ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement (the "Agreement") is made as of the 17th day
of January, 2000, by and among Whole Foods Market, Inc., a Texas corporation
(the "Parent"); Whole Foods Market California, Inc., a California corporation
(the "Subsidiary"); Natural Abilities, Inc. d/b/a Food for Thought Natural Food
Market & Deli, a California corporation (the "Company"); and the following
persons (each a "Shareholder" and collectively the "Shareholders"): Ernest D.
Shelton; Xenia S. Shelton; Ernest D. Shelton and Xenia S. Shelton, Trustees
u/t/a dated August 26, 1996; James D. Shelton; Sandra J. Shelton; James D.
Shelton and Sandra J. Shelton, Trustees u/t/a August 2, 1996; Martin Shelton;
Ernest D. Shelton, Trustee of the Abraham Shelton Trust dated December 8, 1999;
James D. Shelton, Trustee of the Stefon E. Shelton Trust dated December 8, 1999;
and James D. Shelton, Trustee of the Jason A. Shelton Trust dated December 8,
1999.

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

1.   PURCHASE AND SALE OF ASSETS.
     ---------------------------

     1.1. Purchase and Sale.  At the Closing (as hereinafter defined) and
          -----------------
subject to the terms and conditions of this Agreement, Subsidiary shall purchase
from the Company, and the Company shall sell to Subsidiary, all right, title and
interest in and to the following assets (collectively the "Purchased Assets")
related to the operation of the three natural foods supermarkets in Santa Rosa,
Sebastopol and Petaluma, California (the "Stores"), in each case excluding the
assets set forth on Schedule 1.1 to be attached hereto (the "Excluded Assets"):

          (a) All equipment, machinery, spare parts, tools, instruments,
     vehicles, furniture, fixtures and other similar items of tangible personal
     property;

          (b) All leasehold interests in real property, including improvements
     thereon, for the Stores (the "Store Leases");

          (c) All inventory, whether on location, in transit or on consignment
     on the Closing Date;

          (d) All cash, cash equivalents, prepaid expenses and security
     deposits;

          (e) All accounts receivable to the extent not collected by the Company
     prior to the Closing Date;

          (f) All purchase orders, contracts and commitments, including, but not
     limited to those for the purchase of items of inventory or other personal
     property placed or incurred by the Company;

          (g) All (i) proprietary information, trade secrets and confidential
     information, technical information and data, trademarks, trade names and
     service marks (including the
<PAGE>

     "Food for Thought" name and logo); (ii) machinery and equipment warranties
     and service contracts; (iii) all causes of action not pending as of the
     Closing Date related to or in connection with the Purchased Assets; and
     (iv) all other documentation relating to the operation of the Company,
     including all licenses and permits necessary or related to the operation of
     the Stores;

          (h) All books and records related to the Purchased Assets and
     operation of the business of the Stores, including all financial,
     accounting and property tax records, computer data and programs, market
     data, and records and all correspondence with and documents pertaining to
     suppliers, governmental authorities and other third parties (provided,
     however, that copies of the same may be retained by the Company); and

          (i) All other assets, both tangible and intangible, used in, or
     generated by, the operation of the Stores and which are not Excluded
     Assets, including, but not limited to, all insurance recoveries or rights
     to the same relating to damages to or loss of the Purchased Assets.

     1.2  Assumption of Liabilities and Contracts.   At the Closing, the
          ---------------------------------------
Subsidiary shall assume the following:

          (a) The current trade accounts payable and other current liabilities
     incurred in the ordinary course of business in the operation of the Stores
     to the extent (i) the same have been properly recorded according to
     generally accepted accounting principles in the general ledger of the
     Company through the Closing Date and (ii) the Company at the Closing shall
     have provided a complete listing of the same as recorded on the general
     ledger through the Closing Date (the "Assumed Liabilities")(it being
     further understood that (i) Assumed Liabilities will include all amounts
     payable as of the Closing Date to employees for earned but unused vacation
     time, sick pay or other employee benefits and (ii) current liabilities
     shall consist of the line item categories other than "current portion of
     long-term debt" on the Most Recent Balance Sheet (as defined herein) ); and

          (b) To the extent relating to periods on and after the Closing, those
     specified Store Leases and other contractual obligations listed as "Assumed
     Contracts" on Schedule 1.2 to be attached hereto, as the same may be
     amended through the Closing Date with the mutual consent of the Company and
     Subsidiary.

Notwithstanding the foregoing, the Assumed Liabilities shall in no event include
any federal or state income taxes of the Company in respect of periods prior to
the Closing or federal, state or local income arising from the sale of the
Purchased Assets (including any recognition of taxable gain pursuant to Section
1374 of the Internal Revenue Code of 1986, as amended), but shall include state
sales and transfer taxes arising from the sale of the Purchased Assets. Except
as specifically set forth above, neither Parent nor Subsidiary shall assume, and
shall in no event be liable for, any debt, obligation, responsibility, liability
of contingent liability of the Company, or any affiliate or successor of the
Company, or any claim against any of the foregoing, whether known or unknown,
contingent or absolute, or otherwise.

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<PAGE>

     1.3. Purchase Price.
          --------------

     (a)  The consideration to be received by the Company hereunder at the
Closing for the Purchased Assets ("Purchase Price") shall be the sum of the
following:

          (i)  $25.5 million;

          (ii) plus or minus the amount, if any, by which the "Adjusted Net
     Working Capital" (as defined herein) of the Company as of the Closing is
     respectively greater or less than $-0-.

     (b)  For purposes of this Agreement, "Adjusted Net Working Capital" shall
mean the difference of (i) total current assets of the Purchased Assets less
(ii) total current Assumed Liabilities, each as computed in accordance with
generally accepted accounting principles (it being understood that (i) total
current assets shall include all deposits, whether or not identified as a
current asset on the financial statements of the Company, (ii) total current
Assumed Liabilities shall not include any long-term debt of the Company and
(iii) total current Assumed Liabilities shall include an accrual for paid
personal time off (PPTO), even though such amounts have not historically been
required to be accrued). For purposes of determining the inventory component of
Adjusted Net Working Capital, inventories shall be valued at the lower of cost
or market. Cost shall be calculated using the retail inventory method as
follows: (i) all inventory items in good and merchantable condition (with
perishable inventory that is no longer fresh being valued at zero) shall be
physically counted (using a counting service mutually acceptable to the Company
and Subsidiary, with representatives of each party present); (ii) the actual
item count shall be multiplied by the retail price to determine the extended
retail price; (iii) this extended retail price for a given store section shall
be multiplied by the "margin percentage" for that section location to determine
the margin dollars included in the extended retail price; (iv) the margin
dollars shall be subtracted from the extended retail price to determine the cost
of items in that location; and (v) the "margin percentage" to be used in (iii)
above shall be based upon the current mark-up applicable to products in that
store section.

     (c) The Purchase Price shall be adjusted for the prorated items as
described in Section 10.2 herein.

     (d) The Purchase Price shall be allocated among the Purchased Assets in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended,
and in the manner as mutually agreed between the parties; provided, however,
that such allocations shall be based upon the book value of the Purchased
Assets, categorized among the line items set forth on the Most Recent Balance
Sheet as follows: (i) Class I shall include all line items from "cash-on-hand"
through and including ""WF Market rate-Pet," (ii) Class II shall include the
line item "Schwab Mutual Fund, (iii) Class III shall include the remaining line
items and (iv) Classes IV and V shall include the balance of the Purchase Price.
Parent and the Company agree to use the allocations determined pursuant to this
section for all tax purposes, including without limitation, those matters
subject to Section 1060 of the Internal Revenue Code of 1986, as amended.

                                       3
<PAGE>

2.   THE CLOSING.
     -----------

     2.1.  Closing.  Consummation of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of the Subsidiary in
San Francisco, California, commencing at 10:00 a.m., local time, on the date
which is five days after all of the conditions set forth in Articles 8 and 9
have been satisfied or waived, and shall proceed promptly to conclusion, or at
such other place, time and date as shall be fixed by mutual agreement between
Parent and the Company.  The day on which the Closing shall occur is referred to
herein as the "Closing Date." .  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.

     2.2.  Closing Procedure.
           -----------------

     (a) At least five days prior to the Closing, the Company shall provide to
the Parent an estimated balance sheet as of the Closing Date, which, absent
manifest error, shall be the basis for calculating, on a preliminary basis, the
Adjusted Net Working Capital for purposes of a preliminary calculation of the
Purchase Price to be paid at Closing (the "Estimated Purchase Price").  At the
Closing, the Company shall execute such bills of sale and instruments of
assignment and assumption as are necessary to convey title to the Purchased
Assets and the Assumed Contracts, and Subsidiary shall pay to the Company the
Purchase Price in immediately available funds; provided, however, that the
Parent and the Company shall jointly deposit $1.0 million of the Estimated
Purchase Price with an escrow agent (the "Escrow Agent") to be held pursuant to
the terms of the Escrow Agreement of even date herewith and in the form attached
hereto as Exhibit A (the "Escrow Agreement").  The Escrow Agent shall hold
$750,000 of such escrowed portion of the Estimated Purchase Price until the
final determination of Adjusted Net Working Capital (as provided herein) and
$250,000 of such escrowed portion for a period of 12 months, after which the
escrowed amount shall be delivered to the Company, subject to earlier claims in
favor of Parent as set forth elsewhere herein.

     (b) Not later than 75 days after the Closing, the Parent, at its own cost,
shall prepare and deliver to the Company an unaudited balance sheet of the
Purchased Assets and Assumed Liabilities as of the Closing Date (the "Closing
Balance Sheet"), prepared in accordance with generally accepted accounting
principles, applied consistently with the Company's past practices.  The Company
shall permit Parent and its accountants to participate in the physical inventory
of the Stores (as defined herein) as of the Closing Date for the purpose of
preparing the Closing Balance Sheet.  In connection with preparing the Closing
Balance Sheet, Parent shall determine the Adjusted Net Working Capital of the
Company as of the Closing Date.

     (c) Within 30 days after the Closing Balance Sheet is delivered to the
Company pursuant to clause (a) above, the Company at its own cost, shall
complete its examination thereof, and provide for the examination thereof by its
accountants, if necessary, and shall deliver to the Parent either (i) a written
acknowledgment accepting the determination of the Adjusted Net Working Capital
or (ii) a written report of a regional independent accounting firm engaged by
the Company setting forth in reasonable detail any proposed adjustments to the

                                       4
<PAGE>

Adjusted Net Working Capital ("Adjustment Report").  A failure by the Company to
deliver the Adjustment Report within the required 30 day period shall constitute
its acceptance of the Closing Balance Sheet.  The Parent shall, and shall cause
its independent auditors to, cooperate with the Company and its accountants in
the course of the preparation of the Adjustment Report.

     (d) During a period of 30 days following the receipt by the Company of the
Adjustment Report, the Company and Parent shall attempt to resolve any
difference they may have with respect to the matters raised in the Adjustment
Report.  In the event the Company and Parent fail to agree on all of the
proposed adjustments contained in the Adjustment Report within such 30 day
period, then the Company and Parent mutually agree that the San Francisco office
of Ernst & Young, or such other "Big Five" accounting firm mutually acceptable
to the Company and Parent (the "Independent Auditors"), shall make the final
determination with respect to the correctness of the proposed adjustments in the
Adjustment Report in light of the terms and provisions of this Agreement.  The
decision of the Independent Auditors shall be final and binding on the Company
and Parent, and may be used in a court of law by either the Company or Parent
for the purpose of enforcing such decision.  The costs and expenses of the
Independent Auditors and their services rendered pursuant to this clause (d)
shall be borne by the non-prevailing party or, if neither party prevails,
equally by the Company and Parent.

     (e) In the event that, after finalization of the Closing Balance Sheet, the
Adjusted Net Working Capital is in excess of the amounts used for purposes of
determining the Estimated Purchase Price, the Company shall be entitled to
receive from Parent, and Parent shall be obligated to pay to the Company, the
amount of such excess.  In the event that, after finalization of the Closing
Balance Sheet, the Adjusted  Net Working Capital is less than the amount used
for purposes of determining the Estimated Purchase Price, the Parent shall be
entitled to receive from the Escrow Agent, and the Company shall direct the
Escrow Agent to pay to Parent, the amount of such deficiency.

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.  The
     ------------------------------------------------------------------
Company and the Shareholders, jointly and severally, hereby represent and
warrant to Parent as follows:

     3.1.  Organization and Good Standing of the Company.  The Company is a
           ---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California.

     3.2.  Corporate Power and Authority; Binding Effect.  The Company has the
           ---------------------------------------------
corporate power and authority and all material licenses and permits required by
governmental authorities to own, lease and operate its properties and assets, to
carry on its business as currently being conducted, and to execute, deliver and
perform this Agreement.  This Agreement has been or will have been duly
authorized, executed and delivered by the Company and the Shareholders and is
the legal, valid and binding obligation of the Company and the Shareholders
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.

                                       5
<PAGE>

     3.3.  Compliance with Other Instruments.  Neither the execution and
           ---------------------------------
delivery by the Company or the Shareholders of this Agreement nor the
consummation by 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 incorporation or bylaws or (ii) to the
Company's and Shareholders' knowledge and except as set forth in Schedule 3.3 to
be attached hereto, 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 the Company or a Shareholder is
bound, to which any of them is a party or to which any of their assets are
subject.

     3.4.  Consents.  Except for the termination or expiration of all applicable
           --------
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR
Act") and for applicable approvals from beverage control authorities ("Beverage
Permit Transfers"), no approval, authorization, consent, order or other action
of, or filing with, any governmental authority or administrative agency is
required in connection with the execution and delivery by the Company or the
Shareholders of this Agreement or the consummation of the transactions
contemplated hereby.  Except as set forth on Schedule 3.4 to be attached hereto,
no approval, authorization or consent of any other third party is required in
connection with the execution and delivery by the Company or the Shareholders of
this Agreement and the consummation of the transactions contemplated hereby.

     3.5.  Financial Statements and Records of the Company.
           -----------------------------------------------

     (a)   The Company has delivered to Parent true, correct and complete copies
of the following (the "Company Financial Statements"): (i) the unaudited balance
sheets of the Company as of December 31, 1997 and 1998, and the related
statements of income for the years then ended; and (ii) the unaudited balance
sheet of the Company as of October 31, 1999 (the "Most Recent Balance Sheet"),
and the related statement of income for the nine months then ended.

     (b)   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 and have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis with prior periods. 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.

     (c)   The accounts receivable set forth on the Most Recent 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 Most
Recent Balance Sheet has been determined in accordance with past practice. The
amounts receivable arising since the date of the Most Recent

                                       6
<PAGE>

Balance Sheet are, to the knowledge of the Shareholders, valid and genuine and
have been properly recorded in the general ledger of the Company.

     (d)  All inventory used in the conduct of the operations of the Stores
reflected on the Most Recent 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 Most Recent Balance Sheet in
accordance with good business practice and on a basis consistent with prior
periods. Inventory acquired since October 31, 1999 consists of good and
merchantable quality and has been properly recorded in the general ledger of the
Company.

     (e)  The accounts payable and accrued expenses reflected on the Most Recent
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
Most Recent 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 October 31, 1999 have been recorded in the general
ledger of the Company.

     3.6. Title to Purchased Assets.  The Company has good and marketable fee
          -------------------------
or leasehold title to the Purchased Assets (except for assets subject to
financing leases required to be capitalized under generally accepted accounting
principles, all of which are so reflected in the Most Recent Balance Sheet or
notes thereto), free and clear of any lien, claim or encumbrance, except as
reflected in the Company Financial Statements and except for:

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

          (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 leases in the ordinary course of
     business; 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.

     3.7. Absence of Certain Changes.  Since October 31, 1999, the Company has
          --------------------------
not (except as may result from the transactions contemplated by this Agreement
or as set forth on the Company Financial Statements or Schedule 3.7 to be
attached hereto):

          (i)   suffered any change in its business, results of operations,
     working capital, assets, liabilities or condition (financial or otherwise)
     or the manner of conducting its business other than changes in the ordinary
     course of business that, individually or in the aggregate, have not had a
     material adverse effect on the Company;

                                       7
<PAGE>

          (ii)   suffered any damage or destruction to or loss of the Purchased
     Assets not covered by insurance that has a material adverse effect on the
     business, results of operations, assets or condition (financial or
     otherwise) of the Company;

          (iii)  entered into or terminated any material agreement, commitment
     or transaction, or agreed or made any changes in material leases or
     agreements, other than renewals or extensions thereof and leases,
     agreements, transactions and commitments entered into in the ordinary
     course of business;

          (iv)   written up, written down or written off the book value of any
     material amount of the Purchased Assets;

          (v)    increased the compensation of or paid any bonuses to any
     employees or contributed to any employee benefit plan, other than in
     accordance with established policies, practices or requirements;

          (vi)   entered into any employment, consulting, compensation or
     collective bargaining agreement with any person or group; or

          (vii)  entered into, adopted or amended any employee benefit plan.

     3.8.  No Material Undisclosed Liabilities.  There are, to the Company's and
           -----------------------------------
Shareholders' knowledge, 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 Most Recent Balance Sheet, for which the reserves are
appropriate and reasonable, or incurred in the ordinary course of business and
consistent with past practices since October 31, 1999, (ii) liabilities or
obligations not required to be disclosed in financial statements prepared in
accordance with generally accepted accounting principles, (iii) liabilities of
$10,000 or less or (iv) liabilities set forth on Schedule 3.8 to be attached
hereto.

     3.9.  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; has either paid in full all
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 tax. No unsatisfied deficiency,
delinquency or default for any tax, assessment or governmental charge has been
assessed (or, to the knowledge of the Company, claimed or proposed) against the
Company, nor has the Company received notice of any such deficiency, delinquency
or default.

                                       8
<PAGE>

     3.10.  Store Leasehold Sites.
            ---------------------

     (a)    To the Company's and Shareholders' knowledge, (i) applicable zoning
ordinances permit the operation of the Stores at their present sites (such site,
inclusive of building and leasehold improvements being referred to herein as the
"Real Estate"); (ii) the Company has all easements and rights, including
easements for all utilities, services, roadways and other means of ingress and
egress, necessary to operate the Stores; (iii) the Real Estate is not located
within a flood or lakeshore erosion hazard area; and (iv) neither the whole nor
any portion of the Real Estate has been condemned, requisitioned or otherwise
taken by any public authority, and no notice of any such condemnation,
requisition or taking has been received; except in each case where the failure
of such provisions to be true and correct would not have a material adverse
effect on the business and operations of the Company.  No such condemnation,
requisition or taking is threatened or contemplated to the Company's knowledge,
and there are no pending public improvements which may result in special
assessments against or which may otherwise materially and adversely affect the
Real Estate.  To the knowledge of the Company, the Real Estate has not been used
for deposit or disposal of hazardous wastes or substances in violation of any
past or current law in any material respect and there is no material liability
under past or current law with respect to any hazardous wastes or substances
which have been deposited or disposed of on or in the Real Estate.

     (b)    To the Company's and Shareholders' knowledge and except as set forth
on Schedule 3.10 to be attached hereto, the Company has received no 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 Real Estate.

     (c)    To the knowledge of the Company and the Shareholders, no hazardous
or toxic material (as hereinafter defined) exists in any structure located on,
or exists on or under the surface of, the Real Estate which is, in any case, in
material violation 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.  Condition of Assets.  Except as set forth on Schedule 3.11 to be
            -------------------
attached hereto, the Purchased Assets are in good condition and working order,
ordinary wear and tear excepted, and are suitable for the uses for which
intended, free from any known defects except such minor defects as do not
substantially interfere with the continued use thereof.  All operating system,
application and other computer software included in the Purchased Assets is
currently Year 2000 compliant, or to the extent that such software or hardware
is not currently Year 2000 compliant, the Company has in place and is
implementing detailed plans to ensure that such software and hardware will be
Year 2000 compliant no later than the Closing Date.

                                       9
<PAGE>

     3.12.  Litigation and Government Claims.  Except as set forth in Schedule
            --------------------------------
3.12 to be attached hereto, 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 business, results of operations, assets or
the condition, financial or otherwise, of the Company.  To the knowledge of the
Company and the Shareholders, there are no such proceedings threatened,
contemplated or any basis for any unasserted claims (whether or not the
potential claimant may be aware of the claim) which would, if decided against
the Company, individually or in the aggregate, have a material adverse effect on
the business, results of operations, assets or the condition, financial or
otherwise, of the Company.

     3.13.  No Violations or Defaults.  To the knowledge of the Company and the
            -------------------------
Shareholders and except as set forth on Schedule 3.13 to be attached hereto, 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
any of the Purchased Assets pursuant to, the articles of incorporation or bylaws
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 business, results of
operations, assets or the condition, financial or otherwise, of the Company.  To
the knowledge of the Company, there are no existing violations of any law
applicable to the Company's business that have a material adverse effect on the
Company's business, operations, properties, assets or condition.

     3.14.  Intellectual Property.  Set forth on Schedule 3.14 to be attached
            ---------------------
hereto is a list of the trade or service marks used by the Company in, and
material to, its business, any patents owned by the Company, and any licenses
from third parties with respect to any material recipes, processes, techniques
or other intellectual property used by the Company in its business (collectively
the "Proprietary Assets").  Except as set forth on Schedule 3.14 to be attached
hereto, to the knowledge of the Company and the Shareholders, (i) the Company
has the right to use the Proprietary Assets without infringing or violating the
rights of any other person, (ii) no claim has been asserted by any person
challenging the validity of the Proprietary Assets or the use thereof by the
Company and (iii) the Proprietary Assets used by the Company in its operations
may continue to be so used without the consent of, or payment of consideration
to, any other person.

     3.15.  Labor Matters.
            -------------

     (a)    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.

                                       10
<PAGE>

     (b)    Except as set forth on Schedule 3.15 to be attached hereto, there
are no discrimination charges against the Company (relating to sex, age, race,
national origin, handicap or veteran status) pending before any federal or state
agency or authority.

     (c)    There is no labor strike or similar material dispute pending or, to
the knowledge of the Company, threatened against or involving the Company.

     (d)    There is no arbitration proceeding under any collective bargaining
agreement pending or, to the knowledge of the Company or the Shareholders,
threatened involving any employees of the Company.

     (e)    For the past two years, the Company has followed the practices
outlined in its employee policy manuals in all material respects with regard to
conditions and terms of employment and termination benefits with respect to its
employees.

     3.16.  Governmental Licenses.  Schedule 3.16 to be attached hereto lists
            ---------------------
and accurately describes all licenses, permits, orders, approvals,
authorizations and filings issued to the Company by a governmental or regulatory
authority in connection with the lawful ownership and operation of the Company's
business (the "Governmental Licenses"), except where the failure to hold such
Governmental License would not have a material adverse effect on the Company.
The Company has furnished to Parent and the Subsidiary true and accurate copies
of all such Governmental Licenses, and each Governmental License is in full
force and effect and is valid under applicable federal, state and local laws.

     3.17.  Brokers and Finders.  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 person has, as a result of any
agreement or action by the Company, any right or valid claim against the
Company, Parent or any of Parent'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.   REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY.  Parent and
     -------------------------------------------------------
Subsidiary, jointly and severally, represent and warrant to the Company and the
Shareholders as follows:

     4.1.   Organization and Good Standing.  Parent is a corporation duly
            ------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas.  Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of California.

     4.2.   Corporate Power and Authority.  Each of Parent and Subsidiary has
            -----------------------------
the corporate power and authority and all licenses and permits required by
governmental authorities to own, lease and operate its properties and assets, to
carry on its business as currently being conducted, and each has the corporate
power and authority and all licenses and permits required by governmental
authorities to execute, deliver and perform this Agreement.

                                       11
<PAGE>

     4.3.  Binding Effect.  This Agreement has been or will have been duly
           ---------------
authorized, executed and delivered by Parent and Subsidiary and is the legal,
valid and binding obligations of each of them, 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 Parent or Subsidiary of this Agreement nor the consummation by 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 Parent or Subsidiary pursuant to,
their respective certificates 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 Parent or Subsidiary is bound, to which either is a party, or to which
their assets are subject.

     4.5   Consents.  Except for the termination or expiration of all applicable
           --------
waiting periods under the HSR Act and approvals related to the Beverage Permit
Transfers, no approval, authorization, consents, order or other action of, or
filing with, any governmental authority or administrative agency is required in
connection with the execution and delivery by the Parent or Subsidiary of this
Agreement on the consummation of the transactions contemplated hereby.  No
approval, authorization or consent of any third party is required in connection
with the execution and delivery by the Parent or Subsidiary of this Agreement
and the consummation of the transactions contemplated hereby.

     4.6.  Brokers and Finders.  Neither Parent nor Subsidiary has 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 Parent or Subsidiary any right or valid
claim against the Company 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.

     4.7.  No Implied Representations by Company and Shareholders.
           ------------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, it is the express
understanding of the Parent and Subsidiary that the Shareholders and Company are
not making any representation or warranty whatsoever, express or implied, verbal
or written, other than those representations and warranties of the Shareholders
and Company expressly set forth in this Agreement.

                                       12
<PAGE>

5.   CERTAIN COVENANTS.
     -----------------

     5.1.   Cooperation.  Each of the parties hereto shall, and shall cause each
            -----------
of its affiliates to, use its best efforts to (i) obtain at the earliest
practicable date and, in any event, before the Closing Date, any approvals,
authorizations and consents necessary to consummate the transactions
contemplated by this Agreement; (ii) as reasonably requested by the other,
cooperate with and keep the other informed in connection with this Agreement;
and (iii) take such actions as the other parties may reasonably request to
consummate the transactions contemplated by this Agreement and diligently
attempt to satisfy, to the extent within its control, all conditions precedent
to its obligations to close the transactions contemplated by this Agreement;
provided, however, that nothing in this Section 5.1 shall require a party to
expend any monies except as otherwise specifically required under this
Agreement.  With respect to obtaining consents for the assignment of the leases
of the Real Estate, Parent and Subsidiary will promptly provide the financial
and other information reasonably requested by the respective lessors of the Real
Estate.  Parent and Subsidiary shall also use all commercially reasonable
efforts to obtain the release of the Shareholders' from all personal guaranties
of Assumed Liabilities.

     5.2    Maintenance of Company Business and Assets.  Between the date hereof
            ------------------------------------------
and the Closing, the Company not, except as otherwise contemplated herein, (i)
enter into any transaction other than in the ordinary course of business, (ii)
permit any encumbrance, mortgage or pledge on any of the Purchased Assets or
(iii) dispose of any material Purchased Asset other than sales of inventory and
replacement of equipment in the ordinary course of business.

     5.3.   Employment Matters.
            ------------------

     (a)    On the Closing Date, the Parent will cause the Company to continue
the at will employment of persons (the "Continuing Employees") constituting the
substantial majority of the 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 Parent will:

            (i)  upon the execution and delivery by such persons of a customary
     severance agreement in form satisfactory to the Parent, pay a severance
     benefit to Non-Continuing Employees equal to one and one-half weeks' base
     salary for each year of completed service with the Company, up to a maximum
     of four weeks' base salary; and

            (ii) provide Non-Continuing Employees the opportunity to purchase
     health insurance in accordance with the requirements of COBRA.

     (b)    Effective as of the Closing Date, the Parent shall make available to
the Continuing Employees the employee benefit plan(s) maintained by Parent for
its team members (the "WFM Plans") in accordance with their terms.  The Parent
will (i) waive all 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

                                       13
<PAGE>

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 or benefits due any such
Continuing Employee as of the Closing Date. The Parent will further credit each
Continuing Employee with the accrued vacation and personal paid time off (PPTO)
owing to such Continuing Employee by the Company as of the Closing Date as
provided for under the terms of the Company's existing benefit plans, provided
that the same has been recorded in the general ledger of the Company and is
included in the schedule of Assumed Liabilities. Further, the Parent will pay
the severance benefit described in subparagraph (a)(1) above to any Continuing
Employee that Parent or Subsidiary terminates without cause during the six month
period after the Closing Date. Subject to the foregoing, the Parent 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.
Notwithstanding the foregoing, the Parent will pay all accrued vacation and PPTO
in cash to any Continuing Employee who fails to execute a consent to voluntarily
transfer such balances from the Company to Subsidiary, in accordance with the
agreement attached as Schedule 5.3 to be attached hereto.

     (c)   Prior to the Closing, the Company will have terminated its 401(K)
plan and any similar plan covering the Continuing Employees.

     (d)   The Parent shall assume responsibility for all payments on medical
and dental claims of the Company's employees relating to periods prior to the
Closing (whether or not the claim had been made as of the Closing Date),
provided that a proper accrual for same has been made in the determination of
Assumed Liabilities. Otherwise all such liability in respect of periods prior to
the Closing shall remain with the Company.

     5.4.  No Solicitations.  From the date hereof until the Closing or until
           ----------------
this Agreement is terminated or abandoned as provided in this Agreement, neither
the Company nor any of its officers, directors, stockholders, employees or
agent,  shall directly or indirectly (i) solicit or initiate discussion with or
(ii) enter into negotiations or agreements with, or furnish any information that
is not publicly available to, any corporation, partnership, person or other
entity or group (other than Parent or its authorized representatives pursuant to
this Agreement) concerning any proposal for a merger, sale of substantial
assets, sale of shares of stock or securities or other takeover or business
combination transaction (an "Acquisition Proposal") involving the Company, and
the Company will instruct its officers, directors, advisors and its financial
and legal representatives and consultants not to take any action contrary to the
foregoing provisions of this sentence.  The Company will notify Parent promptly
in writing if the Company becomes aware that any inquiries or proposals are
received by, any information is requested from or any negotiations or
discussions are sought to be initiated with, the Company with respect to an
Acquisition Proposal.

     5.5.  Discount at WFM Stores.  The Shareholders shall be entitled to
           ----------------------
Parent's and Subsidiary's customary employee discount for all purchases at
Parent's and Subsidiary's stores

                                       14
<PAGE>

for a period of five years from the Closing Date; provided, however, that the
Shareholders shall adhere to all of Parent's policies with respect to the use of
such discount cards.

     5.6.  Insurance.  Parent and Subsidiary shall obtain and make effective as
           ---------
of the Closing all reasonable and customary business insurance to protect
against loss or damage to the Purchased Assets and liability for personal
injury, worker's compensation claims and any other claims for liability arising
from the operation of the business of the Stores.

6.   CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
     -----------------------------------------------------------------------
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
on or before the Closing Date of each of the following conditions:

     6.1.  Compliance.  Parent and Subsidiary shall have, or shall have caused
           ----------
to be, satisfied or complied with and performed in all material respects, all
terms, covenants and conditions of this Agreement to be complied with or
performed by them on or before the Closing Date.

     6.2.  Representations and Warranties.  All of the representations and
           ------------------------------
warranties made by Parent and Subsidiary in this Agreement shall have been true
and correct in all material respects as of the date hereof, and shall be true
and correct in all material respects at the Closing Date with the same force and
effect as if such representations and warranties had been made at and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.

     6.3.  HSR Act.  All applicable waiting periods under the HSR Act shall have
           -------
been terminated or shall have expired without objection or action which would
prevent the consummation of the transactions contemplated hereby.

     6.4.  Consulting and Non-Competition Agreements.  Parent shall have entered
           -----------------------------------------
into a Consulting and Non-Competition Agreement, substantially in the form of
Exhibit B hereto (the "Non-Competition Agreements"), with each of Ernest Shelton
and James Shelton.

     6.5.  Employment Agreement.  Subsidiary shall have entered into an
           --------------------
Employment Agreement, substantially in the form of Exhibit C hereto (the
"Employment Agreement") with Martin Shelton.

     6.6.  Consent of Lessors.  The lessors of the Real Estate shall have
           ------------------
consented to the assignment of the leases of such Real Estate to the Subsidiary.

     6.7.  Release of Guaranties.  The Shareholders shall have been released
           ---------------------
from the personal guaranties set forth on Schedule 6.7 to be attached hereto.

     6.8.  Schedules.  The Company and Parent shall have agreed to the content
           ---------
of the schedules to be attached hereto.

                                       15
<PAGE>

7.   CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUBSIDIARY.  Except as
     ------------------------------------------------------------
may be waived by Parent and Subsidiary, the obligations of Parent and Subsidiary
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions:

     7.1.  Compliance.  The Company and the Shareholders shall have, or shall
           ----------
have caused to be, satisfied or complied with and performed in all material
respects all terms, covenants, and conditions of this Agreement to be complied
with or performed by the Company or the Shareholders (as the case may be) on or
before the Closing Date.

     7.2.  Representations and Warranties.  All of the representations and
           ------------------------------
warranties made by the Company and Shareholders in this Agreement shall have
been true and correct in all material respects as of the date hereof, and shall
be true and correct in all material respects at the Closing Date with the same
force and effect as if such representations and warranties had been made at and
as of the Closing Date, except for changes permitted or contemplated by this
Agreement.

     7.3.  Landlord Consents/ Estoppel Certificates/ Lease Modifications.  The
           -------------------------------------------------------------
lessors of the Real Estate shall have consented to the assignment of the leases
of such Real Estate to the Subsidiary.   Parent shall have received a
certificate from each lessor of the Real Estate indicating the absence of any
default by the Company under the lease of the Real Estate and confirming the
terms of such lease.  The lessor(s) shall have also consented to the extensions
and/or amendments described on Schedule 7.3 to be attached hereto.

     7.4.  HSR Act.  All applicable waiting periods under the HSR Act shall have
           -------
been terminated or shall have expired without objection or action which would
prevent the consummation of the transactions contemplated hereby.

     7.5.  Consulting and Non-Competition Agreements.  Each of Ernest Shelton
           -----------------------------------------
and James Shelton shall have entered into the Consulting and Non-Competition
Agreements.

     7.6.  Escrow Agreement.  The Company shall have executed and delivered the
           ----------------
Escrow Agreement.

     7.7.  Beverage Permit Transfers.  Subsidiary shall have been issued a
           -------------------------
temporary license in respect of the Beverage Permit Transfers.

     7.8.  Good Standing Certificate.  The California Secretary of State shall
           -------------------------
have issued a satisfactory certificate of status and the California Franchise
Tax Board shall have issued a good standing certificate.

     7.9.  Schedules.  The Company and Parent shall have agreed to the content
           ---------
of the schedules to be attached hereto.

                                       16
<PAGE>

8.   INDEMNIFICATION.
     ---------------

     8.1.  Indemnification of Parent and Subsidiary.  Subject to the limitations
           ----------------------------------------
set forth in Sections 8.3 and 8.4, the Company and the Shareholders, jointly and
severally, shall indemnify and hold Parent and Subsidiary 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 (collectively "Damages") suffered, sustained, incurred or required
to be paid by Parent or Subsidiary, net of any resulting income tax benefits to
Parent or Subsidiary, because of the breach of any written representation,
warranty, agreement or covenant of the Company or the Shareholders contained in
this Agreement; (ii) any and all Damages arising out of the ownership or
operation of the Company on and before the Closing Date, other than the Assumed
Liabilities and Assumed Contracts; and (iii) all reasonable costs and expenses
(including, without limitation, attorneys' fees, interest and penalties)
incurred by Parent or Subsidiary in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 8.1.

     8.2.  Indemnification of Shareholders.  Subject to the limitations set
           -------------------------------
forth in Sections 8.3 and 8.4, Parent and Subsidiary, jointly and severally,
shall indemnify and hold the Shareholders harmless from, against, for and in
respect of: (i) any and all Damages incurred or required to be paid by the
Shareholders, net of any resulting income tax benefits to the Shareholders,
because of the breach of any written representation, warranty, agreement or
covenant of Parent or Subsidiary contained in this Agreement; (ii) any and all
Damages arising out of the ownership or operation of the Company after the
Closing Date; (iii) any and all Damages arising out of the Shareholders not
being released from the guaranties on Schedule 6.7 to be attached hereto; and
(iv) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) incurred by the Shareholders in
connection with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against in this Section 8.2.

     8.3.  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 for 12 months following the
Closing Date.  Notice of any claim, whether made under the indemnification
provisions hereof or otherwise, based on a breach of a 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.  All statements contained herein or in any certificate,
exhibit, list or other document delivered pursuant hereto shall be deemed to be
representations and warranties.

     8.4.  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:

                                       17
<PAGE>

     (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 8.1
or 8.2 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 8.1 or 8.2 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 8.1 and 8.2 hereof,
the indemnified party shall 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)  In no event shall an indemnified party make a claim for
indemnification hereunder until such party has incurred cumulative Damages of
$50,000. Further, in no event shall the cumulative liability of the Company and
the Shareholders in respect of claims for indemnification hereunder exceed
$5,000,000.

     (f)  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 make a timely claim

                                       18
<PAGE>

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).

     (g)    Parent shall be entitled to assert a claim against the funds
escrowed pursuant to the Post-Closing Escrow Agreement in respect of any amounts
to which it is entitled to receive by virtue of this Article 8.

9.   TERMINATION.  This Agreement and the transactions contemplated hereby may
     -----------
be terminated at any time on or before the Closing Date:

            (i)   by mutual consent of the Company, Parent and Subsidiary;

            (ii)  by Parent or Subsidiary if there has been a material
     misrepresentation or breach of warranty in the representations and
     warranties of the Company or the Shareholders set forth herein or if there
     has been any material failure on the part of the Company or the
     Shareholders to comply with their respective obligations hereunder;

            (iii) by the Company or the Shareholders if there has been a
     material misrepresentation or breach of warranty in the representations and
     warranties of Parent or Subsidiary set forth herein or if there has been
     any material failure on the part of Parent or Subsidiary to comply with
     their respective obligations hereunder;

            (iv)  by any of Parent, the Shareholders or the Company if the
     transactions contemplated by this Agreement have not been consummated by
     February 28, 2000, unless the parties otherwise agree or unless such
     failure of consummation is due to the failure of the terminating party to
     perform or observe the covenants and agreements hereof to be performed or
     observed by it at or before the Closing Date; and

            (v)   by any of the Company, Parent or Subsidiary if the
     transactions contemplated hereby violate any order, decree or judgment of
     any court or governmental body or agency having competent jurisdiction.

In the event of the termination of this Agreement pursuant to this Article 9,
this Agreement shall forthwith become null and void and of no further force or
effect; provided, however, that the parties hereto shall remain liable for any
breach of this Agreement prior to its termination.

10.  MISCELLANEOUS.
     -------------

     10.1.  Expenses.  Each of the Subsidiary and the Company shall pay its own
            --------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that (i) all recordation, transfer and documentary
taxes, fees and charges applicable to the transfer of the Purchased Assets shall
be paid by the Company, (ii) all HSR Act filing fees and expenses shall be paid
by Subsidiary, (iii) all fees and expenses associated with the Beverage

                                       19
<PAGE>

Permit Transfers shall be paid by Subsidiary, (iv) all excise, sales or use
taxes applicable to the transfer of the Purchased Assets shall be paid by
Subsidiary, (v) all fees and expenses associated with the inventory audits
referred to in Sections 1.3 and 2.2 shall be paid by Subsidiary and (vi) the
costs of the plumbing work at the Santa Rosa store referenced in Schedule 3.11
to be attached hereto shall be shared equally by Subsidiary and the Company.

     10.2.  Prorations.  All items of income and expense arising from the
            ----------
operation of the Stores on or before the opening of business on the Closing Date
shall be for the account of the Company and thereafter shall be for the account
of the Subsidiary.  Proration of the items described below between the Company
and the Subsidiary shall be effective as of 12:01 a.m., local time, on such date
and shall occur as follows with respect to those rights, liabilities and
obligations of the Company transferred to and assumed by the Subsidiary
hereunder.

            (i)   Liability for state and local taxes assessed on the Purchased
     Assets payable with respect to the year 2000 shall be prorated as between
     the Company and the Subsidiary on the basis of the number of days of the
     tax year elapsed to and including such date.

            (ii)  Prepaid items, deposits, credits and accruals such as rent,
     utilities, other service charges and rental and other payments under any
     Assumed Contracts shall be prorated between the Company and the Subsidiary
     on the basis of the period of time to which such liabilities, prepaid items
     and accruals apply.

All prorations shall be made and paid insofar as feasible on the Closing Date;
any prorations not made on such date shall be made as soon as practicable  (not
to exceed 90 days) thereafter.  The Company and the Subsidiary agree to assume,
pay and perform all costs, liabilities and expenses allocated to each of them
pursuant to this Section 10.2.

     10.3.  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.

     10.4.  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.

                                       20
<PAGE>

     10.6.  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.

     10.7.  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
delivery, addressed as follows:

                (i)  If to the Company or the Shareholders:

                     c/o Ernest Shelton
                     625 Sexton Road
                     Sebastopol, California  95472

                (ii) If to Parent or Subsidiary:

                     c/o Whole Foods Market, Inc.
                     601 N. Lamar Blvd.
                     Suite 300
                     Austin, Texas 78703-5413
                     Attention: Chief Operating Officer

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 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.

     10.8.  Assignment; Successors and Assigns.  This Agreement may not be
            ----------------------------------
assigned by any of the parties hereto without the written consent of all the
other parties.  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.

     10.9   Arbitration.  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 San
Francisco, California, 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

                                       21
<PAGE>

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.

     10.10. 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.

     10.11. 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.

     10.12. 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.

     10.13. Governing Law.  This Agreement shall be construed and enforced in
            -------------
accordance with the laws of the State of California.

                                       22
<PAGE>

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


                               Whole Foods Market California, Inc.


                               By: /s/ Walter Robb
                                   --------------------------------


                               Whole Foods Market, Inc.


                               By: /s/ John Mackey
                                   --------------------------------

                               Natural Abilities, Inc.


                               By: ________________________________


                               ____________________________________
                                   Ernest Shelton


                               ____________________________________
                                   Xenia Shelton


                               ____________________________________
                                   James Shelton


                               ____________________________________
                                   Sandra Shelton


                               ____________________________________
                                   Martin Shelton

                                       23
<PAGE>

                               Ernest D. Shelton and Xenia S. Shelton, Trustees
                               u/t/a dated August 26, 1996

                               By:_________________________________________

                               By:_________________________________________


                               James D. Shelton and Sandra J. Shelton, Trustees
                               u/t/a dated August 2, 1996

                               By:_________________________________________

                               By:_________________________________________


                               Ernest D. Shelton, Trustee of the Abraham Shelton
                               Trust dated December 8, 1999


                               By:_________________________________________


                               James D. Shelton, Trustee of the Stefon E.
                               Shelton Trust dated December 8, 1999


                               By:_________________________________________


                               James D. Shelton, Trustee of the Jason A. Shelton
                               Trust dated December 8, 1999


                               By:_________________________________________

                                       24
<PAGE>

List of Schedules


1.1  Excluded Assets

1.2  Assumed Contracts

3.3  Compliance with Other Instruments

3.4  Consents

3.7  Absence of Certain Changes

3.8  Undisclosed Liabilities

3.10 Real Estate

3.11 Condition of Assets

3.12 Litigation

3.13 Defaults

3.14 Intellectual Property

3.15 Labor Matters

3.16 Governmental Licenses

5.3  Employee Consent Form

6.7  Personal Guaranties

7.3  Lease Modifications

                                       25
<PAGE>

List of Exhibits

A    Escrow Agreement

B    Non-Competition Agreement

C    Employment Agreement

                                       26

Source: OneCLE Business Contracts.