.

(a) The Company shall have the right to deduct from payments of any
kind otherwise due to the optionee any federal, state, local or foreign taxes of
any kind required by law to be withheld with respect to any shares issued upon
exercise of options under this Plan or the subsequent sale of such shares.
Subject to the prior approval of the Board, which may be withheld by the Board
in its sole discretion, the optionee may elect to satisfy such obligations, in
whole or in part, (i) by causing the Company to withhold shares of Common Stock
otherwise issuable pursuant to the exercise of an option or (ii) by delivering
to the Company shares of Common Stock already owned by the optionee. The shares
so delivered or withheld shall have a fair market value equal to such
withholding obligation. The fair market value of the shares used to satisfy such
withholding obligation shall be determined by the Board as of the date that the
amount of tax to be withheld is to be determined. An optionee who has made an
election described above under his or her stock option agreement with the
Company, consistent with the terms of this Section 20(a), may only satisfy his
or her withholding obligation with shares of Common Stock which are not subject
to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.

(b) Notwithstanding the foregoing, in the case of a Reporting Person,
no election to use shares for the payment of withholding taxes shall be
effective unless made in compliance with any applicable requirements of Rule
16b-3.

21. Cancellation and New Grant of Options.

In addition to, and not in limitation of, the provisions contained in
Section 16 hereof, the Board shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees and consistent
with the Plan, (a) the cancellation of any or all outstanding options under this
Plan and the grant in substitution therefor of new options under this Plan
covering the same or different numbers of shares of Common Stock and having an
exercise price per share which may be lower or higher than the exercise price
per share of the canceled options or (b) the amendment of the terms of any

<PAGE> 9

and all outstanding options under this Plan to provide an exercise price per
share which is higher or lower than the then-current exercise price per share of
such outstanding options.

22. Effective Date and Termination of this Plan.

(a) Effective Date. This Plan shall become effective upon adoption by
the Board. Options may be granted under this Plan at any time after the
effective date and before the date fixed for termination of this Plan.

(b) Termination. Unless sooner terminated in accordance with Section
16, this Plan shall terminate upon the tenth anniversary of the date of its
adoption by the Board. Options outstanding on such date shall continue to have
force and effect in accordance with the provisions of the stock option agreement
applicable to such options.

<PAGE> 1
EXHIBIT 99.1

[Natural Nutrition Group letterhead]

July 2, 1998

Mr. Jonathan Nixom
New Hope Communications
Boulder, Colorado

Dear Jonathan:

Natural Nutrition Group (the "Company") (f/k/a Intrepid Food Holdings,
Inc.), the sole stockholder of Health Valley Company ("Health Valley"), has
filed a registration statement with the Securities and Exchange Commission
("SEC") and various state securities commissions for the purpose of registering
shares of it common stock for sale to the public (the "Registration Statement").

In the Registration Statement, we refer to certain information and data
that was contained in Natural Foods Merchandiser, one of your publications, and
disclose Natural Foods Merchandiser as the source of that information. As we
have discussed, you have consented to our use of such information, and the
references to Natural Foods Merchandiser, in the preliminary and final
prospectuses related to the Registration Statement and in any of the Company's
quarterly and annual reports filed with the SEC and/or distributed to our
stockholders after such registration, provided that such use or references in
such prospectuses or reports is, in form and substance, substantially the same
as the use of such information, and the references to Natural Foods
Merchandiser, in the Registration Statement. Please confirm your consent to the
foregoing by signing the enclosed copy of this letter in the space provided at
the bottom and return it to me at your earliest convenience.

Sincerely,

/s/ William R. Voss

The undersigned hereby confirms
its consent to the foregoing.

NEW HOPE COMMUNICATIONS

By: /s/ Jonathan Nixon
---------------------------
Its: Chief Financial Officer
-----------------------------

<PAGE> 1
EXHIBIT 99.2

[Natural Nutrition Group letterhead]

May 12, 1998

Mr. Paddy Spence
Spence Information Services, L.L.C.
185 Berry Street
San Francisco, California 94107

Dear Paddy:

Intrepid Food Holdings, Inc. (d/b/a Natural Nutrition Group), the sole
stockholder of Health Valley Company ("Health Valley"), intends to file a
registration statement with the Securities and Exchange Commission ("SEC") and
various state securities commissions for the purpose of registering shares of it
common stock for sale to the public (the "Registration Statement").

Health Valley has purchased market research and other information
concerning natural and organic food products from Spence Information Services,
Inc. (the "Information"). We have delivered to you the most recent draft of the
Registration Statement (the "Draft"). As we have discussed, you have consented
to our use and disclosure of, and references to, the Information in the
preliminary and final prospectuses related to the Registration Statement and in
any of the Company's quarterly and annual reports filed with the SEC and/or
distributed to our stockholders after such registration and waived any
restrictions on such use, disclosure or reference binding on the Company or
Health Valley, provided that such use and disclosure of, or references to, the
Information in such prospectuses or reports is, in form and substance,
substantially the same as the use and disclosure of, and references to, the
Information in the Draft. Please confirm your consent to, and waiver of, the
foregoing by signing the enclosed copy of this letter in the space provided at
the bottom and return it to me at your earliest convenience.

Sincerely,

/s/ William R. Voss

The undersigned hereby confirms its
consent to and waiver of the foregoing.

SPENCE INFORMATION SERVICES, L.L.C.

By: /s/ Paddy Spence
------------------
Its: President
------------------