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Sample Business Contracts

Stock Purchase Agreement - Whole Foods Market Group Inc., Nature's Heartland Inc. and Leo Kahn

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                            STOCK PURCHASE AGREEMENT

         This Stock Purchase  Agreement  (this  "Agreement") is made as of April
30, 1999,  by and among Whole Foods Market Group,  Inc., a Delaware  corporation
("Purchaser"),  Nature's  Heartland,  Inc.,  a  Massachusetts  corporation  (the
"Company"),  Leo Kahn ("Kahn") and the other shareholders of the Company who are
signatories  hereto (such persons,  together with Kahn, being referred to herein
collectively as the "Sellers").

         WHEREAS,  the  Purchaser and the Company have executed and delivered an
Asset Purchase Agreement dated March 15, 1999 (the "Asset Purchase  Agreement");
and

         WHEREAS,  the  Purchaser  and the  Company  desire to  restructure  the
transactions  contemplated  by  the  Asset  Purchase  Agreement,  and  upon  the
execution  and  delivery of this  Agreement,  the parties  intend that the Asset
Purchase Agreement be superseded by this Agreement in all respects; and

         WHEREAS,  the Sellers own all of the issued and  outstanding  shares of
capital  stock and any other  securities,  options,  warrants or other rights to
acquire shares of the Company's capital stock (collectively the "Shares") of the
Company; and

         WHEREAS, the Purchaser desires to purchase the Shares from the Sellers,
and the Sellers desire to sell the Shares to Purchaser, subject to the terms and
provisions hereof;

         In  consideration  of  the  mutual  covenants  and  agreements   herein
contained, the parties hereto agree as follows:


1.       SALE AND PURCHASE OF SHARES

         1.1.  Purchase  and Sale of Shares.  Upon the terms and  subject to the
conditions  set forth in this  Agreement,  at the Closing (as defined in Section
2.2  hereof),  the  Sellers  shall  assign,  transfer,  convey  and  deliver  to
Purchaser,  and Purchaser shall purchase from the Sellers,  all right, title and
interest  in and to all of the  Shares,  free and clear of all  liens,  security
interests, charges, encumbrances and rights of others.

         1.2 Excluded  Liabilities.  The parties  further  intend that as of the
Closing the  Company  shall only be liable,  in respect of periods  prior to the
Closing,  for the  liabilities  and  obligations  set forth below (the  "Assumed
Liabilities")  and that the Company shall be  indemnified by the Sellers for all
other  liabilities and obligations of the Company in respect of periods prior to

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the Closing (the "Excluded Liabilities"):

                           (i) The  current  trade  accounts  payable  and other
                  current liabilities incurred in the operation of the Stores in
                  the "Accounts Payable," "Accrued Liabilities" and "Withholding
                  Taxes"  categories  on the  1998  Balance  Sheet  (as  defined
                  herein),  to the  extent  (X)  the  same  have  been  properly
                  recorded  in the  general  ledger of the  Company  through the
                  Closing  Date and (Y) the  Company at the  Closing  shall have
                  provided a complete  listing  of the same as  recorded  on the
                  general ledger through the Closing Date;

                           (ii)  The  store  leases,   office  lease  and  other
                  specified   contractual   obligations   listed   as   "Assumed
                  Contracts"  on  Schedule  1.2(b)  hereto,  as the  same may be
                  amended  through the Closing  Date with the mutual  consent of
                  the Company and Purchaser; and

                           (iii)  The   liabilities   for   severance,   accrued
                  vacation,  sick time and COBRA that are set forth in Article 5
                  hereof.

         1.3 Non-Competition Agreement.  Contemporaneously with the purchase and
sale of the  Shares  at the  Closing,  Purchaser  and Kahn  shall  enter  into a
Non-Competition  Agreement in the form of Exhibit A hereto (the "Non-Competition
Agreement").

         1.4. Purchase Price. The consideration to be received by the Sellers at
Closing  in  exchange   for  the  Shares  (the   "Purchase   Price")   shall  be
$24,950,000.The  Purchase Price shall be paid in cash at the Closing,  except as
follows:

                  (i) The  Purchaser  shall retain the sum of $450,000 and shall
         pay $90,000 to the Sellers on each of the five  succeeding  anniversary
         dates of the  Closing,  provided  that on each payment date and for the
         year then ended,  Kahn is not then,  and has not been, in default under
         the  Non-Competition  Agreement;  and upon such  default all  remaining
         unpaid  installments  of such  $450,000  sum shall be  forfeited by the
         Sellers.  In the event of the death of Kahn prior to any such  default,
         the  Purchaser   shall  pay  to  the  Sellers  all   remaining   unpaid
         installments of such $450,000 amount; and

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                  (ii) The Sellers and  Purchaser  will  deposit the sum of $2.0
         million  into  an  escrow  account  pursuant  to  terms  of the  escrow
         agreement (the "Escrow Agreement") substantially in the form of Exhibit
         A attached hereto.

The  Purchase  Price  shall  be  delivered  to  Kahn  as  the  duly   authorized
representative of all of the Sellers.


2.       CLOSING

         2.1 Closing.  A closing (the "Closing") to effect the purchase and sale
of the Shares  shall be held at the  offices of the  Company on the date  hereof
(the "Closing Date"). At the Closing, the Sellers shall deliver the certificates
representing  the Shares,  duly  endorsed to Purchaser or  accompanied  by stock
powers so  endorsed,  against  delivery of the amount of the  Purchase  Price as
described  in Section 1.4  hereof.  All  actions  taken at the Closing  shall be
deemed  to have  been  taken  simultaneously  at the  time  the last of any such
actions is taken or completed.














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         2.2.     Section 338(h)(10)Election; Payment of Taxes.

                  (a) Contemporaneously  with the execution and delivery of this
         Agreement,  the  Purchaser  and the  Sellers  have  joined in making an
         election under Section 338(h)(10) of the Internal Revenue Code of 1986,
         as amended (the "Code"), and any comparable elections,  with respect to
         the  purchase  of the Shares,  under any state or local  income tax law
         (each a "Section 338(h)(10)  Election").  The Purchaser  represents and
         warrants that it is qualified to make such election.  The Purchaser and
         the Sellers  further agree to (i) allocate the Purchase Price among the
         assets of the Company that are deemed to have been acquired pursuant to
         Section  338(h)(10)  of  the  Code  and  comparable  state  income  tax
         provisions  (the  "Section  338 Asset  Allocation  Schedule")  and (ii)
         exchange,  complete and  properly  execute  copies of Internal  Revenue
         Service  Form  8023A,  the  required  schedules  related  thereto,  and
         comparable  state forms and schedules,  all of which have been prepared
         on a basis consistent with the Section 338 Asset  Allocation  Schedule.
         The  Section  338 Asset  Allocation  Schedule  shall be based  upon the
         allocations  set forth on  Schedule  2.2  hereto.  If any  changes  are
         required to be made to these forms or schedules  (including the Section
         338 Asset  Allocation  Schedule) as a result of the  valuation of fixed
         assets  to be  undertaken  by the  Purchaser  after the  Closing  or of
         information that becomes  available after the Closing Date, the parties
         shall  promptly  and in good faith reach an agreement as to the precise
         changes  required to be made.  The Purchaser  will prepare and file all
         further  documents and materials  necessary in connection with making a
         Section  338(h)(10)  Election,  and the  Sellers  agree to  assist  the
         Purchaser and cooperate with the Purchaser in connection therewith.

                  (b) The  Purchaser  and the Sellers  will prepare and file all
         tax returns and reports with respect to taxes  including if  necessary,
         Internal  Revenue  Service  Form 8594 and  comparable  state forms in a
         manner  consistent  with  the  Section  338(h)(10)   Election  and  the
         valuation  of  the  assets  as  set  forth  in the  Section  338  Asset
         Allocation  Schedule.  All taxes  imposed on the deemed  sale of assets
         resulting  from the  Section  338(h)(10)  Election  will be included in
         Sellers' tax returns as applicable and will be paid by Sellers.

3.       REPRESENTATIONS  AND WARRANTIES OF THE COMPANY AND THE SELLERS.  The
Company and the Sellers, jointly and severally (but subject to the provisions of
Section 7.7), hereby represent and warrant to Purchaser as follows.

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<PAGE>


         3.1.  Organization  and Good Standing of the Company.  The Company is a
corporation  duly organized and validly  existing and in good standing under the
laws of the Commonwealth of Massachusetts.

         3.2.  Binding  Effect.  This  Agreement has been or will have been duly
authorized,  executed and  delivered by the Company and is the legal,  valid and
binding  obligation  of the  Company  and  each of the  Sellers  enforceable  in
accordance  with its terms  except  that (i)  enforceability  may be  limited by
bankruptcy,  insolvency or other similar laws  affecting  creditors'  rights and
(ii)  the  availability  of  equitable  remedies  may be  limited  by  equitable
principles of general applicability.

         3.3.  Compliance  with Other  Instruments.  Neither the  execution  and
delivery by the Company or the Sellers of this Agreement nor the consummation by
any of them of the transactions  contemplated hereby will violate, breach, be in
conflict with, or constitute a default under,  or permit the  termination or the
acceleration of maturity of, or result in the imposition of any lien,  claim, or
encumbrance  upon  any  property  or asset of the  Company  pursuant  to (i) the
Company's articles of organization or bylaws or (ii) any note, bond,  indenture,
mortgage,  deed of trust,  evidence of  indebtedness,  loan or lease  agreement,
other  agreement or  instrument  which is material to the  operation of the four
Nature's  Heartland  natural foods  supermarkets  that are owned by or under the
control of the Company (the  "Stores") or any judgment,  order,  injunction,  or
decree by which the  Company or any  Seller is bound,  to which any of them is a
party, or to which any of their respective assets are subject.

         3.4.     Financial Statements and Records of the Company.

                  (a) The Company has delivered to Purchaser  true,  correct and
         complete  copies of the following  financial  statements  (the "Company
         Financial Statements"): the compiled balance sheet of the Company as of
         December  26,  1998  (the  "1998  Balance  Sheet"),   and  the  related
         statements of operations for the year then ended. The Company Financial
         Statements  present  fairly  the  assets,   liabilities  and  financial
         position  of the  Company as of the dates  thereof  and the  results of
         operations thereof for the periods then ended. The books and records of
         the Company have been and are being  maintained in accordance with good
         business practice,  reflect only valid  transactions,  are complete and
         correct in all material  respects,  and present  fairly in all material
         respects the basis for the financial position and results of operations
         of the Company set forth in the Company Financial Statements.


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<PAGE>


                  (b) The  accounts  receivable  set  forth on the 1998  Balance
         Sheet are reflected  thereon in accordance with good business  practice
         and on a  basis  consistent  with  prior  periods.  The  allowance  for
         collection  losses on the 1998  Balance  Sheet has been  determined  in
         accordance with past practice. The amounts receivable arising since the
         date of the 1998  Balance  Sheet are, to the  knowledge of the Sellers,
         valid and genuine and have been properly recorded in the general ledger
         of the Company.

                  (c) All inventory used in the conduct of the operations of the
         Stores  reflected on the 1998 Balance Sheet, or acquired since the date
         thereof, was acquired and has been maintained in the ordinary course of
         business,  consists substantially of good and merchantable quality and,
         other than after  acquired  inventory,  has been  recorded  on the 1998
         Balance Sheet in accordance with good business  practice and on a basis
         consistent with prior periods. Inventory acquired since the date of the
         1998 Balance Sheet  consists of good and  merchantable  quality and has
         been properly recorded in the general ledger of the Company.

                  (d) The accounts payable and accrued expenses reflected on the
         1998 Balance Sheet includes all trade  liabilities and accrued expenses
         incurred in the ordinary  course of business as of that date,  and have
         been  recorded  on the 1998  Balance  Sheet  in  accordance  with  good
         business  practice and on a basis  consistent  with prior periods.  All
         trade accounts payable and accrued expenses  incurred since the date of
         the 1998 Balance Sheet have been recorded in the general  ledger of the
         Company.  As of the Closing Date,  none of the trade  accounts  payable
         included in the Assumed  Liabilities  will relate to invoices  incurred
         for purposes other than the operation of the Stores.

         3.5. Absence of Certain  Changes.  Since December 26, 1998, the Company
has not  (except  as may  result  from  the  transactions  contemplated  by this
Agreement or as set forth on the Company Financial Statements):

               (i) suffered any adverse  change in its results of  operations or
          financial  condition,  other than  changes in the  ordinary  course of
          business  that,  individually  or in the  aggregate,  have  not  had a
          material adverse effect on the Stores;

               (ii)  suffered  any damage or  destruction  to or loss of the its
          material assets not covered by insurance;

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               (iii)  forgiven,  compromised,   canceled,  released,  waived  or
          permitted to lapse any material rights or claims; or

               (iv)  except  as set  forth  on  Schedule  3.5,  entered  into or
          terminated  any material  agreement,  commitment  or  transaction,  or
          agreed or made any changes in the Assumed Contracts.

         3.6.  No  Material  Undisclosed  Liabilities.  There  are  no  material
liabilities  or  obligations  of the  Company of any nature,  whether  absolute,
accrued, contingent or otherwise, other than (i) the liabilities and obligations
that are fully reflected,  accrued, or reserved against on the Company Financial
Statements,  for which the reserves are appropriate and reasonable,  or incurred
in the ordinary  course of business and  consistent  with past  practices  since
December  26,  1998;  or (ii)  liabilities  or  obligations  not  required to be
disclosed in financial statements prepared in accordance with generally accepted
accounting principles.

         3.7. Tax Liabilities.  The Company has filed all federal, state, county
and local tax returns and reports  required to be filed by it,  including  those
with  respect  to  income,  payroll,  property,  withholding,  social  security,
unemployment,  franchise,  excise and sales  taxes,  to the extent that the same
relate to the assets or the  operations of the Company;  has either paid in full
all such taxes that have become due as reflected on any return or report and any
interest and penalties with respect thereto or has fully accrued on its books or
has established adequate reserves for all taxes payable but not yet due; and has
made  required  cash  deposits   with   appropriate   governmental   authorities
representing  estimated  payments of taxes,  including income taxes and employee
withholding  tax  obligations.   No  extension  or  waiver  of  any  statute  of
limitations  or time  within  which to file any  return  has been  granted to or
requested  by  the  Company  with  respect  to  any  such  tax.  No  unsatisfied
deficiency,  delinquency  or default  for any tax,  assessment  or  governmental
charge has been  assessed  (or,  to the  knowledge  of the  Sellers,  claimed or
proposed)  against the Company,  nor has the Company received notice of any such
deficiency, delinquency or default.

         3.8.  Title to  Properties.  The Company has good and marketable fee or
leasehold  title to its material  assets,  free and clear of any lien,  claim or
encumbrance,  except as reflected in the Company  Financial  Statements or notes
thereto and except for the following liens and encumbrances ("Permitted Liens"):

               (i) liens for taxes,  assessments or other  governmental  charges
          not yet due and payable;


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               (ii) statutory  liens incurred in the ordinary course of business
          with respect to liabilities that are not yet due and payable;

               (iii)  landlord  liens  contained  in the  leases  set  forth  on
          Schedule 3.14 hereto; and

               (iv) such  imperfections of title and/or  encumbrances as are not
          material in character,  amount or extent and do not materially detract
          from the value or interfere  with the use of the properties and assets
          subject thereto or affected thereby.

         3.9.     Condition of Assets.  All of the  material  assets of the
Company  (other than  inventory)  viewed as a whole and not on an asset by asset
basis are in good condition and working order,  ordinary wear and tear excepted,
and are  reasonably  suitable  for the uses for  which  intended,  free from any
defects known to the Company, except such minor defects, as do not substantially
interfere with the continued use thereof.

         3.10     Real Estate.

                  (a) The Company has a valid, binding and enforceable leasehold
         interest, free and clear of liens, claims,  encumbrances,  subleases or
         other  restrictions,  in and to the real estate on which the operations
         of  the  Stores  are  conducted  and  the  buildings,   structures  and
         improvements situated thereon (the "Real Estate"), other than Permitted
         Liens.  A true,  complete and correct copy of the Store Leases has been
         furnished to Purchaser;  each Store Lease is currently, or prior to the
         Closing Date will be, in the name of the Company.

                  (b) The  Company  has not  received  any notice of, and has no
         actual  knowledge of, any material  violation of any zoning,  building,
         health, fire, water use or similar statute,  ordinance, law, regulation
         or code in connection  with the leasehold  interest in the Real Estate.
         To the  knowledge  of the Sellers,  no fact or  condition  exists which
         would result in the  termination  or  impairment  of access to the Real
         Estate or discontinuation of necessary sewer, water,  electrical,  gas,
         telephone or other utilities or services.



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                  (c) To the  knowledge of the  Sellers,  except as noted in the
         environmental  reports  listed on  Schedule  3.10  annexed  hereto,  no
         hazardous or toxic  material  (as  hereinafter  defined)  exists in any
         structure  located on, or exists on or under the surface of, any of the
         Real Estate which is, in any case, in material violation by the Company
         of  applicable   environmental  law.  For  purposes  of  this  Section,
         "hazardous or toxic material" shall mean waste,  substance,  materials,
         smoke,  gas or  particulate  matter  designated as hazardous,  toxic or
         dangerous  under any  environmental  law. For purposes of this Section,
         "environmental  law"  shall  include  the  Comprehensive  Environmental
         Response  Compensation  and Liability Act, the Clean Air Act, the Clean
         Water  Act  and  any   other   applicable   federal,   state  or  local
         environmental,  health or safety law, rule or regulation relating to or
         imposing  liability  or  standards  concerning  or in  connection  with
         hazardous, toxic or dangerous waste, substance,  materials,  smoke, gas
         or particulate matter.

         3.11. Litigation  and  Government  Claims.   Except  as  set  forth  on
Schedule   3.11,   there  is  no  pending  suit,   action  or   litigation,   or
administrative, arbitration or other proceeding or governmental investigation or
inquiry,  to which the  Company is a party or to which its  assets  are  subject
which would, if decided  against the Company,  individually or in the aggregate,
have a material  adverse  effect on the results of operations of the Stores.  To
the knowledge of the Sellers,  there are no such  proceedings  threatened  which
would, if decided against the Company,  individually or in the aggregate, have a
material  adverse effect on the results of operations or financial  condition of
the Stores.

         3.12. No Violations or Defaults.  To  the knowledge of the Sellers, the
Company is not in violation of or default under nor has any event occurred that,
with the  lapse of time or the  giving of notice  or both,  would  constitute  a
violation of or default under, or permit the termination or the  acceleration of
maturity of, or result in the imposition of a lien,  claim or  encumbrance  upon
the assets of the Company  pursuant  to, the  articles of  incorporation  of the
Company or any loan or lease agreement, other agreement or instrument, judgment,
order, injunction, or decree to which it is a party, by which it is bound, or to
which any of its assets is subject, except where such violation or default would
not have a material  adverse  effect on the results of  operations  or financial
condition of the Company. To the knowledge of the Sellers, there are no existing
violations of any law applicable to the Stores.


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         3.13.  Labor  Matters.  The  Company  is not  party  to any  collective
bargaining  agreements with any union, and no collective bargaining agreement is
currently being  negotiated by the Company.  There is no labor strike or similar
material dispute pending or, to the knowledge of the Sellers, threatened against
or involving the Company.

         3.14. Material  Contracts.  Set forth on Schedule 3.14 are complete and
accurate lists of all of the following  categories of contracts and  commitments
to which the Company is a party or bound:

               (i)  contracts  with any labor union;  employee  benefit plans or
          contracts; and employment, severance, consulting or similar contracts,
          including confidentiality agreements;

               (ii) leases, whether as lessor or lessee;

               (iii) agreements  providing for liens,  claims or encumbrances on
          the assets of the Company;

               (iv) contracts (other than purchase orders in the ordinary course
          of business) with third parties that involve aggregate payments by the
          Stores of more than $50,000; and

               (v) other  contracts  that are material to the  operations of the
          Stores.

To the extent  requested,  the Company has furnished or made available  accurate
and complete copies of the foregoing contracts and agreements to Purchaser.  All
such contracts are valid, binding, subsisting and enforceable obligations of the
Company.  No contracts or commitments have been made by the Company granting any
person any right to  develop,  franchise,  license,  own,  manage or operate the
Stores or any future store.  The Company has not entered into any  commitment or
understanding for the lease of real property other than the Real Estate.

         3.15. Transaction with Affiliates.  Upon the occurrence of the Closing,
no Seller or any Affiliate of the Company will have any material  interest in or
will own any material property or material right used principally in the conduct
of the business of the Company (it being  understood  that the Company will have
engaged in the transactions  described on Schedule 3.15 immediately prior to the
Closing). The term "Affiliate" shall mean any current officer or director of the
Company,  any  member  of  the  immediate  family  (including  brother,  sister,
descendant,  ancestor  or in-law) of the  forgoing  persons or any  corporation,
partnership,  trust  or  other  entity  in  which  the  Company,  the  Company's

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stockholders,  the  officer and  directors  of the Company or any of such family
member of such  persons has a  substantial  interest or is a director,  officer,
partner or trustee. The Company constitutes the sole legal entity which operates
the Stores.

         3.16.  Brokers and  Finders.  Except for Fulham & Company  (the fees of
which  shall be borne  solely by the Sellers  from its  receipt of the  Purchase
Price  hereunder)  the  Company  has not  engaged  any  person  to act or render
services  as a  broker,  finder  or  similar  capacity  in  connection  with the
transactions  contemplated  herein and no other  person  has, as a result of any
agreement  or  action  by the  Company,  any right or valid  claim  against  the
Sellers,  the  Company,  Purchaser  or any of  Purchaser's  affiliates  for  any
commission,  fee or other  compensation as a broker or finder, or in any similar
capacity in connection with the transactions contemplated herein.

         3.17.  Capitalization.  Schedule 3.17 sets forth the authorized capital
stock of the Company.  All of the issued and  outstanding  Shares have been duly
authorized  and validly issued and are fully paid and  nonassessable.  As of the
Closing, there will be no voting trusts,  shareholder agreements or other voting
arrangements  related to the Company's  capital  stock.  There is no outstanding
subscription,  contract,  convertible or exchangeable security, option, warrant,
call or other  right  obligating  the  Company  to  issue,  sell,  exchange,  or
otherwise dispose of, or to purchase, redeem or otherwise acquire, shares of, or
securities convertible into or exchangeable for, capital stock of the Company.

         3.18.  Title to  Shares.  All of the  outstanding  Shares  are owned of
record and beneficially by the Sellers,  free and clear of all liens, claims and
encumbrances.

4.       REPRESENTATIONS   AND   WARRANTIES   OF  PURCHASER.   Purchaser  hereby
represents and warrants to the Company and the Sellers as follows:

         4.1.  Organization  and Good Standing.  Purchaser is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
Delaware and is in good standing as a foreign  corporation under the laws of the
Commonwealth of Massachusetts.

         4.2.  Corporate Power and Authority.  Purchaser has the corporate power
and authority and all licenses and permits required by governmental  authorities
to execute, deliver and perform this Agreement.

         4.3. Binding Effect. This Agreement has been duly authorized,  executed
and delivered by Purchaser and is the legal, valid and binding obligation of it,


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enforceable in accordance with its terms except that (i)  enforceability  may be
limited by bankruptcy,  insolvency,  or other similar laws affecting  creditors'
rights  and (ii) the  availability  of  equitable  remedies  may be  limited  by
equitable principles of general applicability.

         4.4.  Compliance  with Other  Instruments.  Neither the  execution  and
delivery  by  Purchaser  of this  Agreement  nor the  consummation  by it of the
transactions  contemplated hereby will violate,  breach, be in conflict with, or
constitute a default under,  or permit the  termination or the  acceleration  of
maturity of, or result in the imposition of any lien,  claim or encumbrance upon
any property or asset of Purchaser pursuant to, its certificate of incorporation
or bylaws, or any note, bond,  indenture,  mortgage,  deed of trust, evidence of
indebtedness, loan or lease agreement, other agreement or instrument,  judgment,
order, injunction or decree by which Purchaser is bound, to which it is a party,
or to which its assets are subject.

         4.5.  Brokers and Finders.  Purchaser has not engaged any person to act
or render  services as a broker,  finder or similar  capacity in connection with
the  transactions  contemplated  herein  and no person  has,  as a result of any
agreement or action by Purchaser  any right or valid claim  against the Sellers,
the Company,  Purchaser or any of the Company's  affiliates for any  commission,
fee or other  compensation as a broker or finder,  or in any similar capacity in
connection with the transactions contemplated herein.

         4.6.  Bellingham Letter of Credit.  Purchaser has provided a  guarantee
to the Company's landlord for the Bellingham Store in the form requested by such
landlord.

5.       CERTAIN COVENANTS.

         5.1.  Continuing  Employees.  On the Closing Date,  the Purchaser  will
cause the Company to continue the at will employment of persons (the "Continuing
Employees")  constituting  the majority of the Store employees of the Company as
of the Closing Date.  For the benefit of each  non-officer  of the Company as of
the Closing  Date who is a  full-time  employee of the Company as of the Closing
Date and is not a Continuing  Employee  (the  "Non-Continuing  Employees"),  the
Purchaser will:

               (i)  upon  the  execution  and  delivery  by  such  persons  of a
          customary  severance  agreement in form satisfactory to the Purchaser,
          pay a  severance  benefit  equal to (X) four  weeks'  base  salary for
          Non-Continuing  Employees who have been employed by the Company (as of
          the  Closing  Date)  for more  than one year and (Y) two  weeks'  base

                                       12

<PAGE>

          salary for  Non-Continuing  Employees  who have been  employed  by the
          Company (as of the Closing Date) for one year or less; and

               (ii) provide  Non-Continuing  Employees and Richard Kleinberg (as
          well the seven  former  employees  of the Company who have  previously
          elected  COBRA)  the  opportunity  to  purchase  health  insurance  in
          accordance with the requirements of COBRA.

Schedule 5.1 sets forth all of the severance  arrangements  offered to employees
of the  Company in excess of the amounts set forth  above,  it being  understood
that the  amounts  set  forth on such  Schedule  5.1  shall be  deemed  Excluded
Liabilities  and  therefore  excluded  from the Basket  described in Section 6.4
below.  It is further  understood  that Kahn will fund such amounts prior to the
required disbursement dates.

         5.2. Officers of the Company. Effective as of the Closing Date, each of
the officers and  directors of the Company shall have resigned his position with
the Company and shall have provided the Company with a full and complete release
of  liability.  The Company  shall have  provided  such officers with a full and
complete  release of liability;  provided,  however,  that such release will not
diminish the obligations of Kahn under Article 6.

         5.3.  Purchaser  Benefit  Plans.  Effective as of the Closing Date, the
Purchaser shall make available to the Continuing  Employees the employee benefit
plan(s)  maintained by Whole Foods Market for its Team Members (the "WFM Plans")
in accordance with their terms. To the extent  permitted by the terms of the WFM
Plans,  the  Purchaser  will (i)  waive all  deductibles,  waiting  periods  and
limitations  with  respect  to  pre-existing  conditions  and  other  conditions
applicable to employees of the Company under the WFM Plans,  and (ii) grant full
past service credit (including  credit for eligibility,  benefit accrual and for
vesting) to the Continuing  Employees for service with the Company under any and
all of the WFM Plans, including but not limited to bonus, severance, and similar
employment  policies.  Neither  this  Agreement  nor  the  consummation  of  the
transactions contemplated by this Agreement will entitle any employee, including
but not limited to, Continuing  Employees,  to any other severance  benefits nor
will it  accelerate  compensation  due any such  Continuing  Employee  as of the
Closing Date. The Purchaser will further  credit each  Continuing  Employee with
the  accrued  vacation  and sick time owing to such  Continuing  Employee by the
Company as of the  Closing  Date,  provided  that the same has been  recorded in
either the general ledger or payroll  records of the Company in accordance  with
good business practice and on a basis consistent with prior periods.  Subject to

                                       13

<PAGE>

the foregoing,  the Purchaser shall have the right in the good faith exercise of
operations and managerial discretion to make changes or cause changes to be made
after the Closing Date in  compensation,  benefits and other terms of employment
and to terminate any such employee.

         5.4.  Bellingham  Letter of  Credit.  The  Purchaser  will use its best
efforts  to cause the  landlord  of the  Bellingham  Store to return to Kahn the
letter of credit currently held by such landlord.

6.       INDEMNIFICATION.

         6.1. Indemnification of Purchaser. Subject to the limitations set forth
in Sections 6.3 and 6.4, Kahn shall indemnify and hold Purchaser  harmless from,
against,  for and in  respect  of (i) any and all  damages,  losses,  settlement
payments,  obligations,  liabilities,  claims,  actions  or causes of action and
encumbrances suffered,  sustained, incurred or required to be paid by Purchaser,
net of any resulting income tax benefits to Purchaser, (A) because of the breach
of any written  representation,  warranty,  agreement or covenant of the Company
contained in this Agreement or (B) in respect of the Excluded  Liabilities,  and
(ii)  all  reasonable  costs  and  expenses   (including,   without  limitation,
attorneys'  fees,  interest and  penalties)  incurred by Purchaser in connection
with any action, suit,  proceeding,  demand,  assessment or judgment incident to
any of the  matters  indemnified  against  in  this  Section  6.1  (collectively
"Purchaser's Damages").

         6.2.  Indemnification of Sellers.  Subject to the limitations set forth
in Sections 6.3 and 6.4, Purchaser shall indemnify and hold the Sellers harmless
from,  against,  for  and in  respect  of:  (i) any  and  all  damages,  losses,
settlement  payments,  obligations,  liabilities,  claims,  actions or causes of
action and encumbrances suffered,  sustained, incurred or required to be paid by
the  Sellers,  net of any  resulting  income tax  benefits to the  Sellers,  (A)
because of the breach of any  written  representation,  warranty,  agreement  or
covenant of Purchaser  contained  in this  Agreement or (B) in respect of any of
the Assumed Liabilities;  and (ii) all reasonable costs and expenses (including,
without  limitation,  attorneys' fees,  interest and penalties)  incurred by the
Sellers in connection with any action, suit, proceeding,  demand,  assessment or
judgment incident to any of the matters  indemnified against in this Section 6.2
(collectively "Sellers' Damages").

         6.3.  Survival  of  Representations,   Warranties  and  Covenants.  All
representations,  warranties, covenants and agreements made by any party to this
Agreement  or pursuant  hereto  shall be deemed to be material  and to have been
relied  upon by the  parties  hereto,  and  shall  survive  until  the 18  month
anniversary  of the Closing  Date.  Notice of any claim,  whether made under the
indemnification  provisions  hereof  or  otherwise,  based  on  a  breach  of  a

                                       14

<PAGE>

representation,  warranty,  covenant  or  agreement  must be given  prior to the
expiration of such  representation,  warranty,  covenant or  agreement;  and any
claim  not  made  within  such  period  shall  be of no  force  or  effect.  The
representations and warranties  hereunder shall not be affected or diminished by
any  investigation  at any time by or on behalf  of the party for whose  benefit
such representations and warranties were made.

         6.4.  General Rules  Regarding  Indemnification.  The  obligations  and
liabilities  of  each  indemnifying  party  hereunder  with  respect  to  claims
resulting from the assertion of liability by the other party shall be subject to
the following terms and conditions:

                  (a) The  indemnified  party shall give prompt  written  notice
         (which  in no event  shall  exceed  30 days  from the date on which the
         indemnified party first became aware of such claim or assertion) to the
         indemnifying party of any claim which might give rise to a claim by the
         indemnified party against the indemnifying party based on the indemnity
         agreements contained in Sections 6.1 or 6.2 hereof,  stating the nature
         and basis of said claims and the amounts thereof, to the extent known;

                  (b) If any action,  suit or proceeding is brought  against the
         indemnified party with respect to which the indemnifying party may have
         liability under the indemnity  agreements  contained in Sections 6.1 or
         6.2 hereof,  the action,  suit or proceeding  shall, at the election of
         the  indemnifying  party,  be defended  (including  all  proceedings on
         appeal or for review which counsel for the indemnified party shall deem
         appropriate) by the  indemnifying  party.  The indemnified  party shall
         have the right to employ its own counsel in any such case, but the fees
         and expenses of such counsel  shall be at the  indemnified  party's own
         expense  unless the  employment of such counsel and the payment of such
         fees and  expenses  both shall  have been  specifically  authorized  in
         writing by the  indemnifying  party in  connection  with the defense of
         such action, suit or proceeding.  Notwithstanding the foregoing, (A) if
         there  are  defenses  available  to the  indemnified  party  which  are
         inconsistent  with those  available to the  indemnifying  party to such
         extent as to create a conflict  of interest  between  the  indemnifying
         party and the indemnified  party, the indemnified  party shall have the
         right to direct the defense of such action,  suit or proceeding insofar
         as it relates to such inconsistent defenses, and the indemnifying party
         shall  be  responsible  for the  reasonable  fees and  expenses  of the
         indemnified party's counsel insofar as they relate to such inconsistent
         defenses,  and (B) if such action, suit or proceeding involves or could
         have an effect on matters beyond the scope of the indemnity  agreements
         contained in Sections 6.1 and 6.2 hereof,  the indemnified  party shall

                                       15

<PAGE>

         have the right to  direct  (at its own  expense)  the  defense  of such
         action, suit or proceeding insofar as it relates to such other matters.
         The indemnified party shall be kept fully informed of such action, suit
         or proceeding at all stages thereof whether or not it is represented by
         separate counsel.

                  (c)  The  indemnified   party  shall  make  available  to  the
         indemnifying  party and its  attorneys  and  accountants  all books and
         records  of the  indemnified  party  relating  to such  proceedings  or
         litigation  and the parties  hereto  agree to render to each other such
         assistance  as they may  reasonably  require  of each other in order to
         ensure the  proper and  adequate  defense of any such  action,  suit or
         proceeding.

                  (d) The indemnified party shall not make any settlement of any
         claims without the written consent of the indemnifying party.

                  (e) An  indemnified  party shall not make any claim  hereunder
         unless  and  until it has  incurred  Sellers'  Damages  or  Purchaser's
         Damages (as the case may be) of a cumulative aggregate of $250,000 (the
         "Basket")  and shall  thereafter  be  entitled to make a claim only for
         amounts incurred in excess of such Basket; provided,  however, that the
         provisions  of this  clause  (e) shall not apply to any of  Purchaser's
         Damages arising from (i) the termination or settlement of the Company's
         agreements  with New Mexico Coffee (it being  understood  any agreement
         made by Purchaser to continue  coffee orders from New Mexico Coffee for
         a future period shall not be considered Purchaser's Damages),  (ii) any
         claim by the landlord of the Bedford  Store in respect of the change of
         control  of the  Company as a result of the sale of the  Shares,  (iii)
         unpaid use taxes in respect  of  periods  prior to the  Closing or (iv)
         unpaid sales taxes in respect of periods  prior to 30 days prior to the
         Closing, all of which shall be made on a dollar-for-dollar basis.

                  (f) In no event shall the cumulative  liability of the Sellers
         in  respect of  Purchaser's  Damages  exceed  $5.0  million;  provided,
         however,  that (i) such aggregate maximum shall not apply in respect of
         Purchaser's  Damages arising from a breach of the  representations  and
         warranties  set  forth in  Sections  3.7 and 3.18 or  arising  from the
         fraudulent conduct of the Sellers and/or their representatives and (ii)
         the  cumulative  liability  of the  Sellers in  respect of  Purchaser's
         Damages  relating  to the  leases of the Stores  shall not exceed  $2.5
         million.

                  (g) If any  claims  are  made  by  third  parties  against  an
         indemnified party for which an indemnifying  party would be liable, and
         it  appears  likely  that such  claims  might  also be  covered  by the
         indemnified  party's  insurance  policies,  the indemnified party shall


                                       16

<PAGE>

         make a timely  claim  under such  policies  and to the extent that such
         party obtains any recovery from such insurance,  such recovery shall be
         offset  against  any sums due from an  indemnifying  party (or shall be
         repaid by the  indemnified  party to the  extent  that an  indemnifying
         party has already paid any such amounts).

7.       MISCELLANEOUS.

         7.1.  Expenses.  The Purchaser  shall pay its own expenses  incurred in
connection  with the  negotiation,  execution and delivery of the Asset Purchase
Agreement and this Agreement and the transactions  contemplated  hereby, and the
Sellers shall pay their expenses and those of the Company incurred in connection
with the negotiation, execution and delivery of the Asset Purchase Agreement and
this Agreement and the transactions contemplated hereby.



<PAGE>


         7.2. Entire  Agreement.  This Agreement and the exhibits hereto contain
the  complete  agreement  among the  parties  with  respect to the  transactions
contemplated hereby and supersede all prior agreements and understandings,  oral
or written,  among the parties  with respect to such  transactions.  Section and
other  headings  are for  reference  purposes  only and  shall  not  affect  the
interpretation  or construction  of this Agreement.  The parties hereto have not
made any  representation  or  warranty  except  as  expressly  set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto.

         7.3. Public  Announcements.  No party to this Agreement shall issue any
press release  relating to, or otherwise  publicly  disclose,  the  transactions
contemplated by this Agreement  without the prior approval of the other parties.
Notwithstanding  the  foregoing,  any party may make such  disclosure  as may be
required by law,  provided  the  disclosing  party  obtains from the other party
prior approval of the substance of the proposed  disclosure (such as the content
of a proposed press release), which approval may not be unreasonably withheld or
delayed.

         7.4.  Counterparts.  This  Agreement  may be  executed in any number of
counterparts,  each of which when so executed and  delivered  shall be deemed an
original, and such counterparts together shall constitute only one original.

         7.5. Notices.  All notices,  demands,  requests or other communications
that may be or are  required  to be  given,  served  or sent by any party to any
other party pursuant to this  Agreement  shall be in writing and shall be mailed
by first-class,  registered or certified mail, return receipt requested, postage
prepaid,  or transmitted  by a reputable  overnight  courier  service or by hand

                                       17

<PAGE>

delivery or facsimile transmission, addressed as follows:

                             (i)     If to the Purchaser or the Company:

                                     601 N. Lamar Blvd., Suite 300
                                     Austin, Texas  78703
                                     Attn:  Chief Financial Officer
                                     Fax:  512-477-1069

                             (ii)    If to the Sellers:

                                     c/o United Properties
                                     One DeAngelo Drive
                                     Bedford, Massachusetts 01730
                                     Attn:  Mr. Leo Kahn
                                     Fax:  781-275-3023

Each party may designate by notice in writing a new address to which any notice,
demand,  request or communication  may thereafter be so given,  served, or sent.
Each notice,  demand,  request or communication  that is mailed,  delivered,  or
transmitted in the manner  described above shall be deemed  sufficiently  given,
served,  sent and  received  for all purposes at such time as it is delivered to
the addressee (with the return receipt,  the delivery receipt,  fax confirmation
sheet or the affidavit of courier or messenger being deemed conclusive  evidence
of such  delivery) or at such time as delivery is refused by the addressee  upon
presentation.

         7.6.  Assignment;  Successors  and Assigns.  This  Agreement may not be
assigned by either of the parties hereto without the written  consent of all the
other parties; provided, however, that the Purchaser shall be entitled to assign
this  Agreement to any subsidiary  corporation so long as the Purchaser  remains
liable for the  obligations  of Purchaser  hereunder.  Subject to the  preceding
sentence,  this Agreement and the rights,  interests and  obligations  hereunder
shall be binding  upon and shall inure to the benefit of the parties  hereto and
their respective successors and assigns.

         7.7. Remedies of the Company. After the Closing, the Company shall have
the same rights and benefits  under this  Agreement as does the  Purchaser  with
respect  to  the  representations,  warranties  and  covenants  of  the  Sellers
contained herein, as fully as if such representations,  warranties and covenants
had been made to or with the Company in lieu of Purchaser. In any proceedings by

                                       18

<PAGE>

Purchaser to assert or prosecute any claims under, or to otherwise enforce, this
Agreement  or  any  other  agreement  contemplated  hereby  or  any  transaction
contemplated hereby or thereby,  the Sellers agree that they shall not assert as
a defense or bar to recovery  by the  Company  and hereby  waive any right so to
assert  such  defense  or bar such  recovery,  that (a)  before the date of this
Agreement  the  Company  (as  opposed  to   Purchaser)   had  knowledge  of  the
circumstances  giving rise to the claim being pursued by it; (b) before the date
of this  Agreement the Company  engaged in conduct or took action that caused or
brought  about  the  circumstances   giving  rise  to  its  claim  or  otherwise
contributed  thereto;  (c) the Company is estopped from  asserting or recovering
upon its claim by reason of having  joined in the  representations,  warranties,
and covenants made by Sellers in this Agreement;  or (d) Sellers have a right of
contribution from or  indemnification by the Company to the extent that there is
any recovery against it. The Sellers further agree that they shall not under any
circumstances   whatsoever   affirmatively   seek  any   contribution   from  or
indemnification  by the  Company  for any  losses,  damages,  expenses  or other
claims,  regardless of form,  suffered by them arising out of,  related to or in
connection  with this  Agreement  or any  other  agreement  contemplated  hereby
(except  pursuant  to Section  6.2) or any  transaction  contemplated  hereby or
thereby.

         7.8. Waiver and Other Action. This Agreement may be amended,  modified,
or  supplemented  only by a written  instrument  executed by the parties against
which enforcement of the amendment, modification or supplement is sought.

         7.9.  Severability.  If any  provision of this  Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this  Agreement  shall be construed and enforced as if such illegal,  invalid or
unenforceable  provision  were never a part  hereof;  the  remaining  provisions
hereof  shall  remain in full force and effect and shall not be  affected by the
illegal,  invalid or unenforceable provision or by its severance; and in lieu of
such  illegal,  invalid  or  unenforceable  provision,   there  shall  be  added
automatically as part of this Agreement,  a provision as similar in its terms to
such  illegal,  invalid or  unenforceable  provision  as may be possible  and be
legal, valid and enforceable.

         7.10.  Third-Party  Beneficiaries.   This  Agreement  and  the  rights,
obligations,  duties and benefits hereunder are intended for the parties hereto,
and no other  person or entity  shall have any rights,  obligations,  duties and
benefits pursuant hereto.

         7.11. Governing Law; Arbitration.  This Agreement shall be governed by,
and construed in accordance with, the laws of the Commonwealth of Massachusetts.

                                       19

<PAGE>

Any  controversy  or dispute among the parties  arising in connection  with this
Agreement shall be submitted to a panel of three arbitrators and finally settled
by  arbitration  in  accordance  with the  commercial  arbitration  rules of the
American  Arbitration  Association.  Each of the disputing parties shall appoint
one arbitrator,  and these two arbitrators  shall  independently  select a third
arbitrator. Arbitration shall take place in Boston, Massachusetts, or such other
location as the arbitrators may select. The prevailing party in such arbitration
shall be entitled to the award of all costs and  attorneys'  fees in  connection
with such action.  Any award for monetary  damages  resulting from nonpayment of
sums due  hereunder  shall bear  interest  from the date on which such sums were
originally  due and payable.  Judgment upon the award rendered may be entered in
any court  having  jurisdiction  or  application  may be made to such  court for
judicial  acceptance of the award and an order of  enforcement,  as the case may
be.















                                       20

<PAGE>



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


                                                  Whole Foods Market Group, Inc.


                                                  By /s/  Glenda Flanagan
                                                     --------------------

                                                  Nature's Heartland, Inc.


                                                  By /s/ Leo Kahn
                                                     ------------

                                                  Shareholders:


                                                     /s/ Leo Kahn
                                                     ------------
                                                     Leo Kahn

                                                     /s/ Joseph Kahn
                                                     ---------------
                                                     Joseph Kahn

                                                     /s/ Daniel Kahn
                                                     ---------------
                                                     Daniel Kahn

                                                     /s/ Elizabeth Kahn
                                                     ------------------
                                                     Elizabeth Kahn