SEC Filing | The Hain Celestial Group

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As filed with the Securities and Exchange Commission on November 20, 1997
Registration No. 333-38939

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2
TO

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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THE HAIN FOOD GROUP, INC.
(Exact name of registrant as specified in its charter)

Delaware 22-3240619
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

50 Charles Lindbergh Boulevard
Uniondale, New York 11553
(516) 237-6200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

Irwin D. Simon
President and Chief Executive Officer
The Hain Food Group, Inc.
50 Charles Lindbergh Boulevard
Uniondale, New York 11553
(516) 237-6200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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copies to:

Roger Meltzer, Esq. C. Douglas Buford, Jr., Esq.
Cahill Gordon & Reindel Wright, Lindsey & Jennings LLP
80 Pine Street 200 West Capitol Avenue
New York, New York 10005 Little Rock, AR 72201
(212) 701-3000 (501) 212-1239

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Approximate date of commencement of proposed sale to the public: As soon
as practicable after this registration statement becomes effective. If the only
securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. / /

If any of the securities being registered on this Form are to be offered
to on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, 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. / /

---------------------
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission acting pursuant to
Section 8(a), may determine.
===============================================================================

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 NOVEMBER 20, 1997

PROSPECTUS

2,825,000 Shares

LOGO

Common Stock

Of the 2,825,000 shares of common stock, par value $0.01 per share (the
"Common Stock"), of The Hain Food Group, Inc. (the "Company") offered hereby
(the "Offering"), 2,500,000 shares are being sold by the Company and 325,000
shares are being sold by certain stockholders named herein (the "Selling
Stockholders"). The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders. See "Principal and Selling Stockholders"
and "Underwriting."

The Common Stock is traded on the NASDAQ National Market ("NASDAQ") under
the symbol "HAIN." On October 31, 1997, the last reported sales price of the
Common Stock as reported by NASDAQ was $10 3/4 per share. See "Price Range of
Common Stock and Dividend Policy."

See "Risk Factors" beginning on page 6 for a discussion of certain factors
that should be considered in connection with an investment in the Common Stock
offered hereby.
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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.
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Underwriting Proceeds
Price to Discounts and Proceeds to to Selling
Public Commissions(1) Company(2) Stockholders
- --------------------------------------------------------------------------------
Per Share ...... $ $ $ $
- --------------------------------------------------------------------------------
Total(3) ...... $ $ $ $
================================================================================

(1) The Company and the Selling Stockholders have agreed to indemnify the
several 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 $412,500.

(3) The Company has granted to the several Underwriters an option for 30 days
to purchase up to an additional 423,750 shares of Common Stock solely to
cover over-allotments, if any, on the same terms and conditions as the
shares offered hereby. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, and
subject to certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Common Stock will be made on or
about , 1997.
---------------------

Stephens Inc. CIBC Oppenheimer

The date of this Prospectus is , 1997.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING TRANSACTIONS EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."

PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. The summary is not intended to be a complete description of
the matters covered in this Prospectus and is subject to and qualified in its
entirety by, and should be read in conjunction with, the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference herein. Unless the
context otherwise requires, references herein to the "Company" are to The Hain
Food Group, Inc. and its consolidated subsidiaries, references to "Hain" are to
The Hain Food Group, Inc. and its consolidated subsidiaries prior to the
acquisition of Westbrae Natural, Inc. (the "Acquisition"), and references to
"Westbrae" are to Westbrae Natural, Inc. and its consolidated subsidiaries.
Unless otherwise indicated, the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option or of options granted under
any of the Company's option plans or the exercise of any outstanding warrants
to purchase Common Stock. Industry information used in this Prospectus was
obtained from industry sources that the Company believes to be reliable but
such information has not been independently verified.

The Company

The Company markets and sells dry, refrigerated and frozen specialty food
products under brand names which are sold as "better-for-you" products. The
product categories encompass natural and organic foods, medically-directed
foods, weight management and portion-control foods, and kosher foods. These
products are sold primarily to specialty and natural food distributors and are
marketed nationally to supermarkets, natural food stores, and other retail
classes of trade. The Company's products are produced by independent food
processors ("co-packers") using proprietary specifications and formulations
controlled by the Company.

The Company was organized in May 1993 to acquire certain specialty food
brands. Since its formation, the Company has completed several acquisitions of
companies or brands. In October 1997, the Company acquired Westbrae, a marketer
of over 300 high quality natural and organic food and snack products. In March
1997, the Company entered into a licensing agreement with Weight Watchers
Gourmet Food Company ("Weight Watchers"), a subsidiary of H.J. Heinz Company
("Heinz"), pursuant to which the Company manufactures, markets and sells Weight
Watchers dry and refrigerated products. In May 1997, the Company acquired The
Boston Popcorn Company ("Boston Better Snacks"), a marketer of high quality
popcorn and chip snack products. In July 1997, the Company acquired the Alba
brand of dry milk, shake and cocoa products from Heinz.

As a leading natural and organic food company, the Company sells a full
line of products under its "Hain Pure Foods", "Westbrae Natural", "Westsoy",
"Little Bear", "Bearitos" and "Farm Foods" brands. The Company's specialty food
products include cooking oil and condiment products under its "Hollywood"
brand; sugar-free, medically-directed food products under its "Estee" brand
(all of which carry the logo of the American Diabetes Association); low-sodium
food products under its "Featherweight" brand; weight management and
portion-control foods under the "Weight Watchers" brand; frozen kosher food
products under its "Kineret" and "Kosherific" brands; regular and reduced fat
snack products under its "Boston Better Snacks" brand; and dry milk products
under the "Alba" brand. The Company's brand names are well-recognized in the
various market categories they serve. The Company has acquired these brands
over the past four years and will seek future growth through internal
expansion, as well as the acquisition of complementary brands.

The Company's mission is to be the leading marketer and seller of
specialty food products, with a strong commitment to total quality management
in all departments. The Company intends to increase sales and improve operating
results by investing in product development and building brand equity. Key
elements of the Company's business strategy are: (i) continue growth through
mergers and acquisitions, (ii) invest in brands and consumer awareness, (iii)
outsource manufacturing, (iv) leverage economies of scale in production and
logistics, and (v) develop export opportunities.

The Company's corporate headquarters are located at 50 Charles Lindbergh
Boulevard, Uniondale, New York 11553. Its telephone number is (516) 237-6200.

The Offering

Common Stock offered by the Company ........................ 2,500,000 shares
Common Stock offered by the Selling
Stockholders ............................................. 325,000 shares
Common Stock to be outstanding after the Offering(1) ...... 11,386,899 shares
Use of Proceeds .......................................... To repay certain indebtedness of the
Company, including indebtedness under
the New Credit Facility (as defined
herein). See "Use of Proceeds."
NASDAQ symbol(2) .......................................... HAIN

- ------------
(1) Excludes 2,791,794 shares, of which 1,492,500 shares are reserved for
issuance upon the exercise of stock options (1,247,500 are currently
exercisable), 1,114,294 shares are reserved for issuance upon the exercise
of warrants (1,000,000 are currently exercisable) and 185,000 shares are
reserved for issuance upon the exercise of conditional options granted to
certain officers of the Company subject to stockholder approval. Includes
105,000 shares issued upon the exercise of options in connection with the
Offering. The average exercise price of such stock options and warrants is
$4.45.

(2) Prior to October 30, 1997, the Company's NASDAQ symbol was "NOSH".

Summary Historical and Pro Forma Financial Information
(In thousands, except per share amounts)

The following table sets forth summary historical financial information
for the Company for the periods indicated and summary pro forma financial
information reflecting the Acquisition as if it had occurred at the beginning
of each period presented for purposes of the statement of income information
and on September 30, 1997 for purposes of the balance sheet information. The
summary pro forma financial information is not necessarily representative of
what the Company's results of operations or financial position would have been
had the Acquisition in fact occurred on such dates and is not intended to
project the Company's results of operations or financial position for any
future period or date. The summary financial information should be read in
conjunction with the financial statements of the Company and the related notes
thereto included elsewhere or incorporated by reference in this Prospectus.

Three Months Ended
Year Ended June 30, September 30,
---------------------------------------------- ----------------------------------
Pro Forma Pro Forma
for for
Acquisition Acquisition
1995 1996 1997 1997 1996 1997 1997
--------- --------- --------- ------------- --------- --------- ------------

Statement of Income Information:
Net sales ................................. $58,076 $68,606 $65,353 $98,247 $15,437 $16,336 $26,064
Cost of sales ........................... 36,220 40,884 40,781 60,800 9,708 9,862 15,573
-------- -------- -------- -------- -------- -------- --------
Gross profit ........................... 21,856 27,722 24,572 37,447 5,729 6,474 10,491
Selling, general and administrative
expenses ................................. 15,334 20,905 19,651 29,317 4,333 4,837 7,849
Depreciation of property and equipment ... 158 184 178 272 41 48 71
Amortization of goodwill and other
intangible assets ..................... 474 651 740 1,283 185 210 346
-------- -------- -------- -------- -------- -------- --------
Operating income ........................ 5,890 5,982 4,003 6,575 1,170 1,379 2,225
Interest expense ........................ 1,351 1,745 1,639 3,638 458 420 899
Amortization of deferred financing costs 419 473 509 491 123 131 126
-------- -------- -------- -------- -------- -------- --------
Income before income taxes ............... 4,120 3,764 1,855 2,446 589 828 1,200
Provision for income taxes ............... 1,755 1,630 786 1,027 253 352 504
-------- -------- -------- -------- -------- -------- --------
Net income .............................. $ 2,365 $ 2,134 $ 1,069 $ 1,419 $ 336 $ 476 $ 696
======== ======== ======== ======== ======== ======== ========
Net income per common and common
equivalent share ........................ $ 0.28 $ 0.24 $ 0.12 $ 0.16 $ 0.04 $ 0.05 $ 0.07
======== ======== ======== ======== ======== ======== ========
Weighted average of common shares and
common share equivalents ............... 8,597 8,964 8,993 8,993 8,939 9,965 9,965
======== ======== ======== ======== ======== ======== ========

As of September 30, 1997
----------------------------------------
Pro Forma Pro Forma
for as
Actual Acquisition Adjusted(1)
--------- ------------- ------------
Balance Sheet Information:
Working capital. ............... $ 5,086 $ 8,160 $ 8,160
Total assets ..................... 49,431 79,475 79,475
Total debt ..................... 14,959 41,249 16,051
Total stockholders' equity ...... 26,828 26,828 52,026

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(1) As adjusted to give effect to the sale of 2,500,000 shares of Common Stock
by the Company in the Offering and the application of the net proceeds to
the Company therefrom as described in "Use of Proceeds" and includes
proceeds to the Company of $348,062 upon the exercise of options by
certain Selling Stockholders. See "Principal and Selling Stockholders."

RISK FACTORS

Prospective investors should carefully consider the following factors and
the other information contained in this Prospectus before purchasing any shares
of Common Stock.

Integration of Acquisitions

Since its formation, the Company has completed several acquisitions of
companies or brands, including the recent acquisitions of Westbrae in October
1997 and Boston Better Snacks in May 1997. In addition, in March 1997, the
Company entered into a licensing agreement with Weight Watchers, a subsidiary
of Heinz, pursuant to which the Company will manufacture, market and sell
Weight Watchers dry and refrigerated products. In July 1997, the Company
acquired the Alba brand from Heinz.

The Company's future success may be dependent upon its ability to
effectively integrate these companies and brands, including its ability to
realize potentially available marketing opportunities and cost savings, some of
which may involve operational changes. There can be no assurance as to the
timing or number of marketing opportunities or amount of cost savings that may
be realized as the result of the integration process. Further, there can be no
assurance that the Company will not experience difficulties with customers,
personnel or other parties as a result of these acquisitions, that these
acquisitions will enhance the Company's competitive position and business
prospects or that the combination of the Company and these acquisitions will be
successful. See "Business -- Recent Acquisitions."

Acquisition Strategy

The Company's acquisition strategy is based on identifying and acquiring
businesses with products and/or brands that complement the Company's existing
product mix. The Company will evaluate specific acquisition opportunities based
on prevailing market and economic conditions. There can be no assurance that
the Company will be able to successfully identify suitable acquisition
candidates, obtain necessary financing, complete acquisitions or integrate
acquired businesses into its operations. Acquisitions may not achieve
acceptable levels of operating results or otherwise perform as expected.
Acquisitions also involve special risks, including risks associated with
unanticipated problems, liabilities and contingencies, diversion of management
attention and possible adverse effects on earnings resulting from increased
goodwill amortization, increased interest costs, the issuance of additional
securities and difficulties related to the integration of the acquired
business. The Company may encounter increased competition for acquisitions in
the future, which could result in acquisition prices the Company does not
consider acceptable. In addition, the New Credit Facility (as defined) contains
restrictions that limit the Company's ability to make acquisitions. The Company
is unable to predict whether or when any prospective acquisition candidate will
become available or the likelihood that any acquisition will be completed. See
"Business--Business Strategy."

Fluctuations in Operating Results; Fluctuations in Quarterly Results

The Company's operating results have fluctuated in the past and will
fluctuate in the future based on many factors. These factors include failure to
adequately integrate acquired companies, fluctuations in the general economy,
increased competition, changes in operating expenses, expenses related to
acquisitions, the potential adverse effect of acquisitions, the size and timing
of customer orders, new product introductions, changes in customer preferences
and market acceptance of new products. Many of these factors are outside the
control of the Company. Due to these and many unforeseen factors, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of Common Stock would likely be materially adversely affected.

Evolving Customer Preferences

The Company's business is limited to specialty food products in niche
markets geared to consumers of natural foods, medically-directed and weight
management food products, kosher foods and other specialty food items. The
Company is subject to evolving consumer preferences for these products. While
the Company continues to diversify its product offerings, there can be no
assurance that demand for the Company's products will

continue at current levels or increase in the future. A significant shift in
consumer demand away from the Company's products or failure to maintain its
current market position would have a material adverse effect on the Company's
financial statements. For example, sales of the Company's rice cakes declined
from approximately $22 million during fiscal year 1996 to approximately $12
million in fiscal year 1997 due in part to competition from other snack
products and an overall decline in rice cake demand. The Company has other
significant product categories, such as cooking oils and non-dairy beverages,
which, if consumer demand for such categories were to decrease, could have a
material adverse effect on the Company's financial statements.

Competition

The geographic and product markets in which the Company operates are
highly competitive. The Company faces competition in all of its markets from
larger, more established companies that have greater financial, managerial,
sales and technical resources than the Company, and some of the Company's
markets are dominated by such large firms. There can be no assurance that the
Company can successfully compete for sales to distributors or stores that
purchase from such larger competitors. Larger competitors also may be able to
benefit from economies of scale, pricing advantages or the introduction of new
products that compete with the Company's products. There can be no assurance
that the Company will achieve the market penetration that it seeks in order to
implement its business strategy. There can be no assurance that competitors
will not introduce other products in the future that compete with the Company's
products or that such competitive products will not have an adverse effect on
the Company's financial statements.

Limited Management; Dependence on Key Personnel

The Company is highly dependent upon the services of Irwin D. Simon, its
President and Chief Executive Officer. Although the Company has entered into an
employment agreement with Mr. Simon and maintains $1.0 million of key man life
insurance on the life of Mr. Simon, the loss of the services of Mr. Simon could
have a material adverse effect on the Company's financial statements. In
addition, the Company's ability to develop and market its products and to
achieve and maintain a competitive position depends, in large part, on its
ability to attract and retain qualified operations, sales and marketing
personnel.

Reliance on Independent Distributors and Brokers

The Company relies upon sales efforts made by or through non-affiliated
food brokers to distributors and other customers. The success of its business
depends, in large part, upon the establishment of a strong distribution
network. Food brokers act as selling agents representing specific brands on a
non-exclusive basis under oral or written agreements generally terminable at
any time on 30 days notice and receive a percentage of net sales as
compensation. Distributors purchase directly for their own account for resale.
Two distributors, United Natural Foods and Tree of Life, accounted for 18.4%
and 13.8%, respectively, of the Company's pro forma fiscal year 1997 sales. The
loss of, or business disruption at, one or more of these distributors or
brokers may have a material adverse effect on the Company's financial
statements. If the Company were required to obtain additional or alternative
distribution and food brokerage agreements or arrangements in the future, there
can be no assurance it will be able to do so on satisfactory terms or in a
timely manner. The inability to enter into satisfactory brokerage agreements
may inhibit the Company's ability to implement its business plan or to
establish markets necessary to develop its products successfully. See
"Business--Sales and Marketing Structure" and "-- Customers."

Reliance on Independent Manufacturers and Co-Packers

The Company does not manufacture, produce or package any of the products
or brands which it markets, although it develops and owns the formulas and
recipes and designs the packaging for its products. Accordingly, the Company is
dependent upon independent manufacturers and co-packers to produce and package
its products. The loss of one or more of these manufacturers could have a
material adverse effect on the Company's financial statements until such time
as an alternate source of supply could be secured, which may be on less
favorable terms.

The Company obtains substantially all of its rice cake requirements from
two suppliers, a substantial portion of its Weight Watchers refrigerated
products from one supplier, and all of its Hollywood cooking oils from one
supplier. Failure to obtain in a timely manner and on comparable terms other
suppliers if a present supplier terminated its relationship with the Company
could have a material adverse effect on the Company's financial statements.

Trademark Ownership

The Company owns the principal trademarks for its products, including
HAIN PURE FOODS(R), HOLLYWOOD(R), KINERET(R), KOSHERIFIC(R), FARM FOODS(R),
ESTEE(R), FEATHERWEIGHT(R), WESTBRAE NATURALS(R), WESTSOY(R), LITTLE BEAR(R),
BEARITOS(R) and ALBA(R) and owns a number of other trademarks used on
individual products, such as those for ICE BEAN(R), PIZSOY(R), and BOSTON
LITE(R). The Company believes that such trademarks are important to the
marketing of the Company's products. In connection with the licensing
agreement between Weight Watchers and the Company, the Company obtained the
right to use the WEIGHT WATCHERS(R) and certain other trademarks. The
Company's inability to use these trademarks could have a material adverse
effect on the Company's financial statements.

Government Regulation

The manufacture, marketing, distribution and sale of the Company's
specialty food products are subject to various federal, state and local laws
and regulations governing the production, sale, safety, advertising, labeling
and ingredients of such products. In addition, the Company's kosher food
products are subject to additional regulation and inspection. There can be no
assurance that the Company, its manufacturers, distributors and co-packers will
be able to comply with all such laws and regulations in the future or that new
governmental laws and regulations will not be introduced which could result in
additional compliance costs, seizures, confiscation, recall or monetary fines,
any of which could prevent or inhibit the development, distribution and sale of
the Company's products or have a material adverse effect on the Company's
financial statements. In addition, product recalls could adversely affect sales
of other of the Company's products.

Product Liability

As a marketer of food products, the Company is subject to a risk of claims
for product liability. The Company maintains product liability insurance and
generally requires that its co-packers maintain product liability insurance
with the Company as a co-insured. There is no assurance that such coverage will
be sufficient to insure against claims which may be brought against the
Company, or that the Company will be able to maintain such insurance or obtain
additional insurance covering existing or new products. If a product liability
claim exceeding the Company's insurance coverage were to be successfully
asserted against the Company, it could have a material adverse effect on the
Company's financial statements.

Reliance on Certification

The Company must comply with the requirements of independent organizations
or certification authorities in order to make certain statements on the labels
of its products. For example, for the Company's Estee products to carry the
logo of the American Diabetes Association (the "ADA"), the packaging must meet
the standards of the ADA. In addition, the Company's kosher foods are certified
kosher by the Orthodox Union of Rabbis. The loss of any such independent
certifications or permissions could adversly affect the marketing position and
goodwill afforded such products, which could have a material adverse effect on
the Company's financial statements.

Control by Current Stockholders, Officers and Directors

Upon completion of the Offering, Mr. Simon, the Company's President and
Chief Executive Officer, together with the other officers and directors of the
Company, will beneficially own an aggregate of 23.6% of the Company's Common
Stock, on a fully diluted basis. Accordingly, the officers and directors of the
Company will be in a position to influence the election of the Company's
directors and otherwise influence stockholder action. See "Principal and
Selling Stockholders."

Authorization and Discretionary Issuance of Preferred Stock

The Company's Certificate of Incorporation authorizes the issuance of up
to 5,000,000 shares of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividends, liquidation,
conversion, voting or other rights which could decrease the amount of earnings
and assets available for distribution to holders of Common Stock and adversely
affect the relative voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock could be
used, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future. See "Description of
Capital Stock."

No Dividends

The Company has not paid any dividends on its Common Stock to date and
does not anticipate declaring or paying any dividends in the foreseeable
future. The ability of the Company to pay dividends is currently restricted by
the New Credit Facility and the Debentures (as defined herein). See "Price
Range of Common Stock and Dividend Policy."

Shares Eligible for Future Sale

The market price of the Common Stock could be adversely affected by the
sale of substantial amounts of Common Stock in the market following the
Offering. Upon consummation of the Offering, 1,391,004 shares may be deemed
"restricted securities" as that term is defined under the Securities Act of
1933, as amended (the "Securities Act"). In addition, upon consummation of the
Offering, 1,492,500 shares will be reserved for issuance under the Company's
stock option plans, of which 1,247,500 will be immediately exercisable, and
1,114,294 shares will be reserved for issuance upon the exercise of outstanding
warrants, of which 1,000,000 warrants will be immediately exercisable.
Following the expiration and/or release of certain contractual lock-up
agreements, "restricted securities" held by certain stockholders will be
available for public resale in accordance with Rule 144 under the Securities
Act. See "Description of Capital Stock -- Shares Eligible for Future Sale."

Forward-Looking Statements

This Prospectus contains certain forward-looking statements regarding
future financial condition and results of operations and the Company's business
operations. The words "expect," "estimate," "anticipate," "predict," "intend,"
and similar expressions are intended to identify forward-looking statements.
Such statements involve risks, uncertainties and assumptions, including but not
limited to industry and economic conditions and customer actions and the other
factors discussed in this Prospectus (including but not limited to statements
under the caption "Risk Factors") and in the Company's filings with the
Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.

USE OF PROCEEDS

The net proceeds to the Company from the Offering are expected to be
approximately $24.9 million ($29.1 million if the Underwriters' over-allotment
option is exercised in full), assuming an offering price to the public of
$10 3/4 per share. The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. In connection with the
Acquisition, the Company entered into a Second Amended and Restated Credit and
Term Loan Agreement dated October 14, 1997 (the "New Credit Facility") with
IBJ Schroder Bank & Trust Company providing for a term loan of $30.0 million
in the aggregate and a $10.0 million revolving credit facility. In accordance
with the New Credit Facility, the Company is required to use 50%, up to $15
million, of the proceeds of the Offering to repay a portion of the New Credit
Facility, without prepayment penalties. The balance of the net proceeds to the
Company from the Offering may be used, at the option of the Company, to
further reduce amounts outstanding under the New Credit Facility or to redeem
the Company's 12.5% Senior Subordinated Debentures due April 14, 2004 (the
"Debentures"). The New Credit Facility bears interest at rates equal to, at
the Company's option, either (i) 0.75% over the bank's base rate or (ii) 2.75%
over the Eurodollar Rate. The New Credit Facility terminates, and outstanding
principal is due, on September 30, 2003. The borrowings under the New Credit
Facility to be repaid with the proceeds of the Offering were used to fund the
Acquisition and to refinance indebtedness of the Company and Westbrae. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations --Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth (i) the historical capitalization of the
Company as of September 30, 1997, (ii) the pro forma capitalization of the
Company as of September 30, 1997 after giving effect to the Acquisition and
borrowings under the New Credit Facility and (iii) the pro forma capitalization
of the Company as of September 30, 1997, as adjusted to give effect to the sale
of shares of Common Stock in the Offering and the application of the net
proceeds therefrom as described in "Use of Proceeds" and includes proceeds to
the Company from the exercise of options by certain Selling Stockholders. This
table should be read in conjunction with the Company's financial statements and
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere or incorporated by reference in
this Prospectus.

As of September 30, 1997
-------------------------------------------
Pro Forma Pro Forma
for as
Historical Acquisition Adjusted
------------ --------------- ----------
(In thousands)

Cash and cash equivalents ........................... $ 184 $ 359 $ 359
======= ======= =======
Debt:
Senior term loan .................................... $ 3,339 $30,000 $ 4,802
Revolving credit facility ........................... 3,800 3,429 3,429
Senior subordinated debentures, net of unamortized
original issue discount ........................... 7,350 7,350 7,350
Other ................................................ 470 470 470
------- ------- -------
Total Debt ....................................... 14,959 41,249 16,051
------- ------- -------
Stockholders' equity:
Preferred stock, par value $0.01 per share; 5,000,000
shares authorized, none issued .................. -- -- --
Common stock, par value $0.01 per share; 40,000,000
shares authorized; 8,881,899 issued and 8,781,899
outstanding, 11,386,899 shares outstanding pro forma
as adjusted(1) .................................... 89 89 115
Additional paid-in capital ........................... 21,547 21,547 46,719
Retained earnings .................................... 5,467 5,467 5,467
(Less 100,000 treasury shares at cost) ............ (275) (275) (275)
------- ------- -------
Total stockholders' equity ........................ 26,828 26,828 52,026
------- ------- -------
Total capitalization ................................. $41,787 $68,077 $68,077
======= ======= =======

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock is traded on NASDAQ under the symbol "HAIN."
The following table sets forth, for the fiscal periods indicated, the high and
low sale prices per share of Common Stock on NASDAQ.

Price
--------------------------------------
Period High Low
------ ------------------ -----------------

Year Ended June 30, 1996
First quarter ................................. $ 4 1/2 $ 3 1/2
Second quarter ................................. 3 3/4 2 15/16
Third quarter .................................... 3 11/16 2 15/16
Fourth quarter ................................. 4 1/8 3 1/16

Year Ended June 30, 1997
First quarter ................................. $ 4 $ 3 1/16
Second quarter ................................. 4 3 1/4
Third quarter ................................. 5 3/4 3 3/8
Fourth quarter ................................. 5 5/16 4 1/8

Year Ending June 30, 1998
First quarter .................................... $ 12 1/16 $ 4 27/32
Second quarter (through October 28, 1997) ...... 12 13/16 7 7/8

On October 31, 1997 the last reported sale price of the Common Stock on
NASDAQ was $10 3/4 per share.

The Company has not paid any dividends on its Common Stock to date. The
Company intends to retain all future earnings for use in the development of its
business and does not anticipate declaring or paying any dividends in the
foreseeable future. The payment of all dividends will be at the discretion of
the Company's Board of Directors and will depend on, among other things, future
earnings, operations, capital requirements, contractual restrictions, the
general financial condition of the Company and general business conditions. The
ability of the Company to pay dividends is currently restricted by the New
Credit Facility and the Debentures. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION FOR THE COMPANY
(In thousands, except per share amounts)

The following table sets forth selected historical financial information
for the Company for the periods indicated and selected pro forma financial
information reflecting the Acquisition as if it had occurred at the beginning
of each period presented for purposes of the statements of income information
and on September 30, 1997 for purposes of the balance sheet information. The
selected historical financial information for each year in the five-year period
ended June 30, 1997 is derived from the audited consolidated financial
statements of the Company for each such year. The selected historical financial
information as of September 30, 1997 and for the three-month periods ended
September 30, 1996 and 1997 is derived from the unaudited financial statements
of the Company for such periods. In the opinion of management, all adjustments
consisting of normal recurring accruals considered necessary for a fair
presentation have been made. The results of operations for the three months
ended September 30,1997 are not necessarily indicative of the actual results
for the full fiscal year ending June 30, 1998. The selected pro forma financial
information is not necessarily representative of what the Company's results of
operations or financial position would have been had the Acquisition in fact
occurred at the beginning of each period presented or on September 30, 1997 and
is not intended to project the Company's results of operations or financial
position for any future period or date. The selected financial information
should be read in conjunction with the financial statements of the Company and
the related notes thereto included elsewhere or incorporated by reference in
this Prospectus.

Year Ended June 30,
--------------------------------------------------------------------
Pro Forma
for
Acquisition
1993 1994 1995 1996 1997 1997
--------- --------- --------- --------- --------- -------------

Statement of Income Information
Net sales ........................ $ 137 $14,963 $58,076 $68,606 $65,353 $98,247
Cost of sales ..................... 91 9,812 36,220 40,884 40,781 60,800
------- ------- -------- -------- -------- --------
Gross profit ..................... 46 5,151 21,856 27,722 24,572 37,447
Selling, general and administrative
expenses ........................ 120 3,976 15,334 20,905 19,651 29,317
Depreciation of property and
equipment ......................... 57 158 184 178 272
Amortization of goodwill and other
intangible assets ............... 1 208 474 651 740 1,283
------- ------- -------- -------- -------- --------
Operating income (loss) ......... (75) 910 5,890 5,982 4,003 6,575
Interest expense(1) ............... -- 1,095 1,351 1,745 1,639 3,638
Amortization of deferred financing
costs ........................... -- 97 419 473 509 491
------- ------- -------- -------- -------- --------
Income (loss) before income taxes (75) (282) 4,120 3,764 1,855 2,446
Provision for income taxes ......... -- 220 1,755 1,630 786 1,027
------- ------- -------- -------- -------- --------
Net income (loss) ............... $ (75) $ (502) $ 2,365 $ 2,134 $ 1,069 $ 1,419
======= ======= ======== ======== ======== ========
Net income (loss) per common and
common equivalent share ......... $(0.08) $(0.19) $ 0.28 $ 0.24 $ 0.12 $ 0.16
======= ======= ======== ======== ======== ========
Weighted average number of
common shares and common share
equivalents ..................... 920 2,694 8,597 8,964 8,993 8,993
======= ======= ======== ======== ======== ========

Three Months Ended September 30,
----------------------------------
Pro Forma
for
Acquisition
1996 1997 1997
--------- --------- ------------

Statement of Income Information
Net sales ........................ $15,437 $16,336 $26,064
Cost of sales ..................... 9,708 9,862 15,573
-------- -------- --------
Gross profit ..................... 5,729 6,474 10,491
Selling, general and administrative
expenses ........................ 4,333 4,837 7,849
Depreciation of property and
equipment ......................... 41 48 71
Amortization of goodwill and other
intangible assets ............... 185 210 346
-------- -------- --------
Operating income (loss) ......... 1,170 1,379 2,225
Interest expense(1) ............... 458 420 899
Amortization of deferred financing
costs ........................... 123 131 126
-------- -------- --------
Income (loss) before income taxes 589 828 1,200
Provision for income taxes ......... 253 352 504
-------- -------- --------
Net income (loss) ............... $ 336 $ 476 $ 696
======== ======== ========
Net income (loss) per common and
common equivalent share ......... $ 0.04 $ 0.05 $ 0.07
======== ======== ========
Weighted average number of
common shares and common share
equivalents ..................... 8,939 9,965 9,965
======== ======== ========

As of September 30, 1997
-----------------------------------------
Pro Forma Pro Forma
for as
Actual Acquisition Adjusted (2)
Balance Sheet Information: --------- ------------- -------------

Working capital .................. $ 5,086 $ 8,160 $ 8,160
Total assets ..................... 49,431 79,475 79,475
Total debt ..................... 14,959 41,249 16,051
Total stockholders' equity ...... 26,828 26,828 52,026

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

(1) Interest expense in fiscal year 1994 includes $650,000 with respect to
financing costs incurred in connection with bridge notes which were repaid
with the proceeds of Hain's initial public offering.

(2) As adjusted to give effect to the sale of 2,500,000 shares of Common Stock
in the Offering by the Company and the application of the net proceeds
therefrom as described in "Use of Proceeds" and the receipt of $348,062 by
the Company upon the exercise of options by certain Selling Stockholders.
See "Principal and Selling Stockholders."

SELECTED HISTORICAL FINANCIAL INFORMATION FOR WESTBRAE
(In thousands, except per share amounts)

The following table sets forth selected historical financial information
for Westbrae for the periods indicated. The selected historical financial
information for each year in the three-year period ended December 31, 1996 is
derived from the audited consolidated financial statements of Westbrae for each
such year. The selected historical financial information for the nine-month
periods ended September 30, 1996 and 1997 is derived from the unaudited
financial statements of Westbrae for such periods. In the opinion of
management, all adjustments consisting of normal recurring accruals considered
necessary for a fair presentation have been made. The selected financial
information should be read in conjunction with the financial statements of
Westbrae and the related notes thereto incorporated by reference in this
Prospectus.

Nine Months Ended
Year ended December 31, September 30,
1994 1995 1996 1996 1997
--------- --------- --------- --------- -----------

Statement of Income Information
Net sales .................................... $24,892 $28,836 $32,583 $25,378 $27,230
Cost of sales ................................. 16,059 18,374 20,143 15,728 16,280
------- ------- ------- ------- -------
Gross profit ................................. 8,833 10,462 12,440 9,650 10,950
Selling, general and administrative expenses 8,168 9,676 10,822 8,453 9,430
------- ------- ------- ------- -------
Operating income ........................... 665 786 1,618 1,197 1,520
Interest expense ........................... (257) (259) (266) (203) (136)
Other income, net ........................... 148 89 9 5 13
------- ------- ------- ------- -------
Income before provision for income taxes ... 556 616 1,361 999 1,397
Provision for income taxes (1) ............... 18 14 158 105 170
------- ------- ------- ------- -------
Net income .................................... $ 538 $ 602 $1,203 $ 894 $ 1,227
======= ======= ======= ======= =======

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

(1) The provision for income taxes has been reduced by $203,000, $231,000 and
$516,000 for the years ended December 31, 1994, 1995 and 1996,
respectively, to reflect the benefit from the utilization of net operating
loss carryforwards. The effective income tax rates used for determining
the income tax provision during the nine-month periods ended September 30,
1996 and 1997 have been reduced for the impact of the expected utilization
of net operating loss carryforwards.

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

The following discussion of each of Hain's and Westbrae's historical and
pro forma results of operations and financial condition should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto included elsewhere in this Prospectus or incorporated herein by
reference. The following discussion and analysis covers periods before
completion of the Acquisition. See "Risk Factors" and "Selected Historical and
Pro Forma Financial Information" for a further discussion relating to the
effect that the Offering and the Acquisition described herein may have on the
Company.

The following table sets forth, for the periods indicated, certain
Consolidated Statements of Operations data as a percentage of net sales:

Year Ended June 30,
----------------------------------------------------
Pro Forma
for
Acquisition
1995 1996 1997 1997
----------- ----------- ----------- -------------

Net sales ........................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold .................. 62.4 59.6 62.4 61.9
------- ------- ------- -------
Gross profit ........................ 37.6 40.4 37.6 38.1
SG&A expense ........................ 26.4 30.5 30.1 29.8
Depreciation and amortization of
goodwill and other intangibles ...... 1.1 1.2 1.4 1.6
------- ------- ------- -------
Operating income ..................... 10.1 8.7 6.1 6.7
Interest expense and amortization
of deferred financing costs ......... 3.0 3.2 3.3 4.2
------- ------- ------- -------
Income before income taxes ......... 7.1 5.5 2.8 2.5
Provision for income taxes ......... 3.0 2.4 1.2 1.0
------- ------- ------- -------
Net income ........................... 4.1% 3.1% 1.6% 1.4%
======= ======= ======= =======

Three Months
Ended September 30,
--------------------------------------
Pro Forma
for
Acquisition
1996 1997 1997
----------- ----------- ------------
Net sales ........................... 100.0% 100.0% 100.0%
Cost of goods sold .................. 62.9 60.4 59.7
------- ------- -------
Gross profit ........................ 37.1 39.6 40.3
SG&A expense ........................ 28.1 29.6 30.1
Depreciation and amortization of
goodwill and other intangibles ...... 1.5 1.6 1.6
------- ------- -------
Operating income ..................... 7.6 8.4 8.5
Interest expense and amortization
of deferred financing costs ......... 3.8 3.4 3.9
------- ------- -------
Income before income taxes ......... 3.8 5.1 4.6
Provision for income taxes ......... 1.6 2.2 1.9
------- ------- -------
Net income ........................... 2.2% 2.9% 2.7%
======= ======= =======

Results of Operations of Hain

Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996

On a pro forma basis, net sales were $26.1 million for the three months
ended September 30, 1997. Hain's net sales increased 5.8% to $16.3 million in
the 1997 quarter from $15.4 million in the 1996 quarter. The sales increase was
largely attributable to the addition of the Weight Watchers dry and
refrigerated product line, as well as the acquisition of Boston Better Snacks,
offset by a decrease in rice cake sales. During the current quarter, Hain
continued to experience softness in its rice cake product line. Sales of rice
cake products amounted to $2.4 million (14.6% of total sales) in the current
quarter compared with $3.8 million (24.6% of total sales) in the comparable
quarter of the prior year. Hain believes that recent acquisitions reduce its
reliance on rice cakes, and provide for a more stable and diversified sales
mix.

On a pro forma basis, gross profit was $10.5 million for the three months
ended September 30, 1997. Pro forma gross margin percentage was 40.3%. Hain's
gross profit increased 13.0% to $6.5 million in the 1997 quarter from $5.7
million in the 1996 quarter. Hain's gross margin percentage increased to 39.6%
for the three months ended September 30, 1997 compared to 37.1% for the
comparable quarter of the prior year. The increase in gross margin was
attributable to a change in product mix and a reduction in warehousing and
delivery

expenses as a percentage of sales. Hain has recently adopted free on board
pricing for substantially all sales, thereby reducing delivery expenses. This
pricing policy also reduced net sales to a minor degree because free on board
sales prices are lower than those for delivered items.

On a pro forma basis, selling, general and administrative expenses were
$7.8 million for the three months ended September 30, 1997. Hain's selling,
general and administrative expenses increased 11.6% to $4.8 million in the 1997
quarter from $4.3 million in the 1996 quarter. Selling, general and
administrative expenses as a percentage of net sales increased to 29.6% in the
1997 quarter from 28.1% in the 1996 quarter. The increase was primarily
attributable to license fees associated with the Weight Watchers product line.

On a pro forma basis, depreciation and amortization of goodwill and other
intangible assets were $417,000 for the three months ended September 30, 1997.
Hain's depreciation and amortization of goodwill and other intangible assets
increased 14.2% to $258,000 in the 1997 quarter from $226,000 in the 1996
quarter primarily as a result of the amortization of goodwill associated with
the acquisition of Boston Better Snacks in May 1997.

On a pro forma basis, interest expense and amortization of deferred
financing costs were $1.0 million for the three months ended September 30,
1997. Hain's interest expense and amortization of deferred financing costs
decreased 5.2% to $551,000 in the 1997 quarter from $581,000 in the 1996
quarter.

On a pro forma basis, provision for income taxes was $504,000 for the
three months ended September 30, 1997. Hain's provision for income taxes
increased 39.1% to $352,000 in the 1997 quarter from $253,000 in the 1996
quarter. A large portion of Hain's goodwill amortization is not deductible for
financial and tax reporting purposes. Consequently, as pre-tax income
increases, the effective income tax rate declines because goodwill amortization
becomes a proportionately less significant element of expense. Income taxes as
a percentage of pre-tax income amounted to 42.5% in the 1997 quarter compared
to 43.0% in the 1996 quarter.

On a pro forma basis, net income was $696,000 (or $0.07 per share) for the
three months ended September 30, 1997. Hain's net income increased 41.7% to
$476,000 (or $0.05 per share) in the 1997 quarter from $336,000 (or $0.04 per
share) in the 1996 quarter, principally as a result of the aforementioned
increase in sales and gross margin, offset by the increase in selling, general
and administrative expenses.

Fiscal Year 1997 Compared to Fiscal Year 1996

On a pro forma basis, net sales were $98.2 million for the twelve months
ended June 30, 1997. Net sales of Hain for 1997 decreased by $3.2 million to
$65.4 million as compared with $68.6 million in 1996. The sales decrease was
principally attributable to a $10.5 million decrease in sales of rice cake
products, offset in part by a full year of sales of the Estee division, which
was acquired in November 1995 and sales of Weight Watchers products in the
fourth quarter of 1997. The rice cake product category for Hain, as well as
other sellers of the product (including Quaker Oats), has been under recent
pressure from the growing market acceptance of other snack products and from
increased competition. Hain is reacting by continuing to introduce new products
in a variety of categories, with a goal of reducing reliance on rice cakes and
generating a more diversified product sales mix. In addition, Hain believes
that its recent license arrangement with respect to the Weight Watchers dry and
refrigerated product lines and the acquisition of Weight Watchers and Boston
Better Snacks (see Notes 3 and 4 of the Notes to Consolidated Financial
Statements) will ultimately more than offset reduced rice cake sales.

On a pro forma basis, gross profit was $37.4 million for the twelve months
ended June 30, 1997. Pro forma gross margin percentage was 38.1%. Hain's gross
profit for 1997 decreased by approximately $3.1 million to $24.6 million as
compared to $27.7 million in 1996. Gross margin percentage decreased by
approximately 2.8% in 1997 compared with 1996, principally due to a change in
product mix and an increase in warehousing and delivery costs.

On a pro forma basis, selling, general and administrative expenses were
$29.3 million, or 29.8% of net sales for the twelve months ended June 30, 1997.
Hain's selling, general and administrative expenses decreased by $1.3 million
to $19.7 million in 1997 as compared to $20.9 million in 1996, principally as a
result of lower sales promotional costs on lower sales levels. Such expenses,
as a percentage of net sales, declined to 30.1% in 1997 from 30.5% in 1996.

On a pro forma basis, interest and financing costs were approximately $4.1
million for the twelve months ended June 30, 1997. Interest and financing costs
for 1997 decreased to $2.1 million from $2.2 million for 1996.

On a pro forma basis, income before income taxes was approximately $2.4
million for the twelve months ended June 30, 1997. Hain's income before income
taxes for 1997 was approximately $1.9 million as compared to $3.8 million in
1996. The decrease of $1.9 million is principally a result of the
aforementioned decrease in gross profit offset in part by the decrease in sales
promotional costs.

On a pro forma basis, income taxes were $1.0 million for the twelve months
ended June 30, 1997. Hain's income taxes decreased to $786,000 in 1997 from
$1.6 million in 1996. The decrease in income taxes is substantially
attributable to the decrease in income before taxes. Income taxes as a
percentage of pre-tax income amounted to 42.4% in 1997 as compared to 43.3% in
1996.

Fiscal Year 1996 Compared to Fiscal Year 1995

Net sales for 1996 increased by approximately $10.5 million to $68.6
million as compared with $58.1 million in 1995. The sales increase was
primarily attributable to the acquisition of Estee in November 1995.

Gross profit for 1996 increased by approximately $5.8 million to $27.7
million as compared to $21.9 million in 1995, principally as a result of
increased sales. Gross profit percentage increased by approximately 2.8% in
1996 compared with 1995 principally because of a sales price increase on one of
Hain's major product lines and more efficient production by co-packers.

Selling, general and administrative expenses increased $5.6 million to
$20.9 million in 1996 as compared to $15.3 million in 1995, principally as a
result of increased promotional activity in connection with the introduction of
new products. Such expenses, as a percentage of net sales, were 4.1% higher
than in 1995, reflecting the aforementioned increased promotional activity. The
integration of Estee did not result in any significant increases in Hain's
general and administrative expenses.

Interest and financing costs for 1996 increased $448,000 to $2.2 million
as compared to $1.8 million for 1995, principally because of debt incurred in
connection with the acquisition of Estee in November 1995. The increase was
offset, in part, by the early retirement of a term loan in November 1994, with
the proceeds from the exercise of the warrants and lower interest rates.

Income before income taxes for 1996 decreased $356,000 to $3.8 million
from $4.1 million in 1995, principally as a result of the aforementioned
increase in the level of promotional spending offset in part by the increase in
gross profit based on higher net sales in 1996.

Income taxes decreased to $1.6 million in 1996 from $1.8 million in 1995.
The decrease in income taxes is substantially attributable to the decrease in
income before taxes.

Results of Operations of Westbrae

Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996

Net sales for the nine months ended September 30, 1997 were $27.2 million
compared to $25.4 million in the prior year's period, an increase of 7.3%. New
product introductions in 1997 did not reach the level of 1996, when Westbrae
had its largest product introduction, non-dairy half gallons. However,
continued increases in the sales level of Westbrae's non-dairy beverages and
canned products accounted for the increase over the prior year.

Gross profit of Westbrae was $10.9 million or 40.2% of sales for the nine
months ended September 30, 1997 compared to $9.7 million or 38.0% of sales in
1996. The gross margin increase of 2.2% was caused by a positive change in
product mix during 1997 toward Westbrae's higher margin product categories. In
addition, Westbrae's new product offerings provide better margins than previous
products.

Selling, general and administrative expenses were $9.4 million or 34.6% of
sales for the nine months ended September 30, 1997 compared to $8.5 million or
33.3% of sales in the comparable period of 1996. The increase was due largely
to programs with distributors and retailers to promote Westbrae's products at
attractive retail prices.

Westbrae had net interest and other expense of $123,000 in the nine months
ended September 30, 1997 compared to net interest and other expense of $198,000
in the prior year's comparable period. Westbrae recorded $170,000 of income tax
expense, representing state tax and the Federal alternative minimum tax, in the
nine months ended September 30, 1997.

As a result of the above, Westbrae recorded net income of $1.2 million (or
$0.19 per share) for the nine months ended September 30, 1997, an increase of
37% over the nine months ended September 30, 1996 in which Westbrae recorded
net income of $894,000 (or $0.14 per share).

Fiscal Year 1996 Compared to Fiscal Year 1995

Net sales for the year ended December 31, 1996 were $32.6 million, an
increase of 13.0% from net sales of $28.8 million in the prior year. The sales
increase for the year reflects several important marketing strategies adopted
by Westbrae as described herein. Westbrae's canned products sales grew by over
30% for the year largely due to additional attractive offerings in this
category. During 1996, Westbrae introduced canned organic vegetables and
semi-condensed soups. Westbrae has built brand equity in its extensive lines of
canned goods and has grown to be among the natural food industry's leaders in
this product category through significant product introductions during the last
two years.

Westbrae's non dairy beverage business experienced significant growth due
to the introduction of six varieties of its Westbrae non dairy beverages in a
half gallon size container. Westbrae is the only producer of non- dairy
beverages in half gallons in the natural food marketplace and believes that
consumer acceptance of this size product should grow to mirror that of dairy
milk products. Westbrae's established non-dairy products also continued their
record of year over year growth.

Gross profit of Westbrae was $12.4 million or 38.2% of sales for the year
ended December 31, 1996 compared to $10.5 million or 36.3% of sales in 1995.
The 1.9% improvement in gross profit margin reflects Westbrae's objective of
formulating new products (and when possible, reformulating existing products)
to produce better gross margins.

Selling, general and administrative expenses were $10.8 million or 33.2%
of sales for the year ended December 31, 1996 compared to $9.7 million or 33.6%
of sales in 1995. The increase was due almost entirely to increased variable
expenses, principally promotional expenditures with retailers and distributors
to promote Westbrae's products at attractive retail prices. Westbrae believes
these expenditures contributed to the generation of increased revenue. The
non-variable component of Westbrae's selling, general and administrative
expenses remained level with the prior year.

Westbrae had net interest expense of $266,000 in 1996 compared to net
interest expense of $259,000 in the prior year. The interest expense arises
from regular payments on Westbrae's Subordinated Notes as well as short- term
borrowing under Westbrae's line of credit. Westbrae had other income (net) of
$9,000 in 1996 compared to $89,000 in 1995. During 1995, Westbrae recorded
$83,000 of income from an adjustment to the valuation reserve recorded against
the receivable from the purchaser of Westbrae's Fine Baked Products operations.
This note was fully collected in 1995 and no additional income was recognized
in 1996.

Westbrae recorded income tax expense of $158,000 for the year ended
December 31, 1996. Westbrae's state net operating loss carry forward was fully
utilized early in 1996 and state income taxes were accrued on the balance of
Westbrae's income.

Provision was also made for Federal alternative minimum tax.

As a result of the above items, Westbrae recorded net income of $1.2
million (or $0.19 per share) for the year ended December 31, 1996. In the year
ended December 31, 1995, Westbrae had net income of $602,000 (or $0.10 per
share).

Fiscal Year 1995 Compared to Fiscal Year 1994

Net sales for the year ended December 31, 1995 were $28.8 million, an
increase of 15.8% over net sales of $24.9 million in the prior year. A major
contribution to the increased level was the introduction of Chocolate Chip
Classic and Cookie Classic reduced fat cookies. These cookies, in ten flavors,
accounted for over $2.5 million of net sales in 1995. Westbrae's non-dairy
beverages also experienced a significant increase of approximately 19.0% during
1995.

Gross profit of Westbrae was $10.5 million or 36.3% of sales for the year
ended December 31, 1995 compared to $8.8 million or 35.5% of sales in 1994.
Margins on Westbrae's non-dairy beverages improved somewhat from 1994,
offsetting increased costs of Japanese products due to the weakened dollar
early in the year.

Selling, general and administrative expenses were $9.7 million or 33.6% of
sales for the year ended December 31, 1995 compared to $8.2 million or 32.8% of
sales in 1994. The increase was due largely to marketing expenses incurred to
promote Westbrae's products. In 1995, Westbrae began its first consumer
magazine advertising program with placements in seven healthy lifestyle
magazines. In addition, Westbrae sponsored a promotion in conjunction with Dr.
Earl Mindell's book "The Soy Miracle." Westbrae provided displays to most
natural food stores in the country and gave the book to consumers who purchased
Westbrae's soy beverages.

Westbrae had net interest expense of $259,000 in 1995 compared to net
interest expense of $257,000 in the prior year. Westbrae had other income (net)
of $89,000 in 1995 compared to $148,000 in 1994. In both years, this arose
largely from an adjustment to the valuation reserve recorded against the
receivable from the purchaser of Westbrae's Fine Baked Products operations,
$83,000 in 1995 and $256,000 in 1994.

Westbrae recorded income tax expense of $14,000 which represents
alternative minimum tax, in the year ended December 31, 1995 while there was
$18,000 of income tax expenses for the year ended December 31, 1994.

As a result of the above items, Westbrae recorded net income of $602,000
(or $0.10 per share) for the year ended December 31, 1995. In the year ended
December 31, 1994, Westbrae had net income of $538,000 (or $0.09 per share).

Quarterly Results

The following tables presents unaudited quarterly operating results for
Hain and Westbrae. In the opinion of management, this information has been
prepared on the same basis as the audited Consolidated Financial Statements
included in this Prospectus and includes all adjustments (consisting of only
normal recurring accruals) that management considers necessary for a fair
presentation of the results for such periods. Such quarterly results are not
necessarily indicative of the results of operations for any future period. The
Company's results of operations have fluctuated and may continue to fluctuate
from period to period, including on a quarterly basis.

1996 Quarters Ended
-------------------------------------------
Hain Sept. 30 Dec. 31 Mar. 31 June 30
- ---- ---------- --------- --------- ---------
(In thousands, except per share amounts)

Consolidated Statements of
Operations:
Net Sales ............... $13,527 $18,122 $17,218 $19,739
Gross profit ............ 5,364 7,355 6,812 8,191
Net income ............ 426 701 504 503
EPS ..................... $ .05 $ .08 $ .06 $ .06

1998 Quarter
1997 Quarters Ended Ended
------------------------------------------- -------------
Hain Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30
- ---- ---------- --------- --------- --------- -------------
Consolidated Statements of
Operations:
Net Sales ............... $15,437 $17,117 $13,623 $19,176 $16,336
Gross profit ............ 5,729 6,578 5,030 7,235 6,474
Net income ............ 336 428 33 272 476
EPS ..................... $ .04 $ .05 $ .00 $ .03 $ .05

1995 Quarters 1997 Quarters
Ended 1996 Quarters Ended Ended
-------------------- ------------------------------------------- -------------------------------
Westbrae Sept.30 Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30
- -------- --------- --------- --------- --------- ---------- --------- --------- --------- ---------
(In thousands, except per share amounts)

Consolidated Statements of
Operations:
Net Sales ............... $ 7,066 $7,950 $8,100 $9,091 $8,188 $7,204 $8,098 $9,404 $9,728
Gross profit ............ 2,645 2,918 3,038 3,460 3,152 2,790 3,163 3,770 4,017
Net income ............ 158 195 258 313 324 308 283 424 519
EPS ..................... $ .03 $ .03 $ .04 $ .05 $ .05 $ .05 $ .04 $ .07 $ .08

Liquidity and Capital Resources

In October 1997, in connection with the Acquisition, the Company and IBJ
Schroder Bank & Trust Company entered into the New Credit Facility providing
for a $30 million term loan and a $10 million revolving credit line. The New
Credit Facility replaced the Company's existing $18 million facility with the
same bank which provided for a $9 million term loan and a $9 million revolving
credit line. Borrowings under the facility bear interest at rates equal to, at
the Company's option, either (i) 0.75% over the bank's base rate or (ii) 2.75%
over the Eurodollar Rate. The term loan is repayable in quarterly principal
installments, commencing December 31, 1997 through maturity of the New Credit
Facility on September 30, 2003. Pursuant to the revolving credit line, the
Company may borrow up to 85% of eligible trade receivables and 60% of eligible
inventories. Amounts outstanding under the New Credit Facility are
collateralized by principally all of the Company's assets. The New Credit
Facility also contains certain financial and other restrictive covenants. The
Company borrowed the full $30 million term loan to fund the cash purchase price
and related costs of the Acquisition and to repay certain existing debt of the
Company and Westbrae. Of the $10 million available under the Company's
revolving credit line, $2.0 million was outstanding at October 27, 1997. From
time to time, because of inventory requirements, the Company may utilize a
portion of the revolving credit line.

The Company's 12.5% Subordinated Debentures (the "Debentures") mature on
April 14, 2004 and require principal payments of approximately $1.9 million on
October 14, 2000, and of approximately $2.3 million, $2.1 million and $2.1
million, respectively, on April 14 of 2002, 2003 and 2004.

The aggregate long-term debt service requirements for the year ending
September 30, 1998 are approximately $7.2 million, which includes proceeds from
collections of certain receivables from the sale of equipment, which are
required to be utilized for prepayments of the term loan. The Company
anticipates that cash flow from operations will be sufficient to meet all of
its debt service and operating requirements.

Working capital at June 30, 1997 amounted to approximately $4.5 million,
which is adequate to serve the Company's operational needs. The Company
purchases its products from independent co-packers and does not intend to
invest in plant or equipment relating to the manufacture of products for sale.
Consequently, additions to property and equipment are not expected to be
material in future periods. The Company's New Credit Facility and Debentures
impose limitations on the incurrence of additional indebtedness and require
that the Company comply with certain financial tests and restrictive covenants.
As at June 30, 1997, the Company was in compliance with such covenants. The
financial covenants were restructured in October 1997 upon closing of the New
Credit Facility in connection with the Acquisition.

Notwithstanding the significant cash demands created by the Acquisition,
the Company believes that cash provided by operations and amounts available
under the New Credit Facility will be sufficient for the foreseeable future to
finance its operations, service interest payments on its debt and fund capital
expenditures.

Seasonality

Sales of food products consumed in the home generally decline to some
degree during the summer vacation months. However, the Company believes that
such seasonality has a limited effect on operations.

Inflation

The Company does not believe that inflation had a significant impact on
the Company's results of operations for the periods presented.

BUSINESS

General

The Company markets and sells dry, refrigerated and frozen specialty food
products under brand names which are sold as "better-for-you" products. The
product categories encompass natural and organic foods, medically-directed
foods, weight management and portion-control foods, and kosher foods. These
products are sold primarily to specialty and natural food distributors and are
marketed nationally to supermarkets, natural food stores, and other retail
classes of trade. The Company's products are produced by co-packers using
proprietary specifications and formulations controlled by the Company.

As a leading natural and organic food company, the Company sells a full
line of products under its "Hain Pure Foods", "Westbrae Natural", "Westsoy",
"Little Bear", "Bearitos" and "Farm Foods" brands. Specialty food products
include cooking oil and condiment products under its "Hollywood" brand;
sugar-free, medically-directed food products under its "Estee" brand (all of
which carry the logo of the American Diabetes Association); low-sodium food
products under its "Featherweight" brand; weight management and portion-control
foods under the "Weight Watchers" brand; frozen kosher food products under its
"Kineret" and "Kosherific" brands; regular and reduced fat snack products under
its "Boston Better Snacks" brand; and dry milk products under the "Alba" brand.
The Company's brand names are well-recognized in the various market categories
they serve. The Company has acquired these brands over the past four years, and
seeks to grow through internal expansion, as well as the acquisition of
complementary brands in the future.

Recent Acquisitions

The Company was organized in 1993 for the purpose of acquiring and
marketing specialty food brands. The following is a description of the
Company's acquisitions in 1997.

Westbrae. In October 1997, the Company acquired Westbrae, a marketer of
over 300 high quality natural and organic food and snack products. Westbrae
is the natural food industry market leader in milk substitute beverages,
the largest single natural food category. Westbrae's and Hain Pure Foods'
complementary products combine to lead six of the fifteen top-selling
natural food categories. The combination provides for economies of scale in
production, marketing and distribution.

Weight Watchers. In March 1997, the Company entered into agreements for
the rights to manufacture, market and sell substantially all Weight
Watchers brand dry and refrigerated products, as well as to introduce new
products, under license from Heinz. The licensing agreement with Heinz is
for five years and is renewable under certain circumstances. Weight
Watchers dry grocery weight management products have enhanced the Company's
position in one of its key specialty food market segments. They are sold
and merchandised in similar channels and sections as the Company's Estee
and Featherweight brands. According to ACNielsen syndicated research, the
Company now has approximately a 60% market share of the medically-
directed/weight management section of supermarkets on a national basis.

Alba. The Company acquired the Alba brand from Heinz in July 1997. Alba
markets dry milk, shake, and cocoa products. Alba is marketed primarily
through specialty food distributors and has its greatest strength on the
East Coast. It is frequently merchandised in the same section as Weight
Watchers, Estee and Featherweight, although it also has penetrated other
supermarket sections carrying powdered beverages. Heinz marketed Alba
through its weight management centers for many years, affording it consumer
brand synergy with Weight Watchers.

Boston Better Snacks. In May 1997, the Company acquired the assets of
Boston Better Snacks, a marketer of high-quality popcorn and chip snack
products. Boston Better Snacks' direct-store-delivery ("DSD") route system
primarily serves the New England and Mid-Atlantic regions and provides new
distribution opportunities for other Company brands. Boston Better Snacks'
DSD route system is primarily conducted through Snyder's of Hanover, a
large snack food company. This system provides just-in-time inventory
replenishment for all of Boston Better Snacks' products.

Industry and Market Overview

Natural and Organic Foods

Natural foods are defined as foods which are minimally processed,
completely free of artificial ingredients, preservatives, and other
non-naturally occurring chemicals, and in general are as near to their whole,
natural state as possible. Organic products are certified to be grown without
the use of pesticides, bio-engineering, or any other adulteration. Retail sales
in the natural products market is estimated by Natural Foods Merchandiser at
$11.5 billion in 1996, including vitamin and mineral supplements, grocery
products, produce, and health and beauty care. The market for organic products
is growing at an annual rate of over 20%, and is projected to reach
approximately $3.0 billion in 1997 according to Supermarket News. The Company
believes that this growth is being propelled by several factors, including (i)
consumer concern over the purity and safety of foods due to the presence of
pesticide residues, artificial ingredients and other chemicals, (ii) consumer
awareness of the link between diet and health, and (iii) consumer awareness of
environmental issues. Independent research reveals that 62% of all adults are
highly concerned about food content and that 58% of all adults purchased at
least one natural food item in the last year. According to ACNielsen, natural
food consumers are generally better educated and more affluent, as well as
brand-loyal. The proliferation of natural food supermarkets, including Whole
Foods and Wild Oats, are helping to fuel industry growth. Sales from natural
foods supermarkets accounted for 51% of total natural foods sales in 1996.

Medically-Directed/Weight Management Foods

The market for medically-directed/weight management foods is growing as
the average age of the American population and the number of overweight
Americans increase. Over 90 million people attempted to diet in 1996, 25% above
1995. Over 70% of all food and drug shoppers seek to improve their diets, and
over 80% of all adults aged 50 and over seek to limit their sugar and salt
intake. The American Diabetes Association now advocates a low-fat diet for
people with diabetes. Continued demand for sugar- and sodium-restricted foods
is expected to fuel growth of the $90 million medically-directed/weight
management dry grocery supermarket category.

Kosher Foods

Consumers who specifically purchase kosher food products represent a $2.3
billion market. The appeal of kosher foods now transcends the historic consumer
base of consumers buying kosher foods for religious reasons, growing to include
those who buy kosher foods because they perceive them to be more healthful.

Supermarket Distribution Channel

Supermarkets typically acquire many of their specialty food products
through distributors. According to Arthur D. Little, Inc., this is due to
demand for variety and service, while minimizing inventory and handling costs.
During 1997 several distributors consolidated, providing increased distribution
capabilities in broader geographic areas, resulting in the Company streamlining
its sales efforts. Specialty foods appeal to supermarkets for the following
reasons: (i) the ability of distributors to supply continuous retail
replenishment, (ii) the need for supermarkets to expand product assortments,
(iii) the higher profit margins associated with specialty foods as opposed to
mainstream grocery products, and (iv) the reduced labor costs for services
specialty foods distributors can provide.

Business Strategy

The Company's mission is to be the leading marketer and seller of
specialty food products, with a strong commitment to total quality management
in all departments. The Company intends to build sales and improve operating
results by investing in product development and building brand equity. The
combined strength of its growing portfolio of brands has increased its
importance with manufacturers, brokers, distributors and retailers. The Company
believes it therefore has competitive advantages. The following are key
elements of the Company's business strategy:

Continue Growth Through Mergers and Acquisitions

The Company is committed to pursuing acquisitions, joint ventures, and
strategic alliances that are synergistic with its current portfolio of brands,
both domestically and internationally. This will increase the Company's
importance to its customers. The fragmented nature of the specialty foods
industry provides opportunities for favorable acquisitions. However, there can
be no assurance that the Company will consummate any such agreement.

Invest in Brands and Consumer Awareness

The core of the Company's success is the endurance and growth potential of
its brands. The Company will continue to invest in its brand equity in order to
increase consumer awareness and market share. Each acquisition to date has been
of brands with strong consumer loyalty. The Company plans for the timely
introduction of new products, repositioning of products poised for growth,
improvement of product formulations and support of core product categories. For
example, Estee's new line of Smart Treats products were the first low-fat and
sugar-free foods and snacks marketed to both diabetic and mainstream consumers.

Outsource Manufacturing

The Company outsources all manufacturing in order to enhance margins and
return on capital. This enables the Company to seek the most proficient
manufacturers of specific products. The Company utilizes more than one source
for products in most key categories. The Company controls standardized
formulations and maintains strong quality assurance and control procedures, to
assure a consistent product and source of supply.

Leverage Economies of Scale in Production and Logistics

Many of the Company's key product categories are shared among two or more
of its brands. This increases production economies, as well as leverage with
co-packers, as product quantities are substantially greater than for one brand
alone. This strategy promotes higher profit margins and general co-packer
cooperation. Economies of scale in ingredients, packaging and other
product-related costs are sought and aggressively managed. Costs are similarly
managed at all public warehouse facilities, and deliveries of multiple brands
are similarly coordinated to reduce freight and improve product
competitiveness.

Develop Export Opportunities

The Company increased its focus on export opportunities in 1997 and has
met with increasing demand throughout North America, South America, Europe and
Asia. The Company will focus on export opportunities not requiring significant
investment in custom packaging until sales are well established, as well as
those where product demand is already high. The Company anticipates continuing
the use of distributors for delivery of its products to these export markets.

Products

The Company has over 700 stock keeping units ("SKUs") which target a broad
range of consumer preferences. The Company's products are divided into the
following main categories:

Product Line Brand Name Product Description
- --------------------------- --------------------- -----------------------------------

Natural and Organic Foods (1) Hain Pure Foods All natural dry, refrigerated and
frozen foods, including rice
cakes, expeller-pressed oils, con-
diments and snacks, and selected
organic products. Founded in
1926.

(2) Farm Foods All natural frozen foods, includ-
ing Pizsoy non-dairy pizza.

Frozen chili made with organic
beans. Introduced in 1997.

Ice Bean non-dairy ice cream
products in pints and novelties.

Product Line Brand Name Product Description
- --------------------------- ------------------------------ ------------------------------------

(3) Westbrae Natural/Westsoy Organic soy and rice non-dairy
beverages, as well as soups,
beans and snacks.

(4) Little Bear/Bearitos Organic snack foods and canned
products.
- ---------------------------------------------------------------------------------------------------
Medically-Directed/Weight (1) Estee Complete line of sugar-free
Management Foods foods and snacks.

(2) Featherweight Low-sodium products for people
on sodium-restricted diets.

(3) Alba Dry milk, shake, and cocoa
products.

(4) Weight Watchers Dry and refrigerated portion con-
trolled foods.
- ---------------------------------------------------------------------------------------------------
Kosher Foods Kineret Frozen kosher foods which meet
the requirements of the Orthodox
Union of Rabbis.
- ---------------------------------------------------------------------------------------------------
Other Specialty Foods (1) Hollywood Vitamin E-enhanced cooking
oils, as well as carrot juice, may-
onnaise and margarine.

(2) Boston Better Snacks High-quality popcorn and chip
snacks; primarily New England
and Mid-Atlantic distribution.

Customers

The Company's customers include retail and wholesale classes of trade
nationally, consisting principally of specialty and natural food distributors,
grocery retailers and wholesalers, and kosher food distributors. The Company
also has increased its presence in chain drug, mass merchandisers, and military
segments during 1997. United Natural Foods and Tree of Life accounted for 18.4%
and 13.8%, respectively, of the Company's pro forma fiscal year 1997 sales.

Sales and Marketing Structure

With the completion of the Acquisition, the Company will be organized into
three strategic business units: the Specialty Foods Division, the Natural Foods
Division, and the Snack Foods Division. Each division will be run by an
experienced manager with at least 15 years of industry experience and will have
its own sales department, whose personnel are experienced in their areas of
responsibility. Each division also will have marketing support consisting of
sales planning, promotion planning, and category management personnel, all of
whom will share resources and research. Financial and operations support for
the divisions will be located at the Company's principal executive offices in
Uniondale, New York.

The Specialty Foods Division has two regional vice presidents, each
managing three geographically-dispersed region directors. Region directors are
responsible for Company sales to classes of trade other than natural foods
distributors and retailers. The region directors supervise a national group of
approximately 70 food brokers, who act as commissioned sales representatives
and field marketers on the Company's behalf. These food brokers work on a
non-exclusive basis, although they may not represent competitors of the
Company. The marketing department for this division is run by a seasoned
executive with 15 years of brand management experience, who supervises the
department brand managers.

The Natural Foods Division, located in Carson, California, has a vice
president of sales managing six region directors. The division calls on its
natural food distributors and key retailers directly and utilizes natural food
brokers on a reduced commission basis to execute programs and merchandising
strategies at the retail level. The marketing department of this division is
headed by an experienced manager who has been with Westbrae for over six years.

The Snack Foods Division has two regional managers who supervise the
division's DSD route system. Sales support for this division is shared with the
Specialty Foods Division.

Marketing and Category Management

The Company's advertising and promotional programs have grown the
Company's brand awareness and equity by using a customized campaign of
integrated marketing communications. These elements include packaging, trade
and consumer advertising and sales promotion including couponing, public
relations, and interactive marketing. The Hain Pure Foods brand has launched a
new initiative called "HEY! Read our Labels!"(SM) to capitalize on growing
consumer concern with food ingredients. The Company will also benefit from the
marketing efforts of Heinz for its Weight Watchers centers, involving the
launch of a new weight management program called 1-2-3 Success. This program
will be referenced on all new Weight Watchers packaging. Sarah Ferguson, the
former Duchess of York, is the spokesperson for Weight Watchers International
in a campaign which began in September 1997.

The industry's emphasis on category management and efficient consumer
response has been addressed by the Company's investment in syndicated sales
data. This data is accumulated by ACNielsen and other third-party research
firms, primarily using point-of-purchase scanner technology. This data is then
developed by Company personnel into proprietary category management programs
for customers. These programs are designed to improve profitability of the
sections occupied by the Company's brands. The Company has been appointed
"category captain" by certain major grocery chains, indicating the Company's
responsibility to develop planograms, often involving four feet of shelf space
per brand, to maximize retailer profits.

Manufacturing

All of the Company's products are manufactured by non-affiliated
co-packers. The co-packers produce, supply or package the Company products and
must comply with strict ingredient and processing standards established by the
Company. The Company selectively consolidates its co-packing arrangements for
its products to obtain efficiencies. Pursuant to its co-packing arrangements,
the Company purchases substantially all of its products as finished goods.
Accordingly, the Company's inventories of raw materials and packaging are not
significant.

The Company presently obtains all of its requirements for Hain rice cakes
from two co-packers, a substantial portion of its Weight Watchers refrigerated
products from one co-packer and all of its Hollywood cooking oils from one
co-packer. The Company believes that alternative sources of supply are
available if co-packing arrangements with its suppliers were to be terminated
by the Company or the co-packers. However, there can be no assurance that
alternative sources of supply would be able to meet the requirements of the
Company.

Technical Services

Quality Assurance and Control

The Company has dedicated itself to conforming to GMP (Good Manufacturing
Practice) standards at all of its co-packing facilities. Systematic procedures
are in place and regulated by an experienced technical staff based on-site at
the Company and supplemented by independent laboratory analysis.

The Company audits and inspects all co-packing facilities and warehouses.
The Company uses both open- and Julian code dating on all products, and
products are retained from each production run. Products are not released from
co-packers to warehouses until the quality control team has evaluated and
released the product.

Research and Development

Research and development, located in Carson, California, works to develop
new products and improve existing products. A seven-person team averaging 20
years of experience works together to keep the Company innovative in product
development.

Competition

The Company faces competition in marketing all of its brands and competes
with small specialty food companies in specific categories, large grocery
products companies and suppliers of private label products. Hain Pure Foods and
Westbrae compete with a variety of other natural food companies, including
Health Valley. The Hain Pure Foods business also competes with Quaker Oats and
Orville Redenbacher in its rice cake business. Hollywood competes with other
mainstream oils, but retains its leadership in safflower and peanut oils.
Canola oil is a price-driven commodity in which Hollywood faces strong
competition. Estee has one major competitor which markets largely duplicative
products. It faces strong competition in sugar-free candy, which is marketed
outside the medically-directed section of supermarkets. Weight Watchers
competes for its share of consumer spending with the many companies offering
reduced fat foods. Kineret competes with other frozen food companies, and faces
its strongest competition in fish and potato products. Boston Better Snacks
faces competition from a variety of popcorn and chip manufacturers.

Government Regulations

The Company's products are subject to various federal, state and local
laws governing the production, sale, advertising, labeling and ingredients of
food products. Although the Company believes it and its distributors and
co-packers are currently in compliance with all material federal, state and
local governmental laws and regulations, there can be no assurance that the
Company, its distributors and co-packers will be able to comply with such laws
and regulations in the future or that new governmental laws and regulations
will not be introduced which would prevent or temporarily inhibit the
development, distribution and sale of the Company's products to consumers. If
any of the Company's distributors or co-packers were to violate any such law or
regulation, it could result in fines, recalls, seizure or confiscation of
products marketed by the Company.

The Company has, to its knowledge, complied with all current food labeling
and packaging requirements, including significant labeling requirements that
became effective during 1994.

The Company has not experienced any regulatory problems in the past and
has not been subject to any fines or penalties. No assurance can be given,
however, that future changes in applicable law, regulations or the
interpretation thereof will not necessitate significant expenditures or
otherwise have a material adverse impact on the Company, particularly if the
Company alters its strategy and directly manufactures its own products.

Employees

As of September 30, 1997, Hain employed a total of 57 full-time employees.
The Company's employees are not represented by any labor union. The Company
believes that its relations with its employees are good.

Properties

The Company's corporate headquarters are located in 10,000 square feet of
leased office space located at 50 Charles Lindbergh Boulevard, Uniondale, New
York. This lease commenced on August 15, 1994 and, during 1997, was extended to
February 2002. The current annual rental is approximately $231,000. The
Company's Kineret Foods 7,000 square foot warehouse and distribution center is
located in East Hills, New York. This lease, which provides for annual net
rental of approximately $40,000, was renewed during 1997 and expires in August
1999. The Company's Boston Better Snacks 10,000 square foot warehouse and
distribution center is located in Foxboro, Massachusetts. This lease is for a
three-year term and commenced on June 1, 1997. The current annual rental is
approximately $73,000. Approximately 4,000 square feet of this space is
sub-leased to a major distributor of the Company's Boston Popcorn business for
the same three-year term at a current annual rental of $31,000.

The Company warehouses its products (other than its Boston Better Snacks
and Kineret products) in bonded public warehouses from which it makes
deliveries to customers.

Legal Proceedings

The Company is from time to time involved in litigation incidental to the
conduct of its business. The Company is not currently a party to any litigation
which in the opinion of management is likely to have a material adverse effect
on the Company's business, results of operations or financial condition.

Westbrae entered into a financial advisory services agreement with a
financial advisor on October 24, 1995, which provided that, if a "sale" of
Westbrae were consummated during its term or within one year thereafter, such
financial advisor would be entitled to certain fees. Pursuant to a letter dated
August 8, 1996, Westbrae provided notice of non-renewal of such agreement, and
pursuant to the terms of such agreement, all obligations thereunder terminated
twelve months thereafter. Notwithstanding the foregoing, the financial advisor
delivered an invoice for fees and expenses of approximately $1.0 million, and
the Company responded setting forth its belief that no amounts are due and
owing other than possibly certain expenses incurred during the term of
Westbrae's engagement of such financial advisor. The Company was subsequently
contacted by counsel for such financial advisor further disputing the
non-payment of such invoice. There can be no assurance that legal proceedings
will not arise in connection with such dispute or that such proceedings, if
commenced, would be resolved in a manner favorable to the Company. The Company
intends to vigorously contest any claim made against it, and the Company does
not believe that the outcome of this matter will have a material adverse effect
on the Company's financial statements. In accordance with the position taken by
Westbrae prior to the Acquisition, no provision has been made by the Company
for any fee that may be payable in connection with such financial services
agreement.

MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information regarding the directors
and executive officers of the Company as of October 27, 1997:

Name Age Position
- ---- --- --------

Irwin D. Simon ............... 38 President, Chief Executive Officer and Director
Jack Kaufman .................. 58 Chief Financial Officer, Treasurer and Assistant Secretary
Benjamin Brecher ............ 47 Vice President-Operations
Ellen Deutsch ............... 36 Senior Vice President-Sales and Marketing
Andrew Jacobson ............... 37 President-Natural Foods Division
Andrew R. Heyer ............... 40 Chairman of the Board of Directors
Beth L. Bronner ............... 46 Director
William A. Carmichael ......... 52 Director
William J. Fox ............... 41 Director
Jack Futterman ............... 64 Director
Barry Gordon .................. 52 Director
Steven S. Schwartzreich ...... 49 Director

Mr. Simon has been a Director, President and Chief Executive Officer of
the Company since its inception and is its founder. From December 1990 through
December 1992, Mr. Simon was employed in various marketing capacities with
Slim-Fast Foods Company ("Slim Fast"), a national marketer of meal replacement
and weight loss food supplements with annual revenues in excess of $500
million. His duties initially involved sales and marketing for the frozen and
dairy divisions of Slim Fast, which included establishing and implementing
marketing strategies and establishing a distribution system throughout the
United States. In March 1992, Mr. Simon became Vice President of Marketing for
Slim Fast. From 1986 through 1990, Mr. Simon was employed by The Haagen-Dazs
Company, a division of Grand Metropolitan, plc. Haagen-Dazs is a manufacturer
and distributor of premium ice cream and related products. Mr. Simon held a
number of sales and marketing positions, including Eastern Regional Director of
Haagen-Dazs Shops, the entity managing a majority of the franchisee system and
all company-owned retail shops.

Mr. Kaufman is a certified public accountant and has been Chief Financial
Officer, Treasurer and Assistant Secretary of the Company since February 1994.
During 1992 and part of 1993, Mr. Kaufman was a financial executive for JWP,
Inc. From 1988 to 1991, Mr. Kaufman was Executive Vice President of Sterling
Commercial Capital, Inc., a small business investment company, and from 1976 to
1987 he was Chief Financial Officer of Waldbaum, Inc., a regional supermarket
chain.

Mr. Brecher has been Vice President-Operations of the Company since
November 1993. Mr. Brecher was an officer and director of Kineret Kosher Foods
from 1974 until its acquisition by the Company in November 1993.

Ms. Deutsch has been Senior Vice President-Marketing of the Company since
April 1996 and Senior Vice President-Sales and Marketing since April 1997.
Prior to May 1996, Ms. Deutsch was a principal of F&D Advertising Agency of
Westbury, New York.

Mr. Jacobson became President of the Natural Foods Division of the Company
upon consummation of the Acquisition in October 1997. From November 1992 until
October 1997, Mr. Jacobson was President of Westbrae Natural Foods and Little
Bear. Prior to November 1992, Mr. Jacobson spent eight years in various
divisional and corporate positions with Tree of Life, Inc., a major natural and
specialty foods distributor. Mr. Jacobson serves on the board of the National
Natural Foods Association.

Mr. Heyer has been Chairman of the Board of Directors since he became a
Director in November 1993 and a member of the Compensation Committee since
1994. Mr. Heyer has been a Managing Director of CIBC Oppenheimer Corp.
(formerly CIBC Wood Gundy Securities Corp.), an affiliate of the Canadian
Imperial Bank of Commerce and the successor to the Argosy Group, L.P. since
August 1995. From February 1990 until August

1995, Mr. Heyer was a Managing Director of the Argosy Group, L.P., an
investment banking firm that specialized in merger, acquisition, divestiture,
financing, refinancing and restructuring transactions. Mr. Heyer also serves as
a director of Hayes Wheels International, Inc. and Niagara Corporation.

Ms. Bronner has been a Director since November 1993 and a member of the
Compensation Committee since 1995. Ms. Bronner joined Citibank, N.A. in
September 1996 as Vice President and Director of Marketing for the United
States and Europe. From July 1994 to August 1996, Ms. Bronner was Vice
President-Emerging Markets of American Telephone & Telegraph Company Consumer
Communication Services business. Ms. Bronner was President of the Professional
Products Division of Revlon, Inc. from May 1993 until June 1994. From February
1992 to May 1993 she was Executive Vice President of the Beauty Care and
Professional Products Division of Revlon, Inc. Ms. Bronner also serves as a
director of Fortis, Inc.

Mr. Carmichael has been a director since December 1995 and a member of the
Audit Committee since 1996. Mr. Carmichael is a certified public accountant and
member of the Illinois State Bar. He was Senior Vice President & Chief
Accounting Officer of Sara Lee Corporation from 1991 until his retirement in
1993. From 1988 to 1990 he was Senior Vice President & Chief Financial Officer
of the Beatrice Company. Mr. Carmichael is a director of several other
companies, including Health O Meter Products, Inc., Cobra Electronics
Corporation and The Golden Rule Insurance Company.

Mr. Fox has been a Director since December 1996 and a member of the Audit
Committee since December 1996. Mr. Fox has been Senior Executive Vice President
since January 1997 and Executive Vice President and Chief Financial Officer of
Revlon, Inc. and Revlon Consumer Products Corporation since 1992 and was
elected as a director in November 1995 and September 1994, respectively. He has
been Executive Vice President and Chief Financial Officer of Revlon Holdings
Inc. since November 1991 and a Vice President since 1987. He has been Senior
Vice President of MacAndrews & Forbes Holdings Inc. ("MacAndrews") since August
1990 and was Treasurer from February 1987 to September 1992. From April 1983 to
February 1987, he held various positions at MacAndrews or its affiliates. Prior
to April 1983, Mr. Fox was a certified public accountant at the international
auditing firm of Coopers & Lybrand. Mr. Fox is a director of The Cosmetics
Center, Inc.

Mr. Futterman has been a Director since December 1996 and a member of the
Compensation Committee since December 1996. Mr. Futterman retired as Chairman
and Chief Executive Officer of the Pathmark Supermarket chain in March 1996. He
joined Pathmark in 1973 as Vice President of its drugstore and general
merchandise divisions and occupied a number of positions before becoming
Chairman and Chief Executive Officer. Mr. Futterman is a registered pharmacist
and former Chairman of the National Association of Chain Drugstores. He is a
Director of Del Labs, Inc. and Party City, Inc., as well as several
not-for-profit organizations.

Mr. Gordon has been a Director since November 1993 and a member of the
Audit Committee since 1995. Mr. Gordon has been President and a director of
American Fund Advisors, Inc., a money management firm since 1980, and was
elected Chairman of the Board thereof in 1987. In addition, Mr. Gordon is
President of The John Hancock Global Technology Fund (a mutual fund
specializing in telecommunications and technology securities) and a director of
Winfield Capital Corporation, Robocom Systems, Inc. and Skyland Park
Management, Inc., all of which are publicly traded companies.

Mr. Schwartzreich has been a Director since November 1993. Mr.
Schwartzreich has been Vice President and a director of Nassau Suffolk Frozen
Food Co., Inc., a distributor of frozen food, ice cream and bakery products to
retail stores, since 1973. He is currently the Chairman and President of the
Hunts Point Cooperative Market located in New York City.

Executive Compensation

Summary of Cash and Certain Other Compensation

The following table sets forth the compensation paid by the Company for
services rendered during the three fiscal years ended June 30, 1997 to or for
the accounts of the Chief Executive Officer and the other three most highly
compensated officers.
Summary Compensation Table

Annual Compensation Long-Term Compensation
----------------------------------------------- ------------------------------------------------
Awards
------------------------------------------------
Restricted Securities
Name and Fiscal Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation Awards Options Compensation
------------------ -------- ---------- --------- -------------- ------------ ------------------- -------------

Irwin D. Simon (1) ......... 1997 $200,000 $60,000 $5,400 -- 20,000 --
President, Chief 1996 $160,000 $52,000 $5,400 -- 25,000 --
Executive Officer 1995 $160,000 -- $5,400 -- -- --
and Director

Benjamin Brecher ......... 1997 $125,000 $37,500 $5,400 -- 250,000 (2) --
Vice President- 1996 $125,000 $37,500 $5,400 -- 10,000 --
Operations 1995 $125,000 -- $5,400 -- 15,000 --

Ellen B. Deutsch (3) ...... 1997 $140,000 $10,000 $5,400 -- 25,000 --
Senior Vice President- 1996 $ 35,000 $ 0 $1,350 -- 20,000 --
Sales & Marketing

Jack Kaufman ............... 1997 $100,000 $30,000 $5,400 -- 50,000 --
Chief Financial 1996 $100,000 $30,000 $5,400 -- 10,000 --
Officer, Treasurer and 1995 $100,000 -- $5,400 -- -- --
Assistant Secretary

- ------------
(1) Mr. Simon is employed pursuant to a three year employment agreement (which
extended a prior employment agreement) which commenced on July 1, 1996, at
annual base compensation of $200,000 with minimum annual increases of
$25,000 on July 1, 1997 and July 1, 1998.
(2) Twenty percent of such options became exercisable on December 31, 1996, and
an additional 20% become exercisable on December 31 of each of the next
four years, provided Mr. Brecher remains employed by the Company.
(3) Ms. Deutsch commenced employment on April 1, 1996.

Stock Option Grants and Exercises

The tables below set forth information with respect to grants of options
to, and exercise of options by, the Chief Executive Officer and the three other
most highly compensated executive officers of the Company, during the fiscal
year ended June 30, 1997.

Option Grants in Last Fiscal Year

Individual Grants Potential Realizable
------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options Number of Price Appreciation
Granted to Securities Exercise for Option Term
Employee Underlying or Base ------------------------
in Fiscal Options Price Expiration
Name Year Granted ($/Sh)(1) Date 5% 10%
- ------------------------- ---------------- ------------ ------------ --------------- ---------- -----------

Irwin D. Simon ......... 20,000 4.4% $ 4.8125 June 2007 $ 60,600 $ 153,400
Benjamin Brecher ...... 250,000(2) 54.9% $ 3.25 December 2005 $510,000 $1,295,000
Ellen B. Deutsch ...... 25,000 5.5% $ 3.25 to December 2006 $ 75,800 $ 191,800
$ 4.8125 and June 2007
Jack Kaufman ......... 50,000 11.0% $ 4.8125 June 2007 $151,500 $ 393,500

- ------------
(1) Options were granted at exercise prices which were not less than the fair
market value of the Common Stock at the time of grant.
(2) Twenty percent of such options became exercisable on December 31, 1996, and
an additional 20% become exercisable on December 31 of the next four
years, provided Mr. Brecher remains employed by the Company.

Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values

Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Held at June 30, 1997 at June 30, 1997(1)
Acquired Value ------------------------------- ------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ---------- ------------- --------------- ------------- --------------

Irwin D. Simon(2) ...... 0 $0 645,000 0 $984,313 $ 0
Benjamin Brecher ...... 0 $0 95,000 200,000 $132,788 $312,500
Ellen B. Deutsch ...... 0 $0 45,000 0 $ 39,063 $ 0
Jack Kaufman ............ 0 $0 110,000 0 $ 96,850 $ 0

- ------------
(1) Based on a price of $4.8125 per share, the closing bid price for the Common
Stock on NASDAQ for such date.
(2) Excludes conditionally granted options. See "-- 1994 Long Term Incentive
and Stock Award Plan."

1994 Long Term Incentive and Stock Award Plan

In December 1994, the Company adopted the 1994 Long Term Incentive and
Stock Award Plan (the "1994 Plan"), which amended and restated the Company's
prior stock option plan. The 1994 Plan provides for the granting of incentive
stock options to employees, directors and consultants to purchase up to an
aggregate of 855,000 shares of the Company's Common Stock. The 1994 Plan is
administered by the Compensation Committee of the Board of Directors. All of
the options granted to date under the 1994 Plan have been qualified stock
options providing for exercise prices equivalent to the fair market price at
date of grant, and expire 10 years after date of grant. At the discretion of
the Compensation Committee, options are exercisable upon grant or over a five
year period. Through June 30, 1994, options for an aggregate of 255,000 shares
had been granted at a price of $3.25 per share. During fiscal year 1995,
options for an aggregate of 111,500 shares were granted at prices from $3.50 to
$5.00 per share and 55,000 options were terminated. During fiscal year 1996,
103,500 options were granted at prices ranging from $2.94 to $3.25 per share
and 15,000 options were terminated. During fiscal year 1997, 475,000 options
were granted at prices ranging from $3.00 to $4.81 per share, and 20,000
options were terminated. At June 30, 1997, 855,000 options were outstanding, of
which 610,000 were then exercisable, and no shares were available for grant.

The Board of Directors has approved, subject to stockholder approval at a
meeting of stockholders scheduled to be held on December 9, 1997, an amendment
of the 1994 Plan to increase the number of shares issuable over the term of the
1994 Plan by 345,000 shares to 1,200,000 shares in the aggregate. Subject to
approval of the amendment to the 1994 Plan by the stockholders, 125,000 stock
options have conditionally been granted to Mr. Simon at the closing sales price
of $4.8125 per share on the date of grant (June 30, 1997), 60,000 shares have
conditionally been granted to Andrew Jacobson, who became an executive of the
Company in connection with the Acquisition, at the closing sales price of
$12.6875 on the date of grant (October 14, 1997) and 160,000 options will
remain available for grant under the 1994 Plan. In connection with conditional
options to acquire 125,000 shares of Common Stock granted by the Compensation
Committee of the Board of Directors shortly after the end of the Company's
fiscal year, the Company will incur a straight line non-cash compensation
charge over the 10-year vesting period of the options. The options were
conditioned upon Board of Directors' and stockholders' approval. Board of
Directors approval was received on October 10, 1997. The non-cash compensation
charge will be determined based on the difference between the closing price on
the date all of the conditions to the grant have been satisfied, now expected
to be December 9, 1997, the date of the Company's annual stockholders meeting,
and the closing price on the date of grant. Based on the closing price on
October 31, 1997, the annual non-cash compensation charge would be
approximately $74,200.

1993 Executive Stock Option Plan

The Company also has the 1993 Executive Stock Option Plan (the "1993
Plan") pursuant to which it granted Mr. Irwin D. Simon, its founder and Chief
Executive Officer, options to acquire 600,000 shares of the Company's common
stock. As a result of the Company achieving certain sales thresholds, all of
such shares are currently exercisable. The exercise price of options designed
to qualify as incentive options is $3.58 per share and the exercise price of
non-qualified options is $3.25 per share. None of Mr. Simon's options have been
exercised. The options expire ten years after date of grant.

1996 Directors Stock Option Plan

At the Annual Meeting of Stockholders held in December 1996, stockholders
approved the 1996 Directors Stock Option Plan (the "Directors Plan"). The
Directors Plan provides for the granting of stock options to non-employee
directors to purchase up to an aggregate of 300,000 shares of the Company's
Common Stock. During 1996, options for an aggregate of 90,000 shares were
granted at a price of $3.50 per share, and during 1997, options for an
aggregate of 67,500 shares were granted at a price of $3.38 per share. During
1997, a former director of the Company exercised an option for 15,000 shares.
At June 30, 1997, 142,500 options are outstanding and 142,500 are available for
grant.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of October 27, 1997, and
as adjusted to reflect the sale of shares of Common Stock offered hereby by the
Company and the Selling Stockholders, for (i) each person who is known by the
Company to beneficially own more than five percent of the outstanding shares of
Common Stock, (ii) each of the Selling Stockholders, (iii) each director, (iv)
each executive officer named in the Summary Compensation Table and (v) all of
the current directors and executive officers of the Company as a group. Except
as otherwise noted, each shareholder has sole voting and investment power with
respect to the shares beneficially owned, and no other person is known by the
Company to be the beneficial owner of five percent or more of the outstanding
shares of Common Stock.

Shares Owned Before Shares Owned After
the Offering the Offering
------------------------ Shares Being ------------------------
Number % Offered Number %
----------- ---------- -------------- ----------- ----------

Irwin D. Simon(1) ........................... 1,573,482 16.7% 125,000 1,448,482 12.0%
Andrew R. Heyer(2)(3) ........................ 1,232,176 13.1% -- 1,157,176 9.7%
Jack Kaufman(4) .............................. 115,000 1.3% 50,000 65,000 *
Benjamin Brecher(5) ........................... 122,097 1.4% 50,000 72,097 *
Ellen Deutsch(4) .............................. 50,000 * -- 50,000 *
Bruce M. Lerit(4) ........................... 40,000 * 25,000 15,000 *
Beth L. Bronner(6)(7) ........................ 59,167 * -- 59,167 *
Barry Gordon(6)(8) ........................... 72,500 * -- 72,500 *
Steven S. Schwartzeich(6)(7) .................. 22,500 * -- 22,500 *
William Carmichael(6)(7) ..................... 22,500 * -- 22,500 *
William J. Fox(6)(9) ........................ 25,000 * -- 25,000 *
Jack Futterman(6)(9) ........................ 16,000 * -- 16,000 *
Argosy-Hain Warrant Holdings, L.P.(10) ...... 550,000 5.8% -- 550,000 4.6%
Argosy-Hain Investment Group, L.P. ............ 619,528 7.1% 75,000 544,528 4.6%
Jay R. Bloom(3) .............................. 1,215,222 13.0% -- 1,140,222 9.5%
Dean C. Kehler(3) ........................... 1,232,356 13.2% -- 1,157,356 9.7%
Argosy Investment Corp.(3)(11) ............... 1,169,528 12.5% -- 1,094,528 9.2%
Soros Fund Management LLC(12) ............... 1,246,000 14.2% -- 1,246,000 10.9%
George Soros(12) .............................. 1,246,000 14.2% -- 1,246,000 10.9%
Stanley F. Druckenmiller(12) .................. 1,246,000 14.2% -- 1,246,000 10.9%
White Rock Capital, L.P.(12) .................. 1,396,000 15.9% -- 1,396,000 12.2%
Thomas U. Barton(12) ........................ 1,451,000 16.6% -- 1,451,000 12.7%
Joseph U. Barton(12) ........................ 1,421,000 16.2% -- 1,421,000 12.5%
Robertson, Stephens & Company Investment
Management, L.P.(13) ........................ 477,000 5.4% -- 477,000 4.2%
Bayview Holdings, Inc.(13) .................. 477,000 5.4% -- 477,000 4.2%
Robertson, Stephens Investment Management
Co.(13) .................................... 477,000 5.4% -- 477,000 4.2%
BankAmerica Corporation(13) .................. 477,000 5.4% -- 477,000 4.2%
All executive officers and directors as a group
(eleven persons)(14) ........................ 3,310,422 31.8% 325,000 3,010,422 23.6%

- ------------
* Indicates less than 1%.

(1) Includes 600,000 shares of Common Stock issuable upon the exercise of
options under the Company's 1993 Executive Stock Option Plan and 45,000
shares of Common Stock issuable upon the exercise of options under the
Company's 1994 Long Term Incentive and Stock Award Plan (the "1994 Plan").
Mr. Simon is President, Chief Executive Officer and a Director of the
Company. Excludes conditionally granted options. See "Executive
Compensation --1994 Long-Term Incentive and Stock Award Plan."

(2) Includes 22,500 shares of Common Stock issuable upon the exercise of
options under the Company's 1996 Directors Stock Option Plan (the
"Directors Plan"). Mr. Heyer is Chairman of the Board of Directors of the
Company.

(3) As the officers and directors of Argosy Investment Corp., which is the
general partner of Argosy-Hain Investment Group, L.P. ("AHIG") and
Argosy-Hain Warrant Holdings, L.P. ("AHWH"), Messrs. Heyer, Kehler and
Bloom may be deemed to be the beneficial owners of the 550,000 shares of
Common Stock to be issued upon exercise of AHWH Warrants and the 619,528
shares of Common Stock owned by AHIG.

(4) Includes 110,000 shares for Mr. Kaufman, 45,000 shares for Ms. Deutsch and
40,000 shares for Mr. Lerit of Common Stock issuable upon exercise of
options under the 1994 Plan. Shares sold by Mr. Kaufman and Mr. Lerit in
the Offering consist of shares issuable upon the exercise of options. Mr.
Kaufman and Ms. Deutsch are officers of the Company.

(5) Includes 95,000 shares of Common Stock issuable upon the exercise of
options under the 1994 Plan. Mr. Brecher is an officer of the Company.
Shares sold by Mr. Brecher include 30,000 shares issuable upon exercise of
options.

(6) Director of the Company.

(7) Includes 22,500 shares of Common Stock issuable upon the exercise of
options under the Directors Plan.

(8) Includes 22,500 shares of Common Stock issuable upon the exercise of
options under the Directors Plan and 50,000 shares of Common Stock
issuable upon the exercise of options under the 1994 Plan.

(9) Includes 15,000 shares of Common Stock issuable upon the exercise of
options under the Directors Plan.

(10) Consists of Warrants to purchase 550,000 shares of Common Stock at $3.25
per share.

(11) As general partner of AHIG and AHWH, Argosy Investment Corp. may be deemed
to be the beneficial owner of the 550,000 shares of Common Stock to be
issued upon the exercise of AHWH Warrants and the 619,528 shares of Common
Stock owned by AHIG.

(12) According to a Schedule 13D dated February 18, 1997 and Amendment No. 1
thereto dated August 5, 1997: (i) Soros Fund Management LLC, a Delaware
limited liability company ("SFM LLC"), White Rock Capital, L.P., a Texas
limited partnership ("White Rock"), Mr. Soros, Mr. Druckenmiller, Thomas
U. Barton and Joseph U. Barton may be deemed beneficial owners of
1,246,000 shares of Common Stock (the "SFM Shares") acquired by White Rock
on behalf of certain institutional clients; (ii) White Rock, Thomas U.
Barton and Joseph U. Barton may be deemed beneficial owners of an
additional 150,000 shares of Common Stock held in a securities portfolio
managed by Thomas U. Barton and Joseph U. Barton; (iii) Joseph U. Barton
beneficially owns 25,000 shares of Common Stock acquired for his personal
account; and (iv) Thomas U. Barton beneficially owns 55,000 shares of
Common Stock pursuant to an arrangement with Donaldson, Lufkin & Jenrette
Securities Corporation providing for the trading of options to acquire
such shares. Mr. Soros and Mr. Druckenmiller are members of the management
committee of SFM LLC, which has been granted investment discretion over
the SFM Shares. Thomas U. Barton and Joseph U. Barton are general partners
of White Rock.

(13) According to a Schedule 13D dated July 14, 1997 and Amendment No. 1
thereto dated October 10, 1997, Robertson, Stephens & Company Investment
Management, L.P., Bayview Investors, Ltd., Robertson, Stephens Investment
Management Co. and BankAmerica Corporation may be deemed beneficial owners
of 477,000 shares of Common Stock held by three investment funds: The
Robertson Stephens Orphan Fund; The Robertson Stephens Global Low-Priced
Stock Fund; and The Robertson Stephens Orphan Offshore Fund.

(14) Includes 600,000 shares issuable upon the exercise of options under the
Company's 1993 Executive Stock Option Plan, 295,000 shares issuable upon
the exercise of options under the 1994 Plan, 142,500 shares issuable upon
the exercise of options under the Directors Plan and 550,000 shares
issuable upon the exercise of Warrants. Excludes conditionally granted
options. Options exercisable into 105,000 shares granted under the 1994
Plan will be exercised and sold in connection with the Offering by Messrs.
Kaufman, Brecher and Lerit. See notes 1, 2, 3, 4, 5, 7, 8 and 9.

DESCRIPTION OF CAPITAL STOCK

General

As of October 27, 1997, the authorized capital stock of the Company is
40,000,000 shares of Common Stock, $.0l par value per share, of which 8,781,899
shares are outstanding, and 5,000,000 shares of Preferred Stock, $.0l par value
per share, none of which had been issued.

The following description is qualified in all respects by reference to the
Certificate of Incorporation (the "Certificate of Incorporation") and the
bylaws (the "Bylaws") of the Company.

Common Stock

Each share of Common Stock entitles the holder thereof to one vote on all
matters submitted to a vote of the stockholders. Since the holders of Common
Stock do not have cumulative voting rights, holders of more than 50% of the
outstanding shares can elect all of the directors of the Company then being
elected and holders of the remaining shares by themselves cannot elect any
directors. The holders of Common Stock do not have preemptive rights or rights
to convert their Common Stock into other securities. Holders of Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock have the right to a ratable portion of the assets remaining after payment
of liabilities. All outstanding shares of Common Stock are fully paid and
nonassessable.

Preferred Stock

The Company is authorized by its Certificate of Incorporation to issue a
maximum of 5,000,000 shares of Preferred Stock, in one or more series and
containing such rights, privileges and limitations including voting rights,
dividend rates, conversion privileges, redemption rights and terms, redemption
prices and liquidation preferences, as the Board of Directors of the Company
may, from time to time, determine.

The issuance of shares of Preferred Stock pursuant to the Board of
Directors' authority described above could decrease the amount of earnings and
assets available for distribution to holders of Common Stock, and otherwise
adversely affect the rights and powers, including voting rights, of such
holders and may have the effect of delaying or preventing a change in control
of the Company. The Company is not required by the Delaware General Corporation
Law (the "Delaware GCL") to seek stockholder approval prior to any issuance of
authorized but unissued stock and the Board of Directors does not currently
intend to seek stockholder approval prior to any issuance of authorized but
unissued stock, unless otherwise required by law.

Warrants

Warrants to purchase an aggregate of 1,114,294 shares of Common Stock have
been issued by the Company and are currently outstanding. Each Warrant entitles
the holder to purchase one share of common stock, subject to anti-dilution
adjustments, at an exercise price ranging from $3.25 to $12.29 per share. The
Warrants have expiration dates ranging from April 14, 1999 to December 31,
2003. The foregoing amount of outstanding warrants is after the exercise in
August and September 1997 of warrants for 200,000 shares at an exercise price
of $6.50 per share.

Shares Eligible for Future Sale

Of the 8,781,899 shares of the Company's Common Stock outstanding on
October 27, 1997, 1,391,004 shares may be deemed "restricted securities" (as
that term is defined in Rule 144 under the Securities Act). Such shares may be
sold in the future only pursuant to an effective registration statement under
the Securities Act or in compliance with Rule 144 under the Securities Act, or
pursuant to another exemption therefrom. Approximately 1,376,004 of such shares
of Common Stock outstanding are eligible for sale under Rule 144. Sales of
Common Stock pursuant to this offering and sales of restricted securities under
Rule 144 or pursuant to a future registration statement may depress the price
of the Company's Common Stock.

The Company, each of its directors and executive officers, the Selling
Stockholders and certain other stockholders and warrant holders have agreed,
pursuant to the Underwriting Agreement and other agreements, that they will not
sell any Common Stock without the prior consent of Stephens Inc. for a period
of 180 days from the date of this Prospectus, except that the Company may,
without such consent, grant certain options to purchase stock pursuant to the
1994 Plan and the Directors Plan and the stockholders may, without such
consent, (i) transfer shares as bona fide gifts to persons who agree in writing
to be bound thereby and (ii) pledge shares of Common Stock as collateral
against loans and have such shares sold if such collateral is called.

Certificate of Incorporation and Bylaws

Pursuant to the Delaware GCL, the power to adopt, amend and repeal bylaws
is conferred solely upon the stockholders unless the corporation's certificate
of incorporation also confers such power upon the board of directors. Under the
Company's Certificate of Incorporation, the Board of Directors is granted the
power to amend the Bylaws of the Company. Such Bylaws provide that each
director has one vote on each matter for which directors are entitled to vote.
The Certificate of Incorporation and/or the Bylaws also provide that (i) from
time to time, by resolution, the Board of Directors has the power to change the
number of directors, (ii) the directors will hold office until the next annual
meeting of stockholders and until their respective successors are elected and
qualified, and (iii) special meetings of stockholders may only be called by the
Board of Directors or officers of the Company. These provisions, in addition to
the existence of authorized but unissued capital stock, may have the effect,
either alone or in combination with each other, of making more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors. The Board of Directors of the Company currently consists of eight
persons.

Section 203 of the Delaware Law

Section 203 of the Delaware GCL prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of the business combination, the transaction is approved by the board of
directors of the corporation; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date the business combination is approved by the board of directors
and by the affirmative vote of at least 66 2/3% of the outstanding voting stock
that is not owned by the interested stockholder. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the stockholder. An "interested stockholder" is a person, who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of the corporation's voting stock. This provision of law could
discourage, prevent or delay a change in management or stockholder control of
the Company, which could have the effect of discouraging bids for the Company
and thereby prevent stockholders from receiving the maximum value for their
shares, or a premium for their shares in a hostile takeover situation.

Transfer Agent and Registrar

The Transfer Agent and Registrar for the Common Stock is Continental Stock
Transfer & Trust Company, New York, New York.

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date of this Prospectus, each Underwriter named below has
severally agreed to purchase, and the Company and the Selling Stockholders have
agreed to sell to such Underwriter, the number of shares of Common Stock set
forth opposite the name of such Underwriter.

Number of
Underwriter Shares
- ----------- ----------
Stephens Inc. ..............................
CIBC Oppenheimer Corp. .....................
Total ................................. 2,825,000
=========

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.

The Underwriters, for whom Stephens Inc. and CIBC Oppenheimer Corp. are
acting as Representatives, propose to offer part of the shares directly to the
public at the public offering price set forth on the cover page of this
Prospectus and part of the shares to certain dealers at a price that represents
a concession not in excess of $ per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the Offering, the
public offering price and such concessions may be changed by the Underwriters.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm any Shares to any accounts over which
they exercise discretionary authority.

In connection with this Offering, certain Underwriters and selling group
members (if any) who in the past have acted as market makers in the Common
Stock may engage in passive market making activities in the Common Stock on
NASDAQ in accordance with Rule 103 of Regulation M under the Securities
Exchange Act of 1934. Underwriters and other participants in the distribution
of the Common Stock generally are prohibited during a specified time period
(the "qualifying period"), determined in light of the timing of the pricing of
the Offering, from bidding for or purchasing the Common Stock or a related
security except to the extent permitted under the applicable rules of
Regulation M. Rule 103 allows, among other things, an Underwriter or member of
the selling group (if any) for the Common Stock to effect "passive market
making" transactions on NASDAQ in the Common Stock during the qualifying period
at a price that does not exceed the highest independent bid for that security
at the time of the transaction. Such a passive market maker must not display a
bid for the subject security at a price in excess of the highest independent
bid, and generally must lower its bid if all independent bids are lowered.
Moreover, the passive market maker's net purchases of such security on each day
of the qualifying period shall not exceed 30% of its average daily trading
volume during a reference period preceding the distribution.

In connection with the Offering, the Underwriters may purchase and sell
the Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the shares of Common Stock;
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Common Stock than they are required to purchase from the
Company in the Offering. The Underwriters may also impose a penalty bid,
whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the shares of Common Stock sold in the Offering
for their account may be reclaimed by the syndicate if the shares of Common
Stock are repurchased by the syndicate in stabilizing or covering transactions.
These activities may stabilize, maintain or otherwise affect the market price
of the shares of Common Stock, which may be higher than the price that might
otherwise prevail in the open market; and these activities, if commenced, may
be discontinued at any time. These transactions may be effected on NASDAQ, in
the over-the-counter market or otherwise.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 423,750 additional
shares of Common Stock at the price to the public set forth on the cover page
of this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the Offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number of shares set forth opposite each Underwriter's name in
the preceding table bears to the total number of shares listed in such table.

The Company, and its officers, directors and its affiliate stockholders
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Stephens Inc. offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock of the
Company or any securities convertible into, or exercisable or exchangeable for,
any class of Common Stock of the Company, other than by the Company pursuant to
its existing benefit plans.

The Company and the Selling Stockholders on the one hand, and the
Underwriters, on the other hand, have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

Under Rule 2720 of the National Association of Securities Dealers, Inc.
(the "NASD"), the Company may be deemed an affiliate of CIBC Oppenheimer Corp.
The Offering is being conducted in accordance with Rule 2720, which provides
that, among other things, when a NASD member participates in the underwriting
of an affiliate's equity securities, the initial public offering price can be
no higher than that recommended by a "qualified independent underwriter"
meeting certain standards. In accordance with this requirement, Stephens Inc.
has served in such role and has recommended a price in compliance with the
requirements of Rule 2720. In connection with the Offering, Stephens Inc. in
its role as a qualified independent underwriter has performed due diligence
investigations and reviewed and participated in the preparation of the
Prospectus and the Registration Statement of which this Prospectus forms a
part. In addition, the Underwriters may not confirm sales to any discretionary
account without the prior written approval of the customer.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Cahill Gordon & Reindel
(a partnership including a professional corporation), 80 Pine Street, New York,
New York 10005. Certain legal matters in connection with this Offering will be
passed upon for the Underwriters by Wright, Lindsey & Jennings LLP, Little
Rock, Arkansas.

EXPERTS

The consolidated financial statements of The Hain Food Group, Inc. at June
30, 1997 and 1996, and for each of the three years in the period ended June 30,
1997, appearing and incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere and
incorporated by reference herein, and are included herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

The consolidated financial statements of Vestro National Foods Inc. (the
prior name of Westbrae) ("Vestro") incorporated herein by reference to Vestro's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the
"Vestro 10-K") for the each of the years in the three-year period ended
December 31, 1996 and the balance sheets of Vestro for each of the years in the
two-year period ended December 31, 1996, have been audited by Price Waterhouse
LLP, independent accountants, as set forth in their report thereon included in
the Vestro 10-K. Such consolidated financial statements are included herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is required to file
periodic reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission") relating to its business, financial
statements and other matters. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
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 Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511 and at Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates from the public reference section of the Commission,
Washington, D.C. 20549. Such reports and other information can be reviewed
through the Commission's Electronic Data Gathering Analysis and Retrieval
System, which is publicly available through the Commission's web site
(http://www.sec.gov).

The Company has filed a Registration Statement on Form S-3 with the
Commission under the Securities Act with respect to the Common Stock offered
hereby. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement.
For further information, reference is made to the Registration Statement,
including the financial schedules and exhibits incorporated therein by
reference or filed as a part thereof. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement shall be deemed qualified in its
entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents have been filed by the Company with the Commission
and are hereby incorporated by reference in this Prospectus and made a part
hereof:

(1) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A/A dated November 12,
1993 and any amendment or report filed for the purpose of updating
such description;

(2) The Company's annual report on Form 10-K filed with the Commission
for the fiscal year ended June 30, 1997;

(3) The Company's quarterly report on Form 10-Q filed with the
Commission for the three month period ended September 30, 1997;

(4) The Company's current reports on Form 8-K dated September 8, 1997,
September 12, 1997 and October 28, 1997;

(5) Westbrae's annual report on Form 10-K filed with the Commission
(under Westbrae's prior name of Vestro Natural Foods, Inc.") for the
fiscal year ended December 31, 1997; and

(6) Westbrae's quarterly reports on Form 10-Q filed with the Commission
(under Westbrae's prior name of Vestro Natural Foods, Inc.) for the
three month periods ended March 31, 1997 and June 30, 1997.

All documents subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person,
a copy of any or all of the documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should
be directed to the President, The Hain Food Group, Inc., 50 Charles Lindbergh
Boulevard, Uniondale, New York 11553, (516) 237-6200.

INDEX TO FINANCIAL STATEMENTS

Consolidated financial statements of The Hain Food Group, Inc. for the fiscal
year ended June 30, 1997 (audited) and for the three months ended September
30, 1997 (unaudited)

Report of Independent Auditors ........................................................ F-2
Consolidated Balance Sheets ........................................................... F-3
Consolidated Statements of Income ..................................................... F-4
Consolidated Statements of Cash Flows .................................................. F-5
Consolidated Statement of Stockholders' Equity ......................................... F-6
Notes to Consolidated Financial Statements ............................................ F-7

Pro Forma Condensed Combined Financial Information (unaudited)

Pro Forma Condensed Combined Balance Sheet as of September 30, 1997 ..................... F-21
Pro Forma Condensed Combined Statement of Income for the year Ended June 30, 1997 ...... F-22
Pro Forma Condensed Combined Statement of Income for the three months Ended September 30, F-23
1997
Notes to Pro Forma Condensed Combined Financial Statements .............................. F-24

F-1

Report of Independent Auditors

The Stockholders and Board of Directors
The Hain Food Group, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of The Hain
Food Group, Inc. and Subsidiaries as of June 30, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1997. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Hain Food Group, Inc. and Subsidiaries at June 30, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles.

/s/ Ernst & Young LLP

Melville, New York
September 3, 1997

F-2

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30, September 30,
----------------------------- --------------
1996 1997 1997
------------- ------------- --------------
(Unaudited)

ASSETS
Current assets:
Cash ................................................... $ 306,000 $ 219,000 $ 184,000
Trade accounts receivable, less allowance for doubtful
accounts of $58,000, $265,000 and $258,000 ............ 8,069,000 8,447,000 8,151,000
Inventories ............................................. 7,346,000 6,635,000 7,425,000
Receivables from sales of equipment - current portion 632,000 408,000 379,000
Other current assets .................................... 639,000 818,000 990,000
------------ ------------ ------------
Total current assets ................................. 16,992,000 16,527,000 17,129,000
Property and equipment, net of accumulated depreciation
of $399,000, $577,000 and $625,000 ........................ 685,000 743,000 732,000
Receivables from sales of equipment - non-current portion. 310,000 150,000 150,000
Goodwill and other intangible assets, net of accumulated
amortization of $1,334,000, $2,074,000 and $2,284,000 . 27,140,000 29,188,000 28,998,000
Deferred financing costs, net of accumulated amortization
of $706,000, 1,049,000 and $1,135,000 ..................... 1,312,000 975,000 1,140,000
Other assets ............................................. 1,003,000 1,312,000 1,282,000
------------ ------------ ------------
Total assets .......................................... $47,442,000 $48,895,000 $49,431,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses .................. $ 5,560,000 $ 7,568,000 $ 6,097,000
Current portion of long-term debt ..................... 4,619,000 4,178,000 5,354,000
Income taxes payable .................................... 273,000 299,000 592,000
------------ ------------ ------------
Total current liabilities ........................... 10,452,000 12,045,000 12,043,000
Long-term debt, less current portion ........................ 12,105,000 10,756,000 9,605,000
Other liabilities .......................................... -- 483,000 403,000
Deferred income taxes ....................................... 461,000 552,000 552,000
------------ ------------ ------------
Total liabilities .................................... 23,018,000 23,836,000 22,603,000
------------ ------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.01 par value; authorized 5,000,000
shares, no shares issued
Common stock - $.01 par value, authorized
40,000,000 shares, issued 8,866,899, 8,881,899 and
8,881,899 shares ....................................... 89,000 89,000 89,000
Additional paid-in capital .............................. 20,413,000 20,804,000 21,547,000
Retained earnings ....................................... 3,922,000 4,991,000 5,467,000
------------ ------------ ------------
24,424,000 25,884,000 27,103,000
Less: 300,000 and 100,000 shares of treasury stock, at
cost ................................................... -- 825,000 275,000
------------ ------------ ------------
Total stockholders' equity ........................... 24,424,000 25,089,000 26,828,000
------------ ------------ ------------
Total liabilities and stockholders' equity ......... $47,442,000 $48,895,000 $49,431,000
============ ============ ============

See notes to consolidated financial statements.

F-3

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended
Year Ended June 30, September 30,
------------------------------------------- --------------------------
1995 1996 1997 1996 1997
------------- ------------- ------------- ------------- ------------
(Unaudited)

Net sales .............................. $58,076,000 $68,606,000 $65,353,000 $15,437,000 $16,336,000
Cost of sales ........................... 36,220,000 40,884,000 40,781,000 9,708,000 9,862,000
------------ ------------ ------------ ------------ ------------
Gross profit ........................... 21,856,000 27,722,000 24,572,000 5,729,000 6,474,000
------------ ------------ ------------ ------------ ------------
Selling, general and administrative
expenses ................................. 15,334,000 20,905,000 19,651,000 4,333,000 4,837,000
Depreciation of property and equipment . 158,000 184,000 178,000 41,000 48,000
Amortization of goodwill and other
intangible assets ........................ 474,000 651,000 740,000 185,000 210,000
------------ ------------ ------------ ------------ ------------
15,966,000 21,740,000 20,569,000 4,559,000 5,095,000
------------ ------------ ------------ ------------ ------------
Operating income ........................ 5,890,000 5,982,000 4,003,000 1,170,000 1,379,000
------------ ------------ ------------ ------------ ------------
Interest expense, net .................. 1,351,000 1,745,000 1,639,000 458,000 420,000
Amortization of deferred financing costs . 419,000 473,000 509,000 123,000 131,000
------------ ------------ ------------ ------------ ------------
1,770,000 2,218,000 2,148,000 581,000 551,000
------------ ------------ ------------ ------------ ------------
Income before income taxes ............... 4,120,000 3,764,000 1,855,000 589,000 828,000
Provision for income taxes ............... 1,755,000 1,630,000 786,000 253,000 352,000
------------ ------------ ------------ ------------ ------------
Net income .............................. $ 2,365,000 $ 2,134,000 $ 1,069,000 $ 336,000 $ 476,000
============ ============ ============ ============ ============
Net income per common and common
equivalent share ........................ $ 0.28 $ 0.24 $ 0.12 $ 0.04 $ 0.05
============ ============ ============ ============ ============
Weighted average number of common
shares and common share equivalents. 8,597,000 8,964,000 8,993,000 8,939,000 9,965,000
============ ============ ============ ============ ============

See notes to consolidated financial statements.

F-4

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended June 30
-------------------------------------------------
1995 1996 1997
--------------- --------------- ---------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................. $ 2,365,000 $ 2,134,000 $ 1,069,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation of property and equipment ............... 158,000 184,000 178,000
Amortization of goodwill and other intangible
assets ............................................. 474,000 651,000 740,000
Amortization of deferred financing costs ............... 419,000 473,000 509,000
Provision for doubtful accounts ........................ 44,000 123,000 290,000
Other ................................................ (34,000)
Deferred income taxes ................................. 198,000 36,000 91,000
Increase (decrease) in cash attributable to
changes in assets and liabilities, net of
amounts applicable to acquired businesses:
Accounts receivable ................................. (2,775,000) (218,000) (383,000)
Inventories ....................................... (499,000) 1,172,000 899,000
Other current assets .............................. (255,000) (166,000) (347,000)
Other assets ....................................... (974,000) 81,000 (309,000)
Accounts payable and accrued expenses ............... (1,413,000) (2,153,000) 276,000
Income taxes payable .............................. 1,058,000 (1,023,000) 26,000
------------- ------------- -------------
Net cash provided by (used in) operating
activities .................................... (1,200,000) 1,294,000 3,005,000
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses, net of long-term debt
issued to seller ....................................... (9,758,000) (666,000)
Acquisition of property and equipment and other ......... (429,000) (215,000) (146,000)
------------- ------------- -------------
Net cash used in investing activities ............ (429,000) (9,973,000) (812,000)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from senior term loan ........................ 9,000,000
Proceeds from bank revolving credit facility ......... 300,000 1,100,000 850,000
Purchase of treasury stock ........................... (825,000)
Costs in connection with bank financing ............... (20,000) (256,000) (6,000)
Payment of senior term loan ........................... (8,015,000) (2,919,000) (1,234,000)
Proceeds from exercise of warrants and options, net
of related expenses .................................... 8,424,000 52,000
Collections of receivables from equipment sales ...... 582,000 2,011,000 552,000
Payment of 10% Junior Subordinated Note ............... (1,269,000)
Payment of other long-term debt and other, net ......... (127,000) (138,000) (400,000)
------------- ------------- -------------
Net cash (used in) provided by financing activities . 1,144,000 8,798,000 (2,280,000)
------------- ------------- -------------
Net (decrease) increase in cash ........................ (485,000) 119,000 (87,000)
Cash at beginning of period ........................... 672,000 187,000 306,000
------------- ------------- -------------
Cash at end of period ................................. $ 187,000 $ 306,000 $ 219,000
============= ============= =============

RESTUBBED TABLE

Three Months Ended
September 30,
-------------------------------
1996 1997
--------------- ---------------
(Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................. $ 336,000 $ 476,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation of property and equipment ............... 41,000 48,000
Amortization of goodwill and other intangible
assets ............................................. 185,000 210,000
Amortization of deferred financing costs ............... 123,000 131,000
Provision for doubtful accounts ........................ 30,000
Other ................................................
Deferred income taxes .................................
Increase (decrease) in cash attributable to
changes in assets and liabilities, net of
amounts applicable to acquired businesses:
Accounts receivable ................................. 988,000 296,000
Inventories ....................................... (1,548,000) (790,000)
Other current assets .............................. (368,000) (172,000)
Other assets ....................................... (41,000) 30,000
Accounts payable and accrued expenses ............... 173,000 (1,471,000)
Income taxes payable .............................. (47,000) 293,000
------------- -------------
Net cash provided by (used in) operating
activities .................................... (128,000) (949,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses, net of long-term debt
issued to seller .......................................
Acquisition of property and equipment and other ......... (65,000) (57,000)
------------- -------------
Net cash used in investing activities ............ (65,000) (57,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from senior term loan ........................
Proceeds from bank revolving credit facility ......... 250,000 1,550,000
Purchase of treasury stock ...........................
Costs in connection with bank financing ............... (251,000)
Payment of senior term loan ........................... (218,000) (1,509,000)
Proceeds from exercise of warrants and options, net
of related expenses .................................... 1,293,000
Collections of receivables from equipment sales ...... 204,000 29,000
Payment of 10% Junior Subordinated Note ...............
Payment of other long-term debt and other, net ......... (29,000) (141,000)
------------- -------------
Net cash (used in) provided by financing activities . 207,000 971,000
------------- -------------
Net (decrease) increase in cash ........................ 14,000 (35,000)
Cash at beginning of period ........................... 306,000 219,000
------------- -------------
Cash at end of period ................................. $ 320,000 $ 184,000
============= =============

See notes to consolidated financial statements.

F-5

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 30, 1995, 1996 AND 1997

AND THE THREE MONTHS ENDED SEPTEMBER 30, 1997 (Unaudited)

Common Stock
---------------------- Additional
Amount Paid-in
Shares at $.01 Capital
----------- --------- -------------

Balance at June 30, 1994 ............... 5,933,478 $59,000 $12,019,000
Proceeds from exercise of Common Stock
warrants and other stock issuances, net
of related expenses .................. 2,933,421 30,000 8,394,000
Net income for the year ended June 30,
1995 .................................
--------- -------- ------------
Balance at June 30, 1995 ............... 8,866,899 89,000 20,413,000
Net income for the year ended June 30,
1996 .................................
--------- -------- ------------
Balance at June 30, 1996 ............... 8,866,899 89,000 20,413,000
Acquisition of treasury stock .........
Exercise of stock options and other ... 15,000 -- 79,000
Value ascribed to warrants ............ 312,000
Net income for the year ended June 30,
1997 .................................
--------- -------- ------------
Balance at June 30, 1997 ............... 8,881,899 89,000 20,804,000
Proceeds from exercise of Common Stock
warrants, net of related expenses ...... 743,000
Net income for the three months ended
September 30, 1997 .....................
--------- -------- ------------
Balance at September 30, 1997 ......... 8,881,899 $89,000 $21,547,000
========== ======== ============

RESTUBBED TABLE

Retained Treasury Stock
Earnings -----------------------------
(Deficit) Shares Amount Total
-------------- ------------- -------------- ---------------

Balance at June 30, 1994 ............... $ (577,000) $11,501,000
Proceeds from exercise of Common Stock
warrants and other stock issuances, net
of related expenses .................. 8,424,000
Net income for the year ended June 30,
1995 ................................. 2,365,000 2,365,000
---------- -----------
Balance at June 30, 1995 ............... 1,788,000 22,290,000
Net income for the year ended June 30,
1996 ................................. 2,134,000 2,134,000
---------- -----------
Balance at June 30, 1996 ............... 3,922,000 24,424,000
Acquisition of treasury stock ......... 300,000 $ (825,000) (825,000)
Exercise of stock options and other ... 79,000
Value ascribed to warrants ............ 312,000
Net income for the year ended June 30,
1997 ................................. 1,069,000 1,069,000
---------- --------- ---------- -----------
Balance at June 30, 1997 ............... 4,991,000 300,000 (825,000) 25,059,000
Proceeds from exercise of Common Stock
warrants, net of related expenses ...... (200,000) 550,000 1,293,000
Net income for the three months ended
September 30, 1997 ..................... 476,000 476,000
---------- --------- ---------- -----------
Balance at September 30, 1997 ......... $5,467,000 100,000 $ (275,000) $26,828,000
========== ========= ========== ===========

See notes to consolidated financial statements.

F-6

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

1. BUSINESS:

The Company and its subsidiaries operate in one business segment: the sale
of specialty food products which are manufactured by various co-packers.

The Company's principal product lines consist of Hain Pure Foods (natural
foods), Hollywood Foods (principally healthy cooking oils), Estee (sugar-free,
medically directed snacks), Featherweight (low sodium food products), Kineret
Foods (frozen kosher foods), Weight Watchers (dry and refrigerated products),
and Boston Better Snacks (snacks).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

All amounts in the financial statements have been rounded to the nearest
thousand dollars, except shares and per share amounts.

Consolidation Policy:

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly-owned. Material
intercompany accounts and transactions have been eliminated in consolidation.

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 amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.

Revenue Recognition:

Sales are recognized upon the shipment of finished goods to customers.
Allowances for cash discounts are recorded in the period in which the related
sale is recognized.

Advertising Costs:

Media advertising costs, which are included in selling, general and
administrative expenses, amounted to $52,000, $22,000, and $236,000 for fiscal
1995, 1996 and 1997, respectively. Such costs are expensed as incurred.

Income Taxes:

The Company follows the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax bases of assets and
liabilities at enacted rates in effect in the years in which the differences
are expected to reverse.

Concentration of Credit Risk:

Substantially all of the Company's trade accounts receivable are due from
food distributors and food retailers located throughout the United States. The
Company performs credit evaluations of its customers and generally does not
require collateral. Credit losses are provided for in the consolidated
financial statements and consistently have been within management's
expectations.

F-7

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)

Inventories:

Inventories consist principally of finished goods, raw materials and
packaging materials, and are stated at the lower of cost (first-in, first-out
basis) or market.

Fair Values of Financial Instruments:

As at September 30, 1997, June 30, 1997 and 1996, the Company had no cash
equivalents. The carrying amount of the receivables from sale of equipment
approximates their fair value. The Company believes that the interest rates set
forth in the Company's debt instruments approximates its current borrowing rate
and, accordingly, the carrying amounts of such debt at September 30, 1997, June
30, 1997 and 1996 approximate fair value.

Property and Equipment:

Property and equipment is stated at cost less accumulated depreciation.
Depreciation is provided under the straight-line method over the estimated
useful lives of the related assets.

Goodwill and Other Intangible Assets:

Goodwill consists of the excess of the cost of acquired businesses over
the fair value of the assets and liabilities acquired or assumed, and is being
amortized over a period of 40 years from date of acquisition (see Note 7).

Other intangible assets, which are not significant in the aggregate, are
being amortized over their respective applicable lives.

Amortizable Long-Lived Assets:

Financial Accounting Standards Board Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("FAS 121"), requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the asset carrying amount. FAS 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted FAS 121
effective for the fiscal year beginning July 1, 1996. The adoption did not have
an effect on the Company's consolidated results of operations, cash flows or
financial position.

Deferred Financing Costs:

Costs associated with obtaining debt financing are capitalized and
amortized over the related lives of the applicable debt instruments. The
unamortized deferred financing costs at September 30, 1997, June 30, 1997 and
1996 relate to the bank Credit Facility and Subordinated Debentures (see Note
8).

Earnings Per Common Share:

Net income per share for 1997, 1996 and 1995 and the three month periods
ended September 30, 1996 and 1997 is based on the weighted average number of
common shares and dilutive common equivalent shares.

In February 1997, the FASB issued Statement No. 128, "Earnings Per Share"
("FAS 128"), which is effective for both interim and annual financial
statements for periods ending after December 15, 1997. At that time,

F-8

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- (Continued)

the Company will be required to change the method currently used to compute
earnings per share and restate all periods. Under the new requirements for
calculating basic earnings per share, the dilutive effect of stock options and
warrants will be excluded. The impact of adopting FAS 128 is not expected to be
material.

Supplemental Earnings Common Per Share:

In November 1995, the Company used the proceeds of the exercise of the
Company's Class A Warrants ("Warrants") to repay its Senior Term Loan. Had the
Warrants been exercised as of July 1, 1994, the net income per share for the
year ended June 30, 1995 (based on interest savings, net of tax of
approximately $144,000 and an assumed issuance of shares in connection with the
exercise of the Warrants as of July 1, 1994), would have been the same ($.28
per share), as historically reported.

Unaudited Interim Statements:

The consolidated financial statements as of September 30, 1997 and for the
three month periods ended September 30, 1996 and 1997 have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. The financial statements for such periods are unaudited but, in the
opinion of management, all adjustments (including normal recurring accruals)
necessary for a fair presentation have been included.

3. ACQUISITIONS:

On May 23, 1997, the Company purchased substantially all of the assets and
business, subject to certain liabilities, of The Boston Popcorn Company, Inc.
("Boston Better Snacks"), a manufacturer and marketer of popcorn and chip snack
products, principally in the New England and New York City metropolitan areas.
The purchase price amounted to approximately $870,000 of which $645,000 was
paid in cash and $225,000 by the issuance of a note, with a maturity date in
2002. In addition, the Company assumed certain liabilities. Pro forma
information with respect to the foregoing acquisition is not significant.

On November 3, 1995, the Company purchased substantially all of the assets
and business, subject to certain liabilities, of The Estee Corporation. Estee
is a manufacturer and marketer of sugar-free and low sodium products targeted
towards diabetic and health conscious consumers. The purchase price, after
giving effect to the early redemption of the junior subordinated note referred
to below (see Note 8), amounted to approximately $11.32 million of which $9.75
million was paid in cash and $1.75 million by the issuance of a junior
subordinated note, with a maturity date in 2005. In addition, the Company
issued a warrant to purchase 200,000 shares of the Company's common stock at an
exercise price of $6.50. See Note 10.

The above acquisitions have been accounted for as purchases and,
therefore, operating results of the acquired businesses have been included in
the accompanying financial statements from the date of acquisition.

Unaudited pro forma results of operations for the year ended June 30,
1996, assuming that the Estee acquisition had occurred as of July 1, 1995 are
as follows:

1996
------------
Net sales .................. $75,749,000
Net income ............... 2,316,000
Net income per share ...... $ 0.26

The pro forma operating results shown above are not necessarily indicative
of operations in the period following acquisition.

F-9

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

4. LICENSE AGREEMENT:

On March 31, 1997, the Company entered into a license agreement with
Weight Watchers Gourmet Food Company ("WWGF" -- a wholly-owned subsidiary of
H. J. Heinz Company). Under the agreement, the Company will manufacture, market
and sell approximately 60 Weight Watcher dry and refrigerated products. Sales of
these products were approximately $17 million (unaudited) for the 12 months
ended March 31, 1997. The agreement provides, among other matters, for a royalty
payment to WWGF based on the sales of Weight Watchers products and payment of a
share of the pre-tax profits (as defined) from sale of the such products. In
connection with the license agreement, the Company purchased approximately
$600,000 of inventory, using borrowings under the Company's revolving credit
facility.

5. RECEIVABLES FROM SALE OF EQUIPMENT:

In connection with the acquisitions of Hain, Estee and Boston Better
Snacks, the Company acquired certain food manufacturing equipment, which has
been sold to co-packers for selling prices equal to the fair value of such
equipment recorded at date of acquisition. The balance of the receivables are
due in various installments over a five year period through 2001. The proceeds
of sale of the Estee equipment are required to be utilized to pay down the bank
debt referred to in Note 8.

6. INVENTORIES:

Inventories consist of the following:

June 30, September 30,
--------------------------- --------------
1996 1997 1997
------------ ------------ --------------

Finished goods .................. $6,641,000 $5,418,000 $5,713,000
Raw materials and packaging ...... 705,000 1,217,000 1,712,000
----------- ----------- -----------
$7,346,000 $6,635,000 $7,425,000
=========== =========== ===========

7. GOODWILL AND OTHER INTANGIBLE ASSETS:

Goodwill and other intangible assets consist of the following:

June 30, September 30,
----------------------------- --------------
1996 1997 1997
------------- ------------- --------------

Goodwill ........................... $28,209,000 $30,645,000 $30,665,000
Other intangible assets ............ 265,0000 617,000 617,000
------------ ------------ ------------
28,474,000 31,262,000 31,282,000
Less: Accumulated amortization ...... 1,334,000 2,074,000 2,284,000
------------ ------------ ------------
$27,140,000 $29,188,000 $28,998,000
============ ============ ============

Substantially all unamortized goodwill relates to the acquisition of Hain,
Estee, Boston Popcorn and Kineret Foods. The entities have been in operation
for many years and are viewed to have an unlimited life. Accordingly, such
goodwill is being amortized over the maximum period (40 years) permitted by
Accounting Principles Board Opinion No. 17. The increase in goodwill during
1997 is principally attributable to the acquisition of The Boston Popcorn
Company and the increase in 1996 is all attributable to the acquisition of
Estee.

F-10

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

8. LONG-TERM DEBT:

Long-term debt consists of the following:

June 30, September 30,
----------------------------- --------------
1996 1997 1997
----------- ------------- --------------

Senior Term Loan .............................. $ 6,081,000 $ 4,847,000 $ 3,339,000
Revolving Credit .............................. 1,400,000 2,250,000 3,800,000
12.5% Subordinated Debentures net of unam-
ortized original issue discount of $1,361,000,
$1,195,000 and $1,150,000 ..................... 7,139,000 7,305,000 7,350,000
10% Junior Subordinated Note .................. 1,750,000 -- --
Notes payable to sellers in connection with
acquisition of companies, and other long-
term debt .................................... 354,000 532,000 470,000
------------ ------------ ------------
16,724,000 14,934,000 14,959,000
Current portion ................................. 4,619,000 4,178,000 5,354,000
------------ ------------ ------------
$12,105,000 $10,756,000 $ 9,605,000
============ ============ ============

In connection with the acquisition of Estee in November 1995, the Company
and its bank entered into a $18 million Amended and Restated Credit Facility
("Facility") providing for a $9 million senior term loan and a $9 million
revolving credit line. The Facility replaced the Company's existing $6 million
revolving credit line with the same bank. Borrowings under the facility bear
interest at rates ranging from 1/2% to 1% over the bank's base rate, which was
8.5% and 8.25% at June 30, 1997 and 1996, respectively. The senior term loan is
repayable in quarterly principal installments, commencing March 31, 1996
through maturity of the Facility on June 30, 2000. Pursuant to the revolving
credit line, the Company may borrow up to 85% of eligible trade receivables and
60% of eligible inventories. Amounts outstanding under the Facility are
collateralized by principally all of the Company's assets. The Company borrowed
the full $9 million senior term loan and $2 million under the revolving credit
line to fund the cash purchase price and related closing costs of the
acquisition.

At June 30, 1996 and 1997 and September 30, 1997, the interest rate on the
Credit Facility was 9.25%, and 9.50% and 9.50%, respectively.

The Credit Facility, as amended, contains certain restrictive covenants
which, among other matters, restrict the payment of dividends and the
incurrence of additional indebtedness. The Company is also required to maintain
various financial ratios, including minimum working capital ratios, the
achievement of certain earnings levels, and interest and fixed charge coverage
ratios. The Company was in compliance with all such covenants at June 30, 1997.

The 12.5% Subordinated Debentures ("Debentures") provide for the payment
of interest semi-annually in arrears, and principal payments of $1,943,000 in
October 2000, $2,307,000 in April 2002, $2,125,000 in April 2003 and a final
maturity payment of $2,125,000 in April 2004. The agreement relating to the
issuance of the Debentures also contains certain restrictive covenants which
are generally less restrictive than those contained in the Credit Facility. In
connection with the issuance of the Debentures, the Company also issued 768,229
shares of common stock to the Debenture holders. Such shares were valued at
$1,644,000 and applied as a discount of the value of the Debentures. The
discount is being amortized using the interest method over the life of the
Debentures. Amortization expense for the years ended June 30, 1995, 1996 and
1997 amounted to $108,000, $141,000 and $166,000, respectively. Amortization
expense for the three month periods ended September 30, 1996 and 1997 amounted
to $42,000 and $45,000, respectively.

F-11

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

8. LONG-TERM DEBT: -- (Continued)

The 10% junior subordinated note ("Estee Note"), which was issued to the
seller in connection with the acquisition of Estee, provided for the payment of
interest semi-annually in arrears and a maturity in November 2005. Pursuant to
an option contained in the Estee Note, in April 1997 the note was redeemed by
the Company for $1,269,000. Substantially all of the discount of $481,000,
resulting from such redemption was applied as a reduction of the purchase price
of Estee, resulting in a reduction of goodwill.

Maturities of long-term debt at June 30, 1997, are as follows:

Year Ending June 30
-------------------
1998 ..................... $ 4,178,000
1999 ..................... 1,993,000
2000 ..................... 1,372,000
2001 ..................... 1,988,000
2002 ..................... 2,348,000
Thereafter ............... 4,250,000
------------
16,129,000
Less:
Unamortized original issue
discount ............... 1,195,000
------------
Total long-term debt ...... $14,934,000
============

Interest paid during the years ended June 30, 1995, 1996 and 1997 amounted
to $1,440,000, $1,820,000 and $1,768,000, respectively.

In October 1997, in connection with the acquisition of Westbrae (see Note
15), the Company and its bank entered into a $40 million Amended and Restated
Credit Facility ("New Credit Facility") providing for a $30 million senior term
loan and a $10 million revolving credit line.

The New Credit Facility replaced the Company's existing $18 million
Facility with the same bank which provided for a $9 million senior term loan
and a $9 million revolving credit line. Borrowings under the New Credit
Facility bear interest at rates equal to, at the Company's option, either (i)
0.75% over the bank's base rate or (ii) 2.75% over the Eurodollar Rate. The
senior term loan is repayable in quarterly principal installments commencing
December 31, 1997 through maturity of the New Credit Facility on September 30,
2003. Pursuant to the revolving credit line, the Company may borrow up to 85%
of eligible trade receivables and 60% of eligible inventories. Amounts
outstanding under the New Credit Facility are collateralized by principally all
of the Company's assets. The Company borrowed the full $30 million senior term
loan to fund the cash purchase price and related closing costs of the
acquisition and to repay certain existing debt of the Company and Westbrae.

The New Credit Facility contains certain financial and other restrictive
covenants which, among other matters, restrict the payment of dividends and the
incurrence of additional indebtedness. The Company is also required to maintain
various financial ratios, including minimum working capital ratios, the
achievement of certain earnings levels, and interest and fixed charge coverage
ratios.

F-12

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

9. INCOME TAXES:

The provision for income taxes for the years ended June 30, 1995, 1996 and
1997 are as follows:

1995 1996 1997
------------ ------------ ---------
Current:
Federal ........................ $1,262,000 $1,337,000 $541,000
State ........................... 295,000 257,000 154,000
----------- ----------- ---------
1,557,000 1,594,000 695,000
Deferred Federal and State ...... 198,000 36,000 91,000
----------- ----------- ---------
Total ........................... $1,755,000 $1,630,000 $786,000
=========== =========== =========

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

Components of the Company's deferred tax liability for the years ended
June 30, 1996 and 1997 are as follows:

1996 1997
-------------- -------------

Difference in carrying amount of receivables from sale of equipment ... $ (35,000) $ (8,000)
Difference in amortization period on Estee Goodwill .................. (111,000) (186,000)
Basis difference on property and equipment ........................... (93,000) (102,000)
Basis difference on inventory .......................................... 67,000 134,000
Deferred charges ...................................................... (294,000) (462,000)
Allowance for doubtful accounts ....................................... 5,000 72,000
---------- ----------
Net deferred tax liability ............................................. $ (461,000) $ (552,000)
========== ==========

Reconciliations of expected income taxes at the U.S. federal statutory
rate to the Company's provision for income taxes for the years ended June 30,
1995, 1996, and 1997 are as follows:

1995 % 1996 % 1997 %
------------ ---------- ------------ ---------- ------------- ---------

Expected U.S. federal
income tax at statutory rate $1,401,000 34.0% $1,280,000 34.0% $ 630,000 34.0%
State income taxes, net of
federal benefit ............... 195,000 4.8 172,000 4.6 102,000 5.5
Non-deductible expenses ......... 154,000 3.7 167,000 4.4 169,000 9.1
Other ........................... 5,000 .1 11,000 .3 (115,000) (6.2)
----------- ------ ----------- ------ ---------- -----
Provision for income taxes ...... $1,755,000 42.6% $1,630,000 43.3% $ 786,000 42.4%
=========== ====== =========== ====== ========== =====

Income taxes paid during the years ended June 30, 1995, 1996 and 1997
amounted to $233,000, $2,623,000 and $699,000, respectively.

The income tax provisions for the three month periods ended September 30,
1996 and 1997 are based on the expected effective tax rate for the entire
fiscal year. It is not practical to calculate current and deferred income taxes
on a quarterly basis.

F-13

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

10. STOCKHOLDERS' EQUITY:

Common Stock:

In June 1996, the Board of Directors of the Company adopted a Common Stock
repurchase program authorizing the Company to repurchase up to $2 million of
the Company's common stock. In a private transaction in November 1996, the
Company acquired 300,000 shares of its common stock for treasury at $2.75 per
share for an aggregate cost of $825,000.

In connection with the acquisition of Estee, the Company issued a warrant
to the seller to purchase 200,000 shares of the Company's common stock at an
exercise price of $6.50 per share. In August and September 1997, the seller
exercised all of the warrants and the Company issued 200,000 shares of Common
Stock out of treasury for aggregate proceeds of $1,300,000.

Preferred Stock:

The Company is authorized to issue "blank check" preferred stock (up to 5
million shares) with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
of Directors is empowered to issue, without stockholder approval, preferred
stock with dividends, liquidation, conversion, voting, or other rights which
could decrease the amount of earnings and assets available for distribution to
holders of the Company's common stock. As at June 30,1997 and 1996, no
preferred stock was issued or outstanding.

Warrants:

In December 1994, the Company issued 125,000 shares of Common Stock as a
result of the exercise of a warrant issued by the Company in connection with
the Company's 12.5% Subordinated Debentures. The proceeds from such exercise
were nominal.

In connection with services provided by CIBC Wood Gundy Securities Corp.
("CIBC" -- formerly Argosy Group, L.P.), the Company's investment banking firm,
the Company issued in April 1994, to an affiliate of CIBC, warrants to acquire
550,000 shares of the Company's common stock at a price of $3.25 per share. The
exercise price approximates the fair market value of the Company's common stock
at the time the warrant was negotiated. None of these warrants have been
exercised.

In connection with the Weight Watchers agreement, the Company issued
warrants on March 31, 1997, to acquire 250,000 shares of the Company's common
stock at prices ranging from $7.00 to $9.00 per share. The value ascribed to
these warrants of approximately $312,000 will be amortized over ten years.

During the last three fiscal years, the Company issued a total of 200,000
warrants in connection with services rendered by third party consultants at
prices ranging from $4.13 to $8.00 per share.

As at June 30, 1997, there are 2,940,000 shares of common stock reserved
for issuance of warrants (1,200,000) and Employee and Director Stock Options
(1,740,000). See Note 12.

11. LEASES:

The Company's corporate headquarters are located in leased office space in
Uniondale, New York, under a lease which expires in March 2002. This lease
provides for additional payments of real estate taxes and other operating
expenses over a base period amount. In addition, the Company leases warehouse
space for a subsidiary and a division under net leases which expire in August
1999 and May 2000.

F-14

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

11. LEASES: -- (Continued)

The aggregate minimum future lease payments for these operating leases are
as follows:

Year Ending
June 30
------------
1998 ...... $ 321,000
1999 ...... 325,000
2000 ...... 301,000
2001 ...... 274,000
2002 ...... 191,000
-----------
$1,412,000
===========

Rent expense charged to operations for the years ended June 30, 1995, 1996
and 1997 was $187,000, $162,000 and $224,000, respectively.

12. STOCK OPTION PLANS:

In December 1994, the Company adopted the 1994 Long-Term Incentive and
Stock Award Plan ("Plan"), which amended and restated the Company's 1993 stock
option plan. The Plan provides for the granting of incentive stock options to
employees, directors and consultants to purchase up to an aggregate of 855,000
shares of the Company's common stock. All of the options granted to date under
the Plan have been qualified stock options providing for exercise prices
equivalent to the fair market price at date of grant, and expire 10 years after
date of grant. Vesting terms are determined at the discretion of the Company.
During 1995, options to purchase 111,500 shares were granted at prices from
$3.50 to $5.00 per share. During 1996, options to purchase 103,500 shares were
granted at prices from $2.94 to $3.25 per share. During 1997, options to
purchase 475,000 shares were granted at prices from $3.00 to $4.81 per share.
At June 30, 1997, no options were available for grant.

In December 1995, the Company adopted a Directors Stock Option Plan. The
Plan provides for the granting of stock options to non-employee directors to
purchase up to an aggregate of 300,000 shares of the Company's common stock.
During 1996, options for an aggregate of 90,000 shares were granted at a price
of $3.50 per share. During 1997, options for an aggregate of 67,500 shares were
granted at a price of $3.38 per share. At June 30, 1997, 142,500 options are
available for grant.

The Company also has a 1993 Executive Stock Option Plan pursuant to which
it granted Mr. Irwin D. Simon, its founder and Chief Executive Officer, options
to acquire 600,000 shares of the Company's common stock. As a result of the
Company achieving certain sales thresholds, all of such shares are currently
exercisable. The exercise price of options designed to qualify as incentive
options is $3.58 per share and the exercise price of non-qualified options is
$3.25 per share. None of Mr. Simon's options have been exercised. The options
expire in 2003.-

F-15

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

12. STOCK OPTION PLANS: -- (Continued)

The Company has elected to follow APB Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and related Interpretations, in
accounting for stock options because, as discussed below, the alternative fair
value accounting provided for under Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on date
of grant, no compensation expense is recognized.

Pro-forma information regarding net income and net income per share is
required by FAS 123, and has been determined as if the Company has accounted
for its stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Sholes
option pricing model with the following weighted-average assumptions: risk free
interest rates, ranging from 5.26% to 6.77%; no dividend yield; volatility
factor of the expected market price of the Company's Common Stock at 40%; and a
weighted-average expected life of the options of 5 years at June 30, 1997 and
1996.

The Black-Sholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:

1996 1997
------------ ---------
Pro forma net income ............... $1,997,000 $747,000
Pro forma net income per share ...... $ .22 $ .08

The FAS 123 method of accounting has not been applied to options granted
prior to July 1, 1995. As a result, the pro forma compensation cost may not be
representative of that to be expected in future years.

F-16

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

12. STOCK OPTION PLANS: -- (Continued)

A summary of the transactions pursuant to the Company's stock options
plans for the three years ended June 30, 1997 follows:

1995 1996 1997
---------------------------- ----------------------- ----------------------
Option Weighted Weighted
Exercise Exercise Exercise
Options Price Options Price Options Price
------------ ------------- ------------ -------- ------------ -------

Outstanding at beginning of
year ........................... 855,000 $ 3.25-3.58 911,500 $ 3.57 1,090,000 $ 3.52
Granted ........................ 111,500 3.50-5.00 193,500 3.25 542,000 3.82
Exercised ..................... (15,000) 3.50
Terminated ..................... (55,000) 3.25 (15,000) 3.25 (20,000) 4.75
-------- ---------- ----------
Outstanding at end of year. 911,500 $3.52-$5.00 1,090,000 $ 3.52 1,597,000 $ 3.61
======== ============ ========== ======= ========== =======
Exercisable at end of year . 885,000 1,069,000 1,323,000
======== ========== ==========
Weighted average fair
value of options granted
during year .................. $ 1.33 $ 1.57
========== ==========

The following table summarizes information for stock options outstanding
at June 30, 1997:

Weighted Average
Exercise Options Options Remaining Contractual
Price Outstanding Exercisable Life in Years
- ---------------------- ------------- ------------- ----------------------

$2.94 - $3.125 ...... 92,000 92,000 8.5
3.25 - 3.58 ......... 1,255,000 1,055,000 7.3
4.50 - 4.813 ...... 250,000 176,000 9.5
---------- ---------- ---
1,597,000 1,323,000 7.7
========== ========== ===

13. 401(k) SAVINGS PLAN:

On July 1, 1994, the Company adopted a 401(k) Employee Retirement Plan
("Plan") to provide retirement benefits for eligible employees. All full-time
employees of the Company and its subsidiaries who have attained the age of 21
are eligible to participate upon the completion of 30 days of service.
Participants may elect to make voluntary contributions to the Plan in amounts
not exceeding federal guidelines. On an annual basis, commencing in January
1995, the Company may, in its sole discretion, make certain matching
contributions. For the years ended June 30, 1997, 1996 and 1995, the Company
made contributions of $21,000, $15,000 and $9,000, respectively.

F-17

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

14. QUARTERLY FINANCIAL DATA (UNAUDITED):

Unaudited quarterly financial data (in thousands, except per share
amounts) for fiscal 1997 and 1996 is summarized as follows:

Three Months Ended
-------------------------------------------------
September December March June
30, 1996 31, 1996 31, 1997 30, 1997
----------- ---------- ---------- ---------

Net sales ........................ $15,437 $17,117 $13,623 $19,176
Gross profit ..................... 5,729 6,578 5,030 7,235
Operating income .................. 1,170 1,246 600 987
Income before income taxes ...... 589 752 57 457
Net income ........................ 336 428 33 272
Net income per common share ...... $ .04 $ .05 $ .00 $ .03

Three Months Ended
-------------------------------------------------
September December March June
30, 1995 31, 1995 31, 1996 30, 1996
----------- ---------- ---------- ---------

Net sales ........................ $13,527 $18,122 $17,218 $19,739
Gross profit ..................... 5,364 7,355 6,812 8,191
Operating income .................. 1,094 1,796 1,489 1,603
Income before income taxes ...... 736 1,210 855 963
Net income ........................ 426 701 504 503
Net income per common share ...... $ .05 $ .08 $ .06 $ .06

15. SUBSEQUENT EVENT:

On September 11, 1997, the Company executed a definitive merger agreement
with Westbrae Natural, Inc. ("Westbrae), a publicly-owned company, pursuant to
which the Company commenced a tender offer on September 12, 1997 for all of the
outstanding shares of Westbrae for $3.625 per share of common stock in cash.
Pursuant to the definitive merger agreement, certain shareholders of Westbrae
who own an aggregate of approximately 69% of the outstanding shares of Westbrae
have agreed to tender their shares at the offer price. The aggregate purchase
price for all of the outstanding shares of Westbrae and shares under option
(assuming all of Westbrae's shares are tendered) is approximately $23.5
million. In connection therewith, the Company has obtained a financing
commitment from its lender for a Credit Facility of $40 million, consisting of
a $30 million term loan and a $10 million line of revolving credit. The
proceeds of the term loan will be used to fund the total cost of the
acquisition and to repay certain existing debt of the Company and Westbrae.

The tender offer expires on October 9, 1997 (unless extended), and this
transaction, which is subject to the completion of final diligence procedures,
is expected to close by late October 1997.

Westbrae (formerly known as Vestro Natural Foods, Inc.), headquartered in
Carson, California, is a leading formulator and marketer of high quality
natural and organic foods sold under the brand names Westbrae Natural, Westsoy,
Little Bear and Bearitos, encompassing 300 food items such as non-dairy
beverages, chips, snacks, beans and soups. For its fiscal year ended December
31, 1996, Westbrae reported net sales of $32,583,000 and net income of
$1,203,000. For the six months ended June 30, 1997, Westbrae reported net sales
of $15,502,000 (unaudited) and net income of $708,000 (unaudited).

On October 14, 1997, the Company completed the Westbrae tender offer for
all of the shares of Westbrae for $3.625 per share of common stock in cash. The
aggregate purchase price for all of the outstanding shares of Westbrae and
shares under option was approximately $23.5 million. In connection therewith,
the Company and a bank entered into a $40 million Amended and Restated Credit
Facility ("New Credit Facility") providing for a $30 million senior term loan
and a $10 million revolving credit line. See Note 8.

F-18

THE HAIN FOOD GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

(Information as of September 30, 1997 and for the
three month periods ended September 30, 1997 and 1996 is unaudited)

15. SUBSEQUENT EVENT: -- (Continued)

Unaudited pro forma results of operations for the three months ended
September 30, 1997, assuming that the acquisition of Westbrae had occurred as
of July 1, 1997 are as follows:

Net sales .................. $26,064,000
Net income ............... 696,000
Net income per share ...... $ .07

The pro forma operating results shown above are not necessarily indicative
of operations in the period following acquisition.

F-19

Pro Forma Condensed Combined Financial Information
(Unaudited)

The following unaudited pro forma condensed combined financial information
is based on (i) the historical consolidated financial statements of the Company
which are included elsewhere or incorporated by reference in this Prospectus
and (ii) the historical consolidated financial statements of Westbrae Natural,
Inc. and subsidiaries which are included elsewhere or incorporated by reference
in this Prospectus and should be read in conjunction with such financial
statements and notes thereto.

The historical condensed balance sheets represent the financial position
of the Company and Westbrae Natural, Inc. as of September 30, 1997. The
unaudited pro forma condensed combined balance sheet as of September 30, 1997
assumes the Acquisition and the related financing with respect thereto, had
occurred as of that date.

The unaudited pro forma condensed combined statements of operations were
prepared assuming that the Acquisition had occurred as of the beginning of each
period presented. The unaudited pro forma statements of income give effect to
(i) the acquisition of Westbrae under the purchase method of accounting and
(ii) certain estimated operational and financial benefits and costs that are a
direct result of the acquisition of Westbrae.

The unaudited pro forma condensed financial statements have been prepared
based on assumptions deemed appropriate by the Company and may not be
indicative of actual results of the future operations of the Company.

F-20

Pro Forma Condensed Balance Sheet
September 30, 1997
(Amounts in thousands)
(Unaudited)

Historical Pro Forma
---------------------- ------------------------------
Hain Westbrae Adjustments Combined
Assets --------- ---------- ------------------ ---------

Current Assets:
Cash and cash equivalents ..................... $ 184 $ 1,175 ($ 1,000)(1) $ 359
Accounts receivable, net ..................... 8,151 2,895 11,046
Inventories .................................... 7,425 4,451 11,876
Receivables-sales of equipment ............... 379 -- 379
Other current assets ........................... 990 603 1,593
------- -------- ------------ -------
Total current assets ........................ 17,129 9,124 (1,000) 25,253
Property and equipment, net ..................... 732 138 870
Receivables-sales of equipment, non current
portion ....................................... 150 -- 150
(6,535)(2)
Goodwill and other intangible assets, net ...... 28,998 6,535 20,745 (3) 49,743
Unamortized financing costs and other
assets ....................................... 2,422 256 781 (4) 3,459
------- -------- ------------ -------
Total assets ................................. $49,431 $16,053 $ 13,991 $79,475
======= ======== ============ =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses . $ 6,097 $ 3,754 $ 9,851
(1,000)(1)
(2,800)(5)
Current portion of revolving credit ............ 3,800 3,429 (6) 3,429
(1,333)(5)
Current portion of senior term loan ............ 1,333 3,000 (6) 3,000
Current portion of other long-term debt ......... 221 859 (859)(7) 221
Income taxes payable ........................... 592 592
------- -------- ------------ -------
Total current liabilities .................. 12,043 4,613 437 17,093
------- -------- ------------ -------
Long-term Debt, less current portion:
(2,006) (5)
Senior credit facility ........................ 2,006 -- 27,000 (6) 27,000
Subordinated debentures ........................ 7,350 1,255 (1,255)(7) 7,350
Other .......................................... 249 -- 249
------- -------- ------------ -------
Total long-term debt ........................ 9,605 1,255 23,739 34,599
------- -------- ------------ -------
Other liabilities .............................. 403 -- -- 403
Deferred income taxes ........................... 552 552
------- -------- ------------ -------
Total Liabilities ........................... 22,603 5,868 24,176 52,647
------- -------- ------------ -------
Stockholders' equity:
Preferred stock .............................. -- -- -- --
Common stock ................................. 89 60 (60)(8) 89
Additional paid in capital ..................... 21,547 17,202 (17,202)(8) 21,547
Retained earnings .............................. 5,467 (7,077) 7,077 (8) 5,467
Treasury Stock ................................. (275) -- -- (275)
------- -------- ------------ -------
Total stockholders' equity .................. 26,828 10,185 (10,185) 26,828
------- -------- ------------ -------
Total Liabilities and Stockholders'
Equity .................................... $49,431 $16,053 $ 13,991 $79,475
======= ======== ============ =======

See note to unaudited pro forma condensed financial statements.

F-21

Pro forma Condensed Statement of Income
For the Year Ended June 30, 1997
Amounts in thousands, except per share amounts
(Unaudited)

Historical Pro Forma
---------------------- --------------------------------
Hain Westbrae Adjustments Combined
--------- ---------- -------------------- ---------

Net sales .................................... $65,353 $32,894 -- $98,247
Cost of sales ................................. 40,781 20,019 -- 60,800
-------- -------- -------------- --------
Gross profit ................................. 24,572 12,875 -- 37,447
-------- -------- -------------- --------
Selling, general and administrative expenses 19,651 10,809 ($ 1,143) (1) 29,317
Depreciation of property and equipment ......... 178 94 -- 272
Amortization of goodwill and other (213) (2)
intangible assets ........................... 740 213 543 (3) 1,283
-------- -------- -------------- --------
20,569 11,116 (813) 30,872
-------- -------- -------------- --------
Operating income .............................. 4,003 1,759 813 6,575
-------- -------- -------------- --------
Interest expense .............................. 1,639 213 1,786 (4) 3,638
Amortization of deferred financing costs ...... 509 0 (18) (5) 491
-------- -------- -------------- --------
2,148 213 1,768 4,129
-------- -------- -------------- --------
Income before income taxes ..................... 1,855 1,546 (955) 2,446
Provision for income taxes ..................... 786 206 35(6) 1,027
-------- -------- -------------- --------
Net income .................................... $ 1,069 $ 1,340 ($ 990) $ 1,419
======== ======== ============== ========
Net income per common and common share
equivalents ................................. $ 0.12 $ 0.16
======== ========
Weighted average number of common
shares and common share equivalents ......... 8,993 8,993
======== ========

See notes to unaudited pro forma condensed financial statements.

F-22

Pro forma Condensed Statement of Income
For the Three Months Ended September 30, 1997
Amounts in thousands, except per share amounts.
(Unaudited)

Historical Pro Forma
---------------------- ------------------------------
Hain Westbrae Adjustments Combined
--------- ---------- ------------------ ---------

Net sales ....................................... $16,336 $9,728 -- $26,064
Cost of sales ................................. 9,862 5,711 -- 15,573
-------- ------- ---------- --------
Gross profit .................................... 6,474 4,017 -- 10,491
-------- ------- ---------- --------
Selling, general and administrative expenses 4,837 3,313 ($ 301) (1) 7,849
Depreciation of property and equipment ......... 48 23 -- 71
Amortization of goodwill and other (53) (2)
intangible assets .............................. 210 53 136 (3) 346
-------- ------- ---------- --------
5,095 3,389 (218) 8,266
-------- ------- ---------- --------
Operating income .............................. 1,379 628 218 2,225
-------- ------- ---------- --------
Interest expense .............................. 420 34 445 (4) 899
Amortization of deferred financing costs ...... 131 0 (5) (5) 126
-------- ------- ---------- --------
551 34 440 1,025
-------- ------- ---------- --------
Income before income taxes ..................... 828 594 (222) 1,200
Provision for income taxes ..................... 352 75 77 (6) 504
-------- ------- ---------- --------
Net income .................................... $ 476 $ 519 ($ 299) $ 696
======== ======= ========== ========
Net income per common and common share
equivalents .................................... $ 0.05 $ 0.07
======== ========
Weighted average number of common
shares and common share equivalents ............ 9,965 9,965
======== ========

See notes to unaudited pro forma condensed financial statements.

F-23

Notes to Pro Forma Condensed Combined Financial Information
(Unaudited)

General:

On October 14, 1997, the Company completed the acquisition of Westbrae
Natural, Inc. ("Westbrae") in a transaction that has been accounted for as a
purchase. The cost of the acquisition (including closing costs) and the
repayment of the Company's existing Credit Facility with IBJ Schroder bank and
Trust Company ("IBJ") and the repayment of Westbrae debt was funded by the New
Credit Facility with IBJ providing for a $30 million senior term loan and a $10
million revolving credit facility.

Details of the pro forma adjustments relating to the acquisition and the
financing are set forth below.

Pro forma balance sheet adjustments:

(1) Westbrae cash and cash equivalents utilized to pay down Revolving Credit.

(2) Elimination of Westbrae goodwill at date of acquisition.

(3) Excess of acquisition costs over the fair value of the net tangible assets
of Westbrae at date of acquisition.

(4) Financing costs incurred in connection with the financing relating to the
acquisition.

(5) Old Credit Facility paid off with proceeds of New Credit Facility upon
acquisition of Westbrae.

(6) Proceeds of New Credit Facility used to finance the acquisition, repay the
Old Credit facility and repay Westbrae debt at date of acquisition.

(7) Westbrae debt at date of acquisition paid off with proceeds of New Credit
Facility.

(8) Elimination of Westbrae equity accounts at date of acquisition.

Pro forma statement of income adjustments:

(1) Adjustment to give effect to the reduction of certain costs and expenses
associated with the elimination of the principal corporate offices of
Westbrae.

(2) Elimination of Westbrae historical amortization of goodwill.

(3) Goodwill amortization with respect to goodwill acquired in the acquisition
of Westbrae.

(4) Increase in interest costs resulting from the financing of the Westbrae
acquisition.

(5) Adjustment of amortization of financing costs resulting from the New Credit
Facility.

(6) Adjustment to historical provision for income taxes to eliminate the effect
of net operating loss carryforwards utilized by Westbrae and to adjust
income taxes to the expected effective tax rate following acquisition.

F-24

==============================================================================
No dealer, salesperson or any other person has been authorized to give
any information or to make any representation not contained in this Prospectus
in connection with the offer made hereby. If given or made, such information or
representation must not be relied upon as having been authorized by the
Company, the Selling Stockholders or any Underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy to any person
in any jurisdiction where such an offer would be unlawful. The delivery of this
Prospectus does not imply that the information herein is correct as of any time
subsequent to its date.

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

TABLE OF CONTENTS

Page
---------
Prospectus Summary ........................ 3
Risk Factors .............................. 6
Use of Proceeds ........................... 10
Capitalization. ........................... 11
Price Range of Common Stock and Dividend
Policy ................................. 12
Selected Historical and Pro Forma Financial
Information for the Company ............ 13
Selected Historical Financial Information for
Westbrae ................................. 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 15
Business .................................... 21
Management ................................. 28
Principal and Selling Stockholders ......... 33
Description of Capital Stock ............... 35
Underwriting .............................. 37
Legal Matters .............................. 38
Experts .................................... 38
Available Information ..................... 38
Incorporation of Certain Documents by
Reference .............................. 39
Index to Financial Statements ............... F-1

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

2,825,000 Shares

The Hain Food Group, Inc.

LOGO

Common Stock

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

Stephens Inc.

CIBC Oppenheimer

, 1997

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred in connection with the sale of
Common Stock being registered (all amounts are estimated except the SEC
registration fee, the NASD filing fee and the NASDAQ listing fee). Pursuant to
a registration rights agreement between the Company and the Selling
Stockholders, the Company will bear all expenses incurred in connection with
the sale of the Common Stock being registered hereby, and the Selling
Stockholders will not bear any portion of such expenses other than
Underwriters' commissions and discounts relating to the shares to be sold by
each Selling Stockholder and certain "blue sky" filing, registration and
qualification fees, as provided in such agreement.

SEC Registration Fee .............................. $ 10,091
NASD Filing Fee ................................. 3,830
NASDAQ NMS Listing Fee ........................... 17,500
Printing ....................................... 125,000
Legal Fees and Expenses ........................ 125,000
Accounting Fees and Expenses ..................... 85,000
Blue Sky Fees and Expenses ..................... 10,000
Stock Certificates and Transfer Agent Fees ...... 15,000
Miscellaneous .................................... 21,079
---------
Total ....................................... $412,500
=========

Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article Tenth of the certificate of incorporation of the Registrant
eliminates the personal liability of directors or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
elimination of the personal liability of a director of the Registrant does not
apply to (a) any breach of the director's duty of loyalty to the Registrant or
its stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) actions prohibited
under Section 174 of the Delaware General Corporation Law (the "DGCL") (i.e.,
liabilities imposed upon directors who vote for or assent to the unlawful
payment of dividends, unlawful repurchase or redemption of stock, unlawful
distribution of assets of the Issuer to the stockholders without the prior
payment or discharge of the Registrant's debts or obligations, or unlawful
making or guaranteeing of loans to directors), or (d) any transaction from
which the director derived an improper personal benefit.

Section 145 of the DCGL provides, in summary, that directors and officers
of Delaware corporations such as the Registrant are entitled, under certain
circumstances, to be indemnified against all expenses and liabilities
(including attorneys' fees) incurred by them as a result of suits brought
against them in their capacity as a director or officer, if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, if they had no reasonable cause to believe their conduct was
unlawful; provided, that no indemnification may be made against expenses in
respect of any claim, issue or matter as to which they shall have been adjudged
to be liable to the corporation, unless and only to the extent that the court
in which such action or suit was brought shall determine upon application that
despite the adjudication of liability but in view of all the circumstances of
the case, they are fairly and reasonably entitled to indemnify for such
expenses which such court shall deem proper. Any such indemnification may be
made by the corporation only as authorized in each specific case upon a
determination by stockholders or disinterested directors that indemnification
is proper because the indemnitee has met the applicable standard of conduct. In
addition, Article Eleventh of the Registrant's certificate of incorporation and
Article VI of the Registrant's by-laws provide for the Registrant to indemnify
its corporate personnel, directors and officers to the full extent permitted by
Section 145 of the DGCL, as the same may be supplemented or amended from time
to time.

II-1

Item 16. EXHIBITS.

The following exhibits are filed as part of this Registration Statement:

Exhibit
No. Description
- -------- ------------

1.1 Form of Underwriting Agreement
5.1 Opinion of Cahill Gordon & Reindel regarding the legality of the securities being registered**
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Price Waterhouse LLP, Independent Accountants
23.3 Consent of Cahill Gordon & Reindel (included in Exhibit 5.1)**
24.1 Powers of Attorney**

- ------------
** Previously filed.

Item 17. UNDERTAKINGS.

(A) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13 (a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and

(B) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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 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 Act and
will be governed by the final adjudication of such issue.

1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in the
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 the purpose of determining any liability under the Securities Act
of 1933, 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-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Uniondale, State of New York, on this 20th day of
November, 1997.

THE HAIN FOOD GROUP, INC.

/s/ Jack Kaufman
By: ----------------------------------

Name: Jack Kaufman
Title: Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the Registration Statement has been signed by the
following persons and by Jack Kaufman as Attorney-in-Fact in the capacities and
on the date indicated.

*
- ------------------------------- Chairman of the Board of Directors November 20, 1997
Andrew R. Heyer

* President, Chief Executive Officer and November 20, 1997
- -------------------------------
Irwin D. Simon Director

/s/ Jack Kaufman Vice President-Chief Financial Officer November 20, 1997
- -------------------------------
Jack Kaufman

* Director November 20, 1997
- -------------------------------
Beth L. Bronner

* Director November 20, 1997
-----------------------------
William P. Carmichael

* Director November 20, 1997
- -------------------------------
William J. Fox

* Director November 20, 1997
- -------------------------------
Jack Futterman

* Director November 20, 1997
- -------------------------------
Barry Gordon

* Director November 20, 1997
- -------------------------------
Steven S. Schwartzreich

*By: /s/ Jack Kaufman
- -------------------------------
Jack Kaufman
Attorney-in-Fact

II-3

INDEX TO EXHIBITS

Exhibit Description
- --------- -----------

1.1 Form of Underwriting Agreement
5.1 Opinion of Cahill Gordon & Reindel regarding the legality of the securities being registered**
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Cahill Gordon & Reindel (included in Exhibit 5.1)**
24.1 Powers of Attorney**

- ------------
** Previously filed.




                                                             PRELIMINARY DRAFT



                               2,825,000 Shares
                                 Common Stock
                               ($.01 par value)

                           THE HAIN FOOD GROUP, INC.


                            UNDERWRITING AGREEMENT
                            ----------------------



STEPHENS INC. AND
CIBC OPPENHEIMER CORP.
as Representatives of the
  Several Underwriters                                      November ___, 1997
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201

Gentlemen:

       The Hain Food Group, Inc., a Delaware corporation (the "Company"), and
the stockholders of the Company whose names appear in Schedule I hereto
(collectively, the "Selling Stockholders"), propose to sell to the several
underwriters (the "Underwriters") for whom you are acting as representatives
(the "Representatives") an aggregate of 2,825,000 shares (the "Firm Shares")
of the Company's common stock, $.01 par value (such class of stock being
herein called the "Common Stock"). The Company and the Selling Stockholders
are sometimes referred to collectively herein as the "Sellers." The respective
amounts of the Firm Shares to be sold by each of the Sellers are set forth in
Schedule I hereto. In addition, to cover over-allotments in connection with
the sale of the Firm Shares, the Company proposes to grant to the Underwriters
an option to purchase up to an additional 423,750 shares (the "Option Shares")
of Common Stock.

       As Representatives, you have advised the Company and the Selling
Stockholders that (a) you are authorized to enter into this Agreement on
behalf of the several Underwriters and (b) the Underwriters are willing,
acting severally and not jointly, to purchase the amounts of the Firm Shares
set forth opposite their respective names in Schedule II hereto, plus their
pro rata portion of the Option Shares if you elect to exercise the
over-allotment option in whole or in part for the accounts of the several
Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein called the "Shares."

       In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the Company,
the Selling Stockholders and the several Underwriters hereby agree as follows:

       1.    Representations and Warranties.

       (a)   The Company represents and warrants as follows:

             (i) The Company has been duly organized and is validly existing
       as a corporation in good standing under the laws of the State of
       Delaware with full power and authority (corporate and other) to own its
       properties and conduct its business as described in the Prospectus
       hereafter mentioned; the subsidiaries of the Company (the



       "Subsidiaries") as listed in Exhibit ___ hereto are the only
       subsidiaries of the Company, and have been duly organized and are
       validly existing as corporations in good standing under the laws of
       their respective jurisdictions of incorporation with full power and
       authority (corporate and other) to own their properties and conduct
       their businesses as described in the Prospectus; each of the Company
       and its Subsidiaries is duly qualified to do business as a foreign
       corporation and is in good standing in each jurisdiction in which the
       character of the business conducted by it or the location of the
       properties owned or leased by it makes such qualification necessary,
       except where the failure to be so qualified would not reasonably be
       expected to have a Material Adverse Effect (as defined below); and all
       of the outstanding shares of capital stock of the Subsidiaries have
       been validly authorized and issued, are fully paid and non-assessable,
       and are owned by the Company, free and clear of any claim, lien,
       encumbrance or other security interest, except for liens granted
       pursuant to the Company's existing bank credit agreement.

             (ii) The outstanding shares of Common Stock of the Company,
       including all shares to be sold by the Selling Stockholders, are
       validly authorized and issued, fully paid and non-assessable; the
       portion of the Shares to be issued and sold by the Company, when issued
       and paid for as contemplated herein, will be validly authorized and
       issued, fully paid and non-assessable; and no preemptive rights of
       stockholders exist with respect to the Shares or the issue and sale
       thereof.

             (iii) The Shares conform in all material respects with the
       statements concerning them in the Prospectus.

             (iv) A registration statement (File No. 333-38939) with respect
       to the Shares has been carefully prepared by the Company in conformity
       with the requirements of the Securities Act of 1933, as amended (the
       "Securities Act"), and the Rules and Regulations (the "Rules and
       Regulations") of the Securities and Exchange Commission (the
       "Commission") thereunder and has been filed with the Commission under
       the Securities Act on Form S-3. The Company meets the requirements for
       the use of Form S-3 under the Securities Act. Copies of such
       registration statement and of the related preliminary prospectus have
       heretofore been delivered by the Company to you. Such registration
       statement and prospectus, including exhibits, financial statements and
       schedules, as finally amended and revised upon the effectiveness of the
       registration statement, including information, if any, deemed to be
       part of the registration statement at the time of effectiveness
       pursuant to Rule 430A under the Securities Act and as filed with the
       Commission pursuant to its Rule 424(b), are herein respectively
       referred to as the "Registration Statement" and the "Prospectus." Each
       preliminary prospectus with respect to the Shares is herein referred to
       as a "Preliminary Prospectus."

             (v) Neither the Commission nor any other agency, body, authority,
       court or arbitrator has issued any order preventing or suspending the
       use of any Preliminary Prospectus or the Prospectus relating to the
       proposed offering of the Shares nor, to the knowledge of the Company,
       instituted proceedings for that purpose. The Registration Statement,
       the Prospectus and any Preliminary Prospectus, and any amendments or
       supplements thereto will contain all statements which are required to
       be stated therein by, and will in all material respects conform to the
       requirements of, the Securities Act and the Rules and Regulations.
       Neither the Registration Statement, nor the Preliminary Prospectus nor
       any amendment thereto, and neither the Prospectus nor any supplement
       thereto, contains any untrue statement of a material fact or omits to
       state any material fact required to be stated therein or necessary to
       make the statements therein, in light of the circumstances in which
       they were made, not misleading; provided, however, that the Company
       makes no representations or warranties as to information contained in


                                      2


       or omitted from the Registration Statement or any Preliminary
       Prospectus or the Prospectus, or any such amendment or supplement, in
       reliance upon, and in conformity with, written information furnished to
       the Company by or on behalf of any Underwriter through the
       Representatives or by or on behalf of the Selling Stockholders (in
       their capacity as such) specifically for use in the preparation
       thereof.

             (vi) The consolidated financial statements of the Company and its
       Subsidiaries, together with related notes and schedules as set forth in
       the Registration Statement or incorporated therein by reference,
       present fairly the financial position and the results of operations of
       the Company and the Subsidiaries consolidated, at the indicated dates
       and for the indicated periods. Such financial statements have been
       prepared in accordance with generally accepted accounting principles,
       consistently applied throughout the periods involved, and all
       adjustments for a fair presentation of results for such periods have
       been made. The Selected Consolidated Financial Data included in the
       Prospectus present fairly the information shown therein and have been
       compiled on a basis consistent with that of the financial statements
       from which they were derived.

             (vii) Except as is disclosed in the Prospectus, there is no
       action or proceeding pending or, to the knowledge of the Company,
       threatened against the Company or any of the Subsidiaries before any
       court or administrative agency which might be expected to (A) result in
       any material adverse change in the financial condition, or in the
       earnings, business, affairs, properties or results of operations of the
       Company and its Subsidiaries taken as a whole ("Material Adverse
       Change" or "Material Adverse Effect," as the case may be), whether or
       not arising in the ordinary course of business, (B) adversely affect
       the performance of this Agreement or the consummation of the
       transactions herein contemplated, except as disclosed in the Prospectus
       and for which the Company maintains a reserve in an amount which it
       believes is adequate to cover potential liabilities, or (C) be required
       to be disclosed in the Registration Statement.

             (viii) The Company and each of its Subsidiaries are not in
       violation of any law, ordinance, governmental rule or regulation or
       court decree to which they may be subject which violation reasonably
       would be expected to have a Material Adverse Effect.

             (ix) The Company and the Subsidiaries have good and marketable
       title to all of the real properties and valid title to all other assets
       purported to be owned by any of them as reflected in the financial
       statements (or as described in the Prospectus) hereinabove described,
       subject to no lien, mortgage, pledge, charge or encumbrance of any kind
       except those reflected in such financial statements (or as described in
       the Prospectus) or which do not materially affect the present or
       proposed use of such properties or assets or would not cause a Material
       Adverse Effect. The Company and its Subsidiaries occupy their leased
       properties under valid, subsisting and binding leases with only such
       exceptions as in the aggregate are not material and do not interfere
       with the conduct of the business of the Company and its Subsidiaries.
       There exists no default under the provisions of any lease, contract or
       other obligation to which the Company or any of the Subsidiaries is a
       party which may result in a Material Adverse Change.

             (x) The Company and its Subsidiaries have filed all Federal,
       State and foreign tax returns which have been required to be filed and
       have paid all taxes indicated by said returns and all assessments
       received by them or any of them to the extent that such taxes have
       become due and there is no tax deficiency that has been or, to the
       Company's knowledge, might be asserted against the Company or any of


                                      3


       its Subsidiaries that might have a Material Adverse Effect. All
       material tax liabilities are adequately provided for on the books of
       the Company and its Subsidiaries.

             (xi) Since the respective dates as of which information is given
       in the Registration Statement and the Prospectus, as they may be
       amended or supplemented, and except as set forth in the Registration
       Statement, (A) there has not been any Material Adverse Change nor, to
       the knowledge of the Company, is any such change threatened, (B) there
       has not been any transaction entered into by the Company or its
       Subsidiaries that is material to the earnings, business, affairs,
       properties or operations of the Company and its Subsidiaries taken as a
       whole, other than transactions in the ordinary course of business and
       changes and transactions contemplated by the Registration Statement and
       the Prospectus, as they may be amended or supplemented, (C) other than
       liabilities incurred in the ordinary course of business, including
       changes in amounts outstanding under the Company's revolving credit
       facility, there has not been any material change in the capital stock,
       long term debt or material liabilities of the Company or its
       Subsidiaries, and (D) there has not been any dividend or distribution
       of any kind declared, paid or made on the capital stock of the Company
       or any of its Subsidiaries. Neither the Company nor any Subsidiary has
       any contingent obligations or liabilities which are required to be but
       are not disclosed in the Registration Statement and the Prospectus.

             (xii) Neither the Company nor any of the Subsidiaries is in
       default under any agreement, indenture or other instrument to which it
       is a party or by which it or any of its properties is bound and which
       default would reasonably be expected to have a Material Adverse Effect.
       The consummation of the transactions herein contemplated and the
       fulfillment of the terms hereof will not result in a breach of any of
       the terms and provisions of, or constitute a default under, any
       indenture, mortgage, deed of trust or other agreement or instrument to
       which the Company or any of the Subsidiaries is a party, or of the
       Company's or any of the Subsidiaries' articles of incorporation or
       by-laws or any order, rule or regulation applicable to the Company or
       the Subsidiaries of any court or of any regulatory body or
       administrative agency or other governmental body having jurisdiction,
       except for such breaches or defaults as would not reasonably be
       expected to have a Material Adverse Effect.

             (xiii) Each approval, consent, order, authorization, designation,
       declaration or filing by or with any regulatory, administrative or
       other governmental body, domestic or foreign, necessary in connection
       with the execution and delivery by the Company of this Agreement and
       the performance of its obligations hereunder (except such additional
       steps as may be necessary to make the Registration Statement effective
       and to qualify the Shares for public offering by the Underwriters under
       State securities or Blue Sky laws) has been obtained or made and is in
       full force and effect.

             (xiv) The Company and each Subsidiary hold all material licenses,
       authorizations, charters, certificates and permits from governmental
       authorities which are necessary to the conduct of their businesses and
       neither the Company nor any Subsidiary has received notice of any
       proceeding relating to the revocation or modification of any of such
       licenses, authorizations, charters, certificates or permits. The
       Company and its Subsidiaries own or otherwise possess rights to the
       patents, patent rights, licenses, inventions, copyrights, trademarks,
       service marks and trade names presently employed by them in connection
       with the businesses now operated by them as described in the
       Prospectus, and neither the Company nor any of its Subsidiaries has
       infringed or received any notice of infringements of or conflict with
       asserted rights of others with respect to any of the foregoing, except
       where such infringement or conflict would not reasonably be expected to
       result in a Material Adverse Effect.



                                      4


             (xv) Ernst & Young LLP and Price Waterhouse LLP, who have audited
       certain of the financial statements filed with the Commission as part
       of the Registration Statement and Prospectus or incorporated by
       reference therein, are independent public accountants within the
       meaning of the Securities Act, the Rules and Regulation S-X of the
       Commission and Rule 101 of the Code of Professional Ethics of the
       American Institute of Certified Public Accountants.

             (xvi) There are no agreements, contracts or other documents of a
       character required to be described in the Registration Statement or the
       Prospectus or required by Form S-3 to be filed as exhibits to the
       Registration Statement or incorporated by reference in the Registration
       Statement which are not described, filed or incorporated as required.

             (xvii) No labor dispute is pending or, to the knowledge of the
       Company, threatened by the Company's or any Subsidiary's employees
       which could result in a Material Adverse Effect. No collective
       bargaining agreement exists with any of the Company's employees and, to
       the Company's knowledge, no agreement is imminent.

             (xviii) Except as contemplated by Section 2 hereof and as
       disclosed in the Prospectus and permitted by the Rules, the Company has
       not (itself or through any person) taken and will not take, directly or
       indirectly, any action designed to or which might reasonably be
       expected to, cause or result in a violation of Section 5 of the
       Securities Act or Regulation M under the Securities Act or in
       stabilization or manipulation of the price of the Company's common
       stock.

             (xix) Without limiting the generality of any of the foregoing
       representations and warranties and except to the extent no Material
       Adverse Effect would reasonably be expected to occur, (a) none of the
       operations of the Company or its Subsidiaries is in violation of any
       material environmental law, regulation or any permit; (b) neither the
       Company nor any of its Subsidiaries has been notified that it is under
       investigation or under review by any governmental agency with respect
       to compliance therewith or with respect to the generation, use,
       treatment, storage or release of hazardous material; (c) neither the
       Company nor any of its Subsidiaries have any material liability in
       connection with the past generation, use, treatment, storage, disposal
       or release of any hazardous material; (d) there is no hazardous
       material that may reasonably be expected to pose any material risk to
       safety, health, or the environment, on, under or about any property
       owned, leased or operated by the Company or any of its Subsidiaries or,
       to the knowledge of the Company, any property adjacent to any such
       property; and (e) there has heretofore been no release of any hazardous
       material on, under or about such property, or, to the knowledge of the
       Company, any such adjacent property. None of the present or, to the
       knowledge of the Company, past property of the Company or any of its
       Subsidiaries is listed or proposed for listing on the National
       Priorities List pursuant to the Comprehensive Environmental Response,
       Compensation and Liability Act of 1980, as amended ("CERCLA"), or on
       the Comprehensive Environmental Response Compensation Liability
       Information System List ("CERCLIS") or any similar state list of sites
       requiring remedial action. Neither the Company nor any of its
       Subsidiaries is subject to any state Environmental Property Transfer
       Act, or to the extent that any such statute is applicable to any
       property, the Company and its Subsidiaries have fully complied with
       their obligations under such statute(s), and neither has any
       outstanding obligations or liabilities under any state Environmental
       Property Transfer Act.

             (xx) The Company and its Subsidiaries maintain insurance of the
       types and in the amounts customary for their businesses, including, but
       not limited to, insurance covering liability and real and personal


                                      5


       property owned or leased by the Company against theft, damage,
       destruction, acts of vandalism and all other risks customarily insured
       against, all of which insurance is in full force and effect.

             (xxi) Neither the Company nor any Subsidiary has at any time
       during the last five years (a) made any unlawful contribution to any
       candidate for foreign office, or failed to disclose fully any
       contribution in violation of law, or (b) made any payment to any
       federal or state governmental officer or official, or other person
       charged with similar public or quasi-public duties, other than payments
       required or permitted by the laws of the United States or any
       jurisdiction thereof.

             (xxii) The documents incorporated by reference in the Prospectus,
       when they became effective or were filed with the Commission, as the
       case may be, conformed in all material respects to the requirements of
       the Securities Act or the Securities Exchange Act of 1934, as amended,
       and the rules and regulations of the Commission thereunder
       (collectively, the "Exchange Act"), as applicable, and none of such
       documents contained an untrue statement of a material fact or omitted
       to state a material fact necessary to make the statements therein, in
       light of the circumstances under which they were made, not misleading;
       and any further documents so filed and incorporated by reference in the
       Prospectus, when such documents are filed with the Commission, will
       conform in all material respects to the requirements of the Exchange
       Act, and will not contain an untrue statement of a material fact or
       omit to state a material fact necessary to make the statements therein,
       in light of the circumstances under which they were made, not
       misleading.

             (xxii) The unissued Shares issuable upon the exercise of options
       (the "Options") to be exercised by certain of the Selling Stockholders
       (the "Optionholders") have been duly and validly authorized and
       reserved for issuance, and at the time of delivery to the Underwriters
       with respect to such Shares, such Shares will be issued and delivered
       in accordance with the provisions of the Stock Option Agreements
       between the Company and such Selling Stockholders pursuant to which
       such Options were granted (the "Option Agreements") and will be duly
       and validly issued, fully paid and non-assessable and will conform to
       the description thereof in the Prospectus.

             (xxiii) The Options were duly authorized and issued pursuant to
       the Option Agreements and constitute valid and binding obligations of
       the Company and the Optionholders are entitled to the benefits provided
       by the Option Agreements; the Option Agreements were duly authorized,
       executed and delivered and constitute valid and binding instruments
       enforceable in accordance with the their terms subject, as to
       enforcement, to bankruptcy, insolvency, reorganization and other laws
       of general applicability relating to or affecting creditors' rights and
       to general equity principles; and the Options conform to the
       descriptions thereof in the Prospectus.

       (b) Each Selling Stockholder, severally, represents and warrants as
       follows:

             (i) Such Selling Stockholders has duly executed and delivered
       powers of attorney (the "Power of Attorney"), in the form heretofore
       delivered to the Representatives, appointing the person named therein
       as such Selling Stockholder's attorney-in-fact (the "Attorney-in-Fact")
       with authority to perform this Agreement on behalf of such Selling
       Stockholder, and such Selling Stockholder has duly executed and
       delivered a custody agreement (the "Custody Agreement"), in the form
       heretofore delivered to the Representatives, with the Company as
       custodian (the "Custodian"). Certificates, other than those
       representing such Firm Shares to be issued upon the exercise of
       Options, in negotiable form for the Firm Shares to be sold by such


                                      6


       Selling Stockholder hereunder have been deposited with the Custodian
       pursuant to the Custody Agreement for the purpose of delivery pursuant
       to this Agreement and each of the Selling Stockholders who is selling
       Firm Shares upon the exercise of Options has duly completed, executed
       and deposited with the Custodian irrevocable Option exercise notices,
       in the form specified by the relevant Option Agreement, with respect to
       all of the Firm Shares to be sold upon the exercise of Options by such
       Selling Stockholders hereunder. All authorizations, orders and consents
       necessary for the execution and delivery by such Selling Stockholder of
       this Agreement, the Power of Attorney and the Custody Agreement have
       been duly and validly given, and such Selling Stockholder has full
       legal right, power and authority to enter into this Agreement, the
       Power of Attorney and the Custody Agreement and to sell, assign,
       transfer and deliver to the several Underwriters the Firm Shares to be
       sold by such Selling Stockholder hereunder. Such Selling Stockholder
       agrees that such of the Firm Shares represented by the certificates on
       deposit with the Custodian or the irrevocable Option exercise notice,
       in either case, are for the benefit of, coupled with and subject to the
       interests of the Underwriters hereunder, that the arrangements made for
       such custody and the appointment of the Attorney-in-Fact are to that
       extent irrevocable, and that the obligations of such Selling
       Stockholder hereunder shall not be terminated, except as provided in
       this Agreement, the Power of Attorney or the Custody Agreement, by any
       act of such Selling Stockholder, by operation of law or otherwise,
       whether by death or incapacity or by the occurrence of any other event.
       If such Selling Stockholder should die or become incapacitated or if
       any other event shall occur before delivery of such Firm Shares
       hereunder, the certificates for such Firm Shares or the irrevocable
       Option exercise notice, in either case, deposited with the Custodian
       shall be delivered by the Custodian in accordance with this Agreement
       as if such death, incapacity or other event had not occurred,
       regardless of whether the Custodian or the Attorney-in-Fact shall have
       received notice thereof.

             (ii) Such Selling Stockholder has (other than the Firm Shares to
       be issued upon exercise of Options) and at the Closing Date (as such
       date is hereinafter defined) will have good and valid title to the
       portion of the Firm Shares to be sold by such Selling Stockholder, free
       of any liens, encumbrances, equities and claims, and full right, power
       and authority to effect the sale and delivery of such Firm Shares; and
       upon the delivery of and payment for such Firm Shares pursuant to this
       Agreement, assuming due issuance of any Firm Shares to be issued upon
       exercise of Options, good and valid title thereto, free of any liens,
       encumbrances, equities and claims, will be transferred to the several
       Underwriters.

             (iii) The consummation by such Selling Stockholder of the
       transactions herein contemplated and the fulfillment of the terms
       hereof will not result in a breach of any of the terms and provisions
       of, or constitute a default under, any indenture, mortgage, deed of
       trust or other material agreement or instrument to which such Selling
       Stockholder is a party, or of any order, rule or regulation applicable
       to such Selling Stockholder of any court or of any regulatory body or
       administrative agency or other governmental body having jurisdiction.

             (iv) Such Selling Stockholder has not taken during the pendency
       of the offering and will not take for a period of 120 days following
       the date hereof, directly or indirectly, any action designed to, or
       which has constituted, or which might reasonably be expected to cause
       or result in, stabilization or manipulation of the price of the Common
       Stock of the Company.

             (v) Such Selling Stockholder (except for Argosy-Hain Investment
       Group, L.P. which makes no representation as to this clause (v)) has no
       reason to believe that the representations and warranties of the


                                      7


       Company contained in this Section 1 are not true and correct, is
       familiar with the Registration Statement and has no knowledge of any
       material fact, condition or information not disclosed in the Prospectus
       which would reasonably be expected to have a Material Adverse Effect,
       and the sale of the portion of the Firm Shares by such Selling
       Stockholder pursuant hereto is not prompted by any information
       concerning the Company or the Subsidiaries which is not set forth in
       the Prospectus.

       2. Purchase, Sale and Delivery of the Stock. On the basis of the
representations, warranties and covenants herein contained, and subject to the
conditions herein set forth, the Sellers agree to sell to the Underwriters and
each Underwriter agrees, severally and not jointly, to purchase, at a price of
$__________ per share, the amounts of the Firm Shares set forth opposite the
name of each Underwriter in Schedule II hereto. The Firm Shares to be
purchased by each Underwriter from each Seller shall be as nearly as
practicable in the same proportion as the number of Firm Shares being sold by
each Seller bears to the total number of Firm Shares to be sold hereunder.

       Payment for the Firm Shares shall be made by certified or official bank
check or by wire transfer of immediately available U.S. Funds to designated
accounts of the Company and the Selling Stockholders, to the order of the
Company or the Selling Stockholders, as applicable, against delivery of
certificates for the Shares to the Representatives for the accounts of the
several Underwriters. Delivery of certificates shall be to the Representatives
c/o Stephens Inc. ("Stephens"), 111 Center Street, Little Rock, Arkansas
72201, or at such other address as Stephens may designate in writing. Payment
will be made at the offices of Stephens, or at such other place as shall be
agreed upon by Stephens, the Company and the Selling Stockholders, at
approximately 9:00 a.m., central time, on ________________, 1997, such time
and date being herein referred to as the "Closing Date." The certificates for
the Firm Shares will be delivered in such denominations and in such
registrations as Stephens reasonably requests in writing and will be made
available for inspection at such locations as Stephens may reasonably request
at least one full business day prior to the Closing Date.

       In addition, on the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase up to
an aggregate of 423,750 shares of Common Stock (the "Option Shares") at the
price per share as set forth in the first paragraph of this Section 2. The
option granted hereby may be exercised in whole or in part, but only once,
upon written notice (or oral notice, subsequently confirmed in writing) given
not more than 30 days after the date of this Agreement, by you, as
Representatives of the several Underwriters, to the Company setting forth the
number of Option Shares as to which the several Underwriters are exercising
the option. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter
bears to the total number of Firm Shares, adjusted to avoid fractional shares.
The option with respect to the Option Shares may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. Stephens,
on behalf of the Representatives of the several Underwriters, may cancel such
option at any time prior to expiration by giving written notice (or oral
notice, subsequently confirmed in writing) of such cancellation to the
Company. To the extent, if any, that the option is exercised, payment for the
Option Shares shall be made by wire transfer of immediately available U.S.
Funds to a designated account of the Company, to the order of the Company, at
the offices specified above and at a date and time more than five (5) business
days after the Underwriters' exercise of the option (the "Option Closing
Date") (which may be the Closing Date). Certificates for the Option Shares
shall be delivered in the same manner and upon the same terms as the
Underwritten Shares.

                                      8


       3. Qualified Independent Underwriter." The Company hereby confirms its
engagement of Stephens Inc. and Stephens Inc. hereby confirms its agreement
with the Company to render services as a "qualified independent underwriter"
within the meaning of Section (b)(15) of Rule 2720 of the National Association
of Securities Dealers, Inc. (the "NASD") with respect to the offering and sale
of the Shares, including the recommendation of a public offering price of the
Shares. Stephens Inc., in its capacity as qualified independent underwriter,
and not otherwise, is referred to herein as the "QIU."

       4. Offering by the Underwriters. It is understood that the several
Underwriters are to make a public offering of the Firm Shares as soon as the
Representatives deem it advisable to do so after the Registration Statement
has become effective. The Firm Shares are to be initially offered to the
public at the public offering price set forth in the Prospectus. The
Representatives may from time to time thereafter change the public offering
price and other selling terms. To the extent, if at all, that any Option
Shares are purchased pursuant to Section 2 hereof, the Underwriters will offer
them to the public on the foregoing terms.

       It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with the
Agreement Among Underwriters, which has been entered in by you and the several
other Underwriters.

       5. Covenants of the Company. The Company covenants and agrees with the
several Underwriters that:

       (a) The Company will use its best efforts to cause the Registration
Statement to become effective and will not, either before or after
effectiveness, file any amendment thereto or supplement to the Prospectus of
which the Representatives shall not previously have been advised and furnished
with a copy or to which the Representatives shall have reasonably objected in
writing or which is not in compliance with the Rules and Regulations.

       (b) The Company will advise the Representatives promptly of any request
of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose, and the Company will use its best efforts
to prevent the issuance of any such stop order preventing or suspending the
use of the Prospectus and to obtain as soon as possible the lifting thereof,
if issued.

       (c) The Company will cooperate with the Representatives in endeavoring
to qualify the Shares for sale under the State securities or Blue Sky laws of
such jurisdictions as the Representatives may reasonably have designated in
writing and will make such applications, file such documents and furnish such
information as may be reasonably required for that purpose; provided, however,
that the Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction where it
is not so qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports and other documents as
are or may be required to continue such qualifications in effect for so long a
period as the Representatives may reasonably request for distribution of the
Shares.

       (d) The Company will deliver to, or upon the order of, the
Representatives from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period of
time after the first date of the public offering of the Shares, and thereafter
from time to time during the period when delivery of a Prospectus is required


                                      9


under the Securities Act, as many copies of the Prospectus in final form, or
as thereafter amended or supplemented, as the Representatives may reasonably
request. The Company will deliver to the Representatives at or before the
Closing Date four signed copies of the Registration Statement and all
amendments thereto, including all exhibits, filed therewith, and will deliver
to the Representatives such number of copies of the Registration Statement,
but without exhibits, and of all amendments thereto, as the Representatives
may reasonably request.

       (e) If during the period in which a Prospectus is required by law to be
delivered by an Underwriter or dealer any event shall occur as a result of
which, in the judgment of the Company or the Underwriters or in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law or to file under the Exchange Act any
document which would be deemed to be incorporated by reference in the
Prospectus in order to comply with the Securities Act or the Exchange Act, the
Company promptly will prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the Prospectus as so amended
or supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law, and
will deliver to the Representatives such number of copies of the amended or
supplemented Prospectus as the Representatives may reasonably request.

       (f) The Company will, for a period of five years from the Closing Date,
so long as the Company is subject to the reporting requirements of the
Exchange Act, deliver to the Representatives copies of annual reports and
information furnished by the Company to its stockholders or filed with any
securities exchange pursuant to the requirements of such exchange or with the
Commission pursuant to the Securities Act or the Exchange Act. The Company
will deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial statements.

       (g) Promptly after the Company is advised thereof, it will advise the
Representatives, and confirm the advice in writing, that the Registration
Statement shall have become effective.

       (h) The Company will use the net proceeds from the sale of the Shares
substantially in the manner set forth in the Prospectus under the caption "Use
of Proceeds."

       (i) Other than as permitted by the Securities Act, the Rules and
Regulations and the Exchange Act, the Company will not distribute any
prospectus or offering materials in connection with the offering and sale of
the Shares and prior to the Closing Date or the Option Closing Date will not
issue any press releases or other communications directly or indirectly and
will hold no press conferences with respect to the Company, the financial
condition, results of operations, business, properties, assets or liabilities
of the Company, or the offering of the Shares, without the prior written
consent of Stephens.

       (j) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar for its common
stock and will use its best efforts to maintain the listing of the Shares on
The Nasdaq National Market.

       (k) Except as contemplated hereby or by the Prospectus, the Company
will not, for a period of one hundred eighty (180) days after the Effective
Date of the Registration Statement, offer to sell, contract to sell, sell or


                                      10


otherwise dispose of any shares of the Company's common stock or securities
convertible into shares of the Company's common stock without the prior
written consent of Stephens, which consent will not be unreasonably withheld
other than pursuant to existing benefit plans, as amended from time to time.

       The foregoing covenants and agreements shall apply to any successor of
the Company, including without limitation, any entity into which the Company
might consolidate or merge.

       6. Costs and Expenses. Whether or not the Registration Statement
becomes effective, and except as expressly set out in this Section 6, the
Company will pay all costs, expenses and fees incident to the performance of
the obligations of the Sellers under this Agreement, including, without
limiting the generality of the foregoing, the following: the accounting fees
of the Company; the fees and disbursements of counsel for the Company and the
Selling Stockholders; the cost of printing and delivering the Agreement Among
Underwriters, the Underwriters' copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement and the Underwriters'
Questionnaire and Power of Attorney, and the Blue Sky Survey and any
supplements thereto; the filing fees incident to securing any required review
by the NASD of the terms of the sale of the Shares on behalf of, and any
disbursements made by, the Representatives or Stephens in its capacity as a
"qualified independent underwriter; and the expenses, including the reasonable
fees and the disbursements of counsel for the Underwriters, incurred in
connection with the qualification of the Shares under State securities or Blue
Sky laws. If, in the opinion of counsel to the Underwriters which is concurred
in by counsel for the Company and the Selling Stockholders, the qualification
of the Shares under any State securities or Blue Sky laws requires that the
Company and the Selling Stockholders share any of the costs, expenses and fees
set forth above, the Company and the Selling Stockholders agree to share pro
rata, based on the number of Shares to be sold by each, such costs, expenses
and fees as identified by counsel. Any transfer taxes imposed on the sale of
the Shares to the several Underwriters will be paid by the Company. The
Company shall not, however, be required to pay for any of the Underwriters'
expenses (other than those related to qualification under State securities or
Blue Sky laws), except that if this Agreement shall not be consummated because
the conditions in Section 8 hereof are not satisfied, or because this
Agreement is terminated by the Representatives pursuant to Section 7 hereof,
or by reason of any failure, refusal or inability on the part of the Company
or the Selling Stockholders to perform any undertaking or satisfy any
condition of this Agreement or to comply with any of the terms hereof on their
part to be performed, unless such failure to satisfy said condition or to
comply with said terms be due to the default or omission of any Underwriter,
then the Company shall reimburse the Underwriters for reasonable out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred in
connection with investigating, marketing and proposing to market the Shares or
in contemplation of performing their obligations hereunder but the Company
shall not in any event be liable to any of the several Underwriters for
damages on account of loss of anticipated profits from the sale by them of the
Shares.

       7. Conditions of Obligations of the Underwriters. The obligations of
the Underwriters are subject to the accuracy, as of the Closing Date, of the
representations and warranties of the Company and the Selling Stockholders
contained herein, and to the performance by the Company of its obligations
hereunder and to the following additional conditions:

       (a) The Registration Statement shall have become effective not later
than 10:00 A.M. eastern time, on the date of this Agreement, unless a later
time and date be agreed to by the Representatives, and no stop order
suspending the effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been taken or, to the knowledge of the Company or
the Selling Stockholders, shall be contemplated by the Commission.



                                      11


       (b) The Representatives shall have received on the Closing Date an
opinion of Cahill Gordon & Reindel, counsel for the Company and the Selling
Stockholders, dated the Closing Date, addressed to the Underwriters to the
effect that:

             (i) The Company has been duly incorporated and is validly
       existing as a corporation in good standing under the laws of the State
       of Delaware with full corporate power and authority to own its
       properties and conduct its business as described in the Prospectus; the
       Subsidiaries have been duly incorporated and are validly existing as
       corporations in good standing under the laws of their respective
       jurisdictions of incorporation with full corporate power and authority
       to own their properties and conduct their businesses as described in
       the Prospectus; each of the Company and its Subsidiaries is duly
       qualified to do business as a foreign corporation and is in good
       standing in each jurisdiction in which the character of the business
       conducted by it or the location of the properties owned or leased by it
       makes such qualification necessary, except for such jurisdictions where
       the failure to be so qualified would not result in a Material Adverse
       Effect; and all of the outstanding shares of capital stock of the
       Subsidiaries have been validly authorized and issued, are fully paid
       and non-assessable, and are owned by the Company, free and clear of any
       claim, lien, encumbrance or other security interest (other than with
       respect to its bank credit agreement), and, to such counsel's
       knowledge, no options, warrants or other rights to purchase, agreements
       or other obligations to issue or other rights to convert any
       obligations into any shares of capital stock or ownership interests in
       the Subsidiaries are outstanding.

             (ii) The Company has authorized and outstanding, to the knowledge
       of such counsel, capital stock as set forth under the caption
       "Description of Capital Stock" in the Prospectus, except for issuances
       subsequent to the date of the prospectus, if any, pursuant to
       reservations, commitments, to benefit plans or other existing
       agreements; the authorized shares of its Common Stock have been validly
       authorized; the outstanding shares of its Common Stock have been duly
       authorized and validly issued and are fully paid and non-assessable;
       all of the Shares conform as to legal matters in all material respects
       to the description thereof contained in the Prospectus; the
       certificates for the Shares are in due and proper form; the Shares of
       Common Stock, including the portion of the Option Shares, if any, to be
       sold by the Company pursuant to this Agreement have been duly
       authorized and will be validly issued, fully paid and non-assessable
       when issued and paid for as contemplated by this Agreement; and no
       preemptive rights of stockholders exist pursuant to applicable law, the
       Company's Certificate of Incorporation, Bylaws, or, to such counsel's
       knowledge, any material agreement or other material instrument to which
       the Company is a party or by which it is bound with respect to any of
       the Shares or the issue and sale thereof.

             (iii) The Registration Statement has been declared effective
       under the Securities Act and, to the knowledge of such counsel, no stop
       order proceedings with respect thereto have been instituted or are
       pending or threatened under the Securities Act.

             (iv) The Registration Statement, all Preliminary Prospectuses,
       the Prospectus and each amendment or supplement thereto, as of the
       respective dates they were filed or declared effective, appeared on
       their face to comply as to form in all material respects with the
       requirements of the Securities Act and the Rules and Regulations
       (except that such counsel need express no opinion as to the financial
       statements and other financial or statistical information included
       therein), and the conditions for use of a registration statement on
       Form S-3 have been satisfied.



                                      12


             (v) The statements under the caption "Description of Capital
       Stock" in the Prospectus, insofar as such statements constitute a
       summary of documents referred to therein or matters of law, are
       accurate summaries in all material respects and fairly present the
       information required to be shown.

             (vi) Such counsel does not know of any contracts or documents
       required to be filed as exhibits to the Registration Statement or
       described in the Registration Statement or Prospectus which are not so
       filed (or incorporated by reference therein) or described as required,
       and such contracts and documents as are summarized in the Registration
       Statement or Prospectus are fairly summarized in all material respects.

             (vii) Without having made any independent investigation and
       relying solely on certificates of responsible officers of the Company,
       such counsel knows of no material legal proceedings pending or
       threatened against the Company or any of its Subsidiaries required to
       be disclosed in the Registration Statement except as set forth or
       referred to in the Prospectus.

             (viii) The execution and delivery of this Agreement and the
       consummation of the transactions herein contemplated do not and will
       not conflict with or result in a breach of any of the terms or
       provisions of, or a default under, the articles of incorporation or
       by-laws of the Company or any of its Subsidiaries, or any material
       agreement or instrument known to such counsel to which the Company or
       any of its Subsidiaries is a party or by which the Company or any of
       its Subsidiaries may be bound.

             (ix) This Agreement has been duly authorized, executed and
       delivered by the Company and constitutes a valid and binding obligation
       of the Company.

             (x) No approval, consent, order, authorization, designation,
       declaration or filing by or with any regulatory, administrative or
       other governmental body is necessary in connection with the execution
       and delivery of this Agreement and the consummation of the transactions
       herein contemplated (other than as required by NASD regulation or State
       securities and Blue Sky laws, as to which such counsel need express no
       opinion), except such as have been obtained under the Securities Act,
       the Exchange Act and such other approvals as have been obtained or
       made, specifying the same.

             (xi) Based solely on the representations of the Selling
       Stockholders, this Agreement and the Custody Agreement have been duly
       authorized, executed and delivered on behalf of the Selling
       Stockholders and constitute the valid and binding obligations of each
       of the Selling Stockholders.

             (xii) The Selling Stockholders have full legal right, power and
       authority, and any approval required by law (other than as required by
       State securities and Blue Sky laws, as to which such counsel need
       express no opinion), to sell, assign, transfer and deliver the portion
       of the Shares to be sold by the Selling Stockholders.

             (xiii) The Underwriters (assuming that they are bona fide
       purchasers within the meaning of the Uniform Commercial Code) have
       acquired good and marketable title to the portion of the Shares being
       sold by the Selling Stockholders on the Closing Date, free and clear of
       all claims, liens, encumbrances and security interests whatsoever
       (assuming, with respect to Shares being issued upon the exercise of the
       Options, that payment of the exercise price therefor is made to the
       Company as provided in the Custody Agreement).



                                      13


       In rendering the opinions required by this Section 7(b), such counsel
may rely (A) as to matters involving the application of laws of any
jurisdiction other than the State of Delaware or the United States, to the
extent they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Underwriters' and (B) as to matters of fact,
to the extent they deem proper, on certificates of responsible officers of the
Company and public officials, and with regard to the opinions in paragraphs
(xii) and (xiii), on the representations of the Selling Stockholders contained
in this Agreement and the Custody Agreement. The opinions of such counsel in
paragraphs (x), (xii) and (xiii) above are based upon their review of those
laws, rules and regulations which, in their experience, are normally
applicable to transactions of the type contemplated by this Agreement.

       In addition, such counsel shall state that such counsel has
participated in conferences with representatives of the Underwriters, officers
and other representatives of the Company and representatives of the
independent certified public accountants of the Company and its subsidiaries,
at which conferences the contents of the Registration Statement and Prospectus
and related matters were discussed and, although such counsel does not pass
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus, on the basis of the foregoing (relying as to materiality to a
large extent upon the discussions with, and representations and opinions of,
officers and other representatives of the Company), no facts have come to the
attention of such counsel which causes such counsel to believe that the
Registration Statement at the Effective Date contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that the
Prospectus includes any untrue statement of a material fact or omits to state
a material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, that
such counsel need express no comment with respect to the financial statements,
schedules and other statistical and financial data included in the
Registration Statement or Prospectus.

       (c) The Representatives shall have received on the Closing Date an
opinion of counsel for the Company, dated the Closing Date, addressed to the
Underwriters to the effect that: the Company and its Subsidiaries own the
entire right, title and interest in and to any and all patents, trade names,
trademarks, service marks, and copyrights used in the Company's business or
licensed by the Company or its Subsidiaries for use by others; any such items
licensed to the Company or its Subsidiaries by other parties have been
licensed pursuant to a valid and enforceable license agreement and such use is
in conformity with the license agreement; and to the knowledge of such
counsel, there are no pending or threatened proceedings or litigation
affecting, challenging, or with respect to the validity or otherwise of such
patents, trademarks, trade names or copyrights, or any license for use of such
items (whether by or to the Company).

       (d) The Underwriters shall have received from Wright, Lindsey &
Jennings LLP, counsel for the Underwriters, an opinion dated the Closing Date,
substantially to the effect specified in subparagraphs (ii), (iii), and (iv)
of Paragraph (b) of this Section 7. In rendering such opinion, Wright, Lindsey
& Jennings LLP may rely as to all matters governed other than by Federal law
on the opinion of counsel referred to in Paragraph (b) of this Section 7. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such counsel
which leads them to believe that the Registration Statement, the Prospectus or
any amendment or supplement thereto contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading (except that such counsel need express no
view as to financial statements and other financial information included


                                      14


therein). With respect to such statement, Wright, Lindsey & Jennings LLP may
state that their belief is based upon the procedures set forth therein, but is
without independent check and verification.

       (e) The Representatives shall have received at or prior to the Closing
Date from Wright, Lindsey & Jennings LLP a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the State securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.

       (f) The Representatives shall have received a signed letter on or prior
to the effective date of the Registration Statement and again on and as of the
Closing Date from Ernst & Young LLP and Price Waterhouse LLP, independent
certified public accountants, with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus or incorporated therein by reference. Each such letter shall be in
form and substance satisfactory to the Representatives and their counsel.

       (g) The Representatives shall have received on the Closing Date a
certificate or certificates of the President and Chief Executive Officer and
the Chief Financial Officer of the Company to the effect that, as of the
Closing Date, each of them severally represents as follows:

             (i) The Registration Statement has become effective under the
       Securities Act and no stop order suspending the effectiveness of the
       Registration Statement has been issued, and no proceedings for such
       purpose have been taken or are, to his knowledge, contemplated by the
       Commission.

             (ii) He does not know of any litigation instituted or threatened
       against the Company or any of its Subsidiaries of a character required
       to be disclosed in the Registration Statement which is not so
       disclosed; he does not know of any material contract required to be
       filed as an exhibit to the Registration Statement which is not so
       filed; and the representations and warranties of the Company contained
       in Section 1 hereof are true and correct in all material respects as of
       the Closing Date.

             (iii) He has examined the Registration Statement and the
       Prospectus and, in his opinion, as of the effective date of the
       Registration Statement, the statements contained in the Registration
       Statement and the Prospectus were true and correct in all material
       respects, and such Registration Statement and Prospectus did not omit
       to state a material fact required to be stated therein or necessary in
       order to make the statements therein, in light of the circumstances in
       which they were made, not misleading and, in his opinion, since the
       effective date of the Registration Statement, no event has occurred
       which should have been set forth in a supplement to or an amendment of
       the Prospectus which has not been so set forth in such supplement or
       amendment.

       (h) The Company and the Selling Stockholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representatives may reasonably have requested.

       The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Wright, Lindsey &
Jennings LLP, counsel for the Underwriters.



                                      15


       The several obligations of the Underwriters to purchase the Option
Shares hereunder are subject to satisfaction on and as of the Option Closing
Date of the conditions set forth in Paragraphs (a) through (g) above, except
that the opinions called for in Paragraphs (b) and (c), the letter called for
in Paragraph (e) and the certificate called for in Paragraph (f) shall be
revised to reflect the sale of the Option Shares.

       If any of the conditions provided for in this Section 7 shall not have
been fulfilled when and as required by this Agreement, the obligations of the
Underwriters hereunder may be terminated by the Representatives by notifying
the Company of such termination in writing or by telegram at or prior to the
Closing Date. In such event the Company, the Selling Stockholders and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 6 and 9 hereof).

       8. Conditions of the Obligations of the Sellers. The obligations of the
Sellers to sell and deliver the Shares are subject to the conditions that at
or before 10:00 A.M., eastern time, on the date of this Agreement, or such
later time and date as the Company and the Representatives may from time to
time consent to in writing or by telegram, the Registration Statement shall
have become effective; and at the Closing Date no stop order suspending the
effectiveness of the Registration Statement shall have been issued or
proceedings therefor initiated or threatened.

       9.    Indemnification.

       (a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter, within the meaning of
the Securities Act, and without limiting any other indemnification available
under this Section 9, Stephens Inc. in its capacity as QIU and each person, if
any, who controls the QIU, against any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) which arise out of or are based
upon any breach of any representation, warranty, agreement, or covenant
contained herein, or any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and will reimburse each Underwriter and each such controlling person for any
legal or other expenses reasonably incurred by such Underwriter or such
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement, or alleged untrue statement, or omission or alleged omission made
in the Registration Statement, any Preliminary Prospectus, the Prospectus, or
such amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof and, provided, further, that
the indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any Underwriter to the extent that a prospectus relating to the
purchase of such Shares was required to be delivered by such Underwriter under
the Securities Act in connection with such purchase and any such loss, claim,
damage or liability of such Underwriter results from the fact that there was
not sent or given to such person, at or prior to the written confirmation of
the sale of such Shares to such person, a copy of the Prospectus as then
amended or supplemented (excluding any documents incorporated by reference
therein). This indemnity agreement will be in addition to any liability which
the Company may otherwise have.

       (b) Each Selling Stockholder agrees, severally, to indemnify and hold
harmless each Underwriter and each person, if any, who controls any
Underwriter, within the meaning of the Securities Act, and without limiting


                                      16


any other indemnification available under this Section 9, Stephens Inc. in its
capacity as QIU and each person, if any, who controls the QIU, provided,
however, that the indemnification obligation of each Selling Stockholder shall
be limited to the net proceeds received by such Selling Stockholder with
respect to the Shares sold, from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) which arise out of
or are based upon any breach of any representation, warranty, agreement, or
covenant contained herein, or any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
but only with reference to information relating to such Selling Stockholder
furnished in writing by or on behalf of such Selling Stockholder expressly for
use in the Registration Statement, any Preliminary Prospectus or the
Prospectus; provided, however, that the Selling Stockholders will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement, or alleged
untrue statement, or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by or through the Representatives specifically for
use in the preparation thereof and, provided, further, that the indemnity
agreement contained in this Section 9(b) shall not inure to the benefit of any
Underwriter to the extent that a prospectus relating to the purchase of such
Shares was required to be delivered by such Underwriter under the Securities
Act in connection with such purchase and any such loss, claim, damage or
liability of such Underwriter results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Shares to such person, a copy of the Prospectus as then amended or
supplemented (excluding any documents incorporated by reference therein). This
indemnity agreement will be in addition to any liability which each Selling
Stockholder may otherwise have.

       (c) Each Underwriter severally, but not jointly, will indemnify and
hold harmless the Selling Stockholders, the Company, and each person, if any,
who controls the Company, within the meaning of the Securities Act, against
any losses, claims, damages or liabilities to which the Company or any such
director, officer, Selling Stockholder or controlling person may become
subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or
other expenses reasonably incurred by the Company or such Selling Stockholder
or controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
each Underwriter will provide indemnity and be liable in each case only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Company by or
through the Representatives specifically for use in the preparation thereof.
This indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have.

       (d) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action or proceeding, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 9, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party


                                      17


will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 9, except to the extent that the
indemnifying party is substantially prejudiced by the omission of such
notification. In case any such action or proceeding is brought against any
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and, to the extent
that it may wish, jointly with any other indemnifying party, similarly
notified, to assume the defense thereof with counsel satisfactory to such
indemnified party and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.

       (e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 9 is
for any reason held to be unavailable to an indemnified party under subsection
(a) or (b) above in respect to any losses, claims, damages or liabilities
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Sellers on the one hand and the Underwriters
on the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Sellers on the one hand
and the Underwriters on the other hand shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company or the Selling Stockholders bears to the underwriting discounts and
commissions received by the Underwriters. The relative fault of a party shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.

       The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by
pro-rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute shall be several in proportion to their
respective underwriting obligation and not joint.



                                      18


       (f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 9 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it
as an additional defendant in any such proceeding in which such other
contributing party is a party.

       (g) The indemnification contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement will remain operative and in full force and effect
regardless of any investigations made by or on behalf of any Underwriters or
controlling persons thereof, or by or on behalf of the Company or its
directors or officers or the Selling Stockholders, and will survive delivery
of, and payment for, the Shares.

       10. Default of Underwriters. If any Underwriter shall fail to purchase
and pay for the Firm Shares or the Option Shares, as the case may be, which
such Underwriter has agreed to purchase and pay for hereunder (otherwise than
by reason of any default on the part of the Company or the Selling
Stockholders), you, as Representatives of the Underwriters, shall use your
best efforts to procure within 24 hours thereafter one or more of the other
Underwriters, or any others, to purchase from the Company and the Selling
Stockholders such amounts as may be agreed upon and upon the terms set forth
herein, the Shares which the defaulting Underwriter or Underwriters failed to
purchase. If during such 24 hours you, as such Representatives, shall not have
procured another purchaser, then (i) if the aggregate number of Shares with
respect to which such default shall occur does not exceed ten percent of the
Firm Shares or the Option Shares, as the case may be, the other Underwriters
shall be obligated, severally, in proportion to the respective number of Firm
Shares which they are obligated to purchase hereunder, to purchase the Shares
which such defaulting Underwriter or Underwriters failed to purchase, or (ii)
if the aggregate number of Shares with respect to which such default shall
occur exceeds 10 percent of the Firm Shares or the Option Shares, as the case
may be, the Company or you, as the Representatives of the Underwriters, will
have the right, by written notice given within the next 24-hour period to the
parties to this Agreement, to terminate this Agreement without liability on
the part of the non-defaulting Underwriters or of the Company or the Selling
Stockholders except to the extent provided in Section 9 hereof. In the event
of a default by any Underwriter or Underwriters as set forth in this Section
11, the Closing Date or the Option Closing Date, as the case may be, may be
postponed for such period, not exceeding seven days, as you, as
Representatives, may determine in order that the required changes in the
Registration Statement or in the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriter" includes any person
substituted for a defaulting Underwriter. Any action taken under this Section
11 shall not relieve any defaulting Underwriter from liability in respect of
any default of such Underwriter under this Agreement.

       11. Notices. All communications hereunder shall be in writing and,
except as otherwise provided herein, will be mailed, delivered, or telegraphed
and confirmed as follows: if to the Underwriters, to Stephens Inc., 111 Center
Street, Little Rock, Arkansas 72201, Attention: W. Scott Davis, with a copy to
Wright, Lindsey & Jennings LLP, 200 West Capitol Avenue, Suite 2200, Little
Rock, Arkansas 72201, Attention: C. Douglas Buford, Jr., and if to the Company
or the Selling Stockholders, to The Hain Food Group, Inc., 50 Charles
Lindbergh Blvd., Uniondale, New York 11553, Attention: President, with a copy
to Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005,
Attention: Roger Meltzer.

       12. Termination. This Agreement may be terminated by you by notice to
the Sellers as follows:



                                      19


       (a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M.,
central time, on the first business day following the date on which the
Registration Statement becomes effective;

       (b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any Material Adverse Change
which would, in your reasonable judgment, materially impair the investment
quality of the Shares; (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political conditions
if the effect of such outbreak, calamity, crisis or change on the financial
markets of the United States would, in your reasonable judgment, make the
offering or delivery of the Shares impracticable; (iii) general suspension of
trading in securities on the New York Stock Exchange, the American Stock
Exchange or the over-the-counter market or limitation on prices (other than
limitations on hours or numbers of days of trading) for securities on either
such Exchange or the over-the-counter market; (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your reasonable
discretion materially and adversely affects or will materially and adversely
affect the business or operations of the Company; (v) declarations of a
banking moratorium by either federal or New York State authorities; or (vi)
the taking of any action by any federal, state or local government or agency
in respect of its monetary or fiscal affairs which in your reasonable
discretion has a material adverse effect on the securities markets in the
United States; or

       (c)   as provided in Sections 7 and 10 of this Agreement.

       13. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company, the Selling Stockholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Shares merely because of such purchase.

       14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants of the Company and the Selling Stockholders in this Agreement shall
remain in full force and effect regardless of (a) any termination of this
Agreement, (b) any investigations made by or on behalf of any Underwriter or
controlling person, or (c) delivery of any payment for the Shares under this
Agreement.

       This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

       This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Arkansas.



                                      20


       If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Stockholders and the several Underwriters in accordance with its terms.

                           Very truly yours,

                           THE HAIN FOOD GROUP, INC.



                           By__________________________________________________
                              Title____________________________________________

                           SELLING STOCKHOLDERS, as identified in
                           Schedule I hereto



                           By__________________________________________________
                                           Attorney-in-Fact
                                       for the Selling Stockholders

The foregoing Underwriting Agreement is hereby confirmed and accepted as of
the date first above written.

STEPHENS INC. and CIBC OPPENHEIMER CORP.
as Representatives

By:    STEPHENS INC.


By_______________________________________
    Authorized Officer

Acting severally on behalf of itself and the other several Underwriters named
in Schedule II hereto.




                                      21




                                  SCHEDULE I


              Seller                                        No. of Firm Shares
              ------                                        ------------------

Company       ............................................    2,500,000

Selling Stockholders:

       Irwin D. Simon.....................................      125,000

       Jack Kaufman.......................................       50,000

       Benjamin Brecher...................................       50,000

       Bruce M. Lerit.....................................       25,000

       Argosy - Hain Investment Group, L.P................       75,000
                                                              ---------

              TOTAL.......................................    2,825,000
                                                              =========








                                      22



                                  SCHEDULE II




                       Underwriter                           No. of Firm Shares
                       -----------                           ------------------

Stephens Inc. ..............................................

Oppenheimer & Co., Inc......................................

                                                                2,825,000
                                                                =========





                                      23



                                                                    EXHIBIT 23.1



                        CONSENT OF INDEPENDENT AUDITORS



   
     We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to the Registration Statement (Form S-3 No. 333-38939) and
related Prospectus of The Hain Food Group, Inc. for the registration of
3,248,750 shares of its common stock and to the incorporation by reference
therein of our report dated September 3, 1997, with respect to the consolidated
financial statements of The Hain Food Group, Inc. included in its Annual Report
(Form 10-K) for the year ended June 30, 1997, filed with the Securities and
Exchange Commission.
    







                                                      /s/ Ernst & Young LLP
                                                      -------------------------
                                                       
                                                      ERNST & YOUNG LLP





   
Melville, New York
November 19, 1997




                      CONSENT OF INDEPENDENT ACCOUNTANTS
                      ----------------------------------

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated March 25, 1997,
appearing on page F-1 of the Annual Report on Form 10-K of Vestro Natural
Foods Inc., for the year ended December 31, 1996. We also consent to the
reference to us under the headings "Experts" in such Prospectus.

/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP

   
Costa Mesa, California
November 4, 1997