Document:

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                                                                   EXHIBIT 10.37

                            ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of December 8,
2000 by and between ELENA'S FOOD SPECIALTIES, INC., a California corporation
(the "Seller") and MONTEREY PASTA COMPANY, a Delaware corporation ("Buyer").
This Agreement is made under the following circumstances:

                                    RECITALS:

     A.   Seller is the owner of certain food product lines and inventory,
recipes, formulas, processing technology, customer lists and trade names as more
particularly described hereinbelow (collectively, the "Assets"). Buyer
acknowledges that Seller will continue to manufacture and sell food products
other than those covered by this Agreement.

     B.   Seller has had access to trade secrets and confidential information
related to the Assets, the improper disclosure or misuse of which would
materially adversely affect the Assets and the business of Buyer and the within
transfer.

     C.   Seller and Buyer desire that Buyer purchase and acquire from Seller
all of Seller's respective rights, title and interest in the Assets on the terms
and conditions set forth herein.

     THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties contained in this Agreement, the parties agree
as follows:

                                   AGREEMENT:

1.   PURCHASE AND SALE OF ASSETS

     (a)  THE ASSETS. Subject to all of the terms and conditions set forth in
this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell,
convey, assign and deliver to Buyer, certain tangible and intangible property
owned or used by Seller in connection with Seller's polenta product line sold
under the trade name of "Nate's" (collectively the "Assets"), described as
follows:

          (i)  RECIPES. All recipes, ingredient lists, specifications, notes,
explanatory and background material pertaining thereto, as such recipes are
identified in Exhibit A (collectively the "Recipes") and all product made from
or derived from the Recipes ("Product"), produced subsequent to the Phase 1
Closing Date (as hereinbelow defined).

          (ii) INVENTORY. Subject to Buyer's inspection and approval, all
existing inventory of Product and packaging material.

          (iii) TECHNOLOGY. All of Seller's knowledge, expertise, technology,
advice, information and background regarding Nate's and the Recipes
(collectively, the "Technology").

          (iv) GOODWILL; MARKS. All of the goodwill associated with or used by
Seller in connection with the Recipes and marketing of Product (collectively,
the "Goodwill"); and, subject to the terms of the Limited License dated the date
of the Phase 1 Closing, the use of any and all trade names, trade marks, service
marks and/or designs associated with or used by Seller in connection with the
Recipes and all polenta line extensions (including but not limited to the

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name "Nate's ") (collectively, the "Marks"). The Marks are described in Exhibit
B. Buyer acknowledges that Seller will continue to use the name "Nate's" in
connection with the manufacture and sale of food products other than those
covered by the Agreement.

          (v)  CUSTOMER LISTS. Any and all lists of customers, wholesale or
retail, to whom Seller markets or has marketed the Product.

     (b)  PURCHASE PRICE; PAYMENT. Subject to the "Conditions to Payment", as
hereinafter set forth, the purchase price for the sale and transfer of the
Assets from Seller to Buyer and for the Covenants Not To Compete by Seller (as
described in Section 7(b)) shall be a maximum of Five Hundred and Fifty Thousand
Dollars ($550,000) plus cost of Inventory, which amount shall be paid as
follows:

          (i)  PHASE 1. At the Phase 1 Closing (as described in Section 2(b)(i),
below), subject to the "Conditions to Payment", Buyer shall pay to Seller the
sum of Four Hundred Fifty Thousand Dollars ($450,000) (the "Phase 1 Price"),
plus in cash at its carrying value or cost the value of all Inventory inspected
and approved by Buyer for purchase.

          (ii) PHASE 2. At the Phase 2 Closing (as described in Section
2(b)(ii), below), subject to the "Conditions to Payment", Buyer shall pay to
Seller up to the sum of One Hundred Thousand Dollars ($100,000.00), calculated
as follows (the "Phase 2 Price"):

     All sales of Product subject to the Agreement during the period of eight
months subsequent to the date of the Phase 1 Closing shall be calculated and
annualized. Seller shall pay in cash at the Phase 2 Closing (x) the amount of
such annualized sales in excess of Seven Hundred Fifty Thousand Dollars
($750,000) (y) times .375. Buyer shall make its best efforts to maximize the
sales of polenta goods during the eight months subsequent to the date of the
Phase 1 Closing.

     (c)  CONDITIONS TO PAYMENT. Payment by Buyer of the Purchase Price is
conditioned upon the satisfaction of the following conditions (the "Conditions
to Payment") at the time of Closing:

          (i)  PHASE 1.

               (1)  All representations and warranties of Seller as to the
Assets shall be true and correct as if made at the time of Closing.
               (2)  Seller shall have provided (1) all necessary Technology
pertaining to the Recipes, the Marks and the production of Product, and (2) the
Goodwill.
               (3)  There shall have been no default by Seller hereunder and no
breach of any of Seller's warranties or representations hereunder.
               (4)  The Boards of Directors of Seller and Buyer shall have
approved the Agreement.
               (5)  Buyer shall have completed a due diligence review of the
Assets and business of Seller satisfactory to Buyer in its sole discretion.

          (ii) PHASE 2.

               (1)  All representations and warranties of Seller shall be true
and correct as if made at the time of Closing.
               (2)  Seller shall have provided all necessary Technology.

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               (3)  There shall have been no default by Seller hereunder and no
breach of any of Seller's warranties or representations hereunder.

          (d)  PERFORMANCE. The transfer of the Assets shall be effected as
               follows:

               (i)  TRANSFER OF RECIPES. Seller shall, concurrently with the
Phase 1 Closing, transmit and deliver to Buyer the Recipes for Buyer's use in
developing line extensions and otherwise modifying the Recipes. Seller agrees to
execute any and all documents necessary to effect the transfer to Buyer of the
Recipes and to provide Technology as required to insure that the Recipes may be
produced in such manner and in such quantities as to reasonably satisfy Buyer.
Notwithstanding anything contained herein, Buyer is not restricted in any way in
its use, production, distribution and/or sale of Product and/or the Recipes.

               (ii) LICENSE OF MARKS. Seller shall execute and deliver the
Limited License as of the Phase 1 Closing.

               (iii) CO-PACK AGREEMENT. Seller shall execute and deliver the
Co-Pack Agreement dated the date of the Phase 1 Closing.

               (iv) FURTHER EXECUTION. Seller shall execute and deliver all such
bills of sale, assignments, releases and other documents and instruments as
Buyer or any of its successors in interest or assigns may at any time request to
further and more completely evidence and confirm the sale, assignment, transfer
and conveyance to Buyer pursuant to this Agreement of all right, claim, title
and interest in and to the Assets, subject to no liens, third-party rights,
third-party claims, liabilities, encumbrances or title defects of any kind.

          (e)  NO ASSUMPTION OF LIABILITIES. Buyer does not assume any
liabilities and/or contracts associated with Seller or any of the Assets. Any
and all other liabilities and obligations of Seller, or related to the Assets,
shall be retained by Seller, including, without limitation: (i) all accounts
payable, rental payments, license fees, fines or penalties, and other
outstanding debts to suppliers and other third parties; (ii) all salaries,
vacation pay, fringe benefits, expense reimbursements, shareholder loans,
trustee fees and any other amounts due to employees of the Seller or to any
other party; (iii) all sales, use or other taxes arising out of the sale of the
Assets; and (iv) any and all other taxes of any kind attributable to or measured
by any period before the Phase 1 Closing Date. All such liabilities shall remain
the sole liabilities and obligations of Seller (the "Retained Seller
Liabilities"), and Seller shall pay, perform or discharge such liabilities and
obligations, and remain solely responsible for the payment and performance of
the Retained Seller Liabilities when due.

          (f)  ALLOCATION OF PURCHASE PRICE. Buyer and Seller agree that the
Purchase Price for the Assets and Covenants Not To Compete by Seller and Buyer
shall be allocated according to Exhibit C. Seller and Buyer will each report and
use this allocation for tax purposes.

          (g)  TAXES.

                    (i)  Seller shall pay (1) any and all of Seller's federal
          and state taxes which result from the transactions contemplated by
          this Agreement, including all items of depreciation recapture and
          investment tax credit recapture, (2) all state or local sales tax
          which may be due in connection with the transactions contemplated by
          this Agreement, and (3) Seller's share, prorated as of the Phase 1
          Closing Date, of state and local personal property taxes pertaining to
          the Assets.

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                    (ii) Buyer shall not be responsible for any business,
          occupation, withholding or similar tax, or any taxes of any kind
          related to the period before the Phase 1 Closing Date.

2.   CLOSING

          (a)  TIME AND PLACE. The closing of the transaction to be consummated
by this Agreement (the "Closing") shall take place in two (2) phases upon the
satisfaction of the Conditions to Payment herein described. The date of the
Phase 1 Closing shall be December 8, 2000. The Phase 2 Closing shall take place
not later than ten (10) days following the day which is eight months after the
date of the Phase 1 Closing.

          (b)  PHASES OF CLOSING. The two (2) phases of the Closing shall occur
as follows:

               (i)  PHASE 1. Upon the satisfaction of the conditions to Phase 1
(as described in Section 1(c)(i) above), the Phase 1 Closing shall occur. Upon
the Phase 1 Closing, Seller shall deliver to Buyer clear title to the Assets and
Buyer shall deliver to Seller the Phase 1 Price.

               (ii) PHASE 2. Upon the satisfaction of the conditions to Phase 2
(as described in Section 1(c)(ii) above), the Phase 2 Closing shall occur. Upon
the Phase 2 Closing, Buyer shall deliver to Seller the Phase 2 Price.

          (c)  NO BROKERS' FEES. Each of Seller and Buyer hereby represent that,
except as set forth in the last sentence of this Section, they have not dealt
with any broker or salesperson in connection with this transaction and that no
commission is payable or shall be paid as a result of this Agreement. Each party
shall indemnify, defend, and hold the other party free and harmless from any
liability for any other claims for commissions, referral fees, or finder's fees
asserted by any third party. Buyer has contracted for the services of and shall
be solely responsible to pay the fees of Monterey Bay Corporate Development.

3.   EMPLOYEE MATTERS

          (a)  NO EMPLOYMENT BY BUYER. Buyer shall have no obligation hereunder
to employ any persons who are now employed or claim to have been employed by
Seller, and agrees not to employ any persons presently employed by Seller during
the term of the Limited License and for one year after termination thereof.

          (b)  SEVERANCE. Buyer shall have no obligation to provide any
severance or other payments for any employees of Seller. Seller acknowledges and
agrees that Seller is and will be solely responsible for paying any amounts due
to such employees including, without limitation, any accrued wages, vacation pay
or benefits.

4.   TERMINATION OF AGREEMENT

          (a)  This Agreement shall terminate automatically, unless otherwise
mutually agreed by the parties, in the event of the following:

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               (i)  If the conditions to the Phase 1 Closing are not satisfied
on or before 12 M., December 8, 2000, this Agreement shall terminate altogether.

               (ii) If all the conditions to the Phase 2 Closing are not
satisfied on or before 12 M., August 8, 2001, then, notwithstanding the
completion of the Phase 1 Closing, the Phase 2 Closing shall not occur and
Seller shall have no obligation to pay all or any portion of the Phase 2
Price.

          (b)  In the event of a termination of this Agreement provided for
herein, neither party thereafter shall have any responsibility by virtue of this
Agreement to the other, and any documents or other things owned by one party
that are in the possession of the other party shall be immediately returned to
the owner.

5.   REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants to Buyer as follows:

     (a)  OWNERSHIP OF ASSETS. Seller has good and marketable title to the
Assets, including any contract rights included therein, subject to no lien,
third-party right, third-party claims, charge, security interest, liability,
obligation, restriction, encumbrance or title defect of any kind, and all right,
claim, title and interest in and to the Assets is being sold, assigned,
transferred and conveyed to Buyer effective as of the Phase 1 Closing Date, free
of any and all such interests. Seller has full power and authority to sell and
transfer the Assets without the consent or approval of any other person or
authority, and, subject to the provisions of this Agreement, will transfer the
Assets to Buyer at the Phase 1 Closing free of liens, encumbrances, restrictions
or adverse claims or interests.

     (b)  TAXES. Seller has timely filed or has had filed on its behalf all
required income, franchise, gross receipts, sales, withholding and other tax
returns and reports and has paid all taxes, fees and governmental charges shown
on such returns and reports and all taxes, assessments, governmental charges and
levies otherwise due from it.

     (c)  LEGAL PROCEEDINGS. There is no pending or threatened action, suit,
proceeding, claim or arbitration, nor any pending or threatened investigation by
any governmental agency affecting the Assets, or relating to the transactions
contemplated by this Agreement. There is no outstanding order, writ, injunction
or decree of any court, government or governmental agency affecting the Assets.

     (d)  TRANSACTIONS NOT PROHIBITED. The consummation of the transactions
contemplated by this Agreement will not result in the breach of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) or allow the acceleration of the obligations of Seller
under any lease, license, promissory note, indenture, mortgage, deed of trust,
insurance policy or other instrument, arrangement, or agreement to which Seller
is a party or to which Seller or any of the Assets is subject, nor will such
consummation conflict with any license, certificate, permit or franchise of any
public authority held by Seller. The use by Buyer of the Marks, label and
packaging designs and artwork, the Recipes and the Technology does not

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and will not violate, conflict with or infringe any intellectual property or
other rights of any third party.

     (e)  ENFORCEABILITY. This Agreement and any documents described herein to
be delivered by Seller at the Closings shall be duly executed and, when
delivered as provided in this Agreement: (i) will constitute the legal, valid
and binding obligations of Seller, enforceable in accordance with their
respective terms; (ii) do not and will not violate or conflict with, result in a
breach or default under, or give any person or entity any right to terminate or
modify any contract, agreement or commitment of any kind applicable to Seller or
to any of the Assets; (iii) do not and will not violate, conflict with, result
in a breach or default under, or give any person or entity any right to
terminate or modify any order, writ, judgement, decree, license, permit,
approval, or authorization of any kind applicable to Seller, or to any of the
Assets, (iv) do not and will not violate or conflict with any law, statute,
rule, or regulation of any kind applicable to Seller or to any of the Assets;
and (v) do not and will not result in the creation or imposition of any lien,
third-party right, third-party claim, charge, security interest, liability,
restriction, encumbrance or title defect of any kind against or with respect to
any of the rights, properties, and assets of Seller, including the Assets.

     (f)  NO UNDISCLOSED LIABILITIES. Seller (i) did not have, as of the date of
this Agreement, any debts, liabilities or obligations, whether accrued,
absolute, contingent or otherwise, which are material to the condition, title or
operation of the Assets, (ii) has not incurred since the date of this Agreement,
any such debts, liabilities or obligations, and (iii) was not, as of the date of
this Agreement, or since such date has not become, a party to any contract or
agreement that may adversely affect the condition, title or operation of the
Assets.

     (g)  COMPLIANCE WITH LAWS. Seller has all licenses, permits and
authorizations necessary for the lawful operation of the Assets pursuant to all
applicable statutes, laws, ordinances, rules and regulations of all governmental
bodies, agencies and subdivisions having, asserting or claiming jurisdiction
over the Assets. Seller is not in violation of any laws or regulations, the
violation of which would have an adverse effect on the Assets.

     (h)  SUPPLIERS AND CUSTOMERS. Seller has received no notification from any
agent or representative of any customer for the Products that the customer
intends to discontinue or diminish its business relationship with Seller either
on account of the transactions contemplated hereunder or otherwise. Seller shall
use its best efforts to preserve the current relationships of Seller with
customers for the Products.

     (i)  ORGANIZATION AND AUTHORITY. Seller is a corporation (i) duly
organized, validly existing and in good standing under the laws of California,
and (ii) has all necessary power and authority to own the Assets conveyed by it
hereunder and to utilize the same in the current manner.

     (j)  TRUTH AT CLOSING. All representations and warranties contained in this
Section 5 will be true at each of the Closing Dates, as if made on and as of
each Closing Date, except to the extent of any changes or events specifically
authorized by this Agreement. All information contained in the attached Exhibits
is true, accurate and complete and the Exhibits do not omit

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any fact necessary to make any information or statement contained therein not
misleading in the context in which such information or statement is given or
made. There is no fact, event or circumstance known to Seller that has not been
fully, accurately and completely disclosed to Buyer that may reasonably be
anticipated to have a material and adverse effect on Buyer and/or the Assets.

6.   REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer represents and warrants to Seller as follows:

     (a)  BUYER IS A VALID CORPORATION. Buyer is a corporation duly organized,
     validly existing and in good standing under the laws of Delaware.

     (b)  BUYER'S AUTHORITY. Buyer has the power and authority to enter into and
perform its obligations under this Agreement and to own, use and operate its
rights, properties and assets and to conduct its business.

     (c)  ENFORCEABILITY. This Agreement and any documents described herein to
be delivered by Buyer at the Closings shall be duly executed and, when delivered
as provided in this Agreement: (i) will constitute the legal, valid and binding
obligations of Buyer, enforceable in accordance with their respective terms;
(ii) do not and will not violate or conflict with, or result in a breach or
default under any contract, agreement, writ, judgment, decree, license, permit,
approval or authorization of any kind applicable to Buyer.

7.   COVENANTS OF SELLER

     Seller makes the following covenants to and for the benefit of Buyer:

     (a)  CONDUCT OF BUSINESS IN NORMAL COURSE. Through the Phase 1 Closing
Date, except as otherwise expressly provided herein, Seller will maintain all
aspects of the Assets diligently and in substantially the same manner as has
previously been carried on and will not institute any unusual or novel methods
of manufacture or operation that will vary materially from the methods used by
Seller with respect to the Assets as of the date of this Agreement. In addition,
Seller shall use reasonable efforts to preserve and maintain the goodwill
associated with the Marks, including relationships with employees (subject to
the provisions of Article 3), suppliers and customers, and shall maintain
records pertaining thereto in a manner consistent with past practices of Seller.

     (b)  COVENANTS NOT TO COMPETE.

          (i)  Seller agrees that it will not directly or indirectly, engage in,
own, manage, operate, finance, participate in, perform services for, have an
interest in, or otherwise be involved with any person, firm, partnership,
corporation or business, whether as an employee, officer, director, agent,
security holder, creditor, consultant, shareholder, partner, trustee, joint
venturer, broker, distributor, sales representative or in any other capacity,
that engages in any activity that is the same or similar to, or competitive
with, the manufacture and sale of polenta and polenta products as now engaged in
by Seller at any time within three (3) years immediately following

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the Phase 2 Closing Date, or so long as Buyer or Buyer's successors carry on a
like business, whichever first occurs.

          (ii) Seller covenants and agrees that, for a period of three (3) years
from and after the date of the Phase 2 Closing, it will not solicit or attempt
to induce (or assist any other person or entity in soliciting or attempting to
induce) any person or entity who is or was, on the date of this Agreement or at
any time within one year prior to the date of this Agreement, a customer of or
supplier to Seller with respect to the manufacture and sale of polenta and
polenta products as now engaged in by Seller (A) to refuse to become a customer
of or supplier to Buyer or any of its successors in interest or assigns, or (B)
if such person or entity is or becomes a customer of or supplier to Buyer or any
of its successors in interest or assigns, to terminate or modify his, her or its
relationship with Buyer or such successor in interest or assign.

          (iii) For a period of three (3) years from and after the date of the
Phase 2 Closing, Seller covenants and agrees to promptly refer to Buyer any and
all orders and inquiries that Seller may receive for any polenta products.

          (iv) Seller covenants and agrees that, from and after the date of this
Agreement, the use of the name Nate's shall be governed solely by the terms of
the Limited License.

     (c)  CONFIDENTIAL INFORMATION. Seller acknowledges and agrees that it has
had access to trade secrets and confidential information related to the Assets,
the improper disclosure or misuse of which would materially adversely affect the
ability of Buyer to make use of the Assets, and that its covenants and
agreements contained in this Section 7 are in furtherance of and ancillary to
the purchase and sale transactions contemplated by this Agreement and are
reasonable and necessary to preserve and protect the Assets and the trade
secrets, confidential information and goodwill included therein. Seller
covenants and agrees not to divulge, communicate, use to the detriment of Buyer,
or for the benefit of any other business, firm, person, partnership, or
corporation, or otherwise misuse, any of Seller's confidential information,
trade secrets, data, or customer lists, including but not limited to the
Technology and/or the Marks.

     (d)  TECHNOLOGY. In providing the Technology, Seller shall be acting solely
as an independent contractor and not as an employee or agent of Buyer or any of
its successors in interest or assigns. In providing the Technology, Seller shall
not be authorized to incur any liability or obligation, enter into any agreement
or make any commitment on behalf of Buyer or any of its successors in interest
or assigns

     (e)  REMEDIES REASONABLE The covenants of Seller contained in this Section
7 are reasonable in duration and geographic scope. In the event of a breach of
these covenants by Seller, Buyer shall be entitled to injunctive relief, as well
as to damages sustained and the recovery of actual attorneys' fees and all costs
incurred to enforce these covenants. The time period for which such party is
subject to such covenant or agreement shall be extended by the amount of time
such party was in breach or default under such covenant or agreement.

     (f)  NO FURTHER NEGOTIATIONS BY SELLER. During the pendency of the
Closings, so long as this Agreement has not been terminated as provided under
its terms, Seller agrees that it shall not solicit offers from or negotiate in
any way with any prospective purchaser of the Assets.

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8.   COVENANT OF BUYER

     Until the Phase 1 Closing has been consummated hereunder, Buyer will hold
in confidence, and will not use to the detriment of Seller, any data and
information obtained from Seller in connection with this Agreement. If the Phase
1 Closing is not consummated as herein provided, Buyer shall return to Seller
all writings respecting such data and information as Seller may reasonably
request and shall retain in confidence and not use for its own benefit any data
or information respecting Seller or the Assets.

9.   INDEMNIFICATION

     (a)  SELLER. Seller covenants and agrees to indemnify, hold harmless and
defend Buyer, its successors in interest and assigns and their respective
shareholders, partners, members, directors, officers, managers, employees,
agents and representatives from and against (i) all liabilities, losses, claims,
demands, suits, judgments, damages and expenses (including reasonable legal
expenses) resulting from a breach or nonfulfillment of any of the
representations, warranties, covenants and agreements of Seller set forth in
this Agreement, (ii) all losses, damages, costs and expenses relating to,
arising out of or attributable to any lien, third-party right, third-party
claim, charge, security interest, liability, obligation, restriction,
encumbrance or title defect of any kind with respect to any of the Assets, (iii)
all Retained Seller Liabilities, and (iv) attorneys' fees and other costs and
expenses, judgements and amounts paid in settlement or compromise of any
third-party action, lawsuit, proceeding, citation or investigation relating to,
arising out of or attributable to any matter referred to in clauses (i) - (iii)
of this Section 9(a). In the event that Buyer sustains any liabilities, losses,
damages and expenses which are covered by Seller's indemnification under this
paragraph, Buyer may elect to offset the same against any amount then payable to
Seller.

     (b)  BUYER. Except as otherwise provided in this Agreement, Buyer agrees to
defend, indemnify and hold harmless Seller against all liabilities, losses,
claims, demands, suits, judgments, damages and expenses (including reasonable
legal expenses) resulting from a breach or nonfulfillment of any of the
representations, warranties, agreements and covenants of Buyer set forth in this
Agreement.

     (c)  NOTIFICATION. If any third-party claim is asserted relating to any
liability specified in Sections 9(a) and/or 9(b), the party against which such
claim is made shall promptly give notice of such claim to the indemnifying party
and the indemnifying party shall have the sole right, at its or his own expense,
to contest or to compromise and settle such claim.

10.  PRORATION

     Except as otherwise agreed by the parties in writing, there shall be no
prorations between Buyer and Seller. All expenses incurred in connection with
the use of the Assets prior to the Phase 1 Closing Date shall be the
responsibility of Seller and all expenses incurred in connection with the use of
the Assets after the Phase 1 Closing Date shall be the responsibility of Buyer.

11.  MISCELLANEOUS

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     (a)  EXPENSES. Except as expressly provided herein, Buyer and Seller will
pay their own expenses, including fees of their respective, attorneys,
accountants and consultants, incurred in connection with this transaction,
provided that Seller shall reimburse Buyer for up to $2,500 of document
production costs, which amount Buyer will deduct from the Phase 1 Closing Price.

     (b)  FURTHER ASSURANCES. Seller and Buyer shall, from time to time
subsequent to the date hereof, at the other party's request and without further
consideration, execute and deliver such instruments of conveyance, assignment
and transfer and take such other actions as the other party may reasonably
request to carry into effect the purpose of this Agreement.

     (c)  NOTICES. Any notices, payments or reports required or permitted
hereunder shall be in writing and shall be given by personal delivery, or by
telecopier or United States mail, certified, registered or express with return
receipt requested, postage prepaid and shall be deemed to be effective two (2)
business days after the mailing, or upon the day of transmission of a telecopy
(provided transmission is completed within the hours of 9:00am to 4:30pm at the
location of receipt), or on the date of delivery if delivered personally, at the
following addresses, or such other addresses as one party may from time to time
give the other in writing:

To Seller:                          Elena's Food Specialties, Inc.
                                    405 Allerton Avenue
                                    South San Francisco, CA 94080
                                    Attn: Peter Sartorio
                                    TELEPHONE:(650)871-8700
                                    FAX:(650)871-0502

                                    Copy to:
                                    Peter S. Buchanan, Esq.
                                    Law Offices of Peter S. Buchanan
                                    170 Columbus Avenue, 5th Floor
                                    San Francisco, CA 94133
                                    TELEPHONE:(415)362-1717 ext. 214
                                              (415)868-2471
                                    FAX:(415)362-7237
                                        (415)868-0706

To Buyer:                           Monterey Pasta Company
                                    1528 Moffett St.
                                    Salinas, CA 93905
                                    Attention: Stephen L. Brinkman
                                    TELEPHONE:(831)753-6262 x103
                                    FAX:(831)753-6257

                                    Copy to:
                                    John W. Carr, Esq.
                                    Shapiro Buchman, Provine & Patton, LLP

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                                    1333 No. California Blvd., Suite 350
                                    Walnut Creek, CA 94596
                                    TELEPHONE:(925)944-9700 x154
                                    FAX:(925)944-9701

     (d)  SURVIVAL OF TERMS. All representations, warranties and covenants
contained in this Agreement or in any certificate or other instrument delivered
by or on behalf of the parties hereto shall be continuous and shall survive the
execution of this Agreement, the Closings and the delivery of any documents
transferring title to the Assets to Buyer pursuant to this Agreement.

     (e)  CONFIDENTIAL INFORMATION. Each party agrees that all confidential
information furnished to it pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement shall be treated as confidential and
it shall not use or disclose such information, with the following exceptions:

          (i)  Neither party shall be obligated to keep in confidence or incur
any liability for disclosure of information received which:

               (1)  was already known to the recipient at the time of its
receipt;
               (2)  was permitted in writing to be disclosed by the person or
persons to whom it was obtained;
               (3)  was within the public domain at the time of its disclosure
to the recipient;
               (4)  comes into the public domain without any breach of this
Agreement;
               (5)  becomes known or available to the recipient other than as a
result of any breach of this Agreement by recipient;
               (6)  is validly required to be disclosed by a court or
governmental agency; or
               (7)  is required to be disclosed to enforce the disclosing
party's rights under this Agreement.

          (ii) Buyer shall have no obligation after the consummation of the
Phase 1 Closing to maintain the confidentiality of information transferred to
Buyer in connection with the Assets. Buyer will issue a press release concurrent
with the Phase 1 Closing, the content of which shall be subject to the
reasonable prior approval of Seller.

     (f)  COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which when taken together shall
constitute one and the same instrument.

     (g)  EXHIBITS. All exhibits referred to in this Agreement that are attached
to this Agreement form a part of this Agreement and are incorporated herein by
this reference.

     (h)  INTERPRETATION. The captions used herein are for convenience of
reference only and shall not be considered part of this Agreement nor limit or
otherwise affect the meaning of any provision hereof. Usage of the singular or
plural number or the masculine, feminine or neuter gender shall include the
others, as the context may require.

     (i)  WAIVERS. No waiver or failure of enforcement by either of the parties
hereto of any term or condition of this Agreement shall be effective unless in
writing, nor shall it operate as a waiver of any other breach of such term or
condition or of any other term or condition.

                                       11

<PAGE>

     (j)  BINDING EFFECT. The terms and conditions of this Agreement shall inure
to the benefit of, and be binding upon, the respective successors and assigns of
the parties but are not intended, not shall this Agreement be construed, to
confer any enforceable rights on any person not a party hereto.

     (k)  GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

     (l)  ENTIRE AGREEMENT. This Agreement, along with the Limited License , the
Co-Pack Agreement and the Approved Supplier Insurance and Indemnification
Warranty and Agreement between the parties dated the same date as the Agreement,
contains the entire agreement between the parties with respect to this subject
matter hereof, supersedes any and all prior negotiations, correspondence,
understanding and agreements between the parties with respect to the subject
matter hereof, and may be modified only by a written instrument executed by both
parties hereto.

     (m) MEDIATION OF DISPUTES. Any controversy arising out of the performance
of this Agreement or regarding the interpretation of this Agreement is subject
to a good faith effort at resolution through non-binding mediation before any
complaint (whether a civil complaint in court or a complaint in arbitration) may
be filed. Mediation is a process in which parties attempt to resolve a dispute
by submitting it to an impartial, neutral mediator who is authorized to
facilitate the resolution of the dispute but who is not empowered to impose a
settlement on the parties. The mediation fee, if any, shall be divided equally
among the parties involved. The parties agree to limit the admissibility in any
subsequent litigation or proceeding of anything said, any admissions made, and
any documents prepared, in the course of mediation, consistent with California
Evidence Code section 1152.5.

     IF ANY PARTY COMMENCES A COURT ACTION OR AN ARBITRATION PROCEEDING BASED ON
A DISPUTE OR CLAIM TO WHICH THIS SECTION APPLIES WITHOUT FIRST ATTEMPTING TO
RESOLVE THE MATTER IN GOOD FAITH THROUGH MEDIATION, THEN THAT PARTY SHALL NOT BE
ENTITLED TO RECOVER ATTORNEY'S FEES EVEN IF THEY WOULD OTHERWISE BE AVAILABLE TO
THAT PARTY IN A SUBSEQUENT COURT ACTION OR ARBITRATION PROCEEDING.

     (n)  ARBITRATION OF DISPUTES FOLLOWING MEDIATION. Any controversy or claim
arising out of, or relating to this Agreement, or the making, performance, or
interpretation thereof, which is not resolved through the mediation process
required by the preceding Section, shall be resolved by arbitration conducted in
Monterey County in accordance with the Rules of the American Arbitration
Association then existing, and judgment on the arbitration award may be entered
in any court having jurisdiction over the subject matter of the controversy.
Such award may be appealed to any appellate court having jurisdiction over the
matter to the same extent that an appeal would be permissible from a civil
judgment. The arbitrators selected shall be persons experienced in general
corporate matters or general business agreements, and shall make their awards
based upon the principles of California law. The Parties shall have the right to
discovery and the arbitration proceeding shall be reported by a certified court
reporter.

                                       12

<PAGE>

     BY THEIR EXECUTION OF THIS AGREEMENT, THE PARTIES ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THIS "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION. ADDITIONALLY, THE PARTIES ARE HEREBY
GIVING UP ANY RIGHTS THEY MIGHT OTHERWISE HAVE POSSESSED TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL; PROVIDED, HOWEVER, THE PARTIES ARE NOT
GIVING UP THEIR JUDICIAL RIGHTS TO APPEAL OF THE DECISION OF THE ARBITRATOR(S).
IF ANY PARTY REFUSES TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION,
SUCH PARTY MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA
CODE OF CIVIL PROCEDURE. THE PARTIES' AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY. THE PARTIES HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO
SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION TO NEUTRAL ARBITRATION.

     (o)  ASSIGNMENT. Buyer may sell, transfer, or assign this Agreement and its
right, liabilities and obligations hereunder to any successor to its business
and assets by way of merger, consolidation or sale of business.

     (p)  TIME. Time is of the essence herein.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date set forth above.

SELLER:  ELENA'S FOOD SPECIALTIES, INC., a California corporation

         By:   /s/ Peter J. Sartorio
               ------------------------
               Peter J. Sartorio
         Its:  President

BUYER:   MONTEREY PASTA COMPANY, a Delaware corporation

         By:   /s/ R. Lance Hewitt
               ------------------------
               R. Lance Hewitt
         Its:  President

         By:   /s/ Stephen L. Brinkman
               ------------------------
               Stephen L. Brinkman
         Its:  Secretary

                                       13

<PAGE>

                                    EXHIBIT A

                                     RECIPES

                                       14

<PAGE>

                                    EXHIBIT B

                                      MARKS

ALL TRANSFERABLE LICENSES, PERMITS AND AUTHORIZATIONS ASSOCIATED THEREWITH,
LABEL AND PACKAGING DESIGNS AND ART WORK

                                       15

<PAGE>

                                    EXHIBIT C

                          ALLOCATION OF PURCHASE PRICE
<TABLE>
<CAPTION>

ITEMS                                       AMOUNT
                                            ------
<S>                                      <C>
Goodwill and Customer and
Vendor Information                        $ 435,000

License                                   $  10,000

Covenant Not to Compete                   $   5,000

Maximum Earn-Out                          $ 100,000
                                            -------

         Total                            $ 550,000
</TABLE>

                                       16

<PAGE>

                             THE UNITED STATE OF AMERICA

                                       [LOGO]

                             CERTIFICATE OF REGISTRATION
                                 PRINCIPAL REGISTER

     The Mark shown in this certificate has been registered in the United
States Patent and Trademark Office to the named registrant.

     The records of the United States Patent and Trademark Office show that
an application for registration of the Mark shown in this Certificate was
filed in the Office; that the application was examined and determined to be
in compliance with the requirements of the law and with regulations
prescribed by the Commissioner of Patents and Trademarks; and that the
Applicant is entitled to registration of the Mark under the Trademark Act of
1946, as Amended.

     A copy of the Mark and pertinent data from the application are part of this
certificate.

     This registration shall remain in force for TEN (10) years, unless
terminated earlier as provided by law, and subject to compliance with the
provisions of Section 8 of the Trademark Act of 1946, as Amended.

         [SEAL]                                [SIGNATURE]

                                                ACTING COMMISSIONER OF
                                                PATENTS AND TRADEMARKS

<PAGE>

INTL. CL.:29
PRIOR U.S. CL.:46                                      REG. NO. 2,300,122
UNITED STATES PATENT AND TRADEMARK OFFICE              REGISTERED DEC. 14, 1999
--------------------------------------------------------------------------------

                                  TRADEMARK
                             PRINCIPAL REGISTER

                                  NATE'S
<TABLE>
<CAPTION>

<S>                                         <C>
ELITE FOODS, INC. (CALIFORNIA CORPORATION)   FIRST USE 12-1-1998; IN COMMERCE
489 CABOT ROAD                               12-1-1998.
SOUTH SAN FRANCISCO, CA 94080                SER. NO. 75-633,686, FILED 2-2-1999

  FOR: TOFU, IN CLASS 29 (U.S. CL.46)        TRAVIS BOOZER, EXAMINING ATTORNEY
</TABLE><PAGE>

                                                                    EXIBIT 10.38

                                 LIMITED LICENSE

     This Limited License ("License") is made and effective as of December 8,
2000 by and between ELENA'S FOOD SPECIALTIES, INC., a California corporation
("Licensor") and MONTEREY PASTA COMPANY, a Delaware corporation ("Licensee").

                                    RECITALS:

     A.   Licensor owns Federal Registration Number 2300122 for and uses the
trademark "Nate's" (the "Licensed Mark") in connection with the manufacture and
sale of certain food products.

     B.   In implementation of that certain Asset Purchase Agreement to which
Licensor and Licensee are parties, dated December 8, 2000, Licensee wishes to
use, and Licensor wishes to permit Licensee to use, the Licensed Mark upon and
subject to the terms and conditions of this License.

     NOW THEREFORE, in consideration of the foregoing and the mutual promises
and covenants set forth below, Licensor and Licensee agree as follows:

                                    LICENSE:

1.   OWNERSHIP OF LICENSED MARK. Licensee agrees that Licensor is and shall be
the exclusive owner of the Licensed Mark and all good will associated therewith,
and that this License does not grant to Licensee and Licensee shall not assert
any interest or property rights in the Licensed Mark, except the right to use
the same expressly set forth herein.

2.   GRANT OF LICENSE.

          (a)  Licensor hereby grants to Licensee, and Licensee hereby accepts,
an exclusive license subject to the terms and conditions of this License to use
the Licensed Mark only upon and in connection with the preparation, processing,
manufacture, sale, advertising, packaging and distribution of polenta and
polenta line extensions (the "Licensed Products"). In no event will Licensee be
required to use the Licensed Mark on any or all Licensed Products. The use of
the Licensed Mark permitted to Licensee hereby is subject also to that certain
Co-Pack Agreement between Licensor and Licensee dated the same date as this
License. Compensation to the Licensor for this License shall be as provided in
the Asset Purchase Agreement.

          (b)  Licensee shall have the right to arrange with another person,
firm or corporation: (i) to process and/or package the Licensed Products to be
sold under this License by Licensee; and (ii) to serve as a distributor for
Licensed Products to be sold under this License which have been processed and/or
packaged by or for Licensee and sold to such distributor. Any and all such
arrangements with third parties shall contain provisions suitable to protect
Licensor's rights in the Licensed Mark.

<PAGE>

3.   THIRD PARTY INFRINGEMENTS. In the event that Licensor or Licensee become
aware of any infringement by a third party of the Licensed Mark, that party
shall inform the other in writing of all available evidence and details
available concerning said infringement. The parties shall then consult as to the
best manner in which to proceed. If both parties desire to litigate such
infringement they shall share the control, cost and any recovery thereof
equally. In the event that Licensee desires to litigate such infringement and
Licensor refuses or fails to do so (or refuses or fails to bear its share of the
cost thereof), Licensee may, in its sole discretion, and at its sole cost and
expense, bring and control suit to restrain such infringement. In that event,
Licensee shall be entitled to receive and retain, for its sole use and benefit,
any recovery awarded in such suit. Licensor shall, if requested by Licensee,
join as a party, at Licensee's expense, in such infringement action brought by
Licensee. In the event that Licensor desires to litigate such infringement and
Licensee refuses or fails to do so (or refuses or fails to bear its share of the
cost thereof), Licensor may in its sole discretion, and at its sole cost and
expense, bring and control suit to restrain such infringement. In that event,
Licensor shall be entitled to receive and retain, for its sole use and benefit,
any recovery awarded in such suit. Licensee shall, if requested by Licensor,
join as a party, at Licensor's expense, in such infringement action brought by
Licensor.

4.   WARRANTIES AND INDEMNITIES.

          (a)  Licensee agrees that Licensor shall have no responsibility for
the sale, advertising, distribution or sale of the Licensed Products and agrees
to defend, indemnify and hold harmless Licensor for any claims, liabilities,
losses, actions, proceedings, judgements, penalties, demands, damages, and
expenses (including without limitation, costs and attorney's fees whether or not
litigation is instituted) (collectively, the "Claims") arising out of or related
to the sale, advertising, distribution or sale of the Licensed Products, but
excluding any such Claims made by third parties asserting rights in the Licensed
Mark.

          (b)  Licensee represents and warrants that the entering into and
carrying out of the terms of this License will not violate or constitute a
breach of any License binding on Licensee.

          (c)  Licensor represents and warrants:

               (i)  That Licensor has not previously assigned, pledged or
otherwise encumbered any rights granted to Licensee under this License, and such
rights are and shall remain free of any lien, claim or charge of any kind during
the term of this License;

               (ii) That Licensor owns all right, title and interest in the
Federal Registration Number 2300122, and that Licensor shall take any and all
steps necessary to ensure that such registration remains in effect during the
term of this License;

               (iii) That the uses by Licensee of the Licensed Mark in
connection with this License will not infringe on the rights of any third party;
and

               (iv)  That the entering into and carrying out of the terms of
this License will not violate or constitute a breach of any License binding
on Licensor.

          (d)  Licensee agrees to indemnify, defend and hold Licensor, its
agents, directors, officers and employees harmless from and against any Claims
made against Licensor and arising out of or related to, any claim or suit by a
third party which is based upon breach of any of the representations or
warranties made by Licensee under Section 4(b) hereof.

                                       2

<PAGE>

          (e)  Licensor agrees to indemnify, defend and hold Licensee, its
agents, directors, officers and employees harmless from and against any Claims
made against Licensee and arising out of or related to, any claim or suit by a
third party which is based upon breach of any of the representations or
warranties made by Licensor under Section 4(c) hereof.

          (f)  The obligations of each of the indemnifying parties
("Indemnifying Party") under this Section 4 shall arise provided that each
person the Indemnifying Party has agreed to indemnify ("Indemnified Person")
gives the Indemnifying Party prompt written notice of any Claims and the
Indemnifying Party has control of the defense, litigation and, subject to the
conditions set forth below, settlement of any Claim. Each Indemnified Person
will have the right (subject to the conditions set forth below), but not the
obligation, to select counsel of its own choice, at its expense, to participate
in the defense. In no event shall the Indemnifying Party enter into any
settlement agreement with respect to any Claims without the prior written
approval of the Indemnified Person, which consent shall not be unreasonably
withheld. If such person withholds its consent to any settlement offer, such
person shall thereafter be obligated to participate in the defense. The
foregoing states the Indemnifying Party's entire obligation with respect to any
Claim.

          (g)  THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

5.   TERM AND TERMINATION.

          (a)  Subject to Section 5(b) hereof, the initial term of this License
shall commence upon the effective date hereof and continue for two years.
Thereafter, and subject to termination under Section 5(b) hereof, this License
shall automatically renew for one additional term of one year.

          (b)  This License may be terminated as follows:

               (i)  By mutual agreement by the parties at any time.

               (ii) By either party upon forty-five (45) days prior written
notice for material breach of a material term or condition of this License by
the other party unless (1) the breaching party has cured the breach within the
forty-five (45) days notice period, or (2) the breach is not curable within that
forty-five (45) day period in a commercially practical manner, and the breaching
party has taken steps reasonably calculated to effect such a cure to prevent
recurrence. Any notice under this paragraph shall specify the breach upon which
it is based.
               (iii) By Licensee, with or without cause, upon thirty (30) days
prior written notice.

          (c)  Subject to Section 5(e) hereof, upon any termination of this
License each party shall have no further obligations to the other.

          (d)  Any termination hereunder shall be in addition to any other
remedy either party may have at law or in equity which is not expressly waived
or limited by such party.

          (e)  This Section 5 and Section 4 shall survive termination of this
License.

                                       3

<PAGE>

6.   GENERAL PROVISIONS

          (a)  NOTIFICATION. All notices required or permitted under this
License shall be in writing and shall be given either by personal service,
overnight courier, registered mail or certified mail, return receipt requested,
or confirmed facsimile transmission (a facsimile transmission for which
confirmation of receipt has been received) sent during normal business hours of
the receiving party, with a confirming copy sent to the addressee by express
courier within two days of the facsimile transmission, at the respective
addresses set forth below or such other address as a party may designate by
notice to the other. Mailed notices shall be deemed received five (5) days from
the date of mailing.

To Licensor:                        Elena's Food Specialties, Inc.
                                    405 Allerton Avenue
                                    South San Francisco, CA 94080
                                    Attn: Peter Sartorio
                                    TELEPHONE:(650) 871-8700
                                    FAX:(650) 871-0502

    Copy to:                        Peter S. Buchanan, Esq.
                                    Law Offices of Peter S. Buchanan
                                    170 Columbus Avenue, 5th Floor
                                    San Francisco, CA 94133
                                    TELEPHONE:(415) 362-1717 ext. 214 or
                                              (415) 868-2471
                                    FAX:(415) 362-7237 or (415) 868-0706

To Licensee:                        Monterey Pasta Company
                                    1528 Moffett St.
                                    Salinas, CA 93905
                                    Attention: Stephen L. Brinkman
                                    TELEPHONE:(831) 753-6262 x103
                                    FAX:(831) 753-6257

    Copy to:                        John W. Carr, Esq.
                                    Shapiro Buchman, Provine & Patton, LLP
                                    1333 No. California Blvd., Suite 350
                                    Walnut Creek, CA 94596
                                    TELEPHONE:(925) 944-9700 x154
                                    FAX:(925) 944-9701

          (b)  ASSIGNMENT. Neither party shall assign or transfer any rights or
obligations under this License without the prior written consent of the other
party, except in connection with any merger, sale or other transaction in which
the business of the assigning party is transferred as a whole. Subject to the
foregoing, this License shall inure to the benefit of and shall be binding upon
the parties and their successors and assigns.

                                       4

<PAGE>

          (c)  NO AGENCY. No party has the authority to make any statement,
representation, warranty or other commitment on behalf of the other, and this
License does not create any agency, employment, partnership, joint venture or
similar relationship between the parties.

          (d)  NON-WAIVER. The failure of a party to require performance by the
other party of any provision of this License shall not affect the full right to
require such performance at any subsequent time; nor shall the waiver by a party
of a breach of any provision of this License be taken or held to be a waiver of
the provision itself.

          (e)  SEVERABILITY. If any provision of this License is held invalid or
unenforceable for any reason, such invalidity shall not affect the validity of
the remaining provisions of this License.

          (f)  CONTROLLING LAW. This License shall be governed by the laws of
the State of California.

          (g)  FORCE-MAJEURE. Neither party shall be liable for any delay or
failure to meet its obligations pursuant to this License due to circumstances
beyond its reasonable control, including, but not limited to war, riots,
insurrection, civil commotion, labor strikes, lockouts, shortages, government
action (including export restrictions), factory or other labor conditions, fire,
flood or storm.

          (h)  ENTIRE AGREEMENT. This License, the Asset Purchase Agreement, the
Co-Pack Agreement and that certain Approved Supplier Insurance and
Indemnification Warranty and Agreement (the "Indemnification Agreement") contain
the entire understanding of the parties with respect to the matters contained
herein and therein and supersede all prior or contemporaneous proposals, oral or
written, understandings, representations, conditions and all other
communications between the parties relating to the subject matter hereof and
thereof. This License may not be modified except by a writing signed by
authorized representatives of both parties. There are no promises, covenants or
undertakings other than those expressly set forth in this License, the Asset
Purchase Agreement, the Co-Pack Agreement and the Indemnification Agreement.

     IN WITNESS WHEREOF, the parties have executed this License as of the date
first written above.

ELENA'S FOOD SPECIALTIES, INC. ("LICENSOR)

By: /s/ Peter J. Sartorio
    --------------------------------------------
      Peter J. Sartorio

Its:  PRESIDENT
    --------------------------------------------

                                       5

<PAGE>

MONTEREY PASTA COMPANY ("LICENSEE")

By: /s/ R. Lance Hewitt
    --------------------------------------------
      R. Lance Hewitt

Its:  PRESIDENT
    --------------------------------------------

                                       6

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