EMPLOYMENT AGREEMENT



          This Agreement is made as of March 25, 1997, by and between DIAMOND

WALNUT GROWERS, INC., acting through its Board of Directors, (hereinafter

referred to as "Employer") and MICHAEL MENDES (hereinafter referred to as

"Employee").



          Employer wishes to employ Michael Mendes, and Mr. Mendes is willing to

accept such employment on a full-time basis upon the terms and conditions set

forth in this Agreement.



          Accordingly, in consideration of the promises and mutual covenants

contained in this Agreement and the consideration set forth below, Employer and

Michael Mendes hereby agree as follows:



          1. Terms and Duties.



          1.1 Term of Employment. The employment of Employee under this

Agreement shall be indefinite and is terminable as more particularly set forth

in Article 5 "Termination."



          1.2 Location. Employee's location of employment shall be in Stockton,

California.



          1.3 Position and Primary Responsibility. Employee shall serve as the

Employer's President/Chief Executive Officer, subject to annual election by the

Board of Directors. Employee's responsibilities may be changed at any time if

the Employer believes, in its sole discretion, that such a change would be in

its best interests. Employee shall report directly to the Employer's Board of

Directors.



          1.4 Exclusivity. During the term of his employment, Employee shall

devote his full time, attention, energies and best efforts exclusively to the

performance of his duties for and on behalf of the Employer.



          2. Compensation.



          2.1 Base Salary. Employee shall receive a base salary of Sixteen

Thousand Six Hundred Sixty-Seven Dollars ($16,667.00) per month.



          2.2 Incentive Compensation. Employee shall be eligible to be

considered for incentive compensation as determined by the Board of Directors.

Incentive compensation shall be based on specific performance criteria, which

shall be established in writing by the Employer. Employee shall not be entitled

to any incentive compensation of any kind for any anniversary year of employment

which he does not complete in full.



          2.3 Payment. All compensation to Employee shall be paid in accordance

with all relevant Employer directives, rules and regulations and cost accounting

policies in effect from time to time and shall be subject to all applicable

employment and withholding taxes. Employee shall be responsible for any taxes

resulting from the determination that any portion of





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the benefits provided to Employee under this Agreement were to reimburse for

personal as opposed to business expenses. Employee shall hold the Employer

harmless for any complaints, claims or liabilities, including interest or

penalties, arising from Employee's failure to pay any taxes owed by Employee.



          3. Other Employment Benefits.



          3.1 Commencing on March 25, 1997, Employee shall be provided with

medical insurance under the Employer's Executive Medical Benefits plan.



          3.2 Employee shall be entitled to receive reimbursement for mileage

expenses while using his personal vehicle for Employer business (excluding

travel to and from his home and workplace).



          3.3 Subject to the maximum accrual limit set forth below, Employee

will accrue for each full year of employment a total of four (4) weeks of paid

time off. Paid time off will be accumulated as set forth in the Company's

policies. However, in no event shall Employee accrue paid time off benefits in

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