AUTHENTIC SPECIALTY FOODS INC, S-1, 1997-06-25

AUTHENTIC SPECIALTY FOODS INC
S-1, 1997-06-25

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1997

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

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

<TABLE>
<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
==================================================================================================================
</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.

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 JUNE 25, 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 $9.00 and $11.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial public
offering price. The Company will apply 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 $1,150,000.

(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

PRINCIPAL FINANCIAL SECURITIES, INC.

STEPHENS INC.

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

[THIS PAGE CONTAINS A PHOTOGRAPH OF CERTAIN OF
CALIDAD'S PRODUCTS AND A PHOTOGRAPH OF
CERTAIN OF LA VICTORIA'S PRODUCTS.]

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."

2
<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
simultaneously with, 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 $10 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 , 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 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" 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 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
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<PAGE> 5

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 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.

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. 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 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.

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 has advised and assisted Authentic Specialty Foods since 1992 and
will own approximately 22% of the outstanding Common Stock after this Offering.
Shansby Partners LLC, 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 assisted the Company in arranging the La Victoria
Acquisition, and 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 its business
strategy. See "The Shansby Group" and "Certain Transactions -- Shansby Partners
Advisory Agreement."
4
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THE LA VICTORIA ACQUISITION

As of the date of this Prospectus, 50% of the beneficial interest in 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% of the beneficial interest is owned by Shansby and 0.5% of the
beneficial interest is owned by Mr. Lively. 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 simultaneously with, the consummation of this Offering. Similarly,
the consummation of this Offering is conditioned upon completion of the La
Victoria Acquisition. See "The La Victoria Acquisition."

THE OFFERING

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

Common Stock to be outstanding after
this Offering........................... 6,361,500 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 no
grants have yet been made as of the date 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 and the La Victoria
Acquisition.

The Company was established as a sole proprietorship in 1978 and 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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SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------- -------------------------
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>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $19,637 $21,028 $21,198 $59,346 $5,282 $5,438 $15,190
Cost of sales........................... 13,213 14,266 14,081 33,479 3,490 3,512 8,417
------- ------- ------- ------- ------ ------ -------
Gross profit.......................... 6,424 6,762 7,117 25,867 1,792 1,926 6,773
Operating expenses...................... 7,210 6,940 6,768 22,529 1,681 1,659 6,495
------- ------- ------- ------- ------ ------ -------
Income (loss) from operations......... (786) (178) 349 3,338 111 267 278
------- ------- ------- ------- ------ ------ -------
Other income (expense)
Interest expense........................ (161) (219) (328) (1,537) (84) (82) (344)
Interest income......................... -- 62 2 95 1 -- 33
Loss on disposal of property and
equipment............................. (38) (192) (22) (23) (21) (1) (2)
------- ------- ------- ------- ------ ------ -------
(199) (349) (348) (1,465) (104) (83) (309)
------- ------- ------- ------- ------ ------ -------
Income (loss) before income taxes..... (985) (527) 1 1,873 7 184 (31)
Income tax expense (benefit)............ -- -- -- 1,032 -- 58 (16)
------- ------- ------- ------- ------ ------ -------
Net income (loss)..................... $ (985) $ (527) $ 1 $ 841 $ 7 $ 126 $ (15)
======= ======= ======= ======= ====== ====== =======
Earnings (loss) per share............... $ (0.59) $ (0.31) $ 0.00 $ 0.13 $ 0.00 $ 0.07 $ (0.00)
Weighted average number of common shares
outstanding........................... 1,680 1,700 1,700 6,361 1,700 1,700 6,361
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 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 $ 38 $ 7,922
Working capital (deficit)............... (1,499) (1,557) (1,277) 18,428
Total assets............................ 7,132 7,089 6,936 61,594
Notes payable to bank................... 751 1,319 1,182 --
Long-term debt.......................... 1,249 920 893 11,436
Shareholders' equity.................... 2,048 2,049 2,233 40,149
</TABLE>

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

(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."
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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 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, 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, 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 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

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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%). Although Minyard Foods has been a customer of Calidad
since 1981, there is no assurance that Calidad will be successful in maintaining
its relationship with Minyard Foods in the future. The loss of, or any material
reduction in, sales to Minyard Foods could have a material adverse effect on the
Company's business, financial condition and results of operations. Calidad has
not entered into any long-term contracts with any of its customers, nor is any
customer obligated to order additional products from Calidad. There can be no
assurance that Calidad will be able to maintain or continue to increase the
level of its sales in the future or that Calidad will be able to retain existing
customers or attract new customers. For the year ended May 31, 1996 and the ten
months ended March 31, 1997, no customer accounted for greater than 10% of La
Victoria's total sales. However, two of La Victoria's customers, Vons Grocery
Company and Safeway, are currently in negotiations to combine their businesses.
If this combination had been effective during the year ended May 31, 1996 and
the ten months ended March 31, 1997, the resulting combined customer would have
accounted for 14.1% and 13.4% of net sales, respectively. 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 and Robert C. Tanklage,
the President of La Victoria. The loss of service of Mr. Lively, Mr. Graffunder,
Mr. Hillin, Mr. Tanklage 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 has
not entered into an employment agreement 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."

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

8
<PAGE> 10

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.
La Victoria has an umbrella insurance policy of $5 million and carries product
liability insurance in the aggregate amount of $5 million, with per occurrence
limits of $5 million. 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 2,236,000 shares of Common Stock beneficially owned by
them for a period of 180 days from the date of this Prospectus. Upon completion
of this Offering, the Company will have 6,361,500 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."

9
<PAGE> 11

DILUTION

This Offering and the La Victoria Acquisition will result in immediate
substantial dilution of $7.80 (78.0%) 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 $10.00 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 will apply for quotation of the Common Stock
on the Nasdaq National Market, there can be no assurance that such application
will be granted or, even if granted, 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.

10
<PAGE> 12

FORWARD-LOOKING INFORMATION

Information included in this Prospectus, including information incorporated
by reference herein, contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including projections, estimates and
expectations. Those statements by their nature are subject to certain risks,
uncertainties and assumptions and will be influenced by various factors. Should
one or more of these statements or their underlying assumptions prove to be
incorrect, actual results could vary materially. Although the Company believes
that such projections, estimates and expectations are based on reasonable
assumptions, it can give no assurance that such projections, estimates and
expectations will be achieved. Important factors that could cause actual results
to differ materially from those in the forward-looking statements herein include
economic developments, federal and state regulatory developments, conditions of
the capital markets and equity markets during the periods covered by the
forward-looking statements and changes in customer consumption trends, in the
demographics of the Company's primary markets and in the price of raw materials
used in the Company's manufacturing of products. See "Risk Factors" for further
information with respect to certain of such factors. In addition, certain of
such projections and expectations are based on historical results, which may not
be indicative of future performance. See "Unaudited Pro Forma Consolidated
Financial Statements."

11
<PAGE> 13

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 that management
believes is well-accepted in the Mexican-American community, (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. La Victoria manufactures, markets and distributes a wide
variety of salsas and other Mexican sauces. La Victoria primarily sells its
products to grocery stores in the 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 beneficial ownership interest
in 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% of the beneficial ownership interest is owned by
Shansby and 0.5% of the beneficial interest is owned by Mr. Lively. Pursuant to
the acquisition 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.

Shansby and Mr. Lively will receive shares of Common Stock in the La
Victoria Acquisition having a value of $13.86 million and $140,000, respectively
(based upon the price to public in this Offering). Assuming a price to public of
$10 per share, 1,386,000 shares of Common Stock would be issued to Shansby in
the La Victoria Acquisition and 14,000 shares would be issued to Mr. Lively.
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, 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 (the "La Victoria Shareholder
Note"). The La Victoria Shareholder Note matures 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.

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). Assuming a price to public of $10 per share,
700,000 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, TSG2 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 execution of the Contribution and
Exchange Agreement, Mr. Tanklage has been granted certain registration rights,
and has agreed not to sell any of his 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.

12
<PAGE> 14

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 $37.0 million,
assuming price to public of $10 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 $14.3 million at an initial public offering price of $10
per share), (ii) to pay the $12 million cash consideration to Mr. Tanklage
pursuant to the La Victoria Acquisition, as well as certain 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 $1.2 million as of June 20, 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 20, 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 $734,000 as of
June 20, 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 have any specific plans, agreements or
understandings 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 March 31, 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 and the Revolving Facility are 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. After
the La Victoria Acquisition, LV Foods, which has a 50% beneficial ownership
interest in La Victoria, will be wholly owned by the Company. 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."

13
<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 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 MARCH 31, 1997
-----------------------
HISTORICAL PRO FORMA
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 38 $ 7,922
======= =======
Short-term debt (Revolving Facility)........................ $ 1,182 $ --
======= =======
Long-term debt(1):
Term Loan................................................. $ 400 $ --
Calidad Shareholder Note.................................. 767 --
El Paco Non-Compete....................................... 428 428
La Victoria Shareholder Note.............................. -- 5,000
La Victoria Term Loan..................................... -- 1,742
La Victoria capital leases................................ -- 5,835
------- -------
Total long-term debt........................................ 1,595 13,005
------- -------
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 6,361
1,700,000 shares issued and outstanding; 6,361,500 shares
issued and outstanding, as adjusted(2)(3)..............
Additional paid-in capital................................ 1,918 35,173
Retained earnings......................................... (1,385) (1,385)
------- -------
Total shareholders' equity........................... 2,233 40,149
------- -------
Total capitalization.............................. $ 3,828 $53,154
======= =======
</TABLE>

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

(1) Includes the current portion of long-term debt, which totaled $702,000 and
$1,569,000 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) Excludes 350,000 shares of Common Stock reserved for issuance under the
Stock Plan, pursuant to which no grants have yet been made as of the date
of this Prospectus. See "Management -- Executive Compensation -- 1997 Stock
Plan." Also excludes 350,000 shares of Common Stock issuable pursuant to
the Shansby Warrant.

(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 and the La
Victoria Acquisition.

14
<PAGE> 16

DILUTION

The net tangible book value of the Company as of March 31, 1997 was $0.36
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 March 31, 1997 would
have been $2.20 per share. This represents an immediate increase in the net
tangible book value of $1.84 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 $7.80 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 of $10.00 per share:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $10.00
Net tangible book value per share at March 31, 1997....... $0.36
Increase per share attributable to new investors.......... 1.84
-----
Pro forma net tangible book value per share after the La
Victoria Acquisition and this Offering.................... 2.20
------
Dilution per share to new investors......................... $ 7.80
======
</TABLE>

The following table sets forth, as of March 31, 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)............. 3,800,000 59.7% $24,269,466 48.7% $ 6.39
New investors(2)..................... 2,561,500 40.3 25,615,000 51.3 10.00
--------- ----- ----------- -----
Total...................... 6,361,500 100.0% $49,884,446 100.0%
========= ===== =========== =====
</TABLE>

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

(1) Includes 2,100,000 shares issued in conjunction with the La Victoria
Acquisition valued at $16,800,000. 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
less the repurchase of 1,538,500 shares of Common Stock owned by Shansby on
the date of this Prospectus.

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 54.5% 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 3,177,000 shares, or 45.5% of the total number of shares of
Common Stock outstanding after this Offering. The foregoing computations assume
no exercise of the Shansby Warrant. A total of 350,000 shares of Common Stock
are issuable upon exercise of the Shansby Warrant, at an exercise price (subject
to adjustment) equal to the price to public set forth on the cover page of this
Prospectus. If the 350,000 shares currently subject to the Shansby Warrant were
included in the foregoing calculations, the net tangible book value per share
before the La Victoria Acquisition and this Offering would be $2.00, the pro
forma net tangible book value per share after the La Victoria Acquisition and
this Offering would be $2.60 and the dilution per share to new investors would
be $7.40. In addition, the average price per share paid by existing shareholders
would increase to $6.69 per share.

15
<PAGE> 17

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 three months ended March 31, 1997
are derived from the unaudited financial statements of the Company for the three
months ended March 31, 1997 and the unaudited statements of operations of La
Victoria for the three months ended March 31, 1997, and assume the Transactions
were consummated on January 1, 1996. The unaudited Pro Forma Consolidated
Balance Sheets as of March 31, 1997 are derived from the unaudited balance sheet
of the Company as of March 31, 1997 and the audited balance sheet of La Victoria
as of March 31, 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.

16
<PAGE> 18

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 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........................................ $5,438 $9,752 $ $15,190
Cost of sales.................................... 3,512 4,905 8,417
------ ------ -------
Gross profit........................... 1,926 4,847 6,773
Operating expenses............................... 1,659 5,068 153(A) 6,495
(385)(B)
------ ------ ----- -------
Income (loss) from operations.......... 267 (221) 232 278
Other expense, net............................... 83 197 100(C) 309
(71)(D)
------ ------ ----- -------
Income (loss) before income taxes...... 184 (418) 203 (31)
Income tax expense (benefit)..................... 58 (200) 126(E) (16)
------ ------ ----- -------
Net income (loss)...................... $ 126 $ (218) $ 77 $ (15)
====== ====== ===== =======
Earnings (loss) per common share................. $ 0.07 $ (0.00)
====== =======
Weighted average number of common shares
outstanding.................................... 1,700 6,361
</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 16,130 614(A) 22,529
(983)(B)
------- ------- ----- -------
Income from operations............................. 349 2,620 369 3,338
Other expenses, net................................ 348 995 400(C) 1,465
(278)(D)
------- ------- ----- -------
Income before income taxes............... 1 1,625 247 1,873
Income tax expense (benefit)....................... -- 780 252(E) 1,032
------- ------- ----- -------
Net income (loss)........................ $ 1 $ 845 $ (5) $ 841
======= ======= ===== =======
Earnings per common share.......................... $ 0.00 $ 0.13
=========== ============
Weighted average number of common shares
outstanding...................................... 1,700 6,361
</TABLE>

See Notes to Pro Forma Consolidated Financial Statements.

17
<PAGE> 19

PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 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................... $ 38 $ 3,967 $ (4,064)(F) $ 7,922
(12,000)(G)
34,631(H)
(350)(H)
(14,300)(I)
Accounts receivable, net.................... 1,495 1,291 2,786
Inventories................................. 856 10,964 11,820
Other current assets........................ 143 1,539 1,682
------- ------- -------- -------
Total current assets................ 2,532 17,761 3,917 24,210
------- ------- -------- -------
Property and equipment, net................... 2,745 8,363 11,108
Other assets
Intangibles................................. 1,626 -- 12,000(G) 26,182
12,556(G)
Other....................................... 33 61 94
------- ------- -------- -------
1,659 61 24,556 26,276
------- ------- -------- -------
$ 6,936 $26,185 $ 28,473 $61,594
======= ======= ======== =======

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Line of credit.............................. $ 1,182 $ -- $ (1,182)(H) $ --
Current portion of long-term debt........... 702 1,267 (400)(H) 1,569
Accounts payable............................ 1,653 336 1,989
Accrued expenses............................ 273 1,951 2,224
------- ------- -------- -------
Total current liabilities........... 3,810 3,554 (1,582) 5,782
------- ------- -------- -------
Long-term debt, less current portion.......... 893 6,310 5,000(G) 11,436
(767)(H)
Deferred taxes................................ -- 25 4,202(G) 4,227
Commitments...................................
Shareholders' equity
Preferred stock............................. -- -- --
Common stock................................ 3,618 2,871 (2,871)(J) 41,534
16,800(G)
1,076(G)
(2,640)(G)
22,680(H)
(14,300)(I)
Retained earnings (accumulated deficit)..... (1,385) 13,425 (4,064)(F) (1,385)
(9,361)(J)
------- ------- -------- -------
2,233 16,296 21,620 40,149
------- ------- -------- -------
$ 6,936 $26,185 $ 28,473 $61,594
======= ======= ======== =======
</TABLE>

See Notes to Pro Forma Consolidated Financial Statements.

18
<PAGE> 20

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, expense reimbursements to LV Foods and fees to
Shansby. See "Management" and "Certain Transactions."

(C) The adjustment reflects interest expense on the La Victoria Shareholder
Note. The annual interest rate is 8% on a principal amount of $5 million.

(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 45% tax rate
applied to taxable income. Taxable income is income before income taxes plus
non-deductible intangible amortization.

(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 March 31, 1997 (in
thousands):

<TABLE>
<S> <C>
Purchase Price components:
Common Stock issued(i).................................... $16,800
Cash payments to seller(ii)............................... 12,000
Note payable to seller(iii)............................... 5,000
Transaction expenses...................................... 350
-------
Total purchase price........................................ $34,150
Book value per historical financial statements(iv).......... 12,232
-------
Excess of purchase price over net book value of assets
acquired.................................................. $21,918
=======
Allocated to:
Identifiable intangible assets(v)......................... $12,000
Goodwill(v)............................................... 12,556
Deferred taxes(vi)........................................ (4,202)
Additional paid-in capital (tax benefit)(vi).............. (1,076)
Deemed dividend(vii)...................................... 2,640
-------
Total allocated............................................. $21,918
=======
</TABLE>

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

(i) Based on 2,100,000 shares of Common Stock issued at an assumed price
per share of $10, 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) Represents the La Victoria Shareholder Note. 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) above. See "The La Victoria
Acquisition."

(iv) Represents the historical book value of La Victoria at March 31, 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

19
<PAGE> 21

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 $5,400,000 have been provided on the
amounts allocated to identified intangibles at a rate of 45%. The net
deferred tax liabilities recorded have been reduced by $1,198,000
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 $1,198,000, $1,076,000
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.

(vii) Because the beneficial owners of La Victoria's common stock will have
a continuing ownership interest in the Company (Mr. Tanklage
approximately 11% and Shansby approximately 22%), the purchase price
allocation is calculated based on such beneficial owners' historical
cost basis in their interest in La Victoria, to the extent of their
continuing ownership interest, with the balance calculated at fair
value. As a result, the excess of fair value over the historical cost
for the continuing interest portion is recorded as a dividend.

(H) The adjustment reflects the estimated use of the net proceeds of 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 because
the La Victoria Acquisition is being accounted for as a purchase.

20
<PAGE> 22

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, March 31, 1996 and March 31, 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>
THREE MONTHS ENDED
FIVE YEARS ENDED DECEMBER 31, MARCH 31,
MONTHS ------------------------------------- -------------------------
YEARS ENDED ENDED PRO PRO
JULY 31, DECEMBER 31, FORMA FORMA
----------------- ------------ ------- -------
1992 1993 1993(1) 1994 1995 1996 1996(2) 1996 1997 1997(2)
------- ------- ------------ ------- ------- ------- ------- ------ ------ -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <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 $5,282 $5,438 $15,190
Cost of sales.............. 12,648 14,974 5,466 13,213 14,266 14,081 33,479 3,490 3,512 8,417
------- ------- ------- ------- ------- ------- ------- ------ ------ -------
Gross profit............. 5,904 5,354 2,647 6,424 6,762 7,117 25,867 1,792 1,926 6,773
Operating expenses......... 4,885 8,511 3,304 7,210 6,940 6,768 22,529 1,681 1,659 6,495
------- ------- ------- ------- ------- ------- ------- ------ ------ -------
Income (loss) from
operations............. 1,019 (3,157) (657) (786) (178) 349 3,347 111 267 278
------- ------- ------- ------- ------- ------- ------- ------ ------ -------
Other income (expense)
Interest expense........... (118) (218) (98) (161) (219) (328) (1,537) (84) (82) (344)
Interest income............ -- -- -- -- 62 2 95 1 -- 33
Loss on disposal of
property and equipment... -- (514) -- (38) (192) (22) (23) (21) (1) (2)
------- ------- ------- ------- ------- ------- ------- ------ ------ -------
(118) (732) (98) (199) (349) (348) (1,465) (104) (83) (309)
------- ------- ------- ------- ------- ------- ------- ------ ------ -------
Income (loss) before
income taxes........... 901 (3,889) (755) (985) (527) 1 1,873 7 184 (31)
Income tax expense
(benefit)................ 341 (520) -- -- -- -- 1,032 -- 58 (16)
------- ------- ------- ------- ------- ------- ------- ------ ------ -------
Net income (loss)........ $ 560 $(3,369) $ (755) $ (985) $ (527) $ 1 $ 841 $ 7 $ 126 $ (15)
======= ======= ======= ======= ======= ======= ======= ====== ====== =======

Earnings (loss) per
share.................... $ 0.36 $ (2.15) $ (0.48) $ (0.59) $ (0.31) $ 0.00 $ 0.13 $ 0.00 $ 0.07 $ (0.00)
Weighted average number of
common shares
outstanding.............. 1,564 1,564 1,564 1,680 1,700 1,700 6,361 1,700 1,700 6,361
</TABLE>

<TABLE>
<CAPTION>
AS OF JULY 31, AS OF DECEMBER 31, AS OF MARCH 31, 1997
---------------- ----------------------------------- ----------------------
1992 1993 1993 1994 1995 1996 ACTUAL PRO FORMA(2)
------ ------- ------ ------ ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Cash and cash equivalents................... $ 50 $ -- $ 238 $ 237 $ 9 $ 200 $ 38 $ 7,922
Working capital (deficit)................... 276 (2,289) (139) (44) (1,499) (1,557) (1,277) 18,428
Total assets................................ 7,367 6,630 7,436 5,946 7,132 7,089 6,936 61,594
Notes payable to bank....................... 692 1,551 1,418 639 751 1,319 1,182 --
Long-term debt.............................. 1,658 1,528 1,513 949 1,249 920 893 11,436
Shareholders' equity........................ 2,879 260 1,859 2,175 2,048 2,049 2,233 40,149
</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."

21
<PAGE> 23

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.

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

22
<PAGE> 24

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
-------------------------------------------
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
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 66.1 64.6
----- ----- ----- ----- -----
Gross margin..................................... 32.7 32.2 33.6 33.9 35.4
Operating expenses................................. 36.7 33.0 31.9 31.8 30.5
----- ----- ----- ----- -----
Income from operations........................... (4.0) (0.8) 1.7 2.1 4.9
Other expenses, net................................ 1.0 1.7 1.6 2.0 1.5
----- ----- ----- ----- -----
Income (loss) before taxes....................... (5.0) (2.5) 0.1 0.1 3.4
Provision for income taxes......................... 0.0 0.0 0.0 0.0 1.1
----- ----- ----- ----- -----
Net income (loss)................................ (5.0)% (2.5)% 0.1% 0.1% 2.3%
===== ===== ===== ===== =====
</TABLE>

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

Net Sales. Net sales consists of gross sales less the amount of discounts,
returns and allowances. Net sales for the first quarter of 1997 were $5,438,000
compared to $5,282,000 for the first quarter of 1996, an increase of $156,000,
or 3.0%. The first quarter of 1996 included $86,000 in sales of shelf-stable
products to Minyard Foods, as described below. If these sales of shelf-stable
products to Minyard Foods are disregarded, net sales for the first quarter of
1997 increased by $242,000, or 4.7%, compared to the first quarter of 1996. A
significant portion of the increase in net sales was attributable to cheese and
meat sales because Calidad gained distribution of these products 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 quarter of 1997 was
$1,926,000 compared to $1,792,000 for the first quarter of 1996, an increase of
$134,000, or 7.5%. As a percentage of net sales, gross margin increased from
33.9% in the first quarter of 1996 to 35.4% in the first quarter of 1997. The
increase in gross margin was attributable to improved plant efficiencies and
increased sales. The plant efficiency improvement resulted from a $101,000
reduction of plant payroll costs in the first quarter of 1997 compared to the
first quarter of 1996. The reduction in plant payroll costs was primarily
attributable to the more efficient utilization of equipment at the new
manufacturing facility.

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 quarter of 1997 were $1,659,000 compared to
$1,681,000 for the first quarter of 1996, a decrease of $22,000, or 1.3%. As a
percentage of net sales, operating expenses declined from 31.8% in the first
quarter of 1996 to 30.5% in the first quarter 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 quarter of 1996 but not
in the first quarter of 1997.

Other Expenses. Other expenses consist primarily of interest expense and
loss on disposal of property and equipment. Other expenses for the first quarter
of 1997 were $83,000 compared to $104,000 for the first quarter of 1996, a
decrease of $21,000, or 20.2%. As a percentage of net sales, other expenses
decreased from 2.0% in the first quarter of 1996 to 1.5% in the first quarter of
1997. The decrease is primarily attributable to

23
<PAGE> 25

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 $58,000 for the first quarter
of 1997 compared to no tax provision for the first quarter 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 capital resulting in a corresponding increase to
income tax expense. There was no similar adjustment for the first quarter of
1996 because there was no taxable income. For additional information with
respect to the quasi-reorganization, see Note 7 to the Company's Financial
Statements.

At March 31, 1997, the Company had NOLs of approximately $3,475,000, which
expire throughout the period ending December 31, 2011. Of these NOLs,
approximately $3,165,000 were generated prior to the quasi-reorganization. At
March 31, 1997, the Company recorded a valuation allowance of approximately
$1,198,000 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. See Note 5 to the Company's Financial
Statements.

Net Income. For the reasons described above, net income for the first
quarter of 1997 was $126,000 compared to $7,000 for the first quarter of 1996,
an improvement of $119,000. As a percentage of net sales, net income improved
from 0.1% for the first quarter of 1996 to 2.3% for the first quarter 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

24
<PAGE> 26

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
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

25
<PAGE> 27

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 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 6.0% 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
March 31, 1997 was $1,182,322, and the Company had $159,000 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.

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<PAGE> 28

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 $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 March 31, 1997,
the principal balances on the Term Loan and Revolving Facility were $400,000 and
$1,182,322, 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 March 31, 1997, the Calidad Shareholder Note had an
outstanding principal balance of approximately $767,000. The Company intends to
use a portion of the net proceeds from this Offering to repay the Calidad
Shareholder Note. See "Use of Proceeds."

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 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 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 TEN MONTHS
MAY 31, ENDED MARCH 31,
-------------- ----------------
1995 1996 1996 1997
----- ----- ------ ------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales............................................... 53.7 51.6 51.6 50.3
----- ----- ----- -----
Gross margin........................................... 46.3 48.4 48.4 49.7
Operating expenses.......................................... 45.2 40.0 40.3 44.4
----- ----- ----- -----
Income from operations................................. 1.1 8.4 8.1 5.3
Other expenses, net......................................... (2.0) (2.3) (2.4) (2.5)
----- ----- ----- -----
Income (loss) before taxes............................. (0.9) 6.1 5.7 2.8
Provision for income taxes.................................. (0.2) 2.6 2.4 1.3
----- ----- ----- -----
Net income (loss)...................................... (0.7)% 3.5% 3.3% 1.5%
===== ===== ===== =====
</TABLE>

COMPARISON OF THE TEN MONTHS ENDED MARCH 31, 1996 TO THE TEN MONTHS ENDED MARCH
31, 1997

Net Sales. Net sales for the ten months ended March 31, 1997 were
$30,860,000 as compared to $31,490,000 for the ten months ended March 31, 1996,
a decrease of $630,000, or 2.0%. 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, the ten months ended March 31, 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 $15,337,000 for the ten months ended March 31,
1997 as compared to $15,241,000 for the ten months ended March 31, 1996, an
increase of $96,000, or 0.6%. As a percentage of net sales, gross margin
increased to 49.7% in 1997 from 48.4%

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<PAGE> 30

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.

Operating Expenses. Operating expenses were $13,708,000 for the ten months
ended March 31, 1997 compared to $12,699,000 for the ten months ended March 31,
1996, an increase of $1,009,000, or 7.9%. As a percentage of net sales,
operating expenses increased from 40.3% for 1996 to 44.4% for 1997. The dollar
increase in operating expenses was due to an increase of $517,000 in
discretionary bonuses and consulting fees to management, a $380,000 increase in
selling expenses, primarily advertising expenses, and a $200,000 increase in
legal expenses. During the ten months ended March 31, 1997, La Victoria incurred
legal expenses of approximately $190,000 relating to a dispute with a former
shareholder, as well as $270,000 in salary expense to the husband of that former
shareholder, and La Victoria anticipates that such expenses will not recur in
1998.

Other Expenses. Other expenses, primarily interest related to capital
leases, were $774,000 for the ten months ended March 31, 1997 as compared to
$759,000 for the ten months ended March 31, 1996, an increase of $15,000, or
2.0%. As a percentage of net sales, other expenses increased from 2.4% for the
ten months ended March 31, 1996 to 2.5% for the ten months ended March 31, 1997,
an increase of 0.1%.

Taxes. Taxes were $409,000 for the ten months ended March 31, 1997 compared
to $740,000 for the ten months ended March 31, 1996, a decrease of $331,000, or
44.7%. The decrease was attributable to the decrease in earnings for 1997 as
compared to 1996.

Net Income. For the reasons described above, net income for the ten months
ended March 31, 1997 was $446,000 compared to $1,043,000 for the ten months
ended March 31, 1996, a decrease of $597,000. As a percentage of net sales, net
income decreased from 3.3% for the ten months ended March 31, 1996 to 1.5% for
the ten months ended March 31, 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 -- Lease

29
<PAGE> 31

Arrangements with Robert Tanklage." 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.

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 March 31, 1997, the outstanding principal balance on the La Victoria
Term Loan was $1,742,000. The La Victoria Term Loan agreement includes covenants
requiring the maintenance of certain financial ratios and minimum tangible net
worth. As of March 31, 1997, under these covenants, La Victoria is permitted to
pay up to $500,000 in dividends annually. Although this loan agreement has been
amended to remove an explicit dividend restriction, the financial covenants
described above (including minimum tangible net worth and maximum debt-to-equity
covenants) have the effect of restricting the payment of dividends. La Victoria
anticipates that it will not be 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 full 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 less than 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 March 31, 1997) or
at LIBOR (5.77% at March 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"

30
<PAGE> 32

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 March 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 $5,836,000 was recorded as of March 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 believes these facilities are sufficient for their needs for the
foreseeable future. See "Certain Transactions -- Lease Arrangements with Robert
Tanklage."

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. La Victoria anticipates that this payment will be made from
existing cash balances and operating cash flow.

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

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 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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<PAGE> 35

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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<PAGE> 36

(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, 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. 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 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."

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

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<PAGE> 39

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, 1996 and the ten months ended March 31, 1997,
no customer accounted for greater than 10% of La Victoria's total sales.
However, two of La Victoria's customers, Vons Grocery Company and Safeway, are
currently in negotiations to combine their businesses. If this combination had
been effective during the year ended May 31, 1996 and the ten months ended March
31, 1997, the resulting combined customer would have accounted for 14.1% and
13.4% of net sales, respectively. La Victoria paid approximately $152,000 for
new distribution and slotting fees in the fiscal year ended May 31, 1996.

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 chip
production to support the Company's expansion efforts for the foreseeable future
and subsequently realize additional operating leverage and efficiencies.

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<PAGE> 40

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.

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 March 31,
1997, approximately 35% 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.

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 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
chips and is the most visible competitor in the Company's markets. Bimbo entered
the Texas market in

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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 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 Food 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.

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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.

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.

EMPLOYEES

Calidad. As of March 31, 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 March 31, 1997, La Victoria had 96 employees, 63 of whom
were hourly employees and 33 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 to be
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 Shansby of its 50% beneficial ownership interest of La Victoria.
La Victoria believes that this claim is without merit and intends to vigorously
defend against such claim.

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.

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 be
significant; 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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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 Company ("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. As described
under "The La Victoria Acquisition," Shansby will receive approximately
1,386,000 shares of Common Stock in the La Victoria Acquisition. As a result,
Shansby will remain a significant shareholder of the Company following this
Offering. See "Principal Shareholders."

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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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. 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>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Keith R. Lively............................. 46 Chief Executive Officer, Chairman of the
Board and Director
Herman L.("Bing") Graffunder................ 51 President and Director
Samuel E. Hillin, Jr........................ 40 Chief Financial Officer
J. Gary Shansby............................. 59 Director
Charles H. Esserman......................... 38 Director
Tim G. Bruer................................ 40 Director nominee
Charles A. Lynch............................ 69 Director nominee
Robert K. Swanson........................... 64 Director nominee
</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 Food from 1987
to 1988 and previously, with MJB Coffee, a division of Nestle Food 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.

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

43
<PAGE> 45

("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 Food Company, 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., the owner of a chain of restaurants, 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 Levelor 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. 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 .

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 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.

44
<PAGE> 46

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 $50,000 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 19, 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. All shares of Common Stock
owned by Mr. Graffunder are subject to repurchase rights of the Company upon
termination of Mr. Graffunder's employment for any reason.

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 19, 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 impair the
rights of the holder of such award without the approval of the holder.

The Company has not granted any options under the Stock Plan as of the date
of this Prospectus.

47
<PAGE> 49

CERTAIN TRANSACTIONS

THE LA VICTORIA ACQUISITION

Shansby (through TSG2) will receive shares of Common Stock with a value of
$14 million pursuant to the La Victoria Acquisition. La Victoria has paid LV
Foods $475,000 in order to reimburse LV Foods for expenses it incurred in
connection with the La Victoria Acquisition. In addition, La Victoria has paid
Shansby a fee of $250,000 in connection with this Offering. See "The La Victoria
Acquisition."

ROBERT TANKLAGE EMPLOYMENT AGREEMENT

Mr. Tanklage entered into a five year employment agreement with La
Victoria, effective as of , 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.

LEASE ARRANGEMENTS WITH ROBERT TANKLAGE

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
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.

SHANSBY PARTNERS ADVISORY AGREEMENT

The Company entered into the three-year Advisory Agreement with Shansby
Partners, effective June , 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. 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 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.

48
<PAGE> 50

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.

49
<PAGE> 51

PRINCIPAL SHAREHOLDERS

The following tables set forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 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 29.0% 1,103,470 -- 0.0%
TSG International(2).................... 435,030 11.4% 435,030 -- 0.0%
TSG2 L.P.(2)(3)......................... 1,386,000 36.5% -- 1,386,000 21.8%
Robert C. Tanklage(2)(3)................ 700,000 18.4% -- 700,000 11.0%
</TABLE>

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

(1) Simultaneously with the consummation of this Offering and the La Victoria
Acquisition, 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 ($14.3 million at an
assumed price to public of $10 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 simultaneously with the consummation of this Offering.
The number of shares for these two persons assumes that the price to public
in this Offering is $10 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 36.5% 1,386,000 21.8%
Charles H. Esserman(2)......................... 1,386,000 36.5% 1,386,000 21.8%
Tim G. Bruer(3)................................ -- -- 1,000 *
Charles A. Lynch(3)............................ -- -- 1,000 *
Robert K. Swanson(3)........................... -- -- 1,000 *
All directors and executive officers as a group
(8 persons).................................. 1,536,000 40.4% 1,539,000 24.2%
</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.

(3) Each nonemployee director will receive options to purchase 1,000 shares of
Common Stock upon his election to the Board of Directors. The exercise price
for these options to be granted to these directors will be the price to
public set forth on the cover page of this Prospectus.

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<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 March 31, 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.

COMMON STOCK

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 Directors and to discourage certain types of
transactions that may involve an actual or threatened change of

51
<PAGE> 53

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 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 meeting of holders of
Common Stock, in addition to business proposed (or persons nominated to be
directors)

52
<PAGE> 54

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

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 6,361,500 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 2,236,000 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 "Lock-up
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 date an order to sell is placed
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 no grants have been made as of the date 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. See "Certain Transactions -- Shansby Partners Advisory Agreement."
Shansby Partners will have certain registration rights in connection with the
shares underlying the Shansby Warrant. In addition, Mr. Tanklage and Shansby
will have certain registration rights.

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,
Principal Financial Securities, Inc. and Stephens 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................................
Principal Financial Services, Inc...........................
Stephens 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

55
<PAGE> 57

past and present operations and earnings and the trend of such earnings, the
prospects for future earnings of 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. was succeeded as the Company's auditors in
April 1997, by McGladrey & Pullen, LLP. The report of Rylander, Clay & Opitz,
L.L.P. on the financial statements 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, 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 two
years in the period ended May 31, 1996 and for the ten month period ended March
31, 1997 appearing in this Prospectus and Registration

56
<PAGE> 58

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.

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 March
31, 1997.................................................. F-4
Statements of Operations for the years ended December 31,
1994, 1995 and 1996 and for the three month periods ended
March 31, 1996 and 1997................................... F-5
Statements of Shareholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and for the three month
periods ended March 31, 1996 and 1997..................... F-6
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and for the three month periods ended
March 31, 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 March 31, 1996 and May 31, 1997........ F-16
Statements of Operations for the years ended May 31, 1995
and 1996 and the ten month period ended March 31, 1997.... F-17
Statements of Shareholders' Equity for the years ended May
31, 1995 and 1996 and the ten month period ended March 31,
1997...................................................... F-18
Statements of Cash Flows for the years ended May 31, 1995
and 1996 and the ten month period ended March 31, 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

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, retained earnings (deficit), 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,
-------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents......................... $ 9,027 $ 200,479 $ 37,909
Accounts receivable, net of allowance for doubtful
accounts of $57,000 in 1995, $75,000 in 1996
and $78,000 in 1997 (Note 8)................... 1,323,226 1,474,753 1,494,826
Inventories (Note 3).............................. 868,738 780,222 856,500
Prepaid expenses.................................. 135,077 108,104 142,601
----------- ----------- -----------
Total current assets...................... 2,336,068 2,563,558 2,531,836
----------- ----------- -----------
Property and Equipment, at cost
Leasehold improvements............................ 659,463 730,975 730,975
Fixtures.......................................... 518,102 568,249 589,617
Equipment......................................... 2,313,137 2,722,438 2,762,068
----------- ----------- -----------
3,490,702 4,021,662 4,082,660
Less accumulated depreciation............. 724,232 1,199,125 1,337,569
----------- ----------- -----------
2,766,470 2,822,537 2,745,091
----------- ----------- -----------
Other Assets
Goodwill, net of accumulated amortization of
$305,058 in 1995, $386,379 in 1996 and $406,710
in 1997........................................ 1,727,988 1,646,667 1,626,336
Non-compete agreement, net of accumulated
amortization of $350,654 in 1995 and $493,000
in 1996 and 1997............................... 142,346 -- --
Other............................................. 158,765 56,376 32,533
----------- ----------- -----------
2,029,099 1,703,043 1,658,869
----------- ----------- -----------
$ 7,131,637 $ 7,089,138 $ 6,935,796
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Line of credit (Note 4)........................... $ 750,933 $ 1,319,442 $ 1,182,322
10.5% note payable to officer, unsecured.......... 80,000 -- --
Current portion of long-term debt................. 789,907 766,432 701,744
Accounts payable.................................. 1,956,198 1,723,999 1,652,781
Accrued expenses.................................. 258,013 310,244 272,437
----------- ----------- -----------
Total current liabilities................. 3,835,051 4,120,117 3,809,284
----------- ----------- -----------
Long-Term Debt, less current portion (Note 4)....... 1,248,798 919,866 893,353
----------- ----------- -----------
Commitments (Note 6)................................

Shareholders' Equity
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
Additional paid-in capital........................ 1,860,152 1,860,152 1,918,152
Accumulated deficit, since January 1, 1994
($4,125,298 deficit eliminated on December 31,
1993) (Note 7)................................. (1,512,364) (1,510,997) (1,384,993)
----------- ----------- -----------
2,047,788 2,049,155 2,233,159
----------- ----------- -----------
$ 7,131,637 $ 7,089,138 $ 6,935,796
=========== =========== ===========
</TABLE>

F-4
<PAGE> 63

AUTHENTIC SPECIALTY FOODS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -----------------------
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 $5,281,728 $5,438,146
Cost of Sales..................... 13,213,280 14,266,056 14,081,436 3,489,552 3,512,279
----------- ----------- ----------- ---------- ----------
Gross Profit...................... 6,423,890 6,762,334 7,116,972 1,792,176 1,925,867
Operating Expenses................ 7,210,294 6,940,177 6,767,617 1,680,983 1,658,941
----------- ----------- ----------- ---------- ----------
Income (loss) from operations... (786,404) (177,843) 349,355 111,193 266,926
----------- ----------- ----------- ---------- ----------
Other Income (Expense)
Interest expense................ (161,251) (219,142) (327,994) (83,904) (81,571)
Interest income................. -- 61,218 2,246 1,218 17
Loss on disposal of property and
equipment.................... (37,368) (191,574) (22,240) (21,198) (1,368)
----------- ----------- ----------- ---------- ----------
(198,619) (349,498) (347,988) (103,884) (82,922)
----------- ----------- ----------- ---------- ----------
Income (loss) before income
taxes........................ (985,023) (527,341) 1,367 7,309 184,004
Income tax expense (Note 5)....... -- -- -- -- 58,000
----------- ----------- ----------- ---------- ----------
Net income (loss)............... $ (985,023) $ (527,341) $ 1,367 $ 7,309 $ 126,004
=========== =========== =========== ========== ==========

Earnings (loss) per common
share........................... $ (0.59) $ (0.31) $ 0.00 $ 0.00 $ 0.07
=========== =========== =========== ========== ==========
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).. -- -- -- -- 58,000 -- 58,000
Net income (unaudited)........... -- -- -- -- -- 126,004 126,004
------- ----- --------- ---------- ---------- ------------ ----------
Balance, March 31, 1997
(unaudited)...................... -- $ -- 1,700,000 $1,700,000 $1,918,152 $(1,384,993) $2,233,159
======= ===== ========= ========== ========== ============ ==========
</TABLE>

See Notes to Financial Statements.

F-6
<PAGE> 65

AUTHENTIC SPECIALTY FOODS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------ ---------------------
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 $ 7,309 $ 126,004
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Tax benefit of net operating loss utilized
(Note 5)................................ -- -- -- -- 58,000
Depreciation.............................. 317,408 354,716 515,117 115,400 138,444
Amortization.............................. 266,491 197,187 242,081 52,156 25,153
Loss on disposal of property and
equipment............................... 37,368 191,574 22,240 21,198 1,368
(Increase) decrease in:
Receivables............................... 435,065 430,565 (151,527) (226,450) (20,073)
Inventory................................. 391,134 (157,477) 88,516 34,386 (76,278)
Prepaid expenses.......................... (55,072) (59,726) 26,973 (49,890) (34,497)
Accounts payable.......................... (222,746) 244,740 (232,199) 237,987 (71,218)
Accrued expenses.......................... (4,883) 16,352 52,231 (6,644) (37,807)
---------- ----------- --------- --------- ---------
Net cash provided by operating
activities.............................. 179,742 690,590 564,799 185,452 109,096
---------- ----------- --------- --------- ---------
Cash flows from investing activities
Change in other assets.................... -- (48,466) (28,540) (1,668) (8,314)
Proceeds from disposal of property and
equipment............................... 244,620 -- 171,188 118,301 25,967
Purchase of property and equipment........ (148,115) (1,256,552) (492,176) (145,497) (60,998)
Acquisition of business (Note 2)............ -- (516,453) (159,921) -- --
---------- ----------- --------- --------- ---------
Net cash provided by (used in) investing
activities.............................. 96,505 (1,821,471) (509,449) (28,864) (43,345)
---------- ----------- --------- --------- ---------
Cash flows from financing activities
Increase (decrease) in line of credit..... (778,931) 111,664 568,509 224,660 (137,120)
Borrowing (repayment) on note payable to
officer................................. -- 80,000 (80,000) -- --
Proceeds of long-term debt................ -- 600,000 -- -- --
Payments made on long-term debt........... (583,854) (288,641) (352,407) (281,512) (91,201)
Capital contributions..................... 1,085,000 400,000 -- -- --
---------- ----------- --------- --------- ---------
Net cash provided by (used in) financing
activities.............................. (277,785) 903,023 136,102 (56,852) (228,321)
---------- ----------- --------- --------- ---------
Increase (decrease) in cash and cash
equivalents............................. (1,538) (227,858) 191,452 99,736 (162,570)
Cash and Cash equivalents:
Beginning................................. 238,423 236,885 9,027 9,027 200,479
---------- ----------- --------- --------- ---------
Ending.................................... $ 236,885 $ 9,027 $ 200,479 $ 108,763 $ 37,909
========== =========== ========= ========= =========
Supplemental Disclosures of Cash Flow
Information
Cash paid for interest.................... $ 161,251 $ 219,142 $ 327,994 $ 83,904 $ 81,571
========== =========== ========= ========= =========
</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 shipment of the
product to customers or distributors.

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 financial statements include the
following financial instruments: cash and cash equivalents, line of credit, and
long-term debt. No separate comparison of fair values versus carrying values is
presented for the aforementioned financial instruments since their fair values
are not significantly different than their balance sheet carrying amounts.

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 March 31, 1997 and for the three month periods ended
March 31, 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,
-------------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials..................................... $144,996 $ 83,265 $167,604
Packaging materials............................... 257,332 246,849 182,514
Finished goods.................................... 466,410 450,108 506,382
-------- -------- --------
$868,738 $780,222 $856,500
======== ======== ========
</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 March 31, 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.

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>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------- -------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Current................................. $ -- $ -- $ -- $ -- $58,000
Deferred................................ -- -- -- -- --
------- ------- ------- ------- -------
$ -- $ -- $ -- $ -- $58,000
======= ======= ======= ======= =======
</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>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- -------------------
1994 1995 1996 1996 1997
--------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory rate applied to income (loss)
before tax............................ $(335,000) $(178,000) $ -- $ 3,000 $ 64,000
Non-deductible expenses................. 28,000 28,000 28,000 7,000 7,000
Tax benefit not utilized (utilized)..... 307,000 150,000 (28,000) (10,000) (13,000)
--------- --------- -------- -------- --------
$ -- $ -- $ -- $ -- $ 58,000
========= ========= ======== ======== ========
</TABLE>

The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
MARCH 31,
1994 1995 1996 1997
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net operating loss carryforwards........ $ 1,181,000 $ 1,197,000 $ 1,238,000 $ 1,182,000
Depreciation and amortization........... (128,000) 33,000 (43,000) (42,000)
Accrued expenses and other.............. 70,000 47,000 48,000 32,000
Allowance for doubtful accounts......... 24,000 20,000 26,000 26,000
Valuation allowance..................... (1,147,000) (1,297,000) (1,269,000) (1,198,000)
----------- ----------- ----------- -----------
$ -- $ -- $ -- $ --
=========== =========== =========== ===========
</TABLE>

At March 31, 1997, the Company recorded a valuation allowance of $1,198,000
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 March 31, 1997, the Company had net operating losses of approximately
$3,475,000 expiring as follows:

<TABLE>
<CAPTION>
EXPIRATION
DATE
----------
<S> <C> <C>
2008............................................................................................... $2,894,000
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 $3,165,000, 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 $58,000 for the three months ended
March 31, 1997.

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 $77,000 and
$90,000 for the three months ended March 31, 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 28% for each of the three month periods ended March 31, 1996
and 1997. The major customer accounted for approximately 16% of the Company's
accounts receivable balance at March 31, 1997.

NOTE 9. SUBSEQUENT EVENTS (UNAUDITED)

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
the public offering, the Company will repurchase 1,538,500 shares of Common
Stock currently owned by the Company's majority shareholders.

F-13
<PAGE> 72

AUTHENTIC SPECIALTY FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

La Victoria Acquisition: Currently, 50% of the beneficial interest in the
capital stock of La Victoria is held 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% of the beneficial interest is held by Shansby and 1% is held by
Authentic Specialty Foods' chairman. 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 $38 million, consisting of $12 million in cash (to be paid out of
proceeds of this Offering), Common Stock with a value of $21 million ($17
million after a 20% discount for lack of marketability), 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. None of the 350,000 shares authorized under the Stock Plan have been
granted.

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 March 31, 1997, and the related statements of operations,
shareholders' equity, and cash flows for each of the two years in the period
ended May 31, 1996 and for the ten months ended March 31, 1997. These financial
statements are the responsibility of La Victoria's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, 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 March 31, 1997 and the results of its operations and its cash
flows for each of the two years in the period ended May 31, 1996 and for the ten
months ended March 31, 1997, in conformity with generally accepted accounting
principles.

McGLADREY & PULLEN, LLP

Anaheim, California
May 27, 1997

F-15
<PAGE> 74

LA VICTORIA FOODS, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
MAY 31, 1996 MARCH 31, 1997
------------ --------------
<S> <C> <C>
Current Assets
Cash and cash equivalents (Note 9)........................ $ 5,100,000 $ 3,967,104
Trade receivables, less allowance for doubtful accounts
1996 $50,000 and 1997 $52,000 and market development
fund allowance 1996 $155,000 and 1997 $330,000......... 1,411,585 1,291,175
Note receivables, officer-shareholder paid subsequent to
March 31, 1997......................................... 18,501 345,001
Inventories (Note 2)...................................... 9,684,042 10,964,112
Prepaid expenses (Note 10)................................ 1,200,894 458,975
Prepaid income taxes...................................... 519,000 354,800
Deferred taxes (Note 6)................................... -- 380,000
----------- -----------
Total current assets.............................. 17,934,022 17,761,167
----------- -----------
Long-Term Receivables and Other Assets......................
Note receivable, officer-shareholder less current
maturities............................................. 341,768 --
Security deposits, related parties........................ 61,065 61,065
----------- -----------
402,833 61,065
----------- -----------
Property, Equipment and Leasehold Improvements, net (Note
3)........................................................ 9,160,473 8,363,387
----------- -----------
$27,497,328 $26,185,619
=========== ===========
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)..................................................... 146,278 167,253
Accounts payable.......................................... 610,043 336,099
Accrued payroll and related taxes (Note 4)................ 600,427 515,206
Accrued profit sharing (Note 7)........................... 171,962 145,051
Accrued consulting and bonuses to related parties (Note
11).................................................... -- 975,000
Other accrued expenses.................................... 158,688 315,363
Deferred taxes (Note 6)................................... 91,000 --
----------- -----------
Total current liabilities......................... 3,176,633 3,553,972
----------- -----------
Long-Term Debt (Note 4)..................................... 1,558,333 641,667
----------- -----------
Long-Term Related Party Debt................................ 1,005,000 --
----------- -----------
Long-Term Related Party Capital Leases (Note 5)............. 5,813,151 5,668,253
----------- -----------
Deferred Taxes (Note 6)..................................... 93,026 25,000
----------- -----------
Commitments and Contingencies (Notes 5, 7 and 9)
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 13,425,527
----------- -----------
15,851,185 16,296,727
----------- -----------
$27,497,328 $26,185,619
=========== ===========
</TABLE>

See Notes to Financial Statements.

F-16
<PAGE> 75

LA VICTORIA FOODS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
TEN MONTHS
YEARS ENDED MAY 31, ENDED
------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales............................................. $41,381,679 $38,978,089 $30,859,852
Cost of Sales, including rent paid to related parties
1995 $839,000; 1996 $642,000; 1997 $321,000 (Notes 5
and 7).............................................. 22,218,655 20,107,345 15,522,733
----------- ----------- -----------
Gross Profit.......................................... 19,163,024 18,870,744 15,337,119
Operating Expenses, including consulting and bonuses
to related parties 1995 $0; 1996 $550,000; 1997
$975,000 (Notes 5, 7, 10 and 11).................... 18,709,328 15,607,329 13,708,423
----------- ----------- -----------
Operating income.................................... 453,696 3,263,415 1,628,696
Other Income (Expense)
Interest expense, including related party expense 1995
$540,000; 1996 $751,000; 1997 $717,000.............. (885,673) (996,438) (848,059)
Other, primarily interest income...................... 42,102 91,546 74,338
----------- ----------- -----------
Income (loss) before income tax (credits)........... (389,875) 2,358,523 854,975
Income tax expense (credits) (Note 6)................. (80,880) 979,599 409,433
----------- ----------- -----------
Net income (loss)................................... $ (308,995) $ 1,378,924 $ 445,542
=========== =========== ===========

Earnings (loss) per share............................. $ (1,457.52) $ 6,504.36 $ 2,101.61
=========== =========== ===========
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
Net income........................... -- -- -- 445,542 445,542
--------- ------- ---------- ----------- -----------
Balance, March 31, 1997................ $ -- $21,200 $2,850,000 $13,425,527 $16,296,727
========= ======= ========== =========== ===========
</TABLE>

See Notes to Financial Statements.

F-18
<PAGE> 77
LA VICTORIA FOODS, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
TEN MONTHS
YEARS ENDED MAY 31, ENDED
-------------------------- MARCH 31,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss)..................... $ (308,995) $ 1,378,924 $ 445,542
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation.......................... 741,843 861,481 775,126
Deferred income taxes................. 517,292 (261,208) (539,026)
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) 120,410
Inventories........................ (282,916) 2,468,662 (1,280,070)
Prepaid expenses and other
assets........................... (1,225,027) 1,282,915 741,919
Prepaid income taxes............... 882,000 306,000 164,200
Increase (decrease) in accounts
payable and accrued expenses..... 974,788 (740,537) 745,599
----------- ----------- -----------
Net cash provided by operating
activities ........................ 2,907,636 5,234,734 1,231,565
----------- ----------- -----------
Cash Flows from Investing Activities
Proceeds from sale of equipment....... 3,000 16,000 --
Purchase of equipment................. (334,324) (133,988) (35,904)
Collections on notes receivable from
officers........................... 34,095 17,252 15,268
----------- ----------- -----------
Net cash (used in) investing
activities......................... (297,229) (100,736) (20,636)
----------- ----------- -----------
Cash Flows from Financing Activities
Borrowings on long-term debt.......... 558,000 491,861 --
Principal payments on long-term debt
and capital leases................. (1,861,478) (1,853,932) (2,343,825)
Purchase of preferred stock for
retirement......................... -- (150,000) --
----------- ----------- -----------
Net cash (used in) financing
activities......................... (1,303,478) (1,512,071) (2,343,825)
----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents........................ 1,306,929 3,621,927 (1,132,896)
Cash and Cash Equivalents
Beginning............................. 171,144 1,478,073 5,100,000
----------- ----------- -----------
Ending................................ $ 1,478,073 $ 5,100,000 $ 3,967,104
=========== =========== ===========
</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.

Interim financial information: The financial statements for the interim
period ending March 31, 1997 include ten months of La Victoria's operations and
are not necessarily indicative of the results attained for a full fiscal year.

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 shipment of its
products to customers and when collectibility is reasonably assured.

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.

F-20
<PAGE> 79

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Fair value of financial instruments: The financial statements include the
following financial instruments: cash and cash equivalents, notes receivable and
long-term debt. No separate comparison of fair values versus carrying values is
presented since the fair values approximate their balance sheet carrying
amounts.

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, MARCH 31,
1996 1997
----------- -----------
<S> <C> <C>
Finished goods............................................ $ 9,016,592 $10,188,411
Raw materials............................................. 398,107 377,092
Supplies.................................................. 269,343 398,609
----------- -----------
$ 9,684,042 $10,964,112
=========== ===========
</TABLE>

NOTE 3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

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

<TABLE>
<CAPTION>
MAY 31, MARCH 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.................................... 515,666 527,509
Autos and trucks.......................................... 125,600 125,599
Construction in progress.................................. 12,716 4,846
----------- -----------
18,045,591 17,660,866
Less accumulated depreciation including amounts applicable
to assets acquired under capital leases of $1,606,993 in
1996 and $1,893,112 in 1997............................. 8,885,118 9,297,479
----------- -----------
$ 9,160,473 $ 8,363,387
=========== ===========
</TABLE>

F-21
<PAGE> 80

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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 March
31, 1997) or at LIBOR (5.77% at March 31, 1997) plus 2%, at La Victoria's
option. The agreement expired in May 1997 but was renewed to September 30, 1997
under similar terms. There were no amounts outstanding at May 31, 1996 and March
31, 1997. La Victoria also has a term note outstanding with the same bank with a
balance as of March 31, 1997 of $1,741,667. 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. The term note also restricts the amount of dividends paid on capital
stock to $500,000 per year. La Victoria anticipates that it will not be 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 March 31, 1997 are as follows:

<TABLE>
<S> <C>
April 1, 1997 to May 31, 1997............................ $ 183,333
Year ended May 31, 1998.................................. 1,100,000
Year ended May 31, 1999.................................. 458,334
----------
$1,741,667
==========
</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 13.5%, 15.5% and 11.8%, respectively.

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

F-22
<PAGE> 81

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<CAPTION>
OPERATING CAPITAL
---------- -----------
<S> <C> <C>
April 1, 1997 to May 31, 1997.............................. $ 25,198 $ 158,584
Year ended May 31, 1998.................................... 151,191 951,504
Year ended May 31, 1999.................................... 147,891 951,504
Year ended May 31, 2000.................................... 136,416 951,504
Year ended May 31, 2001.................................... 136,416 951,504
Year ended May 31, 2002.................................... 136,416 951,504
Thereafter................................................. 1,114,064 7,770,616
---------- -----------
$1,847,592 12,686,720
==========
Less amount representing interest........................ 6,851,214
-----------
$ 5,835,506
===========
</TABLE>

The total rental expense relating to facilities and equipment included in
the statements of income for the year ended May 31, 1995 and 1996 and for the
ten months ended March 31, 1997 was $1,024,829, $998,687 and $517,789,
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.

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 March 31, 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.

NOTE 6. INCOME TAX MATTERS

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

<TABLE>
<CAPTION>
TEN MONTHS
YEARS ENDED MAY 31, ENDED
---------------------- MARCH 31,
1995 1996 1997
--------- ---------- ----------
<S> <C> <C> <C>
Current............................................. $(598,172) $1,240,807 $ 948,459
Deferred............................................ 517,292 (261,208) (539,026)
--------- ---------- ---------
$ (80,880) $ 979,599 $ 409,443
========= ========== =========
</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>
TEN MONTHS
YEARS ENDED MAY 31, ENDED
-------------------- MARCH 31,
1995 1996 1997
--------- -------- ----------
<S> <C> <C> <C>
Statutory rate applied to income (loss) before
taxes.............................................. $(136,000) $825,000 $299,000
State income taxes net of federal benefit............ (23,000) 143,000 51,000
Nondeductible expenses............................... 23,000 9,000 40,000
Limitation on state operating loss carryforwards..... 53,000 -- --
Other................................................ 2,120 2,599 19,433
--------- -------- --------
$ (80,880) $979,599 $409,433
========= ======== ========
</TABLE>

The components of deferred taxes are as follows:

<TABLE>
<CAPTION>
MAY 31, MARCH 31,
1996 1997
--------- ---------
<S> <C> <C>
Property, equipment and leasehold improvements.............. $(492,000) $(528,000)
Capital leases.............................................. 399,000 503,000
Accounts receivable reserves................................ 20,000 21,000
Accrued vacation pay........................................ 82,000 71,000
Inventory capitalization.................................... 144,000 158,000
Other accrued expenses...................................... 88,974 63,000
Prepaid advertising......................................... (426,000) --
State income taxes.......................................... -- 67,000
--------- ---------
(184,026) 355,000
Vacation allowance.......................................... -- --
--------- ---------
$(184,026) $ 355,000
========= =========
</TABLE>

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

<TABLE>
<CAPTION>
MAY 31, MARCH 31,
1996 1997
--------- ---------
<S> <C> <C>
Current assets.............................................. $ -- $380,000
Current (liabilities)....................................... (91,000) --
Noncurrent (liabilities).................................... (93,026) (25,000)
--------- --------
$(184,026) $355,000
========= ========
</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. Of the 1997
contribution, $139,000 has been allocated to the period ended March 31, 1997.

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.

F-24
<PAGE> 83

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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.

NOTE 9. CONCENTRATIONS

At March 31, 1997, La Victoria has approximately $334,000 deposited at a
single financial institution. Deposits are insured by the FDIC up to $100,000.
La Victoria has also invested in $5,100,000 and $3,700,000 of commercial paper
with the same institution as of May 31, 1996 and March 31, 1997, respectively.
The investments are typically under 15 days in duration. The 1997 investments
mature between April 3, 1997 and April 11, 1997.

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

NOTE 10. ADVERTISING

At May 31, 1996 and March 31, 1997, $1,064,906 and $427,545 of advertising
was reported as prepaid expenses, respectively. Advertising expense was
$1,965,950 for the ten months ended March 31, 1997 and $4,939,284 and $1,937,217
for the years ended May 31, 1995 and 1996, 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 $475,000 in fees
to a related party to reimburse expenses it incurred in connection with the La
Victoria Acquisition. Of the 1997 amounts, $767,000 of the bonuses (including
$600,000 to the shareholder) and $375,000 of the fee have been allocated to the
period ending March 31, 1997.

NOTE 12. SUBSEQUENT EVENT

On May 28, 1997, La Victoria declared a cash dividend on common stock of
$63,600 ($300 per share). In addition, 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. In May 1997, La Victoria
paid a $250,000 consulting fee to a related party for advice related to the
inclusion of La Victoria stock in the public offering. At 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.

F-25
<PAGE> 84

LA VICTORIA FOODS, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

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 $848,059
=========== ========== ========
Income taxes, net of refunds received....... $(1,430,172) $ 934,807 $784,259
=========== ========== ========
Supplemental Schedule of Noncash Investing and
Financing Activities, capital lease obligations
incurred for use of buildings.................. $ -- $3,040,000 $ --
=========== ========== ========
</TABLE>

F-26
<PAGE> 85

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

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........................
Risk Factors..............................
Forward-Looking Information...............
The La Victoria Acquisition...............
Use of Proceeds...........................
Dividend Policy...........................
Capitalization............................
Dilution..................................
Unaudited Pro Forma Consolidated Financial
Statements..............................
Selected Financial Data...................
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..............................
Business..................................
The Shansby Group.........................
Management................................
Certain Transactions......................
Principal Shareholders....................
Description of Capital Stock..............
Shares Eligible for Future Sale...........
Underwriting..............................
Legal Matters.............................
Experts...................................
Available Information.....................
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

PRINCIPAL FINANCIAL SECURITIES, INC.

STEPHENS INC.
, 1997

==========================================================
<PAGE> 86

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.......................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses (including legal fees)........... *
Printing expenses........................................... *
Transfer Agent fees......................................... *
Miscellaneous............................................... *
-------
TOTAL............................................. $ *
=======
</TABLE>

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

* To be provided by amendment.

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> 87

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> <S>
*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
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
</TABLE>

II-2
<PAGE> 88

<TABLE>
<C> <S>
*4.6 -- Amendment to Term Loan Agreement between Union Bank of
California, N.A. and La Victoria Foods, Inc., dated June
, 1997
*5.1 -- Opinion of Vinson & Elkins L.L.P.
*10.1 -- Employment Agreement between Herman L. Graffunder and
Calidad Foods, Inc., dated June 19, 1997
*10.2 -- Employment Agreement between Samuel E. Hillin, Jr. and
Calidad Foods, Inc., dated June 19, 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 -- Warrant Purchase Agreement between the Company and
Shansby Partners, LLC, dated June , 1997
*10.9 -- Registration Rights Agreement between Calidad Foods, Inc.
and Robert C. Tanklage, dated June , 1997
*10.10 -- Advisory Agreement between the Company and Shansby
Partners, LLC, dated June , 1997
*10.11 -- Employment Agreement between Robert C. Tanklage and La
Victoria Foods, Inc., dated June , 1997
*16.1 -- Letter from Rylander, Clay & Opitz, L.L.P., dated June
, 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.

(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 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.

II-3
<PAGE> 89

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> 90

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this 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 24th day of June, 1997.

AUTHENTIC SPECIALTY FOODS, INC.

By /s/ HERMAN L. GRAFFUNDER
-----------------------------------
Herman L. Graffunder
President

KNOW BY ALL THESE PRESENTS, that each of the undersigned directors and
officers of the Registrant hereby constitute and appoints Herman L. Graffunder
and Sam E. Hillin, Jr. his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and on his behalf and in
his name, place and stead in any and all capacities, to sign, execute and file
with the Securities and Exchange Commission and any state securities regulatory
board or commission any documents relating to the proposed issuance and
registration of the securities offered pursuant to this Registration Statement
on Form S-1 under the Securities Act of 1933, including any and all amendments
(including post-effective amendments and amendments thereto) to this
Registration Statement on Form S-1, and any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, with all exhibits and any and all documents required to
be filed with respect thereto with any regulatory authority, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

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

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

/s/ KEITH R. LIVELY Chief Executive Officer, June 24, 1997
- ----------------------------------------------------- Chairman of the Board and
Keith R. Lively Director (Principal Executive
Officer)

/s/ HERMAN L. GRAFFUNDER President and Director June 24, 1997
- -----------------------------------------------------
Herman L. Graffunder

/s/ SAMUEL E. HILLIN, JR. Chief Financial Officer June 24, 1997
- ----------------------------------------------------- (Principal Financial and
Samuel E. Hillin, Jr. Accounting Officer)

/s/ J. GARY SHANSBY Director June 24, 1997
- -----------------------------------------------------
J. Gary Shansby

/s/ CHARLES H. ESSERMAN Director June 24, 1997
- -----------------------------------------------------
Charles H. Esserman
</TABLE>

II-5
<PAGE> 91

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*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
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
*4.6 -- Amendment to Term Loan Agreement between Union Bank of
California, N.A. and La Victoria Foods, Inc., dated June
, 1997
*5.1 -- Opinion of Vinson & Elkins L.L.P.
*10.1 -- Employment Agreement between Herman L. Graffunder and
Calidad Foods, Inc., dated June 19, 1997
*10.2 -- Employment Agreement between Samuel E. Hillin, Jr. and
Calidad Foods, Inc., dated June 19, 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 -- Warrant Purchase Agreement between the Company and
Shansby Partners, LLC, dated June , 1997
*10.9 -- Registration Rights Agreement between Calidad Foods, Inc.
and Robert C. Tanklage, dated June , 1997
*10.10 -- Advisory Agreement between the Company and Shansby
Partners, LLC, dated June , 1997
*10.11 -- Employment Agreement between Robert C. Tanklage and La
Victoria Foods, Inc., dated June , 1997
*16.1 -- Letter from Rylander, Clay & Opitz, L.L.P., dated June
, 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.

<PAGE> 1
EXHIBIT 2.1

CONTRIBUTION AND EXCHANGE AGREEMENT

This CONTRIBUTION AND EXCHANGE AGREEMENT (this "Agreement") is made
and entered into as of June 20, 1997, 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").

W I T N E S S E T H:

WHEREAS, Tanklage is the beneficial and record owner of 100 shares
(the "Tanklage Shares") of common stock (the "La Victoria Common Stock"), of La
Victoria Foods, Inc., a California corporation (the "Company");

WHEREAS, the LV Foods Owners own 100% of the equity interest of LV
Foods, LLC, a Delaware limited liability company ("LV Foods"), and LV Foods is
the beneficial and record owner of 100 shares of La Victoria Common Stock;

WHEREAS, the irrevocable trust created by Henry Tanklage and Erika
Tanklage under the Trust Agreement dated April 29, 1983, as amended (the
"Trust") is the record owner of 12 shares of La Victoria Common Stock (the
"Trust Shares");

WHEREAS, each of Tanklage and LV Foods is the beneficiary of an
undivided one-half interest in an irrevocable trust created by Henry Tanklage
and Erika Tanklage under the Trust Agreement dated April 29, 1983, as amended
(the "Trust");

WHEREAS, ASF is currently contemplating an initial public offer and
sale of of its common stock, par value $1.00 per share (the "ASF Common
Stock") pursuant to a firm commitment underwriting, which offer and sale of
shares (the "Initial Public Offering") will be registered pursuant to a
registration statement on Form S-1 (the "Registration Statement") to be filed
with the Securities and Exchange Commission (the "SEC");

WHEREAS, ASF intends to use a portion of the proceeds from the Initial
Public Offering to redeem all shares of ASF Common Stock owned by The Shansby
Group and TSG International (the "Shansby Redemption") for a per share purchase
price equal to the price to public in the Initial Public Offering less the
underwriters' discounts and commissions (the "Net Offering Price");

WHEREAS, on the terms and subject to the conditions set forth herein,
Tanklage desires to transfer, and ASF desires to acquire, (i) all of the shares
of La Victoria Common Stock owned by Tanklage and (ii) all of Tanklage's
beneficial interest in the Trust (including without limitation all of his
beneficial interest in and to the Trust Shares, the right to receive
distributions of dividends and all other income received by the Trust and due
or to become due to Tanklage thereunder, and the

<PAGE> 2
right of Tanklage to receive distributions of Trust property upon termination
of the Trust) (collectively, the "Trust Interests");

WHEREAS, on the terms and subject to the conditions set forth herein,
the LV Foods Owners desire to transfer, and ASF desires to acquire all of the
equity interest in LV Foods;

WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the transactions contemplated hereby;

NOW THEREFORE, for and in consideration of the mutual benefits derived
and to be derived from this Agreement 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:

ARTICLE 1
THE CONTRIBUTION AND EXCHANGE

1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following respective meanings:

(a) "Public Offering Price" shall mean the price to the
public in the Initial Public Offering, without giving effect to any
underwriter's discounts and commissions or offering expenses.

(b) "Primary Shares" shall mean the number of shares of
ASF Common Stock equal to the result of (A) $7 million divided by (B)
the Public Offering Price.

(c) "Contingent Shares" shall mean if the aggregate
amount of, without duplication (A) cash received, dividends received,
debt assumed and shares of ASF Common Stock (valued at the Public
Offering Price) received or retained by Tanklage, the LV Foods Owners
and the current shareholders of ASF, in each case pursuant to this
Agreement or in connection with the Initial Public Offering (the
"Aggregate Consideration"), exceeds $63 million, then an additional
number of shares of ASF Common Stock (valued at the Public Offering
Price) necessary so that the portion of the Aggregate Consideration
received by Tanklage is at least one-third of the Aggregate
Consideration received by Tanklage, the LV Foods Owners and the
current shareholders of ASF.

1.2 Transfer of Shares and Trust Interests by Tanklage. (a) At
the Closing (as defined below), Tanklage will transfer, convey and deliver to
ASF all of the Tanklage Shares as evidenced by the delivery of a certificate or
certificates evidencing such Tanklage Shares in good delivery form and duly
endorsed for transfer or accompanied by duly executed stock powers, as well as
the Trust Interests, as evidenced by an assignment in form reasonably
satisfactory to Buyer and its counsel

2
<PAGE> 3
("Trust Assignment"), in exchange for (i) $12 million in cash payable at the
Closing by a completed wire Tanklage of immediately available funds for the
account of Tanklage to the bank account designated by Tanklage prior to
Closing, (ii) one or more certificates registered in the name of Tanklage
representing the Primary Shares and (iii) one or more certificates registered
in the name of the Tanklage representing any Contingent Shares.

1.3 Transfer of Interest in LV Foods by the LV Foods Owners. At
the Closing, the LV Foods Owners will transfer, convey and deliver to ASF 100%
of the equity interest in LV Foods of the Tanklage Shares as evidenced by the
delivery of 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 LV Foods Owners (in proportion to their
ownership of LV Foods) for a number shares of ASF Common Stock equal to $14
million divided by the Initial Public Offering Price.

1.4 Status of Shares of ASF Common Stock. (a) Tanklage and the
LV Foods Owners acknowledge that the issuance to such persons of the shares of
ASF Common Stock pursuant to the terms of this Agreement have not been
registered or qualified under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities or "blue sky" laws. Tanklage and the
LV Foods Owners further acknowledge that such shares may not be sold,
transferred or otherwise disposed of without an effective registration
statement under the Securities Act and compliance with applicable state
securities and "blue sky" laws, or an applicable exemption therefrom, and that
the certificates for such shares shall bear a restrictive legend to such
effect. ASF will enter into a registration rights agreement with each of
Tanklage and the LV Foods Owners at or prior to the Closing with respect to
such shares. Tanklage and each LV Foods Owner, severally and not jointly,
represent to ASF that such person is taking such shares for investment and not
with a view to distribution, within the meaning of the Securities Act.

(b) Tanklage and the LV Foods Owners agree to execute on an
expedited basis any lock-up agreements reasonably requested by the managing
underwriter for the Initial Public Offering; provided, however, that the
lock-up period shall not exceed 180 days after the date of the final prospectus
in connection with the Initial Public Offering. Without limiting the
generality of the foregoing, each of Tanklage and each LV Foods Owner agrees,
for the benefit of ASF and the underwriters for the Initial Public Offering,
that no such person or any affiliate or family member thereof will directly or
indirectly sell, transfer or otherwise dispose of any shares of ASF Common
Stock prior to expiration of 180 days after the date of the final prospectus in
connection with the Initial Public Offering.

1.5 Pre-Closing Dividend. Immediately prior to the consummation
of the transactions contemplated by this Article 1, Tanklage and LV Foods will
cause the Company to declare and pay a $4 million cash dividend to its
shareholders.

1.6 Closing. The closing ("Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Vinson &
Elkins L.L.P., Houston, Texas at 10:00 a.m. (local time)

3
<PAGE> 4
on the date on which the Initial Public Offering is scheduled to occur, or at
such other place, time and date upon which the parties hereto may agree (the
"Closing Date").

1.7 Taking of Necessary Action; Further Action. The parties
hereto shall take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the transactions contemplated by this
Agreement as promptly as possible. If, at any time after the Closing Date, any
such further action is necessary or desirable to carry out the purposes of this
Agreement the parties shall take all such lawful and necessary action.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TANKLAGE

Tanklage represents and warrants to ASF and the LV Foods Owners that:

2.1 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by Tanklage, and Tanklage has
the legal capacity to enter into this Agreement and to perform the transactions
contemplated hereby. Except as disclosed on Schedule 2.1, neither the
execution and delivery of this Agreement by Tanklage nor the consummation by
Tanklage of the transactions contemplated hereby (a) will conflict with or
result in a breach, default or violation of any judgment, decree or order or
any governmental permit, certificate, license, law, statute, rule or regulation
or any judgment, decree or order to which Tanklage is a party or is subject, or
to which the Company or any of its assets is subject, except for (i) any
conflict, breach, default or violation that would not have, individually or in
the aggregate, a Company Material Adverse Effect or (ii) any filings required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") or (b) will result in the creation of any lien, charge or other
encumbrance on the Tanklage Shares; provided, however, that no representation
or warranty is made with respect to the effect of any contractual obligations
set forth in the Stock Purchase Agreement by and between LV Foods and Carolyn
M. Johnson, individually and as trustee of the Ernest and Carolyn Johnson
Living Trust u/t/d October 29, 1994 dated as of March 25, 1997, as amended, or
any assignment documents delivered pursuant thereto (collectively, the "Carolyn
Johnson Documents"). For purposes of this Agreement, an occurrence or
condition shall have a "Company Material Adverse Effect" if it has a material
adverse effect on the financial condition, results of operations or assets of
the Company or materially hinders or impedes the consummation of the
transactions contemplated by this Agreement. Tanklage is not married, and no
person other than Tanklage has any right or interest, whether community,
marital or otherwise, in the Tanklage Shares or Trust Interests transferred by
Tanklage to ASF, or in Tanklage's rights under this Agreement.

2.2 Capitalization and Title to Tanklage Shares and Trust
Interests. (a) The authorized capital stock of the Company consists solely of
(i) 212 shares of La Victoria Common Stock, all of which are validly issued and
outstanding, fully paid and nonassessable, (ii) 60,000 Preferred Class "A"
shares, none of which are issued or outstanding, and (iii) 30,000 Preferred
Class "B" shares, none of which are issued or outstanding, of which shares are
validly issued and outstanding, fully paid and nonassessable. Tanklage has
beneficial and record ownership of the 100 Tanklage Shares, free and clear of
any pledge, lien, charge, encumbrance or other adverse claim. There are no

4
<PAGE> 5
outstanding subscriptions, options, warrants, rights, conversion rights, rights
of first refusal or other agreements or commitments obligating the Company to
issue or purchase shares of its capital stock or any security convertible into
capital stock or obligating Tanklage or the Company to purchase, sell or
transfer any capital stock of the Company.

(b) Tanklage owns a one-half undivided interest in the Trust
Interests, free and clear of any pledge, lien, charge, encumbrance or other
adverse claim, with the possible exception of a contingent interest of
Tanklage's children living at the time of Tanklage's death. A true and correct
copy of the trust agreement and all other organizational documents for the
Trust have been delivered to ASF. The trustees of the Trust are Robert C.
Tanklage, Carolyn M. Johnson, Donald Tanklage and Russell Frank.

2.3 Enforceability. This Agreement constitutes the legal, valid
and binding obligation of Tanklage enforceable against Tanklage in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights generally and general
principles of equity (regardless of whether applied at law or in equity).

2.4 Brokers. No broker or finder has acted for or on behalf of
Tanklage or any affiliate of Tanklage (including without limitation the Company
but not including Carolyn Johnson) in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled
to any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of Tanklage or
any affiliate of Tanklage (including without limitation the Company but not
including Carolyn Johnson) in connection with this Agreement for which ASF has
or will have any liabilities or obligations (contingent or otherwise).

2.5 Absence of Material Adverse Change. To Tanklage's knowledge,
except as expressly permitted by this Agreement and except as disclosed in the
Registration Statement (both at the time such Registration Statement includes
the preliminary prospectus to be distributed to potential investors and at the
time the Registration Statement becomes effective under the Securities Act),
since January 1, 1997, there have been no (a) material adverse changes in the
results of operations, business, prospects or financial condition of the
Company from that set forth in the Company's financial statements most recently
made available to ASF (which are attached as Schedule 2.5) or (b) events or
conditions affecting the assets, properties, contracts with suppliers or
customers, business, prospects or operations of the Company from that in effect
on the date of the most recent balance sheet contained in such financial
statements, other than, with respect to both clauses (a) and (b) hereof,
changes or events or conditions in the ordinary course of business that do not
constitute a Company Material Adverse Effect.

2.6 No Material Omissions. To Tanklage's knowledge, neither this
Agreement nor any of the documents delivered by or on behalf of Tanklage in
connection therewith contains any untrue statement of a material fact, nor does
this Agreement or any such document omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances

5
<PAGE> 6
under which they were made. To Tanklage's knowledge, except as disclosed with
respect to the Company in the Registration Statement (both at the time such
Registration Statement includes the preliminary prospectus to be distributed to
potential investors and at the time the Registration Statement becomes
effective under the Securities Act) there is no fact that would materially
adversely affect the operations, business, assets or prospects of the Company
that has not been disclosed to ASF in writing by Tanklage; provided, however,
that Tanklage makes no representation herein with respect to ASF; provided
further that so long as a particular matter is disclosed in the Registration
Statement, it shall not constitute a breach of this representation if the
accounting or tax treatment of such matter is not disclosed in the Registration
Statement or is recharacterized by ASF in the Registration Statement.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ASF

ASF represents and warrants to Tanklage that:

3.1 Organization and Good Standing. ASF is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas, with full corporate power, right and authority to own and lease the
properties and assets it currently owns and leases and to carry on its business
as such business is currently being conducted. ASF is duly licensed or
qualified under the laws of, and is in good standing in, each jurisdiction
where, because of the nature of its activities or properties, such licensing or
qualification is required, except where the failure to be so licensed or
qualified would not, individually or in the aggregate, have an ASF Material
Adverse Effect. For purposes of this Agreement, an occurrence or condition
shall have a "ASF Material Adverse Effect" if it has a material adverse effect
on the financial condition, results of operations or assets of ASF or
materially hinders or impedes the consummation of the transactions contemplated
by this Agreement.

3.2 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by ASF. ASF has the full
corporate power and authority to enter into this Agreement, to make the
representations, warranties, covenants and agreements made herein and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all requisite
corporate action on the part of ASF. Neither the execution and delivery of
this Agreement by ASF nor the consummation by ASF of the transactions
contemplated hereby (a) will conflict with or result in a breach, default or
violation of (i) the terms, provisions or conditions of the Articles of
Incorporation or Bylaws of ASF or (ii) any judgment, decree or order or any
governmental permit, certificate, license, law, statute, rule or regulation or
any judgment, decree or order to which ASF is a party or is subject, or to
which the business, assets or operations of ASF are subject, except for (A) any
conflict, breach, default or violation that would not have, individually or in
the aggregate, an ASF Material Adverse Effect or (B) any filings required under
the HSR Act or (b) will result in the creation of any lien, charge or other
encumbrance on any property or assets of ASF.

6
<PAGE> 7
3.3 Capitalization of ASF. The authorized capital stock of ASF
consists solely of (a) 20,000,000 shares of ASF Common Stock, of which
1,700,000 shares are validly issued and outstanding, fully paid and
nonassessable and (b) 5,000,000 shares of Preferred Stock, par value $.01 per
share, none of which are issued or outstanding. The outstanding shares of
Common Stock are owned beneficially and of record by the persons set forth on
Schedule 3.3. Except pursuant to this Agreement and in connection with the
Initial Public Offering and except as set forth on Schedule 3.3, there are no
outstanding subscriptions, options, warrants, rights, conversion rights, rights
of first refusal or other agreements or commitments obligating ASF to issue or
purchase shares of its capital stock or any security convertible into capital
stock or obligating ASF to purchase, sell or transfer any capital stock of ASF.

3.4 Enforceability. This Agreement constitutes the legal, valid
and binding obligation of ASF enforceable against ASF in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting creditors' rights generally and general principles of
equity (regardless of whether applied at law or in equity).

3.5 Brokers. No broker or finder has acted for or on behalf of
ASF or any affiliate of ASF in connection with this Agreement or the
transactions contemplated by this Agreement. No broker or finder is entitled
to any brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of ASF or any
affiliate of ASF for which Tanklage has or will have any liabilities or
obligations (contingent or otherwise). For purposes of this Agreement, the
parties acknowledge that the Company is not an affiliate of ASF or LV Foods.

3.6 No Material Omissions. To ASF's knowledge, neither this
Agreement nor any of the documents delivered by or on behalf of ASF in
connection therewith contains any untrue statement of a material fact, nor does
this Agreement or any such document omit to state a material fact necessary to
make the statements contained therein not misleading in light of the
circumstances under which they were made. To ASF's knowledge, except as
disclosed with respect to ASF in the draft of ASF's registration statement on
Form S-1 under the Securities Act of 1933, as amended, which draft is attached
as Appendix I, there is no fact that would materially adversely affect the
operations, business, assets or prospects of ASF that has not been disclosed to
Tanklage in writing by ASF; provided, however, that ASF makes no representation
herein with respect to the Company.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE LV FOODS OWNERS

The LV Foods Owners jointly and severally represent and warrant to
Tanklage that:

4.1 Organization and Good Standing. Each of TSG2 and TSG2
Management is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full partnership
power, right and authority to own and lease the properties and assets it
currently owns and leases and to carry on its business as such business is
currently being

7
<PAGE> 8
conducted. Each of TSG2 and TSG2 Management is duly licensed or qualified
under the laws of, and is in good standing in, each jurisdiction where, because
of the nature of its activities or properties, such licensing or qualification
is required, except where the failure to be so licensed or qualified would not,
individually or in the aggregate, have an ASF Material Adverse Effect.

4.2 Authorization of Agreement; No Violation; No Consents. This
Agreement has been duly executed and delivered by TSG2 and TSG2 Management.
Each of TSG2 and TSG2 Management has the full partnership power and authority
to enter into this Agreement, to make the representations, warranties,
covenants and agreements made herein and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite partnership action on the part of each of
TSG2 and TSG2 Management. Neither the execution and delivery of this Agreement
by any LV Foods Owner nor the consummation by the LV Foods Owners of the
transactions contemplated hereby (a) will conflict with or result in a breach,
default or violation of any judgment, decree or order or any governmental
permit, certificate, license, law, statute, rule or regulation or any judgment,
decree or order to which any LV Foods Owner is a party or is subject, or to
which any LV Foods Owner or any of its or his assets is subject, except for (i)
any conflict, breach, default or violation that would not have, individually or
in the aggregate, an ASF Material Adverse Effect or (ii) any filings required
under the HSR Act or (b) will result in the creation of any lien, charge or
other encumbrance on the shares of La Victoria Common Stock owned by LV Foods.

4.3 Capitalization and Title to Equity Interest in LV Foods and
the Company. (a) TSG2, TSG2 Management and Lively have beneficial ownership of
98.3%, 0.7% and 1%, respectively, of the ownership interest of LV Foods, free
and clear of any pledge, lien, charge, encumbrance or other adverse claim.
There are no outstanding subscriptions, options, warrants, rights, conversion
rights, rights of first refusal or other agreements or commitments obligating
LV Foods to issue or purchase shares of its capital stock or any security
convertible into capital stock or obligating any LV Foods Owner or LV Foods to
purchase, sell or transfer any capital stock of LV Foods.

(b) Except as provided in the Carolyn Johnson Documents, LV Foods
has beneficial and record ownership of 100 shares of La Victoria Common Stock,
free and clear of any pledge, lien, charge, encumbrance or other adverse claim.

(c) Except as provided in the Carolyn Johnson Documents, LV Foods
owns a one-half undivided interest in the Trust Interests, free and clear of
any pledge, lien, charge, encumbrance or other adverse claim, with the possible
exception of a contingent interest of Carolyn Johnson's children living at the
time of Carolyn Johnson's death.

4.4 Enforceability. This Agreement constitutes the legal, valid
and binding obligation of the LV Foods Owners, enforceable against the LV Foods
Owners in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting

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<PAGE> 9
creditors' rights generally and general principles of equity (regardless of
whether applied at law or in equity).

4.5 Brokers. No broker or finder has acted for or on behalf of
any LV Foods Owner or any affiliate of any LV Foods Owner (which term shall not
include the Company) in connection with this Agreement or the transactions
contemplated by this Agreement. No broker or finder is entitled to any
brokerage or finder's fee, or to any commission, based in any way on
agreements, arrangements or understandings made by or on behalf of any LV Foods
Owner or any affiliate of any LV Foods Owner (which term shall not include the
Company) for which Tanklage has or will have any liabilities or obligations
(contingent or otherwise).

4.6 No Material Omissions. To the knowledge of the LV Foods
Owners, except as disclosed in the Registration Statement (both at the time
such Registration Statement includes the preliminary prospectus to be
distributed to potential investors and at the time the Registration Statement
becomes effective under the Securities Act) there is no fact with respect to
the transactions contemplated by the Carolyn Johnson Documents required to be
disclosed in the Registration Statement by the Securities Act that has not been
disclosed to Tanklage in writing by the LV Foods Owners.

ARTICLE 5
COVENANTS OF TANKLAGE

Tanklage covenants and agrees, except as otherwise contemplated by
this Agreement or as otherwise approved by ASF in writing, that from the date
hereof through the Closing Date:

5.1 General. Tanklage will use its reasonable efforts in good
faith to take all actions and to do all things necessary or advisable in order
to consummate and make effective the transactions contemplated by this
Agreement including satisfaction of the closing conditions.

5.2 Operation of the Company Prior to Closing. Tanklage will not
directly or indirectly take any action (or omit to take any action within his
power) that is inconsistent with the limitations on the Company set forth in
this paragraph. The business of the Company shall be conducted in the ordinary
course, consistent with past practice. No change shall be made in the Articles
of Incorporation or Bylaws of the Company. No change shall be made in the
number of shares of authorized or issued capital stock of the Company; nor
shall any option, warrant, call, right, commitment, conversion right, right of
first refusal, or agreement of any character be granted or made by the Company
relating to the authorized or issued capital stock thereof; nor shall the
Company issue, grant or sell any securities or obligations convertible into
shares of the capital stock of the Company; nor shall Tanklage in any manner
whatsoever transfer any direct or indirect interest in the Company to any
person or enter into any agreement, understanding or negotiations with respect
thereto; nor shall the Company, except as expressly contemplated by this
Agreement, make any declaration, setting aside or payment of any dividend or
distribution of assets of any kind in respect of its capital stock nor
repurchase or agree to repurchase any share of such capital stock. Neither
Tanklage (nor any affiliate

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<PAGE> 10
or family member of Tanklage) will enter into any agreement with the Company,
provided that it is acknowledged that Tanklage and his two sons, Jon Tanklage
and Brian Tanklage, will be entering into employment agreements with the
Company in a manner consistent with the Letter Agreement (as hereinafter
defined).

5.3 HSR Act. Tanklage will (a) promptly file any required
notification under the HSR Act relating to the transactions contemplated hereby
with the United States Department of Justice (the "Justice Department") and the
Federal Trade Commission (the "FTC"), (b) respond to inquiries from the Justice
Department and the FTC in connection with such notification, (c) request early
termination or waiver of any applicable waiting period under the HSR Act and
(d) provide to ASF copies of all filings and correspondence between Tanklage
and the Justice Department and the FTC regarding the purchase and sale
contemplated hereby.

5.4 Dissolution of the Trust. The parties acknowledge that
documents are currently being circulated for the purpose of terminating the
Trust, and that such document has been executed by Tanklage, LV Foods and
Carolyn Johnson. In order to eliminate any ambiguity as to the status of the
termination of the Trust, Tanklage agrees to use all reasonable efforts to
cause each trustee and each of his children (including adopted children) to
execute a consent and joinder to the termination documents in an expeditious
manner. Upon the effectiveness of such termination documents (at which time
the Trust shall be deemed terminated), then (a) no party shall be deemed to be
making any representation or warranty with respect to its ownership of any
Trust Interest after the time of such termination, (b) each representation and
covenant made by any party hereto with respect to ownership of shares of La
Victoria Common Stock shall be deemed to apply to the Trust Shares attributable
to the Trust Interests owned by such party immediately prior to the termination
of the Trust and (c) at the Closing each party hereto shall assign and
transfer, convey and deliver, for no additional consideration, to ASF any
shares of La Victoria Common Stock received by such party pursuant to the
distribution of assets from the Trust as a result of such termination.

ARTICLE 6
COVENANTS OF ASF

ASF covenants and agrees, except as otherwise contemplated by this
Agreement or as otherwise approved by Tanklage in writing, that from the date
hereof through the Closing Date:

6.1 General. ASF will use its reasonable efforts in good faith to
take all actions and to do all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
including satisfaction of the closing conditions. Notwithstanding the
foregoing, Tanklage acknowledges that the decision whether to proceed with the
Initial Public Offering (as well as any of the terms and conditions thereof)
shall be in the absolute and sole discretion of ASF, and shall not be affected
by provisions of this Agreement.

6.2 HSR Act. ASF will (a) promptly file any required notification
under the HSR Act relating to the transactions contemplated hereby with the
Justice Department and the FTC,

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<PAGE> 11
(b) respond to inquiries from the Justice Department and the FTC in connection
with such notification, (c) request early termination or waiver of any
applicable waiting period under the HSR Act and (d) provide to Tanklage copies
of all filings and correspondence between ASF and the Justice Department and
the FTC regarding the purchase and sale contemplated hereby.

6.3 No Change in Capital Structure. ASF will not declare or pay
any dividends (or repurchase any shares of its capital stock) prior to the
Closing Date. Except as contemplated by Schedule 3.3, ASF will not issue any
additional shares of capital stock prior to the Closing Date except as
expressly contemplated by this Agreement and except in connection with the
Initial Public Offering.

ARTICLE 7
COVENANTS OF THE LV FOODS OWNERS

The LV Foods Owners jointly and severally covenant and agree, except
as otherwise contemplated by this Agreement or as otherwise approved by
Tanklage in writing, that from the date hereof through the Closing Date:

7.1 General. The LV Foods Owners will use their reasonable
efforts in good faith to take all actions and to do all things necessary or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement including satisfaction of the closing
conditions.

7.2 HSR Act. The LV Foods Owners will (a) promptly file any
required notification under the HSR Act relating to the transactions
contemplated hereby with the Justice Department and the FTC, (b) respond to
inquiries from the Justice Department and the FTC in connection with such
notification, (c) request early termination or waiver of any applicable waiting
period under the HSR Act and (d) provide to Tanklage copies of all filings and
correspondence between any LV Foods Owner and the Justice Department and the
FTC regarding the purchase and sale contemplated hereby.

ARTICLE 8
CONDITIONS TO OBLIGATIONS OF TANKLAGE

The obligations of Tanklage to consummate the transactions
contemplated by this Agreement are subject, at the option of Tanklage, to the
following conditions:

8.1 Representations. The representations and warranties of ASF
and the LV Foods Owners herein contained shall be made again at Closing and
shall be true and correct in all material respects on the Closing Date.

8.2 Consummation of the Initial Public Offering. The Initial
Public Offering shall have been consummated, and as a result of such
consummation, ASF shall have received net proceeds (after taking into account
underwriting discounts and commissions and other offering expenses) at

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<PAGE> 12
least equal to the sum of $12 million plus the amount of funds necessary to
consummate the Shansby Redemption.

8.3 Performance. ASF and the LV Foods Owners shall have performed
all material obligations, covenants and agreements contained in this Agreement
to be performed or complied with by them at or prior to the Closing.

8.4 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall have
lapsed or terminated (by early termination or otherwise).

8.5 Pending Matters. No suit, action or other proceeding shall be
pending or threatened that seeks to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.

8.6 Delivery. ASF shall have delivered to Tanklage:

(a) a certificate of an executive officer of ASF
confirming the matters set forth in Sections 8.1 and 8.2;

(b) the stock certificates and cash consideration
contemplated by Section 1.2; and

(c) any other agreements, documents, certificates or
other instruments reasonably necessary to consummate the transactions
contemplated by this Agreement.

8.7 Shansby Redemption. The Shansby Redemption shall have been
consummated.

8.8 Registration Rights Agreement. At or prior to Closing, a
registration rights agreement, substantially in the form agreed to by the
parties, shall have been entered into by ASF and Tanklage with respect to the
shares of ASF Common Stock to be received by Tanklage pursuant to this
Agreement.

ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ASF AND THE LV FOODS OWNERS

The obligations of ASF and the LV Foods Owners to consummate the
transactions contemplated by this Agreement are subject, at the option of ASF
and the LV Foods Owners to the following conditions:

9.1 Representations. The representations and warranties of
Tanklage herein contained shall be made again at Closing and shall be true and
correct in all material respects on the Closing Date.

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<PAGE> 13
9.2 Consummation of the Initial Public Offering. The Initial
Public Offering shall have been consummated, and as a result of such
consummation, ASF shall have received net proceeds (after taking into account
underwriting discounts and commissions and other offering expenses) at least
equal to the sum of $12 million plus the amount of funds necessary to
consummate the Shansby Redemption.

9.3 Performance. Tanklage shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.

9.4 HSR Act. Any waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall have
lapsed or terminated (by early termination or otherwise).

9.5 Pending Matters. No suit, action or other proceeding shall be
pending or threatened that seeks to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement.

9.6 Deliveries by Tanklage. Tanklage shall have delivered to ASF:

(a) a certificate of Tanklage confirming the matters set
forth in Sections 9.1 and 9.2;

(b) the certificates, stock powers and assignments
contemplated by Section 1.2; and

(c) any other agreements, documents, certificates or
other instruments reasonably necessary to consummate the transactions
contemplated by this Agreement.

9.7 Shansby Redemption. The Shansby Redemption shall have been
consummated.

ARTICLE 10
TERMINATION

10.1 Termination At or Prior to Closing. This Agreement may be
terminated at any time on or prior to the Closing Date:

(a) by mutual written consent of the parties;

(b) by any party if the Closing shall not have occurred
on or before September 30, 1997; provided, however, that no party can
so terminate this Agreement if such party is at such time in material
breach of any provision of this Agreement; or

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<PAGE> 14
(c) by any party if any Governmental Entity shall have
issued an order, judgment or decree or taken any other action
challenging, delaying, restraining, enjoining, prohibiting or
invalidating the consummation of any of the transactions contemplated
herein.

10.2 Effect of Termination. In the event that Closing does not
occur as a result of any party exercising its right to terminate pursuant to
Section 10.1, then this Agreement shall be null and void and no party shall
have any rights or obligations under this Agreement, except that nothing herein
shall relieve any party from any liability for any breach hereof.

ARTICLE 11
OTHER AGREEMENTS OF THE PARTIES

11.1 Survival of Representations and Covenants. The
representations and covenants set forth in this Agreement shall survive the
Closing Date for the following periods after the Closing Date:

(a) The representations and warranties set forth in
Sections 2.2, 2.4 and 3.3, 3.5, 4.3 and 4.5 and all of the covenants
set forth in this Agreement, shall survive without limitation as to
time.

(b) All other representations shall survive for one year.

The date of expiration of any representation or warranty shall be
referred to herein as the "Termination Date". Representations and warranties
under this Agreement shall be of no further force or effect after the
applicable Termination Date; provided, however, that there shall be no such
termination of any representation or warranty with respect to a bona fide claim
asserted with respect thereto prior to such date in accordance with the terms
of Section 11.2.

11.2 Indemnification. (a) Tanklage agrees to defend, indemnify
and hold harmless ASF, the LV Foods Owners, the Company, and their affiliates,
successors, assigns, officers, directors and controlling persons (collectively,
the "ASF Indemnitees") from and against any and all demands, claims, actions,
causes of action, assessments, losses, damages, liabilities, costs and
expenses, including, without limitation, litigation costs and all attorneys'
and experts' fees and expenses ("Losses") asserted against, resulting from,
imposed upon or incurred by any of ASF Indemnitees by, or arising out of, or as
a result of, any of the representations, warranties, covenants or agreements of
Tanklage contained in this Agreement or any certificate or instrument delivered
by Tanklage or the Company pursuant to the terms hereof being incorrect, untrue
or breached. ASF and the LV Foods Owners agree jointly and severally to
defend, indemnify and hold harmless Tanklage and his heirs and personal
representatives (collectively, the "Tanklage Indemnitees") from and against any
and all Losses asserted against, resulting from, imposed upon or incurred by
any of Tanklage Indemnitees by, or arising out of, or as a result of, any of
the representations, warranties, covenants or agreements of ASF or any LV Foods
Owner contained in this Agreement or any certificate or instrument delivered by
ASF or any LV Foods Owner pursuant to the terms hereof being incorrect,

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<PAGE> 15
untrue or breached. Notwithstanding the foregoing provisions of this paragraph
(a), Tanklage, ASF and/or the LV Foods Owner shall have liability pursuant to
this Section 11.2 arising out of representations and warranties being incorrect
or untrue or covenants or agreements breached only with respect to Losses
arising out of or as a result of a breach or untruth described in a Claim
Notice given to Tanklage or ASF, respectively, in accordance with the
provisions hereof on or prior to the applicable Termination Date, if any.

(b) Assertion of Claims. All claims for indemnification by any of
the Tanklage Indemnitees or any of ASF Indemnitees under this Section 11.2
shall be asserted and resolved as follows:

(i) Any person claiming indemnification hereunder is
hereinafter referred to as the "Indemnified Party" and any person
against whom such claims are asserted hereunder is hereinafter
referred to as the "Indemnifying Party." In the event that any Losses
are asserted against or sought to be collected from an Indemnified
Party by a third party, said Indemnified Party shall with reasonable
promptness notify the Indemnifying Party of the Losses, specifying the
nature of and specific basis for such Losses and the indemnity claim
and the amount or the estimated amount thereof to the extent then
feasible and enclosing a copy of all papers (if any) served with
respect to the claim (the "Claim Notice"). The Indemnifying Party
shall not be obligated to indemnify the Indemnified Party with respect
to any such Losses if the Indemnified Party fails to notify the
Indemnifying Party thereof in accordance with the provisions of this
Agreement in reasonably sufficient time so that the Indemnifying
Party's ability to defend against the Losses is not prejudiced, but
only to the extent such notification within such time period is
practicable. The Indemnifying Party shall have 30 days from the date
the Claim Notice is given in accordance with the notice provisions
hereof (the "Notice Period") to notify the Indemnified Party (x)
whether it disputes the liability of the Indemnifying Party to the
Indemnified Party hereunder with respect to such Losses and (y)
whether it desires, at the sole cost and expense of the Indemnifying
Party, to defend the Indemnified Party against such Losses; which
election to defend may be made without prejudicing the Indemnifying
Party as to its liability hereunder, other than with respect to the
costs of defense. Notwithstanding the foregoing, any Indemnified
Party is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading that it shall deem necessary
or appropriate to protect its interests or those of the Indemnifying
Party (and of which it shall have given notice and opportunity to
comment to the Indemnifying Party) and that is not prejudicial to the
Indemnifying Party. (A) In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it
desires to defend the Indemnified Party against such Losses and except
as hereinafter provided, the Indemnifying Party shall have the right
to defend by all appropriate proceedings, and with counsel of its own
choosing, which proceedings shall be promptly settled or prosecuted by
them to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may
do so at its sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the Indemnifying
Party and its counsel in contesting any Losses that the Indemnifying
Party elects to contest, or, if

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<PAGE> 16
appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third party Losses, or
any cross-complaint against any person. No claim with respect to
which the Indemnifying Party has admitted its liability may be settled
or otherwise compromised without the prior written consent of the
Indemnifying Party. Any party settling or compromising a claim in
violation of the preceding sentence shall be solely liable for the
amount of the settlement or compromise. (B) If the Indemnifying
Party does not notify the Indemnified Party within 30 days after the
receipt of a Claim Notice that it elects to undertake the defense
thereof, the Indemnified Party shall have the right to defend at the
expense of the Indemnifying Party the claim with counsel of its
choosing reasonably satisfactory to the Indemnifying Party, subject to
the right of the Indemnifying Party to assume the defense of any claim
at any time prior to settlement or final determination thereof. Any
such defense shall be prosecuted promptly and vigorously by the
Indemnified Party. In the case of either (A) or (B), if the
Indemnifying Party has not yet admitted its liability for a claim, the
Indemnified Party shall send a written notice to the Indemnifying
Party of any proposed settlement of any claim received by the
Indemnified Party. The Indemnifying Party shall have an option for 30
days following receipt of such notice to (i) admit liability for the
claim if it has not already done so and (ii) if liability has been
admitted, reject, in its reasonable judgment, the proposed settlement.
Failure to reject such settlement within such 30-day period shall be
deemed an acceptance of such settlement. If the Indemnified Party
settles any such claim over the objection of the Indemnifying Party,
the Indemnified Party shall thereby waive any right to indemnity
therefor, unless the Indemnifying Party has not prior to the time of
settlement admitted liability for such claim.

(ii) In the event any Indemnified Party should have a
claim for Losses against any Indemnifying Party hereunder that does
not involve a Loss being asserted against or sought to be collected
from it by a third party (for example, but without limitation, a Loss
resulting from a breach of a representation, warranty or covenant),
the Indemnified Party shall send a Claim Notice with respect to such
claim to the Indemnifying Party. If the Indemnifying Party does not
notify the Indemnified Party within 30 days from the date the claim
notice is given that it disputes such claim for Losses, the amount of
such Losses shall be conclusively deemed a liability of the
Indemnifying Party hereunder.

11.3 Expenses. Each party shall be solely responsible for all
expenses, including due diligence expenses, incurred by it in connection with
this transaction, and neither party shall be entitled to any reimbursement for
such expenses from the other party hereto; provided, however, that the
reasonable expenses of Tanklage shall be paid by the Company. Without limiting
the generality of the foregoing, ASF shall be liable for all sales, use,
documentary, recording, stamp, transfer or similar taxes, assessments or fees
arising from the transactions contemplated by this Agreement.

11.4 Amendment of Letter Agreement. The letter agreement between
Tanklage and LV Foods dated May 2, 1997 (the "Letter Agreement") is hereby
amended in the manner set forth below, which amendment shall be effective upon
the Closing. The LV Foods Owner shall cause LV Foods to execute an instrument
acknowledging its agreement to such amendment at or prior to the Closing.

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Except as expressly set forth below, the Letter Agreement is hereby ratified
and confirmed by Tanklage and LV Foods in accordance with its terms.

(a) Paragraph 1 of the Letter Agreement is hereby
deleted.

(b) Paragraph 5 of the Letter Agreement is hereby amended
to read in its entirety as follows:

New counsel shall be selected for La Victoria. It is agreed
that this new counsel will be Vinson & Elkins L.L.P. unless
otherwise determined by LV Foods, and it acknowledged that the
parties currently intend that Hill, Farrer & Burrill LLP will
act as local counsel for La Victoria.

(c) Paragraph 12 of the Letter Agreement is hereby
amended by adding a new sentence to the end of such paragraph, which
new sentence shall read as follows:

Nothing in this Paragraph 12 or in Paragraph 11 of this
Agreement shall limit the ability of LV Foods or any affiliate
thereof (including Authentic Specialty Foods, Inc.) to take
any actions it deems appropriate.

ARTICLE 12
MISCELLANEOUS

12.1 Applicable 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.

12.2 No Third Party Beneficiaries. Except as expressly provided in
Section 1.4(b) and except for any rights to indemnification for the benefit of
the ASF Indemnitees and the Tanklage Indemnitees, nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
parties that this Agreement shall not be construed as a third party beneficiary
contract.

12.3 Waiver. Except as expressly provided in this Agreement,
neither the failure nor any delay on the part of any party hereto in exercising
any right, power or remedy hereunder shall operate as a waiver thereof, or of
any other right, power or remedy; nor shall any single or partial exercise of
any right, power or remedy preclude any further or other exercise thereof, or
the exercise of any other right, power or remedy. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the party against whom it is sought to be
enforced.

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12.4 Entire Agreement; Amendment. This Agreement and Exhibits
hereto, each of which is deemed to be a part hereof, and any agreements,
instruments or documents executed and delivered by the parties pursuant to this
Agreement, constitute the entire agreement and understanding between the
parties hereto, and it is understood and agreed that all previous undertakings,
negotiations and agreements between the parties regarding the subject matter
hereof are merged herein; provided, however, that except as expressly provided
in Section 11.4 hereof, this Agreement does not modify or supersede the Letter
Agreement. This Agreement may not be modified orally, but only by an agreement
in writing signed by the parties hereto.

12.5 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 below. Any such notice
shall be effective upon receipt or three days after placed in the mail,
whichever is earlier.

If to Tanklage:

Robert C. Tanklage
260 S. Sixth Street
City of Industry, California 91746
Telecopy Number: (818) 968-7510

with a copy to:

Hill, Farrer & Burrill LLP
Thirty-Fifth Floor--Union Bank Square
445 South Figueroa Street
Los Angeles, California 90071-1666
Attention: Michael J. DiBiase
Telecopy Number: (213) 624-4840

If to ASF or any LV Foods Owner:

c/o TSG2 L.P.
250 Montgomery Street
Suite 1100
San Francisco, California 94104
Attention: Charles H. Esserman
Telecopy Number: (415) 421-5120

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with a copy to:

Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: J. Mark Metts
Telecopy Number: (713) 758-2346

Any party may, by notice so delivered, change its address for notice purposes
hereunder.

12.6 No Assignment. Neither this Agreement nor any rights or
obligations hereunder shall be assigned or transferred in any way whatsoever by
any party hereto except with prior written consent of the other parties, which
consent such party shall be under no obligation to grant, and any assignment or
attempted assignment without such consent shall have no force or effect with
respect to any non-assigning party. Subject to the preceding sentence, this
Agreement shall be binding on and inure to the benefit of the parties hereto
and their permitted successors and assigns. Any assignment made in violation
of the foregoing provisions shall be void.

12.7 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.

12.8 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.

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

/s/ ROBERT C. TANKLAGE
----------------------------------
Robert C. Tanklage

TSG2 L.P.

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

By: /s/ CHARLES H. ESSERMAN
---------------------------------------------
Charles H. Esserman
Managing Member

TSG2 MANAGEMENT, L.L.C.

By: /s/ CHARLES H. ESSERMAN
---------------------------------------------
Charles H. Esserman
Managing Member

/s/ KEITH LIVELY
------------------------------------------------
Keith Lively

AUTHENTIC SPECIALTY FOODS, INC.

By: /s/ KEITH LIVELY
---------------------------------------------
Name: Keith Lively
----------------------------------------
Title: Chairman of the Board
---------------------------------------

20
<PAGE> 21
SCHEDULE 2.1
TO
CONTRIBUTION AND EXCHANGE AGREEMENT

REQUIRED CONSENTS

The consent of Union Bank of California, N.A. is required in
connection with the Business Loan Agreement between the Company and said bank
in order to pay the dividend provided for in Section 2.5.
<PAGE> 22
SCHEDULE 2.5
TO
CONTRIBUTION AND EXCHANGE AGREEMENT

COMPANY FINANCIAL STATEMENTS
<PAGE> 23
SCHEDULE 3.3
TO
CONTRIBUTION AND EXCHANGE AGREEMENT

OWNERSHIP OF ASF COMMON STOCK

Shares of ASF
SHAREHOLDER Common Stock
----------- -------------
<S> <C>
The Shansby Group 1,103,470
TSG International 435,030
Herman L. Graffunder 85,000
Samuel E. Hillin, Jr. 51,000
Kenneth J. Diekroeger 25,500
---------
Total 1,700,000
=========
</TABLE>

WARRANT

Simultaneously with the consummation of the Initial Public Offering,
ASF will issue a five-year warrant to Shansby Partners, an affiliate of TSG2,
to purchase 350,000 shares of ASF Common Stock for an exercise price (subject
to adjustment) equal to the price to public in the Initial Public Offering.

1997 STOCK PLAN

350,000 shares of ASF Common Stock are reserved for issuance pursuant
to AS's 1997 Stock Plan, pursuant to which no options or other rights to
acquire ASF Common Stock have yet been granted or issued.

<PAGE> 1

EXHIBIT 3.1

RESTATED ARTICLES OF INCORPORATION

AUTHENTIC SPECIALTY FOODS, INC.

ARTICLE ONE

The name of the corporation is Authentic Specialty Foods, Inc.

ARTICLE TWO

The period of its duration is perpetual.

ARTICLE THREE

The purpose for which the corporation is organized is the transaction
of any or all lawful business for which corporations may be incorporated under
the Texas Business Corporation Act (the "TBCA").

ARTICLE FOUR

The total number of shares of stock that the Corporation shall have
authority to issue is, 25,000,000 shares of capital stock, consisting of (i)
20,000,000 shares of common stock, par value $1.00 per share ("Common Stock"),
and (ii) 5,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock").

The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Common Stock and the Preferred Stock are
as follows:

1. Provisions Relating to the Common Stock.

(a)Dividends. Subject to the rights and preferences, if any,
applicable to shares of the Preferred Stock or any class or series thereof, each
share of Common Stock shall entitle the holder of record thereof to receive
dividends (payable in cash, stock or otherwise) out of funds legally available
therefor, when, as and if declared by the board of directors of the Corporation
with respect to any of such class of stock.

(b)Liquidation Rights. In the event of liquidation, dissolution or
winding up of the Corporation, 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
<PAGE> 2
liabilities. A dissolution, liquidation or winding up of the Corporation, as
such terms are used in this paragraph (b), shall not be deemed to be occasioned
by or to include any consolidation or merger of the Corporation with or into
any other corporation or corporations or other entity or a sale, lease,
exchange, or conveyance of all or a part of the assets of the Corporation.

(c)Voting Rights. Each share of Common Stock is entitled to one vote
on all matters submitted to a vote of the shareholders.

2. Provisions Relating to the Preferred Stock.

The Preferred Stock may be divided into and issued from time to time
in one or more series as may be fixed and determined by the board of directors.
The designations, preferences, limitations and relative rights, including
voting rights, of the Preferred Stock of each series shall be such as shall be
stated in any resolution or resolutions adopted by the board of directors
setting forth the designation of the series and fixing and determining the
relative rights, limitations and preferences thereof, any such resolution or
resolutions being herein called a "Directors' Resolution". The board of
directors is hereby authorized to fix and determine such variations in the
designations, preferences limitations and relative rights, including voting
rights, 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, all as shall be stated in a Directors' Resolution,
and the shares of Preferred Stock or any series thereof may have full or
limited voting powers, or be without voting powers, all as shall be stated in a
Directors' Resolution.

3. Denial of Preemptive Rights.

No shareholder shall have a preemptive right to acquire any shares or
securities of any class, whether now or hereafter authorized, which may at any
time be issued, sold or offered for sale by the Corporation.

4. Denial of Cumulative Voting.

The right of shareholders to cumulative voting in the election of
directors is expressly prohibited.

ARTICLE FIVE

The Corporation will not commence business until it has received for
the issuance of its shares consideration of the value of One Thousand Dollars
($1,000.00) consisting of money, labor done or property actually received.

ARTICLE SIX

The address of the Corporation's current registered office is 1313
Avenue R, Grand Prairie, Texas 75050, and the name of its current registered
agent at such address is Samuel E. Hillin, Jr.

2
<PAGE> 3
ARTICLE SEVEN

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 unless the bylaws of the Corporation otherwise provide.

(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 of directors is
changed as permitted by this Article Seven, 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

3
<PAGE> 4
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 eighty percent (80%) of the voting power of the
then outstanding shares of capital stock entitled to vote thereon
("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 Ten of these restated
articles of incorporation. For purposes of these articles of
incorporation, 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 Company or
any of its affiliates.

(e) Notwithstanding any other provisions of these
restated 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 these
restated articles of incorporation, the affirmative vote of eighty
percent (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 Article Seven.

The names and addresses of the persons who are to serve as directors
until the first annual meeting of the shareholders after June 20, 1997 or until
their successors are elected and qualified are:

Keith R. Lively
250 Montgomery Street, Suite 1100
San Francisco, CA 94104

J. Gary Shansby
250 Montgomery Street, Suite 1100
San Francisco, CA 94104

Charles H. Esserman
250 Montgomery Street, Suite 1100
San Francisco, CA 94104

Herman L. Graffunder
1313 Avenue R
Grand Prairie, TX 75050

ARTICLE EIGHT

All of the power of the Corporation, insofar as it may be lawfully
vested by these restated articles of incorporation in the board of directors,
is hereby conferred upon the board of directors of the Corporation. In
furtherance of and not in limitation of that power or the powers conferred by
law, (1) a majority of directors then in office (or such higher percentage as
may be specified in the bylaws with respect to any provision thereof) shall
have the power to adopt, alter, amend and repeal the bylaws of the Corporation;
(2) the shareholders of the Corporation shall have no power to appoint or
remove directors as members of committees of the board of directors, nor to
abrogate the power of the board of directors to establish any such committees
or the power of any such committee to exercise the powers and authority of the
board of directors; (3) the shareholders of the Corporation shall have no power
to elect or remove officers of the Corporation nor to abrogate the power of the
board of directors to elect and remove officers of the Corporation; and (4)
notwithstanding any other provision of these restated 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 these
restated articles of incorporation, the bylaws of the Corporation shall not be
adopted, altered, amended or repealed by

4
<PAGE> 5
the shareholders of the Corporation except in accordance with the provisions of
the bylaws and by the vote of the holders of not less than two-thirds of the
Voting Stock, voting together as a single class, or such higher vote as is set
forth in the bylaws. In the event of a direct conflict between the bylaws of
the Corporation and these restated articles of incorporation, the provisions of
these restated articles of incorporation shall be controlling. Notwithstanding
any other provisions of these restated 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 these
restated articles of incorporation, the affirmative vote of the holders of not
less than eighty percent (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 Article Eight.

ARTICLE NINE

Subject to the terms of any Preferred Stock, 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.

ARTICLE TEN

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 outstanding 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 sixty (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 consenting to being named as a nominee for director in
any proxy statement

5
<PAGE> 6
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 these restated 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 these restated articles of incorporation, the affirmative vote of the
holders of not less than eighty percent (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 Article Ten.

ARTICLE ELEVEN

A director of the Corporation shall not be liable to the Corporation
or its shareholders for monetary damages for an act or omission in the
director's capacity as a director, except that this Article Eleven does not
eliminate or limit the liability of a director to the extent the director is
found liable for (i) a breach of the director's duty of loyalty to the
Corporation or its shareholders; (ii) an act or omission not in good faith that
constitutes a breach of duty of the director to the Corporation 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. Any repeal or
amendment of this Article Eleven by the shareholders of the Corporation shall
be prospective only and shall not adversely affect any limitation on the
liability of a director of the Corporation existing at the time of such repeal
or amendment. In addition to the circumstances in which the director of the
Corporation is not liable as set forth in the preceding sentences, the director
shall not be liable to the fullest extent permitted by any provisions of the
statutes of Texas hereafter enacted that further limits the liability of a
director.

<PAGE> 1
EXHIBIT 4.2

CONSULTING AGREEMENT

This Consulting Agreement (this "AGREEMENT"), is entered into as of
November 22, 1995 by CALIDAD FOODS, INC. ("CALIDAD") and JOSEPH PATOSKIE
("PATOSKIE").

AGREEMENTS

1. DUTIES. Calidad agrees to hire Patoskie, and Patoskie agrees
to serve Calidad as a consultant and advisor (and not as an employee) of
Calidad. In such capacity, Patoskie shall perform such consulting services
relating to Calidad's business as reasonably requested by Calidad. While
performing his duties hereunder, Patoskie shall devote such time, efforts,
skills and attention to the affairs of Calidad as are reasonably necessary to
fulfill the requirements hereunder. The duties of Patoskie shall be performed
at the offices of Calidad in Dallas County, Texas, or such other location
reasonably suited to the performance of such services. Patoskie hereby
acknowledges and agrees he has no authority to bind or act on behalf of
Calidad, and Patoskie covenants and agrees he will not represent himself as
having any such authority to any third party.

2. TERM. The term of service under this Agreement shall be for a
period commencing on the date hereof and ending on the fifth anniversary of
such date (the "SERVICE PERIOD").

3. COMPENSATION. As compensation for his services to Calidad
under this Agreement, in whatever capacity or capacities rendered, and for the
covenant not to compete set forth herein Calidad shall pay to Patoskie during
the term of this Agreement a consulting fee ("ANNUAL COMPENSATION") at an
annual rate of $70,000 per year, payable in monthly installments of $5,833.33,
subject only to such withholdings or deductions as may be required by law.
Patoskie (or Patoskie's estate) shall be paid the Annual Compensation if
Patoskie dies or is incapacitated by accident, sickness or otherwise. The
parties agree that $750 of each monthly installment of Annual Compensation
shall be paid in consideration of the performance of consulting services
hereunder and the balance of each such monthly installment shall be paid in
consideration of the covenant not to compete contained herein. Calidad shall
file a separate form 1099 with the Internal Revenue Service for that portion of
the Annual Compensation allocated to the performance of consulting services and
that portion allocated to the covenant not to compete.

4. EFFECT OF TERMINATION ON COMPENSATION. Upon expiration of the
Service Period, all compensation and benefits relating thereto to Patoskie
hereunder shall terminate.

5. CONFIDENTIAL INFORMATION.

1
<PAGE> 2
data) concerning Calidad's customers and business affiliates, and any such
information relating to the assets acquired by Calidad from El Paco Foods, Inc.
("EL PACO") pursuant to the terms of the Asset Purchase Agreement between El
Paco and Calidad of even date herewith, all comprise confidential business
information and trade secrets of Calidad which are valuable, special, and
unique assets of Calidad, which Calidad uses in its business to obtain a
competitive advantage over Calidad's competitors which do not know or use this
information. Patoskie further acknowledges that protection of Calidad's
confidential business information and trade secrets against unauthorized
disclosure and use is of critical importance to Calidad in maintaining its
competitive position. Accordingly, Patoskie hereby agrees that he will not, at
any time during or after his service with Calidad, make any unauthorized
disclosure of any confidential business information or trade secrets of
Calidad, or make any use thereof, except for the benefit of, and on behalf of,
Calidad. The foregoing shall not apply to any information that was generally
available to the public on a nonconfidential basis prior to the date of this
Agreement or was or becomes generally available to the public on a
nonconfidential basis from a third party who is not bound to keep such
information confidential.

(b) RETURN OF DOCUMENTS. All written materials, records
and other documents made by, or coming into the possession of, Patoskie during
the period of his service with Calidad which contain or disclose Calidad
confidential business information or trade secrets shall be and remain the
property of Calidad. Upon termination of Patoskie's service with Calidad, for
any reason, he promptly shall deliver the same, and all copies thereof, to
Calidad.

6. NON-COMPETITION.

(a) As part of the consideration for the compensation to
be paid to Patoskie hereunder, and as an additional incentive for Calidad to
enter into this Agreement, Patoskie hereby agrees that he will not, without the
prior written consent of Calidad, at any time during his service with Calidad,
or at any time following his service with Calidad prior to the first
anniversary of the voluntary or involuntary termination of his service with
Calidad provided such termination occurs prior to the expiration of the Service
Period, directly or indirectly, for himself or for others, transact any
business in any county or parish within the United States in which Calidad is
then conducting business in any manner pertaining to suppliers or customers of
Calidad or any affiliate which, in any manner, would have, or is likely to
have, a material adverse effect upon Calidad or any affiliate of Calidad; or,
induce any employee of Calidad or any affiliate to terminate his or her
employment with Calidad or such affiliate.

(b) Patoskie understands that the foregoing restrictions
may limit his ability to engage in a business similar to Calidad's business in
counties and parishes in which Calidad is then doing business, but acknowledges
that he is so imbued with Calidad's trade secrets and confidential information
and that he will receive sufficiently high remuneration and other benefits from
Calidad hereunder to justify such restriction.

<PAGE> 3
of the aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or over broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.

7. NOTICE. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when sent by telecopy or
facsimile transaction or delivered or mailed, certified first-class mail,
postage prepaid, return receipt requested, as follows (provided that notice of
change of address shall be deemed given only when received):

<TABLE>
<S> <C>
If to Calidad, to: Sam Hillin
Calidad Foods, Inc.
1313 Avenue R
Grand Prairie, Texas 75050
Fax Number: 214-933-4120

If to Patoskie, to: Joseph Patoskie
c/o El Paco Foods, Inc.
2950 West Commerce
Dallas, Texas 75212
Fax Number: 214-638-0073
</TABLE>

or to such other names or addresses as Calidad or Patoskie, as the case may be,
shall designate by notice to the other in the manner specified in this Section
7.

8. INDEPENDENT CONTRACTOR. In his capacity as a consultant for
Calidad, Patoskie will act as an independent contractor, and will pay all
income tax and social security requirements relating to the Annual Compensation
and Calidad shall have no liability or obligations relating thereto.

9. DEFAULT. Provided that Patoskie is not in default hereunder,
if Calidad fails to pay 6 or more consecutive installments required hereunder
within ten days after delivery of written notice thereof by Patoskie, then, at
the option of Patoskie, all of the remaining unpaid installments provided for
herein may be accelerated and be immediately due and payable in full.

10. GOVERNING LAW. This Agreement shall be governed by and
interpreted under the laws of the State of Texas, and, where applicable, the
laws of the United States.

11. CONTENTS OF AGREEMENT, AMENDMENT AND ASSIGNMENT. This
Agreement sets forth the entire understanding between the parties hereto with
respect to the subject matter hereof and cannot be changed, modified or
terminated except upon written amendment executed by Patoskie and Calidad. All
of the terms and provisions of this Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective heirs, representatives,
successors and assigns of the parties hereto, except that (a) the duties and
responsibilities of Patoskie hereunder (but not the

<PAGE> 4
right to receive Annual Compensation) shall not be assignable in whole or in
part by Patoskie without the prior written consent of Calidad; and (b) should
Calidad sell its business to a third party (a "BUSINESS BUYER"), Calidad will
require the Business Buyer to assume expressly the payment and performance of
all of the obligations of Calidad hereunder, and such Business Buyer shall not
have a negative net worth, as determined by Calidad using generally accepted
accounting principles consistently applied, unless Patoskie consents thereto,
which consent shall not be unreasonably withheld, delayed or conditioned.

12. SEVERABILITY. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be
given effect without the invalid or unenforceable provision or application.

13. HEADINGS; REFERENCES. The headings of the Sections and
paragraphs of this Agreement are inserted for convenience only and are not to
be used to interpret or define the provisions of this Agreement. Any reference
in this Agreement to a Section is deemed a reference to the applicable Section
of this Agreement unless otherwise indicated.

14. WAIVER. The waiver by either party of a breach of any term or
provision of this Agreement shall not operate or be construed as a waiver of a
subsequent breach of the same provision or the breach of any other term or
provision of this Agreement.

15. ATTORNEY's FEES AND COSTS. In the event of a breach by any
party to this Agreement and commencement of a subsequent legal action in a
court of law or form of arbitration, the prevailing party in whose favor a
final judgment is rendered in any such dispute shall be entitled to
reimbursement of reasonable attorneys' fees and court costs, including but not
limited to, the cost of expert witnesses, transportation, lodging, meal costs
of the parties and witnesses, costs of transcript preparation and other
reasonable and necessary direct and incidental costs of such dispute.

16. ARBITRATION. Any controversy, dispute or claim of whatsoever
nature arising out of, or in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved by final and binding
arbitration conducted in Dallas County, Texas, administered by and in
accordance with the then existing rules of practice and procedure of Judicial
Arbitration & Mediation Services, Inc. ("JAMS") and judgment upon any award
rendered by the arbitrator may be entered in any state or federal court having
jurisdiction thereof. The arbitrator shall determine which is the prevailing
party and shall include the award of the costs and reasonable attorneys' fees
of that party's attorneys. The arbitrator shall make such determination based
on applicable Texas law. If JAMS is unable or legally precluded from
administering the arbitration, then the American Arbitration Association ("AAA")
shall serve and the rules of practice and procedure of the AAA will apply. All
arbitration hearings shall be commenced within ninety (90) days after the
demand for arbitration. Further, the arbitrator shall only upon a showing of
cause, be permitted to extend the commencement of such hearing up to an
additional sixty (60) days. This provision shall not be deemed to limit the
right of either party to exercise self-help remedies or to obtain from a court
provisional or ancillary remedies of any nature. Either party may exercise
such self-help or obtain provisional or ancillary remedies

4
<PAGE> 5
before, during or after the pendency of any arbitration proceeding brought
pursuant to this agreement. Neither the exercise of self-help remedies nor the
institution of an action for provisional or ancillary remedies shall constitute
a waiver of the right of the claimant in any such action to arbitrate the
merits of the controversy or claim occasioning resort to such remedies.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

CALIDAD:

CALIDAD FOODS, INC.

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

PATOSKIE:

----------------------------
JOSEPH PATOSKIE

<PAGE> 1
EXHIBIT 4.3

CONSULTING AGREEMENT

This Consulting Agreement (this "AGREEMENT"), is entered into as of
November 22, 1995 by CALIDAD FOODS, INC. ("CALIDAD") and RICHARD PATOSKIE
"PATOSKIE").

AGREEMENTS

17. DUTIES. Subject to the terms and conditions set forth herein,
Calidad hereby retains Patoskie for, and Patoskie hereby agrees to provide to
Calidad, his services as consultant and advisor (and not as an employee) with
respect to such business and financial matters of Calidad as may be reasonably
requested by Calidad from time to time. However, (a) Patoskie shall not be
required to render such services at any location outside of Dallas County,
Texas without Patoskie's prior consent, which shall not be unreasonably
withheld, delayed, or conditioned, (b) Patoskie shall not be required to render
such services more than one day per calendar month without Patoskie's prior
consent, which shall not be unreasonably withheld, delayed, or conditioned, and
(c) Patoskie shall not be required to render such services at any time that
Patoskie reasonably determines would unreasonably interfere with his other
business obligations, although in such event Patoskie shall make himself
available on a reasonable basis to render such services by means of a
conference telephone call. Patoskie hereby acknowledges and agrees he has no
authority to bind or act on behalf of Calidad, and Patoskie covenants and
agrees he will not represent himself as having any such authority to any third
party.

18. TERM. The term of service under this Agreement shall be for a
period commencing on the date hereof and ending on the fifth anniversary of
such date (the "SERVICE PERIOD").

19. COMPENSATION. As compensation for his services to Calidad
under this Agreement, in whatever capacity or capacities rendered, and for the
covenant not to solicit existing customers and employees of Calidad set forth
herein Calidad shall pay to Patoskie during the term of this Agreement a
consulting fee ("ANNUAL COMPENSATION") at an annual rate of $70,000 per
year, payable in monthly installments of $5,833.33, subject only to such
withholdings or deductions as may be required by law. Patoskie (or Patoskie's
estate) shall be paid the Annual Compensation if Patoskie dies or is
incapacitated by accident, sickness or otherwise.

20. EFFECT OF TERMINATION ON COMPENSATION. Upon expiration of the
Service Period, all compensation and benefits relating thereto to Patoskie
hereunder shall terminate.

21. CONFIDENTIAL INFORMATION.

(a) CALIDAD INFORMATION. Patoskie acknowledges that
Calidad's business is highly competitive and that Calidad's books, records and
documents, Calidad's procurement procedures and pricing techniques, the names
of and other information (such as credit and financial data) concerning
Calidad's customers and business affiliates, and any such information relating
to the assets acquired by Calidad from El Paco Foods, Inc. ("EL PACO") pursuant
to the terms of the Asset Purchase Agreement between El Paco and Calidad of
even date herewith, all comprise

<PAGE> 2
confidential business information and trade secrets of Calidad which are
valuable, special, and unique assets of Calidad, which Calidad uses in its
business to obtain a competitive advantage over Calidad's competitors which do
not know or use this information. Patoskie further acknowledges that
protection of Calidad's confidential business information and trade secrets
against unauthorized disclosure and use is of critical importance to Calidad in
maintaining its competitive position. Accordingly, Patoskie hereby agrees that
he will not, at any time during or after his service with Calidad, make any
unauthorized disclosure of any confidential business information or trade
secrets of Calidad, or make any use thereof, except for the benefit of, and on
behalf of, Calidad. The foregoing shall not apply to any information that was
generally available to the public on a nonconfidential basis prior to the date
of this Agreement or was or becomes generally available to the public on a
nonconfidential basis from a third party who is not bound to keep such
information confidential.

22. NON-COMPETITION.

(a) As part of the consideration for the compensation to
be paid to Patoskie hereunder, and as an additional incentive for Calidad to
enter into this Agreement, Patoskie hereby agrees that he will not, without the
prior written consent of Calidad, at any time during his service with Calidad,
or at any time following his service with Calidad prior to the first
anniversary of the voluntary or involuntary termination of his service with
Calidad provided such termination occurs prior to the expiration of the Service
Period, directly or indirectly, for himself or for others, solicit, consult
with, contact, call upon, or contract with any customers listed on Exhibit B to
that certain Asset Purchase Agreement between Calidad and El Paco Foods, Inc.,
dated as of November 22, 1995; or, induce any employee of Calidad or any
affiliate to terminate his or her employment with Calidad or such affiliate.

(c) It is expressly understood and agreed that Calidad
and Patoskie consider the restrictions contained in Section 6.(a) above to be
reasonable and necessary for the purposes of preserving and protecting the
goodwill and proprietary information of Calidad. Nevertheless, if any of the
aforesaid restrictions are found by a court having jurisdiction to be
unreasonable, or over broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein set forth to be
modified by such court so as to be reasonable and enforceable and, as so
modified by the court, to be fully enforced.

2
<PAGE> 3
23. NOTICE. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be deemed to have been given when sent by telecopy or
facsimile transaction or delivered or mailed, certified first-class mail,
postage prepaid, return receipt requested, as follows (provided that notice of
change of address shall be deemed given only when received):

<TABLE>
<S> <C>
If to Calidad, to: Sam Hillin
Calidad Foods, Inc.
1313 Avenue R
Grand Prairie, Texas 75050
Fax Number: 214-933-4120

If to Patoskie, to: Richard Patoskie
c/o El Paco Foods, Inc.
2950 West Commerce
Dallas, Texas 75212
Fax Number: 214-638-0073
</TABLE>

or to such other names or addresses as Calidad or Patoskie, as the case may be,
shall designate by notice to the other in the manner specified in this Section
7.

24. INDEPENDENT CONTRACTOR. In his capacity as a consultant for
Calidad, Patoskie will act as an independent contractor, and will pay all
income tax and social security requirements relating to the Annual Compensation
and Calidad shall have no liability or obligations relating thereto.

25. DEFAULT. Provided that Patoskie is not in default hereunder,
if Calidad fails to pay 6 or more consecutive installments required hereunder
within ten days after delivery of written notice thereof by Patoskie, then, at
the option of Patoskie, all of the remaining unpaid installments provided for
herein may be accelerated and be immediately due and payable in fall.

26. GOVERNING LAW. This Agreement shall be governed by and
interpreted under the laws of the State of Texas, and where applicable, the
laws of the United States.

27. CONTENTS OF AGREEMENT, AMENDMENT AND ASSIGNMENT. This
Agreement sets forth the entire understanding between the parties hereto with
respect to the subject matter hereof and cannot be changed, modified or
terminated except upon written amendment executed by Patoskie and Calidad. All
of the terms and provisions of this Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective heirs, representatives,
successors and assigns of the parties hereto, except that (a) the duties and
responsibilities of Patoskie hereunder (but not the right to receive Annual
Compensation) shall not be assignable in whole or in part by Patoskie without
the prior written consent of Calidad; and (b) should Calidad sell its business
to a third party (a "BUSINESS BUYER"), Calidad will require the Business Buyer
to assume expressly the payment and performance of all of the obligations of
Calidad hereunder, and such Business Buyer shall not have a negative net worth,
as determined by Calidad using generally accepted accounting principles

3
<PAGE> 4
consistently applied, unless Patoskie consents thereto, which consent shall not
be unreasonably withheld, delayed or conditioned.

28. SEVERABILITY. If any provision of this Agreement or
application thereof to anyone or under any circumstances shall be determined to
be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be
given effect without the invalid or unenforceable provision or application.

29. HEADINGS; REFERENCES. The headings of the Sections and
paragraphs of this Agreement are inserted for convenience only and are not to
be used to interpret or define the provisions of this Agreement. Any reference
in this Agreement to a Section is deemed a reference to the applicable Section
of this Agreement unless otherwise indicated.

30. WAIVER. The waiver by either party of a breach of any term or
provision of this Agreement shall not operate or be construed as a waiver of a
subsequent breach of the same provision or the breach of any other term or
provision of this Agreement.

31. ATTORNEY'S FEES AND COSTS. In the event of a breach by any
party to this Agreement and commencement of a subsequent legal action in a
court of law or form of arbitration, the prevailing party in whose favor a
final judgment is rendered in any such dispute shall be entitled to
reimbursement of reasonable attorneys' fees and court costs, including but not
limited to, the cost of expert witnesses, transportation, lodging, meal costs
of the parties and witnesses, costs of transcript preparation and other
reasonable and necessary direct and incidental costs of such dispute.

32. ARBITRATION. Any controversy, dispute or claim of whatsoever
nature arising out of, or in connection with or in relation to the
interpretation, performance or breach of this Agreement, including any claim
based on contract, tort or statute, shall be resolved by final and binding
arbitration conducted in Dallas County, Texas, administered by and in
accordance with the then existing rules of practice and procedure of Judicial
Arbitration & Mediation Services, Inc. ("JAMS"), and judgment upon any award
rendered by the arbitrator may be entered in any state or federal court having
jurisdiction thereof. The arbitrator shall determine which is the prevailing
party and shall include the award of the costs and reasonable attorneys' fees
of that party's attorneys. The arbitrator shall make such determination based
on applicable Texas law. If JAMS is unable or legally precluded from
administering the arbitration, then the American Arbitration Association ("AAA")
shall serve and the rules of practice and procedure of the AAA will apply. All
arbitration hearings shall be commenced within ninety (90) days after the
demand for arbitration. Further, the arbitrator shall only upon a showing of
cause, be permitted to extend the commencement of such hearing up to an
additional sixty (60) days. This provision shall not be deemed to limit the
right of either party to exercise self-help remedies or to obtain from a court
provisional or ancillary remedies of any nature. Either party may exercise
such self-help or obtain provisional or ancillary remedies before, during or
after the pendency of any arbitration proceeding brought pursuant to this
agreement. Neither the exercise of self-help remedies nor the institution of
an action for provisional or ancillary remedies shall constitute a waiver of
the right of the claimant in any such action to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.

4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

CALIDAD:

CALIDAD FOODS, INC.

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

PATOSKIE:

----------------------------
RICHARD PATOSKIE

<PAGE> 1
EXHIBIT 4.4

SECURED PROMISSORY NOTE

$7,000,000.00 April 10, 1997

For value received, the undersigned, LV Foods, LLC, a Delaware
limited liability company (hereinafter referred to as the "Debtor"), hereby
promises to pay to Carolyn M. Johnson, Trustee u/d/t dated October 29, 1994 or
order (hereinafter referred to as the "Holder"), the principal sum of Seven
Million Dollars ($7,000,000.00).

1. Interest. Interest on the unpaid principal amount of
this Note shall accrue from the date of issuance at a rate per annum (computed
on the basis of the actual number of days elapsed over a year of three hundred
sixty-five (365) days) equal to eight percent (8%).

2. Payments.

2.1 Required. The Debtor shall pay to the
Holder all amounts owing hereunder when such amounts are due. Interest
payments shall be due and payable quarterly commencing on the 30th day of July,
1997, and on the 30th day of each October, January, April and July thereafter
until this note is paid in full. Principal, together with any accrued
interest, shall be due and payable on the earlier to occur of (i) April 10,
2004, and (ii) the date on which the Debtor consummates the sale or other
transfer to any unaffiliated third party of all or substantially all of its
equity interest in La Victoria Foods, Inc., a California corporation (the
"Maturity Date").

2.2 Prepayment. The Debtor may prepay the Note
in whole at any time, or in part from time to time, without premium or penalty,
each such prepayment to be accompanied by the payment of accrued interest to
the date of such prepayment on the amount prepaid. Partial prepayments of this
Note shall be applied first to accrued and unpaid interest, then to other
amounts due hereunder and then to principal.

3. Payments of Note - Place and Manner.

3.1 Place. All payments of principal and
interest hereunder shall be made to the Holder of the Note at 1300 Westhaven
Road, San Marino, CA 91108, or any such other place as the Holder shall have
notified the Debtor in accordance with Section 5.4 hereof.

3.2 Business Days. Notwithstanding anything to
the contrary contained herein, if any amount of principal or interest is due
hereunder on a day which is not a business day (a day other than a Saturday,
Sunday or public holiday in Los Angeles, California), the due date thereof
shall be extended to the

1
<PAGE> 2
immediately succeeding business day and interest thereon shall accrue during
the period of such extension at the rate provided therefor in this Note (but
shall not affect the amount of the payment).

4. Default; Security; Acceleration. This Note is the Note
referred to in the Note Agreement of even date herewith between Debtor and
Holder (as the same may be amended, modified, renewed, extended, supplemented,
increased, restated, refinanced, refunded or replaced from time to time, the
"Note Agreement"). Reference is made to the Note Agreement for provisions
relating to default, remedies and acceleration of the maturity hereof,
including, without limitation, Section 7.2. This Note is secured by that
certain Stock Pledge Agreement of even date herewith entered into by and
between Debtor and Holder (as the same may be amended, modified, renewed,
extended, supplemented, restated or replaced, the "Stock Pledge Agreement").
If Debtor is in default on any payment due hereunder or under the Note
Agreement or Stock Pledge Agreement, or if Debtor breaches in any material
respect any of the covenants set forth in the Note Agreement or the Stock
Pledge Agreement, and fails to cure such default or breach prior to the
expiration of all applicable notice and cure periods, this Note shall become
immediately due and payable in full.

5. General.

5.1 Successors and Assigns. This Note, and the
obligations and rights hereunder, shall be binding upon and inure to the
benefit of the Debtor, the Holder of this Note, and their respective heirs,
successors and assigns. The Holder hereof shall have the right to assign or
transfer this Note or any of Holder's rights or obligations hereunder, subject
to the limitations therein in Section 8.11 of the Note Agreement.

5.2 Amendment; Waiver. Changes in or additions to this
Note may be made, or compliance with any term, covenant, agreement, condition
or provision set forth herein may be omitted or waived (either generally or in
a particular instance and either retroactively or prospectively), upon written
consent of the Debtor and the Holder of this Note.

5.3 Currency. All payments hereunder shall be made in
such coin or currency of the United States of America as at the time of payment
shall be legal tender therein for the payment of public and private debts.

5.4 Notices. Any notice or demand which, by provision of
this Agreement, is required or permitted to be given or served by one party on
the other shall be deemed to have been sufficiently given and served for all
purposes (if mailed) three calendar days after being deposited, postage
prepaid, in the United States Mail, registered or certified mail, or (if
delivered by messenger, express courier or overnight courier) one business day
after being delivered to such courier, or (if delivered in person) the same day
as delivery, in each case addressed (until another address or addresses is
given in writing by such party) as follows:

2
<PAGE> 3
<TABLE>
<S> <C>
in the case of Debtor, to:
LV Foods, LLC
250 Montgomery Street
San Francisco, California 94104
Attn: Charles H. Esserman

With a copy to:
Ronald J. Silverman, Esq.
Weissmann, Wolff, Bergman, Coleman & Silverman,
LLP
9665 Wilshire Blvd., Suite 900
Beverly Hills, CA 90212-2316

and, in the case of Holder, to:
Mrs. Carolyn M. Johnson
1300 Westhaven Road
San Marino, CA 91108

with a copy to:

Fulbright & Jaworski L.L.P.
865 South Figueroa Street, 29th Floor
Los Angeles, CA 90017
Attn: Harry L. Hathaway, Esq.
</TABLE>

or to such other address as Debtor or Holder may designate by notice in writing
to the other. The party giving notice shall use its reasonable efforts to
confirm such notice by telephone.

5.5 Governing Law. This Note shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of California governing contracts made and to be
performed entirely within the State.

3
<PAGE> 4

5.6 Titles and Subtitles. The titles for the Sections and
Subsections of this Note are for reference only and are not to be considered in
construing this Note.

IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first above written by the undersigned Debtor.

LV FOODS, LLC, a Delaware limited liability
company

By: TSG2, L.P., a Delaware limited
partnership, its managing member

By: TSG2 Partners, a Delaware limited
partnership, its general partner

By: /s/ CHARLES H. ESSERMAN
----------------------------------------
Charles H. Esserman, General Partner

This Secured Promissory Note is made pursuant to that certain
Note Agreement between Debtor and Holder dated as of April 10, 1997.

<PAGE> 1
EXHIBIT 10.3

AUTHENTIC SPECIALTY FOODS, INC.

1997 STOCK PLAN

I. PURPOSE

The purpose of the AUTHENTIC SPECIALTY FOODS, INC. 1997 STOCK PLAN
(the "Plan") is to provide a means through which AUTHENTIC SPECIALTY FOODS,
INC., a Texas corporation (the "Company"), and its subsidiaries may attract
able persons to serve as directors, consultants, or advisors or to enter the
employ of the Company and to provide a means whereby those individuals upon
whom the responsibilities of the successful administration and management of
the Company rest, and whose present and potential contributions to the welfare
of the Company are of importance, can acquire and maintain stock ownership,
thereby strengthening their concern for the welfare of the Company. A further
purpose of the Plan is to provide such individuals with additional incentive
and reward opportunities designed to enhance the profitable growth of the
Company. Accordingly, the Plan provides for granting Incentive Stock Options
(subject to the provisions of paragraph VII(c)), options that do not constitute
Incentive Stock Options, Restricted Stock Awards, or any combination of the
foregoing, as is best suited to the circumstances of the particular employee,
consultant, advisor, or director as provided herein.

II. DEFINITIONS

The following definitions shall be applicable throughout the Plan
unless specifically modified by any paragraph:

(a) "AWARD" means, individually or collectively, any Option or
Restricted Stock Award.

(b) "BOARD" means the Board of Directors of the Company.

(c) "CHANGE IN CONTROL" means (i) any merger, consolidation, or
reorganization with or into any person other than a Shansby Entity in which the
Company is not the surviving entity (or survives only as a subsidiary of an
entity), (ii) any sale, lease, exchange, or other transfer of (or agreement to
sell, lease, exchange, or otherwise transfer) all or substantially all of the
assets of the Company to any other person or entity (in one transaction or a
series of related transactions) other than a Shansby Entity, (iii) dissolution
or liquidation of the Company, (iv) when any person or entity, including a
"group" as contemplated by Section 13(d)(3) of the 1934 Act, other than a
Shansby Entity acquires or gains ownership or control (including, without
limitation, power to vote) of more than 50% of the outstanding shares of the
Company's voting stock (based upon voting power), or (v) as a result of or in
connection with a contested election of Directors, the persons who were
Directors of the Company before such election shall cease to constitute a
majority of the Board.

(d) "CODE" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations under
such section.
<PAGE> 2
(e) "COMMITTEE" means a committee of the Board that is selected by
the Board as provided in Paragraph IV(a).

(f) "COMMON STOCK" means the common stock, par value $0.01 per
share, of the Company.

(g) "COMPANY" means Authentic Specialty Foods, Inc., a Texas
corporation.

(h) "CONSULTANT" means any person who is not an employee and who
is providing advisory or consulting services to the Company or any parent or
subsidiary corporation (as defined in section 424 of the Code).

(i) "DIRECTOR" means an individual elected to the Board by the
shareholders of the Company or by the Board under applicable corporate law who
is serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.

(j) "employee" means any person (including a Director) in an
employment relationship with the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code).

(k) "FAIR MARKET VALUE" means, as of any specified date, the mean
of the high and low sales prices of the Common Stock (i) reported by the
National Market System of NASDAQ on that date or (ii) if the Common Stock is
listed on a national stock exchange, reported on the stock exchange composite
tape on that date; or, in either case, if no prices are reported on that date,
on the last preceding date on which such prices of the Common Stock are so
reported. If the Common Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the
reported high and low or closing bid and asked prices of Common Stock on the
most recent date on which Common Stock was publicly traded. In the event
Common Stock is not publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its fair market value shall
be made by the Committee in such manner as it deems appropriate.
Notwithstanding the foregoing, the Fair Market Value of a share of Common Stock
on the date of an initial public offering of Common Stock shall be the offering
price under such initial public offering.

(l) "HOLDER" means an employee, Consultant, or Director who has
been granted an Award.

(m) "INCENTIVE STOCK OPTION" means an incentive stock option
within the meaning of section 422 of the Code.

(n) "1934 ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

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<PAGE> 3
(o) "OPTION" means an Award granted under Paragraph VII of the
Plan and includes both Incentive Stock Options to purchase Common Stock and
Options that do not constitute Incentive Stock Options to purchase Common
Stock.

(p) "OPTION AGREEMENT" means a written agreement between the
Company and a Holder with respect to an Option.

(q) "PLAN" means the Authentic Specialty Foods, Inc. 1997 Stock
Plan, as amended from time to time.

(r) "RESTRICTED STOCK AGREEMENT" means a written agreement between
the Company and a Holder with respect to a Restricted Stock Award.

(s) "RESTRICTED STOCK AWARD" means an Award granted under
Paragraph VIII of the Plan.

(t) "RULE 16b-3" means SEC Rule 16b-3 promulgated under the 1934
Act, as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.

(u) "SHANSBY ENTITY" means The Shansby Group or TSG2 L.P., or any
partner or other affiliate of either of them.

III. TERM OF THE PLAN

This Plan shall become effective upon the date of its adoption by the
Board, provided the Plan is approved by the shareholders of the Company within
twelve months thereafter. Notwithstanding any provision in the Plan or in any
Option Agreement or Restricted Stock Agreement, no Option shall be exercisable
and no Restricted Stock Award shall be made prior to such shareholder approval.
No further Awards may be granted under the Plan after the expiration of ten
years from the date of its adoption by the Board. The Plan shall remain in
effect until all Awards granted under the Plan have been satisfied or expired.

IV. ADMINISTRATION

(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by a
committee of, and appointed by, the Board, and such committee shall be
comprised solely of two or more Directors who are both (i) outside directors
(within the meaning of section 162(m) of the Code and applicable interpretive
authority thereunder) and (ii) nonemployee directors (within the meaning of
Rule 16b-3).

(b) POWERS. Subject to the express provisions of the Plan, the
Committee shall have authority, in its discretion, to determine which
employees, Consultants, or Directors shall receive an Award, the time or times
when such Award shall be made, whether an Incentive Stock Option, an Option
that does not constitute an Incentive Stock Option, or a Restricted Stock Award
shall be

-3-
<PAGE> 4
granted, and the number of shares to be subject to each Option or Restricted
Stock Award. In making such determinations, the Committee shall take into
account the nature of the services rendered by the respective employees,
Consultants, or Directors, their present and potential contribution to the
Company's success and such other factors as the Committee in its discretion
shall deem relevant.

(c) ADDITIONAL POWERS. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan. Subject to
the express provisions of the Plan, this shall include the power to construe
the Plan and the respective agreements executed hereunder, to prescribe rules
and regulations relating to the Plan, and to determine the terms, restrictions
and provisions of the agreement relating to each Award, including such terms,
restrictions and provisions as shall be requisite in the judgment of the
Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other determinations necessary or advisable for administering
the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any agreement relating to an
Award in the manner and to the extent it shall deem expedient to carry it into
effect. The determinations of the Committee on the matters referred to in this
Paragraph IV shall be conclusive.

V. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN

(a) STOCK GRANT AND AWARD LIMITS. The Committee may from time to
time grant Awards to one or more employees, Consultants, or Directors
determined by it to be eligible for participation in the Plan in accordance
with the provisions of Paragraph VI. Subject to adjustment in the same manner
as provided in Paragraph IX with respect to shares of Common Stock subject to
Options then outstanding, the aggregate number of shares of Common Stock that
may be issued under the Plan shall not exceed 350,000 shares. Shares shall be
deemed to have been issued under the Plan only (i) to the extent actually
issued and delivered pursuant to an Award or (ii) to the extent an Award is
settled in cash. To the extent that an Award lapses or the rights of its
Holder terminate, any shares of Common Stock subject to such Award shall again
be available for the grant of an Award. Notwithstanding any provision in the
Plan to the contrary, the maximum number of shares of Common Stock that may be
subject to Awards granted to any one individual during any calendar year may
not exceed 50,000 shares of Common Stock (subject to adjustment in the same
manner as provided in Paragraph IX with respect to shares of Common Stock
subject to Options then outstanding). The limitation set forth in the
preceding sentence shall be applied in a manner which will permit compensation
generated under the Plan to constitute "performance-based" compensation for
purposes of section 162(m) of the Code, including, without limitation, counting
against such maximum number of shares, to the extent required under section
162(m) of the Code and applicable interpretive authority thereunder, any shares
subject to Options that are canceled or repriced.

(b) STOCK OFFERED. The stock to be offered pursuant to the grant
of an Award may, at the discretion of the Company, be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and reacquired
by the Company.

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<PAGE> 5
VI. ELIGIBILITY

Awards may be granted only to persons who, at the time of grant, are
employees, Consultants, or Directors. An Award may be granted on more than one
occasion to the same person, and, subject to the limitations set forth in the
Plan, such Award may include an Incentive Stock Option, an Option that is not
an Incentive Stock Option, a Restricted Stock Award, or any combination
thereof.

VII. STOCK OPTIONS

(a) OPTION PERIOD. The term of each Option shall be as specified
by the Committee at the date of grant.

(b) LIMITATIONS ON EXERCISE OF OPTION. An Option shall be
exercisable in whole or in such installments and at such times as determined by
the Committee.

(c) SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. An Incentive
Stock Option may be granted only to an individual who is an employee at the
time the Option is granted. To the extent that the aggregate Fair Market Value
(determined at the time the respective Incentive Stock Option is granted) of
Common Stock with respect to which Incentive Stock Options granted after 1986
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such Incentive Stock Options shall be
treated as Options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the
Code, Treasury Regulations and other administrative pronouncements, which of a
Holder's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Holder of such determination as
soon as practicable after such determination. No Incentive Stock Option shall
be granted to an individual if, at the time the Option is granted, such
individual owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of its parent or subsidiary
corporation, within the meaning of section 422(b)(6) of the Code, unless (i) at
the time such Option is granted the option price is at least 110% of the Fair
Market Value of the Common Stock subject to the Option and (ii) such Option by
its terms is not exercisable after the expiration of five years from the date
of grant. An Incentive Stock Option shall not be transferable otherwise than
by will or the laws of descent and distribution, and shall be exercisable
during the Holder's lifetime only by such Holder or the Holder's guardian or
legal representative. Notwithstanding any provision in the Plan or in any
Option Agreement, (1) no Incentive Stock Option shall be granted after the
expiration of 12 months from the date of the adoption of the Plan by the Board
unless the Plan has been approved by the shareholders of the Company within
such 12-month period in a manner that satisfies the requirements of section 422
of the Code and (2) any Option granted prior to the expiration of such 12-month
period that was intended to constitute an Incentive Stock Option shall
constitute an Option that is not an Incentive Stock Option if the Plan has not
been approved by the shareholders of the Company within such 12-month period in
a manner that satisfies the requirements of section 422 of the Code.

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<PAGE> 6
(d) OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under section 422 of the Code. Each Option Agreement shall specify the effect
of termination of (i) employment, (ii) the consulting or advisory relationship,
or (iii) membership on the Board, as applicable, on the exercisability of the
Option. An Option Agreement may provide for the payment of the option price,
in whole or in part, (1) in cash or (2) by the delivery of a number of shares
of Common Stock (plus cash if necessary) valued at their Fair Market Value.
Moreover, an Option Agreement may provide for a "cashless exercise" of the
Option pursuant to procedures established by the Committee (as the same may be
amended from time to time). The terms and conditions of the respective Option
Agreements need not be identical.

(e) OPTION PRICE AND PAYMENT. The price at which a share of
Common Stock may be purchased upon exercise of an Option shall be determined by
the Committee but, subject to adjustment as provided in Paragraph IX, such
purchase price shall not be less than the Fair Market Value of a share of
Common Stock on the date such Option is granted. The Option or portion thereof
may be exercised by delivery of an irrevocable notice of exercise to the
Company in a manner specified by the Committee. The purchase price of the
Option or portion thereof shall be paid in full in the manner prescribed by the
Committee. Separate stock certificates shall be issued by the Company for
those shares acquired pursuant to the exercise of an Incentive Stock Option and
for those shares acquired pursuant to the exercise of any Option that does not
constitute an Incentive Stock Option.

(f) SHAREHOLDER RIGHTS AND PRIVILEGES. The Holder shall be
entitled to all the privileges and rights of a shareholder only with respect to
such shares of Common Stock as have been purchased under the Option and for
which certificates of stock have been registered in the Holder's name.

(g) OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED
BY OTHER CORPORATIONS. Options may be granted under the Plan from time to time
in substitution for stock options held by individuals employed by corporations
who become employees as a result of a merger or consolidation of the employing
corporation with the Company or any subsidiary, or the acquisition by the
Company or a subsidiary of the assets of the employing corporation, or the
acquisition by the Company or a subsidiary of stock of the employing
corporation with the result that such employing corporation becomes a
subsidiary.

VIII. RESTRICTED STOCK AWARDS

(a) FORFEITURE RESTRICTIONS TO BE ESTABLISHED BY THE COMMITTEE.
Shares of Common Stock that are the subject of a Restricted Stock Award shall
be subject to restrictions on disposition by the Holder and an obligation of
the Holder to forfeit and surrender the shares to the Company under certain
circumstances (the "Forfeiture Restrictions"). The Forfeiture Restrictions
shall be determined by the Committee in its sole discretion, and the Committee
may provide that the

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<PAGE> 7
Forfeiture Restrictions shall lapse upon (i) 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, (ii) the Holder's continued employment with the
Company or continued service as a Consultant or Director for a specified period
of time, (iii) the occurrence of any event or the satisfaction of any other
condition specified by the Committee in its sole discretion, or (iv) a
combination of any of the foregoing. Each Restricted Stock Award may have
different Forfeiture Restrictions, in the discretion of the Committee. The
Forfeiture Restrictions applicable to a particular Restricted Stock Award shall
not be changed except as permitted by Paragraph VIII(b) or Paragraph IX.

(b) OTHER TERMS AND CONDITIONS. Common Stock awarded pursuant to
a Restricted Stock Award shall be represented by a stock certificate registered
in the name of the Holder of such Restricted Stock Award. The Holder shall
have the right to receive dividends with respect to Common Stock subject to a
Restricted Stock Award, to vote Common Stock subject thereto and to enjoy all
other shareholder rights, except that (i) the Holder shall not be entitled to
delivery of the stock certificate until the Forfeiture Restrictions have
expired, (ii) the Company shall retain custody of the stock until the
Forfeiture Restrictions have expired, (iii) the Holder may not sell, transfer,
pledge, exchange, hypothecate or otherwise dispose of the stock until the
Forfeiture Restrictions have expired, and (iv) a breach of the terms and
conditions established by the Committee pursuant to the Restricted Stock
Agreement, shall cause a forfeiture of the Restricted Stock Award. At the time
of such Award, the Committee may, in its sole discretion, prescribe additional
terms, conditions or restrictions relating to Restricted Stock Awards,
including, but not limited to, rules pertaining to the termination of
employment or service as a Consultant or Director (by retirement, disability,
death or otherwise) of a Holder prior to expiration of the Forfeitures
Restrictions. Such additional terms, conditions or restrictions shall be set
forth in a Restricted Stock Agreement made in conjunction with the Award.

(c) PAYMENT FOR RESTRICTED STOCK. The Committee shall determine
the amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required
by law.

(d) AGREEMENTS. At the time any Award is made under this
Paragraph VIII, the Company and the Holder shall enter into a Restricted Stock
Agreement setting forth each of the matters contemplated hereby and such other
matters as the Committee may determine to be appropriate. The terms and
provisions of the respective Restricted Stock Agreements need not be identical.

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<PAGE> 8
IX. RECAPITALIZATION OR REORGANIZATION

(a) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the shareholders
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any issue of debt or
equity securities ahead of or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.

(b) The shares with respect to which Options may be granted are
shares of Common Stock as presently constituted, but if, and whenever, prior to
the expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock without receipt of consideration by the Company,
the number of shares of Common Stock with respect to which such Option may
thereafter be exercised (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (ii) in the event of a
reduction in the number of outstanding shares shall be proportionately reduced,
and the purchase price per share shall be proportionately increased. Any
fractional share resulting from such adjustment shall be rounded up to the next
whole share.

(c) If the Company recapitalizes, reclassifies its capital stock,
or otherwise changes its capital structure (a "recapitalization"), the number
and class of shares of Common Stock covered by an Option theretofore granted
shall be adjusted so that such Option shall thereafter cover the number and
class of shares of stock and securities to which the Holder would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to
the recapitalization, the Holder had been the holder of record of the number of
shares of Common Stock then covered by such Option.

(d) In the event of a Change in Control, the Committee, acting in
its sole discretion without the consent or approval of any Holder, shall effect
one or more of the following alternatives, which alternatives may vary among
individual Holders and which may vary among Options held by any individual
Holder: (i) accelerate the time at which Options then outstanding may be
exercised so that such Options may be exercised in full for a limited period of
time on or before a specified date (before or after such Change in Control)
fixed by the Committee, after which specified date all unexercised Options and
all rights of Holders thereunder shall terminate, (ii) require the mandatory
surrender to the Company by selected Holders of some or all of the outstanding
Options held by such Holders (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after
such Change in Control, specified by the Committee, in which event the
Committee shall thereupon cancel such Options and pay to each Holder an amount
of cash per share equal to the excess, if any, of the amount calculated in
Subparagraph (e) below (the "Change in Control Value") of the shares subject to
such Option over the exercise price(s) under such Options for such shares,
(iii) make such adjustments to Options then outstanding as the Committee deems
appropriate to reflect such Change in Control (provided, however, that the
Committee may determine

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<PAGE> 9
in its sole discretion that no adjustment is necessary to Options then
outstanding), or (iv) provide that the number and class of shares of Common
Stock covered by an Option theretofore granted shall be adjusted so that such
Option shall thereafter cover the number and class of shares of stock or other
securities or property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the agreement of
merger, consolidation or sale of assets and dissolution if, immediately prior
to such merger, consolidation or sale of assets and dissolution, the Holder had
been the holder of record of the number of shares of Common Stock then covered
by such Option.

(e) For the purposes of clause (ii) in Subparagraph (d) above, the
"Change in Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows: (i) the per share price offered
to shareholders of the Company in any such merger, consolidation, sale of
assets or dissolution transaction, (ii) the price per share offered to
shareholders of the Company in any tender offer or exchange offer whereby a
Change in Control takes place, or (iii) if such Change in Control occurs other
than pursuant to a tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are exercisable, as
determined by the Committee as of the date determined by the Committee to be
the date of cancellation and surrender of such Options. In the event that the
consideration offered to shareholders of the Company in any transaction
described in this Subparagraph (e) or Subparagraph (d) above consists of
anything other than cash, the Committee shall determine the fair cash
equivalent of the portion of the consideration offered which is other than
cash.

(f) In the event of changes in the outstanding Common Stock by
reason of recapitalization, reorganizations, mergers, consolidations,
combinations, split-ups, split-offs, spin-offs, exchanges, a Change in Control,
or other relevant changes in capitalization or distributions to the holders of
Common Stock occurring after the date of the grant of any Award and not
otherwise provided for by this Paragraph IX, such Award and any agreement
evidencing such Award shall be subject to adjustment by the Committee at its
discretion as to the number and price of shares of Common Stock or other
consideration subject to such Award. In the event of any such change in the
outstanding Common Stock or distribution to the holders of Common Stock, the
aggregate number of shares available under the Plan (and the aggregate number
of shares that may be granted to any one individual) may be appropriately
adjusted by the Committee, whose determination shall be conclusive.

(g) Any adjustment provided for in the above Subparagraphs shall
be subject to any required shareholder action.

(h) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof

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<PAGE> 10
shall be made with respect to, the number of shares of Common Stock subject to
Awards theretofore granted or the purchase price per share, if applicable.

(i) Plan provisions to the contrary notwithstanding, with respect
to any Restricted Stock Awards outstanding at the time a Change in Control
occurs, the Committee may, in its discretion and as of a date determined by the
Committee, fully vest any or all Common Stock awarded to the Holder pursuant to
such Restricted Stock Award and then outstanding and, upon such vesting, all
restrictions applicable to such Restricted Stock Award shall terminate as of
such date. Any action by the Committee pursuant to this Subparagraph may vary
among individual Holders and may vary among the Restricted Stock Awards held by
any individual Holder.

X. AMENDMENT AND TERMINATION OF THE PLAN

The Board in its discretion may terminate the Plan at any time with
respect to any shares of Common Stock for which Awards have not theretofore
been granted. The Board shall have the right to alter or amend the Plan or any
part thereof from time to time; provided that no change in any Award
theretofore granted may be made which would materially impair the rights of the
Holder without the consent of the Holder, and provided, further, that the Board
may not, without approval of the shareholders, amend the Plan to (a) increase
the maximum aggregate number of shares that may be issued under the Plan or (b)
change the class of individuals eligible to receive Awards under the Plan.

XI. MISCELLANEOUS

(a) NO RIGHT TO AN AWARD. Neither the adoption of the Plan nor
any action of the Board or of the Committee shall be deemed to give an
employee, Consultant, or Director any right to be granted an Award or any other
rights hereunder except as may be evidenced by an Option Agreement or a
Restricted Stock Agreement executed on behalf of the Company, and then only to
the extent and on the terms and conditions expressly set forth therein. The
Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of funds or assets to
assure the payment of any Award.

(b) NO EMPLOYMENT/MEMBERSHIP RIGHTS CONFERRED. Nothing contained
in the Plan shall (i) confer upon any employee or Consultant any right with
respect to continuation of employment or of a consulting or advisory
relationship with the Company or any subsidiary or (ii) interfere in any way
with the right of the Company or any subsidiary to terminate his or her
employment or consulting or advisory relationship at any time. Nothing
contained in the Plan shall confer upon any Director any right with respect to
continuation of membership on the Board.

(c) OTHER LAWS; WITHHOLDING. The Company shall not be obligated
to issue any Common Stock pursuant to any Award granted under the Plan at any
time when the shares covered by such Award have not been registered under the
Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the

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<PAGE> 11
opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules or regulations available for the
issuance and sale of such shares. No fractional shares of Common Stock shall
be delivered. The Company shall have the right to deduct in connection with
all Awards any taxes required by law to be withheld and to require any payments
required to enable it to satisfy its withholding obligations.

(d) NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the
Plan shall be construed to prevent the Company or any subsidiary from taking
any corporate action which is deemed by the Company or such subsidiary to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award made under the Plan. No employee,
Consultant, Director, beneficiary or other person shall have any claim against
the Company or any subsidiary as a result of any such action.

(e) RESTRICTIONS ON TRANSFER. An Award (other than an Incentive
Stock Option, which shall be subject to the transfer restrictions set forth in
Paragraph VII(c)) shall not be transferable otherwise than (i) by will or the
laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, or (iii) with
the consent of the Committee.

(f) RULE 16b-3. It is intended that the Plan and any grant of an
Award made to a person subject to Section 16 of the 1934 Act meet the
requirements of Rule 16b-3 so that any transaction under the Plan involving a
grant, award, or other acquisition from the Company or disposition to the
Company is exempt from Section 16(b) of the 1934 Act. If any provision of the
Plan or any such Award would result in any such transaction not being exempt
from Section 16(b) of the 1934 Act, such provision or Award shall be construed
or deemed amended so that such transaction will be exempt from Section 16(b) of
the 1934 Act.

(g) GOVERNING LAW. THE PLAN SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.

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<PAGE> 1
EXHIBIT 10.4

SUBLEASE AGREEMENT

TABLE OF CONTENTS

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

1. Premises

2. Demise of Premises

3. Term

4. Rent and Additional Rent

5. Use of the Premises

6. Covenants Contained in the Lease

7. Attornment

8. Limitation of Liability and Indemnity

9. No Duty on Part of Landlord

10. Assignment and Subletting

11. Default

12. Remedies

13. Notices

14. Hold Over

15. Security Deposit

16. Sublessee Improvements

17. Miscellaneous
<PAGE> 2
SUBLEASE AGREEMENT

This Sublease Agreement (the "SUBLEASE") is entered into by and between A-1
Freeman Relocation System, Inc., a Texas corporation (the "SUBLESSOR") and
Calidad Foods, Inc., a Texas corporation (the "SUBLESSEE").

WITNESSETH

WHEREAS, Sublessor entered into that certain Lease Agreement (the "LEASE
AGREEMENT") by and between Sublessor, as Tenant, and Northbrook Ventures, Inc.,
a Delaware corporation, as Landlord (herein so called), dated April 23, 1993,
covering certain premises in the building known as Avenue R III Building, which
Lease Agreement was amended by that certain modification and ratification of
lease with addendums "A", "B" and "C" to Lease Agreement dated August 8, 1995
(the Lease Agreement and the First Amendment being hereinafter collectively
referred to as the "LEASE"), a copy of which lease is attached hereto as
Exhibit I-A, the terms of which including all defined terms, being incorporated
herein by reference for all purposes; and

WHEREAS, Sublessee is desirous of subleasing all of the Leased Premises (as
defined in the Lease) from the Sublessor (herein called the "SUBLEASED
PREMISES"), said Subleased Premises consisting of 67,375 rentable square feet.

NOW, THEREFORE, for and in consideration of the payment of the Rent, the
Additional Rent and the performance of the covenants and agreements hereinafter
set forth, Sublessee and Sublessor hereby agree as follows:

1. PREMISES. As used herein, the term Premises shall refer to all of the
Subleased Premises.

2. DEMISE OF PREMISES. Sublessor hereby leases, lets and demises to the
Sublessee, and the Sublessee hereby hires, leases and takes from the
Sublessor, the Premises to Sublessee "as is" upon the commencement of the
Term, and Sublessee agrees that it will accept the Premises in such
existing condition.

3. TERM. The term (the "TERM") of this Sublease shall be for a period
commencing on August 1, 1995 and ending on August 31, 1999. However,
subject to the provisions of Section 7 hereof, the Term shall terminate
earlier in the event of surrender, forfeiture, or other termination of
the Lease.

4. RENT AND ADDITIONAL RENT. For the Term of this Sublease, Sublessee shall
pay to Sublessor as rent (the "RENT") for the Premises monthly base
rental in the sum of $14,597.91, payable in advance on the first day of
each month during the Term hereof, but are not limited to, those payments
set out under the provisions of the Lease entitled Adjustment of Base
Rental, and operating expenses.

5. USE OF THE PREMISES. The Premises shall be used by Sublessee for general
office and warehouse/bakery use and only and for no other purpose
whatsoever.

6. COVENANTS CONTAINED IN THE LEASE. The Sublessee hereby agrees to comply
with all the provisions of the Lease that are to be performed by
Sublessor as Tenant under the Lease with respect to the Premises. The
provisions of the Lease, to the extent that they do not conflict with the
specific provisions contained in this Sublease, are fully incorporated
into this Sublease. The Sublessee agrees to be bound to the Sublessor by
all the terms of the Lease and to assume toward Sublessor and to perform
all of the obligations and responsibilities that Sublessor, by the Lease,
assumes toward the Landlord under the Lease with respect to the Premises.
The relationship between Sublessee and Sublessor under the Sublease shall
be the same as between the Sublessor and Landlord under the Lease.
Notwithstanding anything to the contrary contained in the Lease or
contained in this Sublease, Sublessor alone shall be entitled to exercise
those rights and privileges, shall continue to be solely responsible for,
and shall timely discharge or otherwise satisfy, all of the obligations
and responsibilities of the "Tenant" pursuant to the terms,

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provisions and conditions of the Lease Agreement as set forth in
Paragraph 1 of the Lease Agreement entitled: "Lease of Premises," "Tenant
Plans and Specifications-Installation of Improvements," Completion of
Improvements and Commencement of Rent," "Assignment-Subletting,"
"Indemnity, Liability and Loss or Damage," "Holding Over," "Transfer of
Landlord's Rights," "Default," "Remedies," "Security Deposit," "Notices,"
the Exhibit to the Lease which relates to initial tenant improvements to
the Leased Premises, and all Riders or Addenda to the Lease Agreement.

7. ATTORNMENT. In the event of cancellation or termination of the Lease
before the expiration date of this Sublease or any extensions or renewals
hereof, or in the event of the surrender of the Lease, whether
voluntarily, involuntarily or by operation of law, the Sublessee, at the
option of the Landlord exercisable in Landlord's sole and absolute
discretion, shall make full and complete attornment to the Landlord for
the balance of the Term of this Sublease, including any extensions and
renewals hereof, based on the same covenants and conditions of this
Sublease, so as to establish direct privity of estate and contract
between the Landlord and the Sublessee, with the same force and effect as
though this Sublease was originally made directly between the Landlord
and the Sublessee. The Sublessee shall thereafter make all rent payments
directly to the Landlord. The Landlord will only then become the
Sublessor under this Sublease.

8. LIMITATION OF LIABILITY AND INDEMNITY. Notwithstanding any provision of
the Lease to the contrary, neither the Sublessor nor the Landlord shall
be liable to the Sublessee, or to any of its agents, employees, servants,
or invitees, for any damage to persons or property due to the condition,
design or any defect in the building or its mechanical systems that may
exist or subsequently occur. Sublessee, with respect to itself and its
agents, employees, servants and invitees, expressly assumes all risk and
damage to persons or property, either proximate or remote, by reason of
the present or future condition of the Premises or the building in which
the Premises are located. Sublessee agrees that it will indemnify and
hold Sublessor and Landlord harmless from all suits, claims and actions
of any kind by reasons of any breach, violation or nonperformance of any
term or condition on the part of the Sublessee under this Sublease.
Additionally, Sublessee agrees to indemnify and hold Sublessor and
Landlord harmless from all claims, actions, damages, liabilities and
expenses asserted against the Sublessor and/or Landlord on account of
injuries to person or damage to property to the extent that any such
damage or injury may be caused, either proximately or remotely, by any
act or omission, whether negligent or not, of Sublessee or any of its
agents, servants, employees, contractors, patrons or invitees or of any
other person entering upon the Premises under or with the express or
implied invitation of Sublessee, or if any such injury or damage may in
any other way arise from or out of the occupancy or use of the Premises
by the Sublessee, its agents, employees, servants or invitees.

9. NO DUTY ON PART OF LANDLORD. Sublessee expressly recognizes,
acknowledges and agrees that Landlord shall have no direct duty towards
Sublessee with regard to the performance of any covenant to be performed
by Landlord under the Lease.

10. ASSIGNMENT AND SUBLETTING. Sublessee shall neither assign the Sublease
or the Lease, nor sublease all or any part of the Premises without the
prior written consent of Sublessor and Landlord. The Lease and Landlord's
rights thereunder may be assigned, in whole or in part, by Landlord.

11. DEFAULT. The happening of any one or more of the following events shall
constitute an Event of Default by Sublessee under this Sublease:

11.1 Sublessee shall fail to pay when due any installment of Rent or
Additional Rent.

11.2 Sublessee shall fail to comply with any term, provision or
covenant of this Sublease.

11.3 Sublessee shall become insolvent, make a transfer in fraud of
creditors, make any act of bankruptcy, make an assignment for the
benefit of creditors, or admit in writing its inability to pay
its debts as they become due.

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11.4 Sublessee shall file a petition under any section or chapter of
the Federal Bankruptcy Code, or under any similar law or statute
of the United States, or any state thereof, be adjudged bankrupt
or insolvent in proceedings filed against Sublessee thereunder,
or a petition or answer proposing the adjudication of Sublessee
as a bankrupt or its reorganization under any present or future
federal or state bankruptcy or similar law shall be filed in any
court, and such petition or answer shall not be discharged or
denied within sixty (60) days after filing thereof.

11.5 A receiver or trustee shall be appointed for all or
substantially all the assets of Sublessee or of the Premises or
any of Sublessee's property located thereon in any proceeding
brought by Sublessee, or any Receiver or Trustee shall be
appointed any proceeding brought against Sublessee and shall not
be discharged within sixty (60) days after such appointment, or
if Sublessee shall consent to or acquiesce to such appointment.

11.6 Sublessee shall abandon the Premises. As used herein,
abandonment is defined to include, without limitation, any
absence of Sublessee from the Premises for ten (10) days or
longer.

12. REMEDIES. If an Event of Default shall have occurred, Sublessor shall
have the right, in its sole election, then or at any time thereafter, to
pursue any one or more of the following remedies:

12.1 Terminate this Sublease, in which event Sublessee shall
immediately surrender the Premises to Sublessor, but if
Sublessee shall fail to do so, Sublessor may without notice and
without prejudice to any other remedy Sublessor may have, enter
upon and take possession of the Premises and expel or remove
Sublessee and its effects and any other person who may be
occupying the Premises without being liable to prosecution or
any claim for damages therefor; and Sublessee agrees to
indemnify Sublessor for all loss and damages which Sublessor may
suffer by reason of such termination, whether through inability
to relet the Premises or otherwise, including any loss of rental
for the remainder of the Term of the Sublease.

12.2 Declare the entire amount of Rent and Additional Rent which
would have become due and payable during the remainder of the
Term of this Sublease to be due and payable immediately, in
which event Sublessee agrees to pay the same to Sublessor at
once, it being agreed that such payment shall constitute payment
in advance of the Rent and Additional Rent stipulated for the
remainder of the Sublease Term. The acceptance by Sublessor of
the payment of such rent shall not constitute a waiver of any
default then existing or thereafter occurring hereunder.

12.3 Enter upon and take possession of the Premises as the agent of
Sublessee without terminating this Sublease and without being
liable to prosecution or any claim for damages therefor, and
Sublessor may relet the Premises as the agent of Sublessee and
receive the rent therefor, in which event Sublessee shall pay to
Sublessor on demand the cost of renovating, repairing and
altering the Premises for a new subtenant or subtenants and any
deficiency that may arise by reasons of such reletting;
provided, however, that Sublessor shall have no duty to relet
the Premises and that the failure of Sublessor to relet the
Premises shall not release or affect Sublessee's liability for
Rent, Additional Rent or for damages.

12.4 Sublessor may do whatever Sublessee is obligated to do by the
provisions of this Sublease and may enter the Premises, without
being liable to prosecution or any claim for damages thereof, in
order to accomplish this purpose. Sublessee agrees to reimburse
Sublessor immediately upon demand for any reasonable expenses
which Sublessor may incur in thus effecting compliance with this
Sublease on behalf of Sublessee, and Sublessee further agrees
that Sublessor shall not be liable for damages resulting to
Sublessee from such action, whether caused by the negligence of
Sublessor or otherwise.

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Pursuit of any of the foregoing remedies shall not preclude
pursuit of any of the other remedies herein provided or any
other remedies provided by law or equity.

13. NOTICES. Any notice or document required to be delivered hereunder shall
be in writing, and shall be deemed to be delivered on receipt, if hand
delivered or delivered by courier service, or (whether actually received
or not) upon the date which is two (2) days following the deposit of such
document in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the parties hereto
at the address of the Premises with respect to the Sublessee or the
address set forth below with respect to the Sublessor, or at such other
address as any party may hereafter specify by written notice to the
other.

Sublessor's address:

Freeman Moving and Storage, Inc.
11517 North Broadway Extension
Oklahoma City, Oklahoma 73114

14. HOLDING OVER. If Sublessee continues to hold the Premises after this
Sublease terminates, whether by lapse of time or otherwise, such holding
over shall, unless otherwise agreed by Sublessor in writing, constitute
and be construed as a tenancy-at-will at a monthly rental equal to twice
the Rent and Additional Rent provided for herein, and upon and subject to
the terms and provisions set forth herein.

15. SECURITY DEPOSIT. Contemporaneously with the execution hereof, Sublessee
shall pay to Sublessor the sum of $29,195.82 as a security deposit to
secure Sublessee's obligations hereunder. Sublessor shall hold such
security deposit without any obligation to pay any interest thereon, and
any interest which may be earned thereon shall be the sole property of
the Sublessor. It is expressly understood that said security deposit
shall not be considered an advance payment of rental or a measure of
Sublessor's damages in case of default by Sublessee hereunder. Sublessor
may commingle said security deposit with Sublessor's other funds and may,
from time to time, without prejudice to any other remedy provided for
herein or at law, use the security deposit to the extent necessary to
make good any arrearages of Rent or to satisfy any covenant or obligation
of Sublessee hereunder. Following any such application of the security
deposit, Sublessee shall pay to Sublessor, on demand, the amount so
applied in order to restore the security deposit to its original amount.
If Sublessee is not in default at the termination of this Sublease, the
balance of the security deposit remaining after any such application
shall be returned by Sublessor to Sublessee at Sublessee's address as
shown on the books and records of Sublessor. If Sublessor transfers its
interest in the Premises during the Term of this Sublease, Sublessor may
assign the security deposit to the transferee and, thereafter, shall have
no further liability for the return of such security deposit.

16. SUBLESSEE IMPROVEMENTS. Sublessee shall not make or allow to be made any
alterations or physical in or to the leased premises without first
obtaining the written consent of Sublessor. Any alterations, physical
additions or improvements to the leased premises made by Sublessee shall
at once become the property of Sublessor and shall be surrendered to
Sublessor upon the termination of this Sublease: provided, however,
Sublessor, at its option may require Sublessee to remove any physical
additions and/or repair any alterations in order to restore the leased
premises to the condition existing at the time Sublessee took possession.
All costs of removal and/or alterations to be borne by Sublessee. This
clause shall not apply to moveable equipment or furniture owned by
Sublessee, which may be removed by Sublessee at the end of the term of
this Lease if Sublessee is not then in default and if such equipment and
furniture are not then subject to any rights, liens and interest of
Sublessor. (See Exhibit B) Sublessee shall also adhere to all provisions
in addendum "A", "Construction by Lessee" (See Exhibit C).

17. MISCELLANEOUS.

17.1 SEVERABILITY. Each and every covenant and agreement contained
in this Sublease is, and shall be construed to be, a separate
and independent

5 of 5
<PAGE> 6
covenant and agreement. If any term or subdivision of this
Sublease, or the application thereof to any person or
circumstance, shall to any extent be invalid and unenforceable,
the remainder of this Sublease shall remain in full force and
effect and not be affected thereby.

17.2 ENTIRE AGREEMENT. This Sublease sets forth the entire agreement
between the Sublessee and the Sublessor, superseding any prior
agreements among such parties, and no amendment or modification
of this Sublease shall be binding or valid unless set forth in
writing and executed by both parties hereto.

17.3 PARAGRAPH HEADINGS. Paragraph headings contained in this
Sublease are for convenience only and shall in no way enlarge or
limit the scope of any of the various paragraphs and provisions
hereof.

17.4 BINDING EFFECT. All the covenants, agreements, terms and
conditions to be observed and performed by the parties hereto
shall be applicable and binding upon the respective heirs,
personal representatives, successors and permitted assigns.

17.5 SUBLESSOR STILL LIABLE. Notwithstanding anything to the
contrary contained in this Sublease, Sublessor shall in all
events remain fully and completely liable under the Lease and
shall be relieved of no liability whatsoever hereby.

17.6 GOVERNING LAW. This Sublease shall be construed under and in
accordance with the laws of the State of Texas.

IN WITNESS WHEREOF, this Sublease is executed effective as of August 1, 1995.

SUBLESSOR SUBLESSEE

A-1 Freeman Relocation Systems, Inc. Calidad Foods, Inc.

By: /s/ JAMES FREEMAN By: /s/ SAM HILLIN
------------------------------- -------------------------------
Its: President Its: Chief Financial Officer

Landlord, Greenbriar Holdings Dallas, Ltd., a Texas limited partnership,
executes this Sublease for the sole purpose of evidencing its consent to this
Sublease and the terms contained herein. Nothing contained in this consent
shall operate as a ratification by the Landlord of any of the provisions of the
Sublease or as a representation or warranty by Landlord of any such provisions,
and Landlord shall not be bound or estopped in any way by the provisions of the
Sublease. Neither the Sublease nor this consent shall release or discharge
Sublessor (in its capacity as Tenant) from any liability under the lease, and
Sublessor shall remain liable and responsible to Landlord for the full
performance and observance of all of the provisions, covenants and conditions
set forth in the Lease on the part of Sublessor (in its capacity as Tenant) to
be performed and observed.

LANDLORD

GREENBRIAR HOLDINGS DALLAS, LTD.
- ----------------------------------
By: HIGHFIELD REALTY CAPITAL, INC.

By: /s/ NOT LEGIBLE
------------------------------
Its: President
------------------------------

<PAGE> 1
EXHIBIT 10.5

LEASE AND AGREEMENT

THIS LEASE AND AGREEMENT made this 1st day of February, 1993,
between Tanklage Investments LTD (A California Limited Partnership),
hereinafter referred to as "LESSOR," and LA VICTORIA FOODS, INC., hereinafter
referred to as "LESSEE."

W I T N E S S E T H:

1. DEMISE AND TERM

A. LESSOR demises and leases to LESSEE, and LESSEE does
hereby hire from and take from LESSOR the premises situated at 9200 East
Whitmore Street, Rosemead, California, said premises also being known as 616
Driggs Avenue, El Monte, California, and the property situated at 9133 East
Whitmore Street, Rosemead, California. Said premises consist of buildings and
parking lot areas thereat.

B. The term shall commence January 1, 1993 and terminate
on December 31, 2002.

2. RENTAL

A. LESSEE covenants and agrees to pay to LESSOR monthly
in advance on the first day of each month commencing January 1, 1993, rental as
herein provided:

(1) For the first two (2) years of the term hereof
commencing January 1, 1993 and ending December 31, 1994, a monthly rental of
SEVENTEEN THOUSAND DOLLARS ($17,000.00).

(2) The monthly rental for each twenty-four (24) month
period after the second year hereof and beginning on January 1, 1995 may be set
in the following manner:

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<PAGE> 2
The CONSUMER PRICE INDEX, all items for all urban consumers,
which is published on December 1 of each year shall be compared with the Index
for the date immediately preceding January 1, 1993.

If the new index has increased over the beginning index, the
monthly rent for the 12-month period shall be set by multiplying 17,000 by a
fraction, the enumerator of which is the new index and the denominator of which
is the beginning index. As soon as the minimum monthly rental for each
24-month term is set, LESSOR shall give notice of the amount of said monthly
rental to LESSEE.

If the described index shall no longer be published, another
generally recognized as authoritative shall be substituted by agreement of the
parties. If they are unable to agree within thirty (30) days after demand by
either party, the subsitute index shall, on application of either party, be
selected by the CHIEF OFFICER of the SAN FRANCISCO REGIONAL OFFICE of the
BUREAU OF LABOR STATISTICS or its successor.

B. Rent shall be paid at 9133 East Garvey Avenue,
Rosemead, California, or at such other place or to such other parties as LESSOR
shall designate in writing from time to time.

3. LESSEE'S OBLIGATIONS

A. LESSEE, at LESSEE'S expense, shall keep in good
order, condition and repair the premises and every part thereof (regardless of
whether the damaged portion of the premises or the means of repairing the same
are accessible to LESSEE), including without limiting the generality of the
foregoing, all plumbing, heating, air conditioning, ventilating, electrical and
lighting facilities and equipment within the premises, fixtures, interior
walls, ceilings, windows, doors, plate glass, and skylights, located within the
premises

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<PAGE> 3

and all sidewalks, landscaping, driveways, parking lots, fences and signs
located in the areas which are adjacent to and included with the premises.

B. If LESSEE fails to perform LESSEE'S
obligations under this Article, LESSOR may at LESSOR'S option enter upon the
premises after ten (10) days' prior written notice to LESSEE, and put the same
in good order, condition and repair, and the cost thereof together with
interest thereon at the rate of ten (10) percent per annum shall be due and
payable as additional rent to LESSOR, together with LESSEE'S next rental
installment.

C. On the last day of the term hereof, or on any
sooner termination, LESSEE shall surrender the premises to LESSOR in good
condition, broom clean, ordinary wear and tear excepted. LESSEE shall repair
any damage to the premises occasioned by its use thereof or by the removal of
its trade fixtures, furnishings and equipment pursuant to Article 3 (C), which
repair shall include but not be limited to the patching and filling of holes
and repairs of structural damage.

4. ALTERATIONS AND ADDITIONS

A. LESSEE shall not, without LESSOR'S prior
written consent, make any alterations, improvements or additions, in, on or
about the premises, except for nonstructural alterations not exceeding FIVE
THOUSAND DOLLARS ($5,000.00) in cost. As a condition to giving such consent,
LESSOR may require that LESSEE agree to remove any such alterations,
improvements, additions or utility installations at the expiration of the term,
and to restore the premises to their prior condition.

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<PAGE> 4
B. Before commencing any work relating to
alterations, additions and improvements affecting the premises, LESSEE shall
notify LESSOR in writing of the expected date of commencement thereof. LESSOR
shall then have the right at any time and from time to time to post and
maintain on the premises such notices as LESSOR reasonably deems necessary to
protect the premises and LESSOR from mechanic's liens, materialmen's liens or
any other liens. In any event, LESSEE shall pay, when due, all claims for
labor or materials furnished to or for LESSEE at or for use in the premises.
LESSEE shall not permit any mechanic's or materialmen's liens to be levied
against the premises for any labor or material furnished to LESSEE or claimed
to have been furnished to LESSEE or to LESSEE'S agents or contractors in
connection with work of any character performed or claimed to have been
performed on the premises by or at the direction of LESSEE.

C. Unless LESSOR requires their removal, as set
forth in Article 4-A, all alterations, improvements, or additions which may be
made on the premises shall become the property of LESSOR and remain upon and be
surrendered with the premises at the expiration of the term. Notwithstanding
the provisions of this Article 4-C, LESSEE'S machinery, equipment, and trade
fixtures other than that which is affixed to the premises so that it cannot be
removed without material damage to the premises, shall remain the property of
LESSEE and may be removed by LESSEE subject to the provisions of article 4-C.

5. COMPLIANCE WITH LAW

LESSEE shall, at LESSEE'S expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders

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<PAGE> 5
and requirements in effect during the term or any part of the term hereof
regulating the use by LESSEE of the premises. LESSEE shall not use or permit
the use of the premises in any manner that will tend to create waste, or a
nuisance, or, if there shall be more than one tenant of the building containing
the premises, which shall tend to unreasonably disturb such other tenants.

6. CONDITION OF PREMISES

LESSEE hereby accept the premises in their condition existing
as of the date of the possession hereunder, subject to all applicable zoning,
municipal, county and state laws, ordinances and regulations governing and
regulating the use of the premises, and accepts this lease subject thereto and
to all matters disclosed thereby and by any exhibits attached hereto. LESSEE
acknowledges that neither LESSOR nor LESSEE'S agent has made any representation
or warranty as to the suitability of the premises for the conduct of LESSEE'S
business.

7. ASSIGNMENT AND SUBLETTING

LESSEE shall not assign this lease, or any interest therein,
without the prior written consent of LESSOR, nor shall LESSEE sublet the
demised premises, or any part thereof, without the prior written consent of
LESSOR. The consenting to an assignment or subletting shall not render
unnecessary the securing of consent to subsequent assignments or sublettings.
The within lease shall not be assignable involuntarily or by process of law,
nor shall the same be an asset in bankruptcy.

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<PAGE> 6
8. INSURANCE; INDEMNITY

A. Liability Insurance

LESSEE shall, at LESSEE'S expense, obtain and keep in force
during the term of this lease a policy of comprehensive public liability
insurance insuring LESSOR and LESSEE against any liability arising out of the
ownership, use, occupancy or maintenance of the premises and all areas
appurtenant thereto. Such insurance shall be in an amount of not less than ONE
MILLION DOLLARS ($1,000,000.00) for injury to or death of one person in any one
accident or occurrence and in an amount of not less than TWO MILLION DOLLARS
($2,000,000.00) for injury to or death of more than one person in any one
accident or occurrence. Such insurance shall further insure LESSOR and LESSEE
against liability for property damages of at least ONE HUNDRED THOUSAND DOLLARS
($100,000.00). The limits of said insurance shall not, however, limit the
liability of LESSEE hereunder.

B. Property Insurance

LESSEE shall obtain and keep in force during the term of this
lease a policy or policies of insurance covering loss or damage to the premises
in the amount of the full replacement value thereof providing protection
against all perils, including, within the classification of fire extended
coverage, vandalism, malicious mischief and special extended periods. The
premium for said insurance for the first year and last year hereof shall be
prorated. The proceeds of said policies shall be in the name of and payable to
LESSOR.

C. Insurance

Insurance acquired hereunder shall be in companies rated A
Plus or better in BEST'S INSURANCE GUIDE. LESSEE shall

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<PAGE> 7
deliver to LESSOR annually copies of policies of liability insurance required
under Article 8, A, or certificates evidencing the existence and amounts of
such insurance with loss payable clauses satisfactory to LESSOR. No insurance
policy shall be cancellable or subject to reduction of coverage or other
modifications, except after ten (10) days prior written notice to LESSOR.
LESSEE shall within ten (10) days prior to expiration of such policy furnish
LESSOR with renewals thereof, or LESSOR may order such insurance and charge the
cost thereof to LESSEE which amount shall be payable to LESSEE upon demand.

D. Subrogation

LESSEE and LESSOR each waives any and all rights of recovery
against the other, or against the officers, employees, agents and
representatives of the other, for loss of or damage to such waiving party or
its property or the property of others under its control, where such loss or
damage is insured against any insurance policy in force at the time of such
loss or damage. LESSEE and LESSOR shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carriers that the
foregoing mutual waiver of subrogation is contained in this lease.

E. Hold Harmless

LESSEE shall indemnify, defend and hold LESSOR harmless from
any and all claims arising from LESSEE'S use of the premises or from the
conduct of its business or from any activity, work or things which may be
permitted or suffered by LESSEE in or about the premises and shall further
indemnify, defend and hold LESSOR harmless from and against any and all claims
arising from any breach or default in the performance of any obligation on
LESSEE'S part to be performed

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<PAGE> 8
under the provision of this lease or arising from any negligence of LESSEE or
any of its agents, contractors, employees or invitees and from any and all
costs, attorneys' fees, expenses and liabilities incurred in the defense of any
such claim or any action or proceeding brought thereon. LESSEE hereby assumes
all risk of damage to property or injury to persons in or about the premises
from any cause, and LESSEE hereby waives all claims in respect thereof against
LESSOR, excepting where said damage arises out of negligence of LESSOR.

F. Exemption of LESSOR from Liability

LESSEE hereby agrees that LESSOR shall not be liable for
injury to LESSEE'S business or any loss of income therefrom or for damage to
the goods, wares, merchandise or other property of LESSEE, LESSEE'S employees,
invitees, customers, or any other person in or about the premises; nor, unless
through its negligence, shall LESSOR be liable for injury to the person of
LESSEE, LESSEE'S employees, agents or contractors and invitees, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the premises or upon other portions of the
building of which the premises are a part, or from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to LESSOR or LESSEE. LESSOR shall not be
liable for any damages arising from any act or neglect of any other tenant, if
any, of the building in which the premises are located.

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<PAGE> 9
9. REAL PROPERTY TAXES

A. Payment of Taxes

LESSOR shall pay all real property taxes applicable
to premises. Such payment shall be made by LESSEE within thirty (30) days
after receipt of LESSOR'S written statement setting forth the amount of said
taxes. Taxes for the first and last year for the term hereof shall be prorated
and shall be due and payable upon demand.

B. Definition of Real Property Taxes

As used herein, the term "real property tax" shall
include any form of assessment, license fee, rent tax, levy, penalty, or tax
(other than inheritance or estate taxes), imposed by any authority having the
direct or indirect power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other
improvement district thereof, as against any legal or equitable interest of
LESSOR in the premises or in the real property of which the premises are a
part, as against LESSOR'S right to rent or other income therefrom, or as
against LESSOR'S business of leasing the premises, and LESSEE shall pay any and
all charges and fees which may be imposed by the ENVIRONMENTAL PROTECTION
AGENCY or other similar government regulations or authorities.

C. Personal Property Taxes

(1) LESSEE shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of LESSEE contained in the premises or
elsewhere. LESSEE shall cause said trade fixtures, furnishings,

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<PAGE> 10
equipment and all other personal property to be assessed and billed separately
from the real property of LESSOR.

(2) If any of LESSEE'S said personal property
shall be assessed with LESSOR'S real property, LESSEE shall pay LESSOR the
taxes attributable to LESSEE within ten (10) days after receipt of a written
statement setting forth the taxes applicable to LESSEE'S property.

10. UTILITIES

LESSEE shall pay for all water, gas, heat, light, power, other
utilities and services supplied to the premises, together with any taxes
thereon.

11. REMOVAL OF PERSONAL PROPERTY AND FIXTURES BY LESSEE

LESSEE may remove personal property, office furniture, trade
fixtures and other property installed or belonging to LESSEE during the term
hereof providing LESSEE is not in default and providing all damage occasioned
by said removal is repaired, except that LESSEE may not remove any
installations that are made a permanent part of the improvements thereon.

12. REMEDIES OF LESSOR

If LESSEE shall file a petition or institute any proceeding
under the National Bankruptcy Act, or any amendment thereto, or any other act
relating to bankruptcy or insolvency, whereby it seeks to be adjudicated a
bankrupt or to be discharged from any or all of its debts or obligations or to
effect a reorganization or a composition or extension of time to pay its debts,
or if petition or proceedings of similar character be filed or instituted
against LESSEE, and LESSEE shall thereafter be adjudicated a bankrupt, or

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<PAGE> 11
if any receiver or trustee, or debtor in possession of the property or business
of LESSEE be appointed and such receiver, trustee, or debtor in possession be
not removed within thirty (30) days after his appointment, or if LESSEE shall
make an assignment for the benefit of creditors, or if LESSEE abandons or
vacates the demised premises, or if LESSEE shall be in default in any rental
payment hereunder for a period of twenty (20) days after the same shall be due
and payable, or if an assignment of this lease or any interest therein or any
subletting of the demised premises or any part thereof be made contrary to the
provisions hereof, or if LESSEE shall be in default in any other of the terms,
covenants or conditions hereof for a period of thirty (30) days from the after
written notice of such default given by LESSOR to LESSEE, then in any of such
events LESSOR shall have the option, without notice to LESSEE, or demand for
performance, either:

(1) To collect by suit or otherwise, each installment of
rent as it becomes due hereunder, or to enforce by suit or otherwise, any other
term or provision hereof on the part of LESSEE required to be kept or
performed; or

(2) To re-enter the demised premises, remove all persons
therefrom, take possession of the demised premises and either:

(a) Terminate this lease, in which event LESSOR
shall thereupon be entitled to recover from LESSEE the worth at the time of
such termination of the excess, if any, of the amount of rent reserved
hereunder, for the balance of the term of this lease over the then reasonable
rental value of the premises for the balance of said term; or

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<PAGE> 12
(b) Without terminating or forfeiting this lease,
relet the premises as the agent and for the account of LESSEE, either in
LESSOR'S name or otherwise, upon such terms and conditions and for such period
as LESSOR may deem advisable, in which event LESSEE shall pay to LESSOR monthly
the difference between the rents herein reserved and the rents so received upon
such reletting, after deducting from the rents so received the expenses of
reletting and collecting, including necessary renovation and alteration of the
premises and reasonable attorney's fees and real estate commissions paid by
LESSOR.

The foregoing remedies of LESSOR shall not be exclusive, but
shall be cumulative and in addition to all remedies now or hereafter allowed by
law or elsewhere provided for.

13. WAIVER-ATTORNEY'S FEES--NOTICES--MISCELLANEOUS MATTERS

A. A waiver by LESSOR of any breach of any one
or more of the covenants or conditions hereof shall not bar forfeiture or any
other rights or remedies of LESSOR for any subsequent breach of any such or
other conditions or covenants, nor shall the same in any way constitute a
waiver or alteration of any of the terms, conditions or covenants hereof.

B. In case any action shall be brought by LESSOR
for the recovery of any rent or other sums due under the provisions of this
lease, or the breach or enforcement of any of the conditions or covenants
hereof to be kept or performed by LESSEE, or for the recovery of demised
premises, LESSEE hereby agrees to pay LESSOR a reasonable attorney's fee for
each said action in which LESSOR shall prevail, the same to be fixed by the
court in said action, and recoverable as a part of the costs of each said
action.

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<PAGE> 13
C. Any and all notices to be given herein shall
be deemed sufficiently given if sent by registered or certified mail, return
receipt requested, and properly addressed to LESSOR at the place at which
rentals are payable, or to LESSEE at 9200 East Whitmore Street, Rosemead,
California, or such other place as LESSOR or LESSEE may from time to time
designate in writing, and such service shall be effective when such notice is
placed in the United States mail, providing the mailing takes place in Los
Angeles County, California.

14. CONDEMNATION

If the premises or any portion thereof are taken
under the power of eminent domain, or sold by LESSOR under the threat of the
exercise of said power (all of which is herein referred to as "condemnation"),
this lease shall terminate as to the part so taken as of the date the
condemning authority takes title or possession, whichever occurs first. If
more than twenty-five (25) percent of the floor area of any buildings on the
premises, or more than twenty-five (25) percent of the land area of the
premises not covered with buildings, is taken by condemnation, either LESSOR or
LESSEE may terminate this lease as of the date the condemning authority takes
possession by notice in writing of such election within twenty (20) days after
LESSOR shall have notified LESSEE of the taking or, in the absence of such
notice, then within twenty (20) days after the condemning authority shall have
taken possession.

If this lease is not terminated by either LESSOR or
LESSEE then it shall remain in full force and effect as to the portion of the
premises remaining, provided the rental shall be reduced in proportion to the
floor area of the buildings taken within the premises

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<PAGE> 14
as bears to the total floor area of all buildings located on the premises. In
the event this lease is not so terminated then LESSOR agrees, at LESSOR'S sole
cost, to as soon as reasonably possible restore the premises to a complete unit
of like quality and character as existed prior to the condemnation. All awards
for the taking of any part of the premises or any payment made under the threat
of the exercise of power of eminent domain shall be the property of LESSOR,
whether made a compensation for diminuation of value of the leasehold or for
the taking of the fee or as severance damages; provided, however, that LESSEE
shall be entitled to any award for loss of or damage to LESSEE'S trade fixtures
and removable personal property.

15. GENERAL PROVISIONS

A. Interest on Past-Due obligations

Except as expressly herein provided, any amount due to LESSOR
not paid when due shall bear interest at ten (10) percent per annum from the
date due. Payment of such interest shall not excuse or cure any default by
LESSEE under this lease.

B. Time of Essence

Time is of the essence of all of the terms and conditions
hereof.

C. Waivers

No waiver by LESSOR of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by LESSEE of
the same or any other provision. LESSOR'S consent to or approval of any act
shall not be deemed to render unnecessary

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<PAGE> 15
the obtaining of LESSOR'S consent to or approval of any subsequent act by
LESSEE. The acceptance of rent hereunder by LESSOR shall not be a waiver of
any preceding breach by LESSEE of any provision hereof, other than the failure
of LESSEE to pay the particular rent so accepted, regardless of LESSOR'S
knowledge of such preceding breach at the same time of acceptance of such rent.

D. Recording

LESSEE shall not record this lease. Any such recordation
shall be a breach under this lease.

E. Holding Over

If LESSEE remains in possession of the premises or any part
thereof after the expiration of the term hereof, such occupancy shall be a
tenancy from month to month at a rental in the amount of the last month's
rental, plus all other charges payable hereunder, and at an increased rental
provided notice it given therefor.

F. Attorney's Fees

If either party named herein brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to his reasonable attorney's fees
to be paid by the losing party as fixed by the court.

16. OTHER LEASES

This lease shall supersede any other lease and/or rental agreement
existing between the parties with respect to the herein described premises.

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<PAGE> 16
TANKLAGE INVESTMENTS, LTD.

<TABLE>
<S> <C>
By: /s/ ROBERT C. TANKLAGE
-----------------------------
Robert C. Tanklage
General Partner

By: /s/ CAROLYN M. JOHNSON
-----------------------------
Carolyn M. Johnson
General Partner

LESSOR

LA VICTORIA FOODS, INC.

By: /s/ ROBERT C. TANKLAGE
-----------------------------
Robert C. Tanklage
President

By: /s/ ERNEST JOHNSON
-----------------------------
Ernest Johnson
Secretary
</TABLE>

LESSEE

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<PAGE> 17
AMENDMENT TO LEASE AND AGREEMENT
9200 Whitmore Street

The Lease and Agreement dated February 1, 1993, between Tanklage
Investments LTD (a California Limited Partnership) and La Victoria Foods is
hereby amended as follows:

ITEM 1.B The term of the lease shall be extended to July 31, 2010.
The current monthly rental of $17,800.00 shall be in effect through July 31,
2000.

Item 2.2 The monthly rental for the sixty (60) month period beginning
August 1, 2000, will be calculated in the following manner:

The monthly rental of this Lease shall be subject to adjustment based
on the Consumer Price Index (U.S. City Average ALL Items) determined by the
United States Department of Labor Bureau of Labor Statistics, Washington, D.C.
as follows:

The figure which was paid (Consumer Price Index, U.S. City Average All
Items) for the month of August, 1995 shall be used as a basis, and said rental
shall be adjusted on the first day of the 61st month following August 1, 1995,
by the same ratio as such Consumer Price Index (sixty-first month of this
lease) is to the above same basis. Said adjustment shall be in effect for the
ensuing 60 month period and shall be adjusted on the same formula on each 60
month period for the balance of the lease. Any adjustment may be either up or
down after the first such adjustment, but in no event shall the rental at any
time be less than is otherwise permitted herein.

<TABLE>
<S> <C>
LESSOR

DATED: Oct. 27, 1995 /s/ ROBERT C. TANKLAGE
------------------------------------
Robert C. Tanklage, Trustee

DATED: Oct. 27, 1995 /s/ CAROLYN M. JOHNSON
------------------------------------
Carolyn M. Johnson, Trustee

LESSEE:
LA VICTORIA FOODS, INC.

DATED: Oct. 27, 1995 /s/ ROBERT C. TANKLAGE
------------------------------------
Robert C. Tanklage, President

DATED: Oct. 31, 1995 /s/ ERNEST JOHNSON
------------------------------------
ERNEST JOHNSON, Secretary
</TABLE>

<PAGE> 1
EXHIBIT 10.6

LEASE AND AGREEMENT

1. PARTIES. THIS LEASE AND AGREEMENT is entered into this 1st day of August,
1985, by and between ROBERT C. TANKLAGE, CAROLYN M. JOHNSON and FRANK BARCLAY,
Trustees under that certain Declaration of Trust dated December 30, 1972
(herein called "Lessor") and LA VICTORIA FOODS, INC., a California corporation,
(herein called "Lessee").

2. PREMISES. WHEREAS, the Lessee is in need of additional warehouse and
office space for its operations in the City of Industry.

NOW THEREFORE, it is mutually agreed as follows:

Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor
the premises which comprises a total square foot area of 170,000 square feet,
described in Exhibit "A" the real property located in Los Angeles County,
California, described in Exhibit "B" attached hereto and made a part hereof.

3. TERM.

3.1. TERM. The term of this Lease shall be for twenty-five (25) years,
commencing on the date of occupancy, and ending twenty-five (25) years there-
after.

3.2. DELAY IN COMMENCEMENT. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof, but in such case Lessee shall not be
obligated to pay rent until possession of the Premises is tendered to Lessee;
provided, however, that if Lessor shall not have delivered possession of the
Premises within sixty (60) days from said commencement date, Lessee may, at
Lessee's option, by notice in writing to Lessor within ten (10) days
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay
rent for such period at the initial monthly rates set forth below.

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4. RENT. NET LEASE.

4.1. RENT. Lessee shall pay to Lessor as rent for premises Six Hundred
Twelve Thousand Dollars ($612,000.00) per annum, payable in equal monthly
installments of $51,000.00, in advance on the first day of each month of the
term hereof. Lessee shall pay Lessor upon the execution of this Lease hereof
$102,000.00, which represents the first and last month's rental. Rent for any
period during the term hereof which is for less than one month shall be pro
rata portion of the monthly installment. Rent shall be payable in lawful money
of the United States to Lessor at the address stated herein or to such other
persons or at such other places as Lessor may designate in writing.

4.2. ADDITIONAL RENT. This Lease is what is commonly called a "net lease",
it being understood that Lessor shall receive the rent set forth in
Paragraph 4.1 free and clear of any and all other impositions, taxes, liens,
charges or expenses of any nature whatsoever in connection with the ownership
and operation of the Premises. In addition to the rent reserved by Paragraph
4.1, Lessee shall pay to the parties respectively entitled thereto all
impositions, insurance premiums, operating charges, maintenance charges,
construction costs, and any other charges, costs and expenses which arise or
may be contemplated under any provisions of this Lease during the term hereof.
All of such charges, costs and expenses shall constitute additional rent, and
upon the failure of Lessee to pay any of such costs, charges or expenses,
Lessor shall have the same rights and remedies as otherwise provided in this
Lease for the failure of Lessee to pay rent. It is the intention of the parties
hereto that this Lease shall not be terminable for any reason by the Lessee,
and that Lessee shall in no event be entitled to any abatement of or reduction
in rent payable hereunder, except as herein expressly provided. Any present or
future law to the contrary shall not alter this agreement of the parties.

4.3. ADJUSTMENT OF RENT. The monthly rental of this Lease shall be subject
to adjustment based on the Consumers Price Index (U.S. City Average All Items)
determined by the United States Department of Labor Bureau of Labor Statistics,
Washington, D. C., as follows:

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<PAGE> 3

The figure which shall be paid Consumers Price Index (U.S. City Average
All Items) for the month during which the term of this lease shall commence,
shall be used as a basis, and the said rental shall be adjusted if there is an
increase beginning on the first day of the sixty-first month of this lease by
the same ratio as such Consumers Price Index (sixty-first month of this lease)
is to the above same basis. Said adjustment shall be in effect far the ensuing
sixty-month period and shall be adjusted on the same formula on each
sixty-month period for the balance of the lease. Any adjustments may be either
up or down after the first such adjustment, but in no event shall the rental at
any time be less than is otherwise provided herein.

5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof $51,000.00 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount hereinabove
stated and Lessee's failure to do so shall be a material breach of this Lease.
Lessor shall not be required to keep said deposit separate from its general
accounts. If Lessee performs all of Lessee's obligations hereunder, said
deposit, or so much thereof as has not theretofore been applied by Lessor,
shall be returned without payment of interest or other increment for its use,
to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) at the expiration of the term hereof, and after Lessee has
vacated the Premises.

6. USE

6.1. USE. The Premises shall be used and occupied only for general
offices, and warehousing of products of the Lessee, now sold by it as well as
the products to be processed, stored and sold by it in the future, and all
other purposes and uses relating to the business of the Lessee, all of which
uses are lawful, and the Lessor relies on such representation.

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<PAGE> 4
6.2. COMPLIANCE WITH LAW. Lessee shall at Lessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect during the term or any part of the term hereof
regulating the use by Lessee of the Premises. Lessee shall not use or permit
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant of the building containing
the Premises, which shall tend to disturb such other tenants.

6.3. CONDITION OF PREMISES. Lessee hereby accepts the Premises in their
condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has
made any representation or warranty as to the suitability of the Premises for
the conduct of Lessee's business.

7. MAINTENANCE, REPAIRS AND ALTERATIONS.

7.1. LESSEE'S OBLIGATIONS. Lessee shall during the term of this Lease keep
in good order, condition and repair, the Premises and every part thereof,
structural or non-structural, and all adjacent sidewalks, landscaping,
driveways, parking lots, fences and signs located in the areas which are
adjacent to and included with the Premises, and Lessor shall incur no expense
nor have any obligation of any kind whatsoever in connection with maintenance
of the Premises, and Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair.

7.2. SURRENDER. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as when received, broom clean, ordinary wear and tear excepted. Lessee
shall repair any damage to the Premises occasioned by the removal of Lessee's
trade fixtures, furnishings and equipment pursuant to Paragraph 7.4 (c), which
repair shall include the patching and filling of holes and repair or structural
damage.

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<PAGE> 5
7.3. LESSOR'S RIGHTS. If Lessee fails to perform Lessee's obligations
under this Paragraph 7, Lessor may at its option (but shall not be required to)
enter upon the Premises, after ten (10) days' prior written notice to Lessee,
and put the same in good order, condition and repair, and the cost thereof
together with Interest thereon at the rate of 10% per annum shall become due
and payable as additional rental to Lessor together with Lessee's next rental
installment.

7.4. ALTERATIONS AND ADDITIONS.

(a) Lessee shall not, without Lessor's prior written consent, make any
alterations, improvements, additions, or utility installations in, on or about
the Premises, except for non-structural alterations not exceeding $1,000 in
cost. As used in this Paragraph 7.4, the term "utility installations" shall
include bus ducting, power panels, fluorescent fixtures, space heaters,
conduits and wiring. As a condition to giving such consent, Lessor may require
that Lessee agree to remove any such alterations, improvements, additions or
utility installations at the expiration of the term, and to restore the
Premises to their prior condition. As a further condition to giving such
consent, Lessor may require Lessee to provide Lessor, at Lessee's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half
times the estimated cost of such improvements, to insure Lessor against any
liability for mechanics' and materialmen's liens and to insure completion of
the work.

(b) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of
any work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.

(c) Unless Lessor requires their removal, as set forth in Paragraph 7.4
(a), all alterations, improvements, additions and utility installations
(whether or not such utility installations constitute trade fixtures of
Lessee), which may be made on the Premises, shall become the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
term. Notwithstanding the provisions of this Paragraph 7.4 (c), Lessee's

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<PAGE> 6
machinery and equipment, other than that which is affixed to the premises so
that it cannot be removed without material damage to the Premises, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions
of Paragraph 7.2.

8. INSURANCE; INDEMNITY.

8.1. INSURING PARTY. As used in this Paragraph 8, the term "insuring
party shall mean the party who has the obligation to obtain the insurance
required hereunder. The insuring party in this case shall be designated in
Paragraph 15.20. Whether the insuring party is the Lessor or the Lessee, Lessee
shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder. If Lessor is the insuring party Lessee shall, within ten
(10) days following demand by Lessor, reimburse Lessor for the cost of the
insurance so obtained.

8.2. LIABILITY INSURANCE. The insuring party shall obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Lessor and Lessee against any liability arising out
of the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in an amount of not less than
$300,000 for injury to or death of one person in any one accident or occurrence
and in an amount of not less than $600,000 for injury to or death of more than
one person in any one accident or occurrence. Such insurance shall further
insure Lessor and Lessee against liability for property damage of at least
$50,000. The limits of said insurance shall not, however, limit the liability
of Lessee hereunder. In the event that the Premises constitute a part of a
larger property said insurance shall have a Lessor's Protective Liability
endorsement attached thereto. If the insuring party shall fail to procure and
maintain said insurance the other party may but shall not be required to,
procure and maintain the same, but at the expense of Lessee.

8.3. PROPERTY INSURANCE. The insuring party shall obtain and keep in force
during the term of this. Lease a policy or policies of insurance covering
loss or damage to the Premises, in the amount of the full replacement value
thereof, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended

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<PAGE> 7
perils (all risk) and sprinkler leakage. Said insurance shall provide for
payment for loss thereunder to Lessor or to the holder of a first mortgage or
deed of trust on the Premises. If the insuring party shall fail to procure and
maintain said insurance the other party may, but shall not be required to,
procure and maintain the same, but at the expense of Lessee.

8.4. INSURANCE POLICIES. Insurance required hereunder shall be in
companies rated AAA or better in "Best's Insurance Guide". The insuring party
shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Lessor. No such policy shall be cancellable or
subject to reduction of coverage or other modification except after 10 days
prior written notice to Lessor. If Lessee is the insuring party, Lessee shall,
within 10 days prior to the expiration of such policies, furnish Lessor with
renewals or "binders" thereof, or Lessor may order such insurance and charge
the cost thereof to Lessee, which amount shall be payable by Lessee upon
demand. Lessee shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in Paragraph 8.3. If Lessee does
or permits to be dome anything which shall increase the cost of the insurance
policies referred to in Paragraph 8.3, then Lessee shall forthwith upon
Lessor's demand reimburse Lessor for any additional premiums attributable to
any act or omission or operation of Lessee causing such increase in the cost of
insurance. If Lessor is the insuring party, and if the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Lessor shall deliver to Lessee a written statement setting forth the amount of
any such insurance cost increase and showing in reasonable detail the manner in
which it has been computed.

8.5. WAIVER OF SUBROGATION. Lessee and Lessor each hereby waive any and
all rights of recovery against the other, or against the officers, employees,
agents and representatives of the other, for loss of or damage to such waiving
party or its property or the property of others under its control to the extent
that such loss or damage is insured against under any insurance policy in force
at the time of such loss or damage. The insuring party shall, upon obtaining
the policies of insurance required hereunder, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.

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<PAGE> 8
8.6. INDEMNITY. Lessee shall indemnify and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from
any negligence of the Lessee, or any of Lessee's agents, contractors, or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessor by reason of any such claim, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel satisfactory to Lessor.
Lessee, as a material part of the consideration to Lessor, hereby assumes all
risk of damage to property or injury to persons, in, upon or about the Premises
arising from any cause and Lessee hereby waives all claims in respect thereof
against Lessor.

8.7. EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or
about the Premises, nor shall Lessor be liable for injury to the person of
Lessee, Lessee's employees, agents or contractors, whether such damage of
injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause, whether said damage or injury results from conditions
arising upon the Premises or upon other portions of the building of which the
Premises are a part, or from other sources or places, and regardless of whether
the cause of such damage or injury or the means of repairing the same is
inaccessible to Lessee. Lessor shall not be liable for any damages arising from
any act or neglect of any other tenant, if any, of the building in which the
Premises are located.

9. DAMAGE OR DESTRUCTION; OBLIGATION TO REBUILD. In the event the
improvements on the Premises are damaged or destroyed, partially or totally,
from any cause

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whatsoever, whether or not such damage or destruction is covered by any
insurance required to be maintained under Paragraph 8, then Lessee shall
repair, restore, and rebuild the Premises to the condition existing immediately
prior to such damage or destruction and this Lease shall continue in full force
and effect. Such repair, restoration and rebuilding (all of which are herein
called the "repair") shall be commenced within a reasonable time after such
damage or destruction and shall be diligently prosecuted to completion. There
shall be no abatement of rent or of any other obligation of Lessee hereunder by
reason of such damage or destruction. The proceeds of any insurance maintained
under Paragraph 8.3 shall be made available to Lessee for payment of the cost
and expense of the repair; provided, however, that such proceeds may be made
available to Lessee subject to reasonable conditions including, but not limited
to, architect's certification of costs and retention of a percentage of such
proceeds pending final notice of completion. In the event that such proceeds
are not made available to Lessee within ninety (90) days after such damage or
destruction, Lessee shall have the option for 30 days, commencing on the
expiration of such 90-day period, of cancelling this Lease. If Lessee shall
exercise such option, Lessee shall have no further obligation hereunder and
shall have no further claim against Lessor; provided, however, that Lessor
shall return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor. Lessee shall exercise such option by
written notice to Lessor within said 30-day period. Lessor may require that
Lessee provide, at Lessee's sole cost and expense, a lien and completion bond
to insure against mechanics' or materialman's liens arising out of the repair,
and to insure completion of the repair. In the event that the insurance
proceeds are insufficient to cover the cost of the repair, then any amount in
excess thereof required to complete the repair shall be paid by Lessee.

10. REAL PROPERTY TAXES.

10.1. PAYMENT OF TAXES. Lessee shall pay all real property taxes
applicable to the Premises during the term of this Lease. All such payments
shall be made at least ten (10) days prior to the delinquency date of such
payment. Lessee shall promptly furnish Lessor with satisfactory evidence that
such taxes have been paid. If any such taxes paid by Lessee shall cover any
period of time

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prior to or after the expiration of the term hereof, Lessee's share of such
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to the extent required. If Lessee shall fail to pay any such
taxes, Lessor shall have the right to pay the same, in which case Lessee shall
repay such amount to Lessor with Lessee's next rent installment together with
interest at the rate of 10% per annum.

10.2. DEFINITION OF "REAL PROPERTY" TAX. As used herein, the term "real
property tax" shall include any form of assessment, license fee, commercial
rental tax, levy, penalty, or tax (other than inheritance or estate taxes),
imposed by any authority having the direct or indirect power to tax, including
any city, county, state or federal government, or any school, agricultural,
lighting, drainage or other improvement district thereof, as against any legal
or equitable interest of Lessor in the Premises or in the real property of
which the Premises are a part, as against Lessor's right to rent to other
income therefrom, or as against Lessor's business of leasing the Premises.

10.3. JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's reasonable determination thereof, in good faith,
shall be conclusive.

10.4. PERSONAL PROPERTY TAKES. lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment,
and all other personal property of Lessee contained in the Premises or
elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor.

11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises,
together with any taxes thereon. If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion to be determined by
Lessor of all charges jointly metered with other premises.

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12. ASSIGNMENT AND SUBLETTING

12.1. LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.

12.2. NO RELEASE OF LESSEE. Regardless of Lessor's consent, no subletting
or assignment shall release Lessee of Lessee's obligations or alter the primary
liability of Lessee to pay the rent and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting.

12.3. ATTORNEY'S FEES. In the event that Lessor shall consent to a
sublease or assignment under Paragraph 12.1, Lessee shall pay Lessor's
reasonable attorney's fees not to exceed $100 incurred in connection with
giving such consent.

13. DEFAULTS; REMEDIES.

13.1. DEFAULTS. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease by Lessee:

(a) The vacating or abandonment of the Premises by Lessee.

(b) The failure by Lessee to make any payment or rent or any other payment
required to be made by Lessee hereunder, as and when due, where such failure
shall continue for a period of three days after written notice thereof from
Lessor to Lessee.

(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice hereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee shall not
be

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deemed to be in default if Lessee commences such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.

(d) (i) The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; (ii) the filing by or against Lessee
of a petition to have Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Lessee, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.

13.2. REMEDIES. In the event of any such default or breach by Lessee,
Lessor may at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default or break:

(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession of the Premises to Lessor. In such event Lessor shall be
entitled to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of recovering
possession of the Premises; expenses of relenting, including necessary
renovation and alteration of, the Premises, reasonable attorney's fees, and any
real estate commission actually paid; the worth at the time of award by the
court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the amount of such
rental loss for the same period that Lessee proves could be reasonably avoided.
Unpaid installments or rent or other sums shall bear interest from the date due
at the rate of 10% per annum. In the event Lessee shall have abandoned the
Premises, Lessor shall have the option of (i) retaking possession of the
Premises and recovering from Lessee the amount specified in this Paragraph 13.2
(a), or (ii) proceeding under Paragraph 13.2 (b).

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(b) Maintain Lessee's right to possession in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the Premises. In
such event Lessor shall be entitled to enforce all of Lessor's rights and
remedies under this Lease, including the right to recover the rent as it
becomes due hereunder.

(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the State of California.

13.3. DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and
thereafter diligently prosecutes the same to completion.

13.4. LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed on Lessor by the
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within ten (10) days after such amount shall be
due, Lessee shall pay to Lessor a late charge equal to 10% of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies granted hereunder.

14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
all of which are herein called "condemnation", this Lease shall terminate as

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to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
improvements of the premises, or more than 25% of the land area of the Premises
which is not occupied by any improvements, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing only within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining except that the rent shall be
reduced in the proportion that the floor area taken bears to the total floor
area of the building situated on the Premises. Any award for the taking of all
or any part of the Premises under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the property of
Lessor, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any award for loss of or
damage to Lessee's trade fixtures and removable personal property. In the event
that this Lease is not terminated by reason of such condemnation, Lessor shall,
to the extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the
condemning authority. Lessee shall pay any amount in excess of such severance
damages required to complete such repair.

15. GENERAL PROVISIONS.

15.1. ESTOPPEL CERTIFICATE.

(a) Lessee shall at any time upon not less than ten (10) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and
the date to which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to Lessee's knowledge, any uncured
defaults

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<PAGE> 15
on the part of Lessor hereunder, or specifying such defaults if any are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.

(b) Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance.

(c) If Lessor desires to finance or refinance the Premises, or any part
thereof, Lessee hereby agrees to deliver to any lender designated by Lessor
such financial statements of Lessee as may be reasonably required by such
lender. All such financial statements shall be received by Lessor in confidence
and shall be used only for the purposes herein set forth.

15.2. SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

15.3. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at 10%
per annum from the date due. Payment of such interest shall not excuse or cure
any default by Lessee under this Lease.

15.4. TIME OF ESSENCE. Time is of the essence.

15.5. CAPTIONS. Article and paragraph captious are not a part hereof.

15.6. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective. This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification.

15.7. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and may be served personally or by regular mail, addressed
to Lessor and Lessee respectively at the addresses set forth after their
signatures at the end of this Lease.

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<PAGE> 16
15.8. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.

15.9. RECORDING. Lessee shall not record this Lease without Lessor's prior
written consent and such recordation shall, at the option of Lessor, constitute
a non-curable default of Lessee hereunder. Either party shall, upon request of
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.

15.10. HOLDING OVER. If Lessee remains in Possession of the Premises or
any part thereof after the expiration of the term hereof without the express
written consent of Lessor, such occupancy shall be a tenancy from month to
month at a rental in the amount of the last monthly rental plus all other
charges payable hereunder, and upon all the terms hereof applicable to a
month-to-month tenancy.

15.11. CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

15.12. COVENANTS AND CONDITIONS. Each provision of this Lease performable
by Lessee shall be deemed both a covenant and a condition.

15.13. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee, this Lease shall bind the
parties, their personal representatives, successors and assigns. This Lease
shall be governed by the laws of the State of California.

15.14. SUBORDINATION.

(a) This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation for security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made or the security thereof and to all renewals,

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<PAGE> 17
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's rights to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, dead of trust or ground lease or the date of
recording thereof.

(b) Lessee agrees to execute any documents required to effectuate such
subordination or to make this Lease prior to the lien of any mortgage, deed of
trust or ground lease, as the case may be, and failing to do so within ten (10)
days after written demand, does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney in fact and in Lessee's name, place and stead, to
do so.

15.15. ATTORNEY'S FEES. If either party named herein brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court.

15.16. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, or lenders, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.

15.17. SIGNS AND AUCTIONS. Lessee shall not place any sign upon the
Premises or conduct any auction thereon without Lessor's prior written consent.

15.18. MERGER. The voluntary or other surrender of this Lease by Lessee or
a mutual cancellation thereof, shall not work a merger, and shall, at the
option of Lessor, terminate all of any existing subtenancies or may, at the
option of Lessor, operate as an assignment to Lessor of any or all if such
subtenancies.

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<PAGE> 18
15.19. CORPORATE AUTHORITY. If Lessee is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the By-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Lessee is a corporation Lessee shall, within thirty (30)
days after execution of this Lease, deliver to Lessor a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.

15.20. INSURING PARTY. The insuring party under this Lease shall be the
LESSEE.

The parties hereto have executed this Lease at the place and on the dates
specified immediately adjacent to their respective signatures.

If this Lease has been filled in it has been prepared for submission to
your attorney for his approval. No representation or recommendation is
made as to the legal sufficiency, legal effect, or tax consequences of
this Lease or the transaction relating thereto.

EXECUTED AT
------------------------------ ----------------------------------

on
------------------------------ ----------------------------------

Address By /s/ ROBERT C. TANKLAGE
------------------------------ ----------------------------------
Robert C. Tanklage, Trustee

By /s/ CAROLYN M. JOHNSON
------------------------------ ----------------------------------
Carolyn M. Johnson, Trustee

By /s/ FRANK BARCLAY
------------------------------ ----------------------------------
Frank Barclay, Trustee

"Lessor"

Executed at Rosemead Calif LA VICTORIA FOODS, INC.,
a corporation
------------------------------ ----------------------------------

on 7/9/85 By /s/ ROBERT C. TANKLAGE
President
------------------------------ ----------------------------------

Address 9133 E. Garvey By /s/ ERNEST JOHNSON (Secretary)
------------------------------ ----------------------------------

"Lessee"

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<PAGE> 19

EXHIBIT A

DESCRIPTION

Description of 7.54 acre parcel of land located
at the Northeast corner of Proctor Avenue and
Sixth Avenue in City of Industry, California:

That certain parcel of land, situate in the City of Industry, County
of Los Angeles, State of California, being the southwesterly 691.00 feet of the
northwesterly 475.00 feet of Block 5, Tract No. 1343 as per map recorded in
Book 20, pages 10 and 11 of Maps, records of said County.

<PAGE> 20

MAP

<PAGE> 21

ADDENDUM TO LEASE AND AGREEMENT
CITY OF INDUSTRY LEASE

ITEM 3.1 SHALL READ: THIS LEASE SHALL EXPIRE ON JULY 31, 1995 WITH THREE
FIVE-YEAR OPTIONS, THRU JULY 31, 2010. ALL OTHER PROVISIONS REMAIN THE SAME.

LESSOR

/s/ ROBERT C. TANKLAGE
---------------------------------------
ROBERT C. TANKLAGE, TRUSTEE

---------------------------------------
CAROLYN M. JOHNSON, TRUSTEE

LA VICTORIA FOODS, A CORPORATION

/s/ ROBERT C. TANKLAGE
---------------------------------------
ROBERT C. TANKLAGE, PRESIDENT

---------------------------------------
ERNEST JOHNSON, SECRETARY

<PAGE> 1
EXHIBIT 10.7

LEASE AND AGREEMENT

1. PARTIES. THIS LEASE AND AGREEMENT is entered into this 28 day of November,
1974, to amend the lease entered into the 15 day of July, 1974, by and between
HENRY C. TANKLAGE, ERIKA A. TANKLAGE and LOUIS N. MANTALICA, Trustees under
that certain Declaration of Trust dated December 30, 1972 (herein called
"Lessor") and LA VICTORIA FOODS, INC., A California corporation, (herein called
"Lessee").

2. PREMISES. WHEREAS, the Lessee is in need of additional improvements for
its operations in the El Monte area, and

WHEREAS, Lessor is willing to build said building addition upon his
premises to Lessee's specifications.

NOW THEREFORE, it is mutually agreed as follows:

Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor
the additional premises which with original premises comprises a total square
foot area of 58,225 square feet, per specifications described in Exhibit "A"
the real property located in Los Angeles County, California, described in
Exhibit "B" attached hereto and made a part hereof.

3. TERM.

3.1 TERM. The term of this Lease shall be for twenty-five (25) years,
commencing on the date of occupancy, and ending twenty-five (25) years
thereafter.

3.2. DELAY IN COMMENCEMENT. Notwithstanding said commencement date,
if for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof, but in such case Lessee shall not be
obligated to pay rent until possession of the Premises is tendered to Lessee;
provided, however, that if Lessor shall not have delivered possession of the
Premises within (60) days from said commencement date, Lessee may, at Lessee's
option, by notice in writing to Lessor within ten (10) days thereafter, cancel
this Lease, in which event the parties shall be discharged from all obligations
hereunder. If Lessee occupies the Premises prior to said
<PAGE> 2
commencement date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the termination date, and Lessee shall pay
rent for such period at the initial monthly rates set forth below.

4. RENT. NET LEASE.

4.1. RENT. Lessee shall pay to Lessor as rent for promises Eighty
Seven Thousand Three Hundred Forty Dollars and Eighty Cents ($87,340.80) per
annum, payable in equal monthly installments of $7,278.40, in advance on the
first day of each month of the term hereof. Lessee shall pay Lessor upon the
execution of this Lease hereof $14,556.80, which represents the first and last
month's rental. Rent for any period during the term hereof which is for less
than one month shall be pro rata portion of the monthly installment. Rent shall
be payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may designate
in writing.

4.2. ADDITIONAL RENT. This Lease is what is commonly called a "net
lease", it being understood that Lessor shall receive the rent set forth in
Paragraph 4.1 free and clear of any and all other impositions, taxes, liens,
charges or expenses of any nature whatsoever in connection with the ownership
and operation of the Premises. In addition to the rent reserved by Paragraph
4.1, Lessee shall pay to the parties respectively entitled thereto all
impositions, insurance premiums, operating charges, maintenance charges,
construction costs, and any other charges, costs and expenses which arise or
may be contemplated under any provisions of this Lease during the term hereof.
All of such charges, costs and expenses shall constitute additional rent, and
upon the failure of Lessee to pay any of such costs, charges or expenses,
Lessor shall have the same rights and remedies as otherwise provided in this
Lease for the failure of Lessee to pay rent. It is the intention of the
parties hereto that this Lease shall not be terminable for any reason by the
Lessee, and that Lessee shall in no event be entitled to any abatement of or
reduction in rent payable hereunder, except as herein expressly provided. Any
present or future law to the contrary shall not alter this agreement of the
parties.

4.3. ADJUSTMENT OF RENT. The monthly rental of this Lease shall be
subject to adjustment based on the Consumers Price Index (U.S. City Average All
Items) determined by the United States Department of Labor Bureau of Labor
Statistics, Washington, D.C., as follows:

NOTE: 4.3. The C.P.I. (Consumer Price Index) rose from 224.2 to 315.3
during the period beginning December 1, 1979 to December 1, 1984, a 1.40633
increase. The rent was therefore adjusted to $15,432.88 per month. (10973.87 x
1.40633 or $15,432.88.

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<PAGE> 3
The figure which shall be paid Consumers Price Index (U.S. City Average
All Items) for the month during which the term of this lease shall commence,
shall be used as a basis, and the said rental shall be adjusted if there is an
increase beginning on the first day of the sixty-first month of this lease by
the same ratio as such Consumer Price Index (sixty-first month of this lease)
is to the above same basis. Said adjustment shall be in effect for the ensuing
sixty-month period and shall be adjusted on the same formula on each
sixty-month period for the balance of the lease. Any adjustments may be either
up or down after the first such adjustment, but in no event shall the rental at
any time be less than is otherwise provided herein.

5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
$7,278.40 as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease, Lessor may use,
apply or retain all or any portion of said deposit for the payment of any rent
or other charge in default or for the payment of any other sum to which Lessor
may become obligated by reason of Lessee's default, or to compensate Lessor for
any loss or damage which Lessor may suffer thereby. If Lessor so uses or
applies all or any portion of said deposit, Lessee shall within ten (10) days
after written demand therefor deposit cash with Lessor in an amount sufficient
to restore said deposit to the full amount hereinabove stated and Lessee's
failure to do so shall be a material breach of this Lease. Lessor shall not be
required to keep said deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit, or so much
thereof as has not theretofore been applied by Lessor, shall be returned
without payment of interest or other increment for its use, to Lessee (or, at
Lessor's option, to the last assignee, if any, of Lessee's interest hereunder)
at the expiration of the term hereof, and after Lessee has vacated the Premises.

6. USE

6.1 USE. The Premises shall be used and occupied only for general
offices, and warehousing of products of the Lessee, now sold by it as well as
the products to be processed, stored and sold by it in the future, and all
other purposes and uses relating to the business of the Lessee, all of which
uses are lawful, and the Lessor relies on such representation.

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<PAGE> 4
6.2 COMPLIANCE WITH LAW. Lessee shall, at Lessee's expense, comply
promptly with all applicable statutes, ordinances, rules, regulations, orders
and requirements in effect during the term or any part of the term hereof
regulating the use by Lessee of the Premises. Lessee shall not use or permit
the use of the Premises in any manner that will tend to create waste or a
nuisance or, if there shall be more than one tenant of the building containing
the Premises, which shall tend to disturb such other tenants.

6.3 CONDITION OF PREMISES. Lessee hereby accepts the Premises in
their condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has
made any representation or warranty as to the suitability of the Premises for
the conduct of Lessee's business.

7. MAINTENANCE, REPAIRS AND ALTERATIONS.

7.1 LESSEE'S OBLIGATIONS. Lessee shall during the term of this Lease
keep in good order, condition and repair, the Premises and every part thereof,
structural or non-structural, and all adjacent sidewalks, landscaping,
driveways, parking lots, fences and signs located in the areas which are
adjacent to and included with the Premises, and Lessor shall incur no expense
nor have any obligation of any kind whatsoever in connection with maintenance
of the Premises, and Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair.

7.2. SURRENDER. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as when received, broom clean, ordinary wear and tear excepted.
Lessee shall repair any damage to the Premises occasioned by the removal of
Lessee's trade fixtures, furnishings and equipment pursuant to Paragraph
7.4(c), which repair shall include the patching and filling of holes and repair
or structural damage.

-4-

<PAGE> 5
7.3. LESSOR'S RIGHTS. If Lessee fails to perform Lessee's obligations
under this Paragraph 7, Lessor may at its option (but shall not be required to)
enter upon the Premises, after ten (10) days' prior written notice to Lessee,
and put the same in good order, condition and repair, and the cost thereof
together with interest thereon at the rate of 10% per annum shall become due
and payable at additional rental to Lessor together with Lessee's next rental
installment.

7.4. ALTERATIONS AND ADDITIONS.

(a) Lessee shall not, without Lessor's prior written consent,
make any alterations, improvements, additions, or utility installations in, on
or about the Premises, except for non-structural alterations not exceeding
$1,000 in cost. As used in this Paragraph 7.4, the term "utility installations"
shall include bus ducting, power panels, fluorescent fixtures, space heaters,
conduits and wiring. As a condition to giving such consent, Lessor may require
that Lessee agree to remove any such alterations, improvements, additions or
utility installations at the expiration of the term, and to restore the
Premises to their prior condition. As a further condition to giving such
consent, Lessor may require Lessee to provide Lessor, at Lessee's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half
times the estimated cost of such improvements, to insure Lessor against any
liability for mechanics' and materialmen's liens and to insure completion of
the work.

(b) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or
for use in the Premises, which claims are or may be secured by any mechanics'
or materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of
any work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.

(c) Unless Lessor requires their removal, as set forth in
Paragraph 7.4(a), all alterations, improvements, additions and utility
installations (whether or not such utility installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall become the
property of Lessor and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this Paragraph
7.4(c), Lessee's

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<PAGE> 6
machinery and equipment, other than that which is affixed to the Premises so
that it cannot be removed without material damage to the Premises, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions
of paragraph 7.2.

8. INSURANCE; INDEMNITY.

8.1. INSURING PARTY. As used in this Paragraph 8, the term, "insuring
party" shall mean the party who has the obligation to obtain the insurance
required hereunder. The insuring party in this case shall be designated in
Paragraph 16.21. Whether the insuring party is the Lessor or the Lessee, Lessee
shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder. If Lessor is the insuring party Lessee shall, within ten
(10) days following demand by Lessor, reimburse Lessor for the cost of the
insurance so obtained.

8.2. LIABILITY INSURANCE. The insuring party shall obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance insuring Lessor and Lessee against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in an amount of not less than
$300,000 for injury to or death of one person in any one accident or occurrence
and in an amount of not less than $600,000 for injury to or death of more than
one person in any one accident or occurrence. Such insurance shall further
insure Lessor and Lessee against liability for property damage of at least
$50,000. The limits of said insurance shall not, however, limit the liability
of Lessee hereunder. In the event that the Premises constitute a part of a
larger property said insurance shall have a Lessor's Protective Liability
endorsement attached thereto. If the insuring party shall fail to procure and
maintain said insurance the other party may but shall not be required to,
procure and maintain the same, but at the expense of Lessee.

8.3. PROPERTY INSURANCE. The insuring party shall obtain and keep in
force during the term of this Lease a policy or policies of insurance covering
loss or damage to the Premises, in the amount of the full replacement value
thereof, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended

-6-
<PAGE> 7
perils (all risk) and sprinkler leakage. Said insurance shall provide for
payment for loss thereunder to Lessor or to the holder of a first mortgage or
deed of trust on the Premises. If the insuring party shall fail to procure and
maintain said insurance the other party may, but shall not be required to,
procure and maintain the same, but at the expense of Lessee.

8.4. INSURANCE POLICIES. Insurance required hereunder shall be in
companies rated AAA or better in "Best's Insurance Guide". The insuring party
shall deliver to the other party copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Lessor. No such policy shall be cancellable or
subject to reduction of coverage or other modification except after 10 days
prior written notice to Lessor. If Lessee is the insuring party, Lessee shall,
within 10 days prior to the expiration of such policies, furnish Lessor with
renewals or "binders" thereof, or Lessor may order such insurance and charge
the cost thereof to Lessee, which amount shall be payable by Lessee upon
demand. Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in Paragraph 8.3. If Lessee does or permits
to be done anything which shall increase the cost of the insurance policies
referred to in Paragraph 8.3, then Lessee shall forthwith upon Lessor's demand
reimburse Lessor for any additional premiums attributable to any act or
omission or operation of Lessee causing such increase in the cost of insurance.
If Lessor is the insuring party, and if the insurance policies maintained
hereunder cover other improvements in addition to the Premises, Lessor shall
deliver to Lessee a written statement setting forth the amount of any such
insurance cost increase and showing in reasonable detail the manner in which it
has been computed.

8.5. WAIVER OF SUBROGATION. Lessee and Lessor each hereby waive any
and all rights of recovery against the other, or against the officers,
employees, agents and representatives of the other, for loss of or damage to
such waiving party or its property or the property of others under its control
to the extent that such loss or damage is insured against under any insurance
policy in force at the time of such loss or damage. The insuring party shall,
upon obtaining the policies of insurance required hereunder, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation
is contained in this Lease.

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<PAGE> 8
8.6. INDEMNITY. Lessee shall indemnify and hold harmless Lessor from
and against any and all claims arising from Lessee's use of the Premises, of
from the conduct of Lessee's business or from any activity, work or things
done, permitted or suffered by Lessee in or about the Premises or elsewhere and
shall further indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease, or arising from
any negligence of the Lessee, or any of Lessee's agents, contractors, or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessor by reason of any such claim, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel satisfactory to Lessor.
Lessee, as a material part of the consideration to Lessor, hereby assumes all
risk of damage to property or injury to persons, in, upon or about the Premises
arising from any cause and Lessee hereby waives all claims in respect thereto
against Lessor.

8.7. EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises, nor shall Lessor be liable for injury to the
person of Lessee, Lessee's employees, agents or contractors, whether such
damage of injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said damage or injury results from
conditions arising upon the Premises or upon other portions of the buildings of
which the Premises are a part, or from other sources or places, and regardless
of whether the cause of such damage or injury or the means of repairing the
same is inaccessible to Lessee. Lessor shall not be liable for any damages
arising from any act or neglect of any other tenant, if any, of the building in
which the Premises are located.

9. DAMAGE OR DESTRUCTION; OBLIGATION TO REBUILD. In the event the
improvements on the Premises are damaged or destroyed, partially or totally,
from any cause

-8-
<PAGE> 9
whatsoever, whether or not such damage or destruction is covered by any
insurance required to be maintained under Paragraph 8, then Lessee shall
repair, restore, and rebuild the Premises to the condition existing
immediately prior to such damage or destruction and this Lease shall continue
in full force and effect. Such repair, restoration and rebuilding (all of which
are herein called the "repair") shall be commenced within a reasonable time
after such damage or destruction and shall be diligently prosecuted to
completion. There shall be no abatement of rent or of any other obligation of
Lessee hereunder by reason of such damage or destruction. The proceeds of any
insurance maintained under Paragraph 8.3 shall be made available to Lessee for
payment of the cost and expense of the repair; provided, however, that such
proceeds may be made available to Lessee subject to reasonable conditions
including, but not limited to, architect's certification of costs and retention
of a percentage of such proceeds pending final notice of completion. In the
event that such proceeds are not made available to Lessee within ninety (90)
days after such damage or destruction, Lessee shall have the option for 30
days, commencing on the expiration of such 90-day period, of cancelling this
Lease. If Lessee shall exercise such option, Lessee shall have no further
obligation hereunder and shall have no further claims against Lessor; provided,
however, that Lessor shall return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor. Lessee shall exercise
such option by written notice to Lessor within said 30-day period. Lessor may
require that Lessee provide, at Lessee's sole cost and expense, a lien and
completion bond to insure against mechanics' or materialmen's liens arising out
of the repair, and to insure completion of the repair. In the event that the
insurance proceeds are insufficient to cover the cost of the repair, then any
amount in excess thereof required to complete the repair shall be paid by
Lessee.

10. REAL PROPERTY TAXES.

-9-

10.2. DEFINITION OF "REAL PROPERTY" TAX. As used herein, the term
"real property tax" shall include any form of assessment, license fee,
commercial rental tax, levy, penalty, or tax (other than inheritance or estate
taxes), imposed by any authority having the direct or indirect power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement district thereof, as
against any legal or equitable interest of Lessor in the Premises or in the
real property of which the Premises are a part, as against Lessor's right to
rent or other income therefrom, or as against Lessor's business of leasing the
Premises.

10.4. PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon trade fixtures, furnishings,
equipment, and all other personal property of Lessee contained in the Premises
or elsewhere. When possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Lessor.

11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other premises.

-10-

<PAGE> 11
12. ASSIGNMENT AND SUBLETTING.

12.1. LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.

12.2. NO RELEASE OF LESSEE. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligations or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of
any provision hereof. Consent to one assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting.

13. DEFAULTS; REMEDIES.

13.1. DEFAULTS. The occurrence of any one or more of the following
events shall constitute a default and breach of this Lease by Lessee:

(a) The vacating or abandonment of the Premises by Lessee.

(b) The failure by Lessee to make any payment or rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of three days after written notice
thereof from Lessor to Lessee.

(c) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than described in paragraph (b) above, where such failure shall
continue for a period of 30 days after written notice hereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee shall not be

-11-
<PAGE> 12
deemed to be in default if Lessee commenced such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion.

(d)(i) The making by Lessee of any general assignment or general
arrangement for the benefit of creditors; (ii) the filing by or against Lessee
of a petition to have Lessee adjudged a bankrupt or a petition for
reorganization or arrangement under any law relating to bankruptcy (unless, in
the case of a petition filed against Lessee, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within 30
days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within 30 days.

13.2 REMEDIES. In the event of any such default or breach by Lessee,
Lessor may at any time thereafter, with or without notice or demand and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such default or breach:

(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorney's
fees, and any real estate commission actually paid; the worth at the time of
award by the court having jurisdiction thereof of the amount by which the
unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Lessee proves could be
reasonably avoided; that portion of the leasing commission paid by Lessor
pursuant to Article 15 applicable to the unexpired term of this Lease. Unpaid
installments or rent or other sums shall bear interest from the date due at the
rate of 10% per annum. In the event Lessee shall have abandoned the Premises,
Lessor shall have the option of (i) retaking possession of the Premises and
recovering from Lessee the amount

-12-
<PAGE> 13
specified in this Paragraph 13.2 (a), or (ii) proceeding under Paragraph 13.2
(b).

(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of lessor's
rights and remedies under this Lease, including the right to recover the rent
as it becomes due hereunder.

(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the State of California.

13.4. LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after such
amount shall be due, Lessee shall pay to Lessor a late charge equal to 10% of
such overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's default with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder.

14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power

- 13 -
<PAGE> 14
all of which are herein called "condemnation"), this Lease shall terminate as to
the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than 10% of the floor area of the
improvements on the premises, or more than 25% of the land area of the Premises
which is not occupied by any improvements, is taken by condemnation, Lessee may,
at Lessee's option, to be exercised in writing only within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining except that the rent shall be reduced in the
proportion that the floor area taken bears to the total floor area of the
building situated on the Premises. Any award for the taking of all or any part
of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any award for loss of or damage to
Lessee's trade fixtures and removable personal property. In the event that this
Lease is not terminated by reason of such condemnation, Lessor shall, to the
extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the condemning
authority. Lessee shall pay any amount in excess of such severance damages
required to complete such repair.

-14-
<PAGE> 15
16. GENERAL PROVISIONS.

16.1 ESTOPPEL CERTIFICATE.

(a) Lessee shall at any time upon not less than ten (10) days
prior written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease, as so modified, is in full force and effect)
and the date to which the rent and other charges are paid in advance, if any,
and (iii) acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of Lessor hereunder, or specifying such defaults if any are
claimed. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises.

(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there
are no uncured defaults in Lessor's performance, and (iii) that not more than
one month's rent has been paid in advance.

-15-
<PAGE> 16
Lessee. All such financial statements shall be received by Lessor in confidence
and shall be used only for the purposes herein set forth.

16.2. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean
only the owner or owners at the time in question of the fee title or a
lessee's interest in a ground lease of the Premises, and except as expressly
provided in Paragraph 15, in the event of any transfer of such title or
interest, Lessor herein named (and in case of any subsequent transfers the then
grantor) shall be relieved from the after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by lessor shall,
subject as aforesaid, be binding on Lessor's successors and assigns, only
during their respective periods of ownership.

16.3. SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

16.4. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear interest at 10%
per annum from the date due. Payment of such interest shall not excuse or cure
any default by Lessee under this Lease.

16.5. TIME OF ESSENCE. Time is of the essence.

16.6. CAPTIONS. Article and paragraph captions are not a part hereof.

16.7. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior agreement or understanding pertaining to any such matter shall
be effective. This Lease may be modified in writing only, signed by the parties
in interest at the time of the modification.

16.8. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and may be served personally or by regular mail, addressed
to Lessor and Lessee respectively at the addresses set forth after their
signatures at the end of this Lease.

-16-
<PAGE> 17
16.9. WAIVERS. No waiver by Lessor of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Lessee of the same or any other provision. Lessor's consent to or approval of
any act shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee of
any provision hereof, other than the failure of Lessee to pay the particular
rent so accepted, regardless of Lessor's knowledge of such preceding breach at
the time of acceptance of such rent.

16.10. RECORDING. Lessee shall not record this Lease without Lessor's
prior written consent and such recordation shall, at the option of Lessor,
constitute a non-curable default of Lessee hereunder. Either party shall, upon
request of the other, execute, acknowledge and deliver to the other a "short
form" memorandum of this Lease for recording purposes.

16.11. HOLDING OVER. If Lessee remains in possession of the Premises
or any part thereof after the expiration of the term hereof without the express
written consent of Lessor, such occupancy shall be a tenancy from month to
month at a rental in the amount of the last monthly rental plus all other
charges payable hereunder, and upon all the terms hereof applicable to a
month-to-month tenancy.

16.12. CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

16.13. COVENANTS AND CONDITIONS. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a condition.

16.14. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions
hereof restricting assignment or subletting by Lessee and subject to the
provisions of Paragraph 16.2, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State of California.

16.15. SUBORDINATION.

(a) This Lease, at Lesser's option, shall be subordinate to
any ground lease, mortgage, deed of trust, or any other hypothecation for
security now or hereafter placed upon the real property of which the Premises
are a part

-17-

<PAGE> 18
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust or ground lease, and shall give written
notice thereof to Lessee, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.

(b) Lessee agrees to execute any document required to effectuate such
subordination or to make this Lease prior to the lien of any mortgage, deed of
trust or ground lease, as the case may be, and failing to do so within ten (10)
days after written demand, does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney in fact and in Lessee's name, place and stead, to
do so.

16.16 ATTORNEY'S FEES. If either party or the broker named herein
brings an action to enforce the terms hereof or declare rights hereunder, the
prevailing party in any such action, on trial or appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.

16.17 LESSOR'S ACCESS. Lessor and Lessor's agents shall have the
right to enter the Premises at reasonable times for the purpose of inspecting
the same, showing the same to prospective purchasers, or lenders, and making
such alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, without rebate
of rent or liability to Lessee.

16.18. SIGNS AND AUCTIONS. Lessee shall not place any sign upon the
Premises or conduct any auction thereon without Lessor's prior written consent.

-18-
<PAGE> 19
16.19. MERGER. The voluntary or other surrender of this Lease by
Lessee or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subtenancies or may, at the
option of Lessor, operate as an assignment to Lessor of any or all of such
subtenancies.

16.20. CORPORATE AUTHORITY. If Lessee is a corporation, each
individual executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of said corporation, in accordance with a duly adopted resolution of the Board
of Directors of said corporation or in accordance with the By-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Lessee is a corporation Lessee shall, within thirty (30)
days after execution of this Lease, delivery to Lessor a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.

16.21. INSURING PARTY. The insuring party under this Lease shall be
the LESSEE
- ----------------------------------------------------------------------------.

The parties hereto have executed this Lease at the place and on the
dates specified immediately adjacent to their respective signatures.

If this Lease has been filled in it has been prepared for submission to
your attorney for his approval. No representation or recommendation is
made by the real estate broker or its agents or employees as to the
legal sufficiency, legal effect, or tax consequences of this Lease or
the transaction relating thereto.

Executed at EL MONTE, CA.
------------------------- ------------------------------------
on Jan. 15, 1974 By /s/ H.C. TANKLAGE
--------------------------------- ---------------------------------
Address 9133 Garvey Blvd. H.C. Tanklage, Trustee
----------------------------
By /s/ Erika A. Tanklage
--------------------------------- ---------------------------------
Erika A. Tanklage, Trustee

/s/ Louis N. Mantalica
---------------------------------
Louis N. Mantalica, Trustee
"Lessor"

Executed at EL MONTE, CA. LA VICTORIA FOODS, INC., a corporation
-------------------------- --------------------------------------
on Jan. 15, 1974 By J.A. Pingel - Vice Pres.
--------------------------------- ---------------------------------
Address 9133 Garvey Blvd.
---------------------------- By H.C. Tanklage - Pres.
---------------------------------
--------------------------------- "Lessee"

-19-
<PAGE> 20
That certain area described as warehouse on the plot plan comprises
51,000 square feet, which with original premises comprises a total of 58,225
square feet.

PARCEL 2, IN THE CITY OF EL MONTE, IN THE COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 254, FILED IN BOOK 30, PAGE 78, OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, TOGETHER WITH
THAT PORTION OF LOT 9 OF E. J. BALDWIN'S FIRST SUBDIVISION, IN THE RANCHO
POTRERO GRANDE, IN SAID CITY, COUNTY AND STATE, AS PER MAP RECORDED IN BOOK 66
PAGES 94 AND 95 OF MISCELLANEOUS RECORD, IN SAID OFFICE OF THE COUNTY
RECORDER.

EXHIBIT A
<PAGE> 21

[PLOT PLAN DIAGRAM]
<PAGE> 22
PARCEL 2, IN THE CITY OF EL MONTE, IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 254, FILED IN BOOK 30, PAGE 78, OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, TOGETHER WITH
THAT PORTION OF LOT 9 OF E. J. BALDWIN'S FIRST SUBDIVISION, IN THE RANCHO
POTRERO GRANDE, IN SAID CITY, COUNTY AND STATE, AS PER MAP RECORDED IN BOOK 66
PAGES 94 AND 95 OF MISCELLANEOUS RECORDS, IN SAID OFFICE OF THE COUNTY
RECORDER, DESCRIBED AS A WHOLE AS FOLLOWS:

BEGINNING AT THE NORTHWESTERLY CORNER OF SAID PARCEL 2; THENCE EASTERLY,
SOUTHERLY AND SOUTHWESTERLY ALONG THE NORTHERLY, EASTERLY AND SOUTHEASTERLY
BOUNDARY LINES (RESPECTIVELY) OF SAID PARCEL 2, TO A POINT ON SAID SOUTHEASTERLY
BOUNDARY LINE, DISTANT THEREON NORTH 42 DEGREE 20 FEET 40 INCHES EAST, 68.63
FEET FROM THE SOUTHWESTERLY TERMINUS OF THAT CERTAIN COURSE THEREIN, SHOWN ON
SAID PARCEL MAP NO. 254, AS HAVING A BEARING AND LENGTH OF "NORTH 42 DEGREE 25
FEET 10 INCHES EAST, 80.47 FEET"; THENCE LEAVING SAID SOUTHEASTERLY BOUNDARY
LINE, SOUTH 1 DEGREE 32 FEET 47 INCHES WEST, 101.70 FEET; THENCE SOUTH 6 DEGREE
30 FEET 57 INCHES WEST, 88.63 FEET; THENCE SOUTH 47 DEGREE 15 FEET 04 INCHES
WEST, 119.70 FEET TO A POINT ON THAT CERTAIN COURSE SHOWN ON SAID PARCEL MAP NO.
254 AS HAVING A BEARING AND LENGTH OF "NORTH 13 DEGREE 57 FEET 10 INCHES EAST,
463.00 FEET," SAID POINT BEING DISTANT ALONG SAID LAST MENTIONED CERTAIN COURSE,
SOUTH 13 DEGREE 52 FEET 40 INCHES WEST, 204.56 FEET FROM THE MOST SOUTHERLY
SOUTHEAST CORNER OF SAID PARCEL 2; THENCE SOUTH 47 DEGREE 15 FEET 04 INCHES
WEST, 81.44 FEET; THENCE NORTH 43 DEGREE 18 FEET 56 INCHES WEST 32.01 FEET;
THENCE SOUTH 49 DEGREE 32 FEET 55 INCHES WEST 69.89 FEET; THENCE SOUTH 43 DEGREE
22 FEET 23 INCHES EAST, 31.97 FEET; THENCE SOUTH 41 DEGREE 36 FEET 40 INCHES
WEST, 150.01 FEET TO THE NORTHERLY LINE OF GARVEY AVENUE, 100 FEET WIDE, AS
ESTABLISHED BY DEED RECORDED IN BOOK 13260 PAGE 372, OF OFFICIAL RECORDS, IN
SAID OFFICE OF THE COUNTY RECORDER; THENCE ALONG SAID NORTHERLY LINE, SOUTH 89
DEGREE 41 FEET 40 INCHES WEST, 163.74 FEET TO THAT CERTAIN COURSE IN THE
BOUNDARY LINE OF THAT CERTAIN PARCEL OF LAND DESIGNATED AS "TRACT NO. J-857" IN
CIVIL CASE NO. 9103-WM. UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF
CALIFORNIA CENTRAL DIVISION, A CERTIFIED COPY OF WHICH WAS RECORDED IN BOOK
42564 PAGE 382 OF SAID OFFICIAL RECORDS, AS HAVING A BEARING AND LENGTH OF
"SOUTH 44 DEGREE 41 FEET 40 INCHES WEST 307.85 FEET; THENCE ALONG SAID LAST
MENTIONED CERTAIN COURSE, SOUTH 44 DEGREE 45 FEET 15 INCHES WEST, TO THE
SOUTHERLY LINE OF SAID LOT 9; THENCE ALONG SAID SOUTHERLY LINE, SOUTH 89 DEGREE
45 FEET 15 INCHES WEST 56.67 FEET TO THAT CERTAIN COURSE IN THE EASTERLY LINE OF
THE LAND DESCRIBED IN THE DEED TO SIDNEY M. SMALLEY, RECORDED IN BOOK 23780 PAGE
389 OF SAID OFFICIAL RECORDS, AS HAVING A BEARING AND LENGTH OF "SOUTH 35 DEGREE
30 FEET WEST, 500.00 FEET"; THENCE NORTHEASTERLY ALONG SAID LAST MENTIONED
CERTAIN COURSE TO THE WESTERLY LINE OF "RUBIO WASH" AS DESCRIBED IN FINAL ORDER
OF CONDEMNATION ENTERED IN LOS ANGELES COUNTY SUPERIOR COURT, CASE NO. 8-3767, A
CERTIFIED COPY OF WHICH WAS RECORDED IN BOOK 6698 PAGE 201 OF DEEDS, RECORDS OF
SAID COUNTY; THENCE NORTHERLY ALONG SAID WESTERLY LINE TO A LINE PARALLEL WITH
AND DISTANT WESTERLY 2.00 FEET FROM SAID HEREINBEFORE MENTIONED CERTAIN COURSE
IN THE EASTERLY LINE OF SAID LAND OF SIDNEY M. SMALLEY; THENCE NORTHERLY ALONG
SAID PARALLEL LINE TO A LINE THAT BEARS SOUTH 89 DEGREES 46 FEET WEST, AND WHICH
PASSES THROUGH A POINT ON THE WEST LINE OF SAID LOT 9 DISTANT ALONG SAID WEST
LINE SOUTH 0 DEGREE 14 FEET EAST 710 FEET FROM THE NORTHWEST CORNER OF SAID LOT
9; THENCE EASTERLY ALONG SAID LINE SO BEARING, TO SAID HEREINBEFORE MENTIONED
CERTAIN COURSE IN THE EASTERLY LINE OF SAID LAND OF SIDNEY M. SMALLEY; THENCE
NORTHERLY ALONG SAID LAST MENTIONED CERTAIN COURSE, TO THE SOUTHWESTERLY CORNER
OF SAID PARCEL 2; THENCE NORTHERLY ALONG THE WESTERLY LINE OF SAID PARCEL 2, TO
THE POINT OF BEGINNING.

SUBJECT TO EASEMENTS, RIGHTS, RIGHTS OF WAY, COVENANTS AND CONDITIONS OF
RECORD.

EXHIBIT B
<PAGE> 23

AMENDMENT TO LEASE AND AGREEMENT
9133 E. Garvey Avenue

The Lease and Agreement dated November 28, 1974, between the Tanklage
Property Trust and La Victoria Foods is amended as follows:

Item 3.1 The term of this lease shall be extended to July 31, 2010.

Item 4.3 (2) The figure which was paid (Consumer Price Index, U.S.
City Average All Items) for the month of August, 1995 shall be used as a basis,
and said rental shall be adjusted on the first day of the 61st month following
August 1, 1995, by the same ratio as such Consumer Price Index (sixty-first
month of this lease) is to the above same basis. Said adjustment shall be in
effect for the ensuing 60 month period and shall be adjusted on the same
formula on each 60 month period for the balance of the lease. Any adjustment
may be either up or down after the first such adjustment, but in no event shall
the rental at any time be less than is otherwise permitted herein.

LESSOR:

DATED: OCT. 27, 1995. /s/ ROBERT C. TANKLAGE
--------------------------------------
Robert C. Tanklage, Trustee

DATED: OCT. 27, 1995. /s/ CAROLYN M. JOHNSON
--------------------------------------
Carolyn M. Johnson, Trustee

LESSEE:

LA VICTORIA FOODS, INC.
--------------------------------------

DATED: OCT. 27, 1995. /s/ ROBERT C. TANKLAGE
--------------------------------------
Robert C. Tanklage, President

DATED: OCT. 31, 1995. /s/ ERNEST JOHNSON
--------------------------------------
Ernest Johnson, Secretary

<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, relating to the financial statements of
Authentic Specialty Foods, Inc., and of our report dated May 27, 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
June 24, 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 May 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
June 24, 1997

<PAGE> 1
Exhibit 23.4

CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR

I, Robert K. Swanson, hereby consent to the use of my name in the
Registration Statement on Form S-1 of Authentic Specialty Foods, Inc. (the
"Registration Statement") to be filed with the Securities and Exchange
Commission as a person named therein to become a director of Authentic
Specialty Foods, Inc. contemporaneously with the closing of the offering to be
made pursuant thereto and the filing of this consent as an exhibit to the
Registration Statement.

/s/ ROBERT K. SWANSON
--------------------------------
Robert K. Swanson

June 20, 1997

<PAGE> 1
Exhibit 23.5

CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR

I, Charles A. Lynch, hereby consent to the use of my name in the
Registration Statement on Form S-1 of Authentic Specialty Foods, Inc. (the
"Registration Statement") to be filed with the Securities and Exchange
Commission as a person named therein to become a director of Authentic
Specialty Foods, Inc. contemporaneously with the closing of the offering to be
made pursuant thereto and the filing of this consent as an exhibit to the
Registration Statement.

/s/ CHARLES A. LYNCH
--------------------------------------
Charles A. Lynch

June 20, 1997

<PAGE> 1
Exhibit 23.6

CONSENT OF PERSON ABOUT TO BECOME A DIRECTOR

I, Tim G. Bruer, hereby consent to the use of my name in the
Registration Statement on Form S-1 of Authentic Specialty Foods, Inc. (the
"Registration Statement") to be filed with the Securities and Exchange
Commission as a person named therein to become a director of Authentic
Specialty Foods, Inc. contemporaneously with the closing of the offering to be
made pursuant thereto and the filing of this consent as an exhibit to the
Registration Statement.

/s/ TIM G. BRUER
---------------------------------
Tim G. Bruer

June 20, 1997

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 1,550
<ALLOWANCES> 75
<INVENTORY> 780
<CURRENT-ASSETS> 2,564
<PP&E> 4,022
<DEPRECIATION> 1,199
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0
0
<COMMON> 1,700
<OTHER-SE> 1,860
<TOTAL-LIABILITY-AND-EQUITY> 7,089
<SALES> 21,198
<TOTAL-REVENUES> 21,198
<CGS> 14,081
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<OTHER-EXPENSES> 6,768
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</TABLE>