AUTHENTIC SPECIALTY FOODS INC, S-1/A, 1997-08-21

AUTHENTIC SPECIALTY FOODS INC
S-1/A, 1997-08-21
GROCERIES, GENERAL LINE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1997

REGISTRATION NO. 333-29959
================================================================================

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

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
AUTHENTIC SPECIALTY FOODS, INC.
(Name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
TEXAS 5141 75-1782453
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>

1313 AVENUE R
GRAND PRAIRIE, TEXAS 75050
(972) 933-4100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)

SAMUEL E. HILLIN, JR.
CHIEF FINANCIAL OFFICER
1313 AVENUE R
GRAND PRAIRIE, TEXAS 75050
(972) 933-4100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

<TABLE>
<S> <C>
J. MARK METTS, ESQ. KATHERINE M. SEABORN, ESQ.
VINSON & ELKINS L.L.P. GARDERE & WYNNE, L.L.P.
2300 FIRST CITY TOWER 3000 THANKSGIVING TOWER
1001 FANNIN 1601 ELM STREET
HOUSTON, TEXAS 77002 DALLAS, TEXAS 75201
(713) 758-2222 (214) 999-3000
</TABLE>

---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

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

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

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

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

CALCULATION OF REGISTRATION FEE

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<CAPTION>
==================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 4,715,000 shares $11.00 $51,865,000 $15,717(3)
==================================================================================================================
</TABLE>

(1) Includes 615,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(3) Previously paid.

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

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

SUBJECT TO COMPLETION, DATED AUGUST 21, 1997

PROSPECTUS

<TABLE>
<C> <C> <C>
[CALIDAD LOGO] 4,100,000 SHARES [LA VICTORIA LOGO]
AUTHENTIC SPECIALTY FOODS, INC.
COMMON STOCK
</TABLE>

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

The 4,100,000 shares of Common Stock offered hereby (the "Offering") are
being offered by Authentic Specialty Foods, Inc. (the "Company" or "Authentic
Specialty Foods"). Prior to this Offering, there has been no public market for
the Common Stock. It is currently estimated that the initial public offering
price will be between $8.00 and $10.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial public
offering price. The Company has been approved for inclusion of the Common Stock
on the Nasdaq National Market under the symbol "ASFD."

------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

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

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 615,000 additional shares on the same terms and conditions as set forth
above solely to cover over-allotments, if any. If the Underwriters exercise
this option in full, then the total price to the public, underwriting
discounts and commissions and proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------

The shares of Common Stock are offered severally by the Underwriters named
herein subject to receipt and acceptance by them, and subject to their right to
reject any order in whole or in part. It is expected that certificates
representing the shares will be ready for delivery at the offices of Cruttenden
Roth Incorporated, Irvine, California, on or about , 1997.
------------------------
CRUTTENDEN ROTH
INCORPORATED

SUTRO & CO. INCORPORATED
WEDBUSH MORGAN SECURITIES

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3

[This page contains a photograph of certain of Calidad's products
(including packages of a variety of tortillas and tortilla chips, meats,
cheeses, salsas, spices and peppers) and a photograph of certain of La
Victoria's products (including salsas, taco sauces, other Mexican sauces,
jalapenos, tomatillos, cheese sauce and refried beans), as well as a color logo
of each brand.]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

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<PAGE> 4

PROSPECTUS SUMMARY

The Company has entered into a Contribution and Exchange Agreement as a
result of which La Victoria Foods, Inc. ("La Victoria") will become a
wholly-owned subsidiary of the Company. The consummation of this acquisition
(the "La Victoria Acquisition") is conditioned upon, and will occur immediately
following, the completion of this Offering, and this Offering will not be
consummated unless the La Victoria Acquisition is completed. Unless the context
otherwise requires, (i) references to the "Company" or "Authentic Specialty
Foods" shall refer to Authentic Specialty Foods, Inc. and its consolidated
subsidiaries, (ii) references to "La Victoria" shall refer to La Victoria Foods,
Inc. and the operations conducted thereby, (iii) references to "Calidad" shall
refer to the Company's operations other than those relating to La Victoria and
(iv) references to "Shansby" shall refer to The Shansby Group, TSG
International, TSG2 L.P. and all of their successors and affiliates. Unless
otherwise indicated, the information in this Prospectus assumes an initial
offering price of $9 per share (the mid-point of the pricing range shown on the
cover page of this Prospectus) and that the Underwriters' over-allotment option
will not be exercised. Except as otherwise specified or the context otherwise
requires, share and per share information gives effect to the 1,700-for-1 stock
split effected by the Company on June 20, 1997. Investors should carefully
consider the information set forth in "Risk Factors." The following summary is
qualified in its entirety by the more detailed information and financial
statements and notes thereto appearing elsewhere in this Prospectus.

THE COMPANY

Authentic Specialty Foods provides an extensive line of Mexican food
products to Mexican-American consumers, as well as non-Hispanic consumers who
enjoy authentic Mexican food. The Company believes that it is unique for
focusing its efforts on Mexican-American consumers. After this Offering, the
Company believes that it will be the largest publicly-owned company engaged
solely in the manufacture and distribution of Mexican food products targeting
primarily the Mexican-American consumer. The Company has two separate
brands -- Calidad(TM) and La Victoria(TM) -- both of which are recognized for
high quality products and well-accepted by the Company's target consumers. The
Calidad and La Victoria brands have strong market positions in the southwestern
and western regions of the United States, respectively, particularly in Texas
and California. Following the completion of this Offering, the Company will be
poised for internal growth and to take advantage of acquisition opportunities in
the highly fragmented Mexican food industry. Management has extensive experience
in the food industry and intends to utilize its expertise to improve the
operating efficiencies and to expand the sales of Authentic Specialty Foods and
any companies acquired in the future. With the exception of the La Victoria
Acquisition, the Company does not currently have any agreements, understandings
or negotiations in connection with any future acquisitions.

Calidad sells branded and private label tortillas and tortilla chips, as
well as branded cheeses, meats and shelf-stable products (including spices,
salsas and peppers) primarily to grocery stores in Texas and certain adjacent
states. Calidad provides retailers with an extensive line of quality products
under a comprehensive service program through which Calidad's direct store
delivery ("DSD") salespersons can manage substantially all of a customer's
Mexican food category. The strength of the Calidad brand name (which means
"Quality" in Spanish), its comprehensive service program and the breadth and
quality of its product line have enabled Calidad to achieve significant market
penetration of stores in North Texas, including the Dallas/Ft. Worth metroplex,
one of the largest Mexican-American population centers in the country. Calidad's
tortillas and tortilla chips are manufactured daily in a 70,000 square foot
facility in Grand Prairie, Texas, which is located in the Dallas/Ft. Worth
metroplex. The Company also purchases other products manufactured by third
parties for distribution under the Calidad brand and other brand names.

La Victoria sells a wide variety of branded salsas and other Mexican sauces
primarily to grocery stores in California and certain other western states.
Founded in 1917, La Victoria believes it has significant market share in the
"hot" segment of the salsa and Mexican sauce category. Although La Victoria is a
regional brand, it outsells a number of national brands in several western
states in both taco sauces and salsas. In addition, La Victoria sells its
products to restaurants and wholesale restaurant suppliers on a branded and
private label basis and to warehouse clubs on a branded basis. Generally, La
Victoria's products are delivered to a retail customer's warehouse or
distribution facility rather than directly to a customer's retail outlets. La
Victoria
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<PAGE> 5

manufactures substantially all of its products in a 112,000 square foot
production and warehouse facility located in Rosemead, California, a suburb of
Los Angeles.

The Mexican food segment of the domestic food industry is expected to
experience a compound annual growth rate of approximately 8% from an estimated
base of $2.4 billion in sales in 1994 (excluding tortilla chips). A significant
percentage of the Mexican food segment is comprised of tortillas and
Mexican-style sauces, the Company's principal products. As an example of the
increased popularity of Mexican food, in 1995 United States consumers purchased
30% more Mexican-style sauces than ketchup. In 1996, Hispanics comprised 10.4%,
29.7% and 29.1% of the total United States, California and Texas populations,
respectively. From 1990 to 1996, the Hispanic populations of California and
Texas are estimated to have grown at an average annual rate of approximately
3.3%. The U.S. Census Bureau has estimated that in 1996 there were 27.2 million
Hispanics living in the United States. Of this amount, approximately 64% were of
Mexican descent or origin.

Calidad was acquired in March 1992 by Shansby, a buyout firm based in San
Francisco that specializes in acquiring and improving branded consumer product
companies (particularly in the food industry). Since 1992, Calidad has recruited
its management team, strengthened its management information systems and
infrastructure and acquired another Dallas-area tortilla and tortilla chip
manufacturer. In addition, Calidad has standardized its logo and trade dress,
entered into several independent distribution agreements, extended its product
offerings, discontinued certain marketing relationships that were less
profitable and expanded distribution within North Texas and certain adjacent
states.

Management believes it can execute a number of operational improvements at
La Victoria, including reducing certain operating expenses, particularly
marketing expenditures. The Company plans to gradually shift production of
selected products from fresh to processed tomatoes. La Victoria currently
manufactures the majority of its products with fresh vegetables during the four
to six month tomato harvest in California. Management intends to implement this
change only with respect to those La Victoria products where the taste or
quality of these products will not be affected. Management believes this
production shift will increase manufacturing efficiency, expand useful plant
capacity and reduce working capital requirements. Additionally, the Company
intends to implement new sales and marketing initiatives, including increasing
in-store marketing, introducing new sizes and packages for non-grocery sales
channels and introducing La Victoria products in selected new markets. The
Company also believes it can offer La Victoria's products through the Calidad
distribution system under the Calidad and La Victoria brand names.

The Company's objective is to expand its position as a leading provider of
an extensive line of Mexican food products primarily to Mexican-American
consumers. In order to achieve this objective, the Company's strategy is to (i)
improve the operations of Authentic Specialty Foods in the areas of product
development, merchandising, production, distribution and sales; (ii) acquire
Mexican food manufacturers or brands in areas with large, growing
Mexican-American populations and utilize the skills and experience of its
management team to integrate and improve the operations of these newly acquired
companies; (iii) expand the Company's geographic markets and increase
distribution of the Company's products in its existing markets; and (iv)
continue to add new products and brands to the Company's existing line of
products.

Shansby, which has significant experience in acquiring and improving
branded food companies, has advised and assisted Authentic Specialty Foods since
1992 and will own approximately 22% of the outstanding Common Stock after this
Offering. Shansby Partners, L.L.C., a new affiliate of Shansby ("Shansby
Partners"), has entered into an advisory agreement (the "Advisory Agreement")
with Authentic Specialty Foods in order to assist the Company in developing and
implementing its business strategy. Shansby provided significant assistance to
the Company in arranging the La Victoria Acquisition, and the Company believes
that its relationship with Shansby will be beneficial to its successful
implementation of its business strategy. For example, Shansby has recruited
certain members of the management team of The Famous Amos Chocolate Chip Cookie
Corporation, one of Shansby's former portfolio companies, to serve as chief
executive officer of Authentic Specialty Foods and chief operating officer of La
Victoria. Shansby also assisted in recruiting other key members of management of
Calidad with extensive experience in the food industry. See "Management," "The
Shansby Group" and "Certain Transactions."
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<PAGE> 6

THE LA VICTORIA ACQUISITION

The La Victoria Acquisition is the Company's first step in its acquisition
strategy. This acquisition (i) adds another strong brand of Mexican food
products, (ii) expands the Company's geographic marketing area into another part
of the United States with a large, growing Mexican-American population and (iii)
broadens the Company's extensive product line. See "The La Victoria
Acquisition."

As of the date of this Prospectus, 50% of La Victoria is owned by Robert C.
Tanklage, the President of La Victoria and a member of the family that has owned
and operated La Victoria since 1947, 49.5% is indirectly owned by Shansby and
0.5% is indirectly owned by Keith R. Lively, Chairman and Chief Executive
Officer of the Company. Pursuant to the Contribution and Exchange Agreement
between the Company, Mr. Tanklage, Shansby and Mr. Lively (the "Contribution and
Exchange Agreement"), the Company will acquire beneficial ownership of 100% of
the capital stock of La Victoria. The consummation of the La Victoria
Acquisition is conditioned upon, and will occur immediately following, the
consummation of this Offering.

The total purchase price to be paid by the Company for La Victoria is
approximately $36.6 million (consisting of $12 million of cash, $5 million of
debt assumption and approximately $19.6 million of Common Stock), excluding
transaction expenses. The Company will use approximately 37% of the net proceeds
from this Offering to pay for the $12 million cash portion of the purchase price
for La Victoria and to pay related transaction expenses. See "Use of Proceeds."
The La Victoria Acquisition is the culmination of a series of negotiations and
transactions, with respect to which Shansby has spent a substantial amount of
time, and Shansby, LV Foods, L.L.C., a Shansby affiliate ("LV Foods") and La
Victoria have incurred significant out-of-pocket expenses, including legal,
accounting, market research and finders' fees. La Victoria has paid LV Foods
$475,000 to reimburse LV Foods for its transaction expenses, $200,000 of which
were incurred in 1996 and $275,000 of which were incurred in 1997. In addition,
La Victoria has paid Shansby $250,000 to reimburse Shansby for the transaction
expenses it incurred in 1997.

THE OFFERING

Common Stock offered by the Company..... 4,100,000 shares

Common Stock to be outstanding after
this Offering........................... 6,439,278 shares(1)(2)

Use of Proceeds......................... To repurchase the 1,538,500 shares
of Common Stock currently owned by
Shansby, to pay the cash
consideration in, and transaction
expenses related to, the La
Victoria Acquisition, to repay
certain outstanding indebtedness
and for general corporate
purposes, which may include
acquisitions. See "Use of
Proceeds."

Proposed Nasdaq National Market
symbol.................................. "ASFD"
- ---------------

(1) Excludes 350,000 shares of Common Stock reserved for issuance pursuant to
the Company's 1997 Stock Plan (the "Stock Plan"), pursuant to which grants
of options to purchase 130,000 shares will be made upon consummation of this
Offering with an exercise price (subject to adjustment) equal to the price
to public set forth on the cover page of this Prospectus. See
"Management -- Executive Compensation -- 1997 Stock Plan." Also excludes
350,000 shares of Common Stock issuable pursuant to a five-year warrant (the
"Shansby Warrant") to be issued to Shansby Partners, with an exercise price
(subject to adjustment) equal to the price to public set forth on the cover
page of this Prospectus.

(2) Gives effect to the repurchase of the 1,538,500 shares of Common Stock owned
by Shansby on the date of this Prospectus at a repurchase price equal to the
net proceeds (before offering expenses) to be received by the Company with
respect to an equivalent number of shares. This repurchase will occur
simultaneously with the consummation of this Offering. Also assumes the
issuance of 2,177,778 shares of Common Stock to Shansby, Mr. Lively and Mr.
Tanklage pursuant to the La Victoria Acquisition. See "The La Victoria
Acquisition."
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SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------- ---------------------------
PRO PRO
FORMA FORMA
------- -------
1994 1995 1996 1996(1) 1996 1997 1997(1)
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $19,637 $21,028 $21,198 $59,346 $10,528 $10,962 $29,939
Cost of sales........................... 13,213 14,266 14,081 33,479 6,927 7,191 16,425
------- ------- ------- ------- ------- ------- -------
Gross profit.......................... 6,424 6,762 7,117 25,867 3,601 3,771 13,514
Operating expenses...................... 7,210 6,940 6,768 23,012 3,314 3,247 12,061
------- ------- ------- ------- ------- ------- -------
Income (loss) from operations......... (786) (178) 349 2,855 287 524 1,453
------- ------- ------- ------- ------- ------- -------
Other income (expense)
Interest expense........................ (161) (219) (328) (1,537) (167) (165) (686)
Interest income......................... -- 62 2 95 2 -- 95
Gain (loss) on disposal of property and
equipment............................. (38) (192) (22) (23) (22) 1 12
------- ------- ------- ------- ------- ------- -------
(199) (349) (348) (1,465) (187) (164) (579)
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes..... (985) (527) 1 1,390 100 360 874
Income tax expense (benefit)............ -- -- -- 783 34 122 409
------- ------- ------- ------- ------- ------- -------
Net income (loss)..................... $ (985) $ (527) $ 1 $ 607 $ 66 $ 238 $ 465
======= ======= ======= ======= ======= ======= =======
Earnings (loss) per share............... $ (0.59) $ (0.31) $ 0.00 $ 0.09 $ 0.04 $ 0.14 $ 0.07
Weighted average number of common shares
outstanding........................... 1,680 1,700 1,700 6,439(2) 1,700 1,700 6,439(2)
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
AS OF DECEMBER 31, -------------------
------------------ PRO
1995 1996 ACTUAL FORMA(1)
------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 9 $ 200 $ 114 $ 6,419
Working capital (deficit)............... (1,499) (1,557) (1,300) 16,310
Total assets............................ 7,132 7,089 7,198 54,210
Notes payable to bank................... 751 1,319 1,350 --
Long-term debt.......................... 1,249 920 816 11,125
Shareholders' equity.................... 2,048 2,049 2,409 34,513
</TABLE>

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(1) On a pro forma basis, as adjusted to give effect to the La Victoria
Acquisition and the application of the net proceeds of this Offering in the
manner described in "Use of Proceeds." See "Unaudited Pro Forma Consolidated
Financial Statements."

The Company was incorporated as a Texas corporation in 1981. The Company's
principal executive offices are located at 1313 Avenue R, Grand Prairie, Texas
75050, and its telephone number is (972) 933-4100.

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RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of Common Stock offered hereby.

ABILITY TO IMPLEMENT THE LA VICTORIA STRATEGY

Management believes that the consummation of the La Victoria Acquisition
will substantially increase the Company's geographic market, revenues and net
income. The Company's ability to realize any long-term advantages from the La
Victoria Acquisition will depend in large part on successfully managing and
improving the operations of La Victoria. La Victoria has exhibited declining
sales revenues over the last four years, the result of increased competition,
unsuccessful marketing strategies and management's decision to leave certain
unprofitable markets. Following the consummation of the La Victoria Acquisition,
the Company will implement new sales and marketing initiatives in an effort to
reverse this trend. There can be no assurance that the new marketing strategies
will result in improved sales or profitability. In addition, management believes
that for the foreseeable future the Company will be unable to consolidate many
of the managerial and administrative operations of La Victoria with the
Company's operations, due in part to the geographic separation between the
operations and their dissimilar nature. Accordingly, the Company does not expect
to achieve reductions in general and administrative expenses for the combined
entities. In addition, no assurance can be made that the Company will be able to
successfully achieve improvements at La Victoria in a timely manner or at all.

ACQUISITION STRATEGY

The Company's acquisition strategy is based on identifying and acquiring
businesses engaged in manufacturing and/or distributing Mexican food products in
markets where the Company currently does not operate or businesses with products
and/or brands that would complement the Company's product mix. The Company will
evaluate specific acquisition opportunities based on prevailing market and
economic conditions. The Company's lack of experience in new markets it may
enter through future acquisitions could have an adverse effect on the Company's
results of operations and financial condition. Acquisitions may require
investment of operational and financial resources and could require integration
of dissimilar operations, assimilation of new employees, diversion of management
time and resources, increases in administrative costs, potential loss of key
employees of the acquired company and additional costs associated with debt or
equity financing. Any future acquisition by the Company could have an adverse
effect on the Company's results of operations or could result in dilution to
existing shareholders, including those purchasing shares of Common Stock in this
Offering. The Company may encounter increased competition for acquisitions in
the future, which could result in acquisition prices the Company does not
consider acceptable. There can be no assurance that the Company will find
suitable acquisition candidates at acceptable prices or succeed in integrating
any acquired business into the Company's existing business or in retaining key
customers of acquired businesses. There can also be no assurance that the
Company will have sufficient available capital resources to execute its
acquisition strategy. See "Business -- Business Strategy -- Acquisition
Opportunities."

COMPETITION

The production and distribution of Mexican food is a competitive industry.
The Company is in competition with a number of manufacturers, marketers and
distributors of Mexican food products and manufacturers of snack foods. Many of
the Company's competitors have substantially greater financial and other
resources than the Company and may offer lower prices on competitive products.
While the Company believes it is in an advantageous position as a provider of an
extensive line of Mexican food products in its primary marketing areas of North
Texas and California, there can be no assurance that suppliers focusing on a
single product could not erode the Company's market share of that product and
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company will also be subject to future
competition from other manufacturers, marketers and distributors and retailers
who enter into the Mexican food manufacturing and distribution industry. While
the Company believes that it has brand

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recognition and brand loyalty in its current market areas, particularly among
Mexican-American consumers, many of the Company's competitors engage in
extensive local and national advertising and marketing. The brand names for
products distributed by these competitors may be significantly more recognizable
to the average consumer than the Company's brand names. In addition, competition
for shelf space in retail grocery stores is intense. The Company is competing
with a number of regional and national manufacturers of Mexican food products
for shelf space. While Calidad's and La Victoria's distribution systems are
effective in their respective market areas, no assurance can be given that the
Company will be able to compete as it expands into new markets. See
"Business -- Competition."

FLUCTUATIONS IN OPERATING RESULTS

The Company may experience significant fluctuations in future operating
results because of a number of factors including, among other things, the size
and timing of customer orders, new product introductions, quality control
difficulties, market acceptance of new products, product returns, seasonality in
product purchases and trends in the food industry in general and in the specific
markets in which the Company is active.

DEPENDENCE ON KEY CUSTOMERS

Calidad has certain key customers whose loss would adversely affect the
Company's business, financial condition and results of operations. Calidad's
largest customer is Minyard Food Stores ("Minyard Foods"), which accounted for
27.6% of Calidad's net sales in 1996. Minyard Foods actually consists of three
separate operating divisions: Minyard Food Stores, Sack 'n Save and Carnival.
Calidad has a separate relationship with each of these three divisions, which
are operated somewhat autonomously and serve different market segments. During
1996, Minyard Food Stores accounted for $1.5 million of Calidad's net sales
(6.9%), Sack 'n Save accounted for $2.5 million (11.6%) and Carnival accounted
for $1.9 million (9.1%). Minyard Foods has been a customer of Calidad since
1981. For the year ended May 31, 1997, American Stores Company and Safeway, Inc.
accounted for 10.0% and 12.9% of La Victoria's net sales, respectively. On a
combined basis, the largest customer of Authentic Specialty Foods would be
Minyard Foods, with approximately 10.0% of the aggregate net sales of Calidad
and La Victoria.

There is no assurance that the Company will be successful in maintaining
its relationship with its significant customers in the future. The loss of, or
any material reduction in, sales to any significant customer could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has not entered into any long-term contracts
with any of its customers, nor is any customer obligated to order additional
products from the Company. There can be no assurance that the Company will be
able to maintain or continue to increase the level of its sales in the future or
that the Company will be able to retain existing customers or attract new
customers. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Customers."

DEPENDENCE ON KEY PERSONNEL

The Company's success depends in part upon the continued services of its
highly skilled personnel involved in management, production and distribution,
and, in particular, upon the efforts and abilities of Keith R. Lively, the Chief
Executive Officer and Chairman of the Company's Board of Directors, Herman L.
"Bing" Graffunder, the President and a Director of the Company, Samuel E.
Hillin, Jr., the Chief Financial Officer of the Company, Robert C. Tanklage, the
President of La Victoria, and Michael Westhusing, the Chief Operating Officer of
La Victoria. The loss of service of Mr. Lively, Mr. Graffunder, Mr. Hillin, Mr.
Tanklage, Mr. Westhusing or any other key personnel of the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company has entered into three-year employment
agreements with both Mr. Graffunder and Mr. Hillin, and La Victoria has entered
into a five-year employment agreement with Mr. Tanklage. However, Mr. Lively and
Mr. Westhusing have not entered into employment agreements with the Company.
Furthermore, the Company does not have key-person life insurance on any of its
employees. The success of the Company also depends upon its ability to attract
and retain additional highly qualified employees. See "Management."

8
<PAGE> 10

The Company's future success also depends upon the maintenance of its
relationship with Shansby. The loss of Shansby's advice and guidance,
particularly in the area of strategic acquisitions, could have a material
adverse effect on the Company's business, financial condition and results of
operations. However, the Company and Shansby Partners have entered into the
Advisory Agreement, pursuant to which Shansby Partners will assist the Company
in the development and pursuit of its strategic objectives, including
acquisitions. See "The Shansby Group" and "Certain Transactions -- Shansby
Partners Advisory Agreement."

PRODUCT LIABILITY

The Company may be subject to significant liability should the consumption
of any of its products cause injury, illness or death. There can be no assurance
that product liability claims will not be asserted against the Company or that
the Company will not be obligated to recall its products. The Company has an
umbrella insurance policy of $5 million and carries product liability insurance
in the aggregate amount of $2 million, with per occurrence limits of $1 million.
The Company's umbrella insurance policy supplements the underlying general
liability and product liability insurance. La Victoria has an umbrella insurance
policy of $5 million in the aggregate and with per occurrence limits of $5
million and carries product liability insurance in the aggregate amount of $5
million, with per occurrence limits of $5 million. Unlike the Company's umbrella
policy, La Victoria's umbrella policy excludes product liability. There can be
no assurance that this insurance will be adequate to protect the Company against
product liability claims, or that such insurance will continue to be available
to the Company on reasonable terms. A product recall or a product liability
judgment against the Company (regardless of whether covered by insurance) could
have a material adverse effect on the Company's business, financial condition
and results of operations.

GOVERNMENT REGULATION

The manufacture, processing, packaging, storage, distribution and labeling
of food products are subject to extensive federal, state and local regulations.
The Company's business is subject to regulation by the Food and Drug
Administration (the "FDA") and the United States Department of Agriculture.
Applicable statutes and regulations governing food products include "standards
of identity" for the content of specific types of foods, nutritional labeling
and serving size requirements and "Good Manufacturing Practices" with respect to
production processes. The Company believes that its current products satisfy,
and its new products will satisfy, all applicable regulations and that all of
the ingredients used in its products are "Generally Recognized as Safe" by the
FDA for the intended purposes for which they will be used. Failure to comply
with applicable laws and regulations could subject the Company to civil
remedies, including fines, injunctions, recalls or seizures, as well as
potential criminal sanctions, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

The Company's business is also subject to various other federal, state and
local environmental and health regulations. If the Company were found not to be
in compliance with such regulations, sanctions and penalties could be imposed
which could have a material adverse effect on the Company's business, financial
condition and results of operations.

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of the Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock. The Company's executive officers and directors, as well as Shansby
and Mr. Tanklage, have agreed, pursuant to lock-up agreements, that they will
not, without the prior written consent of the Representatives, sell or otherwise
dispose of approximately 2,313,778 shares of Common Stock beneficially owned by
them for a period of 180 days from the date of this Prospectus (the "Lockup
Period"). The Contribution and Exchange Agreement provides that, upon
consummation of the transactions contemplated thereby, Shansby and Mr. Tanklage
will enter into registration rights agreements with the Company pursuant to
which Shansby and Mr. Tanklage will receive certain demand and "piggyback"
registration rights. These registration rights cannot be exercised until after
the expiration of the Lockup Period. Upon consummation of this Offering, Shansby
will receive the Shansby

9
<PAGE> 11

Warrant, which is a five-year warrant to acquire 350,000 shares of Common Stock
at an exercise price (subject to adjustment) equal to the price to public on the
cover page of this Prospectus. The Shansby Warrant may not be exercised until
after the first anniversary of the consummation of this Offering. Upon
completion of this Offering, the Company will have 6,439,278 shares of Common
Stock outstanding. Of this amount, the 4,100,000 shares sold in this Offering
(plus any additional shares sold upon the Underwriters' exercise of the
over-allotment option) and approximately 25,500 other shares will be available
for immediate sale in the public market as of the date of this Prospectus. See
"Principal Shareholders" and "Underwriting."

DILUTION

This Offering and the La Victoria Acquisition will result in immediate
substantial dilution of $6.91 (76.8%) per share for new investors, which amount
represents the difference between the pro forma net tangible book value per
share after this Offering and the public offering price of $9 per share. See
"Dilution."

EFFECT OF PREFERRED STOCK ON RIGHTS OF COMMON STOCK

The Board of Directors of the Company is authorized to issue, from time to
time, without any action on the part of the Company's shareholders, up to
5,000,000 shares of Preferred Stock in one or more series, with such relative
rights, powers, preferences, limitations and restrictions as are determined by
the Board of Directors at the time of issuance. Accordingly, the Board of
Directors is empowered to issue Preferred Stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of Common Stock. In the event of such issuance,
the Preferred Stock could be utilized, under either circumstance, as a method of
discouraging, delaying or preventing a change in control of the Company. See
"Description of Capital Stock -- Preferred Stock" and "-- Antitakeover
Provisions."

ANTITAKEOVER PROVISIONS

The Company's Articles of Incorporation and Bylaws contain provisions that
may delay, defer or prevent a change in control of the Company. Among other
things, these provisions: (i) divide the Board of Directors into three classes
so that directors will generally serve three year terms and only approximately
one-third of the total number of directors will be elected each year; (ii)
permit directors to be removed only for cause; (iii) permit the Board of
Directors to establish the size of the Board and amend the Bylaws; (iv) prohibit
the taking of shareholder action by written consent; and (v) specify advance
notice requirements for shareholder proposals and director nominations. See
"Description of Capital Stock -- Antitakeover Provisions."

ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering, there has been no public market for the Company's
Common Stock. Although the Company has been approved for quotation of the Common
Stock on the Nasdaq National Market, there can be no assurance that an active
trading market will develop or that the market price of the Common Stock will
not decline below the public offering price. The public offering price of the
Common Stock has been determined by negotiations among the Company and the
Representatives and does not necessarily bear any relationship to assets, book
value, earnings history or other investment criteria. See "Underwriting."

The Company believes that factors such as the announcement of new products
by the Company or its competitors, general market conditions in the Mexican food
industry, changes in management and quarterly fluctuations in financial results
could cause the market price of the Common Stock to vary substantially. In
addition, the stock market has experienced extreme price and volume fluctuations
which have affected the market price of many companies for reasons frequently
unrelated to the operating performance of these companies. These broad market
fluctuations may adversely affect the market price of the Company's Common
Stock.

THE LA VICTORIA ACQUISITION

10
<PAGE> 12

western United States. La Victoria also sells its products in the food service
market on a branded and private label basis and to warehouse clubs on a branded
basis. Although La Victoria is a regional brand, it outsells a number of
national brands in several western states in both taco sauces and salsas.

As of the date of this Prospectus, 50% of the capital stock of La Victoria
is owned by Robert C. Tanklage, the President of La Victoria and a member of the
family that has owned and operated La Victoria since 1947, 49.5% is indirectly
owned by Shansby and 0.5% is indirectly owned by Mr. Lively. Pursuant to the
Contribution and Exchange Agreement, the Company will acquire beneficial
ownership of 100% of the capital stock of La Victoria in exchange for
approximately $36.6 million, as described below.

Shansby and Mr. Lively will receive 1,386,000 and 14,000 shares of Common
Stock, respectively, in the La Victoria Acquisition. However, if the price to
public in this Offering is greater than $10 per share, then the number of shares
issued to Shansby and Mr. Lively will be adjusted so that they will receive
shares having a value of $13.86 million and $140,000 (based upon the price to
public). None of the shares of Common Stock to be issued to Shansby or Mr.
Lively will be sold in this Offering.

Shansby owns 99% of LV Foods, and Mr. Lively owns the remaining 1%. LV
Foods is the record owner of 50% of the outstanding shares of common stock of La
Victoria. Pursuant to the Contribution and Exchange Agreement, 100% of the
ownership of LV Foods will be transferred to the Company, and LV Foods will
become a wholly owned subsidiary of the Company. LV Foods acquired its La
Victoria shares in April 1997 in exchange for $5 million in cash and a $7
million note payable to the seller of the shares (the "La Victoria Shareholder
Note"). The La Victoria Shareholder Note is scheduled to mature in April 2004
(subject to acceleration if LV Foods sells all or substantially all of its
interest in La Victoria) and bears interest at 8% per annum. The La Victoria
Shareholder Note is secured by a pledge of LV Foods' interest in the La Victoria
shares. LV Foods was formed by Shansby solely for the purpose of acquiring an
interest in La Victoria, and it has no other assets or liabilities except in
connection with this ownership. As described more fully below, Shansby and the
holder of the La Victoria Shareholder Note have reached an agreement in
principle that the note will be fully repaid by LV Foods within ten business
days after the consummation of this Offering.

In the La Victoria Acquisition, Mr. Tanklage will receive $12 million in
cash and shares of Common Stock having a value of $7 million (based upon the
price to public in this Offering). Unlike Shansby and Mr. Lively, Mr. Tanklage
will not receive a fixed number of shares of Common Stock in the La Victoria
Acquisition. Assuming a price to public of $9 per share, 777,778 shares of
Common Stock would be issued to Mr. Tanklage in the La Victoria Acquisition.
None of the shares of Common Stock to be issued to Mr. Tanklage will be sold in
this Offering. The cash portion of the purchase price will be funded from the
net proceeds from this Offering. See "Use of Proceeds."

The Company has also agreed to issue additional shares of Common Stock to
Mr. Tanklage if the aggregate amount of dividends received, debt assumed, cash
received and shares of Common Stock (valued at the price to public) received or
retained in connection with this Offering or the La Victoria Acquisition by Mr.
Tanklage, Mr. Lively, Shansby and the current shareholders of the Company (the
"Aggregate Consideration") is greater than $63 million. In that event, the
Company will issue to Mr. Tanklage an additional number of shares of Common
Stock (the "Contingent Shares") so that Mr. Tanklage receives at least one-third
of the Aggregate Consideration. Based upon the price range set forth on the
cover page of this Prospectus, it is unlikely that any Contingent Shares will be
issued to Mr. Tanklage.

In connection with the consummation of the transactions contemplated in the
Contribution and Exchange Agreement, Shansby, Mr. Lively and Mr. Tanklage will
be granted certain demand and "piggyback" registration rights, and have agreed
not to sell any of their shares of Common Stock until the expiration of 180 days
after the date of this Prospectus.

Immediately prior to the consummation of the La Victoria Acquisition, La
Victoria will pay a $4 million dividend to its shareholders, 50% of which will
be paid to Mr. Tanklage and the remaining 50% of which will be paid to LV Foods
and will be used to repay a portion of the La Victoria Shareholder Note. In
order to resolve certain potential disputes that had arisen between Shansby and
the holder of the La Victoria Shareholder Note, LV Foods has agreed in principle
with the noteholder that it will fully repay the note within ten business days
after the consummation of this Offering. As a result, the $5 million portion of
the

11
<PAGE> 13

La Victoria Shareholder Note that is not repaid from the proceeds of the
dividend described above will be refinanced by LV Foods with third party bank
financing. No proceeds from this Offering will be used to repay the La Victoria
Shareholder Note. Although LV Foods has not yet received any definitive
financing commitments in connection with this refinancing, the Company does not
believe that the refinancing will have a material adverse effect on the
Company's financial condition or results of operations. The consummation of the
La Victoria Acquisition is conditioned upon, and will occur immediately
following, the consummation of this Offering.

USE OF PROCEEDS

The net proceeds to the Company from the sale of 4,100,000 shares of Common
Stock offered by the Company are estimated to be approximately $33.4 million,
assuming price to public of $9 per share and after deducting the underwriting
discount and other estimated offering expenses payable by the Company.

The net proceeds to the Company will be used as follows: (i) to repurchase
the 1,538,500 shares of Common Stock owned by Shansby on the date of this
Prospectus at a repurchase price equal to the net proceeds (before offering
expenses) to be received by the Company with respect to an equivalent number of
shares (approximately $12.9 million at an initial public offering price of $9
per share), (ii) to pay the $12 million cash consideration to Mr. Tanklage
pursuant to the La Victoria Acquisition, as well as $350,000 of related
transaction expenses, (iii) to repay outstanding indebtedness under the
Company's $2 million revolving credit facility (the "Revolving Facility"), which
had a balance of approximately $1.4 million as of June 30, 1997, (iv) to repay
outstanding indebtedness under the Company's term loan facility (the "Term
Loan"), which had a balance of approximately $363,000 as of June 30, 1997, (v)
to repay outstanding indebtedness on a note to the former owners of the Company
(the "Calidad Shareholder Note"), which had a balance of approximately $717,000
as of June 30, 1997 and (vi) the remainder for working capital and general
corporate purposes, including acquisitions. With the exception of the La
Victoria Acquisition, the Company does not currently have any specific
agreements, understandings or negotiations in connection with any future
acquisitions.

In connection with the repayment of the amounts outstanding under the
Revolving Facility, the Company intends to terminate the Revolving Facility upon
the consummation of this Offering. As of June 30, 1997, the weighted average
interest rate under the Revolving Facility was 10.25% and the weighted average
interest rate under the Term Loan was 10.50% per annum. The Term Loan matures on
November 1, 1999. The Term Loan is secured by a first lien on Calidad's
equipment, and the Revolving Facility is secured by a first lien on Calidad's
equipment, inventory, accounts receivable and general intangibles. The Calidad
Shareholder Note matures on March 26, 1999, bears interest at 10.50% per annum
and is secured by a second lien on Calidad's equipment, inventory, accounts
receivable and general intangibles. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DIVIDEND POLICY

Authentic Specialty Foods has never paid cash dividends on its Common Stock
and does not intend to pay cash dividends on the Common Stock in the foreseeable
future. The Company currently intends to retain its cash for the continued
development of its business. Payment of future dividends, if any, will be at the
discretion of the Board of Directors after taking into account various factors,
including the Company's financial condition, operating results, current and
anticipated cash needs and plans for expansion.

La Victoria's long-term debt agreements contain covenants, including
minimum tangible net worth and maximum debt-to-equity covenants, that have the
effect of restricting the amount of dividends paid on capital stock. In
addition, under the terms of the La Victoria Shareholder Note, LV Foods is not
permitted to pay dividends without the consent of the holder of that note. LV
Foods, which has a 50% beneficial ownership interest in La Victoria, will be
wholly owned by the Company after the La Victoria Acquisition. See "The La
Victoria Acquisition." Although these dividend restrictions on La Victoria and
LV Foods will affect the amount of dividends payable to the Company (and
therefore will affect the amount of funds available to the Company to pay
dividends on Common Stock), they are not direct prohibitions on the payment of
dividends by the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

12
<PAGE> 14

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1997 and as adjusted to reflect the La Victoria Acquisition, as well as the
sale of the shares of Common Stock offered hereby and the application of the
estimated net proceeds therefrom. This table should be read in conjunction with
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements of the Company and the
Unaudited Pro Forma Consolidated Financial Statements and in each case the
related Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 114 $ 6,419
======= =======
Short-term debt (Revolving Facility)........................ $ 1,350 $ --
======= =======
Long-term debt(1):
Term Loan................................................. $ 363 $ --
Calidad Shareholder Note.................................. 717 --
El Paco Non-Compete(2).................................... 403 403
Facility to Refinance La Victoria Shareholder Note........ -- 5,000
La Victoria Term Loan..................................... -- 1,467
La Victoria capital leases................................ -- 5,795
------- -------
Total long-term debt........................................ 1,483 12,665
------- -------
Shareholders' equity:
Preferred Stock, par value $0.01 per share, 5,000,000
shares authorized; no shares issued and outstanding.... -- --
Common Stock, par value $1.00 per share, 20,000,000 shares
authorized;............................................ 1,700 6,439
1,700,000 shares issued and outstanding; 6,439,278 shares
issued and outstanding, as adjusted(3)(4)..............
Additional paid-in capital................................ 1,982 29,347
Accumulated deficit....................................... (1,273) (1,273)
------- -------
Total shareholders' equity........................... 2,409 34,513
------- -------
Total capitalization.............................. $ 3,892 $47,178
======= =======
</TABLE>

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

(1) Includes the current portion of long-term debt, which totaled $667,000 and
$1,540,000 on a historical and pro forma basis, respectively. For a
description of the Company's long-term debt, see "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

(2) In connection with Calidad's acquisition of the assets of El Paco Foods,
Inc. ("El Paco") in 1995, Calidad entered into a consulting and non-compete
agreement with the shareholders of El Paco.

(3) Excludes 350,000 shares of Common Stock reserved for issuance under the
Stock Plan, pursuant to which grants of options to purchase 130,000 shares
will be made upon consummation of this Offering with an exercise price
(subject to adjustment) equal to the price to public set forth on the cover
page of this Prospectus. See "Management -- Executive Compensation -- 1997
Stock Plan." Also excludes 350,000 shares of Common Stock issuable pursuant
to the Shansby Warrant.

(4) Gives effect to the repurchase of the 1,538,500 shares of Common Stock
owned by Shansby on the date of this Prospectus at a repurchase price equal
to the net proceeds (before offering expenses) to be received by the
Company with respect to an equivalent number of shares. This repurchase
will occur simultaneously with the consummation of this Offering. Also
assumes the issuance of 2,177,778 shares of Common Stock to Shansby, Mr.
Lively and Mr. Tanklage pursuant to the La Victoria Acquisition. See "The
La Victoria Acquisition."

13
<PAGE> 15

DILUTION

The net tangible book value of the Company as of June 30, 1997 was $0.47
per share of Common Stock. Net tangible book value per share is determined by
dividing the tangible net worth of the Company (tangible assets less total
liabilities) by the total number of outstanding shares of Common Stock. After
giving effect to the La Victoria Acquisition, the sale of the shares offered
hereby, the repurchase by the Company of the 1,538,500 shares of Common Stock
owned by Shansby and the receipt of the estimated net proceeds (after deducting
estimated underwriting discounts and commissions and estimated expenses of this
Offering), the net tangible book value of the Company at June 30, 1997 would
have been $2.09 per share. This represents an immediate increase in the net
tangible book value of $1.62 per share to existing shareholders and an immediate
dilution (i.e., the difference between the initial public offering price and the
pro forma net tangible book value after this Offering) of $6.91 per share to new
investors purchasing Common Stock in this Offering. The following table
illustrates the per share dilution to new investors purchasing Common Stock in
this Offering at $9.00 per share:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $9.00
Net tangible book value per share at June 30, 1997........ $0.47
Increase per share attributable to new investors.......... 1.62
-----
Pro forma net tangible book value per share after the La
Victoria Acquisition and this Offering.................... 2.09
-----
Dilution per share to new investors......................... $6.91
=====
</TABLE>

The following table sets forth, as of June 30, 1997, the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company and the average price per share paid by existing shareholders and by new
investors:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CASH CONSIDERATION
-------------------- ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)............. 2,339,278 36.3% $ 9,302,946 20.1% $3.98
New investors(2)..................... 4,100,000 63.7 36,900,000 79.9 9.00
--------- ----- ----------- -----
Total...................... 6,439,278 100.0% $46,202,946 100.0%
========= ===== =========== =====
</TABLE>

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

(1) Includes 2,177,778 shares issued in conjunction with the La Victoria
Acquisition valued at $15,680,000, less the repurchase of 1,538,500 shares
of Common Stock owned by Shansby on the date of this Prospectus. See "The La
Victoria Acquisition" and "Unaudited Pro Forma Consolidated Financial
Statements."

(2) Gives effect to the 4,100,000 shares of Common Stock offered by the Company.

If the Underwriter's over-allotment option is exercised in full, then the
number of shares of Common Stock held by existing shareholders will be reduced
to 33.2% of the total number of shares of Common Stock to be outstanding after
this Offering, and the number of shares of Common Stock held by new investors
will be increased to 4,715,000 shares, or 66.8% of the total number of shares of
Common Stock outstanding after this Offering.

14
<PAGE> 16

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated financial statements (the
"Pro Forma Financial Statements") are based on the financial statements of the
Company and La Victoria, all of which are included elsewhere in the Prospectus,
adjusted to give pro forma effect to the La Victoria Acquisition and this
Offering (collectively, the "Transactions").

The unaudited Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1996 are derived from the audited statements of operations of
the Company for the year ended December 31, 1996 and the unaudited statements of
operations of La Victoria for the year ended December 31, 1996, and assume the
Transactions were consummated on January 1, 1996. The unaudited Pro Forma
Consolidated Statements of Operations for the six months ended June 30, 1997 are
derived from the unaudited financial statements of the Company for the six
months ended June 30, 1997 and the unaudited statements of operations of La
Victoria for the six months ended June 30, 1997, and assume the Transactions
were consummated on January 1, 1996. The unaudited Pro Forma Consolidated
Balance Sheets as of June 30, 1997 are derived from the unaudited balance sheet
of the Company as of June 30, 1997 and the unaudited balance sheet of La
Victoria as of June 30, 1997, and assume the Transactions were consummated on
that date. The unaudited Pro Forma Financial Statements should be read in
conjunction with the historical financial statements of the Company and La
Victoria and the Notes thereto included elsewhere in this Prospectus.

The unaudited Pro Forma Financial Statements do not purport to represent
what the Company's results of operations or financial condition would actually
have been if the Transactions had occurred on the dates indicated or to project
the Company's results or financial condition for or at any future period or
date. The unaudited Pro Forma Financial Statements are presented for comparative
purposes only. The pro forma adjustments, as described in the accompanying data,
are based on available information and certain assumptions that management
believes are reasonable.

15
<PAGE> 17

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)

<TABLE>
<CAPTION>
AUTHENTIC
SPECIALTY LA VICTORIA PRO FORMA PRO FORMA
FOODS, INC. FOODS, INC. ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales........................................ $10,962 $18,977 $ $29,939
Cost of sales.................................... 7,191 9,234 16,425
------- ------- -------
Gross profit........................... 3,771 9,743 13,514
Operating expenses............................... 3,247 9,256 243(A) 12,061
(685)(B)
------- ------- ----- -------
Income from operations................. 524 487 442 1,453
Other expenses, net.............................. 164 357 200(C) 579
(142)(D)
------- ------- ----- -------
Income before income taxes............. 360 130 384 874
Income tax expense (benefit)..................... 122 182 105(E) 409
------- ------- ----- -------
Net income (loss)...................... $ 238 $ (52) $ 279 $ 465
======= ======= ===== =======
Earnings per common share........................ $ 0.14 $ 0.07
======= =======
Weighted average number of common shares
outstanding.................................... 1,700 6,439
</TABLE>

FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
AUTHENTIC
SPECIALTY LA VICTORIA PRO FORMA PRO FORMA
FOODS, INC. FOODS, INC. ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales.......................................... $21,198 $38,148 $ $59,346
Cost of sales...................................... 14,081 19,398 33,479
------- ------- -------
Gross profit............................. 7,117 18,750 25,867
Operating expenses................................. 6,768 16,130 487(A) 23,012
(373)(B)
------- ------- ----- -------
Income from operations............................. 349 2,620 (114) 2,855
Other expenses, net................................ 348 995 400(C) 1,465
(278)(D)
------- ------- ----- -------
Income before income taxes............... 1 1,625 (236) 1,390
Income tax expense (benefit)....................... -- 780 3(E) 783
------- ------- ----- -------
Net income (loss)........................ $ 1 $ 845 $(239) $ 607
======= ======= ===== =======
Earnings per common share.......................... $ 0.00 $ 0.09
=========== ============
Weighted average number of common shares
outstanding...................................... 1,700 6,439
</TABLE>

See Notes to Pro Forma Consolidated Financial Statements.

16
<PAGE> 18

PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
AUTHENTIC
SPECIALTY LA VICTORIA PRO FORMA PRO FORMA
FOODS, INC. FOODS, INC. ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents................... $ 114 $ 4,632 $ (4,064)(F) $ 6,419
(12,000)(G)
30,987(H)
(350)(H)
(12,900)(I)
Accounts receivable, net.................... 1,592 1,787 3,379
Inventories................................. 747 10,268 11,015
Other current assets........................ 220 999 1,219
------- ------- -------- -------
Total current assets................ 2,673 17,686 1,673 22,032
------- ------- -------- -------
Property and equipment, net................... 2,754 8,145 10,899
Other assets
Intangibles................................. 1,606 -- 9,700(G) 21,053
9,747(G)
Other....................................... 165 61 226
------- ------- -------- -------
1,771 61 19,447 21,279
------- ------- -------- -------
$ 7,198 $25,892 $ 21,120 $54,210
======= ======= ======== =======

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Line of credit.............................. $ 1,350 $ -- $ (1,350)(H) $ --
Current portion of long-term debt........... 667 1,273 (400)(H) 1,540
Accounts payable............................ 1,607 1,380 2,987
Accrued expenses............................ 349 846 1,195
------- ------- -------- -------
Total current liabilities........... 3,973 3,499 (1,750) 5,722
------- ------- -------- -------
Long-term debt, less current portion.......... 816 5,989 5,000(G) 11,125
(680)(H)
Deferred taxes................................ -- 5 2,845(G) 2,850
Commitments...................................
Shareholders' equity
Preferred stock............................. -- -- --
Common stock................................ 3,682 2,871 (2,871)(J) 48,686
10,776(G)
811(G)
33,417(H)
Retained earnings (accumulated deficit)..... (1,273) 13,528 (4,064)(F) (1,273)
(9,464)(J)
------- ------- -------- -------
2,409 16,399 28,605 47,413
Less cost of Common Stock repurchased......... -- -- (12,900)(I) (12,900)
------- ------- -------- -------
Total shareholders' equity.......... 2,409 16,399 15,705 34,513
------- ------- -------- -------
$ 7,198 $25,892 $ 21,120 $54,210
======= ======= ======== =======
</TABLE>

See Notes to Pro Forma Consolidated Financial Statements.

17
<PAGE> 19

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(A) The adjustment reflects the additional amortization expense resulting from
the allocation of the purchase price of the La Victoria Acquisition to
intangible assets acquired consisting primarily of La Victoria's tradename
and goodwill. The useful life assigned to intangibles is 40 years.

(B) Reflects the adjustment of the historical salaries and bonuses by La
Victoria to management and expense reimbursements to LV Foods and Shansby
and certain adjustments for new management, as set forth in the following
table. See "Management" and "Certain Transactions."

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
PRO FORMA ADJUSTMENTS 1996 1997
--------------------- ------------ --------------
<S> <C> <C>
Compensation to husband of former shareholder........ $ 270,000 $ 135,000
LV Foods transaction expenses........................ 200,000 325,000
Shansby transaction expenses......................... -- 250,000
Bonus to Mr. Tanklage................................ 663,000 355,000
Mr. Tanklage bonus under new employment agreement.... (360,000) (180,000)
La Victoria Chief Operating Officer salary........... (200,000) (100,000)
Authentic Specialty Foods Chief Executive Officer
salary............................................. (200,000) (100,000)
--------- ---------
Total pro forma adjustments.......................... $ 373,000 $ 685,000
========= =========
</TABLE>

(C) The adjustment reflects interest expense on the facility that will refinance
the La Victoria Shareholder Note. The annual interest rate is assumed to be
8% on a principal amount of $5 million. The original balance on the note was
$7 million. LV Foods will repay $2 million of this note using proceeds from
the dividend received on La Victoria common stock as described in pro forma
adjustment (F) below. LV Foods has agreed in principle to refinance the
remaining $5 million principal amount of the La Victoria Shareholder Note
within ten business days after the consummation of this Offering. See "The
La Victoria Acquisition."

(D) The adjustment reflects the reduction of interest expense to reflect the
reduction of outstanding indebtedness resulting from the estimated use of
proceeds from this Offering. See "Use of Proceeds."

(E) The pro forma adjustments to income taxes are based on a 41% tax rate
applied to taxable income. Taxable income is income before income taxes plus
non-deductible intangible amortization and less certain other items that
were non-deductible in the historical financial statements.

(F) The adjustment reflects a $64,000 dividend declared and paid in May 1997 on
La Victoria common stock and a $4 million dividend to be declared and paid
on La Victoria common stock in conjunction with, and immediately prior to,
the consummation of this Offering.

(G) The adjustment reflects the La Victoria Acquisition, which will be accounted
for as a purchase. See "The La Victoria Acquisition." The purchase price and
estimated allocation of such cost for the La Victoria Acquisition is as
follows, assuming the La Victoria Acquisition occurred on June 30, 1997 (in
thousands):

<TABLE>
<S> <C>
Purchase Price components:
Common Stock issued to Mr. Tanklage(i).................... $ 5,600
Cash payments to Mr. Tanklage(ii)......................... 12,000
Purchase price for LV Foods(iii).......................... 10,176
Transaction expenses...................................... 350
-------
Total purchase price........................................ 28,126
Book value per historical financial statements(iv)........ 12,335
-------
Excess of purchase price over net book value of assets
acquired.................................................. $15,791
=======
Allocated to:
Identifiable intangible assets(v)......................... $ 9,700
Goodwill(v)............................................... 9,747
Deferred taxes(vi)........................................ (2,845)
Additional paid-in capital (tax benefit)(vi).............. (811)
-------
Total allocated............................................. $15,791
=======
</TABLE>

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

18
<PAGE> 20

(i) Based on 777,778 shares of Common Stock issued at an assumed price per
share of $9, net of a 20% discount for lack of marketability.

(ii) Payment to be funded from the net proceeds from this Offering. See
"Use of Proceeds."

(iii) The Company and LV Foods are both controlled by Shansby. As a result,
the acquisition of LV Foods by the Company is a transaction between
entities under common control. In this situation, the purchase
accounting is based on Interpretation No. 39 to APB 16, which
requires that the net assets and liabilities transferred in the
transaction be accounted for at historical cost in a manner similar
to that in pooling of interests accounting. Accordingly, the purchase
price of LV Foods is based on LV Foods' historical cost investment,
at June 30, 1997, in La Victoria, its only asset. This amount is
based on LV Foods' original investment in La Victoria of $12 million
in April 1997, reduced for net equity method adjustments consisting
primarily of dividends as described in pro forma adjustment (F)
above.

(iv) Represents the historical book value of La Victoria at June 30, 1997
adjusted for the dividends in pro forma adjustment (F) above.

(v) The Company is in the process of allocating these approximate amounts
between identified and unidentified intangible assets. The Company
anticipates that the identified intangible assets will consist
primarily of La Victoria's trade name. The Company anticipates the
identified and unidentified intangible assets will have similar useful
lives of 40 years.

(vi) Deferred tax liabilities of $3,977,000 have been provided on the
amounts allocated to identified intangibles at a rate of 41%. The net
deferred tax liabilities recorded have been reduced by $1,132,000
because of the elimination of the valuation allowance on the Company's
deferred tax assets. The valuation allowance has been eliminated
because, as a result of the La Victoria Acquisition, the Company
believes it is now more likely than not that these assets will be
realized. Of the total deferred tax assets of $1,132,000, $811,000
represents amounts generated before the Company's December 31, 1993
quasi-reorganization and are recorded as a direct addition to
additional paid-in capital, with the balance as an adjustment to
intangibles. See Note 7 to the Company's Financial Statements.

(H) The adjustment reflects the estimated use of the net proceeds of this
Offering, after deducting approximately $900,000 of offering expenses: (i)
$600,000 of professional, printing and other miscellaneous expenses, (ii) a
$250,000 fee to Shansby Partners for its financial advisory services in
connection with this Offering and (iii) a reimbursement of up to $50,000 of
Shansby Partners' out-of-pocket expenses related to this Offering. See "Use
of Proceeds."

(I) The adjustment reflects the use of a portion of the net proceeds of this
Offering to repurchase the shares of Common Stock owned by Shansby on the
date of this Prospectus.

(J) The adjustment reflects the elimination of the historical common stock and
retained earnings (net of the $4,064,000 dividend) of La Victoria in order
to consolidate La Victoria's financial statements.

19
<PAGE> 21

SELECTED FINANCIAL DATA

The following table sets forth certain financial data for the Company as of
the dates and for the periods indicated. The financial data of the Company as of
and for the years ended December 31, 1994 and December 31, 1995 set forth below
have been derived from financial statements audited by Rylander, Clay & Opitz,
L.L.P., independent auditors. The financial data of the Company as of and for
the year ended December 31, 1996 set forth below have been derived from
financial statements audited by McGladrey & Pullen, LLP, independent auditors.
The selected financial data of the Company as of and for the periods ended July
31, 1992, July 31, 1993, December 31, 1993, June 30, 1996 and June 30, 1997 and
the pro forma 1996 and 1997 data are unaudited. However, in the opinion of the
Company, all adjustments, consisting of normal recurring accruals necessary for
a fair presentation, have been made. The selected financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and with the Company's Financial Statements and the
Notes related thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>

FIVE YEARS ENDED DECEMBER 31,
MONTHS -------------------------------------
YEARS ENDED ENDED PRO
JULY 31, DECEMBER 31, FORMA
----------------- ------------ -------
1992 1993 1993(1) 1994 1995 1996 1996(2)
------- ------- ------------ ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................... $18,552 $20,328 $8,113 $19,637 $21,028 $21,198 $59,346
Cost of sales............... 12,648 14,974 5,466 13,213 14,266 14,081 33,479
------- ------- ------ ------- ------- ------- -------
Gross profit.............. 5,904 5,354 2,647 6,424 6,762 7,117 25,867
Operating expenses.......... 4,885 8,511 3,304 7,210 6,940 6,768 23,012
------- ------- ------ ------- ------- ------- -------
Income (loss) from
operations.............. 1,019 (3,157) (657) (786) (178) 349 2,855
------- ------- ------ ------- ------- ------- -------
Other income (expense)
Interest expense............ (118) (218) (98) (161) (219) (328) (1,537)
Interest income............. -- -- -- -- 62 2 95
Gain (loss) on disposal of
property and equipment.... -- (514) -- (38) (192) (22) (23)
------- ------- ------ ------- ------- ------- -------
(118) (732) (98) (199) (349) (348) (1,465)
------- ------- ------ ------- ------- ------- -------
Income (loss) before
income taxes............ 901 (3,889) (755) (985) (527) 1 1,390
Income tax expense
(benefit)................. 341 (520) -- -- -- -- 783
------- ------- ------ ------- ------- ------- -------
Net income (loss)......... $ 560 $(3,369) $ (755) $ (985) $ (527) $ 1 $ 607
======= ======= ====== ======= ======= ======= =======

Earnings (loss) per share... $ 0.36 $ (2.15) $(0.48) $ (0.59) $ (0.31) $ 0.00 $ 0.09
Weighted average number of
common shares
outstanding............... 1,564 1,564 1,564 1,680 1,700 1,700 6,439(3)

<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
PRO
FORMA
-------
1996 1997 1997(2)
------- ------- -------

<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................... $10,528 $10,962 $29,939
Cost of sales............... 6,927 7,191 16,425
------- ------- -------
Gross profit.............. 3,601 3,771 13,514
Operating expenses.......... 3,314 3,247 12,061
------- ------- -------
Income (loss) from
operations.............. 287 524 1,453
------- ------- -------
Other income (expense)
Interest expense............ (167) (165) (686)
Interest income............. 2 -- 95
Gain (loss) on disposal of
property and equipment.... (22) 1 12
------- ------- -------
(187) (164) (579)
------- ------- -------
Income (loss) before
income taxes............ 100 360 874
Income tax expense
(benefit)................. 34 122 409
------- ------- -------
Net income (loss)......... $ 66 $ 238 $ 465
======= ======= =======
Earnings (loss) per share... $ 0.04 $ 0.14 $ 0.07
Weighted average number of
common shares
outstanding............... 1,700 1,700 6,439(3)
</TABLE>

<TABLE>
<CAPTION>
AS OF JULY 31, AS OF DECEMBER 31, AS OF JUNE 30, 1997
---------------- ----------------------------------- ----------------------
1992 1993 1993 1994 1995 1996 ACTUAL PRO FORMA(2)
------ ------- ------ ------ ------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 50 $ -- $ 238 $ 237 $ 9 $ 200 $ 114 $ 6,419
Working capital (deficit)....................... 276 (2,289) (139) (44) (1,499) (1,557) (1,300) 16,310
Total assets.................................... 7,367 6,630 7,436 5,946 7,132 7,089 7,198 54,210
Notes payable to bank........................... 692 1,551 1,418 639 751 1,319 1,350 --
Long-term debt.................................. 1,658 1,528 1,513 949 1,249 920 816 11,125
Shareholders' equity............................ 2,879 260 1,859 2,175 2,048 2,049 2,409 34,513
</TABLE>

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

(1) Represents a five month period. At December 31, 1993, the Company changed
its fiscal year end from July 31 to December 31.

(2) On a pro forma basis, as adjusted to give effect to the La Victoria
Acquisition and the application of the net proceeds of this Offering in the
manner described in "Use of Proceeds." See "Unaudited Pro Forma Consolidated
Financial Statements."

(3) Gives effect to the repurchase of the 1,538,500 shares of Common Stock owned
by Shansby on the date of this Prospectus at a repurchase price equal to the
net proceeds (before offering expenses) to be received by the Company with
respect to an equivalent number of shares. This repurchase will occur
simultaneously with the consummation of this Offering. Also assumes the
issuance of 2,177,778 shares of Common Stock to Shansby, Mr. Lively and Mr.
Tanklage pursuant to the La Victoria Acquisition. See "The La Victoria
Acquisition."

20
<PAGE> 22

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

AUTHENTIC SPECIALTY FOODS, INC.

OVERVIEW

Following the Company's acquisition by Shansby in early 1992, Calidad
executed a number of initiatives to improve its operations and infrastructure.
As a result of these initiatives, following the completion of this Offering, the
Company will be poised for internal growth and to take advantage of acquisition
opportunities in the highly fragmented Mexican food industry.

When Shansby acquired the Company in 1992, Calidad had two facilities, a
manufacturing facility in Ft. Worth and a distribution facility in Rendon,
Texas. In December 1992, Calidad relocated its distribution facility, vehicle
fleet and warehouse hub from the small, inefficient Rendon facility to a 50,000
square foot facility in Grand Prairie, Texas. However, because of capital
constraints, Calidad was unable to relocate its manufacturing facility at that
time. The increased warehouse space and centralized distribution capabilities
enabled Calidad to increase its line of Mexican food products and inventory and
to expand its customer base within the Dallas/Ft. Worth area. In order to manage
its growing direct store delivery ("DSD") sales route system more efficiently,
Calidad computerized its invoicing process by installing a system utilizing
hand-held computers on substantially all of its DSD routes. As a result of
Calidad's implementation of this system, as well as increases in management
staffing and benefit levels, increases in facility expenses from the new
distribution facility and the addition of a new fleet of vehicles, Calidad
experienced an overall increase in distribution and operating expenses.

As Calidad continued its growth, it became apparent in 1994 that its 20,000
square foot manufacturing facility in Ft. Worth was constraining Calidad's
ability to expand production. In August 1995, Calidad began to consolidate its
manufacturing, warehouse and office space into a modern 70,000 square foot
location in Grand Prairie, Texas. This consolidation was completed in January
1996. All production, distribution and management functions now take place
within this facility, which allows management to maximize production and
distribution efficiencies. In November 1995, in conjunction with Calidad's
relocation to the new facility, Calidad acquired the tortilla and tortilla chip
business of El Paco Foods, Inc., a Dallas/Ft. Worth area tortilla and tortilla
chip producer ("El Paco"). The primary purpose of the El Paco acquisition was to
acquire additional tortilla chip and flour tortilla manufacturing equipment,
which enabled Calidad to expand its manufacturing capacity. Calidad moved El
Paco's production and processing equipment to Calidad's Grand Prairie facility
and began servicing El Paco's customer base of small distributors and food
service outlets. In June 1997, the Company changed its name from "Calidad Foods,
Inc." to "Authentic Specialty Foods, Inc."

The following discussion and analysis should be read in conjunction with
the Unaudited Pro Forma Consolidated Financial Statements, the Selected
Financial Data, and the historical financial statements of the Company and the
Notes related thereto, which appear elsewhere in this Prospectus.

21
<PAGE> 23

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
historical financial data for Calidad as a percentage of net sales:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-------------------------------------------
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................. 67.3 67.8 66.4 65.8 65.6
----- ----- ----- ----- -----
Gross margin..................................... 32.7 32.2 33.6 34.2 34.4
Operating expenses................................. 36.7 33.0 31.9 31.5 29.6
----- ----- ----- ----- -----
Income from operations........................... (4.0) (0.8) 1.7 2.7 4.8
Other expenses, net................................ 1.0 1.7 1.6 1.8 1.5
----- ----- ----- ----- -----
Income (loss) before taxes....................... (5.0) (2.5) 0.1 0.9 3.3
Provision for income taxes......................... 0.0 0.0 0.0 0.3 1.1
----- ----- ----- ----- -----
Net income (loss)................................ (5.0)% (2.5)% 0.1% 0.6% 2.2%
===== ===== ===== ===== =====
</TABLE>

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

Net Sales. Net sales consists of gross sales less the amount of discounts,
returns and allowances. Net sales for the first six months of 1997 were
$10,962,000 compared to $10,528,000 for the first six months of 1996, an
increase of $434,000, or 4.1%. A significant portion of the increase in net
sales was attributable to cheese and meat sales because Calidad gained
distribution of these products in the first quarter of 1997 in two independent
Dallas grocery chains catering to Mexican-American consumers.

Cost of Sales and Gross Margin. Cost of sales consists primarily of labor,
raw materials and overhead used in the production of the products manufactured
by Calidad. Calidad also incurs costs to purchase various products (such as
meats and cheeses) that have been manufactured by third parties for distribution
through Calidad's DSD system. Gross margin for the first six months of 1997 was
$3,771,000 compared to $3,601,000 for the first six months of 1996, an increase
of $170,000, or 4.7%. As a percentage of net sales, gross margin increased from
34.2% in the first six months of 1996 to 34.4% in the first six months of 1997.
The increase in gross margin was attributable to increased sales.

Operating Expenses. Operating expenses consist primarily of commissions,
sales and administrative salaries, office expenses, fleet expenses, warehouse
costs (including leasehold, labor and utility costs) and general overhead.
Operating expenses for the first six months of 1997 were $3,247,000 compared to
$3,314,000 for the first six months of 1996, a decrease of $67,000, or 2.0%. As
a percentage of net sales, operating expenses declined from 31.5% in the first
six months of 1996 to 29.6% in the first six months of 1997. The decrease in
operating expenses was primarily attributable to non-compete and consulting
payments to two former shareholders that were incurred in the first six months
of 1996 but not in the first six months of 1997.

Other Expenses. Other expenses consist primarily of interest expense and
gain or loss on disposal of property and equipment. Other expenses for the first
six months of 1997 were $165,000 compared to $187,000 for the first six months
of 1996, a decrease of $22,000, or 11.8%. As a percentage of net sales, other
expenses decreased from 1.8% in the first six months of 1996 to 1.5% in the
first six months of 1997. The decrease was primarily attributable to losses
incurred on the disposal of equipment in the first quarter of 1996 related to
the completion of the Company's plant relocation.

Taxes. The Company had income tax expense of $122,000 for the first six
months of 1997 compared to $34,000 for the first six months of 1996. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 86, any
tax benefits recognized from net operating losses ("NOLs") generated before the
Company's December 31, 1993 quasi-reorganization are recorded as a direct
addition to additional paid-in

22
<PAGE> 24

capital resulting in a corresponding increase to income tax expense. For
additional information with respect to the quasi-reorganization, see Note 7 to
the Company's Financial Statements.

At June 30, 1997, the Company had NOLs of approximately $3,265,000, which
expire throughout the period ending December 31, 2011. Of these NOLs,
approximately $2,385,000 were generated prior to the quasi-reorganization. At
June 30, 1997, the Company recorded a valuation allowance of approximately
$1,132,000 on deferred tax assets to reduce the total to an amount the Company
believes will ultimately be realized. The Company believes these deferred tax
assets will be realized as a result of the La Victoria Acquisition. See
"Unaudited Pro Forma Consolidated Financial Statements." Realization of deferred
tax assets is dependent upon generating sufficient future taxable income during
the period that deductible temporary differences and carryforwards are expected
to be available to reduce taxable income. Excluding the effects of the La
Victoria Acquisition and annualizing the Company's taxable income generated in
the first six months of 1997, the benefit of the Company's deferred tax asset
would be fully realized within the next five years. See Note 5 to the Company's
Financial Statements.

Net Income. For the reasons described above, net income for the first six
months of 1997 was $238,000 compared to $66,000 for the first six months of
1996, an improvement of $172,000. As a percentage of net sales, net income
improved from 0.6% for the first six months of 1996 to 2.2% for the first six
months of 1997.

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1996

Net Sales. Calidad's sales growth has historically been limited by its
production capacity. Since the relocation of Calidad's manufacturing facility in
January 1996, significant new grocery store accounts have been added to the
customer base, including Save-A-Lot, Western Family Foods and Brookshire
Brothers. Calidad has experienced steady growth in net sales, driven by extended
route coverage in North Texas (including the Dallas/Ft. Worth metroplex), as
well as expanded distribution into San Antonio, Texas and into Oklahoma,
Louisiana and Arkansas.

Net sales for 1996 were $21,198,000 compared to $21,028,000 for 1995, an
increase of $170,000, or 0.8%. Net sales were flat because net sales for 1995
included a substantial amount of sales of shelf-stable products to Minyard
Foods, which were discontinued in 1996. Accordingly, these low margin sales of
shelf-stable products to Minyard Foods accounted for approximately $86,000 of
Calidad's net sales in 1996, compared to $2,864,000 in 1995. However, the
discontinuation of these sales did not adversely affect Calidad's relationship
with Minyard Foods. In fact, net sales to Minyard Foods in 1996, exclusive of
shelf-stable products, increased by $777,000, or 15.6%, over 1995 net sales.

If sales of shelf-stable products to Minyard Foods are disregarded,
Calidad's net sales increased by $2,948,000, or 16.2%, from $18,164,000 in 1995
to $21,112,000 in 1996. Of this improvement, $2,018,000, or 68.5%, was
attributable to sales of manufactured products (e.g., tortillas, tortilla chips
and spices), of which approximately $741,000 resulted from the El Paco
acquisition. Approximately $761,000, or 25.8%, of the increase in net sales was
generated from increased sales of products manufactured by third parties (e.g.,
meats and cheeses).

Cost of Sales and Gross Margin. The gross margins on products manufactured
by Calidad, such as tortillas and tortilla chips, have improved on a
year-to-year basis because of increased efficiencies from the new manufacturing
facility, as well as Calidad's emphasis on sales of manufactured products in
1996. Most increases in raw material costs have traditionally been recovered
through price increases to Calidad's customers.

Gross margin for 1996 was $7,117,000 compared to $6,762,000 for 1995, an
increase of $355,000, or 5.2%. As a percentage of net sales, gross margin
increased from 32.2% in 1995 to 33.6% in 1996. The improvement in gross margin
was primarily attributable to the increase in sales of higher margin
manufactured products, combined with the discontinuation of low margin sales of
shelf-stable products to Minyard Foods, as described above. Gross margin
achieved on sales of products manufactured by Calidad has historically been
greater than the gross margin achieved on sales of products manufactured by
third parties. Accordingly, increased sales of manufactured products have a
greater impact on the overall gross margin of Calidad. Gross margin for 1996

23
<PAGE> 25

also benefitted from improved manufacturing efficiencies that resulted from the
plant relocation and modernization.

Operating Expenses. Operating expenses for 1996 were $6,768,000 compared to
$6,940,000 in 1995, a decrease of $172,000, or 2.5%. As a percentage of net
sales, operating expenses declined from 33.0% in 1995 to 31.9% in 1996. The
decrease in operating costs was primarily attributable to relocation expenses
incurred in 1995 of approximately $337,000 and $58,000 of long-haul
transportation savings realized in 1996. These expense reductions were partially
offset by nonrecurring 1996 consulting and non-compete payments to former
shareholders and professional fees totaling $113,000 and an increase of $101,000
in distributor commissions attributable to higher sales of manufactured
products.

Calidad expects that operating expenses will increase in absolute amounts
due, in part, to periodic reporting and compliance requirements associated with
being a public company, although such expenses may vary as a percentage of net
sales. Additionally, Calidad expects that operating expenses will increase in
absolute amounts as a result of the implementation of its acquisition strategy.
The Company does not expect that the La Victoria Acquisition will result in any
reductions in general and administrative expenses. See "Risk Factors -- Ability
to Implement the La Victoria Strategy."

Other Expenses. Other expenses for 1996 were $348,000 compared to $349,000
for 1995, a decrease of $1,000, or 0.3%. As a percentage of net sales, other
expenses decreased from 1.7% in 1995 to 1.6% in 1996. Interest expense for 1996
was $328,000 compared to $219,000 for 1995, an increase of $109,000, or 49.8%.
The increase in interest expense is due to interest on the Term Loan and debt
incurred with the El Paco acquisition, which were used to partially finance
Calidad's plant relocation and modernization. See "-- Liquidity and Capital
Resources." Other expenses also included a loss on the disposal of property and
equipment of $22,000 in 1996 compared to a loss of $192,000 in 1995. Both of
these losses resulted from the plant relocation and modification. In addition,
in 1995, interest income consisted primarily of $51,000 of interest income
received on a federal tax refund.

Taxes. Because the Company's deferred tax assets were fully reserved by a
valuation allowance, no provision for income taxes was recorded in 1995 or 1996.
In addition, no taxable income was generated in 1996 that would require an
adjustment to additional paid-in capital pursuant to SAB No. 86.

Net Income. For the reasons described above, net income for 1996 was $1,000
compared to a net loss of $527,000 for 1995, an improvement of $528,000. As a
percentage of net sales, net income improved from a loss of 2.5% in 1995 to a
profit of 0.1% in 1996.

COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1995

Net Sales. Net sales for 1995 were $21,028,000 compared to $19,637,000 for
1994, an increase of $1,391,000, or 7.1%. Of the total net sales increase of
$1,391,000 for 1995, $633,000, or 46.0%, was attributable to cheese and meat
sales, with the remaining increase being attributable to increased sales of
shelf-stable grocery products. Sales of manufactured products were relatively
unchanged between the two years.

Although Calidad's net sales improved in 1995, Calidad closed its Houston
distribution center and began a relationship with an independent Houston
distributor in January 1995. Calidad took this action because of operating
losses at Calidad's Houston distribution center, production limitations at
Calidad's Ft. Worth facility and management's decision to focus on North Texas
operations, including the Dallas/Ft. Worth metroplex. The Houston distributor
retained in 1995 did not carry a complete line of Calidad's products and had a
limited retail presence. Net sales for 1995 in the Houston market declined from
$1,401,000 in 1994 to $303,000 in 1995. Total net sales in the core markets of
North Texas, East Texas and West Texas increased from $18,236,000 in 1994 to
$20,725,000 in 1995, an increase of $2,489,000, or 13.6%.

Cost of Sales and Gross Margin. Gross margin for 1995 was $6,762,000
compared to $6,424,000 for 1994, an increase of $338,000, or 5.3%. As a
percentage of net sales, gross margin decreased from 32.7% in 1994 to 32.2% in
1995. The dollar increase in gross margin was primarily attributable to
increased net sales

24
<PAGE> 26

levels. Relative flatness in manufactured product sales, coupled with
manufacturing inefficiencies at the Ft. Worth plant, caused the decrease in the
gross margin as a percentage of sales.

Operating Expenses. Operating expenses for 1995 were $6,940,000 compared to
$7,210,000 for 1994, a decrease of $270,000, or 3.7%. As a percentage of net
sales, operating expenses decreased from 36.7% in 1994 to 33.0% in 1995. The
decrease in operating expenses was due to the elimination of consulting costs
and vacation pay expenses totaling $415,000, coupled with an $80,000 reduction
in insurance costs and a $53,000 reduction in administrative payroll. These
expense reductions were partially offset by relocation costs of $337,000
incurred in 1995.

Other Expenses. Other expenses for 1995 were $349,000 compared to $199,000
for 1994, an increase of $150,000, or 75.4%. As a percentage of net sales, other
expenses increased from 1.0% in 1994 to 1.7% in 1995. The increase was primarily
attributable to a loss on disposal of property and equipment of $192,000 in 1995
compared to a loss of $37,000 in 1994. Interest expense for 1995 was $219,000
compared to $161,000 for 1994, an increase of $58,000, or 36.0%, as a result of
increased borrowings and higher effective rates under the Company's line of
credit. In 1995, interest income consisted primarily of interest income received
on a federal tax refund.

Taxes. Because the Company's deferred tax assets were fully reserved by a
valuation allowance, no provision for income taxes was recorded in 1994 or 1995.

Net Income. As a result of the above, Calidad had a net loss of $527,000
for 1995 compared to a net loss of $985,000 for 1994, an improvement of
$458,000, or 46.5%. As a percentage of net sales, the net loss improved from a
loss of 5.0% in 1994 to a loss of 2.5% in 1995.

VARIABILITY IN QUARTERLY OPERATING RESULTS; SEASONALITY

Calidad has experienced a minimal degree of seasonality over the three
previous years. Minor increases in tortilla, spice, meat and cheese sales
normally occur during the winter months. A similar sales increase for tortilla
chips is experienced during the summer months. The Company believes that the
relative inelasticity of demand for grocery products is an insulating factor
against material fluctuations in Calidad's sales levels. Anticipated sales gains
due to product acceptance and favorable market demographics should also serve as
a seasonality buffer.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's losses and restricted access to capital have
adversely affected the Company's ability to pursue acquisition and growth
opportunities. As the net sales of Calidad have grown, the Company has
experienced increased working capital requirements. These working capital
requirements have been funded largely by borrowings under asset-based working
capital facilities. An initial $2,000,000 facility was funded in May 1993, with
effective interest rates ranging from prime rate plus 0.75% per annum to prime
rate plus 5.0% per annum as of the termination date. This facility was replaced
in April 1995 by the $2,000,000 Revolving Facility with a different lender. The
Revolving Facility continues to be utilized by the Company and accrues interest
at prime rate plus 1.75%. The principal balance on the Revolving Facility as of
June 30, 1997 was $1,350,000, and the Company had $54,000 of availability under
the Revolving Facility as of that date. Amounts available for borrowing under
the Revolving Facility are based on percentages of the Company's eligible
accounts receivable and inventory balances. Management believes the percentages
used to calculate borrowing availability under the Revolving Facility are
generally in accordance with those offered to companies of similar size.

Although Shansby has provided certain funding since acquiring the Company
in 1992, Shansby has been limited in the amount of funding it was able to
provide because of constraints imposed by its investment objectives.
Nevertheless, because of Calidad's net losses incurred in 1994 and the decrease
in the Company's available working capital facility in effect during that year,
Shansby made several capital infusions that totaled $1,085,000 in 1994.
Furthermore, in order to fund capital expenditures, including the El Paco
acquisition, that were required to relocate and modernize Calidad's plant in
late 1995, Shansby funded $400,000 of the

25
<PAGE> 27

$2,529,000 of these capital and other expenditures. The remaining $2,129,000 was
funded with (i) $600,000 under the Term Loan, (ii) a consulting and non-compete
agreement with the shareholders of El Paco under which the Company was obligated
to pay $549,000 and which is treated as indebtedness for financial accounting
purposes (the "El Paco Non-Compete"), (iii) a federal income tax refund of
$539,000, (iv) $162,000 from the sale of surplus manufacturing equipment and (v)
past due accounts receivable collections made in late 1994. The Term Loan was
initially funded in November 1995, accrues interest at prime rate plus 2.0% per
annum and is payable in 48 monthly principal installments of $12,500 plus
interest. As of June 30, 1997, the principal balances on the Term Loan and
Revolving Facility were $363,000 and $1,350,000, respectively. The Term Loan and
the Revolving Facility are secured by a first lien on Calidad's equipment,
inventory, accounts receivable and general intangibles. The Company intends to
use the net proceeds from this Offering to repay all amounts outstanding under,
and terminate, the Revolving Facility and the Term Loan. In connection with the
termination of the Revolving Facility, the Company will pay a $20,000
termination fee and will expense deferred financing costs of $29,000. See "Use
of Proceeds." The El Paco Non-Compete is due in monthly installments of $11,667,
with interest imputed at 10.0%, through November 2000.

In connection with the acquisition of Calidad by Shansby in 1992, a $1
million subordinated note was issued to the former shareholder of Calidad (the
"Calidad Shareholder Note"). The Calidad Shareholder Note was originally
scheduled to mature on March 26, 1997. Because of funding constraints on the
Company, the former shareholder agreed to extend the note for an additional two
years to March 26, 1999. Interest on this note was increased from 8.0% per annum
to 10.5% per annum. As of June 30, 1997, the Calidad Shareholder Note had an
outstanding principal balance of approximately $717,000. The Company intends to
use a portion of the net proceeds from this Offering to repay the Calidad
Shareholder Note. See "Use of Proceeds."

Cash flows provided by operating activities for 1996 were $565,000,
consisting primarily of depreciation and amortization of $757,000, offset by an
increase in accounts receivable of $151,000 and a decrease in accounts payable
of $232,000. Accounts receivable increased because of slower collections
resulting from increased sales to non-major chains in outlying markets. Accounts
payable decreased because of Calidad's efforts to bring payables to vendors
closer to terms. Cash flows provided by operating activities for the first six
months of 1997 were $415,000, consisting primarily of net income of $238,000 and
noncash expenses of $451,000, offset by an increase in accounts receivable of
$117,000 and a decrease in accounts payable of $117,000. Accounts receivable
continued to increase because of fewer collection days and increased sales to
non-major chains in outlying markets. Accounts payable continued to decrease due
to continuing efforts to bring payables to vendors closer to terms.

Cash flows used in investing activities for 1996 were $509,000, consisting
primarily of capital expenditures of $652,000 related to the Company's
relocation and the El Paco acquisition as discussed above, offset by proceeds
from the sale of property and equipment of $171,000 related to excess equipment
sold as a result of the relocation. Cash flows used in investing activities for
the first six months of 1997 were $328,000, consisting primarily of capital
expenditures of $232,000 and an increase in other assets of $147,000. Capital
expenditures consisted primarily of additions and improvements to manufacturing
equipment, and the increase in other assets consisted primarily of deferred
offering costs.

Cash flows provided by financing activities for 1996 were $136,000,
consisting primarily of additional borrowings on the Company's line of credit of
$569,000, offset by repayments on short and long-term debt. Cash flows used in
financing activities for the first six months of 1997 were $173,000, consisting
primarily of repayments on long-term debt.

Calidad estimates that capital expenditures for the existing business in
1997 and the foreseeable future will range from $300,000 to $400,000 per year.
La Victoria estimates that capital expenditures for 1997 and subsequent years
will range from $200,000 to $300,000 per year. After applying the net proceeds
from this Offering in the manner described under "Use of Proceeds," the Company
believes that its cash on hand and cash generated from operations will provide
the Company with sufficient liquidity and working capital to permit Calidad and
La Victoria to carry on its normal operations without the need of incurring the
expense of

26
<PAGE> 28

maintaining a revolving credit facility in addition to La Victoria's line of
credit facility. As the Company implements its growth strategy, it will continue
to re-evaluate its working capital needs, and will seek to obtain an additional
working capital line of credit when it becomes necessary to do so. Although the
Company believes that it will have sufficient funds to make one or more
acquisitions in pursuit of its growth strategy, it may elect to pursue bank
financing in connection with its acquisitions, depending upon the size of the
acquisition and its other capital needs.

INFLATION AND CHANGES IN PRICES

The costs of ingredients (e.g., corn flour and wheat flour) for products
that Calidad manufactures rise and fall in line with their value in the
commodity markets. Calidad endeavors to insulate itself from wide variations in
prices by entering into supply contracts on a 90 to 360 day basis. Generally,
increases in raw material costs are recovered with periodic product price
increases. Product pricing for products manufactured by third parties are
negotiated. When price increases occur, Calidad passes these increases on to the
retailer.

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<PAGE> 29

LA VICTORIA FOODS, INC.

OVERVIEW

La Victoria has experienced a decline in net sales as a result of increased
competition and its decision to focus on core markets in the western United
States, combined with a withdrawal from less profitable markets. La Victoria's
management undertook a restructuring effort in 1995 that has resulted in more
effective employment of its capital base, reduced costs, and increased
efficiencies throughout La Victoria. La Victoria has refocused its marketing
efforts, concentrating on its core markets, and successfully returned to
profitability in fiscal 1996.

Prior to La Victoria's recent restructuring efforts, its operating margins
had suffered from relatively fixed general and administrative expenses and
certain manufacturing expenses that La Victoria incurred to upgrade its
production capacity and efficiency as well as expenses related to label and
container redesigns. La Victoria's management believes that La Victoria is
capable of supporting a significantly larger sales base with its existing
manufacturing and warehousing facilities.

Prior to Shansby's recent purchase of beneficial ownership of 50% of the
capital stock of La Victoria, La Victoria was a family-owned business. La
Victoria has entered into various transactions with its shareholders and their
affiliates including the payment of discretionary employee bonuses and other
expenses.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
historical financial data for La Victoria as a percentage of net sales:

<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
-----------------------
YEARS ENDED MAY 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... 100.0% 100.0% 100.0%
Cost of sales............................................... 53.7 51.6 49.5
----- ----- -----
Gross margin........................................... 46.3 48.4 50.5
Operating expenses.......................................... 45.2 40.0 45.5
----- ----- -----
Income from operations................................. 1.1 8.4 5.0
Other expenses, net......................................... (2.0) (2.3) (2.3)
----- ----- -----
Income (loss) before taxes............................. (0.9) 6.1 2.7
Provision for income taxes.................................. (0.2) 2.6 1.6
----- ----- -----
Net income (loss)...................................... (0.7)% 3.5% 1.1%
===== ===== =====
</TABLE>

COMPARISON OF FISCAL YEAR ENDED MAY 31, 1996 TO 1997

Net Sales. Net sales for 1997 were $37,192,000 as compared to $38,978,000
for 1996, a decrease of $1,786,000, or 4.6%. The decline in net sales was
primarily the result of increased competition from other Mexican food brands,
including the introduction of the Tostitos(TM) brand Mexican sauces by Frito-Lay
Inc. and the withdrawal of La Victoria from certain less profitable markets in
the eastern and central United States. In addition, 1996 included a one-time
sale at reduced prices of products packaged in containers that became obsolete
as a result of a change in packaging.

Cost of Sales and Gross Margin. Cost of sales consists primarily of labor,
raw materials and overhead used in the production of the products manufactured
by La Victoria. Gross margin was $18,783,000 for 1997 as compared to $18,871,000
for 1996, a decrease of $88,000, or 0.5%. As a percentage of net sales, gross
margin increased to 50.5% in 1997 from 48.4% for 1996. The primary reason for
the increase in gross margin percentage is attributable to a focus by the
Company on cost controls and efficiencies, as well as the absence of the sales
made in the prior period of products in obsolete packaging.

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<PAGE> 30

Operating Expenses. Operating expenses were $16,934,000 for 1997 compared
to $15,608,000 for 1996, an increase of $1,326,000, or 8.5%. As a percentage of
net sales, operating expenses increased from 40.0% for 1996 to 45.5% for 1997.
The dollar increase in operating expenses was due to an increase of $900,000 in
discretionary bonuses and expenses to management and related parties, a $305,000
increase in selling expenses, primarily advertising expenses, and a $253,000
increase in legal expenses. During 1997, La Victoria incurred legal expenses of
approximately $204,000 relating to a dispute with a former shareholder, as well
as $270,000 in salary expense to that former shareholder's husband, who was an
employee of La Victoria. La Victoria anticipates that such expenses will not
recur in 1998.

Other Expenses. Other expenses, primarily interest related to capital
leases, were $868,000 for 1997 as compared to $905,000 for 1996, a decrease of
$37,000, or 4.1%. As a percentage of net sales, other expenses remained constant
at 2.3% for 1996 and 1997.

Taxes. Taxes were $588,000 for 1997 compared to $979,000 for 1996, a
decrease of $391,000, or 39.9%. The decrease was attributable to the decrease in
earnings for 1997 as compared to 1996. The high effective tax rate of 60% in
1997 was due primarily to certain nonrecurring expenses that are not deductible
for tax purposes. See Note 6 to La Victoria's Financial Statements.

Net Income. For the reasons described above, net income was $393,000 for
1997 compared to $1,379,000 for 1996, a decrease of $986,000. As a percentage of
net sales, net income decreased from 3.5% in 1996 to 1.1% in 1997.

COMPARISON OF FISCAL YEAR ENDED MAY 31, 1995 TO 1996

Net Sales. Net sales for 1996 were $38,978,000 compared to $41,382,000 for
1995, a decrease of $2,404,000, or 5.8%. The decrease in net sales was primarily
attributable to (i) increased competition within the salsa category generally,
(ii) an increase in private label products in grocery stores that are not
manufactured by La Victoria and (iii) the withdrawal of La Victoria from certain
less profitable markets to focus on core markets.

Cost of Sales and Gross Margin. Gross margin for 1996 was $18,871,000
compared to $19,163,000 for 1995, a decrease of $292,000, or 1.5%. As a
percentage of net sales, gross margin increased from 46.3% for 1995 to 48.4% for
1996. The increase in gross margin was primarily a result of a 2.9% decline in
raw material and direct labor costs to produce La Victoria's products. Partially
offsetting the gains were increases in manufacturing overhead (including
repairs, maintenance and rent).

Operating Expenses. Operating expenses for 1996 were $15,608,000 compared
to $18,709,000 for 1995, a decrease of $3,101,000, or 16.6%. As a percentage of
net sales, operating expenses decreased from 45.2% for 1995 to 40.0% for 1996.
The decrease in operating expenses was largely the result of a decrease in
advertising spending from $4,939,000 in 1995 to $1,937,000 in 1996, as well as a
reduction in corporate sponsorships from $866,000 in 1995 to $403,000 in 1996.
Advertising spending was high in 1995 as a result of efforts to promote the La
Victoria Thick 'N Chunky Salsa product line. In addition, La Victoria reduced
salaries and commissions paid to sales personnel by $542,000. These decreases
were partially offset by increases in market development funds and promotional
allowances by approximately $300,000 as well as a discretionary bonus paid to
senior management/shareholders of $550,000 in 1996. No comparable bonus was paid
in 1995.

Other Expenses. Other expenses, primarily interest, were $905,000 in 1996
compared to $844,000 for 1995, an increase of $61,000, or 7.2%. As a percentage
of net sales, other expenses increased from 2.0% for 1995 to 2.3% for 1996.
During 1996, La Victoria extended two facility leases with its shareholders that
resulted in the leases being classified as capital leases. As a result interest
expense increased by $238,000. This increase was offset by a decrease in rent
expense included in cost of sales. See "Certain Transactions -- Tanklage Lease
Arrangements." Other interest expense decreased due to a reduction in debt
outstanding.

Taxes. Taxes for 1996 were $979,000 compared to a tax benefit of $81,000
for 1995, an increase of $1,060,000. This increase in taxes was primarily
attributable to the increase in earnings for 1996 as compared to 1995.

29
<PAGE> 31

Net Income. For the reasons described above, net income improved from a
loss of $309,000 for 1995 to $1,379,000 for 1996, an increase of $1,688,000. As
a percentage of net sales, net income improved from a loss of 0.7% in 1995 to a
profit of 3.5% in 1996.

VARIABILITY OF QUARTERLY OPERATING RESULTS; SEASONALITY

La Victoria experiences a minimal degree of seasonality in its sales. La
Victoria's cash flow is affected by costs incurred seasonally as a result of
increased production costs associated with the peak tomato harvest, when La
Victoria currently packs the majority of its products. In terms of sales, minor
increases in salsa and Mexican sauce sales normally occur during the fall and
winter months. La Victoria believes that the relative inelasticity of demand for
grocery products is an insulating factor against material fluctuations in La
Victoria's sales levels.

LIQUIDITY AND CAPITAL RESOURCES

La Victoria's working capital requirements have decreased substantially
since the fiscal year ended May 31, 1994 because of lower discretionary spending
and improved operating efficiencies. Indebtedness, which had increased as a
result of the more than $4 million refurbishment and expansion of its main
production facility in 1993 and 1994, has greatly decreased.

In order to finance its facility refurbishment and expansion, La Victoria
borrowed $5,500,000 in October 1993 on an unsecured basis (the "La Victoria Term
Loan"). The La Victoria Term Loan carries an interest rate of 6.48% per annum.
Under the agreement that governs the La Victoria Term Loan, La Victoria is
required to pay monthly installments of $91,667, plus interest, through October
1998. As of May 31, 1997, the outstanding principal balance on the La Victoria
Term Loan was $1,558,000. The La Victoria Term Loan agreement includes covenants
requiring the maintenance of certain financial ratios and minimum tangible net
worth. These financial covenants have the effect of restricting LaVictoria's
payment of dividends. La Victoria was not in compliance with the cash flow
coverage requirement for the year ended May 31, 1997 and has obtained a waiver
from the bank of this covenant.

La Victoria has traditionally maintained a working capital facility with a
bank in order to fund seasonal requirements associated with the purchase of its
raw materials and production of its products. La Victoria produces its salsas
and Mexican sauces using fresh ingredients, including tomatoes. As a result, its
production is at approximately 80% of capacity during the harvesting season
(approximately June through November). During that time, La Victoria produces
substantially all of its salsa products required until the next harvesting
season. During the off season, La Victoria produces other types of products and
operates its facility at approximately 15% of capacity. As a result of the
seasonality of its production, La Victoria's cash needs are greater during and
immediately after the production season. La Victoria has entered into an
agreement with a bank for a $3,000,000 unsecured line of credit (the "La
Victoria Line of Credit"). Interest on the La Victoria Line of Credit is at the
bank's prime rate (8.50% at May 31, 1997) or at LIBOR (5.77% at May 31, 1997),
plus 2%, at La Victoria's option. As of March 31 and May 31, 1997, the Company
had $3 million available under the La Victoria Line of Credit. The La Victoria
Line of Credit expires in September 1997. The agreement contains similar
covenants to those in the La Victoria Term Loan agreement.

La Victoria entered into various note payable agreements with related
parties, including shareholders, to finance working capital and capital
improvement projects in 1994. In addition to these "on demand" borrowings, La
Victoria historically has borrowed other funds from related parties on a
long-term basis to finance short-term working capital requirements. There were
no amounts outstanding under these note agreements at May 31, 1997.

La Victoria also has entered into three facility lease agreements with
related parties, which have been classified as capital leases. Accordingly, a
liability under these leases of $5,809,000 was recorded as of May 31, 1997. The
leases require minimum monthly payments that total $90,000 over the remaining 14
year term of the agreements. In addition, the leases require adjustment for
increases in the Consumer Price Index (the "CPI") every five years. The next
scheduled increase is to occur in August 2000. La Victoria's management

30
<PAGE> 32

believes these facilities are sufficient for their needs for the foreseeable
future. See "Certain Transactions -- Tanklage Lease Arrangements."

The La Victoria Contribution and Exchange Agreement provides that La
Victoria will pay a dividend of $4 million immediately prior to the La Victoria
Acquisition, 50% of which will be paid to Mr. Tanklage and the remaining 50% of
which will be paid to LV Foods and will be used to repay a portion of the La
Victoria Shareholder Note. La Victoria anticipates that this payment will be
made from existing cash balances and operating cash flow.

Net cash provided by operating activities for the year ended May 31, 1997
decreased from $5,235,000 in 1996 to $2,039,000 in 1997, a decrease of
$3,196,000, or 61%. This was primarily attributable to a $986,000 reduction in
net income along with a decrease in working capital requirements of $1,644,000
compared to a decrease in working capital requirements in 1996 of $3,856,000.

Net cash provided by investing activities for the year ended May 31, 1997
increased from a loss of $101,000 in 1996 to $320,000 in 1997, an increase of
$421,000, or 418%. This was primarily attributable to La Victoria's collecting
$340,000 on a note receivable from an officer. In addition, cash paid for the
purchase of equipment decreased approximately $100,000.

Net cash used in financing activities increased from $1,512,000 in 1996 to
$2,637,000 in 1997, an increase of $1,125,000, or 74%. This was primarily
attributable to the pay-off of related party notes of approximately $1,300,000.

ENVIRONMENTAL MATTERS

La Victoria has been identified as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA"), for the cleanup of contamination from hazardous
substances at the South El Monte Operable Unit of the San Gabriel Valley
Superfund Site. La Victoria does not believe that its ultimate liabilities in
relation to the site will have a material effect on its financial position;
however, it is not possible to determine the ultimate environmental liabilities,
if any, that may arise from this matter. See "Business -- Legal Proceedings."

INFLATION AND CHANGES IN PRICES

The cost of ingredients (e.g., tomatoes, peppers, onions) for products La
Victoria manufactures rises and falls in line with their value in the commodity
markets. La Victoria endeavors to insulate itself from wide variations in prices
by entering into supply contracts on an annual basis. Generally, increases in
raw material costs are recovered with periodic product price increases.

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<PAGE> 33

BUSINESS

INTRODUCTION

Authentic Specialty Foods is a leading provider of an extensive line of
Mexican food products to Mexican-American consumers, as well as non-Hispanic
consumers who enjoy authentic Mexican food. After this Offering, the Company
believes that it will be the largest publicly-owned company engaged solely in
the manufacture and distribution of Mexican food products targeting primarily
the Mexican-American consumer. The Company has two separate
brands -- Calidad(TM) and La Victoria(TM) -- both of which are recognized for
high quality products and well-accepted by the Company's target consumers. The
Calidad and La Victoria brands have strong market positions in the southwestern
and western regions of the United States, respectively, particularly in Texas
and California. Following the completion of this Offering, the Company will be
poised for internal growth and to take advantage of acquisition opportunities in
the highly fragmented Mexican food industry. Management has extensive experience
in the food industry and intends to utilize its expertise to improve the
operating efficiencies and to expand the sales of Authentic Specialty Foods and
any companies acquired in the future.

Calidad sells branded and private label tortillas and tortilla chips, as
well as branded cheeses, meats and shelf-stable products (including spices,
salsas and peppers) primarily to grocery stores in Texas and certain adjacent
states. Calidad provides retailers with an extensive line of quality products
under a comprehensive service program through which Calidad's direct store
delivery ("DSD") salespersons can manage substantially all of a customer's
Mexican food category. The strength of the Calidad brand name (which means
"Quality" in Spanish), its comprehensive service program and the breadth and
quality of its product line have enabled Calidad to achieve significant market
penetration of stores in North Texas, including the Dallas/ Ft. Worth metroplex,
one of the largest Mexican-American population centers in the country. Calidad's
tortillas and tortilla chips are manufactured daily in a 70,000 square foot
facility in Grand Prairie, Texas, which is located in the Dallas/Ft. Worth
metroplex. The Company also purchases other products manufactured by third
parties for distribution under the Calidad brand and other brand names.

La Victoria sells a wide variety of branded salsas and other Mexican sauces
primarily to grocery stores in California and certain other western states.
Founded in 1917, La Victoria believes it has significant market share in the
"hot" end of the salsa and Mexican sauce category. Although La Victoria is a
regional brand, it outsells a number of national brands in several western
states in both taco sauces and salsas. In addition, La Victoria sells its
products in the food service market on a branded and private label basis and to
warehouse clubs on a branded basis. Food service sales consist primarily of
sales to restaurants and wholesale restaurant suppliers. Generally, La
Victoria's products are delivered to a retail customer's warehouse or
distribution facility rather than directly to a customer's retail outlets. La
Victoria manufactures substantially all of its products in a 112,000 square foot
production and warehouse facility located in Rosemead, California, a suburb of
Los Angeles.

INDUSTRY BACKGROUND

Growing Popularity of Mexican Food Segment. The Mexican food segment is one
of the largest and fastest growing categories within the domestic food industry,
and this trend is expected to continue. According to Packaged Facts (1995),
nearly $2.4 billion of Mexican food (excluding tortilla chips) was consumed in
the United States in 1994, and this category is expected to grow to over $3.5
billion by 1999, a compound annual growth rate of 8%. Tortillas are a staple in
the Mexican-American diet as they are served like bread and are used in many
Mexican-style dishes.

As reported by Packaged Facts, the Mexican sauce industry, which includes
salsas, picante sauces, taco sauces and enchilada sauces, is estimated to have
achieved $1 billion in annual sales in 1995 and is projected to grow at a
compound annual growth rate of approximately 11% through 1999. According to
Supermarket Business, sales of Mexican sauces in 1995 increased over 7.3% from
1994 sales levels, compared to year-to-year growth of approximately 4.5% for the
condiment category as a whole. Moreover, also according to Supermarket Business,
in 1995 U.S. consumers purchased approximately 30% more Mexican sauces than
ketchup.

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<PAGE> 34

Growing Mexican-American Population. The Company targets Mexican-American
consumers, an increasingly important part of the U.S. population. According to
estimates by CACI Marketing Systems, Hispanics comprised 10.4%, 29.7% and 29.1%
of the total United States, California and Texas populations, respectively, in
1996. From 1990 to 1996, the overall populations in the United States,
California and Texas are estimated to have grown at an average annual rate of
1.0%, 1.1% and 1.9%, respectively, and the Hispanic populations of each are
estimated to have grown at an average annual rate of approximately 3.3%. The
U.S. Census Bureau has estimated that in 1996 there were 27.2 million Hispanics
living in the United States. Of this amount, approximately 64% were of Mexican
descent or origin. Although the Company is not aware of any separate statistics
with respect to the growth of the Mexican-American portion of the Hispanic
population, management believes that the growth of the Mexican-American
population is consistent with that of the Hispanic population in general,
particularly in the Company's current primary marketing areas of Texas and
California.

Six of the top ten Hispanic markets in the U.S. are in the Company's
marketing areas: Dallas/Ft. Worth, Los Angeles, San Francisco, Houston, San
Antonio and McAllen-Brownsville. Furthermore, these markets comprise
approximately 39% of the total U.S. Hispanic population. Management believes
that the demographic trends within the Mexican-American population, including
absolute growth in numbers and relative growth in purchasing power, will create
market opportunities for companies targeting this growing demographic group.

Shopping and Dining Characteristics. The Company focuses its marketing
efforts on Mexican-American consumers, who generally exhibit shopping and dining
characteristics that distinguish them from non-Hispanic consumers and make them
attractive target consumers. A number of grocery store chains, such as Carnival
and Danal's in the Dallas/Ft. Worth metroplex and Fiesta in Houston,
specifically cater to the preferences of the Mexican-American consumer.
Non-Hispanic grocery store chains have also realized the importance of
attracting Mexican-Americans to their stores. Grocery store chains believe that
a strong selection of Mexican food products will encourage repeat shopping by
these high frequency shoppers and will foster sales of other products throughout
a store. The Company believes that its marketing strategy of providing an
extensive line of Mexican food products appeals to both Mexican-American and
non-Hispanic grocery stores.

Management believes that the Company also benefits from the increasing
popularity of Mexican food products among the general population described above
and that it is well-positioned to take advantage of the expected continued
growth in the Mexican-American population.

BUSINESS STRATEGY

The Company's objective is to expand its position as a leading provider of
an extensive line of Mexican food products primarily to Mexican-American
consumers. In order to achieve this objective, the Company's strategy is to (i)
improve the operations of Authentic Specialty Foods in the areas of product
development, merchandising, production, distribution and sales; (ii) acquire
Mexican food manufacturers or brands in areas with large, growing
Mexican-American populations and utilize the skills and experience of the
management team to integrate and improve the operations of these newly acquired
companies; (iii) expand the Company's geographic markets and increase
distribution of the Company's products in its existing markets; and (iv)
continue to add new products and brands to the Company's existing line of
products.

Integration and Improvement of La Victoria. Management believes it can
execute a number of operational improvements at La Victoria, including reducing
certain operating expenses, particularly marketing expenditures. Additionally,
the Company plans to gradually shift production of selected products from fresh
to processed tomatoes, which can be purchased throughout the year. La Victoria
currently manufactures the majority of its products with fresh vegetables during
the four to six month tomato harvest in California. Management intends to
implement this change only with respect to those La Victoria products where the
taste or quality of these products will not be affected by the change.
Management believes this production shift will increase manufacturing
efficiency, expand useful plant capacity and reduce working capital
requirements. Additionally, the Company intends to implement new sales and
marketing initiatives, including increasing in-store marketing, introducing new
sizes and packages for non-grocery sales channels and introducing La Victoria
products in selected new markets. The Company also believes it can integrate
certain activities of

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Calidad and La Victoria by (i) offering La Victoria's products through the
Calidad distribution system and (ii) selling other Mexican sauces produced by La
Victoria under the Calidad brand name in Calidad's markets.

Acquisition Opportunities. Following the completion of this Offering, the
Company will be poised for internal growth and to take advantage of acquisition
opportunities in the highly fragmented Mexican food industry. The Company
intends to pursue strategic acquisitions of Mexican food manufacturers or brands
in market areas with significant Mexican-American populations. Management has
extensive experience in the food industry and intends to utilize its expertise
to improve the operating efficiencies and to expand the sales of Authentic
Specialty Foods and any companies acquired in the future. The Company believes
that its relationship with Shansby, which has significant experience in
acquiring and improving branded consumer product companies, will be beneficial
to its successful implementation of this strategy. See "The Shansby Group" and
"Certain Transactions -- Shansby Partners Advisory Agreement."

Market Expansion. The Company intends to continue to grow in its current
geographic markets by expanding sales with its existing customers and by adding
new customers. A number of grocery store chains in the southwest have
specifically designed their operations to cater to the Mexican-American
consumer. Many grocery store chains have special areas or displays in their
stores with an extensive selection of Mexican food products to attract
Mexican-American consumers and encourage repeat shopping. Generally, the Company
has sold more products and captured additional shelf space as the Company's
customers have recognized the growing demand for Mexican food and tailored their
operations to appeal to Mexican food consumers.

New Product Developments. Because of the strength of the Calidad brand in
its markets, Calidad has been able to introduce new products that have
contributed to the growth of Calidad's business. Within the last three years,
Calidad has broadened its product line by approximately 60 stock keeping units
("SKUs"), including Calidad branded Tipo Casero (or "home style") tortillas, a
thicker tortilla product, a variety of shortening products used in traditional
Mexican cooking, restaurant-style chips packaged in a 40-ounce bag and fat-free
flour tortillas. Management believes that these recently-introduced products (as
well as other new products that are currently under development but that have
not yet been announced) are logical extensions of the Company's existing product
lines. The Company intends to continue to develop new products for Calidad and
to identify selected new products for La Victoria.

PRODUCTS AND BRANDS

As a result of the La Victoria Acquisition, the Company has expanded its
already extensive line of Mexican food products. The Company has two separate
brands -- Calidad(TM) and La Victoria(TM) -- both of which are recognized for
high quality products and well-accepted by Mexican-American consumers. Under the
Calidad brand, the Company sells branded and private label tortillas and
tortilla chips, as well as branded cheeses, meats and shelf-stable products
(including spices, salsas and peppers). Under the La Victoria brand, the Company
sells a wide variety of branded salsas, taco sauces and other Mexican sauces and
specialty items (such as jalapenos, tomatillos, cheese sauce and refried beans).
The Company offers a variety of products to capitalize on consumers' preferences
for different types of Mexican food products. The Company believes that the
Calidad and La Victoria products have gained wide acceptance in the
Mexican-American population in their respective geographic markets.

Calidad. Calidad's two primary products are tortillas and tortilla chips.
Tortillas are traditional Mexican flat bread made from wheat flour or corn flour
(known as "masa"). They are used in all aspects of Mexican cuisine, are served
like bread and are cooked with many Mexican dishes. Tortilla chips are also made
from masa and are often served with soups and salsas and eaten as a snack. In
addition to distributing these products under the Calidad brand, Calidad also
manufactures and distributes these products on a private label basis for larger
grocery store chains. The Company believes that offering certain of its products
on a private label basis expands the market for Mexican food products generally
and gives the Company a competitive advantage for shelf space over other
suppliers of Mexican food products.

The Company sells a variety of cheese and meat products under the Calidad
brand and other brand names. Calidad's cheese products include a variety of
ethnic cheeses, and the meat products include chorizo

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(a Mexican-style sausage) and tamales (corn meal stuffed with beef, pork or
chicken). These products are manufactured by third parties and distributed by
Calidad. Approximately half of these products are distributed under the Calidad
brand name, and the remainder are distributed under the original brand name.
Calidad distributes certain of these products under the manufacturer's brand
name because of their significant recognition within the Mexican-American
community.

Calidad also packages and sells a wide variety of spices that are used in
Mexican cuisine, including cayenne pepper, chili powder, chili peppers and
cinnamon. Calidad's spices are packaged in small packets that the Company
believes appeal to the Mexican-American consumer. Calidad distributes these
products primarily under the Calidad brand and also on a private label basis.

Shelf-stable products, such as salsas, peppers, fruit drinks and cheese
sauces are obtained from Mexican, national or regional producers and distributed
by Calidad. Approximately half of these shelf-stable products are distributed
under the Calidad brand, and the remainder are distributed under the
manufacturer's brand name. Certain products in this group carry the lowest gross
margins of Calidad's product line, but are essential to the Company's strategy
of providing an extensive line of Mexican food products.

La Victoria. La Victoria markets salsas with a wide variety of tastes, heat
levels and container sizes. Salsas are used for dipping with chips, as a
condiment or as an ingredient in cooking a number of Mexican food dishes. La
Victoria sells its salsas under a variety of descriptive names in order to
emphasize the distinctive character of their ingredients. Examples of these
varieties are Salsa Suprema, Thick 'N Chunky Salsa, Salsa Brava, Green Chili
Salsa and Salsa Victoria. Each of the La Victoria brand salsas contain different
combinations of vegetables (chili peppers, diced onions, jalapenos and garlic)
in a green or red tomato-based sauce.

One of La Victoria's more established products is taco sauce. La Victoria
has manufactured and marketed at least one variety of taco sauce for almost 50
years and continues to be a market leader in this category in the western United
States. La Victoria also markets enchilada sauce, a mild sauce made from fresh
and dehydrated California and Pasilla chili pods. Beyond use with enchiladas, it
is marketed as a condiment for chili, soup and tamales.

La Victoria also sells a variety of specialty items under the La Victoria
brand, such as whole and nacho-sliced jalapenos, crushed tomatillos, refried
beans, cheddar cheese sauce and nacho cheese sauce (which is spiced with
jalapenos). Some of La Victoria's specialty items are produced under separate
one-year agreements with third party manufacturers. These agreements, also known
as co-packing arrangements, are renewable at the Company's option.

SALES AND MARKETING

The Company's combined market area after this Offering will encompass the
southwest and western regions of the United States, particularly Texas and
California. Upon completion of this Offering, the Company intends to explore the
expansion of its marketing area to other geographic areas with existing and new
customers, additional distributor relationships and through acquisitions.

Calidad. Calidad's marketing area currently encompasses locations within
Texas, Arkansas, Louisiana and Oklahoma. Given the Company's historically
limited financial resources, management has focused primarily on distribution
within North Texas, including the Dallas/Ft. Worth metroplex.

Calidad has targeted grocery store chains, independent retail food outlets
and individual retailers that wish to appeal to the growing Mexican-American
community. Calidad is able to approach retail outlets with a comprehensive
full-service program for managing substantially all of a store's Mexican food
category. Under its category management program, Calidad provides an extensive
line of quality Mexican food products, and utilizing its DSD system, delivers
these products to the store and stocks the store's shelves. Generally, Calidad
attempts to gain shelf space for all of its products in each of its customer's
stores. In those circumstances when this is not possible, Calidad often utilizes
one product in order to gain access to shelf space and, through its commitment
to service and quality, continues to add to the product line it supplies.
Calidad believes that its

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category management capabilities enable Calidad to enter new markets where
retailers are seeking strategies to target the Mexican-American consumer.

Calidad spends the majority of its marketing funds reinforcing the image of
the Calidad brand as a Mexican food brand that appeals primarily to
Mexican-Americans. Calidad does this primarily through performance-based
promotional plans. These performance plans typically require the retailer to
provide equal or partial participation in costs associated with displays,
temporary price reductions, advertising and coupons. For example, Calidad's
customers will often run photographs of Calidad's products in their weekly,
biweekly and monthly circulars. Calidad also runs promotions in conjunction with
Mexican-American holidays, such as Cinco de Mayo.

La Victoria. La Victoria's market is focused primarily on California and
adjacent western states with limited distribution in the central United States.
In recent years, La Victoria's management has concentrated on its existing
markets and discontinued sales in regions that have traditionally been less
profitable.

La Victoria targets primarily grocery store chains, independent retail food
outlets and individual retailers. In addition, La Victoria sells its products in
the food service market on a branded and private label basis and to warehouse
clubs on a branded basis. In general, La Victoria's approach to retailers has
differed from Calidad's in that La Victoria offers a more focused product line,
concentrated on Mexican sauces and salsas.

La Victoria employs a variety of marketing methods to support sales,
including advertising, coupons and minimal in-store promotions and displays.
Historically, La Victoria's strategy has been to market broadly the La Victoria
brand rather than to focus on a specific product. However, in 1993 and 1994, La
Victoria focused its marketing efforts and expenditures on the introduction of
its line of Thick 'N Chunky Salsa. Management believes its efforts in
introducing this line of salsa created valuable exposure for the La Victoria
brand. La Victoria focuses its marketing efforts around several key events,
including the Super Bowl and Mexican-American holidays. As described under
"-- Business Strategy -- Integration and Improvement of La Victoria," the
Company intends to increase La Victoria's use of in-store marketing after the La
Victoria Acquisition.

DISTRIBUTION

Calidad. Calidad's products are distributed through an integrated,
computerized DSD system. The DSD system utilizes Calidad's employees in the
Dallas/Ft. Worth and San Antonio market areas, and independent distributors
outside of these markets. Through its DSD system, Calidad has established
rapport with its customers and built strong relationships at the retail level.
In addition, Calidad's frequent visits to customers served by its DSD system
provide valuable information with respect to its products, competition,
consumers' shopping habits, product positioning, marketing effectiveness,
pricing and relative shelf space.

Calidad provides its grocery store customers a comprehensive full-service
category management program. Under this program, Calidad manages substantially
all of a grocery store's Mexican food category by providing an extensive line of
quality Mexican food products, delivering these products to the store, stocking
the store's shelves and removing out-of-date or spoiled products. DSD
salespersons are generally scheduled to visit their customers from two to seven
times per week. DSD salespersons leave Calidad's facility early each morning on
predetermined routes, equipped with hand-held computers, portable printers and a
broad selection of Calidad's products. Nightly, when salespersons return to
Calidad's main distribution facility, all deliveries and orders are downloaded
into Calidad's main computer system. This information is electronically
disseminated to the proper department for invoicing, collection and production
scheduling.

Calidad owns or leases 26 DSD vehicles and manages its DSD system from
Calidad's manufacturing and distribution facility. Although Calidad's DSD system
is generally administered in the same manner regardless of whether the
salesperson is a Calidad employee or an independent distributor, there are
certain differences between the two groups. Independent distributors are
utilized by Calidad to target more distant and less concentrated markets. These
distributors are effective in introducing Calidad's products on either a branded
or private label basis and are required to provide services that are similar to
those provided by Calidad's DSD employees in their market areas. In contrast to
Calidad employees, independent distributors own or lease their

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own vehicles. These distributors are also responsible for any returns of
Calidad's products. Distributors are compensated on a commission basis that
equates to a higher percentage of gross sales than that earned by Calidad's
employees. Almost all distributors are linked by modem to Calidad's computer
system. The Company believes that Calidad's computer-enhanced distribution
system distinguishes Calidad from many of the other participants in the Mexican
food industry.

La Victoria. Generally, in California and the western United States, La
Victoria's products are distributed directly to retailers' warehouses and
through wholesalers for distribution to independent grocery stores. Unlike
Calidad, La Victoria does not utilize a DSD system. The majority of La
Victoria's distribution outside of California is serviced by public warehouses
located in customers' markets which are regularly supplied with La Victoria's
products based on orders. La Victoria owns or leases eight vehicles and delivers
its products to its distributors' and customers' warehouses from its
distribution facilities. Certain customers located in close proximity to La
Victoria's facilities frequently obtain product directly from La Victoria's main
distribution facility, utilizing their own vehicles.

Finished products are stored temporarily at the production facility before
being transferred to the 170,000 square foot distribution center in City of
Industry, California. The products are stored in the main distribution center
until they are delivered to a customer or trucked by common carrier to La
Victoria's seven regional distribution centers. Co-packed shipments are trucked
from the co-packer's plant to La Victoria's City of Industry distribution center
or one of the regional warehouses. La Victoria uses public warehouses, which
serve as regional distribution centers, in Clackamas, Oregon (near Portland);
Salt Lake City, Utah; Billings, Montana; Aurora, Colorado (near Denver); El
Paso, Texas; Itasca, Illinois (near Chicago); and Tampa, Florida.

CUSTOMERS

Calidad. Calidad's customer base includes major grocery stores, independent
food chains and individual retailers. In the past, this base has been quite
stable, with little turnover. Since the acquisition of the Company by Shansby
and the installation of the existing management team, Calidad's customer base
has expanded significantly both within and outside North Texas. Although it is
difficult for many food companies to obtain shelf space in retail outlets,
Calidad currently sells to over 160 grocery retailers and distributors, and
Calidad's products are on the shelves in an estimated 1,400 stores throughout
its marketing area. Among Calidad's customers are Minyard Food Stores, Sack 'n
Save, Carnival, Brookshire Grocery Co., Wal-Mart Stores, Inc., Winn-Dixie Texas,
Inc., The Kroger Co., Albertson's, Inc. and Tom Thumb Food Markets, Inc. Within
the food industry and, in particular, within the grocery store distribution
channel of the food industry, it is common practice for retailers to charge food
producers fees ("slotting fees") for new product placement. Slotting fees are
charged to offset the retailers' startup costs associated with the new item,
including the costs of setting up scan codes, printing shelf tags and resetting
shelves. In general, Calidad does not pay its customers slotting fees to sell
its products. Calidad paid less than $25,000 in slotting fees in 1996.

Sales to Calidad's top ten customers were $14.5 million in 1996, or 68.6%
of net sales, compared to $15.2 million in 1995, or 72.3% of net sales. Only
Minyard Foods accounted for more than 10% of Calidad's net sales during these
periods. The decrease in sales to the top ten customers resulted from the
discontinuation of sales of shelf-stable products to Minyard Foods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Authentic Specialty Foods, Inc." Most of Calidad's principal
customer relationships have been cultivated over a period of many years. In many
cases, Calidad's relationships were established when retailers became aware of
the importance of Mexican-American consumers within their markets and began to
contemplate an appropriate service strategy.

Minyard Foods accounted for 27.6% of Calidad's net sales during 1996.
However, Minyard Foods actually consists of three separate operating divisions:
Minyard Food Stores, Sack 'n Save and Carnival. During 1996, Minyard Food Stores
accounted for $1.46 million of Calidad's net sales (6.9%), Sack 'n Save
accounted for $2.5 million (11.6%) and Carnival accounted for $1.9 million
(9.1%). Calidad has a separate relationship with each of these three divisions,
which are operated somewhat autonomously and have different target consumers.
See "Risk Factors -- Dependence on Key Customers."

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La Victoria. La Victoria sells its products primarily to major grocery
stores, independent retail food outlets, individual retailers and wholesalers.
La Victoria currently has over 800 retail accounts and 200 food service
accounts, and La Victoria's products are sold by an estimated 7,500 stores and
distributors throughout its marketing area. Among La Victoria's customers are
Safeway, Lucky, Albertson's, Inc., Vons Grocery Company and Ralph's Grocery. In
fiscal 1996, La Victoria's top ten customers accounted for approximately 50% of
its total net sales. For the year ended May 31, 1997, American Stores Company
and Safeway, Inc. accounted for 10.0% and 12.9% of La Victoria's net sales,
respectively. La Victoria paid approximately $195,000 for new distribution and
slotting fees in the fiscal year ended May 31, 1997.

La Victoria also sells its products to food service customers, such as
Sysco Corp. and Denny's, Inc. Relationships with other types of customers,
primarily warehouse clubs and private label programs, are currently managed
internally by La Victoria's regional sales managers. While these customers have
traditionally represented a relatively small amount of La Victoria's total
sales, La Victoria's management believes that the expansion of these categories
could provide an area of future growth for La Victoria.

TRADEMARKS

Calidad. The Company believes that its Calidad logo, which features two
traditional Mexican dancers, is an important part of its efforts to appeal to
the Mexican-American consumer. Substantially all of Calidad's products bear a
green, yellow and red Calidad logo, but a few items have a blue, red and white
Calidad logo to differentiate the product type. The logo on all of Calidad's
products features the types of bright colors to which the Mexican-American
consumer is accustomed, and the picture of the dancers is reminiscent of images
from Mexico. The word "Calidad" means "Quality" in Spanish, and Calidad has
incorporated the phrase "Our Name Means Quality" into its logo. In order to
reinforce brand identity and underscore Calidad's ability to provide an
extensive line of Mexican food products, the Company's products can be found
throughout a store in a variety of food categories and are easily identified by
the Calidad logo that is incorporated across all product line packaging. The
Company has obtained federal registration for the trademarks contained in the
logo. The Company has successfully defended its trademark in the past against
one food company that had attempted to use it and plans to continue to defend
its trademark in the future.

La Victoria. La Victoria has a number of important trademarks and
copyrights, including La Victoria, Salsa Brava(TM), Salsa Suprema(TM),
Suprema(TM), Victoria(TM), Mexican Kitchen(TM) and a thermometer, which clearly
indicates to the consumer the heat level of each product (mild, medium, hot or
extra hot). La Victoria uses the slogans "When you're ready for real salsa" and
"Food secrets of Mexico" on many of its labels and in its advertisements. La
Victoria redesigned its labels in 1993 and its jars in 1994 in an effort to
provide its consumers with more information on an individual product's
ingredients and to make the La Victoria brand more recognizable and consistent
throughout its product line. Each container's label is clearly marked with the
La Victoria logo, a depiction of the product's ingredients and the trademarked
thermometer. La Victoria has successfully defended its trademark in the past and
plans to continue to defend its trademark in the future.

MANUFACTURING AND FACILITIES

Calidad. Calidad manufactures tortillas and tortilla chips at its modern
facility in Grand Prairie, Texas, which is located in the Dallas/Ft. Worth
metroplex. Calidad spent an aggregate of $3.1 million in 1995 and 1996 to move
to the facility and to expand its production and distribution capabilities. The
70,000 square foot facility has six tortilla production lines and two tortilla
chip lines. At the facility, Calidad also repackages bulk spices into smaller
packaging that is designed to appeal to Mexican-American consumers. Calidad
employs approximately 90 production personnel at the facility and currently
operates on a two-shift basis, five days per week. Management believes that
Calidad's existing production facility has ample capacity for tortilla and
tortilla chip production to support the Company's expansion efforts for the
foreseeable future and subsequently realize additional operating leverage and
efficiencies.

Calidad leases its Grand Prairie facility under a three-year sublease that
is scheduled to expire in August 1999, with an annual rental rate of
approximately $175,000. The sublease may be renewed at the option of the Company
for an additional six-year term at the fair market value on the date of renewal.

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Management expects Calidad's production efficiencies to improve and costs
to decline as this available production capacity is utilized. If the production
lines were to be run on a three shift, six-day work week, management believes
that current tortilla chip production would be at approximately 30% of total
capacity; corn tortilla production would be at approximately 50% of total
capacity; and flour tortilla production would be at approximately 50% of total
capacity.

Calidad does not manufacture all of its branded products. As of June 30,
1997, approximately 34% of Calidad's branded products were manufactured by third
parties under co-packing arrangements. Products offered by Calidad but produced
under co-packing arrangements include: canned peppers, picante sauce, salsa,
nacho cheese sauce, sweet breads, pork skins, chorizo, cheese, dried beans, taco
shells, tostada shells, ice pops, tamales, gelatin and chili con queso.

La Victoria. With the exception of co-packed products, all of La Victoria's
production is conducted at its production and warehouse facility in Rosemead,
California, a suburb of Los Angeles. The Rosemead facility consists of a total
of approximately 112,000 square feet, including approximately 61,000 square feet
of production space and approximately 51,000 square feet of warehouse space. La
Victoria leases its Rosemead production and warehouse facility under two
separate leases with affiliates of La Victoria. The 61,000 square foot
production facility is leased through July 2010 at lease rates that escalate
based upon changes in the CPI every five years. The annual lease payment is
approximately $214,000, and the next CPI escalation will occur in August 2000.
The 51,000 square foot warehouse facility is leased through July 2010 at lease
rates that escalate in accordance with the CPI every five years. The annual
lease payment is approximately $262,000, and the next CPI escalation will occur
in August 2000. During 1993 and 1994, La Victoria completed a capital
improvement program in the Rosemead facility, investing in excess of $4 million
over two years.

The Rosemead facility currently operates seasonally, as the majority of La
Victoria's products are manufactured with fresh vegetables during the four to
six month tomato harvest in California. During the harvest season, La Victoria
operates at or near capacity to fresh pack the vast majority of its tomato based
products. If La Victoria were to utilize processed tomatoes and operate two
shifts for 5 days per week for 52 weeks, the Rosemead facility would operate at
approximately 29% of capacity at current production levels. Although the
Rosemead facility has three production lines, La Victoria rarely runs all of
them simultaneously. La Victoria believes it could efficiently, and with little
capital expense, support significant additional production of Mexican sauces at
the Rosemead facility with its existing equipment.

Finished products are stored temporarily at the Rosemead facility before
being transferred to La Victoria's approximately 170,000 square foot warehouse
and distribution center in City of Industry, California. The City of Industry
facility is leased through July 2010 at lease rates that escalate according to
the CPI every five years. The annual lease payment is approximately $860,000,
and the next CPI escalation will occur in August 2000. See "Certain
Transactions -- Tanklage Lease Arrangements."

COMPETITION

Although the Company believes that its ability to supply a broad product
line and its category management skills are unique in the Mexican food industry,
the Company faces significant competition in each of the components of its
product line. Many of these competitors are larger, more established and better
capitalized than the Company.

Calidad competes against national and local companies in the manufacture
and distribution of tortillas and tortilla chips. Calidad's two most significant
competitors are Mission Foods Corporation, a subsidiary of Gruma S.A. de C.V.
("Mission"), and Bimar Foods Corporation, a subsidiary of Grupo Industrial
Bimbo, S.A. de C.V. ("Bimbo"). Both Mission and Bimbo are significant
participants in the southwestern region of the United States and are larger and
better capitalized than the Company. Mission produces primarily tortillas and
tortilla chips and is the most visible competitor in the Company's markets.
Bimbo entered the Texas market in 1995 with its acquisition of C&C Bakery and
formed a strategic alliance with Mrs. Baird's Bakeries, Inc. ("Mrs. Baird's"), a
third-generation family bread company with annual sales of approximately $250
million, to act as Bimbo's Texas distribution vehicle. Mrs. Baird's introduced
its tortillas to the North Texas market in July 1995. Mrs. Baird's has a full
line of flour and corn tortillas marketed under the

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Mrs. Baird's Texas Tortilla and Tia Rosa brand names. Management believes that
Mrs. Baird's provides a quality product but that acceptance of the Mrs. Baird's
Texas Tortilla and Tia Rosa brands among Mexican-American families has been
limited to date.

In addition to direct competition from manufacturers of Mexican food
products, certain snack food companies, such as Frito-Lay Inc., manufacture and
distribute tortilla chips and corn chips. Frito-Lay Inc., a national company
headquartered in Dallas, markets its products under several brands, including
Doritos(TM) and Tostitos(TM), among others. However, management does not believe
that snack food companies compete directly with Calidad because their products
are positioned as snack foods and are marketed primarily to non-Hispanic
consumers.

With regard to Calidad's refrigerated product category (i.e., meats and
cheeses), there is only one principal DSD distributor, Alamo Distributing
("Alamo"), in Calidad's major markets that competes in this product category.
Several of the Dallas/Ft. Worth grocery chains carry ethnic meats and cheeses
through their warehouse distribution system, but Calidad believes that it
provides superior service at the store level. In addition, several of the large
grocery distributors also handle meats and cheeses. Gourmet Award Foods also
competes with Calidad in the cheese category.

With respect to the spices that Calidad repackages and sells, Calidad
competes with Mojave Spice Co., Inc., DeLuna Spice Company and Fiesta Bolner
Spice Company.

With respect to Mexican food products that are distributed by Calidad under
other brands (such as salsas, peppers and other shelf-stable products), this
category is broad, with an array of products that are all produced by other
suppliers, and it generates less profitability than other categories. Competing
companies such as Fleming Companies, Inc., Gourmet Award Foods, Grocers Supply
and Cyclone Enterprises, Inc. carry similar products.

La Victoria. The Mexican sauce industry is highly competitive. In the
western United States, La Victoria primarily competes with Pace, Tostitos and
Old El Paso, and to a lesser extent, Ortega. These competitors are divisions of
the following major food companies: Campbell Soup Company, Frito-Lay Inc., The
Pillsbury Company and Nestle USA, Inc., respectively. Additionally, La Victoria
competes against smaller providers of Mexican sauces and against providers of
condiments in general.

GOVERNMENT REGULATION

Public Health. As a manufacturer and distributor of food products, the
Company is subject to the Federal Food, Drug and Cosmetic Act and regulations
promulgated thereunder by the Food and Drug Administration ("FDA"). This
comprehensive regulatory scheme governs the manufacture (including composition
and ingredients), labeling, packaging and safety of food. The FDA regulates
manufacturing practices for foods through its current good manufacturing
practices regulations, specifies the standards of identity for certain foods,
including many of the products sold by the Company, and prescribes the format
and content of certain information required to appear on food products labels.

In addition, the FDA enforces the Public Health Service Act and regulations
issued thereunder, which authorize regulatory activity necessary to prevent the
introduction, transmission or spread of communicable diseases. The Company and
its products are also subject to state and local regulation through such
measures as the licensing of manufacturing facilities, enforcement by state and
local health agencies of state standards for the Company's products, inspection
of the Company's facilities and regulation of the Company's trade practices in
connection with the sale of its products.

To monitor product quality, the Company maintains quality control programs
to test products during various processing stages. Management believes that the
Company's production and storage facilities and manufacturing practices comply
with applicable government regulations.

Employee Safety Regulations. The Company is subject to certain health and
safety regulations issued pursuant to the Occupational Safety and Health Act.
These regulations require the Company to comply with certain manufacturing,
health and safety standards to protect its employees from accidents.

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<PAGE> 42

Environmental Regulations. The Company is subject to certain federal, state
and local environmental regulations regarding the discharge of wastewater and
other environmental matters. Management does not expect environmental compliance
to have a material impact on the Company's capital expenditures, earnings or
competitive position in the foreseeable future. See "-- Legal Proceedings."

EMPLOYEES

Calidad. As of June 30, 1997, Calidad had approximately 155 employees. Of
this total, 66% were hourly, 19% were salaried and 15% were compensated on a
commission basis. Calidad's management considers Calidad's relationship with its
employees to be good. None of Calidad's employees are represented by unions.

La Victoria. As of June 30, 1997, La Victoria had 108 employees, 83 of whom
were hourly employees and 25 of whom were salaried employees. La Victoria
supplements its workforce with hourly workers on a seasonal basis. La Victoria's
peak demand for seasonal employees occurs from June to November, when fresh
tomatoes are harvested in California and La Victoria packs the majority of its
product. During the four to six month packing season, La Victoria employs an
average of an additional 80 to 90 hourly employees. See "-- Business
Strategy -- Integration and Improvement of La Victoria." La Victoria's hourly
employees are subject to a collective bargaining agreement with the United
Industrial Workers, Service, Transportation, Professional and Government of
North America, SIUNA, AFL-CIO. La Victoria has had a collective bargaining
agreement with this union since 1969. The current agreement went into effect on
March 1, 1997 and expires on February 29, 2000. La Victoria has never
experienced a strike or any other type of work stoppage. La Victoria's
management believes that La Victoria's relationship with its employees is good.

LEGAL PROCEEDINGS

In March 1995, La Victoria and F.M. Roberts & Company, Inc. ("F.M.
Roberts") entered into an engagement letter in connection with a possible sale
of La Victoria. This engagement letter was amended by the parties on March 28,
1996. On April 29, 1997, La Victoria received a demand letter from F.M. Roberts
claiming that, under the terms of this engagement letter, it is entitled to an
investment banking fee in the amount of $360,000 in connection with the
acquisition by LV Foods of its 50% beneficial ownership interest of La Victoria.
Although La Victoria and Shansby believe that this claim is without merit,
Shansby and F.M. Roberts are discussing a settlement of this matter. Under the
terms of the settlement being discussed, any payments to F.M. Roberts would be
funded by TSG2 L.P., and would not be directly or indirectly paid by the
Company, LV Foods or La Victoria. Although there can be no assurance that this
matter will be settled, on the current terms being discussed or otherwise, the
Company does not believe it will be required to pay any amounts to F.M. Roberts.

By letter dated April 13, 1995, the U.S. Environmental Protection Agency
("EPA") has identified La Victoria as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA"), for the cleanup of contamination from hazardous
substances at the South El Monte Operable Unit of the San Gabriel Valley
Superfund Site. La Victoria has completed a subsurface soil remediation of
solvents at its Rosemead facility, which is located within the San Gabriel
Valley. Under CERCLA, persons may be subject to joint and several liability for
cleanup costs.

The EPA has identified approximately fifty PRPs at the site. The EPA has
requested that La Victoria participate in the groundwater sampling program for a
remedial investigation and feasibility study. Based on the limited impact to
groundwater that appears to be related to La Victoria's Rosemead facility, La
Victoria declined to participate in the groundwater monitoring. Since that time,
La Victoria has received no further correspondence from the EPA. La Victoria
does not believe that its ultimate liabilities in relation to the site will have
a material effect on its financial position; however, it is not possible to
determine the ultimate environmental liabilities, if any, that may arise from
this matter.

The Company is also involved in routine litigation incidental to the
conduct of its business. There are currently no material pending legal
proceedings to which the Company is a party or to which any of its property is
subject.

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<PAGE> 43

THE SHANSBY GROUP

The Shansby Group, Shansby's initial investment partnership, was founded in
1987 by J. Gary Shansby and Charles H. Esserman to invest in branded consumer
products companies with strong growth potential. TSG International is a separate
investment partnership established in conjunction with The Shansby Group for
certain international transactions. Shansby manages approximately $120 million
of equity capital on behalf of its limited partners, which are largely pension
funds, corporations and high net worth individuals. Its general partners and
employees are former operating executives, management consultants and investment
bankers. As a result, Shansby is able to offer substantial operating, strategic,
financial and analytical support to its portfolio companies.

Shansby's initial investment in the food category was The Famous Amos
Chocolate Chip Cookie Corporation ("Famous Amos") in 1988. At the time of the
investment, Famous Amos had approximately $6 million in annual sales and
operating losses of over $200,000 per month. Famous Amos had super-premium
priced products, was in a number of unprofitable channels of distribution and
was involved in a number of legal disputes. Despite its drawbacks, Famous Amos
retained one of the strongest brands in the cookie and snack business and had
substantial consumer awareness, both in and outside of its distribution areas.
Shansby executed a number of strategic initiatives, including repositioning the
brand to a premium category, eliminating non-core businesses, replacing and
supplementing management and staff, settling legal disputes and reducing general
and administrative costs. As a result, Famous Amos increased annual sales to
over $70 million in 1992 with operating income in excess of $9 million. Shansby
sold the company in 1992, realizing a substantial gain on its investment.

Shansby's investments since 1994 include Arrowhead Mills, Inc., one of the
first natural and organic food manufacturers of grain-based products; DeBoles
Natural Foods, Inc., a manufacturer of natural and organic dried pastas; Dana
Alexander, Inc., a manufacturer of natural potato and assorted root vegetable
chips under the Terra Chip(TM) brand; Medtech Products, Inc., a seller and
marketer of 11 over-the-counter pharmaceutical brands, including Compound W(TM)
(wart remover), Heet(TM) (topical analgesic), Arthritis Pain Formula(TM)
(internal analgesic) and Momentum(TM) (back pain specific internal analgesic);
Kasper, Inc., a contract manufacturer of health and beauty aid products for
prestige brands; The Freestyle Group, a seller and marketer of sport watches
under the Freestyle(TM) brand; and LV Foods, the beneficial owner of 50% of La
Victoria. These investments were made by TSG2 L.P., Shansby's second investment
partnership, which was formed in August 1993.

The Company was purchased by Shansby's first investment partnership, which
was formed in 1987 with a stated life of 10 years. Accordingly, this partnership
is required to liquidate its investment in the Company during 1997, although the
life of the partnership may be extended by the general partner for up to two
additional one-year periods. However, except in connection with the Contribution
and Exchange Agreement (and only if the Offering is consummated), the Company is
not obligated to redeem or otherwise repurchase any of Shansby's shares. As
described under "The La Victoria Acquisition," Shansby, through TSG2 L.P., a
second investment partnership formed by Shansby, will receive 1,386,000 shares
of Common Stock in the La Victoria Acquisition (provided that the value of such
shares will not exceed $13,860,000). As a result, Shansby will remain a
significant shareholder of the Company following this Offering. See "Principal
Shareholders." In addition, upon the consummation of this Offering, Shansby
Partners will receive the Shansby Warrant, which is a five-year warrant to
acquire 350,000 shares of Common Stock at an exercise price (subject to
adjustment) equal to the price to public on the cover page of this Prospectus.
The Shansby Warrant may not be exercised until after the first anniversary of
the consummation of this Offering.

Pursuant to the Advisory Agreement with the Company, Shansby Partners, a
newly formed affiliate of Shansby, has agreed to provide certain advisory
services to the Company. These advisory services will include assisting the
Company in the development and pursuit of its strategic objectives, including
strategic acquisitions and operational improvements of the companies acquired.
There can be no assurance that alliance with Shansby will result in any
acquisitions other than the La Victoria Acquisition. See "Certain
Transactions -- Shansby Partners Advisory Agreement."

Mr. Shansby and Mr. Esserman are members of the Board of Directors of the
Company. See "Management."

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<PAGE> 44

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and titles of the current
directors and executive officers of the Company. As reflected in the table, the
Board of Directors is divided into three classes, with the terms of the
directors of each class expiring at the Company's Annual Meeting of Shareholders
as follows: 1998 (Class I), 1999 (Class II) and 2000 (Class III). The table also
includes information with respect to three individuals that the Company intends
to elect as directors at the time of the consummation of this Offering.

<TABLE>
<CAPTION>
YEAR TERM
DIRECTOR AS DIRECTOR
NAME AGE POSITION CLASS EXPIRES
---- --- -------- -------- -----------
<S> <C> <C> <C> <C>
Keith R. Lively...................... 46 Chief Executive Officer, Chairman of the III 2000
Board and Director
Herman L.("Bing") Graffunder......... 52 President and Director II 1999
Samuel E. Hillin, Jr................. 41 Chief Financial Officer -- --
J. Gary Shansby...................... 59 Director III 2000
Charles H. Esserman.................. 38 Director III 2000
Tim G. Bruer......................... 40 Director nominee II 1999
Charles A. Lynch..................... 69 Director nominee I 1998
Robert K. Swanson.................... 65 Director nominee I 1998
</TABLE>

Set forth below is a brief description of the business experience of the
directors and executive officers of the Company.

Keith R. Lively, Chief Executive Officer, Chairman of the Board and
Director. Mr. Lively has worked as an advisor to several of Shansby's portfolio
companies since 1995, including the Company. Prior to this work, Mr. Lively
served as President, Chief Executive Officer and Director of Famous Amos. Mr.
Lively was appointed to his positions after Shansby purchased Famous Amos in
1988. Prior to joining Famous Amos, Mr. Lively was with Shamitoff Foods from
1987 to 1988 and previously, with MJB Coffee, a division of Nestle USA, Inc.,
where he worked from 1982 to 1986. Mr. Lively currently serves as a director of
Swiss Army Brands Inc. and SweetWater Inc.

Herman L. ("Bing") Graffunder, President and Director. Mr. Graffunder
joined the Company as President and Chief Executive Officer in February 1994
after 25 years in the dairy and specialty food industries. Prior to joining the
Company, Mr. Graffunder served as President and Chief Operating Officer of Oak
Farms Dairy, an operating company of Schepps-Foremost, Inc., in Dallas, Texas,
from 1990 to 1992. Oak Farms Dairy is a manufacturer and distributor of a
full-line of dairy products, frozen desserts and specialty foods. From 1988 to
1990, Mr. Graffunder served as Vice President and General Manager of three
businesses (Cabell's/Oak Farms Dairy, Specialty Foods Inc. and Merritt Foods)
owned by Morningstar Foods, a manufacturer of refrigerated food products based
in Dallas, Texas with over $200 million in annual sales. From 1984 to 1988, Mr.
Graffunder served as the Division Manager of the Specialty Foods Group of
Southland Corporation, the owner of the 7-Eleven convenience store chain, which
also had a significant food and dairy operation. From 1979 to 1984, Mr.
Graffunder held several positions, including Vice President Operations, with
Dairymen, Inc., an 8,500 member dairy co-op that operated 22 plants throughout
the southeastern United States, based in Louisville, Kentucky.

Samuel E. Hillin, Jr., Chief Financial Officer. Mr. Hillin joined the
Company as Chief Financial Officer in 1994 after 15 years in the food industry.
Prior to joining the Company, Mr. Hillin was Vice President, Finance of
Schepps-Foremost, Inc., a dairy company based in Dallas, Texas, from 1990 to
1994. From 1988 to 1990, Mr. Hillin served as the Controller of Texas Operations
(Cabell's/Oak Farms Dairy and Specialty Foods Inc.) for Morningstar Foods. From
1981 to 1988, Mr. Hillin held several positions with Southland Corporation of
Dallas, Texas, including Division Controller of MovieQuik Systems and Assistant
Division Controller of Cabell's/Oak Farms Dairy.

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<PAGE> 45

J. Gary Shansby, Director. Mr. Shansby is the founder of The Shansby Group
and has served as managing general partner of The Shansby Group since it was
formed in 1987. See "The Shansby Group." Mr. Shansby was formerly the Chairman
of the Board and Chief Executive Officer of Shaklee Corporation ("Shaklee"), and
has over 35 years of experience with consumer products companies. During his 11
years at Shaklee, a direct marketer of nutritional, personal care and household
products, the company grew from a family business with annual sales of less than
$80 million to a Fortune 500 company with annual sales of over $500 million.

Charles H. Esserman, Director. Mr. Esserman is a co-founder of The Shansby
Group and has served as general partner of The Shansby Group since it was
founded in 1987. See "The Shansby Group." Prior to joining The Shansby Group,
Mr. Esserman worked at Bain & Company ("Bain"), a strategic consulting firm,
from 1982 to 1987. While at Bain, Mr. Esserman's work was primarily focused on
helping companies formulate and implement marketing strategies.

Tim G. Bruer, Director nominee. Mr. Bruer is President and Chief Executive
Officer of Silverado Foods, Inc., an American Stock Exchange company that
manufactures specialty baked goods. From November 1992 until he joined Silverado
Foods, Inc. in March 1997, Mr. Bruer served as Vice President and General
Manager of the Culinary Division of Nestle Food Company. From February 1992
until November 1992, Mr. Bruer was Vice President, Business Development of
Nestle USA, Inc., and from December 1990 until February 1992, he was a partner
in Bain's consumer marketing practice area. Mr. Bruer is a director of Silverado
Foods, Inc.

Charles A. Lynch, Director nominee. Mr. Lynch has served as Chairman of
Fresh Choice, Inc., a restaurant chain, since March 1995. From 1989 until 1995,
Mr. Lynch was Chairman of Market Value Partners Company, an investment firm.
From 1988 until 1989, Mr. Lynch served as President and Chief Executive Officer
of Levolor Corporation, a manufacturer of window coverings, and from 1986 until
1988, he served as Chairman and Chief Executive Officer of DHL Airways, Inc., an
express courier. Mr. Lynch serves as a director of Pacific Mutual Life Insurance
Company, Nordstrom, Inc., Fresh Choice, Inc., PST Vans, Inc., Madge Networks,
Inc. and SRI International, Inc.

Robert K. Swanson, Director nominee. Mr. Swanson has served as Chairman of
RKS, Inc., an international investment and financial/marketing consulting firm,
since November 1987. During that period, Mr. Swanson has also served as Chairman
of Grossman's Inc., a company offering "do-it-yourself" products. From January
1981 until October 1987, Mr. Swanson served as Chief Executive Officer of Del
Webb Corporation.

OTHER KEY EMPLOYEES

Robert C. Tanklage, President of La Victoria. Mr. Tanklage has served as
President of La Victoria since May 1983, and has held various management
positions with La Victoria since the late 1970s.

Michael T. Westhusing, Chief Operating Officer of La Victoria. Mr.
Westhusing joined La Victoria in 1997 after 20 years in the specialty food and
consumer products industries. Prior to joining La Victoria, Mr. Westhusing was
Senior Vice President, Marketing, from 1995 to 1997, for Favorite Brands
International, an $800 million manufacturer of branded confection products. From
1989 to 1995, Mr. Westhusing served as Vice President, Operations for Famous
Amos. Prior to joining Famous Amos, Mr. Westhusing was Vice President,
Operations for Shamitoff Foods from 1987 to 1988 and previously served in
various marketing and operational capacities at Beecham Cosmetics, the consumer
products division of Beecham Group Ltd., from 1978 to 1988.

BOARD OF DIRECTORS

After consummation of this Offering, the Board of Directors of the Company
will be composed of seven members. In accordance with the Bylaws of the Company,
the members of the Board of Directors are generally elected for a term of office
expiring at the third annual shareholders' meeting following their election to
office or until a successor is duly elected and qualified. The officers of the
Company are elected by and serve

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<PAGE> 46

until their successors are elected by the Board of Directors. Following the
completion of this Offering, the Company intends to form an audit committee,
consisting solely of nonemployee directors.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to the Chief
Executive Officer of the Company, and each of the other executive officers of
the Company who received at least $100,000 in annual salary and bonus during
fiscal 1996:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
NAME AND PRINCIPAL ---------------- ALL OTHER
POSITION SALARY BONUS COMPENSATION
IN THE COMPANY YEAR ($) ($) ($)
------------------ ---- ------- ----- ------------
<S> <C> <C> <C> <C>
Keith R. Lively(1)...................... 1996 -- -- --
Chief Executive Officer
Herman L. Graffunder.................... 1996 190,304 -- 2,200(2)
President
Samuel E. Hillin, Jr.................... 1996 118,751 -- 1,410(3)
Chief Financial Officer
</TABLE>

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

(1) Mr. Lively became Chairman and Chief Executive Officer of the Company on
June 19, 1997. Mr. Lively will receive an annual salary of $200,000 per year
from the Company.

(2) Includes $810 contributed by the Company to Mr. Graffunder's account under
the Company's 401(k) Plan, and $1,390 paid by the Company for term life
insurance premiums for Mr. Graffunder.

(3) Includes $685 contributed by the Company to Mr. Hillin's account under the
Company's 401(k) Plan, and $725 paid by the Company for term life insurance
premiums for Mr. Hillin.

EMPLOYMENT AGREEMENTS

Mr. Graffunder. Mr. Graffunder entered into a three-year employment
agreement with the Company, effective as of June 23, 1997. The agreement
provides for an annual base salary of $200,000, subject to increase by the Board
of Directors, as well as an annual incentive award with a target of 40% of his
base salary, which can be further increased up to 80% upon the attainment of
certain performance targets. Mr. Graffunder will be reimbursed for life
insurance premiums with respect to a $500,000 term policy, subject to an annual
limit of $5,000. Mr. Graffunder will also be reimbursed for the purchase price
or lease payments for an automobile to be used primarily in the Company's
business and for the cost of insurance for such automobile.

Under Mr. Graffunder's prior employment agreement, 85,000 shares of Common
Stock were granted to Mr. Graffunder in 1994, subject to certain forfeiture
restrictions that lapse 25% per year until February 7, 1998. This schedule for
the lapsing of the forfeiture restrictions has also been included in the new
employment agreement. However, all forfeiture restrictions on such shares will
lapse immediately prior to the closing of this Offering. If Mr. Graffunder's
employment with the Company is terminated or terminates for any reason, any
unvested shares will be forfeited to the Company.

During Mr. Graffunder's employment and for a period of two years
thereafter, Mr. Graffunder is prohibited from competing or assisting others to
compete with the Company, or from advising or doing business with any previous
or current customer, in the food distribution, food packaging and food
processing businesses in connection with Mexican food products within the State
of Texas, or from inducing any other employee to terminate his employment with
the Company.

The Company can terminate Mr. Graffunder's employment for cause, as defined
in the agreement, or without cause upon written notice. If employment is
terminated without cause, Mr. Graffunder is entitled to receive his base salary
for a one-year period, which amount will be reduced by any salary or
compensation

45
<PAGE> 47

received or deferred by Mr. Graffunder in connection with his employment by or
consulting with any company not affiliated with the Company.

Mr. Hillin. Mr. Hillin entered into an employment agreement with the
Company, effective as of June 23, 1997. The terms of Mr. Hillin's employment
agreement are substantially similar to those in Mr. Graffunder's employment
agreement described above, except as described below. Mr. Hillin's annual base
salary is $125,000, and his annual incentive award has a target of 25% of his
base salary, which can be further increased to 50% of his base salary based upon
the attainment of certain performance targets. Mr. Hillin was granted 51,000
shares of Common Stock in 1994, the forfeiture restrictions on which will lapse
on March 21, 1998. These 51,000 shares of Common Stock are subject to the same
conditions as the 85,000 shares of Common Stock to be fully vested for Mr.
Graffunder on February 7, 1998. Mr. Hillin is not eligible for an automobile to
be paid for by the Company.

COMPENSATION OF DIRECTORS

No compensation has been paid by the Company to its directors prior to this
Offering. Upon completion of this Offering, directors who are not employees or
executive officers of the Company or Shansby ("nonemployee directors") will
receive directors' fees of $10,000 each year and an additional $1,000 for each
Board of Directors' Meeting and committee meeting they attend. Nonemployee
directors will also receive options to purchase 1,000 shares of Common Stock
upon their election to the Board of Directors. The exercise price for these
options to be granted to nonemployee directors serving at the time of the
consummation of this Offering will be the price to public set forth on the cover
page of this Prospectus. With respect to any nonemployee directors elected after
this Offering, the exercise price will be the fair market value of the Common
Stock on the date that the option is granted.

1997 STOCK PLAN

On June 19, 1997, the Board of Directors and the shareholders of the
Company approved its 1997 Stock Plan (the "Stock Plan"). The purpose of the
Stock Plan is to provide directors, employees and consultants of the Company and
its subsidiaries additional incentive and reward opportunities designed to
enhance the profitable growth of the Company. All employees who are key to the
Company's growth and profitability are eligible to receive awards under the
Stock Plan. The Stock Plan provides for the granting of incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended, options that do not constitute incentive stock options and restricted
stock awards.

The Stock Plan is administered by the Compensation Committee of the Board
of Directors (the "Committee"). In general, the Committee is authorized to
select the recipients of awards and the terms and conditions of those awards.
The number of shares of Common Stock that may be issued under the Stock Plan may
not exceed 350,000 shares (subject to adjustment to reflect stock dividends,
stock splits, recapitalizations and similar changes in the Company's capital
structure). Shares of Common Stock that are attributable to awards that have
expired, terminated or been canceled or forfeited are available for issuance or
use in connection with future awards. The maximum number of shares of Common
Stock that may be subject to awards granted under the Stock Plan to any one
individual during any calendar year may not exceed 50,000 (subject to adjustment
to reflect stock dividends, stock splits, recapitalizations and similar changes
to the Company's capital structure). The price at which a share of Common Stock
may be purchased upon exercise of an option granted under the Stock Plan will be
determined by the Committee, but such purchase price will not be less than the
fair market value of a share of Common Stock on the date such option is granted.
However, with respect to options intended to qualify as incentive stock options
that are issued to a holder of more than 10% of the total combined voting power
of all classes of stock of the Company, or of its parent or subsidiary
corporation, the exercise price must be at least 110% of fair market value on
the date of grant.

Shares of Common Stock that are the subject of a restricted stock award
under the Stock Plan will be subject to restrictions on disposition by the
holder of such award and an obligation of such holder to forfeit and surrender
the shares to the Company under certain circumstances (the "Forfeiture
Restrictions"). The Forfeiture Restrictions will be determined by the Committee
in its sole discretion, and the Committee may

46
<PAGE> 48

provide that the Forfeiture Restrictions will lapse upon: (a) the attainment of
one or more performance targets established by the Committee that are based on
(1) the price of a share of Common Stock, (2) the Company's earnings before
interest, taxes, depreciation, and amortization, (3) the Company's earnings per
share, (4) the total return to holders of Common Stock based upon price
appreciation and dividends paid, (5) the Company's market share, (6) the market
share of a business unit of the Company designated by the Committee, (7) the
Company's sales, (8) the sales of a business unit of the Company designated by
the Committee, (9) the Company's cash flow, or (10) the return on shareholders'
equity achieved by the Company; (b) the award holder's continued employment with
the Company or continued service as a consultant or director for a specified
period of time; (c) the occurrence of any event or the satisfaction of any other
condition specified by the Committee in its sole discretion; or (d) a
combination of any of the foregoing. No awards under the Stock Plan may be
granted after ten years from the date the Stock Plan was approved by the Board
of Directors. The Stock Plan will remain in effect until all awards granted
under the Stock Plan have been satisfied or expired. The Board of Directors in
its discretion may terminate the Stock Plan at any time with respect to any
shares of Common Stock for which awards have not been granted. The Stock Plan
may be amended, other than to increase the maximum aggregate number of shares
that may be issued under the Stock Plan or to change the class of individuals
eligible to receive awards under the Stock Plan, by the Board of Directors
without the consent of the shareholders of the Company. No change in any award
previously granted under the Stock Plan may be made which would materially
impair the rights of the holder of such award without the approval of the
holder.

Option Grants. Upon the consummation of this Offering, the Company will
grant certain employees of the Company stock options to purchase a total of
130,000 shares of Common Stock with an exercise price (subject to adjustment)
equal to the price to public shown on the cover page of this Prospectus. Mr.
Lively, Mr. Graffunder and Mr. Westhusing will each be granted options to
purchase 35,000 shares of Common Stock, and Mr. Hillin will be granted options
to purchase 25,000 shares of Common Stock. The options granted to each
individual will vest over a four-year period, with 25% of the options vesting
each year, commencing one year after the consummation of this Offering. The
options will expire 10 years from the date of grant.

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<PAGE> 49

CERTAIN TRANSACTIONS

THE LA VICTORIA ACQUISITION

Shansby (through TSG2 L.P.) and Mr. Lively will receive 1,386,000 and
14,000 shares of Common Stock, respectively, pursuant to the La Victoria
Acquisition (provided that the value of such shares at the offering price will
not exceed $13,860,000 and $140,000, respectively). La Victoria has paid LV
Foods $475,000 to reimburse LV Foods for expenses it incurred in connection with
the La Victoria Acquisition. Of this amount, $200,000 was incurred during 1996
and $275,000 was incurred during the first six months of 1997. In addition, La
Victoria has paid Shansby $250,000 to reimburse Shansby for expenses it incurred
in connection with the La Victoria Acquisition during the first six months of
1997. See "The La Victoria Acquisition."

ROBERT TANKLAGE EMPLOYMENT AGREEMENT

Mr. Tanklage entered into a five-year employment agreement with La
Victoria, effective as of May 31, 1997. The agreement provides for an annual
base salary of $360,000, subject to increase by the Board of Directors, as well
as an annual incentive award which can be increased, but not decreased by the
Board of Directors, in accordance with past practices of La Victoria. Mr.
Tanklage will be granted an allowance of $800 per month for an automobile. La
Victoria can terminate Mr. Tanklage's employment for cause, death (upon payment
of one month's salary to Mr. Tanklage's estate), incapacity or disability, as
defined in the agreement, or without cause. If employment is terminated without
cause, Mr. Tanklage is entitled to receive the greater of (a) $1,980,000 or (b)
$660,000 multiplied times the number of years then remaining in the term of the
agreement.

TANKLAGE LEASE ARRANGEMENTS

La Victoria leases its facilities from entities partially owned and
controlled by Mr. Tanklage and certain of his family members. Tanklage Property
Trust is owned 50% by Mr. Tanklage and 50% by Ms. Carolyn Johnson, Mr.
Tanklage's sister. Tanklage Investments, Ltd. is owned 12.5% by Mr. Tanklage and
the remaining 87.5% is owned by other family members, two of whom are employed
by La Victoria.

La Victoria's 170,000 square foot warehouse and distribution facility in
City of Industry is owned by Tanklage Property Trust and is leased to La
Victoria under a lease that expires in July 2010. The annual lease payment is
approximately $860,000 and is scheduled to increase at the CPI every five years.
The next scheduled increase is to occur in August 2000.

The 51,000 square foot warehouse facility in Rosemead is owned by Tanklage
Property Trust and leased to La Victoria under a lease that expires in July
2010. The annual lease payment is approximately $262,000 and is scheduled to
increase at the CPI every five years. The next scheduled increase is to occur in
August 2000.

La Victoria's 61,000 square foot production facility in Rosemead is owned
by Tanklage Investments, Ltd. and leased to La Victoria under a lease that
expires in July 2010. The annual lease payment is approximately $214,000 and is
scheduled to increase at the CPI every five years. The next scheduled increase
is scheduled to occur in August 2000.

Although La Victoria has not conducted a survey of rental rates for
comparable properties in the Los Angeles area, it is believed that La Victoria
would be able to obtain more favorable lease terms from unaffiliated third
parties than those contained in these leases.

SHANSBY PARTNERS ADVISORY AGREEMENT

The Company entered into the three-year Advisory Agreement with Shansby
Partners, effective June 1, 1997, pursuant to which Shansby Partners will
provide the Company with advisory services, including assistance with respect to
the identification of potential acquisition candidates and assistance in the
negotiation, implementation and financing of these acquisitions.

48
<PAGE> 50

The Advisory Agreement expires on the third anniversary of the consummation
of this Offering, and may be terminated by either party for a material breach of
the Advisory Agreement by the other party if the breach has not been remedied
within 60 days after notice.

Shansby Partners, Shansby and their affiliates specialize in acquiring and
improving branded consumer product companies (particularly in the food
industry). See "The Shansby Group." The Advisory Agreement provides that, during
the term of the Advisory Agreement, Shansby Partners will offer to the Company
for its consideration any Mexican food companies that primarily produce
tortillas, tortilla chips or salsas and that are identified by Shansby after the
consummation of this Offering. If the Company declines to pursue any such
acquisition opportunity, then Shansby will be able to pursue the opportunity
without the involvement of the Company. There is no assurance that the Company
will have the necessary funds available at the time that any such acquisition
opportunity is offered to it by Shansby Partners, and Shansby Partners will not
be required to use any of its funds, or the funds of any affiliates, in order to
finance any acquisitions on behalf of the Company.

In connection with this Offering, the Company has agreed to pay Shansby
Partners a financial advisory fee of $250,000 and up to an additional $50,000 to
reimburse Shansby Partners for out-of-pocket expenses it incurred in connection
with this Offering. Shansby Partners will also be reimbursed for out-of-pocket
expenses incurred in connection with advising the Company, and will also receive
customary financial advisory fees in connection with acquisitions identified by
the Company during the term of the Advisory Agreement.

SHANSBY WARRANT

Upon the consummation of this Offering, Shansby Partners will receive the
Shansby Warrant, which is a five-year warrant to acquire 350,000 shares of
Common Stock at an exercise price (subject to adjustment) equal to the price to
public on the cover page of this Prospectus. The Shansby Warrant may not be
exercised until after the first anniversary of the consummation of this
Offering. Management believes that it will be beneficial to the Company for its
advisor to benefit from any future increases in the price of the Common Stock.

49
<PAGE> 51

PRINCIPAL SHAREHOLDERS

The following tables set forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 1, 1997, and as adjusted to
reflect the sale of the Common Stock offered hereby, by (i) each director, (ii)
each named executive officer in the Summary Compensation Table, (iii) each
person who is known by the Company to own beneficially 5% or more of the Common
Stock and (iv) all directors and executive officers as a group. Unless otherwise
indicated, each person has sole voting and dispositive power over the shares
indicated as owned by such person.

PRINCIPAL SHAREHOLDERS

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP SHARES TO BE BENEFICIAL OWNERSHIP
BEFORE OFFERING REPURCHASED BY AFTER OFFERING
---------------------- THE -----------------------
NAME SHARES PERCENTAGE COMPANY(1) SHARES PERCENTAGE
---- --------- ---------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C>
The Shansby Group(2).................... 1,103,470 28.5% 1,103,470 -- -- %
TSG International(2).................... 435,030 11.2% 435,030 -- -- %
TSG2 L.P.(2)(3)......................... 1,386,000 35.7% -- 1,386,000 21.5%
Robert C. Tanklage(2)(3)................ 777,778 20.1% -- 777,778 12.1%
</TABLE>

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

(1) Simultaneously with the consummation of this Offering, the Company will
repurchase these shares at a repurchase price equal to the net proceeds
(before offering expenses) to be received by the Company with respect to an
equivalent number of shares ($12.9 million at an assumed price to public of
$9 per share).

(2) The address of The Shansby Group, TSG International and TSG2 L.P. is 250
Montgomery Street, San Francisco, California 94104. The address of Mr.
Tanklage is 260 S. Sixth Street, City of Industry, California 91746.

(3) The shares set forth for TSG2 L.P. and Mr. Tanklage will be issued in the La
Victoria Acquisition immediately following the consummation of this
Offering. The number of shares for these two persons assumes that the price
to public in this Offering is $9 per share. See "The La Victoria
Acquisition."

DIRECTORS (INCLUDING NOMINEES) AND EXECUTIVE OFFICERS

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
----------------------- -----------------------
NAME SHARES PERCENTAGE SHARES PERCENTAGE
---- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Keith R. Lively(1)............................. 14,000 * 14,000 *
Herman L. Graffunder........................... 85,000 2.2% 85,000 1.3%
Samuel E. Hillin, Jr........................... 51,000 1.3% 51,000 *
J. Gary Shansby(2)............................. 1,386,000 35.7% 1,386,000 21.5%
Charles H. Esserman(2)......................... 1,386,000 35.7% 1,386,000 21.5%
Tim G. Bruer................................... -- -- -- --
Charles A. Lynch............................... -- -- -- --
Robert K. Swanson.............................. -- -- -- --
All directors and executive officers as a group
(8 persons).................................. 1,536,000 39.6% 1,536,000 23.9%
</TABLE>

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

* Represents less than one percent.

(1) To be issued pursuant to the La Victoria Acquisition. See "The La Victoria
Acquisition."

(2) Mr. Shansby and Mr. Esserman may be deemed to beneficially own the 1,386,000
shares owned by TSG2 L.P. because they are members of the limited liability
company that is the general partner of TSG2 L.P.

50
<PAGE> 52

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $1.00 per share, of which 1,700,000 shares are
outstanding and are held by five shareholders of record as of August 1, 1997,
and 5,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), none of which is currently outstanding. In addition, there are 350,000
shares of Common Stock (subject to adjustment) reserved for issuance pursuant to
the Shansby Warrant and 350,000 shares of Common Stock reserved for issuance
pursuant to the Stock Plan.

COMMON STOCK

Subject to the rights and preferences of the Preferred Stock, if any, each
share of Common Stock has an equal and ratable right to receive dividends, when,
as and if declared by the Company's Board of Directors, out of any funds legally
available for the payment thereof. In the event of liquidation, dissolution or
winding up of the Company, subject to the rights of any outstanding Preferred
Stock, the holders of Common Stock are entitled to share equally and ratably in
the assets available for distribution after payment of all liabilities.

Each share of Common Stock is entitled to one vote on all matters submitted
to a vote of the shareholders. Holders of Common Stock are not entitled to
cumulative voting, conversion or preemptive rights. All outstanding shares of
Common Stock are, and when issued, the shares of Common Stock to be issued in
connection with this Offering, will be, fully paid and nonassessable.

PREFERRED STOCK

The Company's Restated Articles of Incorporation authorize the Board of
Directors, without the necessity of further action or authorization by the
shareholders (unless required in a specific case by applicable law or
regulations or stock exchange rules), to authorize the issuance of the Preferred
Stock from time to time in one or more series and to determine all pertinent
features of each such series of Preferred Stock, including but not limited to
variations in the designations, preferences, and relative participating,
optional or other special rights (including, without limitation, rights of
conversion into Common Stock or other securities, redemption provisions or
sinking fund provisions) as between series and as between the Preferred Stock or
any series thereof and the Common Stock, and the qualifications, limitations or
restrictions of such rights, and any voting powers of such Preferred Stock.

Holders of Common Stock have no preemptive rights to purchase or otherwise
acquire any Preferred Stock that may be issued in the future. Each series of
Preferred Stock, could, as determined by the Board of Directors at the time of
issuance, rank, with respect to dividends, redemption and liquidation rights,
senior to the Common Stock.

It is not possible to state the actual effect of the authorization of the
Preferred Stock upon the rights of holders of the Common Stock until the Board
of Directors determines the respective rights of the holders of one or more
series of the Preferred Stock. Such effects, however, might include: (a)
restrictions on dividends on Common Stock if dividends on the Preferred Stock
are in arrears; (b) dilution of the voting power of the Common Stock to the
extent that a series of the Preferred Stock would have voting rights; (c) the
holders of Common Stock not being entitled to share in the Company's assets upon
dissolution until satisfaction of any liquidation preference granted to the
Preferred Stock; and (d) potential dilution of the equity of holders of Common
Stock to the extent that a series of the Preferred Stock might be convertible
into Common Stock. In addition, the issuance of Preferred Stock may serve to
discourage or make more difficult an attempt to obtain control of the Company by
way of a merger, tender offer, proxy contest or other means. See "Antitakeover
Provisions" below.

ANTITAKEOVER PROVISIONS

The Restated Articles of Incorporation and the Bylaws of the Company
contain provisions that could have an antitakeover effect. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors of the Company and in the policies
formulated by the Board of

51
<PAGE> 53

Directors and to discourage certain types of transactions that may involve an
actual or threatened change of control of the Company. The provisions are
designed to reduce the vulnerability of the Company to an unsolicited proposal
for a takeover of the Company that does not contemplate the acquisition of all
of its outstanding shares or an unsolicited proposal for the restructuring or
sale of all or part of the Company. The provisions are also intended to
discourage certain tactics that may be used in proxy fights. The Board of
Directors believes that, as a general rule, such takeover proposals would not be
in the best interest of the Company and its shareholders. Set forth below is a
description of such provisions in the Restated Articles of Incorporation and the
Bylaws. The description of such provisions set forth below is intended only as a
summary and is qualified in its entirety by reference to the pertinent sections
of the Restated Articles of Incorporation and the Bylaws, forms of which are
filed as exhibits to the Registration Statement of which this Prospectus forms a
part. The Board of Directors has no current plans to formulate or effect
additional measures that could have an antitakeover effect.

Classified Board of Directors. The classification of directors will have
the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. At least two annual meetings of
shareholders generally will be required to effect a change in a majority of the
Board of Directors. Such a delay may help ensure that the Company's directors,
if confronted by a shareholder attempting to force a proxy contest, a tender or
exchange offer or an extraordinary corporate transaction, would have sufficient
time to review the proposal as well as any available alternatives to the
proposal and to act in what they believe to be the best interests of the
shareholders. The classification provisions will apply to every election of
directors, however, regardless of whether a change in the composition of the
Board of Directors would be beneficial to the Company and its shareholders and
whether a majority of the Company's shareholders believes that such a change
would be desirable. Pursuant to the Restated Articles of Incorporation, the
provisions relating to the classification of directors may only be amended by
the affirmative vote of eighty percent of the voting power of the then
outstanding shares of capital stock entitled to vote thereon ("Voting Stock").

Removal of Directors Only for Cause. Pursuant to the Restated Articles of
Incorporation, directors can be removed from office only for cause (as defined
therein) and only by the affirmative vote of eighty percent of the Voting Stock
other than at the expiration of their term of office. Vacancies on the Board of
Directors may be filled only by a majority vote of the remaining directors and
not by the shareholders.

Number of Directors. The Restated Articles of Incorporation provide that
the whole Board of Directors will consist of not less than three members, the
exact number to be set from time to time by resolution of the Board of
Directors. Accordingly, the Board of Directors, and not the shareholders, has
the authority to determine the number of directors and could delay any
shareholder from obtaining majority representation on the Board of Directors by
enlarging the Board of Directors and filling the new vacancies with its own
nominees until the next shareholder election.

No Written Consent of Shareholders. The Restated Articles of Incorporation
also provides that, subject to the terms of any Preferred Stock, any action
required or permitted to be taken by the shareholders of the Company must be
taken at a duly called annual or special meeting of shareholders and may not be
taken by written consent. In addition, special meetings may only be called by
(i) the Chairman of the Board, (ii) the President, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the then-authorized number of
directors or (iv) the holders of at least 50% of the outstanding Voting Stock.

Restated Articles of Incorporation and Bylaws. The Restated Articles of
Incorporation provides that the Board of Directors, by a majority vote, may
adopt, alter, amend or repeal provisions of the Bylaws.

Preferred Stock. As described above under "Preferred Stock," the Board of
Directors may designate and issue shares of Preferred Stock without shareholder
approval under certain circumstances. As a result, the Preferred Stock could be
issued quickly with terms designed to make more difficult a proposed takeover of
the Company or the removal of its management. The Board of Directors will make
any determination to issue such shares based on its judgment as to the best
interests of the Company and its shareholders.

Advance Notice of Director Nominations and Shareholder Proposals. The
Restated Articles of Incorporation provide that the only business (including
election of directors) that may be considered at an annual

52
<PAGE> 54

meeting of holders of Common Stock, in addition to business proposed (or persons
nominated to be directors) by the directors of the Company, is business proposed
(or persons nominated to be directors) by holders of Common Stock who comply
with the notice and disclosure requirements set forth in the Restated Articles
of Incorporation. In general, the Restated Articles of Incorporation require
that a shareholder give the Company notice of proposed business or nominations
no later than 60 days before the annual meeting of holders of Common Stock
(meaning the date on which the meeting is first scheduled and not postponements
or adjournments thereof) or (if later) ten days after the first public notice of
the annual meeting is sent to holders of Common Stock. In general, the notice
must also contain information about the shareholder proposing the business or
nomination, the shareholder's interest in the business, and (with respect to
nominations for director) information about the nominee of the nature ordinarily
required to be disclosed in public proxy statements. The shareholder also must
submit a letter from each of the shareholder's nominees stating the nominee's
acceptance of the nomination and indicating the nominee's intention to serve as
director if elected.

OTHER MATTERS

ChaseMellon Shareholder Services L.L.C. serves as registrar and transfer
agent for the Common Stock.

53
<PAGE> 55

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have 6,439,278 shares of
Common Stock outstanding. Of the outstanding shares of Common Stock, 4,100,000
shares of Common Stock to be sold in this Offering will be freely transferable
without restriction or further registration under the Securities Act, except
that any shares purchased by affiliates of the Company will be subject to
limitations of Rule 144 under the Securities Act.

Holders of approximately 2,313,778 shares of Common Stock have agreed with
the Underwriters not to sell or otherwise dispose of any shares of Common Stock
for a period of 180 days after the date of this Prospectus (the "Lockup Period")
without the consent of the Representatives or the Underwriters. See
"Underwriting." Following the completion of this Offering, 25,500 shares of
Common Stock held by nonaffiliates for more than two years will be available for
sale in the public market without compliance with Rule 144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares for at
least one year, including persons who may be deemed "affiliates" of the Company,
would be entitled to sell within any three month period a number of shares that
does not exceed the greater of one percent of the number of shares of Common
Stock then outstanding or the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of the written notice of the
proposed sale with the Commission, or if no such notice is required, the date an
order to sell is received with respect to such sale. Sales under Rule 144 are
also subject to certain manner of sale provisions and notice requirements, and
to the availability of current public information about the Company. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time in the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above. The Company is unable to estimate the number of shares that may be sold
under Rule 144 since this will depend on the market price of the Common Stock of
the Company, the personal circumstances of the seller and other factors.

There are also 350,000 shares of Common Stock reserved for issuance under
the Stock Plan, pursuant to which grants of options to purchase 130,000 shares
will be made upon consummation of this Offering with an exercise price (subject
to adjustment) equal to the price to public set forth on the cover page of this
Prospectus. The Company intends to file a registration statement on Form S-8
covering sales of shares issued upon exercise of any securities issued under the
Stock Plan. In addition, Shansby Partners will be issued the Shansby Warrant to
acquire 350,000 shares of Common Stock at the price to public in this Offering.
The Shansby Warrant may not be exercised until after the first anniversary of
the consummation of this Offering. See "Certain Transactions -- Shansby
Warrant." Shansby Partners will have certain registration rights in connection
with the shares underlying the Shansby Warrant. In addition, the Contribution
and Exchange Agreement provides that, at the consummation of the transactions
contemplated thereby, Shansby and Mr. Tanklage will enter into registration
rights agreements with the Company pursuant to which Shansby and Mr. Tanklage
will receive certain demand and "piggyback" registration rights. These
registration rights cannot be exercised until after the expiration of the Lockup
Period.

Prior to this Offering, there has been no public market of the Common Stock
of the Company. No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sales, will have on
the market price of the Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price for the Common Stock.

54
<PAGE> 56

UNDERWRITING

The Underwriters named below, for whom Cruttenden Roth Incorporated, Sutro
& Co. Incorporated and Wedbush Morgan Securities Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
the number of shares of Common Stock set forth opposite their respective names
below at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Cruttenden Roth Incorporated................................
Sutro & Co. Incorporated....................................
Wedbush Morgan Securities Inc...............................

---------
Total............................................. 4,100,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of Common Stock offered hereby if any such
shares are purchased.

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

The Company has granted an option to the Underwriters, exercisable within
30 days after the date of this Prospectus, to purchase up to an additional
615,000 shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only for the purpose of
covering over-allotments made in connection with the sale of the Common Stock
offered hereby. To the extent that the Underwriters exercise such option, each
Underwriter will be committed, subject to certain conditions, to purchase a
number of additional shares of Common Stock proportionate to such Underwriter's
initial commitment pursuant to the Underwriting Agreement. If the additional
shares are purchased, the Underwriters will offer such additional shares on the
same terms as those on which the 4,100,000 shares are being offered.

The Company has agreed to indemnify the Underwriters against certain
liabilities in connection with the Registration Statement, including liabilities
under the Securities Act.

The Company and certain other shareholders and officers and directors of
the Company have agreed with the Underwriters not to sell, offer to sell, issue,
distribute or otherwise dispose of any shares of Common Stock (other than in
connection with acquisitions or pursuant to any option granted under the Stock
Plan) for a period of 180 days after the date of this Prospectus without the
prior written consent of the Representatives for the Underwriters.

Prior to this Offering, there has been no public market for the Common
Stock, and there can be no assurance that a regular trading market will develop
upon the completion of this Offering. The initial public offering price was
determined by negotiations between the Company and the Representatives. There is
no direct relationship between the offering price of the Common Stock and the
assets, book value and net worth of the Company. The primary factors considered
in determining such offering price included the history of and prospects for the
industry in which the Company competes, market valuation of comparable
companies, market conditions for public offerings, the history and prospects for
the Company's business, the Company's past and present operations and earnings
and the trend of such earnings, the prospects for future earnings of

55
<PAGE> 57

the Company, the Company's current financial position, an assessment of the
Company's management, the general condition of the securities markets, the
demand for similar securities of comparable companies and other relevant
factors.

The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specific maximum. Syndicate covering transactions involve purchases of Common
Stock in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit the Representatives to
reclaim a selling concession from a syndicate member when the shares of Common
Stock originally sold by such syndicate member are purchased in a syndicate
covering transaction to cover syndicate short positions. Such stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
price of the Common Stock to be higher than it would otherwise be in the absence
of such transactions. These transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.

The Company has also agreed to pay $250,000 to Cruttenden Roth Incorporated
for its opinion as to whether the proposed consideration to be paid to the
shareholders of La Victoria in connection with the La Victoria Acquisition is
fair from a financial point of view to the shareholders of the Company.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Vinson & Elkins L.L.P., Houston, Texas.
Certain legal matters relating to the Common Stock offered hereby will be passed
on by Gardere & Wynne, L.L.P., Dallas, Texas, as counsel for the Underwriters.

EXPERTS

The financial statements of Authentic Specialty Foods, Inc. for each of the
two years in the period ended December 31, 1995, appearing in this Prospectus
and Registration Statement have been audited by Rylander, Clay & Opitz, L.L.P.,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein. Such financial statements are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.

Rylander, Clay & Opitz, L.L.P. were dismissed by the Company as the
Company's auditors on April 18, 1997. The report of Rylander, Clay & Opitz,
L.L.P. on the financial statements for each of the two years in the period ended
December 31, 1995 did not contain any adverse opinion or disclaimer of opinion,
nor was it qualified or modified as to uncertainty, audit scope, or accounting
principles. The Company's decision to change auditors was approved by the
Company's Board of Directors. In connection with its audits, Rylander, Clay &
Opitz, L.L.P. did not identify any reportable conditions. During the Company's
two most recent fiscal years and through the three-month period ended March 31,
1997, there were no disagreements between the Company and Rylander, Clay &
Opitz, L.L.P. on any matter of accounting principles or practices, financial
statement disclosure or auditing scope and procedure, which, if not resolved to
the satisfaction of Rylander, Clay & Opitz, L.L.P. would have caused it to make
a reference to the subject matter of the disagreement in connection with its
reports.

The financial statements of Authentic Specialty Foods, Inc. for the year
ended December 31, 1996, appearing in this Prospectus and Registration Statement
have been audited by McGladrey & Pullen, LLP, independent auditors, as set forth
in their reports thereon appearing elsewhere herein. Such financial statements
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.

The financial statements of La Victoria Foods, Inc. for each of the three
years in the period ended May 31, 1997 appearing in this Prospectus and
Registration Statement have been audited by McGladrey &

56
<PAGE> 58

Pullen, LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein. Such financial statements are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

The Company has not previously been subject to the reporting requirements
of the Exchange Act. The Company has filed with the Commission a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act,
with respect to the offer and sale of Common Stock pursuant to this Prospectus.
This Prospectus, filed as a part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement or the exhibits
and schedules thereto in accordance with the rules and regulations of the
Commission and reference is hereby made to such omitted information. Statements
made in this Prospectus concerning the contents of any contract, agreement or
other document filed as an exhibit to the Registration Statement are summaries
of the terms of such contracts, agreements or documents and are not necessarily
complete. Reference is made to each such exhibit for a more complete description
of the matters involved and such statements shall be deemed qualified in their
entirety by such reference. The Registration Statement and the exhibits and
schedules thereto filed with the Commission may be inspected, without charge,
and copies may be obtained at prescribed rates, at the public reference facility
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511. The
Commission also maintains a Website (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. For further information pertaining
to the Common Stock offered by this Prospectus and the Company, reference is
made to the Registration Statement.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial statements.

57
<PAGE> 59

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUTHENTIC SPECIALTY FOODS, INC.
Reports of Independent Auditors............................. F-2
Balance Sheets as of December 31, 1995 and 1996 and June 30,
1997...................................................... F-4
Statements of Operations for the years ended December 31,
1994, 1995 and 1996 and for the six month periods ended
June 30, 1996 and 1997.................................... F-5
Statements of Shareholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and for the six month
periods ended June 30, 1996 and 1997...................... F-6
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and for the six month periods ended
June 30, 1996 and 1997.................................... F-7
Notes to Financial Statements............................... F-8
LA VICTORIA FOODS, INC.
Report of Independent Auditors.............................. F-15
Balance Sheets as of May 31, 1996 and 1997.................. F-16
Statements of Operations for the years ended May 31, 1995,
1996 and 1997............................................. F-17
Statements of Shareholders' Equity for the years ended May
31, 1995, 1996 and 1997................................... F-18
Statements of Cash Flows for the years ended May 31, 1995,
1996 and 1997............................................. F-19
Notes to Financial Statements............................... F-20
</TABLE>

F-1
<PAGE> 60

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Authentic Specialty Foods, Inc.
Grand Prairie, Texas

We have audited the accompanying balance sheet of Authentic Specialty
Foods, Inc. as of December 31, 1996 and the related statements of operations,
shareholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Authentic Specialty Foods,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

McGLADREY & PULLEN, LLP

Minneapolis, Minnesota

April 25, 1997, except for Note 9 as
to which the date is June 20, 1997

F-2
<PAGE> 61

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Authentic Specialty Foods, Inc.
(f/k/a Calidad Foods, Inc.)
Grand Prairie, Texas

We have audited the accompanying balance sheet of Authentic Specialty
Foods, Inc. (f/k/a Calidad Foods, Inc.) as of December 31, 1995 and the related
statements of operations, shareholders' equity, and cash flows for each of the
two years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Authentic Specialty Foods,
Inc. (f/k/a/ Calidad Foods, Inc.) as of December 31, 1995 and the results of its
operations and its cash flows for each of the two years in the period then ended
in conformity with generally accepted accounting principles.

RYLANDER, CLAY & OPITZ, L.L.P.

Fort Worth, Texas
March 15, 1996

F-3
<PAGE> 62

AUTHENTIC SPECIALTY FOODS, INC.

BALANCE SHEETS

ASSETS (NOTE 4)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- JUNE 30, JUNE 30,
1995 1996 1997 1997
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents..................... $ 9,027 $ 200,479 $ 114,091 $ 114,091
Accounts receivable, net of allowance for
doubtful accounts of $57,000 in 1995,
$75,000 in 1996 and $79,000 in 1997 (Note
8).......................................... 1,323,226 1,474,753 1,591,838 1,591,838
Inventories (Note 3).......................... 868,738 780,222 747,003 747,003
Prepaid expenses.............................. 135,077 108,104 220,101 220,101
----------- ----------- ----------- -----------
Total current assets................... 2,336,068 2,563,558 2,673,033 2,673,033
----------- ----------- ----------- -----------
Property and Equipment, at cost
Leasehold improvements........................ 659,463 730,975 746,775 746,775
Fixtures...................................... 518,102 568,249 767,399 767,399
Equipment..................................... 2,313,137 2,722,438 2,490,610 2,490,610
----------- ----------- ----------- -----------
3,490,702 4,021,662 4,004,784 4,004,784
Less accumulated depreciation.......... 724,232 1,199,125 1,250,573 1,250,573
----------- ----------- ----------- -----------
2,766,470 2,822,537 2,754,211 2,754,211
----------- ----------- ----------- -----------
Other Assets
Goodwill, net of accumulated amortization of
$305,058 in 1995, $386,379 in 1996 and
$427,040 in 1997............................ 1,727,988 1,646,667 1,606,006 1,606,006
Non-compete agreement, net of accumulated
amortization of $350,654 in 1995 and
$493,000 in 1996 and 1997................... 142,346 -- -- --
Other, primarily deferred offering costs in
1997........................................ 158,765 56,376 164,680 164,680
----------- ----------- ----------- -----------
2,029,099 1,703,043 1,770,686 1,770,686
----------- ----------- ----------- -----------
$ 7,131,637 $ 7,089,138 $ 7,197,930 $ 7,197,930
=========== =========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Line of credit (Note 4)....................... $ 750,933 $ 1,319,442 $ 1,349,716 $ 1,349,716
10.5% note payable to officer, unsecured...... 80,000 -- -- --
Current portion of long-term debt............. 789,907 766,432 666,802 666,802
Accounts payable.............................. 1,956,198 1,723,999 1,607,385 1,607,385
Accrued expenses.............................. 258,013 310,244 348,831 348,831
Due to shareholders upon repurchase........... -- -- -- 12,900,000
----------- ----------- ----------- -----------
Total current liabilities.............. 3,835,051 4,120,117 3,972,734 16,872,734
----------- ----------- ----------- -----------
Long-Term Debt, less current portion (Note 4)... 1,248,798 919,866 816,267 816,267
----------- ----------- ----------- -----------
Commitments (Note 6)............................

Shareholders' Equity (Note 9)
Preferred stock, $.01 par value, 5,000,000
shares authorized (Note 7).................. -- -- -- --
Common stock, $1.00 par value; 20,000,000
shares authorized; 1,700,000 shares issued
and outstanding............................. 1,700,000 1,700,000 1,700,000 161,500
Additional paid-in capital.................... 1,860,152 1,860,152 1,982,152 --
Accumulated deficit, since January 1, 1994
($4,125,298 deficit eliminated on December
31, 1993) (Note 7).......................... (1,512,364) (1,510,997) (1,273,223) (10,652,571)
----------- ----------- ----------- -----------
2,047,788 2,049,155 2,408,929 (10,491,071)
----------- ----------- ----------- -----------
$ 7,131,637 $ 7,089,138 $ 7,197,930 $ 7,197,930
=========== =========== =========== ===========
</TABLE>

F-4
<PAGE> 63

AUTHENTIC SPECIALTY FOODS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales (Note 8).............. $19,637,170 $21,028,390 $21,198,408 $10,527,546 $10,961,606
Cost of Sales................... 13,213,280 14,266,056 14,081,436 6,926,690 7,190,462
----------- ----------- ----------- ----------- -----------
Gross Profit.................... 6,423,890 6,762,334 7,116,972 3,600,856 3,771,144
Operating Expenses.............. 7,210,294 6,940,177 6,767,617 3,313,921 3,246,771
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations................. (786,404) (177,843) 349,355 286,935 524,373
----------- ----------- ----------- ----------- -----------
Other Income (Expense)
Interest expense.............. (161,251) (219,142) (327,994) (166,664) (165,611)
Interest income............... -- 61,218 2,246 1,845 35
Gain (loss) on disposal of
property and equipment..... (37,368) (191,574) (22,240) (22,135) 977
----------- ----------- ----------- ----------- -----------
(198,619) (349,498) (347,988) (186,954) (164,599)
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes...................... (985,023) (527,341) 1,367 99,981 359,774
Income tax expense (Note 5)..... -- -- -- 34,000 122,000
----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ (985,023) $ (527,341) $ 1,367 $ 65,981 $ 237,774
=========== =========== =========== =========== ===========

Earnings (loss) per common
share......................... $ (0.59) $ (0.31) $ 0.00 $ 0.04 $ 0.14
=========== =========== =========== =========== ===========
Weighted average number of
common shares outstanding..... 1,679,973 1,700,000 1,700,000 1,700,000 1,700,000
=========== =========== =========== =========== ===========
</TABLE>

See Notes to Financial Statements.

F-5
<PAGE> 64

AUTHENTIC SPECIALTY FOODS, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ---------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- ------ --------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994........... 31,814 $ 318 1,564,000 $1,564,000 $ 294,830 $ -- $1,859,148
Issuance of preferred stock...... 4,000 40 -- -- (40) -- --
Issuance of common stock......... -- -- 136,000 136,000 (136,000) -- --
Contribution of capital.......... -- -- -- -- 1,085,500 -- 1,085,500
Tax benefit of net operating loss
utilized (Note 5).............. -- -- -- -- 216,004 -- 216,004
Net loss......................... -- -- -- -- -- (985,023) (985,023)
------- ----- --------- ---------- ---------- ----------- ----------
Balance, December 31, 1994......... 35,814 358 1,700,000 1,700,000 1,459,794 (985,023) 2,175,129
Cancellation of preferred
stock.......................... (35,814) (358) -- -- 358 -- --
Contribution of capital.......... -- -- -- -- 400,000 -- 400,000
Net loss......................... -- -- -- -- -- (527,341) (527,341)
------- ----- --------- ---------- ---------- ----------- ----------
Balance, December 31, 1995......... -- -- 1,700,000 1,700,000 1,860,152 (1,512,364) 2,047,788
Net income....................... -- -- -- -- -- 1,367 1,367
------- ----- --------- ---------- ---------- ----------- ----------
Balance, December 31, 1996......... -- -- 1,700,000 1,700,000 1,860,152 (1,510,997) 2,049,155
Tax benefit of net operating loss
utilized (Note 5)
(unaudited).................... -- -- -- -- 122,000 -- 122,000
Net income (unaudited)........... -- -- -- -- -- 237,774 237,774
------- ----- --------- ---------- ---------- ----------- ----------
Balance, June 30, 1997
(unaudited)...................... -- $ -- 1,700,000 $1,700,000 $1,982,152 $(1,273,223) $2,408,929
======= ===== ========= ========== ========== =========== ==========
</TABLE>

See Notes to Financial Statements.

F-6
<PAGE> 65

AUTHENTIC SPECIALTY FOODS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------ ---------------------
1994 1995 1996 1996 1997
---------- ----------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)......................... $ (985,023) $ (527,341) $ 1,367 $ 65,981 $ 237,774
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Tax benefit of net operating loss utilized
(Note 5)................................ -- -- -- 34,000 122,000
Depreciation.............................. 317,408 354,716 515,117 247,796 278,149
Amortization.............................. 266,491 197,187 242,081 104,938 51,731
Gain (loss) on disposal of property and
equipment............................... 37,368 191,574 22,240 22,135 (977)
(Increase) decrease in:
Receivables............................... 435,065 430,565 (151,527) (186,822) (117,085)
Inventory................................. 391,134 (157,477) 88,516 54,761 33,219
Prepaid expenses.......................... (55,072) (59,726) 26,973 (5,677) (111,997)
Accounts payable.......................... (222,746) 244,740 (232,199) (194,832) (116,614)
Accrued expenses.......................... (4,883) 16,352 52,231 150,930 38,587
---------- ----------- --------- --------- ---------
Net cash provided by operating
activities.............................. 179,742 690,590 564,799 293,210 414,787
---------- ----------- --------- --------- ---------
Cash flows from investing activities
Change in other assets.................... -- (48,466) (28,540) (1,984) (146,709)
Proceeds from disposal of property and
equipment............................... 244,620 -- 171,188 110,012 50,750
Purchase of property and equipment........ (148,115) (1,256,552) (492,176) (297,078) (232,261)
Acquisition of business (Note 2).......... -- (516,453) (159,921) (93,000) --
---------- ----------- --------- --------- ---------
Net cash provided by (used in) investing
activities.............................. 96,505 (1,821,471) (509,449) (282,050) (328,220)
---------- ----------- --------- --------- ---------
Cash flows from financing activities
Increase (decrease) in line of credit..... (778,931) 111,664 568,509 246,824 30,274
Borrowing (repayment) on note payable to
officer................................. -- 80,000 (80,000) (55,000) --
Proceeds of long-term debt................ -- 600,000 -- -- --
Payments made on long-term debt........... (583,854) (288,641) (352,407) (174,099) (203,229)
Capital contributions..................... 1,085,000 400,000 -- -- --
---------- ----------- --------- --------- ---------
Net cash provided by (used in) financing
activities.............................. (277,785) 903,023 136,102 17,725 (172,955)
---------- ----------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................. (1,538) (227,858) 191,452 28,885 (86,388)
Cash and Cash equivalents:
Beginning................................. 238,423 236,885 9,027 9,027 200,479
---------- ----------- --------- --------- ---------
Ending.................................... $ 236,885 $ 9,027 $ 200,479 $ 37,912 $ 114,091
========== =========== ========= ========= =========
Supplemental Disclosures of Cash Flow
Information
Cash paid for interest.................... $ 161,251 $ 219,142 $ 327,994 $ 166,664 $ 165,611
========== =========== ========= ========= =========
</TABLE>

See Notes to Financial Statements.

F-7
<PAGE> 66

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of business: Authentic Specialty Foods, Inc. manufactures,
distributes and sells Mexican food products primarily in Texas on credit terms
it establishes for individual customers.

Revenue recognition: The Company recognizes revenue upon delivery of the
product to customers or distributors because the Company is not obligated to
perform significant activities after delivery.

Cash and cash equivalents: For purposes of reporting cash flows, the
Company considers all unrestricted cash and Treasury bills, commercial paper,
and money market funds with maturities of three months or less to be cash
equivalents.

The Company maintains its cash in bank deposit accounts which, at times,
exceed federally insured limits. The Company has not experienced any losses in
such accounts.

Fair value of financial instruments: The fair value of cash and cash
equivalents, accounts receivable and accounts payable approximate the carrying
amount because of the short maturity of those investments. The fair value of the
short and long-term debt is estimated based on interest rates for the same or
similar debt offered to the Company having the same or similar remaining
maturities and collateral requirements and approximates the fair value.

Inventories: Inventories is valued at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) method.

Depreciation and amortization: Depreciation and amortization are provided
using the straight-line method based on the estimated useful lives of individual
assets over the following periods:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Fixtures and equipment................................ 3-10
Leasehold improvements................................ Life of Lease
Non-compete agreement................................. 5
Goodwill.............................................. 25
</TABLE>

In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of, the Company reviews its long-lived assets and goodwill related
to those assets periodically to determine potential impairment by comparing the
carrying value of the long-lived assets and identified goodwill with the
estimated future net undiscounted cash flows expected to result from the use of
the assets, including cash flows from disposition. Should the sum of the
expected future net cash flows be less than the carrying value, the Company
would recognize an impairment loss at the date. An impairment loss would be
measured by comparing the amount by which the carrying value exceeds the fair
value (estimated discounted future cash flows) of the long-lived assets and
identified goodwill.

Goodwill not identified with impaired assets will continue to be evaluated
to determine whether events or circumstances warrant a write-down or revised
estimates of useful lives. The Company will determine a potential impairment by
comparing the carrying value of goodwill with the estimated future net
undiscounted cash flows expected to result from the use of the assets, including
cash flows from disposition. Should the sum of the expected future net cash
flows be less than the carrying value, the Company would recognize an impairment
loss at that date. An impairment loss would be measured by comparing the amount
by which the carrying value exceeds the fair value (estimated discounted future
cash flows) of the goodwill.

To date, management has determined that no impairment of long-lived assets
and goodwill exists.

Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences, and
operating loss carryforwards and deferred tax liabilities

F-8
<PAGE> 67

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

Earnings (loss) per share: Earnings (loss) per share is based upon the
weighted average number of common and common equivalent shares outstanding
during each period. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 83, common stock issued and stock options and warrants
granted with exercise prices below the assumed initial public offering price
during the 12-month period preceding the date of the initial filing of the
registration statement have been included in the calculation as if they were
outstanding for all periods presented.

The FASB has issued Statement No. 128, Earnings Per Share, which supersedes
APB Opinion No. 15. Statement No. 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock, such as
options, warrants and convertible securities, outstanding that trade in a public
market. Those entities that have only common stock outstanding are required to
present basic earnings per-share amounts. All other entities are required to
present basic and diluted per-share amounts. Diluted per-share amounts assume
the conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce a loss or increase the income per common share
from continuing operations. All entities required to present per-share amounts
must initially apply Statement No. 128 for annual and interim periods ending
after December 15, 1997. Earlier application is not permitted.

The adoption of Statement No. 128 would have had no effect on reported
earnings (loss) per share.

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

Interim financial information (unaudited): The financial statements and
notes related thereto as of June 30, 1997 and for the six month periods ended
June 30, 1996 and 1997 are unaudited but, in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position and results of operations. The
operating results for the interim periods are not indicative of the operating
results to be expected for a full year or for other interim periods. Not all
disclosures required by generally accepted accounting principles necessary for a
complete presentation have been included.

NOTE 2. ACQUISITION

In November 1995, the Company purchased substantially all assets of El Paco
Foods, Inc., a Dallas/Fort Worth area tortilla and tortilla chip producer. A
final settlement related to the acquisition was completed in 1996.

The acquisition was accounted for as a purchase. The purchase price is
summarized as follows:

<TABLE>
<S> <C>
Cash paid................................................ $ 648,360
Non-compete and consulting agreement, discounted at 10%
(see Note 4)........................................... 548,984
Direct acquisition costs................................. 28,014
----------
$1,225,358
==========
</TABLE>

F-9
<PAGE> 68

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The purchase price was allocated as follows:

<TABLE>
<S> <C>
Inventory................................................ $ 83,266
Property and equipment................................... 1,142,092
----------
$1,225,358
==========
</TABLE>

The amount allocated to inventory was based on estimated fair value and
property and equipment was based on an independent appraisal.

In connection with the acquisition, the Company agreed to pay commissions
to the seller on future sales to the seller's existing customers at 6% through
November 1997, and at 5% thereafter through November 2002. The Company also
entered into a brokerage contract with one of the seller's shareholders to pay
commissions on sales to new customers brought to the Company at the same terms
as those above. These commissions have been expensed as incurred and are
immaterial for all periods presented.

NOTE 3. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials..................................... $144,996 $ 83,265 $ 77,004
Packaging materials............................... 257,332 246,849 261,480
Finished goods.................................... 466,410 450,108 408,519
-------- -------- --------
$868,738 $780,222 $747,003
======== ======== ========
</TABLE>

NOTE 4. NOTES PAYABLE

Line of credit: The Company has a $2,000,000 revolving line of credit
agreement with a financial institution, expiring April 1998. Advances under the
agreement are subject to borrowing base requirements and bear interest at 1.75%
in excess of the financial institution's prime rate. The interest rate was
10.4%, 10%, and 10.25% at December 31, 1995, 1996 and June 30, 1997,
respectively. Borrowings under the agreement are secured by substantially all
assets of the Company. The agreement also contains certain financial covenants,
including dividend restrictions. Under these dividend restrictions, if the
Company has annual net income before taxes and depreciation of at least
$400,000, less capital expenditures (unless financed by capital contributions),
then the Company may pay dividends of up to 30% of the excess over $400,000.

F-10
<PAGE> 69

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Long-term debt: Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Note payable to financial institution, bearing interest at
2% in excess of financial institution's prime rate, due in
monthly installments of $12,500, plus interest, through
November 1999, secured by substantially all assets(1)..... $ 587,500 $ 437,500
Note payable to former shareholder, bearing interest at
10.5%, due in monthly installments of $16,667, plus
interest, beginning in April 1997, with balance due March
1999, subordinated to line of credit and note payable to
financial institution..................................... 766,880 766,880
Non-compete and consulting agreement with El Paco Foods,
Inc.'s selling shareholders, discounted at 10%, due in
monthly installments of $11,667, through November, 2000... 541,980 452,262
Non-compete agreement with former shareholder, discounted at
8%, due in monthly installments of $10,000, through March
1997...................................................... 142,345 29,656
---------- ----------
2,038,705 1,686,298
Less current maturities..................................... 789,907 766,432
---------- ----------
Total............................................. $1,248,798 $ 919,866
========== ==========
</TABLE>

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

(1) If amounts outstanding under the revolving credit facility are accelerated,
then amounts outstanding under the Term Loan can be accelerated as well and,
accordingly, have been classified as a current liability.

At December 31, 1996, approximate maturities of long-term debt are as
follows:

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1997..................................................... $ 766,000
1998..................................................... 310,000
1999..................................................... 488,000
2000..................................................... 122,000
----------
$1,686,000
==========
</TABLE>

NOTE 5. INCOME TAXES

Income tax expense consisted of the following:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Current................................. $ -- $ -- $ -- $34,000 $122,000
Deferred................................ -- -- -- -- --
------- ------- ------- ------- --------
$ -- $ -- $ -- $34,000 $122,000
======= ======= ======= ======= ========
</TABLE>

F-11
<PAGE> 70

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The Company's income tax expense (benefit) differed from the statutory
federal rate as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------- -------------------
1994 1995 1996 1996 1997
--------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory rate applied to income (loss)
before tax............................ $(335,000) $(178,000) $ -- $ 35,000 $126,000
Non-deductible expenses................. 28,000 28,000 28,000 14,000 14,000
Tax benefit not utilized (utilized)..... 307,000 150,000 (28,000) (15,000) (18,000)
--------- --------- -------- -------- --------
$ -- $ -- $ -- $ 34,000 $122,000
========= ========= ======== ======== ========
</TABLE>

The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
JUNE 30,
1994 1995 1996 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net operating loss carryforwards........ $ 1,181,000 $ 1,197,000 $ 1,238,000 $ 1,110,000
Depreciation and amortization........... (128,000) 33,000 (43,000) (38,000)
Accrued expenses and other.............. 70,000 47,000 48,000 33,000
Allowance for doubtful accounts......... 24,000 20,000 26,000 27,000
Valuation allowance..................... (1,147,000) (1,297,000) (1,269,000) (1,132,000)
----------- ----------- ----------- -----------
$ -- $ -- $ -- $ --
=========== =========== =========== ===========
</TABLE>

At June 30, 1997, the Company recorded a valuation allowance of $1,132,000
on the deferred tax assets to reduce the total to an amount that management
believes will ultimately be realized. Realization of deferred tax assets is
dependent upon sufficient future taxable income during the period that
deductible temporary differences and carryforwards are expected to be available
to reduce taxable income.

At June 30, 1997, the Company had net operating losses of approximately
$3,265,000 expiring as follows:

<TABLE>
<CAPTION>
EXPIRATION
DATE
----------
<S> <C> <C>
2008............................................................................................... $2,684,000
2009............................................................................................... 415,000
2010............................................................................................... 47,000
2011............................................................................................... 119,000
</TABLE>

These net operating losses may be subject to certain annual limitations
resulting from future stock offerings. In addition, any tax benefits recognized
from net operating losses generated before the Company's quasi-reorganization
(see Note 7), which totaled approximately $2,385,000 at June 30, 1997, are
recorded as a direct addition to additional paid-in capital. Such benefits
recognized were $216,004 for the year ended December 31, 1994 and $34,000 and
$122,000 for the six months ended June 30, 1996 and 1997, respectively.

F-12
<PAGE> 71

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6. COMMITMENTS

Operating leases: Certain office and warehouse facilities, computer
equipment and delivery vehicles are leased under non-cancelable operating
leases. Approximate future minimum lease commitments under non-cancelable
operating leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1997....................................................... $397,000
1998....................................................... 209,000
1999....................................................... 123,000
</TABLE>

Rent expense was approximately $548,000, $581,000 and $475,000 for the
years ended December 31, 1994, 1995, and 1996, respectively, and $235,000 and
$190,000 for the six months ended June 30, 1996 and 1997, respectively.

NOTE 7. SHAREHOLDERS' EQUITY

Preferred stock: Under the Company's Restated Articles of Incorporation the
Board of Directors of the Company is authorized to issue, from time to time,
without any action on the part of the Company's shareholders, up to 5,000,000
shares of Preferred Stock in one or more series, with such relative rights,
powers, preferences, limitations and restrictions as are determined by the Board
of Directors at the time of issuance. Accordingly, the Board of Directors is
empowered to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock. In the event of such issuance, the
Preferred Stock could be utilized, under either circumstance, as a method of
discouraging, delaying or preventing a change in control of the Company.

Quasi-reorganization: The Board of Directors approved a corporate
readjustment of the accounts as of December 31, 1993, effected in accordance
with accounting principles applicable to quasi-reorganizations. At December 31,
1993, the Company's assets and liabilities approximated fair value and,
accordingly, there was no write-down of the assets and liabilities of the
Company in conjunction with the quasi-reorganization. The quasi-reorganization
was accomplished by offsetting the accumulated deficit in retained earnings of
$4,125,298 against additional paid-in capital.

NOTE 8. MAJOR CUSTOMER

Sales to one major customer accounted for approximately 45%, 37% and 28% of
net sales for the years ended December 31, 1994, 1995 and 1996, respectively,
and approximated 27% for each of the six month periods ended June 30, 1996 and
1997. The major customer accounted for approximately 16% of the Company's
accounts receivable balance at June 30, 1997.

NOTE 9. SUBSEQUENT EVENTS

Recapitalization: In June 1997, the Company affected a 1,700-to-1 common
stock split and increased its authorized shares of common stock to 20,000,000.
The effect of this common stock split has been retroactively reflected in these
financial statements and notes for all periods presented.

Initial public offering: In June 1997, the Company signed a letter of
intent with an investment banking firm to undertake a public offering by the
Company of 4,100,000 shares of Common Stock at a price based on market
conditions at the time of effectiveness. The letter of intent includes an
over-allotment option to sell an additional 615,000 shares. Simultaneously with,
and subject to, the consummation of the public offering, the Company will
repurchase 1,538,500 shares of Common Stock currently owned by the Company's
majority shareholder for approximately $12.9 million. This purchase price for
the repurchase is based upon the net

F-13
<PAGE> 72

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

offering price (after underwriters' discounts and commissions) in the public
offering. The pro forma column has been added to the balance sheet to reflect
this repurchase of Common Stock and, in accordance with accounting guidelines of
the Commission, does not include the net proceeds from the public offering.
However, as indicated above, the repurchase will not be effected unless and
until the public offering is consummated.

La Victoria Acquisition: Currently, 50% of the beneficial interest in the
capital stock of La Victoria is held by Mr. Robert C. Tanklage, the President of
La Victoria and a member of the family that has owned and operated La Victoria
since 1947, 49.5% of the beneficial interest is held by Shansby (the majority
shareholder of the Company) and .5% is held by Mr. Keith Lively, the Company's
chairman. Shansby owns 99% of LV Foods, L.L.C. ("LV Foods"), and Mr. Lively owns
the remaining 1%. LV Foods is the record owner of 50% of the outstanding shares
of common stock of La Victoria. LV Foods acquired its La Victoria shares in
April 1997 in exchange for $5 million in cash and a $7 million note payable to
the seller of the shares.

Pursuant to a contribution and exchange agreement, the Company will acquire
beneficial ownership of 100% of the capital stock of La Victoria. The purchase
price of the La Victoria Acquisition will be approximately $36.6 million,
consisting of $12 million in cash (to be paid out of proceeds of the public
offering), Common Stock with a value of $19.6 million, and assumed liabilities
of $5 million.

Stock option plan: In June 1997, the Board of Directors and the
shareholders of the Company approved its 1997 Stock Plan (the "Stock Plan"). The
purpose of the 1997 Stock Plan is to provide directors, employees and
consultants of the Company and its subsidiaries additional incentive and reward
opportunities designed to enhance the profitable growth of the Company. The
Stock Plan provides for the granting of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended,
options that do not constitute incentive stock options, and restricted stock
awards. Grants of options to purchase 130,000 shares will be made upon
consummation of the public offering with an exercise price (subject to
adjustment) equal to the offering price.

F-14
<PAGE> 73

LA VICTORIA FOODS, INC.

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
La Victoria Foods, Inc.
City of Industry, California

We have audited the accompanying balance sheets of La Victoria Foods, Inc.
as of May 31, 1996 and 1997, and the related statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended May 31, 1997. These financial statements are the responsibility of La
Victoria Foods, Inc.'s management. Our responsibility is to express an opinion
on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of La Victoria Foods, Inc. as
of May 31, 1996 and 1997 and the results of its operations and its cash flows
for each of the three years in the period ended May 31, 1997, in conformity with
generally accepted accounting principles.

McGLADREY & PULLEN, LLP

Anaheim, California
June 26, 1997

F-15
<PAGE> 74

LA VICTORIA FOODS, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MAY 31,
-----------------------------
1996 1997
------------ --------------
<S> <C> <C>
Current Assets
Cash and cash equivalents (Note 9)........................ $ 5,100,000 $ 4,822,071
Trade receivables, less allowance for doubtful accounts
1996 and 1997 $50,000 and market development fund
allowance 1996 $155,000 and 1997 $100,000.............. 1,411,585 1,238,221
Note receivables, officer-shareholder, current portion.... 18,501 --
Inventories (Note 2)...................................... 9,684,042 9,991,234
Prepaid expenses (Note 10)................................ 1,200,894 50,576
Prepaid income taxes...................................... 519,000 676,000
Deferred taxes (Note 6)................................... -- 451,000
----------- -----------
Total current assets.............................. 17,934,022 17,229,102
----------- -----------
Long-Term Receivables and Other Assets......................
Note receivable, officer-shareholder less current
maturities............................................. 341,768 --
Security deposits, related parties........................ 61,065 61,065
Other..................................................... -- 19,770
----------- -----------
402,833 80,835
----------- -----------
Property, Equipment and Leasehold Improvements, net (Note
3)........................................................ 9,160,473 8,220,576
----------- -----------
$27,497,328 $25,530,513
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable with related parties........................ $ 298,235 $ --
Current maturities of long-term debt (Note 4)............. 1,100,000 1,100,000
Current maturities of related party capital leases (Note
5)..................................................... 146,278 171,033
Accounts payable.......................................... 610,043 872,064
Accrued payroll and related taxes (Note 4)................ 600,427 602,698
Accrued profit sharing (Note 7)........................... 171,962 171,119
Other accrued expenses.................................... 158,688 331,447
Deferred taxes (Note 6)................................... 91,000 --
----------- -----------
Total current liabilities......................... 3,176,633 3,248,361
----------- -----------
Long-Term Debt (Note 4)..................................... 1,558,333 458,333
----------- -----------
Long-Term Related Party Debt................................ 1,005,000 --
----------- -----------
Long-Term Related Party Capital Leases (Note 5)............. 5,813,151 5,638,129
----------- -----------
Deferred Taxes (Note 6)..................................... 93,026 5,000
----------- -----------
Commitments and Contingencies (Notes 5, 7, 9 and 12)
Shareholders' Equity (Notes 4, 8 and 12)
Preferred stock, Class A, $100 par value; 10%
noncumulative 60,000 shares authorized; no shares
issued or outstanding.................................. -- --
Preferred stock, Class B, $100 par value; 9% noncumulative
30,000 shares authorized; no shares issued or
outstanding............................................ -- --
Common stock, $100 par value; 24,000 shares authorized;
issued and outstanding, 212 shares..................... 21,200 21,200
Additional paid-in capital................................ 2,850,000 2,850,000
Retained earnings......................................... 12,979,985 13,309,490
----------- -----------
15,851,185 16,180,690
----------- -----------
$27,497,328 $25,530,513
=========== ===========
</TABLE>

See Notes to Financial Statements.

F-16
<PAGE> 75

LA VICTORIA FOODS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales............................................. $41,381,679 $38,978,089 $37,191,863
Cost of Sales, including rent paid to related parties
1995 $839,000; 1996 $642,000; 1997 $385,000 (Notes 5
and 7).............................................. 22,218,655 20,107,345 18,408,518
----------- ----------- -----------
Gross Profit.......................................... 19,163,024 18,870,744 18,783,345
Operating Expenses, including expenses and bonuses to
related parties 1995 $0; 1996 $550,000; 1997
$1,450,000 (Notes 5, 7, 10 and 11).................. 18,709,328 15,607,329 16,933,692
----------- ----------- -----------
Operating income.................................... 453,696 3,263,415 1,849,653
Other Income (Expense)
Interest expense, including related party expense 1995
$540,000; 1996 $751,000; 1997 $850,000.............. (885,673) (996,438) (998,663)
Other, primarily interest income...................... 42,102 91,546 130,348
----------- ----------- -----------
Income (loss) before income tax expense (credits)... (389,875) 2,358,523 981,338
Income tax expense (credits) (Note 6)................. (80,880) 979,599 588,233
----------- ----------- -----------
Net income (loss)................................... $ (308,995) $ 1,378,924 $ 393,105
=========== =========== ===========

Earnings (loss) per share............................. $ (1,457.52) $ 6,504.36 $ 1,854.27
=========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding....................... 212 212 212
=========== =========== ===========
</TABLE>

See Notes to Financial Statements.

F-17
<PAGE> 76

LA VICTORIA FOODS, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
CAPITAL STOCK ISSUED
--------------------- ADDITIONAL
CLASS B PAID-IN RETAINED SHAREHOLDERS'
PREFERRED COMMON CAPITAL EARNINGS EQUITY
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1994.................. $ 600,000 $21,200 $2,400,000 $11,910,056 $14,931,256
Net (loss)........................... -- -- -- (308,995) (308,995)
--------- ------- ---------- ----------- -----------
Balance, May 31, 1995.................. 600,000 21,200 2,400,000 11,601,061 14,622,261
Net income........................... -- -- -- 1,378,924 1,378,924
Purchase of 6,000 shares of Class B
preferred stock for retirement....... (600,000) -- 450,000 -- (150,000)
--------- ------- ---------- ----------- -----------
Balance, May 31, 1996.................. -- 21,200 2,850,000 12,979,985 15,851,185
Dividends on common stock $300 per
share................................ -- -- -- (63,600) (63,600)
Net income........................... -- -- -- 393,105 393,105
--------- ------- ---------- ----------- -----------
Balance, May 31, 1997.................. $ -- $21,200 $2,850,000 $13,309,490 $16,180,690
========= ======= ========== =========== ===========
</TABLE>

See Notes to Financial Statements.

F-18
<PAGE> 77

LA VICTORIA FOODS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss)..................... $ (308,995) $ 1,378,924 $ 393,105
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation.......................... 741,843 861,481 922,412
Deferred income taxes................. 517,292 (261,208) (630,026)
Loss (gain) on sale of equipment...... 3,815 (16,000) 57,865
Change in assets and liabilities:
(Increase) decrease in:
Trade receivables.................. 1,604,836 (45,503) 173,364
Inventories........................ (282,916) 2,468,662 (307,192)
Prepaid expenses and other
assets........................... (1,225,027) 1,282,915 1,150,318
Prepaid income taxes............... 882,000 306,000 (157,000)
Increase (decrease) in accounts
payable and accrued expenses..... 974,788 (740,537) 436,208
----------- ----------- -----------
Net cash provided by operating
activities ........................ 2,907,636 5,234,734 2,039,054
----------- ----------- -----------
Cash Flows from Investing Activities
Proceeds from sale of equipment....... 3,000 16,000 --
Purchase of equipment................. (334,324) (133,988) (40,380)
Collections on notes receivable from
officers........................... 34,095 17,252 360,269
----------- ----------- -----------
Net cash provided by (used in)
investing activities............... (297,229) (100,736) 319,889
----------- ----------- -----------
Cash Flows from Financing Activities
Borrowings on long-term debt.......... 558,000 491,861 --
Cash dividends paid................... -- -- (63,600)
Principal payments on long-term debt
and capital
leases............................. (1,861,478) (1,853,932) (2,553,502)
Purchase of preferred stock for
retirement......................... -- (150,000) --
Other................................. -- -- (19,770)
----------- ----------- -----------
Net cash (used in) financing
activities......................... (1,303,478) (1,512,071) (2,636,872)
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents........................ 1,306,929 3,621,927 (277,929)
Cash and Cash Equivalents
Beginning............................. 171,144 1,478,073 5,100,000
----------- ----------- -----------
Ending................................ $ 1,478,073 $ 5,100,000 $ 4,822,071
=========== =========== ===========
</TABLE>

See Notes to Financial Statements.

F-19
<PAGE> 78

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of business: La Victoria is engaged in the manufacture, distribution
and sale of a variety of Mexican food products primarily to grocery stores,
independent retail food outlets and individual retailers in the western United
States on credit terms that La Victoria establishes for individual customers. In
addition, La Victoria sells its products to warehouse clubs and on a private
label basis.

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

Cash and cash equivalents: For the purpose of reporting cash flows, La
Victoria considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents.

Inventories: Inventories are stated at the lower of cost (first-in,
first-out method) or market.

Market development fund allowance: La Victoria provides credits to
customers related to specific marketing programs upon proof of the participation
by the customer. All credits offered to customers are recorded at the time of
performance, as a credit against amounts due from the customers.

Property, equipment and leasehold improvements: Property, equipment and
leasehold improvements are recorded at cost. Depreciation is computed primarily
by the straight-line method, over the following estimated useful lives:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Automobiles and trucks.................. 5
Machinery and equipment................. 5-10
Furniture and fixtures.................. 5-10
Buildings............................... 15
</TABLE>

Leaseholds improvements are depreciated over the shorter of the term of the
lease or their estimated useful lives. Depreciation expense on assets acquired
under capital leases is included with depreciation on owned assets.

Income taxes: Deferred income taxes are provided on a liability method
whereby deferred tax assets and deferred tax liabilities are recognized for
temporary differences. Temporary differences are the difference between the
reported amounts of assets and liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

Revenue recognition: La Victoria recognizes revenue upon delivery of its
products to customers or distributors because La Victoria is not obligated to
perform significant activities after shipment of the product.

Advertising: La Victoria expenses the production costs of advertising the
first time the advertising event takes place. Prepaid advertising represents
unused media time which is expensed when the air time is used.

Fair value of financial instruments: The fair value of cash and cash
equivalents, accounts receivable and accounts payable approximate the carrying
amount because of the short maturity of those investments. The fair value of the
short and long-term debt is estimated based on interest rates for the same or
similar debt offered to La Victoria having the same or similar remaining
maturities and collateral requirements and approximates the fair value.

F-20
<PAGE> 79

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Earnings (loss) per share: Earnings (loss) per share is based on the
weighted average number of common and common equivalent shares outstanding
during each period.

The Financial Accounting Standards Board (FASB) has issued Statement No.
128, "Earnings Per Share," which supersedes Accounting Principles Board (APB)
Opinion No. 15. Statement No. 128 requires the presentation of earnings per
share by all entities that have common stock or potential common stock, such as
options, warrants and convertible securities, outstanding that trade in a public
market. Those entities that have only common stock outstanding are required to
present basic earnings per-share amounts. All other entities are required to
present basic and diluted per-share amounts. Diluted per-share amounts assume
the conversion, exercise or issuance of all potential common stock instruments
unless the effect is to reduce a loss or increase the income per common share
from continuing operations. All entities required to present per-share amounts
must initially apply Statement No. 128 for annual and interim periods ending
after December 15, 1997. Earlier application is not permitted.

Because La Victoria has no potential common stock outstanding, La Victoria
will be required to present only basic earnings per share. The adoption of
Statement No. 128 would have had no effect on La Victoria's reported earnings
per share.

NOTE 2. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
MAY 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Finished goods............................................ $ 9,016,592 $ 8,595,094
Raw materials............................................. 398,107 436,772
Supplies.................................................. 269,343 959,418
----------- -----------
$ 9,684,042 $ 9,991,234
=========== ===========
</TABLE>

NOTE 3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

The components of property, equipment and leasehold improvements are as
follows:

<TABLE>
<CAPTION>
MAY 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Leasehold improvements.................................... $ 1,630,615 $ 1,630,615
Buildings under capital leases............................ 6,471,000 6,471,000
Machinery and equipment................................... 9,289,994 8,901,297
Furniture and fixtures.................................... 515,666 531,985
Autos and trucks.......................................... 125,600 125,600
Construction in progress.................................. 12,716 4,845
----------- -----------
18,045,591 17,665,342
Less accumulated depreciation including amounts applicable
to assets acquired under capital leases of $1,606,993 in
1996 and $1,950,336 in 1997............................. 8,885,118 9,444,766
----------- -----------
$ 9,160,473 $ 8,220,576
=========== ===========
</TABLE>

NOTE 4. LINE OF CREDIT AND LONG-TERM DEBT

La Victoria has a $3,000,000 unsecured line of credit agreement with a
bank. Interest on the line of credit is at the bank's prime rate (8.5% at May
31, 1997) or at LIBOR (5.77% at May 31, 1997) plus 2%, at

F-21
<PAGE> 80

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

La Victoria's option. The agreement expires in September 1997. There were no
amounts outstanding at May 31, 1996 and 1997. La Victoria also has a term note
outstanding with the same bank with a balance as of May 31, 1997 of $1,558,333.
The term note is unsecured and is due in monthly installments of $91,667 plus
interest at 6.48%. Final payment is due in October 1998. Both the line of credit
and the term debt contain covenants requiring the maintenance of certain
financial ratios and minimum tangible net worth. La Victoria was not in
compliance with the cash flow coverage requirement for the year ended May 31,
1997 and has obtained a waiver from the bank of this covenant.

Aggregate maturities of long-term debt as of May 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------
<S> <C>
1998..................................................... $1,100,000
1999..................................................... 458,333
----------
$1,558,333
==========
</TABLE>

NOTE 5. LEASE COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

Lease commitments: La Victoria leases its facilities from related parties
under three agreements. In July 1995, La Victoria exercised all remaining
options on one of the lease agreements and amended the other two agreements to
provide that all agreements expire in July 2010. As a result, the lease
agreements were reclassified as capital leases. Prior to July 1995, two of the
leases were classified as operating leases. In accordance with FASB Statement
No. 13, the portion of the lease related to the land for one of the facilities
has been classified as operating.

The lease agreements call for monthly rentals of $17,800, $21,860 and
$71,685, with each agreement subject to adjustment every five years beginning in
August 2000, based on changes in the Consumer Price Index. Future increases in
rent payments as a result of these changes are expensed as incurred. La Victoria
is obligated to pay property taxes and insurance plus normal repairs and
maintenance on all of the above facility leases. The implicit interest rates for
each of the agreements is 11.8%, 15.5% and 13.5%, respectively.

La Victoria also leases certain equipment and office space on a
month-to-month basis.

The total minimum lease commitment under terms of operating and capital
lease agreements for facilities at May 31, 1997, is as follows:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31, OPERATING CAPITAL
------------------ ---------- -----------
<S> <C> <C>
1998....................................................... $ 151,191 $ 951,504
1999....................................................... 147,891 951,504
2000....................................................... 136,416 951,504
2001....................................................... 136,416 951,504
2002....................................................... 136,416 951,504
Thereafter................................................. 1,114,064 7,770,616
---------- -----------
$1,822,394 12,528,136
==========
Less amount representing interest........................ 6,718,974
-----------
$ 5,809,162
===========
</TABLE>

The total rental expense relating to facilities and equipment included in
the statements of income for the years ended May 31, 1995, 1996 and 1997 was
$1,024,829, $998,687 and $849,699, respectively. Rent expense for the years
ended May 31, 1995, 1996 and 1997 include contingent rentals on capital leases
of approximately $210,000 related to increases in the base rent as a result of
increases in the Consumer Price Index.

F-22
<PAGE> 81

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Related party transactions: During the year ended May 31, 1995, La Victoria
purchased $1,174,732 of inventory from a company owned by the shareholders.
There were no purchases from this company during the period ended May 31, 1996
or 1997.

Litigation: La Victoria is party to litigation relating to property damage
and liability claims as well as certain employment-related matters arising in
the ordinary course of business. Management does not believe that the outcome of
the matters will have a material adverse effect on the financial position of La
Victoria.

In March 1995, La Victoria and F.M. Roberts & Company, Inc. ("F.M.
Roberts") entered into an engagement letter in connection with a possible sale
of La Victoria. This engagement letter was amended by the parties on March 28,
1996. On April 29, 1997, La Victoria received a demand letter from F.M. Roberts
claiming that, under the terms of this engagement letter, it is entitled to an
investment banking fee in the amount of $360,000 in connection with the
acquisition by LV Foods of its 50% beneficial ownership interest of La Victoria.
Although La Victoria believes that this claim is without merit, a settlement of
this matter is being discussed with F.M. Roberts. Under the terms of the
settlement being discussed, any payments to F.M. Roberts would be funded by TSG2
L.P. (which is an indirect owner of 50% of the common stock of La Victoria) and
would not be directly or indirectly paid by La Victoria. Although there can be
no assurance that this matter will be settled, on the current terms being
discussed or otherwise, La Victoria does not believe that it will be required to
pay any amounts to F.M. Roberts.

NOTE 6. INCOME TAX MATTERS

La Victoria's income tax expense (credits) consisted of the following:

<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-----------------------------------
1995 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
Current............................................ $(598,172) $1,240,807 $1,218,259
Deferred........................................... 517,292 (261,208) (630,026)
--------- ---------- ----------
$ (80,880) $ 979,599 $ 588,233
========= ========== ==========
</TABLE>

F-23
<PAGE> 82

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

La Victoria's income tax expense (credits) differs from the federal
statutory rate as follows:

<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
---------------------------------
1995 1996 1997
--------- -------- ----------
<S> <C> <C> <C>
Statutory rate applied to income (loss) before
taxes.............................................. $(136,000) $825,000 $343,000
State income taxes net of federal benefit............ (23,000) 143,000 74,000
Nondeductible expenses............................... 23,000 9,000 171,000
Limitation on state operating loss carryforwards..... 53,000 -- --
Other................................................ 2,120 2,599 233
--------- -------- --------
$ (80,880) $979,599 $588,233
========= ======== ========
</TABLE>

The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
MAY 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Property, equipment and leasehold improvements.............. $(492,000) $(537,000)
Capital leases.............................................. 399,000 542,000
Accounts receivable reserves................................ 20,000 20,000
Accrued vacation pay........................................ 82,000 69,000
Inventory capitalization.................................... 144,000 160,000
Other accrued expenses...................................... 88,974 192,000
Prepaid advertising......................................... (426,000) --
--------- ---------
(184,026) 446,000
Vacation allowance.......................................... -- --
--------- ---------
$(184,026) $ 446,000
========= =========
</TABLE>

The components of net deferred tax assets (liabilities) described above
included in the accompanying balance sheets are as follows:

<TABLE>
<CAPTION>
MAY 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Current assets.............................................. $ -- $451,000
Current (liabilities)....................................... (91,000) --
Noncurrent (liabilities).................................... (93,026) (5,000)
--------- --------
$(184,026) $446,000
========= ========
</TABLE>

NOTE 7. PROFIT SHARING AND PENSION PLANS

La Victoria has a profit sharing plan for those employees who meet the
eligibility requirements set forth in the Plan. Contributions to the Plan are at
the discretion of La Victoria's Board of Directors. For the years ended May 31,
1996 and 1997, contributions totaled $171,962 and $175,000 respectively. For the
year ended May 31, 1995, La Victoria made no contributions.

La Victoria's union employees participate in a defined contribution
retirement plan. Contributions to that Plan are made in accordance with the
negotiated labor contract.

NOTE 8. SHAREHOLDERS' EQUITY

La Victoria is authorized to issue two classes of preferred stock. All
preferred shares are nonvoting and have a liquidation preference over the common
shares.

F-24
<PAGE> 83

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. CONCENTRATIONS

At May 31, 1997, La Victoria had approximately $4,822,000 deposited at a
single financial institution. Deposits are insured by the FDIC up to $100,000.
La Victoria had also invested in $5,100,000 of commercial paper with the same
institution as of May 31, 1996 and had made no commercial paper investments with
the same institution as of May 31, 1997. The investments are typically under 15
days in duration.

Substantially all of La Victoria's manufacturing labor is covered by a
negotiated union contract which expires in 2000.

La Victoria had sales to the following customers that individually
accounted for more than 10% of La Victoria's total revenue.

<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
American Stores Company................................... $3,592,256 $3,742,841 $3,725,417
Safeway, Inc.............................................. 5,223,806 5,502,598 4,781,965
</TABLE>

NOTE 10. ADVERTISING

At May 31, 1996 and 1997, $1,064,906 and $0 of advertising was reported as
prepaid expenses, respectively. Advertising expense was $4,939,284, $1,937,217
and $2,510,339 for the years ended May 31, 1995, 1996 and 1997, respectively.

NOTE 11. DISCRETIONARY BONUSES AND FEES

La Victoria pays discretionary bonuses to their officers and key employees.
The amounts of these bonuses charged for the years ended May 31, 1995, 1996 and
1997 were approximately $0, $710,000 and $925,000, respectively, including $0,
$550,000 and $725,000, respectively for bonuses paid to shareholders. In
addition, during the year ended May 31, 1997, La Victoria paid $725,000 to
related parties to reimburse expenses incurred in connection with the
acquisition of 50% ownership of La Victoria by LV Foods.

NOTE 12. SUBSEQUENT EVENT

La Victoria's shareholders have agreed to transfer their shares to
Authentic Specialty Foods, Inc. conditioned upon the successful completion of an
initial public offering of common stock of Authentic Specialty Foods, Inc.
Immediately prior to the closing of the sale, La Victoria will declare a $4
million dividend to its existing shareholders. In addition, La Victoria entered
into an employment contract with its President for $360,000 annually plus
bonuses. The contract expires in 2002. In the event of termination without
cause, the contract requires La Victoria to pay the greater of $1,980,000 or
$660,000 times the number of years remaining on the contract.

NOTE 13. SUPPLEMENTAL CASH FLOWS INFORMATION

<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest................................... $ 885,673 $ 996,438 $ 998,663
=========== ========== ==========
Income taxes, net of refunds received...... $(1,430,172) $ 934,807 $1,375,259
=========== ========== ==========
Supplemental Schedule of Noncash Investing and
Financing Activities, capital lease
obligations incurred for use of buildings..... $ -- $3,040,000 $ --
=========== ========== ==========
</TABLE>

F-25
<PAGE> 84

================================================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS

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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 7
The La Victoria Acquisition............... 11
Use of Proceeds........................... 12
Dividend Policy........................... 12
Capitalization............................ 13
Dilution.................................. 14
Unaudited Pro Forma Consolidated Financial
Statements.............................. 15
Selected Financial Data................... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 21
Business.................................. 32
The Shansby Group......................... 42
Management................................ 43
Certain Transactions...................... 48
Principal Shareholders.................... 50
Description of Capital Stock.............. 51
Shares Eligible for Future Sale........... 54
Underwriting.............................. 55
Legal Matters............................. 56
Experts................................... 56
Available Information..................... 57
Index to Financial Statements............. F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

================================================================================

4,100,000 SHARES

[CALIDAD LOGO] [LA VICTORIA LOGO]

AUTHENTIC SPECIALTY
FOODS, INC.

COMMON STOCK

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

CRUTTENDEN ROTH INCORPORATED

SUTRO & CO. INCORPORATED

WEDBUSH MORGAN SECURITIES

, 1997

================================================================================
<PAGE> 85

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses of the offering are estimated to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,717
NASD filing fee............................................. 5,687
NASDAQ listing fee.......................................... 32,000
Legal fees and expenses..................................... 200,000
Accounting fees and expenses................................ 150,000
Blue Sky fees and expenses (including legal fees)........... 5,000
Printing expenses........................................... 200,000
Transfer Agent fees......................................... 10,000
Advisory Fee to Shansby Partners, L.L.C. ................... 250,000
Miscellaneous............................................... 33,096
--------
TOTAL............................................. $900,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Bylaws of the Company provide that the Company shall indemnify (i) its
directors, (ii) its directors serving at its request as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise and (iii) its
officers, against reasonable expenses incurred by them in connection with the
defense of any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, any
appeal in such an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding, where the person who
was, is, or is threatened to be made a named defendant or respondent in a
proceeding was named because the person is or was a director or an officer of
the Company. The foregoing indemnification is conditioned upon a determination
(i) by a majority vote of a quorum consisting of directors who at the time of
the vote are not named defendants or respondents in the proceeding, (ii) if such
a quorum cannot be obtained, by a majority vote of a committee of the Board of
Directors, designated to act in the matter by a majority vote of all directors
who at the time of the vote are not named defendants or respondents in the
proceeding, (iii) by special legal counsel selected by the Board of Directors or
a committee of the Board by vote as set forth in subsection (i) or (ii), or, if
such a quorum cannot be obtained and such a committee cannot be established, by
a majority vote of all directors, or (iv) by the shareholders in a vote that
excludes the shares held by directors who are named defendants or respondents in
the proceeding, that such person (1) conducted himself in good faith, (2)
reasonably believed, in the case of conduct in his official capacity as a
director or officer of the Company, that his conduct was in the Company's best
interest, and in all other cases, that his conduct was at least not opposed to
the Company's best interest, and (3) in the case of any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. Notwithstanding the
foregoing, the Company shall indemnify each director and officer against
reasonable expenses incurred by him in connection with a proceeding in which he
is a party because he is a director or officer if he has been wholly successful,
on the merits or otherwise, in the defense of the proceeding. A director or
officer, found liable on the basis that personal benefit was improperly received
by him, or found liable to the Company, may be indemnified but the
indemnification is limited to reasonable expenses actually incurred by the
person in connection with the proceeding and shall not be made in respect of any
proceeding in which the person shall have been found liable for willful or
intentional misconduct in the performance of his duty to the Company.

The Company's Bylaws also provide that reasonable expenses incurred by a
director or officer who was, is or is threatened to be named a defendant or
respondent in a proceeding may be paid or reimbursed by the Company in advance
of the final disposition of the proceeding after (i) the Company receives a
written

II-1
<PAGE> 86

affirmation by the director or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification under the Company's Bylaws
and a written undertaking by or on behalf of the director or officer to repay
the amount paid or reimbursed if it is ultimately determined that he has not met
that standard or if it is ultimately determined that indemnification of the
director against expenses incurred by him in connection with that proceeding is
prohibited by law and (ii) a determination is made that the facts then known to
those making the determination would not preclude indemnification under the
Company's Bylaws. The Bylaws of the Company also provide that the Company may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company or who is or was serving at
the Company's request as a director, officer, partner, venturer, proprietor,
trustee, employee or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise, in accordance with Article 2.02-1 of the Texas
Business Corporation Act.

In addition, the Company's Restated Articles of Incorporation provide that
a director of the Company will not be liable to the Company or its shareholders
for monetary damages for an act or omission in the director's capacity as a
director, except in the case of (i) a breach of the director's duty of loyalty
to the Company or its shareholders, (ii) an act or omission not in good faith
that constitutes a breach of duty of the director to the Company or an act or
omission that involves intentional misconduct or a knowing violation of the law,
(iii) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute. The Restated Articles
of Incorporation also excuse a director from liability to the fullest extent
permitted by any provisions of the statutes of Texas enacted in the future that
further limit the liability of a director.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In 1994, Mr. Graffunder and Mr. Hillin received grants of 85,000 and 51,000
shares of Common Stock, respectively. These grants were made in connection with
the commencement of employment with the Company by Mr. Graffunder and Mr.
Hillin, and were subject to forfeiture restrictions lapsing over a four-year
period. No cash consideration was received by the Company in connection with
these grants, which were exempt from registration under the Securities Act
because no sale of securities was involved within the meaning of the Securities
Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<S> <C>
1.1 -- Form of Underwriting Agreement
**2.1 -- Contribution and Exchange Agreement between the Company,
Robert C. Tanklage, TSG2 L.P., TSG2 Management, L.L.C.
and Keith Lively, dated June 20, 1997
2.2 -- Form of First Amendment to Contribution and Exchange
Agreement, dated August , 1997
**3.1 -- Restated Articles of Incorporation of the Company
3.2 -- Bylaws of the Company
*4.1 -- Specimen Common Stock certificate
**4.2 -- Consulting Agreement between Calidad Foods, Inc. and
Joseph Patoskie, dated November 22, 1995
**4.3 -- Consulting Agreement between Calidad Foods, Inc. and
Richard Patoskie, dated November 22, 1995
**4.4 -- Secured Promissory Note, dated April 10, 1997 in favor of
Carolyn M. Johnson, Trustee
*4.5 -- Term Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated November 3, 1993,
including Fourth Amendment thereto, dated June 20, 1997
</TABLE>

II-2
<PAGE> 87

<TABLE>
<S> <C>
*4.6 -- Business Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated October 24, 1995,
including First Amendment thereto, dated May 22, 1997,
and Second Amendment thereto, dated June 20, 1997
5.1 -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Employment Agreement between Herman L. Graffunder and
Calidad Foods, Inc., dated June 23, 1997
10.2 -- Employment Agreement between Samuel E. Hillin, Jr. and
Calidad Foods, Inc., dated June 23, 1997
**10.3 -- Authentic Specialty Foods, Inc. 1997 Stock Plan
**10.4 -- Sublease Agreement between A-1 Freeman Relocation System,
Inc. and Calidad Foods, Inc., dated August 1, 1995
**10.5 -- Lease and Agreement between Tanklage Investments Ltd. and
La Victoria Foods, Inc., dated February 1, 1993
**10.6 -- Lease and Agreement between Robert C. Tanklage, Carolyn
M. Johnson and Frank Barclay, Trustees, and La Victoria
Foods, Inc., dated August 1, 1985
**10.7 -- Lease and Agreement between Henry C. Tanklage, Erika A.
Tanklage and Louis N. Mantalica, Trustees, and La
Victoria Foods, Inc., dated November 28, 1974
10.8 -- Form of Warrant Agreement between the Company and Shansby
Partners, L.L.C., dated September , 1997
10.9 -- Form of Registration Rights Agreement between the Company
and Robert C. Tanklage, dated September , 1997
10.10 -- Advisory Agreement between the Company and Shansby
Partners, L.L.C., dated September , 1997
10.11 -- Employment Agreement between Robert C. Tanklage and La
Victoria Foods, Inc., dated May 31, 1997
10.12 -- Form of Registration Rights Agreement between the
Company, TSG2 L.P., Shansby Partners, L.L.C. and Keith R.
Lively, dated September , 1997
**16.1 -- Letter from Rylander, Clay & Opitz, L.L.P., dated August
6, 1997, regarding change in certifying accountant
23.1 -- Consent of McGladrey & Pullen, LLP
23.2 -- Consent of Rylander, Clay & Opitz, L.L.P.
23.3 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)
**23.4 -- Consent of Robert K. Swanson as a person to be named to
serve as a director
**23.5 -- Consent of Charles A. Lynch as a person to be named to
serve as a director
**23.6 -- Consent of Tim G. Bruer as a person to be named to serve
as a director
24.1 -- Power of Attorney (included on the signature page to this
Registration Statement)
**27.1 -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

** Previously filed.

(b) Consolidated Financial Statement Schedules

All schedules are omitted because the required information is inapplicable
or the information is presented in the Financial Statements or related notes.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of

II-3
<PAGE> 88

expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The undersigned Registrant hereby undertakes to provide at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

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

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

II-4
<PAGE> 89

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this amendment to Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Grand Prairie, State of Texas, on the 21st day of August, 1997.

AUTHENTIC SPECIALTY FOODS, INC.

By /s/ SAMUEL E. HILLIN, JR.
-----------------------------------
Samuel E. Hillin, Jr.
Chief Financial Officer

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

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

KEITH R. LIVELY* Chief Executive Officer, August 21, 1997
- ----------------------------------------------------- Chairman of the Board and
Keith R. Lively Director (Principal Executive
Officer)

HERMAN L. GRAFFUNDER* President and Director August 21, 1997
- -----------------------------------------------------
Herman L. Graffunder

/s/ SAMUEL E. HILLIN, JR. Chief Financial Officer August 21, 1997
- ----------------------------------------------------- (Principal Financial and
Samuel E. Hillin, Jr. Accounting Officer)

J. GARY SHANSBY* Director August 21, 1997
- -----------------------------------------------------
J. Gary Shansby

CHARLES H. ESSERMAN* Director August 21, 1997
- -----------------------------------------------------
Charles H. Esserman

*By /s/ SAMUEL E. HILLIN, JR.
--------------------------------------------------
Samuel E. Hillin, Jr.
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 90

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1 -- Form of Underwriting Agreement
**2.1 -- Contribution and Exchange Agreement between the Company,
Robert C. Tanklage, TSG2 L.P., TSG2 Management, L.L.C.
and Keith Lively, dated June 20, 1997
2.2 -- Form of First Amendment to Contribution and Exchange
Agreement, dated August , 1997
**3.1 -- Restated Articles of Incorporation of the Company
3.2 -- Bylaws of the Company
*4.1 -- Specimen Common Stock certificate
**4.2 -- Consulting Agreement between Calidad Foods, Inc. and
Joseph Patoskie, dated November 22, 1995
**4.3 -- Consulting Agreement between Calidad Foods, Inc. and
Richard Patoskie, dated November 22, 1995
**4.4 -- Secured Promissory Note, dated April 10, 1997 in favor of
Carolyn M. Johnson, Trustee
*4.5 -- Term Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated November 3, 1993,
including Fourth Amendment thereto, dated June 20, 1997
*4.6 -- Business Loan Agreement between Union Bank of California,
N.A. and La Victoria Foods, Inc., dated October 24, 1995,
including First Amendment thereto, dated May 22, 1997,
and Second Amendment thereto, dated June 20, 1997
5.1 -- Opinion of Vinson & Elkins L.L.P.
10.1 -- Employment Agreement between Herman L. Graffunder and
Calidad Foods, Inc., dated June 23, 1997
10.2 -- Employment Agreement between Samuel E. Hillin, Jr. and
Calidad Foods, Inc., dated June 23, 1997
**10.3 -- Authentic Specialty Foods, Inc. 1997 Stock Plan
**10.4 -- Sublease Agreement between A-1 Freeman Relocation System,
Inc. and Calidad Foods, Inc., dated August 1, 1995
**10.5 -- Lease and Agreement between Tanklage Investments Ltd. and
La Victoria Foods, Inc., dated February 1, 1993
**10.6 -- Lease and Agreement between Robert C. Tanklage, Carolyn
M. Johnson and Frank Barclay, Trustees, and La Victoria
Foods, Inc., dated August 1, 1985
**10.7 -- Lease and Agreement between Henry C. Tanklage, Erika A.
Tanklage and Louis N. Mantalica, Trustees, and La
Victoria Foods, Inc., dated November 28, 1974
10.8 -- Form of Warrant Agreement between the Company and Shansby
Partners, L.L.C., dated September , 1997
10.9 -- Form of Registration Rights Agreement between the Company
and Robert C. Tanklage, dated September , 1997
10.10 -- Form of Advisory Agreement between the Company and
Shansby Partners, L.L.C., dated September , 1997
10.11 -- Employment Agreement between Robert C. Tanklage and La
Victoria Foods, Inc., dated May 31, 1997
10.12 -- Form of Registration Rights Agreement between the
Company, TSG2 L.P., Shansby Partners, L.L.C. and Keith R.
Lively, dated September , 1997
**16.1 -- Letter from Rylander, Clay & Opitz, L.L.P., dated August
6, 1997, regarding change in certifying accountant
23.1 -- Consent of McGladrey & Pullen, LLP
23.2 -- Consent of Rylander, Clay & Opitz, L.L.P.
23.3 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)
**23.4 -- Consent of Robert K. Swanson as a person to be named to
serve as a director
**23.5 -- Consent of Charles A. Lynch as a person to be named to
serve as a director
**23.6 -- Consent of Tim G. Bruer as a person to be named to serve
as a director
24.1 -- Power of Attorney (included on the signature page to this
Registration Statement)
**27.1 -- Financial Data Schedule
</TABLE>

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

<PAGE> 1
Exhibit 1.1

AUTHENTIC SPECIALTY FOODS, INC.

COMMON STOCK
(PAR VALUE $1.00 PER SHARE)

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

UNDERWRITING AGREEMENT

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

August ___, 1997

CRUTTENDEN ROTH INCORPORATED
SUTRO & CO. INCORPORATED
WEDBUSH MORGAN SECURITIES INC.
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Cruttenden Roth Incorporated
18301 Von Karman
Irvine, CA 92612

Dear Ladies and Gentlemen:

Authentic Specialty Foods, Inc., a corporation organized under the
laws of the State of Texas (the "Company"), proposes to issue and sell to the
several Underwriters named in Schedule I hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 6) [4,100,000] shares (the "Firm Shares") of
Common Stock, $1.00 par value per share (the "Common Stock"), of the Company,
all of which are to be issued and sold by the Company (the "Firm Shares"), and,
in addition to the Firm Shares, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
[615,000] shares (the "Option Shares"). The Firm Shares and any Option Shares
purchased pursuant to this Agreement are hereinafter called the "Shares."

This is to confirm the agreement concerning the sale and the purchase
of the Shares from the Company by the Underwriters. The Company understands
that the Underwriters propose to make a public offering of the Shares as soon
as you deem advisable after the Registration Statement (as defined below)
becomes effective.

1. Representations, Warranties and Agreements of the Company. The
Company represents and warrants to, and agrees with, each Underwriter that:

<PAGE> 2

(a) A registration statement on Form S-1 (File No. 333-29959)
relating to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Rules and Regulations (as defined below) of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the
Commission. Copies of such registration statement and any amendments, and all
forms of the related prospectuses contained therein, previously filed by the
Company with the Commission have been delivered to you and the Company has
consented to the Underwriter's use of such copies for the purposes permitted by
the Securities Act. Such registration statement, including the prospectus, Part
II and all exhibits thereto, as amended at the time when it shall become
effective, is herein referred to as the "Registration Statement," and the
prospectus included as part of the Registration Statement on file with the
Commission that discloses all the information that was omitted from the
prospectus on the effective date pursuant to Rule 430A of the Rules and
Regulations with any changes contained in any prospectus filed with the
Commission by the Company with your consent after the effective date of the
Registration Statement, is herein referred to as the "Final Prospectus." Such
amendments to such Registration Statement as may have been required prior to
the date hereof have been filed with the Commission; and the Company will file
such additional amendments to such Registration Statement and such amended
prospectuses as may hereafter be required. If the Registration Statement has
been declared effective under the Securities Act by the Commission, the Company
has prepared and will promptly file with the Commission the information omitted
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations as part of an amendment or supplement to the prospectus pursuant to
subparagraph (1) or (4) of Rule 424(b) of the Rules and Regulations or as part
of a post-effective amendment to the Registration Statement (including an
amended prospectus); otherwise the Company has prepared and will promptly file
an amendment to the Registration Statement (including an amended prospectus).
The prospectus included as part of the Registration Statement on the date when
the Registration Statement became effective is referred to herein as the
"Effective Prospectus"; any prospectus included in the Registration Statement
of the Company and in any amendments thereto prior to the effective date of the
Registration Statement is referred to herein as a "Pre-Effective Prospectus."
For purposes of this Agreement, "Rules and Regulations" mean the rules and
regulations adopted by the Commission under either the Securities Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, and "affiliate" shall have the definition specified in Rule 405 of
the Rules and Regulations.

(b) No stop order or other order preventing or suspending the
use of any Pre-Effective Prospectus has been issued by the Commission nor any
"Blue Sky" or securities authority of any jurisdiction and each Pre-Effective
Prospectus, at the time of filing thereof, conformed in all material respects
with the requirements of the Securities Act and the Rules and Regulations, did
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
except that the foregoing shall not apply to statements in or omissions from
any Pre-Effective Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by you, or by any Underwriter through you,
specifically for use in the preparation thereof.

<PAGE> 3

(c) As of the Closing Date (as defined herein), the
Registration Statement will have been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement will have
been filed as of the Closing Date or Option Closing Date (as defined herein),
as the case may be, without the Representatives' approval as provided in
Section 3(a) hereof. When the Registration Statement becomes effective and at
all times subsequent thereto, the Registration Statement, any post-effective
amendment thereto and the Effective Prospectus and the Final Prospectus as
amended or supplemented shall comply in all material respects with the
requirements of the Securities Act and the Rules and Regulations. No such
document shall contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that the foregoing shall not apply to statements in, or
omissions from, any such document, in reliance upon, and in conformity with,
written information furnished to the Company by you, or by any Underwriter
through you, specifically for use in the preparation thereof. There is no
contract or document required to be described in the Registration Statement or
Effective Prospectus or Final Prospectus or to be filed as an exhibit to the
Registration Statement which is not in all material respects accurately
described in the Effective Prospectus or Final Prospectus and filed as an
exhibit to the Registration Statement or Final Prospectus, or both, as the case
may be. As of the Closing Date or Option Closing Date, as the case may be, no
stop order or other order suspending the effectiveness of the Registration
Statement or preventing or suspending the use of the Effective Prospectus or
the Final Prospectus or any amendment or supplement thereto, has been issued by
the Commission or any "Blue Sky" or securities authority of any jurisdiction.

(d) McGladrey & Pullen, LLP, whose reports appear in the
Registration Statement, the Pre-Effective Prospectus, the Effective Prospectus
and the Final Prospectus, are independent auditors as required by the
Securities Act and the Rules and Regulations.

(e) Rylander, Clay & Opitz, L.L.P., whose report appears in
the Registration Statement, the Pre-Effective Prospectus, the Effective
Prospectus and the Final Prospectus, are independent auditors as required by
the Securities Act and the Rules and Regulations.

(f) The financial statements (including the related schedules
and notes) of the Company and La Victoria Foods, Inc., a California corporation
("La Victoria"), included in the Registration Statement, any Pre-Effective
Prospectus, the Effective Prospectus and/or the Final Prospectus, together with
the unaudited financial information of the Company and La Victoria forming part
of the Registration Statement, each Pre-Effective Prospectus, the Effective
Prospectus and/or the Final Prospectus, present fairly the financial condition,
the results of the operations and changes in cash flows and equity of the
entities purported to be shown thereby at the dates and for the periods
indicated and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated. The selected and summary financial data included in the Registration
Statement, the Effective Prospectus, and the Final Prospectus present fairly
the information shown therein and have been compiled on a basis substantially
consistent with the financial statements presented in the Registration
Statement, the Effective Prospectus, and the Final Prospectus.

<PAGE> 4

(g) The pro forma financial information included in the
Registration Statement, each Pre-Effective Prospectus, the Effective Prospectus
and/or the Final Prospectus presents fairly the information shown therein, has
been prepared in accordance with generally accepted accounting principles and
the Rules and Regulations with respect to pro forma information, has been
properly compiled on the pro forma basis described therein and, in the opinion
of the Company, the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate under the circumstances.

(h) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Texas, with full power and authority (corporate and other) to own, lease and
operate its properties and conduct its business as described in the
Registration Statement, each Pre-Effective Prospectus, the Effective Prospectus
and Final Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the business conducted by it or the location of the properties owned or
leased by it makes such qualification necessary; and the Company holds all
licenses, certificates, permits, consents, orders, approvals and other
authorizations from governmental authorities necessary or appropriate for the
conduct of its business and to own or lease, as the case may be, and to operate
its properties as described in the Registration Statement, each Pre-Effective
Prospectus, the Effective Prospectus and Final Prospectus. The expiration or
revocation of any such licenses, certificates, permits, consents, orders,
approvals or other governmental authorizations would not materially affect the
operations of the Company. None of the activities or businesses of the Company
is in violation of, or might cause the Company to violate, any law, rule,
regulation or order of the United States, any state, county, city or locality,
or of any agency or body of the United States or of any state, county, city or
locality of any foreign jurisdiction, which violation could have a material
adverse effect on the financial condition, results of operations, business or
prospects of the Company.

(i) La Victoria has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
California, with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Registration Statement, each Pre-Effective Prospectus, the Effective Prospectus
and Final Prospectus, and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the character
of the business conducted by it or the location of the properties owned or
leased by it makes such qualification necessary; and La Victoria holds all
licenses, certificates, permits, consents, orders, approvals and other
authorizations from governmental authorities necessary or appropriate for the
conduct of its business and to own or lease, as the case may be, and to operate
its properties as described in the Registration Statement, each Pre-Effective
Prospectus, the Effective Prospectus and Final Prospectus. The expiration or
revocation of any such licenses, certificates, permits, consents, orders,
approvals or other governmental authorizations would not materially affect the
operations of La Victoria. None of the activities or businesses of La Victoria
is in violation of, or might cause La Victoria to violate, any law, rule,
regulation or order of the United States, any state, county, city or locality,
or of any agency or body of the United States or of any state, county, city or
locality of any foreign jurisdiction, which

<PAGE> 5

violation could have a material adverse effect on the financial condition,
results of operations, business or prospects of La Victoria.

(j) The Contribution and Exchange Agreement, by and among the
Company, Robert C. Tanklage ("Tanklage"), TSG2 L.P., a Delaware limited
partnership ("TSG2"), TSG2 Management, L.L.C., a Delaware limited liability
company ("TSG2 Management"), and Keith Lively ("Lively"), and Lively comprising
all of the members of LV Foods, L.L.C., a Delaware limited liability company
("LV Foods"), (TSG2, TSG2 Management and Lively collectively, the "Members"),
entered into as of June 20, 1997 (the "Contribution Agreement"), pursuant to
which (A) the Company shall acquire all of the membership interests in and to
LV Foods (the "LV Foods Purchase"), (B) the Company shall acquire 112 shares of
the outstanding common stock, $100.00 par value, of La Victoria (the "Tanklage
Purchase"), and the transactions contemplated therein, have been duly and
validly authorized by the Company, Tanklage and the Members, and the
Contribution Agreement has been duly and validly executed and delivered by the
Company, Tanklage and the Members.

(k) Upon the consummation of the transactions contemplated in
the Contribution Agreement, [WHICH SHALL OCCUR CONTEMPORANEOUSLY WITH AND IN
ANY EVENT NO LATER THAN IMMEDIATELY FOLLOWING THE CLOSING OF THE OFFER AND
PURCHASE OF THE FIRM SHARES], the Company will own directly or indirectly, all
of the outstanding capital stock of La Victoria free and clear of all liens,
encumbrances, equities or claims except as set forth in each Pre-Effective
Prospectus, the Effective Prospectus and Final Prospectus. The company does not
own or control any other corporation association or entity.

(l) The Pro-Forma and As Adjusted capitalization of the
Company as of June 30, 1997 is as set forth under the caption "Capitalization"
in the Registration Statement, each Pre-Effective Prospectus, the Effective
Prospectus and Final Prospectus, and the Common Stock conforms to the
description thereof contained under the caption "Description of Capital Stock"
in the Registration Statement, each Pre-Effective Prospectus, the Effective
Prospectus and Final Prospectus; the outstanding shares of Common Stock
(including the Shareholder Shares) have been and are, and the Shares to be sold
by the Company, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid and
nonassessable and are not subject to any preemptive or similar rights. Except
as described in the Registration Statement, each Pre-Effective Prospectus, the
Effective Prospectus and Final Prospectus, there are no preemptive rights or
other rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any shares of Common Stock pursuant to the Company's
Articles of Incorporation, By-laws or other governing documents or any
agreement, contract or other instrument to which the Company is a party or by
which it may be bound. Neither the filing of the Registration Statement nor the
offering or sale of the Shares as contemplated by this Agreement gives rise to
any rights, other than those which have been waived or satisfied, for or
relating to the registration of any shares of Common Stock; and any such
waivers, to the best of the Company's knowledge, were duly and validly given.
The description of the Company's outstanding stock options and other stock
plans or arrangements and the options or other rights granted and exercised
thereunder set forth in the Registration Statement, each Pre-Effective
Prospectus, the Effective Prospectus and/or the Final

<PAGE> 6

Prospectus accurately and fairly presents in all material respects the
information required to be shown with respect to such options, plans,
arrangements, and rights.

(m) The redemption by the Company of the shares of its Common
Stock held by The Shansby Group ("Shansby") and TSG International ("TSGI") has
been duly and validly authorized by the Company, Shansby and TSGI, and the
consummation of the redemption will not result in a violation of, or constitute
a default under, the Articles of Incorporation, By-laws or other governing
documents of the Company, or any contract, indenture, mortgage, deed of trust,
loan or credit agreement, bond debenture, note, lease or other agreement or
instrument to which the Company, Shansby or TSGI is a party or by which any of
them is bound, or to which any of their properties is subject, nor will the
redemption violate any law, rule, administrative regulation, judgment, order,
writ or decree of any court, or any governmental agency or body having
jurisdiction over the Company, Shansby or TSGI or any of their property, or
result in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company, Shansby or TSGI.

(n) All offers and sales of (i) the Common Stock by the
Company (other than the Shares); and (ii) the capital stock of La Victoria were
at all relevant times exempt from the registration requirements of the
Securities Act and were the subject of an available exemption from the
registration requirements of applicable state securities or Blue Sky laws.

(o) When duly countersigned by the Company's transfer agent
and registrar and delivered to the Underwriters in accordance with the
provisions of this Agreement, good and marketable title to the unissued Shares
to be issued and sold by the Company to the Underwriters hereunder will pass to
the Underwriters free and clear of any liens, security interests, adverse
claims, equities or other encumbrances of any kind or character, except as may
be created by any Underwriter.

(p) Except as described in or contemplated by the
Registration Statement, each Pre-Effective Prospectus, the Effective Prospectus
and Final Prospectus, (i) there has not been any material adverse change in, or
any adverse development which materially affects, the business, properties,
financial condition, results of operations or prospects of any of the Company,
LV Foods or La Victoria whether or not arising in the ordinary course of
business, from the date as of which information is given; (ii) none of the
Company, LV Foods or La Victoria has, directly or indirectly, incurred any
liabilities or obligations, direct or contingent, not in the ordinary course of
business, or which is material in amount whether or not in the ordinary course
of business, or entered into any transactions not in the ordinary course of
business, or which is material to the business of the Company, LV Foods or La
Victoria whether or not in the ordinary course of business; (iii) the
agreements to which the Company, LV Foods or La Victoria is a party, described
in the Registration Statement, each Pre-Effective Prospectus, the Effective
Prospectus and Final Prospectus, are valid and enforceable by the Company, LV
Foods or La Victoria and, to the best knowledge of the Company, the other party
or parties thereto are not in material breach or default under any such
agreement; (iv) there has not been any change in the capital stock of or any
incurrence of long-term debt by, the Company, LV Foods or La Victoria, or any
issuance or grant of options, warrants or

<PAGE> 7

rights to purchase the capital stock of the Company, LV Foods or La Victoria,
or any security convertible into, exercisable for, or exchangeable for capital
stock of the Company, LV Foods or La Victoria, or any declaration or payment of
any dividend or other distribution on any class of the capital stock of the
Company, LV Foods or La Victoria from the date as of which information is given
in the Registration Statement, each Pre-Effective Prospectus, the Effective
Prospectus and Final Prospectus; (v) there is outstanding no security or other
instrument which by its terms is convertible into or exchangeable for capital
stock of the Company, LV Foods or La Victoria; and (vi) there is no commitment,
plan or arrangement to change or alter the rights, preferences or privileges of
any outstanding class or series of the capital stock of the Company, LV Foods
or La Victoria.

(q) None of the Company, LV Foods or La Victoria is, or with
the giving of notice or lapse of time or both would be, in violation of or in
default under, or will the execution or delivery of this Agreement or the
Contribution Agreement or consummation of the transactions contemplated hereby
or thereby result in a violation of, or constitute a default under, the
Articles of Incorporation, By-laws or other governing documents of the Company,
or any contract, indenture, mortgage, deed of trust, loan or credit agreement,
bond, debenture, note, lease or other agreement or instrument, to which any of
the Company, LV Foods or La Victoria is a party or by which any of them is
bound, or to which any of their properties is subject, nor will the performance
by the Company of its obligations under this Agreement or under the
Contribution Agreement violate any law, rule, administrative regulation,
judgment, order, writ or decree of any court, or any governmental agency or
body having jurisdiction over the Company or any of its properties, or result
in the creation or imposition of any lien, charge, claim or encumbrance upon
any property or asset of the Company. Except for permits and similar
authorizations or notifications required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such permits,
authorizations and notifications which have been obtained, no consent,
approval, authorization or order of any court, governmental agency or body,
financial institution or other person or entity is required in connection with
the consummation of the transactions contemplated by this Agreement or the
Contribution Agreement, including, without limitation, the valid sale and
delivery of the Shares.

(r) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the Contribution Agreement, and this Agreement and the Contribution
Agreement have been duly authorized, executed and delivered by the Company and
constitute legal, valid and binding agreements of the Company and are
enforceable against the Company in accordance with their respective terms
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally.

(s) The Company, LV Foods and La Victoria have good and
marketable title in fee simple to all items of real property and good and
marketable title to all personal property owned by them, in each case free and
clear of all liens, charges, claims, encumbrances and defects except such as
are described or referred to in the Registration Statement, each Pre-Effective
Prospectus, the Effective Prospectus and Final Prospectus or such as do not
materially affect the value of such

<PAGE> 8

property and do not interfere with the use made or proposed to be made of such
property by the Company, LV Foods or La Victoria, and any real property and
buildings held under lease by the Company, LV Foods or La Victoria are held by
them under valid, existing and enforceable leases with such exceptions as are
not material and do not interfere with the use made or proposed to be made of
such property and buildings by the Company, LV Foods or La Victoria and except
as enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally.

(t) There is no litigation or governmental proceeding to
which the Company, LV Foods or La Victoria is a party or to which any of their
property is subject or which is pending or, to the Company's knowledge,
threatened against or affecting the Company, LV Foods or La Victoria, which
could result in any material adverse change in the financial condition, results
of operations, business or prospects of the Company, which is required to be
disclosed in the Registration Statement, each Pre-Effective Prospectus, the
Effective Prospectus and Final Prospectus or which could materially and
adversely affect the consummation of the transactions contemplated by this
Agreement, nor are there any actions, suits or proceedings related to
environmental matters or related to discrimination on the basis of age, sex,
religion, race, or physical or mental disability, and no labor disturbance by
the employees of the Company, LV Foods or La Victoria exists or is imminent
which could be expected to affect adversely the financial condition, results of
operations, business or prospects of the Company or which is required to be
disclosed in the Registration Statement, each Pre-Effective Prospectus, the
Effective Prospectus and Final Prospectus.

(u) None of the Company, LV Foods or La Victoria is in
violation of any law, ordinance, governmental rule or regulation or court
decree to which any of them may be subject, which violation could have a
material adverse effect on the financial condition, results of operations,
business or prospects of the Company.

(v) The Company and La Victoria comply in all material
respects with all Environmental Laws (as defined below), except to the extent
that failure to comply with such Environmental Laws would not have a material
adverse effect on the financial condition, results of operation, business or
prospects of the Company. The Company and La Victoria (i) are not the subject
of any pending or, to the knowledge of the Company, threatened federal, state
or local investigation evaluating whether any remedial action by the Company or
La Victoria is needed to respond to a release of any Hazardous Materials (as
defined below) into the environment, resulting from the Company's or La
Victoria's business operations or ownership or possession of any of their
properties or assets, or (ii) is not in contravention of any Environmental Law
that could reasonably be expected to have a material adverse effect on the
financial condition, results of operation, business or prospects of the
Company. Neither the Company nor La Victoria has received any notice or claim,
nor are there pending or, to the knowledge of the Company, threatened lawsuits
against them, with respect to violations of an Environmental Law or in
connection with any release of Hazardous Materials into the environment that,
in the aggregate, if the subject of any unfavorable decision, ruling or
finding, could reasonably be expected to have a material adverse effect on the
financial condition, results of operation, business or prospects of the
Company. As used herein, "Environmental Laws" means any federal, state, city or
local law or regulation applicable to the

<PAGE> 9

Company's or La Victoria's business operations or ownership or possession of
any of their properties or assets relating to environmental matters, and
"Hazardous Materials" means those substances that are regulated by or form the
basis of liability under any Environmental Laws.

(w) The Company has not taken and shall not take, directly or
indirectly, any action designed to cause or result in, or which has constituted
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.

(x) The Company, LV Foods and La Victoria have timely (giving
effect to permitted extensions) filed and properly prepared all necessary
federal, state, local and foreign income, franchise and any other required tax
returns and have paid all taxes shown as due thereon, and the Company has no
knowledge of any tax deficiency which has been or might be asserted against the
Company, LV Foods or La Victoria which might materially and adversely affect
the financial condition, results of operations, business or prospects of the
Company.

(y) Neither the Company, La Victoria nor any officers,
directors, employees or agents or any other persons associated with or acting
on behalf of the Company or La Victoria has at any time (i) made any
contributions to any candidate for political office in violation of law, or
failed to disclose fully any contributions to any candidate for political
office in accordance with any applicable statute, rule, regulation or ordinance
requiring such disclosure, (ii) made any payment to any local, state, federal
or foreign governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or allowed
by applicable law, (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, (iv) made any payment outside the ordinary
course of business to any purchasing or selling agent or person charged with
similar duties of any entity to which the Company or La Victoria sells or from
which the Company or La Victoria buys products for the purpose of influencing
such agent or person to buy products from or sell products to the Company or La
Victoria, (v) made any other bribe, rebate, payoff, influence payment, kickback
or other unlawful payment or (vi) engaged in any transaction, maintained any
bank account or used any corporate funds except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books
and records of the Company or La Victoria.

(z) Except for the several Underwriters and the
Representatives there are no claims for services in the nature of and no person
has any right to receive a finder's fee, brokerage fee or similar fee with
respect to this Agreement, the Contribution Agreement, the transactions
contemplated hereby or thereby or the acquisition by LV Foods of its interest
in La Victoria, for which the Company or any of the several Underwriters may be
responsible.

(aa) The Company and La Victoria have their properties
adequately insured against loss or damage by fire and maintain such other
insurance as is prudent or customarily maintained by companies in the same or
similar business and in the same or similar locality.

<PAGE> 10

(bb) The Company and La Victoria own or possess rights to use
all material patents, patent rights, inventions, proprietary software (whether
represented by source code, object code or in any other manner), trademarks,
service marks, trade names and copyrights (collectively, the "Intangibles")
necessary for the conduct of their respective businesses as described in the
Registration Statement, each Pre-Effective Prospectus, the Effective Prospectus
and Final Prospectus and have taken all reasonable security measures to protect
the secrecy, confidentiality and value of their trade secrets and know-how that
are valid and protectable and are not part of the public knowledge or
literature. All of the Intangibles that the Company or La Victoria own or have
pending, or under which they are licensed, are in good standing and
uncontested. Any of the Company's or La Victoria's employees and any other
person who, either alone or in concert with others, developed, invented,
discovered, derived, programmed or designed these secrets, or who have
knowledge of or access to information relating to them, have been put on notice
and have entered into agreements that these secrets are proprietary to the
Company or La Victoria, as the case may be, and are not to be divulged or
misused. Neither the Company nor La Victoria has received any notice of
infringement of or conflict with, and to the best of the Company's knowledge,
neither the Company nor La Victoria is infringing or in conflict with, asserted
rights of others with respect to any Intangibles which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, could
materially and adversely affect the financial condition, results of operations,
business or prospects of the Company. To the knowledge of the Company, there is
no infringement by others of Intangibles of the Company or La Victoria.

(cc) There are no outstanding loans or advances or guarantees
of indebtedness by the Company, LV Foods or La Victoria to or for the benefit
of any affiliate of the Company, LV Foods or La Victoria, any of the officers
or directors of the Company, LV Foods or La Victoria, or any of the members of
the families of any of them, or any other business relationships or
related-party transaction of the nature described in Item 404 of Regulation S-K
involving the Company, LV Foods or La Victoria and any other persons referred
to in said Item 404, which are required by the Rules and Regulations to be
described in the Registration Statement, each Pre-Effective Prospectus, the
Effective Prospectus and Final Prospectus except such that are so described.

(dd) The Company is eligible to use Form S-1 for the
registration of the Shares.

(ee) Application for quotation of the Common Stock on the
National Association of Securities Dealers Automated Quotations (herein called
Nasdaq) National Market has been approved, subject to notice of issuance.

(ff) The Company and La Victoria have each complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida), relating to doing business with the Government of Cuba or any person
or affiliate located in Cuba.

(gg) The Company and La Victoria each maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally
accepted accounting

<PAGE> 11

principles and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

(hh) The Company is not, and upon the consummation of the
transactions contemplated hereby will not be, an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.

2. Purchase, Sale and Delivery of Shares.

(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell the Firm Shares to the several Underwriters,
and each Underwriter agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $______ per share, the respective number of
Firm Shares set forth opposite their names on Schedule I hereto (subject to
adjustment as provided in Section 6 hereof).

(b) Subject to the terms and conditions and in reliance upon
the representations and warranties and agreements set forth herein, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to [615,000] Option Shares, at the same purchase price per
share as the Underwriters shall pay for the Firm Shares. Said option may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters. Said option may be exercised in whole or in part at any time (but
not more than once) on or before the 30th day after the date of the Effective
Prospectus upon written or telegraphic notice by the Underwriters to the
Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option and the settlement date, which shall not
be earlier than the Closing Date (as defined below). Delivery of certificates
for the Option Shares by the Company and payment therefor shall be made as
provided in Section 2(c) hereof. The number of Option Shares to be purchased by
each Underwriter shall be the same percentage of the total number of Option
Shares to be purchased by the several Underwriters as such Underwriter is
purchasing of the Firm Shares, subject in each case to such adjustments as the
Underwriters in their absolute discretion shall make to eliminate any
fractional shares.

(c) Delivery of definitive certificates for the Firm Shares
and the Option Shares (if the option provided for in Section 2(b) hereof shall
have been exercised on or before the second business day prior to the Closing
Date) shall be made to you for the respective accounts of the Underwriters
against payment to the Company of the purchase price therefor by wire transfer
in immediately available funds. Payment of the purchase price for, and delivery
of certificates for, the Firm Shares shall be made at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002 (or at
such other place as may be agreed upon between you and the Company) at 9:00
a.m. Texas time, on the fourth full business day following the date of this
Agreement or at such other time and date not later than seven full business
days thereafter as you and the Company may determine, such time and date of
payment and delivery being herein called

<PAGE> 12

the "Closing Date." The certificates for the Shares will be registered in such
name or names and denominations as you request in writing at least two full
business days prior to the Closing Date. The Company will permit you to examine
and package such certificates for delivery at least three full business days
prior to the Closing Date.

It is understood that each Underwriter has authorized you,
individually and not as Representatives of the several Underwriters, to accept
delivery and receipt of, for its account, the Shares that it has agreed to
purchase, and each Underwriter has further authorized you (but not obligated
you) to make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior to
the Closing Date or Option Closing Date, as the case may be, for the Shares to
be purchased by such Underwriter or Underwriters. Any such payment by you shall
not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder or under any other underwriting arrangement relating to
the Shares, including, without limitation, the Agreement Among Underwriters.

If the option provided for in Section 2(b) hereof is exercised after
the second business day prior to the Closing Date, the Company will deliver (at
the expense of the Company) to the Underwriters, at Irvine, California, on the
date specified by the Underwriters (which shall be no earlier than the second
business day and no later thin the third business day after the exercise of
said option), certificates for the Option Shares in such names and
denominations as the Underwriters shall have requested against payment to the
Company of the purchase price thereof by wire transfer in immediately available
funds. If settlement for the Option Shares occurs after the Closing Date, the
Company will deliver to the Underwriters on the settlement date for the Option
Shares (such date and time of delivery and payment for the Option Shares being
herein called the "Option Closing Date" and, together with the Closing Date,
the "Closing Dates"), and the obligation of the Underwriters to purchase the
Option Shares shall be conditioned on receipt of supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 4 hereof.

3. Covenants. The Company covenants and agrees with each
Underwriter that:

(a) The Company shall use its best efforts to cause the
Registration Statement to become effective and, if the procedure in Rule 430A
of the Rules and Regulations is utilized, to comply with the provisions of, and
make all requisite filings with the Commission pursuant to, Rule 430A of the
Rules and Regulations and to notify you promptly (in writing, if requested) of
all such filings. The Company shall notify you promptly of the receipt of any
comments from the Commission and any request by the Commission for any
amendment of or supplement to the Registration Statement or the Effective
Prospectus or the Final Prospectus or for additional information. The Company
shall prepare and file with the Commission, promptly upon your request, any
amendments of or supplements to the Registration Statement or the Effective
Prospectus or the Final Prospectus which, in your opinion, may be necessary or
advisable in connection with the distribution of the Shares. The Company shall
not file any amendment of or supplement to the Registration Statement or the
Effective Prospectus or the Final Prospectus (including any post-effective
amendment), which is not approved by you after reasonable notice thereof, such
approval

<PAGE> 13

not to be unreasonably withheld or delayed. The Company shall advise you
promptly of the issuance by the Commission or any State or other regulatory
body of any stop order or other order suspending the effectiveness of the
Registration Statement, suspending or preventing the use of any Pre-Effective
Prospectus, Effective Prospectus or Final Prospectus or suspending the
qualification of the Shares for offering or sale in any jurisdiction, or of the
institution of any proceedings for any such purpose. The Company shall use its
best efforts to prevent the issuance of any stop order or other such order and,
should a stop order or other such order be issued, to obtain as soon as
possible the lifting thereof.

(b) If the Company has elected to rely upon Rule 430A, it
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus.

(c) The Company shall furnish to the Underwriters, from time
to time and without charge, a reasonable number of copies of the Registration
Statement and of each amendment and supplement thereto, of which two of each
such Registration Statement and each amendment and supplement thereto for the
Representatives and one for counsel for the Underwriters ("Underwriters'
Counsel") shall be originally signed and shall include exhibits. During the
period in which a prospectus is required to be delivered under the Securities
Act and the Rules and Regulations, the Company shall furnish to each
Underwriter, from time to time and without charge, such number of copies of the
Pre-Effective Prospectus, Effective Prospectus and Final Prospectus as such
Underwriter may reasonably request and the Company hereby consents to the use
of such copies for purposes permitted by the Securities Act.

(d) Within the time during which a Final Prospectus relating
to the Shares is to be delivered under the Securities Act, the Company shall
comply with all requirements imposed upon it by the Securities Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time in
force, so far as is necessary to permit the continuance of sales of or dealings
in the Shares as contemplated by the provisions hereof and the Final
Prospectus. If during such period any event occurs or condition exists as a
result of which in the opinion of Underwriters' Counsel or counsel for the
Company, the Final Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances then existing,
not misleading, or if during such period it is necessary in the opinion of
Underwriters' Counsel or counsel for the Company, to amend the Registration
Statement or supplement the Final Prospectus to comply with the Securities Act,
the Company shall promptly notify you and shall amend the Registration
Statement or supplement the Final Prospectus (at the expense of the Company),
subject to Section 3(a), so as to correct such statement or omission or effect
such compliance, provided that the Company shall determine the final terms of
any such amendment or supplement only after considering such changes in any
such documents as the Underwriters may reasonably request.

(e) The Company shall take or cause to be taken all necessary
actions and furnish to whomever you may direct such information as may be
required for sale of the Shares under the

<PAGE> 14

laws of such jurisdictions which you shall designate; except that in no event
shall the Company be obligated in connection therewith to qualify as a foreign
corporation.

(f) The Company shall make generally available to its
security holders, in the manner contemplated by Rule 158(b) under the
Securities Act, as soon as practicable but in any event not later than 45 days
after the end of its fiscal quarter in which the first anniversary date of the
effective date of the Registration Statement occurs, an earnings statement
satisfying the requirements of Section 11(a) of the Securities Act covering a
period of at least twelve (12) consecutive months beginning after the effective
date of the Registration Statement.

(g) For a period of 180 days following the date of the
Effective Prospectus (the "Lock-Up Period"), the Company will not, without your
prior written consent, (i) purchase any shares of Common Stock or equity
securities of the Company or (ii) offer, issue, sell, transfer, grant options
to purchase or otherwise dispose of, for value or otherwise, directly or
indirectly, any shares of Common Stock or other equity securities of the
Company except (A) the Shares, (B) pursuant to the exercise of options or
warrants of the Company outstanding immediately prior to the Closing Date, as
described in the Effective Prospectus and Final Prospectus, (C) up to a total
of __________ shares of Common Stock upon the exercise or grant of options
currently outstanding or authorized pursuant to the Company's existing employee
benefit plans, as described in the Effective Prospectus and Final Prospectus,
(D) up to a total of ____ shares of Common Stock currently authorized to any
existing 401(k) benefit plan of the Company, as described in the Effective
Prospectus and Final Prospectus, or (E) in connection with a merger of another
corporation into, or an acquisition of all or substantially all of the assets
or stock of another entity by, the Company where the Company or a subsidiary is
the surviving entity; PROVIDED, the recipient of such shares of Common Stock or
equity securities of the Company agrees in writing to also abide by the
restrictions set forth in this Section 3(g) for the duration of the Lock-Up
Period.

(h) The Company shall take all actions, necessary or
appropriate, to validly consummate the LV Foods Purchase and the Tanklage
Purchase [CONTEMPORANEOUSLY WITH AND IN ANY EVENT NO LATER THAN IMMEDIATELY
FOLLOWING] the closing of the sale of the Firm Shares.

(i) The Company shall apply the net proceeds of the sale of
the Shares as set forth under the caption "Use of Proceeds" in the Final
Prospectus.

(j) The Company shall file such reports with the Commission
with respect to the sale of the Shares and the application of the proceeds
therefrom as may be required in accordance with Rule 463 under the Securities
Act.

(k) The Company will furnish to you as early as practicable
prior to the Closing Date and Option Closing Date, as the case may be, but not
less than two full business days prior thereto, a copy of its latest available
unaudited interim financial statements that have been read by the Company's
independent certified public accountants, as stated in their letters to be
furnished pursuant to Section 4(g).

<PAGE> 15

(l) The Company will comply with all provisions of all
undertakings contained in the Registration Statement.

(m) The Company shall pay or cause to be paid (A) all
expenses (including any capital duties, stamp duties and stock transfer taxes)
incurred in connection with the delivery to the several Underwriters of the
Shares, (B) all fees and expenses (including, without limitation, fees and
expenses of the Company's accountants and counsel) in connection with the
preparation printing, filing, delivery and shipping of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), each Pre-Effective Prospectus, the Effective Prospectus and
the Final Prospectus as amended or supplemented and the printing, delivery and
shipping of this Agreement and other underwriting documents, including
Underwriters' Questionnaires, Underwriters' Powers of Attorney, Blue Sky
Memoranda, Agreements Among Underwriters and Selected Dealer Agreements and any
letters transmitting the offering material to Underwriters or selling group
members (including costs of mailing and shipment) and the cost of furnishing
copies thereof to the Underwriters, (C) all legal fees, filing fees and fees
and disbursements of Underwriters' Counsel incurred in connection with the
qualification of the Shares under state securities laws as provided hereof and
in the review of the offering by the NASD, (D) the filing fee of the NASD, (E)
any applicable listing fees, including the fee for including the Company's
Common Stock for quotation on the Nasdaq National Market, (F) the cost of
printing certificates representing the Shares, (G) the cost and charges of any
transfer agent or registrar, (H) the costs of preparing, promoting and
distributing bound volumes for the Representatives and their counsel, and (I)
all other costs and expenses incident to the performance of its obligations
hereunder which are not otherwise provided for in this section. If the sale of
the Shares provided for herein is not consummated prior to December 31, 1997
and (i) the failure to complete the offering is due to a reason other than the
failure of the Underwriters to satisfy all of their obligations under this
Agreement, (ii) there is a material adverse change in the Company's business,
financial conditions, results of operations or prospects or (iii) the
Underwriters discover in the course of their due diligence, including during
the marketing of the Offering, material facts or circumstances relating to the
Company which render the contemplated Offering impracticable, the Company shall
pay for all reasonable out-of-pocket expenses (including fees and disbursements
of counsel) incurred by the Underwriters in connection with the investigation,
preparing to market and marketing the Shares or in contemplation of performing
their obligations hereunder, all "Blue Sky" filing fees and expenses, legal
fees incurred in qualifying the Shares under State Securities or "Blue Sky"
laws and in the review of the offering by the NASD, and any expenses incurred
by the Company including printing expenses and its accounting and legal fees.
The Company shall not in any event be liable to any of the Underwriters for
loss of anticipated profits from the transactions covered by this Agreement.

(n) The Company, at its expense, will furnish to its
shareholders an annual report (including financial statements prepared in
accordance with generally accepted accounting principles audited by independent
certified public accountants), and, as soon as practicable after the end of
each of the first three quarters of each fiscal year, a statement of operations
of the Company for such quarter (which may be in summary form), all in
reasonable detail, and during the five year period after the date hereof, at
its expense, will furnish you, with copies for each of the several
Underwriters, (i) as soon as practicable after the end of each fiscal year, a
balance sheet of the

<PAGE> 16

Company and any subsidiaries as at the end of such fiscal year, together with
statements of income or operations, shareholders' equity and changes in cash
flows of the Company and any consolidated subsidiaries, and of any
non-consolidated significant subsidiary, for such fiscal year, all in
reasonable detail and accompanied by a copy of the certificate or report
thereon of independent certified public accountants, (ii) as soon as they are
available, a copy of all reports (financial or other) mailed to security
holders, (iii) as soon as they are available, a copy of all reports and
financial statements furnished to or filed with the Commission, and (iv) such
other information as you may from time to time reasonably request. In addition,
during such five-year period the Company will furnish you, with copies for each
of the several Underwriters, every material press release and every material
news item or article in respect of the Company or its affairs that is released
or prepared by the Company.

(o) If the Company has an active subsidiary or subsidiaries,
the financial Statements provided for in Section 3(n) will be on a consolidated
basis to the extent the accounts of the Company and its subsidiary or
subsidiaries are consolidated in reports furnished to its shareholders
generally. Separate financial statements shall be furnished for all
subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations.

(p) At or before the Closing Date, you shall receive from
each of the Company's officers, directors and affiliates, officers and
directors of any significant subsidiary of the Company and certain other
current and prospective holders of the Company's Common Stock and other equity
securities, including without limitation Tanklage and the Members ("Insiders"),
a written agreement (i) not to offer, sell, transfer, grant any option to
purchase or otherwise dispose of, directly or indirectly, any shares of Common
Stock or other equity securities of the Company now owned or hereafter acquired
by such person during the Lock-Up Period without your prior written consent.
For a period of two years following the Lock-Up Period, the Company will use
its best efforts to notify you of any sales made by such Insiders under Rule
144 of the Rules and Regulations or any similar provision of or under the
Securities Act enacted after the date hereof.

(q) The Company shall continue to maintain a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary in order to
permit preparation of financial statements in accordance with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.

(r) The Company shall comply with all registration, filing
and reporting requirements of the Exchange Act which may from time to time be
applicable to the Company. Without limiting the generality of the foregoing,
within 30 days following the Closing Date, the Company will file a registration
statement for the Common Stock under Section 12(g) of the Exchange Act, will
use its best efforts to cause such registration statement to become effective
and

<PAGE> 17

will supply copies of the Form 8-A and any amendments or supplements thereto,
to the Representatives and their counsel, together with copies for each of the
several Underwriters within five days of its filings with the Commission.

(s) The Company shall make all filings required, including
registration under the Exchange Act, to obtain and maintain the inclusion of
the Common Stock on the Nasdaq National Market concurrently with the effective
date of the Registration Statement (with Nasdaq Symbols mutually acceptable to
the Company and the Representatives).

(t) The Company will file timely with the Commission and the
NASD, if required, a report on Form SR in accordance with the Rules and
Regulations of the Commission under the Securities Act.

(u) Prior to the first day of trading, the Company shall
obtain a CUSIP number for the Common Stock.

(v) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.

(w) If any time during the 25-day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Final Prospectus), the Company
will, after written notice from you advising the Company to the effect set
forth above, forthwith prepare, consult with you concerning the substance of,
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor, publication or
event.

(x) Prior to the Closing Date and during the period for which
a prospectus is required to be delivered pursuant to the Rules and Regulations
under the Securities Act, the Company shall not issue any press release or
other publicity about the Company without the prior approval of the
Representatives and Underwriters' Counsel.

4. Conditions of Underwriters' Obligations. The obligations of the
several underwriters hereunder are subject to the accuracy, as of the date
hereof and on each Closing Date and Option Closing Date, as if made on the
dates thereof, of the representations and warranties of the Company contained
herein, to the performance by the Company of its obligations hereunder and to
the following additional conditions:

(a) The Registration Statement and all post-effective
amendments thereto shall have become effective and all filings required by Rule
424 and Rule 430A of the Rules and Regulations shall have been made; at each
Closing Date, no stop order or other order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto shall have been

<PAGE> 18

issued; no proceedings for the issuance of such an order shall have been
initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the Final
Prospectus or otherwise) shall have been disclosed to you and complied with to
the reasonable satisfaction of you and your counsel.

(b) No Underwriter shall have advised the Company that the
Registration Statement or Effective Prospectus or Final Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact which, in
your opinion, is material, or omits to state a fact which, in your opinion, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.

(c) On or prior to each Closing Date, you shall have received
from Gardere & Wynne, L.L.P., Underwriters' Counsel, such opinion or opinions
with respect to the sufficiency of all corporate proceedings and other legal
matters relating to this Agreement and the transactions contemplated hereby as
you reasonably may require and Underwriters' Counsel shall have received such
papers and information as they request to enable them to pass upon such
matters. In rendering such opinion, Underwriters' Counsel may rely upon the
opinion to be delivered to the Underwriters by the counsel for the Company
pursuant to Section 4(d) herein.

(d) On each Closing Date there shall have been furnished to
you the opinion (addressed to the Underwriters) of Vinson & Elkins L.L.P.,
counsel for the Company, dated as of such Closing Date and in form and
substance satisfactory to Underwriters' Counsel and stating that it may be
relied upon by Underwriters' Counsel in giving their opinion, to the effect
that:

(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to
own, lease, license or use its properties and conduct its business as described
in the Registration Statement, each Pre-Effective Prospectus, the Effective
Prospectus and Final Prospectus, and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the business conducted by it or the location of the properties
owned, leased licensed or used by it makes such qualification necessary, except
for jurisdictions in which the failure to so qualify would not have a material
adverse effect on the financial condition, results of operations, business or
prospects of the Company.

(ii) La Victoria has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of California, with full corporate power and authority to own, lease, license
or use its properties and conduct its business as described in the Registration
Statement, each Pre-Effective Prospectus, the Effective Prospectus and Final
Prospectus, and is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned, leased licensed or
used by it makes such qualification necessary, except for jurisdictions in
which the failure to so qualify would not have a material adverse effect on the
financial condition, results of operations, business or prospects of the
Company.

<PAGE> 19

(iii) LV Foods has been duly organized and is
validly existing as a limited liability company under the laws of the State of
Delaware, with full power and authority to own, lease, license or use its
properties and conduct its business as described in the Registration Statement,
each Pre-Effective Prospectus, the Effective Prospectus and Final Prospectus,
and is duly qualified to do business as a foreign limited liability company and
is in good standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned, leased licensed or
used by it makes such qualification necessary, except for jurisdictions in
which the failure to so qualify would not have a material adverse effect on the
financial condition, results of operations, business or prospects of the
Company.

(iv) The authorized, issued and outstanding capital
stock of the Company as of June 30, 1997 is as set forth under the caption
"Capitalization" in each Pre-Effective Prospectus, the Effective Prospectus and
Final Prospectus and there have been no changes in the authorized and
outstanding capital stock of the Company since such date. The Common Stock of
the Company conforms to the description thereof contained in each Pre-Effective
Prospectus, the Effective Prospectus and the Final Prospectus. The outstanding
shares of Common Stock have been and are, and the Shares to be issued and sold
by the Company, upon issuance and delivery and payment therefor in the manner
herein described will be, duly authorized, validly issued, fully paid and
nonassessable and were not issued in violation of any statutory or other
preemptive rights or other rights to subscribe for or purchase any securities.
Except as described in each Pre-Effective Prospectus, the Effective Prospectus
and the Final Prospectus, there are no preemptive or other rights to subscribe
for or to purchase, or any restriction upon the voting or transfer of, any
shares of Common Stock pursuant to the Company's Articles of Incorporation,
By-laws other governing documents or any agreement, contract or other
instrument to which the Company is a party or by which it is bound; neither the
filing of the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any
shares of Common Stock; and such waivers were duly and validly given.

(v) The authorized, issued and outstanding capital
stock of the La Victoria as of June 30, 1997 is as set forth within the
Financial Statements of La Victoria in each Pre-Effective Prospectus, the
Effective Prospectus and Final Prospectus and there have been no changes in the
authorized and outstanding capital stock of La Victoria since such date. The
outstanding shares of capital stock of La Victoria are duly authorized, validly
issued, fully paid and nonassessable and were not issued in violation of any
statutory or other preemptive rights or other rights to subscribe for or
purchase any securities. Except as described in each Pre-Effective Prospectus,
the Effective Prospectus and the Final Prospectus, there are no preemptive or
other rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any shares of capital stock of La Victoria pursuant to
La Victoria's Articles of Incorporation, By-laws, other governing documents or
any agreement, contract or other instrument to which La Victoria is a party or
by which it is bound.

(vi) All of the authorized, issued and outstanding
membership interests of LV Foods are beneficially owned by the Members and
there have been no changes in the authorized and outstanding membership
interests of LV Foods since its formation. The outstanding

<PAGE> 20

membership interests of LV Foods are duly authorized, validly issued, fully
paid and nonassessable and were not issued in violation of any statutory or
other preemptive rights or other rights to subscribe for or purchase any
securities. Except as described in each Pre-Effective Prospectus, the Effective
Prospectus and the Final Prospectus, there are no preemptive or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer
of, any of the membership interests pursuant to LV Foods' [ARTICLES OF
INCORPORATION, BY-LAWS], other governing documents or any agreement, contract
or other instrument to which LV Foods is a party or by which it is bound.

(vii) None of the Company, La Victoria or LV Foods
is, nor with the giving of notice or lapse of time or both will any of them be,
in violation of or in default under, nor will the execution or delivery of this
Agreement or the Contribution Agreement or consummation of the transactions
contemplated hereby or thereby result in a violation of, or constitute a
default under, the Articles of Incorporation, By-laws or other governing
documents of the Company, La Victoria or LV Foods or any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed of
trust, loan or credit agreement, bond, debenture, note, lease or other
agreement or instrument to which the Company, La Victoria or LV Foods is a
party or by which any of them is bound, or to which any of their properties is
subject, nor will the performance by the Company, La Victoria or LV Foods of
their obligations under this Agreement or the Contribution Agreement violate
any existing law, rule, administrative regulation, judgment, order, writ or
decree of any court or any governmental agency or body having jurisdiction over
the Company, La Victoria or LV Foods or their properties, or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company, La Victoria or LV Foods, where such
violation, default or lien would have a material adverse effect on the
financial condition, results of operations, business or prospects of the
Company, La Victoria and LV Foods, taken as a whole. Except for permits and
similar authorizations or notifications required under the Securities Act, the
Securities or "Blue Sky" laws of certain jurisdictions and from the NASD and
for such permits, authorizations and notifications which have been obtained, no
consent, approval, authorization or order of any court, governmental agency or
body or financial institution is required in connection with the consummation
of the transactions contemplated by this Agreement and the Contribution
Agreement, including, without limitation, the valid sale and delivery of the
Shares.

(viii) The redemption by the Company of the shares
of its Common Stock held by Shansby and TSGI has been duly and validly
authorized by the Company and, to the knowledge of such counsel, Shansby and
TSGI, and the consummation of the redemption will not result in a violation of,
or constitute a default under, the Articles of Incorporation, By-laws or other
governing documents of the Company and, to the knowledge of such counsel,
Shansby or TSGI, or any contract, indenture, mortgage, deed of trust, loan or
credit agreement, bond debenture, note, lease or other agreement or instrument
to which the Company and, to the knowledge of such counsel, Shansby or TSGI, is
a party or by which any of them is bound, or to which any of their properties
is subject, nor will the redemption violate any law, rule, administrative
regulation, judgment, order, writ or decree of any court, or any governmental
agency or body having jurisdiction over the Company and, to the knowledge of
such counsel, Shansby or TSGI, or any of their property, or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Company and, to the knowledge of such counsel, Shansby
or TSGI.

<PAGE> 21

(vix) The descriptions in the Registration Statement,
each Pre-Effective Prospectus, the Effective Prospectus and the Final
Prospectus of the statutes, regulations, legal or governmental proceedings,
contracts and other documents therein described, to the extent that such
descriptions constitute summaries of matters of law, documents or proceedings,
or legal conclusions, have been reviewed by such counsel and fairly present the
information disclosed therein in all material respects.

(x) The Registration Statement and all post-effective
amendments thereto have become effective under the Securities Act and no stop
order or other order suspending the effectiveness of the Registration Statement
or preventing or suspending the use of any Pre-Effective Prospectus, the
Effective Prospectus, the Final Prospectus or any amendment or supplement
thereto has been issued and no proceedings for that purpose have been
instituted or are pending before or contemplated by the Commission or any "Blue
Sky" or securities authority of any jurisdiction and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations have been (or will be) made
within the required time period; the Registration Statement, each Pre-Effective
Prospectus, the Effective Prospectus and the Final Prospectus and any amendment
or supplement thereto, as of their respective effective dates, comply in all
material respects with the requirements of the Securities Act and the Rules and
Regulations (except that counsel need express no opinion on the financial
statements or other financial data) and all amendments to the Registration
Statement required to be filed have been so filed.

(xi) To such counsel's knowledge and other than as
set forth in the Effective Prospectus and the Final Prospectus, there are no
legal or governmental proceedings pending to which the Company, LV Foods or La
Victoria is a party or of which any property of the Company, LV Foods or La
Victoria is the subject which, if determined adversely to the Company, LV Foods
or La Victoria, would individually or in the aggregate have a material adverse
effect on the financial condition, results of operation, business or prospects
of the Company (assuming the consummation of the transactions contemplated by
the Contribution Agreement); to such counsel's knowledge, no such proceedings
are threatened by governmental authorities or threatened by others; and, to
such counsel's knowledge, after reasonable investigation, no pending or
threatened litigation or governmental action, suit or proceeding, statute or
regulation required to be described in each Pre-Effective Prospectus, the
Effective Prospectus and the Final Prospectus is not so described.

(xii) To the best of such counsel's knowledge, all
descriptions in each Pre-Effective Prospectus, the Effective Prospectus and
the Final Prospectus of contracts and other documents and trademarks, and the
statements under the captions "Dividend Policy," "The Shansby Group,"
"Management," "Certain Transactions," "Description of Capital Stock" and
"Shares Eligible for Future Sale" are accurate in all material respects and
fairly present the information set forth therein; and such counsel does not
know, after reasonable investigation, of any contracts or documents of a
character required to be summarized or described in each Pre-Effective, the
Effective Prospectus and Final Prospectus, or required to be filed as exhibits
to the Registration Statement, which are not so summarized, described or filed.

<PAGE> 22

(xiii) Except as disclosed or specifically described
in the Effective Prospectus and the Final Prospectus, there are no outstanding
options, warrants or other rights of the Company, La Victoria or LV Foods
calling for the issuance of, and no commitments or obligations to issue, any
shares of capital stock or membership interests of the Company, La Victoria or
LV Foods or any security convertible into or exchangeable for capital stock or
membership interests of the Company, La Victoria or LV Foods

(xiv) The Company has the corporate power to enter
into and perform its obligations under this Agreement and the Contribution
Agreement and this Agreement and the Contribution Agreement have been duly
authorized, executed and delivered by the Company and constitute the valid and
binding agreements of the Company and are enforceable against the Company in
accordance with their terms, except insofar as indemnification and contribution
provisions may be limited by Federal or state securities laws or equitable
principles, and except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally.

(xv) The Members and Tanklage have the power,
corporate and other, to enter into and perform their obligations under the
Contribution Agreement and the Contribution Agreement has been duly authorized,
executed and delivered by Members and Tanklage and constitute the valid and
binding agreements of the Members and Tanklage and are enforceable against the
Members and Tanklage in accordance with their terms, except insofar as
indemnification and contribution provisions may be limited by Federal or state
securities laws or equitable principles, and except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally.

(xvi) Upon the consummation of the transactions
contemplated in the Contribution Agreement, [WHICH SHALL OCCUR
CONTEMPORANEOUSLY WITH AND IN ANY EVENT NO LATER THAN IMMEDIATELY FOLLOWING THE
CLOSING OF THE OFFER AND PURCHASE OF THE FIRM SHARES], the Company will own
directly or indirectly, all of the outstanding capital stock of La Victoria
free and clear of all liens, encumbrances, equities or claims except as set
forth in each Pre-Effective Prospectus, the Effective Prospectus and Final
Prospectus. The Company does not own or control any other corporation,
association or entity.

(xvii) The Company, La Victoria and LV Foods have
obtained all licenses, permits and other governmental authorizations necessary
to the conduct of their business as now being conducted; such licenses, permits
and other governmental authorizations are in full force and effect and the
Company, La Victoria and LV Foods are in all respects complying therewith; and
the Company, La Victoria and LV Foods, their activities and products, are
otherwise in compliance with all laws, rules, regulations and statutes of any
jurisdiction to which it they are subject.

(xviii) The offer and sale of all securities of the
Company made within the last three years as set forth in Part II, Item 26 of
the Registration Statement were exempt from the registration requirements of
the Securities Act and from the registration or qualification requirements of
all relevant state securities laws.

<PAGE> 23

(xix) The Company is not an "investment company" or
a company controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.

In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws other than the laws of the
United States and jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters'
Counsel, familiar with the applicable laws, provided that copies of any such
opinions shall be delivered to Underwriters' Counsel; and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible officers
of the Company, La Victoria, LV Foods and the Members and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company, La Victoria, LV Foods and the Members, provided that copies of any
such statements or certificates shall be delivered to Underwriters' Counsel.
The opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel for the Company and,
in their opinion, you and they are entitled in relying thereon.

Such counsel shall also state that such counsel has
participated in conferences with directors, officers and other representatives
of the Company, representatives of the independent public accountants of the
Company and your representatives at which the contents of the Registration
Statement, the Pre-Effective Prospectus, the Effective Prospectus and the Final
Prospectus and related matters were discussed, have participated in the
preparation of the Registration Statement, the Pre-Effective Prospectus, the
Effective Prospectus and the Final Prospectus, have reviewed all documents
referred to in the Pre-Effective Prospectus, the Effective Prospectus and the
Final Prospectus or annexed as an exhibit to the Registration Statement, as
well as certain other corporate documents furnished to such counsel by the
Company and, on the basis of the foregoing and without independent check or
verification, no facts have come to the attention of such counsel to lead such
counsel to believe that, as of its effective date, the Registration Statement,
or any further amendment thereto made by the Company prior to such Closing Date
(other than the financial statements and related schedules or financial or
statistical data therein, as to which such counsel need express no opinion),
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading or that,
as of their respective dates, the Effective Prospectus and the Final
Prospectus, or any further amendment or supplement thereto made by the Company
prior to such Closing Date (other than the financial statements and related
schedules or financial statistical data therein, as to which such counsel need
express no opinion), contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading or that, as
of such Closing Date, any of the Registration Statement, Effective Prospectus,
the Final Prospectus, or any further amendment or supplement thereto made by
the Company to such Closing Date (other than the financial statements and
related schedules or financial or statistical data therein, as to which such
counsel need express no opinion), contains an untrue

<PAGE> 24

statement of a material fact or omits to state a material fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; and although such counsel has not undertaken to determine
independently the accuracy or completeness of the statements contained in the
Registration Statement, the Effective Prospectus or the Final Prospectus and
takes no responsibility therefor, they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement, the
Effective Prospectus or the Final Prospectus, which are not filed or described
as required.

(e) There shall have been furnished to you on the Closing
Date and on the Option Closing Date, if any, a certificate, dated such Closing
Date and addressed to you, signed by the President and by the Chief Financial
Officer of the Company to the effect that: (i) the representations and
warranties of the Company in this Agreement are true and correct, as if made on
and as of such Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date; (ii) no stop order or other order
suspending the effectiveness of the Registration Statement or preventing or
suspending the use of any Pre-Effective Prospectus, the Effective Prospectus or
Final Prospectus or any amendment or supplement thereto has been issued by the
Commission or any "Blue Sky" or securities authority of any jurisdiction, and
no proceedings for that purpose has been initiated or threatened; (iii) all
filings required by Rule 424 and Rule 430A of the Rules and Regulations have
been made; (iv) the signers of said certificate have carefully examined the
Registration Statement and the Effective Prospectus and the Final Prospectus,
and any amendments or supplements thereto, and such documents contain all
statements and information required to be included therein, and do not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; (v) there has been no material adverse change in the general
affairs, business key personnel, earnings, capitalization, financial position
or net worth of the Company since the effective date of the Registration
Statement; and (vi) since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amendment or
supplement to the Registration Statement or the Effective Prospectus and the
Final Prospectus which has not been so set forth.

(f) Since the effective date of the Registration Statement,
none of the Company, LV Foods or La Victoria shall have sustained any loss or
interference with its business from flood, accident or other calamity (whether
or not covered by insurance) or from any labor dispute or court or governmental
action, order or decree, nor shall the Company, LV Foods or La Victoria have
become a party to or the subject of any litigation, nor shall there have been a
change in the general affairs, business, key personnel, earnings,
capitalization, financial position or net worth of the Company, LV Foods or La
Victoria, whether or not arising in the ordinary course of business, which
loss, litigation or change is so material and adverse to the Company that, in
your judgment, shall render it inadvisable to proceed with the delivery of the
Shares.

(g) On the date of this Agreement and on each Closing Date
you shall have received letters of each of McGladrey & Pullen, LLP, and
Rylander, Clay & Optiz, L.L.P., dated such date and each Closing Date,
addressed to you as Representatives, containing statements and

<PAGE> 25

information of the type ordinarily included in accountants' "comfort letters"
to underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Effective
Prospectus and Final Prospectus, in such form and substance satisfactory to
you, including without limitation the statements set forth in Annex I and Annex
II hereto.

(h) At or prior to the Closing Date, you shall have received
the written agreements described in Section 3(p) hereof.

(i) All proceedings taken in connection with the issuance,
sale, transfer and delivery of the Shares shall be satisfactory in form and
substance to you and to Underwriters' Counsel, and you shall have been
furnished such additional documents and certificates as you may reasonably
request.

(j) You shall have been furnished evidence in usual written
or telegraphic form from the appropriate authorities of the several
jurisdictions, or other evidence satisfactory to you, of the qualification
referred to in Section 3(e) above.

(k) Prior to the Closing Date, the Shares shall have been
duly authorized for quotation on the Nasdaq National Market upon official
notice of issuance.

(l) The NASD, upon review of the terms of the public offering
of the Shares, shall not have objected to your participation in such offering.

(m) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange, American Stock Exchange or
Nasdaq; (ii) a general moratorium on commercial banking activities declared by
either federal or California authorities; or (iii) a material adverse change in
the financial markets in the United States or internationally or any outbreak
or escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if the effect of any such
outbreak or escalation of hostilities specified in this Clause (iii) in your
judgment makes it impracticable or inadvisable to proceed with the delivery of
the Shares.

All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and the Underwriters' Counsel. Any
certificate or document signed by any officer of the Company and delivered to
you or the Underwriters' Counsel shall be deemed a representation and warranty
by such officer individually and by the Company hereunder to the Underwriters
as to the statements made therein. The Company shall furnish you with such
number of conformed copies of such opinions, certificates, letters and other
documents as you shall reasonably request. If any of the conditions specified
in this Section 4 shall not have been fulfilled when and as required by this
Agreement, this Agreement and all obligations of the Underwriters hereunder may
be cancelled at, or at any time prior to, each Closing Date, by you. Any such
cancellation shall be without liability of the Underwriters to the Company.
Notice of such cancellation shall be given to the Company in writing, or by
telegraph or telephone and confirmed in writing.

<PAGE> 26

5. Indemnification and Contribution.

(a) Subject to the conditions set forth below, the Company
agrees to indemnify and hold harmless the Underwriters, any member of the
selling group, and each of such entities' officers, directors, partners,
employees, agents, and counsel, and each person, if any, who controls any one
of the Underwriters or selling group members within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act (each an
"Indemnified Underwriter") against any and all loss, claim, damage, expense or
liability, joint or several, to which such Indemnified Underwriter may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, expense or liability (or action in respect thereof) arises out of or is
based upon (i) the inaccuracy of any of the representations or warranties made
by the Company in Section 1 thereof or otherwise, or (ii) any untrue statement
or alleged untrue statement of a material fact contained (A) in the
Registration Statement, any Pre-Effective Prospectus, the Effective Prospectus
or the Final Prospectus or any amendment or supplement thereto, or (B) in any
application or other document or communication (in this Section 5, collectively
called an "Application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company in any
jurisdiction in order to qualify the Shares under the "Blue Sky" or securities
laws thereof or filed with the Commission or any securities exchange or
national market system, such as the Nasdaq National Market, or (iii) the
omission or alleged omission to state, in the Registration Statement, any
Pre-Effective Prospectus, the Effective Prospectus or Final Prospectus or any
amendment or supplement thereto or in any Application, a material fact required
to be stated therein or necessary to make the statements therein not
misleading, or (iv) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Agreement; and shall pay each
Indemnified Underwriter for any and all costs and expenses, including
reasonable attorneys' fees, as and when incurred by such Indemnified
Underwriter in connection with investigating or defending against or appearing
as a third-party witness in connection with any litigation, commenced or
threatened, and any and all amounts paid in settlement of any claim or
litigation of any such loss, claim, damage, liability or action whatsoever,
notwithstanding the possibility that payments for such expenses might later
held to be improper; except that the Company shall not be liable in any such
case to the extent, but only to the extent, that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company through you by or
on behalf of any Underwriter specifically for use in the preparation of the
Registration Statement, any Pre-Effective Prospectus, the Effective Prospectus
or Final Prospectus or any amendment or supplement thereto, or any Application,
nor shall the Company be liable to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission in any Pre-Effective
Prospectus which is corrected in the Final Prospectus if a sufficient number of
copies of such Final Prospectus were provided to the party seeking
indemnification and such party failed to send or deliver a copy and such Final
Prospectus to the person asserting any such loss, claim, damage or liability at
or prior to the written confirmation of the sale of such shares to such person,
if such delivery was required by law. In addition to its other obligations
under this Section 5(a), the Company agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
arising

<PAGE> 27

out of or based upon any statement or omission, or any alleged statement or
omission, or any inaccuracy in the representations and warranties of the
Company herein or the failure to perform its obligations hereunder, it will pay
each Indemnified Underwriter on a monthly basis for all costs and expenses,
including reasonable attorneys' fees, incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other
proceeding, notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the Company's obligation to indemnify hereunder
or to pay each Indemnified Underwriter for such expenses and the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim payment is so held
to have been improper, each Indemnified Underwriter shall promptly return it to
the Company, together with interest compounded daily, determined on the basis
of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by Bank of America NT&SA,
San Francisco, California (the "Prime Rate"). Any such interim payment which is
not made to an Indemnified Underwriter within 30 days of a request for payment,
shall bear interest at the Prime Rate from the date of such request. The
foregoing agreement to indemnify shall be in addition to any liability which
the Company may otherwise have, including liabilities arising under this
Agreement.

(b) Each Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company, each director of the Company, each
officer of the Company who has signed the Registration Statement and any person
who controls the Company within the meaning of the Securities Act against any
loss, claim, damage or liability to which the Company may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained (A)
in the Registration Statement, any Pre-Effective Prospectus, the Effective
Prospectus or Final Prospectus or any amendment or supplement thereto, or (B)
in any Application, or (ii) the omission or alleged omission to state in the
Registration Statement, any Pre-Effective Prospectus, the Effective Prospectus
or Final Prospectus or any amendment or supplement thereto or in any
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading; except that such indemnification shall
be available in each such case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company through you by or on behalf of such Underwriter specifically for
use in the preparation thereof; and shall pay the Company for any and all costs
and expenses, including reasonable attorneys' fees, as and when incurred by it
in connection with investigating or against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action.
This indemnity agreement shall be in addition to any liability which any
Underwriter may otherwise have. The Company acknowledges that the statements
set forth in the last paragraph of the cover page (insofar as such information
relates to the Underwriters), the paragraph on page 2 with respect to
stabilization and under the heading "Underwriting" in any Pre-Effective
Prospectus, Effective Prospectus and/or the Final Prospectus constitute the
only information furnished in by or on behalf of the several Underwriters, for
inclusion in any such Prospectus, and you, as the Underwriters, confirm that
such statements are correct.

<PAGE> 28

(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the claim or the commencement of that action; the failure
to notify the indemnifying party shall not relieve it from any liability which
it may have to an indemnified party. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying
party thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory the indemnified party. After notice from the indemnifying party to
the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under such subsection for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; except that you shall have the right to
employ counsel to represent you and other Indemnified Underwriters who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Indemnified Underwriters against the Company under such
subsection if, in your reasonable judgment, it is advisable for you and those
Indemnified Underwriters to be represented by separate counsel, and in that
event the fees and expenses of such separate counsel shall be paid by the
Company. The Company agrees promptly to notify the Underwriters and the
Representatives of the commencement of any litigation or proceedings against
the Company, respectively, or against any of their officers or directors in
connection with the sale of the Shares, the Registration Statement, any
Pre-Effective Prospectus, the Effective Prospectus or the Final Prospectus or
any amendment or supplement thereto, or any Application. To the extent any
provision of this Section 5 entitles the indemnified party to reimbursement of
fees and expenses, such obligations may be billed by the indemnified party
monthly and shall be due and payable within ten (10) days of the date thereof.

(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand, and the Underwriters on the other, from the
offering of the Shares or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand, and the Underwriters on the
other, in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand,
and the Underwriters on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Final Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or

<PAGE> 29

prevent such untrue statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were to be determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any and all costs and expenses,
including reasonable attorneys' fees, incurred by such indemnified party in
connection with investigating or defending against any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint. Each
party entitled to contribution agrees that upon the service of a summons or
other initial legal process upon it in any action instituted against it in
respect of which contribution may be sought, it shall promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise. For purposes of this Section
5(d), each person, if any, who controls an Underwriter within the meaning of
the Securities Act shall have the same rights to contribution as such
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of the Securities Act, shall have the same rights to
contribution as the company. This Section 5(d) is intended to supersede any
right to contribution under the Securities Act, the Exchange Act, or otherwise.

(e) It is agreed that any controversy arising out of the
operation of the interim payment arrangements set forth in Section 5(a) hereof,
including the amounts of any requested payments and method of determining such
amounts, shall be settled by arbitration conducted under the provisions of the
Constitution and Rules of the Board of Governors of the New York Stock
Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. Any such arbitration shall be commenced
by service of a written demand for arbitration or written notice of intention
to arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Such an arbitration shall be limited to the operation of
the interim payment provisions contained in Section 5(a) hereof and shall not
resolve the ultimate propriety or enforceability of the obligation to indemnify
or pay expenses which is created by the provisions of such Section 5(a) hereof.

6. Substitution of Underwriters. If any Underwriter defaults in
its obligation to purchase the number of Shares which it has agreed to purchase
under this Agreement, the non-defaulting

<PAGE> 30

Underwriters shall be obligated to purchase (in the respective proportions
which the number of Shares set forth opposite the name of each non-defaulting
Underwriter in Schedule I hereto bears to the total number of Shares set forth
opposite the names of all the non-defaulting Underwriters in Schedule I hereto)
the Shares which the defaulting Underwriter agreed but failed to purchase;
except that the non-defaulting Underwriters shall not be obligated to purchase
any of the Shares if the total number of Shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase exceeds 9.09% of the
total number of Shares, and any non-defaulting Underwriter shall not be
obligated to purchase more than 110% of the number of Shares set forth opposite
its name in Schedule I hereto plus the total number of Option Shares
purchasable by it pursuant to the terms of Section 2(b); provided, further,
that the non-defaulting Underwriters shall not be obligated to purchase any
Shares if such additional purchase would cause any non-defaulting Underwriter
to be in violation of the net capital rule of the Commission or other
applicable law. If the foregoing maximums are exceeded, (i) the non-defaulting
Underwriters, and any other underwriters satisfactory to you who so agree,
shall have the right, but shall not be obligated, to purchase (in such
proportions as may be agreed upon among them) all the Shares which the
defaulting Underwriter agreed but failed to purchase. If the non-defaulting
Underwriters or the other underwriters satisfactory to you do not elect to
purchase the Shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriter or the Company except for the payment of
expenses to be borne by the Company and the Underwriters as provided in Section
3(m) and the indemnity and contribution agreements of the Company and the
Underwriters contained in Section 5 hereof.

Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Shares
of a defaulting Underwriter, either you or the Company may postpone the Closing
Date for up to seven full Business Days in order to effect any changes that may
be necessary in the Registration Statement, the Effective Prospectus or the
Final Prospectus or in any other document or agreement, and to file promptly
any amendments or any supplements to the Registration Statement or the
Effective Prospectus or the Final Prospectus which in your opinion may thereby
be made necessary. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 6.

7. Effective Date and Termination.

(a) This Agreement shall become effective at whichever of the
following times first occur: (i) at 8:00 A.M., Los Angeles time, on the first
full Business Day following the upon which the Registration Statement becomes
effective, or (ii) the time after the Registration Statement becomes effective
as you, in your discretion, shall first release the Shares for sale to the
public. For purposes of this Section 7, the Shares shall be deemed to have been
released for sale to the public upon release by you for publication of a
newspaper advertisement relating to the Shares or upon release by you of
communications offering the Shares for sale to securities dealers, whichever
shall first occur. Until this Agreement is effective, it may be terminated by
the Company by giving notice as hereinafter provided to you or by you by giving
notice as hereinafter provided to the Company, except that the provisions of
Section 3(m) and Section 5 shall at all times be effective.

<PAGE> 31

(b) Until the Closing Date, this Agreement may be terminated
by you by giving notice as hereinafter provided to the Company, if (i) the
Company shall have failed, refused or been unable, at or prior to the Closing
Date, to perform any agreement on its part to be performed hereunder; (ii) any
other condition of the obligations of the Underwriters hereunder is not
fulfilled; (iii) if there has been since the date as of which the information
is given in the Final Prospectus, any material adverse change, or any
development involving a prospective material adverse change, in the financial
condition, results of operation, business or prospects of the Company or La
Victoria; (iv) trading in the Shares has been suspended by the Commission or
trading in securities generally on either the New York Stock Exchange, American
Stock Exchange or Nasdaq shall have been suspended or a material limitation on
trading shall have been established; (v) a general moratorium on commercial
banking activities shall have been declared by Federal or California
authorities; or (vi) if there has occurred any material adverse change in the
financial markets in the United States or internationally or any outbreak of
hostilities or escalation of existing hostilities involving the United States
or the declaration by the United States of a national emergency or war or other
calamity or crisis that, in your reasonable judgment, is material and adverse.
Any termination of this Agreement pursuant to this Section 7 shall be without
liability on the part of the Company or any Underwriter, except as otherwise
provided in Sections 3(m) and 5 hereof.

Any notice referred to above may be given at the address
specified in Section 9 hereof in writing or by telegraph or telephone, and if
by telegraph or telephone, shall be immediately confirmed in writing.

8. Survival of Indemnities, Contribution, Warranties and
Representations. The indemnity and contribution agreements contained in Section
5 and the representations, warranties and agreements of the Company in Sections
1 and 3 shall survive the delivery of the Shares to the Underwriters hereunder
and shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.

9. Notices. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company such notice shall be in writing (and may be telecopied if confirmed
by letter) addressed to the Company at 1313 Avenue R, Grand Prairie, Texas
75050, telecopier number (972) 933-4120, Attention: President; and (b) whenever
notice is required by the provisions of this Agreement to be given to the
several Underwriters, such notice shall be in writing addressed to the
Underwriters in care of Cruttenden Roth Incorporated, 13301 Von Karman, Suite
100, Irvine, California 92715, telecopier number (714) 852-9603, Attention:
President.

10. Information Furnished by Underwriters. The statements set forth
the in the last paragraph on the cover page, the paragraph on page 2 with
respect to stabilization, and under the caption "Underwriting" in any
Pre-Effective Prospectus and in the Effective Prospectus and the Final
Prospectus, constitute the written information furnished by or on behalf of any
Underwriter referred to in paragraph (b) and (c) of Section 1 hereof and in
paragraph (b) of Section 5 hereof.

<PAGE> 32

11. Parties. This Agreement is made solely for the benefit of the
several Underwriters, the Company, any officer, director or controlling person
referred to in Section 5 hereof. The term "successors and assigns," as used in
this Agreement, shall not include any purchaser of any of the Shares from any
of the Underwriters merely by reason of such purchase.

12. Definition of "Business Day." The purposes of this Agreement,
"Business Day" means any other than Saturday, Sunday, a federal holiday or a
day on which the New York Stock Exchange is closed.

13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA,
WITHOUT GIVING EFFECT TO THE CHOICE OF LAW OR CONFLICT OF LAWS
PRINCIPLES THEREOF.

14. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

[THE NEXT PAGE IS THE SIGNATURE PAGE.]

<PAGE> 33

If the foregoing is in accordance with your understanding, please sign
and return to us seven counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination, upon request, but without warranty on your part as to
the authority of the signers thereof.

Very truly yours,

AUTHENTIC SPECIALTY FOODS, INC.

By:
-----------------------------------
Name:
Title: Chief Financial Officer

Accepted as of the date hereof:

CRUTTENDEN ROTH INCORPORATED
SUTRO & CO. INCORPORATED
WEDBUSH MORGAN SECURITIES INC.

By:
--------------------------------------
(Cruttenden Roth Incorporated)
On behalf of each of the Underwriters

<PAGE> 34

SCHEDULE I

<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL
TOTAL SHARES TO BE
NUMBER OF PURCHASED IF
FIRM MAXIMUM
SHARES TO BE OPTION
UNDERWRITER PURCHASED EXERCISED
<S> <C> <C>
Cruttenden Roth Incorporated.....................................
Sutro & Co. Incorporated
Wedbush Morgan Securities Inc.

Total 4,100,000 615,000
========= =======
</TABLE>

I-1

<PAGE> 35

ANNEX I

Pursuant to Section 4(g) of the Underwriting Agreement, McGladrey &
Pullen, LLP shall furnish letters to the Underwriters to the effect that:

(i) They are independent certified public accountants with
respect to the Company and La Victoria within the meaning of the
Securities Act and the applicable published Rules and Regulations;

(ii) In their opinion, the financial statements and any
supplementary financial information and schedules of the Company and
La Victoria audited (and, if applicable, prospective financial
statements and/or pro forma financial information examined) by them
and included in the Prospectus or the Registration Statement comply as
to form in all material respects with the applicable accounting
requirements of the Securities Act and the related published Rules and
Regulations; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the unaudited consolidated interim financial
statements, selected financial data, pro forma financial information,
prospective financial statements and/or condensed financial statements
derived from audited financial statements of the Company and La
Victoria for the periods specified in such letter, as indicated in
their reports thereon, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");

(iii) On the basis of limited procedures, not constituting an
audit in accordance with generally accepted auditing standards,
consisting of, in the case of the Company, a reading of the unaudited
financial statements and other information referred to below, a
reading of the latest available interim financial statements of the
Company and La Victoria, inspection of the minute books of the Company
and La Victoria since the date of the latest audited financial
statements included in the Prospectus, inquiries of officials of the
Company and La Victoria responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them to
believe that:

(A) any unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows as of dates or for periods beginning after June
30, 1997 included in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Securities Act and the related published
Rules and Regulations, or are not in conformity with
generally accepted accounting principles applied on a basis
substantially consistent basis for the audited consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus;

II-1

<PAGE> 36

(B) any other unaudited income statement data and
balance sheet items for the periods or as of the dates
referred to in Clause (A) above included in the Prospectus do
not agree with the corresponding items in the unaudited
consolidated financial statements from which such data and
items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with
the basis for the corresponding amounts in the audited
consolidated financial statements included in the Prospectus;

(C) the unaudited financial statements which were
not included in the Prospectus but from which were derived
any unaudited condensed financial statements as of dates or
for periods beginning after June 30, 1997 and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined
on a basis substantially consistent with the basis for the
audited consolidated financial statements included in the
Prospectus;

(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Securities Act and the
published Rules and Regulations or the pro forma adjustments
have not been properly applied to the historical amounts in
the compilation of those statements;

(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which
were outstanding on the date of the latest financial
statements included in the Prospectus) or any increase in the
consolidated long-term debt of the Company or La Victoria, or
any decreases in consolidated net current assets or net
assets or other items specified by the Representatives or any
increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest
balance sheet included in the Prospectus; except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described
in such letter; and

(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any
increases in any items specified by the Representatives, in
each case as compared with the comparable period of the
preceding year and with any other period of corresponding
length specified by the Representatives, except in each case
for decreases or increases which the Prospectus discloses
have occurred or may occur or which are described in such
letter; and

II-2

<PAGE> 37

(iv) In addition to the audit referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of
minute books, inquiries and other procedures referred to in paragraph
(iii) above, they have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from
the general accounting records of the Company and La Victoria, which
appear in the Prospectus, or in Part II of, or in exhibits and
schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and La Victoria and have found them to be in agreement.

II-3

<PAGE> 38

ANNEX II

Pursuant to Section 4(g) of the Underwriting Agreement, Rylander, Clay
& Optiz, L.L.P., shall furnish letters to the Underwriters to the effect that:

(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Securities Act and the applicable published Rules and Regulations; and

(ii) In their opinion, the financial statements and any
supplementary financial information and schedules of the Company
audited (and, if applicable, prospective financial statements and/or
pro forma financial information examined) by them and included in the
Prospectus or the Registration Statement comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and the related published Rules and Regulations; and,
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited consolidated interim financial statements, selected
financial data, pro forma financial information, prospective financial
statements and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been furnished to the representatives of the Underwriters (the
"Representatives").

<PAGE> 1
EXHIBIT 2.2

FIRST AMENDMENT TO CONTRIBUTION
AND EXCHANGE AGREEMENT

THIS FIRST AMENDMENT TO CONTRIBUTION AND EXCHANGE AGREEMENT, dated as
of July 30, 1997 (this "Amendment"), is by and among Robert C. Tanklage
("Tanklage"), TSG2 L.P., a Delaware limited partnership ("TSG2"), TSG2
Management, L.L.C., a Delaware limited liability company ("TSG2 Management"),
Keith Lively ("Lively"; and together with TSG2 and TSG2 Management, the "LV
Foods Owners") and Authentic Specialty Foods, Inc., a Texas corporation
("ASF").

WHEREAS, the parties hereto have entered into that certain
Contribution and Exchange Agreement, dated as of June 20, 1997 (as amended
hereby, the "Agreement") (capitalized terms used but not defined herein shall
have the respective meanings ascribed to such terms in the Agreement); and

WHEREAS, the parties desire to amend certain provisions of the
Agreement;

NOW THEREFORE, for and in consideration of the mutual benefits
derived and to be derived from the Agreement and this Amendment by each party
hereto, as well as other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:

1. Section 1.3 of the Agreement is hereby amended to read in its
entirety as follows:

At the Closing, the LV Foods Owners will transfer, convey and deliver
to ASF 100% of the equity interest in LV Foods as evidenced by the
delivery of, if applicable, a certificate or certificates evidencing
such equity interest in good form and duly endorsed for transfer or
accompanied by duly executed assignment in form reasonably acceptable
to ASF in exchange for one or more certificates registered in the
name of the LV Foods Owners (in proportion to their ownership of LV
Foods) for 1,400,000 shares of ASF Common Stock; provided, however,
if the Public Offering Price is greater than $10 per share, the
aggregate number of shares of ASF Common Stock issued to the LV Food
Owners will be equal to the result of (A) $14 million divided by (B)
the Public Offering Price.

2. Except as expressly set forth herein, the terms and provisions of the
Agreement are hereby ratified and confirmed.

3. This Amendment may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
<PAGE> 2

IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement on the date first written above.

-------------------------------------
ROBERT C. TANKLAGE

TSG2 L.P.

By: TSG2 Management, L.L.C.,
its general partner

By:
----------------------------------
Charles H. Esserman
Managing Member

TSG2 MANAGEMENT, L.L.C.

By:
----------------------------------
Charles H. Esserman
Managing Member

-------------------------------------
KEITH LIVELY

AUTHENTIC SPECIALTY FOODS, INC.

By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------

<PAGE> 1
EXHIBIT 3.2

BYLAWS

AUTHENTIC SPECIALTY FOODS, INC.

A Texas Corporation

Date of Adoption:

August ___, 1997
<PAGE> 2
TABLE OF CONTENTS
TO
BYLAWS
OF

AUTHENTIC SPECIALTY FOODS, INC.
A Texas Corporation

<TABLE>
<S> <C>
ARTICLE I
REGISTERED OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Quorum; Required Vote for Shareholder Action;
Adjournment of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Closing Share Transfer Records; Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 7. Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Voting; Inspectors; Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 10. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 11. Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 12. Action by Written Consent or Telephone Conference . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE III
BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1. Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Number; Classification; Term of Office; Vacancies;
Increases in the Number of Directors; Removal . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Quorum; Required Vote for Director Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Meetings; Order of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 8. Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 9. Approval or Ratification of Acts or Contracts by Shareholders . . . . . . . . . . . . . . . . . 10
Section 10. Action by Written Consent or Telephone Conference . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>

-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV
COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Designation; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Procedure; Meetings; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3. Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE V
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. Number, Titles and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2. Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Powers and Duties of the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Powers and Duties of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7. Powers and Duties of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 9. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 10. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 11. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 12. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 13. Action With Respect to Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . 14

ARTICLE VI
INDEMNIFICATION OF DIRECTORS,OFFICERS, EMPLOYEES AND AGENTS . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Advance Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3. Indemnification of Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4. Appearance as a Witness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Shareholder Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8. Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE VII
CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1. Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Regulations Regarding Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>

-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3. Notice and Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE IX
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>

-iii-
<PAGE> 5
BYLAWS

AUTHENTIC SPECIALTY FOODS, INC.
A Texas Corporation

ARTICLE I

REGISTERED OFFICE

The registered office of the Corporation required by the Texas
Business Corporation Act (the "TBCA") to be maintained in the State of Texas
shall be the registered office named in the Restated Articles of Incorporation
of the Corporation (referred to herein as the "Articles of Incorporation") or
such other office (which need not be a place of business of the Corporation) as
may be designated from time to time by the Board of Directors in the manner
provided by law.

ARTICLE II

SHAREHOLDERS

Section 1. Place of Meetings. All meetings of the shareholders
shall be held at the principal place of business of the Corporation or at such
other place within or without the State of Texas as shall be specified or fixed
in the notices or waivers of notice thereof; provided that any or all
shareholders may participate in any such meeting by means of conference
telephone or similar communications equipment pursuant to Article II, Section
12 of these bylaws.

Section 2. Quorum; Required Vote for Shareholder Action; Adjournment
of Meetings. (a) Quorum. A quorum shall be present at a meeting of
shareholders if the holders of a majority of the shares entitled to vote are
represented at the meeting in person or by proxy, unless otherwise provided in
the Articles of Incorporation in accordance with the TBCA.

(b) Voting on Matters Other Than the Election of Directors. With
respect to any matter, other than the election of directors or a matter for
which the affirmative vote of the holders of a specified portion of the shares
entitled to vote is required by the TBCA, the affirmative vote of the holders
of a majority of the shares entitled to vote on that matter and represented in
person or by proxy at a meeting of shareholders at which a quorum is present
shall be the act of the shareholders, unless otherwise provided in the Articles
of Incorporation or these bylaws in accordance with the TBCA.

(c) Voting in the Election of Directors. Unless otherwise
provided in the Articles of Incorporation or these bylaws in accordance with
the TBCA, directors shall be elected by a plurality

-1-
<PAGE> 6
of the votes cast by the holders of shares entitled to vote in the election of
directors at a meeting of shareholders at which a quorum is present.

(d) Adjournment. Notwithstanding the other provisions of the
Articles of Incorporation or these bylaws, the chairman of the meeting or the
holders of a majority of the shares entitled to vote that are represented in
person or by proxy at any meeting of shareholders, whether or not a quorum is
present, shall have the power to adjourn such meeting from time to time,
without any notice other than announcement at the meeting of the time and place
of the holding of the adjourned meeting. If such meeting is adjourned by the
shareholders, such time and place shall be determined by a vote of the holders
of a majority of the shares entitled to vote that are represented in person or
by proxy at such meeting. Upon the resumption of such adjourned meeting, any
business may be transacted that might have been transacted at the meeting as
originally called.

Section 3. Annual Meetings. An annual meeting of the shareholders,
for the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, within or without the State of Texas, on such date
and at such time as the Board of Directors shall fix and set forth in the
notice of the meeting, which date shall be within 13 months subsequent to the
last annual meeting of shareholders.

Section 4. Special Meetings. Special meetings of the shareholders
of the Corporation, and any proposals to be considered at such meetings, may
only be called and proposed by (i) the Chairman of the Board, (ii) the
President, (iii) the Board of Directors pursuant to a resolution adopted by a
majority of the then-authorized number of directors or (iv) the holders of at
least 50% of the then outstanding shares of capital stock entitled to vote
thereon ("Voting Stock"), voting together as a single class. Except as
otherwise required by law or regulation, no business proposed by a shareholder
to be considered at an annual meeting of the shareholders (including the
nomination of any person to be elected as a director of the Corporation) shall
be considered by the shareholders at that meeting unless, no later than 60 days
before the annual meeting of shareholders or (if later) ten days after the
first public notice of that meeting is sent to shareholders, the Corporation
receives from the shareholder proposing that business a written notice that
sets forth (1) the nature of the proposed business with reasonable
particularity, including the exact text of any proposal to be presented for
adoption, and the reasons for conducting that business at the annual meeting;
(2) with respect to each such shareholder, that shareholder's name and address
(as they appear on the records of the Corporation), business address and
telephone number, residence address and telephone number, and the number of
shares of each class of stock of the Corporation beneficially owned by that
shareholder; (3) any interest of the shareholder in the proposed business; (4)
the name or names of each person nominated by the shareholder to be elected or
re-elected as a director, if any; and (5) with respect to each nominee, that
nominee's name, business address and telephone number, and residence address
and telephone number, the number of shares, if any, of each class of stock of
the Corporation owned directly and beneficially by that nominee, and all
information relating to that nominee that is required to be disclosed in
solicitations of proxies for elections of directors, or is otherwise required,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (or any provision of law subsequently replacing
Regulation 14A), together with a duly acknowledged letter signed by the nominee
stating his or her acceptance of the nomination by that shareholder, stating
his or her intention to serve as a director if elected, and

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consenting to being named as a nominee for director in any proxy statement
relating to such election. The person presiding at the annual meeting shall
determine whether business (including the nomination of any person as a
director) has been properly brought before the meeting and, if the facts so
warrant, shall not permit any business (or voting with respect to any
particular nominee) to be transacted that has not been properly brought before
the meeting. Notwithstanding any other provisions of the Articles of
Incorporation or any provision of law that might otherwise permit a lesser or
no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required by
law or by the Articles of Incorporation, the affirmative vote of the holders of
not less than 80% of the Voting Stock, voting together as a single class, shall
be required to amend or repeal, or to adopt any provision inconsistent with,
this Section.

Section 5. Closing Share Transfer Records; Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive a
distribution by the Corporation (other than a distribution involving a purchase
or redemption by the Corporation of any of its own shares) or a share dividend,
or in order to make a determination of shareholders for any other purpose
(other than determining shareholders entitled to consent to action by
shareholders proposed to be taken without a meeting of shareholders), the Board
of Directors of the Corporation may provide that the share transfer records
shall be closed for a stated period but not to exceed, in any case, 60 days.
If the share transfer records shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such records shall be closed for at least ten days immediately preceding such
meeting.

In lieu of closing the share transfer records, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than 60 days and, in the
case of a meeting of shareholders, not less than ten days, prior to the date on
which the particular action requiring such determination of shareholders is to
be taken.

If the share transfer records are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote at
a meeting of shareholders, or shareholders entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such distribution or share dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders.

When a determination of shareholders entitled to vote at any meeting
of shareholders has been made as provided herein, such determination shall also
apply to any adjournment thereof except where the determination has been made
through the closing of share transfer records and the stated period of closing
has expired.

Section 6. Notice of Meetings. Written or printed notice stating
the place, day and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than 60 days before the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary
or the officer or person calling the meeting, to each shareholder entitled to
vote at such meeting. If mailed, any such

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notice shall be deemed to be delivered when deposited in the United States
mail, addressed to the shareholder at his address as it appears on the share
transfer records of the Corporation, with postage thereon prepaid.

Any notice required to be given to any shareholder, under any
provision of the TBCA or the Articles of Incorporation or these bylaws need not
be given to the shareholder if (a) notice of two consecutive annual meetings
and all notices of meetings held during the period between those annual
meetings, if any, or (b) all (but in no event less than two) payments of
distributions or interest on securities during a 12-month period have been
mailed to that person by first-class mail, addressed to him at his address as
shown on the share transfer records of the Corporation, and have been returned
undeliverable. Any action or meeting taken or held without notice to such
person shall have the same force and effect as if the notice had been duly
given and, if the action taken by the Corporation is reflected in any articles
or document filed with the Secretary of State, those articles or that document
may state that notice was duly given to all persons to whom notice was required
to be given. If such a person delivers to the Corporation written notice
setting forth his then current address, the requirement that notice be given to
that person shall be reinstated.

Section 7. Voting List. The officer or agent having charge of the
share transfer records of the Corporation shall make, at least ten days before
each meeting of shareholders, a complete list of the shareholders entitled to
vote at such meeting or any adjournment thereof, arranged in alphabetical
order, with the address of and the number of shares held by each, which list,
for a period of ten days prior to such meeting, shall be kept on file at the
registered office or principal place of business of the Corporation and shall
be subject to inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the time and place of
the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting. The original share transfer records shall be
prima-facie evidence as to who are the shareholders entitled to examine such
list or transfer records or to vote at any meeting of shareholders. Failure to
comply with the requirements of this Section shall not affect the validity of
any action taken at such meeting.

Section 8. Proxies. A shareholder may vote either in person or by
proxy executed in writing by the shareholder. A telegram, telex, cablegram or
similar transmission by the shareholder, or a photographic, photostatic,
facsimile or similar reproduction of a writing executed by the shareholder
shall be treated as an execution in writing for purposes of this Section.
Proxies for use at any meeting of shareholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to
time determine by resolution, before or at the time of the meeting. All
proxies shall be received and taken charge of and all ballots shall be received
and canvassed by the secretary of the meeting who shall decide all questions
touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have
been appointed by the chairman of the meeting, in which event such inspector or
inspectors shall decide all such questions.

No proxy shall be valid after 11 months from the date of its execution
unless otherwise provided in the proxy. A proxy shall be revocable unless the
proxy form conspicuously states that the proxy is irrevocable and the proxy is
coupled with an interest. Proxies coupled with an interest

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shall include the appointment as proxy of any of the persons set forth in the
TBCA, including without limitation:

(a) a pledgee;
(b) a person who purchased or agreed to purchase, or owns or holds
an option to purchase, the shares;
(c) a creditor of the Corporation who extended it credit under
terms requiring the appointment;
(d) an employee of the Corporation whose employment contract
requires the appointment; or
(e) a party to a voting agreement executed under Section B,
Article 2.30 of the TBCA.

Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide to the contrary, a majority of such persons
present at any meeting at which their powers thereunder are to be exercised
shall have and may exercise all the powers of voting thereby conferred, or if
only one be present, then such powers may be exercised by that one; or, if an
even number attend and a majority do not agree on any particular issue, the
Corporation shall not be required to recognize such proxy with respect to such
issue if such proxy does not specify how the shares that are the subject of
such proxy are to be voted with respect to such issue.

Section 9. Voting; Inspectors; Elections. Unless otherwise required
by law or provided in the Articles of Incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders. If the Articles of Incorporation provide
for more or less than one vote per share for all the outstanding shares or for
the shares of any class or series on any matter, every reference in these
bylaws or in the Articles of Incorporation (unless expressly stated otherwise
therein), in connection with such matter, to a specified portion of such
shares, shall mean such portion of the votes entitled to be cast in respect of
such shares by virtue of the provisions of such Articles of Incorporation.

All voting, except as required by the Articles of Incorporation or
where otherwise required by law, may be by a voice vote; provided, however,
that a vote by ballot shall be taken upon demand therefor by shareholders
holding issued and outstanding shares representing a majority of the voting
power present in person or by proxy at any meeting. Every vote by ballot shall
be taken by written ballots, each of which shall state the name of the
shareholder or proxy voting and such other information as may be required under
the procedure established for the meeting.

At any meeting at which a vote is taken by ballots, the chairman of
the meeting may appoint one or more inspectors, each of whom shall subscribe an
oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
Such inspector shall receive the ballots, count the votes and make and sign a
certificate of the result thereof. The chairman of the meeting may appoint any
person to serve as inspector, except no candidate for the office of director
shall be appointed as an inspector.

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At each election of directors each shareholder entitled to vote
thereat shall, unless otherwise provided by law or by the Articles of
Incorporation, have the right to vote the number of shares owned by him for as
many persons as there are to be elected and for whose election he has a right
to vote. Unless expressly prohibited by the Articles of Incorporation, a
shareholder shall have the right to cumulate his votes by giving one candidate
as many votes as the number of such directors multiplied by his shares shall
equal, or by distributing such votes on the same principle among any number of
such candidates. Any shareholder who intends to cumulate his votes shall give
written notice of such intention to the Secretary of the Corporation on or
before the day preceding the election at which such shareholder intends to
cumulate his votes.

Section 10. Conduct of Meetings. All meetings of the shareholders
shall be presided over by the chairman of the meeting, who shall be the
Chairman of the Board (if any), or if he is not present, the President, or if
neither the Chairman of the Board (if any) nor President is present, a chairman
elected at the meeting. The Secretary of the Corporation, if present, shall
act as secretary of such meetings, or if he is not present, an Assistant
Secretary (if any) shall so act; if neither the Secretary nor an Assistant
Secretary (if any) is present, then a secretary shall be appointed by the
chairman of the meeting. The chairman of any meeting of shareholders shall
determine the order of business and the procedure at the meeting, including
such regulation of the manner of voting and the conduct of discussion as seem
to him in order. Unless the chairman of the meeting shall otherwise determine
or otherwise conduct the meeting, the order of business shall be as follows:

(a) Calling of meeting to order.
(b) Election of a chairman, and the appointment of a secretary, if
necessary.
(c) Presentation of proof of the due calling of the meeting.
(d) Presentation and examination of proxies and determination of a
quorum.
(e) Reading and settlement of the minutes of the previous meeting.
(f) Reports of officers and committees.
(g) The election of directors, if an annual meeting or a meeting
called for that purpose.
(h) Other business.
(i) Adjournment.

Section 11. Treasury Shares. Neither the Corporation nor any other
person shall vote, directly or indirectly, at any meeting, shares of the
Corporation's own stock owned by the Corporation, shares of the Corporation's
own stock owned by another corporation the majority of the voting stock of
which is owned or controlled by the Corporation, and shares of the
Corporation's own stock held by the Corporation in a fiduciary capacity; and
such shares shall not be counted in determining the total number of outstanding
shares at any given time.

Section 12. Action by Written Consent or Telephone Conference.
Unless otherwise provided in the Articles of Incorporation, any action required
or permitted to be taken by the shareholders of the Corporation must be taken
at a duly called annual or special meeting of shareholders and may not be taken
by written consent.

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Subject to the provisions of the TBCA, the Articles of Incorporation
or these bylaws for notice of meetings, and unless otherwise restricted by the
Articles of Incorporation, shareholders may participate in and hold a meeting
by means of conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.

ARTICLE III

BOARD OF DIRECTORS

Section 1. Power. The powers of the Corporation shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the Board of Directors.

Section 2. Number; Classification; Term of Office; Vacancies;
Increases in the Number of Directors; Removal. The number, classification and
terms of the Board of Directors of the Corporation and the procedures to elect
directors, to remove directors and to fill vacancies in the Board of Directors
shall be as follows:

(a) The number of directors that shall constitute the
whole Board of Directors shall from time to time be fixed exclusively
by the Board of Directors by a resolution adopted by a majority of the
whole Board of Directors serving at the time of that vote. In no
event shall the number of directors that constitute the whole Board of
Directors be fewer than three. No decrease in the number of directors
shall have the effect of shortening the term of any incumbent
director. Directors of the Corporation need not be elected by written
ballot.

(b) The Board of Directors of the Corporation shall be
divided into three classes designated Class I, Class II, and Class
III, respectively, all as nearly equal in number as possible, with
each director then in office receiving the classification that at
least a majority of the Board of Directors designates. The initial
term of office of directors of Class I shall expire at the annual
meeting of shareholders of the Corporation in 1998, of Class II shall
expire at the annual meeting of shareholders of the Corporation in
1999, and of Class III shall expire at the annual meeting of
shareholders of the Corporation in 2000, and in all cases as to each
director until his successor is elected and qualified or until his
earlier death, resignation or removal. At each annual meeting of
shareholders beginning with the annual meeting of shareholders in
1998, each director elected to succeed a director whose term is then
expiring shall hold his office until the third annual meeting of
shareholders after his election and until his successor is elected and
qualified or until his earlier death, resignation or removal. If the
number of directors that constitutes the whole Board

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of Directors is changed as permitted by this Section, the majority of
the whole Board of Directors that adopts the change shall also fix and
determine the number of directors comprising each class; provided,
however, that any increase or decrease in the number of directors
shall be apportioned among the classes as equally as possible.

(c) Vacancies in the Board of Directors resulting from
death, resignation, retirement, disqualification, removal from office,
or other cause and newly-created directorships resulting from any
increase in the authorized number of directors may be filled by no
less than a majority vote of the remaining directors then in office,
though less than a quorum, who are designated to represent the same
class or classes of shareholders that the vacant position, when
filled, is to represent or by the sole remaining director (but not by
the shareholders except as required by law); provided that, with
respect to any directorship to be filled by the Board of Directors by
reason of an increase in the number of directors, (A) such
directorship shall be for a term of office continuing only until the
next election of one or more directors by the shareholders and (B) the
Board of Directors may not fill more than two such directorships
during the period between any two successive annual meetings of
shareholders. Each director chosen in accordance with this provision
shall receive the classification of the vacant directorship to which
he has been appointed or, if it is a newly-created directorship, shall
receive the classification that at least a majority of the Board of
Directors designates and shall hold office until the first meeting of
shareholders held after his election for the purpose of electing
directors of that classification and until his successor is elected
and qualified or until his earlier death, resignation, or removal from
office.

(d) A director of any class of directors of the
Corporation may be removed before the expiration date of that
director's term of office, only for cause and only by an affirmative
vote of the holders of 80% of the Voting Stock, voting together as a
single class, cast at the annual meeting of shareholders or at any
special meeting of shareholders called in accordance with Article II,
Section 4 hereof. For purposes of these bylaws, the term "cause"
shall mean that a director: (i) has engaged in gross negligence or
willful misconduct in the performance of his duties as a director;
(ii) has been convicted of a felony involving moral turpitude; or
(iii) has willfully engaged in conduct that he knows or should know is
materially injurious to the Corporation or any of its affiliates.

(e) Notwithstanding any other provisions of these bylaws,
any provisions of the Articles of Incorporation or any provision of
law that might otherwise permit a lesser or no vote, but in addition
to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by these
bylaws, by law or by the Articles of Incorporation, the affirmative
vote of the holders of 80% of the Voting Stock, voting together as a
single class, shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Section. Unless otherwise provided
in the Articles of Incorporation, the number of directors that shall
constitute the entire Board of Directors shall be determined from time
to time by resolution of the Board of Directors (provided that no
decrease in the number of

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directors that would have the effect of shortening the term of an
incumbent director may be made by the Board of Directors). If the
Board of Directors makes no such determination, the number of
directors shall be the number set forth in the Articles of
Incorporation as the number of directors constituting the initial
Board of Directors. Each director shall hold office for the term for
which he is elected and thereafter until his successor shall have been
elected and qualified, or until his earlier death, resignation or
removal.

Unless otherwise provided in the Articles of Incorporation, directors
need not be shareholders of the Corporation or residents of the State of Texas.

Section 2. Quorum; Required Vote for Director Action. Unless
otherwise required by law or provided in the Articles of Incorporation or these
bylaws, a majority of the total number of directors fixed by, or in the manner
provided in, the Articles of Incorporation or these bylaws shall constitute a
quorum for the transaction of business of the Board of Directors, and the act
of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.

Section 3. Meetings; Order of Business. Meetings of the Board of
Directors may be held at such place or places as shall be determined from time
to time by resolution of the Board of Directors. At all meetings of the Board
of Directors business shall be transacted in such order as shall from time to
time be determined by the Chairman of the Board (if any), or in his absence by
the President (if the President is a director), or by resolution of the Board
of Directors.

Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.

Section 4. First Meeting. In connection with any annual meeting of
shareholders at which directors were elected, the Board of Directors may, if a
quorum is present, hold its first meeting for the transaction of business
immediately after and at the same place as such annual meeting of the
shareholders. Notice of such meeting at such time and place shall not be
required.

Section 5. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by resolution of the Board of Directors. Notice of such regular
meetings shall not be required.

Section 6. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board (if any), the President
or, on the written request of any one director, by the Secretary, in each case
on at least 24 hours personal, written, telegraphic, cable or wireless notice
to each director. Such notice, or any waiver thereof pursuant to Article VIII,
Section 3 hereof, need not state the purpose or purposes of such meeting,
except as may otherwise be required by law or provided for by the Articles of
Incorporation or these bylaws.

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Section 7. Compensation. Unless restricted by the Articles of
Incorporation, the Board of Directors shall have the authority to fix the
compensation, if any, of directors.

Section 8. Presumption of Assent. A director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his written
dissent to such action with the person acting as secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the Secretary immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.

Section 9. Approval or Ratification of Acts or Contracts by
Shareholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the
shareholders, or at any special meeting of the shareholders called for the
purpose of considering any such act or contract, and any act or contract that
shall be approved or be ratified by the vote of the shareholders holding a
majority of the Voting Stock and represented in person or by proxy at such
meeting (provided that a quorum is present), shall be as valid and as binding
upon the Corporation and upon all the shareholders as if it shall have been
approved or ratified by every shareholder of the Corporation.

Section 10. Action by Written Consent or Telephone Conference. Any
action permitted or required by the TBCA, the Articles of Incorporation or
these bylaws to be taken at a meeting of the Board of Directors or any
committee designated by the Board of Directors may be taken without a meeting
if a consent in writing, setting forth the action to be taken, is signed by all
the members of the Board of Directors or committee, as the case may be. Such
consent shall have the same force and effect as a unanimous vote at a meeting
and may be stated as such in any document or instrument filed with the
Secretary of State, and the execution of such consent shall constitute
attendance or presence in person at a meeting of the Board of Directors or any
such committee, as the case may be. Subject to the requirements of the TBCA,
the Articles of Incorporation or these bylaws for notice of meetings, unless
otherwise restricted by the Articles of Incorporation, members of the Board of
Directors, or members of any committee designated by the Board of Directors,
may participate in and hold a meeting of the Board of Directors or any
committee of directors, as the case may be, by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in such meeting shall
constitute attendance and presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.

ARTICLE IV

COMMITTEES

Section 1. Designation; Powers. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members one or more committees, each of which shall be comprised
of one

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or more of its members, and may designate one or more of its members as
alternate members of any committee, who may, subject to any limitations imposed
by the Board of Directors, replace absent or disqualified members at any
meeting of that committee. Any such committee, to the extent provided in such
resolution or in the Articles of Incorporation or bylaws shall have and may
exercise all of the authority of the Board of Directors, subject to the
limitations set forth in the TBCA or below.

No committee of the Board of Directors shall have the authority of the
Board of Directors in reference to:

(1) amending the Articles of Incorporation, except that a
committee may, to the extent provided in the resolution designating
that committee or in the Articles of Incorporation or these bylaws,
exercise the authority of the Board of Directors vested in it in
accordance with Article 2.13 of the TBCA;

(2) proposing a reduction in the stated capital of the
Corporation in the manner permitted by Article 4.12 of the TBCA;

(3) approving a plan of merger or share exchange of the
Corporation;

(4) recommending to the shareholders the sale, lease or
exchange of all or substantially all of the property and assets of the
Corporation otherwise than in the usual and regular course of its
business;

(5) recommending to the shareholders a voluntary
dissolution of the Corporation or a revocation thereof;

(6) amending, altering or repealing the bylaws of the
Corporation or adopting new bylaws of the Corporation;

(7) filling vacancies in the Board of Directors;

(8) filling vacancies in or designating alternate members
of any such committee;

(9) filling any directorship to be filled by reason of an
increase in the number of directors;

(10) electing or removing officers of the Corporation or
members or alternate members of any such committee;

(11) fixing the compensation of any member or alternate
members of such committee; or

(12) altering or repealing any resolution of the Board of
Directors that by its terms provides that it shall not be so amendable
or repealable.

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Unless the resolution designating a particular committee, the Articles
of Incorporation or these bylaws expressly so provides, no committee of the
Board of Directors shall have the authority to authorize a distribution (as
such term is defined in the TBCA) or to authorize the issuance of shares of the
Corporation.

Section 2. Procedure; Meetings; Quorum. Any committee designated
pursuant to Section 1 of this Article shall choose its own chairman and
secretary, shall keep regular minutes of its proceedings and report the same to
the Board of Directors when requested, shall fix its own rules or procedures
and shall meet at such times and at such place or places as may be provided by
such rules, or by resolution of such committee or of the Board of Directors.
At every meeting of any such committee, the presence of a majority of all the
members thereof shall constitute a quorum, and the affirmative vote of a
majority of the members present shall be necessary for the adoption by it of
any resolution.

Section 3. Dissolution. The Board of Directors may dissolve any
committee at any time, unless otherwise provided in the Articles of
Incorporation or these bylaws.

ARTICLE V

OFFICERS

Section 1. Number, Titles and Term of Office. The officers of the
Corporation shall be a President and a Secretary and such other officers as the
Board of Directors may from time to time elect or appoint, including, without
limitation, a Chairman of the Board, one or more Vice Presidents (any one or
more of whom may be designated Executive Vice President or Senior Vice
President), a Treasurer, one or more Assistant Treasurers and one or more
Assistant Secretaries. Each officer shall hold office until his successor
shall be duly elected and shall qualify or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided. Any
number of offices may be held by the same person. Except for the Chairman of
the Board, if any, no officer need be a director.

Section 2. Salaries. The salaries or other compensation, if any, of
the officers and agents of the Corporation shall be fixed from time to time by
the Board of Directors.

Section 3. Removal. Any officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed, either with or
without cause, by the Board of Directors whenever in its judgment the best
interests of the Corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent or member of a committee shall
not of itself create contract rights.

Section 4. Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the Board of Directors.

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Section 5. Powers and Duties of the Chief Executive Officer. The
President shall be the chief executive officer of the Corporation unless the
Board of Directors designates the Chairman of the Board (if any) or other
officer as chief executive officer. Subject to the control of the Board of
Directors, the chief executive officer shall have general executive charge,
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonably incident to such
responsibilities; he may agree upon and execute all leases, contracts,
evidences of indebtedness and other obligations in the name of the Corporation
and may sign all certificates for shares of capital stock of the Corporation;
and he shall have such other powers and duties as designated in accordance with
these bylaws and as from time to time may be assigned to him by the Board of
Directors.

Section 6. Powers and Duties of the Chairman of the Board. The
Chairman of the Board (if any) shall preside at all meetings of the
shareholders and of the Board of Directors; and the Chairman shall have such
other powers and duties as designated in these bylaws and as from time to time
may be assigned to him by the Board of Directors.

Section 7. Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, he shall, in the absence of the Chairman of the Board or
if there be no Chairman of the Board, preside at all meetings of the
shareholders and (should he be a director) of the Board of Directors; and the
President shall have such other powers and duties as designated in accordance
with these bylaws and as from time to time may be assigned to him by the Board
of Directors.

Section 8. Vice Presidents. The Vice President(s), if any, shall
perform such duties and have such powers as the Board of Directors may from
time to time prescribe. In addition, in the absence of the Chairman of the
Board (if any) or President, or in the event of their inability or refusal to
act, (i) a Vice President designated by the Board of Directors or (ii) in the
absence of such designation, the Vice President who is present and who is
senior in terms of time as a Vice President of the Corporation, shall perform
the duties of the Chairman of the Board (if any), or the President, as the case
may be, and when so acting shall have all the powers of and be subject to all
the restrictions upon the Chairman of the Board (if any), or the President;
provided that he shall not preside at meetings of the Board of Directors unless
he is a director.

Section 9. Treasurer. The Treasurer, if any, shall have
responsibility for the custody and control of all the funds and securities of
the Corporation, and he shall have such other powers and duties as designated
in these bylaws and as from time to time may be assigned to him by the Board of
Directors. He shall perform all acts incident to the position of Treasurer
subject to the control of the chief executive officer and the Board of
Directors; and the Treasurer shall, if required by the Board of Directors, give
such bond for the faithful discharge of his duties in such form as the Board of
Directors may require.

Section 10. Assistant Treasurers. Each Assistant Treasurer, if any,
shall have the usual powers and duties pertaining to his office, together with
such other powers and duties as designated

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in these bylaws and as from time to time may be assigned to him by the chief
executive officer or the Board of Directors or the Treasurer. The Assistant
Treasurers shall exercise the powers of the Treasurer during that officer's
absence or inability or refusal to act.

Section 11. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, and the minutes of all meetings of the
shareholders, in books provided for that purpose; he shall attend to the giving
and serving of all notices; he may in the name of the Corporation affix the
seal (if any) of the Corporation to all contracts of the Corporation and attest
thereto; he may sign with the other appointed officers all certificates for
shares of capital stock of the Corporation; he shall have charge of the
certificate books, transfer books and stock ledgers, and such other books and
papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection by any director upon application at the
office of the Corporation during business hours; he shall have such other
powers and duties as designated in these bylaws and as from time to time may be
assigned to him by the chief executive officer or the Board of Directors; and
he shall in general perform all duties incident to the office of Secretary,
subject to the control of the chief executive officer and the Board of
Directors.

Section 12. Assistant Secretaries. Each Assistant Secretary, if any,
shall have the usual powers and duties pertaining to his office, together with
such other powers and duties as designated in these bylaws and as from time to
time may be assigned to him by the chief executive officer or the Board of
Directors or the Secretary. The Assistant Secretaries shall exercise the
powers of the Secretary during that officer's absence or inability or refusal
to act.

Section 13. Action With Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, each of the chief
executive officer and the Treasurer (if any), or either of them, shall have
power to vote and otherwise act on behalf of the Corporation, in person or by
proxy, at any meeting of shareholders of or with respect to any action of
shareholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
corporation.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS

Section 1. Right to Indemnification. Subject to the limitations and
conditions as provided in this Article VI, each person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (hereinafter a "proceeding"), or
any appeal in such a proceeding or any inquiry or investigation that could lead
to such a proceeding, by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a director or officer of the
Corporation or while a director or officer of the Corporation is or was serving
at the request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, partnership, joint venture,

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<PAGE> 19
sole proprietorship, trust, employee benefit plan or other enterprise, shall be
indemnified by the Corporation to the fullest extent permitted by the TBCA, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment) against judgments, penalties (including
excise and similar taxes and punitive damages), fines, settlements and
reasonable expenses (including, without limitation, attorneys' fees) actually
incurred by such person in connection with such proceeding, and indemnification
under this Article VI shall continue as to a person who has ceased to serve in
the capacity which initially entitled such person to indemnity hereunder. The
rights granted pursuant to this Article VI shall be deemed contract rights, and
no amendment, modification or repeal of this Article VI shall have the effect
of limiting or denying any such rights with respect to actions taken or
proceedings arising prior to any such amendment, modification or repeal. It is
expressly acknowledged that the indemnification provided in this Article VI
could involve indemnification for negligence or under theories of strict
liability.

Section 2. Advance Payment. The right to indemnification conferred
in this Article VI shall include the right to be paid or reimbursed by the
Corporation the reasonable expenses incurred by a person of the type entitled
to be indemnified under Section 1 who was, is or is threatened to be made a
named defendant or respondent in a proceeding in advance of the final
disposition of the proceeding and without any determination as to the person's
ultimate entitlement to indemnification; provided, however, that the payment of
such expenses incurred by any such person in advance of the final disposition
of a proceeding, shall be made only upon delivery to the Corporation of a
written affirmation by such director or officer of his good faith belief that
he has met the standard of conduct necessary for indemnification under this
Article VI and a written undertaking, by or on behalf of such person, to repay
all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Article VI or
otherwise.

Section 3. Indemnification of Employees and Agents. The
Corporation, by adoption of a resolution of the Board of Directors, may
indemnify and advance expenses to an employee or agent of the Corporation to
the same extent and subject to the same conditions under which it may indemnify
and advance expenses to directors and officers under this Article VI; and, the
Corporation may indemnify and advance expenses to persons who are not or were
not directors, officers, employees or agents of the Corporation but who are or
were serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise, against any
liability asserted against him and incurred by him in such a capacity or
arising out of his status as such a person to the same extent that it may
indemnify and advance expenses to directors under this Article VI.

Section 4. Appearance as a Witness. Notwithstanding any other
provision of this Article VI, the Corporation may pay or reimburse expenses
incurred by a director or officer in connection with his appearance as a
witness or other participation in a proceeding at a time when he is not a named
defendant or respondent in the proceeding.

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Section 5. Nonexclusivity of Rights. The right to indemnification
and the advancement and payment of expenses conferred in this Article VI shall
not be exclusive of any other right which a director or officer or other person
indemnified pursuant to Section 3 of this Article VI may have or hereafter
acquire under any law (common or statutory), provision of the Articles of
Incorporation of the Corporation or these bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.

Section 6. Insurance. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any person who is or was
serving as a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of
another foreign or domestic corporation, partnership, joint venture,
proprietorship, employee benefit plan, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under this
Article VI.

Section 7. Shareholder Notification. To the extent required by law,
any indemnification of or advancement of expenses to a director or officer in
accordance with this Article VI shall be reported in writing to the
shareholders with or before the notice or waiver of notice of the next
shareholders' meeting and, in any case, within the 12-month period immediately
following the date of the indemnification or advancement.

Section 8. Savings Clause. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each director,
officer or any other person indemnified pursuant to this Article VI as to
costs, charges and expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated and to the fullest extent permitted by applicable law.

ARTICLE VII

CAPITAL STOCK

Section 1. Certificates of Stock. The certificates for shares of
the capital stock of the Corporation shall be in such form, not inconsistent
with that required by law and the Articles of Incorporation, as shall be
approved by the Board of Directors. The Chairman of the Board (if any),
President or a Vice President (if any) shall cause to be issued to each
shareholder one or more certificates, which shall be signed by the Chairman of
the Board (if any), President or a Vice President (if any) and the Secretary or
an Assistant Secretary (if any) or the Treasurer or an Assistant Treasurer (if
any) certifying the number of shares (and, if the stock of the Corporation
shall be divided into classes or series, the class and series of such shares)
owned by such shareholder in the Corporation; provided, however, that any of or
all the signatures on the certificate may be facsimile. If the Board of
Directors shall have provided for a seal, such certificates shall bear such
seal or a facsimile thereof. The stock record books and the blank stock
certificate books shall be kept by the Secretary, or at the office of such
transfer agent or transfer agents as the Board of Directors may from

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<PAGE> 21
time to time by resolution determine. In case any officer, transfer agent or
registrar who shall have signed or whose facsimile signature or signatures
shall have been placed upon any such certificate or certificates shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued by the Corporation, such certificate may nevertheless be issued by
the Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue. The stock certificates shall
be consecutively numbered and shall be entered in the books of the Corporation
as they are issued and shall exhibit the holder's name and number of shares.

Each certificate shall conspicuously bear any legend required pursuant
to Article 2.19 or Article 2.22 of the TBCA, as well as any other legend
required by law.

Section 2. Transfer of Shares. The shares of stock of the
Corporation shall be transferable only on the books of the Corporation by the
holders thereof in person or by their duly authorized attorneys or legal
representatives, upon surrender and cancellation of certificates for a like
number of shares (or upon compliance with the provisions of Section 5 of this
Article VII, if applicable). Upon such surrender to the Corporation or a
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer (or upon compliance with the provisions of Section 5 of this Article
VII, if applicable) and of compliance with any transfer restrictions applicable
thereto contained in an agreement to which the Corporation is a party or of
which the Corporation has knowledge by reason of legend with respect thereto
placed on any such surrendered stock certificate, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.

Section 3. Ownership of Shares. Unless otherwise provided in the
TBCA, and subject to the provisions of Chapter 8 - Investment Securities of the
Texas Business & Commerce Code:

(i) the Corporation may regard the person in whose name
any shares issued by the Corporation are registered in the share transfer
records of the Corporation at any particular time (including, without
limitation, as of a record date fixed pursuant to Article 2.26B or 2.26C of the
TBCA) as the owner of those shares at that time for purposes of voting those
shares, receiving distributions thereon or notices in respect thereof,
transferring those shares, exercising rights of dissent with respect to those
shares, exercising or waiving any preemptive right with respect to those
shares, entering into agreements with respect to those shares in accordance
with Article 2.22 or 2.30 of the TBCA, or giving proxies with respect to those
shares; and

(ii) neither the Corporation nor any of its officers,
directors, employees, or agents shall be liable for regarding that person as
the owner of those shares at that time for those purposes, regardless of
whether that person does not possess a certificate for those shares.

Section 4. Regulations Regarding Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as they may deem expedient concerning the issuance, transfer and
registration or the replacement of certificates for shares of capital stock of
the Corporation.

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<PAGE> 22
Section 5. Lost, Stolen, Destroyed or Mutilated Certificates. The
Board of Directors may determine the conditions upon which a new certificate of
stock may be issued in place of a certificate that is alleged to have been
lost, stolen, destroyed or mutilated; and may, in its discretion, require the
owner of such certificate or his legal representative to give bond, with
sufficient surety, to indemnify the Corporation and each transfer agent and
registrar against any and all losses or claims which may arise by reason of the
issuance of a new certificate in the place of the one so lost, stolen,
destroyed or mutilated.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 1. Fiscal Year. The fiscal year of the Corporation shall be
such as established from time to time by the Board of Directors.

Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation. The Secretary shall
have charge of the seal (if any). If and when so directed by the Board of
Directors, duplicates of the seal may be kept and used by the Treasurer, if
any, or by any Assistant Secretary or Assistant Treasurer.

Section 3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the Articles of Incorporation or these bylaws,
except with respect to notices of meetings of shareholders (with respect to
which the provisions of Article II, Section 6 apply) and except with respect to
notices of special meetings of directors (with respect to which the provisions
of Article VIII, Section 6 apply), said notice shall be deemed to be sufficient
if given (a) by telegraphic, cable or wireless transmission or (b) by deposit
of same in a post office box in a sealed prepaid wrapper addressed to the
person entitled thereto at his address as it appears on the records of the
Corporation, and such notice shall be deemed to have been given on the day of
such transmission or mailing, as the case may be.

Whenever notice is required to be given by law, the Articles of
Incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice.

Section 4. Resignations. Any director, member of a committee or
officer may resign at any time. Such resignation shall be made in writing and
shall take effect at the time specified therein, or if no time be specified, at
the time of its receipt by the chief executive officer or Secretary. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.

Section 5. Facsimile Signatures. In addition to the provisions for
the use of facsimile signatures elsewhere specifically authorized in these
bylaws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors.

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<PAGE> 23
Section 6. Books and Records. The Corporation shall keep books and
records of account and shall keep minutes of the proceedings of its
shareholders, its Board of Directors and each committee of its Board of
Directors. The Corporation shall keep at its registered office or principal
place of business, or at the office of its transfer agent or registrar, a
record of the original issuance of shares issued by the Corporation and a
record of each transfer of those shares that have been presented to the
Corporation for registration of transfer. Such records shall contain the names
and addresses of all past and current shareholders of the Corporation and the
number and class of shares issued by the Corporation held by each of them. Any
books, records, minutes and share transfer records may be in written form or in
any other form capable of being converted into written form within a reasonable
time.

ARTICLE IX

AMENDMENTS

The Board of Directors may amend or repeal the Corporation's bylaws,
or adopt new bylaws, unless: (a) the Articles of Incorporation or the TBCA
reserves the power exclusively to the shareholders in whole or part; or (b) the
shareholders, in amending, repealing or adopting a particular bylaw, expressly
provide that the Board of Directors may not amend or repeal that bylaw.

Unless the Articles of Incorporation or a bylaw adopted by the
shareholders provides otherwise as to all or some portion of the Corporation's
bylaws, the Corporation's shareholders may amend, repeal or adopt the
Corporation's bylaws even though the bylaws may also be amended, repealed or
adopted by the Board of Directors.

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<PAGE> 1
Exhibit 5.1

VINSON & ELKINS L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Telephone (713) 758-2222
Fax (713) 758-2346

August 21, 1997

Authentic Specialty Foods, Inc.
1313 Avenue R
Grand Prairie, Texas 75050

Ladies and Gentlemen:

We have acted as counsel to Authentic Specialty Foods, Inc., a Texas
corporation (the "Company"), in connection with the preparation of the
Company's Registration Statement on Form S-1, Registration Statement No.
333-29959 (the "Registration Statement"), relating to the proposed offer and
sale by the Company of 4,715,000 shares of the Company's common stock, par
value $1.00 per share (the "Shares"). In our capacity as counsel of the
Company, we are passing on certain legal matters in connection with the
registration of the sale of the Shares. At your request, this opinion is being
furnished to you for filing as an exhibit to the Registration Statement.

In connection with rendering this opinion, we have examined such
certificates, instruments and documents and reviewed such questions of law as
we have considered necessary or appropriate for the purposes of this opinion.
In addition, we have relied as to factual matters on certificates of certain
public officials and officers of the Company.

Based upon the foregoing examination and review, we are of the opinion
that, upon the payment therefor in accordance with the underwriting agreement
described in the Registration Statement, the Shares will be duly and validly
authorized and legally issued, fully paid and nonassessable;

The foregoing opinion is limited to the laws of the United States of
America and the State of Texas. For purposes of this opinion, we assume that
the Shares will be issued in compliance with all applicable state securities or
Blue Sky laws.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, however, we do not hereby
admit that we are within the category of persons
<PAGE> 2
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.

Very truly yours,

VINSON & ELKINS L.L.P.

<PAGE> 1
EXHIBIT 10.1

EMPLOYMENT AGREEMENT

This Agreement is made as of this 23rd day of June, 1997, between
Authentic Specialty Foods, Inc., a Texas corporation (the "Corporation"), and
Herman L. Graffunder, an individual (the "Executive").

W I T N E S S E T H:

WHEREAS, the Executive is an employee of the Corporation;

WHEREAS, the Corporation desires to continue to employ the Executive,
and the Executive desires to continue such employment, on the terms and subject
to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the parties hereto,
intending to be legally bound, covenant and agree as follows:

Section 1. Employment. The Corporation hereby employs the
Executive to render services to the Corporation. The Executive shall devote
his time and attention to the management of the business of the Corporation and
its affiliates and perform such duties as may be specified from time to time by
the Board of Directors and shall be empowered to perform all such duties. The
Executive hereby accepts such employment and agrees that during the continuance
thereof he will devote his entire business time, effort, skill and attention to
the affairs of, and for the benefit of, the Corporation and its affiliates.

Section 2. Term. The term of this Agreement shall be three
years commencing on the date hereof.

Section 3. Compensation. (a) As compensation for the services
to be rendered by the Executive under this Agreement, the Corporation agrees to
pay the Executive a salary at an annual rate of $200,000 ("Base Salary"),
payable in equal installments on the customary payroll periods of the
Corporation. The Board of Directors of the Corporation will review the Base
Salary at the beginning of each fiscal year and determine whether to increase
the Base Salary; provided, however, that the Corporation shall be under no
obligation to increase the Base Salary.

(b) The Executive shall be eligible for an annual
incentive award. Such annual incentive award shall have a target of 40% of the
Base Salary and shall be subject to further increase up to 80% of the Base
Salary based upon attainment of performance targets for the Corporation and its
subsidiaries to be agreed upon by the Executive and the Board of Directors of
the Corporation.

Section 4. Fringe Benefits. (a) During the term of his
employment hereunder, the Executive shall be entitled to participate (on a
basis to be determined by the Board of Directors) in all of the Corporation's
employee benefit plans (to the extent he satisfies the eligibility requirements

<PAGE> 2

of the particular plans), including, without limitation, a stock option plan to
be developed by the Corporation, for which his level of employment makes him
eligible.

(b) The Executive will be entitled each year to three
weeks paid vacation, to be taken at such time or times as may be reasonably
convenient to the Corporation and to the Executive. In addition, the Executive
will be entitled to all legal holidays observed by office closings at the
Corporation's headquarters.

(c) The Executive will be reimbursed for the premiums
paid by the Executive in order to obtain a term life insurance policy with up
to a $500,000 benefit; provided, however, that the Corporation shall not be
required to pay aggregate premiums for any year in excess of $5,000.

(d) The Executive will be reimbursed for (i) the purchase
price or lease payments for an automobile to be used primarily in the business
of the Corporation and (ii) the cost of insurance for such automobile;
provided, however, that the amount of such reimbursement shall be approved by
the Board of Directors.

Section 5. Stock Subscription.

(a) Pursuant to Executive's prior employment agreement dated
February 7, 1994 (the "Prior Agreement"), the Executive was granted an
aggregate of 85,000 shares of Common Stock of the Corporation (after giving
effect to the 1,700-for-1 stock split effected by the Company on June 20, 1997)
on March 31, 1994 (the "Shares"). Subject to the remaining provisions hereof,
the Shares are subject to Forfeiture Restrictions (as defined below) that lapse
25% per year until March 31, 1998, and all Forfeiture Restrictions shall lapse
on such date, provided that the Executive is an employee of the Corporation on
the applicable lapse date. As of the date hereof, the Forfeiture Restrictions
have lapsed with respect to 63,750 of the Shares.

(b) The Shares may not be sold, assigned, pledged, exchanged,
hypothecated or otherwise transferred, encumbered or disposed of to the extent
then subject to the Forfeiture Restrictions (as hereinafter defined), and in
the event of termination of the Executive's services hereunder for any reason,
the Executive shall, for no consideration, forfeit to the Corporation all
Shares to the extent then subject to the Forfeiture Restrictions. The
prohibition against transfer and the obligation to forfeit and surrender Shares
to the Corporation for no consideration upon termination of the Executive's
services hereunder are herein referred to as the "Forfeiture Restrictions."
The Forfeiture Restrictions shall be binding upon and enforceable against any
transferee of Shares.

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<PAGE> 3
such sale or public offering, as applicable; provided, however, that
notwithstanding the foregoing, the Executive acknowledges and agrees that the
Forfeiture Restrictions shall not lapse upon the closing of a merger between
the Corporation and another company or an acquisition by the Corporation of
another company. If the Executive's employment with the Corporation is
terminated or terminates for any reason, the Shares shall be forfeited to the
Corporation on the date of such termination pursuant to the terms of the
Forfeiture Restrictions.

(d) The Executive agrees that he will acquire the Shares for
investment for his own account and not with a view to, or for resale in
connection with, the distribution or other disposition thereof. The Executive
agrees that he will not, directly or indirectly, offer, transfer, sell, pledge,
hypothecate or otherwise dispose of any of the Shares (or solicit any offers to
buy), purchase, or otherwise acquire or take a pledge of any Shares, except as
provided in Section 5(e) and Section 5(f) hereof.

(e) If, in connection with a vote of the stockholders of the
Corporation, the holders of a majority of the outstanding common stock of the
Corporation approve either a sale of all or substantially all of the Shares or
a sale of all or substantially all of the assets of the Corporation or its
subsidiaries, the Executive agrees to sell all of the Shares of the Executive
in the event of a sale of Shares or to agree to the proposed sale in the event
of a sale of assets. The Executive shall be entitled to receive his pro rata
portion of the distributions to the Corporation's stockholders.

(f) If the Executive's active employment with the Corporation is
voluntarily or involuntarily terminated by the Corporation or the Executive for
any reason whatsoever (including by reason of death or disability), the
Corporation shall have the option, exercisable at any time after such
termination upon 10 days' written notice to the Executive, to repurchase, and
the Executive shall resell to the Corporation upon such notice, all of the
Shares of the Executive. The purchase price for Shares purchased by the
Corporation pursuant to this Section 5(f) shall be an amount equal to the Book
Value (as defined below); provided, however, that if shares of Common Stock are
traded or quoted on a national securities exchange or on the Nasdaq National
Market or Nasdaq Small Cap Market, then the purchase price per share shall be
the average of the last reported sales price for the Common Stock for the 20
trading days ending on the last full trading day immediately preceding the date
of notice of repurchase; provided further, that if there are no sales for any
such days or for any such market, then the average of the high and low bids for
such day shall be used (instead of the last reported sales price) for any such
day or with respect to any such market. For purposes of this Agreement, the
term "Book Value" shall mean (i) the book value of the Corporation and its
consolidated subsidiaries as of the end of the month immediately preceding the
date on which the Executive ceases to be employed by the Corporation determined
in accordance with generally accepted accounting principles ("GAAP"), applied
on a consistent basis, multiplied by (ii)(A) the number of shares repurchased
by the Corporation divided by (B) the number of Fully Diluted Outstanding
shares of Common Stock (as defined below) of the Corporation on the date the
Executive ceased to be employed by the Corporation (e.g., [5(i) x
[5(ii)(A)/(B)]). The purchase price for Shares purchased pursuant to this
Section shall be paid over a four-year period in equal monthly

3
<PAGE> 4
installments and shall bear interest at a simple rate per annum equal to eight
percent (8%). As used herein, "Fully Diluted Outstanding" shall mean, when
used with reference to the Common Stock of the Corporation, at any date as of
which the number of shares thereof is to be determined, all shares of Common
Stock outstanding at such date and all shares of Common Stock issuable in
respect of options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per shares. Nothwithstanding the foregoing, the provisions of this
subsection (f) will terminate and cease to have any effect after the
consummation of any public offering of the Common Stock.

(g) The parties agree that Section 5 of this Agreement constitutes
a voting agreement within the meaning of the Texas Business Corporation Act.
The Executive agrees that any stock certificates for Shares issued to the
Executive shall bear such legends as shall be determined to be necessary or
appropriate in the Corporation's sole discretion.

(h) A certificate evidencing the Shares has been issued by the
Corporation in the Executive's name, pursuant to which the Executive has all of
the rights of a stockholder of the Corporation with respect to the Shares,
including, without limitation, voting rights and the right to receive dividends
(provided, however, that dividends paid in shares of the Corporation's stock
shall be subject to the Forfeiture Restrictions). The certificate was
delivered upon issuance to the Secretary of the Corporation as a depository for
safekeeping until the forfeiture of such Shares occurs or the Forfeiture
Restrictions lapse pursuant to the terms of this Agreement. Upon the request
of the Corporation, the Executive shall deliver to the Corporation a stock
power, endorsed in blank, relating to the Shares to the extent then subject to
the Forfeiture Restrictions. Upon the lapse of the Forfeiture Restrictions
without forfeiture, the Corporation shall cause a new certificate or
certificates to be issued without legend (except for any legend required
pursuant to applicable securities laws, the provisions of paragraph (g) or any
other agreement to which the Executive is a party) in the name of the Executive
in exchange for the certificate evidencing that the Shares are subject to the
Forfeiture Restrictions.

(i) It is understood that the consideration for the issuance of
the Shares shall be the services of the Executive rendered and to be rendered
to the Corporation, it being acknowledged that the services rendered prior to
the issuance of the Shares have a value not less than the par value of such
Shares.

Section 6. Termination. (a) This Agreement shall terminate
upon the death or disability (as defined herein) of the Executive, in which
case no compensation, benefits or additional Shares or other payments shall be
payable under this Agreement, except for payments which may become due pursuant
to Section 5(f); provided, however, that the repurchase rights set forth in
Section 5(f) shall survive such death or disability, and the confidentiality,
noncompetition and other obligations set forth in Sections 7, 8 and 9 shall
survive disability. As used herein "disability" means an illness,

4
<PAGE> 5
injury or incapacity which prevents the Executive from performing the essential
functions of his position for a period of three consecutive months, with
reasonable accommodation.

(b) The Corporation may terminate the Executive's
employment hereunder for "Cause". Such termination shall be effective
immediately upon notice of termination. For purposes of this Agreement,
"Cause" is defined as follows: a determination by the Board of Directors that
one of the following events shall have occurred: (i) the Executive's material
neglect of his duties hereunder; (ii) material deterioration in the
Corporation's financial performance; (iii) the refusal by the Executive to
follow reasonable and lawful directions from the Board of Directors of the
Corporation; (iv) the engaging by the Executive in misconduct, or in acts of
moral turpitude, that in the judgment of the Board of Directors is or are
injurious to the Corporation; or (v) the violation by the Executive of the
provisions of Section 8, 9 or 10 hereof. If the Executive's employment is
terminated for Cause, no additional compensation, benefits, additional Shares
or other payments shall be payable to the Executive.

(c) The Corporation may terminate the Executive's
employment for reasons other than Cause upon written notice. If the
Corporation terminates the Executive's employment for reasons other than Cause,
the Executive shall be entitled to receive his Base Salary for a one-year
period (which shall be paid over the course of such period in the same
installments required by Section 3(a)) in full and final satisfaction of all
amounts due from the Corporation (including, without limitation, the issuance
of any additional Shares); provided, however, that such amount shall be reduced
to the extent of any salary or other compensation received or deferred by the
Executive in connection with his employment by or consulting with any company
not affiliated with the Corporation.

Section 7. Confidentiality. The Executive understands and
agrees that all conversations, records, correspondence, files, customer or
distribution lists, data, including, but not limited to, purchasing and pricing
information, product formulation and costs of production and other information
pertaining to or concerning the Corporation, its principals, suppliers,
distributors and customers (except such information as is generally known or
known to the Executive prior to his commencing negotiations for employment with
the Corporation) are confidential information and, therefore, during the period
of employment hereunder and at all times thereafter, the Executive shall not
divulge or communicate any such confidential information to any person or
organization without the express authorization of the Board of Directors of the
Corporation. The Executive agrees that, on the termination of his employment,
he will immediately surrender to the Corporation any and all files, memoranda,
forms, customer lists and everything in his possession pertaining to the
Corporation and its business, it being distinctly understood that all such
lists, books and records are not the property of the Executive.

5
<PAGE> 6
created by the Executive or at the Corporation during the term hereof, and all
rights of every kind and character therein and thereto, that is in any way
related to the fields in which the Corporation may be engaged. The Executive
does hereby assign and transfer to the Corporation all of the foregoing without
reservation, condition or limitation.

Section 9. Noncompetition; Corporation Employees. The Executive
agrees that during the period that the Executive is employed by the Corporation
and for a two-year period thereafter:

(i) the Executive shall not, directly or
indirectly, for his own account or for the account of others,
as an officer, director, passive stockholder, owner, partner,
promoter, consultant, advisor, employee, manager or otherwise,
participate in the promotion, financing, ownership, operation
or management of, or assist in, furnish advice with respect
to, or carry on through a proprietorship, partnership, joint
venture, corporation, other form of business entity or
otherwise, any business activity in a geographic market within
the State of Texas involving or relating to the food
distribution, food packaging and food processing businesses in
connection with Mexican food products; provided, however, that
nothing in this clause (i) shall prohibit the Executive's
beneficial ownership of not in excess of 1% of any class of
common stock that is listed for trading on a national
securities exchange;

(ii) the Executive shall not furnish
advice to, solicit, or do business with any customer (or any
previous customer) of the Corporation or any of its
subsidiaries relating to the business of the Corporation in
any geographic market within the State of Texas involving or
relating to food distribution, food packaging and food
processing in connection with Mexican food products; and

(iii) the Executive will not, without the
prior written consent of the Corporation, solicit, or make or
cause to be made any offer of employment to, any officer or
official employed by the Corporation for the purpose of
inducing any such employee to terminate his employment with
the Corporation.

Section 10. Waiver; Remedies for Breach. A waiver by either
party hereto of any breach of any provision of this Agreement shall not operate
or be construed as a waiver of similar or dissimilar provisions at the same
time or at any prior or subsequent time. It is agreed that the Executive's
services are unique and that any breach or threatened breach by the Executive
of any provision of Section 8, 9 or 10 cannot be remedied solely by damages.
Therefore, if there is a breach or threatened breach of the provisions of
Section 8, 9 or 10, the Executive acknowledges that the Corporation shall be
entitled to an injunction restraining the Executive from such breach. Nothing
herein shall be construed as prohibiting the Corporation from pursuing any
other remedies for any breach or threatened breach.

6
<PAGE> 7
Section 11. Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the employment of the Executive
by the Corporation, and no agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. Without
limiting the generality of the foregoing, this Agreement supersedes the Prior
Agreement.

Section 12. Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect, and any provision of this Agreement shall be construed
to render such provision valid and enforceable to the maximum extent possible
by law in the event of any challenge.

Section 13. Binding Agreement. This Agreement shall be binding
on and shall inure to the benefit of the Corporation and its successors and
assigns. This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive's person or legal
representatives, executors, or administrators. Neither this Agreement nor any
right hereunder may be assigned by the Executive.

Section 14. Relationship of the Parties. Nothing herein
contained shall be deemed to constitute a partnership between or a joint
venture by the parties, nor shall anything herein contained be deemed to
constitute either the Executive or the Corporation the agent of the other
except as is provided herein. Neither the Executive nor the Corporation shall
be or become liable or bound by any representation, act or omission whatsoever
of the other made contrary to the provisions of this Agreement.

Section 15. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Texas, except to the extent that the laws of the United States
apply.

Section 16. Notice. Any notice, communication, request,
instruction or other document required or permitted hereunder shall be given in
writing and delivered in person or sent by U.S. Mail postage prepaid, return
receipt requested, or by telex, facsimile or telecopy to the addresses of the
Corporation and the Executive set forth below. Any such notice shall be
effective upon receipt or 3 days after placed in the mail, whichever is
earlier.

To the Corporation:

Authentic Specialty Foods, Inc.
c/o The Shansby Group
250 Montgomery Street, Suite 1100
San Francisco, California 94104
Attention: J. Gary Shansby

7
<PAGE> 8
Telecopy: (415) 421-5120

To the Executive:

4244 West Creek Drive
Dallas, Texas 75287

or to such other address as any party shall hereafter designate by written
notice.

Section 17. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.

Section 18. Headings. The headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of any provision or provisions of this Agreement.

8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

AUTHENTIC SPECIALTY FOODS, INC.

By: /s/ KEITH R. LIVELY
-------------------------------------
Name: Keith R. Lively
----------------------------------
Title: Chief Executive Officer
----------------------------------

/s/ HERMAN L. GRAFFUNDER
-----------------------------------------
HERMAN L. GRAFFUNDER

<PAGE> 1
EXHIBIT 10.2

EMPLOYMENT AGREEMENT

This Agreement is made as of this 23rd day of June, 1997, between
Authentic Specialty Foods, Inc., a Texas corporation (the "Corporation"), and
Samuel E. Hillin, Jr., an individual (the "Executive").

W I T N E S S E T H:

WHEREAS, the Executive is an employee of the Corporation;

WHEREAS, the Corporation desires to continue to employ the Executive,
and the Executive desires to continue such employment, on the terms and subject
to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the parties hereto,
intending to be legally bound, covenant and agree as follows:

Section 2. Term. The term of this Agreement shall be three
years commencing on the date hereof.

Section 3. Compensation. (a) As compensation for the services
to be rendered by the Executive under this Agreement, the Corporation agrees to
pay the Executive a salary at an annual rate of $125,000 ("Base Salary"),
payable in equal installments on the customary payroll periods of the
Corporation. The Board of Directors of the Corporation will review the Base
Salary at the beginning of each fiscal year and determine whether to increase
the Base Salary; provided, however, that the Corporation shall be under no
obligation to increase the Base Salary.

(b) The Executive shall be eligible for an annual
incentive award. Such annual incentive award shall have a target of 25% of the
Base Salary and shall be subject to further increase up to 50% of the Base
Salary based upon attainment of performance targets for the Corporation and its
subsidiaries to be agreed upon by the Executive and the Board of Directors of
the Corporation.

<PAGE> 2

of the particular plans), including, without limitation, a stock option plan to
be developed by the Corporation, for which his level of employment makes him
eligible.

Section 5. Stock Subscription.

(a) Pursuant to Executive's prior employment agreement dated April
15, 1994 (the "Prior Agreement"), the Executive was granted an aggregate of
51,000 shares of Common Stock of the Corporation (after giving effect to the
1,700-for-1 stock split effected by the Company on June 20, 1997) on March 31,
1994 (the "Shares"). Subject to the remaining provisions hereof, the Shares
are subject to Forfeiture Restrictions (as defined below) that lapse 25% per
year until March 31, 1998, and all Forfeiture Restrictions shall lapse on such
date, provided that the Executive is an employee of the Corporation on the
applicable lapse date. As of the date hereof, the Forfeiture Restrictions have
lapsed with respect to 38,250 of the Shares.

(c) If (A) the holders of a majority of the outstanding Common
Stock of the Corporation sell all of their stock or approve the sale by the
Corporation of all or substantially all of the assets of the Corporation, or if
the Corporation consummates a public offering of Common Stock, and (B) such
sale or public offering occurs prior to the time that all Forfeiture
Restrictions have lapsed with respect to the Shares, then the Forfeiture
Restrictions shall lapse immediately prior to the closing of such sale or
public offering, as applicable; provided, however, that notwithstanding the
foregoing, the Executive acknowledges and agrees that the Forfeiture
Restrictions shall not lapse upon the closing of a merger between the
Corporation and another company or an acquisition by the Corporation of another
company. If the Executive's employment with the Corporation is terminated or
terminates for any reason, the Shares shall be forfeited to the Corporation on
the date of such termination pursuant to the terms of the Forfeiture
Restrictions.

(d) The Executive agrees that he will acquire the Shares for
investment for his own account and not with a view to, or for resale in
connection with, the distribution or other disposition

-2-
<PAGE> 3

thereof. The Executive agrees that he will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise dispose of any of the Shares
(or solicit any offers to buy), purchase, or otherwise acquire or take a pledge
of any Shares, except as provided in Section 5(e) and Section 5(f) hereof.

(g) The parties agree that Section 5 of this Agreement constitutes
a voting agreement within the meaning of the Texas Business Corporation Act.
The Executive agrees that any stock

-3-
<PAGE> 4
certificates for Shares issued to the Executive shall bear such legends as
shall be determined to be necessary or appropriate in the Corporation's sole
discretion.

(c) The Corporation may terminate the Executive's
employment for reasons other than Cause upon written notice. If the
Corporation terminates the Executive's employment for

-4-
<PAGE> 5
reasons other than Cause, the Executive shall be entitled to receive his Base
Salary for a one-year period (which shall be paid over the course of such
period in the same installments required by Section 3(a)) in full and final
satisfaction of all amounts due from the Corporation (including, without
limitation, the issuance of any additional Shares); provided, however, that
such amount shall be reduced to the extent of any salary or other compensation
received or deferred by the Executive in connection with his employment by or
consulting with any company not affiliated with the Corporation.

Section 8. Trademarks, Patents, etc. The Corporation shall be
entitled to and shall own, solely and exclusively, any interest in trademarks,
trade names, trade dress, patents, patent applications, trade secrets,
inventions, copyrights, writings, devices and products developed or created by
the Executive or at the Corporation during the term hereof, and all rights of
every kind and character therein and thereto, that is in any way related to the
fields in which the Corporation may be engaged. The Executive does hereby
assign and transfer to the Corporation all of the foregoing without
reservation, condition or limitation.

Section 9. Noncompetition; Corporation Employees. The Executive
agrees that during the period that the Executive is employed by the Corporation
and for a two-year period thereafter:

-5-
<PAGE> 6
(ii) the Executive shall not furnish
advice to, solicit, or do business with any customer (or any
previous customer) of the Corporation or any of its
subsidiaries relating to the business of the Corporation in
any geographic market within the State of Texas involving or
relating to food distribution, food packaging and food
processing in connection with Mexican food products; and

Section 11. Entire Agreement. This Agreement constitutes the
entire agreement of the parties with respect to the employment of the Executive
by the Corporation, and no agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. Without
limiting the generality of the foregoing, this Agreement supersedes the Prior
Agreement.

-6-
<PAGE> 7
Section 15. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Texas, except to the extent that the laws of the United States
apply.

To the Corporation:

Authentic Specialty Foods, Inc.
c/o The Shansby Group
250 Montgomery Street, Suite 1100
San Francisco, California 94104
Attention: J. Gary Shansby
Telecopy: (415) 421-5120

To the Executive:

2009 Ridgemont Ct.
Arlington, Texas 76012

or to such other address as any party shall hereafter designate by written
notice.

Section 18. Headings. The headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of any provision or provisions of this Agreement.

-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

AUTHENTIC SPECIALTY FOODS, INC.

By: /s/ KEITH R. LIVELY
------------------------------------
Name: Keith R. Lively
----------------------------------
Title: Chief Executive Officer
----------------------------------

/s/ SAMUEL E. HILLIN, JR.
-----------------------------------------
SAMUEL E. HILLIN, JR.

-8-

<PAGE> 1
EXHIBIT 10.8

WARRANT AGREEMENT

BETWEEN

AUTHENTIC SPECIALTY FOODS, INC.

AND

SHANSBY PARTNERS, L.L.C.

Dated as of August __, 1997
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
1. ISSUANCE OF WARRANTS; FORM OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 2
(a) EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK . . . . . . . . . . . . . . . . . . . . . 2
(d) EXECUTION AND DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) VALID AND BINDING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) AUTHORIZATION AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3. REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4. EXCHANGE OF WARRANT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

5. TRANSFER OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

6. TERM OF WARRANTS; EXERCISE OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

7. COMPLIANCE WITH GOVERNMENT REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

8. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

9. MUTILATED OR MISSING WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

10. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF WARRANTS . . . . . . . . . . . . . . . . . 5

11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . . . . . . . . . . . . . . . . . . . . . . 5
11.1. MECHANICAL ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11.2. VOLUNTARY ADJUSTMENT BY THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.3. NOTICE OF ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.5. STATEMENT ON WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.6. COMPANY TO PREVENT DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

12. FRACTIONAL INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

13. REGISTRATION UNDER THE SECURITIES ACT OF 1933 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

14. CERTIFICATE TO BEAR LEGENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>

<PAGE> 3
<TABLE>
<S> <C> <C>
15. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 13

16. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

17. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

18. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

19. SUPPLEMENTS AND AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 15

21. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

22. MERGER OR CONSOLIDATION OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

23. BENEFITS OF THIS WARRANT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

24. CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

25. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

ii
<PAGE> 4
WARRANT AGREEMENT

WARRANT AGREEMENT dated as of August __, 1997, between Authentic
Specialty Foods, Inc., a Texas corporation (the "Company"), and Shansby
Partners, L.L.C., a Delaware limited liability company ("Shansby Partners").

WHEREAS, the Company currently contemplates undertaking an initial
public offering (the "Initial Public Offering") of shares of its Common Stock,
par value $1.00 per share ("Common Stock"); and

WHEREAS, in connection with the Initial Public Offering the Company
proposes to issue to Shansby Partners, common stock purchase warrants (the
"Warrants") to purchase up to 350,000 shares of Common Stock (the "Warrant
Shares"), each Warrant entitling the holder thereof to purchase one share of
Common Stock.

NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

1. ISSUANCE OF WARRANTS; FORM OF WARRANT. The Company will issue
and deliver the Warrants to Shansby Partners, or to an affiliate thereof
designated by Shansby Partners (together with successors of Shansby Partners,
the "Warrant Holder(s)"), upon the consummation of the Initial Public Offering.
The number of Warrants to be issued and delivered shall be 350,000. The text
of each Warrant, as well as the purchase form and each assignment form to be
printed on the reverse thereof shall be substantially as set forth in Exhibit A
attached hereto. The Warrants shall be executed on behalf of the Company by
the signature of the present or any future Chairman of the Board, President,
Treasurer or Vice President of the Company, under its corporate seal, affixed
or in facsimile, attested by the signature of the present or future Secretary
or an Assistant Secretary of the Company. A Warrant bearing the signature of
individuals who were at any time the proper officers of the Company shall bind
the Company notwithstanding that such individuals or any of them shall have
ceased to hold such offices prior to the delivery of such Warrant or did not
hold such offices on the date of this Warrant Agreement.

Warrants shall be dated as of the date of execution thereof by the
Company either upon initial issuance or upon division, exchange, substitution
or transfer.

The number of shares of Common Stock purchasable hereunder and the
Exercise Price (as defined in Section 6 hereof) payable therefor, are subject
to adjustment as hereinafter set forth.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and covenants as follows:

(a) EXISTENCE. The Company is a corporation, duly
organized and validly existing under the laws of the State of Texas
and is authorized to do business and is in good standing as a foreign
corporation in every jurisdiction in which it owns or leases real
property
<PAGE> 5
or in which the nature of its business requires it to be so qualified,
except where the failure to so qualify, individually or in the
aggregate, could not reasonably be expected to have a material adverse
effect.

(b) POWER AND AUTHORITY. The Company has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant Agreement, to
grant, issue and deliver this Warrant and to authorize and reserve for
issuance and, upon payment from time to time of the Exercise Price, to
issue and deliver the shares of Common Stock or other securities
issuable upon exercise of the Warrant. This Warrant Agreement has
been duly executed and delivered by the Company.

(c) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK.
There have been reserved for issuance, and the Company shall at all
times keep reserved, out of the authorized and unissued shares of
Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrant, and
such shares, when issued upon receipt of payment therefor in
accordance with the terms of the Warrant and of this Warrant
Agreement, will be legally and validly issued, fully paid and
nonassessable and will be free of any preemptive rights of
shareholders or any restrictions.

(d) EXECUTION AND DELIVERY. Neither the execution or
delivery of this Warrant Agreement nor the consummation of the
transactions herein contemplated does or will result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company is a party or by
which the Company is bound or to which any o the property or assets of
the Company is subject, nor will such action result in any violation
of any provision of the Articles of Incorporation or Bylaws of the
Company or any statute or any order, rule or regulation or any court
or governmental agency or body having jurisdiction over the Company or
any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of
the Warrant or the consummation by the Company of the transactions
contemplated by this Warrant Agreement.

(e) VALID AND BINDING OBLIGATIONS. This Warrant
Agreement and all related documents, when duly executed and delivered,
will be legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, subject to any
applicable bankruptcy, insolvency or other laws of general application
affecting creditors' rights and judicial decisions interpreting any of
the foregoing.

(f) AUTHORIZATION AND CONSENTS. No authorization,
consent, approval, exemption, franchise, permit or license of, or
filing with, any governmental authority or other person is required to
authorize, or is otherwise required in connection with, the valid
execution and delivery by the Company of this Warrant Agreement and
all related documents and the performance by the Company of its
obligations hereunder.

2
<PAGE> 6
3. REGISTRATION. The Warrants shall be numbered and shall be
registered on the books of the Company (the "Warrant Register") as they are
issued. The Warrants shall be registered initially in such names and such
denominations as Shansby Partners has specified to the Company.

4. EXCHANGE OF WARRANT CERTIFICATES. Subject to any restriction
upon transfer set forth in this Warrant Agreement, each Warrant certificate may
be exchanged at the option of the Warrant Holder thereof for another
certificate or certificates of different denominations entitling the Warrant
Holder thereof to purchase upon surrender to the Company or its duly authorized
agent a like aggregate number of Warrant Shares as the certificate or
certificates surrendered then entitle such Warrant Holder to purchase. Any
Warrant Holder desiring to exchange a Warrant certificate or certificates shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate or certificates to be so exchanged.
Thereupon, the Company shall execute and deliver to the person entitled thereto
a new Warrant certificate or certificates, as the case may be, as so requested.
Any Warrant issued upon exchange, transfer or partial exercise of the Warrants
shall be the valid obligation of the Company, evidencing the same generic
rights and entitled to the same generic benefits under this Warrant Agreement
as the Warrants surrendered for such exchange, transfer or exercise.

5. TRANSFER OF WARRANTS. Subject to the provisions of Section 14
hereof, the Warrants shall be transferrable only on the Warrant Register upon
delivery to the Company of the Warrant certificate or certificates duly
endorsed by the Warrant Holder or by his duly authorized attorney-in-fact or
legal representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an
attorney-in-fact, the original power of attorney, duly approved, or an official
copy thereof, duly certified, shall be deposited with the Company. In case of
transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Warrant or Warrants to the person entitled thereto.

6. TERM OF WARRANTS; EXERCISE OF WARRANTS.

(a) Each Warrant entitles the Warrant Holder thereof to
purchase one share of Common Stock at any time from the date hereof
until 5:00 P.M., Houston time, on August ___, 2002 (the "Expiration
Date") at a purchase price equal to the price to public of shares of
Common Stock received in the Initial Public Offering ($____ per
share), subject to adjustment in accordance with Section 11 hereof
(the "Exercise Price"). The Exercise Price and the number of shares
issuable upon exercise of Warrants are subject to adjustment upon the
occurrence of certain events, pursuant to the provisions of Section 11
of this Warrant Agreement.

(b) Subject to the provisions of this Warrant Agreement,
each Warrant Holder shall have the right, which may be exercised as
expressed in such Warrants, to purchase from the Company (and the
Company shall issue and sell to such Warrant Holder) the number of

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<PAGE> 7
fully paid and nonassessable shares of Common Stock specified in such
Warrants, upon surrender to the Company, or its duly authorized agent,
of such Warrants, with the purchase form on the reverse thereof duly
filled in and signed, and upon payment to the Company of the Exercise
Price, as adjusted in accordance with the provisions of Section 11 of
this Warrant Agreement or upon a net exercise as described below in
clause (ii), for the number of shares in respect of which such
Warrants are then exercised. The Warrant Holder may (i) pay the
Exercise Price in cash, by certified check, official bank check or
wire transfer, payable to the order of the Company, or by the
surrender to the Company of Common Stock of the Company having a
Market Price equal to the Exercise Price or (ii) exercise the Warrants
for "Net Warrant Shares." The number of Net Warrant Shares will be
determined as described by the following formula: Net Warrant Shares =
[WS x (MP-EP)]/MP. "WS" is the number of Warrant Shares issuable upon
exercise of the Warrants or portion of Warrants in question. "MP" is
the Market Price of the Common Stock on the last trading day preceding
the date of the request to exercise the Warrants. "Market Price"
shall mean the then current market price per share of Common Stock, as
determined in paragraph 11.1(e). "EP" shall mean the Exercise Price.

Upon such surrender of Warrants, and payment of the Exercise
Price, with cash or securities, or upon a net exercise as aforesaid,
the Company at its expense shall issue and cause to be delivered with
all reasonable dispatch (but in any event within 5 business days) to
or upon the written order of the Warrant Holder and in such name or
names as the Warrant Holder may designate, a certificate or
certificates for the number of full shares of Common Stock so
purchased upon the exercise of such Warrants, together with cash, as
provided in Section 12 of this Warrant Agreement, in respect of any
fraction of a share of such stock otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have
been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares as of the date
of the surrender of such Warrants and payment of the Exercise Price or
receipt of shares by net exercise as aforesaid. The rights of
purchase represented by the Warrants shall be exercisable, at the
election of the Warrant Holders thereof, either in full or from time
to time in part (but not as to a fractional share of Common Stock)
and, in the event that any Warrant is exercised in respect of less
than all of the shares purchasable on such exercise at any time prior
to the Expiration Date, a new certificate evidencing the remaining
Warrant or Warrants will be issued.

7. COMPLIANCE WITH GOVERNMENT REGULATIONS. The Company covenants
that if any share of Common Stock required to be reserved for purposes of
exercise or conversion of Warrants require, under any federal or state law or
applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange, before such shares may be issued upon
exercise, the Company will use its best efforts to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be.

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<PAGE> 8
8. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants and any securities issued pursuant to Section 11 hereof;
provided, however, that the Company shall not be required to pay any tax or
taxes that may be payable in respect of any transfer involved in the issuance
or delivery of any Warrants or certificates for Warrant Shares and any
securities issued pursuant to Section 11 hereof in a name other than that of
the Warrant Holder of such Warrants.

9. MUTILATED OR MISSING WARRANTS. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrant, or in lieu of and in substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and representing an equivalent right or
interest.

10. RESERVATION OF WARRANT SHARES; PURCHASE AND CANCELLATION OF
WARRANTS. The Company shall at all times reserve, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants and every
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such
purpose. The Company will keep a copy of this Warrant Agreement on file with
every transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Company will supply any transfer agent with duly executed stock certificates
for such purpose and will itself provide or otherwise make available any cash
which may be issuable as provided by Section 12 of this Warrant Agreement. The
Company will furnish to the Transfer Agent and any such subsequent transfer
agent a copy of all notices of adjustments, and certificates related thereto,
transmitted to each Warrant Holder pursuant to Section 11.3 hereof. All
warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of
the number of shares of stock which have been issued upon the exercise of such
Warrants (subject to adjustment as herein provided). No shares of stock shall
be subject to reservation in respect of the Warrants subsequent to the
Expiration Date except to the extent necessary to comply with the terms of this
Warrant Agreement.

11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
The number and kind of securities purchasable upon the exercise of each Warrant
and the Exercise Price shall be subject to adjustment from time to time upon
the occurrence of certain events, as hereinafter defined.

11.1. MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price
shall be subject to adjustment as follows:

(a) In case the Company shall (i) pay a dividend
in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller
number

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<PAGE> 9
of shares of Common Stock or (iv) issue by reclassification of
its shares of Common Stock other securities of the Company
(including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving
corporation), the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be
adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have
been entitled to receive after the happening of any of the
events described above, had such Warrant been exercised
immediately prior to the happening of such event or any record
date with respect thereto regardless of whether the Warrants
are exercisable at the time of the happening of such event or
at the time of any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.

(b) In case the Company shall issue rights,
options or warrants to holders of its outstanding Common
Stock, without any charge to such holders, entitling them to
subscribe for or purchase shares of Common Stock at a price
per share that is lower at the record date mentioned below
than the greater of (a) the Exercise Price or (b) the then
current Market Price per share of Common Stock (as determined
in accordance with paragraph (e) below) (the "Greater Price"),
then in each such case the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of each Warrant by a
fraction, of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
rights, options or warrants plus the number of shares that the
[aggregate offering price] of the total number of shares of
Common Stock offered for subscription or purchase would
purchase at the Greater Price. Such adjustment shall be made
whenever such rights, options or warrants are issued, and
shall become effective immediately after the record date for
the determination of stockholders entitled to receive such
rights, options or warrants.

(c) In case the Company shall distribute to
holders of its shares of Common Stock evidences of its
indebtedness or assets (including cash dividends or other cash
distributions) or rights, options or warrants, or convertible
or exchangeable securities containing the right to subscribe
for or purchase shares of Common Stock (excluding those
referred to in paragraph (b) above), then in each case the
number of Warrant Shares thereafter purchasable upon the
exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by a fraction, of which the

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<PAGE> 10
numerator shall be the then current Market Price per share of
Common Stock (as determined in accordance with paragraph (e)
below) on the date of such distribution, and of which the
denominator shall be the then current Market Price per share
of Common Stock, less the then fair value (as determined in
good faith by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such
convertible or exchangeable securities applicable to one share
of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the
date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such
distribution.

In the event of a distribution by the Company to
holders of its shares of Common Stock of stock of a subsidiary
or securities convertible into or exercisable for such stock,
then in lieu of an adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant, the Warrant
Holder, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company,
such subsidiary or both, as the Company shall determine, the
stock or other securities to which such Warrant Holder would
have been entitled if such Warrant Holder had exercised such
Warrant immediately prior thereto regardless of whether the
Warrants are exercisable at such time, all subject to further
adjustment as provided in this subsection 11.1; provided,
however, that no adjustment in respect of dividends or
interest on such stock or other securities shall be made
during the term of a Warrant or upon the exercise of a
Warrant.

(d) In case the Company shall sell and issue
shares of Common Stock (other than pursuant to rights,
options, warrants, or convertible securities initially issued
before the date of this Warrant Agreement) or rights, options,
warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock (excluding
shares, rights, options, warrants or convertible securities
issued in any of the transactions described in paragraphs (a),
(b) or (c) above) at a price per share of Common Stock
(determined, in the case of such rights, options, warrants or
convertible securities, by dividing (w) the total of the
amount received or receivable by the Company (determined as
provided below) in consideration of the sale and issuance of
such rights, options, warrants or convertible securities, by
(x) the total number of shares of Common Stock covered by such
rights, options, warrants or convertible securities) lower
than the Greater Price in effect immediately prior to such
sale and issuance, then the number of Warrant Shares
thereafter purchasable upon the exercise of the Warrants shall
be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise by a fraction, of which
the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such shares, rights,
options, warrants or convertible securities plus the number of
additional shares of Common Stock sold or subject to issuance
pursuant

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<PAGE> 11
to such rights, options, warrants or convertible securities,
and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such
shares, rights, options, warrants or convertible securities
plus the number of shares of Common Stock which the aggregate
consideration received or receivable (determined as provided
below) for such sale or issuance would purchase at the Greater
Price. Such adjustment shall be made successively whenever
such an issuance is made. For the purposes of such
adjustments, the consideration received or receivable by the
Company for rights, options, warrants or convertible
securities shall be deemed to be the consideration received by
the Company for such rights, options, warrants or convertible
securities, plus the consideration or premiums stated in such
rights, options, warrants or convertible securities to be paid
for the shares of Common Stock covered thereby. In case the
Company shall sell and issue shares of Common Stock, or
rights, options, warrants or convertible securities containing
the right to subscribe for or purchase shares of Common Stock,
for a consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in
determining the "price per share of Common Stock" and the
"consideration received or receivable by the Company" for
purposes of the first sentence of this paragraph (d), the
Board of Directors shall determine, in its discretion, the
fair value of said property, and such determination, if made
in good faith, shall be binding upon all Holders.

(e) The "Market Price" on any day shall mean the
average of the daily market prices of Common Stock over a
period of 20 consecutive business days prior to the day as of
which "Market Price" is being determined. The Market Price
for each such business day shall be the average of the closing
prices on such day of the Common Stock on all domestic
exchanges on which the Common Stock is then listed, or, if
there shall have been no sales on any such exchange on such
day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if the Common
Stock shall not be so listed, the average of the
representative bid and asked prices quoted in the NASDAQ
National Market System ("NASDAQ System") as of 3:30 P.M., New
York time, on such day, or if the Common Stock shall not be
quoted in the NASDAQ System, the average of the high and low
bid and asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization.
If the Common Stock is listed on any domestic exchange the
term "business days" as used in this sentence shall mean
business days on which such exchange is open for trading. If
at any time the Common Stock is not listed on any domestic
exchange or quoted in the NASDAQ System or the domestic
over-the-courter market, the "Market Price" shall be deemed to
be the highest of (i) the book value thereof, as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the Company, as
at the last day of any month ending within 60 days preceding
the date as of which the determination is to be made, (ii) the
fair value thereof, which shall be reasonably

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<PAGE> 12
determined by the Board of Directors of the Company as of a
date which is within 15 days of the date as of which the
determination is to be made, or (iii) the Exercise Price in
effect immediately prior to the determination of Market Price.
Notwithstanding the foregoing, for the purpose of any
calculation under paragraph (d) above (A) with respect to any
issuance of options under the Company's employee or director
compensation stock option plans as in effect or as adopted by
the Board of Directors of the Company on the date hereof, the
term "current market price", in such instances shall mean the
fair market price on the date of the issuance of any such
option determined in accordance with the Company's employee
compensation stock option plans as in effect or adopted by the
Board of Directors of the Company on the date hereof; and (B)
with respect to any issuances of Common Stock (or rights,
options, warrants or convertible securities containing the
right to subscribe for or purchase shares of Common Stock) in
connection with bona fide corporate transactions (other than
issuances in such transactions for cash or similar
consideration), the term "fair market price" shall mean the
fair market price per share as determined in arm's-length
negotiations by the Company and such other parties (other than
affiliates or subsidiaries of the Company) to such
transactions as reflected in the definitive documentation with
respect thereto, unless such determination is not reasonably
related to the closing market price on the date of such
determination.

(f) In any case in which this Section 11.1 shall
require that any adjustment in the number of Warrant Shares be
made effective as of immediately after a record date for a
specified event, the Company may elect to defer until the
occurrence of the event the issuing to the holder of any
Warrant exercised after that record date the shares of Common
Stock and other securities of the Company, if any, issuable
upon the exercise of any Warrant over and above the shares of
Common Stock and other securities of the Company, if any,
issuable upon the exercise of any Warrant prior to such
adjustment; provided, however, that the Company shall deliver
to such Warrant Holder a due bill or other appropriate
instrument evidencing the holder's right to receive such
additional shares or securities upon the occurrence of the
event requiring such adjustment.

(g) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent
(1%) in the number of Warrant Shares purchasable upon the
exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (g) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall
be made to the nearest one-thousandth of a share.

(h) Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Warrant Price payable upon the exercise
of each Warrant shall be adjusted by multiplying such Warrant
Price

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<PAGE> 13
immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Warrant Shares
purchasable upon the exercise of such Warrant immediately
prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately
thereafter.

(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of each Warrant need be made
under paragraphs (b), (c) and (d) if the Company issues or
distributes to each Warrant Holder the rights, options,
warrants, or convertible or exchangeable securities, or
evidences of indebtedness or assets referred to in those
paragraphs which each Warrant Holder would have been entitled
to receive had the Warrants been exercised prior to the
happening of such event or the record date with respect
thereto regardless of whether the Warrants are exercisable at
the time of the happening of such event or at the time of any
record date with respect thereto. [No adjustment need be made
for a change in the par value of the Warrant Shares.]

(j) No adjustment need be made for rights to
purchase Warrant Shares pursuant to an employee or director
benefit plan approved by the Company's Board of Directors.

(k) For the purpose of this Section 11.1, the term
"shares of Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Company at the date of
this Warrant Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such
shares consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made
pursuant to paragraph (a) above, the Warrant Holders shall
become entitled to purchase any securities of the Company
other than shares of Common Stock, thereafter the number of
such other securities so purchasable upon exercise of each
Warrant and the Exercise Price of such securities shall be
subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions
with respect to the Warrant Shares contained in paragraphs (a)
through (i), inclusive, above, and the provisions of Section 6
and Section 11.2 through 11.5, inclusive, with respect to the
Warrant Shares, shall apply on like terms to any such other
securities. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common
Stock for the purposes of this Section 11.

(l) Upon the expiration of any rights, options,
warrants or conversion or exchange privileges, if any thereof
shall not have been exercised, the Warrant Price and the
number of shares of Common Stock purchasable upon the exercise
of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be such as it

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<PAGE> 14
would have been had it been originally adjusted (or had the
original adjustment not been required, as the case may be) as
if (A) the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants or conversion
or exchange rights and (B) such shares of Common Stock, if
any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for
the issuance, sale or grant of all such rights, options,
warrants or conversion or exchange rights whether or not
exercised; provided, however, that no such readjustment shall
have the effect of increasing the Warrant Price or decreasing
the number of Warrant Shares by an amount in excess of the
amount of the adjustment initially made with respect to the
issuance, sale or grant of such rights, options, warrants or
conversion or exchange rights.

11.2. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company
may, at its option, at any time during the term of the Warrants,
reduce the then current Exercise Price to any amount determined
appropriate by the Board of Directors of the Company.

11.3. NOTICE OF ADJUSTMENT. When the number of Warrant
Shares purchasable upon the exercise of each Warrant or the Exercise
Price of such Warrant Shares is adjusted, as herein provided, the
Company shall promptly mail by first class, postage prepaid, to each
Warrant Holder notice of such adjustment or adjustments and a
certificate of a firm of independent public accountants selected by
the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of
Warrant Shares purchasable upon the exercise of each Warrant and the
Exercise Price of such Warrant Shares after such adjustment and
setting forth a brief statement of the facts requiring such adjustment
and setting forth the computation by which such adjustment was made.
Such certificate, absent manifest error, shall be conclusive evidence
of the correctness of such adjustment.

11.4. PRESERVATION OF PURCHASE RIGHTS UPON MERGER,
CONSOLIDATION, ETC. In case of any consolidation of the Company with
or merger of the Company into another person, or in case of any sale,
transfer or lease to another person of all or substantially all of the
assets of the Company or in the case of any share exchange involving
the Common Stock of the Company, the Company or such successor or
purchaser, as the case may be, shall execute with each Warrant Holder
an agreement that each Warrant Holder shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to such
action to purchase upon exercise of each Warrant the kind and amount
of shares and other securities and property which the Warrant Holder
would have owned or have been entitled to receive after the happening
of such consolidation, merger, share exchange, sale, transfer or lease
had such Warrant been exercised immediately prior to such action
regardless of whether the Warrants are exercisable at the time of such
action. Such agreement shall provide for adjustments, which shall be
as nearly equivalent as may be practicable to the adjustments

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<PAGE> 15
provided for in this Section 11. The provisions of this Section 11.4
shall similarly apply to successive consolidations, mergers, share
exchanges, sales, transfers or leases.

11.5. STATEMENT ON WARRANTS. Even though Warrants
heretofore or hereafter issued may continue to express the same price
and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement; the parties understand
and agree that such Warrants will represent rights consistent with any
adjustments in the Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants.

11.6. COMPANY TO PREVENT DILUTION. If any event or
condition occurs as to which other provisions of this Section 11 are
not strictly applicable or, if strictly applicable, would not fairly
protect the exercise or purchase rights of this Warrant in accordance
with the essential intent and principles of such provisions, or which
might materially and adversely affect the exercise or purchase rights
of the Warrant Holders under any provision of the Warrants, then the
Company shall make an adjustment in the application of such
provisions, in accordance with such essential intent and principles,
so as to protect such exercise and purchase rights as aforesaid, and
any adjustment necessary with respect to the Exercise Price and the
number of Warrant Shares purchasable hereunder so as to preserve
without dilution the rights of the holders of Warrants. In no event
shall any such adjustment have the effect of increasing the Exercise
Price as otherwise determined pursuant to this Section 11.

12. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
Warrant Holder, the number of full Warrant Shares that shall be issuable upon
the exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section
12, be issuable on the exercise of any Warrant (or specified portion, thereof),
the Company shall pay an amount in cash equal to the Market Price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.

13. REGISTRATION UNDER THE SECURITIES ACT OF 1933. Shansby
Partners represents and warrants to the Company that it will not dispose of the
Warrant or Warrant Shares except pursuant to (i) an effective registration
statement, or (ii) an applicable exemption from registration under the
Securities Act of 1933, as amended (the "Act"). In connection with any sale
by Shansby Partners pursuant to clause (ii) of the preceding sentence, it shall
furnish to the Company an opinion of counsel reasonably satisfactory to the
Company to the effect that such exemption from registration is available in
connection with such sale.

14. CERTIFICATE TO BEAR LEGENDS. The Warrants shall be subject to
a stop-transfer order and the certificate or certificates therefor shall bear
the following legend by which each Warrant Holder shall be bound:

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<PAGE> 16
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES
OF COMMON STOCK OR OTHER SECURITIES ISSUABLE UPON EXERCISE
THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
EXEMPTION FROM REGISTRATION IS AVAILABLE IN CONNECTION WITH
SUCH SALE."

The Warrant Shares or other securities issued upon exercise of the
Warrants shall, unless issued pursuant to an effective registration statement,
be subject to a stop-transfer order and the certificate or certificates
evidencing any such Warrant Shares or securities shall bear the following
legend by which the Warrant Holder thereof shall be bound:

"THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT, OR (ii) AN APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING
SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL TO THE
EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN
CONNECTION WITH SUCH SALE."

Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless in the
opinion of counsel satisfactory to the Company, the securities represented
thereby need no longer be subject to the restrictions contained herein. The
provisions of this Section 14 shall be binding upon all subsequent holders of
certificates bearing the above legend and shall also be applicable to all
subsequent holders of any Warrants.

15. NO RIGHTS AS STOCKHOLDERS; NOTICE TO WARRANT HOLDERS. Nothing
contained in this Warrant Agreement or in any of the Warrants shall be
construed as conferring upon the Warrant Holders or their transferees the right
to vote or to receive dividends or to consent or to receive notice as
stockholders in respect of any meeting of stockholders for the election of
directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company. If, however, at any time prior to the expiration
of the Warrants and prior to their exercise, any of the following events shall
occur:

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<PAGE> 17
(a) the Company shall declare any dividend payable in any
securities upon its shares of Common Stock or make any distribution
(other than a cash dividend) to the holders of its shares of Common
Stock; or

(b) the Company shall offer to the holders of its shares
of Common Stock any additional shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock or any
right to subscribe to or purchase any thereof; or

(c) a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger, sale,
transfer or lease of all or substantially all of its property, assets,
and business as an entirety) shall be proposed,

then in any one or more of said events the Company shall (a) give notice in
writing of such event to the Warrant Holders as provided in Section 17 hereof
and (b) if there are more than 100 Warrant Holders, cause notice of such event
to be published once in The Wall Street Journal (national edition), such giving
of notice and publication to be completed at least 15 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution, or
subscription rights, or for the determination of stockholders entitled to vote
on such proposed dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to publish, mail or receive such notice or any defect therein
or in the publication or mailing thereof shall not affect the validity of any
action taken in connection with such dividend, distribution or subscription
rights, or such proposed dissolution, liquidation or winding up.

16. EXPENSES. The Company shall pay all legal and other
reasonable out-of-pocket expenses of the Warrant Holders and of their counsel.
The Company agrees to reimburse Shansby Partners upon demand for its reasonable
out-of-pocket costs and expenses incurred in connection with the preparation,
review, negotiation, execution and delivery of this Warrant Agreement and all
other related documents.

17. NOTICES. Any notice pursuant to this Warrant Agreement to be
given or made by the holder of any Warrant or Warrant Shares to or on the
Company shall be sufficiently given (i) when made, if by hand delivery, (ii)
upon confirmation, if made by telecopier, or (iii) one business day after being
deposited with a reputable next-day courier, postage prepaid, addressed as
follows:

Authentic Specialty Foods, Inc.
1313 Avenue R
Grand Prairie, Texas 75050
Attn: Samuel E. Hillin, Jr.
Facsimile: (972) 933-4100

Notices or demands authorized by this Warrant Agreement to be given or made to
or on the Warrant Holder of any Warrant or Warrant Shares shall be sufficiently
given or made (except as otherwise

14
<PAGE> 18
provided in this Warrant Agreement) if sent by registered mail, return receipt
requested, postage prepaid, addressed to such Warrant Holder at the address of
such Warrant Holder as shown on the Warrant Register or the Common Stock
Register, as the case may be.

18. GOVERNING LAW. THIS WARRANT AGREEMENT, THE WARRANTS AND ALL
RELATED DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

19. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Holders may from time to time supplement or amend this Warrant Agreement in
order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and the Warrant Holder may deem necessary or
desirable and which shall not be inconsistent with the provisions of the
Warrants and which shall not adversely affect the interests of the Warrant
Holders. Any amendment to this Warrant Agreement may be effected with the
consent of Warrant Holders of at least a majority of the total then outstanding
Warrants (for this purpose Warrant Shares shall be deemed to be Warrants in the
proportion that Warrant Shares are then issuable upon the exercise of
Warrants); provided that, any amendment which shall have the effect of
materially adversely affecting the interests of any Warrant Holder shall not be
effective with respect to such Warrant Holder if such Warrant Holder shall not
have consented thereto.

20. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations and warranties of the Company and all covenants and agreements
made herein shall survive the execution and delivery of this Warrant Agreement
and the Warrants and shall remain in force and effect until the Expiration
Date.

21. SUCCESSORS. All representations and warranties of the Company
and all covenants and agreements of this Warrant Agreement by or for the
benefit of the Company or the Warrant Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder.

22. MERGER OR CONSOLIDATION OF THE COMPANY. So long as this
Warrant Agreement remains in effect, the Company will not merge or consolidate
with or into, or sell, transfer or lease all or substantially all of its
property to, or exchange shares with any other corporation unless the successor
or purchasing corporation, as the case may be (if not the Company), shall
expressly assume, by supplemental agreement executed and delivered to the
Warrant Holders, the due and punctual performance and observance of each and
every covenant and condition of this Warrant Agreement to be performed and
observed by the Company.

23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any person or corporation other than
the Company and the Warrant Holders, any legal or equitable right, remedy or
claim under this Warrant Agreement, but this Warrant Agreement

15
<PAGE> 19
shall be for the sole and exclusive benefit of the Company and the holders of
the Warrants and Warrant Shares.

24. CAPTIONS. The captions of the sections and subsections of
this Warrant Agreement have been inserted for convenience and shall have no
substantive effect.

25. COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.

16
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed on the day, month and year first above written.

AUTHENTIC SPECIALTY FOODS, INC.

By:
------------------------------------
Name:
Title:

<PAGE> 1
EXHIBIT 10.9

Draft Dated August 11, 1997

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
__________ ___, 1997, is between AUTHENTIC SPECIALTY FOODS, INC., a Texas
corporation (the "Company"), and ROBERT C. TANKLAGE ("Holder").

W I T N E S S E T H:

WHEREAS, the Company, Holder, TSG2 L.P., TSG2 Management, L.L.C. and
Keith R. Lively have entered into a Contribution and Exchange Agreement dated
June 20, 1997 (the "Contribution and Exchange Agreement"), pursuant to which,
among other things, the Company has agreed to issue a number of shares of its
Common Stock, par value $1.00 per share ("Common Stock"), determined in the
manner set forth in the Contribution and Exchange Agreement and subject to the
terms and conditions set forth therein; and

WHEREAS, the parties have agreed to enter into this Agreement in order
to satisfy one of the conditions to obligations of the parties to consummate
the transactions contemplated by the Contribution and Exchange Agreement; and

WHEREAS, the Company currently contemplates undertaking an initial
public offering (the "Initial Public Offering") of shares of Common Stock; and

WHEREAS, the consummation of the Initial Public Offering is a
condition to the obligations of the parties to consummate the transactions
contemplated by the Contribution and Exchange Agreement; and

WHEREAS, after the Initial Public Offering, each Holder will own a
substantial number of shares of Common Stock; and

WHEREAS, the Common Stock will be registered under Section 12 of the
Securities and Exchange Act of 1934 (the "Exchange Act"); and

WHEREAS, under the provisions of the Securities Act of 1933 (the
"Securities Act") and the General Rules and Regulations promulgated by the
Securities and Exchange Commission (the "SEC") thereunder, Holder is or may be
limited in the manner of selling the shares of Common Stock owned by Holder,
absent registration under the Securities Act of the sale of such shares or the
availability of another exemption from the registration requirements of the
Securities Act.

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
<PAGE> 2
1. Demand Registration.

(A) Request for Registration. Holder agrees to execute
on an expedited basis any lockup agreements reasonably requested by
the managing underwriter for the Initial Public Offering; provided,
however, that the lockup period shall not exceed 180 days after the
consummation of the Initial Public Offering. Without limiting the
generality of the foregoing, Holder agrees, for the benefit of the
Company and the underwriters for the Initial Public Offering, that no
Holder or any affiliate or family member thereof will directly or
indirectly sell, transfer or otherwise dispose of any shares of
Restricted Stock (as defined below) prior to the expiration of 180
days after the consummation of the Initial Public Offering (such
expiration date shall be referred to herein as the "Lockup Expiration
Date"). As used in this Agreement, "Restricted Stock" shall mean all
shares of Common Stock issued to Holder pursuant to the Contribution
and Exchange Agreement and owned by any Holder after the Initial
Public Offering, together with any securities issued or issuable with
respect to any such Common Stock by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, or otherwise. As to
any particular shares of Restricted Stock, such securities shall cease
to be Restricted Stock when (a) a registration statement with respect
to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) such securities may
be distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act (even though not actually sold
pursuant thereto), (c) such securities shall have been otherwise
transferred, new certificates representing such securities not bearing
a legend restricting transfer shall have been delivered by the Company
and subsequent disposition of such securities (without any volume
limitations) shall not require registration or qualification of such
securities under the Securities Act or any similar state law then in
force, (d) such securities shall have ceased to be outstanding, or (e)
the Holder or Holders thereof shall agree in writing to terminate this
Agreement (each Holder and any permitted assignee of such Holder's
rights and duties hereunder are referred to herein as the "Holders" or
individually as a "Holder"). Subject to the conditions and
limitations set forth in Section 4 of this Agreement, at any time
after the Lockup Expiration Date, one or more Holders may make a
written request for registration under the Securities Act of all or
part of its or their Restricted Stock pursuant to this Section 1 (a
"Demand Registration"), provided that the Minimum Number (as
hereinafter defined) of shares of Restricted Stock shall be registered
in such offering. The term "Minimum Number" shall mean the lesser of
(i) 50% of the initial number of shares of Restricted Stock issued
pursuant to the Contribution and Exchange Agreement (as adjusted for
any stock splits, stock combinations, stock dividends or
recapitalizations that are effected after the Initial Public Offering)
or (ii) 100% of the number of shares of Restricted Stock then
beneficially owned by all of the Holders in the aggregate. The Holder
making such a request for a Demand Registration is sometimes herein
referred to as the "Designating Holder." Such request will specify
the aggregate number of shares of Restricted Stock proposed to be sold
and will also specify the intended method of disposition thereof. The
Holders shall have the right to two Demand Registrations in the
aggregate; provided, however, that the Holders may not elect more than
one Demand

2
<PAGE> 3
Registration in any 18 month period. Within ten days after receipt of
such request, the Company will give written notice of such
registration request to all other Holders of Restricted Stock and
include, subject to the provisions of Section 1(B) hereof, in such
registration all Restricted Stock with regard to which the Company has
received written requests for inclusion therein within 15 business
days after the receipt by the applicable Holders of the Company's
notice. Each such request will also specify the aggregate number of
shares of Restricted Stock to be registered and the intended method of
disposition thereof. The Company may delay for a maximum of 90 days
the filing of a registration statement upon request from a Holder
pursuant to this Section 1 when, it its good faith judgment the
Company reasonably believes that the filing thereof at the time
requested, or the offering of securities pursuant thereto, would
materially and adversely affect a pending or proposed public offering
of securities of the Company, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction
relating to the Company or negotiations, discussions or pending
proposals with respect thereto or require premature disclosure of
information not otherwise required to be disclosed to the potential
detriment of the Company.

(B) Priority on Demand Registrations. If a registration
pursuant to this Section 1 involves an underwritten offering and the
managing underwriter shall advise the Company that, in its judgment,
the number of shares proposed to be included in such offering should
be limited due to market conditions, then the Company will promptly so
advise each Holder of Restricted Stock that has requested
registration, and the shares of the Company to be included in the
offering, if any, shall first be excluded from such offering to the
extent necessary to meet such limitation; and if further exclusions
are necessary to meet such limitation, the shares shall be excluded
pro rata, based on the respective numbers of shares of Common Stock as
to which registration shall have been requested by such Holders.

(C) Selection of Underwriters and Counsel. The Board of
Directors of the Company will select and obtain the services of the
investment banker or investment bankers and manager or managers that
will administer the offering and the counsel to such investment
bankers and managers; provided that such investment bankers, managers
and counsel must be approved by the Holders of a majority in number of
the shares of Restricted Stock to be registered, which approval shall
not be unreasonably withheld.

2. Piggyback Registration. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering
(other than the Initial Public Offering) for the Company's own account of any
class of its equity securities (other than a registration statement on Form S-8
(or any successor form) or any other registration statement relating solely to
director and/or employee benefit plans or filed in connection with an exchange
offer, a transaction to which Rule 145 (or any successor rule) under the
Securities Act applies, a transaction relating solely to an exchange offering,
a transaction relating solely to an acquisition of assets or property for
securities or an offering of securities solely to the Company's existing
stockholders), then the Company shall in each case give written notice of such
proposed filing to the Holders of Restricted Stock as soon as practicable (but
no later than 15 business days) before the anticipated filing date, and such
notice shall offer such Holders the opportunity to register such number of
shares of Restricted Stock as each such Holder may request. Each Holder of
Restricted Stock desiring to have such Holder's Restricted

3
<PAGE> 4
Stock included in such registration statement shall so advise the Company in
writing within ten business days after the date of the Company's notice,
setting forth the amount of such Holder's Restricted Stock for which
registration is requested. If the Company's offering is to be an underwritten
offering, the Company shall, subject to the further provisions of this
Agreement, use its reasonable best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Holders of the
Restricted Stock requested to be included in the registration for such offering
to include such securities in such offering on the same terms and conditions as
any similar securities of the Company included therein. Moreover, if the
registration of which the Company gives notice does involve an underwriting,
the right of each Holder to registration pursuant to this Section 2 shall,
unless the Company otherwise agrees, be conditioned upon such Holder's
participation as a seller in such underwriting and its execution of an
underwriting agreement with the managing underwriter or underwriters selected
by the Company. Notwithstanding the foregoing, if the managing underwriter of
such offering advises the Company that the total number of shares of Common
Stock that the Holders, other than the Company, intend to include in such
offering will in the good faith opinion of such managing underwriter adversely
affect the terms or pricing of such offering, then the number of shares of
Common Stock to be offered for the account of the Holders shall be reduced on a
pro rata basis based on the number of shares proposed to be sold by the Holders
to the extent necessary to reduce the total number of shares of Common Stock to
be included in such offering for the Holders other than the Company to the
number of shares recommended by such managing underwriter. Any Restricted
Stock excluded from an underwriting shall be withdrawn from registration and
shall not, without the consent of the Company and the manager of the
underwriting, be transferred in a public distribution prior to the expiration
of 180 days (or such other shorter period of time as the manager of the
underwriting may require) after the effective date of the registration
statement.

3. Registration Procedures. Whenever, pursuant to Section 1 or
2, any of the Holders of Restricted Stock has requested that any Restricted
Stock be registered, the Company will, subject to the provisions of Section 4,
use all reasonable best efforts to effect the registration and the sale of such
Restricted Stock in accordance with the intended method of disposition thereof
as promptly as practicable, and in connection with any such request, the
Company will:

(A) in connection with a request pursuant to Section 1,
prepare and file with the SEC, not later than 60 days after receipt of
a request to file a registration statement with respect to Restricted
Stock, a registration statement on any form for which the Company then
qualifies and which counsel for the Company shall deem appropriate and
which form shall be available for the sale of such Restricted Stock in
accordance with the intended method of distribution thereof, and use
its reasonable best efforts to cause such registration statement to
become effective; provided (i) that, before filing a registration
statement or prospectus or any amendments or supplements thereto, the
Company will furnish to one counsel selected by the Holders of a
majority in number of shares of the Restricted Stock covered by such
registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel,
and (ii) that after the filing of the registration statement, the
Company will promptly notify each of the selling Holders of Restricted
Stock of any stop order issued or, to the knowledge of the Company,
threatened by the SEC and take all reasonable actions to prevent the
entry of such stop order or to remove it if entered;

4
<PAGE> 5
(B) in connection with a registration pursuant to Section
1, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days or such shorter
period as shall terminate when all shares of Restricted Stock covered
by such registration statement have been sold, and comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the
selling Holders thereof set forth in such registration statement;

(C) as soon as reasonably practicable, furnish to each of
the selling Holders, prior to filing a registration statement, copies
of such registration statement as proposed to be filed, and thereafter
furnish to such selling Holders such number of copies of such
registration statement, each amendment and supplement thereto (in each
case, if specified by such Holder, including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as a selling Holder
may reasonably request in order to facilitate the disposition of the
Restricted Stock owned by such selling Holder;

(D) with reasonable promptness, use its reasonable best
efforts to register or qualify (or cause to be registered or
qualified) such Restricted Stock under such other securities or blue
sky laws of such jurisdictions within the United States as any selling
Holder (or managing underwriter in the case of an underwritten
offering) reasonably (in light of such selling Holder's or managing
underwriter's intended plan of distribution) requests and do any and
all other acts and things that may be reasonably necessary or
advisable to enable such selling Holder to consummate the disposition
in such jurisdictions of the Restricted Stock owned by such selling
Holder; provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subsection (D), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction;

(E) with reasonable promptness, use reasonable best
efforts to cause the Restricted Stock covered by such registration
statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Company to enable the selling Holder or Holders
thereof to consummate the disposition of such Restricted Stock;

(F) promptly notify each selling Holder of such
Restricted Stock, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence
of any event known to the Company requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Restricted Stock, such prospectus
will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly make available
to each selling Holder any such supplement or amendment;

5
<PAGE> 6
(G) in connection with a request pursuant to Section 1,
enter into an underwriting agreement in customary form, the form and
substance of such underwriting agreement being subject to the
reasonable satisfaction of the Company; provided, however, that the
Holders will not be required to make any representation or warranty
with respect to the Company in connection with or as a part of such
underwriting agreement;

(H) in the event such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a comfort letter or
letters from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by
comfort letters as the managing underwriter reasonably requests;

(I) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of twelve months, beginning
within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and

(J) with reasonable promptness, use its reasonable
efforts to cause all such Restricted Stock to be qualified for trading
on the NASDAQ National Market and/or listed on each securities
exchange on which the Common Stock of the Company is then listed,
provided that the applicable qualification or listing requirements are
satisfied.

Each selling Holder of Restricted Stock agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in subsection (F) hereof, such selling Holder will forthwith discontinue
disposition of Restricted Stock pursuant to the registration statement covering
such Restricted Stock until such selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subsection (F) hereof, and,
if so directed by the Company, such selling Holder will deliver to the Company
(at the Company's expense) all copies, other than permanent file copies then in
such selling Holder's possession, of the prospectus covering such Restricted
Stock current at the time of receipt of such notice. In the event the Company
shall give any such notice, the Company shall extend the period during which
such registration statement shall be maintained effective pursuant to this
Agreement (including the period referred to in subsection (B)) by the number of
days during the period from and including the date of the giving of such notice
pursuant to subsection (F) hereof to and including the date when each selling
Holder of Restricted Stock covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
subsection (F) hereof. Each selling Holder also agrees to notify the Company
if any event relating to such selling Holder occurs that would require the
preparation of a supplement or amendment to the prospectus so that such
prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.

4. Conditions and Limitations.

(A) The Company's obligations under Section 1 shall be
subject to the following limitations:

6
<PAGE> 7
(i) the Company shall not be required to furnish
any audited financial statements other than those audited
statements customarily prepared at the end of its fiscal year,
or to furnish any unaudited financial information with respect
to any period other than its regularly reported interim
quarterly periods unless in the absence of such other
unaudited financial information the registration statement
would contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;

(ii) A registration statement will not count as a
Demand Registration until it has become effective and remains
continuously effective for the lesser of (i) the period during
which all Restricted Stock registered in the Demand
Registration is sold and (ii) 180 days; provided, however,
that a registration shall not constitute a Demand Registration
if (x) after such Demand Registration has become effective,
such registration or the related offer, sale or distribution
of Restricted Stock thereunder is interfered with by any stop
order, injunction or other order or requirement of the SEC or
other governmental agency or court for any reason not
attributable to the Holders and such interference is not
thereafter eliminated and (y) the conditions to closing
specified in the underwriting agreement, if any, entered into
in connection with such Demand Registration are not satisfied
or waived, other than by reason of a failure by the Holders;
and

(iii) the Company shall have received the
information and documents specified in Section 5 and each
selling Holder shall have observed or performed its other
covenants and conditions contained in such section.

(B) The Company's obligation under Section 2 shall be
subject to the limitations and conditions specified in such section
and in clauses (i), (ii) and (iv) of subsection (A) of this Section 4,
and to the condition that the Company may at any time terminate its
proposal to register its shares and discontinue its efforts to cause a
registration statement to become or remain effective.

5. Information from and Certain Covenants of Holders of
Restricted Stock. The Holders for whom Restricted Stock is to be registered
pursuant to this Agreement shall provide to the Company such information
regarding the Restricted Stock to be so registered, the Holder and the intended
method of disposition of such Restricted Stock as shall reasonably be required
in connection with the action to be taken. Any Holder whose Restricted Stock
is included in a registration statement pursuant to this Agreement shall
execute all consents, powers of attorney, registration statements and other
documents reasonably required to be signed by it in order to cause such
registration statement to become effective. Each selling Holder covenants
that, in disposing of such Holder's shares, such Holder will comply with
Regulation M of the SEC adopted pursuant to the Exchange Act.

7
<PAGE> 8
relates, and each selling Holder shall be responsible for the fees and expenses
of any counsel, accountants or other agents retained by such selling Holder and
all other out-of-pocket expenses incurred by such selling Holder in connection
with any registration under this Agreement other than fees and expenses of
counsel for the Holders which are treated as Registration Expenses as set forth
below.

As used herein, the term "Registration Expenses" means all expenses
incident to the Company's performance of or compliance with this Agreement
(whether or not the registration in connection with which such expenses are
incurred ultimately becomes effective), including without limitation all
registration and filing fees, fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Restricted Stock), rating agency
fees, printing expenses, messenger and delivery expenses incurred by the
Company, internal expenses incurred by the Company (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the fees and expenses incurred in connection with
the listing of the securities to be registered on each securities exchange on
which similar securities issued by the Company are then listed, and fees and
disbursements of counsel for the Company (but shall not include the fees or
disbursements of counsel for the Holders) and the Company's independent
certified public accountants (including the expenses of any special audit or
comfort letters required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained by the Company and
the fees and expenses of other persons retained by the Company in connection
with such registration.

7. Indemnification; Contribution.

(A) Indemnification by the Company. The Company agrees
to indemnify and hold harmless each selling Holder of Restricted
Stock, its officers, directors and agents and each person, if any, who
controls such selling Holder within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based
upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement or prospectus relating to
the Restricted Stock or in any amendment or supplement thereto or in
any preliminary prospectus relating to the Restricted Stock, or
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of, or are
based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to the Company by
such selling Holder or on such selling Holder's behalf expressly for
use therein and provided further, that with respect to any untrue
statement or omission or alleged untrue statement or omission made in
any preliminary prospectus, the indemnity agreement contained in this
subsection shall not apply to the extent that any such loss, claim,
damage, liability or expense results from the fact that a copy of the
final prospectus was not sent or given to the person asserting any
such losses, claims, damages, liabilities or expenses at or prior to
the written confirmation of the sale of the Restricted Stock concerned
to such person if a final prospectus is made available by the

8
<PAGE> 9
Company on a timely basis. The Company also agrees to include in any
underwriting agreement with any underwriters of the Restricted Stock
provisions indemnifying and providing for contribution to such
underwriters, their officers and directors and each person who
controls such underwriters on substantially the same basis as the
provisions of this Section 8 indemnifying and providing for
contribution to the selling Holders.

(B) Indemnification by Holders of Restricted Stock. Each
selling Holder agrees to indemnify and hold harmless the Company, its
officers, directors and agents and each person, if any, who controls
the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Restricted Stock or in any amendment or supplement thereto or in any
preliminary prospectus relating to the Restricted Stock, or arising
out of or based upon any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided (i) that such losses,
claims, damages, liabilities or expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof
based upon information furnished in writing to the Company by such
selling Holder or on such selling Holder's behalf expressly for use
therein, (ii) that with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this subsection shall
not apply to the extent that any such loss, claim, damage, liability
or expense results from the fact that a copy of the final prospectus
was not sent or given to the person asserting any such losses, claims,
damages, liabilities or expenses at or prior to the written
confirmation of the sale of the Restricted Stock concerned to such
person, and (iii) that no selling Holder shall be liable for any
indemnification under this Section 8 in an aggregate amount that
exceeds the total net proceeds (before deducting expenses) received by
such selling Holder from the offering. Each selling Holder also
agrees to include in any underwriting agreement with underwriters of
the Restricted Stock provisions indemnifying and providing for
contribution to such underwriters, their officers and directors, and
each person who controls such underwriters, on substantially the same
basis as the provisions of this Section 7 indemnifying and providing
for contribution to the Company.

(C) Conduct of Indemnification Proceedings. If any
action or proceeding (including any governmental investigation) shall
be brought or asserted against any indemnified party hereunder in
respect of which indemnity may be sought from an indemnifying party,
the indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified
party, and shall assume the payment of all expenses. Such indemnified
party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees
and expenses or (ii) the indemnifying party shall have failed to
assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to such indemnified party, or (iii) the use of
counsel chosen by the indemnifying

9
<PAGE> 10
party to represent the indemnified party would present such counsel
with a conflict of interest (in which case the indemnifying party
shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying party and
paid as incurred; provided that the indemnifying party shall only be
responsible for the fees and expenses of one counsel for the
indemnified party or parties hereunder. The indemnifying party shall
not be liable for any settlement of any such action or proceeding
effected without its written consent, but if settled with its written
consent, or if there is a final judgment for the plaintiff in any such
action or proceeding, the indemnifying party agrees to indemnify and
hold harmless such indemnified party from and against any loss or
liability (to the extent stated above) by reason of such settlement or
judgment.

(D) Contribution. If the indemnification provided for in
this Section 7 is unavailable to the Company or the selling Holders in
respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each such indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments, in such proportion as is
appropriate to reflect the relative fault of each such party in
connection with such statements or omissions, as well as any other
relevant equitable considerations. The relative fault of each such
party shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission.

The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7(D) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigation or defending any
such action or claim. Notwithstanding the provisions of this Section
7(D), no selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the Restricted
Stock of such selling Holder were offered to the public exceeds the
amount of any damages which such selling Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.

8. Amendments. This Agreement may be amended or modified upon
the written consent thereto of the Company and the Holders of not less than
66-2/3% of the Restricted Stock.

10
<PAGE> 11
9. Assignments. This Agreement shall be binding on and inure to
the benefit of the respective successors and assigns of the parties hereto and
shall be expressly assignable by the Holders with respect to their respective
rights created under this Agreement, provided a Holder may only assign the
rights created under this Agreement in conjunction with the transfer of a
majority of such Holder's Restricted Stock and the rights of the transferor
under this Agreement shall terminate upon such assignment.

10. Entire Agreement; Governing Law. This Agreement constitutes
the entire agreement of the parties relating to the subject matter hereof and
all prior or contemporaneous written or oral agreements are merged herein.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Texas without giving effect to any choice or
conflict of law provision or rule (whether of the State of Texas or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Texas.

11. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered in
person or sent by United States certified or registered mail, postage prepaid,
return receipt requested, or by overnight express mail, or by telex, facsimile
or telecopy to the address of such party set forth in the Contribution and
Exchange Agreement. Any such notice shall be effective upon receipt or three
days after placed in the mail, whichever is earlier. Any party may, by notice
so delivered, change its address for notice purposes hereunder.

12. Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted. If any
provision is inapplicable to any person or circumstance, it shall,
nevertheless, remain applicable to all other persons and circumstances.

13. Construction; Counterparts. Any section headings in this
Agreement are for convenience of reference only, and shall be given no effect
in the construction or interpretation of this Agreement or any provisions
thereof. No provision of this Agreement will be interpreted in favor of, or
against, any party by reason of the extent to which any such party or its
counsel participated in the drafting thereof or by reason of the extent to
which any such provision is inconsistent with any prior draft hereof or
thereof. This Agreement shall be deemed the mutual form of the parties hereto.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and which together shall constitute but one and the same
instrument.

14. Termination. This Agreement shall be terminate and be of no
further force or effect if the Contribution and Exchange Agreement is
terminated in accordance with its terms without the consummation of the
transactions contemplated thereby.

11
<PAGE> 12
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement on the date first written above.

----------------------------------------
ROBERT C. TANKLAGE

AUTHENTIC SPECIALTY FOODS, INC.

By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------

<PAGE> 1
EXHIBIT 10.10

ADVISORY AGREEMENT

THIS ADVISORY AGREEMENT (the "Agreement") is made and entered into
effective as of __________, 1997, among Authentic Specialty Foods, Inc., a
Texas corporation (the "Company"), and Shansby Partners, L.L.C., a Delaware
limited liability company (together with its successors, "Shansby Partners").

1. Retention. The Company hereby acknowledges that it has
retained Shansby Partners, and Shansby Partners acknowledges that, subject to
reasonable advance notice in order to accommodate scheduling, Shansby Partners
will provide the Company with financial advisory services, including assistance
with respect to identification of potential acquisition candidates and
assistance in the negotiation, implementation and financing of these
acquisitions, during the term of this Agreement.

2. Term. The term of this Agreement shall expire on the third
anniversary of the consummation of the initial public offering (the "Initial
Public Offering") the Company is currently contemplating, and the Agreement may
be terminated by either party for a material breach of the Agreement by the
other party if the breach has not been remedied within 60 days after notice of
the breach is given.

3. Compensation.

(a) As compensation for Shansby Partners' services to the
Company under this Agreement, the Company hereby grants Shansby Partners a
five-year warrant to acquire 350,000 shares of the common stock of the Company,
par value $1.00 per share ("Common Stock"), at an exercise price, subject to
adjustment, equal to the price to public of Common Stock in the Initial Public
Offering (the "Warrant").

(b) The Company shall pay Shansby Partners customary
financial advisory fees in connection with acquisitions identified by the
Company during the term of this Agreement.

4. Reimbursement of Expenses. In addition to the Warrant to be
granted pursuant to Section 3 hereof, the Company agrees to pay or reimburse
Shansby Partners for all "Reimbursable Expenses," which shall consist of all
reasonable disbursement and out-of-pocket expenses (including without
limitation, costs of travel, postage, deliveries, communications, etc.)
incurred by Shansby Partners or its affiliates for the account of the Company
or in connection with the performance by Shansby Partners of the services
contemplated by Section 1 hereof. Promptly (but not more than 10 days) after
request by or notice from Shansby Partners, the Company shall pay Shansby
Partners, by wire transfer of immediately available funds to the account
described on Exhibit A hereto (or such other account as Shansby Partners may
hereafter designate in writing), the Reimbursable Expenses for which Shansby
Partners has provided the Company invoices or reasonably detailed descriptions.
All past due payments in respect of the Reimbursable Expenses shall bear
interest at the lesser of the highest rate of interest which may be charged
under applicable law or the Prime Rate plus 5% from
<PAGE> 2
the Payment Date to and including the date on which such Reimbursable Expenses
plus accrued interest thereon are fully paid to Shansby Partners.

5. Acquisition Opportunities. During the term of this Agreement,
Shansby Partners shall offer to the Company for its consideration any
acquisition opportunities for Mexican food companies that primarily produce
tortillas, tortilla chips or salsas and that are identified by Shansby Partners
or its affiliates after the consummation of the Initial Public Offering. If
the Company declines to pursue any such acquisition opportunity, then Shansby
Partners or its affiliates can pursue the acquisition opportunity without the
involvement of the Company. Neither Shansby Partners nor any of its affiliates
will be required to use their funds to finance any acquisition on behalf of the
Company.

6. Indemnification. The Company jointly and severally shall
indemnify and hold harmless each of Shansby Partners, its affiliates, and their
respective directors, officers, controlling persons (within the meaning of
Section 15 of the Securities Act of 1933 or Section 20(a) of the Securities
Exchange Act of 1934, as amended), if any, agents and employees (Shansby
Partners, its affiliates, and such other specified persons being collectively
referred to as "Indemnified Persons," and individually as an "Indemnified
Person") from and against any and all claims, liabilities, losses, damages and
expenses incurred by any Indemnified Person (including those arising out of an
Indemnified Person's negligence and fees and disbursements of the respective
Indemnified Person's counsel) which (A) are related to or arise out of (i)
actions taken or omitted to be taken (including any untrue statements made or
any statements omitted to be made) by the Company or (ii) actions taken or
omitted to be taken by an Indemnified Person with the Company's consent or in
conformity with the Company's instructions or the Company's actions or
omissions or (B) are otherwise related to or arise out of Shansby Partners'
engagement, and will reimburse each Indemnified Person for all costs and
expenses, including fees and disbursements of any Indemnified Person's counsel,
as they are incurred, in connection with investigating, preparing for,
defending, or appealing any action, formal or informal claim, investigation,
inquiry or other proceeding, whether or not in connection with pending or
threatened litigation, caused by or arising out of or in connection with
Shansby Partners acting pursuant to Shansby Partners' engagement, whether or
not any Indemnified Person is named as a party thereto and whether or not any
liability results therefrom. The Company will, however, not be responsible for
any claims, liabilities, losses, damages or expenses pursuant to clause (B) of
the preceding sentence that have resulted primarily from Shansby Partners' bad
faith, gross negligence or willful misconduct. The Company also agrees that
neither Shansby Partners nor any other Indemnified Person shall have any
liability to the Company for or in connection with such engagement except for
any such liability for claims, liabilities, losses, damages or expenses
incurred by the Company that have resulted primarily from Shansby Partners' bad
faith, gross negligence or willful misconduct. The Company further agrees that
it will not, without the prior written consent of Shansby Partners, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of Shansby
Partners and each other Indemnified Person hereunder from all liability arising
out of such claim, action, suit or proceeding. THE COMPANY HEREBY ACKNOWLEDGES
THAT THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO ANY CLAIMS, LIABILITIES,
LOSSES, DAMAGES OR EXPENSES THAT HAVE RESULTED FROM OR ARE ALLEGED TO HAVE
RESULTED FROM THE ACTIVE OR PASSIVE OR THE SOLE, JOINT OR CONCURRENT ORDINARY
NEGLIGENCE OF SHANSBY PARTNERS OR ANY OTHER INDEMNIFIED PERSON.

-2-
<PAGE> 3
The foregoing right to indemnity shall be in addition to any rights
that Shansby Partners and/or any other Indemnified Person may have at common
law or otherwise and shall remain in full force and effect following the
completion or any termination of the engagement. The Company hereby consents
to personal jurisdiction and to service and venue in any court in which any
claim which is subject to this Agreement is brought against Shansby Partners or
any other Indemnified Person.

It is understood that, in connection with Shansby Partners'
engagement, Shansby Partners may also be engaged to act for the Company in one
or more additional capacities, and that the terms of this engagement or any
such additional engagement(s) may be embodied in one or more separate written
agreements. This indemnification shall apply to the engagement specified in
the first paragraph hereof as well as to any such additional engagement(s)
(whether written or oral) and any modification of said engagement or such
additional engagement(s) and shall remain in full force and effect following
the completion or termination of said engagement or such additional
engagements.

7. Confidential Information. In connection with the performance
of the services hereunder, Shansby Partners agrees not to divulge any
confidential information, secret processes or trade secrets disclosed by the
Company to it solely in its capacity as a financial advisor, unless the Company
consents to the divulging thereof or such information, secret processes or
trade secrets are publicly available or otherwise available to Shansby Partners
without restriction or breach of any confidentiality agreement or unless
required by any governmental authority or in response to any valid legal
process.

8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Texas without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Texas or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Texas.

9. Assignment. This Agreement and all provisions contained
herein shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned (other than with respect to the rights and obligations of Shansby
Partners, which may be assigned to any one or more of its principals or
affiliates) by any of the parties without the prior written consent of the
other parties.

10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and the signature of any
party to any counterpart shall be deemed a signature to, and may be appended
to, any other counterpart.

11. Other Understandings. All discussions, understandings and
agreements heretofore made between any of the parties hereto with respect to
the subject matter hereof are merged in this Agreement, which alone fully and
completely expresses the Agreement of the parties hereto. All calculations of
financial advisory fees and Reimbursable Expenses shall be made by Shansby
Partners and, in the absence of mathematical error, shall be final and
conclusive.

-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first above written.

SHANSBY PARTNERS, L.L.C.

By:
------------------------------------

Name:
-------------------------------

Title:
------------------------------

AUTHENTIC SPECIALTY FOODS, INC.

By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------

S-1
<PAGE> 5
EXHIBIT A

Wire Transfer Instructions

__________ Bank
ABA #:
Account #:
Credit:
Reference: Payment of financial advisory fees
or Reimbursable Expenses

A-1

<PAGE> 1
EXHIBIT 10.11

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of this 31st day of May, 1997 (the "Effective Date"), by and between La
Victoria Foods, Inc., a California corporation (the "Company"), and Robert C.
Tanklage ("Employee"). In consideration of the mutual covenants set forth
below, the Company and Employee hereby agree as follows:

1. Employment. The Company hereby employs Employee, and Employee
hereby accepts employment by the Company, upon the terms and conditions
contained in this Agreement.

2. Term. Unless sooner terminated pursuant to the provisions of
Paragraph 7 hereof, the term ("Term") of the Company's employment of Employee
hereunder shall commence on the date hereof and continue until May 31, 2002;
provided, however, that this Agreement shall automatically renew each year for
an additional one-year term unless either party notifies the other party of its
intention not to renew at least 60 days prior to the expiration of the then
current term.

3. Services. Employee shall have the title of Chief Executive
Officer of the Company and shall perform such executive, administrative and
supervisory services and have such authority as are normally associated with
such position. Employee will report to the Company's Board of Directors.
Employee may delegate to other employees of the Company who are supervised by
Employee such of his duties as he considers are appropriate to so delegate, but
Employee shall nevertheless remain principally responsible for the outcome of
such delegated duties. The Company agrees that, other than occasional business
related travel, all services to be performed by Employee during the Term shall
be rendered in the Los Angeles, California metropolitan area.

4. Restrictive Covenant During Term. During the Term, Employee
shall devote his full time and services exclusively to the Company and will
not, without the prior written consent of the Board of Directors of the
Company, own, either directly or indirectly, any interest in, or serve as a
partner, officer, director, advisor or employee of, or act in any other similar
capacity for, any business or commercial enterprise which is competitive with
the business conducted at any time during the Term by the Company. However,
nothing contained in this Paragraph 4 shall be construed to prohibit Employee
from purchasing the capital stock or other securities of any corporation or
other business entity whose stock or securities are traded on any national or
regional securities exchange or in the national over-the-counter market.
<PAGE> 2
5. Compensation.

5.01 Base Salary. As compensation for the services to be
performed hereunder, Employee shall receive an annual salary ("Base Salary")
during the Term of $360,000. In addition to the foregoing, the salary
hereinabove set forth shall be subject to adjustment upward, but not downward,
in the sole and absolute discretion of the Company's Board of Directors. All
salary hereunder shall be payable in accordance with the Company's customary
payroll practices.

5.02 Bonuses. Employee shall be entitled to receive
bonuses as determined from time to time by the Board of Directors consistent
with past practices.

6. Employee Benefits.

6.01 Vacation and Sick Leave. Employee shall be
entitled to paid vacation and sick leave at the appropriate level reflected in
the Company's present vacation and sick leave plans.

6.02 Group Medical Insurance Benefits. The Company shall
provide for Employee and his dependents, at the Company's expense,
participation in medical, accident and dental insurance plans during the Term
equivalent to those benefits currently available to the Company's other
executive management level employees.

6.03 Business Expenses. Employee shall be entitled
to reimbursement by the Company for any ordinary and necessary expenses
reasonably incurred by Employee in the performance of his duties and in acting
for the Company during the Term, provided that:

(a) Each such expenditure is authorized by the
Board of Directors if over $5,000 in amount or if prior such expenditures for
that month exceed $7,500 in the aggregate (exclusive of airfare); and

(b) Employee furnishes to the Company records and
other documentary evidence satisfactory to it including, if such expenditure is
for entertainment or gifts, an account book, diary or similar record in which
Employee has recorded, at or near the time each expenditure was made, (1) the
amount of the expenditure, (2) the time, place, and nature of the entertainment
expense, or the date and description of the gift, (3) the business reason for
the expense and the business benefit derived or expected to be derived
therefrom, and (4) the names, occupations and other data concerning individuals
entertained or given gifts sufficient to establish their business relationship
to the Company.

2
<PAGE> 3
6.04 Automobile Allowance. The Company shall pay to
Employee a car allowance of $800 per month.

6.05 Indemnification. Employee shall have the full benefit
of all provisions of the Company's Articles of Incorporation and Bylaws
limiting the liability of Employee to the Company and its shareholders and
providing for indemnification of Employee in the circumstances described
therein.

7. Termination.

7.01 Termination for Cause. The Company may terminate the
employment of Employee at any time during the Term, without further obligation
or liability to Employee, by action of the Company's Board of Directors, for
cause. As used in this Paragraph 7.01, the term "cause" means the occurrence
of any of the following events:

(a) Employee's conviction of, or plea of nolo
contendere in, any criminal action involving a felony;

(b) Employee's use of drugs or alcohol to an
extent that such use interferes with the proper performance of his duties to
the Company after due notice and recovery opportunity; or

Termination pursuant to this Section 7.01 shall become effective upon receipt
by Employee of written notice from the Company of such termination.

7.02 Termination on Incapacity or Disability of Employee.
If, during the Term, Employee shall become incapacitated from fully performing
his duties in accordance with the terms hereof by reason of any statute, law,
ordinance, regulation, order, judgment or decree, or due to ill health or
disability, for a consecutive period of ten weeks or for an aggregate period of
sixteen weeks during any one year period, the Company may, at its option, by
action of its Board of Directors, terminate the employment of Employee by
paying to Employee an amount equal to two years of Base Salary, payable over
two years in accordance with the Company's normal payroll practices.

7.03 Death of Employee. This Agreement shall terminate
immediately upon the death of Employee. In such event, the Company shall pay to
the estate of Employee one month's of Base Salary.

3
<PAGE> 4
7.04 Termination Without Cause. The Company by action of
its Board of Directors may terminate this Agreement at any time during the Term
without cause by the payment to Employee of an amount equal to the greater of
(a) $1,980,000 or (b) such number of years as remains in the Term hereof times
$660,000.

8. Agency and Authority. Employee agrees that his employment by
the Company shall constitute him an agent for the Company only for such
purposes as are customary for his position. Employee agrees that he will not
act or purport to act in any way for the Company, except as to matters directly
related to his employment.

9. Severability. Nothing contained in this Agreement shall be
construed as requiring the commission of any act contrary to law, and wherever
there is any conflict between any provision of this Agreement and any present
or future statute, law, ordinance or regulation contrary to which the parties
have no legal right to contract, the latter shall prevail, but in such event,
the provision of this Agreement thus affected shall be curtailed and limited
only to the extent necessary to bring it within the requirements of the law. In
the event that any part, article, paragraph or clause of this Agreement shall
be held to be indefinite or invalid, the entire Agreement shall not fail on
account thereof, and the balance of the Agreement shall continue in full force
and effect.

10. Notices. Any notices required or permitted to be given under
this Agreement shall be in writing and shall be deemed given when delivered in
person or two days after the date deposited in the United States mail, postage
prepaid, addressed to the addresses of the parties set forth below, or such
addresses as shall be furnished in writing by any such party:

If to the Company:

La Victoria Foods, Inc.
240 South Sixth Avenue
City of Industry, California 91746

If to Employee:

Robert C. Tanklage
c/o La Victoria Foods, Inc.
240 South Sixth Avenue
City of Industry, California 91746

11. Amendment. Any waiver, alteration or modification of any of
the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be

4
<PAGE> 5
valid unless made in writing and signed by the parties hereto.

12. Governing Law. This Agreement shall be construed and governed
in accordance with the laws of the State of California applicable to contracts
executed and to be wholly performed within the State of California.

13. Waiver. Waiver by either party of the breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.

14. Paragraph Headings. The headings of this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof

15. Entire Agreement. This Agreement contains all the terms and
conditions agreed upon by the parties hereto and sets forth the entirety of the
consideration to which Employee shall be entitled hereunder. No other
agreements, oral or otherwise, shall be deemed to exist or to bind any of the
parties hereto in any manner related to this Agreement. No officer or employee
of the Company has any authorization to make any representation or promise in
any manner related to this Agreement not contained in this Agreement, and
Employee agrees that he has not executed this Agreement in reliance upon any
such representation or promise. This Agreement cannot be modified or changed
except by written instrument, signed by both parties hereto.

16. Counterparts. This Agreement may be executed in a number of
counterparts, each of which shall be construed as an original for all purposes.

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

LA VICTORIA FOODS, INC.

By: /s/ JAMES LEE
---------------------------------
James Lee, Secretary

/s/ ROBERT C. TANKLAGE
-------------------------------------
ROBERT C. TANKLAGE

<PAGE> 1
EXHIBIT 10.12

Draft Dated August 8, 1997

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
__________ ___, 1997, is between AUTHENTIC SPECIALTY FOODS, INC., a Texas
corporation (the "Company"), TSG2 L.P., a Delaware limited partnership
("TSG2"), Shansby Partners, L.L.C., a Delaware limited liability company
("Shansby Partners"), and Keith R. Lively ("Mr. Lively"). TSG2, Shansby
Partners and Mr. Lively and permitted assignees of their rights and duties
hereunder are each referred to herein as a "Holder" and are collectively
referred to herein as the "Holders."

W I T N E S S E T H:

WHEREAS, the Company, TSG2, Keith R. Lively, Robert C. Tanklage and
TSG2 Management, L.L.C. have entered into a Contribution and Exchange Agreement
dated June 20, 1997 (the "Contribution and Exchange Agreement"), pursuant to
which, among other things, the Company has agreed to issue a number of shares
of its Common Stock, par value $1.00 per share ("Common Stock"), determined in
the manner set forth in the Contribution and Exchange Agreement and subject to
the terms and conditions set forth therein; and

WHEREAS, the Company, TSG2 and Mr. Lively have agreed to enter into
this Agreement in order to satisfy one of the conditions to obligations of the
parties to consummate the transactions contemplated by the Contribution and
Exchange Agreement; and

WHEREAS, the Company currently contemplates undertaking an initial
public offering (the "Initial Public Offering") of shares of Common Stock; and

WHEREAS, the consummation of the Initial Public Offering is a
condition to the obligations of the Company, TSG2 and Mr. Lively to consummate
the transactions contemplated by the Contribution and Exchange Agreement; and

WHEREAS, in connection with the Initial Public Offering, the Company
and Shansby Partners have entered into a Warrant Agreement dated __________,
1997, pursuant to which the Company has agreed to issue to Shansby Partners a
number of common stock purchase warrants (the "Warrants") to purchase shares
(the "Warrant Shares") of Common Stock, determined in the manner set forth in
the Warrant Agreement and subject to the terms and conditions set forth
therein; and

WHEREAS, after the Initial Public Offering, each Holder will own a
substantial number of shares of Common Stock; and

WHEREAS, the Common Stock will be registered under Section 12 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"); and
<PAGE> 2

WHEREAS, under the provisions of the Securities Act of 1933, as
amended (the "Securities Act") and the General Rules and Regulations
promulgated by the Securities and Exchange Commission (the "SEC") thereunder,
Holder is or may be limited in the manner of selling the shares of Common Stock
owned by Holder, absent registration under the Securities Act of the sale of
such shares or the availability of another exemption from the registration
requirements of the Securities Act.

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:

1. Demand Registration.

(A) Request for Registration. Holders agree to execute
on an expedited basis any lockup agreements reasonably requested by
the managing underwriter for the Initial Public Offering; provided,
however, that the lockup period shall not exceed 180 days after the
consummation of the Initial Public Offering. Without limiting the
generality of the foregoing, the Holders agree, for the benefit of the
Company and the underwriters for the Initial Public Offering, that no
Holder or any affiliate or family member thereof will directly or
indirectly sell, transfer or otherwise dispose of any shares of
Restricted Stock (as defined below) prior to the expiration of 180
days after the consummation of the Initial Public Offering (such
expiration date shall be referred to herein as the "Lockup Expiration
Date"). As used in this Agreement, "Restricted Stock" shall mean (i)
all shares of Common Stock issued to TSG2 and Mr. Lively pursuant to
the Contribution and Exchange Agreement and owned by TSG2 and Mr.
Lively after the Initial Public Offering, together with any securities
issued or issuable with respect to any such Common Stock by way of
stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization, or otherwise and (ii) the Warrants and the Warrant
Shares (including any securities received by Shansby Partners or its
successors pursuant to Section 12 of the Warrant Agreement). As to
any particular shares of Restricted Stock, such securities shall cease
to be Restricted Stock when (a) a registration statement with respect
to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in
accordance with such registration statement, (b) such securities may
be distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act (even though not actually sold
pursuant thereto), (c) such securities shall have been otherwise
transferred, new certificates representing such securities not bearing
a legend restricting transfer shall have been delivered by the Company
and subsequent disposition of such securities (without any volume
limitations) shall not require registration or qualification of such
securities under the Securities Act or any similar state law then in
force, (d) such securities shall have ceased to be outstanding, or (e)
the Holder or Holders thereof shall agree in writing to terminate this
Agreement. Subject to the conditions and limitations set forth in
Section 4 of this Agreement, at any time after the Lockup Expiration
Date, one or more Holders may make a written request for registration
under the Securities Act of all or part of its or their Restricted
Stock pursuant to this Section 1 (a "Demand Registration"), provided
that the Minimum Number (as hereinafter defined) of shares of
Restricted Stock shall be

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<PAGE> 3
registered in such offering. The term "Minimum Number" shall mean the
lesser of (i) 50% of the initial number of shares of Restricted Stock
or (ii) 100% of the number of shares of Restricted Stock then
beneficially owned by all of the Holders in the aggregate. The Holder
making such a request for a Demand Registration is sometimes herein
referred to as the "Designating Holder." Such request will specify
the aggregate number of shares of Restricted Stock proposed to be sold
and will also specify the intended method of disposition thereof. The
Holders shall have the right to two Demand Registrations in the
aggregate; provided, however, that the Holders may not elect more than
one Demand Registration in any 18 month period. Within ten days after
receipt of such request, the Company will give written notice of such
registration request to all other Holders of Restricted Stock and
include, subject to the provisions of Section 1(B) hereof, in such
registration all Restricted Stock with regard to which the Company has
received written requests for inclusion therein within 15 business
days after the receipt by the applicable Holders of the Company's
notice. Each such request will also specify the aggregate number of
shares of Restricted Stock to be registered and the intended method of
disposition thereof. The Company may delay for a maximum of 90 days
the filing of a registration statement upon request from a Holder
pursuant to this Section 1 when, it its good faith judgment the
Company reasonably believes that the filing thereof at the time
requested, or the offering of securities pursuant thereto, would
materially and adversely affect a pending or proposed public offering
of securities of the Company, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction
relating to the Company or negotiations, discussions or pending
proposals with respect thereto or require premature disclosure of
information not otherwise required to be disclosed to the potential
detriment of the Company.

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<PAGE> 4
employee benefit plans or filed in connection with an exchange offer,
a transaction to which Rule 145 (or any successor rule) under the
Securities Act applies, a transaction relating solely to an exchange
offering, a transaction relating solely to an acquisition of assets or
property for securities or an offering of securities solely to the
Company's existing stockholders), then the Company shall in each case
give written notice of such proposed filing to the Holders of
Restricted Stock as soon as practicable (but no later than 15 business
days) before the anticipated filing date, and such notice shall offer
such Holders the opportunity to register such number of shares of
Restricted Stock as each such Holder may request. Each Holder of
Restricted Stock desiring to have such Holder's Restricted Stock
included in such registration statement shall so advise the Company in
writing within ten business days after the date of the Company's
notice, setting forth the amount of such Holder's Restricted Stock for
which registration is requested. If the Company's offering is to be
an underwritten offering, the Company shall, subject to the further
provisions of this Agreement, use its reasonable best efforts to cause
the managing underwriter or underwriters of a proposed underwritten
offering to permit the Holders of the Restricted Stock requested to be
included in the registration for such offering to include such
securities in such offering on the same terms and conditions as any
similar securities of the Company included therein. Moreover, if the
registration of which the Company gives notice does involve an
underwriting, the right of each Holder to registration pursuant to
this Section 2 shall, unless the Company otherwise agrees, be
conditioned upon such Holder's participation as a seller in such
underwriting and its execution of an underwriting agreement with the
managing underwriter or underwriters selected by the Company.
Notwithstanding the foregoing, if the managing underwriter of such
offering advises the Company that the total number of shares of Common
Stock that the Holders, other than the Company, intend to include in
such offering will in the good faith opinion of such managing
underwriter adversely affect the terms or pricing of such offering,
then the number of shares of Common Stock to be offered for the
account of the Holders shall be reduced on a pro rata basis based on
the number of shares proposed to be sold by the Holders to the extent
necessary to reduce the total number of shares of Common Stock to be
included in such offering for the Holders other than the Company to
the number of shares recommended by such managing underwriter. Any
Restricted Stock excluded from an underwriting shall be withdrawn from
registration and shall not, without the consent of the Company and the
manager of the underwriting, be transferred in a public distribution
prior to the expiration of 180 days (or such other shorter period of
time as the manager of the underwriting may require) after the
effective date of the registration statement.

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<PAGE> 5
to become effective; provided (i) that, before filing a registration
statement or prospectus or any amendments or supplements thereto, the
Company will furnish to one counsel selected by the Holders of a
majority in number of shares of the Restricted Stock covered by such
registration statement copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel,
and (ii) that after the filing of the registration statement, the
Company will promptly notify each of the selling Holders of Restricted
Stock of any stop order issued or, to the knowledge of the Company,
threatened by the SEC and take all reasonable actions to prevent the
entry of such stop order or to remove it if entered;

(B) in connection with a registration pursuant to Section
1, prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days or such shorter
period as shall terminate when all shares of Restricted Stock covered
by such registration statement have been sold, and comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the
selling Holders thereof set forth in such registration statement;

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<PAGE> 6
(F) promptly notify each selling Holder of such
Restricted Stock, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence
of any event known to the Company requiring the preparation of a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Restricted Stock, such prospectus
will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly make available
to each selling Holder any such supplement or amendment;

(G) in connection with a request pursuant to Section 1,
enter into an underwriting agreement in customary form, the form and
substance of such underwriting agreement being subject to the
reasonable satisfaction of the Company; provided, however, that the
Holders will not be required to make any representation or warranty
with respect to the Company in connection with or as a part of such
underwriting agreement;

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<PAGE> 7
selling Holder occurs that would require the preparation of a supplement or
amendment to the prospectus so that such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.

4. Conditions and Limitations.

(A) The Company's obligations under Section 1 shall be
subject to the following limitations:

(i) the Company shall not be required to furnish
any audited financial statements other than those audited
statements customarily prepared at the end of its fiscal year,
or to furnish any unaudited financial information with respect
to any period other than its regularly reported interim
quarterly periods unless in the absence of such other
unaudited financial information the registration statement
would contain an untrue statement of material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;

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<PAGE> 8
connection with the action to be taken. Any Holder whose Restricted Stock is
included in a registration statement pursuant to this Agreement shall execute
all consents, powers of attorney, registration statements and other documents
reasonably required to be signed by it in order to cause such registration
statement to become effective. Each selling Holder covenants that, in
disposing of such Holder's shares, such Holder will comply with Regulation M of
the SEC adopted pursuant to the Exchange Act.

6. Registration Expenses. All Registration Expenses (as defined
herein) will be borne by the Company. Underwriting discounts and commissions
applicable to the sale of Restricted Stock shall be borne by each selling
Holder of the Restricted Stock to which such discount or commission relates,
and each selling Holder shall be responsible for the fees and expenses of any
counsel, accountants or other agents retained by such selling Holder and all
other out-of-pocket expenses incurred by such selling Holder in connection
with any registration under this Agreement other than fees and expenses of
counsel for the Holders which are treated as Registration Expenses as set forth
below.

7. Indemnification; Contribution.

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<PAGE> 9
therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any
such untrue statement or omission or allegation thereof based upon
information furnished in writing to the Company by such selling Holder
or on such selling Holder's behalf expressly for use therein and
provided further, that with respect to any untrue statement or
omission or alleged untrue statement or omission made in any
preliminary prospectus, the indemnity agreement contained in this
subsection shall not apply to the extent that any such loss, claim,
damage, liability or expense results from the fact that a copy of the
final prospectus was not sent or given to the person asserting any
such losses, claims, damages, liabilities or expenses at or prior to
the written confirmation of the sale of the Restricted Stock concerned
to such person if a final prospectus is made available by the Company
on a timely basis. The Company also agrees to include in any
underwriting agreement with any underwriters of the Restricted Stock
provisions indemnifying and providing for contribution to such
underwriters, their officers and directors and each person who
controls such underwriters on substantially the same basis as the
provisions of this Section 8 indemnifying and providing for
contribution to the selling Holders.

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<PAGE> 10
(C) Conduct of Indemnification Proceedings. If any action
or proceeding (including any governmental investigation) shall be
brought or asserted against any indemnified party hereunder in respect
of which indemnity may be sought from an indemnifying party, the
indemnifying party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such indemnified
party, and shall assume the payment of all expenses. Such indemnified
party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees
and expenses or (ii) the indemnifying party shall have failed to
assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to such indemnified party, or (iii) the use of
counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest (in which
case the indemnifying party shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties),
in any of which events such fees and expenses shall be borne by the
indemnifying party and paid as incurred; provided that the
indemnifying party shall only be responsible for the fees and expenses
of one counsel for the indemnified party or parties hereunder. The
indemnifying party shall not be liable for any settlement of any such
action or proceeding effected without its written consent, but if
settled with its written consent, or if there is a final judgment for
the plaintiff in any such action or proceeding, the indemnifying party
agrees to indemnify and hold harmless such indemnified party from and
against any loss or liability (to the extent stated above) by reason
of such settlement or judgment.

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<PAGE> 11
contribute any amount in excess of the amount by which the total price
at which the Restricted Stock of such selling Holder were offered to
the public exceeds the amount of any damages which such selling Holder
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

8. Amendments. This Agreement may be amended or modified upon
the written consent thereto of the Company and the Holders of not less than
66-2/3% of the Restricted Stock.

9. Assignments. This Agreement shall be binding on and inure to
the benefit of the respective successors and assigns of the parties hereto and
shall be expressly assignable by the Holders with respect to their respective
rights created under this Agreement, provided a Holder may only assign the
rights created under this Agreement in conjunction with the transfer of a
majority of such Holder's Restricted Stock and the rights of the transferor
under this Agreement shall terminate upon such assignment.

11. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be given in writing and delivered in
person or sent by United States certified or registered mail, postage prepaid,
return receipt requested, or by overnight express mail, or by telex, facsimile
or telecopy to the address of such party set forth in the Contribution and
Exchange Agreement or the Warrant Agreement. Any such notice shall be
effective upon receipt or three days after placed in the mail, whichever is
earlier. Any party may, by notice so delivered, change its address for notice
purposes hereunder.

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of the parties hereto. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.

14. Termination. This Agreement shall terminate and be of no
further force or effect if the Initial Public Offering is not consummated.

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IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement on the date first written above.

AUTHENTIC SPECIALTY FOODS, INC.

By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------

TSG2 L.P.

By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------

SHANSBY PARTNERS, L.L.C.

By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------

---------------------------------------
Keith R. Lively

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement of Form S-1
of our report, dated April 25, 1997 except for Note 9 as to which the date is
June 20, 1997, relating to the financial statements of Authentic Specialty
Foods, Inc., and of our report dated June 26, 1997, relating to the financial
statements of La Victoria Foods, Inc. We also consent to the reference to our
Firm under the captions "Experts" and "Selected Financial Data" in the
Prospectus.

/s/ McGLADREY & PULLEN, LLP
----------------------------
McGLADREY & PULLEN, LLP

Minneapolis, Minnesota
August 21, 1997

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement of Form S-1 of our
report, dated March 15, 1996, relating to the financial statements of Authentic
Specialty Foods, Inc. (formerly Calidad Foods, Inc.). We also consent to the
reference to our Firm under the captions "Experts" and "Selected Financial
Data" in the Prospectus.

/s/ RYLANDER, CLAY & OPITZ, L.L.P.
-------------------------------------
RYLANDER, CLAY & OPITZ, L.L.P.

Fort Worth, Texas
August 21, 1997