SUIZA FOODS CORP, S-1, 1996-10-01

SUIZA FOODS CORP
S-1, 1996-10-01
ICE CREAM & FROZEN DESSERTS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1996
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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SUIZA FOODS CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 2026 75-2559681
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)

3811 TURTLE CREEK BLVD.
SUITE 1300
DALLAS, TEXAS 75219
(214) 528-0939
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

GREGG L. ENGLES COPIES TO:
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER WILLIAM A. MCCORMACK
3811 TURTLE CREEK BLVD. JON L. MOSLE
SUITE 1300 HUGHES & LUCE, L.L.P.
DALLAS, TEXAS 75219 1717 MAIN STREET
(214) 528-0939 SUITE 2800
(Name, address, including zip code, and telephone DALLAS, TEXAS 75201
number, including area code, of agent for service) (214) 939-5500

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/

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. / /

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CALCULATION OF REGISTRATION FEE
<TABLE>
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TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 625,000 17.75 $11,093,750 $3825.43
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
on the basis of the average of the high and low price paid per share of
Common Stock, as reported on the Nasdaq National Market on Wednesday,
September 25, 1996, in accordance with Rule 457(c) promulgated under the
Securities Act of 1933, as amended.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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SUIZA FOODS CORPORATION

CROSS REFERENCE SHEET

ITEM OF FORM S-1 PROSPECTUS CAPTION OR LOCATION
---------------- ------------------------------
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus . . . . . . . . Forepart of the Registration
Statement and Outside Front Cover
Page of the Prospectus

2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . . Inside Front and Outside Back Cover
Pages of the Prospectus; Additional
Information

3. Summary Information, Risk Factors . Prospectus Summary; Risk Factors
4. Use of Proceeds . . . . . . . . . . Not Applicable
5. Determination of Offering Price . . Not Applicable
6. Dilution . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders . . . . . Principal and Selling Stockholders
8. Plan of Distribution . . . . . . . Outside Front Cover Page of the
Prospectus
9. Description of Securities to be
Registered . . . . . . . . . . . . Description of Capital Stock
10. Interests of Named Experts and
Counsel . . . . . . . . . . . . . . Not Applicable
11. Information with Respect to the
Registrant . . . . . . . . . . . . Outside Front Cover Page; Prospectus
Summary; Risk Factors; Price Range
of Common Stock; Dividend Policy;
Unaudited Pro Forma Consolidated
Financial Data; Selected
Consolidated Financial Data;
Selected Pre-Acquisition Historical
Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Relationships and Related
Transactions; Principal and Selling
Stockholders; Description of Capital
Stock; Shares Eligible for Future
Sale; Consolidated Financial
Statements of Suiza Foods
Corporation; Condensed Consolidated
Financial Statements of Suiza Foods
Corporation; Combined Financial
Statements of Pre-Acquisition
Suiza-Puerto Rico; Financial
Statements of Pre-Acquisition Velda
Farms; Consolidated Financial
Statements of Garrido; Financial
Statements of Swiss Dairy
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . Not Applicable

<PAGE>

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 by 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.

<PAGE>

SUBJECT TO COMPLETION, DATED , 1996

PROSPECTUS

625,000 Shares

SUIZA FOODS

Common Stock

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All of the 625,000 shares of Common Stock, $.01 par value per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by a
stockholder of Suiza Foods Corporation ("Suiza Foods" or the "Company"). See
"Principal and Selling Stockholders". The Company will not receive any of the
proceeds from the sale of the shares offered hereby.

The Common Stock is traded on the Nasdaq National Market under the
symbol "SWZA". On September 25, 1996, the closing sale price of the Common
Stock on the Nasdaq National Market was $17.75 per share. See "Price Range
of Common Stock".

ANY INVESTMENT IN THE SECURITIES OFFERED HEREIN INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.

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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.

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

, 1996

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, registration statements,
proxy statements, and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's Regional Offices: 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such materials can be obtained
at prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of reports,
registration statements, proxy and information statements filed
electronically by the Company and other information regarding the Company can
be obtained from the Commission's address on the world-wide web:
"http://www.sec.gov".

The Company has filed with the Commission a Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act with respect
to the Common Stock offered hereby. As used herein, the term "Registration
Statement" means the initial Registration Statement and any and all
amendments thereto. This Prospectus omits certain information contained in
said Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Statements herein concerning the contents of
any contract or other document are not necessarily complete and in each
instance reference is made to such contract or other document filed with the
Commission as an exhibit to the Registration Statement, or otherwise, each
such statement being qualified by and subject to such reference in all
respects.

<PAGE>

PROSPECTUS SUMMARY

AS USED IN THIS PROSPECTUS, EXCEPT AS OTHERWISE STATED OR UNLESS THE
CONTEXT OTHERWISE REQUIRES, THE TERMS "SUIZA FOODS" AND THE "COMPANY" REFER
TO SUIZA FOODS CORPORATION AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS AND
THE HISTORICAL OPERATIONS AND ACTIVITIES OF CERTAIN ENTITIES (THE "COMBINED
ENTITIES") THAT BECAME SUBSIDIARIES OF THE COMPANY IN MARCH 1995 PURSUANT TO
A CORPORATE COMBINATION ACCOUNTED FOR AS A POOLING OF INTERESTS (THE
"COMBINATION"). SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS --HISTORIC
RELATIONSHIPS AND RELATED TRANSACTIONS -- THE COMBINATION". THE COMPANY'S
OPERATING SUBSIDIARIES ARE REFERRED TO INDIVIDUALLY HEREIN AS "SUIZA-PUERTO
RICO", "SWISS DAIRY", "VELDA FARMS" AND "REDDY ICE". UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO THE COMBINATION
AND TO A 69-FOR-1 COMMON STOCK SPLIT THAT WAS EFFECTED ON FEBRUARY 29, 1996.
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
RELATED NOTES INCLUDED ELSEWHERE HEREIN.

THE COMPANY

Suiza Foods is a leading manufacturer and distributor of fresh milk
products, refrigerated ready-to-serve fruit drinks and coffee in Puerto Rico,
fresh milk and related dairy products in California and Florida, and
packaged ice in Florida and the southwestern United States. The Company has
grown primarily through strategic and consolidating acquisitions. Through
these acquisitions, the Company has realized regional economies of scale and
operating efficiencies by consolidating manufacturing, distribution and/or
purchasing and administrative operations in each of its core businesses. The
Company conducts its dairy operations primarily through Suiza-Puerto Rico,
Swiss Dairy and Velda Farms and its ice operations through Reddy Ice. Each
of these subsidiaries is a strong regional competitor with an established
reputation for customer service and product quality. These subsidiaries
market their products through extensive distribution networks to a diverse
group of customers, including convenience stores, grocery stores, schools and
institutional food service customers.

Through its Suiza-Puerto Rico subsidiary, the Company manufactures and
distributes approximately 66% of the fresh milk sold in Puerto Rico and
manufactures and markets a line of refrigerated ready-to-serve fruit drinks
under its Suiza Fruit-TM- name, a leading brand in Puerto Rico. The Company
is the largest of two fresh milk processors in Puerto Rico and distributes
its products to grocery stores, retail outlets and schools, and also distributes
third party brand name ice cream and other refrigerated and frozen foods
principally to medium-sized and large grocery stores. In June 1994, the
Company acquired Mayaguez Dairy, Inc. ("Mayaguez Dairy"), formerly the third
largest dairy manufacturer and distributor in Puerto Rico. Since that
acquisition, the Company has consolidated Mayaguez Dairy's production into
its existing Puerto Rico facilities and has eliminated the fixed costs of
Mayaguez Dairy's former manufacturing facility and duplicative administrative
expenses. In July 1996, the Company acquired Garrido y Compania, Inc.
("Garrido"), a Puerto Rico processor and distributor of coffee and coffee
related products. Garrido is also the largest provider of in-room gourmet
coffee service in Puerto Rico, serving a majority of the hotels located in
Puerto Rico. The acquisition of Garrido extends the Company's branded product
line and management believes that it will be able to improve Garrido's
operations by leveraging its existing distribution and administrative systems
in Puerto Rico. Management also believes that Garrido's premium coffee export
business offers additional opportunities for growth.

Through Swiss Dairy, which was acquired by the Company in September 1996,
the Company manufactures and distributes fresh milk and certain related
products in Southern California and Nevada. Swiss Dairy's strategy is to
focus its efforts on manufacturing and distributing a limited product line to
high volume retailers, including grocery and club stores, which allows it to
improve efficiencies and reduce costs. Swiss Dairy's manufacturing operation
is conducted from a single facility located in Riverside, California.

Through Velda Farms, the Company manufactures and distributes fresh milk,
ice cream and related products throughout peninsular Florida under its own
brand names and under brands licensed from third parties. The Company serves
approximately 10,000 customers and focuses its distribution efforts on food
service accounts, convenience stores, club stores and schools. Approximately
one-half of the Company's net sales in Florida are to food service accounts,
such as cruise ships, theme parks, hotels, restaurants and healthcare
facilities. Management believes that the Company's long-standing client
relationships, focus on service-intensive accounts and extensive distribution
network

<PAGE>

provide it with a competitive advantage. In November 1994, the Company
acquired the Florida Division of Flav-O-Rich, Inc., a subsidiary of
Mid-America Dairymen, Inc. ("Flav-O-Rich"). Located in St. Petersburg,
Florida, Flav-O-Rich manufactured and distributed fresh dairy products in
peninsular Florida. Since the acquisition, the Company has re-allocated
production among its Florida facilities, consolidated Flav-O-Rich's
distribution operations with its own and reduced Flav-O-Rich's personnel
expenses. In January 1996, the Company acquired Skinners' Dairy, Inc.
("Skinners'") in Jacksonville, Florida. Skinners' manufactured and
distributed fresh dairy products in peninsular Florida, primarily in the
Jacksonville area. Since the acquisition, the Company has closed the
Skinners' manufacturing plant, transferred Skinners' volume to the Company's
Winter Haven facility, consolidated Skinners' distribution with its own and
reduced Skinners' personnel expenses.

The Company manufactures and distributes ice products for retail,
commercial and industrial uses through its Reddy Ice subsidiary. The Company
currently manufactures ice at 21 facilities and serves approximately 20,000
retail locations in Texas, Florida, Arizona, New Mexico, Nevada, Oklahoma and
Utah. Since May 1988, the Company has acquired 27 ice manufacturing or
distribution operations, including 14 acquired since January 1, 1995.
Management believes that the Company is one of the largest manufacturers and
distributors of packaged ice in the United States and that it has significant
market share in each of the markets in which it operates.

In April 1996, the Company completed an initial public offering of
3,795,000 shares of Common Stock at a price of $14.00 per share (the "IPO").
The net proceeds to the Company from the IPO were approximately $49.5 million,
after deducting underwriting discounts and commissions and offering expenses.
The Company used the net proceeds from the IPO to repay a portion of its
outstanding senior and subordinated indebtedness.

On August 7, 1996, the Company completed a private placement of 625,000
shares of Common Stock to T. Rowe Price Small-Cap Value Fund ("T. Rowe Price"
or the "Selling Stockholder") for net proceeds of approximately $9.5 million.
The Company utilized the proceeds from this private placement to retire
outstanding indebtedness under the revolving credit portion of its Senior
Credit Facility (as defined herein). All of the shares of Common Stock sold
to T. Rowe Price are offered for sale to the public by the Selling Stockholder
in this Offering.

The Company was formed to become a holding company for Suiza-Puerto Rico,
Velda Farms and Reddy Ice pursuant to the Combination. In the Combination,
which was completed on March 31, 1995, all of the equity interests in the
Combined Entities were converted into shares of Common Stock, or options to
acquire shares of Common Stock, in a transaction accounted for as a pooling
of interests. See "Certain Relationships and Related Transactions -- Historic
Relationships and Related Transactions -- The Combination". The Company is a
Delaware corporation with its principal offices located at 3811 Turtle Creek
Boulevard, Suite 1300, Dallas, Texas 75219 (telephone number 214-528-0939).

BUSINESS STRATEGY

The Company's strategy is to continue to expand its dairy and ice
operations primarily through consolidating acquisitions within its existing
markets and through strategic acquisitions in new geographic markets.
Management believes that the Company can continue to realize economies of
scale and efficiencies from acquisitions through better utilization of
production facilities, establishment of shorter and more dense distribution
routes, consolidation of acquired brand names and more efficient human
resource allocation. The Company has implemented its consolidation and
acquisition strategy through the acquisition and integration of Mayaguez
Dairy into Suiza-Puerto Rico, Flav-O-Rich and Skinners' into Velda Farms and
a number of ice companies into Reddy Ice and through the acquisitions of
Garrido and Swiss Dairy. Management believes that both the dairy and ice
industries will continue to provide strategic acquisition and consolidation
opportunities. The Company will also seek to expand its existing operations
by adding new customers, extending its product lines and securing distribution
rights for additional branded product lines.

<PAGE>

SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)

The following summary consolidated financial data for the three years
ended December 31, 1995 has been derived from the audited consolidated
financial statements of the Company. The summary consolidated financial data
for the six-month periods ended June 30, 1995 and 1996 were derived from the
unaudited financial statements of the Company, and include, in management's
opinion, all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the results for such periods. The summary
financial data do not purport to indicate results of operations as of any
future date or for any future period. Effective with the Combination, the
Company became the holding company for the operations of Suiza-Puerto Rico,
Velda Farms and Reddy Ice. The Combination was accounted for using the
pooling of interests method of accounting. Results of operations of
Suiza-Puerto Rico and Velda Farms are included from the dates such operations
were acquired in purchase business combinations (December 16, 1993 and April
10, 1994, respectively). The pro forma financial data give effect to the
Swiss Dairy and Garrido acquisitions as if such transactions had been
consummated as of January 1, 1995. The pro forma balance sheet data give
effect to the Swiss Dairy and Garrido acquisitions as if such transactions
had occurred as of June 30, 1996. See "Unaudited Pro Forma Financial Data".

<TABLE>
YEAR ENDED DECEMBER 31, UNAUDITED SIX MONTHS ENDED JUNE 30,
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UNAUDITED
PRO FORMA PRO FORMA
1993 1994 1995 1995 1995 1996 1996
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OPERATING DATA :
Net sales ......................... $ 51,675 $ 341,108 $ 430,466 $ 583,339 $ 214,905 $ 225,307 $ 288,363
Gross profit ...................... 31,263 100,640 117,833 142,540 57,253 59,390 70,706
Operating income .................. 8,702 25,760 30,564 40,030 13,642 14,943 19,058
Interest expense, net ............. 7,697 19,279 19,921 25,401 10,437 8,488 10,978
Income (loss) before extraordinary
loss ............................ 1,420 4,245 (1,576) 1,661 (7,557) 4,936 6,104
Net income (loss) (1) ............. 1,420 4,048 (10,038) 1,661 (16,019) 2,721 6,104
Weighted average shares
outstanding ..................... 2,487,174 6,156,387 6,109,398 7,407,907 5,905,000 8,455,332 9,080,332
Earnings (loss) per share:
Income (loss) before extraordinary
loss ............................ $ .57 $ .69 $ (.26) $ .22 $ (1.28) $ .58 $ .67
Extraordinary loss .................. -- (.03) (1.38) -- (1.43) (.26) --
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Net income (loss) (1) ............... $ .57 $ .66 $ (1.64) $ .22 $ (2.71) $ .32 $ .67
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</TABLE>

<TABLE>
AS OF JUNE 30, 1996
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ACTUAL PRO FORMA
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(UNAUDITED)
BALANCE SHEET DATA:
Working capital (2) ........................................................................ $ 9,748 $ 23,637
Total assets ............................................................................... 237,973 333,841
Total debt ................................................................................. 143,890 223,646
Total stockholders' equity ................................................................. 60,789 70,289
</TABLE>

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(1) Net income and the related per share amounts for 1994 reflect $1,857
($1,799 net of associated income taxes) of nonrecurring and extraordinary
charges consisting of $1,660 in nonrecurring costs related to the
Combination and an uncompleted public offering of Common Stock and $197
of extraordinary losses from the early extinguishment of debt. Net loss
and the related per share amounts for 1995 reflect $18,700 ($18,016 net of
associated income taxes) of nonrecurring and extraordinary charges
consisting of $8,838 in nonrecurring costs related to the Combination,
$1,400 in nonrecurring costs related to an uncompleted debt offering and
uncompleted acquisitions and $8,462 in extraordinary losses from the early
extinguishment of debt.
(2) Working capital means total current assets minus total current liabilities.

<PAGE>
RISK FACTORS

ANY INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY AND
SHOULD CONSIDER, AMONG OTHER THINGS, THE RISKS AND THE SPECULATIVE FACTORS
INHERENT IN AND AFFECTING THE COMPANY'S BUSINESS DESCRIBED BELOW AND THROUGHOUT
THIS PROSPECTUS.

POTENTIAL LIMITATIONS ON EXPANSION

The Company intends to grow principally through acquisitions of dairy and
ice operations or other food related businesses. The Company will evaluate
specific acquisition opportunities based on market conditions and economic
factors existing at the time and intends to pursue favorable opportunities as
they arise. There can be no assurance that the Company will find suitable
acquisition candidates or succeed in integrating any acquired business into the
Company's existing business or in retaining key customers of acquired
businesses. There can also be no assurance that the Company will have
sufficient available capital resources to realize its acquisition strategy. See
" --Substantial Indebtedness", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Business
Strategy".

COMPETITION

The Company's dairy and ice businesses are subject to significant
competition from regional dairy operations and large national food service
distributors that operate in the Company's markets. Competition in the dairy
processing, fruit drink and food distribution businesses is based primarily on
service, price, brand recognition, quality and breadth of product line. Many of
the Company's competitors are larger, better capitalized and have greater
financial, operational and marketing resources than the Company. See
"Business -- Competition -- Dairy".

The packaged ice business is also highly competitive. The Company faces a
number of competitors in the packaged ice business, including smaller
independent ice manufacturers, convenience and grocery retailers that operate
captive commercial ice plants and retailers that manufacture and package ice at
store locations. Competition exists primarily on a regional basis, with
service, price and quality as the principal competitive factors. A significant
increase in the utilization of captive commercial ice plants or on-site
manufacturing by operators of large retail chains served by the Company could
have an adverse effect on the Company's operations. See "Business --
Competition -- Ice".

SUBSTANTIAL INDEBTEDNESS

On June 30, 1996, the Company's total indebtedness and long-term debt
(excluding current portion) were $143.9 million and $134.3 million,
respectively. The Company's long-term debt (excluding current portion)
represented 68.8% of the Company's total capitalization at June 30, 1996. On a
pro forma basis after giving effect to the borrowings to fund the acquisitions
of Garrido and Swiss Dairy and the repayment of outstanding indebtedness from
the net proceeds of the private placement of Common Stock to the Selling
Stockholder as if each such transaction had occurred on June 30, 1996, the
Company would have had total indebtedness and long-term indebtedness (excluding
current portion) of $223.6 million and $213.1 million, respectively. The
Company's Senior Credit Facility, Subordinated Notes and related debt service
obligations (i) limit the Company's ability to obtain additional financing in
the future; (ii) require the Company to dedicate a significant portion of the
Company's cash flow to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) limit the Company's flexibility in planning for, or reacting to,
changes in its business and market conditions; and (iv) impose additional
financial and operational restrictions on the Company, including restrictions on
dividends.

<PAGE>

The Company's ability to make scheduled payments on its indebtedness
depends on its financial and operating performance, which is subject to
prevailing economic conditions and to financial, business and other factors,
some of which are beyond the Company's control. The Company has pledged
substantially all its assets, including the stock of its operating subsidiaries
(except for 35% of the capital stock of Garrido), to secure the Company's
indebtedness under the Senior Credit Facility. The failure of the Company to
comply with the financial and other restrictive covenants under the Senior
Credit Facility or Subordinated Notes may result in an event of default which,
if not cured or waived, could have a material adverse effect on the Company.
The Company has entered into various interest rate agreements to reduce its
exposure to interest rate fluctuations under the Senior Credit Facility. These
agreements have the effect of fixing the Company's interest rate with respect to
a portion of its indebtedness under the Senior Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

GOVERNMENT REGULATION; RAW MATERIAL COSTS

The supply and price of milk in Puerto Rico are regulated under Puerto Rico
law. The government of Puerto Rico establishes an industry-wide production
ceiling and sets the prices that may be charged for milk at the dairy farm level
and the maximum prices that may be charged at the processor and retail levels.
These prices are reviewed on an annual basis and remain fixed unless changed by
the government. The price controls in Puerto Rico make the Company vulnerable
to increases in the costs of manufacturing, packaging and distributing its
products. There can be no assurance that the Company's operating results will
not be adversely affected by price levels set by the government. See
"Business -- Raw Materials and Supply -- Dairy" and "Business -- Government
Regulation -- Puerto Rico Milk Industry Regulation".

The price of raw milk in the mainland United States fluctuates based on
supply and demand, with minimum support prices established monthly on a regional
basis by federal and/or state government agencies. Congress has recently passed
legislation to phase out support prices over a specified period. There can be
no assurance that a material increase in milk prices in the mainland United
States will not occur or that any such increase would not reduce the
profitability of the Company's operations. See "Business -- Raw Materials and
Supply -- Dairy" and "Business -- Government Regulation -- U.S. Dairy Support
Program".

The Company's operations are also subject to other federal, Puerto Rico,
state and local governmental regulation. See "Business -- Government
Regulation".

SEASONALITY OF ICE BUSINESS

The Company's ice business is seasonal, with its highest sales occurring
during the second and third calendar quarters. Over the past two calendar
years, the Company has recorded an average of approximately 69% of its annual
net sales of ice during these two quarters. Because the Company's results of
operations for its ice business depend significantly on sales during its peak
season, adverse weather during this season (such as an unusually mild or rainy
period) could have a disproportionate impact on the Company's results of
operations for the full year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality".

DEPENDENCE ON KEY PERSONNEL

The future success of the Company's business operations is dependent in
part on the efforts and skills of certain key members of management. These
persons include Gregg L. Engles, Chairman and Chief Executive Officer of the
Company; Cletes O. Beshears, President of the Company; and William P. Brick,
Chief Operating Officer of the Company. The loss of any of these persons could
have an adverse effect on the Company. The Company has entered into employment
agreements with each of Messrs. Engles and C.O. Beshears which extend until
March 31, 1999 and which include certain compensation arrangements and
non-compete provisions. The Company has not obtained key man life insurance
with respect to any of its key members of management. See "Management --
Executive Compensation -- Employment Agreements and Other Arrangements".

<PAGE>
LIMITATIONS ON FAVORABLE TAX TREATMENT

Under Section 936 of the Internal Revenue Code of 1986, as amended, a
portion of the Company's income derived from its dairy, fruit drink and plastic
bottle operations in Puerto Rico qualifies for a tax credit that has the effect
of reducing or eliminating United States income taxes on income derived from
these operations. In the Revenue Reconciliation Act of 1993, the United States
Congress imposed certain limitations on the availability of the Section 936
credit. In August 1996, Congress passed the Small Business Job Protection Act
of 1996 which contains further restrictions on the availability of Section 936
credits and eliminates Section 936 altogether by December 31, 2005. These
limitations, combined with certain other provisions in the tax code that govern
the allocation among affiliated corporations of credits derived under
Section 936, may limit the amount of the tax credit available to the Company
prior to the expiration of Section 936. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Tax Benefits".

CONTROL OF THE COMPANY

As of August 31, 1996 the Company's executive officers and directors and
their affiliates and related parties who are existing stockholders beneficially
owned 34.0% of the outstanding shares of Common Stock. The Company's executive
officers and directors acting in concert can influence the business, policies
and affairs of the Company and may, together with their affiliates and related
parties, be able to block approval of any proposed merger, combination or sale
of substantially all the Company's assets. Such ownership may also make a
tender offer or proxy contest involving the Company less likely. See "Principal
and Selling Stockholders" and "Description of Capital Stock -- Certain
Provisions Relating to Changes in Control".

ANTITAKEOVER PROVISIONS

The Company's charter and bylaws contain provisions that may delay, defer
or prevent a change in control of the Company. Among other things, these
provisions: (i) authorize the Board of Directors to issue preferred stock in
series with the terms of each series to be fixed by the Board of Directors;
(ii) divide the Board of Directors into three classes so that only approximately
one-third of the total number of directors will be elected each year;
(iii) permit directors to be removed only for cause; and (iv) specify advance
notice requirements for stockholder proposals and director nominations. See
"Description of Capital Stock -- Certain Provisions Relating to Changes in
Control".

SHARES ELIGIBLE FOR FUTURE SALE

As of August 31, 1996, the Company had 10,739,729 shares of Common Stock
outstanding. Of these shares, the 3,795,000 shares sold in the IPO are, and the
625,000 shares offered hereby will be, freely tradable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any such shares purchased by affiliates of the
Company. Of the remaining shares, 6,313,479 shares, which were issued in the
Combination, and 6,250 shares of restricted stock, which were issued under the
Company's Option and Restricted Stock Plan (as defined herein), will be eligible
for sale in the public market upon expiration of the applicable holding periods,
or sooner if registered under the Securities Act.

The stockholders who received Common Stock in the Combination have three
demand registration rights and unlimited incidental (or piggyback) registration
rights, subject to certain limitations and conditions relating to the timing and
size of the registrations and similar matters. The first two demand
registration rights will be exercisable commencing six months and expiring three
years and three months after completion of the IPO, but no demand registration
right may be exercised less than one year after completion of the IPO unless the
market price of the Common Stock at the time of exercise is at least $16.80 per
share (120% of the IPO price). The third demand registration right may be
exercised beginning three years and three months following completion of the
IPO. The Company's officers and directors and the existing stockholders have
agreed for a period of 180 days after April 17, 1996, the date of the final
prospectus used in the IPO, not to offer, sell, agree to sell, grant any
option to purchase or make any other disposition (excluding certain pledges)
of any shares owned by them without the prior written consent of the
representatives of the underwriters in the IPO. This agreement may be released
by the representatives of the underwriters without notice to persons purchasing
shares in the IPO or in this Offering and without notice to any market

8
<PAGE>
on which the Common Stock is traded. Sales of substantial amounts of
shares in the public market following the Offering could adversely affect the
market price of the Common Stock. See "Certain Relationships and Related
Transactions -- Historic Relationships and Related Transactions -- The
Combination -- Registration Rights", "Shares Eligible for Future Sale".

<PAGE>

PRICE RANGE OF COMMON STOCK

The Common Stock began trading in the Nasdaq National Market on April 17,
1996. The following table sets forth, for the periods from April 17, 1996 to
June 30, 1996, the high and low sales prices of the Common Stock as quoted on
the Nasdaq National Market. On September 25, 1996, the last reported sale price
of the Common Stock on the Nasdaq National Market was $17.75 per share. At
September 26, 1996, there were approximately 34 record holders of Common Stock.

PRICE RANGE OF
COMMON STOCK
----------------
HIGH LOW
------ ------
Year Ended December 31, 1996:

Second Quarter..................................... $18.75 $14.00

DIVIDEND POLICY

The Company has never declared or paid a cash dividend on the Common Stock.
Management intends to retain all earnings to cover working capital fluctuations
and to fund capital expenditures, scheduled debt repayments and acquisitions and
does not anticipate paying cash dividends on the Common Stock in the foreseeable
future. The Company's Senior Credit Facility and Subordinated Notes prohibit
the payment of dividends by the Company on any shares of Common Stock, other
than dividends payable solely in Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".

<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma financial data have been derived by the
application of pro forma adjustments to the financial statements of the Company.
The pro forma statement of operations data represent income from continuing
operations for the year ended December 31, 1995 and for the six months ended
June 30, 1996 and give effect to: (i) the acquisition of Garrido; (ii) the
acquisition of Swiss Dairy; (iii) the related borrowings to fund such
acquisitions; and (iv) the sale of Common Stock to the Selling Stockholder in
the private placement and the related repayment of indebtedness, as if such
transactions had been consummated as of January 1, 1995. The pro forma
balance sheet data give effect to: (i) the acquisition of Garrido; (ii) the
acquisition of Swiss Dairy; (iii) the related borrowings to fund such
acquisitions; and (iv) the sale of Common Stock to the Selling Stockholder in
the private placement and the related repayment of indebtedness, as if such
transactions had been consummated as of June 30, 1996. The pro forma
adjustments, which are described in the accompanying notes, are based on
available information and certain assumptions that management of the Company
believes are reasonable. The pro forma financial data should not be considered
indicative of actual results that would have been achieved if the transactions
given pro forma effect had been consummated on the dates or for the periods
indicated and do not purport to indicate results of operations as of any future
date or for any future period. Because the fiscal year for Garrido ends on June
30 of each year, the financial data for the year ended December 31, 1995 was
derived from the aggregation of the unaudited financial information of Garrido
for the six month period ended June 30, 1995 in Garrido's 1995 fiscal year and
the six month period ended December 31, 1995 in Garrido's 1996 fiscal year; and
the financial data for the six months ended June 30, 1996 was derived from
unaudited financial information for this six month period in Garrido's 1996
fiscal year. The unaudited pro forma financial data should be read in
conjunction with the financial statements of the Company, Swiss Dairy and
Garrido and the related notes appearing elsewhere herein.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
HISTORICAL
-----------------------------------
The Swiss Pro Forma
Company Garrido Dairy Adjustments Pro Forma
---------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 430,466 $26,226 $126,647 $ - $ 583,339
Cost of sales............................ 312,633 17,242 111,798 (874)(a),(b) 440,799
---------- ------- -------- ---------
Gross profit........................... 117,833 8,984 14,849 142,540
Operating expenses:
Selling and distribution............... 64,289 2,506 7,852 (409)(a),(b) 74,238
General and administrative............. 19,277 2,041 2,483 (731)(a),(b) 23,070
Amortization of intangibles and other.. 3,703 -- -- 1,499 (c) 5,202
---------- ------- -------- ---------
Total operating costs and expenses... 87,269 4,547 10,335 102,510
---------- ------- -------- ---------
Income from operations................... 30,564 4,437 4,514 40,030
Other (income) expense:
Interest expense, net.................. 19,921 349 -- 5,820 (d) 25,401
(689)(e)
Merger and other costs................. 10,238 -- -- 10,238
Other income, net...................... (469) (110) (270) (849)
---------- ------- -------- ---------
Total other (income) expense......... 29,690 239 (270) 34,790
---------- ------- -------- ---------
Income (loss) before income taxes........ 874 4,198 4,784 5,240
Income taxes............................. 2,450 589 65 213 (f) 3,579
262 (g)
---------- ------- -------- ---------
Income (loss) from continuing operations. $ (1,576) $ 3,609 $ 4,719 $ 1,661
---------- ------- -------- ---------
---------- ------- -------- ---------

Income (loss) per share from continuing
operations.............................. $ (0.26) $ 0.22
---------- ---------
---------- ---------

Weighted average shares outstanding...... 6,109,398 7,407,907
---------- ---------
---------- ---------
</TABLE>

<PAGE>

- ---------------------
(a) Excess of historical depreciation expense over the depreciation of the
fair value of property and equipment acquired, as follows:

Garrido Swiss Dairy Total
------- ----------- ------
Cost of sales $ (84) $(170) $(254)
Selling and distribution (15) (149) (164)
General and administration (13) (16) (29)
----- ----- -----
$(112) $(335) $(447)
----- ----- -----
----- ----- -----

(b) Elimination of salaries and benefits paid primarily to former
shareholders of Swiss Dairy whose employment was terminated as part of the
purchase agreement, resulting in a pro forma reduction of historical costs
of sales, selling and distribution and general and administrative costs of
$620, $245 and $702, respectively.
(c) Amortization of goodwill over 40 years.
(d) Pro forma interest expense on the average outstanding balance of new
borrowings used to fund the acquisitions at an assumed annual interest rate
of 7.25%, net of the reduction of historical interest expense related to
the historical debt repaid.
(e) Pro forma reduction of interest expense related to the use of the net
proceeds of $9.5 million from the sale of Common Stock to the Selling
Stockholder in the private placement to repay outstanding indebtedness, at
an assumed annual interest rate of 7.25%.
(f) Estimated pro forma adjustment to reflect income taxes on pro forma
pre-tax income for Garrido and Swiss Dairy at the Company's estimated
effective tax rate of 4% for Garrido and 40% for Swiss Dairy.
(g) Estimated pro forma increase in income taxes at the Company's
effective tax rate of 38% for increased pro forma pre-tax income related to
the reduced interest expense from the repayment of indebtedness using the
net proceeds of the sale of Common Stock to the Selling Stockholder in the
private placement.

<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
HISTORICAL
-----------------------------------
The Swiss Pro Forma
Company Garrido Dairy Adjustments Pro Forma
---------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 225,307 $13,228 $49,828 $ -- $ 288,363
Cost of sales............................ 165,917 8,982 43,285 (527)(a),(b) 217,657
---------- ------- ------- ---------
Gross profit........................... 59,390 4,246 6,543 70,706
Operating expenses:
Selling and distribution............... 32,682 1,428 3,454 (279)(a),(b) 37,285
General and administrative............. 9,805 1,163 954 (270)(a),(b) 11,652
Amortization of intangibles and other.. 1,960 -- -- 751 (c) 2,711
---------- ------- ------- ---------
Total operating costs and expenses... 44,447 2,591 4,408 51,648
---------- ------- ------- ---------
Income from operations................... 14,943 1,655 2,135 19,058
Other (income) expense:
Interest expense, net.................. 8,488 131 16 2,687 (d) 10,978
(344)(e)
Merger and other costs................. -- -- --
Other income, net...................... (252) (237) (195) (684)
---------- ------- ------- ---------
Total other (income) expense......... 8,236 (106) (179) 10,294
---------- ------- ------- ---------
Income before income taxes............... 6,707 1,761 2,314 8,764
Income taxes (benefit)................... 1,771 (478) 36 1,200 (f) 2,660
131 (g)
---------- ------- ------- ---------
Income from continuing operations........ $ 4,936 $ 2,239 $ 2,278 $ 6,104
---------- ------- ------- ---------
---------- ------- ------- ---------
Income per share from continuing
operations.............................. $ 0.58 $ 0.67
---------- ---------
---------- ---------
Weighted average shares outstanding...... 8,455,332 9,080,332
---------- ---------
---------- ---------
</TABLE>

- ---------------------
(a) Excess of historical depreciation expense over the depreciation of the
fair value of property and equipment acquired, as follows:

Garrido Swiss Dairy Total
------- ----------- ------
Cost of sales $(42) $ (87) $(129)
Selling and distribution (8) (75) (83)

General and administration (6) (8) (14)
---- ----- -----
$(56) $(170) $(226)
---- ----- -----
---- ----- -----

(b) Elimination of salaries and benefits paid primarily to former
shareholders of Swiss Dairy whose employment was terminated as part of the
purchase agreement, resulting in a pro forma reduction of historical costs
of sales, selling and distribution and general and administrative costs of
$398, $196 and $256, respectively.
(c) Amortization of goodwill over 40 years.
(d) Pro forma interest expense on the average outstanding balance of new
borrowings used to fund the acquisitions at an assumed annual interest rate
of 7.25%, net of the reduction of historical interest expense related to
the historical debt repaid.
(e) Pro forma reduction of interest expense related to the use of the net
proceeds of $9.5 million from the sale of Common Stock to the Selling
Stockholder in the private placement to repay outstanding indebtedness, at
an assumed annual interest rate of 7.25%.
(f) Estimated pro forma adjustment to reflect income taxes on pro forma
pre-tax income for Garrido and Swiss Dairy at the Company's estimated
effective tax rate of 4% for Garrido and 40% for Swiss Dairy.
(g) Estimated pro forma increase in income taxes at the Company's
effective tax rate of 38% for increased pro forma pre-tax income related to
the reduced interest expense from the repayment of indebtedness using the
net proceeds of the sale of Common Stock to the Selling Stockholder in the
private placement.

<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)

<TABLE>
HISTORICAL
-----------------------------------
The Swiss Pro Forma
Company Garrido Dairy Adjustments Pro Forma
---------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 1,179 $10,737 $ 972 $ (1,750)(a) $ 11,138
Accounts receivable, net............... 33,670 2,351 5,923 41,944
Inventories............................ 12,245 1,894 528 500 (b) 15,167
Prepaid expenses and other current
assets................................ 1,644 29 259 1,932
Deferred income taxes.................. 1,587 -- -- 1,587
-------- ------- ------- --------
Total current assets................. 50,325 15,011 7,682 71,768
Property and equipment................... 95,955 1,528 8,069 5,028 (b) 110,580
Intangible and other assets.............. 91,693 132 -- 59,668 (b) 151,493
-------- ------- ------- --------
Total assets............................. $237,973 $16,671 $15,751 $333,841
-------- ------- ------- --------
-------- ------- ------- --------
Current liabilities:
Accounts payable and accrued
expenses.............................. $ 29,998 $ 1,083 $ 5,206 $ -- $ 36,287
Income taxes payable................... 1,023 265 -- 1,288
Current portion of long-term debt...... 9,556 3,015 -- (2,015)(a) 10,556
-------- ------- ------- --------
Total current liabilities............ 40,577 4,363 5,206 48,131
Long-term debt........................... 134,334 1,968 -- 86,288 (a) 213,090
(9,500)(c)
Deferred income taxes.................... 2,273 34 -- 24 (b) 2,331
Stockholders' equity:
Common stock........................... 101 59 65 (124)(b) 107
6 (c)
Additional paid-in capital............. 79,593 -- 6 (6)(b) 89,087
9,494 (c)
Retained earnings (deficit)............ (18,905) 10,247 10,474 (20,721)(b) (18,905)
-------- ------- ------- --------
Total stockholders equity............ 60,789 10,306 10,545 70,289
-------- ------- ------- --------
Total liabilities and equity............. $237,973 $16,671 $15,751 $333,841
-------- ------- ------- --------
-------- ------- ------- --------
</TABLE>
- ---------------------
(a) On July 19, 1996, the Company completed the acquisition of all the
outstanding Common Stock of Garrido for a total purchase price of
approximately $31.0 million, including expenses and acquired cash, net of
debt repaid; and on September 9, 1996, the Company completed the
acquisition of substantially all the net assets of Swiss Dairy for a total
purchase price of approximately $55.0 million, including expenses and
acquired cash, as follows (in thousands):

Garrido Swiss Dairy Total
------- ----------- -------
Cash $ 600 $ 1,150 $ 1,750
Credit agreement borrowings
Current portion 1,000 1,000
Long-term portion 34,356 53,900 88,256
Repayment of existing indebtedness
Current portion (3,015) (3,015)
Long-term portion (1,968) -- (1,968)
------- ------- -------
Net purchase price $30,973 $55,050 $86,023
------- ------- -------
------- ------- -------

<PAGE>

(b) The above purchases resulted in an excess of the purchase price over
the historical net assets acquired which was allocated to the net assets
acquired as follows:

Garrido Swiss Dairy Total
------- ----------- -------
Net purchase price $30,973 $55,050 $86,023
Historical carrying value of net assets
acquired 10,306 10,545 20,851
------- ------- -------
Excess of purchase price over historical
carrying value $20,667 $44,505 $65,172
------- ------- -------
------- ------- -------
Allocation of excess purchase price:
Excess fair value of inventory $ -- $ 500 $ 500
Excess fair value of property and
equipment 861 4,167 5,028
Intangible assets, primarily goodwill 19,830 39,838 59,668
Deferred tax liabilities (24) -- (24)
------- ------- -------
$20,667 $44,505 $65,172
------- ------- -------
------- ------- -------

(c) On August 7, 1996 the Company sold 625,000 shares of Common Stock to
the Selling Stockholder in a private placement, providing net proceeds to
the Company of $9.5 million which was used to repay indebtedness.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
The following table presents selected consolidated financial data of the
Company for the five years ended December 31, 1995 derived from the Company's
audited consolidated financial statements. The selected consolidated financial
data for the six-month periods ended June 30, 1995 and 1996 are unaudited, and
in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) that are necessary to present fairly the financial results
for such periods. The selected financial data do not purport to indicate
results of operations as of any future date or for any future period. Effective
with the Combination, the Company became the holding company for the operations
of Suiza-Puerto Rico, Velda Farms and Reddy Ice. The Combination has been
accounted for using the pooling of interests method of accounting. Results of
operations of Suiza-Puerto Rico and Velda Farms are included from the dates such
operations were acquired in purchase business combinations (December 16, 1993
and April 10, 1994, respectively). The Selected Consolidated Financial Data
should be read in conjunction with the Consolidated Financial Statements and
related notes of the Company included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales .......................... $ 45,513 $ 44,452 $ 51,675 $ 341,108 $ 430,466 $ 214,905 $ 225,307
Costs of sales ..................... 15,016 14,586 20,412 240,468 312,633 157,652 165,917
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit ....................... 30,497 29,866 31,263 100,640 117,833 57,253 59,390
Operating costs and expenses:
Selling and distribution ........... 14,806 14,483 15,434 54,248 64,289 31,391 32,682
General and administrative ......... 6,699 6,110 6,305 16,935 19,277 10,271 9,805
Amortization of intangibles
and other ........................ 720 1,911 (1) 822 3,697 3,703 1,949 1,960
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating costs and
expenses ...................... 22,225 22,504 22,561 74,880 87,269 43,611 44,447
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations ............... 8,272 7,362 8,702 25,760 30,564 13,642 14,943
Other (income) expense:
Interest expense, net ................ 9,212 8,495 7,697 19,279 19,921 10,437 8,488
Merger and other costs ............... 467 1,199 1,660 10,238 (2) 10,304
Other income, net .................... (245) (408) (419) (268) (469) (273) (252)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total other (income) expense ..... (1,162) 9,286 7,278 20,671 29,690 20,468 8,236
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes
and extraordinary loss ............. (1,924) 1,424 5,089 874 (6,826) 6,707
Income taxes ......................... -- -- 4 844 2,450 731 1,771
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
loss ............................... (1,162) (1,924) 1,420 4,245 (1,576) (7,557) 4,936
Extraordinary loss from early
extinguishment of debt ............. 1,272 2,491 -- 197 8,462 8,462 2,215
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) .................... $ (2,434) $ (4,415) $ 1,420 $ 4,048 $ (10,038) $ (16,019) $ 2,721
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average shares
outstanding ........................ 1,763,502 1,763,502 2,487,174 6,156,387 6,109,398 5,905,000 8,455,332
Income (loss) before extraordinary
loss per share ..................... $ (.66) $ (1.09) $ .57 $ .69 $ (.26) $ (1.28) $ 0.58
Extraordinary loss per share ......... (.72) (1.41) -- (.03) (1.38) (1.43) (0.26)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per share .......... $ (1.38) $ (2.50) $ .57 $ .66 $ (1.64) $ (2.71) $ 0.32
---------- ---------- ---------- ---------- ----------- ---------- ----------

BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit) (3) ........ $ (3,851) $ 616 $ (3,609) $ (2,099) $ (1,554) $ (1,002) $ 9,748
Total assets ......................... 52,103 46,991 167,948 238,952 232,522 237,306 237,973
Long-term debt, net of current portion. 51,588 54,739 132,123 173,327 171,745 179,891 134,334
Total stockholders' equity (deficit) .. (9,469) (15,408) 162 9,887 9,460 3,735 60,789
</TABLE>

- -----------
(1) Includes a noncash restructuring charge of $1,141 to write down the
carrying value of certain property, plant and equipment to market value.
(2) Includes $8,838 in nonrecurring costs related to the Combination and $1,400
in nonrecurring costs related to an uncompleted debt offering and
uncompleted acquisitions.
(3) Working capital means total current assets minus total current liabilities.

<PAGE>

SELECTED PRE-ACQUISITION HISTORICAL FINANCIAL DATA
(IN THOUSANDS)

The following tables set forth selected historical financial data for
Pre-Acquisition Suiza-Puerto Rico and Pre-Acquisition Velda Farms as of and for
the periods indicated. The historical financial data for Pre-Acquisition
Suiza-Puerto Rico and Pre-Acquisition Velda Farms is presented for periods prior
to December 16, 1993 and April 10, 1994, respectively, their respective dates of
acquisition. This information should be read in conjunction with the financial
statements and related notes for Pre-Acquisition Suiza-Puerto Rico and
Pre-Acquisition Velda Farms included elsewhere herein.

PRE-ACQUISITION SUIZA-PUERTO RICO

PERIOD ENDED
YEAR ENDED DECEMBER 31, DECEMBER 15,
----------------------- 1993
1991 1992 (50 WEEKS)
-------- -------- ----------
OPERATING DATA:
Net sales ............................. $172,347 $184,022 $174,771
Operating income ...................... 12,438 14,178 11,720
Income from continuing operations (1).. 8,538 10,288 12,893
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets .......................... 68,139 65,110 68,357
Long-term debt ........................ 16,431 12,514 --
OTHER DATA:
Cash dividends paid ................... 3,247 14,251 14,994

PRE-ACQUISITION VELDA FARMS

<TABLE>
PERIOD FROM
YEAR ENDED DECEMBER 31, JANUARY 1, 1994
------------------------------- TO
1991 1992 1993 APRIL 9, 1994
-------- -------- -------- ---------------
<S> <C> <C> <C> <C>
OPERATING DATA:
Net Sales ............................. $115,688 $123,774 $125,908 $38,269
Operating income (2) .................. 4,443 2,977 3,422 1,460
Income from continuing operations (2).. 1,274 379 910 730
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets .......................... 43,599 39,337 38,215 39,867
Long-term debt ........................ 30,556 30,506 30,497 30,517
OTHER DATA:
Cash dividends paid ................... -- -- -- --
</TABLE>

- ----------------
(1) Includes a deferred tax benefit in 1993 of $2,734 from the settlement
of deferred tax liabilities with the Department of Treasury of the
Commonwealth of Puerto Rico.
(2) Includes non-recurring expenses for restructuring costs allocated by
Velda Farms' former parent of $1,048 in 1992 and $1,023 in 1993.

<PAGE>

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

OVERVIEW

Suiza Foods is a leading manufacturer and distributor of fresh milk
products, refrigerated ready-to-serve fruit drinks and coffee in Puerto Rico,
fresh milk and related dairy products in California and Florida, and packaged
ice in Florida and the southwestern United States. The Company has grown
primarily through strategic and consolidating acquisitions. Through these
acquisitions, the Company has realized regional economies of scale and operating
efficiencies by consolidating manufacturing, distribution and/or purchasing and
administrative operations in each of its core businesses. The Company conducts
its dairy operations primarily through Suiza-Puerto Rico, Swiss Dairy and Velda
Farms and conducts its ice operations through Reddy Ice. Each of these
subsidiaries is a strong regional competitor with an established reputation for
customer service and product quality. These subsidiaries market their products
through extensive distribution networks to a diverse group of customers,
including convenience stores, grocery stores, other retail outlets, schools and
institutional food service customers.

RESULTS OF OPERATIONS

Effective with the Combination, the Company became the holding company for
the operations of Suiza-Puerto Rico, Velda Farms and Reddy Ice. The Combination
has been accounted for using the pooling of interests method of accounting.
Results of operations of Suiza-Puerto Rico and Velda Farms are included from the
dates such operations were acquired in purchase business combinations
(December 16, 1993 and April 10, 1994, respectively). These transactions and
other consolidating acquisitions made throughout the periods presented increased
the Company's combined sales from $51.7 million for the year ended December 31,
1993 to $430.5 million for the year ended December 31, 1995.

The following table presents certain information concerning the Company's
results of operations, including information presented as a percentage of net
sales (dollars in thousands):

<TABLE>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------------------- ---------------------------------------
1993 1994 1995 1995 1996
---------------- ------------------ ----------------- ------------------ -------------------
DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT DOLLARS PERCENT
------- ------- -------- -------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
Dairy .................... $ 6,587 $ 293,407 $ 379,959 $ 193,657 $ 202,090
Ice ...................... 45,088 47,701 50,507 21,248 23,217
------- --------- --------- --------- ---------
Net Sales .............. 51,675 100.0% 341,108 100.0% 430,466 100.0% 214,905 100.0% 225,307 100.0%
Cost of Sales .............. 20,412 39.5 240,468 70.5 312,633 72.6 157,652 73.4 165,917 73.6
------- ----- --------- ----- --------- ----- --------- ----- --------- ------
Gross profit ............. 31,263 60.5 100,640 29.5 117,833 27.4 57,253 26.6 59,390 26.4
Operating expenses:
Selling and distribution.. 15,434 29.9 54,248 15.9 64,289 14.9 31,391 14.6 32,682 14.5
General and
administrative ......... 6,305 12.2 16,935 5.0 19,277 4.5 10,271 4.8 9,805 4.4
Amortization of
intangibles ............ 822 1.6 3,697 1.1 3,703 0.9 1,949 0.9 1,960 0.9
------- ----- --------- ----- --------- ----- --------- ----- --------- ------
Total operating
expenses ............... 22,561 43.7 74,880 22.0 87,269 20.3 43,611 20.3 44,447 19.8
Operating income:
Dairy .................... 92 17,122 22,386 12,387 12,375
Ice ...................... 8,610 8,638 9,218 2,479 4,188
Corporate Office ......... -- -- (1,040) (1,224) (1,620)
------- ----- --------- ----- --------- ----- --------- ----- --------- -----
Operating income ....... $ 8,702 16.8% $ 25,760 7.6% $ 30,564 7.1% $ 13,642 6.3% $ 14,943 6.6%
------- ----- --------- ----- --------- ----- --------- ----- --------- -----
------- ----- --------- ----- --------- ----- --------- ----- --------- -----
</TABLE>

18
<PAGE>

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

NET SALES. The Company's net sales increased by 4.8% for the first six
months of 1996 when compared to the first six months of 1995. Net sales for
the Company's dairy operations increased by 4.3% for the first six months of
1996 when compared to the same period in 1995, primarily due to (i) an increase
in prices charged for milk to recoup increases in raw milk costs in the U.S. and
(ii) the acquisition of Skinner's Dairy in January 1996. Net sales for the
Company's ice operations increased by 9.3% for the first six months of 1996 when
compared to the first six months of 1995 due to the addition of new customers
and the acquisition of twelve small ice businesses during 1995 and the first six
months of 1996.

COST OF SALES. The Company's cost of sales margin was 73.6% for the first
six months of 1996 compared to 73.4% for the same period in 1995. Cost of sales
margins for dairy increased primarily due to higher raw milk costs. Cost of
sales margins for ice decreased reflecting additional efficiencies realized from
acquired business and increased volumes processed when compared to the same
period in 1995.

OPERATING EXPENSES. The operating expense ratio was 19.8% for the first
six months of 1996 compared to 20.3% for the same period in 1995. Operating
expense increases were experienced in both dairy and ice as the result of
acquisitions made during the past eighteen months. Operating expense margins
decreased in the six-month comparison because of increased dairy net sales
resulting from higher milk costs, which had little impact on operating expense
levels.

OPERATING INCOME. The Company's operating income increased 9.5% to $14.9
million in the first six months of 1996 from $13.6 million in the first six
months of 1995 as a result of increased sales levels and improved gross margins,
primarily in the ice business. The Company's operating income margin increased
to 6.6% in the first six months of 1996 from 6.3% in the first six months of
1995, due primarily to growth in the Company's ice business.

OTHER (INCOME) EXPENSE. Interest expenses declined to $8.5 million during
the first six months of 1996 from $10.4 million during the first six months of
1995 primarily due to lower debt levels following the IPO, which was completed
in April 1996. The Company incurred $8.8 million in non-recurring merger
expenses related to the Combination, and $1.4 million in other non-operating
expenses related to several uncompleted acquisitions and to an uncompleted debt
offering in the first six months of 1995.

EXTRAORDINARY ITEMS. During the first six months of 1996, the Company
incurred $2.2 million in extraordinary costs (net of a $0.9 million tax benefit)
as a result of the early extinguishment of debt from the net cash proceeds of
the IPO. These costs included $1.3 million for the write-off of deferred
financing costs and $1.8 million in prepayment penalties. During the first six
months of 1995, the Company incurred $8.5 million in extraordinary costs (net of
$0.7 million tax benefit) to refinance the Company's debt in conjunction with
the Combination, including the write-off of deferred financing costs and certain
prepayment penalties.

NET INCOME (LOSS). The Company reported net income of $2.7 million for the
first six months of 1996 compared to a loss of $16.0 million for the first six
months of 1995. The 1996 net income was impacted by higher income taxes and by a
charge of $2.2 million for the extraordinary item mentioned above. The 1995
loss resulted from the $10.2 million in one-time non-operating charges related
to the Combination and uncompleted acquisitions and to the $8.5 million
extraordinary loss on early extinguishment of debt mentioned above.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

NET SALES. The Company's net sales increased 26.2% to $430.5 million in
1995 from $341.1 million in 1994. Net sales for the Company's dairy operations
increased 29.5%, or $86.6 million, primarily due to (i) the acquisition of Velda
Farms in April 1994, (ii) the acquisition of Mayaguez Dairy in June 1994, and
(iii) the acquisition of Flav-O-Rich in November 1994. Net sales for the
Company's ice operations increased 5.9%, or $2.8 million. Unit volumes of ice
increased 5.2% from the addition of new customers and from four small
acquisitions made during 1995. During the pre-acquisition periods during 1994,
Velda Farms, Mayaguez Dairy and Flav-O-Rich reported sales of $38.3 million,
$8.5 million and $32.7 million, respectively.

19
<PAGE>

COST OF SALES. The cost of sales margin for the dairy business
substantially exceeds that of its ice business because of higher raw material
cost for dairy products compared to ice. The Company's cost of sales increased
$72.2 million, resulting in an increase in the cost of sales margin to 72.6% in
1995 from 70.5% in 1994. The increase in cost of sales was due to (i) the
inclusion of the operating results of Velda Farms, Flav-O-Rich and Mayaguez
Dairy for the full year of 1995, (ii) an increase in dairy cost of sales of
$1.3 million due to higher plastic resin costs and $4.7 million in higher milk
costs, and (iii) an increase of $0.9 million in plastic bag costs in the ice
business. Velda Farms, Flav-O-Rich and Mayaguez Dairy reported an aggregate of
$62.7 million in cost of sales for their respective pre-acquisition periods in
1994.

OPERATING EXPENSES. The Company's operating expenses increased
$12.4 million in 1995, while the operating expense margin decreased to 20.3% in
1995 from 22.0% in 1994. The operating expense increase was due to the
inclusion of a full year of operating expenses of Velda Farms, Flav-O-Rich and
Mayaguez Dairy, which reported aggregate operating expenses of $16.3 million for
their respective pre-acquisition periods in 1994. The operating expense margin
declined primarily because the ice business, which has higher operating expense
margins than the dairy business, became a smaller component of the Company.

OPERATING INCOME. The Company's operating income increased 18.6% to
$30.6 million in 1995 from $25.8 million in 1994 primarily as a result of the
dairy acquisitions discussed above. The Company's operating income margin
decreased from 7.6% in 1994 to 7.1% in 1995 primarily due to an increased
proportion of net sales attributable to its dairy business.

OTHER (INCOME) EXPENSE. Interest expense rose to $19.9 million in 1995
from $19.3 million in 1994 primarily due to the additional indebtedness incurred
to finance the dairy acquisitions. The Company incurred $8.8 million in
nonrecurring expenses in 1995 related to the Combination and $1.4 million
related to negotiation and due diligence in connection with uncompleted
acquisitions and an uncompleted debt offering. The Company incurred
$1.7 million in nonrecurring costs in 1994 related to the Combination and to an
uncompleted initial public offering.

EXTRAORDINARY ITEMS. The Company incurred $8.5 million in extraordinary
costs (net of a $0.7 million tax benefit) in 1995 to refinance the Company's
debt in conjunction with the Combination, which costs included the write-off of
deferred financing costs and certain prepayment penalties. The Company incurred
$0.2 million in extraordinary costs in 1994 for the early retirement of debt
related to its ice business.

NET INCOME (LOSS). The Company reported a net loss of $10.0 million in
1995 compared to net income of $4.0 million in 1994. The primary causes of the
1995 net loss were $10.2 million in non-recurring merger and other costs and
$8.5 million in extraordinary losses from the early retirement of debt. The
Company incurred a $2.5 million income tax expense in 1995 on pre-tax income of
$0.9 million due to the non-deductibility of certain nonrecurring merger costs.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

NET SALES. The Company's net sales increased to $341.1 million in 1994
from $51.7 million in 1993 due to the acquisitions of Suiza-Puerto Rico in
December 1993 and Velda Farms in April 1994. The Company reported
$293.4 million of dairy net sales during 1994, as compared to $6.6 million in
1993. Net sales of ice increased 5.8%, or $2.6 million. Unit volumes in the
Company's ice business increased 6.6% as a result of generally warmer weather
conditions and four small acquisitions completed during 1993 and 1994.

COST OF SALES. The cost of sales margin for the Company's dairy business
substantially exceeds that of its ice business because of the higher raw
material cost for dairy products compared to ice. The Company's cost of sales
increased $220.1 million, primarily due to the acquisitions of Suiza-Puerto Rico
in December 1993 and Velda Farms in April 1994. The Company reported
$224.3 million in dairy cost of sales in 1994, as compared to $5.3 million of
dairy cost of sales in 1993. The cost of sales margin rose to 70.5% in 1994
from 39.5% in 1993, primarily due to the Company's increased dairy activity.

20
<PAGE>

OPERATING EXPENSES. The Company's operating expenses increased $52.3
million, while the operating expense margin decreased to 22.0% in 1994 from
43.7% in 1993. The operating expense increase was due to the inclusion of $52.0
million of operating expenses for the Suiza-Puerto Rico and Velda Farms dairy
operations acquired in December 1993 and April 1994, respectively, as compared
to $1.2 million of operating expenses in 1993. The operating expense margin
declined primarily because the Company's ice business, which has a higher
operating expense margin than the dairy business, became a smaller component of
the Company.

OPERATING INCOME. The Company's operating income increased to $25.8
million in 1994 from $8.7 million in 1993 primarily due to the acquisitions
discussed above. The Company's operating income margin decreased from 16.8% in
1993 to 7.6% in 1994 primarily due to an increased proportion of net sales
attributable to its dairy business.

OTHER (INCOME) EXPENSE. Interest expense rose to $19.3 million in 1994
from $7.7 million in 1993 primarily due to the additional indebtedness incurred
to finance the acquisitions discussed above. The Company also expensed
$1.7 million in nonrecurring costs in 1994 related to the Combination and to an
uncompleted initial public offering.

NET INCOME. Net income increased to $4.0 million in 1994 from $1.4 million
in 1993 primarily due to increased operating income from the dairy business.
Increased interest expense resulting from the acquisitions discussed above,
income taxes and an extraordinary loss on the early retirement of refinanced
debt partially offset this increased operating income.

SEASONALITY

The Company's ice business is seasonal with peak demand for its products
occurring during the second and third calendar quarters. Over the past two
calendar years, the Company has recorded an average of approximately 69% of its
annual net sales of ice during these two quarters. While this percentage for
the second and third quarters has remained relatively constant over recent
years, the timing of the hottest summer weather can impact the distribution of
sales between these two quarters. Because the Company's results of operations
for its ice business depend significantly on sales generated during its peak
season, adverse weather during this season (such as an unusually mild or rainy
period) could have a disproportionate impact on the Company's results of
operations for the full year. Management believes, however, that the geographic
diversity of its ice business helps mitigate the potential for a significant
impact from such adverse weather conditions.

The Company's dairy operations are not subject to large seasonal sales
fluctuations. The Company sells milk to schools, most of which are closed
during the summer months. Approximately 8% of the Company's dairy sales were
made to schools during 1995. The Company experiences a decrease in sales to
schools during months when schools close for vacation. In addition, the Company
has traditionally experienced slight shortages in its milk supply during the
months of September and October each year. Management estimates that these
shortages reduce dairy sales by less than 2% during these months.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1996, the Company had total stockholders' equity of $60.8
million and total indebtedness of $143.9 million (including long-term debt and
the current portion of long-term debt). Substantially all of the Company's
indebtedness was incurred or assumed in connection with the recent refinancing
to effect the Combination. The Company is currently in compliance with all
covenants and financial ratios contained in its debt agreements.

CASH FLOW. The working capital needs of the Company historically have been
met with cash flow from operations along with borrowings under revolving credit
facilities. Net cash provided by operating activities was $23.0 million for
1995 and $24.9 million for 1994. Investing activities in 1995 included $10.4
million in capital expenditures, of which $6.7 million was spent on the
Company's dairy operations and $3.6 million was spent on its ice operations.
These capital expenditures included an expansion of the production capacity of
the Company's Aguadilla, Puerto Rico milk facility, initial expenditures on the
expansion of the Winter Haven, Florida milk distribution facility and expansions
of the Albuquerque, New Mexico and Davie, Florida ice manufacturing facilities.
Investing activities also included four ice acquisitions completed during the
last seven months of 1995 totaling $2.4 million. Financing

21
<PAGE>

activities for 1995 included financing incurred to effect the Combination on
March 31, 1995. See "Certain Relationships and Related Transactions -- Historic
Relationships and Related Transactions --The Combination". Net cash provided
by operating activities was $6.8 million for the first six months of 1996 as
contrasted with net cash provided by operations of $8.0 million for the first
six months of 1995. Investing activities in the first six months of 1996
included $8.0 million in capital expenditures, of which $6.3 million was
spent on the Company's dairy manufacturing and distribution facilities, $1.7
million was spent on the Company's ice facilities, and an additional $4.2
million was spent on acquisitions of small dairy and small ice operations.

In April 1996, the Company completed the IPO, which provided net cash
proceeds to the Company of approximately $49.5 million. Of this amount, $5.0
million was used to repay amounts outstanding under the revolving credit portion
of the Senior Credit Facility, an aggregate of $26.5 million was used to repay
current and long-term maturities under the term portion of the Senior Credit
Facility, $15.7 million was used to repay the Company's 15% Subordinated Notes
and $1.8 million was used to pay prepayment penalties related to the early
extinguishment of the 15% Subordinated Notes.

In July 1996, the Company purchased the stock of Garrido, a Puerto Rico
processor and distributor of coffee and coffee related products, for
approximately $35.0 million in cash, plus an earnout of up to an additional
$5.5 million in cash. Funding for this purchase was provided by the Company's
senior lending group through an amendment to its existing Senior Credit
Facility. On August 7, 1996, the Company completed a private placement of
625,000 shares of Common Stock to the Selling Stockholder for net proceeds of
approximately $9.5 million. The net proceeds from this sale were used to retire
outstanding indebtedness under the revolving credit portion of the Senior Credit
Facility. On September 9, 1996, the Company purchased the assets of Swiss
Dairy, a regional dairy based in Riverside, California, for approximately
$54 million in cash. Funding for this purchase was provided primarily by a new
$90 million acquisition facility under the Senior Credit Facility.

In September 1996, the Company sold certain tax credits generated pursuant
to provisions of the Puerto Rico Agricultural Tax Incentives Act of 1995 for net
proceeds of approximately $3.2 million, before provision for income taxes. See
"--Tax Benefits." Management used the net proceeds from this sale to repay
amounts outstanding under the acquisition facility of the Senior Credit
Facility.

In September 1996, hurricane Hortense struck Puerto Rico and caused a
power outage that affected a portion of the island. As a result of the power
outage, the Company's San Juan dairy manufacturing facility was shut down for
approximately one week, resulting in the spoilage of inventory and a loss of
sales that will impact the Company's results of operations for the third
quarter of 1996. The Company is pursuing a claim under its business
interruption insurance policy.

FUTURE CAPITAL REQUIREMENTS. The Company intends to invest approximately
$13.0 million in its manufacturing facilities and distribution capabilities
during 1996, of which $8.0 million was spent during the first six months of
1996. Of this amount, the Company intends to spend approximately $10.8 million
to expand and maintain its dairy manufacturing and distribution facilities and
for fleet replacement and approximately $2.2 million to maintain and increase
the production capacity of its ice facilities.

The Company expects that cash flow from operations will be sufficient to
meet the Company's requirements for the remainder of 1996 and for the
foreseeable future. During the remainder of 1996 and in the future, the Company
intends to pursue additional acquisitions in its existing regional markets and
to seek strategic acquisition opportunities that are compatible with its core
businesses. Management believes that the Company has the ability to secure
additional financing to pursue its acquisition and consolidation strategy. There
can be no assurance, however, that the Company will have sufficient available
capital resources to realize its acquisition and consolidation strategy.

CURRENT DEBT OBLIGATIONS. In September 1996, the Company amended its
existing credit facility and entered into a supplemental credit facility with a
group of lenders, including First Union National Bank of North Carolina, as
agent, and The First National Bank of Chicago, as syndication agent, which
provide for an aggregate senior credit facility (the "Senior Credit Facility")
of $250.0 million comprised of: (i) a $130.0 million term loan; (ii) a
$30.0 million revolving credit facility; and (iii) a $90.0 million acquisition
facility. Under the terms of the Senior Credit Facility, the term loan is
amortized over five and one-half years and the revolving credit facility expires
on March 31, 2000. Any amounts drawn under the acquisition facility that are
outstanding on September 30, 1998 will be amortized in fifteen quarterly
installments. Amounts outstanding under the Senior Credit Facility bear
interest at a rate per annum equal to one of the following rates, at the
Company's option: (i) the sum of a base rate equal to the higher of the Federal
Funds rate plus 50 basis points or First Union National Bank of North Carolina's
prime commercial lending rate, plus a margin that varies from 0 to 75 basis
points depending on the Company's ratio of defined indebtedness to EBITDA (as

22
<PAGE>

defined in the Senior Credit Facility); or (ii) a LIBOR rate plus a margin that
varies from 75 to 200 basis points depending on the Company's ratio of defined
indebtedness to EBITDA. The Company pays a commitment fee on unused amounts of
the revolving facility and the acquisition facility that ranges from 20 basis
points to 37.5 basis points, based on the Company's ratio of defined
indebtedness to EBITDA.

As of September 10, 1996, the Company had $185.0 million of indebtedness
outstanding at a blended interest rate of 7.1% and $65.0 million in unused
borrowing capacity under the Senior Credit Facility. The Company may prepay
loans outstanding under the Senior Credit Facility at any time in increments of
$100,000 or, in the case of a LIBOR loan, $1 million (subject to a $500,000
minimum or, in the case of a LIBOR loan, a $2 million minimum), in whole or in
part, without penalty. In addition, the Senior Credit Facility requires
mandatory prepayments, subject to certain limitations, from the defined net
proceeds of certain casualty events, certain sales of assets, equity issuances
and from excess cash flow.

The Company's Senior Credit Facility requires the Company to comply with
the following financial covenants at all times: (i) the leverage ratio (defined
as the ratio of aggregate debt to EBITDA) will not exceed 4.25 to 1 through
June 29, 1997, declining thereafter to 2.75 to 1 by June 30, 1999; (ii) the
leverage ratio for senior debt will not exceed 3.75 to 1 through June 29, 1997,
declining thereafter to 2.25 to 1 by June 30, 1999; (iii) net worth will not be
less than $63.0 million after September 10, 1996, plus 50% of net income for
each quarter commencing on or after January 1, 1997, plus certain additional
amounts as a result of public or private offerings of Common Stock by the
Company; (iv) the fixed charges ratio will not be less than 1.05 to 1; (v) the
interest coverage ratio will not be less than 2.20 to 1 through June 29, 1997,
increasing thereafter to 3.75 to 1 by June 30, 2000; and (vi) the interest
coverage ratio for senior debt will not be less than 3.50 to 1 through June 29,
1997, increasing thereafter to 5.00 to 1 by June 30, 2000.

Without the consent of the lender, the Senior Credit Facility also:
(i) prohibits the payment of cash dividends; (ii) prohibits capital expenditures
in excess of specified amounts; (iii) prohibits acquisitions exceeding $30.0
million in a single transaction and limits the use of the revolving credit
facility to fund acquisitions not exceeding $1.0 million in a single transaction
or $5.0 million in the aggregate for any year; (iv) limits the incurrence of
additional debt; and (v) limits transactions with affiliates.

The Company has pledged all the capital stock of its subsidiaries (except
for 35% of the capital stock of Garrido) to secure the Senior Credit Facility.
Each of the Company's subsidiaries (other than Garrido) has guaranteed, and
pledged substantially all its assets, and the proceeds therefrom, to secure the
indebtedness under the term loans, revolving facility and/or the acquisition
facility of the Senior Credit Facility. A default with respect to any loan
under the Senior Credit Facility is a default with respect to all other loans
under the Senior Credit Facility. The Senior Credit Facility includes various
events of default customary for similar senior credit facilities, including
defaults resulting from nonpayment of principal when due, nonpayment of interest
and fees, material misrepresentations, default in the performance of any
covenant and the expiration of any applicable grace period, bankruptcy or
insolvency, certain judgments and a change in control of the Company (including
certain changes in the board of directors, certain acquisitions of Common Stock
by third parties or any reduction in Mr. Engles' beneficial ownership of Common
Stock below 75% of the Common Stock he owned on June 1, 1996).

The Company has six interest rate derivative agreements currently in place,
which have been designated as hedges against the Company's variable interest
rate exposure on its loans under the Senior Credit Facility. The first
agreement, which has a notional amount of $40.0 million, matures in December
1996 and caps interest on LIBOR loans at 6.0%, plus the applicable LIBOR margin.
The second agreement, which has a notional amount of $14.0 million, matures in
May 1997 and caps interest on LIBOR loans at 7.5%, plus the applicable LIBOR
margin. The third and fourth agreements, each of which has a notional amount of
$27.5 million and matures in June 1998, fixes the interest rate on LIBOR loans
at 6.0%, plus the applicable LIBOR margin. In the fifth agreement, which has a
notional amount of $40.0 million and matures in December 1996, the Company
established an interest rate floor at 6.0% LIBOR fixed for a premium of
$250,000. The sixth agreement, which has a notional amount of $50.0 million and
matures in December 1997, fixes the interest rate on LIBOR loans at 6.01%, plus
the applicable LIBOR margin. These derivative agreements provide hedges for the
term loans and the acquisition facility under the Senior Credit Facility by
limiting or fixing the LIBOR loan rates on the amounts stated in the agreements
until the indicated expiration dates. The original costs and premiums of these
derivative agreements are being amortized on a straight-line basis as a
component of

<PAGE>

interest expense. There was no material income or expense attributable to
the amortization or periodic settlements of the derivative agreements in 1995
or 1996.

On March 31, 1995, the Company issued certain subordinated notes
(collectively, the "Subordinated Notes") to replace certain of the existing
subordinated notes of each of Suiza-Puerto Rico, Velda Farms and Reddy Ice. The
Subordinated Notes that remain outstanding bear interest at rates of 12% and
13.5% (12.5% on a weighted average basis), payable semiannually in March and
September of each year. The Subordinated Notes require semiannual principal
payments in varying amounts commencing in 2001, with the remaining unpaid
principal balances due at maturity on March 31, 2004. The Subordinated Notes
are junior in right of payment to the loans under the Senior Credit Facility.
The Subordinated Notes place restrictions on the Company similar to, but
generally less stringent than, those imposed under the Senior Credit Facility.
During the first six months of 1996, the Company used $15.7 million of the net
proceeds from the IPO to repay the Company's 15% Subordinated Notes and
$1.8 million to pay prepayment penalties related to the early extinguishment of
the 15% Subordinated Notes.

Concurrently with the consummation of the IPO and the application of the
net proceeds therefrom, the Company expensed approximately $1.3 million during
the first six months of 1996 to write off previously incurred deferred financing
costs related to the indebtedness repaid with the proceeds from the IPO. This
expense combined with the $1.8 million in prepayment penalties related to the
15% Subordinated Notes have been accounted for as an extraordinary loss on the
early extinguishment of debt, which, net of income tax benefit, is approximately
$2.2 million. In September 1996, the Company expensed approximately $570,000
for amendment fees in connection with the amendment of the Senior Credit
Facility.

TAX BENEFITS

Management believes that the Company's effective tax rate will range from
25% to 35% for the next several years. The Company's effective tax rate is
significantly affected by various tax advantages applicable to the Company's
Puerto Rico based operations. Any additional acquisitions could affect this tax
rate.

The Company's Puerto Rico fruit drink and plastic bottle operations are 90%
exempt from Puerto Rico income and property taxes. These operations are also
60% exempt from Puerto Rico municipal taxes. These exemptions were granted
through ten-year exemption decrees issued pursuant to the Puerto Rico Tax
Incentives Act. The decrees have eight and six years remaining for the fruit
drink and plastic bottle entities, respectively. These types of grants are
typically renewable beyond their initial ten-year terms at reduced rates of
exemption. The Company's Puerto Rico dairy and coffee processing, sales and
distribution operations are 90% exempt from Puerto Rico income taxes and 100%
exempt from property, municipal, certain excise and other taxes and fees
pursuant to the Puerto Rico Agricultural Tax Incentives Act of 1995. Dividends
to the Company from Suiza-Puerto Rico will generally be subject to a ten percent
"tollgate" tax in Puerto Rico.

The Company currently is able to maintain the tax benefits from its dairy,
fruit drink and plastic bottle operations described above through U.S. tax
credits specified under Section 936 of the U.S. Internal Revenue Code of 1986,
as amended. The Section 936 credit eliminates or reduces United States income
taxes for U.S. corporations on certain income derived from Puerto Rico and is
available to certain domestic corporations that earn 80% or more of their gross
income from sources within Puerto Rico and earns 75% or more of their gross
income from the active conduct of a trade or business in Puerto Rico over a
three-year period (or such shorter period as may be applicable). Management
believes that each of the operating subsidiaries based in Puerto Rico (except
Garrido) satisfy these conditions. In the Revenue Reconciliation Act of 1993,
Congress imposed certain limitations on the availability of the Section 936
credit. Pursuant to these limitations, the Section 936 credit for each eligible
corporation generally cannot exceed the sum of 60% of certain wage and fringe
benefit expenses and a portion of depreciation allowances for a taxable year
or, if elected, a reduced credit computed without regard to these economic
activity limitations.

<PAGE>

The Puerto Rico Agricultural Tax Incentives Act of 1995 provides a 50% tax
credit for certain "eligible investments" in qualified agricultural businesses
in Puerto Rico. The Company is currently investigating whether its investment
in Garrido or other recent transactions regarding its other Puerto Rico based
operations will qualify for these credits. If the Company qualifies for such
credits, there can be no assurances as to the amounts or timing of any benefits
that the Company may realize.

The Small Business Job Protection Act of 1996 (the "Job Protection Act")
eliminated the Section 936 credit for corporations other than "existing credit
claimants". As an existing credit claimant, the Company's Puerto Rico based
dairy, fruit drink and plastic bottle operations will continue to realize the
benefits of Section 936 through December 31, 2005, the year in which Section 936
will be eliminated. However, for tax years beginning after December 31, 2001
and before January 1, 2006, the total amount of the Company's Puerto Rico income
that is eligible to be offset by the 936 credit cannot exceed the "base period
income" of the Company as determined under the Job Protection Act. This
limitation may reduce the amount of credits otherwise available to the Company.

ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 14, "Financial Reporting
for Segments of a Business Enterprise" requires disclosure related to an
entity's operations in different industries, its foreign operations and export
sales and its major customers. See Note 19 of Notes to Consolidated Financial
Statements for information about the Company's operations in the dairy and ice
businesses and in different geographic areas.

During 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for Long-Lived Assets and for Long-Lived Assets
to be Disposed of", which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment is evaluated by
comparing future cash flows (undiscounted and without interest charges) expected
to result from use of the asset and its eventual disposition to the carrying
amount of the asset. The adoption of this pronouncement had no material impact
on the Company's results of operations or financial condition.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees based on new fair value accounting rules.
Although expense recognition for employee stock based compensation is not
mandatory, SFAS 123 requires companies that choose not to adopt the new fair
value accounting to disclose pro forma net income and earnings per share under
the new method. During the fourth quarter of 1996, the Company will implement
the disclosure requirements of this pronouncement only, and will not adopt the
fair value accounting method.

<PAGE>
BUSINESS

GENERAL

Suiza Foods is a leading manufacturer and distributor of fresh milk
products, refrigerated ready-to-serve fruit drinks and coffee in Puerto Rico,
fresh milk and related dairy products in California and Florida, and packaged
ice in Florida and the southwestern United States. The Company has grown
primarily through strategic and consolidating acquisitions. Through these
acquisitions, the Company has realized regional economies of scale and operating
efficiencies by consolidating manufacturing and distribution operations in each
of its core businesses. The Company conducts its dairy operations primarily
through Suiza-Puerto Rico, Swiss Dairy and Velda Farms and its ice operations
through Reddy Ice. Each of these operating subsidiaries is a strong regional
competitor with an established reputation for customer service and product
quality. These subsidiaries market their products through extensive
distribution networks to a diverse group of customers, including convenience
stores, grocery stores, schools and institutional food service customers.

BUSINESS STRATEGY

The Company's strategy is to continue to expand its dairy and ice
operations primarily through consolidating acquisitions within its existing
markets and through strategic acquisitions of dairy, ice and related businesses
in new geographic markets. The Company will seek to acquire regional dairy and
ice operations that have significant market share and long-standing customer
relationships. After entering new geographic markets through strategic
acquisitions, the Company will pursue consolidating acquisitions where such
opportunities exist. In addition, the Company will seek to expand its existing
operations by adding new customers, extending its product lines and securing
distribution rights for additional branded product lines.

The following table details the Company's acquisition history (dollars in
millions):

Purchase Price
-------------------------
Date Strategic Consolidating
--------------- --------- -------------
Dairy
Suiza-Puerto Rico December 1993 $99.4
Mayaguez July 1994 $7.6
Velda Farms April 1994 54.8
Flav-O-Rich October 1994 5.9
Skinners' Dairy January 1996 2.9
Garrido July 1996 35.4
Swiss Dairy September 1996 53.9

Ice
Reddy Ice April 1988 23.7
Sparkle Ice October 1988 32.1
Various small ice companies (2) 1988 0.9
Various small ice companies (1) 1990 1.3
Various small ice companies (4) 1991 5.2
Various small ice companies (2) 1993 0.7
Various small ice companies (3) 1994 0.8
Various small ice companies (4) 1995 2.3
Various small ice companies (10) 1996 3.9

26
<PAGE>

INDUSTRY OVERVIEW

DAIRY

According to published industry statistics, approximately $22.2 billion of
fresh milk products were sold in 1994 at the wholesale level in the United
States compared to $21.5 billion sold in 1988. Management believes that the
dairy industry is mature in both the mainland United States and Puerto Rico.

The dairy industry has excess capacity and has been in the process of
consolidation for many years. Excess capacity has resulted from the development
of more efficient manufacturing techniques, the establishment of captive dairy
manufacturing operations by large grocery retailers and relatively little growth
in the demand for fresh milk products. As the industry has consolidated, many
smaller dairy processors have been eliminated and several large regional dairy
processors have emerged. According to published industry statistics, in 1994
there were approximately 682 fresh milk processing plants in the United States,
a decline of 509 from the 1,191 plants operating in 1982. The number of plants
with 20 or more manufacturing employees declined from 792 to 466 over the same
period. Management believes that this consolidation trend will continue.

ICE

The ice industry is highly fragmented and is regional because of the
relatively high cost of transporting ice. Demand for ice is seasonal, with peak
demand occurring in the second and third calendar quarters. The availability of
ice during periods of high demand is important to grocery retailers and
convenience stores. The ice industry has therefore emerged as a service
oriented business requiring efficient manufacturing facilities and distribution
systems capable of accommodating peak demand levels.

PRODUCTS AND SERVICES

The Company's largest product line is fresh milk products, which generated
$5.3 million (or 10.3%), $227.9 million (or 66.8%) and $291.8 million (or 67.8%)
of the Company's consolidated total net sales in 1993, 1994 and 1995,
respectively. Ice, the Company's second largest product line, generated
$45.1 million (or 87.3%), $47.7 million (or 14.0%) and $50.5 million (or 11.7%)
of the Company's consolidated total net sales in 1993, 1994 and 1995,
respectively. The change in the percentage of consolidated total net sales
represented by sales of fresh milk and by sales of ice from 1993 to 1995 is
primarily the result of the significant dairy acquisitions in December 1993 and
in April 1994.

DAIRY

The Company's dairy operations manufacture and distribute fluid milk,
coffee and related products under proprietary brand names and on a private-label
basis for large customers. The Company also purchases and distributes certain
other products such as yogurt, packaged ice cream and ice cream novelties.

ICE

The Company manufactures and distributes ice products for retail,
commercial and institutional markets. The Company's primary product is cocktail
ice in eight pound bags, which it sells principally to convenience and grocery
stores. The Company also sells cocktail ice in various bag sizes ranging from
three pounds to 40 pounds to restaurants, bars, stadiums, vendors and caterers.
In addition, the Company sells block ice in ten and 300 pound sizes to
commercial and industrial customers.

27
<PAGE>

SALES AND DISTRIBUTION

DAIRY

The Company markets and sells its dairy product line to a variety of retail
and food service outlets including grocery stores, club stores, convenience
stores, gas stores, schools, restaurants, hotels and cruise ships. The Company's
dairy operations serve over 20,000 customers in its markets utilizing a fleet of
over 950 delivery vehicles. Suiza-Puerto Rico is the largest of two fresh milk
processors in Puerto Rico and distributes its products to grocery stores, retail
outlets and schools, and also distributes third party brand name ice cream and
other refrigerated and frozen foods principally to medium-sized and large
grocery stores. Swiss Dairy distributes fresh milk and a limited number of
other products to high volume retailers, including grocery and club stores.
More than 90% of Swiss Dairy's net sales during the first six months of 1996
were made to three large retailers. Velda Farms serves approximately 10,000
customers and focuses its distribution efforts on food service accounts,
convenience stores, club stores and schools.

ICE

The Company markets its ice products to convenience and grocery stores for
retail sales and, to a lesser extent, to business and institutional customers
that utilize the Company's products in their operations. The Company serves
approximately 20,000 sites from 21 ice manufacturing facilities and 5
distribution centers. The Company provides ice merchandisers to a substantial
majority of these sites. During 1995, the Company's largest two ice customers
accounted for approximately 23% of net ice sales.

The Company's ice distribution fleet consists of approximately 170 delivery
vehicles, the majority of which are owned. In order to meet peak demand, the
Company expands its fleet during the summer season with short-term leased
vehicles.

RAW MATERIALS AND SUPPLY

DAIRY

The Company purchases milk, its primary raw material, from farmers and farm
co-operatives under contractual arrangements. Certain aspects of the Company's
milk supply arrangements are regulated by governmental authorities. See
" -- Government Regulation -- Milk". Fluid milk is generally readily
available. The Company has traditionally experienced slight shortages in its
milk supply in Puerto Rico during the months of September and October each
year. Management estimates that these shortages, when they occur, reduce its
Puerto Rico dairy sales by less than 2% during these months. Other raw
materials, such as juice concentrates, sweeteners, and packaging supplies are
generally available from numerous suppliers and the Company is not dependent
on any single supplier for these materials. Certain of these raw materials
are purchased under long term contracts in order to obtain lower costs.

ICE

Except with respect to its water supply and electricity, the Company is not
dependent upon any single supplier for materials used in the manufacturing and
packaging of its ice products. The Company has not experienced any material
supply problems in the past with respect to its ice business.

COMPETITION

The Company's businesses are highly competitive. The Company has a number
of competitors in each of its major product, service and geographic markets, and
many of these competitors are larger, more established and better capitalized
than the Company.

28
<PAGE>

DAIRY

PUERTO RICO

The Company owns and operates two of the three fresh milk manufacturing
facilities in Puerto Rico. The Company's competitor, Vaqueria Tres Monjitas
("Tres Monjitas"), operates a single manufacturing plant. The Company
manufactures and distributes approximately 66% of the fresh milk sold in Puerto
Rico while Tres Monjitas, which is well capitalized and operates an efficient
manufacturing plant, manufactures and distributes approximately 34%. The
Company competes primarily on the basis of service, price, brand name
recognition and quality. Because of the Company's size, the quality of its
manufacturing facilities, the efficiency of its largely non-union work force,
the strength of its distribution network and the strength of its brand name,
management believes the Company can continue to compete effectively in the
Puerto Rico dairy business.

The Company does not presently face competition in the Puerto Rico fresh
dairy business from outside Puerto Rico, nor does it expect to in the
foreseeable future. The Company's fresh dairy business does, however, compete
with shelf stable milk products, which are manufactured by one manufacturer in
Puerto Rico and also imported from the mainland United States and Canada.
Management believes that shelf stable milk competes with fresh milk primarily
where the consumer lacks adequate refrigeration or in small quantity uses, such
as coffee creamers. Management further believes that sales of shelf stable milk
are approximately one-tenth as large as sales of fresh milk and that sales of
shelf stable products have shown moderate volume increases in recent years.

In the refrigerated ready-to-serve fruit drink segment, Tres Monjitas is
the Company's largest direct competitor located in Puerto Rico. In addition to
competition from other local manufacturers and distributors of refrigerated
ready-to-serve fruit drinks, the Company competes against numerous other
beverage companies, including large United States-based manufacturers and
marketers of carbonated and non-carbonated beverages. These competitors are
generally larger and better capitalized than the Company. Although management
believes that competition will continue to grow from fruit drink and other
beverage companies, management anticipates that the Company will be able to
continue to compete effectively in the fruit drink segment because of the
strength and efficiency of its distribution network, its recognizable brands and
the established presence of its products in the dairy case.

UNITED STATES

The Company's competitors in its U.S. dairy processing and distribution
business include other large, independent dairy processing companies and dairy
processors owned by grocery chains, many of which are larger and better
capitalized than the Company. Due to the cost of transporting fresh milk,
competition in the fluid dairy business tends to be regional rather than
national, with flexibility of service, price, breadth of product line and
quality as the primary competitive factors. Within its U.S. markets, the
Company focuses on tailoring its service to specific classes of trade such as
convenience stores and institutional food service accounts in Florida and
grocery stores in California.

In addition to competition from other dairy manufacturers, the Company's
Florida dairy operation competes with food service companies and other
distributors of dairy products, many of which are large, well-capitalized,
national companies. Although competition in the dairy and food distribution
business is intense, management believes that the Company's focus on customer
service and tailored product lines allow it to compete effectively. In its
Florida ice cream distribution business, the Company competes with large
integrated dairy and ice cream manufacturing companies and independent
distributors of national ice cream brands. Because the Company offers brands
manufactured by third parties as well as its own brand of ice cream products,
the Company competes effectively in this market by offering convenience stores
and other small retailers a broad line of ice cream products and frozen
novelties. By carrying a broad line of popular national and other brands, the
Company generates profitable sales volumes from retail sites that single line or
other more limited distributors may find uneconomical to service.

29
<PAGE>
ICE

The Company competes primarily with smaller independent regional ice
manufacturers and machines that manufacture and package ice at store locations.
In addition to this direct competition, certain convenience and grocery
retailers operate commercial ice plants for internal use or manufacture and bag
ice at their store locations. During peak season, however, the Company
frequently services retailers that manufacture their own ice. To further
compete in this segment, the Company also offers ice machines that manufacture
and package ice at customer locations.

Competition in the ice business is based primarily on service, price and
quality. In order to successfully compete, an ice manufacturer must be able to
substantially increase production and distribution on a seasonal basis while
maintaining cost efficiency. Management believes that the size and quality of
the Company's ice facilities, its high regional market share and its route
density allow it to compete effectively. Because only one ice manufacturer
typically serves an individual retail site, the Company's ice products generally
do not face competition at the retail level.

Several major grocery chains within the Company's ice markets manufacture
ice at their own ice plants. While the Company does not supply these and other
vertically integrated grocery retailers/manufacturers, such companies generally
manufacture ice products for internal use only and do not compete for third
party accounts. However, a significant increase in the utilization of captive
commercial ice plants or on-site manufacturing by retailers currently serviced
by the Company could have an adverse effect on the Company's operations.

FACILITIES

The Company conducts its manufacturing and distribution operations from the
following facilities:

Manufacturing &
Region Distribution Distribution Only
--------------- ---------------- ------------------
DAIRY: Puerto Rico Aguadilla Adjuntas (coffee)
Caguas (coffee) Anasco (coffee)
Lares (coffee) Arecibo
San Juan Ponce (2)
San Juan (coffee)
California Riverside
Florida Miami Daytona Beach
St. Petersburg Fort Myers
Winterhaven Jacksonville
Orlando
Ocala
Riviera Beach
Tampa
Vero Beach
ICE: Arizona Phoenix
Tucson
Yuma
Florida Auburndale St. Petersburg
Crescent City
Davie
New Smyrna Beach
Opa Locka
Tampa
Nevada Las Vegas
New Mexico Albuquerque
Oklahoma Ardmore
Texas Austin Bryan
Dallas Port Neches
Fort Worth
Houston (2)

30
<PAGE>
Manufacturing &
Region Distribution Distribution Only
--------------- ---------------- ------------------
Killeen
Pilot Point
Rockwall
Splendora
Waco
Utah Salt Lake City

The Company maintains two administrative offices located in leased premises
in Dallas, including its executive offices located at 3811 Turtle Creek
Boulevard, Suite 1300, Dallas, Texas 75219.

TRADEMARKS

The Company has developed or acquired several trademarks and brand names
for use in its dairy and ice businesses, including the following:

<TABLE>
Company-owned Licensed
--------------------------------------------------- ------------------------------------------
<S> <C> <C>
DAIRY: Suiza Dairy & Design-TM- Quik-Registered Trademark- (Nestle)
Suiza Fruit & Design-TM- Nestle-Registered Trademark-
Neva-TM- Nestea-Registered Trademark-
Borinquen Dairy-TM- Sunnydell-Registered Trademark-
Suiza Premium-TM- Trimline-Registered Trademark-
Mayaguez Dairy-TM- Farm Field-Registered Trademark-
Puerto Rico Dairy-TM- Dairy Flower Design-Registered Trademark-
Fruit Cooler-TM-
Alto Grande and Design-Registered Trademark-
Aroma Coffee Break and Design-Registered Trademark-
Cafe Crema and Design-Registered Trademark-
Cafe Adjuntas-TM-
Unicaf-TM-
Aromas de Yuaco-TM-
Adjuntas AA-TM-
Grand Lares-TM-
Garrido Caracolillo-TM-
Carbon Adjuntas-TM-
Executive Coffee Break-TM-
Lecherita-TM-
Garrido Gourmet-TM-
Garrido Blend-TM-
Savings Office Supplies-TM-
Grand Lares Super Premium Coffee-TM-
The Coffee of Popes and Kings-TM-
Velda Farms-Registered Trademark-
</TABLE>

31
<PAGE>

<TABLE>
Company-owned Licensed
--------------------------------------------------- ------------------------------------------
<S> <C> <C>
ICE: Reddy Ice-Registered Trademark-
Sparkle Ice-Registered Trademark-
Polar Party-Pak-Registered Trademark-
The Ice Factory-Registered Trademark-
Atlantic Ice Design-TM-
Fun Time Ice-TM-
The Ice Man-TM-
All American Ice, Inc.-TM-
Glacier Ice, Inc.-TM-
Ice Cubes Limited-TM-
Strawberry Festival-TM-
Mountain Ice-TM-
Artesian Ice-TM-
Blue Star Ice-TM-
New Smyrna Ice-TM-
</TABLE>

Although the Company's trademarks help distinguish the Company's products,
management does not believe that the loss of any of the Company's trademarks
would have a material adverse effect on its operations. The Company also
holds a patent on an ice machine that manufacturers and packages ice at store
locations.

GOVERNMENT REGULATION

PUBLIC HEALTH

As a manufacturer and distributor of food products, the Company is
subject to the Federal Food, Drug and Cosmetic Act and regulations
promulgated thereunder by the Food and Drug Administration ("FDA"). This
comprehensive regulatory scheme governs the manufacture (including
composition and ingredients), labeling, packaging and safety of food. The
FDA regulates manufacturing practices for foods through its current good
manufacturing practices regulations, specifies the standards of identity for
certain foods, including many of the products sold by the Company, and
prescribes the format and content of certain information required to appear
on food product labels.

In addition, the FDA enforces the Public Health Service Act and
regulations issued thereunder, which authorize regulatory activity necessary
to prevent the introduction, transmission or spread of communicable diseases.
These regulations require, for example, pasteurization of milk and milk
products. The Company and its products are also subject to state and local
regulation through such measures as the licensing of dairy manufacturing
facilities, enforcement by state and local health agencies of state standards
for the Companys products, inspection of the Companys facilities and
regulation of the Company's trade practices in connection with the sale of
dairy products.

The Company utilizes quality control laboratories to test milk and other
ingredients and finished products. Product quality and freshness are
essential to the successful retail distribution of dairy and refrigerated
ready-to-serve fruit drinks. To monitor product quality at its facilities,
the Company maintains quality control programs to test products during
various processing stages. Management believes that the Companys dairy and
ice facilities and manufacturing practices comply with applicable government
regulations.

EMPLOYEE SAFETY REGULATIONS

The Company is subject to certain health and safety regulations
including regulations issued pursuant to the Occupational Safety and Health
Act. These regulations require the Company to comply with certain
manufacturing, health and safety standards to protect its employees from
accidents.

32
<PAGE>

ENVIRONMENTAL REGULATIONS

The Company is subject to certain federal, state and local environmental
regulations. Certain of the Company's dairy facilities discharge
biodegradable wastewater into municipal waste treatment facilities in excess
of levels permitted under local regulations.

The Company maintains above-ground or underground petroleum storage
tanks at many of its facilities. These tanks are periodically inspected to
determine compliance with applicable regulations. The Company may be
required to make expenditures from time to time in order to maintain
compliance of these tanks.

The federal government has banned the production of a refrigerant used
by the Company in its ice merchandisers. The continued use of this
refrigerant, however, is permitted and there are sufficient quantities of the
refrigerant available to meet the Company's needs for the next several years.
The Company is taking steps to facilitate its conversion to new, reformulated
refrigerants. Management does not anticipate that conversion costs will be
material.

Management does not expect environmental compliance to have a material
impact on the Company's capital expenditures, earnings or competitive position
in the foreseeable future.

U.S. AND CALIFORNIA MILK INDUSTRY REGULATION

The average price paid to producers for Grade A milk in most of the
mainland United States is monitored by Federal Milk Marketing Orders. In
California, milk prices are monitored by a state agency. In both the federal
milk markets and the California milk market, raw milk prices are currently
supported by the federal government through standing offers to buy storable
forms of dairy products such as cheese, nonfat dry milk powder and butter.
Congress has recently passed legislation to phase out federal support prices
by December 31, 1999.

PUERTO RICO MILK INDUSTRY REGULATION

The milk industry in Puerto Rico is regulated under Puerto Rico law
Number 34 of June 11, 1957. This statute establishes a production ceiling
for milk production by dairy farmers in order to manage the supply and demand
of milk products and to stabilize prices. In addition, the Puerto Rico
statute provides that the government will establish maximum prices for the
dairy farm, processor and retail levels and that such prices be reviewed at
least once a year.

The Office for the Regulation of the Milk Industry, an agency of the
Puerto Rico Department of Agriculture, is charged with: (i) ensuring the
quality of milk products; (ii) setting the price of milk at the dairy farm
level and maximum prices at the processor and retail levels; and (iii)
administering and managing licenses and other matters within the industry.
As part of its review and price setting process, this agency examines the
financial condition of each of the participants in the industry as well as
overall economic trends within the industry. As a general rule, pricing at
each of the industry levels reflects an attempt to provide a fair return to
processors and farmers and maintain prices acceptable to consumers. The
latest price increase for dairy manufacturers in Puerto Rico was in 1994 and,
prior to that, in 1990.

<PAGE>

EMPLOYEES

As of September 9, 1996, the Company employed 2,322 employees in the
following categories:

Non-union Union Total
--------- ----- -----
Dairy
Puerto Rico 957 69 1,026
Florida 731 731
California 12 112 124

Ice 434 434
Corporate 7 7
----- --- -----
Total 2,141 181 2,322
----- --- -----
----- --- -----

The Puerto Rico union employees are subject to two collective bargaining
agreements that expire in July and October 1997. The California union
employees are subject to a collective bargaining agreement that expires in
August 1999.

LEGAL PROCEEDINGS

The Company is from time to time a party to legal proceedings that arise
in the ordinary course of business. Management does not believe that the
resolution of any threatened or pending legal proceedings will have a
material adverse affect on the Company's operations.

<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names, ages and positions of the
executive officers and directors of the Company. Their respective
backgrounds are described following the table.

<TABLE>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gregg L. Engles (1) 39 Chairman of the Board and Chief Executive Officer
Cletes O. Beshears (1)(2) 70 President and Director
Hector M. Nevares (1) 45 President of Suiza-Puerto Rico and Director
William P. Brick 45 Executive Vice President and Chief Operating Officer
Tracy L. Noll 48 Vice President, Chief Financial Officer and Secretary
John W. Madden 31 Vice President and Treasurer
Robert Bartholomew (3) 49 Director
Gayle O. Beshears (2) 67 Director
Stephen L. Green (4)(5) 45 Director
Robert L. Kaminski (4)(5) 45 Director
P. Eugene Pender (3)(4)(5) 65 Director
Robert Piccinini (3) 54 Director
</TABLE>

- ------------------------
(1) Member of the Executive Committee of the Board of Directors.
(2) Cletes O. Beshears and Gayle O. Beshears are brothers.
(3) Member of the Audit Committee of the Board of Directors.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Stock Option Committee of the Board of Directors.

GREGG L. ENGLES. Mr. Engles joined the Company in October 1994 as
Chairman of the Board and Chief Executive Officer. Mr. Engles has served as
Chairman of the Board and Chief Executive Officer of Reddy Ice since May
1988, Chairman of the Board of Suiza-Puerto Rico since December 1993, and
Chairman of the Board of Velda Farms since April 1994. In addition, Mr.
Engles has served as President of Kaminski Engles Capital Corporation ("KECC")
since May 1988 and as President of Engles Management Corporation ("EMC") since
February 1993. KECC and EMC are investment banking and consulting firms.
Mr. Engles was also President of Engles Capital Corporation, an investment
banking and consulting firm, from May 1989 to October 1992. Mr. Engles is a
director and member of the compensation committee of Columbus Realty Trust, a
public real estate investment trust.

CLETES O. BESHEARS. Mr. C.O. Beshears joined the Company in October
1994 as director, President and Chief Operating Officer. Mr. C.O. Beshears
served as President and Chief Executive Officer of Velda Farms from April
1994 to April 1995. From March 1988 to April 1994, Mr. C.O. Beshears
provided consulting services to companies pursuing acquisitions of dairy
companies. From 1980 to 1988, Mr. C.O. Beshears served as Vice President of
The Southland Corporation and Chief Operating Officer of its Dairy Group.
From 1965 to 1980, Mr. C. O. Beshears served as Division Manager of several
of The Southland Corporation's regional dairies, including Velda Farms. Mr.
Beshears will relinquish the Chief Operating Officer title in October 1996.

HECTOR M. NEVARES. Mr. Nevares joined the Company as a director in
October 1994. Mr. Nevares has served as President of Suiza-Puerto Rico since
June 1983, having served in additional executive capacities at Suiza-Puerto
Rico since June 1974. Mr. Nevares is a director of First Federal Savings
Bank, a public company, in San Juan, Puerto Rico.

WILLIAM P. BRICK. Mr. Brick joined the Company in July 1996 as
Executive Vice President and will become Chief Operating Officer of the
Company in October 1996. Prior to joining the Company, Mr. Brick served as
Vice President - Sales and Marketing for the Metropoulos Management Group
from February 1996 until June 1996. From

<PAGE>

August 1995 until January 1996, Mr. Brick served as Vice President - Sales
and Marketing for Ultra Products. From April 1995 until August 1995, Mr.
Brick owned and operated a private golf course in Ontario, Canada. Mr. Brick
served in various marketing capacities, including Vice President of Sales,
for The Morningstar Group, Inc. from October 1991 until December 1994.
Beginning in 1988 until August 1991, Mr. Brick served in various marketing
capacities for Palm Dairies Inc. in Calgary, Alberta.

TRACY L. NOLL. Mr. Noll joined the Company in October 1994 as Vice
President, Chief Financial Officer and Secretary. Prior to joining the
Company, Mr. Noll served as Controller of Foxmeyer Corporation from June 1994
until September 1994. From March 1988 until June 1994, Mr. Noll served as
Vice President and Chief Financial Officer of The Morningstar Group Inc., the
parent company of Velda Farms until its acquisition by the Company in April
1994.

JOHN W. MADDEN. Mr. Madden joined the Company in October 1994 as Vice
President and Treasurer. From November 1990 to October 1994, Mr. Madden was
employed by and associated during various periods with KECC, EMC and Engles
Capital Corporation. From July 1988 to July 1990, Mr. Madden was employed as
an analyst with Bankers Trust Company.

ROBERT BARTHOLOMEW. Mr. Bartholomew was elected to the Company's Board
of Directors in October 1994. Since June 1990, Mr. Bartholomew has been a
principal of Pacific Mezzanine Investors, L.P. ("PMI") and an officer of
Pacific Mezzanine Associates, Inc., the general partner of PMI and an
indirect, wholly owned subsidiary of Pacific Mutual Life Insurance Company, a
principal stockholder of the Company.

GAYLE O. BESHEARS. Mr. G.O. Beshears joined the Company as a director
in October 1994. Mr. G.O. Beshears served as President of Reddy Ice from May
1988 until September 1996. From January 1985 to May 1988, Mr. G.O. Beshears
served as Division Manager of the Reddy Ice division of The Southland
Corporation. Prior to January 1985, Mr. G. O. Beshears served in a number of
capacities for The Southland Corporation's Dairy Group, including Division
Manager of Midwest Farms Dairy.

STEPHEN L. GREEN. Mr. Green was elected to the Company's Board of
Directors in October 1994. Mr. Green has served as a General Partner of
Canaan Capital Partners, L.P., the general partner of Canaan Capital Limited
Partnership and Canaan Capital Offshore Limited Partnership, C.V., principal
stockholders of the Company, since November 1991. From October 1985 until
November 1991, Mr. Green served as Managing Director of GE Capital
Corporation's Corporate Finance Group. Mr. Green is a director of Chartwell
Re Corporation and CapMAC Holdings Inc., each of which is a public company.

ROBERT L. KAMINSKI. Mr. Kaminski was elected to the Company's Board of
Directors in November 1994. Mr. Kaminski has served as President of Robert
Kaminski Interests, Inc. since 1984 and has been a principal in KECC since
1988. Robert Kaminski Interests, Inc. and KECC are both investment banking
and consulting firms.

P. EUGENE PENDER. Mr. Pender was elected to the Company's Board of
Directors in October 1994. Prior to his retirement in December 1987, Mr.
Pender served as Vice President and Controller of The Southland Corporation.
Thereafter, Mr. Pender served as a consultant to The Southland Corporation
until March 1991.

ROBERT PICCININI. Mr. Piccinini was elected to the Company's Board of
Directors in November 1995. Mr. Piccinini has served as Chairman of the
Board and Chief Executive Officer of Save Mart Supermarkets since 1985.
Prior to 1985, Mr. Piccinini served in a number of capacities at Save Mart,
including President from 1981 to 1985 and Vice President from 1971 to 1981.

The Company's Certificate of Incorporation divides the Board of Directors
into three classes, with regular three-year staggered terms. C.O. Beshears,
Hector M. Nevares, and Robert Bartholomew will serve until the annual meeting
of stockholders in 1997, Gregg L. Engles, P. Eugene Pender and Robert
Piccinini will serve until the annual meeting of stockholders in 1998, and
G.O. Beshears, Robert L. Kaminski and Stephen Green will serve until the
annual meeting of stockholders in 1999.

36
<PAGE>

Upon completion of the Combination, the Company entered into employment
agreements with Messrs. Engles and C.O. Beshears and agreed to nominate and
support their election as members of the Board of Directors during the term
of their employment with the Company. Additionally, the Company agreed to
nominate and support Mr. Engles' election as Chairman of the Board. The
executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.

DIRECTOR COMPENSATION

The Company pays its unaffiliated outside directors an annual fee of
$15,000, payable quarterly, plus a fee of $1,000 for each board meeting
attended. (As referred to herein, an unaffiliated outside director is a
director who is not an employee or officer of the Company or any of its
subsidiaries, nor a beneficial owner of 345,000 or more shares of Common
Stock, nor an employee or affiliate of a beneficial owner of 345,000 or more
shares of Common Stock; the Company's current unaffiliated outside directors
are Messrs. Pender and Piccinini). The Company also pays its unaffiliated
outside directors $1,000 annually for serving on a board committee and an
additional $2,000 annually for chairing any such committee. The Company
reimburses its directors for expenses incurred in attending board and
committee meetings.

Directors are eligible to receive stock options and restricted stock
awards pursuant to the Suiza Foods Corporation 1995 Stock Option and
Restricted Stock Plan (the "Option and Restricted Stock Plan"). On March 31,
1995, Mr. Pender received nonqualified stock options to purchase 3,450 shares
of Common Stock at $10.51 per share, and on January 1, 1996 Mr. Piccinini
received nonqualified stock options to purchase 3,450 shares of Common Stock
at $12.32 per share. The Option and Restricted Stock Plan provides that each
unaffiliated outside director will automatically receive nonqualified stock
options to purchase 3,450 shares of Common Stock on the date such person
becomes a director of the Company and on each June 30 thereafter that such
person continues to serve as a director. These options vest immediately and
are exercisable at fair market value on the date of grant, as determined by
the Board of Directors. Directors receive stock options and restricted stock
awards as described in "-- Executive Compensation -- Option and Restricted
Stock Plan".

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Compensation decisions concerning the executive officers of the Company for
1995 were made by the Board of Directors. Messrs. Engles, C.O. Beshears and
Nevares participated in deliberations but abstained from voting with respect to
their own employment agreements. Pursuant to the Combination: (i) certain
directors and stockholders affiliated with certain directors received shares of
Common Stock or options to acquire Common Stock in amounts based on their
percentage ownership interest (or right to acquire such ownership interest) in
Suiza-Puerto Rico, Velda Farms and Reddy Ice; (ii) stockholders of the Company,
including certain directors, received certain registration rights with respect
to their shares of Common Stock; (iii) Messrs. Engles and C.O. Beshears received
Common Stock in exchange for certain profit interests granted as compensation
for services related to the acquisition of Suiza-Puerto Rico and Velda Farms;
(iv) Mr. Nevares was paid the redemption value of certain preferred stock of
Suiza-Puerto Rico; and (v) Mr. Kaminski entered into a new noncompetition and
consulting agreement with the Company and received a one-time fee in connection
with the termination of a preexisting consulting agreement. During the first
three months of 1995, Messrs. Engles and Kaminski were paid an aggregate of
$150,000 by the Company and EMC (an affiliate of Mr. Engles) was paid an
aggregate of $87,500 by the Company under management consulting agreements that
were terminated at the time of the Combination. In addition, at the time of the
Combination, Reddy Ice sold its minority equity interest in a plastic bag
manufacturer to an entity formed by the stockholders of Reddy Ice, including
Messrs. Engles and Kaminski. Pacific Mutual (which is affiliated with one
current director of the Company and with a director who served through November
1995) held $5.0 million of the Company's Subordinated Notes at June 30, 1996.
For a more detailed description of each of these transactions and relationships,
see "Certain Relationships and Related Transactions -- Historic Relationships
and Related Transactions". Velda Farms purchases a portion of its requirements
for frozen concentrated orange juice from an entity in which Messrs. Engles,
Kaminski and Madden collectively own a minority limited partner interest.
Purchases by Velda Farms from this supplier totaled approximately $1.3 million
in 1995. For a more detailed description of these transactions and this
relationship, see "Certain Relationships and Related Transactions -- Current
Relationships and Related Transactions".

37
<PAGE>

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

Prior to the completion of the Combination in March 1995, the executive
officers of the Company did not receive any compensation from the Company,
although certain of these officers received compensation from Suiza-Puerto
Rico, Velda Farms or Reddy Ice. Messrs. Engles, C.O. Beshears and Noll now
receive compensation from Suiza Management Corporation, a wholly owned
subsidiary of the Company, in accordance with their respective employment
agreements. Mr. Nevares receives compensation from Suiza-Puerto Rico; and
Mr. G.O. Beshears receives compensation from Reddy Ice.

The following table sets forth the annual cash compensation paid or
accrued by the Company to its Chief Executive Officer and its other four most
highly compensated executive officers for the year ended December 31, 1995.

<TABLE>
ANNUAL COMPENSATION
------------------------------------ LONG-TERM
OTHER ANNUAL COMPENSATION ALL OTHER
NAME AND SALARY BONUS COMPENSATION SHARES UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (1) OPTIONS (#) ($) (2)
- ------------------ ---- -------- -------- ------------ ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles (3)......... 1995 $299,467 $180,000 -- 138,000 --
Chairman of the Board and
Chief Executive Officer
Cletes O. Beshears.......... 1995 291,509 175,300 -- 138,000 --
President and
Chief Operating Officer
Hector M. Nevares........... 1995 280,000 92,400 -- 34,500 --
President of
Suiza-Puerto Rico
Gayle O. Beshears........... 1995 216,711 95,172 -- 34,500 $9,019
President of Reddy Ice
Tracy L. Noll............... 1995 160,000 43,200 -- 77,625 --
Vice President and Chief
Financial Officer
</TABLE>

- -------------------------
(1) In each case, the aggregate value of perquisites and other personal
benefits does not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for the named executive officer.
(2) The amounts shown in the "All Other Compensation" column consist of
contributions by the Company to a 401(k) plan on behalf of the named
executive.
(3) Reflects only payments for the nine months following completion of the
Combination prior to which no compensation was paid by any of the Combined
Entities.

OPTION AND RESTRICTED STOCK PLAN

In March 1995, the Board of Directors of the Company adopted the Option
and Restricted Stock Plan, which provides for grants of incentive and
nonqualified stock options and awards of restricted stock to directors and
key employees of the Company and its subsidiaries. The Option and Restricted
Stock Plan permits grants and awards covering up to 1,069,500 shares of
Common Stock, provided that no more than 379,500 shares may be awarded as
restricted stock. Any shares subject to unexercised portions of stock
options that terminate or subject to restricted stock awards that fail to
vest and are forfeited may be reissued under new stock option grants or
restricted stock awards. At August 31, 1996, options to purchase an
aggregate of 785,078 shares of Common Stock and 6,250 shares of restricted
stock were outstanding under the Option and Restricted Stock Plan and an
additional 278,172 shares were available for future grants.

The Option and Restricted Stock Plan is administered by a committee of
disinterested directors (the "Stock Option Committee"), which has the authority
to determine who will receive stock options or restricted stock, the number
of shares of Common Stock subject to such stock options or restricted stock
awards, and the terms of such stock options or restricted stock awards,
including the exercise price of the stock options and any vesting periods.

In accordance with the Option and Restricted Stock Plan, the exercise
price of stock options will not be less than the fair market value of the
Common Stock on the date of grant, as determined by the Stock Option
Committee,

<PAGE>

and in the case of an incentive stock option granted to an employee owning
10% of the Common Stock of the Company on the date of grant, not less than
110% of the fair market value. The Option and Restricted Stock Plan permits
the exercise of stock options by delivery of shares of Common Stock owned by
the optionee in lieu of or in addition to cash or by financing made available
by the Company. The Option and Restricted Stock Plan also permits the Stock
Option Committee to grant stock options with terms that provide for
acceleration of vesting upon a change in control.

During 1995, options to purchase an aggregate of 477,825 shares of
Common Stock at $10.51 per share were granted under the Option and Restricted
Stock Plan. The following table provides information regarding stock options
granted during 1995 to the executive officers of the Company named in the
Summary Compensation Table.

OPTION GRANTS DURING 1995

<TABLE>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERM (2)
UNDERLYING OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED (#)(1) DURING 1995 ($/SHARE) DATE 5% ($) 10% ($)
- ---- ------------------ ----------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles..... 138,000 29.1% $10.51 3/31/2005 $911,897 $2,310,927
Cletes O. Beshears.. 138,000 29.1 10.51 3/31/2005 911,897 2,310,927
Hector M. Nevares... 34,500 7.3 10.51 3/31/2005 227,974 577,732
Gayle O. Beshears... 34,500 7.3 10.51 3/31/2005 227,974 577,732
Tracy L. Noll....... 77,625 16.4 10.51 3/31/2005 512,942 1,299,896
</TABLE>
___________
(1) Excludes options granted in the Combination pursuant to the Exchange Plan
in exchange for the cancellation of options granted in prior years by the
Combined Entities. See "Certain Relationships and Related Transactions --
Historical Relationships and Related Transactions -- The Combination --
Stock Options".

(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission. The
actual value, if any, an executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the option is
exercised. There is no assurance the value realized by an executive
officer will be at or near the assumed 5% or 10% levels.

The following table provides information regarding the exercise of stock
options during 1995 and the year-end option values.

AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES

<TABLE>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR END (#) AT YEAR END ($)(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregg L. Engles -- -- -- 138,000 $ -- $250,000
Cletes O. Beshears -- -- 1,766 145,065 9,757 289,028
Hector M. Nevares -- -- -- 34,500 -- 62,500
Gayle O. Beshears -- -- 281,645 34,500 3,362,596 62,500
Tracy L. Noll -- -- -- 77,625 -- 140,625
</TABLE>
___________
(1) The value of in-the-money options at year-end is based on the fair market
value of $12.32 per share of Common Stock, as determined by the Stock
Option Committee of the Board of Directors in connection with the grant of
options under the Option and Restricted Stock Plan as of January 1, 1996.

EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS

The Company entered into employment agreements with Messrs. Engles and C.O.
Beshears in March 1995, pursuant to which Mr. Engles serves as Chairman of the
Board and Chief Executive Officer of the Company and Mr. C.O. Beshears serves as
President and Chief Operating Officer of the Company. The employment agreements

39
<PAGE>

provide that Messrs. Engles and C.O. Beshears will receive annual base salaries
of $400,000 and $350,000, respectively, as well as incentive cash bonuses. If
certain minimum levels of net income are met, Mr. Engles and Mr. C.O. Beshears
may earn an incentive cash bonus of up to 100% and 90%, respectively, of their
respective annual base salaries. Based on the Company's net income during 1995,
Mr. Engles received an incentive cash bonus of $180,000 and Mr. C.O. Beshears
received an incentive cash bonus of $141,750. The Board of Directors is
required to review cash compensation arrangements for Messrs. Engles and C.O.
Beshears annually and provide for such increases as may be warranted in
accordance with the Company's policies.

The employment agreements of Messrs. Engles and C.O. Beshears had initial
terms of three years, but have been extended until March 31, 1999. These
agreements may be terminated by the Company prior to completion of the term upon
the death or disability of the employee, "with cause", or in the event the
employee materially breaches the agreement. As defined in the employment
agreements, the term "with cause" means any termination of the employee for:
(i) commission of an act of fraud or embezzlement against the Company;
(ii) conviction of a felony or a crime involving moral turpitude; (iii) gross
negligence or willful misconduct in performing the employee's duties; or
(iv) breach of fiduciary duty in connection with the employee's employment.
Messrs. Engles' and C.O. Beshears' employment agreements also contain two-year
non-compete provisions, which apply if the respective employee is terminated
with cause or in the event the employee materially breaches the agreement.

Hector M. Nevares serves as President of Suiza-Puerto Rico and receives an
annual base salary of $280,000 and an annual bonus equal to 33% of his base
salary, pursuant to an employment agreement entered into in December 1993 and
amended in March 1995. Mr. Nevares may earn up to an additional 27% (or a
combined maximum of up to 60%) of his annual base salary if certain minimum
levels of operating income are met at Suiza-Puerto Rico. Based on operating
income at Suiza-Puerto Rico during 1995, Mr. Nevares received an incentive cash
bonus of $92,400 for 1995. The Company is required to review Mr. Nevares' cash
compensation arrangements annually and provide for such increases as may be
warranted in accordance with the Company's policies. The agreement had an
initial term expiring on December 15, 1996, but has been extended until
March 31, 1999. This Agreement is terminable by the Company prior to the
completion of its term only upon the death or disability of Mr. Nevares or "for
cause". As defined in Mr. Nevares' employment agreement, the term "for cause"
means any termination of the employee for: (i) misconduct or action damaging or
detrimental to the Company; (ii) engaging in conduct that would constitute a
crime; (iii) the use, possession, sale, transportation, distribution or being
under the influence of a controlled substance other than as prescribed by a
licensed physician; or (iv) misappropriation of the Company's funds or
conviction of a crime involving a felony. Mr. Nevares' employment agreement
contains a five-year non-compete provision, which applies upon termination of
his employment agreement for any reason.

Mr. G.O. Beshears has agreed to a three-year noncompetition covenant, which
applies if he is terminated for any reason. Mr. G.O. Beshears ceased serving
as the President of Reddy Ice in September 1996.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Certificate of Incorporation provides, consistent with the
provisions of the Delaware General Corporation Law, that no director of the
Company will be personally liable to the Company or any of its stockholders for
monetary damages arising from the director's breach of fiduciary duty as a
director. This does not apply, however, with respect to any action for unlawful
payments of dividends, stock purchases or redemptions, nor does it apply if the
director: (i) has breached his duty of loyalty to the Company and its
stockholders; (ii) does not act in good faith or, in failing to act, does not
act in good faith; (iii) has acted in a manner involving intentional misconduct
or a knowing violation of law or, in failing to act, has acted in a manner
involving intentional misconduct or a knowing violation of law; or (iv) has
derived an improper personal benefit. The provisions of the Certificate of
Incorporation eliminating liability of directors for monetary damages do not
affect the standard of conduct to which directors must adhere, nor do such
provisions affect the availability of equitable relief. In addition, such
limitations on personal liability do not affect the availability of monetary
damages under causes of action based on federal law.

The Company's Certificate of Incorporation provides for indemnification of
its officers and directors to the fullest extent permitted by the Delaware
General Corporation Law. In addition, the Company intends to purchase and

40
<PAGE>

maintain insurance on behalf of its directors and executive officers insuring
them against any liability asserted against them in their capacities as
directors or executive officers or arising out of such status.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CURRENT RELATIONSHIPS AND RELATED TRANSACTIONS

As of June 30, 1996, John Hancock and Pacific Mutual held $31.0 million and
$5.0 million, respectively, of the Company's outstanding Subordinated Notes. In
April 1996, John Hancock Mutual Life Insurance Company and an affiliate ("John
Hancock") and Pacific Mutual Life Insurance Company and an affiliate ("Pacific
Mutual") were paid approximately $14.0 million (including approximately
$1.4 million in prepayment penalties) and approximately $3.5 million (including
approximately $0.4 million in prepayment penalties), respectively, from the net
proceeds from the IPO in repayment of the 15% Subordinated Notes, together with
accrued interest on the principal amounts repaid.

The Company purchases plastic bags for use in its ice business from a
plastic bag manufacturer in which certain affiliates of the Company own a
minority equity interest. The seller principally manufactures bread bags. The
Company's purchases from this supplier totaled approximately $341,000 through
August 31, 1996 and the Company had outstanding purchase orders from this
supplier totaling approximately $82,000 as of that date. Management believes
that the terms of the purchase orders are at least as favorable to the Company
as could have been obtained in an arms'-length transaction with an unaffiliated
third party. See "-- Historic Relationships and Related Transactions -- Other
Historic Relationships and Related Transactions".

Velda Farms purchases a portion of its requirements for frozen concentrated
orange juice from an entity in which Messrs. Engles, Kaminski and Madden
collectively own a minority limited partner interest. Velda Farms has no
written agreement with this supplier, and all purchases are based on purchase
orders. Management of Velda Farms monitors the market price for frozen
concentrated orange juice by maintaining contact with a number of potential
suppliers and purchases the product from the supplier offering the lowest price,
inclusive of delivery and other service charges. Management believes that the
terms of the purchase orders are at least as favorable to the Company as could
be obtained in an arms'-length transaction with an unaffiliated third party.
Purchases by Velda Farms from this supplier totaled approximately $457,000 in
1994, $1.3 million in 1995 and $1.2 million through August 1996.

In connection with the Combination, the Company granted certain
registration rights to the Predecessor Owners (defined below) and issued new
options in exchange for options previously granted by the Combined Entities.
The Company will have ongoing obligations with respect to these registration
rights and stock options. See "-- Historic Relationships and Related
Transactions -- The Combination -- Registration Rights" and "-- Historic
Relationships and Related Transactions -- The Combination -- Stock Options".

HISTORIC RELATIONSHIPS AND RELATED TRANSACTIONS

ACQUISITIONS

In December 1993, Suiza Holdings, L.P. (the "Suiza Partnership") (one of
the Combined Entities) purchased Suiza-Puerto Rico from the Nevares family. The
total purchase price was $99.4 million, which included: (i) a cash payment of
$85.9 million to the Nevares family; (ii) the payment of certain liabilities to
third parties at closing; (iii) preferred stock of Suiza-Puerto Rico with an
aggregate liquidation preference of $5.0 million, which was issued to
Mr. Nevares and his sister; and (iv) preferred stock of Suiza-Puerto Rico with
an aggregate annual dividend of $50,000, which was issued to Mr. Nevares. The
cash portion of the purchase price and payments made to third parties at closing
were financed with the proceeds from the following: (i) the issuance by the
Suiza Partnership and its general partner of $15.0 million of equity to certain
investors (collectively, the "Predecessor Owners"), including John Hancock,
Pacific Mutual, Canaan Capital Limited Partnership and an affiliate ("Canaan")
and Messrs. Engles, C.O. Beshears, Nevares and Madden, each of whom is a
director and/or executive officer of the Company; (ii) the issuance by the Suiza
Partnership of $25.0 million in principal amount of subordinated indebtedness
(including lender warrants), to John Hancock and Pacific Mutual; and (iii) a
portion of the proceeds from an aggregate $72.0 million senior term loan and
revolving line of credit provided by The Chase Manhattan Bank, N.A. to
Suiza-Puerto Rico. The $15.0 million of

41
<PAGE>

equity issued by the Suiza Partnership and its general partner to the
Predecessor Owners included limited partnership interests of the Suiza
Partnership and shares of common stock of its general partner. The $15.0
million purchase price paid by the Predecessor Owners for this equity was
determined through arms'-length negotiations among the Predecessor Owners.

In April 1994, Velda Holdings, L.P. (the "Velda Partnership") (one of the
Combined Entities) and its general partner purchased Velda Farms from The
Morningstar Group Inc. The total purchase price was $54.8 million, which
included: (i) a cash payment of $48.4 million; and (ii) preferred stock of Velda
Farms with a liquidation preference of $3.0 million. The cash portion of the
purchase price was financed with the proceeds from the following: (i) the
issuance by the Velda Partnership, its general partner and one of its
subsidiaries of $6.2 million of equity to the Predecessor Owners, including John
Hancock, Pacific Mutual, Canaan, and Messrs. Engles, C.O. Beshears, Nevares and
Madden; (ii) the issuance by the Velda Partnership of $14.0 million in principal
amount of subordinated indebtedness (including lender warrants) to John Hancock
and Pacific Mutual; and (iii) a portion of the proceeds from an aggregate
$34.5 million senior term loan and revolving line of credit provided by a group
of banks to Velda Farms. The $6.2 million of equity issued by the Velda
Partnership, its general partner and one of its subsidiaries included limited
partnership interests of the Velda Partnership, shares of common stock of its
general partner and shares of common stock of a subsidiary of the Velda
Partnership. The $6.2 million purchase price for this equity was determined
through arms'-length negotiations among the Predecessor Owners.

THE COMBINATION

As a result of the Combination, the Company became a holding company for
Suiza-Puerto Rico, Velda Farms and Reddy Ice. The Combined Entities were
corporations and partnerships originally formed to acquire Suiza-Puerto Rico,
Velda Farms and Reddy Ice. The Combined Entities and Predecessor Owners entered
into an agreement (the "Combination Agreement") pursuant to which certain
mergers, exchanges and related transactions were consummated simultaneously.
Pursuant to the Combination Agreement, all of the Predecessor Owner's equity
interests in the Combined Entities were converted into shares of Common Stock,
or options to acquire shares of Common Stock, of the Company.

The exchange ratios for conversion or exchange in the Combination of the
pre-existing equity interests in the Combined Entities were determined through
negotiations among the Combined Entities and the Predecessor Owners as to the
relative values of Suiza-Puerto Rico, Velda Farms and Reddy Ice. These relative
values, expressed as a percentage of the value of the Company, are as follows:

Suiza-Puerto Rico..................... 51.02%
Velda Farms........................... 13.74%
Reddy Ice............................. 35.24%

Based on these relative values, the Predecessor Owners of Suiza-Puerto Rico
received shares of Common Stock and options to acquire shares of Common Stock in
the Combination in an aggregate amount equal to 51.02% of the 6,900,002 shares
of Common Stock outstanding or subject to options immediately after the
Combination (excluding options granted under the Option and Restricted Stock
Plan). The Predecessor Owners of Velda Farms and Reddy Ice likewise received
shares of Common Stock and options to acquire shares of Common Stock in an
aggregate amount equal to 13.74% and 35.24%, respectively, of such 6,900,002
shares. Each of the Predecessor Owners received shares or options to acquire
shares of Common Stock in an amount equal to such Predecessor Owner's percentage
ownership interest or right to acquire such ownership interest on a fully
diluted basis in Suiza-Puerto Rico, Velda Farms or Reddy Ice, multiplied by the
aggregate number of shares of Common Stock and shares of Common Stock subject to
options to be received by the Predecessor Owners in Suiza-Puerto Rico, Velda
Farms and Reddy Ice, as applicable. The options held in Suiza-Puerto Rico,
Velda Farms or Reddy Ice were exchanged for options to acquire the same number
of shares of Common Stock as the holders of the predecessor options would have
acquired if they had exercised such options prior to the Combination and then
exchanged the equity acquired upon such exercise for shares of Common Stock in
the Combination. Each of the new options has substantially the same terms as
the predecessor option for which it was exchanged, with the same aggregate
exercise price and vesting schedule. See "-- Stock Options".

42
<PAGE>

As discussed in more detail in the following table, certain executive
officers, directors and 5% stockholders of the Company received certain benefits
in connection with the Combination.

COMMON STOCK RECEIVED IN THE COMBINATION

The following table reflects, for each of the executive officers, directors
and 5% stockholders of the Company, for all such officers, directors and 5%
stockholders as a group and for all the Predecessor Owners as a group: (i) the
number of shares of Common Stock received (of record and beneficially) in the
Combination for his or its equity interests in the Combined Entities; (ii) the
aggregate cost to such person or group of the shares of Common Stock received in
the Combination (which is the aggregate amount of the investment by such person
or group in the Combined Entities); and (iii) the resulting average cost per
share of the shares of Common Stock received in the Combination by each such
person or group for his or its equity interests in the Combined Entities:

SHARES OF AGGREGATE COST
COMMON STOCK OF SHARES OF
RECEIVED IN THE COMMON STOCK AVERAGE COST
NAME COMBINATION RECEIVED PER SHARE
- ---- --------------- -------------- ------------
Gregg L. Engles............... 1,352,169(1) $ 932,500 $0.69
Cletes O. Beshears............ 50,489 220,000 4.36
Hector M. Nevares............. 317,767 2,100,000 6.61
Gayle O. Beshears............. 16,370 45,000 2.75
Tracy L. Noll................. -- -- --
James Green................... 5,887 40,000 6.79
John W. Madden................ 51,495(2) 71,000 1.38
Robert L. Kaminski............ 865,367(1) 52,000 0.06
P. Eugene Pender.............. -- -- --
Robert Bartholomew............ -- (3) -- --
Robert Piccinini.............. -- -- --
Stephen L. Green.............. 847,379(4) 5,600,000 6.61
John Hancock.................. 1,542,418(5) 9,008,543 5.84
Pacific Mutual................ 968,745(6) 6,281,363 6.48
Canaan........................ 847,379(7) 5,600,000 6.61
All executive officers,
directors and 5%
stockholders as a group...... 6,018,086 24,350,406 4.05
All Predecessor Owners
as a group................... 6,313,479 25,592,520 4.05
____________________
(1) Includes 11,757 shares that are held subject to an option in favor of
Mr. Madden.
(2) Excludes 11,757 shares held by each of Messrs. Engles and Kaminski
subject to options in favor of Mr. Madden.
(3) Excludes 879,941 shares held by Pacific Mutual Life Insurance Company
and 88,804 shares held by PM Group Life Insurance Company, each of which
exercises independent voting and investment power with respect to such
shares. Mr. Bartholomew, who is an officer of Pacific Mezzanine
Associates, Inc., an indirect, wholly owned subsidiary of Pacific Mutual
Life Insurance Company, disclaims beneficial ownership of such shares.
(4) Consists solely of shares owned by Canaan Capital Limited Partnership
and Canaan Capital Offshore Limited Partnership, C.V. Mr. Green may be
deemed to share beneficial ownership of such shares since he serves as a
general partner of the general partner of such entities and shares voting
and investment power with the other general partners of the general partner
of such entities.
(5) Includes 1,515,977 shares held by John Hancock Mutual Life Insurance
Company and 26,441 shares held by John Hancock Life Insurance Company of
America, an indirect, wholly owned subsidiary of John Hancock Mutual Life
Insurance Company.
(6) Includes 879,941 shares held by Pacific Mutual Life Insurance Company
and 88,804 shares held by PM Group Life Insurance Co., an indirect, wholly
owned subsidiary of Pacific Mutual Life Insurance Company, each of which
exercises independent voting and investment power with respect to such
shares.
(7) Includes 90,520 shares held by Canaan Capital Limited Partnership and
756,859 shares held by Canaan Capital Offshore Limited Partnership, C.V.
Canaan Capital Partners, L.P., the general partner of both such entities,
exercises sole voting and investment power with respect to such shares.

43
<PAGE>

REGISTRATION RIGHTS

Pursuant to the Combination Agreement, the Predecessor Owners received
three demand registration rights and incidental (or piggyback) registration
rights with respect to their shares of Common Stock, subject to certain
limitations. See "Shares Eligible for Future Sale".

STOCK OPTIONS

In connection with the Combination, the Company's Board of Directors
adopted the Suiza Foods Corporation Exchange Stock Option and Restricted Stock
Plan (the "Exchange Plan"). Pursuant to the Exchange Plan, outstanding stock
options granted by certain of the Combined Entities (the "Predecessor Options"),
including Predecessor Options granted to certain executive officers and
directors of the Company, were converted into options to acquire an aggregate of
586,523 shares of Common Stock of the Company, representing the number of shares
of Common Stock that the holders of such Predecessor Options would have acquired
if they had exercised such Predecessor Options prior to the Combination and then
exchanged the equity acquired upon such exercise for shares of Common Stock in
the Combination. Each option granted under the Exchange Plan has substantially
the same terms as the Predecessor Option for which it was exchanged, with the
same aggregate exercise price and vesting schedule. See "-- Stock Options".
Pursuant to the Exchange Plan, the Company granted Messrs. C.O. Beshears, James
Green and G.O. Beshears options to purchase 8,831 shares, 3,679 shares and
281,645 shares of Common Stock at a per share exercise price of $6.79 per share,
$6.79 per share and $0.03 per share, respectively. The options granted to
Messrs. C.O. Beshears and James Green are subject to certain vesting
requirements. In addition, under the Exchange Plan, restricted stock in OC
Holdings, Inc. (one of the Combined Entities) previously granted to certain
executive officers, directors and employees of the Company was converted into a
total of 35,321 shares of Common Stock of the Company, which shares are subject
to certain restrictions on transfer. Messrs. Engles, C.O. Beshears and James
Green received 9,566 shares, 11,774 shares and 5,887 shares, respectively, of
restricted stock in the Company in exchange for the restricted stock in
OC Holdings, Inc. owned by each of them. All shares of restricted stock awarded
under the Exchange Option and Restricted Stock Plan vested immediately on grant.
No additional options will be granted and no additional shares of restricted
stock will be awarded under the Exchange Option and Restricted Stock Plan.

PROFITS INTERESTS

At the time of the Combination, Engles Dairy Holdings, Inc. ("EDH"), which
was partially owned by Messrs. Engles and C.O. Beshears, received shares of
Common Stock in exchange for EDH's profits interests in the Suiza Partnership
and its general partner and the Velda Partnership and its general partner.
These profits interests were granted to EDH as compensation for the services of
EMC (Engles Management Corporation, an affiliate of Mr. Engles), in identifying,
structuring and negotiating the Suiza-Puerto Rico and Velda Farms acquisitions.
EDH's profits interests in such entities were fixed by mutual agreement of the
partners of the Suiza Partnership and the Velda Partnership. Following the
Combination, EDH was dissolved and the shares of Common Stock it received in the
Combination were distributed to its stockholders. As a result, Messrs. Engles,
C.O. Beshears and Madden received 359,364 shares, 17,530 shares and 40,902
shares of Common Stock, respectively.

REPAYMENT OF DEBT

At the time of the Combination, along with $1.0 million in prepayment
penalties, the Company repaid $16.5 million in principal amount of senior
indebtedness and $500,000 in principal amount of junior subordinated
indebtedness owed to John Hancock by Reddy Ice, including interest accrued
thereon through the date of the Combination. In addition, Suiza Foods assumed
the obligations of the Combined Entities to John Hancock and Pacific Mutual with
respect to an aggregate of approximately $50.7 million in principal amount of
subordinated notes pursuant to a restated note purchase agreement. A portion of
these notes will be repaid out of the net proceeds of the Offering. See "Use of
Proceeds".

44
<PAGE>

REDEMPTION OF PREFERRED STOCK

Pursuant to the Combination, the Company paid an aggregate of approximately
$5.0 million to redeem the shares of preferred stock issued to Hector M. Nevares
and his sister and additional shares of preferred stock issued to Mr. Nevares by
certain operating subsidiaries of Suiza-Puerto Rico in December 1993. The
Company also paid accrued dividends on these shares of preferred stock.

INVESTMENT BANKING AND CONSULTING FEES

In connection with the acquisition of Suiza-Puerto Rico in 1993, EMC
received a transaction fee of $2.0 million. EMC is an investment banking and
consulting firm owned by Gregg L. Engles. EMC and Cletes O. Beshears received
transaction fees in 1994 of $1.0 million and $150,000, respectively, in
connection with the acquisition of Velda Farms. EMC paid an aggregate of
$225,000 from the transaction fees it received in the Suiza-Puerto Rico and
Velda Farms acquisitions to John W. Madden for his services in connection with
such acquisitions. EMC received an additional fee of $50,000 in November 1994
in connection with the acquisition of Flav-O-Rich by Velda Farms. Since the
Combination, the Company has not paid any investment banking or consulting fees
to EMC, and the Company does not intend to pay any such fees in the future.

STRATEGIC SERVICES AND MANAGEMENT CONSULTING AGREEMENTS

At the time of the acquisition of Suiza-Puerto Rico in 1993, EMC entered
into a Strategic Services Agreement with Suiza-Puerto Rico pursuant to which
Suiza-Puerto Rico agreed to pay EMC an annual consulting fee of $200,000 for an
initial term of three years ending in December 1996. During the period from
December 16, 1993 to December 29, 1993, the year ended December 31, 1994 and
during the three months ended March 31, 1995, Suiza-Puerto Rico paid
approximately $8,000, $200,000 and $50,000, respectively, under this agreement.
Pursuant to this agreement, EMC provided management consulting services relating
to strategic and financial matters, including consultation regarding strategic
acquisitions, business strategies and financial planning. EMC entered into a
similar agreement with Velda Farms pursuant to which Velda Farms agreed to pay
EMC an annual consulting fee of $150,000 for an initial term of three years
ending in April 1997. During the period from April 10, 1994 to December 31,
1994 and during the three months ended March 31, 1995, Velda Farms paid
approximately $107,500 and $37,500 under this agreement. As part of the
Combination, EMC terminated these agreements.

In connection with the merger of Reddy Ice with an affiliate and the
related debt financing in September 1992, Reddy Ice entered into management
consulting agreements with Gregg L. Engles and Robert L. Kaminski pursuant to
which Reddy Ice paid each of them a consulting fee of $25,000 per month for an
initial term of ten years, ending in September 2002. Under the agreements,
Messrs. Engles and Kaminski provided management consulting services similar to
those provided by EMC to Suiza-Puerto Rico and Velda Farms. Reddy Ice paid
Messrs. Engles and Kaminski an aggregate of $600,000 during each of the years
ended December 31, 1993 and 1994 and paid an aggregate of $150,000 during the
three-month period ended March 31, 1995 under the agreements, which were
terminated at the time of the Combination.

In connection with the Combination, Mr. Kaminski entered into a new
noncompetition and consulting agreement with the Company pursuant to which he
received $12,500 per month in exchange for consulting services, including
assisting the Company in identifying acquisition or merger candidates engaged in
the business of manufacturing, distributing or selling fragmentary or block ice
and in negotiating and completing such acquisitions or mergers. This agreement
terminated upon completion of the IPO. The Company paid Mr. Kaminski a one-time
fee of $500,000 in connection with the termination of his preexisting management
consulting agreement and the execution of his new noncompetition and consulting
agreement.

OTHER HISTORIC RELATIONSHIPS AND RELATED TRANSACTIONS

Prior to the acquisition of Suiza-Puerto Rico by the Company, Suiza-Puerto
Rico paid dividends in an aggregate amount of $9.3 million in 1993 to Hector M.
Nevares and his family.

45
<PAGE>

Prior to the acquisition of Suiza-Puerto Rico by the Company in
December 1993, Suiza-Puerto Rico entered into certain privately negotiated,
related party transactions with the Nevares family, which transactions do not
necessarily reflect terms that could have been achieved in arms'-length
negotiations. Suiza-Puerto Rico paid Mr. Hector G. Nevares, the founder of
Suiza-Puerto Rico and Hector M. Nevares' father, a salary of approximately
$8,900 per month for consulting services provided after his retirement in
April 1988 and until the acquisition of Suiza-Puerto Rico in December 1993 by
the Company. In December 1989, Suiza-Puerto Rico loaned $540,000 at a 6% fixed
annual interest rate to Suiza Realty S.E., a partnership owned by Hector G.
Nevares, for the purchase of real estate. The loan was repaid, together with
accrued and unpaid interest of $128,000, in December 1993.

In connection with the formation in June 1994 of a bread bag manufacturer
in which Reddy Ice was a minority investor, KECC received a transaction fee of
$200,000 and a profits interest in the manufacturer. In addition, Reddy Ice
issued $1.5 million in aggregate principal amount of junior subordinated
pay-in-kind notes and lender warrants to purchase shares of common stock of
Reddy Ice to John Hancock. The proceeds from these notes were used primarily to
finance Reddy Ice's investment in the bread bag manufacturer. The warrants
entitled John Hancock to purchase an aggregate of 34,127 shares of Reddy Ice
common stock for an exercise price of $20.00 per share, subject to adjustment.
John Hancock exercised these Reddy Ice lender warrants immediately prior to the
Combination and exchanged the shares of Reddy Ice common stock acquired upon
such exercise for 80,243 shares of the Company's Common Stock.
Contemporaneously with the completion of the Combination, Reddy Ice sold its
interest in the bread bag manufacturer to an entity formed by the equity owners
of Reddy Ice at the same price Reddy Ice paid for such interest, including
expenses related to the investment. In connection with this sale, this entity
assumed the $1.7 million in junior subordinated pay-in-kind notes previously
issued to John Hancock. John Hancock and Messrs. Engles, Kaminski, G.O.
Beshears and Madden (as former equity owners of Reddy Ice) now beneficially own
minority interests in the bag manufacturer. See "-- Current Relationships and
Related Transactions".

Reddy Ice paid approximately $55,000 and $54,000 in life insurance premiums
for Gregg L. Engles during 1993 and 1994, respectively, and approximately
$62,000 and $64,000 in life insurance premiums for Robert L. Kaminski during the
same periods, respectively. Pursuant to a buy-sell provision contained in a
shareholders' agreement, Reddy Ice, as beneficiary under the policies, was
required to utilize the proceeds of such policies to purchase Mr. Engles' and
Mr. Kaminski's equity interests in Reddy Ice from their estates. As part of the
Combination, this agreement was terminated.

FUTURE TRANSACTIONS

Although the Company has no present intention to do so, it may in the
future enter into other transactions and agreements incident to its business
with its directors, officers, principal stockholders and other affiliates. The
Company has no current procedure to resolve conflicts of interest arising from
affiliated transactions; however, the Company intends for all such transactions
and agreements to be on terms no less favorable to the Company than those
obtainable from unaffiliated third parties on an arms'-length basis. In
addition, all such transactions will be approved by a majority of the Company's
disinterested directors.

46
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth the beneficial ownership of the Company's
Common Stock by: (i) each stockholder beneficially owning more than 5% of the
Company's outstanding Common Stock; (ii) each director of the Company;
(iii) each executive officer named in the Summary Compensation Table; (iv) all
executive officers and directors as a group; and (v) the Selling Stockholder as
of August 31, 1996 and as adjusted to reflect the sale of shares in the
Offering.

<TABLE>
PERCENT OF CLASS (1)
---------------------
NUMBER OF SHARES BEFORE THE AFTER THE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ------------------------ ------------------ ---------- ---------
<S> <C> <C> <C>
Gregg L. Engles............................. 1,361,944(2) 12.6 12.6
Cletes O. Beshears.......................... 117,271(3) 1.1 1.1
Hector M. Nevares........................... 329,267(4) 3.1 3.1
Tracy L. Noll............................... 32,775(5) * *
Gayle O. Beshears........................... 309,515(6) 2.8 2.8
Robert L. Kaminski.......................... 684,518(7) 6.4 6.4
P. Eugene Pender............................ 7,400(8) * *
Robert Bartholomew.......................... -- (9) * *
Robert Piccinini............................ 6,900(10) * *
Stephen L. Green............................ 847,379(11) 7.9 7.9
John Hancock................................ 1,723,267(12) 16.1 16.1
Pacific Mutual.............................. 968,745(13) 9.0 9.0
Canaan...................................... 847,379(14) 7.9 7.9
All executive officers and directors as a
group (12 persons).......................... 3,837,355 34.0 34.0

SELLING STOCKHOLDER
- -------------------
T. Rowe Price............................... 625,000(15) 5.8 --
</TABLE>

- ------------------------
* Less than 1%
(1) Percentages are based on the total number of shares outstanding, plus
the total number of outstanding options that are exercisable within
60 days.
(2) Includes 46,000 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days and 11,757 shares
subject to an option granted by Mr. Engles in favor of John W. Madden.
Mr. Engles' address is 3811 Turtle Creek Blvd., Suite 1300, Dallas, Texas
75219.
(3) Includes 49,532 shares subject to options granted under the Option and
Restricted Stock Plan and the Exchange Plan that are exercisable within
60 days.
(4) Includes 69,264 shares held by Neva Holdings, Inc., a company wholly
owned by Mr. Nevares and his family, and 11,500 shares subject to options
granted under the Option and Restricted Stock Plan that are exercisable
within 60 days.
(5) Includes 25,875 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days.
(6) Includes 293,145 shares subject to options granted under the Option
and Restricted Stock Plan and the Exchange Plan that are exercisable within
60 days.
(7) Includes 11,757 shares subject to an option granted by Mr. Kaminski in
favor of John W. Madden. Mr. Kaminski's address is 3811 Turtle Creek Blvd.,
Suite 1300, Dallas, Texas 75219.
(8) Includes 6,900 shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days.
(9) Excludes 879,941 shares held by Pacific Mutual Life Insurance Company
and 88,804 shares held by PM Group Life Insurance Company, each of which
exercises independent voting and investment power with respect to such
shares. Mr. Bartholomew, who is an officer of Pacific Mezzanine
Associates, Inc., an indirect, wholly owned subsidiary of Pacific Mutual
Life Insurance Company, disclaims beneficial ownership of such shares.
(10) Consists of shares subject to options granted under the Option and
Restricted Stock Plan that are exercisable within 60 days.
(11) Consists solely of shares owned by Canaan Capital Limited Partnership
and Canaan Capital Offshore Limited Partnership, C.V. Mr. Green may be
deemed to share beneficial ownership of such shares since he serves as a
general partner of the general partner of such entities and shares voting
and investment power with the other general partners of the general partner
of such entities. Mr. Green's address is c/o Canaan Capital, 105 Rowayton
Avenue, Rowayton, Connecticut 06853.

<PAGE>

(12) Includes 1,694,447 shares held by John Hancock Mutual Life Insurance
Company and 28,820 shares held by John Hancock Life Insurance Company of
America, an indirect, wholly owned subsidiary of John Hancock Mutual Life
Insurance Company. John Hancock's address is T-50th Floor, 200 Clarendon
Street, Boston, Massachusetts 02117.
(13) Includes 879,941 shares held by Pacific Mutual Life Insurance Company
and 88,804 shares held by PM Group Life Insurance Co., an indirect, wholly
owned subsidiary of Pacific Mutual Life Insurance Company, each of which
exercises independent voting and investment power with respect to such
shares. Pacific Mutual's address is 700 Newport Center Drive, Newport
Beach, California 92660.
(14) Includes 90,520 shares held by Canaan Capital Limited Partnership and
756,859 shares held by Canaan Capital Offshore Limited Partnership, C.V.
Canaan Capital Partners, L.P., the general partner of both such entities,
exercises sole voting and investment power with respect to such shares.
Canaan's address is 105 Rowayton Avenue, Rowayton, Connecticut 06853.
(15) T. Rowe Price's address is 100 East Pratt Street, Baltimore, Maryland
21202.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 21,000,000 shares,
of which 20,000,000 shares are Common Stock, par value $.01 per share, and
1,000,000 shares are Preferred Stock, par value $.01 per share. As of
August 31, 1996 there were 10,739,729 shares of Common Stock issued and
outstanding and 579,760 shares reserved for issuance upon exercise of options
granted pursuant to the Exchange Plan. In addition, 1,069,500 shares of Common
Stock are reserved for issuance upon exercise of options or as grants of
restricted stock under the Option and Restricted Stock Plan, of which options to
purchase a total of 791,978 shares of Common Stock have been granted and
6,250 shares of restricted stock have been awarded. No shares of Preferred
Stock are currently outstanding.

COMMON STOCK

All outstanding shares of Common Stock, including the shares of Common
Stock offered hereby, are duly authorized, validly issued, fully paid and
nonassessable. Subject to the rights of the holders of any outstanding shares
of preferred stock and any restrictions that may be imposed by any lender to the
Company, holders of Common Stock are entitled to receive such dividends, if any,
as may be declared by the Board of Directors out of legally available funds. In
the event of the liquidation, dissolution or winding up of the Company, holders
of Common Stock are entitled to share equally and ratably, based on the number
of shares held, in the assets, if any, remaining after payment of all of the
Company's debts and liabilities and the liquidation preference of any
outstanding preferred stock.

Holders of Common Stock are entitled to one vote per share for each share
held of record on any matter submitted to the holders of Common Stock for a
vote. Because holders of Common Stock do not have cumulative voting rights, the
holders of a majority of the shares of Common Stock represented at a meeting can
elect all the directors. The shares of Common Stock are neither redeemable nor
convertible, and the holders thereof have no preemptive rights to subscribe for
or purchase any additional shares of capital stock issued by the Company.

PREFERRED STOCK

The Company is authorized to issue shares of Preferred Stock in one or more
series, and to designate the rights, preferences, limitations and restrictions
of and upon shares of each series, including voting, redemption and conversion
rights. The Board of Directors also may designate dividend rights and
preferences in liquidation. It is not possible to state the actual effect of
the authorization and issuance of additional series of Preferred Stock upon the
rights of holders of Common Stock until the Board of Directors determines the
specific terms, rights and preferences of a series of Preferred Stock. Such
effects, however, might include, among other things, granting the holders of
Preferred Stock priority over the holders of Common Stock with respect to the
payment of dividends; diluting the voting power of the Common Stock; or granting
the holders of Preferred Stock preference with respect to liquidation rights.
In addition, under certain circumstances, the issuance of Preferred Stock may
render more difficult or tend to discourage a merger, tender offer or proxy
contest, the assumption of control by a holder of a large block of the Company's
securities or the removal of incumbent management.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which prohibits certain persons ("Interested Stockholders")
from engaging in a "business combination" with a Delaware corporation for
three years following the date such persons become Interested Stockholders.
Interested Stockholders generally include: (i) persons who are the beneficial
owners of 15% or more of the outstanding voting stock of the corporation; and
(ii) persons who are affiliates or associates of the corporation and who hold
15% or more of the corporation's outstanding voting stock at any time within
three years before the date on which such person's status as an Interested
Stockholder is determined. Subject to certain exceptions, a "business
combination" includes, among other things: (i) mergers or consolidations;
(ii) the sale, lease, exchange, mortgage, pledge, transfer or other disposition
of assets having an aggregate market value equal to 10% or more of either the
aggregate market value of all assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding stock of
the corporation; (iii) transactions that result in the issuance or transfer by
the corporation of any stock of the corporation to the Interested Stockholder,
except pursuant to a transaction that effects a pro rata distribution to all
stockholders of the

<PAGE>

corporation; (iv) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series, or securities convertible into the stock of any class or series, of
the corporation that is owned directly or indirectly by the Interested
Stockholder; or (v) any receipt by the Interested Stockholder of the benefit
(except proportionately as a stockholder) of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.

Section 203 does not apply to a business combination if: (i) before a
person becomes an Interested Stockholder, the board of directors of the
corporation approves the transaction in which the Interested Stockholder became
an Interested Stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commences (other than certain excluded shares); or (iii) following a
transaction in which the person became an Interested Stockholder, the business
combination is (a) approved by the board of directors of the corporation, and
(b) authorized at a regular or special meeting of stockholders (and not by
written consent) by the affirmative vote of the holders of at least two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
Stockholder.

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

The Company's Certificate of Incorporation and Bylaws contain several
provisions that could have the effect of delaying, deterring or preventing the
acquisition of control of the Company by means of tender offer, open market
purchases, a proxy contest or otherwise. Set forth below is a description of
those provisions.

CLASSIFIED BOARD OF DIRECTORS

The Certificate of Incorporation divides the Board of Directors into three
classes, with one class having an initial term of one year, one class having an
initial term of two years and one class having an initial term of three years.
Each class is as nearly equal in number as possible. At each annual meeting of
stockholders, commencing with the annual meeting of stockholders held in 1995,
directors will be elected to succeed those directors whose terms have expired,
and each newly elected director will serve for a three-year term. The Company
believes that a classified Board of Directors will help assure the continuity
and stability of the Company's Board of Directors and the Company's business
strategies and policies. The classified board provision could increase the
likelihood that, in the event of a takeover of the Company, incumbent directors
will retain their positions. In addition, the classified board provision will
help ensure that the Company's board of directors, if confronted with an
unsolicited proposal from a third party that has acquired a block of the voting
stock of the Company, will have sufficient time to review the proposal and
appropriate alternatives and to seek the best available result for all
stockholders.

NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES

The Bylaws provide that the exact number of directors shall be fixed from
time to time by the Board of Directors. With a classified board, directors may
only be removed "for cause" and only by the affirmative vote of a majority of
the stockholders entitled to vote. As defined in the Company's Bylaws, "for
cause" means: (i) commission of an act of fraud or embezzlement against the
Company; (ii) conviction of a felony or a crime involving moral turpitude;
(iii) gross negligence or willful misconduct in performing the director's duties
to the Company or its stockholders; or (iv) breach of fiduciary duty owed to the
Company. The Bylaws also provide that vacant directorships may be filled by the
Board of Directors.

SPECIAL MEETINGS OF STOCKHOLDERS

The Company's Bylaws provide that special meetings of stockholders may be
called only by the Chief Executive Officer, and shall be called by the Chief
Executive Officer or the Secretary at the written request of a majority of the
Board of Directors. Special meetings may not be called by the stockholders.

<PAGE>

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS

The Company's Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of stockholder proposals
and stockholder nominations for the election of directors at an annual meeting
must be in writing and received by the Secretary of the Company no later than
March 1 of any calendar year (or if less than 35 days' notice of a meeting of
stockholders is given, stockholder nominations must be delivered to the
Secretary of the Company no later than the close of business on the seventh day
following the day notice was mailed). Stockholder proposals and nominations for
the election of directors at a special meeting must be in writing and received
by the Secretary of the Company no later than the close of business on the tenth
day following the day on which notice of the meeting was mailed or public
disclosure of the date of the meeting was made, whichever occurs first. The
notice of stockholder nominations must set forth certain information with
respect to each nominee who is not an incumbent director.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Under the Certificate of Incorporation, there will be as of the closing of
the Offering 7,617,261 unissued and unreserved shares of Common Stock and
1,000,000 unissued and unreserved shares of Preferred Stock, after giving effect
to the reservation of 579,760 shares pursuant to the Company's Exchange Plan and
the reservation of 1,069,500 shares of Common Stock for issuance upon exercise
of options or as grants of restricted stock under the Option and Restricted
Stock Plan. The unissued and unreserved shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital and for facilitating corporate acquisitions. Except pursuant to certain
employee benefit plans described in this Prospectus, the Company does not
currently have any plans to issue additional shares of Common Stock or Preferred
Stock. One of the effects of unissued and unreserved shares of capital stock
may be to enable the Board of Directors to render more difficult or discourage
an attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or otherwise, and thereby to protect the continuity of the
Company's management. If, in the due exercise of its fiduciary obligations, for
example, the Board of Directors determines that a takeover proposal was not in
the Company's best interests, such shares could be issued by the Board of
Directors without stockholder approval in one or more private transactions or
other transactions that might prevent or render more difficult or costly the
completion of the takeover transaction by diluting the voting or other rights of
the proposed acquiror or insurgent stockholder group, by creating a substantial
voting block in institutional or other hands that might undertake to support the
position of the incumbent board of directors, by effecting an acquisition that
might complicate or preclude the takeover, or otherwise.

TRANSFER AGENT AND REGISTRAR

Harris Trust and Savings Bank is the transfer agent and registrar for the
Common Stock.

NASDAQ NATIONAL MARKET QUOTATION

The Common Stock is quoted on the Nasdaq National Market under the symbol
"SWZA".

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 10,739,729 shares of
Common Stock outstanding. Of these shares, the 3,795,000 shares sold in the IPO
are, and the 625,000 shares sold in this Offering will be, freely tradable
without restriction or further registration under the Securities Act, except for
shares purchased by affiliates of the Company. The 6,313,479 shares issued in
the Combination and the 6,250 shares of restricted stock issued under the Option
and Restricted Stock Plan are "restricted securities" subject to holding period,
volume and other resale restrictions under Rule 144 of the Securities Act
("Rule 144"). These shares will be eligible for sale in the public market upon
expiration of the applicable holding periods under Rule 144 or sooner if
registered under the Securities Act.

<PAGE>

Under Rule 144 as currently in effect, any person (or persons whose shares
are aggregated) who has beneficially owned restricted securities for at least
two years is entitled to sell, within any three-month period, a number of shares
that does not exceed the greater of: (i) 1% of the then outstanding shares of
the Company's Common Stock (107,397 shares immediately after the Offering); or
(ii) the average weekly trading volume during the four calendar weeks
immediately preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission. Sales pursuant to Rule 144 are also subject
to certain requirements relating to the manner of sale, notice and availability
of current public information about the Company.

The Predecessor Owners, all of whom received shares of Common Stock or
options to purchase shares of Common Stock (collectively, the "Subject Shares")
in the Combination, have an aggregate of three demand registration rights
requiring the Company to use its best efforts to effect the registration of
their shares under the Securities Act and applicable state securities laws. The
Predecessor Owners have the right to exercise two demand registration rights
commencing six months and expiring three years and three months after the date
of completion of the IPO, and the right to exercise one additional demand
registration right commencing three years and three months and expiring five
years after the date of completion of the IPO. The Company is also obligated to
offer the Predecessor Owners the right to include the Subject Shares owned by
them in certain registration statements filed by the Company for a period
commencing six months and expiring five years after the date of completion of
the IPO.

The first demand registration right may be exercised by Predecessor Owners
that collectively own at least 1,380,000 of the Subject Shares so long as at
least 1,380,000 of the Subject Shares are offered for sale in an underwritten
public offering. In order to exercise the first demand registration right
between six months and one year after the date of completion of the IPO, the
price of the Company's Common Stock in the public market at the time of exercise
must be at least 120% of the initial public offering price. The second demand
registration right may be exercised by Predecessor Owners that collectively own
at least 1,035,000 of the Subject Shares so long as at least 1,035,000 of the
Subject Shares are offered for sale in an underwritten public offering. No
offering may be conducted upon exercise of the second demand registration right
sooner than nine months after completion of the offering conducted upon exercise
of the first demand registration right. The third demand registration right may
be exercised by Predecessor Owners that collectively own at least 1,035,000 of
the Subject Shares so long as at least 1,035,000 of the Subject Shares are
offered for sale in an underwritten public offering. No offering may be
conducted upon exercise of the third demand registration right sooner than nine
months after completion of the offering conducted upon exercise of the second
demand registration right. The third demand registration right will expire when
none of the Predecessor Owners, other than Gregg L. Engles, owns more than 5% of
the then-current fully diluted shares of Common Stock.

The Company will have a prior right to conduct public offerings for
corporate purposes and may pre-empt any registration undertaken upon exercise by
the Predecessor Owners of their demand registration rights. If the Company
pre-empts any demand registration, the registration will not be counted as a
demand registration. If the Company pre-empts the third demand registration
right so that Predecessor Owners are unable to exercise such right within the
five-year period described above, then such five-year period will be extended
until nine months after completion of the Company's public offering.

The Company will choose the underwriter or underwriters to conduct the
public offering of any Subject Shares upon exercise of the demand registration
rights. The Company will indemnify the Predecessor Owners and their respective
officers, directors and controlling persons for securities law liabilities in
connection with any such offering, other than liabilities resulting from
information furnished in writing by the Predecessor Owners. Except in certain
limited instances, the Company is obligated to pay all expenses incidental to a
demand registration, excluding underwriters' discounts and commissions.

The Company has agreed with the Underwriters of the IPO not to offer,
issue, sell, agree to sell, grant any option for the sale of or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (except for
options granted pursuant to the Option and Restricted Stock Plan) for a period
of 180 days after April 17, 1996, the date of the final prospectus used in the
IPO, without the prior written consent of the Representatives of the
Underwriters.

<PAGE>

The officers and directors of the Company and the Predecessor Owners have
also agreed that for a period of 180 days after April 17, 1996, the date of the
final prospectus used in the IPO, they will not offer, sell, agree to sell,
grant any option to purchase or make any other disposition (excluding certain
pledges) of any shares owned by them without the prior written consent of the
Representatives of the Underwriters.

Prior to April 1996, there has been no public market for the Common Stock,
and no prediction can be made as to the effect, if any, that sales of shares of
Common Stock in this Offering or otherwise, or the availability of such shares
for future sale will have on the market price of the Common Stock prevailing
from time to time. Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
the prevailing market price for the Common Stock. Such sales may also make it
more difficult for the Company to sell equity securities or equity-related
securities in the future at a time and price that it deems appropriate.

LEGAL MATTERS

The validity of the Common Stock will be passed upon for the Company by
Hughes & Luce, L.L.P., Dallas, Texas. William A. McCormack, a partner with
Hughes & Luce, L.L.P., beneficially owns 41,795 shares of Common Stock.

EXPERTS

The consolidated financial statements of Suiza Foods Corporation as of
December 31, 1995 and 1994 and for each of the three years in the period
ended December 31, 1995; the combined financial statements of Pre-Acquisition
Suiza-Puerto Rico as of December 15, 1993 and for the period from December
31, 1992 to December 15, 1993; the financial statements of Pre-Acquisition
Velda Farms as of April 9, 1994 and December 31, 1993 and for the period from
January 1, 1994 to April 9, 1994 and for the year ended December 31, 1993;
and the financial statements of Swiss Dairy, a Corporation, as of December
31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 appearing in this Prospectus have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing
herein. The consolidated financial statements of Garrido & Compania, Inc. as
of June 30, 1996 and 1995 and for each of the years in the three year period
ended June 30, 1996 have been audited by KPMG Peat Marwick LLP, independent
auditors, as stated in their report appearing herein. Such financial
statements are included herein in reliance upon the respective reports of
such firms given upon their authority as experts in accounting and auditing.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

PAGE
----
SUIZA FOODS CORPORATION
Report of Independent Auditors - Deloitte & Touche LLP............. F-2
Consolidated Balance Sheets........................................ F-3
Consolidated Statements of Operations.............................. F-4
Consolidated Statements of Stockholders' Equity.................... F-5
Consolidated Statements of Cash Flows.............................. F-6
Notes to Consolidated Financial Statements......................... F-7

SUIZA FOODS CORPORATION
Condensed Consolidated Balance Sheet (Unaudited)................... F-23
Condensed Consolidated Statements of Operations (Unaudited)........ F-24
Consolidated Statements of Cash Flows (Unaudited).................. F-25
Notes to Condensed Consolidated Financial Statements............... F-26

PRE-ACQUISITION SUIZA-PUERTO RICO
Report of Independent Auditors - Deloitte & Touche LLP............. F-29
Combined Balance Sheet............................................. F-30
Combined Statement of Operations................................... F-31
Combined Statement of Stockholders' Equity......................... F-32
Combined Statement of Cash Flows................................... F-33
Notes to Combined Financial Statements............................. F-34

PRE-ACQUISITION VELDA FARMS
Report of Independent Auditors - Deloitte & Touche LLP............. F-39
Balance Sheets..................................................... F-40
Statements of Operations........................................... F-41
Statements of Stockholders' Equity................................. F-42
Statements of Cash Flows........................................... F-43
Notes to Financial Statements...................................... F-44

GARRIDO & COMPANIA, INC.
Report of Independent Auditors - KPMG Peat Marwick LLP............. F-50
Consolidated Balance Sheets........................................ F-52
Consolidated Statements of Earnings................................ F-53
Consolidated Statements of Changes in Stockholders' Equity......... F-54
Consolidated Statements of Cash Flows.............................. F-55
Notes to Consolidated Financial Statements......................... F-56

SWISS DAIRY
Report of Independent Auditors - Deloitte & Touche LLP............. F-64
Balance Sheets..................................................... F-65
Statements of Earnings and Retained Earnings....................... F-66
Statements of Cash Flows........................................... F-67
Notes to Financial Statements...................................... F-68

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Suiza Foods Corporation
Dallas, Texas

We have audited the accompanying consolidated balance sheets of Suiza Foods
Corporation and subsidiaries (the "Company") as of December 31, 1995 and 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated financial statements
give retroactive effect to the Combination of Suiza-Puerto Rico, Velda Farms and
Reddy Ice, which has been accounted for as a pooling-of-interests, as described
in Note 1 of the Notes to Consolidated Financial Statements.

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, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Suiza Foods
Corporation and subsidiaries at December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

DELOITTE & TOUCHE LLP

Dallas, Texas
February 18, 1996
(February 29, 1996, as to Note 13)

F-2
<PAGE>
SUIZA FOODS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995

ASSETS

1994 1995
---------- ----------
(IN THOUSANDS)
CURRENT ASSETS:
Cash and cash equivalents........................ $ 5,395 $ 3,177
Accounts receivable.............................. 29,164 31,045
Inventories...................................... 10,747 11,346
Prepaid expenses and other current assets........ 1,821 1,380
Deferred income taxes............................ 866 1,448
---------- ----------
Total current assets........................... 47,993 48,396
PROPERTY, PLANT AND EQUIPMENT...................... 90,874 92,715
INTANGIBLE AND OTHER ASSETS........................ 100,085 91,411
---------- ----------
TOTAL.............................................. $ 238,952 $ 232,522
---------- ----------
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses............ $ 30,945 $ 31,957
Income taxes payable............................. 266 2,415
Current portion of long-term debt................ 14,683 15,578
---------- ----------
Total current liabilities...................... 45,894 49,950
LONG-TERM DEBT..................................... 173,327 171,745
DEFERRED INCOME TAXES.............................. 1,199 1,367
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARIES.................. 8,645
STOCKHOLDERS' EQUITY (Note 13):
Preferred stock, par value $.01; 1,000,000
shares authorized, no shares issued and
outstanding.....................................
Common stock, par value $.01; 20,000,000 shares
authorized, 6,313,479 shares issued and
outstanding, as adjusted........................ 1 63
Additional paid-in capital....................... 20,894 31,023
Warrants......................................... 580
Retained earnings (deficit)...................... (11,588) (21,626)
---------- ----------
Total stockholders' equity....................... 9,887 9,460
---------- ----------
TOTAL.............................................. $ 238,952 $ 232,522
---------- ----------
---------- ----------

See notes to consolidated financial statements.

F-3
<PAGE>
SUIZA FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C> <C>
NET SALES......................................... $ 51,675 $ 341,108 $ 430,466
COST OF SALES..................................... 20,412 240,468 312,633
---------- ---------- ----------
Gross profit.................................. 31,263 100,640 117,833
OPERATING COSTS AND EXPENSES:
Selling and distribution........................ 15,434 54,248 64,289
General and administrative...................... 6,305 16,935 19,277
Amortization of intangibles..................... 822 3,697 3,703
---------- ---------- ----------
Total operating costs and expenses............ 22,561 74,880 87,269
---------- ---------- ----------
INCOME FROM OPERATIONS............................ 8,702 25,760 30,564
OTHER (INCOME) EXPENSE:
Interest expense, net........................... 7,697 19,279 19,921
Merger and other costs.......................... 1,660 10,238
Other income, net............................... (419) (268) (469)
---------- ---------- ----------
Total other expense........................... 7,278 20,671 29,690
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS. 1,424 5,089 874
INCOME TAXES...................................... 4 844 2,450
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS........... 1,420 4,245 (1,576)
EXTRAORDINARY LOSS FROM EARLY
EXTINGUISHMENT OF DEBT........................... 197 8,462
---------- ---------- ----------
NET INCOME (LOSS)................................. $ 1,420 $ 4,048 $ (10,038)
---------- ---------- ----------
---------- ---------- ----------
NET EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary loss......... $ 0.57 $ 0.69 $ (0.26)
Extraordinary loss.............................. (0.03) (1.38)
---------- ---------- ----------
Net income (loss)............................... $ 0.57 $ 0.66 $ (1.64)
---------- ---------- ----------
---------- ---------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING............... 2,487,174 6,156,387 6,109,398
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
SUIZA FOODS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
----------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL WARRANTS (DEFICIT) TOTAL
---------- ----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993.................... 25,558 $ -- $ 1,068 $ 276 $ (16,752) $ (15,408)
Issuance of common stock.................. 42,150 1 14,149 14,150
Issuance of warrants...................... 247 (247) --
Net income................................ 1,420 1,420
---------- ----- ----------- ----- ---------- ----------
BALANCE, DECEMBER 31, 1993.................. 67,708 1 15,217 523 (15,579) 162
Issuance of common stock.................. 11,960 5,677 5,677
Increase in market value of warrants...... 57 (57) --
Net income................................ 4,048 4,048
---------- ----- ----------- ----- ---------- ----------
BALANCE, DECEMBER 31, 1994.................. 79,668 1 20,894 580 (11,588) 9,887
Issuance of common stock.................. 11,832 5,080 (580) 4,500
Capital contribution (Note 13)............ 5,111 5,111
Net loss.................................. (10,038) (10,038)
69 for 1 stock split (Note 13)............ 6,221,979 62 (62) --
---------- ----- ----------- ----- ---------- ----------
BALANCE, DECEMBER 31, 1995.................. 6,313,479 $ 63 $ 31,023 $ -- $ (21,626) $ 9,460
---------- ----- ----------- ----- ---------- ----------
---------- ----- ----------- ----- ---------- ----------
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>
SUIZA FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................................... $ 1,420 $ 4,048 $ (10,038)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization............................................ 3,476 8,244 9,258
Amortization of intangible assets, including deferred financing costs.... 995 4,876 4,686
Gain on the sale of assets............................................... (16) (177) (265)
Extraordinary loss from early extinguishment of debt..................... 197 8,462
Merger and other nonrecurring costs...................................... 1,660 10,238
Noncash and imputed interest............................................. 54 483 1,087
Minority interests....................................................... 8 556 101
Deferred income taxes.................................................... 333 (414)
Changes in operating assets and liabilities:
Accounts and notes receivable.......................................... (259) (108) (1,881)
Inventories............................................................ (344) (73) (599)
Prepaid expenses and other assets...................................... 199 (222) 1,007
Accounts payable and other accrued expenses............................ 262 4,862 716
Income tax payable..................................................... (16) 254 649
---------- ---------- -----------
Net cash provided by operating activities............................ 5,779 24,933 23,007
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment................................. (1,207) (4,784) (10,392)
Proceeds from sale of property, plant and equipment........................ 129 245 691
Sales (purchases) of cash investments and marketable securities............ 10,880 (277)
Increase in investments and other assets................................... (10) (1,331)
Cash outflows for acquisitions............................................. (82,783) (61,357) (2,425)
---------- ---------- -----------
Net cash used in investing activities................................ (72,991) (67,504) (12,126)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt......................................... 90,500 67,585 154,505
Repayment of debt.......................................................... (33,520) (30,906) (154,387)
Payments of deferred financing, debt restructuring and merger costs........ (1,660) (8,972)
Issuance of common stock, net of expenses.................................. 14,150 5,677 4,087
Investments by (distributions to) minority interests....................... 151 (61) (63)
Purchase of subsidiary preferred stock..................................... (8,269)
---------- ---------- -----------
Net cash provided by (used in) financing activities.................. 71,281 40,635 (13,099)
---------- ---------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................................. 4,069 (1,936) (2,218)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................... 3,262 7,331 5,395
---------- ---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD..................................... $ 7,331 $ 5,395 $ 3,177
---------- ---------- -----------
---------- ---------- -----------
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995

1. THE COMBINATION
Suiza Foods Corporation (the "Company" or "Suiza Foods") is a Delaware
corporation, incorporated on September 19, 1994, for the sole purpose of
entering into certain mergers, exchanges and related transactions (the
"Combination"). On March 31, 1995, the Company completed the Combination
pursuant to which the Company acquired Suiza Holdings, L.P. and subsidiaries
("Suiza-Puerto Rico"), Velda Holdings, L.P., Velda Holdings, Inc. and
subsidiaries ("Velda Farms"), and Reddy Ice Corporation ("Reddy Ice")
(collectively, the "Combined Entities") by engaging in certain mergers,
exchanges and related transactions. Pursuant to the Combination, the Company
issued 6,313,479 shares, as adjusted, of its common stock in exchange for all of
the outstanding equity interests of Suiza-Puerto Rico, Velda Farms and Reddy
Ice.

The Company has accounted for the Combination using the pooling of interests
method of accounting, whereby the assets acquired and liabilities assumed are
reflected in the consolidated financial statements of the Company at the
historical amounts of the Combined Entities. The operations of Suiza-Puerto Rico
and Velda Farms are only included in the results of operations from the dates
they were acquired in purchase business combinations (December 16, 1993, for
Suiza-Puerto Rico and April 10, 1994, for Velda Farms). In connection with the
Combination, the equity accounts of Suiza-Puerto Rico, Velda Farms and Reddy Ice
were adjusted to allocate partners' capital and additional paid-in capital
between common stock, additional paid-in capital and retained earnings based on
each of the companies' historical results and the number of shares of the
Company's common stock issued in the Combination.

The Company had no operations until its acquisition of Suiza-Puerto Rico,
Velda Farms and Reddy Ice in the Combination. Separate results of the Combined
Entities preceding the Combination were as follows:

UNAUDITED
THREE MONTHS
ENDED MARCH
1993 1994 31, 1995
--------- ---------- -------------
(IN THOUSANDS)
Revenues:
Suiza-Puerto Rico..................... $ 6,587 $ 191,334 $ 52,229
Velda Farms........................... 102,073 46,235
Reddy Ice............................. 45,088 47,701 6,412
--------- ---------- -------------
Total............................... $ 51,675 $ 341,108 $ 104,876
--------- ---------- -------------
--------- ---------- -------------
Net income (loss):
Suiza Foods........................... $ -- $ -- $ (7,024)
Suiza-Puerto Rico..................... (130) 2,211 (4,806)
Velda Farms........................... 544 (219)
Reddy Ice............................. 1,550 1,293 (5,941)
--------- ---------- -------------
Total............................... $ 1,420 $ 4,048 $ (17,990)
--------- ---------- -------------
--------- ---------- -------------

Included in net income of Reddy Ice for the year ended December 31, 1994, is
an extraordinary loss from early extinguishment of debt of $.2 million. In
addition, included in net losses of Suiza-Puerto Rico, Velda Farms and Reddy Ice
for the three-month period ended March 31, 1995 are extraordinary losses from
the early extinguishment of debt of $5.0 million (net of income tax benefit of
$.1 million), $.9 million (net of income tax benefit of $.5 million) and $2.6
million, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS -- Effective with the Combination, the Company became the parent
company for the operations of Suiza-Puerto Rico, Velda Farms and Reddy Ice.
Suiza-Puerto Rico, which includes Suiza Dairy

F-7
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Corporation ("Suiza Dairy"), Suiza Fruit Corporation ("Suiza Fruit") and Neva
Plastics Manufacturing Corp. ("Neva Plastics"), manufactures and distributes
fluid milk products and refrigerated ready-to-serve fruit drinks, and
distributes refrigerated and frozen foods to various customers, including
grocery stores, retail outlets and schools throughout Puerto Rico. Velda Farms
manufactures and distributes fresh milk, ice cream and related products
throughout peninsular Florida under its own brand names and under brands
licensed from third parties. Velda Farms customers include food service
accounts, convenience stores, club stores and schools. Reddy Ice manufactures
and distributes ice products for retail, commercial and industrial use in Texas,
Florida, Arizona, New Mexico and Nevada. The Company and its subsidiaries
provide credit terms to customers generally ranging up to 30 days, perform
ongoing credit evaluations of their customers and maintain allowances for
potential credit losses based on historical experience. The preparation of
financial statements requires the use of significant estimates and assumptions
by management; actual results could differ from these estimates.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries, Suiza Dairy,
Suiza Fruit, Neva Plastics, Velda Farms and Reddy Ice. All significant
intercompany balances and transactions are eliminated in consolidation.

INVENTORIES -- Pasteurized and raw milk inventories are stated at the lower
of average cost or market. Raw materials, spare parts and supplies and
merchandise for resale inventories are stated at the lower of cost, using the
first-in, first-out ("FIFO") method, or market. Manufactured finished goods
inventories are stated at the lower of average production cost or market.
Production costs include raw materials, direct labor and indirect production and
overhead costs.

PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated at
cost. Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the assets, as follows:

<TABLE>
<CAPTION>
ASSET USEFUL LIFE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Buildings and improvements.................... Ten to 40 years
Machinery and equipment....................... Five to 20 years
Motor vehicles................................ Five to 15 years
Furniture and fixtures........................ Three to ten years
</TABLE>

Capitalized lease assets are amortized over the shorter of their lease term
or their estimated useful lives. Expenditures for repairs and maintenance which
do not improve or extend the life of the assets are expensed as incurred.

INTANGIBLE ASSETS -- Intangible assets include the following intangibles
which are amortized over their related useful lives:

<TABLE>
<CAPTION>
INTANGIBLE ASSET USEFUL LIFE
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Goodwill...................................... Straight-line method over 20 to 40 years
Identifiable intangible assets:
Customer list............................... Straight-line method over seven to ten years
Trademarks/trade names...................... Straight-line method over 30 years
Noncompetition agreements................... Straight-line method over five to ten years
Deferred financing costs...................... Interest method over the terms of the related
debt (ranging from seven to 11 years)
Organization costs............................ Straight-line method over five years
</TABLE>

F-8
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company periodically assesses the net realizable value of its intangible
assets, as well as all other assets, by comparing the expected future net
operating cash flows, undiscounted and without interest charges, to the carrying
amount of the underlying assets. The Company would evaluate a potential
impairment if the recorded value of these assets exceeded the associated future
net operating cash flows. Any potential impairment loss would be measured as the
amount by which the carrying value exceeds the fair value of the asset. Fair
value of assets would be measured by market value, if an active market exists,
or by a forecast of expected future net operating cash flows, discounted at a
rate commensurate with the risk involved.

INTEREST RATE AGREEMENTS -- Interest rate swaps, caps and floors are entered
into as a hedge against interest exposure of variable rate debt. Differences
between amounts to be paid or received on these interest rate agreements
designated as hedges are included in interest expense as payments are made or
received. Amounts paid to acquire interest rate caps and amounts received for
interest rate floors are amortized as an adjustment to interest expense over the
life of the related agreement.

REVENUE -- Revenue is recognized when the product is shipped to the
customer.

INCOME TAXES -- At the Combination date, the Company became the parent
company of Suiza Dairy, Suiza Fruit, Neva Plastics, Velda Farms and Reddy Ice.
Velda Farms and Reddy Ice are now included in the consolidated tax return of the
Company. The Company's Puerto Rico subsidiaries, Suiza Dairy, Suiza Fruit and
Neva Plastics, which are organized as Delaware companies, will be required to
file separate U.S. and Puerto Rico income tax returns. Since their operations
are in Puerto Rico, they are eligible for Section 936 tax credits which may
reduce or eliminate U.S. income taxes due.

Prior to the Combination, Suiza-Puerto Rico, Velda Farms and Reddy Ice were
separate taxpayers and income taxes were provided for in the financial
statements, where applicable, based on each company's separate income tax
return. Suiza-Puerto Rico was organized as a U.S. limited partnership, which was
not subject to income taxes, with its operating subsidiaries, Suiza Dairy, Suiza
Fruit and Neva Plastics, organized under the laws of the Commonwealth of Puerto
Rico. As a result, each of its operating subsidiaries was required to file a
separate income tax return in Puerto Rico. Both before and after the
Combination, Suiza Fruit and Neva Plastics were eligible through grants, with
certain qualifications, for partial exemptions from Puerto Rico income, property
and municipal taxes. The grants were originally made for ten-year terms and
provide for a 90% exemption from income and property taxes and 60% exemption
from municipal taxes. Reddy Ice historically qualified as a small business
corporation under Section 1372 of Subchapter S of the Internal Revenue Code.
Accordingly, no provision for income taxes or income tax liabilities were
recorded in its financial statements since such amounts, if any, were the
responsibility of the individual stockholders.

Since prior to the Combination, certain of Suiza-Puerto Rico's operations
were organized as a partnership and Reddy Ice's operations were organized as a
small business corporation under Subchapter S, no income taxes were provided in
the financial statements. However, had these operations been subject to
corporate income taxes, available net operating losses would have been
sufficient to eliminate any corporate income taxes due.

Deferred income taxes are provided for temporary differences in the
financial statement and tax bases of assets and liabilities using current tax
rates. Deferred tax assets, including the benefit of net operating loss
carryforwards, are evaluated based on the guidelines for realization and may be
reduced by a valuation allowance.

CASH EQUIVALENTS -- The Company considers all highly liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.

F-9
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE -- The Company computes earnings per share based
on the weighted average number of common shares outstanding during the year, as
adjusted for the stock split (Note 13), including common equivalent shares, when
dilutive. Fully diluted earnings per share are not presented since the assumed
exercise of stock options and warrants would not result in a material dilutive
effect.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS -- Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition to the carrying amount of the asset. This new accounting principle
is effective for the Company's fiscal year ending December 31, 1996. The Company
believes that this new accounting principle will not have a material impact on
its financial position.

Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," encourages, but does not require,
companies to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on new fair value accounting
rules. Although expense recognition for employee stock based compensation is not
mandatory, SFAS 123 requires companies that choose not to adopt the new fair
value accounting to disclose pro forma net income and earnings per share under
the new method. This new accounting principle is effective for the Company's
fiscal year ending December 31, 1996. The Company intends to comply with the
disclosure requirements of this new accounting principle and will not adopt fair
value accounting expense recognition provisions.

3. ACQUISITIONS
Effective December 16, 1993, the Company, through its Suiza-Puerto Rico
subsidiaries, acquired all of the outstanding common and preferred stock of
Suiza Dairy, Suiza Fruit and Neva Plastics. The total purchase price, including
related acquisition and financing costs, was approximately $99.4 million, which
was funded with the proceeds from partners' capital contributions, the proceeds
from the issuance of subordinated notes payable of $25.0 million, term loan and
revolving credit facility advances directly to the subsidiaries of $67.0 million
and preferred stock issued to the seller of $5.0 million. In connection with the
refinancing of debt on March 31, 1995, the term loan, revolving credit facility
advances and preferred stock were repaid as part of the Combination.

Effective April 10, 1994, the Company, through its Velda Farms subsidiary,
acquired all of the outstanding common stock of Velda Farms, Inc., a wholly
owned subsidiary of The Morningstar Group, Inc. The total purchase price,
including related acquisition and financing costs, was approximately $54.8
million, which was funded with the net proceeds from the issuance of common
stock, the proceeds from the issuance of subordinated notes, term loan and
revolving credit facility advances, and preferred stock issued to the seller. In
connection with the refinancing of debt at the date of the Combination, the term
loan, revolving credit facility advances and preferred stock were repaid.

Effective June 29, 1994, Suiza Dairy acquired Mayaguez Dairy, Inc. for a
total purchase price, including costs and expenses, of approximately $7.6
million, which was funded primarily by additional term loan borrowings of $7.0
million.

Effective November 1, 1994, Velda Farms acquired all of the net assets of
the Florida Division of Flav-O-Rich, Inc. The total purchase price, including
related acquisition and financing costs, was approximately $5.9 million, which
was funded with revolving credit agreement borrowings, along with a subordinated
note payable to the seller and an amount payable to the seller upon the final
purchase price settlement, which was paid subsequent to year-end.

F-10
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. ACQUISITIONS (CONTINUED)
During 1993, 1994 and 1995, the Company's Reddy Ice subsidiary entered into
noncompetition arrangements and acquired certain property, plant and equipment
of eight separate ice companies for cash, including costs and expenses, of
approximately $.4 million in 1993, $.3 million in 1994 and $2.4 million in 1995,
along with the issuance of notes payable to the sellers of approximately $.4
million in 1993, $.4 million in 1994 and $.1 million in 1995.

The above acquisitions were accounted for using the purchase method of
accounting as of their respective acquisition dates, and accordingly, only the
results of operations of the acquired companies subsequent to their respective
acquisition dates are included in the consolidated financial statements of the
Company. At the acquisition date, the purchase price was allocated to assets
acquired, including identifiable intangibles, and liabilities assumed based on
their fair market values. The excess of the total purchase prices over the fair
values of the net assets acquired represented goodwill. In connection with the
acquisitions, assets were acquired and liabilities were assumed as follows:

1993 1994 1995
---------- ---------- ---------
(IN THOUSANDS)
Purchase prices:
Cash paid for capital stock........... $ 82,783 $ 61,357 $ 2,425
Subsidiary preferred stock issued..... 5,000 3,000
Notes and amounts payable to seller... 365 4,495 91
Cash acquired in acquisitions......... 12,035 142
---------- ---------- ---------
Total purchase prices................... 100,183 68,994 2,516
Fair values of net assets acquired:
Fair values of assets acquired........ 92,680 53,590 2,317
Liabilities assumed................... (43,400) (10,924)
---------- ---------- ---------
Total net assets acquired............... 49,280 42,666 2,317
---------- ---------- ---------
Goodwill................................ $ 50,903 $ 26,328 $ 199
---------- ---------- ---------
---------- ---------- ---------

The following table presents unaudited pro forma results of operations of
the Company for the year ended December 31, 1994, as if the above 1994
acquisitions had occurred at the beginning of 1994. There was no material pro
forma impact of the acquisitions in 1995.

(IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
Net sales............................................. $ 426,626
-------------
-------------
Income before extraordinary loss...................... $ 7,447
-------------
-------------
Net income............................................ $ 7,250
-------------
-------------
Earnings per share.................................... $ 1.14
-------------
-------------

The unaudited pro forma results of operations are not necessarily indicative
of what the actual results of operations of the Company would have been had the
acquisitions occurred at the beginning of 1994, nor do they purport to be
indicative of the future results of operations of the Company.

Subsequent to year-end, the Company, through its Velda Farms subsidiary,
acquired certain assets of Skinners' Dairy, Inc. for a purchase price of $2.7
million. The acquisition was funded with additional term loan borrowings under
the Senior Credit Facility. There was no material pro forma impact of the
acquisition.

F-11
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACCOUNTS RECEIVABLE

1994 1995
--------- ---------
(IN THOUSANDS)
Trade customers, including route receivables...... $ 24,731 $ 28,435
Milk industry and milk price stabilization fund... 3,539 1,839
Suppliers......................................... 497 604
Customer financing receivables.................... 516 353
Officers and employees............................ 388 425
Other............................................. 709 737
--------- ---------
30,380 32,393
Less allowance for doubtful accounts.............. (1,216) (1,348)
--------- ---------
$ 29,164 $ 31,045
--------- ---------
--------- ---------

5. INVENTORIES

1994 1995
--------- ---------
(IN THOUSANDS)
Pasteurized and raw milk and raw materials....... $ 3,725 $ 4,278
Parts and supplies............................... 3,075 3,105
Finished goods................................... 3,458 3,355
Merchandise purchased for resale................. 489 608
--------- ---------
$ 10,747 $ 11,346
--------- ---------
--------- ---------

6. PROPERTY, PLANT AND EQUIPMENT

1994 1995
---------- ----------
(IN THOUSANDS)
Land.............................................. $ 15,587 $ 15,582
Buildings and improvements........................ 30,392 33,264
Machinery and equipment........................... 42,338 47,119
Motor vehicles.................................... 9,140 9,994
Furniture and fixtures............................ 16,421 18,219
---------- ----------
113,878 124,178
Less accumulated depreciation and amortization.... (23,004) (31,463)
---------- ----------
$ 90,874 $ 92,715
---------- ----------
---------- ----------

7. INTANGIBLE AND OTHER ASSETS

1994 1995
---------- ---------
(IN THOUSANDS)
Goodwill.......................................... $ 78,304 $ 78,503
Identifiable intangibles.......................... 16,552 13,374
Deferred financing costs.......................... 9,964 6,018
Organization costs................................ 745
Investments....................................... 1,936 89
Deposits and other................................ 1,488 905
---------- ---------
108,989 98,889
Less accumulated amortization..................... (8,904) (7,478)
---------- ---------
$ 100,085 $ 91,411
---------- ---------
---------- ---------

F-12
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INTANGIBLE AND OTHER ASSETS (CONTINUED)
In 1994, the Company's Reddy Ice subsidiary invested $1.2 million, including
expenses, to acquire a less than 20% partnership interest in a plastic bread bag
manufacturer which was accounted for using the cost method whereby no earnings
or losses are recognized until distributions are made. This investment was
funded through $1.5 million of junior subordinated notes, a portion of which was
required to be maintained in an investment collateral account. Immediately prior
to the Combination, Reddy Ice distributed this investment to an entity formed by
the stockholders of Reddy Ice at its carrying value in consideration for cash
and the assumption by this entity of the existing junior subordinated note and
the related investment collateral account used to fund the investment.

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

1994 1995
--------- ---------
(IN THOUSANDS)
Accounts payable.................................. $ 19,949 $ 21,689
Accrued payroll and benefits...................... 3,468 6,965
Accrued interest.................................. 3,274 1,845
Amount payable for acquisition.................... 1,672
Other............................................. 2,582 1,458
--------- ---------
$ 30,945 $ 31,957
--------- ---------
--------- ---------

9. LONG-TERM DEBT

1994 1995
---------- ----------
(IN THOUSANDS)
Senior credit facility:
Revolving loan facility......................... $ -- $ 10,900
Term loans...................................... 123,750
Senior and subordinated debt subsequently repaid.. 135,142
Subordinated notes................................ 50,430 51,101
Capital lease obligations and other............... 2,438 1,572
---------- ----------
188,010 187,323
Less current portion.............................. (14,683) (15,578)
---------- ----------
$ 173,327 $ 171,745
---------- ----------
---------- ----------

SENIOR CREDIT FACILITY -- Simultaneously with the Combination, the Company
entered into a senior credit facility (the "Senior Credit Facility") with a
syndicate of banks with the Chase Manhattan Bank, N.A., as agent, providing for
an aggregate senior credit facility of $160.0 million, which included: (i) a
$57.0 million term loan for its mainland United States operations; (ii) a $78.0
million term loan for its Puerto Rico operations; (iii) a $20.0 million
revolving credit facility for its mainland United States operations; and (iv) a
$5.0 million revolving credit facility for its Puerto Rico operations. Under the
terms of the Senior Credit Facility, each term loan is amortized over seven
years. The revolving credit facilities expire at the end of five years. Amounts
outstanding under the Senior Credit Facility bear interest at a rate per annum
equal to one of the following rates, at the Company's option: (i) a base rate
(Base Rate) equal to the higher of the Federal Funds rate plus 50 basis points
or the Chase Manhattan Bank's prime commercial lending rate plus a margin that
varies from 0 to 75 basis points depending on the Company's ratio of defined
indebtedness to EBITDA (as defined in the Senior Credit Facility); or (ii) a
LIBOR rate plus a margin that varies from 75 to 200 basis points depending on
the Company's ratio of defined indebtedness to EBITDA. The Company pays

F-13
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. LONG-TERM DEBT (CONTINUED)
a commitment fee on unused amounts of the revolving facility that ranges from 20
basis points to 37.5 basis points, based on the Company's ratio of debt to
EBITDA. The blended interest rate in effect at December 31, 1995, on the Senior
Credit Facility was 7.8%.

Interest is payable quarterly, and scheduled principal installments on the
term loan facilities are due in quarterly installments of approximately $3.8
million through March 1997, $4.4 million for each quarter thereafter through
March 1998, $5.0 million for each quarter thereafter through March 2000, $5.6
million for each quarter thereafter through March 2001 and $6.3 million for each
quarter thereafter through March 2002. Loans under the Senior Credit Facility
are collateralized by substantially all assets. Borrowings under the revolving
credit facility are limited to 85% of eligible accounts receivable and 50% of
eligible inventories.

The proceeds from this Senior Credit Facility were used to repay outstanding
senior and certain subordinated debt of the Company's subsidiaries, including
Suiza-Puerto Rico's and Velda Farms' term loan and revolving credit facility
advances, and Reddy Ice's senior secured notes, subordinated notes, certain
junior subordinated notes, senior bridge loan and certain other debt, and to
redeem the outstanding preferred stock of Suiza-Puerto Rico and Velda Farms.

SUBORDINATED NOTES -- On March 31, 1995, the Company issued subordinated
notes in the Combination to replace certain of the existing subordinated notes
of each of Suiza-Puerto Rico, Velda Farms and Reddy Ice. The subordinated notes
bear interest at rates ranging from 12% to 15% (13.2% on a weighted average
basis), payable on a semiannual basis in March and September of each year, with
semi-annual principal installments due in varying amounts commencing in 2001,
with the remaining unpaid principal balances due at maturity on March 31, 2004.
Certain of the subordinated notes contain provisions which allow the Company to
pay a portion of the interest through the issuance of additional notes. The
notes are subordinated to the loans under the Senior Credit Facility.

OTHER DEBT -- Other debt includes a mortgage note payable which was
collateralized by one of the Reddy Ice properties, various promissory notes for
the purchase of property, plant and equipment and capital lease obligations. The
mortgage note payable provided for interest at the prime interest rate, plus 1%,
payable monthly with principal payments through January 1996. The various
promissory notes payable provided for interest at rates ranging from 10% to
prime plus 1% and were payable in monthly installments of principal and interest
until maturity, when the remaining principal balance was due. Capital lease
obligations represent machinery and equipment financing obligations which are
payable in monthly installments of principle and interest and are collateralized
by the related assets financed.

INTEREST RATE AGREEMENTS -- During 1994, the Company entered into interest
rate cap agreements to hedge against future impacts of increases in interest
rates. The cap agreements have three-year terms and notional values of $40.0
million and $14.0 million, and cap the interest rate on LIBOR loans at 6% plus
the LIBOR margin and 7.5% plus the LIBOR margin, respectively. In July 1995, the
Company entered into an interest rate floor agreement and received an up-front
payment of $250,000. The floor agreement expires in December 1996, has a
notional value of $40.0 million and sets an interest floor of 6% plus the LIBOR
margin. The up-front payment is being amortized over the life of the floor
agreement. During 1995, the Company also entered into two interest rate swap
agreements, which mature on June 30, 1998, to fix the interest on a notional
amount of $55.0 million at a fixed cost of 6% plus the LIBOR margin. The Company
has designated these interest rate agreements as hedges against its interest
rate exposure on its variable rate loans under the Senior Credit Facility.

The Company is exposed to market risk under these swap arrangements due to
the possibility of exchanging a lower interest rate for a higher interest rate.
The counterparties are major financial institutions and the risk of incurring
losses related to credit risk is considered by the Company to be remote.

F-14
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. LONG-TERM DEBT (CONTINUED)
DEBT COVENANTS -- The Company's Senior Credit Facility contains various
financial and other restrictive covenants and requirements that the Company
maintain certain financial ratios, including leverage (computed as the ratio of
the aggregate outstanding principal amount of defined indebtedness to EBITDA, as
defined), fixed charges (computed as the ratio of EBITDA to defined fixed
charges), interest coverage (computed as the ratio of EBITDA to defined interest
expense) and minimum net worth. The Senior Credit Facility also contains
limitations on capital expenditures, investments, the payment of dividends and
the incurrence of additional indebtedness and requires certain mandatory
prepayments from the proceeds of certain dispositions of property.

SCHEDULED MATURITIES -- The scheduled maturities of long-term debt, which
include capitalized lease obligations, at December 31, 1995, were as follows (in
thousands):

1996.............................................. $ 15,578
1997.............................................. 17,401
1998.............................................. 19,648
1999.............................................. 20,129
2000.............................................. 21,895
Thereafter........................................ 92,672
---------
$ 187,323
---------
---------

10. LEASES
The Company leases certain property, plant and equipment used in its
operations under both capital and operating lease agreements. Such leases, which
are primarily for machinery and equipment and vehicles, have lease terms ranging
from two to nine years. Certain of the operating lease agreements require the
payment of additional rentals for maintenance, based on miles driven or units
produced. Rent expense, including additional rent, was $.6 million, $4.5 million
and $6.3 million for the years ended December 31, 1993, 1994 and 1995,
respectively.

The composition of capital leases which are reflected as property, plant and
equipment in the balance sheets at December 31, 1994 and 1995, is as follows:

1994 1995
--------- ---------
(IN THOUSANDS)
Machinery and equipment........................... $ 2,854 $ 2,518
Less accumulated amortization..................... (573) (814)
--------- ---------
$ 2,281 $ 1,704
--------- ---------
--------- ---------

F-15
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LEASES (CONTINUED)
Future minimum payments at December 31, 1995, under noncancelable capital
and operating leases with terms in excess of one year are summarized below (in
thousands):

CAPITAL OPERATING
LEASES LEASES
----------- -----------
1996.............................................. $ 470 $ 4,310
1997.............................................. 185 4,146
1998.............................................. 151 3,270
1999.............................................. 112 2,293
2000.............................................. 2,057
Thereafter........................................ 3,071
----- -----------
Total minimum lease payments.................. 918 $ 19,147
-----------
-----------
Less amount representing imputed interest......... (69)
-----
Present value of capitalized lease obligations.... $ 849
-----
-----

11. INCOME TAXES
There is no material provision for income taxes during 1993 primarily as a
result of Reddy Ice's S corporation election and net operating losses. The
provision for income taxes for the years ended December 31, 1994 and 1995,
excluding the tax benefit of $669,000 applicable to the extraordinary loss
during 1995, are as follows:

1994 1995
--------- ---------
(IN THOUSANDS)
Current taxes payable (refundable):
Federal......................................... $ 491 $ 2,763
State........................................... 20 101
Deferred income taxes............................. 333 (414)
--------- ---------
$ 844 $ 2,450
--------- ---------
--------- ---------

The following is a reconciliation of income taxes reported in the statements
of operations:

DECEMBER 31,
--------------------
1994 1995
--------- ---------
Tax expense at statutory rates.................... $ 1,959 $ 306
Tax benefit from tax-exempt earnings.............. (2,745) (1,532)
Tax expense from losses not subject to taxes
at the corporate level........................... 1,612
Minority interest................................. 84 35
Net operating loss carryforwards.................. 1,344 188
Nondeductible expenses............................ 202 1,841
--------- ---------
$ 844 $ 2,450
--------- ---------
--------- ---------

F-16
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
The tax effects of temporary differences giving rise to deferred income tax
assets and liabilities were:

DECEMBER 31,
--------------------
1994 1995
--------- ---------
Deferred income tax assets:
Asset valuation reserves........................ $ 157 $ 326
Nondeductible accruals.......................... 1,024 1,122
Net operating loss carryforwards................ 914 1,989
Valuation allowance............................. (1,229) (1,989)
--------- ---------
866 1,448
--------- ---------
Deferred income tax liabilities:
Depreciation.................................... (203) 312
Amortization of intangibles..................... (996) (1,185)
Foreign distributions and other................. (494)
--------- ---------
1,199 1,367
--------- ---------
Net deferred income tax asset (liability)....... $ (333) $ 81
--------- ---------
--------- ---------

The Company has established a valuation allowance for deferred tax assets of
the Company's Suiza Dairy subsidiary in Puerto Rico. The deferred tax assets of
this subsidiary represent primarily net operating loss carryforwards, which,
under Puerto Rico law, are only available for utilization against future taxable
income of this subsidiary. Because of the continuing operating losses of this
subsidiary, the Company has been unable to determine that it is more likely than
not that the net deferred tax assets of this subsidiary will be realized. Should
the Company's Suiza Dairy subsidiary become profitable in future periods, this
valuation allowance may be reduced or eliminated. The Company will continue to
review this valuation allowance on a quarterly basis and make adjustments as
appropriate.

During 1995, the Company increased the valuation allowance as a result of
operating losses incurred and reversals of deferred tax assets by its Suiza
Dairy subsidiary in 1995 which increased this subsidiary's net operating loss
carryforwards.

12. MINORITY INTEREST
Prior to the Combination, minority interest included common equity interests
of approximately $.4 million representing an interest in the common stock of
certain subsidiaries, along with shares of preferred stock of certain
subsidiaries with cumulative liquidation values aggregating $8.0 million plus
cumulative unpaid dividends of between 5% and 9% annually.

The charges for minority interest in the statements of operations, which are
reflected in other income, were $.6 million and $.1 million for the years ended
December 31, 1994 and 1995, respectively, and represented accrued dividends and
the minority shareholders interest in net income of the respective subsidiary.

In connection with the Combination, the Company acquired the remaining
outstanding shares of certain of its subsidiaries, redeemed outstanding
preferred stock and paid cumulative dividends.

13. STOCKHOLDERS' EQUITY

CAPITAL SHARES -- Authorized capital shares of the Company include 10,000
shares (1,000,000 shares as of February 29, 1996) of preferred stock with a par
value of $.01 per share and 200,000 shares (20,000,000 shares as of February 29,
1996) of common stock with a par value of $.01 per share. There have been no
shares of preferred stock issued by the Company. The rights and preferences of
preferred stock are

F-17
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCKHOLDERS' EQUITY (CONTINUED)
established by the Company's board of directors upon issuance. In connection
with the Combination, the Company issued 1,973,049 shares of common stock in
exchange for outstanding equity interests held by Reddy Ice investors; 3,415,558
shares of common stock in exchange for outstanding equity interests held by
Suiza-Puerto Rico investors; and 924,872 shares of common stock in exchange for
outstanding equity interests held by Velda Farms investors.

The Company also granted the previous owners two demand registration rights
as well as incidental registration rights and additional registration rights,
effective upon the Company becoming eligible for registration on Form S-3, with
respect to their shares of common stock, subject to certain limitations.
Effective upon the closing of the Company's first underwritten public offering,
these registration rights will terminate and the previous owners will receive
three new demand registration rights and incidental registration rights subject
to certain limitations.

In connection with the acquisitions of Suiza-Puerto Rico and Velda Farms,
profits interests were granted to certain individuals, through an affiliate, as
compensation for services in identifying, structuring and negotiating these
acquisitions. Immediately prior to the Combination, the existing owners of
Suiza-Puerto Rico and Velda Farms fixed this profits interest by mutual
agreement and exchanged equity interests among investors and these individuals.
In connection with this exchange, the Company recorded a compensation expense
charge to merger expense of $5.1 million, which approximated the fair value of
these interests, and resulted in a capital contribution in the same amount.

COMMON STOCK SPLIT -- On February 28, 1996, the Company's Board of Directors
authorized a 69 for 1 stock split in the form of a common stock dividend payable
to stockholders of record on February 29, 1996. In addition, on the same date,
the Board of Directors authorized the increase in the number of authorized
shares of preferred and common stock to 1,000,000 shares and 20,000,000 shares,
respectively. All references in the consolidated financial statements to number
of common shares outstanding and per share amounts, and all references to common
stock issued, stock options and related prices in the notes to the consolidated
financial statements have been restated to reflect the split.

STOCK OPTION AND RESTRICTED STOCK PLANS -- In connection with the
Combination, the Company adopted an exchange option and restricted stock plan,
whereby the outstanding stock options granted by the Combined Entities were
converted into options to acquire 586,523 shares of common stock on
substantially the same terms as the prior options. These options are exercisable
at prices ranging from $.03 to $6.79 per share, which approximated the fair
market value of such shares at the date of original grant. At December 31, 1995,
579,760 of such options were outstanding, of which 480,450 were exercisable at
prices ranging from $.03 to $6.79 per share. The options vest ratably in five
annual increments and may be exercised, to the extent vested, over the ten-year
period following the award date.

Concurrently with the Combination, the Company adopted the Option and
Restricted Stock Plan (the "Plan"), which provides for grants of incentive and
nonqualified stock options and awards of restricted stock to directors and key
employees of the Company or its subsidiaries of up to 1,069,500 shares, provided
that no more than 379,500 shares may be awarded as restricted stock. Under the
terms of the Plan, the options vest ratably over a three year period, except for
options granted to outside directors, which vest immediately. The Plan also
provides that the exercise price of stock options will not be less than the fair
market value on the date of grant, and in the case of an incentive stock option
granted to an employee owning more than 10% of the common stock of the Company
on the date of grant, not less than 110% of the fair market value. In connection
with the Combination, on March 31, 1995, the Company's Board of Directors
granted 474,375 options pursuant to the Plan at an exercise price per share of
$10.51. In addition, during the remainder of 1995, the Company granted options
for an additional 3,450 shares at the same exercise price per share. At

F-18
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. STOCKHOLDERS' EQUITY (CONTINUED)
December 31, 1995, 477,825 options were outstanding at an exercise price of
$10.51 per share, of which 3,450 shares were exercisable. Subsequent to December
31, 1995, the Board of Directors authorized the grant of options for 159,253
shares at an exercise price of $12.32 per share.

WARRANTS -- Prior to the Combination, Suiza-Puerto Rico, Velda Farms and
Reddy Ice had entered into various warrant agreements with their subordinated
and junior subordinated noteholders which granted such holders the right to
purchase equity interests in each of the companies. These warrants were
exercisable, in whole or in part, at various dates through December 31, 2005.
Immediately prior to the Combination, all warrant holders exercised their
warrants to acquire equity interests in Suiza-Puerto Rico, Velda Farms and Reddy
Ice in consideration for aggregate proceeds of $4.1 million. As a result, such
warrant holders became equity holders of each of Suiza-Puerto Rico, Velda Farms
and Reddy Ice, and received shares of the Company's common stock in the
Combination.

14. EMPLOYEES SAVINGS AND PROFIT SHARING PLAN
The Company's subsidiaries each sponsor an employees savings and profit
sharing plan. Employees who have completed one or more years of service and have
met other requirements pursuant to the plans are eligible to participate in the
plans. The employees participating in the plan can generally make contributions
to the plan of between 6% and 8% of their annual compensation, and each of the
subsidiaries can elect to match such contributions. During the years ended
December 31, 1994 and 1995, the Company expensed contributions to the plan of
approximately, $.8 million and $.8 million, respectively. There were no material
contributions during 1993.

15. MERGER AND OTHER COSTS

MERGER AND OTHER COSTS -- During 1994 and 1995, in connection with the
Combination, the Company incurred merger and other costs of $1.7 million and
$10.2 million, respectively, which consisted of the costs associated with the
negotiation of the merger and preparation of related merger documents and
agreements, financial consulting costs and other costs related to the
Combination of $1.4 million and $8.8 million in 1994 and 1995, respectively; and
other non-operating costs of $.3 million and $1.4 million, respectively. During
1995, these other merger costs related to the Combination included a one-time
$.5 million payment to cancel an existing management consulting agreement; a
one-time tax cost of $1.5 million to convert the Company's Puerto Rico operating
subsidiaries to United States corporations; the write-off of $.4 million in
unamortized organization costs; and $5.1 million to recognize compensation
expense related to the issuance of common stock in exchange for the profits
interest in Suiza-Puerto Rico and Velda Farms (Note 13), which resulted in a
capital contribution in the same amount.

Other non-operating costs included $.3 million of bank fees in 1994 related
to the funding of bridge loans to repay certain indebtedness prior to the
Combination, and during 1995, $.7 million of costs associated with several
uncompleted acquisitions and $.7 million of costs associated with an uncompleted
debt offering.

EXTRAORDINARY LOSS -- During 1994 and 1995, as a result of the repayment of
outstanding indebtedness, the Company expensed approximately $.2 million and
$8.5 million (net of income tax benefit of $.7 million), respectively, of debt
issuance, legal and other costs associated with extinguishment of prior credit
facilities. These amounts have been classified as an extraordinary loss in
accordance with the provisions of Statement of Financial Accounting Standards
No. 4, "Reporting Gains and Losses From the Extinguishment of Debt."

F-19
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for interest.................................................. $ 6,136 $ 16,929 $ 17,226
Cash paid for taxes..................................................... 362 1,432

Noncash transactions:
Issuance of subsidiary preferred stock in connection with
acquisitions......................................................... 5,000 3,000
Issuance of subordinated notes and amounts payable to the seller in
connection with acquisitions......................................... 365 4,495 91
Dividends payable or paid in additional preferred stock on subsidiary
stock................................................................ 10 197
Distribution of investment and related debt in a bread bag
manufacturer to stockholders of Reddy Ice............................ 1,534
Acquisition of minority interest common stock and exercise of
warrants............................................................. 993
Compensation expense recorded as a capital contribution............... 5,111
Subordinated notes issued in lieu of interest......................... 430 671
</TABLE>

17. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries are parties, in the ordinary course of
business, to certain claims and litigation. In management's opinion, the
settlement of such matters is not expected to have a material impact on the
consolidated financial statements.

In connection with the Combination, the Company entered into employment
agreements with certain officers which provided for minimum compensation levels
and incentive bonuses along with provisions for termination of benefits in
certain circumstances. The Company also entered into a consulting and
noncompetition arrangement with a former officer for a period of three years
providing for monthly payments of $12,500 for services to be rendered in the
future.

18. RELATED PARTY TRANSACTIONS
Prior to the Combination, the Company had consulting agreements with certain
stockholders and affiliates requiring the payment of monthly consulting fees,
plus expenses, in consideration for financial advisory and oversight services
provided to it by such stockholders. These consulting agreements, which were
cancelable only at the option of such stockholders over their term, were
canceled in the Combination. During the years ended December 31, 1993, 1994 and
1995, the Company expensed $.6 million, $.9 million and $.2 million,
respectively, plus expenses under the provisions of these agreements, which are
included in general and administrative expenses. In addition, the Company paid
an affiliate of one of its stockholders investment banking fees of $2.0 million
and $1.1 million, along with related expenses, during the years ended December
31, 1993 and 1994, respectively, for acquisition and financing services, which
were included as part of the costs and expenses of the acquisition.

F-20
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. BUSINESS AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
Information about the Company's operations in the Dairy and Ice businesses
and in different geographic areas for the three years ended December 31, 1995,
is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales to unaffiliated customers:
Dairy:
United States................................. $ -- $ 102,073 $ 175,553
Puerto Rico................................... 6,587 191,334 204,406
---------- ---------- ----------
6,587 293,407 379,959
Ice -- United States............................ 45,088 47,701 50,507
---------- ---------- ----------
Total....................................... $ 51,675 $ 341,108 $ 430,466
---------- ---------- ----------
---------- ---------- ----------
Operating income:
Dairy:
United States................................. $ -- $ 4,848 $ 8,772
Puerto Rico................................... 92 12,274 13,614
---------- ---------- ----------
92 17,122 22,386
Ice -- United States............................ 8,610 8,638 9,218
Corporate....................................... (1,040)
---------- ---------- ----------
Total....................................... $ 8,702 $ 25,760 $ 30,564
---------- ---------- ----------
---------- ---------- ----------
Identifiable assets (at end of period):
Dairy:
United States................................. $ -- $ 68,781 $ 68,852
Puerto Rico................................... 121,501 125,207 119,977
---------- ---------- ----------
121,501 193,988 188,829
Ice -- United States............................ 46,447 44,964 40,519
Corporate....................................... 3,174
---------- ---------- ----------
Total....................................... $ 167,948 $ 238,952 $ 232,522
---------- ---------- ----------
---------- ---------- ----------
Capital expenditures:
Dairy........................................... $ 312 $ 3,364 $ 6,676
Ice............................................. 895 1,420 3,573
Corporate....................................... 143
---------- ---------- ----------
Total....................................... $ 1,207 $ 4,784 $ 10,392
---------- ---------- ----------
---------- ---------- ----------
Depreciation expense:
Dairy........................................... $ 217 $ 4,943 $ 5,995
Ice............................................. 3,259 3,301 3,263
---------- ---------- ----------
Total....................................... $ 3,476 $ 8,244 $ 9,258
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

20. FAIR VALUE OF FINANCIAL INSTRUMENTS
Pursuant to SFAS No. 107, "Disclosure About Fair Value of Financial
Instruments", the Company is required to disclose an estimate of the fair value
of the Company's financial instruments as of December 31, 1994 and 1995.
Differences between the historical presentation and estimated fair values can
occur for many reasons, including taxes, commissions, prepayment penalties,
make-whole provisions and other restrictions as well as the inherent limitations
in any estimation technique.

F-21
<PAGE>
SUIZA FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

20. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Due to their near-term maturities, the carrying amounts of accounts
receivable and accounts payable are considered equivalent to fair value. In
addition, because the interest rates on the Company's revolving credit and term
loan facilities and certain other debt are variable, their fair values
approximate their carrying values.

Certain of the Company's long-term debt bears fixed interest rates and is
privately placed with unique terms and no active market. The fair value of such
long-term debt was determined by discounting future cash flows at current market
yields. In addition, the Company has entered into various interest rate
agreements to reduce the Company's sensitivity to changes in interest rates on
its variable rate debt. The fair values of these instruments were determined
based on current values for similar instruments with similar terms. The
following is a summary of the asset (liability) values for both the carrying
values and fair values of such instruments:

DECEMBER 31,
----------------------------------------------
1994 1995
---------------------- ----------------------
HISTORICAL HISTORICAL
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS) (IN THOUSANDS)
Fixed rate debt............... $ (91,929) $ (85,121) $ (52,472) $ (53,621)
Interest rate agreements...... 333 630 -- (1,220)

F-22
<PAGE>
SUIZA FOODS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, June 30,
1995 1996
------------ -----------
(Unaudited)
(In thousands)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 3,177 $ 1,179
Accounts receivable 31,045 33,670
Inventories 11,346 12,245
Prepaid expenses and other current assets 1,380 1,644
Deferred income taxes 1,448 1,587
-------- --------
Total current assets 48,396 50,325
PROPERTY, PLANT AND EQUIPMENT 92,715 95,955
INTANGIBLE AND OTHER ASSETS 91,411 91,693
-------- --------
TOTAL $232,522 $237,973
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 31,957 $ 29,998
Income Taxes Payable 2,415 1,023
Current portion of long-term debt 15,578 9,556
-------- --------
Total current liabilities 49,950 40,577
LONG-TERM DEBT 171,745 134,334
DEFERRED INCOME TAXES 1,367 2,273

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, par value $.01; 20,000,000
shares authorized, 10,108,479 shares
issued and outstanding, as adjusted 63 101
Additional paid-in capital 31,023 79,593
Retained earnings (deficit) (21,626) (18,905)
-------- --------
Total stockholders' equity 9,460 60,789
-------- --------
TOTAL $232,522 $237,973
-------- --------
-------- --------

See notes to condensed consolidated financial statements

F-23
<PAGE>

SUIZA FOODS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three months ended Six months ended
June 30, June 30,
---------------------- ----------------------
1995 1996 1995 1996
--------- --------- --------- ---------
(Dollars in thousands, except share data)

NET SALES $ 110,029 $ 116,272 $ 214,905 $ 225,307
COST OF SALES 78,983 83,302 157,652 165,917
--------- --------- --------- ---------
GROSS PROFIT 31,046 32,970 57,253 59,390
OPERATING COSTS AND EXPENSES:
Selling and distribution 15,997 17,180 31,391 32,682
General and Administration 5,112 4,884 10,271 9,805
Amortization of intangibles 914 1,023 1,949 1,960
--------- --------- --------- ---------
Total operating costs
and expenses 22,023 23,087 43,611 44,447
--------- --------- --------- ---------
INCOME FROM OPERATIONS 9,023 9,883 13,642 14,943
OTHER (INCOME) EXPENSE:
Interest expense, net 5,088 3,872 10,437 8,488
Merger and other costs 1,466 10,304
Other income, net (83) (172) (273) (252)
--------- --------- --------- ---------
Total other expense 6,471 3,700 20,468 8,236
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY LOSS 2,552 6,183 (6,826) 6,707
INCOME TAXES 220 1,630 731 1,771
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY LOSS 2,332 4,553 (7,557) 4,936

EXTRAORDINARY LOSS FROM
EXTINGUISHMENT OF DEBT - (2,215) (8,462) (2,215)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 2,332 $ 2,338 $ (16,019) $ 2,721
--------- --------- --------- ---------
--------- --------- --------- ---------
NET EARNINGS (LOSS) PER SHARE:
Income (loss) before
extraordinary loss $ 0.37 $ 0.46 $ (1.28) $ 0.58
Extraordinary loss 0.00 (0.22) (1.43) (0.26)
--------- --------- --------- ---------
Net Income (loss) $ 0.37 $ 0.24 $ (2.71) $ 0.32
--------- --------- --------- ---------
--------- --------- --------- ---------
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,313,000 9,921,715 5,905,000 8,455,332
--------- --------- --------- ---------
--------- --------- --------- ---------

See notes to condensed consolidated financial statements

F-24
<PAGE>

SUIZA FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six months ended June 30,
(Dollars in thousands)
-------------------------
1995 1996
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (16,019) $ 2,721
Operating activities:
Depreciation and amortization 4,571 4,479
Amortization of intangible assets, including
deferred financing costs 2,617 2,297
(Gain) loss on the sales of assets (150) 20
Extraordinary loss from early extinguishment
of debt 8,462 2,215
Merger costs 10,304
Noncash and imputed interest 670 236
Minority interests 101
Deferred income taxes (1,083) 767
Changes in operating assets and liabilities:
Accounts receivable (5,333) (2,625)
Inventories (602) (899)
Prepaid expenses and other assets (482) 37
Accounts payable and other accrued expenses 2,738 (1,959)
Income tax payable 2,207 (511)
--------- --------
Net cash provided by operating activities 8,001 6,778
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (5,264) (7,984)
Proceeds from the sale of property, plant
and equipment 286 245
Cash outflows for acquisitions (1,520) (4,176)
--------- --------
Net cash used in investing activities (6,498) (11,915)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt 146,700 8,653
Repayment of debt (139,405) (52,322)
Payment of deferred financing, debt
restructuring and merger costs (8,972) (1,800)
Issuance of common stock, net of expenses 4,087 48,608
Distributions to minority interests (63)
Purchase of subsidiary preferred stock (8,269) -
--------- --------
Net cash (used in) provided by
financing activities (5,922) 3,139
--------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (4,419) (1,998)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,395 3,177
--------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 976 $ 1,179
--------- --------
--------- --------

See notes to condensed consolidated financial statements

F-25

<PAGE>

SUIZA FOODS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 1996

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements as of June 30, 1996 and for
the three-month and six-month periods ended June 30, 1996 have been
prepared by Suiza Foods Corporation (the "Company" or "Suiza Foods")
without audit. In the opinion of management, all necessary adjustments
(which include only normal recurring adjustments) to present fairly, in all
material respects, the consolidated financial position, results of
operations and cash flows as of and for the three-month and six-month
periods ended June 30, 1996 have been made. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
These financial statements should be read in conjunction with the Company's
1995 financial statements contained in its Form S-1 as filed with the
Securities and Exchange Commission on March 1, 1996, as amended.

2. INVENTORIES
June 30,
1996
--------
Pasteurized and raw milk and raw materials $ 4,018
Parts and supplies 3,966
Finished goods 4,261
--------
$ 12,245
--------
--------

3. LONG-TERM DEBT
June 30,
1996
--------
Senior credit facility:
Revolving loan facility $ 12,298
Term loans 94,544
Subordinated notes 36,000
Capital lease obligations and other debt 1,048
--------
143,890
Less: current portion (9,556)
--------
$134,334
--------
--------

On April 22, 1996, the Company issued 3,795,000 shares of common stock,
$.01 par value per share, in a public offering (the "Offering") at an
issue price of $14 per share. The Offering

F-26

<PAGE>

SUIZA FOODS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 1996

3. LONG-TERM DEBT (Continued)

provided net cash proceeds to the Company of approximately $49 million. Of
this amount, $31.5 million was used to repay senior debt, $15.7 million was
used to repay the Company's 15% subordinated notes and $1.8 million was
used to pay prepayment penalties related to the early extinguishment of the
15% subordinated notes. As a result of these transactions, the Company
recorded a $2.2 million extraordinary loss from extinguishment of debt
which included $1.8 million in prepayment penalties and $1.3 million for
the write-off of deferred financing costs related to the repaid debt, net
of a tax benefit of $0.9 million.

On July 19, 1996, the Company amended its senior credit facilities to
borrow $35 million to complete the Garrido acquisition (see footnote 5,
"Subsequent Events"). Pursuant to this amendment, the Company's term loans
were combined into a single, $130 million U.S. based facility. Quarterly
amortization payments beginning September 30, 1996 will be $2.5 million,
increasing to: 1) $3.75 million on September 30, 1997; 2) $5.0 million on
September 30, 1998; 3) $5.375 million on September 30, 1999; 4) $6.0
million on September 30, 2000; 5) $9.875 on September 30, 2001 with a final
installment of $19.75 due on March 3, 2002.

4. ACQUISITIONS

During the quarter, the Company paid approximately $2.7 million to acquire
seven small ice businesses. Estimated annual sales of these seven ice
companies was $2.4 million.

5. STOCKHOLDERS' EQUITY

On April 22, 1996, the Company issued 3,795,000 shares of common stock,
$.01 par value per share, in a public offering at a price to the public of
$14.00 per share. Following this offering, the Company had 10,108,479
shares of common stock issued and outstanding. On August 7, 1996, the
Company issued 625,000 shares of common stock, $.01 par value per share
(see footnote 6, "Subsequent Events"). Following this private sale, the
Company had 10,739,729 shares of common stock issued and outstanding.

6. SUBSEQUENT EVENTS

On July 19, 1996, the Company acquired the common stock of Garrido y
Compania, Inc. ("Garrido"). The total purchase price was approximately
$35 million (inclusive of acquired cash) which was paid at closing plus an
additional future cash payment of up to $5.5 million if certain earnings
criteria are met during the first eighteen months of Garrido's
post-acquisition operating results. The cash paid at closing was funded by
additional borrowings under senior loan facilities. This acquisition was
accounted for using the purchase method of accounting as of the effective
date, and accordingly, only the results of operations of Garrido
subsequent to the

F-27

<PAGE>

SUIZA FOODS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 1996

6. SUBSEQUENT EVENTS (Continued)

acquisition date will be included in the consolidated financial statements
of the Company. The Puerto Rico Agricultural Tax Incentives Act of 1995
provides a 50% tax credit for certain "eligible investments" in qualified
agricultural businesses in Puerto Rico. The Company is currently
investigating whether its investment in Garrido or other recent
transactions regarding its other Puerto Rico based operations will qualify
for these tax credits. If the Company qualifies for such tax credits,
there can be no assurance as to the amounts or timing of any benefits that
the Company may realize.

On July 31, 1996, the Company announced that it had signed a non-binding
letter of intent to acquire Swiss Dairy Corporation of Riverside,
California. There are no assurances that this acquisition will be
consummated. It is the Company's plan to finance this potential
acquisition with additional borrowings from it senior lenders by obtaining
an amendment to its existing credit facilities.

On August 7, 1996, the Company issued 625,000 shares of common stock, $.01
par value per share, in a private sale to an institutional investor an
issue price of $16.00 per share. The private sale provided net cash
proceeds to the Company of approximately $9.5 million, which was used to
repay a portion of the amounts borrowed under the Company's revolving
credit facility. The Company has agreed to file a registration statement
with respect to these shares within 60 days of issuance.

F-28
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Suiza Dairy Corporation
Suiza Fruit Corporation
Neva Plastics Manufacturing Corp.

We have audited the accompanying combined balance sheet of Suiza Dairy
Corporation and subsidiary, Borinquen Dairy, Inc., Suiza Fruit Corporation and
Neva Plastics Manufacturing Corp. (collectively referred to as "Pre-acquisition
Suiza-Puerto Rico") as of December 15, 1993, and the related combined statements
of operations, stockholders' equity and cash flows for the period from December
31, 1992 to December 15, 1993. These financial statements are the responsibility
of Pre-acquisition Suiza-Puerto Rico's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of Pre-acquisition Suiza-Puerto Rico
as of December 15, 1993, and the results of their combined operations and cash
flows for the period from December 31, 1992 to December 15, 1993, in conformity
with generally accepted accounting principles.

On December 16, 1993, as discussed in Note 1, the Pre-acquisition
Suiza-Puerto Rico companies were acquired by Suiza Holdings, L.P.

DELOITTE & TOUCHE LLP

Dallas, Texas
April 15, 1994

F-29
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO

COMBINED BALANCE SHEET

DECEMBER 15, 1993

ASSETS

CURRENT ASSETS:
Cash............................................ $11,303,709
Marketable securities........................... 9,788,501
Accounts receivable (Note 2).................... 10,017,470
Inventories (Note 3)............................ 3,987,522
Prepaid expenses and other current assets....... 1,561,185
----------
Total current assets.......................... 36,658,387

PROPERTY, PLANT AND EQUIPMENT (Note 4)............ 31,134,998

INTANGIBLE AND OTHER ASSETS (Note 5).............. 564,082
----------

TOTAL............................................. $68,357,467
----------
----------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Revolving credit facility advances (Note 7)..... $17,565,233
Accounts payable and accrued expenses (Note 6).. 10,940,482
Income tax payable (Note 9)..................... 28,029
Current portion of long-term debt (Note 7)...... 13,074,206
----------
Total current liabilities..................... 41,607,950

COMMITMENTS AND CONTINGENCIES (Notes 8 and 12)

COMBINED STOCKHOLDERS' EQUITY:
Preferred stock................................. 6,922,700
Common stock.................................... 8,998,741
Additional paid-in capital......................
Retained earnings............................... 10,828,076
----------

Total equity.................................. 26,749,517
----------

TOTAL............................................. $68,357,467
----------
----------

See notes to combined financial statements.

F-30
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO
COMBINED STATEMENT OF OPERATIONS
PERIOD FROM DECEMBER 31, 1992 TO DECEMBER 15, 1993

PERIOD ENDED
DECEMBER 15,
1993
(50 WEEKS)
--------------
NET SALES................................................ $ 174,770,747
COST OF SALES............................................ 135,020,164
--------------
GROSS PROFIT............................................. 39,750,583
OPERATING EXPENSES:
Selling and distribution............................... 21,664,253
General and administrative............................. 6,263,115
Amortization of intangibles............................ 103,529
--------------
Total operating expenses............................. 28,030,897
--------------
OPERATING INCOME......................................... 11,719,686
OTHER (INCOME) EXPENSE:
Interest expense, including amortization of
deferred financing costs.............................. 2,407,316
Interest income........................................ (1,228,133)
Other.................................................. (106,640)
--------------
Total other expense.................................. 1,072,543
--------------
INCOME BEFORE INCOME TAXES............................... 10,647,143
INCOME TAX BENEFIT (Note 9).............................. (2,246,209)
--------------
NET INCOME............................................... $ 12,893,352
--------------
--------------

See notes to combined financial statements.

F-31
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM DECEMBER 31, 1992 TO DECEMBER 15, 1993

<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED PAID-IN RETAINED
STOCK COMMON STOCK CAPITAL EARNINGS TOTAL
------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992................ $ 6,922,700 $ 8,529,306 $ 439,694 $ 7,279,515 $ 23,171,215
Distribution of net assets of the fruit
business of Suiza Dairy Corporation to
form Suiza Fruit Corporation........... 469,435 (439,694) (29,741) --
Net income for the period ended December
15, 1993............................... 12,893,352 12,893,352
Dividends............................... (9,315,050) (9,315,050)
------------ ------------ ----------- ------------- -------------
BALANCE, DECEMBER 15, 1993................ $ 6,922,700 $ 8,998,741 $ -- $ 10,828,076 $ 26,749,517
------------ ------------ ----------- ------------- -------------
------------ ------------ ----------- ------------- -------------
</TABLE>

See notes to combined financial statements.

F-32
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO
COMBINED STATEMENT OF CASH FLOWS
PERIOD FROM DECEMBER 31, 1992 TO DECEMBER 15, 1993

PERIOD ENDED
DECEMBER 15,
1993
(50 WEEKS)
-------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 12,893,352
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 4,874,100
Amortization of intangibles and other assets,
including deferred financing costs.................... 103,529
Change in deferred income taxes........................ (2,734,497)
Gain on sale of marketable securities.................. (679,112)
Changes in operating assets and liabilities:
Accounts receivable.................................. 2,590,937
Inventories.......................................... 99,600
Prepaid expenses and other assets.................... (467,560)
Accounts payable and other accrued expenses.......... (600,638)
Income tax payable................................... (3,703,506)
-------------
Net cash provided by operating activities.......... 12,376,205
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities....................... (9,819,875)
Proceeds from sale of marketable securities.............. 11,290,693
Capital expenditures..................................... (3,758,983)
Collection of note receivable............................ 540,000
-------------
Net cash used in investing activities.............. (1,748,165)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt....................... 16,702,291
Repayments of debt....................................... (4,315,389)
Cash dividends........................................... (14,994,428)
-------------
Net cash used in financing activities.............. (2,607,526)
-------------
INCREASE IN CASH........................................... 8,020,514
CASH AT BEGINNING OF PERIOD................................ 3,283,195
-------------
CASH AT END OF PERIOD...................................... $ 11,303,709
-------------
-------------

See notes to combined financial statements.

F-33
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO

NOTES TO COMBINED FINANCIAL STATEMENTS

PERIOD FROM DECEMBER 31, 1992 TO DECEMBER 15, 1993

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS -- Suiza Dairy Corporation and its wholly owned
subsidiary, Borinquen Dairy, Inc., Suiza Fruit Corporation (formed effective
January 1, 1993, through the distribution of the net assets of the fruit
business of Suiza Dairy Corporation) and Neva Plastics Manufacturing Corp.
(collectively, "Pre-Acquisition Suiza-Puerto Rico" or "Suiza-Puerto Rico") were
affiliated companies in Puerto Rico under common control and management.
Accordingly, combined financial statements are presented for the operations of
these affiliated companies. All significant intercompany balances and
transactions were eliminated in combination. Effective December 16, 1993,
Pre-Acquisition Suiza-Puerto Rico was acquired by Suiza Holdings, L.P. (a
limited partnership) which was organized under the laws of the State of Delaware
in December 1993 as a holding company for its Puerto Rico subsidiaries, Suiza
Dairy Corporation (formerly Engles Acquisition D, Inc.), Suiza Fruit Corporation
(formerly Engles Acquisition F, Inc.) and Neva Plastics Manufacturing Corp.
(formerly Engles Acquisition P, Inc.) to effect the acquisition of the combined
companies.

Suiza-Puerto Rico manufactures and distributes fluid milk products and
refrigerated ready-to-serve fruit drinks, and distributes refrigerated and
frozen foods to various customers, including grocery stores, retail outlets and
schools throughout Puerto Rico. Suiza-Puerto Rico provides credit terms to
certain customers generally ranging from 15 to 30 days, performs ongoing credit
evaluations of its customers and maintains allowances for potential credit
losses based on historical experience.

MARKETABLE SECURITIES -- Marketable securities consist principally of U.S.
government securities and are stated at the lower of cost or market at the
balance sheet date. Dividends and interest income are accrued as earned. The
cost of marketable securities sold is determined on the specific identification
method for recognizing realized gains or losses on sales of marketable
securities.

INVENTORIES -- Pasteurized and raw milk inventories are stated at the lower
of average cost or market. Raw materials, spare parts and supplies, and
merchandise for resale inventories are stated at the lower of cost, using the
first-in, first-out ("FIFO") method, or market. Manufactured finished goods
inventories are stated at the lower of average production cost or market.
Production costs include raw materials, direct labor and indirect production and
overhead costs.

ASSET USEFUL LIFE
- -------------------------------------------------- ---------------------
Buildings and improvements........................ Ten to 40 years
Machinery and equipment........................... Five to 20 years
Motor vehicles.................................... Five to 15 years
Furniture and fixtures............................ Three to ten years

INTANGIBLES AND OTHER ASSETS -- Intangibles and other assets include
primarily goodwill which is amortized over 40 years using the straight-line
method.

Suiza-Puerto Rico periodically assesses the net realizable value of its
intangible assets, as well as all other assets, by comparing the expected future
net operating cash flows, undiscounted and without interest charges, to the
carrying amount of the underlying assets. Suiza-Puerto Rico would evaluate a
potential impairment if the recorded value of these assets exceeded the
associated future net operating cash flows.

F-34
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Any potential impairment loss would be measured as the amount by which the
carrying value exceeds the fair value of the asset. Fair value of assets would
be measured by market value, if an active market exists, or by a forecast of
expected future net operating cash flows, discounted at a rate commensurate with
the risk involved.

REVENUE -- Revenue is recognized when the product is shipped to the
customer.

INCOME TAXES -- Suiza Dairy Corporation, Suiza Fruit Corporation and Neva
Plastics Manufacturing Corp. were all organized under the laws of the
Commonwealth of Puerto Rico, and as a result, each is required to file a
separate income tax return in Puerto Rico. Accordingly, Puerto Rico income taxes
are provided for in the combined financial statements based on each company's
separate Puerto Rico tax returns.

Suiza Fruit Corporation and Neva Plastics Manufacturing Corp. have been
granted, with certain qualifications, partial exemptions from Puerto Rico
income, property and municipal taxes. The grants were originally made to extend
for a period of ten years and provide for a 90% exemption from income and
property taxes and a 60% exemption from municipal taxes.

Deferred income taxes are provided for in the combined financial statements
for temporary differences in the financial statement and tax bases of assets and
liabilities using current tax rates in effect in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." There are
no material temporary differences which give rise to deferred income taxes.

CASH EQUIVALENTS -- Suiza-Puerto Rico considers all highly liquid
investments purchased with a remaining maturity of three months or less to be
cash equivalents.

2. ACCOUNTS RECEIVABLE

DECEMBER 15, 1993
-----------------
Trade customers, including route receivables............... $ 7,811,936
Milk industry and milk price stabilization fund............ 750,406
Suppliers.................................................. 292,058
Customer financing receivables............................. 683,207
Officers and employees..................................... 330,578
Other...................................................... 499,285
-----------------
10,367,470
Less allowance for doubtful accounts....................... (350,000)
-----------------
$ 10,017,470
-----------------
-----------------

Trade customers accounts receivable include $1,656,000 of route receivables.

3. INVENTORIES

DECEMBER 15, 1993
-----------------
Pasteurized and raw milk................................... $ 771,571
Raw materials.............................................. 821,606
Spare parts and supplies................................... 1,573,743
Manufactured finished goods................................ 306,860
Merchandise purchased for resale........................... 513,742
-----------------
$ 3,987,522
-----------------
-----------------

F-35
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. PROPERTY, PLANT AND EQUIPMENT

DECEMBER 15, 1993
-----------------
Land....................................................... $ 997,112
Buildings and improvements................................. 12,888,499
Machinery and equipment.................................... 24,355,356
Motor vehicles............................................. 9,770,939
Furniture and fixtures..................................... 3,059,807
-----------------
51,071,713
Less accumulated depreciation and amortization............. (19,936,715)
-----------------
$ 31,134,998
-----------------
-----------------

5. INTANGIBLE AND OTHER ASSETS

DECEMBER 15, 1993
-----------------
Goodwill................................................... $ 722,187
Deposits and other......................................... 2,100
--------
724,287
Less accumulated amortization.............................. (160,205)
--------
$ 564,082
--------
--------

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

DECEMBER 15, 1993
-----------------
Accounts payable........................................... $ 8,318,021
Accrued payroll and benefits............................... 1,638,505
Accrued interest........................................... 41,672
Other...................................................... 942,284
-----------------
$ 10,940,482
-----------------
-----------------

7. DEBT

DECEMBER 15, 1993
-----------------
Revolving credit facility advances......................... $ 17,565,233
-----------------
-----------------
Long-term debt:
Debt repaid upon acquisition............................. $ 12,279,991
Capitalized lease obligations (Note 8)................... 794,215
-----------------
13,074,206
Less current portion....................................... (13,074,206)
-----------------
$ --
-----------------
-----------------

In connection with the acquisition by Suiza Holdings, L.P. described in Note
1, the Pre-acquisition Suiza-Puerto Rico debt, including revolving credit
facility advances, were assumed and repaid on December 16, 1993.

CAPITAL LEASE OBLIGATIONS AND OTHER -- Capital lease obligations represent
primarily machinery and equipment financing obligations which are payable in
monthly installments of principal and interest and are collateralized by the
related assets financed.

F-36
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

8. LEASES
Suiza-Puerto Rico leases certain property, plant and equipment used in its
operations under both capital and operating lease agreements. Such leases, which
are primarily for equipment and vehicles, have lease terms ranging from five to
seven years. Certain of the operating lease agreements require the payment of
additional rentals based on units produced. Rent expense, including additional
rent, was $351,000 for the period from December 31, 1992 to December 15, 1993.

9. INCOME TAXES
The following is a reconciliation of income taxes reported in the combined
statements of operations:

PERIOD ENDED
DECEMBER 15,
1993
(50 WEEKS)
-------------
Tax expense at statutory rates............................. $ 4,473,031
Tax benefit from tax-exempt earnings....................... (4,348,317)
Deferred tax benefit....................................... (2,734,497)
Other...................................................... 363,574
-------------
$ (2,246,209)
-------------
-------------

During 1993, the Department of Treasury of the Commonwealth of Puerto Rico
completed an examination of Suiza Dairy Corporation's income tax returns through
fiscal year 1992. As the result of this examination, the Department of Treasury
assessed Suiza Dairy Corporation additional taxes to recapture tax deductions
taken for flexible depreciation in prior years. During the period ended December
15, 1993, an agreement was reached with the Department of Treasury of the
Commonwealth of Puerto Rico whereby Suiza Dairy Corporation agreed to pay
$3,000,000 (including interest assessed of $604,000) to settle all claims
related to flexible depreciation and to eliminate any temporary differences
related to depreciation in the future. As a result of this settlement of all
flexible depreciation claims, excess deferred tax liabilities of $2,734,497 were
recognized as a tax benefit.

10. EMPLOYEES SAVINGS AND PROFIT SHARING PLAN
The companies sponsor an employees savings and profit sharing plan.
Employees who are both 21 years of age and have completed one or more years of
service are eligible to participate in the plan. The employees participating in
the plan can make contributions to the plan of up to 8% of their annual
compensation, and the companies can elect to match such contributions, at the
discretion of the boards of directors. The matching amount during 1993 was set
at a rate of $.75 for each dollar contributed by the employees. In addition, the
companies can make an additional profit sharing contribution at the discretion
of the companies' boards of directors. During the period from December 31, 1992
to December 15, 1993, Suiza-Puerto Rico accrued profit sharing expense of
$828,000.

11. SUPPLEMENTAL CASH FLOW INFORMATION
Cash used to pay interest during the period from December 31, 1992 to
December 15, 1993, amounted to approximately $2,313,000.

Cash used to pay taxes during the period from December 31, 1992 to December
15, 1993, amounted to approximately $1,084,000.

Noncash transactions during the period ended December 15, 1993, included the
distribution of the net assets of the fruit business of Suiza Dairy Corporation
to stockholders and the contribution of such net assets to Suiza Fruit
Corporation in exchange for the issuance of common stock in the amount of
$548,358.

F-37
<PAGE>
PRE-ACQUISITION SUIZA-PUERTO RICO

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

12. COMMITMENTS AND CONTINGENCIES
The companies are a party, in the ordinary course of business, to certain
claims and litigation. In management's opinion, the settlement of such matters
is not expected to have a material impact on the combined financial statements.

F-38
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Velda Farms, Inc.
Dallas, Texas

We have audited the accompanying balance sheets of Velda Farms, Inc. (a
wholly owned subsidiary of The Morningstar Group, Inc. ("Pre-acquisition Velda
Farms")) as of April 9, 1994 and December 31, 1993, and the related statements
of operations, equity (deficit) and cash flows for the period from January 1,
1994 to April 9, 1994, and for the year ended December 31, 1993. These financial
statements are the responsibility of Pre-acquisition Velda Farms' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Pre-acquisition Velda Farms at April 9, 1994
and December 31, 1993 and the results of its operations and its cash flows for
the period from January 1, 1994 to April 9, 1994 and the year ended December 31,
1993 in conformity with generally accepted accounting principles.

Effective April 10, 1994, as discussed in Note 1, Pre-acquisition Velda
Farms was acquired by Velda Holdings, Inc. and Velda Holdings, L.P.

DELOITTE & TOUCHE LLP

Dallas, Texas
November 4, 1994

F-39
<PAGE>
PRE-ACQUISITION VELDA FARMS
BALANCE SHEETS
DECEMBER 31, 1993 AND APRIL 9, 1994
ASSETS

DECEMBER 31,
1993 APRIL 9, 1994
------------- -------------
CURRENT ASSETS:
Cash........................................... $ 2,219 $ 1,425
Accounts receivable (Note 2)................... 10,066,504 12,072,851
Inventories (Note 3)........................... 4,063,307 3,925,354
Prepaid expenses and other current assets...... 31,882 228,627
------------- -------------
Total current assets......................... 14,163,912 16,228,257
PROPERTY, PLANT AND EQUIPMENT (Note 4)........... 13,627,432 13,425,470
INTANGIBLE AND OTHER ASSETS (Note 5)............. 10,423,366 10,213,730
------------- -------------
TOTAL............................................ $ 38,214,710 $ 39,867,457
------------- -------------
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable and accrued expenses (Note 6). $ 8,597,223 $ 9,398,931
Intercompany payables to parent................ 899,021 1,010,578
Current portion of long-term debt (Note 7)..... 87,021 76,061
------------- -------------
Total current liabilities.................... 9,583,265 10,485,570
LONG-TERM DEBT (Note 7).......................... 30,497,325 30,517,346
COMMITMENTS AND CONTINGENCIES (Notes 8 and 12)
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, par value $1.00 per share; 1,000
shares authorized, issued and outstanding....... 1,000 1,000
Retained earnings (deficit).................... (1,866,880) (1,136,459)
------------- -------------
Total equity (deficit)....................... (1,865,880) (1,135,459)
------------- -------------
TOTAL............................................ $ 38,214,710 $ 39,867,457
------------- -------------
------------- -------------

See notes to financial statements.

F-40
<PAGE>
PRE-ACQUISITION VELDA FARMS

STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1993
PERIOD FROM JANUARY 1, 1994 TO APRIL 9, 1994

PERIOD FROM
JANUARY 1,
1994 TO
APRIL 9,
1993 1994
-------------- -------------
NET SALES...................................... $ 125,907,847 $ 38,268,830
COST OF SALES.................................. 95,145,659 29,462,819
-------------- -------------
Gross profit............................... 30,762,188 8,806,011
OPERATING EXPENSES:
Selling and distribution..................... 20,459,855 5,901,185
General and administrative................... 3,789,260 1,009,012
Amortization of intangibles.................. 797,174 178,449
Parent administrative allocation............. 1,270,937 257,720
Parent restructuring allocation.............. 1,022,761
-------------- -------------
Total operating expenses................... 27,339,987 7,346,366
-------------- -------------
INCOME FROM OPERATIONS......................... 3,422,201 1,459,645
OTHER (INCOME) EXPENSE:
Interest expense, including amortization
of deferred financing costs................. 2,546,343 639,058
Other........................................ (34,260) 90,166
-------------- -------------
Total other expense........................ 2,512,083 729,224
-------------- -------------
INCOME BEFORE INCOME TAXES..................... 910,118 730,421
INCOME TAXES (Note 9)..........................
-------------- -------------
NET INCOME..................................... $ 910,118 $ 730,421
-------------- -------------
-------------- -------------

See notes to financial statements.

F-41
<PAGE>
PRE-ACQUISITION VELDA FARMS

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

YEAR ENDED DECEMBER 31, 1993 AND
PERIOD FROM JANUARY 1, 1994 TO APRIL 9, 1994

<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993......................... $ 1,000 $ -- $ (2,776,998) $ (2,775,998)
Net income..................................... 910,118 910,118
----------- ----------- ------------- -------------
BALANCE, DECEMBER 31, 1993....................... 1,000 -- (1,866,880) (1,865,880)
Net income for the period from January 1,
1994 to April 9, 1994......................... 730,421 730,421
----------- ----------- ------------- -------------
BALANCE, APRIL 9, 1994........................... $ 1,000 $ -- $ (1,136,459) $ (1,135,459)
----------- ----------- ------------- -------------
----------- ----------- ------------- -------------
</TABLE>

See notes to financial statements.

F-42
<PAGE>
PRE-ACQUISITION VELDA FARMS

STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1993 AND
PERIOD FROM JANUARY 1, 1994 TO APRIL 9, 1994

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1994 TO APRIL 9,
1993 1994
------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 910,118 $ 730,421
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 1,308,366 344,728
Amortization of intangible assets, including deferred financing costs........... 913,626 210,034
Changes in operating assets and liabilities:
Accounts receivable........................................................... (848,604) (2,006,347)
Inventories................................................................... 148,046 137,953
Prepaid expenses and other assets............................................. (3,048) (197,143)
Accounts payable and other accrued expenses................................... 975,773 801,708
------------- -------------
Net cash provided by operating activities................................... 3,404,277 21,354
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.............................................................. (336,023) (122,745)
------------- -------------
Net cash used in investing activities....................................... (336,023) (122,745)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt................................................................ (57,157) (10,960)
Net repayments of intercompany payables........................................... (3,010,703) 111,557
------------- -------------
Net cash provided by (used in) financing activities......................... (3,067,860) 100,597
------------- -------------
INCREASE (DECREASE) IN CASH......................................................... 394 (794)
CASH AT BEGINNING OF PERIOD......................................................... 1,825 2,219
------------- -------------
CASH AT END OF PERIOD............................................................... $ 2,219 $ 1,425
------------- -------------
------------- -------------
</TABLE>

See notes to financial statements.

F-43
<PAGE>
PRE-ACQUISITION VELDA FARMS

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 1993 AND
PERIOD FROM JANUARY 1, 1994 TO APRIL 9, 1994

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Velda Farms, Inc. ("Pre-acquisition Velda
Farms" or "Velda Farms") was a wholly owned subsidiary of The Morningstar Group
Inc. (the "Parent"). Effective April 10, 1994, Velda Holdings, Inc. and Velda
Holdings, L.P. (a limited partnership) acquired Velda Farms, Inc. from the
Parent.

Velda Farms manufactures and distributes fresh milk, ice cream and related
products throughout peninsular Florida under its own brand names and under
brands licensed from third parties to various customers, including food service
accounts, convenience stores, club stores and schools. Velda Farms provides
credit terms to customers generally ranging to up to 30 days, performs ongoing
credit evaluations of its customers and maintains allowances for potential
credit losses based on historical experience.

INVENTORIES -- Pasteurized and raw milk inventories are stated at the lower
of average cost or market. Raw material, packaging material and case and
container inventories are stated at the lower of cost, using the first-in,
first-out ("FIFO") method, or market. Manufactured finished goods inventories
are stated at the lower of average production cost or market. Production costs
include raw materials, direct labor and indirect production and overhead costs.

PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated at
cost. Depreciation and amortization is provided using the straight-line method
over the estimated useful lives of the assets, as follows:

<TABLE>
<CAPTION>
ASSET USEFUL LIFE
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Buildings and improvements............................................. Ten to 40 years
Machinery and equipment................................................ Five to 20 years
Furniture and fixtures................................................. Three to ten years
</TABLE>

INTANGIBLE ASSETS -- Intangible assets include the following intangibles
which are amortized over their related useful lives:

<TABLE>
<CAPTION>
INTANGIBLE ASSET USEFUL LIFE
- ------------------------------------- -------------------------------------------------------
<S> <C>
Goodwill............................. Straight-line method over 40 years
Customer list........................ Straight-line method over eight years
Other identifiable intangibles....... Straight-line method over five to 15 years
Deferred financing costs............. Interest method over the terms of the related debt
</TABLE>

Velda Farms periodically assesses the net realizable value of its intangible
assets as well as all other assets by comparing the expected future net
operating cash flows, undiscounted and without interest charges, to the carrying
amount of the underlying assets. Velda Farms would evaluate a potential
impairment if the recorded value of these assets exceeded the associated future
net operating cash flows. Any potential impairment loss would be measured as the
amount by which the carrying value exceeds the fair value of the asset. Fair
value of assets would be measured by market value, if an active market exists,
or by a forecast of expected future net operating cash flows, discounted at a
rate commensurate with the risk involved.

REVENUE -- Revenue is recognized when the product is shipped to the
customer.

INCOME TAXES -- Pre-acquisition Velda Farms was included in the consolidated
tax return of the Parent. Current and deferred income tax expense was allocated
to Pre-acquisition Velda Farms by the Parent in

F-44
<PAGE>
PRE-ACQUISITION VELDA FARMS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accordance with the provisions of Statement of Financial Accounting Standards
No. 109 ("SFAS 109"), "Accounting for Income Taxes." Under SFAS 109, deferred
income taxes are provided for temporary differences in the financial statement
and tax bases of assets and liabilities using the current tax rates in effect.
Deferred tax assets, including the benefit for net operating loss carryforwards,
are evaluated based on the guidelines in SFAS 109 for realization and may be
reduced by a valuation allowance. As of December 31, 1993 and April 9, 1994,
there were no material amounts of current or deferred income tax liabilities
included in the Pre-acquisition Velda Farms intercompany payable account.

CORPORATE ALLOCATIONS -- The Parent has allocated certain assets and
liabilities, such as goodwill, deferred financing costs, other intangibles and
debt, to Pre-acquisition Velda Farms in accordance with the Pre-acquisition
Velda Farms' pro rata share of such assets and liabilities. In addition, the
Parent has allocated significant expenses to Pre-acquisition Velda Farms using
the following allocation bases:

<TABLE>
<CAPTION>
EXPENSE ALLOCATION BASE
- ------------------------------------------ ---------------------------------------------------------------------
<S> <C>
Interest expense.......................... 8% on the balance of the note payable to Parent
Amortization of intangibles............... As described in "Intangible Assets" above
Corporate, general and administrative
expense.................................. Corporate overhead costs for accounting and finance, executive, human
resources, legal, management information systems and certain other
corporate departments, which consist primarily of salary costs, were
allocated based on the percentage of sales, property, employees,
specific product sales and number of data processing users of
Pre-acquisition Velda Farms to the Parent's consolidated amounts
Profit sharing expense.................... Determined by the Parent based on its overall performance and
allocated to Pre-acquisition Velda Farms based on its employees'
participation
Restructuring expense..................... Estimated charges of the Parent for severance pay, a chairman's
contract and the Parent's data processing conversion were allocated
to Pre-acquisition Velda Farms as determined by the Parent
Income taxes.............................. As described in "Income Taxes" above
Relocation costs.......................... At a rate of $7,500 per month for normal personnel relocations within
the operations group
Data processing charges................... The Parent's outside data processing service bureau charges were
allocated based on Pre-acquisition Velda Farms' usage as a
proportion of the total consolidated usage
Employee benefits expense................. Costs as estimated by the Parent for employee benefits such as
medical and dental care, term life insurance and long-term
disability coverages under the Parent's plans
Workers' compensation expense............. As estimated by the Parent based on the Parent's overall cost and the
experience of Pre-acquisition Velda Farms
</TABLE>

F-45
<PAGE>
PRE-ACQUISITION VELDA FARMS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

<TABLE>
<CAPTION>
EXPENSE ALLOCATION BASE
- ------------------------------------------ ---------------------------------------------------------------------
Insurance expense:
<S> <C>
General and other liability............. Based on the percentage of Pre-acquisition Velda Farms' sales to
consolidated sales
Automobile liability...................... Based on historical claims and losses
Property liability........................ Based on actual property values of Pre-acquisition Velda Farms
</TABLE>

CASH EQUIVALENTS -- Velda Farms considers all highly liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.

2. ACCOUNTS RECEIVABLE

DECEMBER 31, APRIL 9,
1993 1994
------------- -------------
Trade customers.................................. $ 10,187,723 $ 12,308,914
Other............................................ 51,833 74,199
------------- -------------
10,239,556 12,383,113
Less allowance for doubtful accounts............. (173,052) (310,262)
------------- -------------
$ 10,066,504 $ 12,072,851
------------- -------------
------------- -------------

3. INVENTORIES

DECEMBER 31, APRIL 9,
1993 1994
------------ ------------
Raw materials.................................... $ 503,238 $ 450,845
Packaging materials.............................. 325,882 310,422
Finished goods................................... 2,500,914 2,440,614
Cases and containers............................. 733,273 723,473
------------ ------------
$4,063,307 $ 3,925,354
------------ ------------
------------ ------------

4. PROPERTY, PLANT AND EQUIPMENT

DECEMBER 31, APRIL 9,
1993 1994
------------- -------------
Land............................................. $ 3,918,876 $ 3,918,876
Buildings and improvements....................... 6,610,137 6,621,091
Machinery and equipment.......................... 8,082,235 8,269,883
Furniture and fixtures........................... 2,107,911 2,081,448
------------- -------------
20,719,159 20,891,298
Less accumulated depreciation and amortization... (7,091,727) (7,465,828)
------------- -------------
$ 13,627,432 $ 13,425,470
------------- -------------
------------- -------------

F-46
<PAGE>
PRE-ACQUISITION VELDA FARMS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. INTANGIBLE AND OTHER ASSETS

DECEMBER 31, APRIL 9,
1993 1994
------------- -------------
Goodwill......................................... $ 6,405,880 $ 6,405,880
Customer list.................................... 2,332,067 2,332,067
Other identifiable intangibles................... 3,093,920 3,093,920
Deferred financing costs......................... 588,414 588,414
Deposits and other............................... 197,930 198,328
------------- -------------
12,618,211 12,618,609
Less accumulated amortization.................... (2,194,845) (2,404,879)
------------- -------------
$ 10,423,366 $ 10,213,730
------------- -------------
------------- -------------

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

DECEMBER 31, APRIL 9,
1993 1994
------------ ------------
Accounts payable................................. $6,740,086 $ 7,675,488
Accrued payroll and benefits..................... 1,459,441 1,221,303
Other............................................ 397,696 502,140
------------ ------------
$8,597,223 $ 9,398,931
------------ ------------
------------ ------------

Trade accounts payable at December 31, 1993, and April 9, 1994, includes
$707,929 and $441,505, respectively, due to Bancroft Dairy, which is a wholly
owned subsidiary of the Parent.

7. DEBT

DECEMBER 31, APRIL 9,
1993 1994
------------- -------------
Long-term debt:
Note payable to the Parent..................... $ 30,373,652 $ 30,373,652
Capitalized lease obligations (Note 8)......... 210,694 219,755
------------- -------------
30,584,346 30,593,407
Less current portion............................. (87,021) (76,061)
------------- -------------
$ 30,497,325 $ 30,517,346
------------- -------------
------------- -------------

The note payable to the Parent was not assumed in the acquisition described
in Note 1.

Capital lease obligations represent machinery and equipment financing
obligations which are payable in monthly installments of principal and interest
and are collateralized by the related assets financed.

8. LEASES
Velda Farms leases certain property, plant and equipment used in its
operations under both capital and operating lease agreements. Such leases, which
are primarily for machinery and equipment and vehicles, have lease terms ranging
from two to nine years. Certain of the operating lease agreements require the
payment of additional rentals for maintenance based on miles driven or units
produced. Rent expense, including additional rent, was $4,440,454 and $1,238,823
for the year ended December 31, 1993, and the period from January 1, 1994 to
April 9, 1994, respectively.

F-47
<PAGE>
PRE-ACQUISITION VELDA FARMS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. LEASES (CONTINUED)
The composition of capital leases which are reflected as property, plant and
equipment in the balance sheets is as follows:

DECEMBER 31, APRIL 9,
1993 1994
------------ -----------
Machinery and equipment.......................... $ 382,125 $ 382,125
Less accumulated amortization.................... (103,622) (113,176)
------------ -----------
$ 278,503 $ 268,949
------------ -----------
------------ -----------

9. INCOME TAXES
There is no current or deferred income tax expense for the year ended
December 31, 1993, or for the period ended April 9, 1994, as a result of
available net operating loss carryforwards in sufficient amounts to eliminate
any deferred income tax liabilities.

The following is a reconciliation of income taxes reported in the statements
of operations:

PERIOD FROM
JANUARY 1,
1994 TO
DECEMBER 31, APRIL 9,
1993 1994
------------ -----------
Tax expense at statutory rates................... $ 350,000 $ 281,000
Net operating loss carryforwards................. (415,000) (299,000)
Other............................................ 65,000 18,000
------------ -----------
$ -- $ --
------------ -----------
------------ -----------

10. EMPLOYEES SAVINGS AND PROFIT SHARING PLAN
Velda Farms sponsors an employees savings and profit sharing plan. Employees
of Velda Farms who have completed one or more years of service are eligible to
participate in the plan. The employees participating in the plan can make
contributions to the plan of up to 6% of their annual compensation and Velda
Farms can elect, on a discretionary basis, to match such contributions. During
the year ended December 31, 1993, and the period from January 1, 1994 to April
9, 1994, the accrued profit sharing expense was $218,000 and $60,000,
respectively.

11. SUPPLEMENTAL CASH FLOW INFORMATION
Cash used to pay interest, primarily to the Parent, which was cleared
through the intercompany payable account, was approximately $2.4 million for the
year ended December 31, 1993, and for the period from January 1, 1994 to April
9, 1994, was approximately $607,000. Noncash transactions of Pre-acquisition
Velda Farms during the year ended December 31, 1993, included the acquisition of
equipment through capital lease obligations of $60,305.

12. COMMITMENTS AND CONTINGENCIES
Velda Farms is a party in the ordinary course of business to certain claims
and litigation. In management's opinion, the settlement of such matters is not
expected to have a material impact on the financial statements.

13. MAJOR CUSTOMER
Velda Farms is a party to a supply contract with The Southland Corporation
("Southland") which requires certain of Southland's retail sites to purchase
their product requirements from the Company at formula prices. Sales under this
supply contract, which expires in December 1996, approximated $22.9 million, or
18% of net sales, for the year ended December 31, 1993; and $6.1 million, or 16%
of net sales, for the period from January 1, 1994 to April 9, 1994.

F-48
<PAGE>
PRE-ACQUISITION VELDA FARMS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

14. RELATED PARTY TRANSACTIONS
As discussed in Note 1, significant costs and expenses were allocated to
Pre-acquisition Velda Farms by the Parent. The following is a summary of such
corporate allocations and their classification in the statements of operations:

PERIOD FROM
JANUARY 1,
YEAR ENDED 1994 TO
DECEMBER 31, APRIL 9,
1993 1994
------------- ------------
Cost of sales:
Workers' compensation.......................... $ 279,488 $ 62,360
Employee benefits.............................. 576,304 130,956
Insurance...................................... 303,585 83,489
------------- ------------
1,159,377 276,805
------------- ------------
Selling and distribution:
Workers' compensation.......................... 579,303 134,215
Employee benefits.............................. 1,122,780 281,852
Insurance...................................... 531,600 146,190
------------- ------------
2,233,683 562,257
------------- ------------
General and administrative:
Workers' compensation.......................... 127,921 26,113
Employee benefits.............................. 245,751 54,838
Relocation..................................... 87,888 22,500
EDP services................................... 703,403 227,678
------------- ------------
1,164,963 331,129
------------- ------------
Parent administrative costs...................... 1,270,937 257,720
Restructuring costs.............................. 1,022,761
Amortization of intangibles...................... 797,174 178,449
Interest expense................................. 2,546,343 639,058
------------- ------------
Total allocated costs and expenses........... $ 10,195,238 $ 2,245,418
------------- ------------
------------- ------------

Management believes that the above allocated costs and expenses were
reasonable costs of the Parent which were allocated to all of the Parent's
subsidiaries. However, management believes that the Parent administrative costs
and the restructuring costs allocated to Velda Farms by the Parent are costs
which Velda Farms would not have incurred on a stand-alone basis. Management
believes the remaining allocated costs are competitive with costs to acquire
similar services.

F-49
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Garrido & Compania, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Garrido &
Compania, Inc. and Subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of earnings, changes in stockholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

As discussed in note 1 to the consolidated financial statements, effective July
19, 1996, Garrido & Compania, Inc.'s wholly-owned subsidiaries, Garrido Alto
Grande Corp., Alto Grande Export Corp. and Guest Choice, Inc. merged with and
into Garrido & Compania, Inc. Simultaneously on the same date, Garrido &
Compania, Inc. was acquired by G Acquisition Corp., who changed its name to
Garrido & Compania, Inc. These mergers and acquisition result in a new
accounting entity whose financial statements are not included herewith.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Garrido & Compania,
Inc. and Subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1996 in conformity with generally accepted accounting principles.

(Continued)

F-50

<PAGE>

As discussed in notes 1 and 7 to the consolidated financial statements,
effective July 1, 1993, Garrido & Compania, Inc. and Subsidiaries changed their
method of accounting for income taxes to adopt the provisions of Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 109, ACCOUNTING FOR INCOME TAXES.

KPMG Peat Marwick, LLP

San Juan, Puerto Rico
August 23, 1996

Stamp No. 1353935 of the Puerto Rico
Society of Certified Public Accountants
was affixed to the record copy of this report.

F-51

<PAGE>
GARRIDO & COMPANIA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 1996 and 1995

<TABLE>
ASSETS 1996 1995
------ ------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents of $8,694,471
in 1996 and $4,830,762 in 1995 (note 1) $ 10,736,810 $ 4,969,014
------------- ------------
Accounts receivable:
Trade (note 5) 2,420,152 2,756,225
Other 31,010 106,788
------------- ------------
2,451,162 2,863,013
Less allowance for doubtful accounts 100,000 -
------------- ------------
Accounts receivable, net 2,351,162 2,863,013

Inventories (notes 3 and 5) 1,893,681 2,141,911
Other prepaid expenses 29,149 187,554
------------- ------------
Total current assets 15,010,802 10,161,492
------------- ------------
Investments in government securities 11,229 14,062
------------- ------------
Property and equipment, at cost (notes 2, 4 and 5) 4,099,079 5,193,094
Less accumulated depreciation and amortization 2,570,627 3,341,099
------------- ------------
Property and equipment, net 1,528,452 1,851,995

Other assets, including unamortized cost of intangibles of
$97,335 in 1996 and $129,896 in 1995 (note 2) 121,245 177,913
------------- ------------
$ 16,671,728 $ 12,205,462
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (notes 1 and 5) $ 2,115,000 $ 217,616
Current installments of long-term debt (notes 1 and 5) 711,429 711,428
Current portion of notes payable to former
stockholders (notes 1 and 5) 188,314 143,759
Accounts payable and accrued expenses (note 2) 1,083,607 736,368
Income taxes payable (note 7) 265,088 90,849
------------- ------------
Total current liabilities 4,363,438 1,900,020
Long-term debt, excluding current installments (notes 1 and 5) 1,499,523 2,210,952
Notes payable to former stockholders, excluding
current portion (notes 1 and 5) 469,269 664,853
Deferred income taxes (note 7) 34,277 788,598
Other liabilities (note 2) - 85,000
------------- ------------
Total liabilities 6,366,507 5,649,423
------------- ------------
Stockholders' equity:
Common stock, $100 par value. Authorized 10,000
shares; 586 shares issued and outstanding (note 5) 58,600 58,600
Retained earnings 10,246,621 6,497,439
------------- ------------
Total stockholders' equity 10,305,221 6,556,039

Commitments and contingencies (notes 6, 7 and 8)
------------- ------------
$ 16,671,728 $ 12,205,462
------------- ------------
------------- ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-52

<PAGE>

GARRIDO & COMPANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Earnings

Years ended June 30, 1996, 1995 and 1994

1996 1995 1994
----------- ----------- -----------
Net sales $26,219,899 $25,803,634 $24,747,415
Cost of sales 17,793,564 18,200,625 17,571,451
----------- ----------- -----------
Gross profit 8,426,335 7,603,009 7,175,964

Selling, general and
administrative expenses
(notes 6 and 8) 5,034,182 4,493,311 4,968,225
----------- ----------- -----------
Operating income 3,392,153 3,109,698 2,207,739

Other income/(expenses):
Interest expense (notes 2 and 5) (299,885) (353,439) (422,965)
Other, net 327,450 56,028 12,610
----------- ----------- -----------
Total other income/
(expense), net 27,565 (297,411) (410,355)
----------- ----------- -----------

Earnings before income taxes
and cumulative effect of
change in accounting
principle 3,419,718 2,812,287 1,797,384
----------- ----------- -----------

Income taxes (note 7)
Current (424,857) (336,077) (254,358)
Deferred 754,321 (134,260) (34,910)
----------- ----------- -----------
329,464 (470,337) (289,268)
----------- ----------- -----------
Earnings before cumulative
effect of change in
accounting principle 3,749,182 2,341,950 1,508,116
----------- ----------- -----------
Cumulative effect at July 1, 1993
of change in accounting principle
(notes 1 and 7) - - (103,074)
----------- ----------- -----------
Net earnings $ 3,749,182 $ 2,341,950 $ 1,405,042
----------- ----------- -----------
----------- ----------- -----------
Earnings per share of common
stock (note 1):
Before cumulative effect of
change in accounting principle $ 6,398 $ 3,997 $ 2,356

Cumulative effect of change in
accounting principle (notes 1
and 7) - - (161)
----------- ----------- -----------
Net earnings per share (note 1) $ 6,398 $ 3,997 $ 2,195
----------- ----------- -----------
----------- ----------- -----------

See accompanying notes to consolidated financial statements.

F-53
<PAGE>

GARRIDO & COMPANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

June 30, 1996, 1995 and 1994

Total
Common Retained Stockholders'
Stock Earnings Equity
------- ----------- -------------
Balance at June 30, 1993 $65,100 $ 3,493,947 $ 3,559,047

Net earnings - 1,405,042 1,405,042

Acquisition and cancellation of
65 shares of common stock (note 5) (6,500) (743,500) (750,000)
------- ----------- -------------

Balance at June 30, 1994 58,600 4,155,489 4,214,089

Net earnings - 2,341,950 2,341,950
------- ----------- -------------

Balance at June 30, 1995 58,600 6,497,439 6,556,039

Net earnings - 3,749,182 3,749,182
------- ----------- -------------

Balance at June 30, 1996 $58,600 $10,246,621 $10,305,221
------- ----------- -------------
------- ----------- -------------

See accompanying notes to consolidated financial statements.

F-54
<PAGE>

GARRIDO & COMPANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended June 30, 1996, 1995 and 1994
Increase/(Decrease) in Cash and Cash Equivalents

<TABLE>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,749,182 $ 2,341,950 $ 1,405,042
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 543,277 633,298 656,814
Deferred income taxes (754,321) 134,260 137,984
Net gain/(loss) in disposition of property
and equipment 8,144 - (1,800)
Amortization on discount on notes payable to
former stockholders 10,092 10,396 10,613
Change in assets and liabilities:
Decrease/(increase) in accounts receivable,
net 511,851 (427,983) (252,874)
Decrease/(increase) in inventories 248,230 4,371,240 (1,954,132)
Decrease in prepaid income tax - 23,357
Decrease/(increase) in other prepaid
expenses 158,405 111,003 (70,319)
Decrease/(increase) in other assets 48,144 (37,071) 4,668
Increase/(decrease) in accounts payable and
accrued expenses 347,239 (49,710) 205,368
Decrease in obligation under capital lease - (19,266) (19,202)
Increase/(decrease) in other liabilities (85,000) (85,000) (149,876)
Increase in income tax payable 174,239 1,373 89,476
----------- ----------- -----------
Total adjustments 1,210,300 4,642,540 (1,319,923)
----------- ----------- -----------
Net cash provided by operating activities 4,959,482 6,984,490 85,119
----------- ----------- -----------
Cash flows from investing activities:
Principal returns on investment in government
securities 2,833 3,343 2,765
Proceeds on sale of property and equipment 1,000 8,600 3,100
Capital expenditures for additions to property
and equipment (220,354) (312,544) (261,299)
----------- ----------- -----------
Net cash used in investing activities (216,521) (300,601) (255,434)
----------- ----------- -----------
Cash flows from financing activities:
Net borrowings under various lines of credit
agreements and demand notes payable 8,048,242 1,700,000 962,269
Payments of long-term debt and note payable to
bank (6,862,287) (3,215,049) (565,476)
Payments on principal of notes payable to
former stockholders (161,120) (351,370) (46,886)
Acquisition and cancellation of common stock - - (269,123)
----------- ----------- -----------
Net cash provided by/(used in) financing
activities 1,024,835 (1,866,419) 80,784
----------- ----------- -----------
Net increase/(decrease) in cash (note 9) 5,767,796 4,817,470 (89,531)
Cash and cash equivalents at beginning of year 4,969,014 151,544 241,075
----------- ----------- -----------
Cash and cash equivalents at end of year $10,736,810 $ 4,969,014 $ 151,544
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-55

<PAGE>

GARRIDO & COMPANIA, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 1996 and 1995

(1) NATURE OF BUSINESS, AFFILIATION, SUBSEQUENT EVENTS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

Garrido & Compania, Inc. and its subsidiaries (the Company)are mainly
engaged in the processing and roasting of raw coffee for sale and
distribution under the tradenames of Cafe Crema, Cafe Adjuntas, Cafe Pilon,
Cafe Expreso, Cafe Alto Grande and under Executive and Aroma Coffee Break
Services. In addition, the Company exports certain products to be sold
outside the United States' territories, such as Japan, Sweden, and other
European countries, which currently represents less than 10% of sales.

AFFILIATION

The Company is 100% owner of the outstanding common stock of Garrido Alto
Grande Corp. (GAGC), Alto Grande Export Corp. (AGEC) and Guest Choice, Inc.
(GC).

Guest Choice, Inc. was incorporated under the laws of Puerto Rico on
February 8, 1996, and will be engaged in providing and servicing coffee to
hotels and other businesses in Puerto Rico, the United States and the
Caribbean. Guest Choice, Inc. main offices are located in the state of
Arizona. Guest Choice, Inc. did not have any sales during 1996, and total
assets related to these operations amounted to approximately $1,122,000 as
of June 30, 1996.

SUBSEQUENT EVENTS

Effective July 19, 1996, Garrido & Compania, Inc. and subsidiaries were
acquired by G Acquisition Corp., a wholly-owned subsidiary of Suiza Foods
Corporation through the purchase of all of its outstanding common stock.
Simultaneously, Garrido & Compania, Inc. merged with and into its wholly-
owned subsidiaries. Subsequent to the mergers and acquisition, G
Acquisition Corp. changed its name to Garrido & Compania, Inc.

The abovementioned mergers and acquisition result in a new accounting
entity after June 30, 1996 whose financial statements are not included
herewith. The accompanying consolidated financial statements relate
to the Company and its subsidiaries as of June 30, 1996, which is prior
to the effectiveness of the mergers and acquisition of July 19, 1996.

As a part of the aforementioned transactions, on or about July 19, 1996
all the outstanding long-term debt, including certain term loans, revolving
and temporary lines of credit, notes payable to former stockholders and
other notes payable included as part of other liabilities in the
consolidated balance sheets at June 30, 1996, were assumed and paid in
full by the stockholders of the Company.

F-56

<PAGE>

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in the
preparation of the consolidated financial statements.

(b) INVENTORIES

Inventories are stated at the lower of cost (average cost) or
market (net realizable value). For finished goods inventories, the
cost is comprised of the cost of coffee, the cost of packaging
material and the cost of labor and overhead.

Property and equipment are stated at cost. Major renewals and
betterments are charged to property accounts. Replacements,
maintenance and repairs which do not improve or extend the life of the
respective assets are charged to expense.

(d) DEPRECIATION AND AMORTIZATION

Depreciation and amortization are provided over the estimated
useful life of the respective assets under the straight-line method.
Useful lives of the depreciable assets fluctuate from 3 to 20 years.
Leasehold improvements are amortized over the shorter of the lease
term or estimated useful life of the asset.

(e) INTANGIBLES

Intangibles consist primarily of customer lists, benefits from
covenants not to compete, trademarks, confidential formulas, right of
use of water wells and others. The cost of these intangible assets
are being amortized over their estimated useful lives under the
straight-line method.

(f) INCOME TAXES

Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, and
reported the cumulative effect of that change in the method of
accounting for income taxes in the 1994 consolidated statement of
earnings.

Statement No. 109 requires a change from the deferred method of
accounting for income taxes of APB Opinion 11 to the asset and
liability method of accounting for income taxes. Under the asset and
liability method of Statement No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

F-57

<PAGE>

(g) CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents. Cash equivalents for 1996
and 1995 consist of U.S. Treasury bills amounting to $8,694,471 and
$4,830,762, respectively, with market value of $8,752,487 and
$4,860,338, respectively. Management has the ability and intent to
hold these cash equivalents until maturity.

(h) NET EARNINGS PER COMMON SHARE

Net Earnings per common share is based upon the weighted average
number shares of common stock outstanding during the year, which
equals 586 shares for 1996 and 1995 and 640 shares for 1994.

(i) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash and cash equivalents,
trade and other receivables, investments, trade accounts payable,
other accrued liabilities, notes payable to banks and others and
long-term debt. At June 30, 1996 the carrying value of all financial
instruments approximated their fair value, due to their nature.

Fair value estimates are made at a specific point in time, based
on relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainty and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could
significantly affect the estimates.

(j) USE OF ESTIMATES

Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from
those estimates.

F-58

<PAGE>

(k) RECLASSIFICATION

Certain reclassifications have been made to the 1995 figures in
order to conform them with the 1996 consolidated financial statements.

(2) ASSET ACQUISITIONS

During 1991, the Company acquired certain assets from an unrelated party.
Of the total purchase price, $510,000 is payable in annual installments of
$85,000, plus interest, through 1996. Interest rate fluctuates between 9%
or prime rate, whichever is lower. As of June 30, 1996 and 1995, the
unpaid principal balance amounted to $85,000 and $170,000 respectively, of
which $85,000 is included in accounts payable and accrued expenses and the
remaining balance in 1995 is included in other liabilities. The liability
is secured by the assets acquired. As stated in note 1, amounts
outstanding at June 30, 1996 were subsequently paid on or about July 19,
1996.

During 1990, the Company also acquired certain assets from an unrelated
party. Of the total purchase price, $154,463 remained unpaid at June 30,
1995 and is included in accounts payable. Such amount was paid in full
during 1996.

(3) INVENTORIES

Inventories at June 30, 1996 and 1995 consist of the following:

1996 1995
---- ----
Raw coffee $ 925,176 $ 1,381,553
Finished goods 623,063 514,133
Bags, labels and supplies 345,442 246,225
----------- -----------
$ 1,893,681 $ 2,141,911
----------- -----------
----------- -----------

(4) PROPERTY AND EQUIPMENT

Property and equipment at June 30, 1996 and 1995 consist of the following:

1996 1995
---- ----
Land $ 157,464 $ 157,464
Building 723,488 727,109
Machinery and equipment 2,379,515 2,914,072
Motor vehicles 294,544 575,244
Data processing equipment 115,181 114,677
Furniture and fixtures 110,584 318,968
Leasehold improvements 318,303 385,560
----------- -----------
Total $ 4,099,079 $ 5,193,094
----------- -----------
----------- -----------

F-59

<PAGE>

(5) INDEBTEDNESS

Long-term debt at June 30, 1996 and 1995 consists of the following:

<TABLE>
1996 1995
---- ----
<S> <C> <C>
Term loan payable to bank in monthly
installments of $5,952, plus interest,
through 1998. Interest rate fluctuates
based on the prime interest rate, which at
June 30, 1996 was 8.25%. Term loan
payable is partially secured by land and
property of the Company. $ 130,952 $ 202,380

Term loan payable to bank in quarterly
installments of $160,000 through 2000
secured by trade receivables and
inventories. Interest rate fluctuates based
on prime rate plus 1/2%, floating. 2,080,000 2,720,000
----------- -----------

2,210,952 2,922,380
Less current installments 711,429 711,428
----------- -----------
Long-term debt, excluding current
installments $ 1,499,523 $ 2,210,952
----------- -----------
----------- -----------
</TABLE>

Notes payable to banks represent advances under revolving and temporary
lines of credit with a commercial bank amounting to $5,500,000.
Withdrawals, under these credit facilities can be made under a Master
Promissory Note and will be available for letters of credit and guarantee
letters. These facilities will be available to cover working capital needs
and for buying coffee directly from suppliers. Advances from such lines of
credit amounting to $2,115,000 in 1996 and $217,616 in 1995 are secured by
the personal guarantee of the Company's stockholders. These obligations
bear interest at 6.66%.

Notes payable to former stockholders consist of a 6% subordinated note
payable in monthly installments of $7,750, including interest, through June
1, 2007. Aggregate unpaid principal balance of these notes was $640,316
and $693,164 as of June 30, 1996 and 1995, respectively. The notes are
presented net of unamortized discounts amounting to $53,743 in 1996 and
$63,836 in 1995 which were originally computed based on the prime interest
rates at the time of their issuance. During 1994, the Company acquired and
canceled 65 shares of common stock from a former stockholder for $750,000.
At the date of the purchase $269,123 were paid and the rest was financed
through a $480,877 noninterest bearing note payable in monthly installments
of $8,333 through April 1997. Unpaid balances as of June 30, 1996 and 1995
are $71,010 and $179,284, respectively.

As stated in note 1, on or about July 19, 1996 all the aforementioned
outstanding long-term debt, notes payable to banks and notes payable to
former stockholders amounting to $4,983,535 at June 30, 1996 were assumed
and paid in full by the Company's stockholders.

F-60

<PAGE>

(6) RELATED PARTY TRANSACTIONS

The Company leases certain of its production and office facilities in
premises owned by a related party under a ten (10) year operating lease
agreement expiring in April 2005. The annual minimum lease expense is
approximately $62,000.

(7) INCOME TAX AND TAX EXEMPTIONS

Pursuant to the 1987 Puerto Rico Tax Incentives Act, Garrido Alto Grande
Corp. (GAGC) has been granted partial tax exemption from the Commonwealth
of Puerto Rico income, property and municipal taxes with respect to a
portion of its operations up to year 2011.

During 1996, the Company and Garrido Alto Grande Corp. have been granted
partial tax exemption under Law No. 225, AGRICULTURAL TAX INCENTIVES ACT OF
1995, of the Commonwealth of Puerto Rico. Under subject law, the companies
are 100% exempt from property and municipal taxes, effective for part of
the year ended June 30, 1996. Furthermore, effective for taxable year
ending June 30, 1997, the companies will be entitled to a 90% exemption on
income taxes related to their agricultural business income.

The dollar effect of the income tax saving related to the partial tax
exemption for the years ended June 30, 1996, 1995 and 1994 are $1,067,580,
$552,781 and $341,453, respectively. Per share amounts of such income tax
savings are $1,822 in 1996, $943 in 1995 and $534 in 1994.

As discussed in note 1, the Company adopted Statement No. 109 as of July 1,
1993. The cumulative effect of this change in accounting for income taxes
amounting to $103,074 was determined as of July 1, 1993 and is reported
separately in the consolidated statement of earnings for the year ended
June 30, 1994.

Income tax benefit/(expense) for the years ended June 30, 1996, 1995 and
1994 consists of:

1996 1995 1994
----------- ----------- -----------
Current $ (424,857) $ (336,077) $ (254,358)
Deferred 754,321 (134,260) (34,910)
----------- ----------- -----------
$ 329,464 $ (470,337) $ (289,268)
----------- ----------- -----------
----------- ----------- -----------

Deferred income tax expense for 1995 and 1994 is mainly related to the use
of flexible depreciation for income tax purposes and straight-line
depreciation for consolidated financial statement purposes, and the tax
effect for consolidated financial statements of current undistributed
earnings of subsidiaries as required by Statement No. 109. The 1996
deferred tax benefit arises from a reduction in the Company's effective tax
rate after considering the future tax effect of the 90% income tax
exemption under Law No. 225 referred to above and the reversal of prior
years deferred tax liability related to undistributed earnings, which will
not be paid due to the transactions described in note 1.

F-61

<PAGE>

Income tax expense for the years ended June 30, 1996, 1995 and 1994 differs
from the amounts computed by applying the Company's Puerto Rico effective
income tax rate to pretax accounting income from operations as a result of
the following:

1996 1995 1994
---------- ---------- ----------
Provision computed on pretax
accounting income, net of the
GAGC tax exemption $ 236,686 $ 236,942 $ 116,469
Add/(deduct) tax effect on the
following items:
Nondeductible expenses 44,064 17,140 14,475
Excess of depreciation per
financial statements over
depreciation for tax purposes 179,406 77,696 121,472
Tax-exempt interest income
and others (35,299) 4,299 1,942
---------- ---------- ----------
Puerto Rico income tax
current $ 424,857 $ 336,077 $ 254,358
---------- ---------- ----------
---------- ---------- ----------
Deferred income tax expense/
(benefit) is composed as follows:
Reversal of temporary difference
related to flexible depreciation
and the effect of income
tax exemption under Law No. 225 $ (336,170) $ (77,696) $ (121,472)
Unamortized discounts and
others (21,855) (23,406) (4,552)
Undistributed earnings of
wholly-owned subsidiary (396,296) 235,362 160,934
---------- ---------- ----------
Puerto Rico deferred income tax
expense/(benefit) $ (754,321) $ 134,260 $ 34,910
---------- ---------- ----------
---------- ---------- ----------

The tax effect of temporary differences that give rise to significant
portions of deferred income tax liabilities at June 30, 1996 and 1995 are
presented below:

1996 1995
--------- ----------
Flexible depreciation for tax
purposes $ 32,181 $ 368,351
Unamortized discount on notes
payable to stockholders 2,096 23,951
Undistributed earnings of wholly-
owned subsidiary - 396,296
--------- ----------
$ 34,277 $ 788,598
--------- ----------
--------- ----------

As of June 30, 1996, the Company is being audited by the Treasury
Department of the Commonwealth of Puerto Rico for the year 1993.
Management believes that no significant deficiencies will result from this
audit. However, as per the terms of the purchase agreement related to the
acquisition as stated in note 1, any deficiencies will be assumed and paid
by the Company's stockholders.

F-62

<PAGE>

As of June 30, 1996, the Company has a net operating loss (NOL) of $94,019
related to the 1996 operations of Guest Choice, Inc., available to offset
future taxable income, if any, related to the Guest Choice operations. No
deferred tax asset is recognized due to the fact that the realization of
the NOL is uncertain.

(8) COMMITMENTS AND CONTINGENCIES

The Company leases certain building facilities for the operations of coffee
break services under a noncancellable operating lease, expiring in April
1998. Rent expense under such lease agreement for the year ended June 30,
1996 was approximately $43,000 and for 1995 and 1994 was approximately
$41,000. The future minimum lease payments under this noncancellable
operating lease amounted to approximately $78,833.

The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the Company's consolidated financial position, results of
operations or liquidity.

(9) SUPPLEMENTAL INFORMATION ON CASH FLOWS

During the years ended June 30, 1996, 1995 and 1994, the Company made the
following cash payments and noncash transactions:

1996 1995 1994
--------- --------- ---------
Interest payments $ 316,712 $ 329,919 $ 417,190
--------- --------- ---------
--------- --------- ---------
Income tax payments $ 264,881 $ 334,704 $ 125,194
--------- --------- ---------
--------- --------- ---------
Acquisition and cancellation of 65
shares of common stock financed
through the issuance of a notes
payable (note 5) $ - $ - $ 480,877
--------- --------- ---------
--------- --------- ---------

F-63

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Swiss Dairy, a Corporation
Riverside, California

We have audited the accompanying balance sheets of Swiss Dairy, a Corporation
(the Company) as of December 30, 1995 and December 31, 1994, and the related
statements of earnings and retained earnings and cash flows for each of the
three years in the period ended December 30, 1995. 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.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Swiss Dairy, a Corporation at December 30,
1995 and December 31, 1994, and the results of its operations and cash flows for
each of the three years in the period ended December 30, 1995 in conformity with
generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Costa Mesa, California
August 28, 1996

F-64
<PAGE>

SWISS DAIRY, A CORPORATION

BALANCE SHEETS
- --------------------------------------------------------------------------------

JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 972 $ 449 $ 2,414
Accounts receivable 5,923 7,146 8,296
Note receivable from related party 600
Inventories 528 785 591
Prepaid expenses and other 259 309 305
---------- ---------- ----------

Total current assets 7,682 8,689 12,206

PROPERTY, PLANT AND EQUIPMENT, net 8,069 8,426 6,331
---------- ---------- ----------
$ 15,751 $ 17,115 $ 18,537
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 4,481 $ 6,352 $ 7,541
Accrued expenses 725 488 435
---------- ---------- ----------

Total current liabilities 5,206 6,840 7,976

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock, par value $10; 20,000 shares authorized;
6,500 shares issued and outstanding 65 65 65
Additional paid-in capital 6 6 6
Retained earnings 10,474 10,204 10,490
---------- ---------- ----------

Total stockholders' equity 10,545 10,275 10,561
---------- ---------- ----------

$ 15,751 $ 17,115 $ 18,537
---------- ---------- ----------
---------- ---------- ----------

</TABLE>

See notes to financial statements.

F-65
<PAGE>

SWISS DAIRY, A CORPORATION

STATEMENTS OF EARNINGS AND RETAINED EARNINGS
- --------------------------------------------------------------------------------

TWENTY-FOUR WEEKS ENDED FOR THE YEARS ENDED
------------------------- ------------------------------------------
JUNE 15, JUNE 17, DECEMBER 30, DECEMBER 31, DECEMBER 23,
1996 1995 1995 1994 1993
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
NET SALES $ 49,828 $ 67,332 $ 126,647 $ 149,153 $ 142,107

COST OF SALES 43,285 59,535 111,798 132,443 125,961
--------- --------- --------- --------- ---------

GROSS PROFIT 6,543 7,797 14,849 16,710 16,146

OPERATING COSTS AND EXPENSES:
Selling and distribution 3,454 3,914 7,852 8,168 8,266
General and administrative 954 1,178 2,483 2,892 2,423
--------- --------- --------- --------- ---------

Total operating costs and expenses 4,408 5,092 10,335 11,060 10,689
--------- --------- --------- --------- ---------

INCOME FROM OPERATIONS 2,135 2,705 4,514 5,650 5,457

OTHER INCOME (EXPENSE):
Interest expense, net (16) (10) (25)
Other income, net 195 295 270 511 612
--------- --------- --------- --------- ---------

Total other income 179 295 270 501 587
--------- --------- --------- --------- ---------

INCOME BEFORE FRANCHISE TAXES 2,314 3,000 4,784 6,151 6,044

FRANCHISE TAXES 36 45 65 99 127
--------- --------- --------- --------- ---------

NET EARNINGS 2,278 2,955 4,719 6,052 5,917

RETAINED EARNINGS, beginning
of period 10,204 10,490 10,490 10,443 8,431

DIVIDENDS (2,008) (4,109) (5,005) (6,005) (3,905)
--------- --------- --------- --------- ---------

RETAINED EARNINGS, end of period $ 10,474 $ 9,336 $ 10,204 $ 10,490 $ 10,443
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

NET EARNINGS PER SHARE $ 350.46 $ 454.62 $ 726.00 $ 931.07 $ 910.31
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

</TABLE>

See notes to financial statements.

F-66
<PAGE>

SWISS DAIRY, A CORPORATION

STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------

TWENTY-FOUR WEEKS ENDED FOR THE YEARS ENDED
------------------------- ------------------------------------------
JUNE 15, JUNE 17, DECEMBER 30, DECEMBER 31, DECEMBER 23,
1996 1995 1995 1994 1993
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,278 $ 2,955 $ 4,719 $ 6,052 $ 5,917
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 960 1,222 1,752 1,816 1,954
(Gain) loss on the sale of assets 68 (103) 186 (12) 7
Changes in operating assets and liabilities:
Accounts receivable 1,223 862 1,150 (1,757) 720
Inventories 257 (37) (194) 66 140
Prepaid expenses and other 50 36 (4) 35 18
Accounts payable (1,871) 1,955 (1,189) (3,675) (760)
Accrued expenses 237 233 53 324 (252)
---------- ---------- ---------- ---------- ----------
Net cash provided by operating activities 3,202 7,123 6,473 2,849 7,744

CASH FLOWS FROM INVESTING ACTIVITIES:
Collections (advances) from note receivable 400 600 (316) 151
Additions to property, plant and equipment (750) (2,118) (4,215) (1,023) (2,237)
Proceeds from sale of property, plant
and equipment 79 132 182 156 256
---------- ---------- ---------- ---------- ----------

Net cash used in investing activities (671) (1,586) (3,433) (1,183) (1,830)

CASH FLOWS FROM FINANCING ACTIVITIES -
Cash dividends (2,008) (4,109) (5,005) (6,005) (3,905)
---------- ---------- ---------- ---------- ----------

INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 523 1,428 (1,965) (4,339) 2,009

CASH AND CASH EQUIVALENTS,
beginning of period 449 2,414 2,414 6,753 4,744
---------- ---------- ---------- ---------- ----------

CASH AND CASH EQUIVALENTS,
end of period $ 972 $ 3,842 $ 449 $ 2,414 $ 6,753
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

Cash paid for interest $ 16 $ - $ - $ 10 $ 25
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

</TABLE>

See notes to financial statements.

F-67

<PAGE>

SWISS DAIRY, A CORPORATION

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS - Swiss Dairy, a Corporation (the Company), is a California
corporation which processes and distributes fluid milk products,
refrigerated ready-to-serve fruit drinks and bottled water throughout
Southern California under its own brand names and private labels. The
Company provides credit terms to customers, the majority of which are major
grocery chains, generally ranging to up to 30 days, performs ongoing credit
evaluations of their customers and maintains allowances for potential
credit losses based on historical experience. The preparation of financial
statements requires the use of significant estimates and assumptions by
management; actual results could differ from these estimates.

INVENTORIES - Pasteurized and raw milk inventories are stated at the lower
of average cost or market. Raw materials and merchandise for resale
inventories are stated at the lower of cost, using the first-in, first-out
(FIFO) method, or market. Manufactured finished goods inventories are
stated at the lower of average production cost or market. Production costs
include raw materials, direct labor, and indirect production and overhead
costs.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
cost. Depreciation and amortization are provided using the straight-line
method over the estimated useful lives of the assets, as follows:

ASSET USEFUL LIFE

Buildings and improvements 7 to 40 years
Machinery and equipment 3 to 20 years
Milk cases and carts 3 to 7 years
Sales and delivery equipment 3 to 7 years
Furniture and fixtures 3 to 7 years

Expenditures for repairs and maintenance which do not improve or extend the
life of the assets are expensed as incurred.

IMPAIRMENT OF LONG-LIVED ASSETS - Effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition to the carrying amount of the asset. The Company does not
anticipate a material impact on the financial statements of the Company as
a result of its adoption of this new accounting principle.

REVENUE - Revenue is recognized when the product is shipped to the
customer.

F-68
<PAGE>

SWISS DAIRY, A CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

INCOME TAXES - The Company is qualified as a small business corporation
under Section 1372 of Subchapter S of the Internal Revenue Code, which
results in the income of the Company being taxable to the individual
stockholders instead of at the corporate level. The Company pays a
franchise tax to the State of California at a rate of 1.5% of taxable
income. As a result, the financial statements of the Company do not
contain either a provision for federal income taxes or the related current
and deferred income tax liabilities, since such amounts are the
responsibility of the individual stockholders. Had the Company been
subject to state and federal income taxes at the corporate level, the
estimated income tax expense would have been approximately $1.9 million,
$2.4 million and $2.4 million for the years ended December 31, 1995, 1994
and 1993, respectively, and $.9 million and $1.2 million for the unaudited
twenty-four weeks ended June 15, 1996 and June 17, 1995, respectively,
based on a combined federal and state income tax rate of 40%.

CASH EQUIVALENTS - The Company considers all highly-liquid investments
purchased with a remaining maturity of three months or less to be cash
equivalents.

EARNINGS PER SHARE - The Company computes earnings per share based on the
weighted average number of common shares outstanding during the period.

FINANCIAL INSTRUMENTS - Pursuant to SFAS No. 107, DISCLOSURE ABOUT FAIR
VALUE OF FINANCIAL INSTRUMENTS, the Company is required to disclose an
estimate of the fair value of the Company's financial instruments; however,
due to their near-term maturities, the carrying amounts of the Company's
financial instruments, which consist of accounts receivable and accounts
payable, are considered equivalent to fair value.

UNAUDITED INTERIM FINANCIAL STATEMENTS - The Company's balance sheet as of
June 15, 1996 and the statements of earnings and retained earnings and cash
flows for the twenty-four weeks ended June 15, 1996 and June 17, 1995, have
been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal, recurring adjustments) necessary
to present fairly the balance sheet of the Company at June 15, 1996, and
the results of operations and cash flows of the Company for the twenty-four
weeks ended June 15, 1996 and June 17, 1995, have been made. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for the full year.

F-69

<PAGE>

SWISS DAIRY, A CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of:

JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)

Trade customers $ 5,623 $ 6,844 $ 7,852
Rebates and other 300 302 444
-------- -------- --------
Accounts receivable $ 5,923 $ 7,146 $ 8,296
-------- -------- --------
-------- -------- --------

3. INVENTORIES
Inventories consist of the following as of:

JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Pasteurized and raw milk and raw materials $ 305 $ 228 $ 208
Finished goods 98 305 238
Merchandise purchased for resale 125 252 145
------ ------ ------
$ 528 $ 785 $ 591
------ ------ ------
------ ------ ------

</TABLE>

F-70

<PAGE>

SWISS DAIRY, A CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as of:

JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)

Land $ 120 $ 120 $ 47
Buildings and improvements 3,939 4,005 2,768
Machinery and equipment 5,048 4,163 3,885
Milk cases and carts 1,210 1,210 1,202
Sales and delivery equipment 5,719 6,076 4,893
Furniture and fixtures 166 169 189
Construction in progress 139 581 0
-------- -------- --------

16,341 16,324 12,984

Less accumulated depreciation
and amortization (8,272) (7,898) (6,653)
-------- -------- --------

$ 8,069 $ 8,426 $ 6,331
-------- -------- --------
-------- -------- --------

5. ACCRUED EXPENSES
Accrued expenses consist of the following as of:

JUNE 15, DECEMBER 30, DECEMBER 31,
1996 1995 1994
(UNAUDITED)
(IN THOUSANDS)

Accrued payroll and benefits $ 462 $ 455 $ 390
Accrued severance 160
Other 103 33 45
------ ------ ------
$ 725 $ 488 $ 435
------ ------ ------
------ ------ ------

6. LINE OF CREDIT

The Company has a credit facility with a bank of $1,500,000 with interest
due monthly at the bank's reference rate. This facility may be utilized as
a revolving line of credit or for the purchase of equipment.

F-71
<PAGE>

SWISS DAIRY, A CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

The interest rate is the bank's reference rate. At December 30, 1995,
there was no outstanding balance on this loan.

The credit facility is secured by the assets of the Company.

7. EMPLOYEES 401(k) PLAN

The Company sponsors a 401(k) plan for eligible employees who have
completed one or more years of service and have met other requirements
pursuant to the plan. The employees participating in the plan can
generally make contributions to the plan of up to 15% of their annual
compensation, and the Company can elect to match such contributions.
During the unaudited period ended June 15, 1996, the Company expensed
contributions to the plan of approximately $53,000. No contributions were
made by the Company during each of the three years in the period ended
December 30, 1995, and during the unaudited period ended June 17, 1995.

8. COMMITMENTS AND CONTINGENCIES

The Company is a party in the ordinary course of business to certain claims
and litigation. In management's opinion, the outcome of such matters is
not expected to have a material impact on the financial statements.

The Company has a practice which provides for bonuses and termination of
benefits in certain circumstances, subject to the sole discretion of
management. No expenses were incurred by the Company during each of the
three years in the period ended December 30, 1995, and during the unaudited
period ended June 17, 1995, for these discretionary benefits. However,
during the unaudited period ended June 15, 1996, the Company expensed
$160,000 for severance benefits for certain employees who were terminated
prior to the transfer of ownership interests.

9. RELATED PARTY TRANSACTIONS

In 1993, the Company had a note receivable from a stockholder. This note
has been fully reimbursed in 1995.

10. MAJOR CUSTOMERS

During the years ended December 23, 1993, December 31, 1994 and
December 30, 1995, sales to four customers in the aggregate represented
approximately 95%, 96% and 96% of sales, respectively. A decision by a
significant customer to decrease the amount purchased from the Company or
to cease carrying the Company's products could have a material adverse
effect on the Company's financial condition and results of operations.

F-72
<PAGE>

SWISS DAIRY, A CORPORATION

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

11. TRANSFER OF OWNERSHIP INTERESTS

Subsequent to December 30, 1995, the Company transferred all of its assets
and liabilities pursuant to an agreement for the transfer of ownership
interests.

F-73

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED BY THE
COMPANY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER
THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES
SHALL THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER CREATE ANY
IMPLICATION THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF
ANY TIME SUBSEQUENT THE DATE OF THIS PROSPECTUS.

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

TABLE OF CONTENTS
Page
----
Available Information........................ 2
Prospectus Summary........................... 3
Risk Factors................................. 6
Price Range of Common Stock.................. 10
Dividend Policy.............................. 10
Unaudited Pro Forma Consolidated
Financial Data.......................... 11
Selected Consolidated Financial Data......... 16
Selected Pre-Acquisition Historical
Financial Data.......................... 17
Management's Discussion and
Analysis of Financial Condition and
Results of Operations................... 18
Business..................................... 26
Management................................... 35
Certain Relationships and
Related Transactions.................... 41
Principal and Selling Stockholders........... 47
Description of Capital Stock................. 49
Shares Eligible for Future Sale.............. 51
Legal Matters................................ 53
Experts...................................... 53
Index to Financial Statements................ F-1

625,000 SHARES

SUIZA FOODS

COMMON STOCK

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

, 1996

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

<PAGE>

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table indicates the estimated expenses to be incurred in
connection with the Offering described in this Registration Statement, all of
which will be paid by the Company.

Registration fee........................................ $ 3,825
Accounting fees and expenses............................ 15,000
Legal fees and expenses................................. 25,000
Printing and engraving.................................. 15,000
Blue Sky fees and expenses (including counsel fees)..... 5,000
Miscellaneous other expenses............................ 2,000
-------
Total.............................................. $65,825
-------
-------

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's Certificate of Incorporation provides that no director of
the Company will be personally liable to the Company or any of its
stockholders for monetary damages arising from the director's breach of
fiduciary duty as a director, with certain limited exceptions. See
"Management -- Limitation of Liability and Indemnification" in the Prospectus.

Pursuant to the provisions of Section 145 of the Delaware General
Corporation Law, every Delaware corporation has the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, against any and all
expenses, judgments, fines and amounts paid in settlement and reasonably
incurred in connection with such action, suit or proceeding. The power to
indemnify applies only if such person acted in good faith and in a manner
such person reasonably believed to be in the best interests, or not opposed
to the best interests, of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct
was unlawful.

The power to indemnify applies to actions brought by or in the right of
the corporation as well, but only to the extent of defense and settlement
expenses and not to any satisfaction of a judgment or settlement of the claim
itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence
or misconduct unless the court, in its discretion, believes that in light of
all the circumstances indemnification should apply.

The Company's Certificate of Incorporation contains provisions requiring
it to indemnify its officers and directors to the fullest extent permitted by
the Delaware General Corporation Law. See "Management -- Limitation of
Liability and Indemnification" in the Prospectus.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On August 7, 1996, the Company completed a private placement of 625,000
shares of Common Stock to T. Rowe Price Small-Cap Value Fund, Inc., a
Maryland corporation. The sale of Common Stock in this private placement was
exempt from registration pursuant to Section 4(2) of the Securities Act. No
underwriter participated in this transaction.

In March 1995, the Company completed a private placement of shares of
its Common Stock and options to acquire shares of its Common Stock in
connection with the Combination described in the Prospectus under the caption
"Certain Relationships and Related Transactions". The offerees in such
private placement were the Predecessor Owners of the Combined Entities in the
Combination. These Predecessor Owners received Common Stock and options

II-1
<PAGE>
to acquire Common Stock in exchange for their equity interests in the
Combined Entities, as shown in the table below (which reflects record
ownership). The Company's sale of its securities in this private placement
was exempt from registration pursuant to Rule 506 of Regulation D under
Section 4(2) of the Securities Act. The Company's sale of its securities in
this private placement to certain of its employees and employees of its
subsidiaries also qualified for an exemption from registration pursuant to
Rule 701 under the Securities Act. No underwriters participated in these
transactions.

<TABLE>
NUMBER OF
SHARES OF AVERAGE
NUMBER OF COMMON STOCK EXERCISE
SHARES OF SUBJECT TO PRICE PER TOTAL SHARES
NAME COMMON STOCK OPTIONS OPTION SHARE AND OPTIONS
- ---- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gregg L. Engles................ 1,352,169 -- -- 1,352,169
Cletes O. Beshears............. 50,489 8,831 6.79 59,320
Gayle O. Beshears.............. 16,370 281,645 0.03 298,015
Hector M. Nevares.............. 248,503 -- -- 248,503
Neva Holdings, Inc. ........... 69,264 -- -- 69,264
Robert L. Kaminski............. 865,367 -- -- 865,367
John Hancock Mutual Life
Insurance Company............. 1,515,977 -- -- 1,515,977
John Hancock Life
Insurance Company
of America.................... 26,441 -- -- 26,441
Pacific Mutual Life
Insurance Company............. 879,941 -- -- 879,941
PM Group Life
Insurance Company............. 88,804 -- -- 88,804
Canaan Capital
Limited Partnership........... 90,520 -- -- 90,520
Canaan Capital
Offshore Limited
Partnership C.V. ............. 756,859 -- -- 756,859
John W. Madden................. 51,495 -- -- 51,495
Graham D. Davis................ 16,370 88,438 0.06 104,808
Rick C. Smith.................. -- 88,438 0.06 88,438
BP Puerto Rico, Inc. .......... 137,699 -- -- 137,699
William A. McCormack........... 41,795 -- -- 41,795
James Silcock Jr. 1994 Trust... 2,648 -- -- 2,648
Hunt E. Silcock 1994 Trust..... 2,648 -- -- 2,648
William L. Farrell............. 5,296 -- -- 5,296
Todd Follmer................... 46,687 -- -- 46,687
Suiza Profit Sharing Plan...... 34,156 -- -- 34,156
Other Suiza-Puerto Rico
Employees..................... -- 104,823 4.44 104,823
James Green.................... 5,887 3,679 6.79 9,566
Other Velda Farms Employees.... 8,094 10,669 6.79 18,763
--------- ------- ---------
Totals: ................... 6,313,479 586,523 6,900,002
--------- ------- ---------
</TABLE>

ITEM 16. EXHIBITS.

(a) EXHIBITS:
<TABLE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 -- Amended and Restated Reorganization Agreement (filed as
Exhibit 2.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
3.1 -- Certificate of Incorporation of the Company (filed
as Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)

II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.2 -- Certificate of Amendment of Certificate of
Incorporation of the Company (filed as Exhibit 3.2
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
3.3 -- Certificate of Correction of Certificate of
Amendment of Certificate of Incorporation (filed as
Exhibit 3.3 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
3.4 -- Certificate of Amendment of Certificate of
Incorporation of the Company (filed as Exhibit 3.4
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
3.5 -- Bylaws of the Company (filed as Exhibit 3.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
4.1 -- Specimen of Common Stock Certificate (filed as
Exhibit 4.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
4.2 -- Registration Rights (Exhibit G-2 to Amended and
Restated Reorganization Agreement) (filed as Exhibit
4.2 to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1858) and
incorporated herein by this reference)
5.1 -- Opinion of Hughes & Luce, L.L.P. regarding legality of
securities being registered
10.1 -- Suiza Foods Corporation Exchange Stock Option and
Restricted Stock Option Plan (filed as Exhibit 10.1
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
10.2 -- Exchange Stock Option and Restricted Stock Agreement
between the Company and Cletes O. Beshears (filed as
Exhibit 10.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.3 -- Exchange Stock Option Agreement between the Company
and Gayle O. Beshears (filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.4 -- Exchange Stock Option Agreement between the Company
and Gayle O. Beshears (filed as Exhibit 10.4 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.5 -- Suiza Foods Corporation 1995 Stock Option and
Restricted Stock Plan (filed as Exhibit 10.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.6 -- Employment Agreement between Suiza Management
Corporation and Gregg L. Engles (filed as Exhibit
10.8 to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1858) and
incorporated herein by this reference)
10.7 -- Amendment No. 1 to Employment Agreement between
Suiza Management Corporation and Gregg L. Engles
(filed as Exhibit 10.9 to the Registrant's
Registration Statement on Form S-1 (Registration No.
333-1858) and incorporated herein by this reference)
10.8 -- Employment Agreement between Suiza Management
Corporation and Cletes O. Beshears (filed as Exhibit
10.10 to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1858) and
incorporated herein by this reference)
10.9 -- Amendment No. 1 to Employment Agreement between
Suiza Management Corporation and Cletes O. Beshears
(filed as Exhibit 10.11 to the Registrant's
Registration Statement on Form S-1 (Registration No.
333-1858) and incorporated herein by this reference)
10.10 -- Employment Agreement between Suiza Dairy
Corporation, Suiza Fruit Corporation, Neva Plastics
Manufacturing Corp. and Hector M. Nevares (filed as
Exhibit 10.12 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.11 -- Amendment No. 1 to Hector M. Nevares' Employment
Agreement (filed as Exhibit 10.13 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
II-3
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.12 -- Amendment No. 2 to Hector M. Nevares' Employment
Agreement (filed as Exhibit 10.14 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.13 -- Amended and Restated Credit Agreement with Chase
Manhattan Bank, N.A.
10.14 -- Amendment and Waiver to Amended and Restated Credit
Agreement with Chase Manhattan Bank, N.A.
10.15 -- Amendment No. 2 to Amended and Restated Credit
Agreement with First Union National Bank of North
Carolina
10.16 -- Supplemental Credit Agreement with First Union
National Bank of North Carolina
10.17 -- Note Purchase Agreement with John Hancock and
Pacific Mutual (filed as Exhibit 10.18 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.18 -- Agreement among Suiza Holdings, L.P., Engles
Acquisition D, Inc., Engles Acquisition F, Inc. and
Engles Acquisition P, Inc. and Hector M. Nevares La
Costa, Carmen M. La Costa Bolivar, and certain other
shareholders and Suiza Dairy Corporation, Borinquen
Dairy, Inc., Suiza Fruit Corporation and Neva
Plastics Manufacturing Corp. (filed as Exhibit 10.19
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
10.19 -- Amended and Restated Agreement and Plan of Merger
among Engles Dairy Acquisition, L.P., Velda Farms,
Inc. and the Morningstar Group Inc. (filed as
Exhibit 10.20 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.20 -- Noncompetition Agreement by and between Velda Farms,
L.P. and The Morningstar Group Inc. (filed as
Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.21 -- Form of Underwriting Agreement (filed as Exhibit 1.1
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
10.22 -- Stock Purchase Agreement among G Acquisition Corp.
and Jose M. Rodriguez Garrido and Jorge Rodriguez
Garrido (filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K/A filed with the
Commission on September 25, 1996 and incorporated
herein by this reference)
10.23 -- Asset Purchase Agreement by and among Suiza Foods
Corporation, Swiss Dairy Corporation a Delaware
corporation, Swiss Dairy, a Corporation, a
California corporation and the principal
stockholders of Swiss Dairy, a Corporation
identified therein (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed with
the Commission on September 24, 1996 and
incorporated herein by this reference)
10.24 -- Stock Purchase Agreement by and between T. Rowe
Price Small-Corp. Value Fund, Inc. and Suiza Foods
Corporation
11.1 -- Statement re computation of per share earnings
21.1 -- List of Subsidiary Corporations
23.1 -- Consent of Hughes & Luce, L.L.P. (included in
Exhibit 5.1)
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of KPMG Peat Marwick LLP
24.1 -- Powers of Attorney (included on page II-6)
</TABLE>

(b) FINANCIAL STATEMENT SCHEDULES:

No financial statement schedules are required as all material required
information is disclosed in the notes to the consolidated financial
statements.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the underwriting agreement, the Company's Certificate
of Incorporation or Bylaws, Delaware law or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of
Texas, on September 30, 1996.

SUIZA FOODS CORPORATION

By: /s/ Gregg L. Engles
---------------------------------
Gregg L. Engles,
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

We, the undersigned officers and directors of Suiza Foods Corporation,
hereby severally constitute and appoint Gregg L. Engles and Tracy L. Noll,
and each of them, our true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for each of us in our name, place
and stead, in any and all capacities, to sign Suiza Food Corporation's
Registration Statement on Form S-1, and any other Registration Statement
relating to the same offering, and any and all amendments thereto (including
post-effective amendments), and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grant to such attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and
purposes as each of us might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or his
or their substitute or substitutes may lawfully do or cause to be done by
virtue hereof.

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

<TABLE>
<S> <C> <C>
/s/ Gregg L. Engles Chairman of the Board and Chief September 30, 1996
- ----------------------------- Executive Officer
Gregg L. Engles

/s/ Cletes O. Beshears
- ----------------------------- President and Director September 30, 1996
Cletes O. Beshears

/s/ Hector M. Nevares President of Suiza-Puerto September 30, 1996
- ----------------------------- Rico and Director
Hector M. Nevares

/s/ Tracy L. Noll Vice President, Chief Financial September 30, 1996
- ----------------------------- Officer and Secretary
Tracy L. Noll

/s/ Gayle O. Beshears
- ----------------------------- Director September 30, 1996
Gayle O. Beshears

/s/ P. Eugene Pender
- ----------------------------- Director September 30, 1996
P. Eugene Pender

/s/ Stephen Green
- ----------------------------- Director September 30, 1996
Stephen Green

/s/ Robert L. Kaminski
- ----------------------------- Director September 30, 1996
Robert L. Kaminski

/s/ Robert Piccinini
- ----------------------------- Director September 30, 1996
Robert Piccinini

/s/ Robert Bartholomew
- ----------------------------- Director September 30, 1996
Robert Bartholomew

</TABLE>

II-6
<PAGE>
<TABLE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 -- Amended and Restated Reorganization Agreement (filed as
Exhibit 2.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
3.1 -- Certificate of Incorporation of the Company (filed
as Exhibit 3.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
3.2 -- Certificate of Amendment of Certificate of
Incorporation of the Company (filed as Exhibit 3.2
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
3.3 -- Certificate of Correction of Certificate of
Amendment of Certificate of Incorporation (filed as
Exhibit 3.3 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
3.4 -- Certificate of Amendment of Certificate of
Incorporation of the Company (filed as Exhibit 3.4
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
3.5 -- Bylaws of the Company (filed as Exhibit 3.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
4.1 -- Specimen of Common Stock Certificate (filed as
Exhibit 4.1 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
4.2 -- Registration Rights (Exhibit G-2 to Amended and
Restated Reorganization Agreement) (filed as Exhibit
4.2 to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1858) and
incorporated herein by this reference)
5.1 -- Opinion of Hughes & Luce, L.L.P. regarding legality of
securities being registered
10.1 -- Suiza Foods Corporation Exchange Stock Option and
Restricted Stock Option Plan (filed as Exhibit 10.1
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
10.2 -- Exchange Stock Option and Restricted Stock Agreement
between the Company and Cletes O. Beshears (filed as
Exhibit 10.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.3 -- Exchange Stock Option Agreement between the Company
and Gayle O. Beshears (filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.4 -- Exchange Stock Option Agreement between the Company
and Gayle O. Beshears (filed as Exhibit 10.4 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.5 -- Suiza Foods Corporation 1995 Stock Option and
Restricted Stock Plan (filed as Exhibit 10.5 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.6 -- Employment Agreement between Suiza Management
Corporation and Gregg L. Engles (filed as Exhibit
10.8 to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1858) and
incorporated herein by this reference)
10.7 -- Amendment No. 1 to Employment Agreement between
Suiza Management Corporation and Gregg L. Engles
(filed as Exhibit 10.9 to the Registrant's
Registration Statement on Form S-1 (Registration No.
333-1858) and incorporated herein by this reference)
<PAGE>

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.8 -- Employment Agreement between Suiza Management
Corporation and Cletes O. Beshears (filed as Exhibit
10.10 to the Registrant's Registration Statement on
Form S-1 (Registration No. 333-1858) and
incorporated herein by this reference)
10.9 -- Amendment No. 1 to Employment Agreement between
Suiza Management Corporation and Cletes O. Beshears
(filed as Exhibit 10.11 to the Registrant's
Registration Statement on Form S-1 (Registration No.
333-1858) and incorporated herein by this reference)
10.10 -- Employment Agreement between Suiza Dairy
Corporation, Suiza Fruit Corporation, Neva Plastics
Manufacturing Corp. and Hector M. Nevares (filed as
Exhibit 10.12 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.11 -- Amendment No. 1 to Hector M. Nevares' Employment
Agreement (filed as Exhibit 10.13 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.12 -- Amendment No. 2 to Hector M. Nevares' Employment
Agreement (filed as Exhibit 10.14 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.13 -- Amended and Restated Credit Agreement with Chase
Manhattan Bank, N.A.
10.14 -- Amendment and Waiver to Amended and Restated Credit
Agreement with Chase Manhattan Bank, N.A.
10.15 -- Amendment No. 2 to Amended and Restated Credit
Agreement with First Union National Bank of North
Carolina
10.16 -- Supplemental Credit Agreement with First Union
National Bank of North Carolina
10.17 -- Note Purchase Agreement with John Hancock and
Pacific Mutual (filed as Exhibit 10.18 to the
Registrant's Registration Statement on Form S-1
(Registration No. 333-1858) and incorporated herein
by this reference)
10.18 -- Agreement among Suiza Holdings, L.P., Engles
Acquisition D, Inc., Engles Acquisition F, Inc. and
Engles Acquisition P, Inc. and Hector M. Nevares La
Costa, Carmen M. La Costa Bolivar, and certain other
shareholders and Suiza Dairy Corporation, Borinquen
Dairy, Inc., Suiza Fruit Corporation and Neva
Plastics Manufacturing Corp. (filed as Exhibit 10.19
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
10.19 -- Amended and Restated Agreement and Plan of Merger
among Engles Dairy Acquisition, L.P., Velda Farms,
Inc. and the Morningstar Group Inc. (filed as
Exhibit 10.20 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.20 -- Noncompetition Agreement by and between Velda Farms,
L.P. and The Morningstar Group Inc. (filed as
Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-1858)
and incorporated herein by this reference)
10.21 -- Form of Underwriting Agreement (filed as Exhibit 1.1
to the Registrant's Registration Statement on Form
S-1 (Registration No. 333-1858) and incorporated
herein by this reference)
10.22 -- Stock Purchase Agreement among G Acquisition Corp.
and Jose M. Rodriguez Garrido and Jorge Rodriguez
Garrido (filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K/A filed with the
Commission on September 25, 1996 and incorporated
herein by this reference)

<PAGE>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.23 -- Asset Purchase Agreement by and among Suiza Foods
Corporation, Swiss Dairy Corporation a Delaware
corporation, Swiss Dairy, a Corporation, a
California corporation and the principal
stockholders of Swiss Dairy, a Corporation
identified therein (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K filed with
the Commission on September 24, 1996 and
incorporated herein by this reference)
10.24 -- Stock Purchase Agreement by and between T. Rowe
Price Small-Corp. Value Fund, Inc. and Suiza Foods
Corporation
11.1 -- Statement re computation of per share earnings
21.1 -- List of Subsidiary Corporations
23.1 -- Consent of Hughes & Luce, L.L.P. (included in
Exhibit 5.1)
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of KPMG Peat Marwick
24.1 -- Powers of Attorney (included on page II-6)
</TABLE>

<PAGE>

EXHIBIT 5.1

[Hughes & Luce, L.L.P. Letterhead]

September 30, 1996

Suiza Foods Corporation
3811 Turtle Creek Boulevard
Suite 1300
Dallas, Texas 75219

Re: Shelf Registration Statement on Form S-1 (the "Registration
Statement")

Ladies and Gentlemen:

We have acted as special counsel to Suiza Foods Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of 625,000 shares (the "Shares") of the
Company's common stock, $.01 par value per share. The Shares are being
registered pursuant to a registration statement on Form S-1 to be filed with the
Securities and Exchange Commission on or about September 30, 1996 (the
"Registration Statement") and are to be sold by the selling stockholder
identified in the Registration Statement.

In connection with this opinion, we have examined such documents and
records of the Company and such statutes, regulations and other instruments and
certificates as we have deemed necessary or advisable for the purposes of this
opinion. We have assumed that all signatures on all documents presented to us
are genuine, that all documents submitted to us as originals are accurate and
complete and that all documents submitted to us as copies are true and correct
copies of the originals thereof. We have also relied upon such certificates of
public officials, corporate agents and officers of the Company and such other
certifications with respect to the accuracy of material factual matters
contained therein which were not independently established.

Based on the foregoing, we are of the opinion that the Shares are validly
issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement.

Very truly yours,

/s/ Hughes & Luce, L.L.P.

<PAGE>

EXECUTION COPY

************************************************************

SUIZA FOODS CORPORATION

_____________________________

AMENDED AND RESTATED
CREDIT AGREEMENT

Dated as of July 17, 1996

______________________________

THE CHASE MANHATTAN BANK,
as Agent

************************************************************

<PAGE>

TABLE OF CONTENTS

This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.

Page
----

Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . 2
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 2
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . 31
1.03 Classes and Types of Loans. . . . . . . . . . . . . . . . . . 32

Section 2. Commitments, Loans, Notes and Prepayments. . . . . . . . . . 32
2.01 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.02 Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.03 Changes of Commitments. . . . . . . . . . . . . . . . . . . . 35
2.04 Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . 36
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . 36
2.06 Several Obligations; Remedies Independent . . . . . . . . . . 36
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.08 Optional Prepayments and Conversions or Continuations of
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.09 Mandatory Prepayments and Reductions of Commitments . . . . . 39
2.10 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 42

Section 3. Payments of Principal and Interest . . . . . . . . . . . . . 48
3.01 Repayment of Loans. . . . . . . . . . . . . . . . . . . . . . 48
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . 50
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.02 Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . 51
4.03 Computations. . . . . . . . . . . . . . . . . . . . . . . . . 52
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . 52
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . 52
4.06 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . 53
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . 54

Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . 56
5.01 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . 56

(i)

<PAGE>

Page
----

5.02 Limitation on Types of Loans. . . . . . . . . . . . . . . . . 59
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . 60
5.05 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 61
5.06 Net Payments; Taxes . . . . . . . . . . . . . . . . . . . . . 62
5.07 Replacement of Lenders. . . . . . . . . . . . . . . . . . . . 64
5.08 Additional Costs in Respect of Letters of Credit. . . . . . . 65

Section 6. [Intentionally Left Blank] . . . . . . . . . . . . . . . . . 66

Section 7. Conditions Precedent . . . . . . . . . . . . . . . . . . . . 66
7.01 Conditions to Effectiveness . . . . . . . . . . . . . . . . . 66
7.02 Additional Conditions Precedent to Revolving Credit Loans . . 71
7.03 Initial and Subsequent Extensions of Credit . . . . . . . . . 74

Section 8. Representations and Warranties . . . . . . . . . . . . . . . 75
8.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 75
8.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . 75
8.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.05 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . 78
8.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.10 Investment Company Act. . . . . . . . . . . . . . . . . . . . 79
8.11 Public Utility Holding Company Act. . . . . . . . . . . . . . 79
8.12 Material Agreements and Liens . . . . . . . . . . . . . . . . 79
8.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . 80
8.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 83
8.15 Subsidiaries, Etc.. . . . . . . . . . . . . . . . . . . . . . 83
8.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 84
8.17 True and Complete Disclosure. . . . . . . . . . . . . . . . . 85
8.18 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 85
8.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Section 9. Covenants of the Company . . . . . . . . . . . . . . . . . . 86
9.01 Financial Statements, Etc.. . . . . . . . . . . . . . . . . . 86
9.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 90
9.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . 91
9.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 91

(ii)

<PAGE>
Page
----

9.05 Prohibition of Fundamental Changes. . . . . . . . . . . . . . 94
9.06 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 96
9.07 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 98
9.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . . 99
9.09 Restricted Payments . . . . . . . . . . . . . . . . . . . . .100
9.10 Leverage Ratios . . . . . . . . . . . . . . . . . . . . . . .100
9.11 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . .101
9.12 Fixed Charges Ratio . . . . . . . . . . . . . . . . . . . . .102
9.13 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . .102
9.14 Capital Expenditures. . . . . . . . . . . . . . . . . . . . .103
9.15 Interest Rate Protection Agreements . . . . . . . . . . . . .104
9.16 Lines of Business . . . . . . . . . . . . . . . . . . . . . .104
9.17 Transactions with Affiliates. . . . . . . . . . . . . . . . .104
9.18 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . .105
9.19 Certain Obligations Respecting Subsidiaries; Additional
Mortgaged Properties . . . . . . . . . . . . . . . . . . . 105
9.20 Modifications of Certain Documents. . . . . . . . . . . . . .106
9.21 Further Assurances. . . . . . . . . . . . . . . . . . . . . .107
9.22 Subordinated Indebtedness . . . . . . . . . . . . . . . . . .107

Section 10. Events of Default . . . . . . . . . . . . . . . . . . . . .108

Section 11. The Agent . . . . . . . . . . . . . . . . . . . . . . . . .113
11.01 Appointment, Powers and Immunities . . . . . . . . . . . . .113
11.02 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . .114
11.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . .114
11.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . .115
11.05 Indemnification. . . . . . . . . . . . . . . . . . . . . . .115
11.06 Non-Reliance on Agent and Other Lenders. . . . . . . . . . .116
11.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . .116
11.08 Resignation or Removal of Agent. . . . . . . . . . . . . . .117
11.09 Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . .117
11.10 Consents under Other Loan Documents. . . . . . . . . . . . .117

Section 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . .118
12.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . .118
12.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . .118
12.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . .118
12.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . .120
12.05 Successors and Assigns . . . . . . . . . . . . . . . . . . .121
12.06 Assignments and Participations . . . . . . . . . . . . . . .121
12.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . .124

(iii)

<PAGE>

Page
----

12.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . .125
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .125
12.10 Governing Law; Submission to Jurisdiction; Service of
Process and Venue. . . . . . . . . . . . . . . . . . . . .125
12.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . .126
12.12 Treatment of Certain Information; Confidentiality. . . . . .126
12.13 Intention of Parties . . . . . . . . . . . . . . . . . . . .127

(iv)

<PAGE>

SCHEDULE I - Existing Material Agreements and Liens
SCHEDULE II - Environmental Matters
SCHEDULE III - Subsidiaries and Investments
SCHEDULE IV - Real Property
SCHEDULE V - Litigation
SCHEDULE VI - Existing Puerto Rico Security Documents
SCHEDULE VII - Existing Mortgages

EXHIBIT A-1 - Form of Facility A Note
EXHIBIT A-2 - Form of Facility B Note
EXHIBIT B - Form of Borrowing Base Certificate
EXHIBIT C-1 - Form of Amendment to Security Agreement
EXHIBIT C-2 - Form of New Subsidiary Guarantee
and Security Agreement
EXHIBIT C-3 - Form of P.R. Inventory Agreement
EXHIBIT D-1 - Form of Mortgage
EXHIBIT D-2 - Form of Deed of Trust
EXHIBIT D-3 - Form of Garrido Factors Lien Agreement
EXHIBIT E-1 - Form of Opinion of Counsel to the Obligors
EXHIBIT E-2 - Form of Opinion of Puerto Rico Counsel to the
Obligors
EXHIBIT F - Form of Opinion of Local Counsel
EXHIBIT G - Form of Opinion of Special New York Counsel
to Chase
EXHIBIT H - Form of Confidentiality Agreement
EXHIBIT I - Form of Assignment and Acceptance
EXHIBIT J - Form of Amendment to Subordination
Agreement

(v)

<PAGE>

AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 17, 1996
between: SUIZA FOODS CORPORATION, a corporation duly organized and validly
existing under the laws of the State of Delaware (the "COMPANY"); each of the
lenders that is a signatory hereto identified under the caption "LENDERS" on the
signature pages hereto or that, pursuant to Section 12.06(b) hereof, shall
become a "Lender" hereunder (individually, a "LENDER" and, collectively, the
"LENDERS"); and THE CHASE MANHATTAN BANK, a New York state bank, as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "AGENT").

WHEREAS, the Company, certain Subsidiaries of the Company (the
"SUBSIDIARY BORROWERS", and together with the Company, the "BORROWERS"), the
Existing Lenders (as hereinafter defined) and the Agent are party to a Credit
Agreement dated as of March 31, 1995 as amended by Amendment No. 1 dated as of
April 18, 1995, Amendment No. 2 dated as of December 21, 1995, Amendment No. 3
dated as of March 18, 1996 and Amendment No. 4 dated as of May 8, 1996 (as
heretofore modified and supplemented and in effect immediately prior to the
Effective Date referred to below, the "EXISTING CREDIT AGREEMENT") providing,
subject to the terms and conditions thereof, for extensions of credit (by making
of loans and issuing letters of credit) to be made by the Existing Lenders to
the Borrowers in an aggregate principal or face amount not exceeding
$160,000,000.

WHEREAS, the parties hereto now wish to amend and restate the Existing
Credit Agreement by, among other things, increasing the aggregate amount of the
credit facilities under the Existing Credit Agreement available to the Company
for the purpose of providing financing for the acquisition by the Company of all
of the capital stock of Garrido y Compania, Inc., a Puerto Rico corporation
("GARRIDO") and Guest Choice, Inc., a Delaware corporation ("GUEST CHOICE"),
pursuant to the Garrido Purchase Agreement (as hereinafter defined) (the
"GARRIDO ACQUISITION"), and related fees, commissions and expenses, by repaying
in full the credit extended to the Subsidiary Borrowers and cancelling the
credit facilities available to the Subsidiary Borrowers under

<PAGE>

- 2 -

the Existing Credit Agreement and by amending certain of the other provisions
thereof and, in that connection, wish to amend and restate the Existing
Credit Agreement in its entirety, it being the intention of the parties
hereto that the loans and letters of credit outstanding under the Existing
Credit Agreement to or for the account of the Company on the Effective Date
(as hereinafter defined) shall continue and remain outstanding and not be
repaid on the Effective Date, but shall be assigned and reallocated among the
Lenders as provided in Sections 2.01(a) and (b) hereof and accordingly the
Loans and Commitments (as hereinafter defined) are not in novation or
discharge thereof.

WHEREAS, each of the Obligors (as hereinafter defined) expects to
derive benefit, directly or indirectly, from the loans so made to the Company,
both in its separate capacity and as a member of the integrated group, since the
successful operation of each of the Company and its Subsidiaries is dependent on
the continued successful performance of the functions of the integrated group as
a whole.

Accordingly, the parties hereto hereby agree that the Existing Credit
Agreement shall, as of the Effective Date (the occurrence of which is subject to
the satisfaction of the conditions precedent specified in Section 7.01 hereof),
be amended and restated in its entirety as follows:

Section 1. DEFINITIONS AND ACCOUNTING MATTERS.

1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):

"ADDITIONAL PUERTO RICO SECURITY DOCUMENTS" shall have the meaning
assigned to such term in Section 9.21(b) hereof.

"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is

<PAGE>

- 3 -

controlled by, the Company and, if such Person is an individual, any member
of the immediate family (including parents, spouse, children and siblings) of
such individual and any trust whose principal beneficiary is such individual
or one or more members of such immediate family and any Person who is
controlled by any such member or trust. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise), PROVIDED that, in any event, any Person that owns
directly or indirectly securities having 10% or more of the voting power for
the election of directors or other governing body of a corporation or 10% or
more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
control such corporation or other Person. Notwithstanding the foregoing, (a)
no individual shall be an Affiliate solely by reason of his or her being a
director, officer or employee of the Company or any of its Subsidiaries and
(b) none of the Wholly Owned Subsidiaries of the Company shall be Affiliates.

"AMENDMENT TO SECURITY AGREEMENT" shall mean the Amendment to Security
Agreement substantially in the form of Exhibit C-1 hereto between the Company
and the Agent, as the same shall be modified and supplemented and in effect from
time to time.

<PAGE>

- 4 -

"APPLICABLE COMMITMENT FEE RATE" shall mean 0.375% per annum; PROVIDED
that if the Leverage Ratio as at the last day of any fiscal quarter of the
Company ending on or after the Effective Date shall fall within any of the
ranges set forth below then, upon the delivery to the Agent of a certificate of
a Responsible Financial Officer of the Company (which shall accompany the
financial statements for such fiscal quarter delivered under Section 9.01(a)
hereof on which the calculation of such Leverage Ratio is based) demonstrating
such fact prior to the end of the next succeeding fiscal quarter, the
"Applicable Commitment Fee Rate" shall be reduced to the rate per annum set
forth below opposite such range during the period commencing on the third
Business Day following the date of receipt of such certificate to but not
including the date the next such certificate to be delivered under this
definition is delivered or due, whichever is earlier (except that,
notwithstanding the foregoing, the Applicable Commitment Fee Rate shall not as a
consequence of this proviso be so reduced for any period during which an Event
of Default shall have occurred and be continuing):

Range Applicable Commitment Fee Rate
of ------------------------------
Leverage Ratio
--------------

Less than 2.0:1 0.20%

Equal to or greater than 0.25%
2.0:1 but less
than 2.50:1

"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other office of such Lender (or of an affiliate of such Lender) as such Lender
may from time to time specify to the Agent and the Company as the office by
which its Loans of such Type are to be made and maintained.

<PAGE>

- 5 -

"APPLICABLE MARGIN" shall mean: with respect to Loans that are Base
Rate Loans, 0.25% and/or Eurodollar Loans, 1.5% per annum; PROVIDED that if the
Leverage Ratio as at the last day of any fiscal quarter of the Company ending on
or after the Effective Date shall fall within any of the ranges set forth below
then, upon the delivery to the Agent of a certificate of a Responsible Financial
Officer of the Company (which shall accompany the financial statements for such
fiscal quarter delivered under Section 9.01(a) hereof on which the calculation
of such Leverage Ratio is based) demonstrating such fact prior to the end of the
next succeeding fiscal quarter, the "Applicable Margin" for each Loan shall be
adjusted upwards or downwards, as the case may be, to the rate per annum for the
respective Type and Class of Loan set forth below opposite such range during the
period commencing on the third Business Day following the date of receipt of
such certificate to but not including the date the next succeeding such
certificate to be delivered hereunder is delivered or due, whichever is earlier
(except that, notwithstanding the foregoing, the Applicable Margin for any such
Loan shall not as a consequence of this proviso be so reduced for any period
during which an Event of Default shall have occurred and be continuing):

Range Applicable Margin (% p.a.)
of --------------------------
Leverage Ratio Base Rate Loans Eurodollar Loans
-------------- --------------- ----------------

Less than 2.0:1 0% 0.75%

Equal to or greater than 0% 1.0%
2.0:1 but less
than 2.50:1

Equal to or greater than 0% 1.25%
2.50:1 but less than
3.25:1

<PAGE>

- 6 -

Equal to or greater than 0.25% 1.50%
3.25:1 but less than
3.75:1

Equal to or greater than 0.50% 1.75%
3.75:1 but less than
4.0:1

Equal to or greater than 0.75% 2.00%
4.0:1

"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.

"BASE RATE" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day PLUS 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.

"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.

"BASIC DOCUMENTS" shall mean, collectively, the Loan Documents, the
Subordinated Debt Documents and the Garrido Purchase Agreement.

"BORROWING BASE" shall mean, as at any date, the sum of (a) 85% of the
aggregate amount of Eligible Receivables at said date PLUS (b) 50% of the
aggregate value of Eligible Inventory at said date. The "value" of Eligible
Inventory shall be determined at the lower of cost (using the first-in first-out
method) or market in accordance with GAAP.

"BORROWING BASE CERTIFICATE" shall mean a certificate of a Responsible
Financial Officer of the Company, substantially in the form of Exhibit B hereto
and appropriately completed.

<PAGE>

- 7 -

"BUSINESS DAY" shall mean (a) any day on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, any day on which dealings in Dollar deposits are
carried out in the London interbank market.

"CAPITAL EXPENDITURES" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Subsidiaries to acquire or construct fixed assets, plant and equipment
(including renewals, improvements and replacements, but excluding repairs)
during such period computed in accordance with GAAP.

"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

"CASUALTY EVENT" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, proceeds of a condemnation award or other compensation.

"CHASE" shall mean The Chase Manhattan Bank.

"CLASS" shall have the meaning assigned to such term in Section 1.03
hereof.

<PAGE>

- 8 -

"CLOSING DATE" shall mean March 31, 1995.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

"COLLATERAL ACCOUNT" shall mean with respect to the Company and any of
its Subsidiaries, the Collateral Account as defined in the Security Agreement.

"COMMISSION" shall mean the Securities and Exchange Commission or any
governmental agency substituted therefor.

"COMMITMENTS" shall mean the Facility A Commitments and the Facility B
Commitments.

"COMMONWEALTH" shall mean the Commonwealth of Puerto Rico and its
political subdivisions, municipalities, agencies and instrumentalities.

"COMPANY" shall have the meaning assigned to such term in the preamble
of this Agreement.

"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.08 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.

"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.08 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.

<PAGE>

- 9 -

made during such period PLUS (b) all Interest Expense for such period, it
being understood that, if any installment of principal of the Loans shall
have been prepaid during or prior to such period, the amount of principal of
the Loans included in Debt Service for such period shall be equal to the
aggregate amount of principal of the Loans originally scheduled to be paid
hereunder during such period.

"DEFAULT" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.

"DISPOSITION" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Subsidiaries to any other Person excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business and on ordinary business terms.

"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Company or any of its Subsidiaries), but excluding
dividends payable solely in shares of common stock of the Company.

"DOLLARS" and "$" shall mean lawful money of the United States.

<PAGE>

- 10 -

attributable to equity in Affiliates) for such period PLUS (b) depreciation
and amortization (to the extent deducted in determining operating income) for
such period PLUS (c) other income not exceeding $1,500,000 for such period.

"EFFECTIVE DATE" shall mean the date on which all of the conditions to
effectiveness of this Agreement set forth in Section 7.01 hereof shall have been
satisfied or waived.

"ELIGIBLE INVENTORY" shall mean, as at any date, (a) all Inventory
(i) that is owned by (and in the possession or under the control of) any Obligor
as at such date, (ii) that is located in a jurisdiction in the United States,
(iii) in which the Agent for the benefit of the Lenders shall have a perfected
first priority lien and security interest and (in the case of Inventory located
in a jurisdiction of the United States subject to the Security Agreement, the
Existing Subsidiary Guarantee and Security Agreement or the New Subsidiary
Guarantee and Security Agreement) as to which appropriate Uniform Commercial
Code financing statements have been filed naming the relevant Obligor as
"debtor" and the Agent as "secured party", (iv) that is in good condition and is
not damaged or obsolete, (v) that meets all standards imposed by any
governmental agency or department or division thereof having regulatory
authority over such Inventory, its use or sale, (vi) that is either currently
usable or currently saleable in the normal course of such Obligor's business and
(vii) that is not manufactured, processed, assembled or commingled with property
of Persons other than such Obligor and (b) 50% of all Inventory that is located
in a jurisdiction in the Commonwealth and that complies with all the
requirements set forth in clause (a) above (other than clause (a)(ii) and
(a)(iii)); PROVIDED that Majority Lenders may exclude from Eligible Inventory
any type of Inventory that the Majority Lenders may reasonably determine to be
unmarketable.

<PAGE>

- 11 -

"ELIGIBLE RECEIVABLES" shall mean, as at any date, the aggregate
amount of all Receivables as at such date payable to any of the Obligors other
than the following (determined without duplication):

(a) any Receivable not payable in Dollars;

(b) any Receivable which does not represent a final sale (subject to
the proviso set forth in paragraph (j) below), or the goods giving rise to
such Receivable have not been shipped and delivered to the account debtor
thereof, or the services giving rise to such Receivable have not been
performed by the respective Obligor, or for which payment is not absolute
or is contingent upon the fulfillment of any condition;

(d) (other than any Receivable described under clause (n), (r) or (s)
below), any Receivable which remains due and unpaid more than 60 days after
the date of the original invoice with respect thereto;

(e) any Receivable with respect to which any warranty or covenant
contained in this Agreement or any other Loan Document has been breached;

(f) any Receivable against which the account debtor thereof or any
Person obligated to make payment thereof or any commercial carrier asserts
any defense, offset, counterclaim, or other right to avoid or reduce the
liability represented by such Receivable, other than discounts in the
ordinary course of business of the respective Obligor;

(g) any Receivable for which the account debtor thereof is also any
Obligor's supplier or creditor, and that such account debtor has not
entered into an agreement which

<PAGE>

- 12 -

is reasonably acceptable to the Majority Lenders with respect to
waiver of rights of setoff;

(h) the Receivables of an account debtor and its Affiliates which, at
the time of determination, exceed 25% percent of the aggregate amount of
the Obligors' aggregate Receivables at such time of determination, but only
to the extent of such excess;

(i) (other than any Receivable described under clause (n) or (s)
below), all Receivables of any account debtor if more than 25% of the
aggregate amount of the Receivables owing from such account debtor shall at
the time have remained unpaid for more than 90 days after the date of the
issuance of the original invoices therefor;

(j) any Receivable for which the sale to the account debtor is on a
bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is otherwise
contingent on or subject to the fulfillment of any condition; PROVIDED that
no Receivable under this clause (j) shall be excluded by virtue of an
Obligor's customary policy of accepting returns for out-of-code-date,
damaged or leaking products;

(k) any Receivable that arises from a sale outside of the ordinary
course of business or to or for services rendered to any employee or
Affiliate or Subsidiary of any Obligor;

(l) any Receivable that is an obligation of any Person located in a
jurisdiction other than the United States or the Commonwealth unless such
Receivable is supported by a letter of credit issued by a bank reasonably
satisfactory to the Majority Lenders;

(m) any Receivable subject to any Lien other than the Lien granted
pursuant to the relevant Security Documents;

<PAGE>

- 13 -

(n) any Receivable that is an obligation arising from any contracts
for the sale of Eligible Inventory by any Obligor to the Commonwealth
and/or the United States or any agency, instrumentality or department
thereof (i) unless and until all documents or other action required to
assign any such Receivable to the Agent for the benefit of the Lenders
pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Section 3727) and/or Articles 200 and 201 of the Puerto Rico Political Code
of 1902, as amended by Act No. 16 of May 1, 1967 and the rules and
regulations promulgated from time to time thereunder, shall have been
executed and delivered to the Agent or taken, as the case may be, and (ii)
unless such Receivable has not remained due and unpaid for more than 90
days after the date of the original invoice with respect thereto;

(o) any Receivable if the account debtor thereof or any Person liable
in connection therewith is insolvent, subject to bankruptcy or receivership
proceedings, or has made an assignment for the benefit of creditors;

(p) any Receivable identified in any Obligor's books and records as
"Cooperative Advertising Receivables" or any other denomination
representing reimbursement of advertising expenses to such Obligor;

(q) any Receivable that arises from returned checks, conditional
sales contracts or from a sale to any other Obligor or any Affiliate of any
Obligor;

(r) any Receivable identified in any Obligor's books and records as
"Salesmen Accounts" or any other similar denomination which remains due and
unpaid more than 7 days after the date of the original invoice with respect
thereto;

(s) any Receivable that arises from a sale to the Milk Price
Stabilization Fund of the Commonwealth which remains due and unpaid more
than 180 days after the date of the original invoice with respect thereto
and the amount at the

<PAGE>

- 14 -

time of determination of such Receivable remaining due and unpaid
within the period between 121 days to 180 days, which represents 25% or
more of the aggregate amount of Eligible Receivables remaining due and
unpaid within the period of up to 180 days;

(t) with respect to any Obligor (other than Garrido) located in the
Commonwealth, any Receivable arising out of, or relating to, inventory not
covered by the Factor's Lien Contract;

(u) to the extent not already excluded from Eligible Receivables, any
Receivables which are reasonably determined by the Majority Lenders to be
unacceptable for any reason (including, without limitation, relating to the
credit standing of the account debtor of such Receivable) for inclusion as
an Eligible Receivable.

"ENVIRONMENTAL CLAIM" shall mean, with respect to any Person, any
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (a) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law. The term "Environmental Claim" shall
include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.

<PAGE>

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"ENVIRONMENTAL LAWS" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.

"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries after the Effective Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors, officers or employees of the
Company or any of its Subsidiaries, pursuant to employee benefit plans
established in the ordinary course of business and any capital stock of the
Company or any of its Subsidiaries issued upon the exercise of such warrants or
options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the Company or any of
its Subsidiaries or (b) the receipt by the Company or any of its Subsidiaries
whether directly (or indirectly through one or more of its Subsidiaries) after
the Effective Date of any capital contribution (whether or not evidenced by any
equity security issued by the recipient of such contribution); PROVIDED that
Equity Issuance shall not include (x) any such issuance or sale by any
Subsidiary of the Company to the Company or any Wholly Owned Subsidiary of the
Company or (y) any capital contribution by the Company or any Wholly Owned
Subsidiary of the Company to any Subsidiary of the Company.

"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation,

<PAGE>

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any stockholders' or voting trust agreements) for the issuance, sale,
registration or voting of, or securities convertible into, any additional
shares of capital stock of any class, or partnership or other ownership
interests of any type in, such Person.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

"ERISA AFFILIATE" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the Company
is a member.

"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar Loan
for any Interest Period therefor, the rate per annum for deposits in Dollars for
a period comparable to such Interest Period which appears on the Telerate Page
3750 as of 11:00 a.m. London time two Business Days preceding the first day of
such Interest Period or, if Telerate Page 3750 is unavailable at such time, the
rate which appears on the Reuters Screen ISDA Page as of such date and time;
PROVIDED, however, that if Agent determines that the relevant foregoing source
is unavailable for the relevant Interest Period, Eurodollar Base Rate shall mean
the rate of interest determined by the Agent to be the average (rounded upward,
if necessary, to the nearest 1/100th of 1%) of the rates per annum at which
deposits in Dollars in immediately available funds are offered to the Agent or
other money center banks two Business Days preceding the first day of such
Interest Period by leading banks in the London interbank market as of 11:00 a.m.
London time for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to the amount of
the relevant Loan.

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- 17 -

"EURODOLLAR LOANS" shall mean Loans that bear interest at rates based
on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.

"EURODOLLAR RATE" shall mean, for any Eurodollar Loan for any Interest
Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the Eurodollar Base Rate for
such Loan for such Interest Period divided by 1 MINUS the Reserve Requirement
(if any) for such Loan for such Interest Period.

"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 10 hereof.

"EXCESS CASH FLOW" shall mean, for any period, the sum, determined
without duplication, for the Company and its Subsidiaries, of (a) EBITDA for
such period MINUS (b) Capital Expenditures made during such period (other than
Capital Expenditures made from the proceeds of Indebtedness permitted under
Section 9.07 hereof) MINUS (c) the aggregate amount of Debt Service for such
period PLUS (d) decreases (if any) (or MINUS increases (if any)) in Working
Capital for such period, MINUS (e) income taxes paid in cash for such period.

"EXCLUDED DISPOSITION" shall mean the Disposition of any motor
vehicles or other equipment no longer used or useful in the business of the
Company or any of its Subsidiaries to the extent the proceeds thereof are used
to acquire similar replacement Property within a period of 30 days after the end
of the fiscal quarter in which such Disposition was made.

"EXISTING LENDER" shall mean each Lender under the Existing Credit
Agreement.

"EXISTING SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean the
Subsidiary Guarantee and Security Agreement dated as of March 31, 1995 between
each Subsidiary of the Company party thereto and the Agent, as the same shall be
modified and supplemented and in effect from time to time.

<PAGE>

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"FACILITY A COMMITMENT" shall mean, for each Facility A Lender, the
obligation of such Lender to make Facility A Loans to the Company in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount set opposite the name of such Lender on the signature pages hereof
under the caption "Facility A Commitment" (as the same may be reduced from time
to time pursuant to Section 2.03 hereof). The original aggregate principal
amount of the Facility A Commitments is $30,000,000.

"FACILITY A COMMITMENT PERCENTAGE" shall mean, with respect to any
Facility A Lender, the ratio of (a) the amount of the Facility A Commitment of
such Lender to (b) the aggregate amount of the Facility A Commitments of all of
the Facility A Lenders.

"FACILITY A LENDERS" shall mean the Lenders having Facility A
Commitments and/or holding Facility A Loans from time to time.

"FACILITY A LOANS" shall mean the loans provided for by
Section 2.01(a)(i) hereof, which may be Base Rate Loans and/or Eurodollar Loans.

"FACILITY A NOTES" shall mean the promissory notes provided for by
Section 2.07(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.

"FACILITY B COMMITMENT" shall mean, for each Facility B Lender, the
obligation of such Lender to make a Facility B Loan to the Company in a
principal amount up to but not exceeding the amount set opposite the name of
such Lender on the signature pages hereof under the caption "Facility B
Commitment" (as the same may be reduced from time to time pursuant to
Section 2.03 hereof). The aggregate principal amount of the Facility B
Commitments as of the Effective Date is $130,000,000.

<PAGE>

- 19 -

"FACILITY B LENDERS" shall mean the Lenders having Facility B
Commitments and/or holding Facility B Loans from time to time.

"FACILITY B LOANS" shall mean the loans provided for by
Section 2.01(b) hereof, which may be Base Rate Loans and/or Eurodollar Loans.

"FACILITY B NOTES" shall mean the promissory notes provided for by
Section 2.07(b) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time. The term "Facility B Notes" shall include any
Registered Notes evidencing Facility B Loans executed and delivered pursuant to
Section 2.07(e).

"FACTOR'S LIEN CONTRACT" shall mean one or more certain agreements for
the creation of a factor's lien under the provisions of Act No. 86 of June 24,
1954 of the Commonwealth, as amended, between each of the Obligors operating in
the Commonwealth and the Agent, as the same shall be modified and supplemented
and in effect from time to time.

"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, PROVIDED that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Agent.

<PAGE>

- 20 -

"FIXED CHARGES" shall mean, for any period, the sum, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) the aggregate amount of Debt
Service for such period, PLUS (b) the aggregate amount of taxes paid in respect
of the income or profit of the Company and its Subsidiaries for such period,
PLUS (c) Capital Expenditures made during such period, PLUS (d) any Dividend
Payments made for such period PLUS (e) Management Fees for such period (but only
to the extent such Management Fees are not included in the calculation of
EBITDA); provided that Capital Expenditures shall not include Capital
Expenditures permitted to be incurred pursuant to the last sentence of Section
9.14 hereof.

"FIXED CHARGES RATIO" shall mean, as at any date, the ratio of (a)
EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Fixed Charges for such period.

"GAAP" shall mean generally accepted accounting principles applied on
a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.

"GARRIDO" shall have the meaning assigned to such term in the recitals
hereof.

"GARRIDO ACQUISITION" shall have the meaning assigned to such term in
the recitals hereof.

"GARRIDO FACTORS LIEN AGREEMENT" shall mean the Factors Lien Contract
substantially in the form of Exhibit D-3 hereto between Garrido and the Agent,
as the same shall be modified and supplemented and in effect from time to time.

"GARRIDO MORTGAGES" shall have the meaning assigned to such term in
Section 7.02(c)(ii) hereof.

<PAGE>

- 21 -

"GARRIDO PURCHASE AGREEMENT" shall mean the Stock Purchase Agreement,
dated as of July , 1996, relating to the Garrido Acquisition, between Jose M.
Rodriguez Garrido and his wife and Jorge Rodriguez Garrido and his wife, and G
Acquisition Corp., a Puerto Rico corporation and a Wholly Owned Subsidiary of
the Company, as the same shall be modified and supplemented and in effect from
time to time.

"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall
have a correlative meaning.

"GUEST CHOICE" shall have the meaning assigned to such term in the
recitals hereof.

"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB'S"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances",

<PAGE>
- 22 -

"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.

"INDEBTEDNESS" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 120 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.

"INTEREST COVERAGE RATIO" shall mean, as at any date, the ratio of
(a) EBITDA for a period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date to (b) Interest Expense for such period.

<PAGE>

- 23 -

expensed during such period (whether or not actually paid during such
period), but excluding any non-cash interest, PLUS (b) the net amount payable
(or MINUS the net amount receivable) under Interest Rate Protection
Agreements during such period (whether or not actually paid or received
during such period) MINUS (c) all interest income for such period.

"INTEREST PERIOD" shall mean with respect to any Eurodollar Loan, each
period commencing on the date such Eurodollar Loan is made or Converted from a
Base Rate Loan or the last day of the next preceding Interest Period for such
Loan and ending on the numerically corresponding day in the first, second, third
or sixth calendar month thereafter, as the Company may select as provided in
Section 4.05 hereof, except that each Interest Period for a Eurodollar Loan that
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month. Notwithstanding the foregoing: (i) if any Interest Period for any
Facility A Loan would otherwise end after the Revolving Credit Commitment
Termination Date, such Interest Period shall end on the Revolving Credit
Commitment Termination Date; (ii) no Interest Period for any Facility B Loan may
commence before and end after any Principal Payment Date for such Facility B
Loan unless, after giving effect thereto, the aggregate principal amount of the
Facility B Loans having Interest Periods that end after such Principal Payment
Date shall be equal to or less than the aggregate principal amount of such
Facility B Loans scheduled to be outstanding after giving effect to the payments
of principal required to be made on such Principal Payment Date; (iii) each
Interest Period that would otherwise end on a day that is not a Business Day
shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iv) notwithstanding clauses (i) through (iii) above, no
Interest Period shall have a duration of less than one month for any Eurodollar
Loan and, if the Interest Period for any such Loan

<PAGE>

- 24 -

would otherwise be a shorter period, such Loan shall not be available
hereunder for such period.

"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.

"INTEREST RATE PROTECTION OBLIGATIONS" shall mean the obligations of
any Obligor in respect of Interest Rate Protection Agreements permitted under
Section 9.08(d) hereof.

"INVENTORY" shall mean raw and packaging materials and finished goods
(including spare parts) of the Company or any of its Subsidiaries held for sale
in the ordinary course of business.

"INVESTMENT" shall mean, for any Person: (a) the acquisition (whether
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other extension
of credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days representing the
purchase price of inventory or supplies sold by such Person in the ordinary
course of business); (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement.

<PAGE>

- 25 -

"ISSUING BANK" shall mean Chase, as the issuer of Letters of Credit
under Section 2.10 hereof, together with its successors and assigns in such
capacity.

"LETTER OF CREDIT" shall have the meaning assigned to such term in the
first sentence of Section 2.10 hereof.

"LETTER OF CREDIT DOCUMENTS" shall mean, with respect to any Letter of
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same shall be modified and supplemented and in effect from time to
time.

"LETTER OF CREDIT INTEREST" shall mean, for each Facility A Lender,
such Facility A Lender's participation interest in the Issuing Bank's liability
under Letters of Credit (or, in the case of the Issuing Bank, the Issuing Bank's
retained interest therein) and such Facility A Lender's rights and interests in
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.

"LETTER OF CREDIT LIABILITY" shall mean, without duplication, at
any time and in respect of any Letter of Credit, the sum of (a) the undrawn
face amount of such Letter of Credit PLUS (b) the aggregate unpaid principal
amount of all Reimbursement Obligations of the Company at such time due and
payable in respect of all drawings made under such Letter of Credit. For
purposes of this Agreement, a Facility A Lender (other than the Issuing Bank)
shall be deemed to hold a Letter of Credit Liability in an amount equal to
its participation interest in the related Letter of Credit under Section 2.10
hereof, and the Issuing Bank shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in such Letter of
Credit after giving effect to the acquisition by

<PAGE>

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the Facility A Lenders other than the Issuing Bank of their participation
interests under said Section 2.10, together with its successors and assigns
in such capacity.

"LEVERAGE RATIO" shall mean, as at any date, the ratio of (a) the
aggregate outstanding principal amount of Indebtedness at such date to (b)
EBITDA for the period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date; provided that if the Company or any of its
Subsidiaries shall have acquired any business, Property or Person during such
period (whether before, on or after the Effective Date), EBITDA shall, to the
extent the Company shall have delivered audited financial statements (or, if
audited financial statements are not available to the Company, unaudited
financial statements (i) reviewed by independent certified accountants of
recognized national standing and acceptable to the Majority Lenders and (ii) in
form satisfactory to the Majority Lenders) for the acquired business, Property
or Person for such period, be adjusted to reflect on a pro forma basis EBITDA
for such business, Property or Person as if such business, Property or Person
had been acquired at the beginning of such period.

"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own, subject to a Lien, any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.

"LOANS" shall mean the Facility A Loans and the Facility B Loans.

"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes,
the Letter of Credit Documents and the Security Documents.

<PAGE>

- 27 -

"MAJORITY LENDERS" shall mean, as at any time, Facility A Lenders and
Facility B Lenders having at least a majority of the sum of (a) the aggregate
unused amount, if any, of the Facility A Commitments and the Facility B
Commitments as at such time PLUS (b) the aggregate outstanding principal amount
of the Facility A Loans and Facility B Loans at such time PLUS (c) the aggregate
amount of all Letter of Credit Liabilities at such time.

"MANAGEMENT FEES" shall mean, for any period, any amounts paid or
incurred by the Company or any of its Subsidiaries to any Person on account of
fees, salaries and other compensation in respect of services rendered in
connection with the management or supervision of the Company and/or any of its
Subsidiaries (but excluding customary and reasonable compensation and other
benefits paid or provided to officers, employees and directors for services
rendered to the Company or any of its Subsidiaries in such capacities or any
such amounts by any Subsidiary of the Company to the Company or any other
Subsidiary of the Company).

"MARGIN STOCK" shall mean "margin stock" within the meaning of
Regulations U and X.

"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Obligor to perform its obligations under any of
the Loan Documents to which it is a party, (c) the validity or enforceability of
any of the Loan Documents, (d) the rights and remedies of the Lenders and the
Agent under any of the Loan Documents or (e) the timely payment of the principal
of or interest on the Loans or the Reimbursement Obligations or other amounts
payable in connection therewith.

"MORTGAGES" shall mean, collectively, (a) the mortgages or deeds of
trust identified in Schedule VII hereto and (b) one or more mortgages or deeds
of trust, in the respective forms of

<PAGE>

- 28 -

Exhibits D-1 and D-2 hereto (with such modifications thereto requested by the
Agent as may be appropriate to effect a lien on real property in the state
where the respective property to be covered by such instrument is located),
executed by the respective Obligors who own or lease such property in favor
of the Agent (or, in the case of a deed of trust, in favor of the trustee for
the benefit of the Agent and the Lenders) pursuant to Section 7.02(c),
9.19(c), 9.19(d) hereof covering the respective Properties and/or leasehold
interests identified in Schedule IV hereto or subject to the requirements of
said Section 7.02(c), 9.19(c), 9.19(d), as the case may be, in each case as
the same shall be modified and supplemented and in effect from time to time.

"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and that is covered by Title IV of ERISA.

"NET AVAILABLE PROCEEDS" shall mean:

(a) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;

(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Company and its Subsidiaries in respect of such Casualty Event net
of (i) reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith and (ii) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Company or any of its Subsidiaries
in respect of such Casualty Event; and

(c) in the case of any Equity Issuance, the aggregate amount of all
cash received by the Company and its Subsidiaries in respect of such Equity
Issuance net of

<PAGE>

- 29 -

reasonable expenses incurred by the Company and its Subsidiaries in
connection therewith.

"NET CASH PAYMENTS" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Company and its Subsidiaries directly or
indirectly in connection with such Disposition; PROVIDED that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the Company and its
Subsidiaries in connection with such Disposition and (ii) any Federal, state and
local income or other taxes estimated to be payable by the Company and its
Subsidiaries as a result of such Disposition (but only to the extent that such
estimated taxes are in fact paid to the relevant Federal, state or local
governmental authority within six months of the date of such Disposition) and
(b) Net Cash Payments shall be net of any repayments by the Company or any of
its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the Disposition thereof.

"NET WORTH" shall mean, as at any date, the sum for the Company and
its Subsidiaries (determined on a consolidated basis without duplication) of (a)
the amount of capital stock PLUS (b) the amount of additional paid-in capital
plus (c) the amount of retained earnings (or, in the case of any retained
earnings deficit, MINUS the amount of such deficit).

"NEVA PLASTICS" shall mean Neva Plastics Manufacturing Corp., a
Delaware corporation.

"NEW LENDERS" shall mean each Lender which is not a party as a lender
to the Existing Credit Agreement.

"NEW SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean the New
Subsidiary Guarantee and Security Agreement

<PAGE>
- 30 -

substantially in the form of Exhibit C-2 hereto among Garrido, Guest Choice
and the Agent, as the same shall be modified and supplemented and in effect
from time to time.

"NON-COMMITTING LENDERS" shall mean The Chase Manhattan Bank (as a
Facility C and Facility D Lender under the Existing Credit Agreement),
Scotiabank de Puerto Rico, Banco Popular de Puerto Rico (as a Facility C and
Facility D Lender under the Existing Credit Agreement) and Banco Central
Hispano-Puerto Rico.

"NOTES" shall mean the Facility A Notes and the Facility B Notes.

"OBLIGOR" shall mean the Company and each Subsidiary of the Company
party to any Security Document.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.

"PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
United States, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States, or of any agency thereof, in either
case maturing not more than one year from the date of acquisition thereof;
(b) direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of such
acquisition, having the highest rating obtainable from either Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc. ("S&P") or Moody's Investors
Services, Inc. ("MOODY'S"); (c) certificates of deposit issued by any bank or
trust company organized under the laws of the United States or any state thereof
or the Commonwealth and having capital, surplus and undivided profits of at
least $500,000,000, maturing not more than six months from the date of
acquisition thereof; (d) commercial paper rated A-1 or better or P-1 by S&P or
Moody's, respectively, maturing not more than six months from the date of
acquisition thereof; and (e) Eurodollar

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time deposits having a maturity of less than six months purchased directly
from any such bank (whether such deposit is with such bank or any other such
bank).

"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).

"PLAN" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.

"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan, any Reimbursement Obligation or any other amount under this Agreement, any
Note or any other Loan Document that is not paid when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), and in respect
of any principal of any Loan during any period commencing upon the occurrence of
any Event of Default and thereafter for so long as any Event of Default shall be
continuing, a rate per annum during the period from and including the due date
to but excluding the earlier of the date on which such amount is paid in full or
such Event of Default ceases to be continuing equal to 2% PLUS the Base Rate as
in effect from time to time PLUS the Applicable Margin for Base Rate Loans
(PROVIDED that, if the amount so in default is principal of a Eurodollar Loan
and the due date thereof is a day other than the last day of the Interest Period
therefor, the "Post-Default Rate" for such principal shall be, for the period
from and including such due date to but excluding the last day of such Interest
Period, 2% PLUS the interest rate for such Loan as provided in Section 3.02(b)
hereof and, thereafter, the rate provided for above in this definition).

"PRIME RATE" shall mean the rate of interest from time to time
announced by Chase at the principal office as its prime commercial lending rate.

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"P.R. INVENTORY AGREEMENT" shall mean the P.R. Inventory Agreement
substantially in the form of Exhibit C-3 hereto between each Subsidiary of the
Company that owns Inventory in the Commonwealth and the Agent, as shall be
modified and supplemented and in effect from time to time.

"PRINCIPAL PAYMENT DATES" shall mean the Quarterly Dates falling on or
nearest to March 31, June 30, September 30 and December 31 of each year,
commencing with September 30, 1996, through and including March 31, 2002.

"PROCESS AGENT" shall have the meaning assigned to such term in
Section 12.10(c) hereof.

"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal (including, without limitation, cash) or
mixed and whether tangible or intangible.

"PUERTO RICO SECURITY DOCUMENTS" shall mean each of the agreements
listed in Schedule VI hereto, the P.R. Inventory Agreement, the Garrido Factors
Lien Agreement and each of the Additional Puerto Rico Security Documents, in
each case, as any such agreement shall be modified and supplemented and in
effect from time to time.

"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be September 30,
1996.

"RECEIVABLES" shall mean, as at any date, the unpaid portion of the
obligation, as stated on the respective invoice, of a customer of any Obligor in
respect of Inventory sold and shipped by such Obligor in the ordinary course of
its business to such customer, net of any credits, rebates or offsets owed to
such customer and also net of any commissions payable to third parties (and for
purposes hereof, a credit or rebate paid by check or draft of any Obligor shall
be deemed to be outstanding

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until such check or draft shall have been debited to the account of such
Obligor on which such check or draft was drawn).

"REGISTER" shall have the meaning assigned to such term in Section
12.06(g) hereof.

"REGISTERED HOLDER" shall have the meaning assigned to such term in
Section 5.06(b)(ii) hereof.

"REGISTERED LOANS" shall have the meaning assigned to such term in
Section 2.07(e) hereof.

"REGISTERED NOTE" shall have the meaning assigned to such term in
Section 2.07(e) hereof.

"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations A,
D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.

"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the date of this Agreement in United States, Federal, state or foreign law
or regulations or in the law or regulations of the Commonwealth (including,
without limitation, Regulation D) or the adoption or making after such date of
any interpretation, directive or request applying to a class of banks including
such Lender of or under any Federal, state or foreign law or regulations or in
the law or regulations of the Commonwealth (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.

"REIMBURSEMENT OBLIGATIONS" shall mean, at any time, the obligations
of the Company then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Bank in respect of any drawings under a Letter of Credit.

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"RELEASE" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.

"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.

"RESPONSIBLE FINANCIAL OFFICER" shall mean, with respect to any
Person, the Chairman of the Board of Directors, the President, the Chief
Executive Officer, the Chief Financial Officer or the Treasurer of such Person.

"REVOLVING CREDIT COMMITMENT TERMINATION DATE" shall mean the earlier
of the Quarterly Date falling on or nearest to March 31, 2000 and the date on
which the Facility B Loans shall have been paid in full.

"SECURITY AGREEMENT" shall mean the Security Agreement dated as of
March 31, 1995 between the Company and the Agent, as amended by the Amendment to
Security Agreement and as further modified and supplemented and in effect from
time to time.

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"SECURITY DOCUMENTS" shall mean, collectively, the Security Agreement,
the Amendment to Security Agreement, the Mortgages, the New Subsidiary Guarantee
and Security Agreement, the Existing Subsidiary Guarantee and Security
Agreement, the Puerto Rico Security Documents, all Uniform Commercial Code
financing statements and/or other filings required hereby or thereby to be filed
with respect to the security interests in personal Property and fixtures created
pursuant hereto or thereto, and the Subordination Agreement.

"SENIOR INDEBTEDNESS" shall mean (a) the principal of, and accrued
interest on, the Loans and all other amounts owing from time to time hereunder
and under the other Loan Documents and (b) all other amounts constituting
"Senior Indebtedness" under, and as such term is defined in, the Subordinated
Note Purchase Agreement.

"SENIOR INTEREST COVERAGE RATIO" shall mean, as at any date, the
ratio of (a) EBITDA for a period of four consecutive fiscal quarters ending on,
or most recently ended prior to, such date to (b) Interest Expense in respect of
Senior Indebtedness for such period.

"SENIOR LEVERAGE RATIO" shall mean, as at any date, the ratio of (a)
the aggregate outstanding principal amount of Senior Indebtedness at such date
to (b) EBITDA for the period of four consecutive fiscal quarters ending on or
most recently ended prior to such date; provided that if the Company or any of
its Subsidiaries shall have acquired any business, Property or Person during
such period (whether before, on or after the Effective Date), EBITDA shall, to
the extent the Company shall have delivered audited financial statements (or, if
audited financial statements are not available to the Company, unaudited
financial statements (i) reviewed by independent certified accountants of
recognized national standing and acceptable to the Majority Lenders, and (ii) in
form satisfactory to the Majority Lenders) for the acquired business, Property
or Person for such period, be adjusted to reflect on a pro forma basis EBITDA
for such

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business, Property or Person as if such business, Property or Person had been
acquired at the beginning of such period.

"SENIOR SUBORDINATED NOTES" shall mean the Notes (as such term is
defined in the Note Purchase Agreement) issued under the Subordinated Note
Purchase Agreement in an original aggregate principal amount of $50,699,076.40,
in each case as the same shall be modified and supplemented and in effect from
time to time (subject to compliance with Section 9.22 hereof and Section 9 of
the Subordination Agreement).

"SKINNERS ACQUISITION" shall mean the acquisition by Velda Farms, Inc.
of substantially all the business and certain of the assets of Skinners' Dairy,
Inc., a Florida corporation.

"SUBORDINATED INDEBTEDNESS" shall mean the indebtedness, liabilities
and obligations of the Company and/or its Subsidiaries owing from time to time
under or in respect of the Subordinated Note Purchase Agreement, the Senior
Subordinated Notes and the other Subordinated Debt Documents.

"SUBORDINATED DEBT DOCUMENTS" shall mean (a) the Subordinated Note
Purchase Agreement, (b) the Senior Subordinated Notes, (c) the Guarantees (as
such term is defined in the Subordinated Note Purchase Agreement) and (d) the
Subordination Agreement, in each case as the same shall be modified and
supplemented and in effect from time to time (subject to compliance with Section
9.22 hereof and Section 9 of the Subordination Agreement).

"SUBORDINATED NOTE PURCHASE AGREEMENT" shall mean the Note Purchase
Agreement dated as of March 31, 1995 by and among the Company, John Hancock
Mutual Life Insurance Company, John Hancock Life Insurance Company of America,
Pacific Mutual Life Insurance Company and PM Group Life Insurance Co., providing
for the issuance of the Subordinated Indebtedness, as the same shall be modified
and supplemented and in effect from time to time (subject to compliance with
Section 9.22 hereof and Section 9 of the Subordination Agreement).

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"SUBORDINATION AGREEMENT" shall mean the Subordination Agreement dated
as of March 31, 1995 by and among the Company and each of its Subsidiaries, John
Hancock Mutual Life Insurance Company, John Hancock Life Insurance Company of
America, Pacific Mutual Life Insurance Company and PM Group Life Insurance Co.
and the Agent, substantially in the form of Exhibit J hereto, as the same shall
be modified and supplemented and in effect from time to time.

"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

"SUBSIDIARY GUARANTORS" shall mean Suiza Dairy Corporation, Suiza
Fruit Corporation, Neva Plastics Manufacturing Corp., Reddy Ice Corporation,
Velda Farms, Inc. and Suiza Management Corporation, each a Delaware corporation
and, upon execution of the New Subsidiary Guarantee and Security Agreement,
Garrido and Guest Choice.

"SUIZA DAIRY" shall mean Suiza Dairy Corporation, a Delaware
corporation.

"SUIZA FRUIT" shall mean Suiza Fruit Corporation, a Delaware
corporation.

"TAXES" shall have the meaning assigned to such term in Section
5.06(a) hereof.

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"TERM LOAN COMMITMENT TERMINATION DATE" shall mean July 31, 1996.

"TYPE" shall have the meaning assigned to such term in Section 1.03
hereof.

"UNITED STATES" shall mean the United States of America.

"U.S. TAXES" shall have the meaning assigned to such term in Section
5.06(b) hereof.

"WHOLLY OWNED SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.

"WORKING CAPITAL" shall mean, for any period, the excess of (a) the
aggregate amount of inventory, accounts receivable and prepaid expenses of the
Company and its Subsidiaries over (b) the aggregate amount of accounts payable
and current accrued expenses of the Company and its Subsidiaries.

<PAGE>

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1.02 ACCOUNTING TERMS AND DETERMINATIONS.

(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder. All calculations made for the
purposes of determining compliance with this Agreement shall (except as
otherwise expressly provided herein) be made by application of generally
accepted accounting principles applied on a basis consistent with those used in
the preparation of the latest annual or quarterly financial statements furnished
to the Lenders pursuant to Section 9.01 hereof unless (i) the Company shall have
objected to determining such compliance on such basis at the time of delivery of
such financial statements or (ii) the Majority Lenders shall so object in
writing within 30 days after delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made.

(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 9.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.

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(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9 hereof, the Company will not, without
the prior consent of the Majority Lenders, change the last day of its fiscal
year from December 31 of each year, or the last days of the first three fiscal
quarters in each of its fiscal years from March 31, June 30 and September 30 of
each year, respectively.

1.03 CLASSES AND TYPES OF LOANS. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
Loan or the related Note) refers to whether such Loan is a Facility A Loan, or a
Facility B Loan, each of which constitutes a Class. The "Type" of a Loan refers
to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each of which
constitutes a Type. Loans may be identified by both Class and Type.

Section 2. COMMITMENTS, LOANS, NOTES AND PREPAYMENTS.

2.01 LOANS.

(a) FACILITY A LOANS.

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(i) On the Effective Date, the "Facility A Loans" (as defined in the
Existing Credit Agreement) held by the Existing Lenders under the Existing
Credit Agreement shall automatically, and without any action on the part of
any Person, be designated as Facility A Loans hereunder and each of the New
Lenders that is a Facility A Lender (and each Existing Lender, if any,
whose relative proportion of Facility A Commitments hereunder is increasing
over the proportion of "Facility A Loans" held by it under the Existing
Credit Agreement) shall by assignments from the Existing Lenders (which
assignments shall be deemed to occur hereunder automatically, and without
any requirement for additional documentation, on the Effective Date),
acquire a portion of the Facility A Loans of the Existing Lenders so
designated in such amounts (and the Facility A Lenders shall, through the
Agent, make such additional adjustments among themselves as shall be
necessary) so that after giving effect to such assignments and adjustments,
the Facility A Lenders shall hold the Facility A Loans hereunder ratably in
accordance with their respective Facility A Commitments. As of the
Effective Date, each Existing Lender represents and warrants to each New
Lender to which such Existing Lender assigns any of its Facility A Loans
hereunder that it has not created any adverse claim upon the interest being
assigned by it to such New Lender hereunder and that such interest is free
and clear of any adverse claim. On the Effective Date all Interest Periods
under the Existing Credit Agreement in respect of the "Facility A Loans"
under and as defined in the Existing Credit Agreement shall automatically
be terminated (and the Company shall make payments to the Existing Lenders
that held such "Facility A Loans" under Section 5.05 thereof to compensate
for such termination), and, subject to the provisions of paragraph (c)
below, the Company shall be permitted to Continue such "Facility A Loans"
as Eurodollar Loans hereunder, or to convert such "Facility A Loans" into
Base Rate Loans hereunder.

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(ii) In addition to the foregoing, each Facility A Lender severally
agrees, on the terms and conditions of this Agreement, to make loans to the
Company in Dollars during the period from and including the Effective Date
to but not including the Revolving Credit Commitment Termination Date in an
aggregate principal amount (including any Loans continued or acquired by it
under the immediately preceding paragraph) at any one time outstanding up
to but not exceeding the amount of the Facility A Commitment of such Lender
as in effect from time to time (such Loans being herein called "FACILITY A
LOANS"); PROVIDED that in no event shall the aggregate principal amount of
all Facility A Loans, together with the aggregate amount of all Letter of
Credit Liabilities, exceed the aggregate amount of the Facility A
Commitments as in effect from time to time. Subject to the terms and
conditions of this Agreement, during such period the Company may borrow,
repay and reborrow the amount of the Facility A Commitments by means of
Base Rate Loans and/or Eurodollar Loans and may Convert Facility A Loans of
one Type into Facility A Loans of another Type (as provided in Section 2.08
hereof) or Continue Facility A Loans of one Type as Facility A Loans of the
same Type (as provided in Section 2.08 hereof).

(b) FACILITY B LOANS.

(i) On the Effective Date, the "Facility B Loans" (as defined in the
Existing Credit Agreement) held by the Existing Lenders under the Existing
Credit Agreement shall automatically, and without any action on the part of
any Person, be designated as Facility B Loans hereunder and each of the New
Lenders that is a Facility B Lender (and each Existing Lender, if any,
whose relative proportion of Facility B Commitments hereunder is increasing
over the proportion of "Facility B Loans" held by it under the Existing
Credit Agreement) shall by assignments from the Existing Lenders (which
assignments shall be deemed to occur hereunder automatically, and without
any requirement for additional documentation, on the Effective Date),
acquire a

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portion of the Facility B Loans of the Existing Lenders so
designated in such amounts (and the Facility B Lenders shall, through the
Agent, make such additional adjustments among themselves as shall be
necessary) so that after giving effect to such assignments and adjustments,
the Facility B Lenders shall hold the Facility B Loans hereunder ratably in
accordance with their respective Facility B Commitments. As of the
Effective Date, each Existing Lender represents and warrants to each New
Lender to which such Existing Lender assigns any of its Facility B Loans
hereunder that it has not created any adverse claim upon the interest being
assigned by it to such New Lender hereunder and that such interest is free
and clear of any adverse claim. On the Effective Date all Interest Periods
under the Existing Credit Agreement in respect of the "Facility B Loans"
under and as defined in the Existing Credit Agreement shall automatically
be terminated (and the Company shall make payments to the Existing Lenders
that held such "Facility B Loans" under Section 5.05 thereof to compensate
for such termination), and, subject to the provisions of paragraph (c)
below, the Company shall be permitted to Continue such "Facility B Loans"
as Eurodollar Loans hereunder, or to convert such "Facility B Loans" into
Base Rate Loans hereunder.

(ii) In addition to the foregoing, each Facility B Lender severally
agrees, on the terms and conditions of this Agreement, to make a single
term loan to the Company in Dollars on the Effective Date (PROVIDED that
the same shall occur no later than the Term Loan Commitment Termination
Date) in a principal amount up to but not exceeding the amount of the
Facility B Commitment of such Lender less the amount of any Facility B Loan
continued or acquired by it under the immediately preceding paragraph.
Subject to the terms and conditions of this Agreement, the Company may
borrow the amount of the Facility B Loan Commitments by means of Base Rate
Loans and/or Eurodollar Loans and thereafter may Convert Facility B Loans
of one Type into Facility B Loans of another Type (as provided in

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Section 2.08 hereof) or Continue Facility B Loans of one Type as Facility B
Loans of the same Type (as provided in Section 2.08 hereof).

(c) ADJUSTMENTS. On the date three Business Days prior to the
Effective Date, the Agent shall notify each Lender of the amount of Loans
required to be made by each such Lender (if any) to the Company on the
Effective Date, the amount of increase or decrease in the Commitments of
each such Lender and of any other assignments or adjustments that the Agent
deems necessary and advisable such that after giving effect to the
transactions contemplated in this Section to occur on the Effective Date,
each Lender's Commitments shall be in accordance with the Commitments set
forth opposite its name on the signature pages hereof, each Lender's Loans
of any Class to the Company shall not exceed its pro rata portion of all
Loans of any such Class then outstanding to the Company hereunder and the
unused Commitments of all the Lenders plus all outstanding Loans under this
Agreement shall not exceed $160,000,000 in aggregate principal amount.
Each Lender hereby agrees to give effect to the instructions of the Agent
to such Lender contained in the notice described above.

(d) LIMIT ON CERTAIN LOANS. No more than four separate Interest
Periods in respect of Eurodollar Loans of any Class from each Lender may be
outstanding at any one time.

2.02 BORROWINGS.

(a) The Company shall give the Agent notice of each borrowing
hereunder as provided in Section 4.05 hereof.

(b) With respect to each borrowing, not later than 1:00 p.m. New York
time on the date specified for such borrowing, each Lender shall make available
the amount of the Loan or Loans to be made by it to the Company on such date to
the Agent at any account designated by the Agent, in immediately available
funds, for account of the Company. The amount so received by the Agent

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shall, subject to the terms and conditions of this Agreement, be made
available to the Company by depositing the same, in immediately available
funds, in an account of the Company maintained with Chase at the Principal
Office as designated by the Company or otherwise upon its instructions.

2.03 CHANGES OF COMMITMENTS.

(a) The aggregate amount of each of the Facility A Commitments shall
be automatically reduced to zero on the Revolving Credit Commitment Termination
Date.

(b) The Company shall have the right at any time or from time to time
(i) to terminate or reduce the aggregate unused amount of any of the Facility B
Commitments, (ii) so long as no Facility A Loans or Letter of Credit Liabilities
in respect of Letters of Credit are outstanding, to terminate the Facility A
Commitments, and (iii) to reduce the aggregate unused amount of any of the
Facility A Commitments (for which purpose use of the Facility A Commitments
shall be deemed to include the aggregate amount of Letter of Credit
Liabilities); PROVIDED that (x) the Company shall give notice of each such
termination or reduction as provided in Section 4.05 hereof and (y) each such
partial reduction shall be in an aggregate amount at least equal to $2,000,000
(or a larger multiple of $1,000,000).

(d) The Commitments once terminated or reduced may not be reinstated.

2.04 COMMITMENT FEE. The Company shall pay to the Agent for account
of each Facility A Lender a commitment fee on the daily average unused amount of
such Lender's Facility A Commitment (for which purpose the aggregate amount of
any Letter of Credit Liabilities in respect of Letters of Credit shall be deemed
to be a pro rata (based on the Facility A Commitments) use of each Facility A
Lender's Commitment), for the period from and

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including the Effective Date to but not including the earlier of the date
such Commitment is terminated and the Revolving Credit Commitment Termination
Date, at a rate per annum equal to the Applicable Commitment Fee Rate.
Accrued commitment fees shall be payable on each Quarterly Date and on the
earlier of (i) the date the relevant Commitments are terminated and (ii) the
Revolving Credit Commitment Termination Date.

2.05 LENDING OFFICES. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.

2.06 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Agent shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender, and no Lender shall
have any obligation to the Agent or any other Lender for the failure by such
Lender to make any Loan required to be made by such Lender. The amounts payable
by the Company at any time hereunder and under the Notes to each Lender shall be
a separate and independent debt and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall not
be necessary for any other Lender or the Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes.

2.07 NOTES.

(a) The Facility A Loans made (or continued, as the case may be) by
each Lender shall be evidenced by a single promissory note of the Company
substantially in the form of Exhibit A-1 hereto, dated the Effective Date,
payable to such Lender in a principal amount equal to the amount of its Facility
A Commitment as originally in effect and otherwise duly completed.

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(b) The Facility B Loan made (or continued, as the case may be) by
each Lender shall be evidenced by a single promissory note of the Company
substantially in the form of Exhibit A-2 hereto, dated the Effective Date,
payable to such Lender in a principal amount equal to the amount of its Facility
B Commitment as originally in effect and otherwise duly completed.

(c) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender, and each
payment made on account of the principal thereof, shall be recorded by such
Lender on its books and, prior to any transfer of the Note evidencing the Loans
of such Class held by it, endorsed by such Lender on the schedule attached to
such Note or any continuation thereof; PROVIDED that the failure of such Lender
to make any such recordation or endorsement shall not affect the obligations of
the Company to make a payment when due of any amount owing hereunder or under
such Note in respect of the Loans to be evidenced by such Note.

(d) No Lender shall be entitled to have its Notes subdivided, by
exchange for promissory notes of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Lender's
relevant Commitments, Loans and Notes pursuant to Section 12.06(b) hereof.

(e) Notwithstanding the foregoing, any Lender that is not a U.S.
Person and is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code may request the Company (through the Agent), and the Company agrees
thereupon, to record on the Register referred to in Section 12.06(g) hereof any
Facility B Loans held by such Lender under this Agreement. Loans recorded on
the Register ("REGISTERED LOANS") may not be evidenced by promissory notes other
than Registered Notes as defined below and, upon the registration of any
Facility B Loan, any promissory note (other than a Registered Note) evidencing
the same shall be null and void and shall be returned to the Company. The
Company agrees, at the request of any Lender that is the holder of Registered
Loans, to execute and deliver to such Lender a

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promissory note in registered form to evidence such Registered Loans (i.e.
containing the optional registered note language as indicated in Exhibit A-2
hereto) and registered as provided in Section 12.06(g) hereof (herein, a
"REGISTERED NOTE"), dated the Effective Date, payable to such Lender and
otherwise duly completed. A Facility B Loan once recorded on the Register
may not be removed from the Register so long as it remains outstanding and a
Registered Note may not be exchanged for a promissory note that is not a
Registered Note.

2.08 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS.
Subject to Section 4.04 hereof, the Company shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
PROVIDED that:

(a) the Company shall give the Agent notice of each such prepayment,
Conversion or Continuation as provided in Section 4.05 hereof (and, upon the
date specified in any such notice of prepayment, the amount to be prepaid shall
become due and payable hereunder);

(b) Eurodollar Loans may be prepaid or Converted on any day, PROVIDED
that, if such prepayment or Conversion falls on a day other than the last day of
an Interest Period for such Loans, the Company shall pay any and all amounts
required by Section 5.05 hereof as a result thereof; and

(c) prepayments of the Facility B Loans under this Section 2.08 shall
be applied ratably as among the remaining installments of the Facility B Loans.

Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 10 hereof, in the event that any Event of Default
shall have occurred and be continuing, the Agent may (and at the request of the
Majority Lenders shall) suspend the right of the Company to borrow any Loan as a
Eurodollar Loan or to Convert any Loan into a Eurodollar Loan, or

<PAGE>

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to Continue any Loan as a Eurodollar Loan, in which event all Eurodollar
Loans outstanding shall be automatically Converted (on the last day(s) of the
respective Interest Periods therefor) to or all Base Rate Loans shall be
Continued, as the case may be, as Base Rate Loans.

2.09 MANDATORY PREPAYMENTS AND REDUCTIONS OF COMMITMENTS.

(a) BORROWING BASE. Until the Revolving Credit Commitment
Termination Date, the Company shall from time to time prepay the Facility A
Loans (and/or provide cover for Letter of Credit Liabilities in respect of
Letters of Credit as specified in paragraph (h) below) in such amounts as shall
be necessary so that at all times the aggregate outstanding principal amount of
the Facility A Loans together with the outstanding Letter of Credit Liabilities
shall not exceed the Borrowing Base, such amount to be applied, first, to the
Facility A Loans then outstanding and, second, as cover for Letter of Credit
Liabilities.

(b) CASUALTY EVENTS. Not later than 60 days following the receipt by
the Company or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Company or any of its Subsidiaries (or upon such
earlier date as the Company or such Subsidiary, as the case may be, shall have
determined not to repair or replace the Property affected by such Casualty
Event), the Company shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (h) below), and the Facility A
Commitments shall be subject to automatic reduction, in an aggregate amount, if
any, equal to 100% of the Net Available Proceeds of such Casualty Event not
theretofore applied to the repair or replacement of such Property or prepayment
of Facility B Loans, such prepayment and reduction to be effected in each case
in the manner and to the extent specified in paragraph (f) below. Nothing in
this paragraph (b) shall be deemed to limit any obligation of the Company or any
of its Subsidiaries pursuant to any of the

<PAGE>

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Security Documents to remit to a collateral or similar account (including,
without limitation, any Collateral Account) maintained by the Agent pursuant
to any of the Security Documents the proceeds of insurance, condemnation
award or other compensation received in respect of any Casualty Event.
Notwithstanding the foregoing, in the event that a Casualty Event shall occur
with respect to Property covered by the Mortgages, the Company shall prepay
the Loans (and/or provide cover for Letter of Credit of Liabilities) on the
dates and in the amounts to the extent specified in the Mortgages.

(c) SALE OF ASSETS. Without limiting the obligation of the Company
to obtain the consent of the Majority Lenders pursuant to Section 9.05(c) hereof
to any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition other than an Excluded Disposition
(herein, the "CURRENT DISPOSITION"), and of all prior Dispositions as to which a
prepayment has not yet been made under this Section 2.09(c), shall exceed
$500,000 then, no later than 5 Business Days prior to the occurrence of the
Current Disposition, the Company will deliver to the Lenders a statement,
certified by a Responsible Financial Officer of the Company, in form and detail
satisfactory to the Agent, of the amount of the Net Available Proceeds of the
Current Disposition and of all such prior Dispositions and the Company will
prepay the Loans (or cause the Loans to be prepaid), and the Facility A
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of the Current Disposition and such
prior Dispositions, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (f) below; PROVIDED that,
with respect to any Current Disposition that includes any Eligible Inventory or
Eligible Receivables, the Company shall deliver to the Agent a statement of a
Responsible Financial Officer of the Company specifying the portion of Net
Available Proceeds of the Current Disposition and of all prior Dispositions as
to which a prepayment has not yet been made hereunder relating to such Inventory
or Receivables and the Company shall prepay the

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Facility A Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (h) below).

(d) EQUITY ISSUANCE. Upon any Equity Issuance or the issuance of any
Indebtedness (other than Indebtedness permitted under Section 9.07 hereof) after
the Effective Date, the Company shall prepay Loans (and/or provide cover for
Letter of Credit Liabilities as specified in paragraph (h) below), and the
Facility A Commitments shall be subject to automatic reduction, in an aggregate
amount equal to 100% of the Net Available Proceeds thereof (after effecting any
payments in respect of the redemption, prepayment or retirement, as the case may
be, of the Subordinated Indebtedness to the extent permitted under Section
9.22(a)), such prepayment and reduction to be effected in each case in the
manner and to the extent specified in paragraph (f) below.

(e) EXCESS CASH FLOW. Not later than 90 days after the end of each
fiscal year of the Company, commencing with the fiscal year ending December 31,
1996, the Company shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (h) below), and the Facility A
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to the excess of (A) 50% of Excess Cash Flow for such fiscal year (or, if
the Leverage Ratio is less than 2.50 to 1, 25% of Excess Cash Flow) over (B) the
aggregate amount of prepayments of Facility B Loans made during such fiscal year
pursuant to Section 2.08 hereof and, after the payment in full of the Facility B
Loans, the aggregate amount of voluntary reductions of Facility A Commitments
made during such fiscal year pursuant to Section 2.03(b) hereof, such prepayment
and reduction to be effected in each case in the manner and to the extent
specified in paragraph (f) below.

(f) APPLICATION. Prepayments and reductions of Commitments described
in paragraphs (b), (c), (d) and (e) above shall be effected as follows:

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(i) first, the amount of the prepayment specified in such paragraphs
shall be applied to the Facility B Loans then outstanding, 50% of which
amount shall be applied in the inverse order of the maturities of the
installments thereof and (after taking into account such application) the
remainder thereof shall be applied ratably to then remaining installments
of principal of the Facility B Loans; and

(ii) second, the Facility A Commitments shall be automatically reduced
in an amount equal to any excess over the amount referred to in the
foregoing clause (i) (and to the extent that, after giving effect to such
reduction, the aggregate principal amount of Facility A Loans, together
with the aggregate amount of all Letter of Credit Liabilities, would exceed
the Facility A Commitments, the Company shall prepay Facility A Loans in an
aggregate amount equal to such excess (and, to the extent that the amount
of any such prepayment to be applied to the Facility A Loans exceeds the
outstanding amount thereof, provide cover for Letter of Credit Liabilities
as specified in paragraph (h) below).

(g) SALE OF BORROWING BASE ASSETS. In the event that any portion of
the Net Available Proceeds required to be applied pursuant to Section 2.09(c)
hereof shall include Eligible Inventory or Eligible Receivables the Company
shall, first, prepay the aggregate principal amount of Facility A Loans and
second, to the extent of any remaining proceeds, prepay Loans as required by
clause (i) of paragraph (f) above).

(h) COVER FOR LETTER OF CREDIT LIABILITIES. In the event that the
Company shall be required pursuant to this Section 2.09 to provide cover for
Letter of Credit Liabilities, the Company shall effect the same by paying to the
Agent in immediately available funds an amount equal to the required amount,
which funds shall be retained by the Agent in the Collateral Account (as
collateral security in the first instance for the Letter of Credit Liabilities)
until such time as the

<PAGE>

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Letters of Credit shall have been terminated and all of such Letter of Credit
Liabilities paid in full.

<PAGE>

- 54 -

2.10 LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, the Facility A Commitments may be utilized, upon the request of the
Company, in addition to the Facility A Loans provided for by Section 2.01(a)
hereof, by the issuance by the Issuing Bank of letters of credit (collectively,
"LETTERS OF CREDIT") including (a) Letters of Credit issued under the Existing
Agreement and outstanding on the Effective Date, for account of any of the
Subsidiaries of the Company, and (b) in respect of all (1) Letters of Credit
described in clause (a) above that are amended, renewed or otherwise modified
and (2) other Letters of Credit, for account of the Company and any of its
Subsidiaries PROVIDED that in no event shall (i) the aggregate amount of all
Letter of Credit Liabilities in respect of Letters of Credit, together with the
aggregate principal amount of the Facility A Loans, exceed the aggregate amount
of the Facility A Commitments as in effect from time to time, (ii) the
outstanding aggregate amount of all Letter of Credit Liabilities in respect of
Letters of Credit exceed $5,000,000, (iii) the expiration date of any Letter of
Credit extend beyond the earlier of the Revolving Credit Commitment Termination
Date and the date 12 months following the issuance of such Letter of Credit and
(iv) the aggregate amount of all Letter of Credit Liabilities in respect of
Letters of Credit provided for in clause (a) above exceed $200,000. The
following additional provisions shall apply to Letters of Credit:

(a) The Company shall give the Agent at least three Business Days'
irrevocable prior notice (effective upon receipt) specifying the Business
Day (which shall be no later than 30 days preceding the Revolving Credit
Commitment Termination Date) each Letter of Credit is to be issued and the
account party or parties therefor and describing in reasonable detail the
proposed terms of such Letter of Credit (including the beneficiary thereof)
and the nature of the transactions or obligations proposed to be supported
thereby (including whether such Letter of Credit is to be a commercial
letter of credit or a standby letter of credit). Upon receipt of any such
notice, the Agent shall advise the Issuing Bank of the contents thereof.

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(b) On each day during the period commencing with the issuance by the
Issuing Bank of any Letter of Credit (from the Effective Date in the case
of outstanding Letters of Credit) and until such Letter of Credit shall
have expired or been terminated, the Facility A Commitment of each Facility
A Lender shall be deemed to be utilized for all purposes of this Agreement
in an amount equal to such Lender's Facility A Commitment Percentage of the
then undrawn face amount of such Letter of Credit. Each Facility A Lender
(other than the Issuing Bank) agrees that, upon the issuance of any Letter
of Credit hereunder, it shall automatically acquire a participation in the
Issuing Bank's liability under such Letter of Credit in an amount equal to
such Lender's Facility A Commitment Percentage of such liability, and each
Facility A Lender (other than the Issuing Bank) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and shall be unconditionally obligated to the Issuing Bank to pay
and discharge when due, its Facility A Commitment Percentage of the Issuing
Bank's liability under such Letter of Credit.

(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Bank shall
promptly notify the Company (through the Agent) of the amount to be paid by
the Issuing Bank as a result of such demand and the date on which payment
is to be made by the Issuing Bank to such beneficiary in respect of such
demand (but the failure to give such notice shall not impair the Company's
obligations). Notwithstanding the identity of the account party of any
Letter of Credit, the Company hereby unconditionally agrees to pay and
reimburse the Agent for account of the Issuing Bank for the amount of each
demand for payment under such Letter of Credit that is in substantial
compliance with the provisions of such Letter of Credit at or prior to the
date on which payment is to be made by the Issuing Bank to the beneficiary
thereunder,

<PAGE>

- 56 -

without presentment, demand, protest or other formalities of
any kind and irrespective of any claim, set-off, defense or other right
which the Company or any of its Subsidiaries or Affiliates may have at any
time against such Issuing Bank or any other Person, under all
circumstances, including without limitation, any of the following
circumstances: (i) any lack of validity or enforceability of this Agreement
or any of the Loan Documents; (ii) the existence of any claim, set-off,
defense or other right which the Company or any of its Subsidiaries or
Affiliates may have at any time against a beneficiary named in any Letter
of Credit or any transferee thereof (or any Person for whom any such
transferee may be acting), the Issuing Bank, any Lender or any other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between the Company or any of its
Subsidiaries or Affiliates and the beneficiary named in any Letter of
Credit; (iii) any draft, certificate or any other document presented under
a Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Loan
Documents; or (v) the existence of any Default.

(d) Forthwith upon its receipt of a notice referred to in
paragraph (c) of this Section 2.10, the Company shall advise the Agent
whether or not the Company intends to borrow hereunder to finance its
obligation to reimburse the Issuing Bank for the amount of the related
demand for payment and, if it does, submit a notice of such borrowing as
provided in Section 4.05 hereof.

(e) Each Facility A Lender (other than the Issuing Bank) shall pay to
the Agent for account of the Issuing Bank at the Principal Office in
Dollars and in immediately available funds, the amount of such Lender's
Facility A Commitment Percentage of any payment under a Letter of

<PAGE>

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Credit upon notice by the Issuing Bank (through the Agent) to such
Facility A Lender requesting such payment and specifying such amount.
Each such Facility A Lender's obligation to make such payment to the
Agent for account of the Issuing Bank under this paragraph (e), and the
Issuing Bank's right to receive the same, shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever
(except as provided in the proviso at the end of this sentence),
including, without limitation, the failure of any other Facility A
Lender to make its payment under this paragraph (e), the financial
condition of the Company (or any other account party), the existence of
any Default or the termination of the Commitments; PROVIDED that no
Facility A Lender shall be obligated to make any payment to the Agent
for account of the Issuing Bank in respect of any payment made by the
Issuing Bank under a Letter of Credit where such payment was made in
respect of a demand for payment that was not in substantial compliance with
the provisions of such Letter of Credit or to the extent that the Company
shall not be required to indemnify any Lender or the Agent in the
circumstances provided in clause (x) of the penultimate sentence of the
last paragraph of this Section 2.10. Each such payment to the Issuing
Bank shall be made without any offset, abatement, withholding or
reduction whatsoever. If any Facility A Lender shall default in its
obligation to make any such payment to the Agent for account of the
Issuing Bank, for so long as such default shall continue the Agent may at
the request of the Issuing Bank withhold from any payments received by
the Agent under this Agreement or any Note for account of such Facility
A Lender the amount so in default and, to the extent so withheld, pay
the same to the Issuing Bank in satisfaction of such defaulted
obligation.

(f) Upon the making of each payment by a Facility A Lender to the
Issuing Bank pursuant to paragraph (e) above in respect of any Letter of
Credit, such Lender shall, automatically and without any further action on
the part of the Agent, the Issuing Bank or such Lender, acquire (i) a

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participation in an amount equal to such payment in the Reimbursement
Obligation owing to the Issuing Bank by the Company hereunder and under the
Letter of Credit Documents relating to such Letter of Credit and (ii) a
participation in a percentage equal to such Lender's Facility A Commitment
Percentage in any interest or other amounts payable by the Company
hereunder and under such Letter of Credit Documents in respect of such
Reimbursement Obligation (other than the commissions, charges, costs and
expenses payable to the Issuing Bank pursuant to paragraph (g) of this
Section 2.10). Upon receipt by the Issuing Bank from or for account of the
Company of any payment in respect of any Reimbursement Obligation or any
such interest or other amount (including by way of setoff or application of
proceeds of any collateral security), the Issuing Bank shall promptly pay
to the Agent for account of each Facility A Lender entitled thereto, such
Facility A Lender's Facility A Commitment Percentage of such payment, each
such payment by the Issuing Bank to be made in the same money and funds in
which received by the Issuing Bank. In the event any payment received by
the Issuing Bank and so paid to the Facility A Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Bank, each Facility
A Lender shall, upon the request of the Issuing Bank (through the Agent),
repay to the Issuing Bank (through the Agent) the amount of such payment
paid to such Lender, with interest at the rate specified in paragraph (j)
of this Section 2.10.

(g) The Company shall pay to the Agent for account of each Facility A
Lender (ratably in accordance with their respective Commitment Percentages)
a letter of credit fee in respect of each Letter of Credit in an amount
equal to the percentage equivalent of the Applicable Margin for Eurodollar
Loans (less 0.25%) of the daily average undrawn face amount of such Letter
of Credit for the period from and including the date of issuance of such
Letter of Credit (i) in the case of a Letter of Credit that expires in
accordance with its terms, to and including such expiration date and (ii)
in the case of a Letter of Credit that is drawn in full

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or is otherwise terminated other than on the stated expiration date
of such Letter of Credit, to but excluding the date such Letter of
Credit is drawn in full or is terminated (such fee to be non-refundable,
to be paid in arrears on each Quarterly Date and on the Revolving Credit
Commitment Termination Date and to be calculated for any day after
giving effect to any payments made under such Letter of Credit on such
day). In addition, the Company shall pay to the Agent for account of
the Issuing Bank a fronting fee in respect of each Letter of Credit in
an amount equal to 0.25% per annum of the daily average undrawn face
amount of such Letter of Credit for the period from and including the
date of issuance of such Letter of Credit (i) in the case of a Letter of
Credit that expires in accordance with its terms, to and including such
expiration date and (ii) in the case of a Letter of Credit that is drawn
in full or is otherwise terminated other than on the stated expiration
date of such Letter of Credit, to but excluding the date such Letter of
Credit is drawn in full or is terminated (such fee to be non-refundable,
to be paid in arrears on each Quarterly Date and on the Revolving Credit
Commitment Termination Date and to be calculated for any day after
giving effect to any payments made under such Letter of Credit on such
day) plus all commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Bank from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.

(h) Promptly following the end of each fiscal quarter, the Issuing
Bank shall deliver (through the Agent) to each Facility A Lender and the
Company a notice describing the aggregate amount of all Letters of Credit
outstanding at the end of such quarter. Upon the request of any Facility A
Lender from time to time, the Issuing Bank shall deliver any other
information reasonably requested by such Lender with respect to each Letter
of Credit then outstanding.

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(i) The issuance by the Issuing Bank of each Letter of Credit shall,
in addition to the conditions precedent set forth in Section 7 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
reasonably satisfactory to the Issuing Bank consistent with its then
current practices and procedures with respect to letters of credit of the
same type and (ii) the Company shall have executed and delivered such
applications, agreements and other instruments relating to such Letter of
Credit as the Issuing Bank shall have reasonably requested consistent with
its then current practices and procedures with respect to letters of credit
of the same type, PROVIDED that in the event of any conflict between any
such application, agreement or other instrument and the provisions of this
Agreement or any Security Document, the provisions of this Agreement and
the Security Documents shall control.

(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section 2.10
on the due date therefor, such Lender shall pay interest to the Issuing
Bank (through the Agent) on such amount from and including such due date to
but excluding the date such payment is made at a rate per annum equal to
the Federal Funds Rate, PROVIDED that if such Lender shall fail to make
such payment to the Issuing Bank within three Business Days of such due
date, then, retroactively to the due date, such Lender shall be obligated
to pay interest on such amount at the Post-Default Rate.

(k) The issuance by the Issuing Bank of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.10 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit affected
thereby would have complied with such conditions

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had it originally been issued hereunder in such modified or supplemented
form or (ii) each Facility A Lender shall have consented thereto.

The Company hereby indemnifies and holds harmless each Facility A Lender and the
Agent from and against any and all claims and damages, losses, liabilities,
costs or expenses that such Lender or the Agent may incur (or that may be
claimed against such Lender or the Agent by any Person whatsoever) by reason of
or in connection with the execution and delivery or transfer of or payment or
refusal to pay by the Issuing Bank under any Letter of Credit; PROVIDED that the
Company shall not be required to indemnify any Lender or the Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (x) the willful misconduct or gross negligence of the
Issuing Bank in determining whether a request presented under any Letter of
Credit complied with the terms of such Letter of Credit or (y) in the case of
the Issuing Bank, such Lender's failure to pay under any Letter of Credit after
the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit. Nothing in this Section 2.10 is intended
to limit the other obligations of the Company, any Lender or the Agent under
this Agreement.

Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.

3.01 REPAYMENT OF LOANS.

(a) The Company hereby promises to pay to the Agent for account of
each Facility A Lender the entire outstanding principal amount of such Lender's
Facility A Loans, and each such Facility A Loan shall mature, on the Revolving
Credit Commitment Termination Date.

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(b) The Company hereby promises to pay to the Agent for account of
each Facility B Lender the principal of such Lender's Facility B Loan in 23
installments payable on the Principal Payment Dates falling on or nearest to the
dates specified below, each in an amount equal to such Lender's ratable share of
the aggregate amount set forth opposite such date, as follows:

Date Amount of Installment ($)
---- -------------------------

September 30, 1996 2,500,000
December 31, 1996 2,500,000
March 31, 1997 2,500,000
June 30, 1997 2,500,000
September 30, 1997 3,750,000
December 31, 1997 3,750,000
March 31, 1998 3,750,000
June 30, 1998 3,750,000
September 30, 1998 5,000,000
December 31, 1998 5,000,000
March 31, 1999 5,000,000
June 30, 1999 5,000,000
September 30, 1999 5,375,000
December 31, 1999 5,375,000
March 31, 2000 5,375,000
June 30, 2000 5,375,000
September 30, 2000 6,000,000
December 31, 2000 6,000,000
March 31, 2001 6,000,000
June 30, 2001 6,000,000
September 30, 2001 9,875,000
December 31, 2001 9,875,000
March 31, 2002 19,750,000
----------
$130,000,000

If the Company does not borrow the full amount of the aggregate Facility B
Commitments on or before the Term Loan Commitment Termination Date, the
shortfall shall be applied to reduce the foregoing installments ratably.

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3.02 INTEREST. The Company hereby promises to pay to the Agent for
account of each Lender interest on the unpaid principal amount of each Loan for
the period from and including the date of such Loan to but excluding the date
such Loan shall be paid in full, at the following rates per annum:

(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) PLUS the Applicable Margin, and

(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period PLUS the Applicable Margin.

Notwithstanding the foregoing, the Company hereby promises to pay to the Agent
for account of each Lender interest at the applicable Post-Default Rate as
follows:

(i) on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount
payable by the Company hereunder or under the Notes held by such Lender to
or for account of such Lender that shall not be paid in full when due
(whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full; and

(ii) on the principal of all Loans made by such Lender commencing
upon the occurrence of any Event of Default, and thereafter for so long as
any Event of Default shall be continuing.

Accrued interest on each Loan shall be payable (i) in the case of a Base Rate
Loan, quarterly on the Quarterly Dates, (ii) in the case of a Eurodollar Loan,
on the last day of each Interest Period therefor and, if such Interest Period is
longer than

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three months, at three-month intervals following the first day of
such Interest Period, and (iii) in the case of any Loan, upon the payment or
prepayment thereof or the Conversion of such Loan to a Loan of another Type (but
only on the principal amount so paid, prepaid or Converted), except that
interest payable at the Post-Default Rate shall be payable from time to time on
demand. Promptly after the determination of any interest rate provided for
herein or any change therein, the Agent shall give notice thereof to the Lenders
to which such interest is payable and to the Company.

Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.

4.01 PAYMENTS.

(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company under this Agreement and the Notes of the Company, and, except to
the extent otherwise provided therein, all payments to be made by the Obligors
under any other Loan Document, shall be made in Dollars, in immediately
available funds, to the Agent at any account designated by the Agent not later
than 1:00 p.m. New York time on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day).

(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Company with such
Lender (with notice to the Company and the Agent).

(c) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Agent (which
shall so notify the intended recipient(s) thereof) the Loans, Reimbursement
Obligations or other amounts payable hereunder to which such payment is to be

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applied (and in the event that the Company fails to so specify, or if an Event
of Default has occurred and is continuing, the Agent may distribute such payment
to the Lenders for application in such manner as it or the Majority Lenders,
subject to Section 4.02 hereof, may determine to be appropriate).

(d) Except to the extent otherwise provided in the last sentence of
Section 2.10(e) hereof, each payment received by the Agent under this Agreement
or any Note for account of any Lender shall be paid by the Agent promptly to
such Lender, in immediately available funds, for account of such Lender's
Applicable Lending Office for the Loan or other obligation in respect of which
such payment is made.

(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.

4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Loans of a particular Class from the Lenders
under Section 2.01 hereof shall be made from the relevant Lenders, each payment
of commitment fee under Section 2.04 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular Class
under Section 2.03 hereof shall be applied to the respective Commitments of such
Class of the relevant Lenders, pro rata according to the amounts of their
respective Commitments of such Class; (b) the making, Conversion and
Continuation of Loans of a particular Type and Class (other than Conversions
provided for by Section 5.04 hereof) shall be made pro rata among the relevant
Lenders according to the amounts of their respective Commitments (in the case of
making of Loans) or their respective Loans (in the case of Conversions and
Continuations of Loans); (c) each payment or prepayment of principal of Loans of
any Class by the Company shall be made for account of the relevant Lenders pro
rata in accordance with the

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respective unpaid principal amounts of the Loans of such Class held by them;
and (d) each payment of interest on any Loans of any Class by the Company
shall be made for account of the relevant Lenders pro rata in accordance with
the amounts of interest on such Loans then due and payable to the respective
Lenders.

4.03 COMPUTATIONS. Interest on Eurodollar Loans, commitment fees and
letter of credit fees shall be computed on the basis of a year of 360 days and
actual days elapsed (including the first day but, except as otherwise provided
in Section 2.10(g) hereof, excluding the last day) occurring in the period for
which payable and interest on Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which payable.

4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant
to Section 2.09 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, (a) each borrowing and Conversion of principal of Base Rate
Loans shall be in an aggregate amount at least equal to $1,000,000 or a larger
multiple of $1,000,000, (b) each borrowing and Conversion of Eurodollar Loans
shall be in an aggregate amount at least equal to $3,000,000 or a larger
multiple of $1,000,000, (c) each partial prepayment of principal of Loans shall
be in an aggregate amount at least equal to $2,000,000 or a larger multiple of
$1,000,000 (borrowings, Conversions or prepayments of or into Loans of different
Types or, in the case of Eurodollar Loans, having different Interest Periods at
the same time hereunder to be deemed separate borrowings, Conversions and
prepayments for purposes of the foregoing, one for each Type or Interest
Period).

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4.05 CERTAIN NOTICES. Notices by the Company to the Agent of
terminations or reductions of the Commitments, of Borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable
(other than with respect to notices of optional prepayments, which shall be
revocable, PROVIDED that upon any such revocation the Company shall be obligated
to pay the Lenders any amounts payable under Section 5.05 hereof as a
consequence of such revocation) and shall be effective only if received by the
Agent not later than 12:00 noon New York time on the number of Business Days
prior to the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:

Number of
Business
Notice Days Prior
------ ----------

Termination or reduction
of Commitments 3

Borrowing or prepayment of,
or Conversions into,
Base Rate Loans Same Day

Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3

Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a

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Business Day). Each such notice of the duration of an Interest Period shall
specify the Loans to which such Interest Period is to relate. The Agent
shall promptly notify the Lenders of the contents of each such notice. In
the event that the Company fails to select the Type of Loan, or the duration
of any Interest Period for any Eurodollar Loan, within the time period and
otherwise as provided in this Section 4.05, such Loan (if outstanding as a
Eurodollar Loan) will be automatically Converted into a Base Rate Loan on the
last day of the then current Interest Period for such Loan or (if outstanding
as a Base Rate Loan) will remain as, or (if not then outstanding) will be
made as, a Base Rate Loan.

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4.06 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have
been notified by a Lender or the Company (the "PAYOR") prior to the date on
which the Payor is to make payment to the Agent of (in the case of a Lender) the
proceeds of a Loan to be made by such Lender hereunder or (in the case of the
Company) a payment to the Agent for account of one or more of the Lenders
hereunder (such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date (the "ADVANCE DATE") such amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Rate for such day and, if such
recipient(s) shall fail promptly to make such payment, the Agent shall be
entitled to recover such amount, on demand, from the Payor, together with
interest as aforesaid, PROVIDED that if neither the recipient(s) nor the Payor
shall return the Required Payment to the Agent within three Business Days of the
Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:

(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the Company and the recipient(s) shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the Post-Default Rate (and, in case the
recipient(s) shall return the Required Payment to the Agent, without
limiting the obligation of the Company under Section 3.02 hereof to pay
interest to such recipient(s) at the Post-Default Rate in respect of the
Required Payment) and

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(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to the Company, the Payor and the Company shall each be
obligated retroactively to the Advance Date to pay interest in respect of
the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.02 hereof (and, in case the Company shall
return the Required Payment to the Agent, without limiting any claim the
Company may have against the Payor in respect of the Required Payment).

4.07 SHARING OF PAYMENTS, ETC.

(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option, to offset balances held by
it for account of the Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
the Company), in which case it shall promptly notify the Company and the Agent
thereof, PROVIDED that such Lender's failure to give such notice shall not
affect the validity thereof.

(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Loan Document through the exercise of any right of set-off, Lender's lien or
counterclaim or similar right or otherwise (other than from the Agent as
provided herein), and, as a result of such payment, such Lender shall have
received a greater percentage of the principal of or interest on the Loans of
such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent

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specified by such Lender, direct interests in) the Loans of such Class or
such other amounts, respectively, owing to such other Lenders (or in interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Lenders shall share the benefit of such excess payment (net of any expenses
that may be incurred by such Lender in obtaining or preserving such excess
payment) pro rata in accordance with the unpaid principal of and/or interest
on the Loans of such Class or Letter of Credit Liabilities or such other
amounts, respectively, owing to each of the Lenders. To such end all the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored.

(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.

Section 5. YIELD PROTECTION, ETC.

5.01 ADDITIONAL COSTS.

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(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "ADDITIONAL
COSTS"), resulting from any Regulatory Change that:

(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of such
Loans or its Notes or changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Notes in respect of any of such
Loans (excluding changes in the rate of tax on the overall net income of
such Lender or of its Applicable Lending Office by the jurisdiction in
which such Lender is organized or has its principal office or in which its
Applicable Lending Office is organized or located or, in each case, any
political subdivision or taxing authority thereof or therein); or

(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definitions of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or

(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.

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If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Agent), suspend
the obligation of such Lender thereafter to make or Continue Eurodollar Loans,
to Convert Loans of another Type into Eurodollar Loans or to Convert Eurodollar
Loans into Loans of another Type until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of Section 5.04
hereof shall be applicable), PROVIDED that such suspension shall not affect the
right of such Lender to receive the compensation so requested.

(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender that includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender that includes Eurodollar
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets that it may hold then, if such Lender so elects by
notice to the Company (with a copy to the Agent), the obligation of such Lender
to make or Continue, or to Convert Loans of another type into, Eurodollar Loans,
hereunder (as the case may be) shall be suspended until any such Regulatory
Change ceases to be in effect (in which case the provisions of Section 5.04
hereof shall be applicable).

(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the bank
holding company of which such Lender is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the

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force of law and whether or not failure to comply therewith would be
unlawful) of any court or governmental or monetary authority (i) following
any Regulatory Change or (ii) hereafter implementing any risk-based capital
guideline or other requirement (whether or not having the force of law and
whether or not the failure to comply therewith would be unlawful) heretofore
or hereafter issued by any government or governmental or supervisory
authority implementing at the national level the Basle Accord (including,
without limitation, the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 C.F.R. Part 208, Appendix A; 12
C.F.R. Part 225, Appendix A) and the Final Risk-Based Capital Guidelines of
the Office of the Comptroller of the Currency (12 C.F.R. Part 3, Appendix
A)), of capital in respect of its Commitments or Loans (such compensation to
include, without limitation, an amount equal to any reduction of the rate of
return on assets or equity of such Lender (or any Applicable Lending Office
or such bank holding company) to a level below that which such Lender (or any
Applicable Lending Office or such bank holding company) could have achieved
but for such law, regulation, interpretation, directive or request). For
purposes of this Section 5.01(d) and Section 5.08 hereof, "BASLE ACCORD"
shall mean the proposals for risk-based capital framework described by the
Basle Committee on Banking Regulations and Supervisory Practices in its paper
entitled "International Convergence of Capital Measurement and Capital
Standards" dated July 1988, as amended, modified and supplemented and in
effect from time to time or any replacement thereof.

(d) Each Lender shall notify the Company of any event occurring after
the date of this Agreement entitling such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable, but in any
event within 45 days, after such Lender obtains actual knowledge thereof;
PROVIDED that (i) if any Lender fails to give such notice within 45 days after
it obtains actual knowledge of such an event, such Lender shall, with respect to
compensation payable pursuant to this Section 5.01 in respect of any costs
resulting from such event, only be entitled to payment under this Section 5.01
for costs

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incurred from and after the date 45 days prior to the date that such
Lender does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Loans of such Lender affected by such event if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate an Applicable Lending Office located in the United States. Each
Lender will furnish to the Company a certificate setting forth the basis and
amount of each request by such Lender for compensation under paragraph (a)
or (c) of this Section 5.01. Determinations and allocations by any Lender for
purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to
paragraph (a) or (b) of this Section 5.01, or of the effect of capital
maintained pursuant to paragraph (c) of this Section 5.01, on its costs or rate
of return of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to compensate
such Lender under this Section 5.01, shall be conclusive in the absence of
manifest error, PROVIDED that such determinations and allocations are made on a
reasonable basis.

5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:

(a) the Agent determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in
the definition of "Eurodollar Base Rate" in Section 1.01 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Eurodollar Loans as provided
herein; or

(b) The Majority Lenders determine, which determination shall be
conclusive, and notify the Agent that the relevant rates of interest
referred to in the definitions of "Eurodollar Base Rate" in Section 1.01
hereof

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upon the basis of which the rate of interest for Eurodollar Loans
for such Interest Period is to be determined are not likely adequately to
cover the cost to such Lenders of making or maintaining Eurodollar Loans
for such Interest Period;

then the Agent shall give the Company and each Lender prompt notice thereof
(describing the circumstances giving rise to such event) and, so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Eurodollar Loans, to Continue Eurodollar Loans, to Convert Loans of
another Type into Eurodollar Loans and the Company shall, on the last day(s) of
the then current Interest Period(s) for the outstanding Eurodollar Loans either
prepay such Loans or Convert such Loans into Loans of another Type in accordance
with Section 2.08 hereof.

5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Agent) and such Lender's obligation to make or Continue, or
to Convert Loans of any other Type into, Eurodollar Loans shall be suspended
until such time as such Lender may again make and maintain Eurodollar Loans (in
which case the provisions of Section 5.04 hereof shall be applicable).

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5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make Eurodollar Loans ("AFFECTED LOANS"), or to Continue, or to Convert Loans of
another Type into Affected Loans shall be suspended pursuant to Section 5.01
or 5.03 hereof, such Lender's Affected Loans shall be automatically Converted
into Base Rate Loans on the last day(s) of the then current Interest Period(s)
therefor (or, in the case of a Conversion required by Section 5.01(b), 5.01(c)
or 5.03 hereof, on such earlier date as such Lender may specify to the Company
with a copy to the Agent) and, unless and until such Lender gives notice as
provided below that the circumstances specified in Section 5.01 or 5.03 hereof
that gave rise to such Conversion no longer exist:

(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its
Base Rate Loans; and

(b) all Loans that would otherwise be made or Continued by such
Lender as Affected Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Affected Loans (as the case may be) shall remain as Base
Rate Loans.

If such Lender gives notice to the Company with a copy to the Agent that the
circumstances specified in Section 5.01 or 5.03 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 5.04 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Affected Loans made by other Lenders, and of
the same Class as such Lender's Loans are outstanding, such Lender's Base Rate
Loans of each Class (subject to Section 2.10 hereof) shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Affected Loans and of such Class, to the extent necessary so
that, after giving effect thereto, all Loans of such Class held by the Lenders
holding Affected Loans and by such Lender are held

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pro rata (as to principal amounts, Types and Interest Periods) in accordance
with their respective Commitments.

5.05 COMPENSATION. The Company shall pay to the Agent for account of
each Lender, upon the request of such Lender through the Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Lender) to
compensate it for any loss, cost or expense that such Lender determines is
attributable to:

(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by the Company for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10 hereof) on
a date other than the last day of the Interest Period for such Loan; or

(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof or in the notice from the
Agent given pursuant to Section 2.01(c);

(c) any failure for any reason (including, without limitation, as
provided in Section 5.02 or 5.03 hereof) of a Loan of such Lender to be
Continued as or Converted into a Eurodollar Loan on the date for such
Continuation or Conversion specified in the relevant notice given under
Section 4.05 hereof; or

(d) the revocation of any notice of optional prepayment or any failure
for any reason to make any optional prepayment on the date specified
therefor in the relevant notice of prepayment given pursuant to Section
4.05 hereof.

Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued

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on the principal amount so paid, prepaid, Converted or not borrowed or
prepaid for the period from the date of such payment, prepayment, Conversion
or failure to borrow or prepay to the last day of the then current Interest
Period for such Loan (or, in the case of a failure to borrow, the Interest
Period for such Loan that would have commenced on the date specified for such
borrowing) at the applicable rate of interest for such Loan (MINUS the
Applicable Margin) provided for herein over (ii) the amount of interest that
otherwise would have accrued on such principal amount at a rate per annum
equal to the interest component of the amount such Lender would have bid on
the date of such payment, prepayment, conversion or failure to borrow or
prepay in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).

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5.06 NET PAYMENTS; TAXES.

(a) All payments to be made hereunder and under the Notes and any
other Loan Documents by the Company shall be made without setoff, counterclaim
or other defense. Subject to Section 5.06(b) hereof with respect to U.S. Taxes,
all such payments shall be made free and clear of and without deduction for or
on account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any governmental authority
(other than taxes imposed on the Agent, any Lender or its Applicable Lending
Office by the jurisdiction in which the Agent or such Lender is organized or has
its principal office or in which its Applicable Lending Office is organized or
located or, in each case, any political subdivision or taxing authority thereof
or therein) (collectively, "TAXES"). If any Taxes are imposed and required to
be withheld from any amount payable by the Company hereunder or under the Notes,
the Company shall be obligated to (i) pay such additional amount so that the
Agent and the Lenders will receive a net amount (after giving effect to the
payment of such additional amount and to the deduction of all Taxes) equal to
the amount due hereunder, (ii) pay such Taxes to the appropriate taxing
authority for the account of the Agent, for the benefit of the Lenders and (iii)
as promptly as possible thereafter, sending the Agent a certified copy of any
original official receipt showing payment thereof, together with such additional
documentary evidence as the Agent may from time to time reasonably require. If
the Company fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Agent the required receipts or other required
documentary evidence, the Company shall be obligated to indemnify the Agent and
each Lender for any incremental taxes, interest or penalties that may become
payable by the Agent or such Lender as a result of such failure. The
obligations of the Company under this Section 5.01(a) shall survive the
repayment of the Loans and the termination of the Commitments.

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(b) The Company agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to and received by such non-U.S. Person hereunder
after deduction for or withholding in respect of any U.S. Tax imposed with
respect to such payment (or in lieu thereof, payment of such U.S. Tax by such
non-U.S. Person), will not be less than the amount stated herein to be then due
and payable, PROVIDED that the foregoing obligation to pay such additional
amounts shall not apply:

(i) to any payment to a Lender (other than in respect of a Registered
Loan) hereunder unless such Lender is, on the date hereof (or on the date
it becomes a Lender as provided in Section 12.06(b) hereof) and on the date
of any change in the Applicable Lending Office of such Lender, either
entitled to submit a Form 1001 (relating to such Lender and entitling it to
a complete exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all interest
to be received by such Lender hereunder in respect of the Loans), or

(ii) to any payment to any Lender hereunder in respect of a Registered
Loan (a "REGISTERED HOLDER"), unless such Registered Holder (or, if such
Registered Holder is not the beneficial owner of such Registered Loan, the
beneficial owner thereof) is, on the date hereof (or on the date such
Registered Holder becomes a Lender as provided in Section 12.06(b) hereof)
and on the date of any change in the Applicable Lending Office of such
Lender, entitled to submit a Form W-8, together with an annual certificate
stating that (x) such Registered Holder (or beneficial owner, as the case
may be) is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, and (y) such Registered Holder (or beneficial owner, as the case may
be) shall promptly notify the Company if at any time, such Registered
Holder (or beneficial owner, as the case may be) determines that it is no
longer in a position to provide such certificate to the Company (or any
other form of

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certification adopted by the relevant taxing authorities of the United
States of America for such purposes), or

(iii) to any U.S. Tax imposed solely by reason of the failure by such
non-U.S. Person (or, if such non-U.S. Person is not the beneficial owner of
the relevant Loan, such beneficial owner) to comply with applicable
certification, information, documentation or other reporting requirements
concerning the nationality, residence, identity or connections with the
United States of such non-U.S. Person (or such beneficial owner, as the
case may be) if such compliance is required by statute or regulation of the
United States as a precondition to relief or exemption from such U.S. Tax.

For the purposes of this Section 5.06(a), (v) "FORM 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States, (w) "FORM 4224" shall mean Form 4224 (Exemption
from Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States) of the Department of the Treasury of the
United States, (x) "FORM W-8" shall mean Form W-8 (Certificate of Foreign Status
of the Department of Treasury of the United States of America) (or in relation
to any of such Forms such successor and related forms as may from time to time
be adopted by the relevant taxing authorities of the United States to document a
claim to which such Form relates), (y) "U.S. PERSON" shall mean a citizen,
national or resident of the United States, a corporation, partnership or other
entity created or organized in or under any laws of the United States, or any
estate or trust that is subject to Federal income taxation regardless of the
source of its income and (z) "U.S. TAXES" shall mean any present or future tax,
assessment or other charge or levy imposed by or on behalf of the United States
or any taxing authority thereof or therein.

Within 30 days after paying any amount to the Agent or any Lender from
which it is required by law to make any deduction or withholding, and within 30
days after it is required by law to

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remit such deduction or withholding to any relevant taxing or other
authority, the Company shall deliver to the Agent for delivery to such
non-U.S. Person evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).

5.07 REPLACEMENT OF LENDERS. If any Lender requests compensation
pursuant to Section 5.01 or 5.06 hereof, or any Lender's obligation to make or
Continue, or to Convert Loans of any Type into, any other Type of Loan shall be
suspended pursuant to Section 5.01 or 5.03 hereof (any such Lender so requesting
compensation, or whose obligations are so suspended being herein called a
"RELEVANT LENDER"), the Company upon three Business Days notice, may require
that such Relevant Lender transfer all of its right, title and interest under
this Agreement and such Relevant Lender's Notes to any bank or other financial
institution identified by the Company that is reasonably satisfactory to the
Agent (i) if such bank or other financial institution (a "PROPOSED LENDER")
agrees to assume all of the obligations of such Relevant Lender hereunder, and
to purchase all of such Relevant Lender's Loans hereunder for consideration
equal to the aggregate outstanding principal amount of such Relevant Lender's
Loans, together with accrued, but unpaid interest thereon to the date of such
purchase, and satisfactory arrangements are made for payment to such Relevant
Lender of all other amounts payable hereunder to such Relevant Lender on or
prior to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section 5.05 hereof as if all of such
Relevant Lender's Loans were being prepaid in full on such date) and (ii) if
such Relevant Lender has requested compensation pursuant to Section 5.01 or 5.06
hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 5.01 or 5.06 with respect to such Relevant Lender's
Loans is lower than that of the Relevant Lender. Subject to compliance with the
provisions of Section 12.06(b) hereof, such Proposed Lender shall be a "Lender"
for all purposes hereunder. Without prejudice to the survival of any other
agreement of the Company hereunder, the agreements of the Company contained in
Sections 5.01, 5.06 and 12.03 hereof (without duplication of any

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payments made to such Relevant Lender by the Company or the Proposed Lender)
shall survive for the benefit of such Relevant Lender under this Section 5.07
with respect to the time prior to such replacement.

5.08 ADDITIONAL COSTS IN RESPECT OF LETTERS OF CREDIT. Without
limiting the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be hereafter imposed, modified or deemed applicable any
tax, reserve, special deposit, capital adequacy or similar requirement against
or with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Agent), the
Company shall pay immediately to the Agent for account of such Lender or
Lenders, from time to time as specified by such Lender or Lenders (through the
Agent), such additional amounts as shall be sufficient to compensate such Lender
or Lenders (through the Agent) for such increased costs or reductions in amount.
A statement as to such increased costs or reductions in amount incurred by any
such Lender or Lenders, submitted by such Lender or Lenders to the Company shall
be conclusive in the absence of manifest error as to the amount thereof.

Section 6. [INTENTIONALLY LEFT BLANK].

Section 7. CONDITIONS PRECEDENT.

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7.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Agreement (and the amendment and restatement of the Existing Credit Agreement to
be effected thereby), and the obligation of any Lender to extend or continue
credit hereunder on the Effective Date, are subject to (i) the condition
precedent that the Effective Date shall occur on or before July 31, 1996 and
(ii) the receipt by the Agent of the following documents, each of which shall be
satisfactory to the Agent (and to the extent specified below, to each Lender or
the Majority Lenders, as the case may be) in form and substance:

(a) CORPORATE DOCUMENTS. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor (including, without limitation,
Garrido and Guest Choice) and of all corporate authority for each Obligor
(including, without limitation, board of director resolutions and evidence
of the incumbency of officers, together with specimen signatures of each
such officer) with respect to the execution, delivery and performance of
such of the Basic Documents to which such Obligor is intended to be a party
and each other document to be delivered by such Obligor from time to time
in connection herewith and the extensions of credit hereunder (and the
Agent and each Lender may conclusively rely on such certificate until it
receives notice in writing from such Obligor to the contrary).

(b) OFFICER'S CERTIFICATE. A certificate of a Responsible Financial
Officer of the Company, dated the Effective Date, to the effect set forth
in the first sentence of Section 7.03(a) hereof.

(c) BORROWING BASE CERTIFICATE. A Borrowing Base Certificate dated
as of June 30, 1996 accompanied by a certificate of a Responsible Financial
Officer of the Company, dated the Effective Date, to the effect that there
has been no material adverse change in any of the components of Borrowing
Base as set forth in such Borrowing Base Certificate since said date.

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(d) OPINION OF COUNSEL TO THE OBLIGORS. Opinions, each dated the
Effective Date, of Hughes & Luce, counsel to the Obligors, substantially in
the form of Exhibit E-1 hereto, and of Axtmayer Adsuar Muniz & Goyco,
special Puerto Rico counsel to the Subsidiary Guarantors operating in the
Commonwealth, substantially in the form of Exhibit E-2 hereto and, in each
case, covering such other matters as the Agent or any Lender may reasonably
request (and each Obligor hereby instructs such counsel to deliver such
opinion to the Lenders and the Agent).

(e) OPINION OF COUNSEL TO CHASE. An opinion, dated the Effective
Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel to
Chase, substantially in the form of Exhibit G hereto (and Chase hereby
instructs such counsel to deliver such opinion to the Lenders).

(f) NOTES. The Notes, duly completed and executed.

(g) AMENDMENT TO SECURITY AGREEMENT. The Amendment to Security
Agreement, duly executed and delivered by the Company and the Agent and the
certificates identified in Annex 1 thereto, accompanied by undated stock
powers executed in blank. In addition, the Company shall have taken such
other action (including, without limitation, delivering to the Agent, (i)
Uniform Commercial Code searches for each Obligor for each jurisdiction in
which such Obligor conducts its respective business or in which any of its
respective Properties are located (or otherwise as the Agent may reasonably
request) (to the extent such searches have not already been effected
pursuant to the Existing Credit Agreement) and (ii) for filing,
appropriately completed and duly executed copies of Uniform Commercial Code
financing statements) as the Agent shall have requested in order to perfect
the security interests created pursuant to the Amendment to Security
Agreement (or, to the extent such filings have been effected pursuant to
the Existing Credit Agreement, such amendments to such

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filings determined to be necessary or advisable by the Agent).

(h) [Intentionally Left Blank]

(i) GARRIDO ACQUISITION. Evidence that the Garrido Acquisition shall
have been consummated in all material respects in accordance with the terms
of the Garrido Purchase Agreement, and the Agent shall have received a
certificate of a Responsible Financial Officer of the Company to that
effect (and attaching thereto a true and complete copy of the Garrido
Purchase Agreement).

(j) INSURANCE. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Company and its Subsidiaries
(other than Garrido and Guest Choice) pursuant to Section 9.04 hereof and
the designation of the Agent as the loss payee or additional named insured,
as the case may be, thereunder. In addition, the Company shall have
delivered a certificate of a Responsible Financial Officer of the Company
setting forth the insurance obtained by it in accordance with the
requirements of Section 9.04 and stating that such insurance is in full
force and effect and that all premiums then due and payable thereon have
been paid.

(k) ENVIRONMENTAL MATTERS. Environmental surveys and assessments
prepared by one or more firms of licensed engineers (familiar with the
identification of toxic and hazardous substances) in form and substance
satisfactory to each Lender, such environmental survey and assessment to be
based upon physical on-site inspections by such firm of each of the
existing sites and facilities owned, operated or leased by Garrido as well
as an historical review of the uses of such sites and facilities and of the
business and operations of Garrido (including any former Subsidiaries or
divisions of Garrido or any of its Subsidiaries that have been disposed of
prior to the date of such survey and assessment and with respect to which
Garrido may have

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retained liability for Environmental Claims), and if requested by the
Agent, the Company shall have agreed to take other reasonable steps after
the Effective Date with respect to such matters as shall be agreed in
writing with the Agent.

(l) SUBORDINATED INDEBTEDNESS. Amendment to the Subordinated Debt
Documents in form and substance satisfactory to the Majority Lenders,
PROVIDED that in no event shall amortization in respect of the Subordinated
Indebtedness be modified pursuant to such Amendment, and the Agent shall
have received copies of all of the Amendments to the Subordinated Debt
Documents and of all instruments and documents executed and delivered in
connection therewith, certified by a Responsible Financial Officer of the
Company.

(m) PUERTO RICO TAX EXEMPTION AND TAX RULING. Evidence that each tax
exemption grant heretofore issued to Suiza Fruit and Neva Plastics by the
Commonwealth in respect of manufacturing income from its respective
operations in the Commonwealth shall be in full force and effect, and the
Agent shall have received true and complete copies thereof, certified by a
Responsible Financial Officer of the relevant Subsidiary Guarantor.

(n) SOLVENCY ANALYSIS. A certificate from a Responsible Financial
Officer of the Company to the effect that, as of the Effective Date and
after giving effect to the initial extension of credit hereunder and to the
other transactions contemplated hereby (including, without limitation, the
Garrido Acquisition), (i) the aggregate value of all Properties of the
Company, its Subsidiaries, Garrido and Guest Choice at their present fair
saleable value (i.e., the amount that may be realized within a reasonable
time, considered to be six months to one year, either through collection or
sale at the regular market value, conceiving the latter as the amount that
could be obtained for the Property in question within such period by a
capable and diligent businessman from an interested buyer

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who is willing to purchase under ordinary selling conditions),
exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the
Company, its Subsidiaries, Garrido and Guest Choice, (ii) the Company,
its Subsidiaries, Garrido and Guest Choice will not, on a consolidated
basis, have unreasonably small capital with which to conduct their
business operations as heretofore conducted and (iii) the Company, its
Subsidiaries, Garrido and Guest Choice will have, on a consolidated
basis, sufficient cash flow to enable them to pay their debts as they
mature. The Agent shall have also received (x) a certificate from a
Responsible Financial Officer of the Company certifying that the
financial projections and underlying assumptions contained in such
analyses were at the time made, and on the Effective Date are, fair and
reasonable and accurately computed and (y) appropriate factual
information supporting the conclusions of the solvency analyses and the
financial condition certificate required to be delivered as provided
above.

(o) FINANCIAL INFORMATION. (i) Copies of the pro forma projections
of the Company and its Subsidiaries for the period from the Effective Date
through December 31, 1996 and (ii) unaudited consolidating financial
statements of the Company and its Subsidiaries for the three-month period
ended on March 31, 1996.

(p) PROCESS AGENT ACCEPTANCE. A letter from the Process Agent to the
Agent, in form and substance satisfactory to the Agent, accepting the
appointment of the Process Agent by the Obligors operating in the
Commonwealth (other than Garrido and Guest Choice) as provided in
Section 12.10(c) hereof.

(q) 1996 BUDGET. A budget for the fiscal year ending December 31,
1996 setting forth for each Subsidiary of the Company and for the Company,
its Subsidiaries, Garrido and Guest Choice as a whole, anticipated income,
expense and

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capital expenditure items for each quarter during such fiscal year.

(r) PAYMENT OF FEES AND EXPENSES, ETC. Evidence that the Company
shall have paid such fees and expenses as the Company shall have agreed to
pay to the Agent in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, and Fiddler Gonzalez & Rodriguez, special Puerto
Rico counsel to Chase, in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Notes and the other Loan
Documents and the making of the Loans hereunder (to the extent that
statements for such fees and expenses have been delivered to the Company).

(s) INTEREST RATE PROTECTION AGREEMENTS. Evidence that the Company
and/or the Obligors shall have entered into one or more Interest Rate
Protection Agreements as to the notional principal amount at least equal to
(i) $40,000,000 for a period ending on December 31, 1996, (ii) $14,000,000
for a period ending on May 13, 1997 and (iii) $55,000,000 for a period
ending on June 30, 1998.

(t) REPAYMENT OF CERTAIN INDEBTEDNESS UNDER EXISTING CREDIT
AGREEMENT. Evidence of (i) payment to each Facility C Lender and Facility
D Lender under the Existing Credit Agreement of the principal of and
interest on the loans to, and all other amounts owing to it under the
Existing Credit Agreement on the Effective Date by, the Subsidiary
Borrowers thereunder and (ii) payment to each Non-Committing Lender of the
principal of and interest on the loans held by it and all other amounts
owing to it under the Existing Credit Agreement on the Effective Date.

(u) P.R. INVENTORY AGREEMENT. P.R. Inventory Agreement, duly
executed and delivered by each of the parties thereto.

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(v) OTHER DOCUMENTS. Such other documents as the Agent or any Lender
or special New York counsel to Chase may reasonably request.

7.02 ADDITIONAL CONDITIONS PRECEDENT TO REVOLVING CREDIT LOANS. The
obligation of the Lenders to make extensions of credit in respect of the
Facility A Commitments hereunder in excess of $22,500,000 in the aggregate
(whether by making of Loans or issuance of Letters of Credit) at any time on or
after the Effective Date is subject to the satisfaction, on or prior to August
12, 1996, of the condition precedent that the Agent shall have received the
following documents, each of which shall be satisfactory to the Agent in form
and substance, as well as to the satisfaction of the other conditions set forth
in following subsections:

(a) PUERTO RICO SECURITY DOCUMENTS. To the extent requested by the
Agent, amendments to each of the Puerto Rico Security Documents, duly
executed and delivered by the parties thereto in proper form for filing in
each Section of the Registry of Property of the Commonwealth in which such
filings are required together with all required filing fees, taxes and all
other expenses related to such filings. In addition, the Obligors
operating in the Commonwealth shall have taken all action as the Agent may
have requested in order to perfect the security interests created pursuant
to the Puerto Rico Security Documents (to the extent not already taken
pursuant to the Existing Credit Agreement).

(b) NEW SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT. The New
Subsidiary Guarantee and Security Agreement, duly executed and delivered by
each of Garrido, Guest Choice and the Agent and the certificates (if any)
identified under the name of the respective parties thereto in Annex 1
thereto, in each case accompanied by undated stock powers executed in
blank. In addition, each of Garrido and Guest Choice shall have taken such
other action (including, without limitation, delivering to the Agent, for
filing, appropriately completed and duly executed copies of Uniform
Commercial Code

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financing statements) as the Agent shall have requested in order to
perfect the security interests created pursuant to the New Subsidiary
Guarantee and Security Agreement (or, to the extent such filings
have been effected pursuant to the Existing Credit Agreement, such
amendments to such filings determined to be necessary or advisable by the
Agent).

(c) MORTGAGES. The following documents each of which shall be
executed (and, where appropriate, acknowledged) by Persons satisfactory to
the Agent:

(i) one or more Mortgages covering the parcels of real Property
of each of Garrido and Guest Choice identified in Schedule IV hereto
(collectively, the "GARRIDO MORTGAGES"), in each case duly executed
and delivered by Garrido or Guest Choice, as applicable, in recordable
form and, to the extent necessary under applicable law, for filing in
the appropriate county land offices, Uniform Commercial Code financing
statements covering fixtures, in each case appropriately completed and
duly executed;

(ii) one or more mortgagee policies of title insurance on forms
of and issued by one or more Title Companies, insuring the validity
and priority of the Liens created under the Garrido Mortgages (except
as identified in Schedule IV hereto) for and in amounts satisfactory
to the Majority Lenders, subject only to such exceptions as are
satisfactory to the Majority Lenders;

(iii) current as-built surveys of each of the parcels identified
in Schedule IV hereto to be covered by the Garrido Mortgages and, in
the case of certain surveys identified in said Schedule IV,
accompanied by a certificate of an appropriate officer or employee of
the Company, which surveys shall be in form and content acceptable to
the Agent and shall have been prepared by a registered surveyor
acceptable to the Agent;

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(iv) upon request of the Agent, certified copies of permanent
and unconditional certificates of occupancy (or, if it is not the
practice to issue certificates of occupancy in the jurisdiction in
which the parcels to be covered by the Garrido Mortgages are located,
then such other evidence reasonably satisfactory to each Lender)
permitting the fully functioning operation and occupancy of each such
facility and of such other permits necessary for the use and operation
of each such facility issued by the respective governmental
authorities having jurisdiction over each such facility;

(v) upon request of the Agent, in the case of Garrido Mortgages
covering leasehold interests, such estoppel, consents and other
agreements from the lessor, the holder of a fee mortgage or a
sublessee, as the Agent may reasonably request;

(vi) upon request of the Agent, appraisals of each of the
facilities located on the Properties covered by the Garrido Mortgages
and identified in Schedule IV hereto prepared by a Person, and using a
methodology, satisfactory to the Agent; and

(vii) contemporaneously dated opinions of local counsel in the
respective jurisdictions in which the properties covered by the
Garrido Mortgages are located, substantially in the form of Exhibit F-
1 hereto (with such changes thereto as the Agent shall approve), and
in each case, covering such other matters as the Agent may reasonably
request (and each Obligor hereby instructs such counsel to deliver
such opinion to the Lenders and the Agent).

In addition, the Company shall have paid to the Title Companies all
expenses and premiums of the Title Companies in connection with the
issuance of such

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policies and in addition shall have paid to the Title Companies an
amount equal to the recording and stamp taxes payable in
connection with recording the Garrido Mortgages in the appropriate
jurisdictions.

(d) GARRIDO FACTORS LIEN AGREEMENT. The Garrido Factors Lien
Agreement, duly executed and delivered by the parties thereto.

(e) PROCESS AGENT ACCEPTANCE. A letter from the Process Agent, in
form and substance satisfactory to the Agent, accepting the appointment of the
Process Agent by Garrido and Guest Choice as provided in Section 7.08 of the New
Subsidiary Guarantee and Security Agreement.

(f) INSURANCE. Certificates of insurance evidencing the existence of
all insurance required to be maintained by Garrido and Guest Choice pursuant to
Section 9.04 hereof and the designation of the Agent as the loss payee, or
additional named insured thereunder. In addition, the Company shall have
delivered a certificate of a Responsible Financial Officer of the Company
stating that such insurance is in full force and effect and that all premiums
then due and payable thereon have been paid.

(g) OTHER DOCUMENTS. Such proof of corporate action, incumbency of
officers, opinions of counsel and other documents relating to the foregoing as
is consistent with those delivered pursuant to Section 7.01 hereof or as any
Lender or the Agent may reasonably request.

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7.03 INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT.

(a) The effectiveness of this Agreement (and the amendment and
restatement of the Existing Credit Agreement to be effected thereby) and the
obligation of the Lenders to make any Loan or otherwise extend any credit to the
Company upon the occasion of each borrowing hereunder (including the borrowing
on the Effective Date) are subject to the further conditions precedent that,
both immediately prior to such effectiveness and to the making of such Loan or
other extension of credit and also after giving effect thereto and to the
intended use thereof:

(i) no Default shall have occurred and be continuing;

(ii) the representations and warranties made by the Company in
Section 8 hereof, and by each Obligor in each of the other Loan Documents
to which it is a party, shall be true and complete on and as of the date of
such effectiveness or the date of the making of such Loan or other
extension of credit, as the case may be, with the same force and effect as
if made on and as of such date (or, if any such representation or warranty
is expressly stated to have been made as of a specific date, as of such
specific date); and

(iii) the aggregate principal amount of the Facility A Loans
together with the aggregate amount of all Letter of Credit Liabilities
shall not exceed the Borrowing Base reflected on the most recent Borrowing
Base Certificate delivered under Section 9.01(f) (or, with respect to the
Facility A Loans made prior to the delivery of the first such certificate
thereunder, the Borrowing Base Certificate referred to in Section 7.01(c)
hereof), PROVIDED that, if requested by the Majority Lenders or the Agent,
the Company shall have delivered a Borrowing Base Certificate dated not
more than 30 days prior to the date of such borrowing.

Each notice of borrowing or request for the issuance of a Letter of Credit by
the Company hereunder shall constitute a

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certification by the Company to the effect set forth in the first sentence of
this Section 7.03(a) (both as of the date of such notice and, unless the
Company otherwise notifies the Agent prior to the date of such borrowing or
issuance, as of the date of such borrowing or issuance).

(b) The Agent shall have received (i) such Additional Puerto Rico
Security Documents as shall be reasonably requested by the Agent in proper form
for filing in the corresponding Section of the Registry of Property of the
Commonwealth as are required from time to time pursuant to this Agreement and
payment of all required filing fees, taxes and all other expenses related to
such filings and (ii) an opinion of counsel for the Obligors in form and
substance reasonably satisfactory to the Agent in connection with such
Additional Puerto Rico Security Documents.

Section 8. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Agent and the Lenders that (with respect to matters
pertaining to itself and each of its Subsidiaries):

8.01 CORPORATE EXISTENCE. Each of the Company and its Subsidiaries:
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.

8.02 FINANCIAL CONDITION. The Company has heretofore furnished to
each of the Lenders the following:

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(a) a pro forma unaudited consolidated balance sheet of the Company
and its Subsidiaries (including Garrido and Guest Choice) as at January 1, 1996
and related pro forma consolidated statements of income, retained earnings and
cash flows for the twelve-month period ending on December 31, 1996, in each
case, prepared on the assumption that the Reorganization (as such term is
defined in the Existing Credit Agreement), the Skinners Acquisition and the
Garrido Acquisition and all other transactions contemplated hereby to occur at
the same time had been effected, accompanied by a certificate of a Responsible
Financial Officer of the Company to the effect that (i) all such financial
statements fairly present the pro forma consolidated financial condition and
results of operations of the Company, its Subsidiaries, Garrido and Guest
Choice, all in accordance with generally accepted accounting principles and
practices applied on a consistent basis, (ii) none of the Company or any of its
Subsidiaries has on the date hereof any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in said balance sheet as at said date, and (iii) since
January 1, 1996, there has been no material adverse change in the pro forma
financial condition, operations, business or prospects of the Company, its
Subsidiaries, Garrido and Guest Choice taken as a whole;

(b) audited balance sheets of Garrido as at June 30, 1995 and 1994
and the related statements of income, retained earnings and cash flow of
Garrido for the relevant fiscal period ended on each said date, with
opinions thereon of KMPG Peat Marwick, and the unaudited balance sheet of
Garrido as at March 31, 1996 and the related statements of income and
retained earnings of Garrido for the quarterly period ended on said date;

(c) unaudited consolidating balance sheets of the Company and its
Subsidiaries as at March 31, 1996 or the most current quarterly financial
statement required to be delivered prior to the Effective Date, and the
related

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consolidating statements of income, retained earnings and cash flow
for the three-month period ended on said date; and

(d) an audited consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1995 and the related consolidated
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for the fiscal period ended on said date, with the opinion
thereon of Deloitte Touche LLP and the unaudited consolidated balance sheet
of the Company as at March 31, 1996 and the related consolidated statements
of income and retained earnings and cash flow of the Company and its
Subsidiaries for the quarterly period ended on said date.

All such financial statements fairly present the respective actual or pro forma
financial condition, as the case may be, of the respective entities as at the
respective dates, and the respective actual or pro forma results of operations
for the respective periods ended on said respective dates, all in accordance
with generally accepted accounting principles and practices applied on a
consistent basis. None of such respective entities has on the date hereof any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the
respective balance sheets referred to above. Since December 31, 1995 (with
respect to the Company and each of its Subsidiaries (other than Garrido)) and
since June 30, 1995 (with respect to Garrido), there has been no material
adverse change in the respective actual or pro forma financial condition,
operations, business or prospects of each such entity from that set forth in the
respective financial statements as at such respective dates.

8.03 LITIGATION. Except as disclosed in Schedule V hereto, there are
no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of the Company) threatened against the Company or any of its Subsidiaries that,

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if adversely determined could (either individually or in the aggregate) have a
Material Adverse Effect.

8.04 NO BREACH. None of the execution and delivery of this Agreement
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of any Obligor, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their Property is bound or to which any of them is
subject, or constitute a default under any such agreement or instrument, or
(except for the Liens created pursuant to the Security Documents) result in the
creation or imposition of any Lien upon any Property of the Company or any of
its Subsidiaries pursuant to the terms of any such agreement or instrument.

8.05 ACTION. Each Obligor has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents to which it is a party; the execution, delivery and
performance by each Obligor of each of the Basic Documents to which it is a
party have been duly authorized by all necessary corporate action on its part
(including, without limitation, any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by each Obligor and
constitutes, and each of the Notes and the other Basic Documents to which it is
a party when executed and delivered by such Obligor (in the case of the Notes,
for value) will constitute, its legal, valid and binding obligation, enforceable
against each Obligor in accordance with its terms, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors'
rights and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Except with

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respect to the Security Documents delivered pursuant to Section 7.02
hereof, each Security Document is effective to create in favor of the Agent for
the benefit of the Lenders a legal, valid and enforceable first priority Lien
upon all right, title and interest of the Obligor or Obligors party thereto in
the Property described therein and such Lien has been perfected, except as
otherwise permitted under Section 9.06 hereof or in such Security Document.
With respect to the Security Documents delivered pursuant to Section 7.02
hereof, such Security Documents shall be effective to so create a Lien upon the
execution thereof and such Lien shall be perfected upon the filing of such
Security Document or other relevant instruments, or taking possession of such
Property, in the manner and in the places required by applicable law, except as
otherwise permitted under Section 9.06 hereof or in such Security Document.

8.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.

8.07 USE OF CREDIT. None of the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of the Loans
hereunder will be used to buy or carry any Margin Stock.

8.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company

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would be under an obligation to furnish a report to the Lenders under Section
9.01(e) hereof.

8.09 TAXES. The Company and its Subsidiaries (other than the
Obligors operating in the Commonwealth) are members of an affiliated group of
corporations filing consolidated returns for Federal income tax purposes, of
which the Company is the "common parent" (within the meaning of Section 1504 of
the Code) of such group. The Company and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any of its Subsidiaries.
The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. The Company has not given or been requested
to give a waiver of the statute of limitations relating to the payment of
Federal, state, local and foreign taxes or other impositions. Neva Plastics and
Suiza Fruit each hold industrial tax exemption grants entitling each of them to
a 90% exemption from income and property taxes and a 60% exemption from
municipal license taxes. The grant held by Neva Plastics will expire on August
31, 2000 for income tax purposes, on June 30, 2001 for municipal tax purposes
and on January 1, 2000 for property tax purposes. The grant held by Suiza Fruit
will expire on October 12, 2002 for income and property tax purposes and on June
30, 2003 for municipal license tax purposes.

8.10 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.

8.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.

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8.12 MATERIAL AGREEMENTS AND LIENS.

(a) Part A of Schedule I hereto is a complete and correct list, as of
the Effective Date, and after giving effect to the Garrido Acquisition, and the
transactions contemplated hereunder to occur on such date, of each credit
agreement, loan agreement, indenture, purchase agreement, guarantee, letter of
credit or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, the Company or any of its Subsidiaries, and the
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Part A of said Schedule I.

(b) Part B of Schedule I hereto is a complete and correct list, as of
the Effective Date (and after giving effect to the Garrido Acquisition and
transactions contemplated hereunder to occur on such date), of each Lien
securing Indebtedness of any Person and covering any Property of the Company or
any of its Subsidiaries that will continue after the Effective Date, and the
aggregate Indebtedness secured (or that may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in Part B of said
Schedule I.

8.13 ENVIRONMENTAL MATTERS. Each of the Company and its Subsidiaries
has obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and each of the Company and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,

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decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect.

In addition, except as to matters with respect to which the Company
and its Subsidiaries could not reasonably be expected to incur liabilities in
excess of $250,000 in the aggregate:

(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by the Company or any of its Subsidiaries to have any
environmental, health or safety permit, license or other authorization
required under any Environmental Law in connection with the conduct of the
business of the Company or any of its Subsidiaries or with respect to any
generation, treatment, storage, recycling, transportation, discharge or
disposal, or any Release of any Hazardous Materials generated by the
Company or any of its Subsidiaries.

(b) Neither the Company nor any of its Subsidiaries owns, operates or
leases a treatment, storage or disposal facility requiring a permit under
the Resource Conservation and Recovery Act of 1976, as amended, or under
any comparable state or local statute; and

(i) no polychlorinated biphenyls (PCB's) is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;

(ii) no asbestos or asbestos-containing materials is or has
been present at any site or facility now or previously owned, operated
or leased by the Company or any of its Subsidiaries;

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(iii) there are no underground storage tanks, other than
those disclosed in consultant reports provided to the Agent by the
Company or its Subsidiaries, or surface impoundments for Hazardous
Materials, active or abandoned, at any site or facility now or
previously owned, operated or leased by the Company or any of its
Subsidiaries;

(iv) no Hazardous Materials have been Released at, on or
under any site or facility now or previously owned, operated or leased
by the Company or any of its Subsidiaries in a reportable quantity
established by statute, ordinance, rule, regulation or order; and

(v) no Hazardous Materials have been otherwise Released at,
on or under any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries that would (either
individually or in the aggregate) have a Material Adverse Effect.

(c) Neither the Company nor any of its Subsidiaries has transported
or arranged for the transportation of any Hazardous Material to any
location that is listed on the National Priorities List ("NPL") under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), listed for possible inclusion on the NPL by
the Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System, as provided for by 40 C.F.R.
Section 300.5 ("CERCLIS"), or on any similar state or local list or that is
the subject of Federal, state or local enforcement actions or other
investigations that may lead to Environmental Claims against the Company or
any of its Subsidiaries.

(d) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored, disposed of or Released by
the Company or any of its

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Subsidiaries at any location other than those listed in Schedule II
hereto.

(e) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Company or any of its
Subsidiaries and no site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries is listed or proposed for
listing on the NPL, CERCLIS or any similar state list of sites requiring
investigation or clean-up.

(f) No Liens have arisen under or pursuant to any Environmental Laws
on any site or facility owned, operated or leased by the Company or any of
its Subsidiaries, and no government action has been taken or is in process
that could subject any such site or facility to such Liens and neither the
Company nor any of its Subsidiaries would be required to place any notice
or restriction relating to the presence of Hazardous Materials at any site
or facility owned by it in any deed to the real property on which such site
or facility is located.

(g) All environmental investigations, studies, audits, tests, reviews
or other analyses conducted by or that are in the possession of the Company
or any of its Subsidiaries in relation to facts, circumstances or
conditions at or affecting any site or facility now or previously owned,
operated or leased by the Company or any of its Subsidiaries and that could
result in a Material Adverse Effect have been made available to the
Lenders.

8.14 CAPITALIZATION. As of the Effective Date (and after giving
effect to the Garrido Acquisition and the other transactions contemplated
hereunder to occur on such date),

(a) the authorized capital stock of the Company consists of
21,000,000 shares, consisting of 20,000,000 shares of common stock, par
value $0.01 per

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share, and 1,000,000 shares of preferred stock, par value $0.01 per share;

(b) the Company has 10,108,479 shares of issued and outstanding
common stock, and all of such issued shares are duly and validly issued and
outstanding and are not held in treasury;

(d) except for options to purchase 579,760 shares of common stock
granted under the Company's Exchange Stock Option and Restricted Stock Plan
and options to purchase up to 1,069,500 shares of common stock granted
(637,078) or available (432,422) for future grants under the Company's 1995
Stock Option and Restricted Stock Plan, there are no outstanding Equity
Rights with respect to the Company; and

(e) there are no outstanding obligations of the Company or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or to make payments
to any Person, such as "phantom stock" payments, where the amount thereof
is calculated with reference to the fair market value or equity value of
the Company or any of its Subsidiaries.

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8.15 SUBSIDIARIES, ETC.

(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the date hereof (and as of the Effective Date after giving
effect to the transactions contemplated hereunder to occur on such date and
after consummation of the Garrido Acquisition), of all of the Subsidiaries of
the Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary and (iii) the nature of the ownership interests held by each
such Person and the percentage of ownership of such Subsidiary represented by
such ownership interests. Except as disclosed in Part A of Schedule III hereto,
(x) each of the Company and its Subsidiaries owns, free and clear of Liens
(other than Liens created pursuant to the Security Documents), and has the
unencumbered right to vote, all outstanding ownership interests in each Person
shown to be held by it in Part A of Schedule III hereto, (y) all of the issued
and outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.

(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the date of this Agreement (and as of the Effective Date
after giving effect to the transactions contemplated hereunder to occur on such
date and after consummation of the Garrido Acquisition), of all Investments
(other than Investments disclosed in Part A of said Schedule III hereto) held by
the Company or any of its Subsidiaries in any Person and, for each such
Investment, (x) the identity of the Person or Persons holding such Investment
and (y) the nature of such Investment. Except as disclosed in Part B of
Schedule III hereto, each of the Company and its Subsidiaries owns, free and
clear of all Liens (other than Liens created pursuant to the Security
Documents), all such Investments.

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or other arrangement of the type described in Section 9.19(b) hereof.

8.16 TITLE TO ASSETS. The Company owns and has on the date hereof,
and will own and have on the Effective Date, good and marketable title (subject
only to Liens permitted by Section 9.06 hereof) to the Properties shown to be
owned in the most recent financial statements referred to in Section 8.02 hereof
(other than Properties disposed of in the ordinary course of business or
otherwise permitted to be disposed of pursuant to Section 9.05 hereof). The
Company owns and has on the date hereof, and will own and have on the Effective
Date, good and marketable title to, and enjoys on the date hereof, and will
enjoy on the Effective Date, peaceful and undisturbed possession of, all
Properties (subject only to Liens permitted by Section 9.06 hereof) that are
necessary for the operation and conduct of its businesses.

8.17 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Loan
Documents or included herein or therein or delivered pursuant hereto or thereto,
when taken as a whole do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Company and its Subsidiaries to the Agent and the Lenders in connection with
this Agreement and the other Loan Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on the
date as of which such information is stated or certified. There is no fact
known to the Company that could have a Material Adverse Effect that has not been
disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for

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use in connection with the transactions contemplated hereby or thereby.

8.18 REAL PROPERTY. Set forth on Schedule IV attached hereto is a
list, as of the Effective Date (and after giving effect to the Garrido
Acquisition), of all of the real property interests held by the Company and its
Subsidiaries, indicating in each case whether the respective Property is owned
or leased, the identity of the owner or lessee and the location of the
respective Property.

8.19 SOLVENCY. As of the Effective Date and after giving effect to
the initial extension of credit hereunder, the Garrido Acquisition and the other
transactions contemplated hereby, (a) the aggregate value of all Properties of
the Company and its Subsidiaries at their present fair saleable value (i.e., the
amount that may be realized within a reasonable time, considered to be six
months to one year, either through collection or sale at the regular market
value, conceiving the latter as the amount that could be obtained for the
Property in question within such period by a capable and diligent businessman
from an interested buyer who is willing to purchase under ordinary selling
conditions), exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the Company
and its Subsidiaries, (b) the Company and its Subsidiaries will not, on a
consolidated basis, have unreasonably small capital with which to conduct their
business operations as heretofore conducted and (c) the Company and its
Subsidiaries will have, on a consolidated basis, sufficient cash flow to enable
them to pay their debts as they mature.

Section 9. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Agent that, so long as any Commitment or Loan or
Letter of Credit Liability is outstanding and until payment in full of all
amounts payable by the Company hereunder:

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9.01 FINANCIAL STATEMENTS, ETC. The Company shall deliver, or shall
cause to be delivered, to each of the Lenders:

(a) as soon as available and in any event within 45 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated and consolidating statements of income, retained earnings and
cash flow of the Company and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of
the Company and its Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding fiscal
year, accompanied by a certificate of a Responsible Financial Officer of
the Company, which certificate shall state that said consolidated financial
statements fairly present the consolidated financial condition and results
of operations of the Company and its Subsidiaries, and said consolidating
financial statements fairly present the respective individual
unconsolidated financial condition and results of operations of the Company
and of each of its Subsidiaries, in each case in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);

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Company, by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state
that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the
Company and its Subsidiaries as at the end of, and for, such fiscal year
in accordance with generally accepted accounting principles, and a
certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of a
Responsible Financial Officer of the Company, which certificate shall
state that said consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Company and of each of its Subsidiaries, in each case in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such fiscal year;

(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Commission or any national securities
exchange;

(d) promptly upon mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements
so mailed;

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(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a Responsible Financial Officer of the
Company setting forth details respecting such event or condition and the
action, if any, that the Company or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by the Company or an ERISA Affiliate with
respect to such event or condition):

(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (PROVIDED that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;

(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by the
Company or an ERISA Affiliate to terminate any Plan;

(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has

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been taken by PBGC with respect to such Multiemployer Plan;

(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate that results
in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by the Company or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;

(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and

(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Company or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions
of said Sections;

(f) as soon as available and in any event within 10 Business Days
after the end of each monthly accounting period of the Company (and from
time to time as the Agent may reasonably request), a Borrowing Base
Certificate as at the last day of such accounting period;

(g) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;

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(h) periodically at the request of the Majority Lenders (but, unless
a Default shall have occurred and be continuing, no more frequently than
once in any calendar year) and at the expense of the Company, a report of
an independent collateral auditor (which may be, or be affiliated with, one
of the Lenders) with respect to the Receivables and Inventory components
included in the Borrowing Base as at the end of the latest fiscal quarter,
which report shall indicate that, based upon a review by such auditors of
the Receivables (including, without limitation, the verification with
respect to the amount, aging, identity and credit of the respective account
debtors and the billing practices of the Company and its Subsidiaries) and
Inventory (including, without limitation, verification as to value,
location and respective types), the information set forth in the Borrowing
Base Certificate as at the end of such fiscal quarter is accurate and
complete in all material respects; and in addition, as soon as available
and in any event within 90 days after the end of each fiscal year of the
Company, a like report of Deloitte Touche LLP or any other independent
certified public accountants of recognized national standing with respect
to the Receivables and Inventory components included in the Borrowing Base
as at the end of such fiscal year;

(i) promptly upon receipt thereof, copies of all management letters
and other material reports which are submitted to the Board of Directors of
the Company or any of its Subsidiaries by their independent certified
public accountants in connection with any annual audit of the Company
and/or any such Subsidiary by such accountants;

(j) as soon as available and in any event on or before December 31 of
each fiscal year, a budget for the next following fiscal year setting forth
for each Subsidiary of the Company and for the Company and its Subsidiaries
as a whole, anticipated income, expense and capital expenditure items for
each quarter during such fiscal year, and

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quarterly, concurrently with the delivery of the financial statements for
such fiscal year pursuant to clause (a) above, a report setting forth a
detailed comparison of actual performance to the budget referred to above;
and

(k) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Agent may reasonably request.

The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to clause (b) above, a certificate of a
Responsible Financial Officer of the Company (i) to the effect that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
that the Company has taken or proposes to take with respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Sections 9.10, 9.11, 9.12, 9.13 and
9.14 hereof as of the end of the respective quarterly fiscal period or fiscal
year.

9.02 LITIGATION. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Subsidiaries, except proceedings that, if adversely determined, would not
(either individually or in the aggregate) have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company will give to each
Lender notice of the assertion of any Environmental Claim by any Person against,
or with respect to the activities of, the Company or any of its Subsidiaries and
notice of any alleged violation of or non-compliance with any Environmental Laws
or any permits, licenses or authorizations, other than any Environmental Claim
or alleged violation that, if adversely determined, would not

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(either individually or in the aggregate) have a Material Adverse Effect.

9.03 EXISTENCE, ETC. The Company will, and will cause each of its
Subsidiaries to:

(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 9.03 shall prohibit any transaction expressly permitted under
Section 9.05 hereof);

(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;

(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;

(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;

(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and

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officers, all to the extent reasonably requested by such Lender or the Agent
(as the case may be).

9.04 INSURANCE. The Company will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations. The Company will in any
event maintain (with respect to itself and each of its Subsidiaries):

(1) Casualty Insurance -- insurance against loss or damage covering
all of the tangible real and personal Property and improvements of the
Company and each of its Subsidiaries by reason of any Peril (as defined
below) in such amounts (subject to such deductibles as shall be
satisfactory to the Majority Lenders) as shall be reasonable and customary
and sufficient to avoid the insured named therein from becoming a
co-insurer of any loss under such policy but in any event in an amount
(i) in the case of fixed assets and equipment (including, without
limitation, vehicles), at least equal to 100% of the actual replacement
cost of such assets (including, without limitation, foundation, footings
and excavation costs), subject to deductibles as aforesaid (PROVIDED that
recovery limits may be applicable to losses caused by flood or earthquake)
and (ii) in the case of inventory, not less than the fair market value
thereof, subject to deductibles as aforesaid.

(2) Automobile Liability Insurance for Bodily Injury and Property
Damage -- insurance against liability for bodily injury and property damage
in respect of all vehicles (whether owned, hired or rented by the Company
or any of its Subsidiaries) at any time located at, or used in connection
with, its Properties or operations in such amounts as are then customary
for vehicles used in connection with similar

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Properties and businesses, but in any event to the extent required by
applicable law.

(3) Comprehensive General Liability Insurance -- insurance against
claims for bodily injury, death or Property damage occurring on, in or
about the Properties (and adjoining streets, sidewalks and waterways) of
the Company and its Subsidiaries, in such amounts as are then customary for
Property similar in use in the jurisdictions where such Properties are
located.

(4) Workers' Compensation Insurance -- workers' compensation
insurance (including, without limitation, Employers' Liability Insurance)
to the extent required by applicable law.

(5) Product Liability Insurance -- insurance against claims for
bodily injury, death or Property damage resulting from the use of products
sold by the Company or any of its Subsidiaries in such amounts as are then
customarily maintained by responsible persons engaged in businesses similar
to that of the Company and its Subsidiaries.

(6) Business Interruption Insurance -- insurance against loss of
operating income (up to an aggregate amount equal to $15,000,000 and
subject to a deductible, or self-insured amount, not in excess of $500,000)
by reason of any Peril.

(7) Other Insurance -- such other insurance, including, without
limitation, War-Risk Insurance when and to the extent obtainable from the
United States Government, in each case as generally carried by owners of
similar Properties in the jurisdictions where such Properties are located,
in such amounts and against such risks as are then customary for Property
similar in use.

Such insurance shall be written by financially responsible companies selected by
the Company and having an A. M. Best rating

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of "A-" or better and being in a financial size category of VIII or larger,
or by other companies acceptable to the Majority Lenders, and (other than
workers' compensation) shall name the Agent as loss payee (to the extent
covering risk of loss or damage to tangible property) and as an additional
named insured as its interests may appear (to the extent covering any other
risk). Each policy referred to in this Section 9.04 shall provide that it
will not be canceled or reduced, or allowed to lapse without renewal, except
after not less than 30 days' notice to the Agent and shall also provide that
the interests of the Agent and the Lenders shall not be invalidated by any
act or negligence of the Company or any Person having an interest in any
Property covered by the Mortgages nor by occupancy or use of any such
Property for purposes more hazardous than permitted by such policy nor by any
foreclosure or other proceedings relating to such Property. The Company will
advise the Agent promptly of any policy cancellation, reduction or amendment.

On or before the Effective Date, the Company will deliver to the
Agent certificates of insurance satisfactory to the Agent evidencing the
existence of all insurance required to be maintained by the Company hereunder
setting forth the respective coverages, limits of liability, carrier, policy
number and period of coverage (and attaching original copies of any policies
with respect to casualty insurance). Thereafter, each year the Company will
deliver to the Agent certificates of insurance evidencing that all insurance
required to be maintained by the Company hereunder will be in effect through
the calendar year following the date of such certificates, subject only to
the payment of premiums as they become due. In addition, the Company will
not modify any of the provisions of any policy with respect to casualty
insurance without delivering the original copy of the endorsement reflecting
such modification to the Agent accompanied by (if requested by the Agent) a
written report of a firm of independent insurance brokers of nationally
recognized standing, stating that, in their opinion, such policy (as so
modified) adequately protects the interests of the Lenders and the Agent, is
in compliance with the provisions of this Section 9.04, and is comparable in
all respects with insurance carried by responsible

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owners and operators of Properties similar to those covered by the Mortgages.
The Company will not obtain or carry separate insurance concurrent in form
or contributing in the event of loss with that required by this Section 9.04
unless the Agent is the named insured thereunder, with loss payable as
provided herein. The Company will immediately notify the Agent whenever any
such separate insurance is obtained and shall deliver to the Agent the
certificates evidencing the same.

Without limiting the obligations of the Company under the foregoing
provisions of this Section 9.04, in the event the Company shall fail to maintain
in full force and effect insurance as required by the foregoing provisions of
this Section 9.04, then the Agent may, but shall have no obligation so to do,
procure insurance covering the interests of the Lenders and the Agent in such
amounts and against such risks as the Agent (or the Majority Lenders) shall deem
appropriate, and the Company shall reimburse the Agent in respect of any
premiums paid by the Agent in respect thereof.

For purposes hereof, the term "PERIL" shall mean, collectively, fire,
lightning, flood, windstorm, hail, earthquake, explosion, riot and civil
commotion, vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk" endorsement then in use in
the jurisdictions where the Properties of the Company and its Subsidiaries are
located.

9.05 PROHIBITION OF FUNDAMENTAL CHANGES. (a) The Company will not,
nor will it permit any of its Subsidiaries to, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution).

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(b) The Company will not, nor will it permit any of its Subsidiaries
to, acquire any business or Property from, or capital stock of, or be a party to
any acquisition of, any Person except:

(i) for purchases of inventory and other Property to be sold or
used in the ordinary course of business;

(ii) Investments permitted under Section 9.08 hereof;

(iii) Capital Expenditures permitted under Section 9.14 hereof;

(iv) the acquisition of any capital stock, business or Property
of any Person not exceeding (x) for the period from the day after the
Effective Date to and including December 31, 1996, a purchase price
(including, without limitation, non-cash compensation and the assumption of
any additional Indebtedness to the extent permitted under Section 9.07
hereof) of $12,500,000 in the aggregate and (y) thereafter, $5,000,000 in a
single transaction (or a series of related transactions), $10,000,000 in
the aggregate for any fiscal year and $25,000,000 in the aggregate
(including any acquisitions made in the period from the day after the
Effective Date to and including December 31, 1996), PROVIDED that at the
time of such acquisition no Default shall have occurred and be continuing,
and PROVIDED further that any future earn-out payments in connection with
any such acquisition shall be counted at the time such earn-out payment is
made in determining whether the dollar limitations contained in this clause
(iv) have been exceeded; and

(v) the Garrido Acquisition in accordance with the terms of the
Garrido Purchase Agreement and for a purchase price not exceeding
$37,000,000 (excluding up to $5,500,000 in future earn-out payments and
$10,625,000 for tax credit sharing, if any), PROVIDED that such acquisition
shall be

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consummated prior to July 31, 1996 and such earn-out payments shall be
made prior to April 30, 1998.

(c) The Company will not, nor will it permit any of its Subsidiaries
to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or
a series of transactions, any part of its business or Property, whether now
owned or hereafter acquired (including, without limitation, receivables and
leasehold interests), but excluding:

(i) any Excluded Disposition;

(ii) obsolete or worn-out Property, tools or equipment no longer
used or useful in its business (other than any Excluded Disposition) or
real Property no longer used or useful in its business so long as the
aggregate amount thereof sold in any single fiscal year by the Company and
its Subsidiaries shall not have a fair market value in excess of $500,000;
and

(iii) any inventory or other Property sold or disposed of in the
ordinary course of business and on ordinary business terms.

(d) Notwithstanding the foregoing provisions of this Section 9.05, so
long as no Default shall have occurred and be continuing, and after giving
effect to any of the succeeding transactions, no Default would exist hereunder:

(i) any Subsidiary of the Company may be merged or consolidated
with or into: (x) the Company if the Company shall be the continuing or
surviving corporation or (y) any other such Subsidiary; and

(ii) any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to the Company or a Subsidiary of the Company.

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9.06 LIMITATION ON LIENS. The Company will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:

(a) Liens created pursuant to the Security Documents;

(b) Liens in existence on the date hereof and listed in Part B of
Schedule I hereto;

(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet delinquent or that are being contested in
good faith and by appropriate proceedings if, unless the amount thereof is
not material with respect to it or its financial condition, adequate
reserves with respect thereto are maintained on the books of the Company or
the affected Subsidiaries, as the case may be, in accordance with GAAP;

(d) carriers', warehousemen's, mechanics', materialmen's, landlord's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith and by appropriate proceedings;

(e) Liens securing judgments but only to the extent for an amount and
for a period not resulting in an Event of Default under Section 10(i)
hereof;

(f) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;

(g) deposits or pledges to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;

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(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;

(i) Liens upon tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise), or upon other property
acquired after the date hereof as a Capital Expenditure, by the Company or
any of its Subsidiaries, each of which Liens either (A) existed on such
Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the
cost of such Property; PROVIDED that (i) no such Lien shall extend to or
cover any Property of the Company or such Subsidiary other than the
Property so acquired, (ii) the principal amount of Indebtedness secured by
any such Lien shall at no time exceed the fair market value (as determined
in good faith by a Responsible Financial Officer of the Company) of such
Property at the time it was acquired, and (iii) the principal amount of all
Indebtedness (other than Indebtedness permitted by Section 9.07(e) hereof)
secured by such Liens shall not exceed $500,000 in the aggregate;

(j) Liens upon real Property heretofore leased or leased after the
date hereof (under operating or capital leases) in the ordinary course of
business by the Company or any of its Subsidiaries in favor of the lessor
created at the inception of the lease transaction, securing obligations of
the Company or any of its Subsidiaries under or in respect of such lease
and extending to or covering only the Property subject to such lease and
improvements thereon;

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- 125 -

(k) Liens of sellers or creditors of sellers of farm products
encumbering such farm products when sold to any of the Obligors pursuant to
the Food Security Act of 1985 or pursuant to similar state laws to the
extent such Liens may be deemed to extend to the assets of such Obligors;

(l) protective Uniform Commercial Code filings with respect to
personal Property leased by any Obligor; and

(m) any extension, renewal or replacement of the foregoing, PROVIDED,
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or Property.

9.07 INDEBTEDNESS. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:

(a) Indebtedness to the Lenders hereunder and under the other Loan
Documents;

(b) the Subordinated Indebtedness (but not any replacement, renewal,
refunding, refinancing or extension thereof);

(d) Indebtedness of Subsidiaries of the Company to the Company or to
other Subsidiaries of the Company or of the Company to any of its
Subsidiaries to the extent permitted under Section 9.08(g) hereof;

(e) Indebtedness (including Capital Lease Obligations) incurred to
finance the purchase of equipment, and other Capital Lease Obligations, not
to exceed $3,750,000 in the aggregate outstanding at any time; and

<PAGE>

- 126 -

(f) additional Indebtedness of the Company and its Subsidiaries up to
but not exceeding $1,000,000 at any one time outstanding.

9.08 INVESTMENTS. The Company will not, nor will it permit any of
its Subsidiaries to, make or permit to remain outstanding any Investments
except:

(a) Investments outstanding as of the Effective Date and identified
in Part B of Schedule III hereto (including, without limitation,
Indebtedness of any Subsidiary of the Company to the Company or any other
Subsidiary of the Company);

(b) operating deposit accounts with depository institutions;

(d) Interest Rate Protection Agreements entered into pursuant to
Section 9.15 hereof;

(e) the Garrido Acquisition;

(f) Investments by the Company in the capital stock of its
Subsidiaries to the extent outstanding as of the Effective Date;

(g) Investments (other than of a type specified in clause (f) above
and other than the Investments permitted under clause (a) above) by the
Company in its Subsidiaries or by any Subsidiary of the Company in the
Company or any other Subsidiary of the Company made after the Effective
Date not exceeding $10,000,000 at any time outstanding (MINUS (without
duplication) the aggregate principal amount of Indebtedness outstanding
under Section 9.07(d) hereof);

(h) Loans and advances to employees up to but not exceeding $500,000
in the aggregate;

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- 127 -

(i) deposits to secure bids, tenders, utilities, vendors, leases,
statutory obligations, surety and appeal bonds and other deposits of like
nature arising in the ordinary course of business not exceeding $250,000 in
the aggregate;

(j) additional Investments up to but not exceeding $500,000 in the
aggregate;

(k) any guarantees permitted under Section 9.07 hereof; and

(l) Investments permitted under Section 9.05(b) hereof.

9.09 RESTRICTED PAYMENTS.

(a) DIVIDEND PAYMENTS. The Company will not, nor will it permit any
of its Subsidiaries to, declare or make any Dividend Payment at any time,
PROVIDED that the Company may redeem or retire shares of its common stock from
any of its officers in connection with his or her voluntary departure,
dismissal, retirement or death, PROVIDED that (i) at the time of such redemption
or retirement no Default shall have occurred and be continuing and (ii) the
aggregate amount of all cash paid in respect of all such shares so redeemed or
repurchased does not exceed $500,000 in any fiscal year. Nothing herein shall
be deemed to prohibit the payment of dividends by any Subsidiary of the Company
to the Company or any other Subsidiary of the Company.

(b) MANAGEMENT FEES. The Company will not, nor will it permit any of
its Subsidiaries to, accrue or pay any Management Fees to any Person (including,
without limitation, any Affiliates), PROVIDED that, so long as no Default shall
have occurred and be continuing or would result therefrom, the Company may make
payments to Robert L. Kaminski not exceeding $150,000 in any fiscal year.

<PAGE>

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9.10 LEVERAGE RATIOS.

(a) The Company will not permit the Leverage Ratio to exceed the
following respective ratios at any time during the following respective periods:

Period Ratio
------ -----

From the Effective Date
through and including
June 29, 1997 4.25 to 1

From June 30, 1997
through and including
June 29, 1998 3.75 to 1

From June 30, 1998
through and including
June 29, 1999 3.25 to 1

From June 30, 1999
and at all times
thereafter 2.75 to 1

(b) The Company will not permit the Senior Leverage Ratio to exceed
the following respective ratios at any time during the following respective
periods:

Period Ratio
------ -----

From the Effective Date
through and including
June 29, 1997 3.25 to 1

From June 30, 1997
through and including
June 29, 1998 2.50 to 1

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From June 30, 1998
through and including
June 29, 1999 2.25 to 1

From June 30, 1999
and at all times
thereafter 2.00 to 1

9.11 MINIMUM NET WORTH. The Company will not permit its Net Worth
(i) for the period from the Effective Date to and including December 31, 1996 to
be less than $40,000,000 and (ii) for each fiscal year thereafter, to be less
than $40,000,000 plus 50% of net income for all preceding fiscal years (without
including the results of any fiscal year in respect of which there was a net
loss) commencing with the fiscal year beginning January 1, 1996. The amounts of
Net Worth set forth above shall be increased by 75% of the amount by which the
"total stockholders equity" of the Company is increased as a result of any
public or private offering of common stock of the Company. Promptly upon
consummation of each such public or private offering, the Company shall notify
the Agent in writing of the amount of such increase in total stockholders
equity.

9.12 FIXED CHARGES RATIO. The Company will not permit the Fixed
Charges Ratio to be less than 1.05 to 1 at any time.

9.13 INTEREST COVERAGE RATIOS.

(a) The Company will not permit the Interest Coverage Ratio to be
less than the following respective ratios at any time during the following
respective periods:

Period Ratio
------ -----

From the Effective Date
through and including
June 29, 1997 2.20 to 1

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From June 30, 1997
through and including
June 29, 1998 2.40 to 1

From June 30, 1998
through and including
June 29, 1999 2.75 to 1

From June 30, 1999
through and including
June 29, 2000 3.25 to 1

From June 30, 2000
and at all times
thereafter 3.75 to 1

(b) The Company will not permit the Senior Interest Coverage Ratio to
be less than the following respective ratios at any time during the following
respective periods:

Period Ratio
------ -----

From the Effective Date
through and including
June 29, 1997 3.50 to 1

From June 30, 1997
through and including
June 29, 1998 3.75 to 1

From June 30, 1998
through and including
June 29, 1999 4.00 to 1

From June 30, 1999
through and including
June 29, 2000 4.50 to 1

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- 131 -

From June 30, 2000
and at all times
thereafter 5.00 to 1

9.14 CAPITAL EXPENDITURES. The Company will not permit the aggregate
amount of Capital Expenditures by the Company and its Subsidiaries to exceed the
following respective amounts for the following respective periods:

Period Amount
------ ------

From January 1, 1996 $10,000,000
through and including
December 31, 1996

From January 1, 1997 $10,000,000
through and including
December 31, 1997

From January 1, 1998 $11,000,000
through December 31, 1998,
and for each fiscal year
thereafter

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- 132 -

acquisition permitted under Section 9.05(b)(iv) hereof; (c) Capital
Expenditures not exceeding $6,000,000 during the period from and after the
Closing Date to and including December 31, 1996 in respect of the expansion
by Velda Farms of its facilities at Winter Haven, Miami, Jacksonville and/or
St. Petersburg, Florida; (d) Capital Expenditures made with the proceeds of
property or casualty insurance for the purposes of repairing or replacing
damaged or destroyed fixed or capital assets; and (e) any acquisition
permitted under Section 9.05(b)(v) hereof.

9.15 INTEREST RATE PROTECTION AGREEMENTS. The Company shall maintain
in full force and effect the Interest Rate Protection Agreements existing as of
the Effective Date as described in Section 7.01(s) hereof until the stated
expiration date thereof. The Company further agrees to provide to the Agent on
or before May 17, 1997 evidence that it has in full force and effect Interest
Rate Protection Agreements in form and substance satisfactory to the Agent that
enable the Company to protect against floating interest rates as to a notional
principal amount at least equal to 50% of the maximum aggregate principal amount
of the Facility B Loans outstanding from time to time during the period from May
17, 1997 to and including July 31, 1999.

9.16 LINES OF BUSINESS. Neither the Company nor any of its
Subsidiaries will engage to any substantial extent in any line or lines of
business activity other than operations involved in the manufacture, processing
or distribution of ice, ice-related products, coffee or dairy products, or the
lines of business conducted by the Company or any of its Subsidiaries as of the
Effective Date.

9.17 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Subsidiaries
to, directly or indirectly: (a) make any Investment in an Affiliate;
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the

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benefit of an Affiliate (including, without limitation, Guarantees and
assumptions of obligations of an Affiliate); PROVIDED that (i) any Affiliate
who is an individual may serve as a director, officer or employee of the
Company or any of its Subsidiaries and receive reasonable compensation for
his or her services in such capacity and (ii) the Company and its
Subsidiaries may enter into transactions (other than extensions of credit by
the Company or any of its Subsidiaries to an Affiliate) if the monetary or
business consideration arising therefrom would be substantially as
advantageous to the Company and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not
an Affiliate.

9.18 USE OF PROCEEDS. The Company will use the proceeds of (a) the
Facility A Loans and the Facility B Loans to be made hereunder on the Effective
Date solely to repay loans under the Existing Credit Agreement and to finance
the Garrido Acquisition and to pay transaction costs related thereto and
otherwise for working capital or other general corporate purposes and (b) the
Facility A Loans to be made at any time after the Effective Date solely for
working capital or other general corporate purposes (including, without
limitation, to finance acquisitions permitted under Section 9.05(b)(iv) and (v)
hereof). The Company will use the proceeds of all Loans hereunder in compliance
with all applicable legal and regulatory requirements. Neither the Agent nor
any Lender shall have any responsibility as to the use of any of such proceeds.

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9.19 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; ADDITIONAL
MORTGAGED PROPERTIES.

(a) The Company will, and will cause each of its Subsidiaries to,
take such action from time to time as shall be necessary to ensure that each of
its Subsidiaries is a Wholly Owned Subsidiary. In the event that any additional
shares of stock shall be issued by any Subsidiary, the respective Obligor agrees
forthwith to deliver to the Agent pursuant to the relevant Security Document the
certificates evidencing such shares of stock, accompanied by undated stock
powers executed in blank and to take such other action as the Agent shall
request to perfect the security interest created therein pursuant to such
Security Document.

(b) The Company will not permit any of its Subsidiaries to enter
into, after the date of this Agreement, any indenture, agreement, instrument or
other arrangement that, directly or indirectly, prohibits or restrains, or has
the effect of prohibiting or restraining, or imposes materially adverse
conditions upon, the incurrence or payment of Indebtedness, the granting of
Liens, the declaration or payment of dividends, the making of loans, advances or
Investments or the sale, assignment, transfer or other disposition of Property.

(c) The Company will take such action, and will cause each of its
Subsidiaries to take such action, from time to time as shall be necessary to
ensure that all Subsidiaries of the Company are party to, as obligors, the
Existing Subsidiary Guarantee and Security Agreement or the New Subsidiary
Guarantee and Security Agreement. Without limiting the generality of the
foregoing, in the event that the Company or any of its Subsidiaries shall form
or acquire any new Subsidiary, the Company or the respective Subsidiary will
cause such new Subsidiary to (i) become a party to the Existing Subsidiary
Guarantee and Security Agreement or the New Subsidiary Guarantee and Security
Agreement pursuant to a written instrument in form and substance satisfactory to
the Agent, (ii) if requested by the Majority Lenders, cause such new Subsidiary
to execute and

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deliver one or more Mortgages, in substantially the form of Exhibits D-1 or
D-2 hereto (with such changes thereto as the Agent may reasonably request),
covering the real Property and/or fixtures of such Subsidiary, and (iii) to
deliver such proof of corporate action, incumbency of officers, opinions of
counsel and other documents relating to the foregoing as is consistent with
those delivered by each Obligor pursuant to Section 7.01 hereof upon the
Effective Date or pursuant to Section 7.01 of the Existing Credit Agreement
upon the Closing Date, as the case may be, or as any Lender or the Agent
shall have reasonably requested.

(d) Without affecting the obligations of the Company under any
provision prohibiting such action hereunder, in the event that the Company or
any of its Subsidiaries shall acquire any business or Property after the
Effective Date, the Company shall, or shall cause such Subsidiary to (i) if
requested by the Majority Lenders, execute and deliver one or more Mortgages,
substantially in the form of Exhibits D-1 or D-2 hereto (with such changes as
the Agent may reasonably request), covering the real property and/or fixtures so
acquired, (ii) execute and deliver to the Agent for filing, appropriately
completed Uniform Commercial Code financing statements or other filings or
instruments as the Agent shall request in order to perfect the security interest
in favor of the Agent for the benefit of the Lenders in such Property so
acquired and (iii) deliver such proof of corporate action, incumbency of
officers, opinions of counsel and other documents relating to the foregoing as
is consistent with those delivered by each Obligor pursuant to Section 7.01
hereof upon the Effective Date or pursuant to Section 7.01 of the Existing
Credit Agreement upon the Closing Date, as the case may be, or as any Lender or
the Agent shall have reasonably requested.

9.20 MODIFICATIONS OF CERTAIN DOCUMENTS. Except in connection with
any transaction expressly permitted hereunder, the Company will not, nor will it
permit any of its Subsidiaries to, consent to any modification, supplement or
waiver of any of the provisions of the Garrido Purchase Agreement or any

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agreement, instrument or other document evidencing or relating to the charter or
by-laws of the Company or any of its Subsidiaries, in each case, without the
prior consent of the Agent (with the approval of the Majority Lenders). Without
limiting the requirement for consent as provided in the immediately preceding
sentence, the Company will furnish to the Agent a copy of each such
modification, supplement or waiver promptly upon the effectiveness thereof (and
the Agent will promptly furnish a copy thereof to each Lender).

9.21 FURTHER ASSURANCES.

(a) The Company shall deliver to the Agent within 60 days after the
Effective Date appraisals of each of the facilities located on the Properties
owned by Garrido or Guest Choice, which appraisals shall be satisfactory to the
Majority Lenders.

(b) As and to the extent requested from time to time by the Agent or
the Majority Lenders, each Obligor operating in the Commonwealth will grant to
the Agent, for the benefit of the Lenders, a Lien in respect of any Property
acquired by such Obligor operating in the Commonwealth after the Effective Date
and not otherwise covered by the Puerto Rico Security Documents (collectively,
the "ADDITIONAL PUERTO RICO SECURITY DOCUMENTS"). Such Lien shall be granted
pursuant to documentation reasonably satisfactory in form and substance to the
Agent and shall constitute valid and enforceable perfected liens superior to and
prior to the rights of all other Persons and subject to no other Liens except
for the Liens permitted pursuant to Section 9.06 hereof. The Additional Puerto
Rico Security Documents or other instruments related thereto shall be duly
recorded or filed in such manner and in such places as are required by law to
establish, perfect, preserve and protect the Liens in favor of the Agent for the
benefit of the Lenders required to be granted pursuant to the Additional Puerto
Rico Security Documents and all taxes, fees and other charges payable in
connection therewith shall be paid in full.

<PAGE>

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9.22 SUBORDINATED INDEBTEDNESS.

(a) Neither the Company nor any of its Subsidiaries will purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any payment or prepayment of the
principal of or interest on, or any other amount owing in respect of, any
Subordinated Indebtedness, except: (i) for regularly scheduled payments of
principal and interest (including post-default interest) in respect thereof
required pursuant to the instruments evidencing such Subordinated Indebtedness
(and permitted to be made at the time of payment thereof pursuant to the
Subordination Agreement); (ii) the payment or reimbursement of expenses in
connection with the negotiation, execution, delivery and administration and/or
the supervision of, and any permitted amendment or waiver of, the Subordinated
Debt Documents, all in accordance with Section 14 of the Subordinated Note
Purchase Agreement, but excluding expenses, fees or other amounts relating to
the exercise of any rights or remedies or the taking of any enforcement action
by the holders of any Subordinated Indebtedness under or in respect of any
Subordinated Debt Document or any restructuring, refinancing or workout or
similar transaction relating thereto; and (iii) that the Company may redeem or
prepay the Subordinated Indebtedness, in whole or in part, pursuant to Section
7.2 of the Subordinated Note Purchase Agreement from the proceeds of a Public
Offering by the Company after the Effective Date, PROVIDED that (i) at the time
of such redemption or prepayment, and at the time any notice with respect
thereto shall be required to be given pursuant to the Subordinated Debt
Documents, no Default shall have occurred and be continuing and (ii) any
proceeds of such offering that remain unapplied after such redemption or
prepayment shall be applied pursuant to Section 2.09(d) hereof. For purposes of
this Section 9.22(a), "PUBLIC OFFERING" shall mean a registered public offering
under the Securities Act of 1933, as amended, of capital stock of the Company.

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(b) The Company will not, nor will it permit any of its Subsidiaries to,
consent to any modification, supplement or waiver of any of the provisions of
the Subordinated Debt Documents without the prior consent of the Agent (with the
approval of the Majority Lenders), except for any such modification, supplement
or waiver which does not require such consent under the express terms of the
Subordination Agreement; PROVIDED, however, that prior to entering into any
modification, supplement or waiver of the Subordinated Debt Documents the
Company shall give the Agent not less than 10 Business Days prior notice thereof
furnishing the Agent with a copy of the proposed amendment, modification or
waiver.

Section 10. EVENTS OF DEFAULT. If one or more of the following
events (herein called "EVENTS OF DEFAULT") shall occur and be continuing:

(a) The Company shall: (i) default in the payment of any principal
of any Loan when due (whether at stated maturity or at mandatory
prepayment); or (ii) default in the payment of any interest on any Loan or
Reimbursement Obligation, any fee or any other amount payable by it
hereunder or under any other Loan Document when due and such default shall
have continued unremedied for three or more Business Days; or

(b) The Company or any of its Subsidiaries shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $500,000 or more, or in the payment when due of
any amount under any Interest Rate Protection Agreement; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness or any event specified in any Interest
Rate Protection Agreement shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become
due, or to

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be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity or to have the
interest rate thereon reset to a level so that securities evidencing such
Indebtedness trade at a level specified in relation to the par value
thereof or, in the case of an Interest Rate Protection Agreement, to permit
the payments owing under such Interest Rate Protection Agreement to be
liquidated; or

(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by any Obligor, or any certificate furnished to any
Lender or the Agent pursuant to the provisions hereof or thereof, shall
prove to have been false or misleading as of the time made or furnished in
any material respect; or

(d) The Company shall default in the performance of any of its
obligations under any of Sections 9.01(f), 9.01(g), 9.05, 9.06, 9.07, 9.08,
9.09, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.16, 9.17, 9.19, 9.21 or 9.22
hereof; or the Company shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied
for a period of 30 or more days after notice thereof to the Company by the
Agent or any Lender (through the Agent); or

(e) The Company shall default in the performance of any of its
obligations under Section 4.02 of the Security Agreement; any Obligor party
to the Existing Subsidiary Guarantee and Security Agreement or the New
Subsidiary Guarantee and Security Agreement shall default in the
performance of any of its obligations under Section 2 or 5.02 thereof; or
any Obligor shall default in the performance of any of its other
obligations in any Loan Document (other than this Agreement) to which it is
party and such default shall continue unremedied for a period of 30 or more
days after notice thereof to the Company by the Agent or any Lender
(through the Agent); or

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(f) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or

(g) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its Property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code (or such similar laws) or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or

(h) A proceeding or case shall be commenced, without the application
or consent of the Company or the relevant Subsidiary affected thereby, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver, custodian,
trustee, examiner, liquidator or the like of the Company or such
Subsidiary, as the case may be, or of all or any substantial part of its
Property, or (iii) similar relief in respect of such Company or such
Subsidiary, as the case may be, under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against the Company

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or any of its Subsidiaries shall be entered in an involuntary case under
the Bankruptcy Code; or

(i) A final judgment or judgments for the payment of money in excess
of $500,000 in the aggregate (exclusive of judgment amounts fully bonded or
covered by insurance where the surety or the insurer, as the case may be,
has admitted liability in respect of such judgment) shall be rendered by
one or more courts, administrative tribunals or other bodies having
jurisdiction against the Company or any of its Subsidiaries and the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured, within 30
days from the date of entry thereof and the Company or any such Subsidiary,
as the case may be, shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or

(j) An event or condition specified in Section 9.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
PBGC (or any combination of the foregoing) that, in the determination of
the Majority Lenders, would (either individually or in the aggregate) have
a Material Adverse Effect; or

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individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by the
Company or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor); or

(l) Mr. Gregg L. Engles ("ENGLES") shall at any time cease to own
beneficially at least 75% of that number of shares of common stock of the
Company held by him as of June 1, 1996 (as adjusted to take into account
any subsequent stock split, stock dividend or other form of
recapitalization); or any of the Subsidiaries of the Company shall cease to
be a Wholly Owned Subsidiary of the Company; or during any period of 25
consecutive calendar months, a majority of the Board of Directors of the
Company shall no longer be composed of individuals (i) who were members of
said Board on the first day of such period, (ii) whose election or
nomination to said Board was approved by individuals referred to in clause
(i) above constituting at the time of such election or nomination at least
a majority of said Board or (iii) whose election or nomination to said
Board was approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority
of said Board; or any Person or group of Persons acting in concert, other
than Engles or any other shareholder of the Company as of the Effective
Date, shall at any time own or control, directly or indirectly, 30% or more
of such voting capital stock; or

(m) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on any material portion of the
collateral intended to be covered thereby (to the extent perfection by
filing, registration, recordation or possession is required herein or
therein) in favor of the Agent, free and clear of all other Liens (other
than Liens permitted under Section 9.06 hereof or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Security Documents

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shall for whatever reason be terminated or cease to be in full force and
effect, or the enforceability thereof shall be contested by any Obligor; or

(n) The Company shall fail to satisfy the conditions set forth in
Section 7.02 hereof on or before August 12, 1996.

THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (g) or (h) of this Section 10 with respect to any Obligor, the Agent may
(and, if requested by the Majority Lenders shall), by notice to the Company,
terminate the Commitments and/or declare the principal amount then outstanding
of, and the accrued interest on, the Loans, the Reimbursement Obligations and
all other amounts payable by the Obligors hereunder, under the other Loan
Documents and under the Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.08 hereof) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Obligor; and (2) in the case of the occurrence of an
Event of Default referred to in clause (g) or (h) of this Section 10 with
respect to any Obligor, the Commitments shall automatically be terminated and
the principal amount then outstanding of, and the accrued interest on, the
Loans, the Reimbursement Obligations and all other amounts payable by the
Company hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 or 5.08 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor.

In addition, upon the occurrence and during the continuance of any
Event of Default (if the Agent has declared the principal amount then
outstanding of, and accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Company hereunder and under the
Notes to be due and payable), the Company agrees that it shall, if

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requested by the Agent or the Majority Lenders through the Agent (and, in the
case of any Event of Default referred to in clause (g) or (h) of this Section
10 with respect to the Company, forthwith, without any demand or the taking
of any other action by the Agent or such Lenders) provide cover for the
Letter of Credit Liabilities by paying to the Agent immediately available
funds in an amount equal to the then aggregate undrawn face amount of all
Letters of Credit, which funds shall be held by the Agent in the Collateral
Account as collateral security in the first instance for the Letter of Credit
Liabilities and be subject to withdrawal only as therein provided.

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Section 11. THE AGENT.

11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms of this Agreement and of the other Loan Documents,
together with such other powers as are reasonably incidental thereto. The Agent
(which term as used in this sentence and in Section 11.05 and the first sentence
of Section 11.06 hereof shall include reference to its affiliates and its own
and its affiliates' officers, directors, employees and agents): (a) shall have
no duties or responsibilities except those expressly set forth in this Agreement
and in the other Loan Documents, and shall not by reason of this Agreement or
any other Loan Document be a trustee for any Lender; (b) shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document referred to
or provided for herein or therein or for any failure by the Company or any other
Person to perform any of its obligations hereunder or thereunder; (c) shall not
be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Loan Document; and (d) shall not be responsible for
any action taken or omitted to be taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. The Agent
may deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a notice of the assignment or transfer thereof shall
have been filed with the Agent.

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11.02 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including, without limitation,
any thereof by telephone, telecopy, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. As to any
matters not expressly provided for by this Agreement or any other Loan Document,
the Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Majority Lenders or, if provided herein, in accordance with the instructions
given by all of the Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.

11.03 DEFAULTS. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default unless the Agent has received notice from
a Lender or any Obligor specifying such Default and stating that such notice is
a "Notice of Default". In the event that the Agent receives such a notice of
the occurrence of a Default, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
PROVIDED that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Lenders except to the extent that this Agreement
expressly requires that such action be taken, or not be taken, only with the
consent or upon the authorization of the Majority Lenders, or all of the
Lenders.

11.04 RIGHTS AS A LENDER. With respect to its Commitments and the
Loans made by it, Chase (and any successor acting as Agent) in its capacity as a
Lender hereunder shall have

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the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. Chase (and any successor acting as Agent) and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Agent, and Chase
and its affiliates may accept fees and other consideration from the Obligors
for services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.

11.05 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to
the extent not reimbursed under Section 12.03 hereof, but without limiting the
obligations of the Company under said Section 12.03, and including in any event
any payments under any indemnity that the Agent is required to issue to any bank
referred to in Section 4.02 of the Security Agreement and Section 5.02 of each
of the Existing Subsidiary Guarantee and Security Agreement and the New
Subsidiary Guarantee and Security Agreement to which remittances in respect of
Accounts, as defined in each such agreement, are to be made) ratably in
accordance with the aggregate principal amount of the Loans and Reimbursement
Obligations held by the Lenders (or, if no Loans or Reimbursement Obligations
are at the time outstanding, ratably in accordance with their respective
Commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement or
any other Loan Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses that the Company is obligated to pay
under Section 12.03 hereof, and including also any payments under any indemnity
that the Agent is required to

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issue to any bank referred to in Section 4.02 of the Security Agreement and
Section 5.02 of each of the Existing Subsidiary Guarantee and Security
Agreement and the New Subsidiary Guarantee and Security Agreement to which
remittances in respect of Accounts, as defined in each such agreement, are to
be made, but excluding, unless a Default has occurred and is continuing,
normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, PROVIDED that no Lender shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.

11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Company and its Subsidiaries
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or under any other Loan Document. The Agent shall not be required to keep
itself informed as to the performance or observance by any Obligor of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the Properties or books of the
Company or any of its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder or under the Security Documents, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Company or any of its Subsidiaries (or any of their affiliates) that may come
into the possession of the Agent or any of its affiliates.

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11.07 FAILURE TO ACT. Except for action expressly required of the
Agent hereunder and under the other Loan Documents, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction from the Lenders of
their indemnification obligations under Section 11.05 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.

11.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by giving notice thereof to the Lenders and the Company, and the Agent
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent with the prior consent of the Company (which consent
shall not be unreasonably withheld); PROVIDED, that no such consent of the
Company shall be required if an Event of Default has occurred and is continuing
and the Commitments have been terminated and/or the Loans and other amounts
payable by the Obligors hereunder have been declared forthwith are due and
payable. If no successor Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, that shall be a bank that has an office in
New York, New York with a combined capital and surplus of at least $500,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Section 11 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.

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11.09 AGENCY FEE. So long as the Commitments are in effect and until
payment in full of the principal of and interest on the Loans and all other
amounts payable by the Company hereunder, the Company will pay to the Agent an
agency fee in the amount agreed in writing between the Company and the Agent,
payable annually in advance commencing on the Effective Date and on each
anniversary thereof. Such fee, once paid, shall be non-refundable.

11.10 CONSENTS UNDER OTHER LOAN DOCUMENTS. Except as otherwise
provided in Section 12.04 hereof with respect to this Agreement, the Agent may,
with the prior consent of the Majority Lenders (but not otherwise), consent to
any modification, supplement or waiver under any of the Loan Documents, PROVIDED
that, without the prior consent of each Lender, the Agent shall not (except as
provided herein or in the Security Documents) release any guarantee or
collateral or otherwise terminate any Lien under any Loan Document providing for
collateral security, or agree to additional obligations being secured by such
collateral security, except that no such consent shall be required, and the
Agent is hereby authorized, to release any Lien covering Property that is the
subject of a disposition of Property permitted hereunder or to which the
Majority Lenders have consented or to release any guarantee of any Obligor that
is the subject of a disposition to which the Majority Lenders have consented.

Section 12. MISCELLANEOUS.

12.01 WAIVER. No failure on the part of the Agent or any Lender to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Note shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.

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12.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telex or telecopy) delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.

12.03 EXPENSES, ETC. The Company agrees to pay or reimburse each of
the Lenders and the Agent for: (a) all reasonable out-of-pocket costs and
expenses of the Agent (including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase,
and Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to Chase) in
connection with (i) the negotiation, preparation, execution and delivery of this
Agreement and the other Loan Documents and the extensions of credit hereunder
and (ii) the negotiation or preparation of any modification, supplement or
waiver of any of the terms of this Agreement or any of the other Loan Documents
(whether or not consummated); (b) all reasonable out-of-pocket costs or
allocated costs and expenses of the Lenders and the Agent (including, without
limitation, the reasonable fees, allocated costs and expenses of legal counsel,
which may be employees of the Lenders or the Agent) in connection with (i) any
Default and any enforcement or collection proceedings resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (x) bankruptcy, insolvency, receivership, foreclosure, winding
up or liquidation proceedings, (y) judicial or regulatory proceedings and
(z) workout, restructuring or other negotiations or proceedings (whether or not
the workout, restructuring or

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transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 12.03; (c) all transfer, stamp, documentary or other similar
taxes, assessments or charges levied by any governmental or revenue authority
in respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated
by any Loan Document or any other document referred to therein; and (d) all
costs, expenses and other charges in respect of title insurance procured with
respect to the Liens created pursuant to the Mortgages.

The Company hereby agrees to indemnify the Agent and each Lender and
their respective directors, officers, employees, attorneys and agents from, and
hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them (including, without limitation, any
and all losses, liabilities, claims, damages or expenses incurred by the Agent
to any Lender, whether or not the Agent or any Lender is a party thereto)
arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the extensions of credit hereunder or any actual or
proposed use by the Company or any of its Subsidiaries of the proceeds of any of
the extensions of credit hereunder, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified). Without
limiting the generality of the foregoing, the Company will (x) indemnify the
Agent for any payments that the Agent is required to make under any indemnity
issued to any bank referred to in Section 4.02 of the Security Agreement and
Section 5.02 of each of the Existing Subsidiary Guarantee and Security Agreement
and the New Subsidiary Guarantee and Security Agreement to which remittances in
respect to Accounts, as defined in each such agreement, are to be made and (y)
indemnify the

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Agent and each Lender from, and hold the Agent and each Lender harmless
against, any losses, liabilities, claims, damages or expenses described in
the preceding sentence (including any Lien filed against all or any part of
the Property covered by the Mortgages in favor of any governmental entity,
but excluding, as provided in the preceding sentence, any loss, liability,
claim, damage or expense incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified) arising under any
Environmental Law as a result of the past, present or future operations of
the Company or any of its Subsidiaries (or any predecessor in interest to the
Company or any of its Subsidiaries), or the past, present or future condition
of any site or facility owned, operated or leased at any time by the Company
or any of its Subsidiaries (or any such predecessor in interest), or any
Release or threatened Release of any Hazardous Materials at or from any such
site or facility, including any such Release or threatened Release that shall
occur during any period prior to the termination of the Commitments and the
payment in full of the Loans and other amounts owing hereunder and under the
other Loan Documents when the Agent or any Lender shall be in possession of
any such site or facility following the exercise by the Agent or any Lender
of any of its rights and remedies hereunder or under any of the Security
Documents to the extent such Release results from a continuation of
conditions previously in existence at, or practices theretofore employed in
connection with the operation of, such site or facility.

12.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Agent and the
Majority Lenders, or by the Company and the Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Agent acting with the consent of the Majority
Lenders; PROVIDED that: (a) no modification, supplement or waiver shall, unless
by an instrument signed by all of the Lenders or by the Agent acting with the
consent of all of the Lenders: (i) increase, or extend the term of any of the
Commitments, or extend the time or waive any requirement for the

<PAGE>

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reduction or termination of any of the Commitments, (ii) extend the date
fixed for the payment of principal of or interest on any Loan, the
Reimbursement Obligations or any fee hereunder, (iii) reduce the amount of
any such payment of principal, (iv) reduce the rate at which interest is
payable thereon or any fee is payable hereunder, (v) alter the rights or
obligations of the Company to prepay Loans, (vi) alter the terms of this
Section 12.04, (vii) modify the definition of the term "Majority Lenders", or
modify in any other manner the number or percentage of the Lenders required
to make any determinations or waive any rights hereunder or to modify any
provision hereof, (viii) release any Subsidiary Guarantor from any of its
guarantee obligations under the Existing Subsidiary Guarantee and Security
Agreement or the New Subsidiary Guarantee and Security Agreement or release
(or terminate any Lien on) all or substantially all of the Collateral except
as provided in the Security Documents with respect to such Collateral in any
of the Security Documents or (ix) waive any of the conditions precedent set
forth in Section 7.01 or 7.02 hereof; (b) any modification of any of the
rights or obligations of the Agent or any Issuing Bank shall require the
consent of the Agent or the Issuing Bank, as the case may be; and (c) any
modification or supplement of Section 6 hereof shall require the consent of
the Company.

12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.

12.06 ASSIGNMENTS AND PARTICIPATIONS.

(a) The Company may not assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Agent.

<PAGE>

- 155 -

(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Facility A Lender, its Letter of Credit
Interest with the consent of the Agent (which consent shall not be unreasonably
withheld), and in the case of the Facility A Commitment or Letter of Credit
Interest, the Issuing Bank pursuant to an Assignment and Acceptance
substantially in the form of Exhibit E hereto; PROVIDED that:

(i) no such consent by the Agent shall be required in the case
of any assignment to another Lender;

(ii) each assignment by a Lender of its Loans, Note or
Commitment of any Class or Letter of Credit Interest shall be made in such
a manner so that the same portion of such Loans, Note, Commitment and (if
applicable) Letter of Credit Interest is assigned to the respective
assignee;

(iii) each assignment by any Facility A Lender or Facility B
Lender of its Loans (and related Note and Commitment) of a particular Class
and (in the case of a Facility A Lender) its Letter of Credit Interest
shall be made in such a manner so that the same portion of all of its Loans
to the Company of each other Class (and related Notes and Commitments) and
(if applicable) its Letter of Credit Interest is assigned to the respective
assignee; and

(iv) any such assignment of less than all of such Lender's
interests in the Loans, Notes, Commitments and Letter of Credit Interests,
as the case may be, shall be in an aggregate amount at least equal to
$10,000,000.

Upon execution and delivery by the assignor and assignee to the Company, the
Agent and, if applicable, the Issuing Bank of such Notice of Assignment, and
upon consent thereto by the Agent and Issuing Bank, to the extent required
above, the assignee shall have, to the extent of such assignment, the
obligations, rights and benefits of a Lender hereunder holding the Commitment(s)
and Loans and, if applicable, Letter of Credit Interests (or portions

<PAGE>

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thereof) assigned to it as specified in such Notice of Assignment (in
addition to the Commitment(s), Loans and/or Letter of Credit Interests, if
any, theretofore held by such assignee) and the assigning Lender shall, to
the extent of such assignment, be released from the Commitment(s) (or
portion(s) thereof) so assigned. Upon each such assignment the assigning
Lender shall pay the Agent an assignment fee of $3,000.

(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans or Letter of Credit Interests held
by it, or in its Commitments, in which event each purchaser of a participation
(a "PARTICIPANT") shall be entitled to the rights and benefits of the provisions
of Section 9.01(k) hereof with respect to its participation in such Loans,
Letter of Credit Interests and Commitments as if (and the Company shall be
directly obligated to such Participant under such provisions as if) such
Participant were a "Lender" for purposes of said Section, but, except as
otherwise provided in Section 4.07(c) hereof, shall not have any other rights or
benefits under this Agreement or any Note or any other Loan Document (the
Participant's rights against such Lender in respect of such participation to be
those set forth in the agreements executed by such Lender in favor of the
Participant). All amounts payable by the Company to any Lender under Section 5
hereof in respect of Loans or Letter of Credit Interests held by it, and its
Commitments, shall be determined as if such Lender had not sold or agreed to
sell any participations in such Loans, Letter of Credit Interests and
Commitments, and as if such Lender were funding each of such Loans, Letter of
Credit Interests and Commitments in the same way that it is funding the portion
of such Loans, Letter of Credit Interests and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term, or extend the time or
waive any requirement for the reduction or termination, of such Lender's related
Commitment, (ii) extend the date fixed for the

<PAGE>
- 157 -

payment of principal of or interest on the related Loan or Loans,
Reimbursement Obligations or any portion of any fee hereunder payable to the
Participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee, (v) alter the rights
or obligations of the Company to prepay the related Loans, (vi) consent to
any modification, supplement or waiver hereof or of any of the other Loan
Documents to the extent that the same, under Section 11.10 or 12.04 hereof,
requires the consent of each Lender or (vii) release any Subsidiary Guarantor
from any of its guarantee obligations under the Existing Subsidiary Guarantee
and Security Agreement or the New Subsidiary Guarantee and Security Agreement
or release (or terminate any Lien on) all or substantially all of the
Collateral except as provided in the Security Documents with respect to such
Collateral in any of the Security Documents.

(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.06, any Lender may (without notice
to the Company, the Agent or any other Lender and without payment of any fee)
(i) assign and pledge all or any portion of its Loans, Notes and/or Letter of
Credit Interests to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement and its Loans,
Notes and Letter of Credit Interests to an affiliate. No such assignment shall
release the assigning Lender from its obligations hereunder.

(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 12.12(b) hereof.

(f) Anything in this Section 12.06 to the contrary notwithstanding,
no Lender may assign or participate any interest

<PAGE>

- 158 -

in any Loan or Reimbursement Obligation held by it hereunder to the Company
or any of its Subsidiaries or Affiliates without the prior consent of each
Lender.

(g) At the request of any Lender that is not a U.S. Person and is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code, the Company
shall maintain, or cause to be maintained, a register (the "Register") that, at
the request of the Company, shall be kept by the Agent on behalf of the Company
at no charge to the Company at the address to which notices to the Agent are to
be sent hereunder, on which it enters the name of such Lender as the registered
owner of each Registered Loan held by such Lender. A Registered Loan (and the
Registered Note, if any, evidencing the same) may be assigned or otherwise
transferred in whole or in part by registration of such assignment or transfer
on the Register (and each Registered Note shall expressly so provide). Any
assignment or transfer of all or part of such Registered Loan (and the
Registered Note, if any, evidencing the same) may be effected by registration of
such assignment or transfer on the Register, together with the surrender of the
Registered Note, if any, evidencing the same duly endorsed by (or accompanied by
a written instrument of assignment or transfer duly executed by) the holder of
such Registered Note, whereupon, at the request of the designated assignee(s) or
transferee(s), one or more new Registered Notes in the same aggregate principal
amount shall be issued to the designated assignee(s) or transferee(s). Prior to
the registration of assignment or transfer of any Registered Loan (and the
Registered Note, if any, evidencing the same), the Company shall treat the
Person in whose name such Loan (and the Registered Note, if any, evidencing the
same) is registered as the owner thereof for the purpose of receiving all
payments thereon and for all other purposes, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Company and any
Bank that is a Registered Holder at any reasonable time upon reasonable prior
notice.

12.07 SURVIVAL. The obligations of the Company under Sections 5.01,
5.05, 5.06, 5.08 and 12.03 hereof, the obligations

<PAGE>

- 159 -

of the Company under Section 6.03 hereof, and the obligations of the Lenders
under Section 11.05 hereof, shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments. In
addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit (whether by means of a Loan or the issuance
of a Letter of Credit), herein or pursuant hereto shall survive the making of
such representation and warranty, and no Lender shall be deemed to have
waived, by reason of making any extension of credit hereunder (whether by
means of a Loan or the issuance of a Letter of Credit), any Default that may
arise by reason of such representation or warranty proving to have been false
or misleading, notwithstanding that such Lender or the Agent may have had
notice or knowledge or reason to believe that such representation or warranty
was false or misleading at the time such extension of credit was made.

12.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.

12.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

12.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS
AND VENUE.

(a) This Agreement and the Notes shall be governed by, and construed
in accordance with, the law of the State of New York.

(b) The Company hereby agrees that any suit, action or proceeding
with respect to this Agreement, any Note or any other Loan Document to which it
is a party or any judgment entered by any court in respect thereof may be
brought in the United States

<PAGE>
- 160 -

District Court for the Southern District of New York, in the Supreme Court of
the State of New York sitting in New York County (including its Appellate
Division), or in any other appellate court in the State of New York, as the
party commencing such suit, action or proceeding may elect in its sole
discretion; and each party hereto hereby irrevocably submits to the
non-exclusive jurisdiction of such court for the purpose of any such suit,
action, proceeding or judgment. Each party hereto further submits, for the
purpose of any such suit, action, proceeding or judgment brought or rendered
against it, to the appropriate courts of the jurisdiction of its domicile.

(c) The Company hereby agrees that service of all writs, process and
summonses in any suit, action or proceeding brought hereunder or under any of
the other Loan Documents to which the Company is a party may be made upon The
Prentice Hall Corporation System, Inc. presently located at 15 Columbus Circle,
New York, New York 10023, U.S.A. (the "Process Agent"), and the Company hereby
confirms and agrees that the Process Agent has been duly and irrevocably
appointed as its agent and true and lawful attorney in fact in its name, place
and stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give any notice
of any such service of process to the Company shall not impair or affect the
validity of such service or of any judgment based thereon. Without limiting the
foregoing, the Company hereby irrevocably consents to the service of process in
any suit, action or proceeding in such courts by the mailing thereof by the
Agent or any Lender by registered or certified mail, postage prepaid, at its
address set forth beneath its signature hereto. Nothing herein shall in any way
be deemed to limit the ability of the Agent or any Lender to serve any such
writs, process or summonses in any other manner permitted by applicable law or
to obtain jurisdiction over the Company in such other jurisdictions, and in such
manner, as may be permitted by applicable law.

(d) The Company hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the

<PAGE>

- 161 -

venue of any suit, action or proceeding arising out of or relating to this
Agreement, the Notes or the other Loan Documents brought in any such court
and hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.

12.11 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

12.12 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.

(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Company hereby authorizes each Lender to share
any information delivered to such Lender by the Company and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of such Lender to
enter into this Agreement, to any such subsidiary or affiliate, it being
understood that any such subsidiary or affiliate receiving such information
shall be bound by the provisions of clause (b) below as if it were a Lender
hereunder. Such authorization shall survive the repayment of the Loans and
Reimbursement Obligations and the termination of the Commitments.

<PAGE>

- 162 -

at the time the same is delivered to the Lenders or the Agent, PROVIDED that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for any of the Lenders or the Agent, (iii) to any Lender's examiners,
auditors or accountants, (iv) to the Agent or any other Lender (or to Chase
Securities, Inc.), (v) in connection with any litigation to which any one or
more of the Lenders or the Agent is a party, (vi) to a subsidiary or
affiliate of such Lender as provided in clause (a) above or (vii) to any
assignee or participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or participant) first
executes and delivers to the respective Lender a Confidentiality Agreement
substantially in the form of Exhibit H hereto; PROVIDED, further, that in no
event shall any Lender or the Agent

<PAGE>

- 163 -

be obligated or required to return any materials furnished by any Obligor. The
obligations of any assignee that has executed a Confidentiality Agreement in the
form of Exhibit H hereto shall be superseded by this Section 12.12 upon the date
upon which such assignee becomes a Lender hereunder pursuant to Section 12.06
hereof.

12.13 INTENTION OF PARTIES. Notwithstanding anything contained
herein to the contrary, it is the intention of the parties hereto that this
Agreement and the Commitments and extensions of credit provided hereunder
represent a continuation, renewal and extension of, but not a novation or
discharge of, the credit facilities provided by the Existing Credit Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be duly executed and delivered as of the day and
year first above written.

COMPANY
-------

SUIZA FOODS CORPORATION

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

Address for Notices:

3811 Turtle Creek Boulevard
Suite 1300
Dallas, Texas 75219

Attention: Gregg L. Engles

Telecopier No.: (214) 528-9929

Telephone No.: (214) 528-9922

<PAGE>

- 164 -

LENDERS
-------

FACILITY A LENDERS AND FACILITY B
---------------------------------
LENDERS
-------

Facility A Commitment THE CHASE MANHATTAN BANK
- ---------------------
$ 3,375,000

Facility B Commitment By
- --------------------- ----------------------------
$ 14,625,000 Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017

Address for Notices:

The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017

Attention: John Coyle

Telecopier No.: (212) 270-4238

Telephone No.: (212) 270-5632

<PAGE>

- 165 -

Facility A Commitment THE FIRST NATIONAL BANK OF CHICAGO
- ---------------------
$ 3,375,000

Facility B Commitment
- ---------------------
$ 14,625,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670

Address for Notices:

The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670

Attention: April Yebd

Telecopier No.: (312) 732-2715
(312) 732-6276

Telephone No.: (312) 732-4823

<PAGE>

- 166 -

Facility A Commitment FIRST UNION NATIONAL BANK OF
- ---------------------
$ 3,375,000 NORTH CAROLINA

Facility B Commitment
- ---------------------
$ 14,625,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

First Union National Bank of
North Carolina
301 S. College Street
Charlotte, NC 28288-0737

Address for Notices:

First Union National Bank of
North Carolina
301 S. College Street
Charlotte, NC 28288-0737

Attention: Sana Alkoor - Suiza

Telecopier No.: (704) 383-6537

Telephone No.: (704) 374-9831

<PAGE>

- 167 -

Facility A Commitment HARRIS TRUST AND SAVINGS BANK
- ---------------------
$ 3,375,000

Facility B Commitment
- ---------------------
$ 14,625,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690

Address for Notices:

Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690

Attention: Jerry Karl/Marieky Estrada

Telecopier No.: (312) 765-8095

Telephone No.: (312) 461-3776/7664

<PAGE>

- 168 -

Facility A Commitment THE BANK OF NOVA SCOTIA
- ---------------------
$ 2,625,000

Facility B Commitment
- ---------------------
$ 11,375,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308

Address for Notices:

The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308

Attention: F.C.H. Ashby
Senior Assistant Agent

Telecopier No.: (404) 888-8998

Telephone No.: (404) 877-1500

with a copy to:

The Bank of Nova Scotia
Houston Representative Office
1100 Louisiana
Suite 3000

<PAGE>

- 169 -

Houston, Texas 77002

Attention: Rosine Matthews
Relationship Manager

Telecopier No.: (713) 752-2425

Telephone No.: (713) 759-3432

<PAGE>

- 170 -

Facility A Commitment BANCO POPULAR DE PUERTO RICO
- ---------------------
$ 2,625,000

Facility B Commitment
- ---------------------
$ 11,375,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019

Address for Notices:

Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019

Attention: John Cuneo

Telecopier No.: (212) 586-3537

Telephone No.: (212) 315-2800

<PAGE>

- 171 -

Facility A Commitment BANK OF AMERICA ILLINOIS
- ---------------------
$ 1,875,000

Facility B Commitment
- ---------------------
$ 8,125,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697

Address for Notices:

Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697

Attention: Paul Youmaura

Telecopier No.: (312) 974-9626

Telephone No.: (312) 828-6574

<PAGE>

- 172 -

Facility A Commitment BANQUE PARIBAS
- ---------------------
$ 1,875,000

Facility B Commitment
- ---------------------
$ 8,125,000 By
----------------------------
Title:

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

Lending Office for Base Rate Loans and
Eurodollar Loans:

Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002

Address for Notices:

Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002

Attention: Chuck E. Irwin

Telecopier No.: (713) 659-4234

Telephone No.: (713) 659-4811

<PAGE>

- 173 -

Facility A Commitment CHL HIGH YIELD LOAN PORTFOLIO
- ---------------------
$ 1,875,000 (a unit of The Chase Manhattan Bank)

Facility B Commitment
- ---------------------
$ 8,125,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

CHL High Yield Loan Portfolio
380 Madison Avenue
12th Floor
New York, NY 10017

Address for Notices:

CHL High Yield Loan Portfolio
380 Madison Avenue
12th Floor
New York, NY 10017

Attention: Richard W. Stewart

Telecopier No.: (212) 622-3797

Telephone No.: (212) 622-3062

<PAGE>

- 174 -

Facility A Commitment CAISSE NATIONALE DE CREDIT AGRICOLE
- ---------------------
$ 1,875,000

Facility B Commitment
- ---------------------
$ 8,125,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603

Address for Notices:

Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603

Attention: Laura Schmuck

Telecopier No.: (312) 372-4421

Telephone No.: (312) 917-7428

<PAGE>
- 175 -

Facility A Commitment THE FUJI BANK, LIMITED,
- ---------------------
$ 1,875,000 HOUSTON AGENCY

Facility B Commitment
- ---------------------
$ 8,125,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Fuji Bank, Limited,
Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010

Telecopier No.: (713) 759-0048

Address for Notices:

The Fuji Bank, Limited,
Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010

Attention: Philip C. Lauinger III
Vice President and Joint
Manager or
David L. Kelley
Senior Vice President
(713) 650-7850

Telecopier No.: (713) 759-0048

Telephone No.: (713) 650-7852

<PAGE>

- 176 -

Facility A Commitment THE LONG-TERM CREDIT BANK OF JAPAN,
- ---------------------
$ 1,875,000 LIMITED, NEW YORK BRANCH

Facility B Commitment
- ---------------------
$ 8,125,000 By
----------------------------
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Long-Term Credit Bank of Japan,
Limited, New York Branch
165 Broadway
New York, NY 10006

Address for Notices:

The Long-Term Credit Bank of Japan,
Limited, New York Branch
165 Broadway
New York, NY 10006

Attention: Frank H. Madden, Jr.

Telecopier No.: (212) 608-2371

Telephone No.: (212) 335-4550

<PAGE>

- 177 -

AGENT
-----

THE CHASE MANHATTAN BANK,
as Agent

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

Address for Notices to
Chase as Agent:

The Chase Manhattan Bank
140 East 45th Street
29th Floor
New York, New York 10017

Attention: Agent Bank Services

Telex No.: 6720516
(Answerback: CMBNYAUW)

Telecopier No.: 212-622-0122

Telephone No.: 212-622-0004

<PAGE>

AMENDMENT AND WAIVER

AMENDMENT AND WAIVER dated as of August 7, 1996, between: SUIZA FOODS
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware (the "COMPANY"); each of the lenders that is a signatory
hereto (individually, a "LENDER" and, collectively, the "LENDERS"); and THE
CHASE MANHATTAN BANK, as agent for the Lenders (in such capacity, together with
its successors in such capacity, the "AGENT").

WHEREAS, the Company, the Lenders and the Agent are parties to an
Amended and Restated Credit Agreement dated as of July 17, 1996 (as in effect on
the date hereof, the "CREDIT AGREEMENT");

WHEREAS, the Company has announced that it proposes to acquire Swiss
Dairy Corporation, a California corporation, pursuant to terms and conditions to
be negotiated (the "SWISS DAIRY ACQUISITION");

WHEREAS, the Company is also proposing an Equity Issuance (as defined
in the Credit Agreement) in the amount of $10,000,000 (the "AUGUST 1996 EQUITY
ISSUANCE");

WHEREAS, in connection with the foregoing, the Company has requested
certain amendments to, and waivers of the effect of, certain provisions of the
Credit Agreement, and the Lenders and the Agent are willing to agree to such
amendments and waivers on the terms and conditions hereof,

Accordingly, the parties hereto agree as follows:

Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment and Waiver, terms defined in the Credit Agreement are used herein as
defined therein.

Section 2. AMENDMENTS. Subject to the satisfaction of the condition
precedent specified in Section 5 hereof, the

<PAGE>
2

Lenders hereby agree that the Credit Agreement shall be amended as follows:

A. References in the Credit Agreement (including references to the
Credit Agreement as amended hereby) to "this Agreement" (and indirect references
such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be a
reference to the Credit Agreement as amended hereby.

B. The date "August 12, 1996" in line 7 of Section 7.02 of the Credit
Agreement is hereby deleted and the date "September 30, 1996" is inserted in
place thereof.

C. The date "August 12, 1996" in lines 2 and 3 of clause (n) of
Section 10 of the Credit Agreement is hereby deleted and the date "September 30,
1996" is inserted in place thereof.

Section 3. WAIVER. Subject to the satisfaction of the conditions
precedent specified in Section 5 hereof, the Lenders hereby agree that, in the
event the August 1996 Equity Issuance is completed prior to September 30, 1996,
the following arrangements shall apply, the requirements of paragraphs (d) and
(f) of Section 2.09 of the Credit Agreement notwithstanding: (i) the Company
shall prepay outstanding Facility A Loans in an aggregate amount equal to 100%
of the Net Available Proceeds of the August 1996 Equity Issuance upon the date
of the August 1996 Equity Issuance and (ii) in the event that the Company has
not completed the Swiss Dairy Acquisition by September 30, 1996 on terms and
conditions satisfactory to the Lenders, then on September 30, 1996, the Company
will apply an amount equal to 100% of the Net Available Proceeds of the August
1996 Equity Issuance to the prepayment of the outstanding Facility B Loans in
accordance with paragraph (f) of Section 2.09 of the Credit Agreement. The
parties agree that nothing contained herein shall be deemed to be a present
consent by the Lenders to the Swiss Dairy Acquisition or any of the terms or
conditions thereof.

Section 4. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Agent and the Lenders that (a) no Default has occurred and
is continuing and (b) the representations and warranties set forth in Section 8
of the Credit Agreement and in each of the Security Documents are true

<PAGE>
3

and correct on the date hereof as if made on and as of the date hereof (or,
if stated to have been made solely as of an earlier date, were true and
correct as of such date) as if each reference (whether direct or indirect)
therein to "this Agreement" included reference to this Amendment and Waiver
and the Credit Agreement as amended hereby.

<PAGE>
4

Section 5. CONDITION PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 hereof and the waivers contained in Section 3
hereof shall become effective upon the condition precedent that the Agent shall
have received one or more counterparts of this Amendment and Waiver executed by
each of the Company and the Lenders and consented to by the Subsidiary
Guarantors listed on the signature pages hereof.

Section 6. MISCELLANEOUS. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
and Waiver may be executed in any number of counterparts, all of which taken
together shall constitute one and the same amendatory instrument and any of the
parties hereto may execute this Amendment and Waiver by signing any such
counterpart. This Amendment and Waiver shall be governed by, and construed in
accordance with, the law of the State of New York.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be duly executed and delivered as of the day and year first above
written.

COMPANY

SUIZA FOODS CORPORATION

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

LENDERS

THE CHASE MANHATTAN BANK

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

THE FIRST NATIONAL BANK OF CHICAGO

<PAGE>
5

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

FIRST UNION NATIONAL BANK OF NORTH CAROLINA

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

HARRIS TRUST AND SAVINGS BANK

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

THE BANK OF NOVA SCOTIA

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

BANCO POPULAR DE PUERTO RICO

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

BANK OF AMERICA ILLINOIS

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

BANQUE PARIBAS

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

By
-------------------------------------

<PAGE>

Title:

CHL HIGH YIELD LOAN PORTFOLIO (A UNIT OF
CHASE MANHATTAN BANK (FORMERLY KNOWN AS
CHEMICAL BANK))

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

CAISSE NATIONALE DE CREDIT AGRICOLE

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

THE FUJI BANK, LIMITED, HOUSTON AGENCY

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

THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED,
NEW YORK BRANCH

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

<PAGE>

AGENT

THE CHASE MANHATTAN BANK, as Agent

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

CONSENT AND AGREEMENT

Each of the undersigned Subsidiary Guarantors hereby (1) consents to the
amendments and waivers provided for in this Amendment and Waiver, (2) agrees
that each reference to the Credit Agreement in each Security Document (as
defined in the Credit Agreement) to which such Subsidiary Guarantor is a
party shall be a reference to the Credit Agreement as amended by this
Amendment and Waiver and (3) confirms its obligations under each Security
Document to which it is a party after giving effect to the amendments and
waivers set forth in this Amendment and Waiver.

REDDY ICE CORPORATION SUIZA FRUIT CORPORATION

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

VELDA FARMS, INC. NEVA PLASTICS MANUFACTURING CORP.

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

SUIZA MANAGEMENT CORPORATION

By
------------------------------

<PAGE>

Title:

SUIZA DAIRY CORPORATION

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

<PAGE>
EXECUTION COPY

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

SUIZA FOODS CORPORATION

_____________________________

AMENDMENT NO. 2

Dated as of September 6, 1996

AMENDED AND RESTATED
CREDIT AGREEMENT

Dated as of July 17, 1996

_____________________________

FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent

THE FIRST NATIONAL BANK OF CHICAGO,
as Syndication Agent

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

AMENDMENT NO. 2 dated as of September 6, 1996, between: SUIZA FOODS
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Delaware (the "COMPANY"); each of the lenders that is a signatory
hereto (individually, a "LENDER" and, collectively, the "LENDERS"); and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "AGENT").

WHEREAS, the Company, the Lenders and the Agent (as successor to The
Chase Manhattan Bank in such capacity) are parties to an Amended and Restated
Credit Agreement dated as of July 17, 1996 (as amended by Amendment and Waiver
dated as of August 7, 1996 and as in effect on the date hereof, the "EXISTING
CREDIT AGREEMENT");

WHEREAS, the Company has requested that the Lenders provide financing
for acquisitions by the Company from time to time and, in connection therewith,
amend certain provisions of the Existing Credit Agreement, among other things,
to permit such acquisitions and the financing thereof and to change certain of
the covenants therein; and

WHEREAS, the Lenders and the Agent are willing to agree to such
amendments on the terms and conditions hereof and, simultaneously with the
execution and delivery hereof, to enter into a Supplemental Credit Agreement
dated as of the date hereof (as amended from time to time, the "SUPPLEMENTAL
CREDIT AGREEMENT") to provide, subject to the terms and conditions thereof, a
$90,000,000 credit facility for financing certain acquisitions by the Company
from time to time.

Accordingly, the parties hereto agree as follows:

1. DEFINITIONS. Except as otherwise defined in this Amendment No.
2, terms defined in the Existing Credit Agreement are used herein as defined
therein.

2. AMENDMENTS. Subject to the satisfaction of the conditions
precedent specified in Section 4 hereof, the Company, the Agent and the Lenders
hereby agree that the Existing Credit Agreement shall be amended as follows:

A. References in the Existing Credit Agreement (including references
to the Existing Credit Agreement as amended hereby) to "this Agreement" (and
indirect references such as

<PAGE>
2

"hereunder", "hereby", "herein" and "hereof") shall be deemed to be a reference
to the Existing Credit Agreement as amended hereby (as so amended, herein called
the "CREDIT AGREEMENT").

B. Section 1.01 of the Existing Credit Agreement is hereby amended
(a) by inserting the following definitions therein in appropriate alphabetical
order:

"AMENDMENT NO. 2" shall mean Amendment No. 2 to this Agreement dated
as of September 6, 1996 among the Company, the Lenders and the Agent.

"AMENDMENT NO. 2 TO SECURITY AGREEMENT" shall mean Amendment No. 2 to
the Security Agreement substantially in the form of Exhibit C-1 to the
Supplemental Credit Agreement.

"FACILITY C COMMITMENTS" shall have the meaning set forth in the
Supplemental Credit Agreement.

"FACILITY C COMMITMENT TERMINATION DATE" shall have the meaning set
forth in the Supplemental Credit Agreement.

"FACILITY C LOANS" shall mean the loans provided for in the
Supplemental Credit Agreement.

"FACILITY C NOTES" shall have the meaning set forth in the
Supplemental Credit Agreement.

"FIRST UNION" shall mean First Union National Bank of North Carolina.

"GARRIDO NEGATIVE PLEDGE AGREEMENT" shall mean the Garrido Negative
Pledge Agreement between the Agent and Garrido in form and substance
satisfactory to the Agent, as the same shall be modified and supplemented
from time to time.

"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement substantially
in the form of Exhibit C-3 to the Supplemental Credit Agreement, as the
same shall be modified and supplemented from time to time.

<PAGE>
3

"INVESTMENT TAX CREDIT" shall have the meaning set forth in the
Supplemental Credit Agreement.

"NET PURCHASE PRICE" shall have the meaning set forth in the
Supplemental Credit Agreement.

"PERMITTED ACQUISITION" shall have the meaning set forth in the
Supplemental Credit Agreement.

"SUPPLEMENTAL CREDIT AGREEMENT" shall have the meaning assigned
thereto in the recitals to Amendment No. 2.

"SUPPLEMENTAL GUARANTOR" shall mean each Subsidiary of the Company
party to a Supplemental Subsidiary Guarantee and Security Agreement.

"SUPPLEMENTAL SECURITY DOCUMENTS" shall mean, collectively, each
Supplemental Subsidiary Guarantee and Security Agreement between a
Supplemental Guarantor and the Agent, each amendment to the Security
Agreement and all Uniform Commercial Code financing statements and/or other
filings required hereby or thereby to be filed with respect to the security
interests in personal Property and fixtures created pursuant hereto or
thereto.

"SUPPLEMENTAL SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean
a Supplemental Subsidiary Guarantee and Security Agreement, substantially
in the form of Exhibit C-2 to the Supplemental Credit Agreement, as the
same shall be modified and supplemented from time to time.

and (b) by deleting therefrom the definitions of "GARRIDO FACTORS LIEN
AGREEMENT", "GARRIDO MORTGAGES" and "NEW SUBSIDIARY GUARANTEE AND SECURITY
AGREEMENT" and (c) by amending the following definitions to read in their
entirety as follows:

"BASIC DOCUMENTS" shall mean, collectively, the Loan Documents and, except
for purposes of the definitions of "Secured Obligations" and "Guaranteed
Obligations" in any of the Security Documents, the Purchase Agreements and
the Subordinated Debt Documents.

"BUSINESS DAY" shall mean (a) any day on which commercial banks are
not authorized or required to

<PAGE>
4

close in North Carolina and (b) if such day relates to a borrowing of, a
payment or prepayment of principal of or interest on, a Conversion of or
into, or an Interest Period for, a Eurodollar Loan or a notice by the
Company with respect to any such borrowing, payment, prepayment, Conversion
or Interest Period, any day on which dealings in Dollar deposits are
carried out in the London interbank market.

"DEBT SERVICE" shall mean, for any period, the sum, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all payments of principal of
Indebtedness (including, without limitation, the principal component of any
payments in respect of Capital Lease Obligations) scheduled to be made
during such period PLUS (b) all Interest Expense for such period, it being
understood that, if any installment of principal of the Facility C Loans,
or the Facility B Loans shall have been prepaid during or prior to such
period, the amount of principal of the Facility C Loans and the Facility B
Loans included in Debt Service for such period shall be equal to the
aggregate amount of principal of the Facility C Loans and the Facility B
Loans originally scheduled to be paid hereunder and under the Supplemental
Credit Agreement during such period.

"EXCLUDED DISPOSITION" shall mean the Disposition of (i) an Investment Tax
Credit or (ii) any motor vehicles or other equipment no longer used or
useful in the business of the Company or any of its Subsidiaries to the
extent the proceeds thereof are used to acquire similar replacement
Property within a period of 30 days after the end of the fiscal quarter in
which such Disposition was made.

"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Supplemental
Credit Agreement, the Notes, the Facility C Notes, the Letter of Credit
Documents and the Security Documents.

<PAGE>
5

thereto requested by the Agent as may be appropriate to effect a lien on
real property in the state where the respective property to be covered by
such instrument is located), executed by the respective Obligors who own
or lease such property in favor of the Agent (or, in the case of a deed of
trust, in favor of the trustee for the benefit of the Agent and the
Lenders) pursuant to Section 9.19(c) and 9.19(d) hereof or Section 8.19(c)
and 8.19(d) of the Supplemental Credit Agreement covering the respective
Properties and/or leasehold interests identified in Schedule IV hereto or
subject to the requirements of said Section 9.19(c) and 9.19(d) or Section
8.19(c) and 8.19(d) of the Supplemental Credit Agreement, as the case may
be, in each case as the same shall be modified and supplemented and in
effect from time to time.

"OBLIGOR" shall mean the Company and each Subsidiary of the Company
party to any Security Document; PROVIDED that for the purposes of the
definition of the terms "Eligible Inventory", "Eligible Receivable",
and "Receivables", the term "Obligor" shall not include any
Supplemental Guarantor.

"SECURITY DOCUMENTS" shall mean, collectively, the Security Agreement, the
Amendment to Security Agreement, Amendment No. 2 to Security Agreement, the
Mortgages, each Supplemental Subsidiary Guarantee and Security Agreement,
the Existing Subsidiary Guarantee and Security Agreement, the Guarantee
Agreement, the Puerto Rico Security Documents, all Uniform Commercial Code
financing statements and/or other filings required hereby or thereby to be
filed with respect to the security interests in personal Property and
fixtures created pursuant hereto or thereto, and the Subordination
Agreement.

and (c) by the following: (1) the definition of "ELIGIBLE INVENTORY" is hereby
amended by replacing the percentage "50%" with the percentage "100%" in clause
(b) thereof, (2) the definition of "INTEREST EXPENSE" is hereby amended by
inserting the words "and by the Supplemental Credit Agreement" after "hereby" in
the eighth line thereof, (3) the definition of "MATERIAL ADVERSE EFFECT" is
hereby amended by inserting the words "or under the Loan Documents" after
"therewith" in the last line thereof, and (4) the definition of "SUBSIDIARY
GUARANTORS"

<PAGE>
6

is amended by deleting the words "Garrido, Guest Choice," in the first and
second lines thereof.

C. References to "Chase" in the definitions of "Federal Funds Rate",
"Issuing Bank", and "Prime Rate" and in Sections 2.02(b), 11.04 and 12.03 of
the Existing Credit Agreement are deleted and replaced by "First Union".

D. The references to "Garrido Factors Lien Agreement", "Garrido
Mortgages" and "New Subsidiary Guarantee and Security Agreement" in the Existing
Credit Agreement are hereby deleted.

E. Section 2.02(b) of the Existing Credit Agreement is hereby amended
by replacing the words "1:00 p.m. New York time" with the words "3:30 p.m.
Charlotte, North Carolina time" in the second line thereof and by replacing the
words "the Principal Office" with the words "its principal office" in the tenth
line thereof.

F. The second sentence of Section 2.06 of the Existing Credit
Agreement is hereby amended (1) by adding ", subject to the prior written
consent of the Majority Lenders," immediately after the word "entitled" and (2)
by deleting "consent to, or" in the penultimate line thereof.

G. Subsections (b) through (e) of Section 2.09 of the Existing
Credit Agreement are hereby amended to read in their entirety as follows:

"(b) CASUALTY EVENTS. Not later than 60 days following the receipt
by the Company or any of its Subsidiaries (other than a Supplemental
Guarantor) of the proceeds of insurance, condemnation award or other
compensation in respect of any Casualty Event affecting any Property of the
Company or any of its Subsidiaries (other than Property of a Supplemental
Guarantor or acquired with the proceeds of Facility C Loans under the
Supplemental Credit Agreement) (or upon such earlier date as the Person
owning such Property shall have determined not to repair or replace the
Property affected by such Casualty Event), the Company shall prepay the
Loans (and/or provide cover for Letter of Credit Liabilities as specified
in paragraph (h) below), and the Facility A Commitments shall be subject to

<PAGE>
7

automatic reduction, in an aggregate amount, if any, equal to 100% of the
Net Available Proceeds of such Casualty Event not theretofore applied to
the repair or replacement of such Property or prepayment of the Facility B
Loans, such prepayment and reduction to be effected in each such case in
the manner and to the extent specified in paragraph (f) below. Nothing in
this paragraph (b) shall be deemed to limit any obligation of the Company
or any of its Subsidiaries pursuant to any of the Security Documents to
remit to a collateral or similar account (including, without limitation,
the Collateral Account) maintained by the Agent pursuant to any of the
Security Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event. Notwithstanding
the foregoing, in the event that a Casualty Event shall occur with respect
to Property of the Company or any of its Subsidiaries (other than Property
of a Supplemental Guarantor or acquired with the proceeds of Facility C
Loans under the Supplemental Credit Agreement) and covered by any Mortgage,
the Company shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities) on the dates and in the amounts to the extent specified
in such Mortgage. In the event of a Casualty Event involving Property of a
Supplemental Guarantor or acquired with the proceeds of Facility C Loans
under the Supplemental Credit Agreement, the Net Available Proceeds of such
Casualty Event shall be applied in accordance with the terms of the
Supplemental Credit Agreement.

<PAGE>
8

Business Days prior to the occurrence of the Current Disposition, the
Company will deliver to the Lenders a statement, certified by a
Responsible Financial Officer of the Company, in form and detail
satisfactory to the Agent, of the amount of the Net Available Proceeds of
the Current Disposition and of all such prior Dispositions and the Company
will prepay the Loans (or cause the Loans to be prepaid) and the Facility A
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of the Current Disposition and
such prior Dispositions not theretofore used to prepay Facility B Loans
such prepayment and reduction to be effected in each case in the manner and
to the extent specified in paragraph (f) below; PROVIDED that with respect
to any Current Disposition that includes any Eligible Inventory or Eligible
Receivables, the Company shall deliver to the Agent a statement of a
Responsible Financial Officer of the Company specifying the portion of Net
Available Proceeds of the Current Disposition and of all prior Dispositions
as to which a prepayment has not yet been made hereunder relating to such
Inventory or Receivables and the Company shall prepay the Facility A Loans
(and/or provide cover for Letter of Credit Liabilities as specified in
paragraph (h) below). In the case of all Dispositions of Property of a
Supplemental Guarantor or acquired with the proceeds of Facility C Loans
under the Supplemental Credit Agreement, the Company will make (or cause to
be made) prepayments of the Facility C Loans as required by the
Supplemental Credit Agreement.

(d) EQUITY ISSUANCE; INVESTMENT TAX CREDITS. Upon any Equity
Issuance or the issuance of any Indebtedness (other than Indebtedness
permitted under Section 9.07 hereof) or the Disposition of any Investment
Tax Credit after the Closing Date (as defined in the Supplemental Credit
Agreement), the Company shall (i) prepay the Facility C Loans or the
Facility B Loans in an aggregate amount equal to 100% of the Net Available
Proceeds thereof (after effecting any payments in respect of the
redemption, prepayment or retirement, as the case may be, of the
Subordinated Indebtedness to the extent permitted under Section 9.22(a)) or
(ii) in connection with a Disposition of any Investment Tax Credit, apply
any part of the Net Available Proceeds thereof to the purchase price of the

<PAGE>
9

Swiss Dairy Acquisition and use the balance of such Net Available Proceeds
to prepay the Facility C Loans or the Facility B Loans as contemplated in
clause (i) above. Promptly after each such Equity Issuance the Company
shall advise the Agent in writing of its designated application of such Net
Available Proceeds thereof. Any such prepayments of the Facility C Loans
shall be effected in the manner specified in the Supplemental Credit
Agreement. Any such prepayment of the Facility B Loans shall be effected
in the manner and to the extent specified in paragraph (f) below.

(e) EXCESS CASH FLOW. Not later than 90 days after the end of the
fiscal quarter ending December 31, 1996 and after the end of each fiscal
year of the Company, commencing with the fiscal year ending December 31,
1997, the Company shall prepay the Facility B Loans and Facility C Loans in
an aggregate amount equal to the excess of (A) 50% of Excess Cash Flow for
such fiscal quarter or year, as the case may be (or, if the Leverage Ratio
is less than 2.50 to 1, 25% of such Excess Cash Flow) over (B) the
aggregate amount of prepayments of Facility B Loans and Facility C Loans
made during such fiscal quarter or year, as the case may be, pursuant to
Section 2.08 hereof and Section 2.08 of the Supplemental Credit Agreement.
Mandatory prepayments arising from Excess Cash Flow required prior to the
Facility C Commitment Termination Date shall be applied to the Facility B
Loans in the manner and to the extent specified in paragraph (f) below.
Mandatory prepayments arising from Excess Cash Flow required on or after
the Facility C Commitment Termination Date shall be applied to the
Facility B Loans and the Facility C Loans pro rata based on the aggregate
principal amounts thereof then outstanding and such prepayments of Facility
B Loans shall be effected in each case in the manner and to the extent
specified in paragraph (f) below."

H. Section 2.10(e) of the Existing Credit Agreement is amended by
replacing the words "the Principal Office" with the words "its principal office"
in the third line thereof.

I. Section 3.01(b) of the Existing Credit Agreement is amended by
inserting the following aggregate amounts directly opposite the dates set forth
below in place of those set forth therein:

<PAGE>
10

"September 30, 2001 6,000,000
December 31, 2001 6,000,000
March 31, 2002 27,500,000"

J. Section 3.02 of the Existing Credit Agreement is hereby amended
(1) by replacing the comma immediately after the word "Dates" with the word
"and" in the third sentence thereof and (2) by deleting the words "and (iii) in
the case of any Loan, upon the payment or prepayment thereof or the Conversion
of such Loan to a Loan of another Type (but only on the principal amount so
paid, prepaid or Converted)" from the third sentence thereof.

K. Section 4.01(a) of the Existing Credit Agreement is hereby amended
by replacing the words "1:00 p.m. New York time" with the words "2:00 p.m.
Charlotte, North Carolina time" in the eighth line thereof.

L. Section 4.04 of the Existing Credit Agreement is hereby amended to
read in its entirety as follows:

"4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made
pursuant to Section 2.09 hereof and Conversions or prepayments made
pursuant to Section 5.04 hereof, (a) each borrowing and Conversion of
principal of Base Rate Loans shall be in an aggregate amount at least
equal to $500,000 or a larger multiple of $100,000, (b) each borrowing
and Conversion of Eurodollar Loans shall be in an aggregate amount at
least equal to $2,000,000 or a larger multiple of $1,000,000, (c) each
partial prepayment of principal of Eurodollar Loans shall be in an
aggregate amount at least equal to $2,000,000 or a larger multiple of
$1,000,000 and each partial prepayment of principal of Base Rate Loans
shall be in an aggregate amount at least equal to $500,000 or a larger
multiple of $100,000 (borrowings, Conversions or prepayments of or
into Loans of different Types or, in the case of Eurodollar Loans,
having different Interest Periods at the same time hereunder to be
deemed separate borrowings, Conversions and prepayments for purposes
of the foregoing, one for each Type or Interest Period)."

<PAGE>
11

M. Section 4.05 of the Existing Credit Agreement is hereby amended by
replacing the words "12:00 noon New York time" with the words "1:30 p.m.
Charlotte, North Carolina time" in the first sentence thereof.

N. Section 4.07(a) of the Existing Credit Agreement is hereby amended
by adding the words "but with the prior written consent of the Majority Lenders"
immediately after the words "at its option" in the fourth line thereof.

O. Section 5.06(a) of the Existing Credit Agreement is hereby amended
by replacing the reference to "Section 5.01(a)" in the penultimate line thereof
with the reference to "Section 5.06(a)".

P. Section 7.02 of the Existing Credit Agreement is hereby amended to
read in its entirety as follows: "7.02 [Intentionally Omitted]".

Q. Section 9.01(f) of the Existing Credit Agreement is hereby amended
by replacing the number "10" with the number "20" in the first line thereof.

R. Section 9.05(b) of the Existing Credit Agreement is hereby amended
(i) by amending clause (iv) to read in its entirety as follows:

"(iv) Permitted Acquisitions and the acquisition of any capital stock,
business or Property of any Person with the proceeds of Facility A Loans
PROVIDED that unless otherwise consented to by the Majority Banks (w) no
more than $1,000,000 of the proceeds of Facility A Loans may be used,
directly or indirectly, to finance any single acquisition and no more
than $5,000,000 in the aggregate of the proceeds of Facility A Loans may
be used, directly or indirectly, to finance acquisitions in any fiscal
year, except in connection with the financing of the Swiss Dairy
Acquisition, in which case up to $10,000,000 in the aggregate of the
proceeds of Facility A Loans may be used for such financing, (x) the Net
Purchase Price of any such acquisition financed with the proceeds of
Facility A Loans (other than the Swiss Dairy Acquisition) shall not exceed
$1,000,000 in a single transaction (or

<PAGE>
12

series of related transactions) and $5,000,000 in the aggregate for any
fiscal year, (y) at the time of such acquisition no Default shall have
occurred and be continuing and (z) any future earn-out payments in
connection with any such acquisition shall be counted at the time such
earn-out payment is made in determining whether the dollar limitations
contained in this clause (iv) have been exceeded;"

S. Section 9.05(d) of the Existing Credit Agreement is hereby amended
by adding the words "and so long as the Liens created under the Security
Documents continue to be in effect" immediately before the semicolon therein.

T. Section 9.06(a) of the Existing Credit Agreement is hereby amended
by adding the words "and the Supplemental Security Documents" immediately prior
to the semicolon therein.

U. Section 9.07(a) of the Existing Credit Agreement is hereby amended
by replacing the word "and" with a comma and by adding the words "and under the
Supplemental Credit Agreement" immediately prior to the colon therein.

V. Section 9.07(c) of the Existing Credit Agreement is hereby amended
by adding the words "and Indebtedness outstanding on the date of Amendment No. 2
and listed on Part A of Schedule I to the Supplemental Credit Agreement"
immediately after the word "hereto".

W. Section 9.07(d) of the Existing Credit Agreement is hereby amended
by replacing the section reference to "Section 9.08(g)" with the section
references "Section 9.08(e) or (g)".

X. Section 9.08(e) of the Existing Credit Agreement is hereby amended
by adding the words "and indemnities executed in connection with the sale of
Investment Tax Credits" immediately before the semicolon therein.

Y. Section 9.10(b) of the Existing Credit Agreement is hereby amended
to read in its entirety as follows:

"(b) The Company will not permit the Senior Leverage Ratio to exceed the
following respective ratios at any time during the following respective
periods:

<PAGE>
13

PERIOD RATIO
------ -----
From the Effective Date
through and including
June 29, 1997 3.75 to 1

From June 30, 1997
through and including
June 29, 1998 3.25 to 1

From June 30, 1998
through and including
June 29, 1999 2.75 to 1

From June 30, 1999
and at all times
thereafter 2.25 to 1"

Z. Section 9.11 of the Existing Credit Agreement is hereby amended
to read in its entirety as follows:

"9.11 MINIMUM NET WORTH. The Company will not permit its Net Worth
(i) for the period from the date hereof to and including December 31,
1996 to be less than $63,000,000 and (ii) for each fiscal quarter
thereafter, to be less than $63,000,000 plus 50% of net income for all
preceding fiscal quarters (without including the results of any fiscal
quarter in respect of which there was a net loss) commencing with the
fiscal quarter beginning January 1, 1997. The amounts of Net Worth
set forth above shall be increased by 75% of the amount by which the
"total stockholders equity" of the Company is increased as a result of
any public or private offering of common stock of the Company after
September 1, 1996. Promptly upon consummation of each such public or
private offering, the Company shall notify the Agent in writing of the
amount of such increase in total stockholders equity."

AA. Section 9.14 of the Existing Credit Agreement is hereby amended
to read in its entirety as follows:

<PAGE>
14

"9.14 CAPITAL EXPENDITURES. The Company will not permit the
aggregate amount of Capital Expenditures by the Company and its
Subsidiaries to exceed the following respective amounts for the
following respective periods:

PERIOD AMOUNT
------ ------
From January 1, 1996 $13,000,000
through and including
December 31, 1996

From January 1, 1997 $14,000,000
through and including
December 31, 1997

From January 1, 1998 $15,000,000
through December 31, 1998,
and for each fiscal year
thereafter

If the aggregate amount of Capital Expenditures for any period set
forth in the schedule above shall be less than the amount set forth
opposite such period in the schedule above, then 50% of the shortfall
shall be added to the amount of Capital Expenditures permitted for the
immediately succeeding period (but not any other) period and, for the
purposes hereof, the amount of Capital Expenditures made during any
period shall be deemed to have been made first from the permitted
amount for such period set forth in the schedule above and last from
the amount of any carryover from any previous period. Notwithstanding
the foregoing, in addition to the Capital Expenditures permitted to be
incurred as provided above the Company may make the following
additional Capital Expenditures: (a) the acquisition of replacement
Property in respect of an Excluded Disposition; (b) the purchase price
paid by the Company or any of its Subsidiaries in respect of any
acquisition permitted under Section 9.05(b)(iv) hereof; (c) Capital
Expenditures not exceeding $6,000,000 during the period from and after
the Closing Date to and including December 31, 1997 in respect of the
expansion by Velda Farms of its facilities at

<PAGE>
15

Winter Haven, Miami, Jacksonville and/or St. Petersburg, Florida;
(d) Capital Expenditures made with the proceeds of property or casualty
insurance for the purposes of repairing or replacing damaged or
destroyed fixed or capital assets; and (e) any acquisition permitted
under Section 9.05(b)(v) hereof."

BB. Section 9.15 of the Existing Credit Agreement is amended by
replacing the percentage "50%" with the percentage "75%" in the second sentence
thereof.

CC. Section 9.19(b) of the Existing Credit Agreement is hereby
amended by adding the words "(other than the Garrido Negative Pledge Agreement)"
after the word "arrangement" in the third line thereof.

DD. Section 9.19(c) of the Existing Credit Agreement is hereby
amended (1) by adding the words "(other than Garrido and Guest Choice)"
immediately after the word "Subsidiaries" and after the word "Company" in the
second and fourth lines thereof, respectively, (2) by replacing the words "the
New Subsidiary Guarantee and Security Agreement" with the words "a Supplemental
Subsidiary Guarantee and Security Agreement" in the fifth and sixth lines and in
the eleventh and twelfth lines thereof, and (3) by adding the words "or to the
Supplemental Credit Agreement" after the word "hereto" in the sixteenth line
thereof.

EE. Section 9.19(d) of the Existing Credit Agreement is hereby
amended (1) by adding the words "(other than Garrido)" immediately after the
word "Subsidiaries" in the third line thereof and (2) by adding the words "or to
the Supplemental Credit Agreement" after the word "hereto" in the seventh line
thereof.

FF. Section 10(a) of the Existing Credit Agreement is hereby amended
by adding the words "or under the Supplemental Credit Agreement" immediately
after the words "any other Loan Document" in the sixth line thereof.

GG. Section 10(b) of the Existing Credit Agreement is hereby amended
by adding the words "or any Event of Default (as defined in the Supplemental
Credit Agreement) shall occur and be continuing" after the word "liquidated" in
the last line thereof.

<PAGE>
16

HH. Section 10(n) of the Existing Credit Agreement is hereby deleted
in its entirety.

II. Section 11.05 of the Existing Credit Agreement is hereby amended
by replacing the words "the New Subsidiary Guarantee and Security Agreement"
with the words "each Supplemental Subsidiary Guarantee and Security Agreement"
in the eighth line and in the twenty-eighth and twenty-ninth lines thereof.

JJ. Section 11.08 of the Existing Credit Agreement is hereby amended
(1) by deleting the word "are" at the end of the twelfth line thereof and (2) by
deleting the words "that has an office in New York, New York" in the third
sentence thereof.

KK. Section 11.09 of the Existing Credit Agreement is hereby amended
to read in its entirety as follows:

"11.09 AGENCY FEE. So long as the Commitments are in effect and
until payment in full of the principal of and interest on the Loans
and all other amounts payable by the Company hereunder, the Company
will pay to the Agent an agency fee in the amount agreed in writing
between the Company and the Agent, payable quarterly in arrears
commencing on September 30, 1996 and on the last day of each calendar
quarter thereafter; PROVIDED that if the Commitments shall have been
terminated prior to such date, the agency fee shall be payable on the
date of such termination. Such fee, once paid, shall be
non-refundable."

LL. Section 12.03 of the Existing Credit Agreement is hereby amended
by replacing the words "the New Subsidiary Guarantee and Security Agreement"
with the words "each Supplemental Subsidiary Guarantee and Security Agreement"
in the third sentence thereof.

MM. Section 12.04 of the Existing Credit Agreement is hereby amended
(1) by adding the words, "or modify Section 12.06(b)(iii) hereof" immediately
after the word "hereof" in clause (a)(vii) thereof, (2) by replacing the words
"the New Subsidiary Guarantee and Security Agreement" with the words "any
Supplemental Subsidiary Guarantee and Security Agreement" in

<PAGE>
17

clause (a)(viii) thereof, and (3) by deleting the words "or 7.02" in clause
(a)(ix) thereof.

NN. Section 12.06(b) of the Existing Credit Agreement is amended (1)
by amending clauses (iii) and (iv) of the first sentence thereof to read in
their entirety as follows:

"(iii) each assignment by any Facility A Lender or Facility B Lender
of any of its Loans (and related Note and Commitment) of a particular
Class and (in the case of a Facility A Lender) its Letter of Credit
Interest shall be made in such a manner so that (x) the same ratable
portion of all of its Loans to the Company under this Agreement of the
other Class (and related Notes and Commitments) and (if applicable)
its Letter of Credit Interest is assigned to the respective assignee
and (y) the same ratable portion of all of its Facility C Loans (and
related Facility C Note and Facility C Commitment) under and as
defined in the Supplemental Credit Agreement is assigned to the
respective assignee; and

(iv) any such assignment of less than all of such Lender's interests in
the Facility A Loans, Facility B Loans and Facility C Loans, Facility A
Notes, Facility B Notes and Facility C Notes, and Facility A Commitments,
Facility B Commitments and Facility C Commitments, as the case may be,
shall be in an aggregate amount at least equal to $10,000,000."

and (2) by replacing the words "Notice of Assignment" with the words "Assignment
and Acceptance" therein.

OO. Section 12.12(b) of the Existing Credit Agreement is hereby
amended by deleting the words "(or to Chase Securities, Inc.)" in clause (iv)
thereof.

PP. Schedules I through VII of the Existing Credit Agreement are
replaced with Schedules I through VII of the Supplemental Credit Agreement.

QQ. Exhibit D-3 of the Existing Credit Agreement is hereby deleted in
its entirety.

<PAGE>
18

3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that, after giving effect to the
amendments to the Existing Credit Agreement set forth in Section 2 of this
Amendment No. 2, (a) no Default has occurred and is continuing and (b) the
representations and warranties set forth in Section 8 of the Credit Agreement
and in each of the Security Documents are true and correct on the date hereof as
if made on and as of the date hereof (or, if stated to have been made solely as
of an earlier date, were true and correct as of such date) as if each reference
(whether direct or indirect) therein to "this Agreement" included reference to
this Amendment No. 2 and the Credit Agreement as amended hereby.

4. CONDITIONS PRECEDENT. The amendments to the Existing Credit
Agreement set forth in Section 2 hereof shall become effective upon prior or
simultaneous satisfaction of the condition precedent that the Agent shall have
received the following, each of which shall be satisfactory to the Agent:

(a) one or more counterparts of this Amendment No. 2 executed by each
of the Company and the Lenders and consented to by the Subsidiary
Guarantors listed on the signature pages hereof.

(b) one or more counterparts of the Supplemental Credit Agreement
executed by each of the parties thereto, together with evidence that all
conditions precedent set forth in Section 6.01 of the Supplemental Credit
Agreement shall have been satisfied or waived.

(d) certified copies of all corporate authority for each Obligor
(including, without limitation, board of director resolutions and evidence
of the incumbency of officers, together with specimen signatures of each
such officer) with respect to the execution, delivery and performance of
this Amendment No. 2, the Existing Credit Agreement as amended hereby and
each such other document to which such Obligor is intended to be a party by
the terms of this Amendment No. 2.

<PAGE>
19

(e) opinions, appropriately dated, of Hughes & Luce and Axtmayer
Adsuar Muniz & Goyco, each as counsel to the Obligors, covering such
matters as the Agent or any Lender may reasonably request (and each Obligor
hereby instructs such counsel to deliver such opinion to the Lenders and
the Agent).

(f) new Facility A Notes and Facility B Notes, duly completed and
executed.

(g) such other documents as the Agent or any Lender or special New
York counsel to First Union may reasonably request.

5. MISCELLANEOUS. Except as herein provided, the Existing Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 2 by signing any such counterpart. This
Amendment No. 2 shall be governed by, and construed in accordance with, the law
of the State of New York.

Section 6. INTENTION OF THE PARTIES. Notwithstanding anything
contained herein to the contrary, it is the intention of the parties hereto that
this Amendment No. 2 represents a modification of, but not a novation or
discharge of, the credit facilities provided by the Existing Credit Agreement.

Section 7. SYNDICATION AGENT. The Syndication Agent named on the
cover page of this Amendment No. 2 shall have no duties, obligations or
responsibilities under the Credit Agreement except in its capacity as a Lender.

<PAGE>
20

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to be duly executed and delivered as of the day and year first above written.

COMPANY

SUIZA FOODS CORPORATION

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

LENDERS

THE FIRST NATIONAL BANK OF CHICAGO

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

FIRST UNION NATIONAL BANK
OF NORTH CAROLINA

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

HARRIS TRUST AND SAVINGS BANK

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

THE BANK OF NOVA SCOTIA

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

BANCO POPULAR DE PUERTO RICO

<PAGE>
21

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

<PAGE>
22

BANK OF AMERICA ILLINOIS

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

BANQUE PARIBAS

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

CAISSE NATIONALE DE CREDIT AGRICOLE

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

THE FUJI BANK, LIMITED, HOUSTON AGENCY

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

THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH

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

<PAGE>
23

AGENT

FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Agent

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

CONSENT AND AGREEMENT

Each of the undersigned Subsidiary Guarantors hereby (1) consents to the
amendments provided for in this Amendment No. 2, (2) agrees that each
reference to the Credit Agreement in each Security Document (as defined in
the Credit Agreement) to which such Subsidiary Guarantor is a party shall be
a reference to the Credit Agreement as amended by this Amendment No. 2 and
(3) confirms its obligations under each Security Document to which it is a
party after giving effect to the amendments set forth in this Amendment No. 2.

REDDY ICE CORPORATION SUIZA FRUIT CORPORATION

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

VELDA FARMS, INC. NEVA PLASTICS MANUFACTURING CORP.

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

SUIZA MANAGEMENT CORPORATION

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

<PAGE>
24

SUIZA DAIRY CORPORATION

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

<PAGE>

EXECUTION COPY

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

SUIZA FOODS CORPORATION

_____________________________

SUPPLEMENTAL CREDIT AGREEMENT

$90,000,000 of $250,000,000 Aggregate Credit Facility

Dated as of September 6, 1996

______________________________

FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Agent

THE FIRST NATIONAL BANK OF CHICAGO,
as Syndication Agent

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.

PAGE
----
Section 1. Definitions and Accounting Matters. . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . 26
1.03 Types of Facility C Loans . . . . . . . . . . . . . . . . . . 27

Section 2. Facility C Commitments, Facility C Loans, Facility C Notes
and Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.01 Facility C Loans. . . . . . . . . . . . . . . . . . . . . . . 27
2.02 Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.03 Changes of Facility C Commitments . . . . . . . . . . . . . . 28
2.04 Commitment Fee. . . . . . . . . . . . . . . . . . . . . . . . 28
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . 28
2.06 Several Obligations; Remedies Independent . . . . . . . . . . 28
2.07 Facility C Notes. . . . . . . . . . . . . . . . . . . . . . . 29
2.08 Optional Prepayments and Conversions or Continuations of
Facility C Loans. . . . . . . . . . . . . . . . . . . . . . . 29
2.09 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . 30

Section 3. Payments of Principal and Interest. . . . . . . . . . . . . . 33
3.01 Repayment of Facility C Loans . . . . . . . . . . . . . . . . 33
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . 34
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.02 Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . 35
4.03 Computations. . . . . . . . . . . . . . . . . . . . . . . . . 35
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . 36
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . 36
4.06 Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . 37
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . 38

Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . 39
5.01 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . 39
5.02 Limitation on Types of Facility C Loans . . . . . . . . . . . 42

(i)
<PAGE>
PAGE
----
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.04 Treatment of Affected Facility C Loans. . . . . . . . . . . . 43
5.05 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 44
5.06 Net Payments; Taxes . . . . . . . . . . . . . . . . . . . . . 45
5.07 Replacement of Lenders. . . . . . . . . . . . . . . . . . . . 48

Section 6. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 49
6.01 Conditions to Effectiveness and Initial Lending . . . . . . . 49
6.02 Conditions Precedent to Lending for Permitted Acquisitions. . 52
6.03 Initial and Subsequent Loans. . . . . . . . . . . . . . . . . 58

Section 7. Representations and Warranties. . . . . . . . . . . . . . . . 59
7.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . 59
7.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . 59
7.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.05 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.07 Use of Credit . . . . . . . . . . . . . . . . . . . . . . . . 62
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.10 Investment Company Act. . . . . . . . . . . . . . . . . . . . 63
7.11 Public Utility Holding Company Act. . . . . . . . . . . . . . 63
7.12 Material Agreements and Liens . . . . . . . . . . . . . . . . 63
7.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . 64
7.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . 66
7.15 Subsidiaries, Etc.. . . . . . . . . . . . . . . . . . . . . . 67
7.16 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . 68
7.17 True and Complete Disclosure. . . . . . . . . . . . . . . . . 68
7.18 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 68
7.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Section 8. Covenants of the Company. . . . . . . . . . . . . . . . . . . 69
8.01 Financial Statements, Etc.. . . . . . . . . . . . . . . . . . 69
8.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . 73
8.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 74
8.05 Prohibition of Fundamental Changes. . . . . . . . . . . . . . 77
8.06 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 78
8.07 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 80
8.08 Investments . . . . . . . . . . . . . . . . . . . . . . . . . 81

(ii)
<PAGE>
PAGE
----
8.09 Restricted Payments. . . . . . . . . . . . . . . . . . . . . 82
8.10 Leverage Ratios. . . . . . . . . . . . . . . . . . . . . . . 83
8.11 Minimum Net Worth. . . . . . . . . . . . . . . . . . . . . . 84
8.12 Fixed Charges Ratio. . . . . . . . . . . . . . . . . . . . . 84
8.13 Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . 84
8.14 Capital Expenditures . . . . . . . . . . . . . . . . . . . . 85
8.15 Interest Rate Protection Agreements. . . . . . . . . . . . . 86
8.16 Lines of Business. . . . . . . . . . . . . . . . . . . . . . 86
8.17 Transactions with Affiliates . . . . . . . . . . . . . . . . 87
8.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 87
8.19 Certain Obligations Respecting Subsidiaries; Additional
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . 87
8.20 Modifications of Certain Documents . . . . . . . . . . . . . 89
8.21 Further Assurances . . . . . . . . . . . . . . . . . . . . . 89
8.22 Subordinated Indebtedness. . . . . . . . . . . . . . . . . . 90

Section 9. Events of Default. . . . . . . . . . . . . . . . . . . . . . 91

Section 10. The Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.01 Appointment, Powers and Immunities . . . . . . . . . . . . . 95
10.02 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . 96
10.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . 97
10.05 Indemnification. . . . . . . . . . . . . . . . . . . . . . . 97
10.06 Non-Reliance on Agent and Other Lenders. . . . . . . . . . . 98
10.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . 98
10.08 Resignation or Removal of Agent. . . . . . . . . . . . . . . 98
10.09 Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . 99
10.10 Consents under Other Loan Documents. . . . . . . . . . . . . 99
10.11 Syndication Agent. . . . . . . . . . . . . . . . . . . . . . 100

Section 11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 100
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . 100
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . 102
11.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . 103
11.06 Assignments and Participations . . . . . . . . . . . . . . . 103
11.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 106
11.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 106
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 106

(iii)
<PAGE>
PAGE
----
11.10 Governing Law; Submission to Jurisdiction; Service of
Process and Venue. . . . . . . . . . . . . . . . . . . . . . 106
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 108
11.12 Treatment of Certain Information; Confidentiality. . . . . . 108
11.13 Intention of Parties . . . . . . . . . . . . . . . . . . . . 109

(iv)
<PAGE>

EXHIBIT A-1 - Form of Note
EXHIBIT B - Form of Account Designation Letter
EXHIBIT C-1 - Form of Amendment No. 2 to Security Agreement
EXHIBIT C-2 - Form of Supplemental Subsidiary Guarantee and Security Agreement
EXHIBIT C-3 - Form of Guarantee Agreement
EXHIBIT D-1 - Form of Mortgage
EXHIBIT D-2 - Form of Deed of Trust
EXHIBIT E-1 - Form of Opinion of Counsel to the Obligors
EXHIBIT E-2 - Form of Opinion of Puerto Rico Counsel to the Obligors
EXHIBIT F - Form of Opinion of Local Counsel
EXHIBIT G - Form of Opinion of Special New York Counsel to First Union
EXHIBIT H - Form of Confidentiality Agreement
EXHIBIT I - Form of Assignment and Acceptance
EXHIBIT J - Form of Amendment No. 2 to Subordination Agreement

(v)
<PAGE>

SUPPLEMENTAL CREDIT AGREEMENT dated as of September 6, 1996 between:
SUIZA FOODS CORPORATION, a corporation duly organized and validly existing under
the laws of the State of Delaware (the "COMPANY"); each of the lenders that is a
signatory hereto identified under the caption "LENDERS" on the signature pages
hereto or that, pursuant to Section 11.06(b) hereof, shall become a "Lender"
hereunder (individually, a "LENDER" and collectively, the "LENDERS"); and FIRST
UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association, as agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT").

WHEREAS, the Company, certain Lenders and the Agent are party to an
Amended and Restated Credit Agreement dated as of July 17, 1996, as amended by
Amendment and Waiver dated as of August 7, 1996 and as amended by Amendment
No. 2 dated of even date herewith (the "EXISTING CREDIT AGREEMENT") providing,
subject to the terms and conditions thereof, for extensions of credit (by making
of loans and issuing letters of credit) to be made by the Lenders party thereto,
to the Company in an aggregate principal or face amount not exceeding
$160,000,000.

WHEREAS, the parties hereto now wish to supplement the Existing Credit
Agreement, among other things, providing a new revolving credit facility for the
purpose of providing financing for the acquisition by the Company or its
Subsidiaries from time to time of assets, business or capital stock of certain
Persons and related fees, commissions and expenses.

<PAGE>
-2-

Accordingly, the parties hereto hereby agree as follows:

Section 1. DEFINITIONS AND ACCOUNTING MATTERS.

"ACCOUNT DESIGNATION LETTER" shall mean a letter in substantially the
form of Exhibit B hereto.

"ADDITIONAL PUERTO RICO SECURITY DOCUMENTS" shall have the meaning
assigned to such term in Section 8.21 hereof.

"AFFILIATE" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), PROVIDED that, in any event, any
Person that owns directly or indirectly securities having 10% or more of the
voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of the Company or

<PAGE>
-3-

any of its Subsidiaries and (b) none of the Wholly Owned Subsidiaries of the
Company shall be Affiliates.

"AMENDMENT NO. 2 TO SECURITY AGREEMENT" shall mean the Amendment No. 2
to Security Agreement substantially in the form of Exhibit C-1 hereto between
the Company and the Agent, as the same shall be modified and supplemented and in
effect from time to time.

"APPLICABLE COMMITMENT FEE RATE" shall mean 0.375% per annum; PROVIDED
that if the Leverage Ratio as at the last day of any fiscal quarter of the
Company ending on or after the Closing Date shall fall within any of the ranges
set forth below then, upon the delivery to the Agent of a certificate of a
Responsible Financial Officer of the Company (which shall accompany the
financial statements for such fiscal quarter delivered under Section 8.01(a)
hereof on which the calculation of such Leverage Ratio is based) demonstrating
such fact prior to the end of the next succeeding fiscal quarter, the
"Applicable Commitment Fee Rate" shall be reduced to the rate per annum set
forth below opposite such range during the period commencing on the third
Business Day following the date of receipt of such certificate to but not
including the date the next such certificate to be delivered under this
definition is delivered or due, whichever is earlier (except that,
notwithstanding the foregoing, the Applicable Commitment Fee Rate shall not as a
consequence of this proviso be so reduced for any period during which an Event
of Default shall have occurred and be continuing):

RANGE
OF
LEVERAGE RATIO APPLICABLE COMMITMENT FEE RATE
-------------- ------------------------------
Less than 2.0:1 0.20%

Equal to or greater than 0.25%
2.0:1 but less
than 2.50:1

<PAGE>
-4-

"APPLICABLE MARGIN" shall mean: with respect to Facility C Loans
that are Base Rate Loans, 0.25% and/or Eurodollar Loans, 1.5% per annum;
PROVIDED that if the Leverage Ratio as at the last day of any fiscal quarter of
the Company ending on or after the Closing Date shall fall within any of the
ranges set forth below then, upon the delivery to the Agent of a certificate of
a Responsible Financial Officer of the Company (which shall accompany the
financial statements for such fiscal quarter delivered under Section 8.01(a)
hereof on which the calculation of such Leverage Ratio is based) demonstrating
such fact prior to the end of the next succeeding fiscal quarter, the
"Applicable Margin" for each Facility C Loan shall be adjusted upwards or
downwards, as the case may be, to the rate per annum for the respective Type of
Facility C Loan set forth below opposite such range during the period commencing
on the third Business Day following the date of receipt of such certificate to
but not including the date the next succeeding such certificate to be delivered
hereunder is delivered or due, whichever is earlier (except that,
notwithstanding the foregoing, the Applicable Margin for any such Facility C
Loan shall not as a consequence of this proviso be so reduced for any period
during which an Event of Default shall have occurred and be continuing):

RANGE APPLICABLE MARGIN (% P.A.)
OF ------------------------------------
LEVERAGE RATIO BASE RATE LOANS EURODOLLAR LOANS
-------------- --------------- ----------------
Less than 2.0:1 0% 0.75%

<PAGE>
-5-

Equal to or greater than 0% 1.0%
2.0:1 but less
than 2.50:1

Equal to or greater than 0% 1.25%
2.50:1 but less than
3.25:1

Equal to or greater than 0.25% 1.50%
3.25:1 but less than
3.75:1

Equal to or greater than 0.50% 1.75%
3.75:1 but less than
4.0:1

Equal to or greater than 0.75% 2.00%
4.0:1

"BANKRUPTCY CODE" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.

"BASE RATE LOANS" shall mean Facility C Loans that bear interest at
rates based upon the Base Rate.

"BASIC DOCUMENTS" shall mean, collectively, the Loan Documents and,
except for purposes of the definitions of "Secured Obligations" and "Guaranteed
Obligations" in any of the Security Documents, the Purchase Agreements and the
Subordinated Debt Documents.

<PAGE>
-6-

"BUSINESS DAY" shall mean (a) any day on which commercial banks are
not authorized or required to close in North Carolina and (b) if such day
relates to a borrowing of, a payment or prepayment of principal of or interest
on, a Conversion of or into, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, any day on which dealings in Dollar deposits are
carried out in the London interbank market.

"CLOSING DATE" shall mean the date of the initial Facility C Loans
hereunder.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

<PAGE>
-7-

"COLLATERAL ACCOUNT" shall mean with respect to the Company and any of
its Subsidiaries, the Collateral Account as defined in the Security Agreement.

"COMMISSION" shall mean the Securities and Exchange Commission or any
governmental agency substituted therefor.

"COMMONWEALTH" shall mean the Commonwealth of Puerto Rico and its
political subdivisions, municipalities, agencies and instrumentalities.

"COMPANY" shall have the meaning assigned to such term in the preamble
of this Agreement.

"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.08 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.

"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.08 hereof of one Type of Facility C Loans into another
Type of Facility C Loans, which may be accompanied by the transfer by a Lender
(at its sole discretion) of a Facility C Loan from one Applicable Lending Office
to another.

"DEBT SERVICE" shall mean, for any period, the sum, for the Company
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all payments of principal of
Indebtedness (including, without limitation, the principal component of any
payments in respect of Capital Lease Obligations) scheduled to be made during
such period PLUS (b) all Interest Expense for such period, it being understood
that, if any installment of principal of the Facility C Loans or the Facility B
Loans shall have been prepaid during or prior to such period, the amount of
principal of the Facility C Loans and the Facility B Loans included in Debt
Service for such period shall be equal to the aggregate amount of principal of
the Facility C Loans and the Facility B Loans

<PAGE>
-8-

originally scheduled to be paid hereunder and under the Existing Credit
Agreement during such period.

"DEFAULT" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.

"DOLLARS" and "$" shall mean lawful money of the United States.

"EBITDA" shall mean, for any period, the sum, for the Company and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) operating income (calculated
before income taxes, Interest Expense, extraordinary and unusual items and
income or loss attributable to equity in Affiliates) for such period PLUS
(b) depreciation and amortization (to the extent deducted in determining
operating income) for such period PLUS (c) other income not exceeding $1,500,000
for such period.

<PAGE>
-9-

"EQUITY ISSUANCE" shall mean (a) any issuance or sale by the Company
or any of its Subsidiaries after the Closing Date of (i) any capital stock,
(ii) any warrants or options exercisable in respect of capital stock (other than
any warrants or options issued to directors, officers or employees of the
Company or any of its Subsidiaries, pursuant to employee benefit

<PAGE>
-10-

plans established in the ordinary course of business and any capital stock of
the Company or any of its Subsidiaries issued upon the exercise of such
warrants or options) or (iii) any other security or instrument representing
an equity interest (or the right to obtain any equity interest) in the
Company or any of its Subsidiaries or (b) the receipt by the Company or any
of its Subsidiaries whether directly (or indirectly through one or more of
its Subsidiaries) after the Closing Date of any capital contribution (whether
or not evidenced by any equity security issued by the recipient of such
contribution); PROVIDED that Equity Issuance shall not include (x) any such
issuance or sale by any Subsidiary of the Company to the Company or any
Wholly Owned Subsidiary of the Company or (y) any capital contribution by the
Company or any Wholly Owned Subsidiary of the Company to any Subsidiary of
the Company.

"EQUITY RIGHTS" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including, without limitation, any stockholders' or
voting trust agreements) for the issuance, sale, registration or voting of,
or securities convertible into, any additional shares of capital stock of any
class, or partnership or other ownership interests of any type in, such
Person.

"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

"ERISA AFFILIATE" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which the Company is a member and (ii) solely
for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of
the Code of which the Company is a member.

"EURODOLLAR BASE RATE" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the rate per

<PAGE>
-11-

annum for deposits in Dollars for a period comparable to such Interest Period
which appears on the Telerate Page 3750 as of 11:00 a.m. London time two
Business Days preceding the first day of such Interest Period or, if Telerate
Page 3750 is unavailable at such time, the rate which appears on the Reuters
Screen ISDA Page as of such date and time; PROVIDED, however, that if Agent
determines that the relevant foregoing source is unavailable for the relevant
Interest Period, Eurodollar Base Rate shall mean the rate of interest
determined by the Agent to be the average (rounded upward, if necessary, to
the nearest 1/100th of 1%) of the rates per annum at which deposits in
Dollars in immediately available funds are offered to the Agent or other
money center banks two Business Days preceding the first day of such Interest
Period by leading banks in the London interbank market as of 11:00 a.m.
London time for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to the amount of
the relevant Eurodollar Loan.

"EURODOLLAR LOANS" shall mean Facility C Loans that bear interest
at rates based on rates referred to in the definition of "Eurodollar Base
Rate" in this Section 1.01.

"EURODOLLAR RATE" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Agent to be equal to the
Eurodollar Base Rate for such Eurodollar Loan for such Interest Period
divided by 1 MINUS the Reserve Requirement (if any) for such Eurodollar Loan
for such Interest Period.

"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 9 hereof.

<PAGE>
-12-

Service for such period PLUS (d) decreases (if any) (or MINUS increases (if
any)) in Working Capital for such period, MINUS (e) income taxes paid in cash
for such period.

"EXCLUDED DISPOSITION" shall mean the Disposition of (i) an
Investment Tax Credit or (ii) any motor vehicles or other equipment no longer
used or useful in the business of the Company or any of its Subsidiaries to
the extent the proceeds thereof are used to acquire similar replacement
Property within a period of 30 days after the end of the fiscal quarter in
which such Disposition was made.

"EXISTING SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall mean
the Subsidiary Guarantee and Security Agreement dated as of March 31, 1995
between each Subsidiary of the Company party thereto and the Agent, as the
same shall be modified and supplemented and in effect from time to time.

"FACILITY A COMMITMENT" shall have the meaning assigned thereto in
the Existing Credit Agreement.

"FACILITY A COMMITMENT PERCENTAGE" shall have the meaning assigned
thereto in the Existing Credit Agreement.

"FACILITY A LENDER" shall have the meaning assigned thereto in the
Existing Credit Agreement.

"FACILITY A LOAN" shall have the meaning assigned thereto in the
Existing Credit Agreement.

"FACILITY B COMMITMENT" shall have the meaning assigned thereto in
the Existing Credit Agreement.

"FACILITY B COMMITMENT PERCENTAGE" shall have the meaning assigned
thereto in the Existing Credit Agreement.

"FACILITY B LENDER" shall have the meaning assigned thereto in the
Existing Credit Agreement.

<PAGE>
-13-

"FACILITY B LOAN" shall have the meaning assigned thereto in the
Existing Credit Agreement.

"FACILITY C COMMITMENT" shall mean, for each Lender, the obligation
of such Lender to make Facility C Loans to the Company in an aggregate amount
at any one time outstanding up to but not exceeding the amount set forth
opposite the name of such Lender on the signature pages hereof under the
caption "Facility C Commitment" (as the same may be reduced from time to time
pursuant to Section 2.03 hereof). The original aggregate principal amount of
the Facility C Commitments is $90,000,000.

"FACILITY C COMMITMENT PERCENTAGE" shall mean, with respect to any
Facility C Lender, the ratio of (a) the amount of the Facility C Commitment
of such Lender to (b) the aggregate amount of the Facility C Commitments of
all of the Facility C Lenders.

"FACILITY C COMMITMENT TERMINATION DATE" shall mean the Quarterly
Date falling on or nearest to September 30, 1998.

"FACILITY C LENDERS" shall mean the Lenders having Facility C
Commitments and/or holding Facility C Loans from time to time.

"FACILITY C LOANS" shall mean the loans provided for by Section
2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.

"FACILITY C NOTES" shall mean the promissory notes provided for by
Section 2.07(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time.

<PAGE>
-14-

published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, PROVIDED that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day and (b) if such rate is not
so published for any Business Day, the Federal Funds Rate for such Business
Day shall be the average rate charged to First Union on such Business Day on
such transactions as determined by the Agent.

"FIRST UNION" shall mean First Union National Bank of North Carolina.

"FIXED CHARGES" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) the aggregate
amount of Debt Service for such period, PLUS (b) the aggregate amount of
taxes paid in respect of the income or profit of the Company and its
Subsidiaries for such period, PLUS (c) Capital Expenditures made during such
period, PLUS (d) any Dividend Payments made for such period PLUS (e)
Management Fees for such period (but only to the extent such Management Fees
are not included in the calculation of EBITDA); provided that Capital
Expenditures shall not include Capital Expenditures permitted to be incurred
pursuant to the last sentence of Section 8.14 hereof.

"GAAP" shall mean generally accepted accounting principles applied
on a basis consistent with those that, in accordance with the last sentence
of Section 1.02(a) hereof, are to be used in making the calculations for
purposes of determining compliance with this Agreement.

<PAGE>
-15-

"GARRIDO" shall mean Garrido y Compania, Inc., a Puerto Rico
corporation.

"GARRIDO NEGATIVE PLEDGE AGREEMENT" shall have the meaning assigned
to such term in the Existing Credit Agreement.

"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of,
or otherwise to be or become contingently liable under or with respect to,
the Indebtedness, other obligations, net worth, working capital or earnings
of any Person, or a guarantee of the payment of dividends or other
distributions upon the stock or equity interests of any Person, or an
agreement to purchase, sell or lease (as lessee or lessor) Property,
products, materials, supplies or services primarily for the purpose of
enabling a debtor to make payment of such debtor's obligations or an
agreement to assure a creditor against loss, and including, without
limitation, causing a bank or other financial institution to issue a letter
of credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.

"GUARANTEE AGREEMENT" shall mean the Guarantee Agreement
substantially in the form of Exhibit C-3.

"HAZARDOUS MATERIAL" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other
equipment that contain polychlorinated biphenyls ("PCB'S"), (b) any chemicals
or other materials or substances that are now or hereafter become defined as
or included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants"
or words of similar import under any Environmental Law and (c) any other
chemical or other material or substance, exposure to which is now

<PAGE>
-16-

or hereafter prohibited, limited or regulated under any Environmental Law.

"INDEBTEDNESS" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by
loan, the issuance and sale of debt securities or the sale of Property to
another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations of
such Person to pay the deferred purchase or acquisition price of Property or
services, other than trade accounts payable (other than for borrowed money)
arising, and accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within 120 days of the date
the respective goods are delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such Person,
whether or not the respective indebtedness so secured has been assumed by
such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of
such Person; and (f) Indebtedness of others Guaranteed by such Person.

"INTEREST COVERAGE RATIO" shall mean, as at any date, the ratio of
(a) EBITDA for a period of four consecutive fiscal quarters ending on, or
most recently ended prior to, such date to (b) Interest Expense for such
period.

"INTEREST EXPENSE" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest
component of any payments in respect of Capital Lease Obligations, but
excluding amortization of any deferred loan costs incurred in connection with
the transactions contemplated hereby or by the Existing Credit Agreement)
capitalized or expensed during such period (whether or not actually paid
during such period), but excluding any non-cash interest, PLUS (b) the net
amount payable (or MINUS the net amount receivable) under Interest Rate
Protection

<PAGE>
-17-

Agreements during such period (whether or not actually paid or received
during such period) MINUS (c) all interest income for such period.

"INTEREST PERIOD" shall mean with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or the last day of the next preceding Interest Period
for such Eurodollar Loan and ending on the numerically corresponding day in
the first, second, third or sixth calendar month thereafter, as the Company
may select as provided in Section 4.05 hereof, except that each Interest
Period for a Eurodollar Loan that commences on the last Business Day of a
calendar month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last
Business Day of the appropriate subsequent calendar month. Notwithstanding
the foregoing: (i) no Interest Period for any Eurodollar Loan may commence
before and end after any Principal Payment Date for the Facility C Loans
unless, after giving effect thereto, the aggregate principal amount of the
Facility C Loans having Interest Periods that end after such Principal
Payment Date shall be equal to or less than the aggregate principal amount of
the Facility C Loans scheduled to be outstanding after giving effect to the
payments of principal required to be made on such Principal Payment Date;
(ii) each Interest Period that would otherwise end on a day that is not a
Business Day shall end on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); and (iii) notwithstanding clauses (i) and (ii)
above, no Interest Period shall have a duration of less than one month for
any Facility C Loan and, if the Interest Period for any such Facility C Loan
would otherwise be a shorter period, such Facility C Loan shall not be
available as a Eurodollar Loan hereunder for such period.

"INTEREST RATE PROTECTION AGREEMENT" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between
such Person and one or more financial institutions providing for the transfer
or mitigation of interest risks either generally or under specific
contingencies.

<PAGE>
-18-

"INTEREST RATE PROTECTION OBLIGATIONS" shall mean the obligations
of any Obligor in respect of Interest Rate Protection Agreements permitted
under Section 8.08(d) hereof.

"INVESTMENT" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of
any securities at a time when such securities are not owned by the Person
entering into such sale); (b) the making of any deposit with, or advance,
loan or other extension of credit to, any other Person (including the
purchase of Property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such Property to such Person),
but excluding any such advance, loan or extension of credit having a term not
exceeding 90 days representing the purchase price of inventory or supplies
sold by such Person in the ordinary course of business); (c) the entering
into of any Guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person; or (d)
the entering into of any Interest Rate Protection Agreement.

"INVESTMENT TAX CREDIT" shall mean an investment tax credit to
which the Company or any of its Subsidiaries may be entitled pursuant to the
Puerto Rico Agricultural Tax Incentives Act of 1995.

<PAGE>
-19-

available to the Company, unaudited financial statements (i) reviewed by
independent certified accountants of recognized national standing and
acceptable to the Agent and (ii) in form satisfactory to the Agent) for the
acquired business, Property or Person for such period, be adjusted to reflect
on a pro forma basis EBITDA for such business, Property or Person as if such
business, Property or Person had been acquired at the beginning of such
period.

"LIEN" shall mean, with respect to any Property, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such Property. For purposes of this Agreement and the other Loan
Documents, a Person shall be deemed to own, subject to a Lien, any Property
that it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement (other than an operating lease) relating to such Property.

"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Existing Credit Agreement, the Facility C Notes, the Facility A Notes, the
Facility B Notes and the Security Documents.

"MAJORITY LENDERS" shall mean, as at any time, Lenders having at
least a majority of the sum of (a) the aggregate unused amount, if any, of
the Facility C Commitments as at such time PLUS (b) the aggregate outstanding
principal amount of the Facility C Loans at such time.

"MANAGEMENT FEES" shall mean, for any period, any amounts paid or
incurred by the Company or any of its Subsidiaries to any Person on account
of fees, salaries and other compensation in respect of services rendered in
connection with the management or supervision of the Company and/or any of
its Subsidiaries (but excluding customary and reasonable compensation and
other benefits paid or provided to officers, employees and directors for
services rendered to the Company or any of its Subsidiaries in such
capacities or any such amounts by any

<PAGE>
-20-

Subsidiary of the Company to the Company or any other Subsidiary of the
Company).

"MARGIN STOCK" shall mean "margin stock" within the meaning of
Regulations U and X.

"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Subsidiaries taken as a
whole, (b) the ability of any Obligor to perform its obligations under any of
the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lenders and
the Agent under any of the Loan Documents or (e) the timely payment of the
principal of or interest on the Facility C Loans or other amounts payable in
connection therewith or under the Loan Documents.

"MORTGAGES" shall mean, collectively, (a) the mortgages or deeds of
trust identified in Schedule VII hereto and (b) one or more mortgages or
deeds of trust, in the respective forms of Exhibits D-1 and D-2 hereto or of
Exhibits D-1 and D-2 to the Existing Credit Agreement (with such
modifications thereto requested by the Agent as may be appropriate to effect
a lien on real property in the state where the respective property to be
covered by such instrument is located), executed by the respective Obligors
who own or lease such property in favor of the Agent (or, in the case of a
deed of trust, in favor of the trustee for the benefit of the Agent and the
Lenders and/or the lenders under the Existing Credit Agreement, as the case
may be) pursuant to Sections 8.19(c) or 8.19(d) hereof or Sections 9.19(c) or
9.19(d) of the Existing Credit Agreement covering the respective Properties
and/or leasehold interests identified in Schedule IV hereto or subject to the
requirements of said Sections 8.19(c), 8.19(d), 9.19(c) or 9.19(d), as the
case may be, in each case as the same shall be modified and supplemented and
in effect from time to time.

"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions

<PAGE>
-21-

have been made by the Company or any ERISA Affiliate and that is covered by
Title IV of ERISA.

"NET AVAILABLE PROCEEDS" shall mean:

(a) in the case of any Disposition, the amount of Net Cash Payments
received in connection with such Disposition;

(c) in the case of any Equity Issuance, the aggregate amount of all
cash received by the Company and its Subsidiaries in respect of such Equity
Issuance net of reasonable expenses incurred by the Company and its
Subsidiaries in connection therewith.

"NET CASH PAYMENTS" shall mean, with respect to any Disposition,
the aggregate amount of all cash payments, and the fair market value of any
non-cash consideration, received by the Company and its Subsidiaries directly
or indirectly in connection with such Disposition; PROVIDED that (a) Net Cash
Payments shall be net of (i) the amount of any legal, title and recording tax
expenses, commissions and other fees and expenses paid by the Company and its
Subsidiaries in connection with such Disposition and (ii) any Federal, state
and local income or other taxes estimated to be payable by the Company and
its Subsidiaries as a result of such Disposition (but only to the extent that
such estimated taxes are in fact paid to the relevant Federal, state or local
governmental authority within six months of the date of such Disposition) and
(b) Net Cash Payments shall be net of any repayments by the Company or any of
its Subsidiaries of Indebt-

<PAGE>
-22-

edness to the extent that (i) such Indebtedness is secured by a Lien on the
Property that is the subject of such Disposition and (ii) the transferee of
(or holder of a Lien on) such Property requires that such Indebtedness be
repaid as a condition to the Disposition thereof.

"NET PURCHASE PRICE" shall mean 100% of the purchase price
(including noncash compensation) paid by the Company or any of its
Subsidiaries for any business, Property or Person in connection with a
Permitted Acquisition MINUS any cash on the balance sheet of the Person or
included in the business or Property being acquired pursuant to such
Permitted Acquisition.

"NET WORTH" shall mean, as at any date, the sum for the Company and
its Subsidiaries (determined on a consolidated basis without duplication) of
(a) the amount of capital stock PLUS (b) the amount of additional paid-in
capital plus (c) the amount of retained earnings (or, in the case of any
retained earnings deficit, MINUS the amount of such deficit).

"NEVA PLASTICS" shall mean Neva Plastics Manufacturing Corp., a
Delaware corporation.

"OBLIGOR" shall mean the Company and each Subsidiary of the Company
party to any Security Document.

"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.

"PERMITTED ACQUISITION" shall mean any acquisition by the Company
or any of its Subsidiaries of any business or Property from, or capital stock
of, any Person, PROVIDED that, unless otherwise consented to in writing by
the Majority Lenders (i) if the Net Purchase Price for such acquisition shall
be greater than or equal to $10,000,000, then such Net Purchase Price shall
not be greater than 6.5 times the sum of the components of the definition of
EBITDA herein (including pro forma adjustments satisfactory to the Agent)
calculated for the business, Property or Person to be acquired for the period
of 12

<PAGE>
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months preceding the date of the proposed acquisition, (ii) the Net Purchase
Price of such acquisition shall not exceed $30,000,000 (other than the Swiss
Dairy Acquisition, which shall not exceed $54,000,000), (iii) if the subject
of such acquisition is a Person, the Company and/or its Subsidiaries shall
not acquire less than 90% of the issued and outstanding ownership interests
(including, without limitation, warrants, options or other securities
convertible into ownership interests) in such Person, (iv) prior to such
acquisition, the Company shall have delivered to the Agent for further
distribution to the Lenders copies of the proposed acquisition agreement
relating to such acquisition, all material documents related thereto and at
the reasonable request of the Agent, such other material information
respecting such business, Property or Person, as the case may be, obtained by
the Company in the exercise of its due diligence, (v) at the time of such
acquisition, the Company or its Subsidiary, as the case may be, shall grant a
security interest in such business or Property or pledge such ownership
interests to the Agent for the benefit of the Lenders, (vi) such business,
Property or Persons shall be in the same line or lines of business currently
engaged in by the Company or any of its Subsidiaries and (vii) on a pro forma
basis, after giving effect to such acquisition, the Company shall be in
compliance with Sections 8.10, 8.11, 8.12, 8.13 and 8.14 hereof.

"PERMITTED INVESTMENTS" shall mean: (a) direct obligations of the
United States, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States, or of any agency thereof, in
either case maturing not more than one year from the date of acquisition
thereof; (b) direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at
the time of such acquisition, having the highest rating obtainable from
either Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
("S&P") or Moody's Investors Services, Inc. ("MOODY'S"); (c) certificates of
deposit issued by any bank or trust company organized under the laws of the
United States or any state thereof or the Commonwealth and having capital,
surplus and undivided profits of at least

<PAGE>
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$500,000,000, maturing not more than six months from the date of acquisition
thereof; (d) commercial paper rated A-1 or better or P-1 by S&P or Moody's,
respectively, maturing not more than six months from the date of acquisition
thereof; and (e) Eurodollar time deposits having a maturity of less than six
months purchased directly from any such bank (whether such deposit is with
such bank or any other such bank).

"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization
or government (or any agency, instrumentality or political subdivision
thereof).

"PLAN" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.

"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Facility C Loan or any other amount under this Agreement, any Facility C Note
or any other Loan Document that is not paid when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), and in
respect of any principal of any Facility C Loan during any period commencing
upon the occurrence of any Event of Default and thereafter for so long as any
Event of Default shall be continuing, a rate per annum during the period from
and including the due date to but excluding the earlier of the date on which
such amount is paid in full or such Event of Default ceases to be continuing
equal to 2% PLUS the Base Rate as in effect from time to time PLUS the
Applicable Margin for Base Rate Loans (PROVIDED that, if the amount so in
default is principal of a Eurodollar Loan and the due date thereof is a day
other than the last day of the Interest Period therefor, the "Post-Default
Rate" for such principal shall be, for the period from and including such due
date to but excluding the last day of such Interest Period, 2% PLUS the
interest rate for such Eurodollar Loan as provided in Section 3.02(b) hereof
and, thereafter, the rate provided for above in this definition).

<PAGE>
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"PRIME RATE" shall mean the rate of interest from time to time
announced by First Union at its principal office as its prime commercial
lending rate.

"PRINCIPAL PAYMENT DATES" shall mean the Quarterly Dates falling on
or nearest to March 31, June 30, September 30 and December 31 of each year,
commencing with September 30, 1998, through and including March 31, 2002.

"PROCESS AGENT" shall have the meaning assigned to such term in
Section 11.10(c) hereof.

"PROPERTY" shall mean any right or interest in or to property of
any kind whatsoever, whether real, personal (including, without limitation,
cash) or mixed and whether tangible or intangible.

"PUERTO RICO SECURITY DOCUMENTS" shall mean each of the agreements
listed in Schedule VI hereto, and each of the Additional Puerto Rico Security
Documents, in each case as any such agreement shall be modified and
supplemented and in effect from time to time.

"PURCHASE AGREEMENTS" shall mean, collectively, each Purchase
Agreement between the Company or any of its Subsidiaries and the seller of
the business, Property or Person purchased by the Company or such Subsidiary
pursuant to a Permitted Acquisition financed under this Agreement.

"QUARTERLY DATES" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be September
30, 1996.

"REGULATIONS A, D, U AND X" shall mean, respectively, Regulations
A, D, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from
time to time.

"REGULATORY CHANGE" shall mean, with respect to any Lender, any
change after the date of this Agreement in United

<PAGE>
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States, Federal, state or foreign law or regulations or in the law or
regulations of the Commonwealth (including, without limitation, Regulation D)
or the adoption or making after such date of any interpretation, directive or
request applying to a class of banks including such Lender of or under any
Federal, state or foreign law or regulations or in the law or regulations of
the Commonwealth (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) by any court or governmental
or monetary authority charged with the interpretation or administration
thereof.

"RELEASE" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata.

"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including,
without limitation, any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion Dollars against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing,
the Reserve Requirement shall include any other reserves required to be
maintained by such member banks by reason of any Regulatory Change with
respect to (i) any category of liabilities that includes deposits by
reference to which the Eurodollar Base Rate is to be determined as provided
in the definition of "Eurodollar Base Rate" in this Section 1.01 or (ii) any
category of extensions of credit or other assets that includes Eurodollar
Loans.

<PAGE>
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"SECURITY AGREEMENT" shall mean the Security Agreement dated as of
March 31, 1995 between the Company and the Agent, as amended by the Amendment
to Security Agreement dated as of July 17, 1996 between the Company and the
Agent and as amended by Amendment No. 2 to the Security Agreement and as
further modified and supplemented and in effect from time to time.

"SECURITY DOCUMENTS" shall mean, collectively, the Security
Agreement, the Mortgages, each Supplemental Subsidiary Guarantee and Security
Agreement, the Existing Subsidiary Guarantee and Security Agreement, the
Guarantee Agreement, the Puerto Rico Security Documents, all Uniform
Commercial Code financing statements and/or other filings required hereby or
thereby to be filed with respect to the security interests in personal
Property and fixtures created pursuant hereto or thereto, and the
Subordination Agreement.

"SENIOR INDEBTEDNESS" shall mean (a) the principal of, and accrued
interest on, the Facility C Loans and all other amounts owing from time to
time hereunder and under the other Loan Documents and (b) all other amounts
constituting "Senior Indebtedness" under, and as such term is defined in, the
Subordinated Note Purchase Agreement.

"SENIOR INTEREST COVERAGE RATIO" shall mean, as at any date, the
ratio of (a) EBITDA for a period of four consecutive fiscal quarters ending
on, or most recently ended prior to, such date to (b) Interest Expense in
respect of Senior Indebtedness for such period.

<PAGE>
-28-

(i) reviewed by independent certified accountants of recognized national
standing and acceptable to the Majority Lenders, and (ii) in form
satisfactory to the Majority Lenders) for the acquired business, Property or
Person for such period, be adjusted to reflect on a pro forma basis EBITDA
for such business, Property or Person as if such business, Property or Person
had been acquired at the beginning of such period.

"SENIOR SUBORDINATED NOTES" shall mean the Notes (as such term is
defined in the Note Purchase Agreement) issued under the Subordinated Note
Purchase Agreement in an original aggregate principal amount of
$50,699,076.40, in each case as the same shall be modified and supplemented
and in effect from time to time (subject to compliance with Section 8.22
hereof and Section 9 of the Subordination Agreement).

"SDC" shall mean Swiss Dairy, a Corporation, a California
corporation.

"SUBORDINATED INDEBTEDNESS" shall mean the indebtedness,
liabilities and obligations of the Company and/or its Subsidiaries owing from
time to time under or in respect of the Subordinated Note Purchase Agreement,
the Senior Subordinated Notes and the other Subordinated Debt Documents.

"SUBORDINATED DEBT DOCUMENTS" shall mean (a) the Subordinated Note
Purchase Agreement, (b) the Senior Subordinated Notes, (c) the Guarantees (as
such term is defined in the Subordinated Note Purchase Agreement) and (d) the
Subordination Agreement, in each case as the same shall be modified and
supplemented and in effect from time to time (subject to compliance with
Section 8.22 hereof and Section 9 of the Subordination Agreement).

"SUBORDINATED NOTE PURCHASE AGREEMENT" shall mean the Note Purchase
Agreement dated as of March 31, 1995 by and among the Company, John Hancock
Mutual Life Insurance Company, John Hancock Life Insurance Company of
America, Pacific Mutual Life Insurance Company and PM Group Life Insurance
Co., providing for the issuance of the Subordinated Indebtedness, as the same
shall

<PAGE>
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be modified and supplemented and in effect from time to time (subject to
compliance with Section 8.22 hereof and Section 9 of the Subordination
Agreement).

"SUBORDINATION AGREEMENT" shall mean the Subordination Agreement
dated as of March 31, 1995 by and among the Company and each of its
Subsidiaries, John Hancock Mutual Life Insurance Company, John Hancock Life
Insurance Company of America, Pacific Mutual Life Insurance Company and PM
Group Life Insurance Co. and the Agent, as heretofore amended and as amended
by Amendment No. 2 thereto substantially in the form of Exhibit J hereto, as
the same shall be modified and supplemented and in effect from time to time.

"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such Person
and one or more Subsidiaries of such Person.

"SUIZA DAIRY" shall mean Suiza Dairy Corporation, a Delaware
corporation.

"SUIZA FRUIT" shall mean Suiza Fruit Corporation, a Delaware
corporation.

<PAGE>
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"SUPPLEMENTAL GUARANTOR" shall mean each corporation or other
entity that shall become a Subsidiary of the Company pursuant to a Permitted
Acquisition financed under this Agreement.

"SUPPLEMENTAL SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT" shall
mean any Supplemental Subsidiary Guarantee and Security Agreement
substantially in the form of Exhibit C-2 hereto, as the same shall be
modified and supplemented and in effect from time to time.

"SWISS DAIRY" shall mean Swiss Dairy Corporation, a Delaware
corporation and a Wholly Owned Subsidiary of the Company.

"SWISS DAIRY ACQUISITION" shall mean the acquisition by the Company
of certain of the assets and the assumption of certain liabilities of SDC
substantially on the terms and conditions set forth in the Swiss Dairy
Purchase Agreement.

"SWISS DAIRY PURCHASE AGREEMENT" shall mean the Asset Purchase
Agreement made and entered into as of September 5, 1996 by and among the
Company, Swiss Dairy, SDC and the principal stockholders of SDC identified on
the signature pages thereof, as the same shall be modified and supplemented
and in effect from time to time.

"TAXES" shall have the meaning assigned to such term in Section
5.06(a) hereof.

"TYPE" shall have the meaning assigned to such term in Section 1.03
hereof.

"UNITED STATES" shall mean the United States of America.

"U.S. TAXES" shall have the meaning assigned to such term in
Section 5.06(b) hereof.

<PAGE>
-31-

1.02 ACCOUNTING TERMS AND DETERMINATIONS.

(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder. All calculations made for the
purposes of determining compliance with this Agreement shall (except as
otherwise expressly provided herein) be made by application of generally
accepted accounting principles applied on a basis consistent with those used in
the preparation of the latest annual or quarterly financial statements furnished
to the Lenders pursuant to Section 8.01 hereof unless (i) the Company shall have
objected to determining such compliance on such basis at the time of delivery of
such financial statements or (ii) the Majority Lenders shall so object in
writing within 30 days after delivery of such financial statements, in either of
which events such calculations shall be made on a basis consistent with those
used in the preparation of the latest financial statements as to which such
objection shall not have been made.

<PAGE>
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(b) The Company shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.

(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, the Company will not, without
the prior consent of the Majority Lenders, change the last day of its fiscal
year from December 31 of each year, or the last days of the first three fiscal
quarters in each of its fiscal years from March 31, June 30 and September 30 of
each year, respectively.

1.03 TYPES OF FACILITY C LOANS. Facility C Loans hereunder are
distinguished by "Type". The "Type" of a Facility C Loan refers to whether such
Facility C Loan is a Base Rate Loan or a Eurodollar Loan, each of which
constitutes a Type.

Section 2. FACILITY C COMMITMENTS, FACILITY C LOANS, FACILITY C NOTES
AND PREPAYMENTS.

2.01 FACILITY C LOANS.

(a) FACILITY C LOANS. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to the Company in Dollars during the
period from and including the date hereof to but not including the Facility C
Commitment Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount of the Facility C Commitment of
such Lender as in effect from time to time. Subject to the terms and conditions
of this Agreement, during such period the Company may borrow, repay and reborrow
the amount of the Facility C Commitments by means of Base Rate Loans and/or

<PAGE>
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Eurodollar Loans and prior to the final maturity date of the Facility C Loans
may Convert Facility C Loans of one Type into Facility C Loans of another Type
(as provided in Section 2.08 hereof) or Continue Facility C Loans of one Type as
Facility C Loans of the same Type (as provided in Section 2.08 hereof).

(b) LIMIT ON CERTAIN FACILITY C LOANS. No more than four separate
Interest Periods in respect of Eurodollar Loans from each Lender may be
outstanding at any one time.

2.02 BORROWINGS.

(a) The Company shall give the Agent notice of each borrowing
hereunder as provided in Section 4.05 hereof.

(b) With respect to each borrowing, not later than 3:30 p.m.
Charlotte, North Carolina time on the date specified for such borrowing, each
Lender shall make available the amount of the Facility C Loan or Facility C
Loans to be made by it to the Company on such date to the Agent at any account
designated by the Agent, in immediately available funds, for account of the
Company. The amount so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Company by depositing the
same, in immediately available funds, in an account designated by the Company or
otherwise upon its instructions.

2.03 CHANGES OF FACILITY C COMMITMENTS.

(a) The Company shall have the right at any time or from time to time
(i) so long as no Facility C Loans are outstanding, to terminate the Facility C
Commitments, and (ii) to reduce the aggregate unused amount of any of the
Facility C Commitments; PROVIDED that (x) the Company shall give notice of each
such termination or reduction as provided in Section 4.05 hereof and (y) each
such partial reduction shall be in an aggregate amount at least equal to
$2,000,000 (or a larger multiple of $1,000,000).

<PAGE>
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(b) The Facility C Commitments once terminated or reduced may not be
reinstated.

2.04 COMMITMENT FEE. The Company shall pay to the Agent for account
of each Lender a commitment fee on the daily average unused amount of such
Lender's Facility C Commitment, for the period from and including the date
hereof to but not including the earlier of the date such Facility C Commitment
is terminated and the Facility C Commitment Termination Date, at a rate per
annum equal to the Applicable Commitment Fee Rate. Accrued commitment fees
shall be payable on each Quarterly Date and on the earlier of (i) the date the
relevant Facility C Commitments are terminated and (ii) the Facility C
Commitment Termination Date.

2.05 LENDING OFFICES. The Facility C Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Facility C Loans of such Type.

2.06 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Lender to make any Facility C Loan to be made by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its
Facility C Loan on such date, but neither any Lender nor the Agent shall be
responsible for the failure of any other Lender to make a Facility C Loan to be
made by such other Lender, and no Lender shall have any obligation to the Agent
or any other Lender for the failure by such Lender to make any Facility C Loan
required to be made by such Lender. The amounts payable by the Company at any
time hereunder and under the Facility C Notes to each Lender shall be a separate
and independent debt and each Lender shall be entitled, subject to the prior
written consent of the Majority Lenders, to protect and enforce its rights
arising out of this Agreement and the Facility C Notes, and it shall not be
necessary for any other Lender or the Agent to be joined as an additional party
in, any proceedings for such purposes.

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2.07 FACILITY C NOTES.

(a) The Facility C Loans made by each Lender shall be evidenced by a
single promissory note of the Company substantially in the form of Exhibit A
hereto, dated the date hereof, payable to such Lender in a principal amount
equal to the amount of its Facility C Commitment as originally in effect and
otherwise duly completed.

(b) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Facility C Loan made by each Lender, and each
payment made on account of the principal thereof, shall be recorded by such
Lender on its books and, prior to any transfer of the Facility C Note evidencing
the Facility C Loans held by it, endorsed by such Lender on the schedule
attached to such Facility C Note or any continuation thereof; PROVIDED that the
failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Company to make a payment when due of any amount
owing hereunder or under such Facility C Note in respect of the Facility C Loans
to be evidenced by such Facility C Note.

(c) No Lender shall be entitled to have its Facility C Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise, except in connection with a permitted assignment of all or any
portion of such Lender's relevant Facility C Commitment, Facility C Loans and
Facility C Note pursuant to Section 11.06(b) hereof.

<PAGE>
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2.08 OPTIONAL PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF
FACILITY C LOANS. Subject to Section 4.04 hereof, the Company shall have the
right to prepay Facility C Loans, or to Convert Facility C Loans of one Type
into Facility C Loans of another Type or Continue Facility C Loans of one Type
as Facility C Loans of the same Type, at any time or from time to time, PROVIDED
that:

(b) Eurodollar Loans may be prepaid or Converted on any day, PROVIDED
that, if such prepayment or Conversion falls on a day other than the last day of
an Interest Period for such Facility C Loans, the Company shall pay any and all
amounts required by Section 5.05 hereof as a result thereof; and

(c) prepayments of the Facility C Loans under this Section 2.08 shall
be applied (i) if such prepayment is made prior to the Facility C Commitment
Termination Date, ratably as among the Facility C Loans then outstanding, and
(ii) if such prepayment is made on or after the Facility C Commitment
Termination Date, ratably as among the remaining installments of the Facility C
Loans.

Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Agent may (and at the request of the
Majority Lenders shall) suspend the right of the Company to borrow any Facility
C Loan as a Eurodollar Loan or to Convert any Facility C Loan into a Eurodollar
Loan, or to Continue any Facility C Loan as a Eurodollar Loan, in which event
all Eurodollar Loans outstanding shall be automatically Converted (on the last
day(s) of the respective Interest Periods therefor) to or all Base Rate Loans
shall be Continued, as the case may be, as Base Rate Loans.

<PAGE>
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2.09 MANDATORY PREPAYMENTS.

(a) CASUALTY EVENTS. Not later than 60 days following the receipt by
the Company or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of any Supplemental Guarantor or acquired with the
proceeds of Facility C Loans hereunder (or upon such earlier date as the Person
owning such Property shall have determined not to repair or replace the Property
affected by such Casualty Event), the Company shall prepay the Facility C Loans,
in an aggregate amount, if any, equal to 100% of the Net Available Proceeds of
such Casualty Event not theretofore applied to the repair or replacement of such
Property, such prepayments to be effected in each such case in the manner and to
the extent specified in paragraphs (e)(i) and (e)(ii) below. In the event that
such Net Available Proceeds exceed the outstanding amount of the Facility C
Loans, such excess shall be applied to the prepayment of the Facility B Loans in
accordance with the terms of the Existing Credit Agreement. Nothing in this
paragraph (a) shall be deemed to limit any obligation of the Company or any of
its Subsidiaries pursuant to any of the Security Documents to remit to a
collateral or similar account (including, without limitation, the Collateral
Account) maintained by the Agent pursuant to any of the Security Documents the
proceeds of insurance, condemnation award or other compensation received in

<PAGE>
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respect of any Casualty Event. Notwithstanding the foregoing, in the event that
a Casualty Event shall occur with respect to Property of a Supplemental
Guarantor or acquired with the proceeds of Facility C Loans hereunder and
covered by any Mortgage, the Company shall prepay the Facility C Loans on the
dates and in the amounts specified in such Mortgage. In the event of a Casualty
Event involving Property not covered by this Section 2.09(a), the Net Available
Proceeds of such Casualty Event shall be applied in accordance with the terms of
the Existing Credit Agreement.

(b) SALE OF ASSETS. Without limiting the obligation of the Company
to obtain the consent of the Majority Lenders pursuant to Section 8.05(c) hereof
to any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition of Property of any Supplemental Guarantor
or Property acquired with the proceeds of Facility C Loans hereunder other than
an Excluded Disposition (herein, the "CURRENT DISPOSITION"), and of all prior
Dispositions of Property of any Supplemental Guarantor or Property acquired with
the proceeds of Facility C Loans hereunder as to which a prepayment has not yet
been made under this Section 2.09(b), shall exceed $500,000 then, no later than
5 Business Days prior to the occurrence of the Current Disposition, the Company
will deliver to the Lenders a statement, certified by a Responsible Financial
Officer of the Company, in form and detail satisfactory to the Agent, of the
amount of the Net Available Proceeds of the Current Disposition and of all such
prior Dispositions and the Company will prepay the Facility C Loans (or cause
the Facility C Loans to be prepaid), in an aggregate amount equal to 100% of the
Net Available Proceeds of the Current Disposition and such prior Dispositions,
such prepayment to be effected in each case in the manner and to the extent
specified in paragraphs (e)(i) and (e)(ii) below. In the event that such Net
Available Proceeds exceed the outstanding amount of the Facility C Loans, such
excess shall be applied to the prepayment of the Facility B Loans in accordance
with the terms of the Existing Credit Agreement. In the case of all
Dispositions of Property other than those referred to in this paragraph (b), the
Company will make (or cause to be made) prepayments of the Facility A Loans and
the Facility B Loans as required by the Existing Credit Agreement.

(c) EQUITY ISSUANCE; INVESTMENT TAX CREDITS. Upon any Equity
Issuance or the issuance of any Indebtedness (other than Indebtedness permitted
under Section 8.07 hereof) or the Disposition of any Investment Tax Credit after
the Closing Date, the Company shall (i) prepay the

<PAGE>
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Facility C Loans or the Facility B Loans in an aggregate amount equal to 100%
of the Net Available Proceeds thereof (after effecting any payments in
respect of the redemption, prepayment or retirement, as the case may be, of
the Subordinated Indebtedness to the extent permitted under Section

<PAGE>
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8.22(a)) or (ii) in connection with a Disposition of any Investment Tax
Credit, apply any part of the Net Available Proceeds thereof to the purchase
price of the Swiss Dairy Acquisition and use the balance of such Net
Available Proceeds to prepay the Facility C Loans or the Facility B Loans as
contemplated in clause (i) above. Promptly after each such Equity Issuance
the Company shall advise the Agent in writing of its designated application
of such Net Available Proceeds thereof. Any such prepayments of the Facility
C Loans shall be effected in the manner specified in paragraphs (e)(i) and
(e)(ii) below.

(d) EXCESS CASH FLOW. Not later than 90 days after the end of the
fiscal quarter ending December 31, 1996 and after the end of each fiscal year of
the Company, commencing with the fiscal year ending December 31, 1997, the
Company shall prepay the Facility C Loans and the Facility B Loans in an
aggregate amount equal to the excess of (A) 50% of Excess Cash Flow for such
fiscal quarter or year, as the case may be (or, if the Leverage Ratio is less
than 2.50 to 1, 25% of such Excess Cash Flow) over (B) the aggregate amount of
prepayments of Facility B Loans and Facility C Loans made during such fiscal
quarter or year, as the case may be, pursuant to Section 2.08 hereof and Section
2.08 of the Existing Credit Agreement. Mandatory prepayments arising from
Excess Cash Flow required prior to the Facility C Commitment Termination Date
shall be applied to the Facility B Loans in accordance with the terms of the
Existing Credit Agreement. Mandatory prepayments arising from Excess Cash Flow
required on or after the Facility C Commitment Termination Date shall be applied
to the Facility B Loans and the Facility C Loans pro rata based on the aggregate
principal amounts thereof then outstanding. Prepayments of Facility C Loans
under this paragraph (d) shall be effected in each case in the manner and to the
extent specified in paragraph (e)(ii) below.

(e) APPLICATION. Prepayments of Facility C Loans described in
paragraphs (a) through (d) above shall be effected as follows:

<PAGE>
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(i) if such prepayment is required to be made prior to the Facility C
Commitment Termination Date, the amount of the prepayment specified in the
respective paragraph shall be applied ratably to the Facility C Loans then
outstanding.

(ii) if such prepayment is required to be made on or after the
Facility C Commitment Termination Date, the amount of the prepayment
specified in the respective paragraph shall be applied to the Facility C
Loans then outstanding,

<PAGE>
-42-

50% of which amount shall be applied in the inverse order of the maturities
of the installments thereof and (after taking into account such
application) the remainder thereof shall be applied ratably to then
remaining installments of principal of the Facility C Loans.

Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.

3.01 REPAYMENT OF FACILITY C LOANS. The Company hereby promises to
pay to the Agent for account of each Lender the unpaid principal of each
Facility C Loan made by such Lender and outstanding on the Facility C Commitment
Termination Date in 15 installments payable on each Principal Payment Date, the
first twelve installments to be in an amount equal to 1 1/4% of the principal
amount of such Facility C Loan, the thirteenth and fourteenth installments each
to be in an amount equal to 2 1/2% of the principal amount of such Facility C
Loan and the final installment to be in an amount equal to 80% of the principal
amount of such Facility C Loan.

3.02 INTEREST. The Company hereby promises to pay to the Agent for
account of each Lender interest on the unpaid principal amount of each Facility
C Loan for the period from and including the date of such Facility C Loan to but
excluding the date such Facility C Loan shall be paid in full, at the following
rates per annum:

(a) during such periods as such Facility C Loan is a Base Rate Loan,
the Base Rate (as in effect from time to time) PLUS the Applicable Margin,
and

(b) during such periods as such Facility C Loan is a Eurodollar Loan,
for each Interest Period relating thereto, the Eurodollar Rate for such
Facility C Loan for such Interest Period PLUS the Applicable Margin.

<PAGE>
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Notwithstanding the foregoing, the Company hereby promises to pay to the Agent
for account of each Lender interest at the applicable Post-Default Rate as
follows:

(i) on any principal of any Facility C Loan made by such Lender and
on any other amount payable by the Company hereunder or under the Facility
C Note held by such Lender to or for account of such Lender that shall not
be paid in full when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise), for the period from and including the
due date thereof to but excluding the date the same is paid in full; and

(ii) on the principal of each Facility C Loan made by such Lender
commencing upon the occurrence of any Event of Default, and thereafter for
so long as any Event of Default shall be continuing.

Accrued interest on each Facility C Loan shall be payable (i) in the case of a
Base Rate Loan, quarterly on the Quarterly Dates and (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, except that interest payable at the
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, the Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Company.

<PAGE>
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Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.

4.01 PAYMENTS.

(a) Except to the extent otherwise provided herein, all payments of
principal, interest, commitment fee and other amounts to be made by the Company
under this Agreement and the Facility C Notes of the Company, and, except to the
extent otherwise provided therein, all payments to be made by the Obligors under
any other Loan Document, shall be made in Dollars, in immediately available
funds, to the Agent at any account designated by the Agent not later than
2:00 p.m. Charlotte, North Carolina time on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day).

(c) The Company shall, at the time of making each payment under this
Agreement or any Facility C Note for account of any Lender, specify to the Agent
(which shall so notify the intended recipient(s) thereof) the Facility C Loans
or other amounts payable hereunder to which such payment is to be applied (and
in the event that the Company fails to so specify, or if an Event of Default has
occurred and is continuing, the Agent may distribute such payment to the Lenders
for application in such manner as it or the Majority Lenders, subject to Section
4.02 hereof, may determine to be appropriate).

(d) Each payment received by the Agent under this Agreement or any
Facility C Note for account of any Lender shall be paid by the Agent promptly to
such Lender, in immediately available funds, for account of such Lender's
Applicable Lending

<PAGE>
-45-

Office for the Facility C Loan or other obligation in respect of which such
payment is made.

(e) If the due date of any payment under this Agreement or any
Facility C Note would otherwise fall on a day that is not a Business Day, such
date shall be extended to the next succeeding Business Day, and interest shall
be payable for any principal so extended for the period of such extension.

4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing of Facility C Loans from the Lenders under
Section 2.01 hereof shall be made from the Lenders, each payment of commitment
fee under Section 2.04 hereof in respect of Facility C Commitments shall be made
for account of the Lenders, and each termination or reduction of the amount of
the Facility C Commitments under Section 2.03 hereof shall be applied to the
Facility C Commitments of the Lenders pro rata according to the amounts of their
Facility C Commitments; (b) the making, Conversion and Continuation of Facility
C Loans of a particular Type (other than Conversions provided for by
Section 5.04 hereof) shall be made pro rata among the Lenders according to the
amounts of their Facility C Commitments (in the case of making of Facility C
Loans) or their Facility C Loans (in the case of Conversions and Continuations
of Facility C Loans); (c) each payment or prepayment of principal of Facility C
Loans by the Company shall be made for account of the Lenders pro rata in
accordance with the respective unpaid principal amounts of the Facility C Loans
held by them; and (d) each payment of interest on any Facility C Loans by the
Company shall be made for account of the relevant Lenders pro rata in accordance
with the amounts of interest on such Facility C Loans then due and payable to
the Lenders.

4.03 COMPUTATIONS. Interest on Eurodollar Loans and commitment fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable and interest on Base Rate Loans shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days

<PAGE>
-46-

elapsed (including the first day but excluding the last day) occurring in the
period for which payable.

4.04 MINIMUM AMOUNTS. Except for mandatory prepayments made pursuant
to Section 2.09 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, (a) each borrowing and Conversion of principal of Base Rate
Loans shall be in an aggregate amount at least equal to $500,000 or a larger
multiple of $100,000, (b) each borrowing and Conversion of Eurodollar Loans
shall be in an aggregate amount at least equal to $2,000,000 or a larger
multiple of $1,000,000, (c) each partial prepayment of principal of Eurodollar
Loans shall be in an aggregate amount at least equal to $2,000,000 or a larger
multiple of $1,000,000 and each partial prepayment of principal of Base Rate
Loans shall be in an aggregate amount at least equal to $500,000 or a larger
multiple of $100,000 (borrowings, Conversions or prepayments of or into Facility
C Loans of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period).

<PAGE>
-47-

4.05 CERTAIN NOTICES. Notices by the Company to the Agent of
terminations or reductions of the Facility C Commitments, of Borrowings,
Conversions, Continuations and optional prepayments of Facility C Loans, of
Types of Facility C Loans and of the duration of Interest Periods shall be
irrevocable (other than with respect to notices of optional prepayments, which
shall be revocable, PROVIDED that upon any such revocation the Company shall be
obligated to pay the Lenders any amounts payable under Section 5.05 hereof as a
consequence of such revocation) and shall be effective only if received by the
Agent not later than 1:30 p.m. Charlotte, North Carolina time on the number of
Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:

Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Facility C Commitments 3

Borrowing or prepayment of,
or Conversions into,
Base Rate Loans Same Day

Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3

Each such notice of termination or reduction shall specify the amount of the
Facility C Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Type of each Facility C Loan to be borrowed, Converted, Continued or prepaid and
the date of borrowing, Conversion, Continuation or optional prepayment (which
shall be a Business Day). Each such notice of the duration of an Interest
Period shall specify the Facility C Loans

<PAGE>
-48-

to which such Interest Period is to relate. The Agent shall promptly notify
the Lenders of the contents of each such notice. In the event that the
Company fails to select the Type of Facility C Loan, or the duration of any
Interest Period for any Eurodollar Loan, within the time period and otherwise
as provided in this Section 4.05, such Facility C Loan (if outstanding as a
Eurodollar Loan) will be automatically Converted into a Base Rate Loan on the
last day of the then current Interest Period for such Facility C Loan or (if
outstanding as a Base Rate Loan) will remain as, or (if not then outstanding)
will be made as, a Base Rate Loan.

<PAGE>
-49-

4.06 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall have
been notified by a Lender or the Company (the "PAYOR") prior to the date on
which the Payor is to make payment to the Agent of (in the case of a Lender) the
proceeds of a Facility C Loan to be made by such Lender hereunder or (in the
case of the Company) a payment to the Agent for account of one or more of the
Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"),
which notice shall be effective upon receipt, that the Payor does not intend to
make the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date (the "ADVANCE DATE") such amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Rate for such day and, if such
recipient(s) shall fail promptly to make such payment, the Agent shall be
entitled to recover such amount, on demand, from the Payor, together with
interest as aforesaid, PROVIDED that if neither the recipient(s) nor the Payor
shall return the Required Payment to the Agent within three Business Days of the
Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:

<PAGE>
-50-

(ii) if the Required Payment shall represent proceeds of a Facility C
Loan to be made by the Lenders to the Company, the Payor and the Company
shall each be obligated retroactively to the Advance Date to pay interest
in respect of the Required Payment at the rate of interest provided for
such Required Payment pursuant to Section 3.02 hereof (and, in case the
Company shall return the Required Payment to the Agent, without limiting
any claim the Company may have against the Payor in respect of the Required
Payment).

4.07 SHARING OF PAYMENTS, ETC.

(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option but with the prior written
consent of the Majority Lenders, to offset balances held by it for account of
the Company at any of its offices, in Dollars or in any other currency, against
any principal of or interest on any of such Lender's Facility C Loans or any
other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Agent thereof, PROVIDED that such
Lender's failure to give such notice shall not affect the validity thereof.

(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Facility C Loan owing to it or payment of any
other amount under this Agreement or any other Loan Document through the
exercise of any right of set-off, Lender's lien or counterclaim or similar right
or otherwise (other than from the Agent as provided herein), and, as a result of
such payment, such Lender shall have received a greater percentage of the
principal of or interest on the Facility C Loans or such other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Facility C Loans or such other amounts, respectively, owing to
such other

<PAGE>
-51-

Lenders (or in interest due thereon, as the case may be) in such amounts, and
make such other adjustments from time to time as shall be equitable, to the
end that all the Lenders shall share the benefit of such excess payment (net
of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid
principal of and/or interest on the Facility C Loans or such other amounts,
respectively, owing to each of the Lenders. To such end all the Lenders
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored.

(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off,
banker's lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender were a direct holder of Facility C
Loans or other amounts (as the case may be) owing to such Lender in the
amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a set-off to which this Section 4.07 applies, such Lender
shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders entitled
under this Section 4.07 to share in the benefits of any recovery on such
secured claim.

Section 5. YIELD PROTECTION, ETC.

5.01 ADDITIONAL COSTS.

<PAGE>
-52-

(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Eurodollar Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"ADDITIONAL COSTS"), resulting from any Regulatory Change that:

(i) shall subject any Lender (or its Applicable Lending Office
for any of such Eurodollar Loans) to any tax, duty or other charge in
respect of such Eurodollar Loans or its Facility C Note or changes the
basis of taxation of any amounts payable to such Lender under this
Agreement or its Facility C Note in respect of any of such Eurodollar Loans
(excluding changes in the rate of tax on the overall net income of such
Lender or of its Applicable Lending Office by the jurisdiction in which
such Lender is organized or has its principal office or in which its
Applicable Lending Office is organized or located or, in each case, any
political subdivision or taxing authority thereof or therein); or

(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Eurodollar Loan) relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Eurodollar Loans or any deposits referred to in the definitions of
"Eurodollar Base Rate" in Section 1.01 hereof), or any commitment of such
Lender (including, without limitation, the Facility C Commitment of such
Lender hereunder); or

(iii) imposes any other condition affecting this Agreement or its
Facility C Note (or any of such extensions of credit or liabilities) or its
Facility C Commitment.

<PAGE>
-53-

If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Agent), suspend
the obligation of such Lender thereafter to make or Continue Eurodollar Loans,
to Convert Facility C Loans of another Type into Eurodollar Loans or to Convert
Eurodollar Loans into Facility C Loans of another Type until the Regulatory
Change giving rise to such request ceases to be in effect (in which case the
provisions of Section 5.04 hereof shall be applicable), PROVIDED that such
suspension shall not affect the right of such Lender to receive the compensation
so requested.

(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Lender that includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender that includes Eurodollar
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets that it may hold then, if such Lender so elects by
notice to the Company (with a copy to the Agent), the obligation of such Lender
to make or Continue, or to Convert Facility C Loans of another type into,
Eurodollar Loans, hereunder (as the case may be) shall be suspended until any
such Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.04 hereof shall be applicable).

<PAGE>
-54-

interpretation, directive or request (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory
Change or (ii) hereafter implementing any risk-based capital guideline or
other requirement (whether or not having the force of law and whether or not
the failure to comply therewith would be unlawful) heretofore or hereafter
issued by any government or governmental or supervisory authority
implementing at the national level the Basle Accord (including, without
limitation, the Final Risk-Based Capital Guidelines of the Board of Governors
of the Federal Reserve System (12 C.F.R. Part 208, Appendix A; 12 C.F.R. Part
225, Appendix A) and the Final Risk-Based Capital Guidelines of the Office of
the Comptroller of the Currency (12 C.F.R. Part 3, Appendix A)), of capital
in respect of its Facility C Commitments or Facility C Loans (such
compensation to include, without limitation, an amount equal to any reduction
of the rate of return on assets or equity of such Lender (or any Applicable
Lending Office or such bank holding company) to a level below that which such
Lender (or any Applicable Lending Office or such bank holding company) could
have achieved but for such law, regulation, interpretation, directive or
request). For purposes of this Section 5.01(d) and Section 5.08 hereof,
"BASLE ACCORD" shall mean the proposals for risk-based capital framework
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, modified and
supplemented and in effect from time to time or any replacement thereof.

<PAGE>
-55-

incurred from and after the date 45 days prior to the date that such Lender
does give such notice and (ii) each Lender will designate a different
Applicable Lending Office for the Facility C Loans of such Lender affected by
such event if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no
obligation to designate an Applicable Lending Office located in the United
States. Each Lender will furnish to the Company a certificate setting forth
the basis and amount of each request by such Lender for compensation under
paragraph (a) or (c) of this Section 5.01. Determinations and allocations by
any Lender for purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to paragraph (a) or (b) of this Section 5.01, or of the
effect of capital maintained pursuant to paragraph (c) of this Section 5.01,
on its costs or rate of return of maintaining Facility C Loans or its
obligation to make Facility C Loans, or on amounts receivable by it in
respect of Facility C Loans, and of the amounts required to compensate such
Lender under this Section 5.01, shall be conclusive in the absence of
manifest error, PROVIDED that such determinations and allocations are made on
a reasonable basis.

5.02 LIMITATION ON TYPES OF FACILITY C LOANS. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Base Rate for any Interest Period:

<PAGE>
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upon the basis of which the rate of interest for Eurodollar Loans for such
Interest Period is to be determined are not likely adequately to cover the
cost to such Lenders of making or maintaining Eurodollar Loans for such
Interest Period;

then the Agent shall give the Company and each Lender prompt notice thereof
(describing the circumstances giving rise to such event) and, so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Eurodollar Loans, to Continue Eurodollar Loans, to Convert Facility C
Loans of another Type into Eurodollar Loans and the Company shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Eurodollar
Loans either prepay such Eurodollar Loans or Convert such Eurodollar Loans into
Facility C Loans of another Type in accordance with Section 2.08 hereof.

5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Agent) and such Lender's obligation to make or Continue, or
to Convert Facility C Loans of any other Type into, Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 5.04 hereof shall be applicable).

<PAGE>
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5.04 TREATMENT OF AFFECTED FACILITY C LOANS. If the obligation of
any Lender to make Eurodollar Loans ("AFFECTED FACILITY C LOANS"), or to
Continue, or to Convert Facility C Loans of another Type into Affected Facility
C Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof, such
Lender's Affected Facility C Loans shall be automatically Converted into Base
Rate Loans on the last day(s) of the then current Interest Period(s) therefor
(or, in the case of a Conversion required by Section 5.01(b), 5.01(c) or 5.03
hereof, on such earlier date as such Lender may specify to the Company with a
copy to the Agent) and, unless and until such Lender gives notice as provided
below that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to such Conversion no longer exist:

(a) to the extent that such Lender's Affected Facility C Loans have
been so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Facility C Loans shall be
applied instead to its Base Rate Loans; and

(b) all Facility C Loans that would otherwise be made or Continued by
such Lender as Affected Facility C Loans shall be made or Continued instead
as Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be Converted into Affected Facility C Loans (as the case may be)
shall remain as Base Rate Loans.

If such Lender gives notice to the Company with a copy to the Agent that the
circumstances specified in Section 5.01 or 5.03 hereof that gave rise to the
Conversion of such Lender's Affected Facility C Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Affected Facility C Loans made by
other Lenders are outstanding, such Lender's Base Rate Loans shall be
automatically Converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Affected Facility C Loans, to the extent
necessary so that, after giving effect thereto, all Facility C Loans held by the
Lenders holding Affected Facility C Loans and by such Lender are held pro rata

<PAGE>
-58-

(as to principal amounts, Types and Interest Periods) in accordance with their
respective Facility C Commitments.

(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by the Company for any reason (including, without
limitation, the acceleration of the Facility C Loans pursuant to Section 10
hereof) on a date other than the last day of the Interest Period for such
Eurodollar Loan; or

(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof or in the notice from the
Agent given pursuant to Section 2.01(c);

(c) any failure for any reason (including, without limitation, as
provided in Section 5.02 or 5.03 hereof) of a Facility C Loan of such
Lender to be Continued as or Converted into a Eurodollar Loan on the date
for such Continuation or Conversion specified in the relevant notice given
under Section 4.05 hereof; or

Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued

<PAGE>
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on the principal amount so paid, prepaid, Converted or not borrowed or
prepaid for the period from the date of such payment, prepayment, Conversion
or failure to borrow or prepay to the last day of the then current Interest
Period for such Eurodollar Loan (or, in the case of a failure to borrow, the
Interest Period for such Eurodollar Loan that would have commenced on the
date specified for such borrowing) at the applicable rate of interest for
such Eurodollar Loan (MINUS the Applicable Margin) provided for herein over
(ii) the amount of interest that otherwise would have accrued on such
principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid on the date of such payment, prepayment,
conversion or failure to borrow or prepay in the London interbank market for
Dollar deposits of leading banks in amounts comparable to such principal
amount and with maturities comparable to such period (as reasonably
determined by such Lender).

<PAGE>

- 60 -

5.06 NET PAYMENTS; TAXES.

(a) All payments to be made hereunder and under the Facility C Notes
and any other Loan Documents by the Company shall be made without setoff,
counterclaim or other defense. Subject to Section 5.06(b) hereof with respect
to U.S. Taxes, all such payments shall be made free and clear of and without
deduction for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
governmental authority (other than taxes imposed on the Agent, any Lender or its
Applicable Lending Office by the jurisdiction in which the Agent or such Lender
is organized or has its principal office or in which its Applicable Lending
Office is organized or located or, in each case, any political subdivision or
taxing authority thereof or therein) (collectively, "TAXES"). If any Taxes are
imposed and required to be withheld from any amount payable by the Company
hereunder or under the Facility C Notes, the Company shall be obligated to (i)
pay such additional amount so that the Agent and the Lenders will receive a net
amount (after giving effect to the payment of such additional amount and to the
deduction of all Taxes) equal to the amount due hereunder, (ii) pay such Taxes
to the appropriate taxing authority for the account of the Agent, for the
benefit of the Lenders and (iii) as promptly as possible thereafter, sending the
Agent a certified copy of any original official receipt showing payment thereof,
together with such additional documentary evidence as the Agent may from time to
time reasonably require. If the Company fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Company shall be obligated
to indemnify the Agent and each Lender for any incremental taxes, interest or
penalties that may become payable by the Agent or such Lender as a result of
such failure. The obligations of the Company under this Section 5.06(a) shall
survive the repayment of the Facility C Loans and the termination of the
Facility C Commitments.
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(b) The Company agrees to pay to each Lender that is not a
U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to and received by such non-U.S. Person hereunder
after deduction for or withholding in respect of any U.S. Taxes imposed with
respect to such payment (or in lieu thereof, payment of such U.S. Taxes by such
non-U.S. Person), will not be less than the amount stated herein to be then due
and payable, PROVIDED that the foregoing obligation to pay such additional
amounts shall not apply:

(i) to any payment to a Lender (other than in respect of a Registered
Loan) hereunder unless such Lender is, on the date hereof (or on the date
it becomes a Lender as provided in Section 11.06(b) hereof) and on the date
of any change in the Applicable Lending Office of such Lender, either
entitled to submit a Form 1001 (relating to such Lender and entitling it to
a complete exemption from withholding on all interest to be received by it
hereunder in respect of the Facility C Loans) or Form 4224 (relating to all
interest to be received by such Lender hereunder in respect of the Facility
C Loans), or

(ii) to any payment to any Lender hereunder in respect of a Registered
Loan (a "REGISTERED HOLDER"), unless such Registered Holder (or, if such
Registered Holder is not the beneficial owner of such Registered Loan, the
beneficial owner thereof) is, on the date hereof (or on the date such
Registered Holder becomes a Lender as provided in Section 11.06(b) hereof)
and on the date of any change in the Applicable Lending Office of such
Lender, entitled to submit a Form W-8, together with an annual certificate
stating that (x) such Registered Holder (or beneficial owner, as the case
may be) is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code, and (y) such Registered Holder (or beneficial owner, as the case may
be) shall promptly notify the Company if at any time, such Registered
Holder (or beneficial owner, as the case may be) determines that it is no
longer in a position to provide such certificate to the Company (or any
other form of
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certification adopted by the relevant taxing authorities of the United
States for such purposes), or

(iii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Facility C Loan, such beneficial owner) to comply
with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connections with the United States of such non-U.S. Person (or such
beneficial owner, as the case may be) if such compliance is required by
statute or regulation of the United States as a precondition to relief or
exemption from such U.S. Taxes.

For the purposes of this Section 5.06(b), (w) "FORM 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States, (w) "FORM 4224" shall mean Form 4224 (Exemption
from Withholding of Tax on Income Effectively Connected with the Conduct of a
Trade or Business in the United States) of the Department of the Treasury of the
United States, (x) "FORM W-8" shall mean Form W-8 (Certificate of Foreign Status
of the Department of Treasury of the United States of America) (or in relation
to any of such Forms such successor and related forms as may from time to time
be adopted by the relevant taxing authorities of the United States to document a
claim to which such Form relates), (y) "U.S. PERSON" shall mean a citizen,
national or resident of the United States, a corporation, partnership or other
entity created or organized in or under any laws of the United States, or any
estate or trust that is subject to Federal income taxation regardless of the
source of its income and (z) "U.S. TAXES" shall mean any present or future tax,
assessment or other charge or levy imposed by or on behalf of the United States
or any taxing authority thereof or therein.

Within 30 days after paying any amount to the Agent or any Lender from
which it is required by law to make any deduction or withholding, and within 30
days after it is required by law to remit such deduction or withholding to any
relevant taxing or
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other authority, the Company shall deliver to the Agent for delivery to such
non-U.S. Person evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).

5.07 REPLACEMENT OF LENDERS. If any Lender requests compensation
pursuant to Section 5.01 or 5.06 hereof, or any Lender's obligation to make or
Continue, or to Convert Facility C Loans of any Type into, any other Type of
Facility C Loan shall be suspended pursuant to Section 5.01 or 5.03 hereof (any
such Lender so requesting compensation, or whose obligations are so suspended
being herein called a "RELEVANT LENDER"), the Company upon three Business Days
notice, may require that such Relevant Lender transfer all of its right, title
and interest under this Agreement and such Relevant Lender's Facility C Note to
any bank or other financial institution identified by the Company that is
reasonably satisfactory to the Agent (i) if such bank or other financial
institution (a "PROPOSED LENDER") agrees to assume all of the obligations of
such Relevant Lender hereunder, and to purchase all of such Relevant Lender's
Facility C Loans hereunder for consideration equal to the aggregate outstanding
principal amount of such Relevant Lender's Facility C Loans, together with
accrued, but unpaid interest thereon to the date of such purchase, and
satisfactory arrangements are made for payment to such Relevant Lender of all
other amounts payable hereunder to such Relevant Lender on or prior to the date
of such transfer (including any fees accrued hereunder and any amounts that
would be payable under Section 5.05 hereof as if all of such Relevant Lender's
Facility C Loans were being prepaid in full on such date) and (ii) if such
Relevant Lender has requested compensation pursuant to Section 5.01 or 5.06
hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 5.01 or 5.06 with respect to such Relevant Lender's
Facility C Loans is lower than that of the Relevant Lender. Subject to
compliance with the provisions of Section 11.06(b) hereof, such Proposed Lender
shall be a "Lender" for all purposes hereunder. Without prejudice to the
survival of any other agreement of the Company hereunder, the agreements of the
Company contained in Sections 5.01, 5.06 and 12.03 hereof (without duplication
of any payments made to such Relevant Lender by the
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Company or the Proposed Lender) shall survive for the benefit of such
Relevant Lender under this Section 5.07 with respect to the time prior to
such replacement.

Section 6. CONDITIONS PRECEDENT.

6.01 CONDITIONS TO EFFECTIVENESS AND INITIAL LENDING. The
effectiveness of this Agreement and the obligation of any Lender to make its
initial Facility C Loan hereunder is subject to the receipt by the Agent on or
before September 30, 1996 of the following documents, each of which shall be
satisfactory to the Agent (and to the extent specified below, to each Lender or
the Majority Lenders, as the case may be) in form and substance:

(a) CORPORATE DOCUMENTS. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor and of all corporate authority
for each Obligor (including, without limitation, board of director
resolutions and evidence of the incumbency of officers, together with
specimen signatures of each such officer) with respect to the execution,
delivery and performance of such of the Basic Documents to which such
Obligor is intended to be a party and each other document to be delivered
by such Obligor from time to time in connection herewith and the extensions
of credit hereunder (and the Agent and each Lender may conclusively rely on
such certificate until it receives notice in writing from such Obligor to
the contrary).

(b) OFFICER'S CERTIFICATE. A certificate of a Responsible Financial
Officer of the Company, dated the date hereof, to the effect set forth in
the first sentence of Section 6.03 hereof.

(c) OPINION OF COUNSEL TO THE OBLIGORS. Opinions, each dated the
date hereof, of Hughes & Luce, counsel to the Obligors, substantially in
the form of Exhibit E-1 hereto, and of Axtmayer Adsuar Muniz & Goyco,
special Puerto Rico counsel to the Subsidiary Guarantors operating in the
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Commonwealth, substantially in the form of Exhibit E-2 hereto and, in each
case, covering such other matters as the Agent or any Lender may reasonably
request (and each Obligor hereby instructs such counsel to deliver such
opinion to the Lenders and the Agent).

(d) OPINION OF COUNSEL TO FIRST UNION. An opinion, dated the date
hereof, of Milbank, Tweed, Hadley & McCloy, special New York counsel to
First Union, substantially in the form of Exhibit G hereto (and First Union
hereby instructs such counsel to deliver such opinion to the Lenders).

(e) FACILITY C NOTES. The Facility C Notes, duly completed and
executed.

(f) AMENDMENT NO. 2 TO SECURITY AGREEMENT. Amendment No. 2 to
Security Agreement, duly executed and delivered by the Company and the
Agent. In addition, the Company shall have taken such other action
(including, without limitation, delivering to the Agent, (i) Uniform
Commercial Code searches for each Obligor for each jurisdiction in which
such Obligor conducts its respective business or in which any of its
respective Properties are located (or otherwise as the Agent may reasonably
request) (to the extent such searches have not already been effected
pursuant to the Existing Credit Agreement) and (ii) for filing,
appropriately completed and duly executed copies of Uniform Commercial Code
financing statements) as the Agent shall have requested in order to perfect
the security interests created pursuant to Amendment No. 2 to Security
Agreement (or, to the extent such filings have been effected pursuant to
the Existing Credit Agreement, such amendments to such filings determined
to be necessary or advisable by the Agent).

(g) GUARANTEE AGREEMENT. The Guarantee Agreement, duly executed and
delivered by each Subsidiary Guarantor (other than a Supplemental
Guarantor) on the date hereof.
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(h) INSURANCE. Certificates of insurance evidencing the existence of
all insurance required to be maintained by the Company and its Subsidiaries
pursuant to Section 8.04 hereof and the designation of the Agent as the
loss payee or additional named insured, as the case may be, thereunder. In
addition, the Company shall have delivered a certificate of a Responsible
Financial Officer of the Company setting forth the insurance obtained by it
in accordance with the requirements of Section 8.04 and stating that such
insurance is in full force and effect and that all premiums then due and
payable thereon have been paid.

(i) SUBORDINATED INDEBTEDNESS. Amendment to the Subordinated Debt
Documents in form and substance satisfactory to the Majority Lenders,
PROVIDED that in no event shall amortization in respect of the Subordinated
Indebtedness be modified pursuant to such Amendment, and the Agent shall
have received copies of all of the Amendments to the Subordinated Debt
Documents and of all instruments and documents executed and delivered in
connection therewith, certified by a Responsible Financial Officer of the
Company.

(j) FINANCIAL INFORMATION. (i) Copies of the pro forma projections
of the Company and its Subsidiaries for the period ended December 31, 1996
and (ii) unaudited consolidating financial statements of the Company and
its Subsidiaries for the six-month period ended on June 30, 1996.

(k) PAYMENT OF FEES AND EXPENSES, ETC. Evidence that the Company
shall have paid such fees and expenses as the Company shall have agreed to
pay to the Agent in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to First Union, and Fiddler Gonzalez & Rodriguez, special
Puerto Rico counsel to First Union, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the Facility C
Notes and the other Loan Documents and the making of the Facility C Loans
hereunder (to the extent that statements for such fees and
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expenses have been delivered to the Company three days prior to the
Closing Date).

(l) INTEREST RATE PROTECTION AGREEMENTS. Evidence that the Company
and/or the Obligors shall have entered into one or more Interest Rate
Protection Agreements as to the notional principal amount at least equal to
(i) $40,000,000 for a period ending on December 31, 1996, (ii) $14,000,000
for a period ending on May 13, 1997 and (iii) $55,000,000 for a period
ending on June 30, 1998.

(m) ACCOUNT DESIGNATION LETTER. The Account Designation Letter duly
executed by the Company.

(n) AMENDMENT NO. 2 TO EXISTING CREDIT AGREEMENT. Amendment No. 2 to
Existing Credit Agreement, duly executed by each of the parties thereto,
together with evidence that all conditions precedent set forth in Section 4
of Amendment No. 2 to Existing Credit Agreement shall have been satisfied
or waived.

(o) PROCESS AGENT ACCEPTANCE. A letter from the Process Agent, in
form and substance satisfactory to the Agent, accepting the appointment of
the Process Agent by the Company.

(p) EVIDENCE OF LENDER ALLOCATIONS. Evidence from the Agent that on
the date of this Agreement (after giving effect to the transactions
contemplated hereby) the Lenders under this Agreement shall hold the same
pro rata portion of Facility C Loans (and if no Facility C Loans are
outstanding, Facility C Commitments) under this Agreement, as they hold of
Facility A Loans and Facility B Loans (or Facility A Commitments and
Facility B Commitments) under the Existing Credit Agreement.

(q) OTHER DOCUMENTS. Such other documents as the Agent or any Lender
or special New York counsel to First Union may reasonably request.
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6.02 CONDITIONS PRECEDENT TO LENDING FOR PERMITTED ACQUISITIONS. The
obligation of any Lender to make Facility C Loans hereunder to finance any
Permitted Acquisition is subject to the receipt by the Agent of the following
documents, each of which shall be satisfactory to the Agent (and to the extent
specified below, to each Lender or the Majority Lenders, as the case may be) in
form and substance:

(a) In connection with each Permitted Acquisition involving the
purchase of the capital stock or other ownership interests of a Person or
the formation of a corporation or other entity for the purpose of such
Permitted Acquisition:

(i) CORPORATE DOCUMENTS. Certified copies of the charter and
by-laws (or equivalent documents) of the relevant Person and of all
corporate authority for such Person (including, without limitation,
board of director resolutions and evidence of the incumbency of
officers, together with specimen signatures of each such officer) with
respect to the execution, delivery and performance of such of the
Basic Documents to which such Person is intended to be a party and
each other document to be delivered by such Person from time to time
in connection herewith and therewith (and the Agent and each Lender
may conclusively rely on such certificate until it receives notice in
writing from such Person to the contrary).

(ii) SUPPLEMENTAL SUBSIDIARY GUARANTEE AND SECURITY AGREEMENT.
A Supplemental Subsidiary Guarantee and Security Agreement,
substantially in the form of Exhibit C-2 hereto and duly executed by
the Agent and the relevant Supplemental Guarantor, pursuant to which
such Supplemental Guarantor shall create a first priority security
interest in all of its personal Property in favor of the Agent for the
benefit of the Lenders and the Facility A Lenders and the Facility B
Lenders, except as otherwise provided herein or therein. In addition,
the Company shall have taken
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such other action (including, without limitation, delivering to the
Agent, (i) Uniform Commercial Code searches for such Supplemental
Guarantor for each jurisdiction in which such Supplemental
Guarantor conducts its business or in which any of its Properties
are located (or otherwise as the Agent may reasonably request) and
(ii) for filing, appropriately completed and duly executed copies
of Uniform Commercial Code financing statements, as the Agent shall
have requested in order to perfect the security interest created
pursuant to such Supplemental Subsidiary Guarantee and Security
Agreement.

(iii) OPINION OF COUNSEL TO THE SUPPLEMENTAL GUARANTOR.
Opinions, appropriately dated, of counsel to the relevant Supplemental
Guarantor covering such matters as the Agent or any Lender may
reasonably request.

(iv) OPINION OF COUNSEL TO FIRST UNION. An opinion,
appropriately dated, of Milbank, Tweed, Hadley & McCloy, special New
York counsel to First Union, substantially in the form of Exhibit G
hereto but as to the relevant Supplemental Guarantee and Security
Agreement (and First Union hereby instructs such counsel to deliver
such opinion to the Lenders).

(v) AMENDMENT TO SECURITY AGREEMENT; FILINGS. An amendment to
the Security Agreement (or, if applicable, the Existing Subsidiary
Guaranty and Security Agreement), duly executed and delivered by the
Company (or the appropriate Subsidiary) and the Agent and the
certificates identified in Annex 1 thereto, accompanied by undated
stock powers executed in blank. In addition, the Company shall have
taken such other action (including, without limitation, delivering to
the Agent, (i) Uniform Commercial Code searches for each Supplemental
Guarantor for each jurisdiction in which such Supplemental Guarantor
conducts its respective business or in which any of its respective
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Properties are located (or otherwise as the Agent may reasonably
request) and (ii) for filing, appropriately completed and duly
executed copies of Uniform Commercial Code financing statements) as
the Agent shall have requested in order to perfect the security
interests created pursuant to such amendment to the Security Agreement
and/or the relevant Supplemental Subsidiary Guarantee and Security
Agreement.

(vi) INSURANCE. Certificates of insurance evidencing the
existence of all insurance required to be maintained by the relevant
Supplemental Guarantor pursuant to Section 8.04 hereof and the
designation of the Agent as the loss payee or additional named
insured, as the case may be, thereunder. In addition, the Company or
the relevant Supplemental Guarantor shall have delivered a certificate
of a Responsible Financial Officer of the Company or such Supplemental
Guarantor setting forth the insurance obtained by the Company or such
Supplemental Guarantor in accordance with the requirements of
Section 8.04 and stating that such insurance is in full force and
effect and that all premiums then due and payable thereon have been
paid.

(b) In connection with all Permitted Acquisitions (as appropriate):

(i) CONSUMMATION OF PERMITTED ACQUISITION. Evidence that the
relevant Permitted Acquisition shall have been consummated in all
material respects in accordance with the terms of the relevant
Purchase Agreement, and the Agent shall have received a certificate of
a Responsible Financial Officer of the Company to that effect (and
attaching thereto a true and complete copy of the relevant Purchase
Agreement).

(ii) ENVIRONMENTAL MATTERS. To the extent that a Permitted
Acquisition involves the direct or indirect acquisition of real
Property, upon the request of the Agent, environmental surveys and
assessments prepared
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by one or more firms of licensed engineers (familiar with the
identification of toxic and hazardous substances) in form and
substance satisfactory to each Lender, such environmental survey
and assessment to be based upon physical on-site inspections by
such firm of each of the existing sites and facilities to be owned,
operated or leased by the Company or the relevant Supplemental
Guarantor or any of its Subsidiaries pursuant to such Permitted
Acquisition as well as an historical review of the uses of such sites
and facilities and of the business and operations of such Supplemental
Guarantor or any of its Subsidiaries (including any former
Subsidiaries or divisions thereof or any of its Subsidiaries that have
been disposed of prior to the date of such survey and assessment and
with respect to which such Supplemental Guarantor or any of its
Subsidiaries may have retained liability for Environmental Claims),
and if requested by the Agent, the Company shall have agreed to take
other reasonable steps after the date of such Permitted Acquisition
with respect to such matters as shall be agreed in writing with the
Agent.

(iii) SOLVENCY ANALYSIS. A certificate from a Responsible
Financial Officer of the Company to the effect that, as of the date of
the respective Permitted Acquisition and after giving effect to the
Facility C Loans in connection with the relevant Permitted Acquisition
hereunder and to the other transactions contemplated hereby in
connection with such Permitted Acquisition, (i) the aggregate value of
all Properties of the Company and its Subsidiaries at their present
fair saleable value (i.e., the amount that may be realized within a
reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the
latter as the amount that could be obtained for the Property in
question within such period by a capable and diligent businessman from
an interested buyer who is willing to purchase under ordinary selling
conditions), exceeds
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the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of the
Company and its Subsidiaries, (ii) the Company and its Subsidiaries
will not, on a consolidated basis, have unreasonably small capital
with which to conduct their business operations as theretofore
conducted and (iii) the Company and its Subsidiaries will
have, on a consolidated basis, sufficient cash flow to enable them to
pay their debts as they mature. The Agent shall have also received
(x) a certificate from a Responsible Financial Officer of the Company
certifying that the financial projections and underlying assumptions
contained in such analyses were at the time made, and on the date
thereof are, fair and reasonable and accurately computed and (y)
appropriate factual information supporting the conclusions of the
solvency analyses and the financial condition certificate required to
be delivered as provided above.

(iv) MORTGAGES. The following documents each of which shall be
executed (and, where appropriate, acknowledged) by Persons
satisfactory to the Agent:

(A) one or more Mortgages covering the parcels of real
Property of the relevant Supplemental Guarantor or acquired by
the Company or any Subsidiary thereof pursuant to a Permitted
Acquisition financed hereunder (collectively, the "SUPPLEMENTAL
MORTGAGES"), in each case duly executed and delivered by the
Company or the relevant Subsidiary or Supplemental Guarantor, as
applicable, in recordable form and, to the extent necessary under
applicable law, for filing in the appropriate county land
offices, Uniform Commercial Code financing statements covering
fixtures, in each case appropriately completed and duly executed;

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(B) one or more mortgagee policies of title insurance on
forms of and issued by one or more title companies satisfactory
to the Agent ("TITLE COMPANIES"), insuring the validity and
priority of the Liens created under the Supplemental Mortgages
for and in amounts satisfactory to the Agent, subject only to
such exceptions as are satisfactory to the Majority Lenders;

(C) current as-built surveys of each of the parcels to be
covered by the Supplemental Mortgages and, in the case of certain
surveys (as agreed by the Company and the Agent), accompanied by
a certificate of an appropriate officer or employee of the
Company, which surveys shall be in form and content acceptable to
the Agent and shall have been prepared by a registered surveyor
acceptable to the Agent;

(D) upon request of the Agent, certified copies of
permanent and unconditional certificates of occupancy (or, if it
is not the practice to issue certificates of occupancy in the
jurisdiction in which the parcels to be covered by the
Supplemental Mortgages are located, then such other evidence
reasonably satisfactory to each Lender) permitting the fully
functioning operation and occupancy of each such facility and of
such other permits necessary for the use and operation of each
such facility issued by the respective governmental authorities
having jurisdiction over each such facility;

(E) upon request of the Agent, in the case of Supplemental
Mortgages covering leasehold interests, such estoppel, consents
and other agreements from the lessor, the holder of a fee
mortgage or a sublessee, as the Agent may reasonably request;

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(F) upon request of the Agent, appraisals of each of the
facilities located on the Properties covered by the Supplemental
Mortgages prepared by a Person, and using a methodology,
satisfactory to the Agent; and

(G) contemporaneously dated opinions of local counsel in
the respective jurisdictions in which the properties covered by
the Supplemental Mortgages are located, substantially in the form
of Exhibit F-1 hereto (with such changes thereto as the Agent
shall approve), and in each case, covering such other matters as
the Agent may reasonably request (and the Company, each relevant
Subsidiary of the Company and each Supplemental Guarantor hereby
instructs such counsel to deliver such opinion to the Lenders and
the Agent).

In addition, the Company shall have paid to the Title Companies all
expenses and premiums of the Title Companies in connection with the
issuance of such policies and in addition shall have paid to the Title
Companies an amount equal to the recording and stamp taxes payable in
connection with recording the Supplemental Mortgages in the
appropriate jurisdictions.

(v) FINANCIAL INFORMATION. (A) a certificate of a Responsible
Financial Officer of the Company to the effect that on a pro forma
basis after giving effect to the relevant Permitted Acquisition, the
Company shall remain in compliance with Sections 8.10, 8.11, 8.12,
8.13 and 8.14 hereof and (B) the most recent audited consolidated
balance sheet of the Person (if any) to be acquired and its
Subsidiaries and the related statement of income, retained earnings
and cash flow for the fiscal year ended on said date, with opinions
thereon of the auditors of such Person(or, if audited financial
statements are not available to the Company, unaudited financial
statements (i) reviewed by independent
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certified accountants of recognized national standing and
acceptable to the Agent and (ii) in form satisfactory to the
Agent), and the most recent unaudited consolidated balance
sheet of such Person and its Subsidiaries and the related
statements of income and retained earnings for the period
ended on the date of such unaudited statements.

(vi) PAYMENT OF FEES AND EXPENSES, ETC. Evidence that the
Company shall have paid such fees and expenses as the Company shall
have agreed to pay to the Agent in connection herewith, including,
without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special New York counsel to First Union, and
Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to First
Union, in connection with the satisfaction of the conditions in this
Section 6.02 and the making of the Facility C Loans hereunder in
connection with the relevant Permitted Acquisition (to the extent that
statements for such fees and expenses have been delivered to the
Company).

(vii) OTHER DOCUMENTS. Such other documents as the Agent or any
Lender or special New York counsel to First Union may reasonably
request.

6.03 INITIAL AND SUBSEQUENT LOANS. The obligation of the Lenders to
make any Facility C Loan or otherwise extend any credit to the Company upon the
occasion of each borrowing hereunder (including any borrowing on the date
hereof) are subject to the further conditions precedent that, both immediately
prior to the making of such Facility C Loan and also after giving effect thereto
and to the intended use thereof:

(i) no Default shall have occurred and be continuing; and

(ii) the representations and warranties made by the Company in
Section 7 hereof, and by each Obligor in each of the other Loan Documents to
which it is a party, shall be true and complete on and as of the date of the
making of such Facility C Loan with

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the same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date).

Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the first sentence of
this Section 6.03 (both as of the date of such notice and, unless the Company
otherwise notifies the Agent prior to the date of such borrowing, as of the date
of such borrowing).

Section 7. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Agent and the Lenders that (with respect to
matters pertaining to itself and each of its Subsidiaries):

7.01 CORPORATE EXISTENCE. Each of the Company and its
Subsidiaries: (a) is a corporation, partnership or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents
and approvals necessary to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business and
is in good standing in all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify could (either individually or in the aggregate) have a Material
Adverse Effect.

7.02 FINANCIAL CONDITION. The Company has heretofore furnished to
each of the Lenders the following:

(a) a pro forma unaudited consolidated balance sheet of the Company
and its Subsidiaries (including Garrido, Guest Choice and Swiss Dairy) as
at September 30, 1996, prepared on the assumption that the Garrido
Acquisition (as defined in the Existing Credit Agreement) and the Swiss
Dairy Acquisition and all other transactions contemplated hereby to occur
at the same time had been effected,
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accompanied by a certificate of a Responsible Financial Officer of the
Company to the effect that (i) such balance sheet fairly presents the
pro forma consolidated financial condition of the Company and its
Subsidiaries, all in accordance with generally accepted accounting
principles and practices applied on a consistent basis, (ii) none of
the Company or any of its Subsidiaries has on the date hereof any
material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected
or provided for in said balance sheet as at said date, and (iii) since
August 19, 1996, there has been no material adverse change in the pro
forma financial condition, business or prospects of the Company or
its Subsidiaries taken as a whole;

(b) unaudited consolidating balance sheets of the Company and its
Subsidiaries as at June 30, 1996 and the related consolidating statements
of income and retained earnings for the six-month period ended on said
date; and

(c) an audited consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 1995 and the related consolidated
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for the fiscal period ended on said date, with the opinion
thereon of Deloitte & Touche LLP and the unaudited consolidated balance
sheet of the Company and its Subsidiaries as at June 30, 1996 and the
related consolidated statements of income and retained earnings of the
Company and its Subsidiaries for the quarterly period ended on said date.

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liabilities, liabilities for taxes, unusual forward or long-term commitments
or unrealized or anticipated losses from any unfavorable commitments, except
as referred to or reflected or provided for in the respective balance sheets
referred to above. Since June 30, 1996 (with respect to the Company and each
of its Subsidiaries), there has been no material adverse change in the
respective actual or pro forma financial condition, operations, business or
prospects of each such entity from that set forth in the respective financial
statements as at such respective dates.

7.03 LITIGATION. Except as disclosed in Schedule V hereto, there are
no legal or arbitral proceedings, or any proceedings by or before any
governmental or regulatory authority or agency, now pending or (to the knowledge
of the Company) threatened against the Company or any of its Subsidiaries that,
if adversely determined could (either individually or in the aggregate) have a
Material Adverse Effect.

7.04 NO BREACH. None of the execution and delivery of this Agreement
and the Facility C Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of any Obligor, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their Property is bound or to which any of them is
subject, or constitute a default under any such agreement or instrument, or
(except for the Liens created pursuant to the Security Documents) result in the
creation or imposition of any Lien upon any Property of the Company or any of
its Subsidiaries pursuant to the terms of any such agreement or instrument.

7.05 ACTION. Each Obligor has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Basic Documents to which it is a party; the execution, delivery and
performance by each Obligor of each of the Basic Documents to which it is a
party have been
<PAGE>

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duly authorized by all necessary corporate action on its part (including,
without limitation, any required shareholder approvals); and this Agreement
has been duly and validly executed and delivered by the Company and
constitutes, and each of the Facility C Notes and the other Basic Documents
to which it is a party when executed and delivered by the respective Obligor
(in the case of the Facility C Notes, for value) will constitute, its legal,
valid and binding obligation, enforceable against such Obligor in accordance
with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Each
Security Document providing collateral security, directly or indirectly, for
the Facility C Loans is effective to create in favor of the Agent for the
benefit of the Lenders a legal, valid and enforceable first priority Lien
upon all right, title and interest of the Obligor or Obligors party thereto
in the Property described therein and such Lien has been perfected, except as
otherwise permitted under Section 8.06 hereof or in such Security Document.

7.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of the Basic Documents to which it is a party or for
the legality, validity or enforceability hereof or thereof, except for filings
and recordings in respect of the Liens created pursuant to the Security
Documents.

7.07 USE OF CREDIT. None of the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of the Facility
C Loans hereunder will be used to buy or carry any Margin Stock.
<PAGE>

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7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Lenders under Section 8.01(e)
hereof.

7.09 TAXES. The Company and its Subsidiaries (other than the
Obligors operating in the Commonwealth and Garrido) are members of an affiliated
group of corporations filing consolidated returns for Federal income tax
purposes, of which the Company is the "common parent" (within the meaning of
Section 1504 of the Code) of such group. The Company and its Subsidiaries have
filed all Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Company or any of its
Subsidiaries. The charges, accruals and reserves on the books of the Company
and its Subsidiaries in respect of taxes and other governmental charges are, in
the opinion of the Company, adequate. The Company has not given or been
requested to give a waiver of the statute of limitations relating to the payment
of Federal, state, local and foreign taxes or other impositions. Neva Plastics
and Suiza Fruit each hold industrial tax exemption grants entitling each of them
to a 90% exemption from income and property taxes and a 60% exemption from
municipal license taxes. The grant held by Neva Plastics will expire on August
31, 2000 for income tax purposes, on June 30, 2001 for municipal tax purposes
and on January 1, 2000 for property tax purposes. The grant held by Suiza Fruit
will expire on October 12, 2002 for income and property tax purposes and on June
30, 2003 for municipal license tax purposes.

7.10 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
<PAGE>

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7.11 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.

7.12 MATERIAL AGREEMENTS AND LIENS.

(a) Part A of Schedule I hereto is a complete and correct list, as of
the date hereof, and after giving effect to the transactions contemplated
hereunder to occur on such date, of each credit agreement, loan agreement,
indenture, purchase agreement, guarantee, letter of credit or other arrangement
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guarantee by, the
Company or any of its Subsidiaries, and the aggregate principal or face amount
outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of said Schedule I.

(b) Part B of Schedule I hereto is a complete and correct list, as of
the date hereof (and after giving effect to the transactions contemplated
hereunder to occur on such date), of each Lien securing Indebtedness of any
Person and covering any Property of the Company or any of its Subsidiaries that
will continue after the date hereof, and the aggregate Indebtedness secured (or
that may be secured) by each such Lien and the Property covered by each such
Lien is correctly described in Part B of said Schedule I.

7.13 ENVIRONMENTAL MATTERS. Each of the Company and its Subsidiaries
has obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and each of the Company and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
<PAGE>

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in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect.

In addition, except as to matters with respect to which the Company
and its Subsidiaries could not reasonably be expected to incur liabilities in
excess of $250,000 in the aggregate:

(i) no polychlorinated biphenyls (PCB's) is or has been
present at any site or facility now or previously owned, operated or
leased by the Company or any of its Subsidiaries;
<PAGE>

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(ii) no asbestos or asbestos-containing materials is or has
been present at any site or facility now or previously owned, operated
or leased by the Company or any of its Subsidiaries;

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(d) No Hazardous Material generated by the Company or any of its
Subsidiaries has been recycled, treated, stored, disposed of or Released by
the Company or any of its Subsidiaries at any location other than those
listed in Schedule II hereto.

7.14 CAPITALIZATION. As of the date hereof (and after giving effect
to the Swiss Dairy Acquisition and the other transactions contemplated hereunder
to occur on such date),

(a) the authorized capital stock of the Company consists of
21,000,000 shares, consisting of
<PAGE>

- 85 -

20,000,000 shares of common stock, par value $0.01 per share, and
1,000,000 shares of preferred stock, par value $0.01 per share;

(b) the Company has 10,739,729 shares of issued and outstanding
common stock, and all of such issued shares are duly and validly issued and
outstanding and are not held in treasury;

(d) except for options to purchase 579,760 shares of common stock
granted under the Company's Exchange Stock Option and Restricted Stock Plan
and options to purchase up to 1,069,500 shares of common stock granted
(787,078) or available (282,422) for future grants under the Company's 1995
Stock Option and Restricted Stock Plan, there are no outstanding Equity
Rights with respect to the Company; and

7.15 SUBSIDIARIES, ETC.

(a) Set forth in Part A of Schedule III hereto is a complete and
correct list, as of the date hereof (and as of the Closing Date after giving
effect to the transactions contemplated hereunder to occur on such date and
after consummation of the Swiss Dairy Acquisition), of all of the Subsidiaries
of the Company, together with, for each such Subsidiary, (i) the jurisdiction of
organization of such Subsidiary, (ii) each Person holding ownership interests in
such Subsidiary and (iii) the nature of the ownership interests held by each
such Person and
<PAGE>

- 86 -

the percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Part A of Schedule III hereto, (x) each of
the Company and its Subsidiaries owns, free and clear of Liens (other than
Liens created pursuant to the Security Documents), and has the unencumbered
right to vote, all outstanding ownership interests in each Person shown to be
held by it in Part A of Schedule III hereto, (y) all of the issued and
outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and (z) there are no outstanding
Equity Rights with respect to such Person.

(b) Set forth in Part B of Schedule III hereto is a complete and
correct list, as of the date hereof, of all Investments (other than Investments
disclosed in Part A of said Schedule III hereto) held by the Company or any of
its Subsidiaries in any Person and, for each such Investment, (x) the identity
of the Person or Persons holding such Investment and (y) the nature of such
Investment. Except as disclosed in Part B of Schedule III hereto, each of the
Company and its Subsidiaries owns, free and clear of all Liens (other than Liens
created pursuant to the Security Documents), all such Investments.

(c) None of the Subsidiaries of the Company is, on the date hereof,
subject to any indenture, agreement, instrument or other arrangement of the type
described in Section 8.19(b) hereof.

7.16 TITLE TO ASSETS. The Company owns and has on the date hereof,
and will own and have on the Closing Date, good and marketable title (subject
only to Liens permitted by Section 8.06 hereof) to the Properties shown to be
owned in the most recent financial statements referred to in Section 8.02 hereof
(other than Properties disposed of in the ordinary course of business or
otherwise permitted to be disposed of pursuant to Section 8.05 hereof). The
Company owns and has on the date hereof, and will own and have on the Closing
Date, good and marketable title to, and enjoys on the date hereof, and will
enjoy on the Closing Date, peaceful and undisturbed possession of, all
Properties
<PAGE>

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(subject only to Liens permitted by Section 8.06 hereof) that are necessary
for the operation and conduct of its businesses.

7.17 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Loan
Documents or included herein or therein or delivered pursuant hereto or thereto,
when taken as a whole do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Company and its Subsidiaries to the Agent and the Lenders in connection with
this Agreement and the other Loan Documents and the transactions contemplated
hereby and thereby will be true, complete and accurate in every material
respect, or (in the case of projections) based on reasonable estimates, on the
date as of which such information is stated or certified. There is no fact
known to the Company that could have a Material Adverse Effect that has not been
disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for use in connection with the transactions contemplated hereby or
thereby.

7.18 REAL PROPERTY. Set forth on Schedule IV attached hereto is a
list, as of the date hereof of all of the real property interests held by the
Company and its Subsidiaries, indicating in each case whether the respective
Property is owned or leased, the identity of the owner or lessee and the
location of the respective Property.

7.19 SOLVENCY. As of the Closing Date and after giving effect to the
initial Facility C Loans hereunder and the other transactions contemplated
hereby, (a) the aggregate value of all Properties of the Company and its
Subsidiaries at their present fair saleable value (i.e., the amount that may be
realized within a reasonable time, considered to be six months to
<PAGE>

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one year, either through collection or sale at the regular market value,
conceiving the latter as the amount that could be obtained for the Property
in question within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling
conditions), exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of the
Company and its Subsidiaries, (b) the Company and its Subsidiaries will not,
on a consolidated basis, have unreasonably small capital with which to
conduct their business operations as heretofore conducted and (c) the Company
and its Subsidiaries will have, on a consolidated basis, sufficient cash flow
to enable them to pay their debts as they mature.

Section 8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Agent that, so long as any Facility C Commitment
or Facility C Loan is outstanding and until payment in full of all amounts
payable by the Company hereunder:

8.01 FINANCIAL STATEMENTS, ETC. The Company shall deliver, or shall
cause to be delivered, to each of the Lenders:

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financial statements fairly present the respective individual
unconsolidated financial condition and results of operations of the Company
and of each of its Subsidiaries, in each case in accordance with generally
accepted accounting principles, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);

(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, consolidated and consolidating
statements of income, retained earnings and cash flow of the Company and
its Subsidiaries for such fiscal year and the related consolidated and
consolidating balance sheets of the Company and its Subsidiaries as at the
end of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of the Company, by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Subsidiaries as at the end of, and for,
such fiscal year in accordance with generally accepted accounting
principles, and a certificate of such accountants stating that, in making
the examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of a
Responsible Financial Officer of the Company, which certificate shall state
that said consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of operations of
the Company and of each of its Subsidiaries, in each case in accordance
with generally accepted accounting principles, consistently applied, as at
the end of, and for, such fiscal year;
<PAGE>

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(d) promptly upon mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements
so mailed;

(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any
<PAGE>

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action taken by the Company or an ERISA Affiliate to terminate any
Plan;

(f) [Intentionally left blank];

(g) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and,
<PAGE>

- 92 -

together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken or proposes
to take with respect thereto;

(h) promptly upon receipt thereof, copies of all management letters
and other material reports which are submitted to the Board of Directors of
the Company or any of its Subsidiaries by their independent certified
public accountants in connection with any annual audit of the Company
and/or any such Subsidiary by such accountants;

(i) as soon as available and in any event on or before December 31 of
each fiscal year, a budget for the next following fiscal year setting forth
for each Subsidiary of the Company and for the Company and its Subsidiaries
as a whole, anticipated income, expense and capital expenditure items for
each quarter during such fiscal year, and quarterly, concurrently with the
delivery of the financial statements for such fiscal year pursuant to
clause (a) above, a report setting forth a detailed comparison of actual
performance to the budget referred to above; and

(j) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Agent may reasonably request.

The Company will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to clause (a) above, a certificate of a
Responsible Financial Officer of the Company (i) to the effect that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail and describing the action
that the Company has taken or proposes to take with respect thereto) and
(ii) setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Sections 8.10, 8.11, 8.12, 8.13 and
8.14 hereof as of the end of the respective quarterly fiscal period or fiscal
year.
<PAGE>

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8.02 LITIGATION. The Company will promptly give to each Lender
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Subsidiaries, except proceedings that, if adversely determined, would not
(either individually or in the aggregate) have a Material Adverse Effect.
Without limiting the generality of the foregoing, the Company will give to each
Lender notice of the assertion of any Environmental Claim by any Person against,
or with respect to the activities of, the Company or any of its Subsidiaries and
notice of any alleged violation of or non-compliance with any Environmental Laws
or any permits, licenses or authorizations, other than any Environmental Claim
or alleged violation that, if adversely determined, would not (either
individually or in the aggregate) have a Material Adverse Effect.

8.03 EXISTENCE, ETC. The Company will, and will cause each of its
Subsidiaries to:

(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (PROVIDED that nothing in this
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);

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being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained;

(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;

(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and

(f) permit representatives of any Lender or the Agent, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect any of its Properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by such
Lender or the Agent (as the case may be).

8.04 INSURANCE. The Company will, and will cause each of its
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations engaged in the same or similar business
similarly situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations. The Company will in any
event maintain (with respect to itself and each of its Subsidiaries):

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cost of such assets (including, without limitation, foundation, footings
and excavation costs), subject to deductibles as aforesaid (PROVIDED that
recovery limits may be applicable to losses caused by flood or earthquake)
and (ii) in the case of inventory, not less than the fair market value
thereof, subject to deductibles as aforesaid.

(4) Workers' Compensation Insurance -- workers' compensation
insurance (including, without limitation, Employers' Liability Insurance)
to the extent required by applicable law.

(6) Business Interruption Insurance -- insurance against loss of
operating income (up to an aggregate amount equal to $15,000,000 and
subject to a deductible, or
<PAGE>

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self-insured amount, not in excess of $500,000) by reason of any Peril.

Such insurance shall be written by financially responsible companies selected by
the Company and having an A. M. Best rating of "A-" or better and being in a
financial size category of VIII or larger, or by other companies acceptable to
the Majority Lenders, and (other than workers' compensation) shall name the
Agent as loss payee (to the extent covering risk of loss or damage to tangible
property) and as an additional named insured as its interests may appear (to the
extent covering any other risk). Each policy referred to in this Section 8.04
shall provide that it will not be canceled or reduced, or allowed to lapse
without renewal, except after not less than 30 days' notice to the Agent and
shall also provide that the interests of the Agent and the Lenders shall not be
invalidated by any act or negligence of the Company or any Person having an
interest in any Property covered by the Mortgages which, directly or indirectly,
secure the Facility C Loans nor by occupancy or use of any such Property for
purposes more hazardous than permitted by such policy nor by any foreclosure or
other proceedings relating to such Property. The Company will advise the Agent
promptly of any policy cancellation, reduction or amendment.

On or before the date hereof, the Company will deliver to the Agent
certificates of insurance satisfactory to the Agent evidencing the existence of
all insurance required to be maintained by the Company hereunder setting forth
the respective coverage, limits of liability, carrier, policy number and period
of coverage (and attaching original copies of any policies with respect to
casualty insurance). Thereafter, each year the Company will deliver to the
Agent certificates of insurance
<PAGE>

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evidencing that all insurance required to be maintained by the Company
hereunder will be in effect through the calendar year following the date of
such certificates, subject only to the payment of premiums as they become
due. In addition, the Company will not modify any of the provisions of any
policy with respect to casualty insurance without delivering the original
copy of the endorsement reflecting such modification to the Agent accompanied
by (if requested by the Agent) a written report of a firm of independent
insurance brokers of nationally recognized standing, stating that, in their
opinion, such policy (as so modified) adequately protects the interests of
the Lenders and the Agent, is in compliance with the provisions of this
Section 8.04, and is comparable in all respects with insurance carried by
responsible owners and operators of Properties similar to those covered by
the Mortgages which, directly or indirectly, secure the Facility C Loans.
The Company will not obtain or carry separate insurance concurrent in form or
contributing in the event of loss with that required by this Section 8.04
unless the Agent is the named insured thereunder, with loss payable as
provided herein. The Company will immediately notify the Agent whenever any
such separate insurance is obtained and shall deliver to the Agent the
certificates evidencing the same.

Without limiting the obligations of the Company under the foregoing
provisions of this Section 8.04, in the event the Company shall fail to maintain
in full force and effect insurance as required by the foregoing provisions of
this Section 8.04, then the Agent may, but shall have no obligation so to do,
procure insurance covering the interests of the Lenders and the Agent in such
amounts and against such risks as the Agent (or the Majority Lenders) shall deem
appropriate, and the Company shall reimburse the Agent in respect of any
premiums paid by the Agent in respect thereof.

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use in the jurisdictions where the Properties of the Company and its
Subsidiaries are located.

8.05 PROHIBITION OF FUNDAMENTAL CHANGES. (a) The Company will not,
nor will it permit any of its Subsidiaries to, enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution).

(b) The Company will not, nor will it permit any of its Subsidiaries
to, acquire any business or Property from, or capital stock of, or be a party to
any acquisition of, any Person except:

(i) for purchases of inventory and other Property to be sold or
used in the ordinary course of business;

(ii) Investments permitted under Section 8.08 hereof;

(iii) Capital Expenditures permitted under Section 8.14 hereof;
and

(iv) Permitted Acquisitions and acquisitions permitted under
Section 9.05(b)(iv) of the Existing Credit Agreement.

(i) any Excluded Disposition;

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its Subsidiaries shall not have a fair market value in excess of $500,000;
and

(iii) any inventory or other Property sold or disposed of in the
ordinary course of business and on ordinary business terms.

(d) Notwithstanding the foregoing provisions of this Section 8.05, so
long as no Default shall have occurred and be continuing and, after giving
effect to any of the succeeding transactions, no Default would exist hereunder,
and so long as the Liens created under the Security Documents continue to be in
effect:

(i) any Subsidiary of the Company may be merged or consolidated
with or into: (x) the Company if the Company shall be the continuing or
surviving corporation or (y) any other such Subsidiary; and

8.06 LIMITATION ON LIENS. The Company will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:

(a) Liens created pursuant to the Security Documents;

(b) Liens in existence on the date hereof and listed in Part B of
Schedule I hereto;

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or the affected Subsidiaries, as the case may be, in accordance with GAAP;

(e) Liens securing judgments but only to the extent for an amount and
for a period not resulting in an Event of Default under Section 9(i)
hereof;

(f) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;

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for the purpose of securing Indebtedness representing, or incurred to
finance, refinance or refund, the cost of such Property; PROVIDED that
(i) no such Lien shall extend to or cover any Property of the Company
or such Subsidiary other than the Property so acquired, (ii) the
principal amount of Indebtedness secured by any such Lien shall at no
time exceed the fair market value (as determined in good faith by a
Responsible Financial Officer of the Company) of such Property at the
time it was acquired, and (iii) the principal amount of all Indebtedness
(other than Indebtedness permitted by Section 8.07(e) hereof)
secured by such Liens shall not exceed $500,000 in the aggregate;

(l) protective Uniform Commercial Code filings with respect to
personal Property leased by any Obligor; and

(m) any extension, renewal or replacement of the foregoing, PROVIDED,
however, that the Liens permitted hereunder shall not be spread to cover
any additional Indebtedness or Property.
<PAGE>

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8.07 INDEBTEDNESS. The Company will not, nor will it permit any of
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:

(a) Indebtedness to the Lenders hereunder, under the other Loan
Documents and under the Existing Credit Agreement;

(b) the Subordinated Indebtedness (but not any replacement, renewal,
refunding, refinancing or extension thereof);

(f) additional Indebtedness of the Company and its Subsidiaries up to
but not exceeding $1,000,000 at any one time outstanding.

8.08 INVESTMENTS. The Company will not, nor will it permit any of
its Subsidiaries to, make or permit to remain outstanding any Investments
except:

(a) Investments outstanding as of the date hereof and identified in
Part B of Schedule III hereto (including, without limitation, Indebtedness
of any Subsidiary of the Company to the Company or any other Subsidiary of
the Company);
<PAGE>

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(b) operating deposit accounts with depository institutions;

(d) Interest Rate Protection Agreements entered into pursuant to
Section 8.15 hereof;

(e) Investments permitted under Section 8.05(b) hereof and
indemnities executed in connection with the sale of Investment Tax Credits;

(f) Investments by the Company in the capital stock of its
Subsidiaries to the extent outstanding as of the date hereof;

(g) Investments (other than of a type specified in clause (f) above
and other than the Investments permitted under clause (a) above) by the
Company in its Subsidiaries or by any Subsidiary of the Company in the
Company or any other Subsidiary of the Company made after the date hereof
not exceeding $10,000,000 at any time outstanding (MINUS (without
duplication) the aggregate principal amount of Indebtedness outstanding
under Section 8.07(d) hereof);

(h) loans and advances to employees up to but not exceeding $500,000
in the aggregate;

(j) additional Investments up to but not exceeding $500,000 in the
aggregate; and

(k) any guarantees permitted under Section 8.07 hereof.
<PAGE>

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8.09 RESTRICTED PAYMENTS.

8.10 LEVERAGE RATIOS.

(a) The Company will not permit the Leverage Ratio to exceed the
following respective ratios at any time during the following respective periods:

PERIOD RATIO

From the date hereof
through and including
June 29, 1997 4.25 to 1

From June 30, 1997
through and including
June 29, 1998 3.75 to 1

From June 30, 1998
through and including
June 29, 1999 3.25 to 1

From June 30, 1999
and at all times
thereafter 2.75 to 1

(b) The Company will not permit the Senior Leverage Ratio to exceed
the following respective ratios at any time during the following respective
periods:

PERIOD RATIO

From the date hereof
through and including
June 29, 1997 3.75 to 1

From June 30, 1997
through and including
June 29, 1998 3.25 to 1
<PAGE>

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From June 30, 1998
through and including
June 29, 1999 2.75 to 1

From June 30, 1999
and at all times
thereafter 2.25 to 1

8.11 MINIMUM NET WORTH. The Company will not permit its Net Worth
(i) for the period from the date hereof to and including December 31, 1996 to be
less than $63,000,000 and (ii) for each fiscal quarter thereafter, to be less
than $63,000,000 plus 50% of net income for all preceding fiscal quarters
(without including the results of any fiscal quarter in respect of which there
was a net loss) commencing with the fiscal quarter beginning January 1, 1997.
The amounts of Net Worth set forth above shall be increased by 75% of the amount
by which the "total stockholders equity" of the Company is increased as a
<PAGE>

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result of any public or private offering of common stock of the Company after
September 1, 1996. Promptly upon consummation of each such public or private
offering, the Company shall notify the Agent in writing of the amount of such
increase in total stockholders equity.

8.12 FIXED CHARGES RATIO. The Company will not permit the Fixed
Charges Ratio to be less than 1.05 to 1 at any time.

8.13 INTEREST COVERAGE RATIOS.

(a) The Company will not permit the Interest Coverage Ratio to be
less than the following respective ratios at any time during the following
respective periods:

Period Ratio
------ -----
From the date hereof
through and including
June 29, 1997 2.20 to 1

From June 30, 1997
through and including
June 29, 1998 2.40 to 1

From June 30, 1998
through and including
June 29, 1999 2.75 to 1

From June 30, 1999
through and including
June 29, 2000 3.25 to 1

From June 30, 2000
and at all times
thereafter 3.75 to 1

(b) The Company will not permit the Senior Interest Coverage Ratio to
be less than the following respective ratios at any time during the following
respective periods:

<PAGE>

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Period Ratio
------ -----
From the date hereof
through and including
June 29, 1997 3.50 to 1

From June 30, 1997
through and including
June 29, 1998 3.75 to 1

From June 30, 1998
through and including
June 29, 1999 4.00 to 1

From June 30, 1999
through and including
June 29, 2000 4.50 to 1

From June 30, 2000
and at all times
thereafter 5.00 to 1

8.14 CAPITAL EXPENDITURES. The Company will not permit the aggregate
amount of Capital Expenditures by the Company and its Subsidiaries to exceed the
following respective amounts for the following respective periods:

Period Amount
------ ------
From January 1, 1996 $13,000,000
through and including
December 31, 1996

From January 1, 1997 $14,000,000
through and including
December 31, 1997

From January 1, 1998 $15,000,000
through December 31, 1998,
<PAGE>

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and for each fiscal year thereafter

If the aggregate amount of Capital Expenditures for any period set forth in the
schedule above shall be less than the amount set forth opposite such period in
the schedule above, then 50% of the shortfall shall be added to the amount of
Capital Expenditures permitted for the immediately succeeding period (but not
any other) period and, for the purposes hereof, the amount of Capital
Expenditures made during any period shall be deemed to have been made first from
the permitted amount for such period set forth in the schedule above and last
from the amount of any carryover from any previous period. Notwithstanding the
foregoing, in addition to the Capital Expenditures permitted to be incurred as
provided above, the Company may make the following additional Capital
Expenditures: (a) the acquisition of replacement Property in respect of an
Excluded Disposition; (b) the purchase price paid by the Company or any of its
Subsidiaries in respect of any acquisition permitted under Section 8.05(b)(iv)
hereof; (c) Capital Expenditures not exceeding $6,000,000 during the period from
and after the Closing Date to and including December 31, 1997 in respect of the
expansion by Velda Farms of its facilities at Winter Haven, Miami, Jacksonville
and/or St. Petersburg, Florida; and (d) Capital Expenditures made with the
proceeds of property or casualty insurance for the purposes of repairing or
replacing damaged or destroyed fixed or capital assets.

8.15 INTEREST RATE PROTECTION AGREEMENTS. The Company shall maintain
in full force and effect the Interest Rate Protection Agreements existing as of
the date hereof as described in Section 6.01(l) hereof until the stated
expiration date thereof. The Company further agrees to provide to the Agent on
or before May 17, 1997 evidence that it has in full force and effect Interest
Rate Protection Agreements in form and substance satisfactory to the Agent that
enable the Company to protect against floating interest rates as to a notional
principal amount at least equal to 75% of the maximum aggregate principal amount
of the Facility B Loans outstanding from time to time during the period from
May 17, 1997 to and including July 31, 1999.
<PAGE>

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8.16 LINES OF BUSINESS. Neither the Company nor any of its
Subsidiaries will engage to any substantial extent in any line or lines of
business activity other than operations involved in the manufacture, processing
or distribution of ice, ice-related products, coffee or dairy products, or the
lines of business conducted by the Company or any of its Subsidiaries as of the
date hereof.

8.17 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Subsidiaries
to, directly or indirectly: (a) make any Investment in an Affiliate;
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; or (d) enter into any other transaction directly or
indirectly with or for the benefit of an Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate); PROVIDED
that (i) any Affiliate who is an individual may serve as a director, officer or
employee of the Company or any of its Subsidiaries and receive reasonable
compensation for his or her services in such capacity and (ii) the Company and
its Subsidiaries may enter into transactions (other than extensions of credit by
the Company or any of its Subsidiaries to an Affiliate) if the monetary or
business consideration arising therefrom would be substantially as advantageous
to the Company and its Subsidiaries as the monetary or business consideration
that would obtain in a comparable transaction with a Person not an Affiliate.

8.18 USE OF PROCEEDS. The Company will use the proceeds of the
Facility C Loans only to make Permitted Acquisitions. The Company will use the
proceeds of all Facility C Loans hereunder in compliance with all applicable
legal and regulatory requirements. Neither the Agent nor any Lender shall have
any responsibility as to the use of any of such proceeds.
<PAGE>

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8.19 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; ADDITIONAL
MORTGAGED PROPERTIES.

(b) The Company will not permit any of its Subsidiaries to enter
into, after the date of this Agreement, any indenture, agreement, instrument or
other arrangement (other than the Garrido Negative Pledge Agreement) that,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon, the incurrence or
payment of Indebtedness, the granting of Liens, the declaration or payment of
dividends, the making of loans, advances or Investments or the sale, assignment,
transfer or other disposition of Property.

(c) The Company will take such action, and will cause each of its
Subsidiaries (other than Garrido) to take such action, from time to time as
shall be necessary to ensure that all Subsidiaries of the Company (other than
Garrido) are party to, as obligors, the Existing Subsidiary Guarantee and
Security Agreement or a Supplemental Subsidiary Guarantee and Security
Agreement. Without limiting the generality of the foregoing, in the event that
the Company or any of its Subsidiaries shall form or acquire any new Subsidiary,
the Company or the respective Subsidiary will cause such new Subsidiary to (i)
become a party to the Existing Subsidiary Guarantee and Security Agreement or a
Supplemental Subsidiary Guarantee and Security Agreement pursuant to a written
instrument in form and substance satisfactory to the Agent, (ii) if requested by
the Majority Lenders, cause such new

<PAGE>

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Subsidiary to execute and deliver one or more Mortgages, in substantially the
form of Exhibits D-1 or D-2 hereto (with such changes thereto as the Agent
may reasonably request), covering the real Property and/or fixtures of such
Subsidiary, and (iii) to deliver such proof of corporate action, incumbency
of officers, opinions of counsel and other documents relating to the
foregoing as is consistent with those to be delivered by each Supplemental
Guarantor pursuant to Section 6.02 hereof or delivered pursuant to
Section 7.01 of the Existing Credit Agreement, as the case may be, or as any
Lender or the Agent shall have reasonably requested.

(d) Without affecting the obligations of the Company under any
provision prohibiting such action hereunder, in the event that the Company or
any of its Subsidiaries (other than Garrido) shall acquire any business or
Property after the date hereof, the Company shall, or shall cause such
Subsidiary to (i) if requested by the Majority Lenders, execute and deliver one
or more Mortgages, substantially in the form of Exhibits D-1 or D-2 hereto (with
such changes as the Agent may reasonably request), covering the real property
and/or fixtures so acquired, (ii) execute and deliver to the Agent for filing,
appropriately completed Uniform Commercial Code financing statements or other
filings or instruments as the Agent shall request in order to perfect the
security interest in favor of the Agent for the benefit of the Lenders in such
Property so acquired and (iii) deliver such proof of corporate action,
incumbency of officers, opinions of counsel and other documents relating to the
foregoing as is consistent with those to be delivered by each Supplemental
Guarantor pursuant to Section 6.02 hereof or delivered pursuant to Section 7.01
of the Existing Credit Agreement, as the case may be, or as any Lender or the
Agent shall have reasonably requested.

8.20 MODIFICATIONS OF CERTAIN DOCUMENTS. Except in connection with
any transaction expressly permitted hereunder, the Company will not, nor will it
permit any of its Subsidiaries to, consent to any modification, supplement or
waiver of any of the provisions of the Swiss Dairy Purchase Agreement or any
agreement, instrument or other document evidencing or relating to
<PAGE>

- 112 -

the charter or by-laws of the Company or any of its Subsidiaries, in each
case, without the prior consent of the Agent (with the approval of the
Majority Lenders). Without limiting the requirement for consent as provided
in the immediately preceding sentence, the Company will furnish to the Agent
a copy of each such modification, supplement or waiver promptly upon the
effectiveness thereof (and the Agent will promptly furnish a copy thereof to
each Lender).

8.21 FURTHER ASSURANCES. As and to the extent requested from time to
time by the Agent or the Majority Lenders, each Supplemental Guarantor operating
in the Commonwealth will grant to the Agent, for the benefit of the Lenders, a
Lien in respect of any Property owned by such Supplemental Guarantor operating
in the Commonwealth. Such Lien shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Agent (collectively, the
"ADDITIONAL PUERTO RICO SECURITY DOCUMENTS") and shall constitute valid and
enforceable perfected liens superior to and prior to the rights of all other
Persons and subject to no other Liens except for the Liens permitted pursuant to
Section 8.06 hereof. The Additional Puerto Rico Security Documents or other
instruments related thereto shall be duly recorded or filed in such manner and
in such places as are required by law to establish, perfect, preserve and
protect the Liens in favor of the Agent for the benefit of the Lenders required
to be granted pursuant to the Additional Puerto Rico Security Documents and all
taxes, fees and other charges payable in connection therewith shall be paid in
full.
<PAGE>

- 113 -

8.22 SUBORDINATED INDEBTEDNESS.

(a) Neither the Company nor any of its Subsidiaries will purchase,
redeem, retire or otherwise acquire for value, or set apart any money for a
sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any payment or prepayment of the
principal of or interest on, or any other amount owing in respect of, any
Subordinated Indebtedness, except: (i) for regularly scheduled payments of
principal and interest (including post-default interest) in respect thereof
required pursuant to the instruments evidencing such Subordinated Indebtedness
(and permitted to be made at the time of payment thereof pursuant to the
Subordination Agreement); (ii) the payment or reimbursement of expenses in
connection with the negotiation, execution, delivery and administration and/or
the supervision of, and any permitted amendment or waiver of, the Subordinated
Debt Documents, all in accordance with Section 14 of the Subordinated Note
Purchase Agreement, but excluding expenses, fees or other amounts relating to
the exercise of any rights or remedies or the taking of any enforcement action
by the holders of any Subordinated Indebtedness under or in respect of any
Subordinated Debt Document or any restructuring, refinancing or workout or
similar transaction relating thereto; and (iii) that the Company may redeem or
prepay the Subordinated Indebtedness, in whole or in part, pursuant to Section
7.2 of the Subordinated Note Purchase Agreement from the proceeds of a Public
Offering by the Company after the date hereof, PROVIDED that (i) at the time of
such redemption or prepayment, and at the time any notice with respect thereto
shall be required to be given pursuant to the Subordinated Debt Documents, no
Default shall have occurred and be continuing and (ii) any proceeds of such
offering that remain unapplied after such redemption or prepayment shall be
applied pursuant to Section 2.09(c) hereof. For purposes of this Section
8.22(a), "PUBLIC OFFERING" shall mean a registered public offering under the
Securities Act of 1933, as amended, of capital stock of the Company.

(b) The Company will not, nor will it permit any of its Subsidiaries to,
consent to any modification, supplement or
<PAGE>

- 114 -

waiver of any of the provisions of the Subordinated Debt Documents without
the prior consent of the Agent (with the approval of the Majority Lenders),
except for any such modification, supplement or waiver which does not require
such consent under the express terms of the Subordination Agreement;
PROVIDED, however, that prior to entering into any modification, supplement
or waiver of the Subordinated Debt Documents the Company shall give the Agent
not less than 10 Business Days prior notice thereof furnishing the Agent with
a copy of the proposed amendment, modification or waiver.

Section 9. EVENTS OF DEFAULT. If one or more of the following events
(herein called "EVENTS OF DEFAULT") shall occur and be continuing:

(a) The Company shall: (i) default in the payment of any principal
of any Facility C Loan when due (whether at stated maturity or at mandatory
prepayment); or (ii) default in the payment of any interest on any Facility
C Loan, any fee or any other amount payable by it hereunder or under any
other Loan Document when due and such default shall have continued
unremedied for three or more Business Days; or

- 115 -

specified in relation to the par value thereof or, in the case of an
Interest Rate Protection Agreement, to permit the payments owing under
such Interest Rate Protection Agreement to be liquidated or any "Event
of Default" (as defined in the Existing Credit Agreement) shall occur
and be continuing; or

(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17, 8.19, 8.21 or 8.22 hereof;
or the Company shall default in the performance of any of its other
obligations in this Agreement and such default shall continue unremedied
for a period of 30 or more days after notice thereof to the Company by the
Agent or any Lender (through the Agent); or

(e) The Company shall default in the performance of any of its
obligations under Section 4.02 of the Security Agreement; any Obligor party
to the Existing Subsidiary Guarantee and Security Agreement or any
Supplemental Subsidiary Guarantee and Security Agreement shall default in
the performance of any of its obligations under Section 2 or 5.02 thereof;
or any Obligor shall default in the performance of any of its other
obligations in any Loan Document (other than this Agreement) to which it is
party and such default shall continue unremedied for a period of 30 or more
days after notice thereof to the Company by the Agent or any Lender
(through the Agent); or

(f) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
<PAGE>

- 116 -

(i) A final judgment or judgments for the payment of money in excess
of $500,000 in the aggregate (exclusive of judgment amounts fully bonded or
covered by insurance where
<PAGE>

- 117 -

the surety or the insurer, as the case may be, has admitted liability
in respect of such judgment) shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against
the Company or any of its Subsidiaries and the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within 30 days from
the date of entry thereof and the Company or any such Subsidiary,
as the case may be, shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or

(j) An event or condition specified in Section 8.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or shall be
reasonably likely to incur a liability to a Plan, a Multiemployer Plan or
PBGC (or any combination of the foregoing) that, in the determination of
the Majority Lenders, would (either individually or in the aggregate) have
a Material Adverse Effect; or

(k) A reasonable basis shall exist for the assertion against the
Company or any of its Subsidiaries, or any predecessor in interest of the
Company or any of its Subsidiaries, of (or there shall have been asserted
against the Company or any of its Subsidiaries) an Environmental Claim
that, in the judgment of the Majority Lenders, is reasonably likely to be
determined adversely to the Company or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate) is reasonably
likely to have a Material Adverse Effect (insofar as such amount is payable
by the Company or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor); or
<PAGE>

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(l) Mr. Gregg L. Engles ("ENGLES") shall at any time cease to own
beneficially at least 75% of that number of shares of common stock of the
Company held by him as of June 1, 1996 (as adjusted to take into account
any subsequent stock split, stock dividend or other form of
recapitalization); or any of the Subsidiaries of the Company shall cease to
be a Wholly Owned Subsidiary of the Company; or during any period of 25
consecutive calendar months, a majority of the Board of Directors of the
Company shall no longer be composed of individuals (i) who were members of
said Board on the first day of such period, (ii) whose election or
nomination to said Board was approved by individuals referred to in clause
(i) above constituting at the time of such election or nomination at least
a majority of said Board or (iii) whose election or nomination to said
Board was approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority
of said Board; or any Person or group of Persons acting in concert, other
than Engles or any other shareholder of the Company as of the date hereof,
shall at any time own or control, directly or indirectly, 30% or more of
such voting capital stock; or

(m) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on any material portion of the
collateral intended to be covered thereby (to the extent perfection by
filing, registration, recordation or possession is required herein or
therein) in favor of the Agent, free and clear of all other Liens (other
than Liens permitted under Section 8.06 hereof or under the respective
Security Documents), or, except for expiration in accordance with its
terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Obligor.

THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (g) or (h) of this Section 9 with respect to any Obligor, the Agent may
(and, if requested by the Majority Lenders shall), by notice to the Company,
terminate the Facility
<PAGE>

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C Commitments and/or declare the principal amount then outstanding of, and
the accrued interest on, the Facility C Loans and all other amounts payable
by the Obligors hereunder, under the other Loan Documents and under the
Facility C Notes (including, without limitation, any amounts payable under
Section 5.05 or 5.08 hereof) to be forthwith due and payable, whereupon such
amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by each Obligor; and (2) in the case of the occurrence of an Event of
Default referred to in clause (g) or (h) of this Section 9 with respect to
any Obligor, the Facility C Commitments shall automatically be terminated and
the principal amount then outstanding of, and the accrued interest on, the
Facility C Loans and all other amounts payable by the Company hereunder and
under the Facility C Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.08 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor.

<PAGE>
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Section 10. THE AGENT.

10.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms of this Agreement and of the other Loan Documents,
together with such other powers as are reasonably incidental thereto. The Agent
(which term as used in this sentence and in Section 10.05 and the first sentence
of Section 10.06 hereof shall include reference to its affiliates and its own
and its affiliates' officers, directors, employees and agents): (a) shall have
no duties or responsibilities except those expressly set forth in this Agreement
and in the other Loan Documents, and shall not by reason of this Agreement or
any other Loan Document be a trustee for any Lender; (b) shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any other Loan Document, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Facility C Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the Company
or any other Person to perform any of its obligations hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and (d) shall not be
responsible for any action taken or omitted to be taken by it hereunder or under
any other Loan Document or under any other document or instrument referred to or
provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct. The Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
The Agent may deem and treat the payee of any Facility C Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment or
transfer thereof shall have been filed with the Agent.
<PAGE>
- 121 -

10.02 RELIANCE BY AGENT. The Agent shall be entitled to rely upon
any certification, notice or other communication (including, without limitation,
any thereof by telephone, telecopy, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. As to any
matters not expressly provided for by this Agreement or any other Loan Document,
the Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Majority Lenders or, if provided herein, in accordance with the instructions
given by all of the Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.

10.03 DEFAULTS. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default unless the Agent has received notice from
a Lender or any Obligor specifying such Default and stating that such notice is
a "Notice of Default". In the event that the Agent receives such a notice of
the occurrence of a Default, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders,
PROVIDED that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Lenders except to the extent that this Agreement
expressly requires that such action be taken, or not be taken, only with the
consent or upon the authorization of the Majority Lenders, or all of the
Lenders.

10.04 RIGHTS AS A LENDER. With respect to its Facility C Commitment
and the Facility C Loans made by it, First Union (and any successor acting as
Agent) in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
<PAGE>
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not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
First Union (and any successor acting as Agent) and its affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to,
make investments in and generally engage in any kind of banking, trust or other
business with the Obligors (and any of their Subsidiaries or Affiliates) as if
it were not acting as the Agent, and First Union and its affiliates may accept
fees and other consideration from the Obligors for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders.

10.05 INDEMNIFICATION. The Lenders agree to indemnify the Agent
(to the extent not reimbursed under Section 11.03 hereof, but without
limiting the obligations of the Company under said Section 11.03, and
including in any event any payments under any indemnity that the Agent is
required to issue to any bank referred to in Section 4.02 of the Security
Agreement and Section 5.02 of each Supplemental Subsidiary Guarantee and
Security Agreement to which remittances in respect of Accounts, as defined in
each such agreement, are to be made) ratably in accordance with the aggregate
principal amount of the Facility C Loans held by the Lenders (or, if no
Facility C Loans are at the time outstanding, ratably in accordance with
their respective Facility C Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Loan Document or
any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation,
the costs and expenses that the Company is obligated to pay under Section
11.03 hereof, and including also any payments under any indemnity that the
Agent is required to issue to any bank referred to in Section 4.02 of the
Security Agreement and Section 5.02 of each Supplemental Subsidiary Guarantee
and Security Agreement to which remittances in respect of Accounts, as
defined in each such
<PAGE>
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agreement, are to be made, but excluding, unless a Default has occurred and
is continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, PROVIDED that no
Lender shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the party to be indemnified.

10.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees
that it has, independently and without reliance on the Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Company and its Subsidiaries
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or under any other Loan Document. The Agent shall not be required to keep
itself informed as to the performance or observance by any Obligor of this
Agreement or any of the other Loan Documents or any other document referred to
or provided for herein or therein or to inspect the Properties or books of the
Company or any of its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Agent hereunder or under the Security Documents, the Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Company or any of its Subsidiaries (or any of their affiliates) that may come
into the possession of the Agent or any of its affiliates.

10.07 FAILURE TO ACT. Except for action expressly required of the
Agent hereunder and under the other Loan Documents, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction from the Lenders of
their indemnification obligations under Section 10.05
<PAGE>
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hereof against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action.

10.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the appointment
and acceptance of a successor Agent as provided below, the Agent may resign at
any time by giving notice thereof to the Lenders and the Company, and the Agent
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent with the prior consent of the Company (which consent
shall not be unreasonably withheld); PROVIDED, that no such consent of the
Company shall be required if an Event of Default has occurred and is continuing
and the Facility C Commitments have been terminated and/or the Facility C Loans
and other amounts payable by the Company hereunder have been declared to be
forthwith due and payable. If no successor Agent shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, that shall be a bank with a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.

10.09 AGENCY FEE. So long as the Facility C Commitments are in
effect and until payment in full of the principal of and interest on the
Facility C Loans and all other amounts payable by the Company hereunder, the
Company will pay to the Agent an agency fee in the amount agreed in writing
between the Company and the Agent, payable quarterly in arrears
<PAGE>
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commencing on September 30, 1996 and on the last day of each calendar quarter
thereafter; PROVIDED that if the Facility C Commitments shall have been
terminated prior to such date, the agency fee shall be payable on the date of
such termination. Such fee, once paid, shall be non-refundable.

10.10 CONSENTS UNDER OTHER LOAN DOCUMENTS. Except as otherwise
provided in Section 11.04 hereof with respect to this Agreement, the Agent may,
with the prior consent of the Majority Lenders (but not otherwise), consent to
any modification, supplement or waiver under any of the Loan Documents, PROVIDED
that, without the prior consent of each Lender, the Agent shall not (except as
provided herein or in the Security Documents) release any guarantee or
collateral or otherwise terminate any Lien under any Loan Document providing for
collateral security, or agree to additional obligations being secured by such
collateral security, except that no such consent shall be required, and the
Agent is hereby authorized, to release any Lien covering Property that is the
subject of a disposition of Property permitted hereunder or to which the
Majority Lenders have consented or to release any guarantee of any Obligor that
is the subject of a disposition to which the Majority Lenders have consented.

10.11 SYNDICATION AGENT. The Syndication Agent named on the cover
page of this Agreement shall have no duties, obligations or responsibilities
hereunder except in its capacity as Lender.
<PAGE>
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Section 11. MISCELLANEOUS.

11.01 WAIVER. No failure on the part of the Agent or any Lender to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any Facility C Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Facility C Note preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.

11.02 NOTICES. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telex or telecopy) delivered to the intended recipient at the "Address for
Notices" specified below its name on the signature pages hereof; or, as to any
party, at such other address as shall be designated by such party in a notice to
each other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by telex
or telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.

11.03 EXPENSES, ETC. The Company agrees to pay or reimburse each of
the Lenders and the Agent for: (a) all reasonable out-of-pocket costs and
expenses of the Agent (including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to First
Union, and Fiddler Gonzalez & Rodriguez, special Puerto Rico counsel to First
Union) in connection with (i) the negotiation, preparation, execution and
delivery of this Agreement and the other Loan Documents and the extensions of
credit hereunder and (ii) the negotiation or preparation of any modification,
supplement or waiver of any of the terms of this Agreement or any of the other
Loan Documents (whether or not

<PAGE>
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consummated); (b) all reasonable out-of-pocket costs or allocated costs and
expenses of the Lenders and the Agent (including, without limitation, the
reasonable fees, allocated costs and expenses of legal counsel, which may be
employees of the Lenders or the Agent) in connection with (i) any Default and
any enforcement or collection proceedings resulting therefrom, including,
without limitation, all manner of participation in or other involvement with
(x) bankruptcy, insolvency, receivership, foreclosure, winding up or
liquidation proceedings, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not
the workout, restructuring or transaction contemplated thereby is
consummated) and (ii) the enforcement of this Section 11.03; (c) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement
or any of the other Loan Documents or any other document referred to herein
or therein and all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection
of any security interest contemplated by any Loan Document or any other
document referred to therein; and (d) all costs, expenses and other charges
in respect of title insurance procured with respect to the Liens created
pursuant to any Mortgages securing, directly or indirectly, the Facility C
Loans.

litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified). Without limiting the
generality of the foregoing, the Company will (x) indemnify the Agent for any
payments that the Agent is required to make under any indemnity issued to any
bank referred to in Section 4.02 of the Security Agreement and Section 5.02
of each Supplemental Subsidiary Guarantee and Security Agreement to which
remittances in respect to Accounts, as defined in each such agreement, are to
be made and (y) indemnify the Agent and each Lender from, and hold the Agent
and each Lender harmless against, any losses, liabilities, claims, damages or
expenses described in the preceding sentence (including any Lien filed
against all or any part of the Property covered by any Mortgages (securing,
directly or indirectly, the Facility C Loans) in favor of any governmental
entity, but excluding, as provided in the preceding sentence, any loss,
liability, claim, damage or expense incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) arising
under any Environmental Law as a result of the past, present or future
operations of the Company or any of its Subsidiaries (or any predecessor in
interest to the Company or any of its Subsidiaries), or the past, present or
future condition of any site or facility owned, operated or leased at any
time by the Company or any of its Subsidiaries (or any such predecessor in
interest), or any Release or threatened Release of any Hazardous Materials at
or from any such site or facility, including any such Release or threatened
Release that shall occur during any period prior to the termination of the
Facility C Commitments and the payment in full of the Facility C Loans and
other amounts owing hereunder and under the other Loan Documents when the
Agent or any Lender shall be in possession of any such site or facility
following the exercise by the Agent or any Lender of any of its rights and
remedies hereunder or under any of the Security Documents to the extent such
Release results from a continuation of conditions previously in existence at,
or practices theretofore employed in connection with the operation of, such
site or facility.

<PAGE>
- 129 -

11.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Agent and the
Majority Lenders, or by the Company and the Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Agent acting with the consent of the Majority
Lenders; PROVIDED that: (a) no modification, supplement or waiver shall, unless
by an instrument signed by all of the Lenders or by the Agent acting with the
consent of all of the Lenders: (i) increase, or extend the term of any of the
Facility C Commitments, or extend the time or waive any requirement for the
reduction or termination of any of the Facility C Commitments, (ii) extend the
date fixed for the payment of principal of or interest on any Facility C Loan or
any fee hereunder, (iii) reduce the amount of any such payment of principal,
(iv) reduce the rate at which interest is payable thereon or any fee is payable
hereunder, (v) alter the rights or obligations of the Company to prepay Facility
C Loans, (vi) alter the terms of this Section 11.04, (vii) modify the definition
of the term "Majority Lenders", or modify in any other manner the number or
percentage of the Lenders required to make any determinations or waive any
rights hereunder or to modify any provision hereof, or modify Section
11.06(b)(iii) hereof, (viii) release any Subsidiary Guarantor from any of its
guarantee obligations under the Existing Subsidiary Guarantee and Security
Agreement or any Supplemental Subsidiary Guarantee and Security Agreement or
release (or terminate any Lien on) all or substantially all of the Collateral
except as provided in the Security Documents with respect to such Collateral in
any of the Security Documents or (ix) waive any of the conditions precedent set
forth in Section 6.01 or 6.02 hereof; and (b) any modification of any of the
rights or obligations of the Agent shall require the consent of the Agent.

11.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.

<PAGE>
- 130 -

11.06 ASSIGNMENTS AND PARTICIPATIONS.

(a) The Company may not assign any of its rights or obligations
hereunder or under the Facility C Notes without the prior consent of all of the
Lenders and the Agent.

(b) Each Lender may assign any of its Facility C Loans, its Facility
C Note and its Facility C Commitment with the consent of the Agent (which
consent shall not be unreasonably withheld) pursuant to an Assignment and
Acceptance substantially in the form of Exhibit E hereto; PROVIDED that:

(i) no such consent by the Agent shall be required in the case
of any assignment to another Lender;

(ii) each assignment by a Lender of its Facility C Loans,
Facility C Note or Facility C Commitment shall be made in such a manner so
that the same portion of such Facility C Loans, Facility C Note and
Facility C Commitment is assigned to the respective assignee;

(iii) each assignment by any Facility C Lender, Facility A
Lender or Facility B Lender of any of its Facility C Loans, Facility A
Loans or Facility B Loans respectively (and related Facility C Note,
Facility A Note and Facility B Note and related Facility C Commitment,
Facility A Commitment and Facility B Commitment) shall be made in such a
manner so that the same portion of its Facility C Loans, Facility A Loans
and Facility B Loans to the Company (and related Facility C Note, Facility
A Note and Facility B Note and related Facility C Commitment, Facility A
Commitment and Facility B Commitment) is assigned to the respective
assignee; and

(iv) any such assignment of less than all of such Lender's
interests in the Facility A Loans, Facility B Loans and Facility C Loans,
Facility A Notes, Facility B Notes and Facility C Notes, and Facility A
Commitments, Facility B Commitments and Facility C Commitments, as the case
may be,
<PAGE>
- 131 -

shall be in an aggregate amount at least equal to $10,000,000.

Upon execution and delivery by the assignor and assignee to the Agent of such
Assignment and Acceptance, and upon consent thereto by the Agent to the extent
required above, the assignee shall have, to the extent of such assignment, the
obligations, rights and benefits of a Lender hereunder holding the Facility C
Commitment and Facility C Loans (or portions thereof) assigned to it as
specified in such Assignment and Acceptance (in addition to the Facility C
Commitment and Facility C Loans theretofore held by such assignee) and the
assigning Lender shall, to the extent of such assignment, be released from the
Facility C Commitment (or portion thereof) so assigned. Upon each such
assignment the assigning Lender shall pay the Agent an assignment fee of $3,000.

(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Facility C Loans held by it, or in its
Facility C Commitment, in which event each purchaser of a participation (a
"PARTICIPANT") shall be entitled to the rights and benefits of the provisions of
Section 8.01(j) hereof with respect to its participation in such Facility C
Loans and Facility C Commitment as if (and the Company shall be directly
obligated to such Participant under such provisions as if) such Participant were
a "Lender" for purposes of said Section, but, except as otherwise provided in
Section 4.07(c) hereof, shall not have any other rights or benefits under this
Agreement or any Facility C Note or any other Loan Document (the Participant's
rights against such Lender in respect of such participation to be those set
forth in the agreements executed by such Lender in favor of the Participant).
All amounts payable by the Company to any Lender under Section 5 hereof in
respect of Facility C Loans held by it, and its Facility C Commitment, shall be
determined as if such Lender had not sold or agreed to sell any participations
in such Facility C Loans and Facility C Commitment, and as if such Lender were
funding each of such Facility C Loans and Facility C Commitment in the same way
that it is funding the portion of such Facility C Loans and Facility C
Commitment in which no participations have been sold. In no event shall a
Lender that sells a participation

<PAGE>
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agree with the Participant to take or refrain from taking any action
hereunder or under any other Loan Document except that such Lender may agree
with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term, or extend the time or
waive any requirement for the reduction or termination, of such Lender's
related Facility C Commitment, (ii) extend the date fixed for the payment of
principal of or interest on the related Facility C Loan or Facility C Loans
or any portion of any fee hereunder payable to the Participant, (iii) reduce
the amount of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon, or any fee hereunder payable to the Participant,
to a level below the rate at which the Participant is entitled to receive
such interest or fee, (v) alter the rights or obligations of the Company to
prepay the related Facility C Loans, (vi) consent to any modification,
supplement or waiver hereof or of any of the other Loan Documents to the
extent that the same, under Section 10.10 or 11.04 hereof, requires the
consent of each Lender or (vii) release any Subsidiary Guarantor from any of
its guarantee obligations under the Guarantee Agreement or any Supplemental
Subsidiary Guarantee and Security Agreement or release (or terminate any Lien
on) all or substantially all of the collateral directly or indirectly
securing the Facility C Loans except as provided in the Security Documents
with respect to such collateral in any of the Security Documents.

(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Lender may (without notice
to the Company, the Agent or any other Lender and without payment of any fee)
(i) assign and pledge all or any portion of its Facility C Loans and its
Facility C Note to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement and its
Facility C Loans and its Facility C Note to an affiliate. No such assignment
shall release the assigning Lender from its obligations hereunder.
<PAGE>
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(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Facility C Loan held by
it hereunder to the Company or any of its Subsidiaries or Affiliates without the
prior consent of each Lender.

11.07 SURVIVAL. The obligations of the Company under Sections 5.01,
5.05, 5.06, 5.08 and 11.03 hereof, and the obligations of the Lenders under
Section 10.05 hereof, shall survive the repayment of the Facility C Loans and
the termination of the Facility C Commitments. In addition, each representation
and warranty made, or deemed to be made by a notice of any extension of credit
(whether by means of a Facility C Loan), herein or pursuant hereto shall survive
the making of such representation and warranty, and no Lender shall be deemed to
have waived, by reason of making any extension of credit hereunder (whether by
means of a Facility C Loan), any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Agent may have had notice or knowledge
or reason to believe that such representation or warranty was false or
misleading at the time such extension of credit was made.

11.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.

11.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
<PAGE>
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11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF PROCESS
AND VENUE.

(a) This Agreement and the Facility C Notes shall be governed by, and
construed in accordance with, the law of the State of New York.

(b) The Company hereby agrees that any suit, action or proceeding
with respect to this Agreement, any Facility C Note or any other Loan Document
to which it is a party or any judgment entered by any court in respect thereof
may be brought in the United States District Court for the Southern District of
New York, in the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), or in any other appellate court in
the State of New York, as the party commencing such suit, action or proceeding
may elect in its sole discretion; and each party hereto hereby irrevocably
submits to the non-exclusive jurisdiction of such court for the purpose of any
such suit, action, proceeding or judgment. Each party hereto further submits,
for the purpose of any such suit, action, proceeding or judgment brought or
rendered against it, to the appropriate courts of the jurisdiction of its
domicile.

(c) The Company hereby agrees that service of all writs, process and
summonses in any suit, action or proceeding brought hereunder or under any of
the other Loan Documents to which the Company is a party may be made upon The
Prentice Hall Corporation System, Inc. presently located at 15 Columbus Circle,
New York, New York 10023, U.S.A. (the "PROCESS AGENT"), and the Company hereby
confirms and agrees that the Process Agent has been duly and irrevocably
appointed as its agent and true and lawful attorney in fact in its name, place
and stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give any notice
of any such service of process to the Company shall not impair or affect the
validity of such service or of any judgment based thereon. Without limiting the
foregoing, the Company hereby irrevocably consents to the service of process in
any suit, action or proceeding in such courts by the mailing thereof by the
Agent or any Lender by registered or certified mail,

<PAGE>
- 135 -

postage prepaid, at its address set forth beneath its signature hereto.
Nothing herein shall in any way be deemed to limit the ability of the Agent
or any Lender to serve any such writs, process or summonses in any other
manner permitted by applicable law or to obtain jurisdiction over the Company
in such other jurisdictions, and in such manner, as may be permitted by
applicable law.

(d) The Company hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement, the Facility C Notes or
the other Loan Documents brought in any such court and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.

11.11 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

11.12 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.

<PAGE>
- 136 -

Facility C Loans and the termination of the Facility C Commitments.

(b) Each Lender and the Agent agree (on behalf of itself and each of
its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by any Obligor pursuant to this Agreement that is identified by
such Person as being confidential at the time the same is delivered to the
Lenders or the Agent, PROVIDED that nothing herein shall limit the disclosure of
any such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Lenders or the Agent, (iii) to
any Lender's examiners, auditors or accountants, (iv) to the Agent, the
Syndication Agent named on the cover page of this Agreement or any other Lender,
(v) in connection with any litigation to which any one or more of the Lenders or
the Agent is a party, (vi) to a subsidiary or affiliate of such Lender as
provided in clause (a) above or (vii) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first executes and delivers to the
respective Lender a Confidentiality Agreement substantially in the form of
Exhibit H hereto; PROVIDED, further, that in no event shall any Lender or the
Agent be obligated or required to return any materials furnished by any Obligor.
The obligations of any assignee that has executed a Confidentiality Agreement in
the form of Exhibit H hereto shall be superseded by this Section 11.12 upon the
date upon which such assignee becomes a Lender hereunder pursuant to
Section 11.06 hereof.

11.13 INTENTION OF PARTIES. Notwithstanding anything contained
herein to the contrary, it is the intention of the parties hereto that this
Agreement and the Facility C Commitments and extensions of credit provided
hereunder represent a supplement to, but not a novation or discharge of, the
credit facilities provided by the Existing Credit Agreement.

<PAGE>
- 137 -

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Credit Agreement to be duly executed and delivered as of the day and year first
above written.

COMPANY

SUIZA FOODS CORPORATION

By_________________________
Title:

Address for Notices:

3811 Turtle Creek Boulevard
Suite 1300
Dallas, Texas 75219

Attention: Gregg L. Engles

Telecopier No.: (214) 528-9929

Telephone No.: (214) 528-9922
<PAGE>
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LENDERS

FACILITY C COMMITMENT FIRST UNION NATIONAL BANK OF
$16,200,000 NORTH CAROLINA

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

First Union National Bank of
North Carolina
301 S. College Street
Charlotte, NC 28288-0737

Address for Notices:

First Union National Bank of
North Carolina
301 S. College Street
Charlotte, NC 28288-0737

Attention: Sana Alkoor - Suiza

Telecopier No.: (704) 383-6537

Telephone No.: (704) 374-9831

<PAGE>
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FACILITY C COMMITMENT THE FIRST NATIONAL BANK OF CHICAGO
$16,200,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670

Address for Notices:

The First National Bank of Chicago
1 First National Plaza
Suite 0088, 14th Floor
Chicago, IL 60670

Attention: April Yebd

Telecopier No.: (312) 732-2715
(312) 732-6276

Telephone No.: (312) 732-4823
<PAGE>
- 140 -

FACILITY C COMMITMENT HARRIS TRUST AND SAVINGS BANK
$9,000,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690

Address for Notices:

Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60690

Attention: Jerry Karl/Marieky Estrada

Telecopier No.: (312) 765-8095

Telephone No.: (312) 461-3776/7664

<PAGE>
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FACILITY C COMMITMENT THE BANK OF NOVA SCOTIA
$10,800,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30308

Address for Notices:

The Bank of Nova Scotia
Atlanta Agency
600 Peachtree Street N.E.
Suite 2700
Atlanta, Georgia 30308

Attention: F.C.H. Ashby
Senior Assistant Agent

Telecopier No.: (404) 888-8998

Telephone No.: (404) 877-1500

with a copy to:

The Bank of Nova Scotia
Houston Representative Office
1100 Louisiana
Suite 3000
<PAGE>
- 142 -

Houston, Texas 77002

Attention: Rosine Matthews
Relationship Manager

Telecopier No.: (713) 752-2425

Telephone No.: (713) 759-3432

<PAGE>
- 143 -

FACILITY C COMMITMENT BANCO POPULAR DE PUERTO RICO
$7,200,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019

Address for Notices:

Banco Popular de Puerto Rico
7 West 51st Street
New York, New York 10019

Attention: John Cuneo

Telecopier No.: (212) 586-3537

Telephone No.: (212) 315-2800

<PAGE>
- 144 -

FACILITY C COMMITMENT BANK OF AMERICA ILLINOIS
$5,400,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697

Address for Notices:

Bank of America Illinois
231 S. LaSalle
Chicago, Illinois 60697

Attention: Paul Youmaura

Telecopier No.: (312) 974-9626

Telephone No.: (312) 828-6574

<PAGE>
- 145 -

FACILITY C COMMITMENT BANQUE PARIBAS
$5,400,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002

Address for Notices:

Banque Paribas
1200 Smith Street
Suite 3100
Houston, Texas 77002

Attention: Chuck E. Irwin

Telecopier No.: (713) 659-5234

Telephone No.: (713) 659-4811
<PAGE>
- 146 -

FACILITY C COMMITMENT CAISSE NATIONALE DE CREDIT AGRICOLE
$5,400,000

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603

Address for Notices:

Caisse Nationale de Credit Agricole
55 E. Monroe
Suite 4700
Chicago, IL 60603

Attention: Laura Schmuck

Telecopier No.: (312) 372-4421

Telephone No.: (312) 917-7428
<PAGE>
- 147 -

FACILITY C COMMITMENT THE FUJI BANK, LIMITED,
$9,000,000 HOUSTON AGENCY

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Fuji Bank, Limited,
Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010

Telecopier No.: (713) 759-0048

Address for Notices:

The Fuji Bank, Limited,
Houston Agency
One Houston Center
1221 McKinney Street, Suite 4100
Houston, TX 77010

Attention: Philip C. Lauinger III
Vice President and Joint
Manager or
David L. Kelley
Senior Vice President
(713) 650-7850

Telecopier No.: (713) 759-0048

Telephone No.: (713) 650-7852
<PAGE>
- 148 -

FACILITY C COMMITMENT THE LONG-TERM CREDIT BANK OF JAPAN,
$5,400,000 LIMITED, NEW YORK BRANCH

By_________________________
Title:

Lending Office for Base Rate Loans and
Eurodollar Loans:

The Long-Term Credit Bank of Japan,
Limited, New York Branch
165 Broadway
New York, NY 10006

Address for Notices:

The Long-Term Credit Bank of Japan,
Limited, New York Branch
165 Broadway
New York, NY 10006

Attention: Frank H. Madden, Jr.

Telecopier No.: (212) 608-2371

Telephone No.: (212) 335-4550

<PAGE>
- 149 -

AGENT

FIRST UNION NATIONAL BANK OF
NORTH CAROLINA,
as Agent

By_________________________
Title:

Address for Notices to
the Agent:

First Union National Bank of
North Carolina
301 S. College Street TW-10
Charlotte, NC 28288-0608

Attention: Syndication Agency Services

Telecopier No.: (704) 383-0288

Telephone No.: (704) 383-0281

Telex No.:
(Answerback: )

<PAGE>

THE SECURITIES REFERRED TO HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT IS AVAILABLE.

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this "Agreement") dated as of August 6, 1996 is
entered into by and between T. Rowe Price Small-Cap Value Fund, Inc., a Maryland
corporation (the "Purchaser"), and Suiza Foods Corporation, a Delaware
corporation (the "Company").

The Company has offered for sale, and the Purchaser has agreed to purchase,
625,000 shares (the "Shares") of common stock, par value of $.01 per share, of
the Company. In connection therewith, the Company and the Purchaser hereby
agree as follows:

1. PURCHASE AND SALE OF SHARES. Upon the basis of the representations
and warranties and subject to the terms and conditions set forth herein, the
Company agrees to issue and sell the Shares to the Purchaser on the Closing Date
(as hereinafter defined) at an aggregate purchase price of $10,000,000 (the
"Purchase Price"), and upon the basis of the representations and warranties, and
subject to the terms and conditions, set forth herein, the Purchaser agrees to
purchase the Shares from the Company on the Closing Date at the Purchase Price.

2. CLOSING. The closing of the purchase and sale of the Shares shall
take place at 10:00 a.m., New York City time, on August 7, 1996 at the offices
of Hughes & Luce, L.L.P., or on such other date or at such other time or place
as the Company and the Purchaser may agree upon in writing (such time and date
of the closing being referred to herein as the "Closing Date"). Upon payment of
the Purchase Price in full in immediately available funds by or on behalf of the
Purchaser to the Company (to an account specified in writing by the Company to
the Purchaser prior to the Closing Date), the Company will deliver to the
Purchaser a certificate or certificates representing the Shares, in such
denominations and registered in such nominee names as the Purchaser shall
request.

3. REGISTRATION.

(a) Within 60 days after the Closing Date, the Company will prepare and
file with the Securities and Exchange Commission a registration statement on
Form S-1 with respect to a continuous offering of the Shares (including any
Shares to which the Purchaser may be entitled pursuant to SECTION 3(b) below) by
the Purchaser (together with any subsequent registration statement with respect
to such offering that may be filed on Form S-3, the "Registration Statement")
and will use its best efforts to cause the Registration Statement to become
effective within 100 days after the Closing Date and to remain effective for a
period of three years; provided that such three year period will be extended by
the aggregate number of days during which the Purchaser is prevented from
selling Shares as a result of SECTION 3(c) or 3(d) below. The Purchaser will
not sell any Shares under the Registration Statement unless, at the time of

<PAGE>

sale, the Registration Statement (and the most recently filed post-effective
amendment thereto, if any) has been declared effective. Promptly after the
Company becomes eligible to register a continuous offering of the Shares by the
Purchaser on Form S-3, the Company will prepare and file a registration
statement on Form S-3 with respect to such offering.

(b) If the Registration Statement is not declared effective within 100
days after the Closing Date, the Company will issue to the Purchaser, for no
additional consideration, 383.8 additional shares of its common stock for each
day after such 100th day and prior to the date on which the Registration
Statement is declared effective, up to a maximum of 103,626 additional shares.
Any additional shares required to be issued under this paragraph will constitute
"Shares" hereunder and will be issued by the Company on the earlier to occur of
(i) the date on which the Registration Statement is declared effective and (ii)
the 371st day after the Closing Date. As promptly as practicable after the date
of issuance, the Company will deliver to the Purchaser a certificate or
certificates representing such additional shares, in such denominations and
registered in such nominee names as the Purchaser shall request.

(c) The Purchaser will notify the Company two business days prior to
selling any Shares pursuant to the Registration Statement. If, upon receipt of
such a notice, the Company certifies to the Purchaser in writing that (i) due to
a change in circumstances or a pending transaction, the Registration Statement
contains an 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
not misleading and (ii) the public disclosure required to correct such
misstatement or omission would be injurious to the Company, then the Purchaser
will refrain from selling any Shares pursuant to the Registration Statement for
the period of time, not to exceed 45 days in each instance, requested by the
Company. The Company will use reasonable efforts to minimize the time period
during which the Purchaser is required to refrain from selling Shares under this
paragraph.

(d) If, during the Registration Period, the Company commences an
underwritten offering of common stock on its own behalf or on behalf of selling
stockholders, the Purchaser will refrain from selling Shares pursuant to the
Registration Statement for a period of time beginning ten days before the
anticipated effective date of the Company's offering (as disclosed by the
Company to the Purchaser in writing) and ending 90 days after such effective
date (or 30 days after the beginning of such period, if such effective date has
not yet occurred); provided that the Purchaser is given the opportunity to sell
Shares in such offering on an equivalent basis with any other selling
stockholders (based on the pro rata ownership of the Company's outstanding
common stock).

(e) The Company's obligations under this Section will terminate at the
first time at which the Purchaser would be entitled, under Rule 144 under the
Securities Act of 1933, as amended (the "Act"), to sell all of the Shares then
owned by the Purchaser in a single three month period regardless of the volume
of trading in the Company's common stock.

(f) The Purchaser will furnish to the Company, at the Company's reasonable
request, such information regarding the ownership of the Shares and the intended
method of disposition

<PAGE>

thereof as is required in connection with the preparation of a registration
statement covering the Shares.

(g) The Company will bear all expenses arising or incurred in connection
with any registration of the Shares hereunder, including without limitation
registration fees, printing expenses and the Company's accounting and legal fees
and expenses; provided that the Purchaser will bear the expense of any
underwriting fees, discounts or commissions applicable to its sale of the Shares
and the fees and expenses of any separate legal counsel or accounting firm
engaged by the Purchaser.

4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants, as of the date hereof and as of the Closing Date, as follows:

(a) no consent, approval, authorization or order of any court,
governmental agency or body or arbitrator having jurisdiction over the Company
or any of the Company's affiliates is required for the execution of this
Agreement or the performance of the Company's obligations hereunder, including,
without limitation, the sale of the Shares to the Purchaser;

(b) neither the sale of the Shares nor the performance of the Company's
other obligations pursuant to this Agreement will violate, conflict with, result
in a breach of, or constitute a default (or an event that, with the giving of
notice or the lapse of time or both, would constitute a default) under (i) the
certificate of incorporation or bylaws of the Company, (ii) any decree,
judgment, order or determination of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or any of the Company's
properties or assets, (iii) any law, treaty, rule or regulation applicable to
the Company (other than the federal securities laws, representations and
warranties with respect to which are made by the Company solely in paragraphs
(e) through (h) of this Section 3) or (iv) the terms of any bond, debenture,
note or other evidence of indebtedness, or any agreement, stock option or other
similar plan, by which the Company is bound or to which any property of the
Company is subject;

(c) the Company has or, prior to the Closing Date, will have taken all
corporate action required to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder;

(d) the Company has duly authorized the Shares and, when issued and
delivered in accordance with the terms of the Company's certificate of
incorporation and delivered to and paid for by the Purchaser in accordance with
the terms hereof, the Shares will be duly and validly issued, fully paid and
non-assessable, and the issuance of such Shares is not subject to any preemptive
or similar rights;

(e) the sale of the Shares by the Company is not part of a plan or scheme
to evade the registration requirements of Act;

(f) neither the Company nor any person acting on behalf of the Company has
offered or sold any of the Shares by any form of general solicitation or general
advertising;

<PAGE>

(g) the Company has offered the Shares for sale only to "accredited
investors," as such term is defined in Rule 501(a) under the Act, who by reason
of their business and financial experience have such knowledge, sophistication
and experience in business and financial matters as to be capable of evaluating
the merits and risks of the investment in the Shares;

(h) the offering of the Shares to the Purchaser hereunder was not
contemplated by the Company at the time of the Company's initial public
offering, and the proceeds from the sale of the Shares hereunder will be used
for a different purpose than the proceeds from such initial public offering;

(i) the prospectus included in the Company's registration statement on
Form S-1 (Registration No. 333-1858), the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996 and June 30, 1996, each Current
Report on Form 8-K filed by the Company and each press release of the Company
attached hereto (collectively, the "Disclosure Documents"), taken as a whole,
fairly and accurately present the Company's business as of the date hereof and
as of the Closing Date and its financial condition and results of operations
through June 30, 1996, and the Disclosure Documents do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading;

(j) the financial statements of the Company included in each of the
Disclosure Documents, including the schedules and notes thereto, comply in all
material respects with the requirements of the Act or the Securities Exchange
Act of 1934, as amended, (as applicable) and have been prepared, and fairly
present the financial condition and results of operations and cash flows of the
Company and its subsidiaries at the respective dates and for the respective
periods indicated, in accordance with generally accepted accounting principles
consistently applied throughout such periods;

(k) except as set forth in the Disclosure Documents, since June 30, 1996
(i) the Company has not incurred any material liabilities, direct or contingent,
and (ii) there has been no material adverse change in the properties, business,
results of operations, condition (financial or other), affairs or prospects of
the Company and its subsidiaries, taken as a whole;

(l) as of the date hereof (and without giving effect to the sale of Shares
hereunder), the Company has a total of 10,114,729 shares of common stock issued
and outstanding, and options to purchase an additional 1,316,838 shares of
common stock are outstanding; otherwise, there are no options, warrants or
similar rights outstanding pursuant to which the Company is required to issue
any shares of its capital stock;

(m) the proceeds from the sale of the Shares hereunder will not be used to
repurchase any of the Company's outstanding common stock; and

(n) Except for such matters as would, individually or in the aggregate,
not have a material adverse effect on the Company, (i) the Company has obtained
all permits, licenses and

<PAGE>

authorizations required under, and has complied in all respects with, all
federal, state, local and foreign laws, rules and regulations (including the
common law) relating to or regulating health, safety, pollution or the
protection of the environment, the manufacture, labeling, packaging and
safety of food, and manufacturing, health and safety standards for the
protection of employees (collectively, "Environmental, Health and Safety
Laws"); (ii) no notice has been received by the Company regarding any
violation of, or any claim, liability or corrective or remedial obligation
under, any Environmental, Health and Safety Laws; and (iii) no facts or
circumstances exist with respect to the past or present operations or
facilities of the Company that would give rise to a liability or corrective
or remedial obligation under any Environmental, Health and Safety Laws.

5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants that:

(a) the purchase of the Shares by the Purchaser is not part of a plan or
scheme to evade the registration requirements of the Act;

(b) the Purchaser is an "accredited investor," as such term is defined in
Rule 501(a) under the Act, who by reason of its business and financial
experience has such knowledge, sophistication and experience in business and
financial matters as to be capable of evaluating the merits and risks of an
investment in the Shares and, having had access to or having been furnished with
all such information as it has considered necessary (including, without
limitation, the Disclosure Documents), has concluded that it is able to bear to
those risks;

(c) the Purchaser understands that the Shares constitute "restricted
securities" within the meaning of Rule 144 under the Act and may not be sold,
pledged or otherwise disposed of unless they are subsequently registered under
the Act and applicable state securities laws or unless an exemption from
registration is available;

(d) in making any subsequent offering or sale of the Shares, the Purchaser
will be acting only for itself and not as part of a sale or planned distribution
in violation of the Act;

(e) the Shares were not offered to the Purchaser by any form of general
solicitation or general advertising;

(f) the Purchaser understands that no federal or state or other
governmental agency has passed upon or made any recommendation or endorsement
with respect to the Shares;

(g) the Purchaser is purchasing the Shares for its own account and not
with a view to, or for sale in connection with, any distribution of the Shares
in violation of the Act;

(h) no consent, approval, authorization or order of any count,
governmental agency or body or arbitrator having jurisdiction over the Purchaser
or any of the Purchaser's affiliates is required for the execution of this
Agreement, or the performance of the Purchaser's obligations hereunder,
including, without limitation, the purchase of the Shares by the Purchaser; and

<PAGE>

(i) the Purchaser has or, prior to the Closing Date, will have taken all
corporate action required to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder.

6. CONDITIONS TO CLOSING. The obligations of each party hereunder shall
be subject to (a) the accuracy of the representations and warranties of the
other party hereto as of the date hereof and as of the Closing Date, as if such
representations and warranties had been made on and as of such date, (b) the
performance by the other party of its obligations hereunder and (c) the
condition that Hughes & Luce, L.L.P., counsel to the Company, shall have
delivered on or prior to the Closing Date a legal opinion substantially in the
form attached hereto. The Company and the Purchaser hereby acknowledge that, in
giving such opinion, Hughes & Luce, L.L.P. will rely on the accuracy and truth,
as to factual matters, of the representations and warranties of the Company and
the Purchaser in Section 3 and Section 4, respectively, and hereby consent to
such reliance by such counsel.

7. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless the Purchaser, each
person, if any, who controls the Purchaser within the meaning of Section 15 of
the Act and each officer, director, employee and agent of the Purchaser and of
any such controlling person against any and all losses, liabilities, claims,
damages or expenses whatsoever, as incurred arising out of any representation,
warranty, covenant or undertaking by the Company contained in this Agreement,
and the Company will reimburse the Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation, and including
the reasonable fees and expenses of counsel) incurred in connection therewith.

(b) The Purchaser agrees to indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of Section 15 of the
Act and each officer, director, employee and agent of the Company and of any
such controlling person against any and all losses, liabilities, claims, damages
or expenses whatsoever, as incurred arising out of or resulting from any breach
or alleged breach or other violation or alleged violation of any representation,
warranty, covenant or undertaking by the Purchaser contained in this Agreement,
and the Purchaser will reimburse the Company for its reasonable legal and other
expenses (including the cost of any investigation and preparation, and including
the reasonable fees and expenses of counsel) incurred in connection therewith.

8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
agreements, representations, warranties, indemnities and other statements made
by or on behalf of each party hereto pursuant to this Agreement shall remain in
full force and effect, regardless of any investigation made by or on behalf of
any party, and shall survive delivery of any payment for the Shares.

<PAGE>

9. MISCELLANEOUS.

(a) This Agreement may be executed in one or more counterparts, and such
counterparts shall constitute but one and the same agreement.

(b) This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their respective successors and, with respect to the
indemnification provisions hereof, each person entitled to indemnification
hereunder, and no other person shall have any right or obligation hereunder.
This Agreement shall not be assignable by any party hereto without the prior
written consent of the other party hereto. Any assignment contrary to the terms
hereof shall be null and void and of no force or effect.

(c) This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes any prior agreements or
understandings, whether written or oral, between the parties respecting such
subject matter.

10. TIME OF THE ESSENCE. Time shall be of the essence in this Agreement.

11. GOVERNING LAW. This Agreement shall be governed by the internal laws
of the State of New York.

IN WITNESSES WHEREOF, the parties have entered into this Agreement as
of the date first set forth above.

SUIZA FOODS CORPORATION

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

T. ROWE PRICE SMALL-CAP
VALUE FUND, INC.

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

<PAGE>
EXHIBIT 11.1

Statement re: Computation of Per Share Earnings

<TABLE>
1993 1994 1995
---------- ---------- ----------
(Amounts in thousands, except share
and per share amounts)
<S> <C> <C> <C>
Income (loss) before extraordinary items $ 1,420 $ 4,245 $ (1,576)
Extraordinary loss 197 8,462
---------- ---------- ----------
Net income (loss) $ 1,420 $ 4,048 $ (10,038)
---------- ---------- ----------
---------- ---------- ----------

CALCULATION OF PRIMARY EARNINGS (LOSS) PER SHARE:

Weighted average shares outstanding 1,891,014 5,273,256 6,109,398
Common stock equivalents (options and warrants) 596,160 883,131 *
---------- ---------- ----------
Total weighted average shares outstanding 2,487,174 6,156,387 6,109,398
---------- ---------- ----------
---------- ---------- ----------

Income (loss) before extraordinary items $ 0.57 $ 0.69 $ (0.26)
Extraordinary loss (0.03) (1.39)
---------- ---------- ----------
Net income (loss) $ 0.57 $ 0.66 $ (1.64)
---------- ---------- ----------
---------- ---------- ----------

CALCULATION OF FULLY DILUTED EARNINGS (LOSS) PER SHARE:

Weighted average shares outstanding 1,891,014 5,273,256 6,109,398

Common stock equivalents (options and warrants) 596,160 935,778 *
---------- ---------- ----------
Total weighted average shares outstanding 2,487,174 6,209,034 6,109,398
---------- ---------- ----------
---------- ---------- ----------

Income (loss) before extraordinary items $ 0.57 $ 0.68 $ (0.26)
Extraordinary loss (0.03) (1.39)
---------- ---------- ----------
Net income (loss) $ 0.57 $ 0.65 $ (1.64)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

* Excluded as such amounts are anti-dilutive.

<PAGE>

<TABLE>
FOR THE THREE FOR THE THREE FOR THE SIX FOR THE SIX
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996
------------- ------------- ------------- -------------
(AMOUNTS, IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Income (loss) before extraordinary items $ 2,332 $ 4,553 $ (7,557) $ 4,936
Extraordinary loss -- (2,215) (8,462) (2,215)
---------- ---------- ---------- ----------
Net income (loss) $ 2,332 $ 2,338 $ (16,019) $ 2,721
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

CALCULATION OF PRIMARY EARNINGS (LOSS) PER SHARE:

Weighted average shares outstanding 6,313,000 9,191,006 5,905,000 7,752,243
Common stock equivalents (options and warrants) * 730,709 * 703,089
---------- ---------- ---------- ----------
Total weighted average shares outstanding 6,313,000 9,921,715 5,905,000 8,455,332
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

Income (loss) before extraordinary items $ 0.37 $ 0.46 $ (1.28) $ 0.58
Extraordinary loss -- (0.22) (1.43) (0.26)
---------- ---------- ---------- ----------
Net income (loss) $ 0.37 $ 0.24 $ (2.71) $ 0.32
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

CALCULATION OF FULLY DILUTED EARNINGS (LOSS) PER SHARE:

Weighted average shares outstanding 6,313,000 9,191,006 5,805,000 7,752,243
Common stock equivalents (options and warrants) * 776,503 * 776,503
---------- ---------- ---------- ----------
Total weighted average shares outstanding 6,313,000 9,967,509 5,905,000 8,528,746
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

* Excluded as such amounts are anti-dilutive.

<PAGE>

EXHIBIT 21.1

Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------

Suiza Dairy Corporation Delaware
Suiza Fruit Corporation Delaware
Neva Plastics Manufacturing Corp. Delaware
Velda Farms, Inc. Delaware
Reddy Ice Corporation Delaware
Suiza Management Corporation Delaware
Garrido y Compania, Inc. Puerto Rico
Guest Choice, Inc. Delaware
Swiss Dairy Corporation Delaware

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Suiza Foods
Corporation on Form S-1 of our reports on the consolidated financial
statements of Suiza Foods Corporation dated February 18, 1996 (February 29,
1996 as to Note 13); the combined financial statements of Pre-Acquisition
Suiza-Puerto Rico dated April 15, 1994; the financial statements of
Pre-Acquisition Velda Farms dated November 4, 1994; and the financial
statements of Swiss Dairy dated August 28, 1996, appearing in the Prospectus,
which is a part of this Registration Statement, and to the reference to us
under the heading "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

Dallas, Texas
September 30, 1996

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the use in the registration statement on Form S-1 of Suiza
Foods Corporation and the related prospectus of our report dated August 23,
1996, with respect to the consolidated balance sheets of Garrido & Compania,
Inc. and Subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of earnings, changes in stockholders' equity, and
cash flows for each of the years in the three-year period ended June 30,
1996, and to the reference to us under the heading "Experts" in such
prospectus.

/s/ KPMG PEAT MARWICK LLP

San Juan, Puerto Rico
September 30, 1996