EXHIBIT 10.40
                          SALARY CONTINUATION AGREEMENT

     This Employment  Agreement (the "Agreement") is made effective as of August
11, 1995 by and between Sparta Foods, Inc. ("Sparta"),  a Minnesota corporation,
and A. Merrill Ayers ("Employee").

RECITALS:

     1.  Employee  has been  employed  by Sparta  since 1994 as Chief  Financial
Officer and has  performed  such other duties as a key employee of Sparta as the
parties have agreed to from time to time,  and Employee has extensive  knowledge
and experience relating to Sparta's business.

     2.  Sparta  and  Employee  desire  to set  forth  in this  Agreement  their
understandings  and agreements  with respect to the  continuation  of Employee's
salary and the  payment of certain  other  benefits  in the event of a Change of
Control of Sparta and Employee's employment terminates.

DEFINITION:

         1.       Change of Control.  Change of Control shall mean:

                  (a) The merger or consolidation of Sparta with or into another
         corporation or other entity,  other than a merger or  consolidation  in
         which a majority in interest of the shareholders of Sparta  immediately
         prior to such merger or consolidation own a majority in interest of the
         equity of the surviving entity.

                  (b) The sale of all or substantially all of Sparta's assets to
         a corporation  or other entity other,  than a sale to a corporation  or
         other  entity  with  respect to which a  majority  in  interest  of the
         shareholders of Sparta immediately prior to such sale own a majority in
         interest of the equity of the purchasing corporation or entity.

                  (c) The sale of all or substantially  all of Sparta's stock to
         an individual,  corporation or other entity,  other than to persons who
         are  shareholders of Sparta as of the date hereof and their  affiliates
         and other than sales of securities as part of the private  placement or
         public offering of Sparta's stock to investors.

AGREEMENTS:

     1.  Termination  of  Employment.  Either  Sparta or Employee may  terminate
Employee's employment at any time and for any reason, with or without cause.

                  a. In the event of a Change of  Control  of Sparta  and either
         (i)  Sparta  or  any  successor  entity  (collectively  referred  to as
         "Sparta")  terminates   Employee's   employment  for  any  reason,  but
         excluding a  termination  "for cause" as defined in Section 1(b) below,
         or (ii)  Employee  terminates  his  employment  with  Sparta  for  "any
         reason,"  Employee,  or in the event of  Employee's  death,  Employee's
         estate,  shall  continue to receive  Employee's  base  salary,  payable
         bi-weekly,  for a period of  twenty-four  (24) months after the date of
         Employee's  termination.  Employee  shall also receive  payment for any
         unpaid  reimbursements  of Employee's  out-of-pocket  business expenses
         incurred by Employee during the regular  performance of his duties upon
         providing  receipts  or other  written  verification  of such  business
         expenses to Sparta,  and shall be entitled to such  bonuses,  incentive
         compensation or other employee benefits that may be available under the
         terms and conditions of any benefit plans or programs adopted by Sparta
         in which Employee participates.

                  Nothing in this Section 1(a) shall  obligate  Sparta to employ
         Employee  after the date of this  Agreement  for any period of time nor
         interfere  with Sparta's right to terminate  Employee's  employment for
         any reason, including termination for "cause" pursuant to Section 1(b),
         at any time  during the  Employee's  employment,  including  any period
         after the date of any written notice of termination provided


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         by Sparta to Employee but prior to the date of termination specified in
         such notice. If Employee dies or Employee's employment is terminated by
         Sparta for "cause"  under Section 1(b) after Sparta  provides  Employee
         with  written  notice of  termination,  the terms of Section 1(b) shall
         control.

                  b. Sparta may terminate Employee's employment  immediately for
         "cause." In the event of Employee's  death or termination of Employee's
         employment  by Sparta for cause,  Employee  (or,  in the case of death,
         Employee's  estate)  shall not be entitled to receive any base  salary,
         bonuses,  incentive  compensation  or other employee  benefit  payments
         following such  termination,  except for any unpaid  reimbursements  of
         Employee's  out-of-pocket business expenses incurred by Employee during
         the regular  performance of his duties upon providing receipts or other
         written verification of such business expenses to Sparta, and except as
         may be  otherwise  provided in this Section 1(b) or under the terms and
         conditions of any benefit plans or programs  adopted by Sparta in which
         Employee participates.

                  For purposes of this Section 1(b), "cause" shall mean:

                  (i)  Employee's  conviction of a felony under federal or state
         law, any act of dishonesty or  disloyalty  (including,  but not limited
         to, the willful  misappropriation of Sparta's funds), or the commission
         of any act involving moral turpitude;

                  (ii)  Employee's  willful  and  material  breach  of  Sparta's
         policies,  or his willful and material  failure,  neglect or refusal to
         perform  any of  the  duties  that  may be  assigned  to him by  mutual
         agreement of the parties or to comply with any of the  obligations  set
         forth in this Agreement;

                  (iii)  Employee's  willful  failure  to act  subject to and in
         accordance with the  Confidential  Information  provisions set forth in
         Section 2 of this Agreement;

                  (iv) Employee's  willful  misconduct  that: (A) materially and
         adversely effects the reputation of Sparta's business,  (B) is contrary
         to the best interests of Sparta or (C) conflicts with or is competitive
         with the business activities of Sparta; or

                  (v)   Employee's   (A)   physical  or  mental   inability   to
         substantially  perform his duties that has continued or can  reasonably
         be expected to continue for a period of sixty (60) consecutive days, as
         determined by Sparta's  Board of Directors in its sole  discretion,  or
         (B) adjudication as an incompetent and the appointment of a conservator
         for Employee's person or property by a court of competent jurisdiction;
         provided,  however,  that, if Employee's  employment is terminated  for
         cause  pursuant to this Section  1(b)(v),  Employee  shall  continue to
         receive his base salary  payable  bi-weekly for a period of twelve (12)
         months and benefits which Employee  participates after the date of such
         termination.

     An act or failure to act by Employee  shall not be  "willful"  unless it is
done, or omitted to be done, in bad faith and without any reasonable belief that
Employee's action or omission was in the best interests of Sparta.  With respect
to the events listed in clause (ii), (iii) or (iv),  Employee's employment shall
not be deemed to have been terminated for cause unless and until Sparta provides
Employee with a written notice that  describes in detail the conduct  supporting
such  termination  for cause and that  grants  Employee a period of at least ten
(10) days from the date of such notice to take  whatever  steps are necessary to
discontinue  the  conduct  described  therein  or  to  correct  the  effects  of
Employee's  prior conduct to the  satisfaction  of Sparta.  If Employee fails to
discontinue such conduct  described in such written notice or cannot correct the
effects of such prior conduct within such ten-day period,  Employee's employment
shall immediately terminate upon the expiration of such ten-day period, and such
termination shall be deemed to be for cause.

     2. Confidential Information. The Employee recognizes that Sparta is engaged
in a  competitive  business,  and that  Sparta has and will  develop and acquire
valuable, Confidential Information.  Employee further recognizes that during the
course of his employment he will  necessarily  have access to and be required to
use  Confidential  Information,  and that it is anticipated that his duties will
include the  development and refinement of  Confidential  Information.  Employee
further  recognizes and acknowledges that Sparta will suffer irreparable harm if
Employee,  after  developing  or becoming  familiar  with any such  Confidential
Information, makes any unauthorized

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disclosure or  communication of any such  Confidential  Information to any third
party or uses such  Confidential  Information  wrongfully or in competition with
Sparta  while  employed  by  Sparta.  Having  recognized  and  acknowledged  the
foregoing facts and circumstances, Employee hereby agrees as follows:

                  (a) For purposes of this Agreement, "Confidential Information"
         means any  information not generally known or held in the public domain
         and  proprietary to Sparta,  and includes,  without  limitation,  trade
         secrets, purchasing,  marketing,  advertising,  selling, accounting and
         licensing. By way of illustration,  but not a limitation,  Confidential
         Information may be contained in Sparta's  marketing plans or proposals,
         customer lists,  the particular  needs or requirements of customers and
         the identity of customers and potential customers. Information shall be
         treated  as  Confidential   Information  irrespective  of  its  source.
         However,   the  Company  acknowledges  that  Employee  has  substantial
         knowledge and expertise in accounting and financial management and that
         such  knowledge  and  expertise  acquired  to  the  date  of  Employees
         employment with Sparta shall not be deemed to be Sparta's  Confidential
         Information.

                  (b)  The  parties  acknowledge  and  agree  that  Confidential
         Information  not  generally  known or held in the public  domain is the
         sole  and  exclusive  property  of  Sparta.  During  the  term  of this
         Agreement,  Employee  shall hold in its strictest  confidence and shall
         never,  without the prior written  authorization  of Sparta,  disclose,
         divulge, assign, transfer,  convey, communicate or use any Confidential
         Information for his own or any third party's benefit or permit the same
         to be used in competition with Sparta.

                  (c) Upon termination of Employee's  employment with Sparta for
         any reason,  Employee  shall  promptly  deliver to Sparta all  records,
         memoranda,  notes, plans,  records,  reports or other documents and any
         copies  thereof  obtained  or  prepared  during a course of  Employee's
         employment and which contain or disclose any  Confidential  Information
         or which pertain in any materially way to Sparta's business.

     3. Vesting  Stock  Options.  In the event of a Change of Control of Sparta,
all outstanding  stock options granted to Employee shall vest immediately  prior
to the  effective  date of such  Change of Control and  Employee  shall have the
right to dispose of the shares Common Stock received upon exercise of such stock
options,   subject  to  the   federal  and  state   securities   and  tax  laws,
notwithstanding  the  restrictions  imposed on optionees after exercise of stock
options under Section 7(g) of Sparta Foods, Inc. Incentive Stock Option Plan (as
amended on July 8, 1993 and March 18, 1994).

     4.  Withholding.  Sparta  shall have the right to deduct  from any  amounts
payable under this  Agreement  any state or federal taxes  required by law to be
withheld with respect to such payments.

     5.  Severability.  If the  final  determination  of a  court  of  competent
jurisdiction  declares,  after the  expiration of the time within which judicial
review (if  permitted)  may be perfected,  that any term or provision  hereof is
invalid or unenforceable, (a) the remaining terms and provisions hereof shall be
unimpaired  and (b) the  invalid or  unenforceable  term or  provision  shall be
deemed  replaced by a term or provision that is valid and  enforceable  and that
comes closest to expressing the intention of the invalid or  unenforceable  term
or provision.

     6. Binding  Agreement.  This Agreement  shall be binding upon, and inure to
the benefit of, the parties hereto,  any successor to or assigns of Sparta,  and
Employee's  heirs and the personal  representative  of  Employee's  estate.  The
parties agree that the rights and  obligations  contained in this  Agreement may
not be delegated or assigned except as specifically provided herein.

     7. Amendment; Waiver. This Agreement may not be modified, amended or waived
in any manner except by an instrument in writing signed by both parties  hereto.
The waiver by either party of compliance with any provision of this Agreement by
the other  party  shall not  operate  or be  construed  as a waiver of any other
provision  of this  Agreement,  or of any  subsequent  breach by such party of a
provision of this Agreement.

     8. Specific Enforcement. Sparta and Employee acknowledge that, in the event
of a breach of this Agreement by Employee, money damages would be inadequate and
Sparta would have no adequate  remedy at law.  Accordingly,  in the event of any
controversy  concerning the rights or  obligations  under this  Agreement,  such
rights or  obligations  shall be enforceable in a court of equity by a decree of
specific performance. Employee further

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consents to the specific  enforcement  of this  Agreement  by Sparta  through an
injunction or restraining  order issued by the appropriate  court.  The remedies
provided in this Section 8 shall be cumulative and  nonexclusive and shall be in
addition to any other remedy to which Sparta may be entitled.

     9. Supersedes Previous  Agreements.  This Agreement supersedes all prior or
contemporaneous  negotiations,  commitments,  agreements  (written  or oral) and
writings  between Sparta and Employee with respect to the subject matter hereof.
All such other negotiations,  commitments,  agreements and writings will have no
further  force  or  effect,  and the  parties  to any  such  other  negotiation,
commitment,  agreement  or writing  will have no further  rights or  obligations
thereunder.

     10.  Governing  Law. All matters  affecting this  Agreement,  including the
validity thereof, are to be governed by, interpreted and construed in accordance
with the laws of the State of Minnesota.

     11.  Notices.  Any notice  hereunder  by either party to the other shall be
given in writing  by  personal  delivery,  by  telecopy  (with  confirmation  of
transmission) or by certified mail,  return receipt  requested.  If addressed to
Employee,  the notice  shall be  delivered  or mailed to Employee at the address
specified under  Employee's  signature  hereto,  or if addressed to Sparta,  the
notice shall be delivered  or mailed to Sparta at its  executive  offices to the
attention of its President and to the attention of its General Counsel. A notice
shall be deemed given,  if by personal  delivery or by telecopy,  on the date of
such  delivery or, if by  certified  mail,  on the date shown on the  applicable
return receipt.

     12. Headings.  The headings of Sections and paragraphs  herein are included
solely  for  convenience  of  reference  and shall not  control  the  meaning or
interpretation of any of the provisions of this Agreement.

     IN WITNESS  WHEREOF,  Sparta has caused the  Agreement  to be signed by its
officer  pursuant to the authority of its Board of  Directors,  and Employee has
executed this Agreement, as of the day and year first above written.

                                         SPARTA FOODS, INC.


                                         By:
                                             ------------------------------
                                             Joel Bachul, President and CEO


                                             ------------------------------
                                              A. Merrill Ayers

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