Dean Foods Co – ‘S-4/A’ on 10/24/97

As of:  Friday, 10/24/97   ·   Accession #:  1047469-97-1600   ·   File #:  333-37861

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Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction   —   Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Pre-Effective Amendment to Registration of           247   1.44M 
                          Securities Issued in a                                 
                          Business-Combination Transaction                       
 2: EX-5.1      Opinion re: Legality                                   1      9K 
 3: EX-8.1      Opinion re: Tax Matters                                5     26K 
11: EX-23.10    Consent of Experts or Counsel                          1      7K 
12: EX-23.11    Consent of Experts or Counsel                          1      8K 
 4: EX-23.2     Consent of Experts or Counsel                          1      9K 
 5: EX-23.3     Consent of Experts or Counsel                          1      8K 
 6: EX-23.4     Consent of Experts or Counsel                          1      8K 
 7: EX-23.5     Consent of Experts or Counsel                          1      8K 
 8: EX-23.6     Consent of Experts or Counsel                          1      8K 
 9: EX-23.7     Consent of Experts or Counsel                          1      7K 
10: EX-23.8     Consent of Experts or Counsel                          1      7K 
13: EX-99.1     Miscellaneous Exhibit                                  1      9K 

S-4/A   —   Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 1997

                                                      REGISTRATION NO. 333-37861
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2 TO

FORM S-4

REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933
------------------------

SUIZA FOODS CORPORATION 

(Exact name of registrant as specified in its charter)

                                                                [Download Table]
                                                                                
           DELAWARE                          2026                  75-2559681   
 (State or other jurisdiction    (Primary Standard Industrial   (I.R.S. Employer
              of                 Classification Code Number)     Identification 
incorporation or organization)                                      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 
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER 
3811 TURTLE CREEK BLVD. 
SUITE 1300
DALLAS, TEXAS 75219 
(214) 528-0939
(Name, address, including zip code, and telephone number, 
including area code, of agent for service)
------------------------

COPIES TO:

William A. McCormack                        Tracy T. Larsen   
  Hughes & Luce, L.L.P.                   Warner Norcross & Judd LLP
  1717 Main Street                       900 Old Kent Building
     Suite 2800                          111 Lyon Street, N.W.
      Dallas, Texas 75201                 Grand Rapids, Michigan49503-2487
(214) 939-5500                            (616) 752-2000

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: 
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVENESS OF THIS REGISTRATION 
STATEMENT.
------------------------

If the securities being registered on this Form are being offered in    
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box.  / /                            

If this form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, 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(d)
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.  / /                                                     
------------------------

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    
BECOMES EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID       
SECTION 8(a), MAY DETERMINE.                                                    

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

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CROSS REFERENCE SHEET 

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FORM S-4 ITEM                                                                       PROSPECTUS                    
--------------------------------------------------------------  --------------------------------------------------
                                                                                                                  
            Part I                                                                                                

            A. INFORMATION ABOUT THE TRANSACTION                                                                  

  Item  1.  Forepart of Registration Statement and Outside                                                        
              Front Cover of Prospectus.......................  Forepart of Registration Statement and Outside    
                                                                  Front Cover of Prospectus                       

  Item  2.  Inside Front and Outside Back Cover Pages of                                                          
              Prospectus......................................  Inside Front and Outside Back Cover Pages of      
                                                                  Prospectus; Available Information; Incorporation
                                                                  of Certain Information by Reference; Table of   
                                                                  Contents                                        

  Item  3.  Risk Factors, Ratio of Earnings to Fixed Charges                                                      
              and Other Information...........................  Summary; Risk Factors                             

  Item  4.  Terms of the Transaction..........................  Summary; The Merger--General Description of the   
                                                                  Merger; The Merger--Reasons for the Merger; The 
                                                                  Merger--Certain Federal Income Tax Consequences;
                                                                  The Merger-- Anticipated Accounting Treatment;  
                                                                  Certain Terms of the Merger Agreement;          
                                                                  Comparison of Shareholder Rights                

  Item  5.  Pro Forma Financial Information...................  Summary; Pro Forma Financial Data                 

  Item  6.  Material Contacts with the Company Being                                                              
              Acquired........................................  The Merger--Background of the Merger              

   Item 7.  Additional Information Required for Reoffering by                                                     
              Persons and Parties Deemed to be Underwriters...  Not Applicable                                    

  Item  8.  Interests of Named Experts and Counsel............  Legal Matters                                     

  Item  9.  Disclosure of Commission Position on                                                                  
              Indemnification for Securities Act                                                                  
              Liabilities.....................................  Comparison of Shareholder Rights-- Indemnification

            B. INFORMATION ABOUT THE REGISTRANT                                                                   

  Item 10.  Information with Respect to S-3 Registrants.......  Recent Developments; Selected Financial Data of   
                                                                  Suiza Foods; Selected Financial Data of         
                                                                  Morningstar; Pro Forma Financial Data           

  Item 11.  Incorporation of Certain Information by                                                               
              Reference.......................................  Incorporation of Certain Information by Reference 

  Item 12.  Information with Respect to S-2 or S-3                                                                
              Registrants.....................................  Not Applicable                                    

  Item 13.  Incorporation of Certain Information by                                                               
              Reference.......................................  Not Applicable                                    

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FORM S-4 ITEM                                                                       PROSPECTUS                    
--------------------------------------------------------------  --------------------------------------------------
                                                                                                                  
  Item 14.  Information with Respect to Registrants Other Than                                                    
              S-3 or S-2 Registrants..........................  Not Applicable                                    

            C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED                                                       

  Item 15.  Information with Respect to S-3 Companies.........  Not Applicable                                    

  Item 16.  Information with Respect to S-2 or S-3                                                                
              Companies.......................................  Not Applicable                                    

  Item 17.  Information with Respect to Companies Other Than                                                      
              S-3 or S-2 Companies............................  Summary; Selected Financial Data of Country Fresh,
                                                                  Management's Discussion and Analysis of         
                                                                  Financial Condition and Results of Operations of
                                                                  Country Fresh; Business of Country Fresh        

            D. VOTING AND MANAGEMENT INFORMATION                                                                  

  Item 18.  Information if Proxies, Consents or Authorizations                                                    
              are to be Solicited.............................  Forepart of Registration Statement and Outside    
                                                                  Front Cover Page of Prospectus; Summary; The    
                                                                  Merger--Interests of Certain Persons in the     
                                                                  Merger; The Merger--Dissenters' Rights; The     
                                                                  Special Meeting--Date, Time and Place; The      
                                                                  Special Meeting--Record Date and Outstanding    
                                                                  Shares; The Special Meeting--Voting and         
                                                                  Revocation of Proxies; The Special              
                                                                  Meeting--Quorum and Vote Required; The Special  
                                                                  Meeting--Solicitation of Proxies; Business of   
                                                                  Country Fresh--Directors and Executive Officers;
                                                                  Principal Shareholders of Country Fresh         

  Item 19.  Information if Proxies, Consents or Authorizations                                                    
              are Not to be Solicited, or in an Exchange                                                          
              Offer...........................................  Not Applicable                                    

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COUNTRY FRESH, INC. 
2555 BUCHANAN AVENUE, SW
GRAND RAPIDS, MICHIGAN 49518

OCTOBER 24, 1997

Dear Shareholder:                                                               

  You are cordially invited to attend a Special Meeting of Shareholders (the
"Special Meeting") of Country Fresh, Inc. ("Country Fresh") to be held at 10:00 
a.m., local time, on November 25, 1997 at the Holiday Inn Crowne Plaza, at 5700 
28th Street, Grand Rapids, Michigan 49546.                                      

At the Special Meeting, you will be asked to consider and vote upon a   
proposal to approve the Agreement and Plan of Merger dated as of September 18,  
1997 (the "Merger Agreement"), pursuant to which a wholly-owned subsidiary of   
Suiza Foods Corporation ("Suiza Foods") would merge with Country Fresh (the     
"Merger"). As a result of the Merger, Country Fresh will become a wholly-owned  
subsidiary of Suiza Foods. Subject to the terms and conditions of the Merger    
Agreement, at the effective time of the Merger (the "Effective Time"), each     
share of Country Fresh common stock outstanding immediately prior to the        
Effective Time will be converted into .5454 shares of Suiza Foods common stock  
(subject to the "Top Up" provisions described below), and each share of Series A
8% Preferred Stock of Country Fresh outstanding immediately prior to the        
Effective Time will be converted into one share of Series A Preferred Stock of  
Suiza Foods having rights and preferences substantially identical to the Country
Fresh preferred stock. If the average price of the Suiza Foods common stock over
the three trading days prior to the closing date of the Merger (as more fully   
described in the Merger Agreement, the "Average Price") is less than $36.00 per 
share, Country Fresh may terminate the Merger Agreement or deliver a "Top Up    
Request" to Suiza Foods. If Suiza Foods elects to comply with this request, then
the total number of shares of Suiza Foods common stock to be issued in the      
Merger will be increased to have an aggregate value (based on the Average Price)
of $68.8 million. If Suiza Foods does not elect to comply with the Top Up       
Request, Country Fresh may elect either to complete the Merger with no          
adjustment to the number of shares of Suiza Foods common stock to be issued or  
to terminate the Merger Agreement.                                              

  Details of the proposed Merger and other material information are included
in the attached Proxy Statement/ Prospectus, and a copy of the Merger Agreement 
is included as Appendix A to the Proxy Statement/Prospectus. Please review the  
Proxy Statement/Prospectus and the Merger Agreement carefully, particularly the 
information under the caption "Risk Factors." A formal Notice of Special Meeting
is also included with these materials.                                          

    The Board of Directors of Country Fresh (the "Board") has carefully reviewed
and considered the terms and conditions of the proposed Merger. In addition, the
Board has received the written opinion, dated as of September 18, 1997, of The  
Ohio Company, Country Fresh's financial advisor, to the effect that the         
consideration to be received by the shareholders of Country Fresh in the Merger 
is fair to such shareholders from a financial point of view. The full text of   
The Ohio Company's written opinion is included as Appendix B to the Proxy       
Statement/ Prospectus.                                                          

 FOR THE REASONS SET FORTH IN THE ATTACHED PROXY STATEMENT/PROSPECTUS, THE
BOARD BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF COUNTRY  
FRESH AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF      
COUNTRY FRESH VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.                      

   The affirmative vote of the holders of a majority of the outstanding shares
of Country Fresh common stock and Country Fresh preferred stock, voting together
as a single class, and a majority of the outstanding shares of Country Fresh    
preferred stock, voting alone as a separate class, is required to approve the   
Merger Agreement. Failure to vote and abstentions will have the same effect as a
vote against the Merger Agreement. Accordingly, we urge you to complete, sign   
and date the enclosed proxy or voting instruction card and return it in the     
enclosed return envelope, whether or not you plan to attend the Special Meeting.
Your vote is important regardless of the number of shares you own.              

If you have any questions prior to the Special Meeting or need further  
assistance, please call Delton Parks at (616) 243-0173.                         

                     Very truly yours,

                DELTON PARKS
                                         PRESIDENT AND CHIEF EXECUTIVE OFFICER

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COUNTRY FRESH, INC. 
2555 BUCHANAN AVENUE, SW
GRAND RAPIDS, MICHIGAN 49518
OCTOBER 24, 1997

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

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 
TO BE HELD ON NOVEMBER 25, 1997 

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

To the Shareholders of                                                          
COUNTRY FRESH, INC.:                                                        

   A Special Meeting of Shareholders (the "Special Meeting") of Country Fresh,
Inc., a Michigan corporation ("Country Fresh"), will be held at 10:00 a.m.,     
local time, on November 25, 1997 at Holiday Inn Crowne Plaza, at 5700 28th      
Street, Grand Rapids, Michigan 49546 for the following purposes:                

     1.  To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of September 18, 1997 (the "Merger Agreement"),
among Suiza Foods Corporation ("Suiza Foods"), CF Acquisition Corp., a  
 wholly owned subsidiary of Suiza Foods ("Merger Sub"), and Country Fresh,
  pursuant to which Merger Sub will merge with Country Fresh (the "Merger").
As a result of the Merger, Country Fresh will become a wholly-owned     
    subsidiary of Suiza Foods. Subject to the terms and conditions of the Merger
   Agreement, at the effective time of the Merger (the "Effective Time"), each
 share of common stock, no par value, of Country Fresh (the "Country Fresh
  Common Stock") outstanding immediately prior to the Effective Time will be
 converted into .5454 shares of common stock, $.01 par value per share, of
  Suiza Foods (the "Suiza Common Stock"), subject to the "Top Up" provisions
 described below, and each share of Series A 8% Preferred Stock of Country
    Fresh (the "Country Fresh Preferred Stock") outstanding immediately prior to
 the Effective Time will be converted into one share of Series A Preferred
Stock of Suiza Foods (the "Suiza Preferred Stock") having rights and    
    preferences substantially identical to the Country Fresh Preferred Stock. If
the average price of the Suiza Common Stock over the three trading days 
prior to the closing date of the Merger (as more fully described in the 
Merger Agreement, the "Average Price") is less than $36.00 per share,   
Country Fresh may terminate the Merger Agreement or deliver a "Top Up   
   Request" to Suiza Foods. If Suiza Foods elects to comply with this request,
 then the total number of shares of Suiza Common Stock to be issued in the
Merger will be increased to have a value (based on the Average Price) of
$68.8 million. If Suiza Foods does not elect to comply with the Top Up  
Request, Country Fresh may elect either to complete the Merger with no  
   adjustment to the number of shares of Suiza Common Stock to be issued or to
terminate the Merger Agreement.                                         

   2.  To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.                             

  The Board of Directors has fixed the close of business on October 21, 1997
as the record date (the "Record Date") for the determination of shareholders    
entitled to notice of, and to vote at, the Special Meeting or any adjournment   
thereof. Only holders of record of shares of Country Fresh Common Stock and     
Country Fresh Preferred Stock at the close of business on the Record Date are   
entitled to notice of, and to vote at, the Special Meeting.                     

   Holders of Country Fresh Preferred Stock are entitled to dissenters' rights
under the Michigan Business Corporation Act (the "MBCA") pursuant to which such 
holders may dissent from the Merger and be paid the fair value for their shares 
of Country Fresh Preferred Stock by complying with the procedures set forth in  
Sections 761 through 774 of the MBCA, copies of which are attached to the Proxy 
Statement/                                                                      

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Prospectus as Appendix C. Holders of Country Fresh Common Stock are not entitled
to dissenters' rights as a result of the Merger.                                

    Your vote is important. The affirmative vote of the holders of a majority of
the outstanding shares of Country Fresh Common Stock and Country Fresh Preferred
Stock, voting together as a single class, and a majority of the outstanding     
shares of Country Fresh Preferred Stock, voting alone as a separate class, is   
required for approval of the Merger Agreement. Even if you plan to attend the   
Special Meeting in person, we request that you sign and return the enclosed     
proxy or voting instruction card and thus ensure that your shares will be       
represented at the Special Meeting if you are unable to attend. If you do attend
the Special Meeting and wish to vote in person, you may withdraw your proxy and 
vote in person.                                                                 

                                      By Order of the Board of Directors

                DELTON PARKS
                                         PRESIDENT AND CHIEF EXECUTIVE OFFICER

Grand Rapids, Michigan                                                          

October 24, 1997                                                                

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COUNTRY FRESH, INC. 
PROXY STATEMENT 
--------------------- 

SUIZA FOODS CORPORATION 
PROSPECTUS
--------------------- 

This Proxy Statement/Prospectus relates to the proposed merger of CF    
Acquisition Corp. ("Merger Sub"), a Michigan corporation and wholly owned       
subsidiary of Suiza Foods Corporation, a Delaware corporation ("Suiza Foods"),  
with Country Fresh, Inc., a Michigan corporation ("Country Fresh"), pursuant to 
the Agreement and Plan of Merger dated as of September 18, 1997 among Suiza     
Foods, Merger Sub and Country Fresh (the "Merger Agreement"). The merger        
contemplated by the Merger Agreement is referred to herein as the "Merger." As a
result of the Merger, Country Fresh will become a wholly-owned subsidiary of    
Suiza Foods. The Merger Agreement is attached as Appendix A and is incorporated 
herein by reference.                                                            

Subject to the terms and conditions of the Merger Agreement, at the     
effective time of the Merger (the "Effective Time"), each share of common stock,
no par value, of Country Fresh (the "Country Fresh Common Stock") outstanding   
immediately prior to the Effective Time will be converted into .5454 shares of  
common stock, $.01 par value per share, of Suiza Foods (the "Suiza Common       
Stock"), subject to the "Top Up" provisions described below, and each share of  
Series A 8% Preferred Stock of Country Fresh (the "Country Fresh Preferred      
Stock") outstanding immediately prior to the Effective Time (other than shares  
of Country Fresh Preferred Stock whose holders exercise their statutory         
dissenters' rights) will be converted into one share of Series A Preferred Stock
of Suiza Foods (the "Suiza Preferred Stock") having rights and preferences      
substantially identical to the Country Fresh Preferred Stock. If the average    
price of the Suiza Common Stock over the three trading days prior to the closing
date of the Merger (as more fully described in the Merger Agreement, the        
"Average Price") is less than $36.00 per share, Country Fresh may terminate the 
Merger Agreement or deliver a "Top Up Request" to Suiza Foods. If Suiza Foods   
elects to comply with the Top Up Request, then the total number of shares of    
Suiza Common Stock to be issued in the Merger will be increased to have an      
aggregate value (based on the Average Price) of $68.8 million. If Suiza Foods   
does not elect to comply with the Top Up Request, Country Fresh may elect either
to complete the Merger with no adjustment to the number of shares of Suiza      
Common Stock to be issued or to terminate the Merger Agreement.                 

This Proxy Statement/Prospectus is being furnished to holders of Country
Fresh Common Stock and Country Fresh Preferred Stock (collectively, "Country    
Fresh Capital Stock") in connection with the solicitation of proxies by the     
Board of Directors of Country Fresh for use at a special meeting of shareholders
of Country Fresh (the "Special Meeting") to be held on November 25, 1997, at    
which holders of the Country Fresh Capital Stock will be asked to approve the   
Merger Agreement. This Proxy Statement/Prospectus and the accompanying forms of 
proxy are first being mailed to shareholders of Country Fresh on or about       
October 24, 1997.                                                               

    This Proxy Statement/Prospectus also constitutes a prospectus of Suiza Foods
that is part of a registration statement on Form S-4 (together with all         
amendments, supplements and exhibits, the "Suiza Registration Statement") filed 
with the Securities and Exchange Commission (the "Commission") with respect to  
the issuance of shares of Suiza Common Stock and Suiza Preferred Stock pursuant 
to the Merger Agreement. The shares of Suiza Common Stock issued pursuant to the
Merger will be listed on the New York Stock Exchange (the "NYSE"). On October   
10, 1997, the closing price of the Suiza Common Stock as reported on the NYSE   
Composite Tape, was $52.69. Current market prices are not available for either  
the Country Fresh Common Stock or the Country Fresh Preferred Stock, neither of 
which is traded on any established public trading market or listed for trading  
on any exchange or automated quotation system. No shares of Suiza Preferred     
Stock are currently outstanding. The Suiza Preferred Stock to be issued pursuant
to the Merger will not be listed for trading on any exchange or automated       
quotation system, and it is unlikely that an active trading market will develop 
for the Suiza Preferred Stock, which immediately following the Merger will be   
held by approximately 54 holders (assuming that no holders of Country Fresh     
Preferred Stock exercise their statutory dissenters' rights).                   

   SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY THE SHAREHOLDERS OF COUNTRY FRESH IN CONNECTION    
WITH AN INVESTMENT IN SUIZA COMMON STOCK AND SUIZA PREFERRED STOCK UPON         
CONSUMMATION OF THE MERGER.                                                     

  NEITHER THIS TRANSACTION NOR THE SECURITIES OF SUIZA FOODS TO BE ISSUED IN
CONNECTION WITH THE MERGER HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES  
AND EXCHANGE COMMISSION OR ANY OTHER STATE SECURITIES COMMISSION NOR HAS THE    
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED    
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY           
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.                           

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY    
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN 
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE  
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE    
RELIED UPON AS HAVING BEEN AUTHORIZED BY SUIZA FOODS OR COUNTRY FRESH. NEITHER  
THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE     
SECURITIES OFFERED HEREBY WILL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION    
THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF SUIZA FOODS OR COUNTRY     
FRESH SINCE THE DATE HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROXY   
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF 
AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY    
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH    
OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION.                        

THE INFORMATION CONTAINED IN THE JOINT PROXY STATEMENT/PROSPECTUS WITH  
RESPECT TO SUIZA FOODS, MERGER SUB AND THEIR AFFILIATES HAS BEEN SUPPLIED BY    
SUIZA FOODS, WHICH IS SOLELY RESPONSIBLE FOR SUCH INFORMATION, AND THE          
INFORMATION WITH RESPECT TO COUNTRY FRESH AND ITS AFFILIATES HAS BEEN SUPPLIED  
BY COUNTRY FRESH, WHICH IS SOLELY RESPONSIBLE FOR SUCH INFORMATION.             

THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS OCTOBER 24, 1997.

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AVAILABLE INFORMATION 

  Suiza Foods is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance       
therewith, files reports, proxy statements and other information with the       
Commission. Such reports, proxy statements and other information filed by Suiza 
Foods with the Commission can be inspected and copied at the public reference   
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,   
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World 
Trade Center, 13th Floor, New York, New York 10048 and Northwest Atrium Center, 
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of such    
material can be obtained by mail from the Public Reference Section of the       
Commission at 450 West Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a site on the World Wide Web at            
http://www.sec.gov that contains reports, proxy and information statements and  
other information regarding registrants that file electronically with the       
Commission, including Suiza Foods. In addition, reports, proxy statements and   
other information concerning Suiza Foods may be inspected at the offices of the 
New York Stock Exchange, 20 Broad Street, New York, New York 10005.             

This Proxy Statement/Prospectus, which constitutes a part of the Suiza  
Registration Statement, does not contain all of the information set forth in the
Suiza Registration Statement, certain parts of which were omitted in accordance 
with the rules and regulations of the Commission. For further information,      
reference is hereby made to the Suiza Registration Statement including the      
schedules and exhibits filed as a part thereof or incorporated by reference     
therein. Any statements contained herein concerning the provisions of any       
document filed as an exhibit to the Suiza Registration Statement or otherwise   
filed with the Commission are not necessarily complete, and in each instance    
reference is made to the copy of such document so filed. Each such statement is 
qualified in its entirety by such reference. The Suiza Registration Statement   
and the exhibits and schedules thereto may be inspected, without charge, and    
copies thereof may be obtained at prescribed rates, at the offices of the       
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.                   

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 

    The following documents filed with the Commission pursuant to the Securities
Act of 1933, as amended (the "Securities Act") and the Exchange Act are         
incorporated herein by reference and shall be deemed a part hereof:             

SUIZA FOODS CORPORATION FILINGS                                         

(a) the audited financial statements of Garrido & Compania, Inc. and    
subsidiaries, Swiss Dairy, a Corporation, and Model Dairy, Inc. included in the 
Suiza Foods Final Prospectus dated January 22, 1997 and filed with the          
Commission pursuant to Rule 424(b) on January 23, 1997 (File No. 333-18263);    

(b) the Suiza Foods Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (File No. 1-12755);                                           

(c) the Suiza Foods Quarterly Report on Form 10-Q for the quarter ended 
March 31, 1997 and the Suiza Foods Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 (as amended on October 24, 1997) (File No. 1-12755);        

(d) the Suiza Foods Current Report on Form 8-K filed July 14, 1997 (as  
amended on August 22, 1997), which includes the audited financial statements of 
Dairy Fresh L.P. ("Dairy Fresh") and The Garelick Companies ("Garelick"), and   
the Suiza Foods Current Report on Form 8-K filed September 29, 1997 (File No.   
1-12755); and                                                                   

(e) the description of Suiza Foods' Common Stock contained in its       
Registration Statement on Form 8-A filed on February 19, 1997 (File No.         
1-12755).                                                                       

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THE MORNINGSTAR GROUP, INC. FILINGS                                     

  (a) The Morningstar Group, Inc. ("Morningstar") Annual Report on Form 10-K
for the year ended December 31, 1996 (File No. 0-19075);                        

 (b) the Morningstar Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 and June 30, 1997 (File No. 0-19934);                            

(c) the Morningstar Current Report on Form 8-K filed September 29, 1997 
(File No. 0-19075); and                                                         

(d) the audited financial statements of Presto Foods Products, Inc. and 
Affiliate ("Presto") contained in the Morningstar Current Report on Form 8-K    
dated December 3, 1996 (as amended on February 18, 1997) (File No. 0-19075).    

All other reports and other documents filed by either Suiza Foods or    
Morningstar pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act   
subsequent to the date of this Proxy Statement/ Prospectus and prior to the date
of the Special Meeting shall be deemed to be incorporated by reference herein   
and to be a part hereof from the dates of filing such reports and documents. Any
statement contained in a document incorporated by reference herein will be      
deemed to be modified or superseded for all purposes to the extent that a       
statement contained in this Proxy Statement/Prospectus or in any other          
subsequently filed document that is also, or is deemed to be, incorporated by   
reference, modifies or replaces such statement. Any such statement so modified  
or superseded will not be deemed to constitute a part of this Proxy             
Statement/Prospectus, except as so modified or superseded.                      

   THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUIZA FOODS HEREBY         
UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL   
OWNER, TO WHOM A COPY OF THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED, ON 
WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY AND ALL OF THE        
DOCUMENTS REFERRED TO ABOVE THAT HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE, 
OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY    
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS ARE AVAILABLE   
UPON REQUEST FROM THE CORPORATE SECRETARY OF SUIZA FOODS AT 3811 TURTLE CREEK   
BLVD., SUITE 1300, DALLAS, TEXAS 75219, TELEPHONE NUMBER: (214) 528-0939. IN    
ORDER TO ENSURE DELIVERY OF DOCUMENTS PRIOR TO THE SPECIAL MEETING, REQUESTS    
SHOULD BE RECEIVED BY NOVEMBER 18, 1997 (FIVE BUSINESS DAYS PRIOR TO THE SPECIAL
MEETING).                                                                       

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AVAILABLE INFORMATION......................................................................................        ii

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..........................................................        ii

SUMMARY....................................................................................................         1
    Parties to the Merger..................................................................................         1
    Recent Developments....................................................................................         2
    The Merger and the Merger Agreement....................................................................         2
    Comparison of Shareholder Rights.......................................................................         7
    The Special Meeting....................................................................................         7
    Stock Price and Dividend Information...................................................................         7
    Comparative Per Common Share Data......................................................................         9
    Summary Pro Forma Financial Data.......................................................................        10
    Summary Financial Data of Suiza Foods..................................................................        11
    Summary Financial Data of Morningstar..................................................................        12
    Summary Financial Data of Country Fresh................................................................        13

RISK FACTORS...............................................................................................        14

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............................................................        17

RECENT DEVELOPMENTS........................................................................................        17

THE MERGER.................................................................................................        18
    General Description of the Merger......................................................................        19
    Background of the Merger...............................................................................        19
    Reasons for the Merger.................................................................................        21
    Recommendation of the Board of Directors of Country Fresh..............................................        22
    Opinion of the Financial Advisor to Country Fresh......................................................        23
    Certain Federal Income Tax Consequences................................................................        26
    Anticipated Accounting Treatment.......................................................................        27
    Governmental and Regulatory Approvals..................................................................        27
    Restrictions on Resale by Affiliates...................................................................        28
    Interests of Certain Persons in the Merger.............................................................        28
    Dissenters' Rights.....................................................................................        28
    Management and Operations After the Merger.............................................................        30

CERTAIN TERMS OF THE MERGER AGREEMENT......................................................................        31
    Effective Time of the Merger...........................................................................        31
    Manner and Basis of Converting Shares..................................................................        31
    Top Up Provisions......................................................................................        32
    Country Fresh Options..................................................................................        32
    Representations and Warranties.........................................................................        33
    Conditions to the Merger...............................................................................        33
    Covenants..............................................................................................        35
    Non-Solicitation.......................................................................................        37
    Termination or Amendment of the Merger Agreement.......................................................        38
    Expenses...............................................................................................        39

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THE SPECIAL MEETING........................................................................................        39
    Date, Time and Place...................................................................................        39
    Purpose of the Special Meeting.........................................................................        39
    Record Date and Outstanding Shares.....................................................................        39
    Voting and Revocation of Proxies.......................................................................        40
    Quorum and Vote Required...............................................................................        40
    Solicitation of Proxies................................................................................        40
    Other Matters..........................................................................................        40

PRO FORMA FINANCIAL DATA...................................................................................        41

SELECTED FINANCIAL DATA OF SUIZA FOODS.....................................................................        51

SELECTED FINANCIAL DATA OF MORNINGSTAR.....................................................................        53

SELECTED FINANCIAL DATA OF COUNTRY FRESH...................................................................        54

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF COUNTRY FRESH.....        55

BUSINESS OF SUIZA FOODS....................................................................................        60
    General................................................................................................        60
    Business Strategy......................................................................................        60
    The 1997 Acquisitions..................................................................................        61
    Industry Overview......................................................................................        61
    Products and Services..................................................................................        62
    Sales and Distribution.................................................................................        62
    Raw Materials and Supply...............................................................................        63
    Competition............................................................................................        64

BUSINESS OF COUNTRY FRESH..................................................................................        66
    General................................................................................................        66
    Business Strategy......................................................................................        66
    Products...............................................................................................        66
    Sales and Distribution.................................................................................        66
    Raw Materials and Supply...............................................................................        67
    Competition............................................................................................        67
    Directors and Executive Officers.......................................................................        67
    Employees..............................................................................................        68
    Properties.............................................................................................        68
    Legal Proceedings......................................................................................        68
    Voting Securities and Principal Shareholders of Country Fresh..........................................        68

DESCRIPTION OF SUIZA CAPITAL STOCK.........................................................................        72
    Common Stock...........................................................................................        72
    Preferred Stock........................................................................................        72

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COMPARISON OF SHAREHOLDER RIGHTS...........................................................................        75
    Amendments to Articles or Certificate of Incorporation.................................................        75
    Amendments to Bylaws...................................................................................        75
    Board Classification...................................................................................        76
    Filling Vacancies in the Board of Directors............................................................        76
    Removal of Directors...................................................................................        76
    Vote Required for Mergers..............................................................................        76
    Anti-Takeover Provisions...............................................................................        77
    Dissenters' Rights.....................................................................................        78
    Limitation on Directors' Liability.....................................................................        78
    Indemnification........................................................................................        78
    Shareholder/Stockholder Meetings.......................................................................        79
    Action by Written Consent..............................................................................        79
    Payment of Dividends...................................................................................        80

LEGAL MATTERS..............................................................................................        80

EXPERTS....................................................................................................        80

INDEX TO FINANCIAL STATEMENTS..............................................................................       F-1

APPENDICES                                                                                                           
    Appendix A--Agreement and Plan of Merger                                                                         
    Appendix B--Opinion of Financial Advisor to Country Fresh                                                        
    Appendix C--Dissenters' Rights Provisions of Michigan Law                                                        
    Appendix D--Excerpts from the Joint Proxy Statement/Prospectus for the Morningstar Merger                        

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SUMMARY 

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT/PROSPECTUS. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE   
AND IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION WITH, THE
MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS
AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE AND THE APPENDICES ATTACHED  
HERETO. CERTAIN CAPITALIZED TERMS WHICH ARE USED BUT NOT DEFINED IN THIS SUMMARY
ARE DEFINED ELSEWHERE IN THIS PROXY STATEMENT/PROSPECTUS. UNLESS THE CONTEXT    
REQUIRES OTHERWISE, REFERENCES IN THIS PROXY STATEMENT/PROSPECTUS TO "SUIZA     
FOODS" MEAN SUIZA FOODS CORPORATION AND ITS SUBSIDIARIES, ON A CONSOLIDATED     
BASIS, REFERENCES TO "COUNTRY FRESH" MEAN COUNTRY FRESH, INC. AND ITS           
SUBSIDIARIES, ON A CONSOLIDATED BASIS, AND REFERENCES TO "MORNINGSTAR" MEAN THE 
MORNINGSTAR GROUP INC. AND ITS SUBSIDIARIES, ON A CONSOLIDATED BASIS. CERTAIN OF
SUIZA FOODS' OPERATING SUBSIDIARIES ARE REFERRED TO INDIVIDUALLY HEREIN AS      
"SUIZA-PUERTO RICO," "VELDA FARMS," "SWISS DAIRY," "MODEL DAIRY," "DAIRY FRESH,"
"GARELICK DAIRY," "FRANKLIN PLASTICS" AND "REDDY ICE."                          

PARTIES TO THE MERGER 

SUIZA FOODS AND MERGER SUB                                                      

Suiza Foods is a leading manufacturer and distributor of fresh milk and 
related dairy products, plastic containers and packaged ice in the United       
States. Each of Suiza Foods' operating subsidiaries is a strong competitor with 
an established reputation for customer service and product quality. Suiza Foods'
dairy and ice 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. Suiza Foods' customers
in the plastic container business include regional dairy manufacturers, bottled 
water processors and other beverage manufacturers. Suiza Foods has grown        
primarily through a successful acquisition strategy, having consummated 54      
acquisitions since its inception in 1988, including 27 acquisitions since its   
initial public offering in April 1996.                                          

Merger Sub is a newly formed Michigan corporation and a wholly owned    
subsidiary of Suiza Foods. Merger Sub was organized for the purpose of effecting
the Merger pursuant to the Merger Agreement. Merger Sub has no material assets  
and has not engaged in any activities except in connection with the Merger. The 
principal executive offices of Suiza Foods and Merger Sub are located at 3811   
Turtle Creek Blvd., Suite 1300, Dallas, Texas 75219, telephone number: (214)    
528-0939.                                                                       

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE   
CONSIDERED BY THE SHAREHOLDERS OF COUNTRY FRESH IN CONNECTION WITH AN INVESTMENT
IN SUIZA COMMON STOCK AND SUIZA PREFERRED STOCK UPON CONSUMMATION OF THE MERGER.

COUNTRY FRESH                                                                   

  Country Fresh is a leading manufacturer, supplier and distributor of milk,
ice cream and related products in the Midwest. Country Fresh's products are     
principally marketed in Michigan, northern Indiana, northern Illinois and       
northern Ohio. Country Fresh processes raw milk into such products as fortified 
and homogenized milk and cream, ice cream, low fat ice cream, cream cheese,     
cottage cheese, fresh and frozen yogurt, specialty dips, sherbet, eggnog, sour  
cream, buttermilk and extended shelf life products such as half & half, coffee  
cream and whipped cream. In addition, Country Fresh processes and markets       
purified water and various fruit drinks. Country Fresh also manufactures and    
markets frozen dessert products and other ice cream novelty items.              

    Country Fresh and its subsidiaries market their products under trademarks or
trade names such as Country Fresh-TM-, McDonald-TM-, Burger Dairy-TM-, Home     
Dairy-TM-, Orchard Grove-TM-, Sun Born-TM-, Country Lane-TM-, and Frostbite-TM-.
Through license agreements, Country Fresh also manufactures and/or markets      
products under trademarks or trade names owned by other companies, such as      
Smilk-TM-, Nestles-Registered Trademark-, Guilt Free-TM-, Alaskan               
Classics-Registered Trademark-, and Borden-Registered Trademark-.               

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The principal executive offices of Country Fresh are located at 2555    
Buchanan, S.W., Grand Rapids, Michigan 49518-0814, telephone number: (616)      
243-0173.                                                                       

RECENT DEVELOPMENTS 

On September 28, 1997, Suiza Foods entered into an agreement pursuant to
which a subsidiary of Suiza Foods would merge with Morningstar and Morningstar  
would become a wholly-owned subsidiary of Suiza Foods (the "Morningstar         
Merger"). In this stock-for-stock transaction, Suiza Foods will issue           
approximately 12.5 million shares of Suiza Common Stock to Morningstar's        
stockholders and will assume outstanding stock options of Morningstar, which    
will be converted into substitute options to purchase approximately 3.0 million 
additional shares of Suiza Common Stock. Morningstar reported pro forma revenues
of approximately $528 million for 1996. See "Recent Developments."              

Morningstar is a national manufacturer, distributor and marketer of     
refrigerated, shelf-stable and frozen food products. Its established branded    
products include: International Delight-Registered Trademark- gourmet-flavored  
and non-flavored coffee creamers, Second Nature-Registered Trademark-           
refrigerated no-cholesterol egg substitute, Mocha Mix-Registered Trademark-     
non-dairy coffee creamers, Naturally Yours-Registered Trademark- fat-free and   
regular real dairy sour cream, Jon Donaire-Registered Trademark- cheesecakes and
desserts, Wacky Willie-TM- flavored shakes and, in the western two-thirds of the
United States, Lactaid-Registered Trademark- lactose-free and lactose-reduced   
milks produced under license from McNeil Consumer Products Company (a subsidiary
of Johnson & Johnson). Morningstar also specializes in providing private label  
refrigerated, shelf-stable and frozen products to grocery warehouses,           
bakery/industrial companies, club stores and dairy companies. For further       
information regarding the Morningstar Merger and the business of Morningstar,   
see "Recent Developments."                                                      

In connection with the Morningstar Merger, Suiza Foods has received a   
commitment letter from its senior lenders to enter into a new credit facility   
that would increase Suiza Foods' total borrowing capacity to approximately $1.25
billion. See "Recent Developments."                                             

THE MERGER AND THE MERGER AGREEMENT 

RECOMMENDATION OF THE BOARD OF DIRECTORS OF COUNTRY FRESH                       

The Board of Directors of Country Fresh (the "Country Fresh Board") has 
unanimously approved the Merger Agreement and determined that the Merger is fair
to and in the best interests of Country Fresh and its shareholders. THE COUNTRY 
FRESH BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF COUNTRY FRESH VOTE FOR  
THE APPROVAL OF THE MERGER AGREEMENT. For a discussion of the factors considered
by the Board of Directors of Country Fresh in reaching its decision, see "The   
Merger--Reasons for the Merger--Country Fresh" and "--Recommendation of the     
Board of Directors of Country Fresh." In considering the recommendation of the  
Country Fresh Board with respect to the Merger, shareholders of Country Fresh   
should be aware that certain officers and directors have direct or indirect     
interests in recommending the Merger, apart from their interests as shareholders
of Country Fresh, which are not identical to those of unaffiliated shareholders 
of Country Fresh. See "The Merger--Interests of Certain Persons in the Merger." 

OPINION OF THE FINANCIAL ADVISOR TO COUNTRY FRESH                               

   The Country Fresh Board has received an opinion from its financial advisor,
The Ohio Company, to the effect that the consideration to be received by the    
shareholders of Country Fresh in the Merger is fair from a financial point of   
view. The full text of the written opinion of The Ohio Company is attached to   
this Proxy Statement/Prospectus as Appendix B. See "The Merger--Opinion of the  
Financial Advisor to Country Fresh."                                            

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CERTAIN TERMS OF THE MERGER AGREEMENT                                           

  GENERAL DESCRIPTION OF THE MERGER.  At the Effective Time, Merger Sub will
merge with and into Country Fresh, and Country Fresh will become a wholly-owned 
subsidiary of Suiza Foods. Subject to the terms and conditions of the Merger    
Agreement, at the Effective Time, each share of Country Fresh Common Stock      
outstanding immediately prior to the Effective Time will be converted into .5454
shares of Suiza Common Stock, subject to the "Top Up" provisions described      
below, and each share of Country Fresh Preferred Stock outstanding immediately  
prior to the Effective Time (other than Country Fresh Preferred Stock whose     
holders exercise their statutory dissenters' rights) will be converted into one 
share of Suiza Preferred Stock having rights and preferences substantially      
identical to the Country Fresh Preferred Stock. If the Average Price is less    
than $36.00 per share, Country Fresh may terminate the Merger Agreement or      
deliver a "Top Up Request" to Suiza Foods. If Suiza Foods elects to comply with 
the Top Up Request, then the total number of shares of Suiza Common Stock to be 
issued in the Merger will be increased to have an aggregate value (based on the 
Average Price) of $68.8 million. If Suiza Foods does not elect to comply with   
the Top Up Request, Country Fresh may elect either to complete the Merger with  
no adjustment to the number of shares of Suiza Common Stock to be issued or to  
terminate the Merger Agreement. See "Certain Terms of the Merger Agreement--Top 
Up Provisions."                                                                 

 Assuming that the Average Price equals or exceeds $36.00 and based on the
number of shares of Country Fresh Common Stock outstanding on September 30,     
1997, a total of 1,911,075 shares of Suiza Common Stock will be issued to       
holders of Country Fresh Common Stock in the Merger. Based on the number of     
shares of Suiza Common Stock outstanding on September 30, 1997, this would      
result in the former holders of Country Fresh Common Stock owning approximately 
12.1% of the total number of shares of Suiza Common Stock to be outstanding     
immediately after the Merger. On the same basis, but giving effect to the       
issuance of an additional 12.5 million shares of Suiza Common Stock in the      
Morningstar Merger, the former holders of Country Fresh Common Stock would own  
approximately 6.8% of the total number of shares of Suiza Common Stock to be    
outstanding. See "Recent Developments" for a description of the Morningstar     
Merger.                                                                         

  Based on the number of shares of Country Fresh Preferred Stock outstanding
on September 30, 1997, Suiza Foods will issue a total of 11,691 shares of Suiza 
Preferred Stock in the Merger. Such shares would represent 100% of the Suiza    
Preferred Stock outstanding after the Merger and the Morningstar Merger.        

  MANNER AND BASIS OF CONVERTING SHARES.  At or prior to the Effective Time,
Suiza Foods will deposit with a bank or trust company (the "Exchange Agent"),   
for the benefit of holders of Country Fresh Capital Stock, certificates         
evidencing the number of shares of Suiza Common Stock and Suiza Preferred Stock 
to be issued in the Merger. As soon as practicable following the Effective Time,
Suiza Foods will cause the Exchange Agent to mail to each record holder of      
Country Fresh Capital Stock at the Effective Time a letter of transmittal and   
other information advising such holder of the consummation of the Merger and for
use in exchanging Country Fresh Capital Stock certificates for certificates     
evidencing Suiza Common Stock and Suiza Preferred Stock. No fractional shares of
Suiza Common Stock will be issued in the Merger. In lieu of fractional shares,  
Suiza Foods will cause the Exchange Agent to pay an amount in cash (without     
interest) based on an assumed value of $40.00 per share of Suiza Common Stock.  

COUNTRY FRESH OPTIONS.  Options to purchase a total of 420,000 shares of
Country Fresh Common Stock (the "Stock Options") are currently outstanding under
Country Fresh's existing stock option plans, all of which are held by Delton C. 
Parks, Country Fresh's President and Chief Executive Officer. In connection with
the Merger, Suiza Foods will assume the Stock Options and take such actions as  
may be necessary, including amending the Stock Options and related stock option 
plans, to substitute Suiza Common Stock for the Country Fresh Common Stock      
purchasable thereunder. Assuming all 420,000 Stock Options remain unexercised as
of the Effective Time, the options assumed by Suiza Foods will be exercisable to
purchase a total of 229,068 shares of Suiza Common Stock at an exercise price of
$10.08 per share. However, if Country Fresh delivers and Suiza Foods accepts a  
Top Up Request (as described above), the Stock Options will be exercisable for a
number of shares of Suiza Common Stock equal to (a) 229,068                     

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times $36.00 divided by (b) the Average Price. The per share exercise price will
be calculated by (a) multiplying $10.08 by the Average Price and (b) dividing by
$36.00. Subject to the foregoing, the assumed options will have the same terms  
and conditions as the outstanding options being assumed and will not give the   
optionee additional benefits that he did not have before such assumption.       

GOVERNMENTAL AND REGULATORY APPROVALS.  Consummation of the Merger is   
conditioned upon the expiration or early termination of the required waiting    
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as       
amended (the "HSR Act"), and will also require the declaration by the Commission
of the effectiveness of the Suiza Registration Statement under the Securities   
Act and the filing of a Certificate of Merger with the Department of Consumer   
and Industry Services of the State of Michigan.                                 

CONDITIONS TO THE MERGER.  The respective obligations of Suiza Foods and
Country Fresh to effect the Merger are subject to the effectiveness of the Suiza
Registration Statement, shareholder approval, the expiration or termination of  
the applicable waiting period under the HSR Act, the receipt of a pooling letter
and tax opinions and certain customary and other conditions. See "Certain Terms 
of the Merger Agreement--Conditions to the Merger."                             

  COVENANTS.  The Merger Agreement includes various affirmative and negative
covenants of Country Fresh and Suiza Foods designed to insure that, prior to the
Effective Time, they operate their respective businesses in all material        
respects only in the usual and ordinary course, consistent with past practices. 
See "Certain Terms of the Merger Agreement--Covenants."                         

  NON-SOLICITATION.  Country Fresh has agreed that it will not, and will use
all reasonable best efforts to cause its subsidiaries and affiliates not to,    
initiate, solicit or encourage (including by way of furnishing information or   
assistance), or take any other action to facilitate, any inquiries or the making
of any proposal relating to, or that may reasonably be expected to lead to, any 
Competing Transaction (as defined in the Merger Agreement). Notwithstanding the 
foregoing, nothing in the Merger Agreement will prohibit the Country Fresh Board
from (a) furnishing information to, or entering into discussions or negotiations
with, any person or entity in connection with an unsolicited BONA FIDE proposal 
for a Competing Transaction from a person or entity reasonably believed by      
Country Fresh to have the financial ability to consummate the Competing         
Transaction (as defined in the Merger Agreement) on a timely basis, if, and only
to the extent that (i) Country Fresh has complied fully and in a timely manner  
with its obligations to notify Suiza Foods of all material terms of the         
Competing Transaction in accordance with the Merger Agreement, (ii) the Country 
Fresh Board, after consultation with and based upon the advice of independent   
legal counsel, determines in good faith that such action is necessary for the   
Country Fresh Board to comply with its fiduciary duties to the shareholders of  
Country Fresh under applicable law and (iii) prior to furnishing such           
information to, or entering into discussions or negotiations with, such person  
or entity Country Fresh (A) provides prior written notice to Suiza Foods to the 
effect that it is furnishing information to, or entering into discussions or    
negotiations with, such person or entity and (B) enters into with such person or
entity a confidentiality agreement in reasonably customary form on terms not    
more favorable to such person or entity than the terms contained in the         
confidentiality agreement between Suiza Foods and Country Fresh; (b) failing to 
make or withdrawing or modifying its recommendation for the Merger; or (c)      
making or disclosing any position or taking any other action if the Country     
Fresh Board, after consultation with and based on the advice of independent     
legal counsel, determines in good faith that such action is necessary for the   
Country Fresh Board to comply with its fiduciary duties to the shareholders of  
Country Fresh under applicable law. See "Certain Terms of the                   
Merger--Non-Solicitation."                                                      

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

No ruling from the Internal Revenue Service ("IRS") has been or will be 
requested in connection with the Merger. At Closing, Country Fresh will receive 
from its counsel, Warner Norcross & Judd LLP, an opinion to the effect that (a) 
the Merger will constitute a reorganization within the meaning of section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), (b) Suiza Foods, 
Merger Sub and Country Fresh will each be a party to that reorganization within 
the meaning of section 368(b) of the                                            

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Code, (c) Suiza Foods, Merger Sub and Country Fresh will not recognize any gain 
or loss for U.S. federal income tax purposes as a result of the Merger, (d) no  
gain or loss will be recognized by the shareholders of Country Fresh who receive
shares of Suiza Common Stock or Suiza Preferred Stock in the Merger, except to  
the extent of any cash received in lieu of a fractional share of Suiza Common   
Stock, (e) the basis of Suiza Common Stock or Suiza Preferred Stock to be       
received by shareholders of Country Fresh will, in each instance, be the same as
the basis of the respective shares of the Country Fresh Capital Stock           
surrendered in exchange therefor, (f) the holding period of the Suiza Common    
Stock or Suiza Preferred Stock to be received by shareholders of Country Fresh  
will, in each instance, include the period during which the Country Fresh       
Capital Stock surrendered in exchange therefor was held, provided that the      
Country Fresh Capital Stock was, in each instance, held as a capital asset in   
the hands of the shareholder of Country Fresh at the Effective Time, and (g) no 
gain or loss will be recognized by the holder of the Stock Options by reason of 
the issuance of replacement stock options for shares of Suiza Common Stock. Such
opinion is subject to certain assumptions and based on certain representations  
of Suiza Foods, Merger Sub and Country Fresh. Shareholders of Country Fresh     
should be aware that such opinion is not binding on the IRS and no assurance can
be given that the IRS will not adopt a contrary position or that a contrary IRS 
position would not be sustained by a court. Any holder of Country Fresh         
Preferred Stock that exercises his or her statutory dissenters' rights in       
connection with the Merger and consequently receives payment in cash for his or 
her shares of Country Fresh Preferred Stock will recognize gain or loss with    
respect to such stock to the extent that the amount realized from the exercise  
of dissenter's rights exceeds or is less than such holder's tax basis in such   
stock. For a discussion of these and other federal income tax considerations in 
connection with the Merger, see "The Merger--Certain Federal Income Tax         
Consequences."                                                                  

ANTICIPATED ACCOUNTING TREATMENT                                                

Suiza Foods anticipates that the Merger will be accounted for using the 
"pooling of interests" method of accounting pursuant to Opinion No. 16 of the   
Accounting Principles Board. One of the conditions to the Merger is that Suiza  
Foods and Country Fresh must be advised in writing by Deloitte & Touche LLP on  
the closing date of the Merger (the "Closing Date"), that the Merger should be  
treated as a pooling of interests for financial accounting purposes. See "The   
Merger--Anticipated Accounting Treatment."                                      

RESTRICTIONS ON RESALE BY AFFILIATES                                            

  The shares of Suiza Common Stock and Suiza Preferred Stock to be issued in
connection with the Merger and received by persons who are deemed to be         
"affiliates" (as that term is defined in Rule 144 under the Securities Act) of  
Country Fresh prior to the Merger may be resold by them only in transactions    
permitted by the resale provisions of Rule 145 under the Securities Act (or, in 
the case of such persons who become affiliates of Suiza Foods, Rule 144 under   
the Securities Act) or as otherwise permitted under the Securities Act. In      
addition, each director and executive officer of Country Fresh has executed a   
written agreement to the effect that such person will not sell, transfer or     
otherwise dispose of any shares of Country Fresh Capital Stock, Suiza Common    
Stock or Suiza Preferred Stock, as the case may be, during the period commencing
30 days prior to the Effective Time and ending upon the publication of financial
results that include at least 30 days of post-Merger combined operations of     
Suiza Foods and Country Fresh (the "Pooling Period") and that such person will  
not sell, transfer or otherwise dispose of Suiza Common Stock or Suiza Preferred
Stock at any time in violation of the Securities Act or the rules and           
regulations promulgated thereunder, including Rule 145. See "The                
Merger--Restrictions on Resale by Affiliates."                                  

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

    Certain members of Country Fresh's management and the existing Country Fresh
Board may be deemed to have interests in the Merger in addition to their        
interests as shareholders of Country Fresh generally. These include provisions  
in the Merger Agreement and other agreements relating to: (a) the appointment of
Delton Parks as a director of Suiza Foods following the Merger; (b) the         
employment of Mr. Parks by Country Fresh following the Merger and the           
continuation of certain existing employee benefit plans; (c) the assumption by  
Suiza Foods of the Stock Options held by Mr. Parks; and (d) the agreement of    
Suiza Foods to indemnify and hold harmless all past and present officers,       
directors, employees and agents                                                 

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of Country Fresh and its subsidiaries against all losses, claims, damages,      
expenses or liabilities arising out of or related to any acts or omissions, or  
alleged acts or omissions, occurring at or prior to the Effective Time to the   
same extent and on the same terms and conditions currently provided. Upon       
consummation of the Merger, 17 members of Country Fresh management will be paid 
retention bonuses not to exceed $740,000 in the aggregate. In addition, members 
of the Country Fresh Board will be paid accrued but unpaid compensation for     
services rendered pursuant to pre-existing compensation agreements, in the      
approximate aggregate amount of $480,000. See "The Merger--Interests of Certain 
Persons in the Merger."                                                         

DISSENTERS' RIGHTS                                                              

   Holders of Country Fresh Preferred Stock are entitled to dissenters' rights
under the Michigan Business Corporation Act (the "MBCA") pursuant to which such 
holders may dissent from the Merger and obtain payment for their shares of      
Country Fresh Preferred Stock in accordance with the provisions of Sections 761 
through 774 of the MBCA, copies of which are attached to this Proxy             
Statement/Prospectus as Appendix C. Holders of Country Fresh Common Stock are   
not entitled to dissenters' rights as a result of the Merger. See "The          
Merger--Dissenters' Rights."                                                    

MANAGEMENT AND OPERATIONS AFTER THE MERGER                                      

  Once the Merger is consummated, the separate corporate existence of Merger
Sub will cease, and Country Fresh, as the surviving corporation of the Merger   
(the "Surviving Corporation"), will succeed to all of the assets, rights and    
obligations of Merger Sub and will be a wholly-owned subsidiary of Suiza Foods. 
Pursuant to the Merger Agreement, (a) the articles of incorporation of Country  
Fresh, as in effect immediately prior to the Effective Time, will be the        
articles of incorporation of the Surviving Corporation, until amended as        
provided therein and pursuant to the MBCA; (b) the bylaws of Merger Sub, as in  
effect immediately prior to the Effective Time, will be the bylaws of the       
Surviving Corporation, until amended as provided therein and pursuant to the    
MBCA; (c) the directors of Merger Sub immediately prior to the Effective Time   
will be the directors of the Surviving Corporation, until their respective      
successors are duly elected or appointed and qualified; and (d) the officers of 
Country Fresh immediately prior to the Effective Time will be the officers of   
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualified. See "The Merger--Management and Operations After the   
Merger."                                                                        

TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT                                

   TERMINATION.  The Merger Agreement may be terminated prior to the Effective
Time under certain circumstances. See "Certain Terms of the Merger              
Agreement--Termination or Amendment of the Merger Agreement."                   

  AMENDMENT.  The Merger Agreement may be amended by Suiza Foods and Country
Fresh by action taken by or on behalf of their respective boards of directors,  
as applicable, at any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the requisite vote of Country Fresh             
shareholders, no amendment may be made, which under applicable law may not be   
made without the approval of such shareholders. See "Certain Terms of the Merger
Agreement--Termination or Amendment of the Merger Agreement."                   

EXPENSES; TERMINATION FEE.  All out-of-pocket expenses incurred by or on
behalf of the parties in connection with the Merger, the Merger Agreement, this 
Proxy Statement/Prospectus and the related transactions will be borne solely and
entirely by the party that has incurred such expenses. Notwithstanding the      
foregoing, if the Merger Agreement is terminated under certain circumstances,   
then Country Fresh will pay to Suiza Foods a fee of $500,000, and reimburse all 
of Suiza Foods' expenses up to $500,000. In addition, if the foregoing fee is   
payable and if any Competing Transaction is consummated within 180 days after   
such termination, then Country Fresh will pay, in addition to the foregoing, a  
fee of $4,000,000. See "Certain Terms of the Merger Agreement--Expenses."       

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COMPARISON OF SHAREHOLDER RIGHTS

The rights of Country Fresh's shareholders are currently governed by    
Michigan law and by Country Fresh's Articles of Incorporation and Bylaws. Upon  
effectiveness of the Merger, Country Fresh's shareholders will become           
stockholders of Suiza Foods, a Delaware corporation, and their rights as Suiza  
Foods stockholders will be governed by Delaware law and by Suiza Foods'         
Certificate of Incorporation and Bylaws. See "Comparison of Shareholder Rights."

THE SPECIAL MEETING 

   The Special Meeting will be held at 10:00 a.m., local time, on November 25,
1997 at The Holiday Inn Crowne Plaza, at 5700 28th Street, Grand Rapids,        
Michigan 49546. The purpose of the Special Meeting is to consider and vote upon 
(a) a proposal to approve the Merger Agreement and (b) such other matters as may
properly be brought before the Special Meeting. Only holders of record of       
Country Fresh Capital Stock at the close of business on the Record Date, October
21, 1997, are entitled to notice of, and to vote at, the Special Meeting. On the
Record Date, there were approximately 185 record holders of the 3,503,987 shares
of Country Fresh Common Stock then issued and outstanding and entitled to vote  
at the Special Meeting and approximately 54 record holders of the 11,691 shares 
of Country Fresh Preferred Stock then issued and outstanding and entitled to    
vote at the Special Meeting. Approval of the Merger Agreement requires the      
affirmative vote of a majority of the issued and outstanding Country Fresh      
Common Stock and Country Fresh Preferred Stock, voting together as a single     
class, and a majority of the issued and outstanding Country Fresh Preferred     
Stock, voting as a separate class. See "The Special Meeting."                   

   No vote of the stockholders of Suiza Foods is required in order to complete
the Merger.                                                                     

STOCK PRICE AND DIVIDEND INFORMATION

SUIZA FOODS.  The Suiza Common Stock began trading on the Nasdaq Stock  
Market National Market System ("Nasdaq") on April 17, 1996. Effective March 5,  
1997, the Suiza Common Stock began trading on the NYSE. The following table sets
forth, for the periods from April 17, 1996 to October 10, 1997, the high and low
sales prices of the Suiza Common Stock as quoted on the Nasdaq and the NYSE, as 
applicable. On October 22, 1997, the last reported sale price of the Suiza      
Common Stock on the NYSE was $51.47 per share. At September 30, 1997, there were
approximately 77 record holders of Suiza Common Stock.                          

                                                        [Enlarge/Download Table]

                                                                               PRICE RANGE OF   
                                                                                COMMON STOCK    
                                                                            --------------------
                                                                              HIGH        LOW   
                                                                            ---------  ---------
                                                                                                
Year Ended December 31, 1996:                                                                   
  Second Quarter (from April 17, 1996)..................................... $   18.75  $   14.00
  Third Quarter............................................................ $   17.75  $   15.75
  Fourth Quarter........................................................... $   20.75  $   16.75
Year Ended December 31, 1997:                                                                   
  First Quarter............................................................ $   29.25  $   19.50
  Second Quarter........................................................... $   42.00  $   24.75
  Third Quarter............................................................ $   57.50  $   39.13
  Fourth Quarter (through October 22, 1997)................................ $   55.00  $   47.00

  Suiza Foods has never declared or paid a cash dividend on the Suiza 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 Suiza Common 
Stock in the foreseeable future. In addition, Suiza Foods' senior credit        
facility prohibits the payment of dividends by Suiza Foods on any shares of     
Suiza Common Stock, other than dividends payable solely in shares of Suiza      
Common Stock and the terms of the Suiza Preferred Stock will restrict payment of
dividends on Suiza Common Stock. See "Description of Suiza Capital              
Stock--Preferred Stock."                                                        

No shares of Suiza Preferred Stock are currently outstanding. The Suiza 
Preferred Stock to be issued pursuant to the Merger will not be listed for      
trading on any exchange or automated quotation system, and                      

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it is unlikely that an active trading market will develop for the Suiza         
Preferred Stock, which immediately following the Merger will be held by         
approximately 54 holders (assuming no holders of Country Fresh Preferred Stock  
exercise their statutory dissenters' rights).                                   

    COUNTRY FRESH.  Neither the Country Fresh Common Stock nor the Country Fresh
Preferred Stock is traded on any market. There are 185 record holders of Country
Fresh Common Stock and 54 record holders of Country Fresh Preferred Stock.      

 Country Fresh has not declared or paid any dividends on the Country Fresh
Common Stock within the past two fiscal years or any subsequent period. Certain 
restrictions contained in financing agreements to which Country Fresh is a party
limit Country Fresh's ability to pay dividends on the Country Fresh Common      
Stock. For example, the loan agreement between Country Fresh and Harris Trust   
and Savings Bank and Old Kent Bank dated April 11, 1995, as amended, provides   
that Country Fresh may not pay dividends on the Country Fresh Common Stock, with
certain exceptions. One of these exceptions allows Country Fresh to pay         
dividends on the Country Fresh Common Stock during any fiscal quarter if, for   
the 12-month period ending on the last day immediately preceding the first day  
of that fiscal quarter, Country Fresh has a Consolidated Cash Flow Coverage     
Ratio (as defined in that agreement) of not less than 2.0 to 1.0. Country       
Fresh's management has no current plans to declare or pay any dividends on the  
Country Fresh Common Stock.                                                     

The loan agreement described above also exempts dividend payments on the
Country Fresh Preferred Stock. Under Country Fresh's Articles of Incorporation, 
holders of Country Fresh Preferred Stock are entitled to receive, in preference 
to the holders of Country Fresh Common Stock, when, as and if declared by       
Country Fresh's Board of Directors, out of funds legally available for          
distribution to shareholders, cumulative dividends of $25.60 per share per year,
and no more. Such dividends on the Country Fresh Preferred Stock accumulate and 
(if declared) are payable semiannually on the first day of March and September  
in each year (or, if those days are not business days, then the next succeeding 
business day). Under Country Fresh's Articles of Incorporation, so long as any  
Country Fresh Preferred Stock is outstanding, no dividends may be declared and  
paid on the Country Fresh Common Stock until all dividends accrued on the       
Country Fresh Preferred have been paid for the current and all prior periods.   

EQUIVALENT PER SHARE PRICES.  The following table sets forth the last   
reported sale price of the Suiza Common Stock on September 18, 1997, the last   
trading day preceding public announcement of the Merger, and on October 22,     
1997, the last practicable day prior to the mailing of this Proxy               
Statement/Prospectus. The equivalent per share price of the Country Fresh Common
Stock was determined by multiplying the last reported sale price of a share of  
Suiza Common Stock at each specified date by an assumed exchange ratio in the   
Merger of .5454 (assuming that the Average Price equals or exceeds $36.00).     
These assumptions are made solely for the purpose of calculating the pro forma  
data presented below and are not intended to be, nor should they be, interpreted
as a representation or approximation of the actual exchange ratio in the Merger 
or the value of the Suiza Common Stock to be issued in the Merger. For a        
discussion of the terms upon which Country Fresh Common Stock will be converted 
into Suiza Common Stock in the Merger, see "The Merger--General Description of  
the Merger."                                                                    

                                                        [Enlarge/Download Table]

                                                                        EQUIVALENT PRICE PER 
                                                     PRICE OF SUIZA       SHARE OF COUNTRY   
                                                          FOODS                 FRESH        
                                                      COMMON STOCK          COMMON STOCK     
                                                   -------------------  ---------------------
                                                                                             
September 18, 1997................................      $   45.25             $   24.68      
October 22, 1997..................................      $   51.47             $   28.07      

  The market price of the Suiza Common Stock will fluctuate between the date
of this Proxy Statement/ Prospectus and the Effective Date. The market value per
share of Suiza Common Stock that Country Fresh shareholders ultimately receive  
in the Merger and the Average Price used in calculating the number of shares of 
Suiza Common Stock to be issued could be more or less than the market value of  
the Suiza Common Stock on the date of this Proxy Statement/Prospectus. No       
assurance can be given concerning the Average Price or the market price of the  
Suiza Common Stock before or after the Effective Date.                          

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COMPARATIVE PER COMMON SHARE DATA 

 Set forth below are the earnings and book value per common share of Suiza
Foods and Country Fresh on an historical basis, of Suiza Foods on a pro forma   
basis, and on an equivalent pro forma basis for Country Fresh. See "Pro Forma   
Financial Data."                                                                

The information set forth below should be read in conjunction with the  
respective audited and unaudited consolidated financial statements and related  
notes of Suiza Foods, Country Fresh and Morningstar incorporated by reference or
included elsewhere in this Proxy Statement/Prospectus and the pro forma         
financial data included elsewhere in this Proxy Statement/Prospectus. The pro   
forma financial data is not necessarily indicative of the operating results or  
financial position that would have occurred had the mergers been consummated at 
the beginning of the earliest period presented and should not be construed as   
indicative of future operations.                                                

SUIZA FOODS 

                                                        [Enlarge/Download Table]

                                                                                                            SIX MONTHS 
                                                                                     YEAR ENDED             ENDED JUNE 
                                                                                    DECEMBER 31,                30,    
                                                                           -------------------------------  -----------
                                                                             1994       1995       1996        1997    
                                                                           ---------  ---------  ---------  -----------
                                                                                                                       
                                                                                                            (UNAUDITED)
HISTORICAL PER COMMON SHARE DATA:                                                                                      
  Net earnings (loss)(1).................................................. $     .66  $   (1.64) $    2.59   $    1.36 
  Book value(2)...........................................................      1.80       1.50       8.71       13.65 
UNAUDITED PRO FORMA PER COMMON SHARE DATA:                                                                             
  Net earnings(1)......................................................... $     .76  $     .64  $    2.45   $    1.48 
  Book value(3)...........................................................       N/A        N/A       7.59       10.76 

COUNTRY FRESH 

                                                        [Enlarge/Download Table]

                                                                                                            20 WEEKS   
                                                                                YEAR ENDED                 ENDED JULY  
                                                                  --------------------------------------       19,     
                                                                  FEBRUARY 25,   MARCH 2,     MARCH 1,    -------------
                                                                      1995         1996         1997          1997     
                                                                  ------------  -----------  -----------  -------------
                                                                                                                       
                                                                                                           (UNAUDITED) 
HISTORICAL PER COMMON SHARE DATA:                                                                                      
  Net earnings(1)................................................  $      .22    $    1.04    $    1.75     $    1.07  
  Book value(2)..................................................        6.70         6.11         7.94          9.07  
UNAUDITED EQUIVALENT PRO FORMA PER COMMON SHARE DATA:                                                                  
  Net earnings(4)................................................  $      .41    $     .35    $    1.34     $     .81  
  Book value(5)..................................................         N/A          N/A         4.14          5.87  

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

(1) Earnings per share is calculated by dividing total actual historical and pro
    forma net income applicable to common stock for the indicated periods by the
   actual historical and pro forma weighted average number of shares of common
  stock outstanding, as adjusted for stock splits, for the period indicated.

(2) Book value per share is calculated by dividing the total actual historical  
common stockholders' equity as of the end of the indicated period by the
  actual historical number of common shares outstanding as of the same date.

(3) The pro forma common stockholders' book value per share of Suiza Common     
Stock is based upon the pro forma total common stockholder's equity for 
Suiza Foods, Morningstar and Country Fresh as of the end of the period  
    indicated, divided by total pro forma common shares of the combined entities
as of the same date.                                                    

(4) The pro forma equivalent earnings per common share represents the pro forma 
earnings per common share for the indicated periods multiplied by the   
assumed exchange ratio of .5454 shares of Suiza Common Stock for each   
weighted average share of Country Fresh Common Stock for the period     
indicated.                                                              

(5) The pro forma equivalent book value per share of Country Fresh Common Stock 
 represents the pro forma book value per common share as of the end of the
    period indicated multiplied by the assumed exchange ratio of .5454 shares of
Suiza Common Stock for each share of Country Fresh Common Stock.        

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

  The following summary pro forma financial data are based on adjustments to
the historical consolidated balance sheets and related consolidated statements  
of income of Suiza Foods to give effect to the Merger and the Morningstar Merger
using the pooling of interests method of accounting and, for the year ended     
December 31, 1996 and the six-month period ended June 30, 1997, the purchase    
business combinations completed by Suiza Foods and Morningstar during 1996 and  
1997.                                                                           

    Country Fresh's consolidated financial statements are based on a fiscal year
ending on the Saturday nearest to the end of February, while the fiscal years of
Suiza Foods and Morningstar end on December 31. As a result, the unaudited pro  
forma financial information combines different fiscal periods. The unaudited pro
forma balance sheet as of June 30, 1997 assumes that the above described        
transactions occurred as of such date and reflects the combination of the       
historical balance sheet of Suiza Foods and Morningstar as of June 30, 1997 with
the historical balance sheets of Country Fresh as of July 19, 1997.             

 The pro forma statements of income for the years ended December 31, 1994,
1995 and 1996 and the six-month period ended June 30, 1997 (a) assume that the  
merger with Country Fresh and the merger with Morningstar had been consummated  
as of January 1, 1994, and combine the historical results of operations of Suiza
Foods and Morningstar for those periods with the historical results of          
operations of Country Fresh for the fiscal years ended February 25, 1995, March 
2, 1996 and March 1, 1997, and the six-month period (26 weeks) ended July 19,   
1997, respectively, and (b) assume that the business combinations completed by  
Suiza Foods and Morningstar during 1996 and 1997 on a purchase accounting basis 
had been consummated as of January 1, 1996. For ease of reference, all column   
headings used in such table refer to the period-ended date of Suiza Foods.      

The summary pro forma data presented below should be read in conjunction
with the selected historical financial information of Suiza Foods, Country Fresh
and Morningstar, the pro forma financial data and notes thereto, "Recent        
Developments" and the financial statements and other financial information      
included elsewhere in this Joint Proxy Statement/Prospectus and in the documents
incorporated herein by reference by Suiza Foods and Morningstar. The unaudited  
pro forma income statement data are not necessarily indicative of the operating 
results that would have occurred had the Merger and the Morningstar Merger      
occurred on January 1, 1994, nor are they necessarily indicative of future      
operating results of the combined companies.                                    

                                                        [Enlarge/Download Table]

                                                                                                  UNAUDITED   
                                                                          UNAUDITED               SIX MONTHS  
                                                                  YEARS ENDED DECEMBER 31,      ENDED JUNE 30,
                                                               -------------------------------  --------------
                                                                 1994       1995       1996          1997     
                                                               ---------  ---------  ---------  --------------

                                                                                                              
PRO FORMA INCOME STATEMENT DATA:                                                                              
  Net sales................................................... $ 938,866  $1,065,433 $2,014,626   $1,022,064  
  Operating income............................................    49,470     57,910    135,171        80,118  
  Interest expense, net.......................................    23,817     25,615     66,439        28,579  
  Net income from continuing operations.......................    17,534     13,833     61,607        46,196  
  Net income from continuing operations applicable to common                                                  
    shares....................................................    17,534     13,529     61,308        46,046  
  Net earnings per common share...............................       .76        .64       2.45          1.48  

  Weighted average common shares outstanding.................. 23,106,841 21,036,608 25,066,383   31,113,819  

PRO FORMA BALANCE SHEET DATA (AT END OF PERIOD):                                                              
  Total assets................................................                                    $1,312,265  
  Long term debt (excluding current portion)..................                                       729,825  
  Preferred Stock.............................................                                         3,741  
  Total common stockholders' equity...........................                                       321,851  

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SUMMARY FINANCIAL DATA OF SUIZA FOODS 
(IN THOUSANDS, EXCEPT SHARE DATA) 

 The following table sets forth selected historical consolidated financial
data for Suiza Foods Corporation and subsidiaries for each of the three years in
the period ended December 31, 1996 and for the unaudited six-month periods ended
June 30, 1996 and 1997. Such data have been derived from, and should be read in 
conjunction with, the audited consolidated financial statements and unaudited   
interim financial statements and other financial information contained elsewhere
in this Proxy Statement/Prospectus or incorporated by reference herein. See     
"Available Information" and "Incorporation of Certain Information by Reference."

                                                        [Enlarge/Download Table]

                                                                                                     UNAUDITED       
                                                                                                  SIX MONTHS ENDED   
                                                                   YEAR ENDED DECEMBER 31,            JUNE 30,       
                                                               -------------------------------  -------------------- 
                                                                 1994       1995       1996       1996       1997    
                                                               ---------  ---------  ---------  ---------  --------- 
                                                                                                                     
INCOME STATEMENT DATA:                                                                                               
  Net sales................................................... $ 341,108  $ 430,466  $ 520,916  $ 225,307  $ 336,819 
  Income from operations......................................    25,760     30,564     35,122     14,943     23,149 
  Interest expense, net.......................................    19,279     19,921     17,470      8,488      6,580 
  Income (loss) before extraordinary losses...................     4,245     (1,576)    27,929      4,936     24,399 
  Net income (loss)(1)........................................     4,048    (10,038)    25,714      2,721     21,129 
  Earnings (loss) per share:                                                                                         
    Income (loss) before extraordinary loss...................       .69       (.26)      2.81        .58       1.57 
    Extraordinary loss........................................      (.03)     (1.38)      (.22)      (.26)      (.21)
    Net income (loss)(1)......................................       .66      (1.64)      2.59        .32       1.36 

  Weighted average shares outstanding......................... 6,156,387  6,109,398  9,921,822  8,455,332  15,509,388

BALANCE SHEET DATA (AT END OF PERIOD):                                                                               
  Total assets................................................ $ 238,952  $ 232,522  $ 384,148  $ 237,973  $ 402,306 
  Long term debt, excluding current portion...................   173,327    171,745    226,693    134,334    128,150 
  Total stockholders' equity..................................     9,887      9,460     93,532     60,789    208,633 

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

(1) Net income (loss) and related per share amounts include the following       
nonrecurring and extraordinary charges and benefits:                    

                                                        [Enlarge/Download Table]

                                                                                               SIX MONTHS ENDED   
                                                                YEAR ENDED DECEMBER 31,            JUNE 30,       
                                                            -------------------------------  -------------------- 
                                                              1994       1995       1996       1996       1997    
                                                            ---------  ---------  ---------  ---------  --------- 
                                                                                                                  
Merger, financing and other costs (a)...................... $  (1,602) $  (9,554) $    (354) $      --  $      -- 
Tax benefits (b)...........................................        --         --     13,950         --     11,500 
Extraordinary loss from early extinguishment of debt (c)...      (197)    (8,462)    (2,215)    (2,215)    (3,270)
                                                            ---------  ---------  ---------  ---------  --------- 
                                                            $  (1,799) $ (18,016) $  11,381  $  (2,215)     8,230 
                                                            ---------  ---------  ---------  ---------  --------- 
                                                            ---------  ---------  ---------  ---------  --------- 

   (a) Consists of costs incurred in connection with the corporate combination
       pursuant to which Suiza Foods Corporation was formed as a holding company
    for certain pre-existing operations, an uncompleted public offering of
shares of Suiza Foods' Common Stock, an uncompleted debt offering,
    uncompleted acquisitions and debt refinancing costs, net of associated
income taxes of $58 in 1994, $684 in 1995 and $217 in 1996.       

    (b) For 1996, includes the sale of Puerto Rico tax credits of $3,400 (net of
  related expenses), reflected in other income, and the recognition of
 $11,750 in deferred income tax benefits recorded as a credit to tax
    expense, both effects related to tax credits generated by Suiza-Puerto
       Rico, partially offset by additional income tax expense of $1,200 related
     to the sale of the tax credits. For the six months ended June 30, 1997,
  includes a nonrecurring gain of $18,100 net of discounts and related
       expenses, resulting from additional tax credits generated by Suiza-Puerto
 Rico that Suiza Foods subsequently sold to third parties, partially
      offset by additional income tax expense of $6,600 related to the sale of
tax credits.                                                      

 (c) Net of associated income taxes of approximately $700 in 1995, $900 in
1996 and $2,000 for the six months ended June 30, 1997.           

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SUMMARY FINANCIAL DATA OF MORNINGSTAR 
(IN THOUSANDS, EXCEPT SHARE DATA) 

 The following table sets forth selected historical consolidated financial
data for The Morningstar Group, Inc. and subsidiaries for each of the three     
years in the period ended December 31, 1996 and for the unaudited six-month     
periods ended June 30, 1996 and 1997. Such data have been derived from, and     
should be read in conjunction with, the audited consolidated financial          
statements and unaudited interim financial statements and other financial       
information contained elsewhere in this Proxy Statement/Prospectus or           
incorporated by reference herein. See "Available Information" and "Incorporation
of Certain Information by Reference."                                           

                                                        [Enlarge/Download Table]

                                                                                                 UNAUDITED       
                                                                                              SIX MONTHS ENDED   
                                                               YEAR ENDED DECEMBER 31,            JUNE 30,       
                                                           -------------------------------  -------------------- 
                                                             1994       1995       1996       1996       1997    
                                                           ---------  ---------  ---------  ---------  --------- 
                                                                                                                 
INCOME STATEMENT DATA:                                                                                           
  Net Sales............................................... $ 292,314  $ 304,730  $ 394,306  $ 167,417  $ 270,672 
  Income from operations..................................    18,407     20,428     26,160     10,644     23,427 
  Interest expense, net...................................     4,797      4,302      4,026      1,532      6,798 
  Income from continuing operations(1)....................     9,321     11,340     14,576      6,294      9,961 
  Net income..............................................    10,647     11,524     14,576      6,294      9,961 
  Earnings per share:                                                                                            
    Income from continuing operations(1)..................       .62        .74        .96        .42        .64 
    Income from discontinued operations...................       .09        .02         --         --         -- 
    Net income............................................       .71        .76        .96        .42        .64 

  Weighted average shares outstanding..................... 15,050,538 15,245,562 15,133,887 14,778,316 15,643,651

BALANCE SHEET DATA (AT END OF PERIOD):                                                                           
    Total assets.......................................... $ 165,265  $ 162,709  $ 355,991  $ 170,042  $ 352,323 
    Long-term debt, excluding current portion.............    53,892     36,000    177,349     30,463    169,200 
    Total common stockholders' equity.....................    66,802     77,323     88,788     79,748     99,443 

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

(1) Represents income before income from discontinued operations of $1,326 in   
1994 and $184 in 1995.                                                  

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SUMMARY FINANCIAL DATA OF COUNTRY FRESH 
(IN THOUSANDS, EXCEPT SHARE DATA) 

 The following table sets forth selected historical consolidated financial
data for Country Fresh and subsidiaries for each of the three years in the      
period ended March 1, 1997 and for the unaudited 20 weeks ended June 20, 1996   
and July 19, 1997. Such data has been derived from, and should be read in       
conjunction with, the audited and unaudited consolidated financial statements   
and financial information contained elsewhere in this Proxy                     
Statement/Prospectus.                                                           

                                                        [Enlarge/Download Table]

                                                                                                          UNAUDITED      
                                                                            YEARS ENDED                 20 WEEKS ENDED   
                                                                 ----------------------------------  --------------------
                                                                 FEBRUARY 25,  MARCH 2,   MARCH 1,   JULY 20,   JULY 19, 
                                                                     1995        1996       1997       1996       1997   
                                                                 ------------  ---------  ---------  ---------  ---------

                                                                                                                         
INCOME STATEMENT DATA:                                                                                                   
  Net sales.....................................................  $  310,164   $ 336,055  $ 353,037  $ 135,328  $ 136,154
  Operating income..............................................       5,303       6,918     10,841      6,028      6,451
  Interest expense (income), net................................        (259)      1,392      1,219        613        597
  Earnings from continuing                                                                                               
    operations (1)..............................................       3,968       4,069      6,673      3,642      4,029
  Net earnings..................................................       1,696       4,069      6,673      3,642      4,029
  Net earnings applicable to common shares......................       1,696       3,765      6,371      3,566      3,954
  Net earnings per common share:                                                                                         
    Earnings from continuing operations.........................         .52        1.04       1.75        .97       1.07
    Cumulative effect of change in accounting...................        (.30)         --         --         --         --
    Net earnings................................................         .22        1.04       1.75        .97       1.07

  Weighted average common shares outstanding....................   7,622,840   3,609,245  3,636,519  3,631,758  3,685,236
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                   
  Total assets..................................................  $   98,870   $  94,765  $  99,206  $ 105,565  $ 101,942
  Long term debt, excluding current portion.....................      14,217      32,152     28,571     36,318     26,523
  Preferred stock...............................................      --           3,800      3,741      3,800      3,741
  Total common stockholders' equity.............................      51,265      21,326     27,793     25,002     31,775

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

(1) Represents earnings before cumulative effect of change in accounting for    
post-retirement benefits other than pensions.                           

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RISK FACTORS

IN CONSIDERING THE MATTERS SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS,
SHAREHOLDERS OF COUNTRY FRESH SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE
SIGNIFICANT RISKS AND SPECULATIVE FACTORS DESCRIBED BELOW, WHICH ARE ASSOCIATED 
WITH AN INVESTMENT IN SUIZA COMMON STOCK AND SUIZA PREFERRED STOCK UPON         
CONSUMMATION OF THE MERGER.                                                     

RISKS ASSOCIATED WITH ACQUISITION STRATEGY                                      

Suiza Foods' strategy is to continue to expand its dairy, ice, food     
distribution and related food businesses primarily through acquisitions of      
strong regional operators in new markets and consolidating or add-on            
acquisitions in its existing markets. Suiza Foods 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. Suiza Foods may encounter increased competition for acquisitions in the  
future, which could result in acquisition prices that Suiza Foods does not      
consider acceptable. There can be no assurance that Suiza Foods will find       
suitable acquisition candidates at acceptable prices or succeed in integrating  
acquired businesses into Suiza Foods' existing business or in retaining key     
customers of acquired businesses. There can also be no assurance that Suiza     
Foods will have sufficient available capital resources to realize its           
acquisition strategy. See "--Substantial Indebtedness" and "Business of Suiza   
Foods--Business Strategy."                                                      

    Although Suiza Foods often acquires operations in new markets, which require
minimal integration, the success of Suiza Foods' acquisition strategy is also   
dependent on the ability of Suiza Foods to integrate add-on acquisitions into   
Suiza Foods' existing operations in established markets. In addition, Suiza     
Foods' recent growth has placed, and is expected to continue to place, a        
significant strain on its management, operational and financial resources. Suiza
Foods has recently entered into an agreement to acquire Morningstar, which will 
significantly expand and will require integration into Suiza Foods' operations. 
See "Recent Developments." There can be no assurance that the integration and   
management of these operations and future acquired operations will not require  
the investment of capital or result in unforeseen difficulties or absorb        
significant management resources at levels higher than that anticipated by      
management, or that Suiza Foods will realize meaningful economies of scale or   
operating efficiencies from its acquisitions. The failure of Suiza Foods to     
successfully integrate and manage acquired operations could have a material     
adverse effect on Suiza Foods. See "Business of Suiza Foods--Business Strategy" 
and                                                                             
"--The 1997 Acquisitions."                                                      

COMPETITION                                                                     

Suiza Foods' regional dairy businesses are subject to significant       
competition from regional dairy operations and large national food service      
distributors that operate in Suiza Foods' 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. Certain 
of Suiza Foods' competitors are large, well capitalized and may have greater    
financial, operational and marketing resources than Suiza Foods. See "Business  
of Suiza Foods--Competition--Dairy."                                            

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. Any expansion of production capacity in a
regional market could adversely affect Suiza Foods' results of operations in    
such market. See "Business of Suiza Foods-- Industry Overview--Dairy."          

   The plastic container manufacturing industry is also subject to significant
competition. Suiza Foods competes with larger independent manufacturing         
companies and vertically integrated food and industrial companies that operate  
captive plastic container manufacturing facilities. The primary competitive     
factors in the plastic container manufacturing industry are price, quality and  
service. Many of the Suiza Foods'                                               

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competitors are larger and better capitalized than Suiza Foods, and have greater
resources than Suiza Foods. See "Business of Suiza                              
Foods--Competition--Plastics."                                                  

 The packaged ice business is also highly competitive. Suiza Foods 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 Suiza Foods could have an adverse    
effect on Suiza Foods' operations. See "Business of Suiza                       
Foods--Competition--Ice."                                                       

SUBSTANTIAL INDEBTEDNESS                                                        

On June 30, 1997 (as adjusted to reflect the July 1, 1997 acquisition of
Dairy Fresh and the July 31, 1997 acquisitions of Garelick Dairy and Franklin   
Plastics), Suiza Foods' total indebtedness and long-term debt (excluding current
portion) were $551.4 million and $534.1 million, respectively, with long-term   
indebtedness (excluding current portion) representing 71% of total              
capitalization. In connection with its acquisition of Garelick Dairy and        
Franklin Plastics in July 1997, Suiza Foods increased the size of its existing  
senior credit facility from $300.0 million to $700.0 million in the aggregate.  
Suiza Foods' total indebtedness and long-term debt (excluding current portion), 
on a pro forma basis, as of June 30, 1997, after giving effect to the Merger and
the Morningstar Merger would be $762.4 million and $729.8 million, respectively,
with long-term indebtedness (excluding current portion) representing 69% of     
total capitalization.                                                           

    In connection with the Morningstar Merger, Suiza Foods intends to enter into
the New Credit Facility (as defined), in order to increase its total borrowing  
capacity to approximately $1.25 billion. For a description of the New Credit    
Facility, see "Recent Developments." As a result, Suiza Foods would be able to  
incur substantial amounts of additional indebtedness in the future. The New     
Credit Facility and related debt service obligations are expected to (a) limit  
Suiza Foods' ability to obtain additional financing in the future, (b) require  
Suiza Foods to dedicate a significant portion of its cash flow to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to Suiza Foods for other purposes, (c) limit Suiza Foods' flexibility in        
planning for, or reacting to, changes in its business and market conditions, and
(d) impose additional financial and operational restrictions on Suiza Foods,    
including restrictions on dividends. See "Recent Developments" and "Pro Forma   
Financial Data."                                                                

Suiza Foods' ability to make scheduled payments on its indebtedness and 
scheduled preferred stock dividend payments 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 Suiza Foods'    
control. Under its existing senior credit facilities, Suiza Foods has pledged   
substantially all of its assets to secure its indebtedness. Although the lenders
would release such security interests under the proposed terms of the New Credit
Facility, Suiza Foods would pledge the stock of most of its direct and indirect 
subsidiaries. The failure of Suiza Foods to comply with the financial and other 
restrictive covenants under its existing senior credit facilities or the New    
Credit Facility may result in an event of default which, if not cured or waived,
could have a material adverse effect on Suiza Foods. Suiza Foods has entered    
into various interest rate agreements to reduce its exposure to interest rate   
fluctuations under its senior credit facilities, which have the effect of fixing
Suiza Foods' interest rate with respect to a portion of its indebtedness under  
its senior credit facilities. Suiza Foods remains subject to interest rate risk,
however, with respect to a substantial portion of its indebtedness.             

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, typically on an annual basis, and remain fixed unless
changed by the                                                                  

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government. The price controls in Puerto Rico make Suiza Foods vulnerable to    
increases in the costs of manufacturing, packaging and distributing its         
products. There can be no assurance that Suiza Foods' operating results will not
be adversely affected by price levels set by the government of Puerto Rico. See 
"Business of Suiza Foods--Raw Materials and Supply--Dairy."                     

 The price of raw milk in the United States fluctuates based on supply and
demand, with minimum support prices established monthly on a regional basis by  
federal or state government agencies. In 1996, Congress 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 United States will not occur or that  
any such increase would not reduce the profitability of Suiza Foods' operations.
See "Business of Suiza Foods--Raw Materials and Supply--Dairy."                 

  As a manufacturer and distributor of food products, Suiza Foods is subject
to federal, state and local laws and regulations governing the manufacture      
(including composition and ingredients), labeling, packaging and safety of food.
The Federal Food and Drug Administration and various state and local agencies   
are authorized to enforce these laws and regulations by inspecting Suiza Foods' 
facilities and requiring remedial action where necessary. Although Suiza Foods  
maintains quality control programs designed to address these issues, an actual  
or perceived problem with the quality or safety of products at any of Suiza     
Foods' facilities could lead to product withdrawals, product recalls,           
remediation expenses, temporary plant closings and related negative publicity,  
any of which could have a material adverse effect on Suiza Foods. Suiza Foods'  
operations are also subject to other federal, Puerto Rico, state and local      
governmental regulation.                                                        

DEPENDENCE ON KEY PERSONNEL                                                     

   The future success of Suiza Foods' business operations is dependent in part
on the efforts and skills of certain key members of management, including Gregg 
L. Engles, Chairman and Chief Executive Officer of Suiza Foods. The loss of any 
of its key members of management could have an adverse effect on Suiza Foods.   

LIMITATIONS ON FAVORABLE TAX TREATMENT                                          

    Under Section 936 of the Code, a portion of Suiza Foods' income derived from
its dairy, fruit drink and plastic container manufacturing 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 Code that govern the allocation among affiliated
corporations of credits under Section 936, may limit the amount of tax credits  
available to Suiza Foods prior to the expiration of Section 936.                

ANTITAKEOVER PROVISIONS                                                         

   Suiza Foods' charter and bylaws contain provisions that may delay, defer or
prevent a change in control of Suiza Foods. Among other things, these           
provisions: (a) 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; (b) 
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; (c) permit
directors to be removed only for cause; and (d) specify advance notice          
requirements for stockholder proposals and director nominations. See "Comparison
of Shareholder Rights."                                                         

ANTICIPATED ACCOUNTING TREATMENT                                                

  Suiza Foods and Country Fresh anticipate that the Merger will be accounted
for using the "pooling of interests" method of accounting pursuant to Opinion   
No. 16 of the Accounting Principles Board. The                                  

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pooling of interests method of accounting assumes that the combining companies  
have been merged from inception, and the historical consolidated financial      
statements for periods prior to consummation of the Merger are restated as      
though the companies had been combined from inception. One of the conditions to 
the Merger is that Suiza Foods and Country Fresh will have been advised in      
writing by Deloitte & Touche LLP, on the closing date of the Merger, that the   
Merger should be treated as a pooling of interests for accounting purposes.     
However, such opinions are not binding on the Commission.                       

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 

    This Proxy Statement/Prospectus includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical fact included in this   
Proxy Statement/Prospectus, including without limitation, statements under      
"Summary," "Risk Factors," "Recent Developments," "The Merger--Reasons for the  
Merger," "Business of Suiza Foods," "Business of Country Fresh" and             
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations of Country Fresh" regarding the financial position, business strategy
and plans and objectives of management of Suiza Foods and Country Fresh are     
forward-looking statements. Although Suiza Foods and Country Fresh believe that 
the expectations reflected in such forward-looking statements, to the extent    
applicable to each of them, are reasonable, neither can give any assurance that 
such expectations will prove to be correct. Important factors that could cause  
actual results to differ materially from expectations ("Cautionary Statements") 
are disclosed under "Risk Factors" and elsewhere in this Proxy                  
Statement/Prospectus, including without limitation in conjunction with the      
forward-looking statements included herein. All subsequent written and oral     
forward-looking statements attributable to Suiza Foods, Country Fresh or persons
acting on their behalf are expressly qualified in their entirety by the         
Cautionary Statements.                                                          

RECENT DEVELOPMENTS 

On September 28, 1997, Suiza Foods entered into an Agreement and Plan of
Merger (the "Morningstar Merger Agreement") with Morningstar, pursuant to which 
a subsidiary of Suiza Foods would merge with Morningstar and Morningstar would  
become a wholly-owned subsidiary of Suiza Foods. The Morningstar Merger is a    
stock-for-stock transaction in which Suiza Foods will issue .85 shares of Suiza 
Common Stock for each outstanding share of Morningstar common stock. Based on   
the number of shares of Morningstar common stock outstanding on September 30,   
1997, Suiza Foods will issue approximately 12.5 million shares of Suiza Common  
Stock in the Morningstar Merger. In addition, Suiza Foods will assume           
outstanding options of Morningstar, which will be convertible into substitute   
options to purchase approximately 3.0 million shares of Suiza Common Stock. As  
of June 30, 1997, Morningstar had approximately $176 million in indebtedness,   
which Suiza Foods will either refinance or assume in connection with the        
Morningstar Merger. For information regarding the pro forma effect of the       
Morningstar Merger, see "Pro Forma Financial Data."                             

Morningstar is a national manufacturer, distributor and marketer of     
refrigerated, shelf-stable and frozen food products. Its established branded    
products include: International Delight-Registered Trademark- gourmet-flavored  
and non-flavored coffee creamers, Second Nature-Registered Trademark-           
refrigerated no-cholesterol egg substitute, Mocha Mix-Registered Trademark-     
non-dairy coffee creamers, Naturally Yours-Registered Trademark- fat-free and   
regular real dairy sour cream, Jon Donaire-Registered Trademark- cheesecakes and
desserts, Wacky Willie-TM- flavored shakes and, in the western two-thirds of the
United States, Lactaid-Registered Trademark- lactose-free and lactose-reduced   
milks produced under license from McNeil Consumer Products Company (a subsidiary
of Johnson & Johnson). Morningstar also specializes in providing private label  
refrigerated, shelf-stable and frozen products to grocery warehouses,           
bakery/industrial companies, club stores and dairy companies. For further       
information regarding the business of Morningstar, the Morningstar Merger and   
Suiza Foods' reasons for the Morningstar Merger, see "The Companies," "The      
Merger," and "The Merger Agreement" contained in the Exerpts from the Joint     
Proxy Statement/ Prospectus for the Morningstar Merger attached as Appendix D.  

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   Suiza Foods and Morningstar have called stockholder meetings related to the
Morningstar Merger for November 26, 1997, and management expects that the       
Morningstar Merger will close shortly thereafter. However, there can be no      
assurances that the Morningstar Merger will close by such date or at all. The   
Morningstar Merger is subject to a number of conditions, including shareholder  
and regulatory approval, the receipt of tax opinions and other customary        
conditions. The Merger and the Morningstar Merger are separate transactions and 
the closing of one merger is not in any way contingent on the closing of the    
other. See "The Merger Agreement--Conditions Precedent" contained in the Exerpts
from the Joint Proxy Statement/Prospectus for the Morningstar Merger attached as
Appendix D.                                                                     

In connection with the Morningstar Merger, Suiza Foods has received a   
commitment letter from its senior lenders to replace its existing $700 million  
senior credit facilities with replacement facilities in the aggregate amount of 
$1.25 billion, consisting of a $550 million term loan and a $700 million        
revolving credit facility (collectively, the "New Credit Facility"). The term   
loan would be amortized over six years beginning in 1998, and the revolving     
credit facility would expire on December 31, 2003. Amounts outstanding under the
New Credit Facility would bear interest at a rate per annum equal to one of the 
following rates, at Suiza Foods' option: (i) a specified base rate or (ii) The  
London Interbank Offered Rate ("LIBOR") plus a margin that would vary from 40 to
100 basis points depending on Suiza Foods' leverage ratio (defined as the ratio 
of aggregate funded debt to EBITDA). Suiza Foods would pay a commitment fee on  
unused amounts of the revolving facility that ranges from 15 to 25 basis points 
depending on the leverage ratio.                                                

The New Credit Facility would require Suiza Foods to comply with certain
financial covenants, including the following: (i) the leverage ratio will not   
exceed 3.90 to 1 during 1998, 3.75 to 1 during 1999 and 3.50 to 1 thereafter;   
(ii) net worth will not be less than $300 million, plus 50% of positive net     
income, plus 75% of the proceeds of new equity offerings; (iii) the interest    
coverage ratio (defined as the ratio of EBITDA to interest expense) will not be 
less than 3.00 to 1; and (iv) the fixed charge coverage ratio (defined as the   
ratio of EBITDA to the sum of scheduled principal repayments, interest, taxes,  
capital expenditures and dividends) will not be less than 1.00 to 1 during 1998 
and 1.10 to 1 thereafter.                                                       

 The New Credit Facility would also include usual and customary covenants,
including limitations on material acquisitions or dispositions of assets, lines 
of business, the incurrence of additional indebtedness and transactions with    
affiliates, subject to specified exceptions. Suiza Foods would pledge all of the
capital stock of its direct and indirect subsidiaries (except for 35% of the    
capital stock of Garrido) to secure the New Credit Facility, and Suiza Foods    
would agree not to grant a security interest in its remaining assets to any     
other person (subject to certain exceptions). In addition, each of Suiza Foods' 
direct and indirect subsidiaries (other than Garrido) would guarantee the debt  
incurred under the New Credit Facility. The New Credit Facility would include   
various events of default customary for similar senior credit facilities,       
including defaults resulting from a change in control of Suiza Foods (including 
certain changes in the Suiza Board and certain acquisitions of Suiza Common     
Stock by third parties).                                                        

  Suiza Foods currently anticipates that it will be able to finalize the New
Credit Facility prior to completion of the Morningstar Merger. There can be no  
assurance, however, that the New Credit Facility will be finalized on the terms 
contained in the commitment letter or that Suiza Foods will ultimately be able  
to amend or replace its existing senior credit facilities.                      

THE MERGER

   This section of the Proxy Statement/Prospectus, as well as the next section
entitled "Certain Terms of the Merger Agreement," describe certain aspects of   
the proposed Merger. The detailed terms and conditions to the consummation of   
the Merger are contained in the Merger Agreement, which is attached hereto as   
Appendix A and incorporated herein by reference. The discussions in this section
and the next section do not purport to be complete and are qualified in their   
entirety by reference to the Merger Agreement. Shareholders of Country Fresh are
urged to read the Merger Agreement in its entirety.                             

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GENERAL DESCRIPTION OF THE MERGER                                               

  The Merger Agreement provides that, at the Effective Time, Merger Sub will
merge with and into Country Fresh, and Country Fresh will become a wholly-owned 
subsidiary of Suiza Foods. Subject to the terms and conditions of the Merger    
Agreement, at the Effective Time, each share of Country Fresh Common Stock      
outstanding immediately prior to the Effective Time will be converted into .5454
shares of Suiza Common Stock, subject to the "Top Up" provisions described      
below, and each share of Country Fresh Preferred Stock outstanding immediately  
prior to the Effective Time (other than shares of Country Fresh Preferred Stock 
whose holders exercise dissenters' rights) will be converted into one share of  
Suiza Preferred Stock having rights and preferences substantially similar to the
Country Fresh Preferred Stock. If the Average Price is less than $36.00 per     
share, Country Fresh may terminate the Merger Agreement or deliver a "Top Up    
Request" to Suiza Foods. If Suiza Foods elects to comply with this request, then
the total number of shares of Suiza Common Stock to be issued in the Merger will
be increased to have a value (based on the Average Price) of $68.8 million. If  
Suiza Foods does not elect to comply with the Top Up Request, Country Fresh may 
elect either to complete the Merger with no adjustment to the number of shares  
of Suiza Common Stock to be issued or to terminate the Merger Agreement. See    
"Certain Terms of the Merger Agreement--Top Up Provisions."                     

For purposes of these provisions, "Average Price" is defined to mean the
weighted average price of all transactions in Suiza Common Stock on the New York
Stock Exchange as reported on the Bloomberg Financial Markets System (or an     
equivalent system) for the three trading days immediately prior to the Closing  
Date. Assuming that the Average Price equals or exceeds $36.00 per share and    
based on the number of shares of Country Fresh Common Stock outstanding on      
September 30, 1997, a total of 1,911,075 shares of Suiza Common Stock will be   
issued to holders of Country Fresh Common Stock in the Merger. Based on the     
number of shares of Suiza Common Stock outstanding on September 30, 1997, this  
would result in the former holders of Country Fresh Common Stock owning         
approximately 12.1% of the total number of shares of Suiza Common Stock to be   
outstanding immediately after the Merger. On the same basis, but giving effect  
to the issuance of an additional 12.5 million shares of Suiza Common Stock in   
the Morningstar Merger, the former holders of Country Fresh Common Stock would  
hold approximately 6.8% of the total number of shares of Suiza Common Stock to  
be outstanding. See "Recent Developments."                                      

  Based on the number of shares of Country Fresh Preferred Stock outstanding
on September 30, 1997, Suiza Foods will issue a total of 11,691 shares of Suiza 
Preferred Stock in the Merger. Such shares would represent 100% of the Suiza    
Preferred Stock outstanding after the Merger and the Morningstar Merger.        

 The market value of the Suiza Common Stock at the Effective Time may vary
from the prices as of the date of execution of the Merger Agreement, the date   
hereof, or the date on which shareholders vote on the Merger due to, among other
factors, changes in the business, operations and prospects of Suiza Foods and   
general market and economic conditions. Because the Merger consideration is a   
fixed ratio of shares of Suiza Common Stock (unless the Average Price falls     
below $36.00) and because the market price of Suiza Common Stock fluctuates, the
value of the shares of Suiza Common Stock that each share of Country Fresh      
Common Stock will be converted into may increase or decrease prior to and       
following the Merger. See "Certain Terms of the Merger Agreement--Manner and    
Basis of Converting Shares."                                                    

BACKGROUND OF THE MERGER                                                        

    On March 6, 1997, Gregg Engles, Suiza Foods' Chairman of the Board and Chief
Executive Officer, Mr. Beshears, Mr. Parks and Mr. Corea of The Ohio Company,   
Country Fresh's historical financial advisor, met and discussed possible        
synergistic advantages to a combination of Country Fresh and Suiza Foods. On    
March 13, 1997, the parties entered into a confidentiality agreement in         
contemplation of exchanging certain financial and business information.         

At its meeting held on March 25, 1997, the Country Fresh Board reviewed 
financial information relating to Suiza Foods and Country Fresh and Country     
Fresh's long-range strategy. On April 8, 1997, Suiza Foods requested financial  
information from Country Fresh as part of its initial analysis of Country       

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Fresh. Country Fresh sent this information to Suiza Foods on May 19, 1997. At a 
meeting held on May 16, 1997, Mr. Parks reported to the Country Fresh Board his 
conversations with Mr. Beshears and Mr. Engles and noted his plans to continue  
conversations with Suiza Foods.                                                 

On June 3, 1997, Mr. Engles sent to Mr. Parks a letter expressing Suiza 
Foods' interest in pursuing an acquisition of Country Fresh. After the letter of
interest was received from Mr. Engles, Mr. Parks had telephone conversations    
with Mr. Engles and Mr. Beshears to clarify the letter of interest. Country     
Fresh's management, along with Mr. Corea, made an analysis of the letter of     
interest and updated internal valuation data and benchmarking.                  

At a meeting held on June 26, 1997, the Country Fresh Board met with    
representatives of The Ohio Company. The Ohio Company discussed with the Country
Fresh Board various potential strategic alternatives to enhance the value of    
Country Fresh to its shareholders, including continuing Country Fresh's business
without affiliation with another business, offering shares of Country Fresh     
Common Stock to the public, and a possible business combination with Suiza      
Foods. After an extensive discussion among the directors, the Board of Directors
authorized management to continue discussions with Suiza Foods to determine     
whether a proposal could be obtained that would provide a premium value to      
Country Fresh's shareholders.                                                   

 On July 17 and July 24, 1997, the Country Fresh Board again met to review
the terms of a possible business combination with Suiza Foods. Representatives  
of The Ohio Company attended the meetings and presented certain financial       
information for consideration by the Country Fresh Board. At the meeting held   
July 24, 1997, the Country Fresh Board formally engaged The Ohio Company to     
render certain financial advisory and investment banking services to Country    
Fresh in connection with a possible merger with Suiza Foods, including rendering
an opinion, if it were able, as to the fairness, from a financial point of view,
of the consideration to be received by the shareholders of Country Fresh in any 
such business combination.                                                      

On July 28, 1997 and July 30, 1997, Mr. Parks had lengthy telephone     
conferences with Mr. Engles and Mr. Beshears as to possible transaction issues  
and due diligence procedures. Between July 28 and August 4, 1997, discussions   
between the parties continued.                                                  

  On August 7, 1997, representatives of Country Fresh and Suiza Foods met in
Grand Rapids and continued discussions regarding the Merger. Following this     
meeting, legal counsel for Country Fresh and Suiza Foods met and discussed      
possible transaction structures, timing and due diligence. They also discussed, 
in general terms, the scope of the representations and warranties to be included
in the Merger Agreement, whether the representations and warranties would       
survive the Merger, the conditions to the parties' obligations to consummate the
Merger, and the size of a termination fee and the instances in which a          
termination fee would be payable if the transactions contemplated by the Merger 
Agreement were not consummated.                                                 

  On August 11 through August 13, 1997, Mr. Engles, Mr. Parks and members of
Suiza Foods' and Country Fresh's management visited the facilities of Country   
Fresh and its subsidiaries in Grand Rapids, Michigan, New Paris, Indiana,       
Toledo, Ohio, Livonia, Michigan, Detroit, Michigan and Flint, Michigan.         

    On August 29, 1997, at the regularly scheduled meeting of Suiza Foods' Board
of Directors (the "Suiza Board"), Mr. Engles led a discussion regarding the     
Merger and the Merger Agreement, including the principal terms of the           
transaction, the negotiations to date, Suiza Foods' due diligence and Country   
Fresh's business and financial condition. After an extensive discussion, the    
Suiza Board approved the Merger and the Merger Agreement.                       

    On September 11, 1997, the Country Fresh Board met and continued discussions
regarding the possible strategic advantages of a merger with Suiza Foods, as    
well as various strategic alternatives. A draft Merger Agreement was reviewed by
legal counsel at this meeting. From September 11 to September 17, 1997, the     
parties continued negotiations with regard to the terms of the Merger Agreement 
and the Merger.                                                                 

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  On September 17, 1997, Mr. Engles and L. Hollis Jones, President and Chief
Operating Officer of Morningstar, traveled to Grand Rapids, Michigan to meet    
with Mr. Parks to discuss Suiza Foods' potential acquisition of Country Fresh   
and a potential merger between Suiza Foods and Morningstar. At that meeting, Mr.
Parks, on behalf on Country Fresh, executed a confidentiality agreement         
regarding the potential merger between Suiza Foods and Morningstar.             

During the morning of September 18, 1997, the parties resolved all      
substantive terms of the Merger Agreement, and the Country Fresh Board convened 
to consider the terms of the Merger Agreement. At this meeting, Mr. Engles      
addressed the Country Fresh Board and discussed Suiza Foods' organizational and 
business strategy, including the potential merger with Morningstar. Also at this
meeting, The Ohio Company delivered its opinion to the Country Fresh Board to   
the effect that the consideration to be received by the shareholders of Country 
Fresh in the Merger was fair from a financial point of view, and the Country    
Fresh Board unanimously approved the Merger Agreement. Later that day, the      
parties executed the Merger Agreement.                                          

On the morning of September 19, 1997, before the opening of the NYSE, a 
press release was issued by Suiza Foods announcing the execution of the Merger  
Agreement and the transactions contemplated by the Merger Agreement.            

REASONS FOR THE MERGER                                                          

SUIZA FOODS.  Suiza Foods management believes that the acquisition of   
Country Fresh through the Merger is consistent with Suiza Foods' established    
acquisition strategy. Suiza Foods has grown primarily through a successful      
acquisition strategy, having consummated 54 acquisitions since its inception in 
May 1988, including 27 acquisitions since its initial public offering in April  
1996. The dairy and ice markets in which Suiza Foods operates tend to be        
relatively mature and do not offer opportunities for rapid internal growth.     
However, these markets are relatively stable in nature and thus provide some    
level of predictability for Suiza Foods' operations. As a result of these       
dynamics, Suiza Foods' strategy has been to grow primarily through acquisitions 
and to realize revenue and operating income growth as well as economies of scale
by eliminating duplicative manufacturing, distribution, purchasing and          
administrative operations. This acquisition strategy has historically focused on
companies like Country Fresh, which have established regional operations with   
significant market share and long-standing customer relationships.              

  The acquisition of Country Fresh also provides Suiza Foods with a platform
in the Midwest from which to pursue consolidating or add-on acquisitions. Suiza 
Foods has implemented this consolidation strategy in the past by acquiring and  
integrating dairy operations into Suiza-Puerto Rico and Velda Farms, as well as 
a number of ice companies into Reddy Ice. Management has enhanced the           
profitability of the acquired operations through increased purchasing power and 
by consolidating delivery routes, production, acquired brand names and human    
resources into Suiza Foods' larger scale operations. For example, in January    
1996 Suiza Foods acquired Skinners' Dairy, Inc. in Jacksonville, Florida and    
then consolidated Skinners' manufacturing and distribution operations into those
of Velda Farms.                                                                 

    A number of risks are associated with Suiza Foods' acquisition strategy, and
there can be no assurance that it will be successful. See "Risk Factors--Risks  
Associated with Acquisition Strategy."                                          

COUNTRY FRESH.                                                          

In making its decision and concluding to recommend to holders of Country
Fresh Capital Stock that they vote their shares in favor of the Merger, the     
Country Fresh Board considered a number of factors, including, among others, the
following material considerations:                                              

 (a) the directors' familiarity with and review of the business, financial
        condition and results of operations of Country Fresh and Country Fresh's
competitive position in its business, as well as other financial
information and general economic conditions;                    

   (b) the advantages of a strategic combination with Suiza Foods in enhancing
   Country Fresh's product offerings, growth prospects and competitive
position;                                                       

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(c) the possible alternatives to the Merger including, among others,    
    continuing to operate Country Fresh as an independent entity and the
risks associated therewith;                                     

    (d) management's historical valuation of Country Fresh Common Stock relative
   to the value represented by the consideration to be received in the
Merger;                                                         

(e) the anticipated costs associated with restructuring Country Fresh or
pursuing other strategic alternatives;                          

(f) the directors' belief that the consideration payable in the Merger  
     represented the highest price per share that could be negotiated with
Suiza Foods;                                                    

    (g) the presentations by The Ohio Company, including the opinion of The Ohio
      Company to the effect that the consideration to be received by holders
       of shares of Country Fresh Capital Stock in the Merger is fair to those
holders from a financial point of view;                         

  (h) the timing of the transaction and premiums currently being obtained in
comparable transactions;                                        

(i) the proposed structure of the transaction, including its tax-free   
nature;                                                         

(j) the terms and conditions of the Merger Agreement, including, among  
       others, (i) the right of the Country Fresh Board (A) in connection with
      the discharge of the Country Fresh Board's fiduciary duties to Country
Fresh and its shareholders, to withdraw, modify or amend its    
    recommendation to the shareholders to accept the Merger and pursue a
Competing Transaction with another party and (B) in certain     
  circumstances to terminate the Merger Agreement, and the financial
      consequences of such termination, and (ii) the absence from the Merger
       Agreement of any upward limitation or "ceiling" on the number of shares
     of Suiza Common Stock to be issued to Country Fresh's shareholders in
        the Merger, and the absence of any right of Suiza Foods to terminate the
    Merger Agreement if the value of a share of Suiza Common Stock rises
       above any particular level prior to the consummation of the Merger; and

(k) the financial condition of Suiza Foods.                             

    The Country Fresh Board also recognized that holders of Country Fresh Common
Stock will be entitled to receive shares of Suiza Common Stock in the Merger,   
and that this would allow such holders the opportunity to participate in the    
benefits, if any, of increases in the value of Suiza Foods' business and        
properties following the Merger. Accordingly, the directors gave consideration  
to Suiza Foods' future prospects, as well as its historical results of          
operations.                                                                     

The Country Fresh Board did not assign relative weights to the foregoing
factors or determine that any factor was of specific importance relative to any 
other factor. Rather, the Country Fresh Board viewed its position and           
recommendation as being based on the totality of the information presented to it
and considered by it.                                                           

  The full text of the opinion of The Ohio Company dated as of September 18,
1997 is attached as Appendix B to this Proxy Statement/Prospectus and is        
incorporated herein by reference. A description of the assumptions made, matters
considered, analyses used and limitations on the review undertaken by The Ohio  
Company in connection with the opinion is set forth below under the caption     
"--Opinion of the Financial Advisor to Country Fresh." SHAREHOLDERS ARE URGED TO
READ THE OPINION AND THE RELATED DESCRIPTION IN THEIR ENTIRETY. The Country     
Fresh Board was aware that The Ohio Company would be entitled to receive certain
fees described under "--Opinion of the Financial Advisor to Country Fresh" upon 
the consummation of the transactions contemplated by the Merger Agreement.      

RECOMMENDATION OF THE BOARD OF DIRECTORS OF COUNTRY FRESH                       

   The Country Fresh Board has determined that the consideration to be paid in
the Merger is fair to Country Fresh and its shareholders from a financial point 
of view and is in the best interests of such shareholders, and, therefore, has  
adopted the Merger Agreement. THE COUNTRY FRESH BOARD                           

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UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF COUNTRY FRESH VOTE FOR APPROVAL 
OF THE MERGER AGREEMENT.                                                        

OPINION OF THE FINANCIAL ADVISOR TO COUNTRY FRESH                               

Pursuant to an engagement letter dated July 25, 1997 (the "Engagement   
Letter"), Country Fresh retained The Ohio Company to render certain financial   
advisory and investment banking services to Country Fresh in connection with the
transaction contemplated by the Merger Agreement, including rendering an        
opinion, if it was able, as to the fairness, from a financial point of view, of 
the consideration to be received by Country Fresh's shareholders pursuant to the
Merger Agreement.                                                               

The Ohio Company is a recognized investment banking firm. As part of its
investment banking activities, The Ohio Company is regularly engaged in the     
valuation of businesses and securities in connection with mergers and           
acquisitions and valuations for estate, corporate and other purposes. Country   
Fresh retained The Ohio Company as its financial advisor on the basis of The    
Ohio Company's experience and expertise in past financial advisory and          
investment banking services rendered to Country Fresh as well as its experience 
and expertise in transactions similar to the Merger and its reputation in the   
investment banking community. As part of its services, The Ohio Company analyzed
Country Fresh's operations, historical performance and future prospects,        
participated in negotiations concerning the financial aspects of the Merger     
Agreement under the guidance of Country Fresh's Board of Directors, and provided
an opinion as to the fairness, from a financial point of view, of the           
consideration to be received by Country Fresh's shareholders pursuant to the    
Merger Agreement.                                                               

The Ohio Company has in the past and may in the future render investment
banking services to Country Fresh. The Ohio Company's opinion concerning the    
fairness of the consideration to be received by Country Fresh's shareholders    
pursuant to the Merger Agreement was not subject to indications of future       
business with either Country Fresh or Suiza Foods.                              

  The Ohio Company has rendered a written opinion to the Country Fresh Board
to the effect that, as of the date of the Merger Agreement, the consideration to
be received by Country Fresh's shareholders pursuant to the Merger Agreement is 
fair, from a financial point of view, to those shareholders. No limitations were
imposed by the Country Fresh Board upon The Ohio Company with respect to the    
investigations made or procedures followed by The Ohio Company in rendering its 
opinion. The full text of the opinion of The Ohio Company dated September 18,   
1997, which sets forth certain assumptions made, matters considered and limits  
on the review undertaken by The Ohio Company, is attached as Appendix B to this 
Proxy Statement/Prospectus. COUNTRY FRESH'S SHAREHOLDERS ARE URGED TO READ THIS 
OPINION IN ITS ENTIRETY.                                                        

The Ohio Company's opinion is directed only to the fairness, from a     
financial point of view, of the consideration to be received by Country Fresh's 
shareholders pursuant to the Merger Agreement and does not constitute a         
recommendation to any of Country Fresh's shareholders as to how such            
shareholders should vote on any matter at the Special Meeting.                  

  As consideration for The Ohio Company's services, Country Fresh has agreed
to pay The Ohio Company a fee of $750,000 if Country Fresh consummates the      
transactions contemplated by the Merger Agreement. In addition, whether or not  
the Merger is consummated, Country Fresh has agreed to reimburse The Ohio       
Company for its reasonable out-of-pocket expenses incurred in connection with   
the performance of its duties under its engagement letter with Country Fresh,   
and has agreed to indemnify The Ohio Company against certain liabilities,       
including liabilities arising under applicable securities laws.                 

In connection with its opinion, The Ohio Company reviewed and analyzed  
material and information bearing upon the financial operating condition of      
Country Fresh and Suiza Foods including, but not limited to: (a) the Merger     
Agreement, including the financial terms thereof; (b) the audited financial     
statements of Country Fresh for the fiscal years 1992 through 1997 as well as   
interim unaudited financial statements through June 21, 1997; (c) annual        
divisional unaudited financial statements of Country Fresh for the fiscal years 
1992 through 1997; (d) certain internal information, primarily financial in     
nature,                                                                         

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concerning the business and operations of Country Fresh; (e) Country Fresh's    
consolidated budget plan for fiscal 1998 along with certain internal information
and forecasts for Country Fresh prepared by management; (f) the audited         
financial statements of Suiza Foods for the year ended December 31, 1996; (g)   
the Form 8-K of Suiza Foods dated July 14, 1997, as amended on August 22, 1997; 
(h) the Form 10-Q of Suiza Foods for the period ended June 30, 1997; (i) the    
Form 10-Q of Suiza Foods for the three-month period ended March 31, 1997; (j)   
the Form 10-K of Suiza Foods for the period ended December 31, 1996; (k) the    
Form 8-K of Suiza Foods dated December 31, 1996; (l) the Form 10-Q of Suiza     
Foods for the nine-month period ended September 30, 1996; (m) the Form 8-K of   
Suiza Foods dated July 19, 1996, as amended on September 24, 1996; (n) the Form 
8-K of Suiza Foods dated September 24, 1996; and (o) certain public information 
concerning merger and acquisition transactions during 1996 and 1997 involving   
Suiza Foods as well as involving companies engaged in the dairy business and    
related businesses.                                                             

   The Ohio Company also held discussions with members of senior management of
both Country Fresh and Suiza Foods regarding past and current business          
operations, financial conditions and future prospects of Country Fresh and Suiza
Foods, both separately and on a combined basis. In addition, The Ohio Company   
reviewed the historical exchange value of the Country Fresh Common Stock as well
as a summary of the most recent transactions in Country Fresh Common Stock. The 
Ohio Company also reviewed the reported stock price and trading activity for the
Suiza Common Stock and compared that information with similar information for   
certain other companies the securities of which are publicly traded, reviewed   
the financial terms of certain recent business combinations in the dairy        
industry specifically and other industries generally and performed other studies
and analyses as it considered appropriate. The Ohio Company was not requested to
seek, nor did it seek, alternative participants for a proposed transaction. The 
Ohio Company's opinion was necessarily based upon conditions as they existed and
could be analyzed and evaluated on the date of the opinion and the information  
made available to The Ohio Company through that date.                           

   In connection with its review, The Ohio Company assumed and relied upon the
accuracy and completeness of all of the foregoing information and, with respect 
to any information concerning future prospects, that such information had been  
reasonably prepared on bases reflecting the best currently available estimates  
and judgments of Country Fresh's management as to the future financial          
performance of Country Fresh, and that such information provided a reasonable   
basis upon which The Ohio Company could form an opinion. The Ohio Company did   
not attempt to verify independently any such information, nor did it make or    
obtain an independent valuation, appraisal or physical inspection of any of the 
assets, properties or liabilities of Country Fresh. The opinion states that The 
Ohio Company did not have any reason to believe that any of the foregoing       
information was inaccurate or incomplete.                                       

The Ohio Company's opinion is necessarily based solely upon information 
available to The Ohio Company and business, market, economic and other          
conditions as they existed on, and could be evaluated as of September 18, 1997. 
The Ohio Company also assumed that the Merger could be consummated on the terms 
described in the Merger Agreement without any waiver of any material terms or   
conditions by Country Fresh.                                                    

  The following is a brief description of the analysis performed by The Ohio
Company in connection with its opinion as described to the Country Fresh Board  
by The Ohio Company:                                                            

   DISCOUNTED CASH FLOW ANALYSIS. The Ohio Company performed a discounted cash
   flow analysis of Country Fresh based on the forecasted information provided
by Country Fresh's management. Using assumed weighted costs of capital  
 between 11% and 13%, the present value per fully diluted share of Country
  Fresh Common Stock implied a range of between $14.66 and $16.78 per share.

  COMPARABLE COMPANY ANALYSIS. The Ohio Company compared selected historical
   and other operating information, stock market data and financial ratios for
 Country Fresh to selected historical and projected operating information,
   stock market data and financial ratios of certain publicly traded companies
  in the dairy and related food industries. Among the information considered
    were such factors as rates of return on assets, operating assets and equity,
overall profitability and total                                         

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capitalization. For companies used as comparable: (a) an analysis of the
    price to book value yielded a range of values between 1.2 and 3.9 times book
 value with a median value of 2.6 times book value; (b) an analysis of the
   common stock value to the latest twelve months earnings per share yielded a
    range for comparable companies of 18.4 to 29 times earnings with a median of
 20.8 times earnings; and (c) an analysis of the common stock value to the
 projected calendar 1997 earnings per share yielded a range for comparable
companies of 16.5 to 24.2 times earnings with a median of 19.7 times    
  earnings. Among other information considered were earnings before interest
and taxes ("EBIT") and earnings before interest, taxes, depreciation and
   amortization ("EBITDA") to total value (defined as equity value adjusted by
  adding long term debt and subtracting cash and short-term investments). An
 analysis of total value to EBIT yielded a range of 4.7 to 16.2 times EBIT
   with a median value of 10.6. An analysis of total value to EBITDA yielded a
range of 4.1 to 10 times EBITDA with a median value of 7.4. The implied 
  trading values for Country Fresh Common Stock derived from such comparable
   company analyses ranged from approximately $8.77 to $46.24 per share with a
median range of approximately $18.23 to $19.86 per share.               

 COMPARISON TO SUIZA FOODS' ACQUISITION PROGRAM. The Ohio Company compared
historical operating information, total transaction value, equity       
transaction value and financial ratios for Country Fresh to other       
acquisitions made by Suiza Foods. Among the information considered were 
    profitability, historical growth, and return on investment. Using data at or
   for the 12 months ended June 1997, the implied equity transaction value for
 Country Fresh Common Stock ranged from approximately $17.37 to $26.37 per
share with a median value of $21.15 per share.                          

   COMPARABLE ACQUISITION ANALYSIS. The Ohio Company reviewed selected mergers
  and acquisitions involving companies engaged in dairy and food processing.
 In examining these transactions, The Ohio Company analyzed certain income
 statement and balance sheet parameters, cash flow parameters and rates of
return on assets relative to equity consideration paid as well as total 
   transaction value. Multiples considered included total transaction value as
    a multiple of last twelve months EBITDA and last twelve months EBIT. In many
cases, complete financial data were not publicly available for these    
transactions and only partial information was used in such instances. An
analysis of these ratios as applied to Country Fresh's results implied a
  value range for shares of Country Fresh Common Stock of between $18.10 and
$29.76 per share with a median value of $26.88 per share.               

  The foregoing summary does not purport to be a complete description of the
analyses performed by The Ohio Company. The preparation of a fairness opinion   
involves various determinations as to the most appropriate and relevant methods 
of financial analysis and the application of these methods to the particular    
circumstances. Therefore, such an opinion is not readily susceptible to a       
summary description. The preparation of a fairness opinion does not involve a   
mathematical evaluation or weighing of the results of the individual analyses   
performed, but required The Ohio Company to exercise its professional judgment, 
based on its experience and expertise in considering a wide variety of analyses 
taken as a whole. Each of the analyses conducted by The Ohio Company was carried
out in order to provide a different perspective on the Merger and add to the    
total mix of information available. The Ohio Company did not form a conclusion  
as to whether any individual analysis, considered in isolation, supported or    
failed to support an opinion as to fairness. Rather, in reaching its conclusion,
The Ohio Company considered the results of the analyses in light of each other  
and ultimately reached its opinion based on the results of all analyses taken as
a whole. The Ohio Company did not place a particular reliance or weight on any  
particular analysis, but instead concluded that its analyses, taken as a whole, 
supported its determination. Accordingly, notwithstanding the separate factors  
summarized above, The Ohio Company has informed Country Fresh that it believes  
that its analyses must be considered as a whole and that selecting portions of  
its analyses and the factors considered by it, without considering all analyses 
and factors, may create an incomplete view of the evaluation process underlying 
its opinion. In performing its analyses, The Ohio Company made numerous         
assumptions with respect to industry performance, business and economic         
conditions and other matters. The analyses performed by The Ohio Company are not
necessarily indicative                                                          

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of future actual values and future results, which may be significantly more or  
less favorable than suggested by such analyses.                                 

CERTAIN FEDERAL INCOME TAX CONSEQUENCES                                         

 The following is a general summary of certain material federal income tax
consequences of the Merger to the holders of Country Fresh Capital Stock and is 
based upon current provisions of the Code, existing regulations thereunder and  
current administrative rulings and court decisions, all of which are subject to 
change. No attempt has been made to comment on all federal income tax           
consequences of the Merger that may be relevant to particular holders, including
holders that are subject to special tax rules such as dealers in securities,    
foreign persons, mutual funds, insurance companies, tax-exempt entities and     
holders who do not hold their shares as capital assets. Holders of Country Fresh
Capital Stock are advised and expected to consult their own tax advisers        
regarding the federal income tax consequences of the Merger in light of their   
personal circumstances and the consequences under state, local and foreign tax  
laws.                                                                           

   No ruling from the IRS has been or will be requested in connection with the
Merger. At Closing, Country Fresh will receive from its counsel, Warner Norcross
& Judd LLP, an opinion to the effect that:                                      

(a) the Merger will constitute a reorganization within the meaning of   
section 368(a) of the Code;                                                     

  (b) Suiza Foods, Merger Sub and Country Fresh will each be a party to that
reorganization within the meaning of section 368(b) of the Code;                

    (c) Suiza Foods, Merger Sub and Country Fresh will not recognize any gain or
loss for U.S. federal income tax purposes as a result of the Merger;            

   (d) no gain or loss will be recognized by the shareholders of Country Fresh
who receive shares of Suiza Common Stock or Suiza Preferred Stock in the Merger,
except to the extent of any cash received in lieu of a fractional share of Suiza
Common Stock;                                                                   

   (e) the basis of Suiza Common Stock or Suiza Preferred Stock to be received
by shareholders of Country Fresh will, in each instance, be the same as the     
basis of the respective shares of the Country Fresh Capital Stock surrendered in
exchange therefor;                                                              

    (f) the holding period of the Suiza Common Stock or Suiza Preferred Stock to
be received by shareholders of Country Fresh will, in each instance, include the
period during which the Country Fresh Capital Stock surrendered in exchange     
therefor was held, provided that the Country Fresh Capital Stock was, in each   
instance, held as a capital asset in the hands of the shareholder of Country    
Fresh at the Effective Time; and                                                

    (g) no gain or loss will be recognized by the holder of the Stock Options by
reason of their assumption by Suiza Foods.                                      

At closing, Suiza Foods will receive from its counsel, Hughes & Luce,   
L.L.P., an opinion as to the items addressed in (a), (b) and (c) above. Such    
opinions are subject to certain assumptions and based on certain representations
of Suiza Foods, Merger Sub and Country Fresh. Shareholders of Country Fresh     
should be aware that such opinions are not binding on the IRS and no assurance  
can be given that the IRS will not adopt a contrary position or that a contrary 
IRS position would not be sustained by a court.                                 

Subject to the qualifications in the preceding paragraph, the following 
federal income tax consequences will occur:                                     

(a) the Merger will constitute a reorganization within the meaning of   
section 368(a) of the Code;                                                     

  (b) Suiza Foods, Merger Sub and Country Fresh will each be a party to that
reorganization within the meaning of section 368(b) of the Code;                

    (c) Suiza Foods, Merger Sub and Country Fresh will not recognize any gain or
loss for U.S. federal income tax purposes as a result of the Merger;            

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   (d) no gain or loss will be recognized by the shareholders of Country Fresh
who receive shares of Suiza Common Stock or Suiza Preferred Stock in the Merger,
except to the extent of any cash received in lieu of a fractional share of Suiza
Common Stock;                                                                   

   (e) the basis of Suiza Common Stock or Suiza Preferred Stock to be received
by shareholders of Country Fresh will, in each instance, be the same as the     
basis of the respective shares of the Country Fresh Capital Stock surrendered in
exchange therefor;                                                              

    (f) the holding period of the Suiza Common Stock or Suiza Preferred Stock to
be received by shareholders of Country Fresh will, in each instance, include the
period during which the Country Fresh Capital Stock surrendered in exchange     
therefor was held, provided that the Country Fresh Capital Stock was, in each   
instance, held as a capital asset in the hands of the shareholder of Country    
Fresh at the Effective Time; and                                                

    (g) no gain or loss will be recognized by the holder of the Stock Options by
reason of their assumption by Suiza Foods.                                      

 (h) Any holder of Country Fresh Preferred Stock that exercises his or her
statutory dissenters' rights in connection with the Merger and consequently     
receives payment in cash for his or her shares of Country Fresh Preferred Stock 
will recognize gain or loss with respect to such stock to the extent that the   
amount realized from the exercise of dissenter's rights exceeds or is less than 
such holder's tax basis in such stock.                                          

  THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS NOT
TAX ADVICE AND CONSTITUTES ONLY A GENERAL DESCRIPTION OF CERTAIN OF THE UNITED  
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, WITHOUT CONSIDERATION OF  
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH SHAREHOLDER'S SITUATION.         
ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX AND        
FINANCIAL ADVISORS AS TO MATTERS DESCRIBED HEREIN AND ALSO AS TO ANY ESTATE,    
GIFT, STATE OR LOCAL OR FOREIGN TAX CONSEQUENCES ARISING OUT OF THE MERGER.     

ANTICIPATED ACCOUNTING TREATMENT                                                

Suiza Foods anticipates that the Merger will be accounted for using the 
"pooling of interests" method of accounting pursuant to Opinion No. 16 of the   
Accounting Principles Board. The pooling of interests method of accounting      
assumes that the combining companies have been merged from inception, and the   
historical consolidated financial statements for periods prior to consummation  
of the Merger are restated as though the companies had been combined from       
inception. One of the conditions to the Merger is that Suiza Foods and Country  
Fresh must be advised in writing by Deloitte & Touche LLP on the closing date of
the Merger, that the Merger should be treated as a pooling of interests for     
financial accounting purposes.                                                  

GOVERNMENTAL AND REGULATORY APPROVALS                                           

 Transactions such as the Merger are reviewed by the Department of Justice
(the "DOJ") and the Federal Trade Commission (the "FTC") to determine whether   
they comply with applicable antitrust laws. Under the provisions of the HSR Act,
the Merger may not be consummated until such time as the specified waiting      
period requirements of the HSR Act have been satisfied. Suiza Foods filed its   
notification request, together with a request for early termination of the      
waiting period, with the DOJ and the FTC under the HSR Act on October 3, 1997   
and Country Fresh filed its notification report and early termination request on
October 8, 1997. On October 20, 1997, Suiza Foods and Country Fresh received    
early termination of the applicable waiting period. At any time before or after 
the Effective Time, the DOJ, the FTC or a private person or entity could seek   
under the antitrust laws, among other things, to enjoin the Merger or to cause  
Suiza Foods to divest itself, in whole or in part, of Country Fresh or of other 
businesses conducted by Suiza Foods. There can be no assurance that a challenge 
to the Merger will not be                                                       

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made or that, if such a challenge is made, Suiza Foods and Country Fresh will   
prevail. In addition, consummation of the Merger will require the filing of a   
Certificate of Merger with the Department of Consumer and Industry Services of  
the State of Michigan.                                                          

RESTRICTIONS ON RESALE BY AFFILIATES                                            

    The shares of Suiza Common Stock and Suiza Preferred Stock to be received by
Country Fresh shareholders in connection with the Merger have been registered   
under the Securities Act and, except as set forth in this paragraph, may be     
traded without restriction. The shares of Suiza Common Stock and Suiza Preferred
Stock to be issued in connection with the Merger and received by persons who are
deemed to be "affiliates" (as that term is defined in Rule 144 under the        
Securities Act) of Country Fresh prior to the Merger may be resold by them only 
in transactions permitted by the resale provisions of Rule 145 under the        
Securities Act (or, in the case of such persons who become affiliates of Suiza  
Foods, Rule 144 under the Securities Act) or as otherwise permitted under the   
Securities Act. Under guidelines published by the Commission, the sale or other 
disposition of Suiza Common Stock or Country Fresh Common Stock by an affiliate 
of either Suiza Foods or Country Fresh, as the case may be during the Pooling   
Period could preclude pooling of interests accounting treatment of the Merger.  
Concurrently with the execution and delivery of the Merger Agreement, each      
director and executive officer of Country Fresh executed a written agreement to 
the effect that such person will not sell, transfer or otherwise dispose of any 
shares of Country Fresh Common Stock, Suiza Common Stock or Suiza Preferred     
Stock, as the case may be, during the Pooling Period and that such person will  
not sell, transfer or otherwise dispose of Suiza Common Stock or Suiza Preferred
Stock at any time in violation of the Securities Act or the rules and           
regulations promulgated thereunder, including Rule 145.                         

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

    Certain members of Country Fresh's management and the existing Country Fresh
Board may be deemed to have interests in the Merger in addition to their        
interests as shareholders of Country Fresh generally. These include, among other
things, provisions in the Merger Agreement and other agreements relating to: (a)
the appointment of Delton Parks as a director of Suiza Foods following the      
Merger; (b) the employment of Mr. Parks by Country Fresh following the Merger   
and the continuation of certain existing employee benefit plans; (c) the        
assumption by Suiza Foods of the Stock Options held by Mr. Parks; (d) the       
agreement of Suiza Foods to indemnify and hold harmless all past and present    
officers, directors, employees and agents of Country Fresh and its subsidiaries 
against all losses, claims, damages, expenses or liabilities arising out of or  
related to any acts or omissions, or alleged acts or omissions, occurring at or 
prior to the Effective Time to the same extent and on the same terms and        
conditions currently provided. Upon consummation of Merger, 17 members of       
Country Fresh management will be paid retention bonuses not to exceed $740,000  
in the aggregate. In addition, members of the Country Fresh Board of Directors  
will be paid accrued but unpaid compensation for services rendered pursuant to  
pre-existing compensation agreements, in the approximate aggregate amount of    
$480,000.                                                                       

DISSENTERS' RIGHTS                                                              

   Holders of Country Fresh Preferred Stock are entitled to dissenters' rights
under the MBCA pursuant to which such holders may dissent from the Merger and   
obtain payment for their shares of Country Fresh Preferred Stock in accordance  
with the provisions of Sections 761 through 774 of the MBCA, copies of which are
attached to this Proxy Statement/Prospectus as Appendix C. Holders of Country   
Fresh Common Stock are not entitled to dissenters' rights to demand appraisal   
of, or payment for, their shares as a result of the Merger.                     

The following is a summary of Sections 761 through 774 of the MBCA (the 
"Dissenters' Rights Statute") and the procedures for dissenting from the Merger 
and demanding dissenters' rights thereunder. This summary is qualified in its   
entirety by reference to the Dissenters' Rights Statute, which is reprinted in  

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full as Appendix C to this Proxy Statement/Prospectus provided to Country Fresh 
shareholders. Any holder of Country Fresh Preferred Stock who wishes to exercise
statutory dissenters' rights or who wishes to preserve the right to do so should
refer to the Dissenters' Rights Statute and consult counsel prior to taking any 
action because FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN THE  
DISSENTERS' RIGHTS STATUTE COULD RESULT IN THE LOSS OF DISSENTERS' RIGHTS.      

  The Dissenters' Rights Statute states that persons in whose name shares of
Country Fresh Preferred Stock are registered in the records of a corporation, or
beneficial owners of shares to the extent of the rights granted by a nominee    
certificate on file with a corporation, and persons who are beneficial owners of
shares held by nominees as the record holders (collectively defined, for        
purposes of this section only, as "shareholders") are entitled to dissenters'   
rights, as long as they comply with the provisions set forth in the Dissenters' 
Rights Statute.                                                                 

PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS                            

Shareholders who wish to exercise dissenters' rights:                   

      (a) must deliver to Country Fresh, before the vote with respect to the
   Merger Agreement is taken, written notice of their intent to demand payment
for their shares if the Merger Agreement is approved; and               

(b) must not vote their shares in favor of the Merger Agreement.

Shareholders who do not satisfy these requirements are not entitled to payment  
for shares under the Dissenters' Rights Statute.                                

Although shareholders electing to exercise appraisal rights under the   
Dissenters' Rights Statute must not vote FOR approval of the Merger Agreement, a
vote against approval of the Merger Agreement is not required in order for      
shareholders to exercise dissenters' rights. However, if a shareholder returns a
signed proxy, but does not specify a vote against approval of the Merger        
Agreement or a direction to abstain, the proxy will be voted for approval of the
Merger Agreement, which will have the effect of waiving that shareholder's      
dissenters' rights.                                                             

  If the Merger Agreement is approved, the Surviving Corporation must notify
all shareholders entitled to assert dissenters' rights under the Dissenters'    
Rights Statute that the action was taken and send them a dissenters' notice no  
later than 10 days after the Effective Time.                                    

Upon receipt of the dissenters' notice, dissenters must make a payment  
demand by the date set by the Surviving Corporation in the notice. A shareholder
who elects to exercise dissenters' rights must mail or deliver his or her       
written demand to: Country Fresh, Inc., attn: Corporate Secretary, 2555 Buchanan
Avenue, S.W., Grand Rapids, Michigan 49518. The written demand for payment      
should comply with the provisions of the Dissenters' Rights Statute and should  
specify the shareholder's name and mailing address, the number of shares of     
Country Fresh Preferred Stock owned, and that the shareholder is demanding      
payment of his or her shares. The shareholder also must certify that the        
shareholder acquired beneficial ownership of the shares before the date set     
forth in the dissenters' notice and deposit his or her share certificates in    
accordance with the terms of the dissenters' notice. Failure to make a payment  
demand or to deposit the share certificates where required, each by the date set
forth in the dissenters' notice, shall forfeit the shareholder's entitlement to 
payment for his or her shares under the Dissenters' Rights Statute.             

Within seven days after the Merger is consummated or a payment demand is
received, whichever occurs later, the Surviving Corporation will pay dissenting 
shareholders who complied with the Dissenters' Rights Statute the amount that   
the Surviving Corporation estimates to be the fair value of the dissenters'     
shares, plus accrued interest.                                                  

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PROCEDURE IF THE DISSENTERS ARE DISSATISFIED WITH THE PAYMENT OFFER     

A dissenting holder of Country Fresh Preferred Stock may notify the     
Surviving Corporation in writing of his or her own estimate of the fair value of
his or her shares of Country Fresh Preferred Stock and the amount of interest   
due, and demand payment of that estimate, less any payment made by the Surviving
Corporation as described above (or reject the Surviving Corporation's offer, if 
any, made to shareholders who were not beneficial holders of Country Fresh      
Preferred Stock prior to the time that the transaction was publicly announced), 
if (a) the dissenter believes that the amount paid by the Surviving Corporation 
(or offered as described above) is less than the fair value of such shares or   
that interest was incorrectly calculated or (b) the corporation fails to make   
payment within 60 days after the date set for demanding payment in the          
dissenters' notice. This demand must be made within 30 days after the Surviving 
Corporation made (or offered as described above) payment to the shareholder. A  
shareholder who fails to meet this deadline waives his or her right to demand   
payment and must accept the amount paid (or offered) by the Surviving           
Corporation.                                                                    

  If a dissenter has rejected the Surviving Corporation's offer and demanded
payment of the fair value of the shares and interest due, the Surviving         
Corporation must (unless it accepts the dissenter's demand) commence a judicial 
proceeding within 60 days after receiving the payment demand and petition an    
appropriate court, as described in the Dissenters' Rights Statute, to determine 
the fair value of the shares and accrued interest.                              

    All dissenters whose demands remain unsettled will be made parties to such a
judicial proceeding, the purpose of which is to determine the fair value of the 
shares. To this end, the court may appoint one or more appraisers to receive    
evidence and recommend decision on the question of fair value. Each dissenter   
made a party to the proceeding is entitled to judgment for the amount, if any,  
by which the court finds that the fair value of his or her shares, plus         
interest, exceeds the amount that the Surviving Corporation paid (or offered as 
described above). The court shall assess the costs against the Surviving        
Corporation, except that the court may assess costs against all or some of the  
dissenters to the extent the court finds the dissenters acted arbitrarily,      
vexatiously, or not in good faith in demanding payment under the Dissenters'    
Rights Statute.                                                                 

MANAGEMENT AND OPERATIONS AFTER THE MERGER                                      

  Once the Merger is consummated, the separate corporate existence of Merger
Sub will cease, and Country Fresh, as the Surviving Corporation, will succeed to
all of the assets, rights and obligations of Merger Sub and will be a           
wholly-owned subsidiary of Suiza Foods. Pursuant to the Merger Agreement, (a)   
the articles of incorporation of Country Fresh, as in effect immediately prior  
to the Effective Time, will be the articles of incorporation of the Surviving   
Corporation, until amended as provided therein and pursuant to the MBCA; (b) the
bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will
be the bylaws of the Surviving Corporation, until amended as provided therein   
and pursuant to the MBCA; (c) the directors of Merger Sub immediately prior to  
the Effective Time will be the directors of the Surviving Corporation, until    
their respective successors are duly elected or appointed and qualified; and (d)
the officers of Country Fresh immediately prior to the Effective Time will be   
the officers of the Surviving Corporation, until their respective successors are
duly elected or appointed and qualified.                                        

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CERTAIN TERMS OF THE MERGER AGREEMENT 

EFFECTIVE TIME OF THE MERGER                                                    

The Merger Agreement provides that, as promptly as practicable after the
satisfaction or waiver of the conditions to the Merger, the parties will cause  
the Merger to be consummated by filing a Certificate of Merger with the         
Department of Consumer and Industry Services of the State of Michigan, in such  
form as required by, and executed in accordance with, the relevant provisions of
the MBCA. It is anticipated that, if the Merger Agreement is approved and       
adopted at the Special Meeting and all other conditions to the Merger have been 
satisfied or waived, the Effective Time will occur on the date of the Special   
Meeting or as soon thereafter as practicable.                                   

MANNER AND BASIS OF CONVERTING SHARES                                           

Subject to the terms and conditions of the Merger Agreement, at the     
Effective Time, each share of Country Fresh Common Stock outstanding immediately
prior to the Effective Time will be converted into .5454 shares of Suiza Common 
Stock, subject to the "Top Up" provisions described below, and each share of    
Country Fresh Preferred Stock outstanding immediately prior to the Effective    
Time (other than shares of Country Fresh Preferred Stock whose holders exercise 
their statutory dissenters' rights) will be converted into one share of Suiza   
Preferred Stock having rights and preferences substantially identical to the    
Country Fresh Preferred Stock. If the Average Price is less than $36.00 per     
share, Country Fresh may terminate the Merger Agreement or deliver a "Top Up    
Request" to Suiza Foods. If Suiza Foods elects to comply with this request, then
the total number of shares of Suiza Common Stock to be issued in the Merger will
be increased to have a value (based on the Average Price) of $68.8 million. If  
Suiza Foods does not elect to comply with the Top Up Request, Country Fresh may 
elect either to complete the Merger with no adjustment to the number of shares  
of Suiza Common Stock to be issued or to terminate the Merger Agreement.        

At or prior to the Effective Time, Suiza Foods will deposit with the    
Exchange Agent, for the benefit of holders of Country Fresh Capital Stock,      
certificates evidencing the number of shares of Suiza Common Stock and Suiza    
Preferred Stock to be issued in the Merger. The Exchange Agent will, pursuant to
irrevocable instructions, deliver Suiza Common Stock and Suiza Preferred Stock  
(and any dividends or distributions related thereto) and/or cash in lieu of     
fractional shares of Suiza Common Stock in exchange for surrendered certificates
of Country Fresh Capital Stock.                                                 

   As soon as practicable following the Effective Time, Suiza Foods will cause
the Exchange Agent to mail to each record holder of Country Fresh Capital Stock 
at the Effective Time, a letter of transmittal and other information advising   
such holder of the consummation of the Merger and for use in exchanging Country 
Fresh Capital Stock certificates for certificates evidencing Suiza Common Stock 
and Suiza Preferred Stock. After the Effective Time, there will be no further   
registration of transfers on the stock transfer books of Country Fresh. Share   
certificates should not be surrendered for exchange by shareholders of Country  
Fresh prior to the Effective Time and the receipt of a letter of transmittal.   

   No fractional shares of Suiza Common Stock will be issued in the Merger. In
lieu of any fractional shares, Suiza Foods will cause the Exchange Agent to pay 
an amount in cash (without interest), rounded to the nearest cent, determined by
multiplying (i) $40.00 by (ii) the fractional interest to which the owner       
thereof would otherwise be entitled (after taking into account all shares of    
Country Fresh Common Stock held of record by such owner and all full shares of  
Suiza Common Stock issued in respect thereof).                                  

  Until so surrendered and exchanged, each certificate previously evidencing
Country Fresh Common Stock will, after the Effective Time, represent solely     
Suiza Common Stock and the right to receive cash in lieu of fractional shares,  
and each certificate previously evidencing Country Fresh Preferred Stock will   
represent solely Suiza Preferred Stock. Unless and until any such certificates  
are so surrendered and exchanged, no dividends or other distributions payable to
the holders of record of Suiza Common Stock or                                  

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Suiza Preferred Stock as of any time on or after the Effective Time will be paid
to the holders of such certificates previously evidencing Country Fresh Capital 
Stock; PROVIDED, HOWEVER, that, Suiza Foods will deposit with the Exchange Agent
any such dividends or other distributions payable with respect to any           
unsurrendered certificates, and upon surrender and exchange of such             
certificates, there will be paid to the record holders of the certificates      
issued and exchanged therefor (a) the amount, without interest, of dividends and
other distributions, if any, with a record date after the Effective Time        
theretofore paid with respect to such whole shares of Suiza Common Stock or     
Suiza Preferred Stock, and (b) at the appropriate payment date, the amount of   
dividends or other distributions, if any, with a record date after the Effective
Time but prior to surrender and a payment date occurring after surrender,       
payable with respect to such whole shares of Suiza Common Stock or Suiza        
Preferred Stock. Notwithstanding the foregoing, no party to the Merger will be  
liable to any former holder of Country Fresh Capital Stock for any cash, Suiza  
Common Stock, Suiza Preferred Stock or dividends or distributions thereon       
delivered to a public official pursuant to applicable abandoned property,       
escheat or similar law.                                                         

TOP UP PROVISIONS                                                               

   If the Average Price is less than $36.00, Country Fresh will have the right
to terminate the Merger Agreement or to request Suiza Foods (the "Top Up        
Request") to increase the total number of shares of Suiza Common Stock to be    
issued in the Merger (the "Adjusted Consideration") to a number of shares equal 
to $68.8 million divided by the Average Price. The Top-Up Request must be       
delivered to Suiza Foods in writing no later than 9:00 a.m. Michigan time on the
Closing Date. If Country Fresh delivers a Top-Up Request, the Closing will be   
postponed for two business days and Suiza Foods will have the right to give     
notice to Country Fresh (the "Top-Up Notice") that Suiza Foods elects to proceed
with the Merger at the Adjusted Consideration. The Top-Up Notice must be        
delivered to Country Fresh in writing no later than 9:00 a.m. Michigan time on  
the business day immediately following the day on which Country Fresh delivered 
the Top-Up Request. If Suiza Foods has not delivered a Top-Up Notice by the     
above deadline, Country Fresh will have the right to give notice to Suiza Foods 
(the "Closing Notice") that, notwithstanding its delivery of the Top-Up Request,
Country Fresh elects to proceed with the Merger on the terms and conditions set 
forth in the Merger Agreement, without adjustment to the number of shares of    
Suiza Common Stock to be issued in the Merger. The Closing Notice must be       
delivered to Suiza Foods in writing no later than 6:00 p.m. Michigan time on the
business day prior to the Closing Date (as delayed above). If Country Fresh has 
not delivered the Closing Notice by the above deadline, the Merger Agreement    
will terminate without further action by any of the parties.                    

COUNTRY FRESH OPTIONS                                                           

   Stock Options to purchase a total of 420,000 shares of Country Fresh Common
Stock are currently outstanding under Country Fresh's existing stock option     
plans. All of such options are held by Delton C. Parks, Country Fresh's         
President and Chief Executive Officer. In connection with the Merger, Suiza     
Foods will assume the Stock Options and take such actions as may be necessary,  
including amending the Stock Options and related stock option plans, to         
substitute Suiza Common Stock for the Country Fresh Common Stock purchasable    
thereunder. Assuming all 420,000 Stock Options remain unexercised as of the     
Effective Time, the options assumed by Suiza Foods will be exercisable to       
purchase a total of 229,068 shares of Suiza Common Stock at an exercise price of
$10.08 per share. However, if Country Fresh delivers and Suiza Foods accepts a  
Top Up Request, the Stock Options will be exercisable for a number of shares of 
Suiza Common Stock equal to (a) 229,068 times $36.00 divided by (b) the Average 
Price. The per share exercise price will be calculated by (a) multiplying $10.08
by the Average Price and (b) dividing by $36.00. Subject to the foregoing, the  
assumed options will have the same terms and conditions as the outstanding      
options being assumed and will not give the optionee additional benefits that he
did not already have.                                                           

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REPRESENTATIONS AND WARRANTIES                                                  

In the Merger Agreement, Suiza Foods and Country Fresh have made various
representations and warranties relating to, among other things: (a) organization
and similar corporate matters; (b) capitalization; (c) authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related    
matters; (d) the absence of conflicts, violations and defaults under their      
respective charters and bylaws and certain other agreements and documents; (e)  
financial statements and, in the case of Suiza Foods, the accuracy of documents 
and reports filed with the Commission; (f) compliance with laws, including those
related to employee benefit plans, labor matters, taxes and environmental       
matters; (g) the absence of certain changes and events; (h) litigation; and (i) 
certain matters relating to pooling of interests accounting. None of the        
representations and warranties in the Merger Agreement will survive the         
Effective Time.                                                                 

CONDITIONS TO THE MERGER                                                        

 The respective obligations of Suiza Foods and Country Fresh to effect the
Merger and related transactions are subject to the satisfaction, at or prior to 
the Closing Date, of the following conditions, any or all of which may be waived
in writing by the parties to the Merger Agreement, in whole or in part, to the  
extent permitted by applicable law: (a) the Suiza Registration Statement must   
have been declared effective by the Commission under the Securities Act, no stop
order suspending the effectiveness of the Suiza Registration Statement will have
been issued by the Commission and no proceedings for that purpose will have been
initiated, and Suiza Foods must have received all "blue sky" and other          
authorizations necessary to consummate the Merger; (b) the Merger and the Merger
Agreement must have been approved by the requisite shareholder vote of Country  
Fresh; (c) no Governmental Entity or federal or state court of competent        
jurisdiction will have enacted, issued, promulgated, enforced or entered any    
statute, rule, regulation, executive order, decree, injunction or other order   
(whether temporary, preliminary or permanent) which is in effect and which has  
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; and no such Governmental Entity will have initiated or threatened to
initiate any proceeding seeking any of the foregoing; (d) the applicable waiting
period under the HSR Act will have expired or been terminated; and (e) Suiza    
Foods and Country Fresh will have been advised in writing by Deloitte & Touche  
LLP on the Closing Date that the Merger should be treated for financial         
accounting purposes as a pooling of interests.                                  

The obligations of Suiza Foods and Merger Sub to effect the Merger and  
related transactions are also subject to the satisfaction at or prior to the    
Closing Date of the following conditions, any or all of which may be waived in  
writing by Suiza Foods, in whole or in part: (a) certain representations and    
warranties of Country Fresh contained in the Merger Agreement will be true and  
correct in all material respects as of the Closing Date as though made on and as
of the Closing Date (except to the extent such representations and warranties   
specifically relate to an earlier date, in which case such representations and  
warranties will be true and correct in all material respects as of such earlier 
date) and, with respect to representations and warranties not subject to        
material adverse effect qualifications (with certain exceptions), where the     
failure to be true and correct would not reasonably be expected to have a       
material adverse effect on Country Fresh's business, operations, assets,        
financial condition or results of operations, taken as a whole; (b) Country     
Fresh will have performed or complied in all material respects with all         
agreements and covenants required by the Merger Agreement to be performed or    
complied with by it on or prior to the Closing Date; (c) since the date of the  
Merger Agreement, there will have been no change, occurrence or circumstance in 
the current or future business, financial condition or results of operations of 
Country Fresh and its subsidiaries taken as a whole having or reasonably likely 
to have a material adverse effect on Country Fresh's business, operations,      
assets, financial condition or results of operations, taken as a whole; (d)     
there will not have been any action taken, or any statute, rule, regulation or  
order enacted, entered, enforced or deemed applicable to the Merger, by any     
governmental entity in connection with the grant of a regulatory approval or    
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operation of the current or future business of Country Fresh, which imposes any 
condition or restriction upon Suiza Foods, Merger Sub or the business or        
operations of Country Fresh which, in the reasonable judgment of Suiza Foods,   
would be materially burdensome in the context of the transactions contemplated  
by the Merger Agreement; (e) Hughes & Luce, L.L.P. must have delivered to Suiza 
Foods its written opinion with respect to the Federal income tax consequences of
the Merger (see "The Merger--Certain Federal Income Tax Consequences"); (f) the 
holder of all of the outstanding Stock Options must have consented to the       
assumption of such options by Suiza Foods on the terms provided in the Merger   
Agreement; (g) counsel to Country Fresh will have delivered a written legal     
opinion to Suiza Foods, in the agreed form; (h) Country Fresh will have obtained
each consent and approval necessary in order that the Merger and related        
transactions do not constitute a breach or violation of, or result in a right of
termination or acceleration of any encumbrance on any portion of Country Fresh's
assets, any material contract, license, franchise or permit of Country Fresh,   
other than any such breach, violation, termination or acceleration that would   
not reasonably be expected to have a material adverse effect on Country Fresh's 
business, operations, assets, financial condition or results of operations,     
taken as a whole; (i) Suiza Foods will have received certain certificates from  
officers of Country Fresh with respect to the satisfaction of certain of the    
foregoing conditions and setting forth the estimated amount of Country Fresh's  
expenses related to the Merger; and (j) all proceedings taken by Country Fresh  
and all instruments executed and delivered by Country Fresh on or prior to the  
Closing Date in connection with the Merger and related transactions will be     
reasonably satisfactory in form and substance to Suiza Foods.                   

The obligations of Country Fresh to effect the Merger and the other     
transactions contemplated hereby are also subject to the satisfaction at or     
prior to the Closing Date of the following conditions, any or all of which may  
be waived in writing by Country Fresh, in whole or in part: (a) certain         
representations and warranties of Suiza Foods and Merger Sub contained in the   
Merger Agreement must be true and correct in all material respects as of the    
Closing Date as though made on and as of the Closing Date (except to the extent 
such representations and warranties specifically relate to an earlier date, in  
which case such representations and warranties will be true and correct in all  
material respects as of such earlier date) and, with respect to representations 
and warranties not subject to material adverse effect qualifications, where the 
failure to be true and correct would not reasonably be expected to have a       
material adverse effect on Suiza Foods' business, operations, assets, financial 
condition or results of operations, taken as a whole; (b) Suiza Foods and Merger
Sub will have performed or complied in all material respects with all agreements
and covenants required by the Merger Agreement to be performed or complied with 
by them on or prior to the Closing Date; (c) all of the shares of Suiza Common  
Stock to be issued in the Merger must have been registered under the Securities 
Act, no stop order suspending the effectiveness of the Suiza Registration       
Statement will have been issued and such shares of Suiza Common Stock must have 
been authorized for listing, subject to official notice of issuance, on the New 
York Stock Exchange; (d) counsel to Suiza Foods must have delivered a written   
legal opinion to Country Fresh, in the agreed form; (e) since the date of the   
Merger Agreement, there will have been no change, occurrence or circumstance in 
the business, financial condition or results of operations of Suiza Foods and   
its subsidiaries taken as a whole having or reasonably likely to have a material
adverse effect on Suiza Foods' business, operations, assets, financial condition
or results of operations, taken as a whole; (f) Delton C. Parks will have been  
elected to the Board of Directors of Suiza Foods effective immediately after the
Effective Time; (g) Warner Norcross & Judd LLP must have delivered to Country   
Fresh its written opinion with respect to the Federal income tax consequences of
the Merger (see "The Merger--Certain Federal Income Tax Consequences"); (h)     
Country Fresh will have received certain certificates from officers of Suiza    
Foods with respect to the satisfaction of certain of the foregoing conditions;  
and (i) all proceedings taken by Suiza Foods and Merger Sub and all instruments 
executed and delivered by them on or prior to the Closing Date in connection    
with the Merger and related transactions will be reasonably satisfactory in form
and substance to Country Fresh.                                                 

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COVENANTS                                                                       

    AFFIRMATIVE COVENANTS OF COUNTRY FRESH.  Prior to the Effective Time, unless
otherwise required by applicable law, expressly contemplated by the Merger      
Agreement or consented to in writing by Suiza Foods, Country Fresh will and will
cause its subsidiaries to: (a) operate its business in all material respects    
only in the usual and ordinary course consistent with past practices; (b) use   
its reasonable efforts to preserve substantially intact its business            
organization, maintain its material contracts, permits, intellectual property   
and other material rights, retain the services of its officers and key employees
and maintain its relationships with its material customers and suppliers; (c)   
maintain and keep its properties and assets in as good repair and condition as  
at present, ordinary wear and tear excepted, and maintain supplies and          
inventories in quantities consistent with its customary business practice; (d)  
use its reasonable efforts to keep in full force and effect insurance and bonds 
comparable in amount and scope of coverage to that currently maintained; and (e)
promptly supplement or amend the Company Disclosure Statement referenced in the 
Merger Agreement with respect to any matter that arises or is discovered that,  
if existing or known at the date of the Merger Agreement, would have been       
required to be set forth or listed in the Company Disclosure Statement;         
provided, that for purposes of determining the rights and obligations of the    
parties under the Merger Agreement, any such supplemental or amended disclosure 
will not be deemed to have been disclosed unless Suiza Foods otherwise expressly
consents in writing.                                                            

NEGATIVE COVENANTS OF COUNTRY FRESH.  Except as otherwise required by   
applicable law, expressly contemplated by the Merger Agreement or consented to  
in writing by Suiza Foods, from the date of the Merger Agreement until the      
Effective Time, Country Fresh will not do, and will not permit any of its       
subsidiaries to do, any of the following: (a) (i) increase the compensation     
payable to or to become payable to any director or executive officer, except for
annual merit and seniority increases in the ordinary course of business         
consistent with past practices and increases resulting from the operation of    
compensation arrangements in effect prior to the date hereof; (ii) grant any    
severance or termination pay (other than pursuant to the normal severance policy
of Country Fresh or its subsidiaries as in effect on the date of this Agreement)
to, or enter into or amend any employment or severance agreement with, any      
director, officer or key employee; (iii) establish, adopt or enter into any     
employee benefit plan or arrangement except in connection with the              
re-negotiation of any expired union contract or labor agreement; or (iv) amend  
or otherwise modify in any respect that would reasonably be expected to be      
materially adverse to Country Fresh and its subsidiaries taken as a whole, any  
of its material contracts or material employee benefit plans, except in         
connection with the re-negotiation of any expired union contract or labor       
agreement; (b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock, except for (i) regularly       
scheduled semi-annual dividends on the Country Fresh Preferred Stock, and (ii)  
dividends by a wholly-owned subsidiary of Country Fresh to Country Fresh or     
another wholly-owned subsidiary of Country Fresh; (c) (i) redeem, purchase or   
otherwise acquire any shares of its or any of its subsidiaries' capital stock or
any securities or obligations convertible into or exchangeable for any shares of
its or its subsidiaries' capital stock, or any options, warrants or conversion  
or other rights to acquire any shares of its or its subsidiaries' capital stock 
or any such securities or obligations; (ii) effect any reorganization or        
recapitalization; or (iii) split, combine or reclassify any of its or its       
subsidiaries' capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
or its subsidiaries' capital stock; (d) (i) issue, deliver, award, grant or     
sell, or authorize or propose the issuance, delivery, award, grant or sale      
(including the grant of any security interests, liens, claims, pledges,         
limitations in voting rights, charges or other encumbrances) of, any shares of  
any class of its or its subsidiaries' capital stock, any securities convertible 
into or exercisable or exchangeable for any such shares, or any rights, warrants
or options to acquire any such shares; or (ii) amend or otherwise modify the    
terms of any such rights, warrants or options the effect of which will be to    
make such terms less favorable to Country Fresh or any of its subsidiaries; (e) 
acquire or agree to acquire, by merging or consolidating with, by purchasing an 
equity interest in or a portion of the assets of, or by any other manner, any   
business or any corporation, partnership, association or other business         
organization or division thereof, or otherwise acquire or agree to acquire any  
assets of any other person                                                      

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(other than in the ordinary course of business and consistent with past         
practice); (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise   
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or    
otherwise dispose of, any of its assets or any assets of any of its             
subsidiaries, except in the ordinary course of business and consistent with past
practice; (g) release any third party from its obligations, or grant any        
consent, under any existing standstill provision relating to a Competing        
Transaction (as defined in the Merger Agreement) or otherwise under any similar 
confidentiality or other agreement, or fail to enforce in all material respects 
any such agreement; (h) adopt or propose to adopt any amendments to its charter 
or bylaws; (i) (i) materially change any of its methods of accounting in effect 
at March 1, 1997, or (ii) make or rescind any express or deemed election        
relating to taxes, settle or compromise any material claim, action, suit,       
litigation, proceeding, arbitration, investigation, audit or controversy        
relating to taxes, or change any of its methods of reporting income or          
deductions for federal income tax purposes from those employed in the           
preparation of the federal income tax returns for the taxable year ending March 
1, 1997, except, in each case, as may be required by law or generally accepted  
accounting principles; (j) (i) incur any obligation for borrowed money or       
purchase money indebtedness, except under existing lines of credit or purchase  
money indebtedness incurred in the ordinary course of business consistent with  
past practice and provided that the aggregate amount thereof in no event exceeds
$3,000,000 and except as expressly provided in or contemplated by Country       
Fresh's 1998 capital budget, or (ii) make or incur any capital expenditure      
except in the ordinary course of business consistent with past practice and     
provided that the amount thereof will not exceed $250,000 for any one item or   
$1,000,000 in the aggregate, except as expressly provided in or contemplated by 
the 1998 capital budget; (k) enter into any arrangement, agreement or contract  
with any third party (other than customers in the ordinary course of business)  
that would constitute a Material Contract (as defined in the Merger Agreement)  
if existing on the date of the Merger Agreement which provides for an exclusive 
arrangement with that third party or is substantially more restrictive on       
Country Fresh or substantially less advantageous to Country Fresh than          
arrangements, agreements or contracts existing on the date hereof; or (l) agree 
in writing or otherwise to do any of the foregoing.                             

COVENANTS OF SUIZA FOODS.  Prior to the Effective Time, unless otherwise
required by applicable law, expressly contemplated by the Merger Agreement or   
consented to in writing by Country Fresh, Suiza Foods will and will cause its   
subsidiaries to (a) operate its business in all material respects only in the   
usual and ordinary course consistent with past practices and (b) promptly       
supplement or amend the Parent Disclosure Statement (as defined in the Merger   
Agreement) referenced in the Merger Agreement with respect to any matter that   
arises or is discovered that, if existing or known at the date of the Merger    
Agreement, would have been required to be set forth or listed in the Suiza Foods
Disclosure Statement; provided, that for purposes of determining the rights and 
obligations of the parties hereunder, any such supplemental or amended          
disclosure will not be deemed to have been disclosed to Country Fresh unless    
Country Fresh otherwise expressly consents in writing.                          

   Except as expressly contemplated by the Agreement or otherwise consented to
in writing by Country Fresh, from the date of the Merger Agreement until the    
Effective Time, Suiza Foods will not do, and will not permit any of its         
subsidiaries to do, any of the following: (a) knowingly take any action which   
would result in a failure to maintain the listing of the Suiza Common Stock on  
the NYSE or registration of the Suiza Common Stock under the Securities Act or  
the Exchange Act; (b) declare or pay any dividend on, or make any other         
distribution in respect of, outstanding shares of capital stock except for      
dividends by a wholly-owned subsidiary of Suiza Foods to Suiza Foods or another 
wholly owned subsidiary of Suiza Foods; (c) adopt or propose to adopt any       
amendments to its charter or bylaws, which would have an adverse impact on the  
consummation of the transactions contemplated by the Merger Agreement; (d)      
repurchase any shares of Suiza Common Stock during the period commencing with   
the mailing of this Proxy Statement/Prospectus and ending on the Closing Date;  
or (e) agree in writing or otherwise to do any of the foregoing.                

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EMPLOYEE BENEFIT PLANS.  On and after the Closing Date, Suiza Foods will
cause Country Fresh to take all such actions as are necessary so that (a) for   
not less than six months after the Closing Date, employees of Country Fresh or  
its subsidiaries during such period will be provided employee benefits and      
similar plans and programs as will provide benefits which in the aggregate are  
not materially less favorable than those provided to such employees as of the   
date of the Merger Agreement and (b) Country Fresh honors the existing          
employment agreements identified in the Merger Agreement. Except as otherwise   
provided in the Merger Agreement or pursuant to any collective bargaining       
agreement to which Country Fresh is a party, Suiza Foods may terminate, amend,  
suspend or modify any such employee benefits or plans of Country Fresh at any   
time.                                                                           

 INDEMNIFICATION.  From and after the Effective Time, Suiza Foods will and
will cause Country Fresh (including, if necessary, providing Country Fresh with 
sufficient funds) to, exculpate, indemnify and hold harmless all past and       
present officers, directors, employees and agents of Country Fresh and its      
subsidiaries (the "Company Indemnified Parties") against all losses, claims,    
damages, expenses or Liabilities arising out of or related to any acts or       
omissions, or alleged acts or omissions, occurring at or prior to the Effective 
Time to the same extent and on the same terms and conditions (including with    
respect to the advancement of expenses) provided for in Country Fresh's or any  
such subsidiary's charter or bylaws (or similar organizational documents), in   
effect as of the date hereof or under applicable law. Any determination required
to be made with respect to whether a Company Indemnified Party is entitled to   
such indemnification under the applicable charter or bylaws will be made by     
independent counsel selected by such Company Indemnified Party reasonably       
satisfactory to Suiza Foods (whose reasonable fees and expenses will be paid by 
Suiza Foods or the Surviving Corporation unless such independent counsel        
determines that such fees and expenses should be paid by such Company           
Indemnified Party, in which case they will be paid by such Company Indemnified  
Party).                                                                         

NON-SOLICITATION                                                                

    Pursuant to the Merger Agreement, Country Fresh has agreed that it will not,
and will use all reasonable best efforts to cause its subsidiaries and          
affiliates not to, initiate, solicit or encourage (including by way of          
furnishing information or assistance), or take any other action to facilitate,  
any inquiries or the making of any proposal relating to, or that may reasonably 
be expected to lead to, any Competing Transaction (as defined below), or enter  
into substantive discussions or negotiate with any person or entity in          
furtherance of such inquiries or to obtain a Competing Transaction, or agree to 
or endorse any Competing Transaction, or authorize or permit any of the         
officers, directors or employees of Country Fresh or any of its subsidiaries or 
any investment banker, financial advisor, attorney, accountant or other         
representative retained by Country Fresh or any of its subsidiaries or          
affiliates, as applicable, to take any such action, and Country Fresh will      
promptly (and in any event within two business days) notify Suiza Foods of all  
material terms of any such inquiries and proposals received by Country Fresh or 
any of its subsidiaries or affiliates, as applicable, or by any such officer,   
director, investment banker, financial advisor, attorney, accountant or other   
representative relating to any of such matters.                                 

    Notwithstanding the foregoing, nothing in the Merger Agreement will prohibit
the Country Fresh Board from: (a) furnishing information to, or entering into   
discussions or negotiations with, any person or entity in connection with an    
unsolicited BONA FIDE proposal for a Competing Transaction from a person or     
entity reasonably believed by Country Fresh to have the financial ability to    
consummate the Competing Transaction on a timely basis, if, and only to the     
extent that (i) Country Fresh has complied fully and in a timely manner with its
obligations to notify Suiza Foods of all material terms of the Competing        
Transaction in accordance with the Merger Agreement, (ii) the Country Fresh     
Board, after consultation with and based upon the advice of independent legal   
counsel, determines in good faith that such action is necessary for the Country 
Fresh Board to comply with its fiduciary duties to the shareholders of Country  
Fresh under applicable law and (iii) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity Country   
Fresh (A) provides prior written notice to Suiza Foods to the effect            

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that it is furnishing information to, or entering into discussions or           
negotiations with, such person or entity and (B) enters into with such person or
entity a confidentiality agreement in reasonably customary form on terms not    
more favorable to such person or entity than the terms contained in the         
Confidentiality Agreement dated March 13, 1997 between Suiza Foods and Country  
Fresh; (b) failing to make or withdrawing or modifying its recommendation for   
the Merger; or (c) making or disclosing any position or taking any other action 
if the Country Fresh Board, after consultation with and based on the advice of  
independent legal counsel, determines in good faith that such action is         
necessary for the Country Fresh Board to comply with its fiduciary duties to the
shareholders of Country Fresh under applicable law. For such purposes,          
"Competing Transaction" is defined to mean any of the following (other than the 
transactions contemplated by the Merger Agreement) involving Country Fresh or   
any of its subsidiaries: (a) any acquisition of all or a material portion of    
Country Fresh and its subsidiaries taken as a whole by any merger,              
consolidation, share exchange, business combination or similar transaction; (b) 
any sale, lease, exchange, mortgage, pledge, transfer or other disposition of   
20% or more of the assets of Country Fresh and its subsidiaries taken as a      
whole, (c) any offer for 20% or more of the outstanding shares of capital stock 
of Country Fresh; or (d) any public announcement of a proposal, plan or         
intention to do any of the foregoing or any agreement to engage in any of the   
foregoing.                                                                      

In the event that the Country Fresh Board receives a proposal for a     
Competing Transaction that, in the exercise of their fiduciary obligations (as  
determined in good faith by the Country Fresh Board after consultation with     
outside counsel), they determine to be a Superior Transaction (as defined       
below), the Country Fresh Board may withdraw or modify its approval or          
recommendation of the Merger Agreement or the Merger, approve or recommend any  
such Superior Transaction, or enter into an agreement with respect to such      
Superior Transaction and terminate the Merger Agreement. For purposes of the    
Merger Agreement, a "Superior Transaction" means any Competing Transaction the  
terms of which the Country Fresh Board determines in their good faith reasonable
judgment (after reviewing the advice of, and consultation with, its financial   
advisor and legal counsel) to be more favorable to Country Fresh's shareholders 
than the transactions contemplated by the Merger Agreement.                     

TERMINATION OR AMENDMENT OF THE MERGER AGREEMENT                                

 The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of this Agreement and the Merger by the  
shareholders of Country Fresh: (a) by mutual consent of Suiza Foods and Country 
Fresh; (b) by Suiza Foods, (i) upon a material breach of any covenant or        
agreement on the part of Country Fresh set forth in the Merger Agreement, (ii)  
if certain representations or warranties of Country Fresh are untrue or (iii) if
certain other representations and warranties are untrue and the failure of such 
representations and warranties to be true would reasonably be expected to have, 
individually or in the aggregate, a material adverse effect on the business,    
operations, assets, financial condition or results of operations of Country     
Fresh, in each case such that the conditions to the Merger would be incapable of
being satisfied by February 28, 1998; however, in any case, a willful breach    
will be deemed to cause such conditions to be incapable of being satisfied for  
purposes of such provision; (c) by Country Fresh, (i) upon a material breach of 
any covenant or agreement on the part of Suiza Foods set forth in the Merger    
Agreement, (ii) if certain representations or warranties of Suiza Foods are     
untrue or (iii) if certain other representations and warranties are untrue and  
the failure of such representations and warranties to be true would reasonably  
be expected to have, individually or in the aggregate, a material adverse effect
on the business, operations, assets, financial condition or results of          
operations of Suiza Foods, in either case such that the conditions to the Merger
would be incapable of being satisfied by February 28, 1998; however, in any     
case, a willful material breach will be deemed to cause such conditions to be   
incapable of being satisfied for such purposes; (d) by either Suiza Foods or    
Country Fresh if there is any decree, judgment, injunction or other order which 
is final and nonappealable preventing the consummation of the Merger, except if 
the party relying on such provision to terminate this Agreement has not complied
with its obligations under the Merger Agreement to vigorously contest such      
order; (e) by either Suiza Foods or Country Fresh if the Merger has not been    
consummated before February 28, 1998; (f) by                                    

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either Suiza Foods or Country Fresh if the Merger Agreement fails to receive the
requisite vote of the shareholders of Country Fresh; (g) by Suiza Foods, if (i) 
the Country Fresh Board withdraws, modifies or changes its recommendation of the
Merger in a manner adverse to Suiza Foods or resolves to do any of the          
foregoing, (ii) the Country Fresh Board recommends any Competing Transaction or 
will have resolved to do so or (iii) Country Fresh enters into a letter of      
intent or a definitive agreement for a Competing Transaction; (h) by Country    
Fresh, if the Country Fresh Board (i) withdraws its recommendation of the       
Merger, if a Superior Transaction exists at such time, or (ii) recommends       
approval or acceptance of a Superior Transaction, in each case only if the      
Country Fresh Board, after consultation with and based upon the advice of       
independent legal counsel, determines in good faith that such action is         
necessary for the Country Fresh Board to comply with their fiduciary duties     
under applicable law; or (i) as provided in connection with the "Top Up"        
provisions described above.                                                     

   The Merger Agreement may be amended by the parties by action taken by or on
behalf of their respective Boards of Directors, as applicable, at any time prior
to the Effective Time; provided, however, that, after approval of the Merger by 
the requisite shareholder vote, no amendment may be made that would require the 
approval of such shareholders under applicable law. The Merger Agreement may not
be amended except by an instrument in writing signed by the parties.            

EXPENSES                                                                        

All out-of-pocket expenses (including, without limitation, all fees and 
expenses of counsel, accountants, investment bankers, experts and consultants to
the parties and their affiliates) incurred by or on behalf of the parties in    
connection with or related to the authorization, preparation, negotiation,      
execution and performance of the Merger Agreement, the preparation, printing,   
filing and mailing of this Proxy Statement/Prospectus and the related Suiza     
Registration Statement and the solicitation of shareholder approval and all     
other matters related to the consummation of the transactions contemplated by   
the Merger Agreement (collectively, "Expenses") incurred by the parties to the  
Merger Agreement will be borne solely and entirely by the party which has       
incurred such Expenses. Notwithstanding the foregoing, if the Merger Agreement  
is terminated in connection with a Competing Transaction or a Superior          
Transaction, as described in clause (g) or (h) under the caption "--Termination 
or Amendment of the Merger Agreement," and Suiza Foods and Merger Sub are not in
material breach of any material representation, warranty, covenant or agreement 
contained in the Merger Agreement, then Country Fresh will pay to Suiza Foods a 
fee of $500,000, and reimburse all of Suiza Foods' Expenses up to $500,000. In  
addition, if the foregoing fee is payable and if any Competing Transaction is   
consummated within 180 days after such termination, then Country Fresh will pay,
in addition to the foregoing, a fee of $4,000,000.                              

THE SPECIAL MEETING 

DATE, TIME AND PLACE                                                            

   The Special Meeting will be held at 10:00 a.m., local time, on November 25,
1997 at The Holiday Inn Crowne Plaza, at 5700 28th Street, Grand Rapids,        
Michigan 49546.                                                                 

PURPOSE OF THE SPECIAL MEETING                                                  

The purpose of the Special Meeting is to consider and vote upon (i) a   
proposal to approve the Merger Agreement and (ii) such other matters as may     
properly come before the special Meeting.                                       

RECORD DATE AND OUTSTANDING SHARES                                              

Only holders of record of Country Fresh Capital Stock at the close of   
business on the Record Date, October 21, 1997, are entitled to notice of, and to
vote at, the Special Meeting.                                                   

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On the Record Date, there were approximately 3,503,987 shares of Country
Fresh Common Stock then issued and outstanding and entitled to vote at the      
Special Meeting and approximately 11,691 shares of Country Fresh Preferred Stock
then issued and outstanding and entitled to vote at the Special Meeting. Each   
share of Country Fresh Common Stock and each share of Country Fresh Preferred   
Stock entitles the holder thereof to one vote on each matter submitted for      
shareholder approval.                                                           

VOTING AND REVOCATION OF PROXIES                                                

    A form of proxy for use by shareholders of Country Fresh Common Stock, and a
separate form of proxy for use by holders of Country Fresh Preferred Stock, at  
the Special Meeting accompany this Proxy Statement/Prospectus. All properly     
executed proxies that are received prior to or at the Special Meeting and not   
revoked will be voted at the Special Meeting in accordance with the instructions
contained therein. IF A HOLDER OF COUNTRY FRESH CAPITAL STOCK EXECUTES AND      
RETURNS A PROXY AND DOES NOT SPECIFY OTHERWISE, THE SHARES REPRESENTED BY SUCH  
PROXY WILL BE VOTED "FOR" APPROVAL OF THE MERGER AGREEMENT IN ACCORDANCE WITH   
THE RECOMMENDATION OF THE COUNTRY FRESH BOARD. A shareholder of Country Fresh   
who has executed and returned a proxy may revoke it at any time before it is    
voted at the Special Meeting by executing and returning a proxy bearing a later 
date, filing written notice of such revocation with the Secretary of Country    
Fresh stating that the proxy is revoked or attending the Special Meeting and    
voting in person.                                                               

QUORUM AND VOTE REQUIRED                                                        

  The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Country Fresh Common Stock and       
Country Fresh Preferred Stock, voting together, and the holders of a majority of
Country Fresh Preferred Stock, voting as a separate class, entitled to vote at  
the Special Meeting will constitute a quorum for the transaction of business.   
Approval of the Merger Agreement requires the affirmative vote of a majority of 
the issued and outstanding Country Fresh Common Stock and Country Fresh         
Preferred Stock, voting together as a single class, and a majority of the issued
and outstanding Country Fresh Preferred Stock, voting alone as a single class.  
Accordingly, a failure to vote or abstention will have the same effect as a vote
against the Merger Agreement. Directors and executive officers of Country Fresh 
and their respective affiliates own approximately 35.0% and 45.9% of the        
outstanding shares of Country Fresh Common Stock and Country Fresh Preferred    
Stock, respectively. See "Principal Shareholders of Country Fresh" for          
information regarding persons known to the management of Country Fresh to be the
beneficial owners of more than 5% of the outstanding Country Fresh Common Stock 
or Country Fresh Preferred Stock.                                               

   No vote of the stockholders of Suiza Foods is required in order to complete
the Merger.                                                                     

SOLICITATION OF PROXIES                                                         

   In addition to solicitation by mail, the directors, officers, employees and
agents of Country Fresh may solicit proxies from shareholders by personal       
interview, telephone or otherwise. Country Fresh will bear the costs of the     
solicitation of proxies from its shareholders.                                  

OTHER MATTERS                                                                   

    At the date of this Proxy Statement/Prospectus, the Country Fresh Board does
not know of any business to be presented at the Special Meeting other than      
approval of the Merger Agreement. If any other matters should properly come     
before the Special Meeting, it is intended that the shares represented by       
proxies will be voted with respect to such matters in accordance with the       
judgment of the persons voting such proxies.                                    

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PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA) 

   The following unaudited pro forma financial data is based on adjustments to
the historical consolidated balance sheet and related consolidated statements of
income of Suiza Foods to give effect to (i) the Merger and the Morningstar      
Merger with Suiza Foods, expected to be accounted for using the pooling of      
interests method of accounting (the "Combined Companies"), and (ii) the         
completed acquisitions by Suiza Foods of Garrido on July 1, 1996, Swiss Dairy on
September 9, 1996, Model Dairy on December 16, 1996, Dairy Fresh on July 1, 1997
and Garelick Dairy and Franklin Plastics on July 31, 1997 and the completed     
acquisition by Morningstar of Presto on December 3, 1996, all of which have been
accounted for using the purchase method of accounting (the "Acquired            
Businesses").                                                                   

 The unaudited pro forma consolidated statements of earnings for the years
ended December 31, 1994, 1995 and 1996 and the six month period ended June 30,  
1997 give effect to (i) the proposed mergers of the Combined Companies as if    
they had been consummated on January 1, 1994, and (ii) the completed            
acquisitions of the Acquired Businesses as if they had been consummated on      
January 1, 1996. There is no unaudited pro forma consolidated statement of      
earnings effect during the six month period ended June 30, 1997 of the          
acquisitions by Suiza Foods of Garrido, Swiss Dairy and Model Dairy or of the   
acquisition by Morningstar of Presto since these acquisitions were completed    
prior to January 1, 1997 and, as a result, their results of operations are      
already included in the historical consolidated results of operations of Suiza  
Foods or Morningstar. The unaudited pro forma consolidated balance sheet as of  
June 30, 1997 gives effect to (i) the proposed mergers of the Combined Companies
and (ii) the completed acquisitions by Suiza Foods of Dairy Fresh, Garelick     
Dairy and Franklin Plastics, as if they had all been consummated on June 30,    
1997. There is no pro forma consolidated balance sheet effect of the            
acquisitions by Suiza Foods of Garrido, Swiss Dairy and Model Dairy or of the   
acquisition by Morningstar of Presto since these acquisitions were completed    
prior to December 31, 1996 and, as a result, their balance sheets are already   
included in the historical consolidated balance sheets of Suiza Foods or        
Morningstar.                                                                    

 Country Fresh's consolidated financial statements are based on its fiscal
year which ends on the Saturday nearest to February 28, as compared to Suiza    
Foods' and Morningstars' fiscal year ends of December 31. As a result, the      
unaudited pro forma consolidated financial data for the years ended December 31,
1994, 1995 and 1996 combines the different fiscal year end of Country Fresh with
the calendar year ends of Suiza Foods and Morningstar. Similarly, the unaudited 
pro forma consolidated financial data as of and for the six month period ended  
June 30, 1997, combines the six-month information as of and for the period ended
June 30, 1997 for Suiza Foods and Morningstar with the financial information for
Country Fresh as of and for the 26 weeks ended July 19, 1997, which includes 6  
weeks of operations already included in the Country Fresh financial statements  
for the year ended March 1, 1997. For ease of reference, all headings used in   
the unaudited pro forma consolidated financial data refer to the period ended   
date of Suiza Foods.                                                            

In connection with the Merger and the Morningstar Merger, Suiza Foods   
expects to expense approximately $28 million as merger costs, which represent   
transaction related expenses that are expected to be incurred on the consumation
dates of the mergers. These transaction related costs include approximately $16 
million of investment banking fees, legal fees, accounting fees, and filing and 
printing fees, along with approximately $12 million of employee costs related to
the payments of retention bonuses and excise and other taxes to certain Country 
Fresh and Morningstar employees pursuant to existing contractual agreements and 
the payments pursuant to existing contractual agreements of severance costs and 
excise and other taxes for certain Morningstar employees whose employment will  
be terminated on the consummation date of the Morningstar Merger.               

After the consummation of the Merger and the Morningstar Merger, Suiza  
expects to achieve at least $10 million of savings from eliminating redundant   
administrative and financial aspects of the Combined                            

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Companies, including the elimination of certain Morningstar employee costs      
related to employees terminated at the consummation date and reduced interest   
costs from the lower interest rates on the new credit facility for the Combined 
Company currently being negotiated. In addition, Suiza expects to realize       
significant additional annual cost savings within the first year from combined  
purchasing and rationalized manufacturing and distribution.                     

 The unaudited pro forma financial data should be read in conjunction with
the separate audited and unaudited financial statements of the Combined         
Companies and of the Acquired Businesses, including the notes thereto, either   
included elsewhere or incorporated by reference in this Proxy                   
Statement/Prospectus. The unaudited pro forma consolidated income statement data
are not necessarily indicative of the operating results that would have occurred
had the proposed mergers of the Combined Companies and the completed            
acquisitions of the Acquired Businesses occurred on the pro forma dates         
indicated, nor are they necessarily indicative of the future operating results  
of the Combined Companies.                                                      

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                        [Enlarge/Download Table]

                                                  HISTORICAL COMBINED COMPANIES                                 
                                               ------------------------------------                             
                                                 SUIZA      COUNTRY      MORNING-     COMBINING     COMBINED    
                                                 FOODS       FRESH         STAR      ADJUSTMENTS   COMPANIES    
                                               ----------  ----------  ------------  -----------  ------------  
                                                                                                                
NET SALES..................................... $  341,108  $  310,164  $    292,314   $  (4,720)(a) $    938,866

COST OF SALES.................................    240,468     268,500       222,145      (4,720)(a)      726,393
                                               ----------  ----------  ------------               ------------  

  Gross profit................................    100,640      41,664        70,169                    212,473  

OPERATING EXPENSES:                                                                                             
  Selling and distribution....................     54,248      21,225        39,984                    115,457  
  General and administrative..................     16,935      15,036         9,497                     41,468  
  Amortization of intangibles.................      3,697         100         2,281                      6,078  
                                               ----------  ----------  ------------               ------------  

    Total operating expenses..................     74,880      36,361        51,762                    163,003  
                                               ----------  ----------  ------------               ------------  

OPERATING INCOME..............................     25,760       5,303        18,407                     49,470  

OTHER:                                                                                                          
  Interest expense, net.......................     19,279        (259)        4,797                     23,817  
  Merger and other costs......................      1,660          --            --                      1,660  
  Other (income) expense......................       (268)       (551)       (1,244)                    (2,063) 
                                               ----------  ----------  ------------               ------------  

    Total other...............................     20,671        (810)        3,553                     23,414  
                                               ----------  ----------  ------------               ------------  

INCOME BEFORE                                                                                                   
  INCOME TAXES................................      5,089       6,113        14,854                     26,056  

INCOME TAXES..................................        844       2,145         5,533                      8,522  
                                               ----------  ----------  ------------               ------------  

INCOME FROM                                                                                                     
  CONTINUING OPERATIONS....................... $    4,245  $    3,968  $      9,321               $     17,534  
                                               ----------  ----------  ------------               ------------  
                                               ----------  ----------  ------------               ------------  

INCOME PER COMMON SHARE FROM CONTINUING                                                                         
  OPERATIONS.................................. $     0.69  $     0.52  $       0.62               $       0.76  
                                               ----------  ----------  ------------               ------------  
                                               ----------  ----------  ------------               ------------  

WEIGHTED AVERAGE SHARES                                                                                         
  OUTSTANDING.................................  6,156,387   7,622,840    15,050,538                 23,106,841  
                                               ----------  ----------  ------------               ------------  
                                               ----------  ----------  ------------               ------------  

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

(a) Elimination of sales and cost of sales for transactions between Morningstar 
and Suiza Foods.                                                        

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

                                                        [Enlarge/Download Table]

                                                  HISTORICAL COMBINED COMPANIES                                 
                                               ------------------------------------                             
                                                 SUIZA      COUNTRY      MORNING-     COMBINING     COMBINED    
                                                 FOODS       FRESH         STAR      ADJUSTMENTS   COMPANIES    
                                               ----------  ----------  ------------  -----------  ------------  
                                                                                                                
NET SALES..................................... $  430,466  $  336,055  $    304,730   $  (5,818)(a) $  1,065,433

COST OF SALES.................................    312,633     291,722       232,948      (5,818)(a)      831,485
                                               ----------  ----------  ------------               ------------  

  Gross profit................................    117,833      44,333        71,782                    233,948  

OPERATING EXPENSES:                                                                                             
  Selling and distribution....................     64,289      21,633        38,353                    124,275  
  General and administrative..................     19,277      15,700        10,682                     45,659  
  Amortization of intangibles.................      3,703          82         2,319                      6,104  
                                               ----------  ----------  ------------               ------------  

    Total operating expenses..................     87,269      37,415        51,354                    176,038  
                                               ----------  ----------  ------------               ------------  

OPERATING INCOME..............................     30,564       6,918        20,428                     57,910  

OTHER:                                                                                                          
  Interest expense, net.......................     19,921       1,392         4,302                     25,615  
  Merger and other costs......................     10,238          --            --                     10,238  
  Other (income) expense......................       (469)       (633)       (1,276)                    (2,378) 
                                               ----------  ----------  ------------               ------------  

    Total other...............................     29,690         759         3,026                     33,475  
                                               ----------  ----------  ------------               ------------  

INCOME BEFORE                                                                                                   
  INCOME TAXES................................        874       6,159        17,402                     24,435  

INCOME TAXES..................................      2,450       2,090         6,062                     10,602  
                                               ----------  ----------  ------------               ------------  

INCOME FROM                                                                                                     
  CONTINUING OPERATIONS....................... $   (1,576) $    4,069  $     11,340               $     13,833  
                                               ----------  ----------  ------------               ------------  
                                               ----------  ----------  ------------               ------------  

INCOME PER COMMON SHARE FROM CONTINUING                                                                         
  OPERATIONS                                   $    (0.26) $     1.04  $       0.74               $       0.64  
                                               ----------  ----------  ------------               ------------  
                                               ----------  ----------  ------------               ------------  

WEIGHTED AVERAGE SHARES                                                                                         
  OUTSTANDING.................................  6,109,398   3,609,245    15,245,562                 21,036,608  
                                               ----------  ----------  ------------               ------------  
                                               ----------  ----------  ------------               ------------  

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

(a) Elimination of sales and cost of sales for transactions between Morningstar 
and Suiza Foods.                                                        

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                        [Enlarge/Download Table]

                        HISTORICAL COMBINED COMPANIES                                                                         
                       -------------------------------                               HISTORICAL       ACQUIRED                
                         SUIZA     COUNTRY   MORNING-     COMBINING     COMBINED      ACQUIRED       BUSINESSES               
                         FOODS      FRESH      STAR      ADJUSTMENTS    COMPANIES   BUSINESSES(A)   ADJUSTMENTS     PRO FORMA 
                       ---------  ---------  ---------  -------------  -----------  -------------  --------------  -----------
                                                                                                                              
NET SALES............. $ 520,916  $ 353,037  $ 394,306   $  (7,910)(b)  $1,260,349    $ 754,277    $      --        $2,014,626
COST OF SALES.........   388,548    305,614    302,801      (7,910)(b)    989,053       586,167       (2,624)(c)(d)  1,572,596
                       ---------  ---------  ---------                 -----------  -------------                  -----------
  Gross profit........   132,368     47,423     91,505                    271,296       168,110                       442,030 
OPERATING EXPENSES:                                                                                                           
  Selling and                                                                                                                 
    distribution......    70,709     19,916     49,895                    140,520        79,847       (4,202)(c)(d)    216,165
  General and                                                                                                                 
    administrative....    21,913     16,010     12,538                     50,461        29,693       (9,411)(c)(d)     70,743
  Amortization of                                                                                                             
    intangibles.......     4,624        656      2,912                      8,192         2,217        9,542(e)        19,951 
                       ---------  ---------  ---------                 -----------  -------------                  -----------
    Total operating                                                                                                           
      expenses........    97,246     36,582     65,345                    199,173       111,757                       306,859 
                       ---------  ---------  ---------                 -----------  -------------                  -----------
OPERATING INCOME......    35,122     10,841     26,160                     72,123        56,353                       135,171 
OTHER:                                                                                                                        
  Interest expense,                                                                                                           
    net...............    17,470      1,219      4,026                     22,715         5,600       38,124(f)        66,439 
  Merger and other                                                                                                            
    costs.............       571         --         --                        571            --                           571 
  Other (income)                                                                                                              
    expense...........    (4,012)      (436)      (286)                    (4,734)         (495)                       (5,229)
                       ---------  ---------  ---------                 -----------  -------------                  -----------
    Total other.......    14,029        783      3,740                     18,552         5,105                        61,781 
                       ---------  ---------  ---------                 -----------  -------------                  -----------
INCOME BEFORE                                                                                                                 
  INCOME TAXES........    21,093     10,058     22,420                     53,571        51,248                        73,390 
INCOME TAXES..........    (6,836)     3,385      7,844                      4,393         1,280        6,110(g)        11,783 
                       ---------  ---------  ---------                 -----------  -------------                  -----------
INCOME FROM                                                                                                                   
  CONTINUING                                                                                                                  
    OPERATIONS........ $  27,929  $   6,673  $  14,576                  $  49,178     $  49,968                     $  61,607 
                       ---------  ---------  ---------                 -----------  -------------                  -----------
                       ---------  ---------  ---------                 -----------  -------------                  -----------
INCOME PER COMMON                                                                                                             
  SHARE FROM                                                                                                                  
  CONTINUING                                                                                                                  
  OPERATIONS.......... $    2.81  $    1.75  $    0.96                  $    1.97                                   $    2.45 
                       ---------  ---------  ---------                 -----------                                 -----------
                       ---------  ---------  ---------                 -----------                                 -----------
WEIGHTED AVERAGE                                                                                                              
  SHARES                                                                                                                      
  OUTSTANDING......... 9,921,822  3,636,519  15,133,887                24,768,983                                  25,066,383 
                       ---------  ---------  ---------                 -----------                                 -----------
                       ---------  ---------  ---------                 -----------                                 -----------

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

(a) Includes the pre-acquisition results of operations of Suiza Foods' 1996     
 acquisitions of Garrido through June 30, 1996, Swiss Dairy through August
31, 1996 and Model Dairy through November 30, 1996; the pre-acquisition 
 results of operations of Morningstars' 1996 acquisition of Presto through
 November 30, 1996; and the pre-acquisition results of operations of Suiza
Foods' 1997 acquisitions of Dairy Fresh for the year ended December 31, 
    1996, and Garelick for its most recent fiscal year ended September 30, 1996.

(b) Elimination of sales and cost of sales for transactions between Morningstar 
and Suiza Foods.                                                        

(c) Excess of historical depreciation expense over the depreciation of the fair 
 value of property and equipment acquired in the Suiza Foods acquisitions,
   which resulted in a decrease of $2,107, $708 and $121 in amounts charged to
cost of sales, selling and distribution expense and general and         
administrative expense, respectively. There was no material difference  
between the                                                             

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 historical depreciation expense and the depreciation of the fair value of
property and equipment acquired in the Morningstar acquisition.         

(d) Elimination of salaries and benefits paid primarily to former shareholders  
of the acquired businesses whose employment was either terminated or    
salaries were reduced as part of the purchase agreement, along with the 
 elimination of certain related party expenses of the acquired businesses,
pursuant to an agreement with such related parties at acquisition date, 
resulting in a reduction of historical costs of sales, selling and      
distribution and general administrative costs, as follows:              

                                                        [Enlarge/Download Table]

                                                                    SUIZA       MORNING-              
                                                                    FOODS         STAR                
                                                                ACQUISITIONS   ACQUISITION    TOTAL   
                                                                -------------  -----------  --------- 
                                                                                                      
Cost of sales..................................................   $    (517)    $      --   $    (517)
Selling and distribution.......................................        (968)       (2,526)       (968)
General and administration.....................................      (4,816)       (4,474)    (11,816)
                                                                -------------  -----------  --------- 
                                                                  $  (6,301)    $  (7,000)  $ (13,301)
                                                                -------------  -----------  --------- 
                                                                -------------  -----------  --------- 

(e) Amortization of goodwill and other intangibles, over the following          
amortization periods, in excess of historical amounts, as follows:      

                                                        [Enlarge/Download Table]

                                                                     SUIZA       MORNING-             
                                                                     FOODS         STAR               
                                                        LIFE     ACQUISITIONS   ACQUISITION    TOTAL  
                                                      ---------  -------------  -----------  ---------
                                                                                                      
Organization costs...................................     5        $      22     $      --   $      22
Tradenames...........................................   25-40            510         1,833       2,343
Customer list........................................    10              367            --         367
Goodwill.............................................    40            6,069           741       6,810
                                                                 -------------  -----------  ---------
                                                                   $   6,968     $   2,574   $   9,542
                                                                 -------------  -----------  ---------
                                                                 -------------  -----------  ---------

(f) Pro forma interest expense on the average outstanding balance of new        
variable rate borrowings used to fund the Suiza Foods and Morningstar   
acquisitions at an assumed interest rate of 7.75%, including the        
    amortization of deferred financing costs, net of the reduction of historical
interest expense related to the historical debt repaid as follows:      

                                                                [Download Table]

                                                                                
Suiza Foods acquisitions........................................   $  31,346    
Morningstar acquisition.........................................       6,778    
                                                                 -------------  
Total...........................................................   $  38,124    
                                                                 -------------  
                                                                 -------------  

The effect of a .125% change in the interest rate on the new variable rate
   borrowings to fund the Suiza Foods and Morningstar acquisitions, would have
 resulted in a change in the proforma interest expense adjustment of $615.

(g) Estimated pro forma adjustment to reflect income taxes at the estimated     
  effective tax rate for the Suiza Foods acquisitions of 4% for Garrido, 35%
  for Model Dairy and 40% for Swiss Dairy, Dairy Fresh and Garelick, and for
Morningstar's Presto acquisition of 42%.                                

                                                                [Download Table]

                                                                                
Suiza Foods acquisitions........................................   $   3,995    
Morningstar acquisition.........................................       2,115    
                                                                 -------------  
Total...........................................................   $   6,110    
                                                                 -------------  
                                                                 -------------  

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE DATA) 

                                                        [Enlarge/Download Table]

                            HISTORICAL COMBINED COMPANIES                                                                       
                          ---------------------------------                            HISTORICAL      ACQUIRED                 
                            SUIZA      COUNTRY    MORNING-    COMBINING    COMBINED     ACQUIRED      BUSINESSES         PRO    
                            FOODS       FRESH       STAR     ADJUSTMENTS  COMPANIES   BUSINESSES(A)   ADJUSTMENTS       FORMA   
                          ----------  ---------  ----------  -----------  ----------  -------------  -------------   -----------
                                                                                                                                
NET SALES................ $  336,819  $ 172,295  $  270,672  $(4,699)(b)  $ 775,087     $246,977     $    --         $1,022,064 
COST OF SALES............    252,047    147,711     196,022   (4,699)(b)    591,081      192,812      (1,995)(c)        781,898 
                          ----------  ---------  ----------               ----------  -------------                  -----------
  Gross profit...........     84,772     24,584      74,650                 184,006       54,165                        240,166 
OPERATING EXPENSES:                                                                                                             
  Selling and                                                                                                                   
    distribution.........     42,244      9,497      41,785                  93,526       22,073        (473)(c)        115,126 
  General and                                                                                                                   
    administrative.......     16,397      7,775       6,685                  30,857        5,674      (1,243)(c)(d)      35,288 
  Amortization of                                                                                                               
    intangibles..........      2,982         25       2,753                   5,760        1,251       2,623(e)           9,634 
                          ----------  ---------  ----------               ----------  -------------                  -----------
    Total operating                                                                                                             
      expenses...........     61,623     17,297      51,223                 130,143       28,998                        160,048 
                          ----------  ---------  ----------               ----------  -------------                  -----------
OPERATING INCOME.........     23,149      7,287      23,427                  53,863       25,167                         80,118 
OTHER:                                                                                                                          
  Interest expense,                                                                                                             
    net..................      6,580        803       6,798                  14,181        3,410      10,988(f)          28,579 
  Other (income)                                                                                                                
    expense..............    (18,575)      (230)       (249)                (19,054 )        (18)                       (19,072)
                          ----------  ---------  ----------               ----------  -------------                  -----------
    Total other..........    (11,995)       573       6,549                  (4,873 )      3,392                          9,507 
                          ----------  ---------  ----------               ----------  -------------                  -----------
INCOME BEFORE                                                                                                                   
INCOME TAXES.............     35,144      6,714      16,878                  58,736       21,775                         70,611 
INCOME TAXES.............     10,745      2,303       6,917                  19,965          715       3,735(g)          24,415 
                          ----------  ---------  ----------               ----------  -------------                  -----------
INCOME FROM                                                                                                                     
CONTINUING OPERATIONS.... $   24,399  $   4,411  $    9,961               $  38,771     $ 21,060                     $   46,196 
                          ----------  ---------  ----------               ----------  -------------                  -----------
                          ----------  ---------  ----------               ----------  -------------                  -----------
INCOME PER COMMON SHARE                                                                                                         
  FROM                                                                                                                          
CONTINUING OPERATIONS.... $     1.57  $    1.16  $     0.64               $    1.25                                  $     1.48 
                          ----------  ---------  ----------               ----------                                 -----------
                          ----------  ---------  ----------               ----------                                 -----------
WEIGHTED AVERAGE SHARES                                                                                                         
OUTSTANDING.............. 15,509,388  3,685,236  15,643,651               30,816,419                                 31,113,819 
                          ----------  ---------  ----------               ----------                                 -----------
                          ----------  ---------  ----------               ----------                                 -----------

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

(a) Includes the pre-acquisition results of operations Suiza Foods' 1997        
  acquisitions of Dairy Fresh and Garelick for the six months ended June 30,
1997.                                                                   

(b) Elimination of sales and cost of sales for transactions between Morningstar 
and Suiza Foods.                                                        

(c) Excess of historical depreciation expense over the depreciation of the fair 
 value of property and equipment acquired in the Suiza Foods acquisitions,
  which resulted in a decrease of $1,995, $473 and $71 in amounts charged to
cost of sales, selling and distribution expense and general and         
administrative expense, respectively.                                   

(d) Elimination of salaries and benefits paid primarily to former shareholders  
of the Suiza Foods acquired businesses whose employment was either      
    terminated or salaries were reduced as part of the purchase agreement, along
with the elimination of certain related party expenses of the acquired  
businesses, pursuant to an agreement with such related parties at       
acquisition date, resulting in a reduction of historical general        
administrative costs of $1,172.                                         

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(e) Amortization of goodwill and other intangibles for the Suiza Foods          
acquisitions, over the following amortization periods, in excess of     
historical amounts, as follows:                                         

                                                                [Download Table]

                                              LIFE              
                                               ---              
                                                                
Organization costs...........................       5  $       5
Tradename....................................      25        200
Goodwill.....................................      40      2,418
                                                          ------
                                                       $   2,623
                                                          ------
                                                          ------

(f) Pro forma interest expense to reflect additional interest expense of $10,988
  on the average outstanding balance of new variable rate borrowings used to
fund the Suiza Foods acquisitions at an assumed interest rate of 7.75%, 
    including the amortization of deferred financing costs, net of the reduction
 of historical interest expense related to the historical debt repaid. The
effect of a .125% change in the interest rate on the new variable rate  
 borrowings to fund the Suiza Foods acquisitions, would have resulted in a
change in the proforma interest expense adjustment of $177.             

(g) Estimated pro forma adjustment to reflect increased income taxes for the    
 Suiza Foods acquisitions of $3,735 at the estimated effective tax rate of
40% for Dairy Fresh and Garelick.                                       

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997 
(IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                 HISTORICAL COMBINED COMPANIES                                                                 
                                --------------------------------                           HISTORICAL    ACQUIRED              
                                 SUIZA     COUNTRY     MORNING-    COMBINING    COMBINED    ACQUIRED    BUSINESSES             
                                 FOODS      FRESH        STAR     ADJUSTMENTS   COMPANIES  BUSINESSES  ADJUSTMENTS   PRO FORMA 
                                --------  ---------   ----------  ------------  ---------  ----------  ------------  ----------
                                                                                                                               
                                                                                              (A)                              
CURRENT ASSETS:                                                                                                                
  Cash........................  $ 7,130   $  6,697     $  2,167   $             $ 15,994    $    291   $    (68)(e)  $  16,217 
  Accounts receivable.........   50,784     26,084       48,038                  124,906      32,948                   157,854 
  Inventories.................   21,536     18,846       25,689                   66,071       6,882                    72,953 
  Prepaid expenses and other..    3,369        241        3,229                    6,839       2,299        (75)(e)      9,063 
  Deferred income taxes.......    3,796      1,186        7,339                   12,321          --                    12,321 
                                --------  ---------   ----------                ---------  ----------                ----------
    Total current assets......   86,615     53,054       86,462                  226,131      42,420                   268,408 
PROPERTY AND EQUIPMENT........  136,281     43,476      100,708                  280,465      85,199     26,862(e)     392,526 
DEFERRED INCOME TAXES.........    8,319      3,059           --                   11,378          --                    11,378 
INTANGIBLE AND OTHER ASSETS...  171,091      2,353      165,153                  338,597      42,219    259,137(e)     639,953 
                                --------  ---------   ----------                ---------  ----------                ----------
TOTAL ASSETS..................  $402,306  $101,942     $352,323                 $856,571    $169,838                 $1,312,265
                                --------  ---------   ----------                ---------  ----------                ----------
                                --------  ---------   ----------                ---------  ----------                ----------
CURRENT LIABILITIES:                                                                                                           
  Accounts payable and accrued                                                                                                 
    expenses..................  $42,118   $ 30,316     $ 63,466   $ 28,000(c)   $163,900    $ 40,122   $   (380)(d)  $ 203,642 
  Income taxes payable........    1,154      2,262           --                    3,416          --                     3,416 
  Current portion of long-term                                                                                                 
    debt......................   17,323      3,767       11,500                   32,590      57,762    (57,762)(d)     32,590 
                                --------  ---------   ----------                ---------  ----------                ----------
    Total current                                                                                                              
      liabilities.............   60,595     36,345       74,966                  199,906      97,884                   239,648 
LONG-TERM DEBT................  128,150     26,523      169,200                  323,873      32,436    373,516(c)     729,825 
OTHER LIABILITIES.............       --      3,558        3,020                    6,578          --                     6,578 
DEFERRED INCOME TAXES.........    4,928         --        5,694                   10,622          --                    10,622 
STOCKHOLDERS' EQUITY:                                                                                                          
  Preferred stock.............       --      3,741           --                    3,741                                 3,741 
  Common stock................      153      1,898          153     (1,908)(b)       296                      3(d)         299 
  Additional paid-in                                                                                                           
    capital...................  183,263         --       67,733      1,908(b)    252,904                  9,997(c)     262,901 
  Retained earnings...........   25,217     29,877       31,557    (28,000)(c)    58,651                                58,651 
  Equity of acquired                                                                                                           
    businesses................       --         --           --                       --      39,518    (39,518)(e)         -- 
                                --------  ---------   ----------                ---------  ----------                ----------
    Total stockholders'                                                                                                        
      equity..................  208,633     35,516       99,443                  315,592      39,518                   325,592 
                                --------  ---------   ----------                ---------  ----------                ----------
TOTAL LIABILITIES AND                                                                                                          
  STOCKHOLDERS' EQUITY........  $402,306  $101,942     $352,323                 $856,571    $169,838                 $1,312,265
                                --------  ---------   ----------                ---------  ----------                ----------
                                --------  ---------   ----------                ---------  ----------                ----------

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

(a) Includes the pre-acquisition balance sheets of Suiza Foods' 1997            
acquisitions of Dairy Fresh and Garelick as of June 30, 1997.           

(b) Pro forma adjustment to common stock and additional paid-in capital to      
reflect the par value of the common stock issued to affect the mergers. 

(c) Pro forma adjustment to expense $28 million of estimated merger costs which 
 are expected to be incurred on the consumation date of the mergers. These
estimated transaction related costs include approximately $16 million of
investment banking fees, legal fees, accounting fees, and filing and    
printing fees, along with approximately $12 million of employee costs   
  related to the payments of retention bonuses and excise and other taxes to
certain Country Fresh and Morningstar employees pursuant to existing    
contractual agreements and the payments pursuant to existing contractual
agreements of severance costs and excise and other taxes for certain    
Morningstar employees whose employment will be terminated on the        
consummation date of the Morningstar Merger.                            

(d) On July 1, 1997, Suiza Foods completed the acquisition of substantially all 
   the net assets of Dairy Fresh and, on July 31, 1997, the acquisition of all
  of the outstanding common stock of Garelick. The purchase prices for these
acquisitions were approximately $104.5 million and $306.6 million,      
    respectively, including acquired cash and including expenses of $1.8 million
   and $3.0 million, respectively, which were used to acquired Dairy Fresh and
Garelick and to repay their existing debt. The total purchase prices    

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were funded primarily with borrowings under Suiza Foods' senior credit  
   facility and the issuance of 297,400 shares of Suiza Common Stock for $10.0
million to Garelick shareholders, as follows:                           

                                                        [Enlarge/Download Table]

                                                                                                   
Credit agreement borrowings............................................................. $ 405,952 
Issuance of common stock................................................................    10,000 
                                                                                         --------- 
Total purchase prices...................................................................   415,952 
Repayment of existing indebtedness:                                                                

  Accrued interest......................................................................      (380)
  Current portion of long-term debt.....................................................   (57,762)
  Long-term debt........................................................................   (32,436)
                                                                                         --------- 
Net purchase price...................................................................... $ 325,374 
                                                                                         --------- 
                                                                                         --------- 

(e) The above acquisitions resulted in an excess of the purchase prices over the
historical net assets acquired, which were allocated to the net assets  
acquired, as follows:                                                   

                                                        [Enlarge/Download Table]

                                                                                                   
Net purchase prices..................................................................... $ 325,374 
Historical carrying value of net assets:                                                           
  Total net assets......................................................................    39,518 
  Less net assets not assumed:                                                                     
    Cash................................................................................       (68)
    Prepaid expenses....................................................................       (75)
    Intangible and other assets.........................................................   (38,693)
                                                                                         --------- 
Historical carrying values of net assets acquired.......................................       682 
                                                                                         --------- 
Excess of net purchase prices over historical carrying values........................... $ 324,692 
                                                                                         --------- 
Allocation of excess purchase price:                                                               
  Excess fair value of property and equipment........................................... $  26,862 
  Intangible assets.....................................................................   297,830 
                                                                                         --------- 
                                                                                         $ 324,692 
                                                                                         --------- 

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SELECTED FINANCIAL DATA OF SUIZA FOODS
(IN THOUSANDS, EXCEPT SHARE DATA) 

 The following selected financial data of Suiza Foods for each of the five
years in the period ended December 31, 1996 have been derived from Suiza Foods' 
audited consolidated financial statements. The selected consolidated financial  
data for the six months ended June 30, 1996 and 1997 are unaudited, and in the  
opinion of management, reflect all adjustments (consisting only 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. The selected      
financial data of Suiza Foods should be read in conjunction with the            
Consolidated Financial Statements and related notes of Suiza Foods incorporated 
by reference into or included elsewhere in this Joint Proxy                     
Statement/Prospectus.                                                           

                                                        [Enlarge/Download Table]

                                                                                                               UNAUDITED  
                                                                                                               SIX MONTHS 
                                                                                                               ENDED JUNE 
                                                                    YEAR ENDED DECEMBER 31,                       30,     
                                                   ----------------------------------------------------------  ---------- 
                                                      1992        1993        1994        1995        1996        1996    
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
                                                                                                                          
OPERATING DATA:                                                                                                           
  Net sales....................................... $   44,452  $   51,675  $  341,108  $  430,466  $  520,916  $  225,307 
  Cost of sales...................................     14,586      20,412     240,468     312,633     388,548     165,917 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
  Gross profit....................................     29,866      31,263     100,640     117,833     132,368      59,390 
  Operating costs and expenses:                                                                                           
    Selling and distribution......................     14,483      15,434      54,248      64,289      70,709      32,682 
    General and administrative....................      6,110       6,305      16,935      19,277      21,913       9,805 
    Amortization of intangibles and other.........      1,911         822       3,697       3,703       4,624       1,960 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
    Total operating costs and expenses............     22,504      22,561      74,880      87,269      97,246      44,447 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
  Income from operations..........................      7,362       8,702      25,760      30,564      35,122      14,943 
  Other (income) expense:                                                                                                 
    Interest expense, net.........................      8,495       7,697      19,279      19,921      17,470       8,488 
    Merger and other costs........................      1,199          --       1,660      10,238         571          -- 
    Other income, net.............................       (408)       (419)       (268)       (469)     (4,012)       (252)
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
    Total other (income) expense..................      9,286       7,278      20,671      29,690      14,029       8,236 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
  Income (loss) before income taxes and                                                                                   
    extraordinary loss............................     (1,924)      1,424       5,089         874      21,093       6,707 
  Income taxes (benefit)..........................     --               4         844       2,450      (6,836)      1,771 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
  Income (loss) before extraordinary loss.........     (1,924)      1,420       4,245      (1,576)     27,929       4,936 
  Extraordinary loss from early extinguishment of                                                                         
    debt..........................................      2,491      --             197       8,462       2,215       2,215 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
  Net income (loss) (1)........................... $   (4,415) $    1,420  $    4,048  $  (10,038) $   25,714  $    2,721 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
  Weighted average shares outstanding.............  1,763,502   2,487,174   6,156,387   6,109,398   9,921,822   8,455,332 

  Earnings (loss) per share:                                                                                              
    Income (loss) before extraordinary loss....... $    (1.09) $      .57  $      .69  $     (.26) $     2.81  $      .58 
    Extraordinary loss............................      (1.41)         --        (.03)      (1.38)       (.22)       (.26)
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
    Net income (loss)(1).......................... $    (2.50) $      .57  $      .66  $    (1.64) $     2.59  $      .32 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 
                                                   ----------  ----------  ----------  ----------  ----------  ---------- 

BALANCE SHEET DATA (AT END OF PERIOD):                                                                                    
  Total assets....................................     46,991     167,948     238,952     232,522     384,148     237,973 
  Long-term debt, net of current portion..........     54,739     132,123     173,327     171,745     226,693     134,334 
  Total stockholders' equity (deficit)............    (15,408)        162       9,887       9,460      93,532      60,789 

OTHER DATA:                                                                                                               
  Ratio of earnings to fixed charges (2)..........         --        1.18        1.24        1.04        2.05        1.68 
  Deficiency of earnings to fixed charges (2)..... $    1,924          --          --          --          --          -- 



                                                      1997                                                                
                                                   -----------                                                            
                                                                                                                          
OPERATING DATA:                                                                                                           
  Net sales....................................... $   336,819                                                            
  Cost of sales...................................     252,047                                                            
                                                   -----------                                                            
  Gross profit....................................      84,772                                                            
  Operating costs and expenses:                                                                                           
    Selling and distribution......................      42,244                                                            
    General and administrative....................      16,397                                                            
    Amortization of intangibles and other.........       2,982                                                            
                                                   -----------                                                            
    Total operating costs and expenses............      61,623                                                            
                                                   -----------                                                            
  Income from operations..........................      23,149                                                            
  Other (income) expense:                                                                                                 
    Interest expense, net.........................       6,580                                                            
    Merger and other costs........................          --                                                            
    Other income, net.............................     (18,575)                                                           
                                                   -----------                                                            
    Total other (income) expense..................     (11,995)                                                           
                                                   -----------                                                            
  Income (loss) before income taxes and                                                                                   
    extraordinary loss............................      35,144                                                            
  Income taxes (benefit)..........................      10,745                                                            
                                                   -----------                                                            
  Income (loss) before extraordinary loss.........      24,399                                                            
  Extraordinary loss from early extinguishment of                                                                         
    debt..........................................       3,270                                                            
                                                   -----------                                                            
  Net income (loss) (1)........................... $    21,129                                                            
                                                   -----------                                                            
                                                   -----------                                                            
  Weighted average shares outstanding.............  15,509,388                                                            
  Earnings (loss) per share:                                                                                              
    Income (loss) before extraordinary loss....... $      1.57                                                            
    Extraordinary loss............................        (.21)                                                           
                                                   -----------                                                            
    Net income (loss)(1).......................... $      1.36                                                            
                                                   -----------                                                            
                                                   -----------                                                            
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                    
  Total assets....................................     402,306                                                            
  Long-term debt, net of current portion..........     128,150                                                            
  Total stockholders' equity (deficit)............     208,633                                                            
OTHER DATA:                                                                                                               
  Ratio of earnings to fixed charges (2)..........        5.37                                                            
  Deficiency of earnings to fixed charges (2).....          --                                                            

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

(1)  Net income (loss) and related per share amounts include the following      
nonrecurring and extraordinary charges and benefits:                  

                                                        [Enlarge/Download Table]

                                                                                                             UNAUDITED  
                                                                                                             SIX MONTHS 
                                                                                                             ENDED JUNE 
                                                                  YEAR ENDED DECEMBER 31,                       30,     
                                                 ----------------------------------------------------------  ---------- 
                                                    1992        1993        1994        1995        1996        1996    
                                                 ----------  ----------  ----------  ----------  ----------  ---------- 
                                                                                                                        
Merger, financing and other costs (a)........... $   (1,199) $       --  $   (1,602) $   (9,554) $     (354) $       -- 
Tax benefits (b)................................         --          --          --          --      13,950          -- 
Extraordinary loss from early extinguishment of                                                                         
  debt (c)......................................     (2,491)         --        (197)     (8,462)     (2,215)     (2,215)
                                                 ----------  ----------  ----------  ----------  ----------  ---------- 
                                                 $   (3,690) $       --  $   (1,799) $  (18,016) $   11,381  $   (2,215)
                                                 ----------  ----------  ----------  ----------  ----------  ---------- 
                                                 ----------  ----------  ----------  ----------  ----------  ---------- 



                                                    1997                                                                
                                                 -----------                                                            
                                                                                                                        
Merger, financing and other costs (a)........... $        --                                                            
Tax benefits (b)................................      11,500                                                            
Extraordinary loss from early extinguishment of                                                                         
  debt (c)......................................      (3,270)                                                           
                                                 -----------                                                            
                                                 $     8,230                                                            
                                                 -----------                                                            
                                                 -----------                                                            

   (a) Consists of costs incurred in connection with the corporate combination
       pursuant to which Suiza Foods was formed as a holding company for certain
  pre-existing operations, an uncompleted public offering of shares of
Suiza Common Stock, an uncompleted debt offering, uncompleted     
     acquisitions and debt refinancing costs, net of associated income taxes
of $58 in 1994, $684 in 1995 and $217 in 1996.                    

    (b) For 1996, includes the sale of Puerto Rico tax credits of $3,400 (net of
  related expenses), reflected in other income, and the recognition of
 $11,750 in deferred income tax benefits recorded as a credit to tax
    expense, both effects related to tax credits generated by Suiza-Puerto
       Rico, partially offset by additional income tax expense of $1,200 related
     to the sale of the tax credits. For the six months ended June 30, 1997,
   includes a nonrecurring gain of $18,100, net of discounts and related
       expenses, resulting from additional tax credits generated by Suiza-Puerto
 Rico that Suiza Foods subsequently sold to third parties, partially
      offset by additional income tax expense of $6,600 related to the sale of
tax credits.                                                      

 (c) Net of associated income taxes of approximately $700 in 1995, $900 in
1996 and $2,000 for the six months ended June 30, 1997.           

(2) For the purposes of computing the ratios of earnings to fixed charges,      
    "earnings" consist of earnings before income taxes and fixed charges. "Fixed
  charges" consist of interest charges, the portion of rental expense deemed
representative of the interest factor and preferred stock dividends.    

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SELECTED FINANCIAL DATA OF MORNINGSTAR
(IN THOUSANDS, EXCEPT SHARE DATA) 

 The following selected financial data of Morningstar for each of the five
years in the period ended December 31, 1996 have been derived from Morningstar's
audited consolidated financial statements. The selected consolidated financial  
data for the six months ended June 30, 1996 and 1997 are unaudited, and in the  
opinion of management, reflect all adjustments (consisting only 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. The selected      
financial data of Morningstar should be read in conjunction with the            
Consolidated Financial Statements and related notes of Morningstar incorporated 
by reference into or included elsewhere in this Joint Proxy                     
Statement/Prospectus.                                                           

                                                        [Enlarge/Download Table]

                                                                                                                  UNAUDITED        
                                                                                                            SIX MONTHS ENDED JUNE  
                                                             YEAR ENDED DECEMBER 31,                                 30,           
                                        ------------------------------------------------------------------  ---------------------- 
                                            1992            1993           1994        1995        1996        1996        1997    
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
                                                                                                                                   
OPERATING DATA:                                                                                                                    
  Net sales...........................  $  230,220      $  273,949      $  292,314  $  304,730  $  394,306  $  167,417  $  270,672 
  Cost of sales.......................     174,130         211,418         222,145     232,948     302,801     128,036     196,022 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
    Gross profit......................      56,090          62,531          70,169      71,782      91,505      39,381      74,650 
  Operating costs and expenses:                                                                                                    
    Selling and distribution..........      27,100          36,669          39,984      38,353      49,895      22,316      41,785 
    General and administrative........       7,579           9,432           9,497      10,682      12,538       5,259       6,685 
    Amortization of intangibles.......       4,825           3,995           2,281       2,319       2,912       1,162       2,753 
    Restructuring and other charges...       1,093           7,100              --          --          --          --          -- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
    Total operating costs and                                                                                                      
      expenses........................      40,597          57,196          51,762      51,354      65,345      28,737      51,223 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
  Income from operations..............      15,493           5,335          18,407      20,428      26,160      10,644      23,427 
  Other (income) expenses:                                                                                                         
    Interest expense, net.............       7,875           5,477           4,797       4,302       4,026       1,532       6,798 
    Refinancing charges...............       9,584              --              --          --          --          --          -- 
    Other income, net.................        (424)           (726)         (1,244)     (1,276)       (286)       (382)       (249)
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
    Total other (income) expense......      17,035           4,751           3,553       3,026       3,740       1,150       6,549 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
  Income (loss) before income taxes,                                                                                               
    discontinued operations and                                                                                                    
    extraordinary loss................      (1,542)            584          14,854      17,402      22,420       9,494      16,878 
  Income taxes........................          98             841           5,533       6,062       7,844       3,200       6,917 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
  Income (loss) from continuing                                                                                                    
    operations........................      (1,640)           (257)          9,321      11,340      14,576       6,294       9,961 
  Income (loss) from discontinued                                                                                                  
    operations........................      (3,359)          1,241           1,326         184          --          --          -- 
  Extraordinary loss from early                                                                                                    
    extinguishment of debt............      (5,676)(1)        (164)(2)          --          --          --          --          -- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
  Net income (loss)...................     (10,675)            820          10,647      11,524      14,576       6,294       9,961 
  Dividends on preferred stock........         939              --              --          --          --          --          -- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
  Net income (loss) to common.........  $  (11,614)     $      820      $   10,647  $   11,524  $   14,576  $    6,294  $    9,961 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 

  Weighted average common shares                                                                                                   
    outstanding.......................  12,128,343      15,011,607      15,050,538  15,245,562  15,133,887  14,778,316  15,643,651 

  Earnings (loss) per common share:                                                                                                
    Income (loss) from continuing                                                                                                  
      operations......................  $    (0.21)     $    (0.02)     $     0.62  $     0.74  $     0.96  $     0.42  $     0.64 
    Income (loss) from discontinued                                                                                                
      operations......................       (0.28)           0.08            0.09        0.02          --          --          -- 
    Extraordinary loss................       (0.47)          (0.01)             --          --          --          --          -- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
    Net Income (loss).................  $    (0.96)     $     0.05      $     0.71  $     0.76  $     0.96  $     0.42  $     0.64 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
    Dividends declared per common                                                                                                  
      share...........................  $     .075      $      .15      $       --  $       --  $       --  $       --  $       -- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
                                        -------------   -------------   ----------  ----------  ----------  ----------  ---------- 
BALANCE SHEET DATA (AT END OF PERIOD):                                                                                             
  Total assets........................     180,786         212,134         165,265     162,709     355,991     170,042     352,323 
  Long-term debt, net of current                                                                                                   
    portion...........................      86,329         105,425          53,892      36,000     177,349      30,463     169,200 
  Total stockholders' equity..........      55,779          54,533          66,802      77,323      88,788      79,748      99,443 

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

(1) Morningstar reported a net loss of $5,676 on the purchase of approximately  
$34,000 in subordinated debt at a premium.                              

(2) Loss on purchase of senior subordinated debentures, net of applicable tax   
benefit of $71.                                                         

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SELECTED FINANCIAL DATA OF COUNTRY FRESH
(IN THOUSANDS, EXCEPT SHARE DATA) 

   The following selected financial data of Country Fresh for each of the five
fiscal years in the period ended March 1, 1997 have been derived from Country   
Fresh's audited consolidated financial statements. The selected consolidated    
financial data for the 20 weeks ended July 20, 1996 and July 19, 1997 are       
unaudited, and in the opinion of management, reflect all adjustments (consisting
only 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. The selected financial data of Country Fresh should be read in          
conjunction with the Consolidated Financial Statements and related notes of     
Country Fresh included elsewhere in this Joint Proxy Statement/ Prospectus.     

                                                        [Enlarge/Download Table]

                                                                                                                 UNAUDITED       
                                                                                                             TWENTY WEEKS ENDED  
                                                                    YEAR ENDED                                                   
                                        ------------------------------------------------------------------  -------------------- 
                                        FEBRUARY 27,  FEBRUARY 26,  FEBRUARY 25,   MARCH 2,     MARCH 1,    JULY 20,   JULY 19,  
                                            1993          1994          1995         1996         1997        1996       1997    
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
                                                                                                                                 
OPERATING DATA:                                                                                                                  
  Net sales...........................   $  294,305    $  298,739    $  310,164    $ 336,055    $ 353,037   $ 135,328  $ 136,154 
  Cost of sales.......................      248,081       254,927       268,500      291,722      305,614     115,963    116,233 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Gross profit........................       46,224        43,812        41,664       44,333       47,423      19,365     19,921 
  Operating costs and expenses:                                                                                                  
    Selling and distribution..........       24,202        22,638        21,225       21,633       19,916       7,397      7,217 
    General and administrative........       12,705        14,123        15,036       15,700       16,010       5,907      6,234 
    Amortization of intangibles.......            9            37           100           82          656          33         19 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
    Total operating costs and                                                                                                    
      expenses........................       36,916        36,798        36,361       37,415       36,582      13,337     13,470 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Income from operations..............        9,308         7,014         5,303        6,918       10,841       6,028      6,451 
  Other (income) expenses:                                                                                                       
    Interest expense, net.............          319           463          (259)       1,392        1,219         613        597 
    Other income, net.................         (411)         (572)         (551)        (633)        (436)       (111)      (254)
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
    Total other (income) expense......          (92)         (109)         (810)         759          783         502        343 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Income before income taxes and                                                                                                 
    cumulative effect of accounting                                                                                              
    change............................        9,400         7,123         6,113        6,159       10,058       5,526      6,108 
  Income taxes........................        3,347         2,400         2,145        2,090        3,385       1,884      2,079 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Income before cumulative effect of                                                                                             
    accounting change.................        6,053         4,723         3,968        4,069        6,673       3,642      4,029 
  Cumulative effect of change in                                                                                                 
    accounting for post-retirement                                                                                               
    benefits other than pensions......           --            --         2,272           --           --          --         -- 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Net income..........................   $    6,053    $    4,723    $    1,696    $   4,069    $   6,673   $   3,642  $   4,029 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Net income applicable to common                                                                                                
    shares............................   $    6,053    $    4,723    $    1,696    $   3,765    $   6,371   $   3,566  $   3,954 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
  Weighted average shares                                                                                                        
    outstanding.......................    7,905,400     7,865,120     7,622,840    3,609,245    3,636,519   3,631,758  3,685,236 

  Net earnings per common share:                                                                                                 
    Income before cumulative effect of                                                                                           
      accounting change...............   $     0.77    $     0.60    $     0.52    $    1.04    $    1.75   $    0.97  $    1.07 
    Cumulative effect of change in                                                                                               
      accounting for post-retirement                                                                                             
      benefits other than pensions....           --            --         (0.30)          --           --          --         -- 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
    Net income........................   $     0.77    $     0.60    $     0.22    $    1.04    $    1.75   $    0.97  $    1.07 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
                                        ------------  ------------  ------------  -----------  -----------  ---------  --------- 
Balance sheet data (at end of period):                                                                                           
  Total assets........................       93,629        95,089        98,870       94,765       99,206     105,565    101,942 
  Long-term debt, net of current                                                                                                 
    portion...........................       14,777        13,832        14,217       32,152       28,571      36,318     26,523 
  Preferred stock.....................           --            --            --        3,800        3,741       3,800      3,741 
  Total common stockholders' equity...       47,168        49,606        51,265       21,326       27,793      25,002     31,775 

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

OVERVIEW                                                                        

  Country Fresh was incorporated in Michigan in 1946 under the name "Grocers
Dairy Company" and changed its name to "Country Fresh, Inc" in 1981. Country    
Fresh was originally formed as a grocers cooperative, but, in 1994, its articles
of incorporation were amended to structure it as a general for profit           
corporation for federal tax purposes.                                           

   Country Fresh is a leading processor and distributor of fresh milk products
and related dairy products, ice cream and ice cream snacks in Michigan, northern
Ohio and northern Indiana, and a processor of hot pack juices and drink products
under co-packing agreements in Tennessee. The markets in which Country Fresh    
operates tend to be relatively mature and do not offer opportunities for rapid  
growth. As a result, Country Fresh's strategy has been to grow primarily through
acquisitions of small processors and processing plants and realize synergies    
within the acquired companies by processing a complete range of dairy           
by-products and through elimination of duplicated purchasing and administrative 
operations.                                                                     

RESULTS OF OPERATIONS                                                           

   The following table presents certain information concerning Country Fresh's
results of operations, including information presented as a percentage of net   
sales (dollars in thousands) for the fiscal years ended February 25, 1995, March
2, 1996 and March 1, 1997 and the 20 weeks ended July 20, 1996 and July 19,     
1997:                                                                           

                                                        [Enlarge/Download Table]

                                                                                                               UNAUDITED      
                                                                                                             20 WEEKS ENDED   
                                                                                                          --------------------
                                                1995                  1996                  1997             JULY 20, 1996    
                                        --------------------  --------------------  --------------------  --------------------
                                         DOLLARS       %       DOLLARS       %       DOLLARS       %       DOLLARS       %    
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                                                                              
Net Sales.............................. $ 310,164      100.0  $ 336,054      100.0  $ 353,037      100.0  $ 135,328      100.0
Cost of Sales..........................   268,500       86.6    291,721       86.8    305,614       86.6    115,963       85.7
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Gross Profit...........................    41,664       13.4     44,333       13.2     47,423       13.4     19,365       14.3
Operating Expenses                                                                                                            
  Selling & Distribution...............    21,225        6.8     21,633        6.4     19,916        5.7      7,397        5.5
  General & Administrative.............    15,036        4.9     15,700        4.7     16,010        4.5      5,907        4.4
  Amortization of Intangibles..........       100         --         82         --        656         .1         33         --
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Total Operating Expenses...............    36,361       11.7     37,415       11.1     36,582       10.3     13,337        9.9
Operating Income.......................     5,303        1.7      6,918        2.0     10,841        3.1      6,028        4.4
Other (Income) Expense.................      (810)       (.3)       759         .2        783         .2        502         .3
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Earnings Before Taxes on Income &                                                                                             
  Cumulative Effect of Change in                                                                                              
  Accounting...........................     6,113        2.0      6,159        1.8     10,058        2.9      5,526        4.1
Taxes on Income........................     2,145         .7      2,090         .6      3,385        1.0      1,884        1.4
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Earnings Before Cumulative Effect of                                                                                          
  Change in Accounting.................     3,968        1.3      4,069        1.2      6,673        1.9      3,642        2.7
Cumulative Effect of Change in                                                                                                
  Accounting...........................     2,272         .7         --         --         --         --         --         --
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Net Earnings........................... $   1,696         .6  $   4,069        1.2  $   6,673        1.9  $   3,642        2.7
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                        ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------



                                           JULY 19, 1997                                                                      
                                        --------------------                                                                  
                                         DOLLARS       %                                                                      
                                        ---------  ---------                                                                  
                                                                                                                              
Net Sales.............................. $ 136,154      100.0                                                                  
Cost of Sales..........................   116,233       85.4                                                                  
                                        ---------  ---------                                                                  
Gross Profit...........................    19,921       14.6                                                                  
Operating Expenses                                                                                                            
  Selling & Distribution...............     7,217        5.3                                                                  
  General & Administrative.............     6,234        4.6                                                                  
  Amortization of Intangibles..........        19         --                                                                  
                                        ---------  ---------                                                                  
Total Operating Expenses...............    13,470        9.9                                                                  
Operating Income.......................     6,451        4.7                                                                  
Other (Income) Expense.................       343         .2                                                                  
                                        ---------  ---------                                                                  
Earnings Before Taxes on Income &                                                                                             
  Cumulative Effect of Change in                                                                                              
  Accounting...........................     6,108        4.5                                                                  
Taxes on Income........................     2,079        1.5                                                                  
                                        ---------  ---------                                                                  
Earnings Before Cumulative Effect of                                                                                          
  Change in Accounting.................     4,029        3.0                                                                  
Cumulative Effect of Change in                                                                                                
  Accounting...........................        --         --                                                                  
                                        ---------  ---------                                                                  
Net Earnings........................... $   4,029        3.0                                                                  
                                        ---------  ---------                                                                  
                                        ---------  ---------                                                                  

TWENTY WEEKS ENDED JULY 19, 1997 COMPARED TO TWENTY WEEKS ENDED JULY 20, 1996   

NET SALES.  On April 19, 1997 Country Fresh acquired certain assets of  
Wesley Quaker Maid, Inc. ("Wesley"), a supplier of ice cream and novelty        
products to the Great Atlantic and Pacific Tea Company. The twenty weeks ended  
July 19, 1997 include the operating results of the Wesley plant from the date of
acquisition.                                                                    

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   Country Fresh's net sales increased slightly to $136.2 million in 1997 from
$135.3 million in 1996. The Wesley plant acquisition added $4.8 million in sales
in 1997, however, this increase was offset by lower volume from competitive     
retail conditions in many of Country Fresh's markets.                           

COST OF SALES.  Country Fresh's cost of sales margin was 85.4% in 1997  
compared to 85.7% in 1996. The cost of sales decrease was primarily due to      
reductions in the cost of raw milk and orange juice solids that have not been   
passed on to customers, offset by increases in plant costs.                     

   OPERATING EXPENSES.  The operating expense margin was 9.9% in both 1997 and
1996. General and administrative expenses increased primarily due to an increase
in health care costs.                                                           

OPERATING INCOME.  Country Fresh's operating income in 1997 was $6.5    
million, an increase of 7.0% from operating income in 1996 of $6.0 million.     
Country Fresh's operating income margin increased to 4.7% in 1997 from 4.4% in  
1996 primarily due to the items discussed above.                                

 OTHER (INCOME) EXPENSE.  Interest expense was slightly lower in 1997 than
1996. The reduction in the expense was primarily due to lower average debt      
levels in 1997 and reflects a program to repay debt faster than required. Other 
income increased slightly primarily due to equity in earnings of a Country Fresh
joint venture entered into in December 1996.                                    

  NET EARNINGS.  Country Fresh reported net earnings of $4.0 million in 1997
compared to $3.6 million in 1996. The 1997 net earnings improved due to the     
items discussed above.                                                          

YEAR ENDED MARCH 1, 1997 COMPARED TO YEAR ENDED MARCH 2, 1996:                  

 NET SALES.  Country Fresh's net sales increased 5.1% to $353.0 million in
1997 from $336.1 million in 1996 primarily due to (a) a 14.5% increase in       
Country Fresh's net sales of ice cream snacks, to $37 million up from $32       
million in 1996, and (b) an increase in prices charged for milk to recoup       
increases in raw milk costs.                                                    

COST OF SALES.  Country Fresh's cost of sales margin was 86.6% in 1997  
compared to 86.8% in 1996. The cost of sales decrease was primarily due to a    
shift in the product mix to higher margin items such as ice cream and other     
cultured products and to reductions in overhead costs, primarily plant          
production losses, depreciation and self insured workers compensation claims.   
The reduction in plant loss resulted from processing changes such as the        
installation of new milk fillers, while the depreciation decrease reflects      
relatively lower capital investments in 1996.                                   

    OPERATING EXPENSES.  The operating expense margin was 10.3% in 1997 compared
to 11.1% in 1996. Delivery expenses decreased due to several changes in the     
direct delivery of ice cream to support Country Fresh's strategy of eliminating 
the double handling of products.                                                

OPERATING INCOME.  Country Fresh's operating income in 1997 was $10.8   
million, an increase of 56.7% from operating income in 1996 of $6.9 million. The
operating income margin increased to 3.1% in 1997 from 2.0% in 1996 primarily   
due to the increase in higher margin products in Country Fresh's product mix,   
the effect of higher milk costs, and lower distribution costs.                  

  OTHER (INCOME) EXPENSE.  Interest expense declined $.5 million during 1997
from $2.4 million in 1996. The reduction in interest expense was primarily due  
to lower average debt levels in 1997, reflecting management's program to repay  
debt faster than required. Other income decreased $.5 million primarily due to a
reduction in interest income as a result of lower average investable cash       
positions. On December 1, 1996, Country Fresh engaged in a joint venture, East  
Coast Ice Cream L.L.C., to supply the east coast of the United States with      
private label ice cream and novelties. Country Fresh's 1997 other income        
includes $.1 million of its equity in earnings in the joint venture from the    
date of investment.                                                             

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  NET EARNINGS.  Country Fresh reported net earnings of $6.7 million in 1997
compared to $4.1 million in 1996. Net earnings in 1997 improved due to (a)      
higher margins on milk by-products, (b) increased distribution efficiencies and 
(c) increased sales of ice cream and ice cream snacks.                          

YEAR ENDED FEBRUARY 28, 1996 COMPARED TO YEAR ENDED FEBRUARY 28, 1995.          

 NET SALES.  Country Fresh's net sales increased 8.3% to $336.1 million in
1996 from $310.2 million in 1995. Net sales increased $17.9 million due to the  
inclusion of a full year of operations of CF Ohio and Southeastern Juice Inc.,  
which were acquired on November 20, 1994 and October 19, 1994, respectively. The
volume of ice cream snacks increased 21% from the addition of new customers and 
additional products from existing customers.                                    

COST OF SALES.  Country Fresh's cost of sales margin was 86.8% in 1996  
compared to 86.6% in 1995. A significant decrease in the butterfat portion of   
raw milk and resulting increase in the skim portion of raw milk increased costs 
late in calendar 1995 and was not passed on to customers until 1997. This raw   
milk increase was partially offset by increases in plant labor efficiencies.    

OPERATING EXPENSES.  Country Fresh's operating expenses increased $1.1  
million in 1996, but decreased as a percentage of net sales to 11.1% in 1996    
from 11.7% in 1995. The operating expense increase was due to the inclusion of a
full year of operating expenses of CF Ohio and Southeastern Juice, which        
accounted for operating expenses of $1.1 million for 1996.                      

   OPERATING INCOME.  Country Fresh's operating income increased 30.5% to $6.9
million in 1996 from $5.3 million in 1995. The increase in operating income was 
primarily due to increased sales of ice cream snacks and lower distribution     
costs.                                                                          

  OTHER (INCOME) EXPENSE.  Interest expense rose $1.8 million in 1996 due to
the additional indebtedness incurred to recapitalize Country Fresh effective    
February 26, 1995, for which Country Fresh borrowed $27 million to repurchase   
48% of its outstanding common stock.                                            

    ADOPTION OF NEW ACCOUNTING STANDARD.  Country Fresh incurred $2.3 million in
additional expense (net of a $1.2 million tax benefit) for the cumulative effect
of a change in accounting for post retirement benefits other than pensions in   
accordance with Statement of Financial Accounting Standards ("SFAS") No. 106,   
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The    
provisions of SFAS No. 106 were adopted as of the beginning of the year ended   
February 25, 1995.                                                              

   NET EARNINGS.  Country Fresh reported net earnings of $4.1 million in 1996,
compared to $1.7 million in 1995. The decrease primarily resulted from the      
cumulative effect of the change in accounting for postretirement benefits.      

SEASONALITY                                                                     

    Country Fresh's ice cream and ice cream snack business is seasonal with peak
demand for these products occurring during the months of May through August.    
Because ice cream and ice cream mixes have higher gross margins relative to     
other fluid dairy items, results of operations could be affected if there is    
adverse weather during this season (such as unusually mild weather). To meet the
summer peak demand, inventories are built up in January through May utilizing   
cash flow from operations. In 1997, Country Fresh recorded approximately 48% of 
its annual net sales of ice cream and ice cream snacks during this time period. 

Country Fresh's fluid dairy operations are not subject to large seasonal
sales fluctuations. Country Fresh sells milk to schools, most of which are      
closed during the summer months. Approximately 1.5% of Country Fresh's fluid    
dairy sales were made to schools during 1997.                                   

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LIQUIDITY AND CAPITAL RESOURCES                                                 

  As of March 1, 1997, Country Fresh had total stockholders' equity of $31.5
million and total indebtedness of $31.4 million (including long-term debt and   
current portion of long-term debt). With one exception, for which a temporary   
waiver was obtained, Country Fresh is currently in compliance with all covenants
and financial ratios contained in its debt agreements.                          

CASH FLOW                                                               

  The working capital needs of Country Fresh have historically been met with
cash flow from operations, although debt has been required to recapitalize      
Country Fresh and fund certain acquisitions. Net cash provided by operating     
activities was $13.5 million for 1997 and $11.9 million for 1996. Investing     
activities in 1997 included $8.8 million for property, plant and equipment, of  
which $3.5 million was spent on Country Fresh's ice cream snack production      
equipment. Financing activities for 1997 included payments of $5.4 million to   
repay existing debt.                                                            

In April, 1995, Country Fresh completed a plan of recapitalization which
changed Country Fresh's capital structure by redeeming all Class A Common shares
and approximately 48% of the Class B Common shares for cash. Additionally,      
approximately 6% of Class B Common shares were converted into Series A 8%       
Cumulative Preferred Stock, with a par value of $320 per share. The remaining   
Class B Common shares were converted into forty shares of no par voting Common  
Stock. Payment for shares redeemed for cash was financed by borrowing $27.0     
million under a then-existing $35.0 million long-term credit facility.          

FUTURE CAPITAL REQUIREMENTS                                             

Management expects that cash flow from operations along with additional 
borrowings under existing and future credit facilities will be sufficient to    
meet Country Fresh's requirements for fiscal 1998 and the foreseeable future. In
the future, Country Fresh intends to pursue additional acquisitions in its      
existing regional markets. There can be no assurance, however, that Country     
Fresh will have sufficient available capital resources to realize its           
acquisition strategy.                                                           

CURRENT DEBT OBLIGATIONS                                                

  Country Fresh has three Economic Development Corporation bond issues ("EDC
bonds") which are secured by irrevocable letters of credit issued by financial  
institutions. Interest on the EDC bonds is due semi-annually at rates (subject  
to certain maximums) which will approximate market conditions for tax exempt    
securities of the same stature. The EDC bonds have sinking fund obligations     
which aggregate $.75 million annually and are secured by first mortgages on real
property and equipment with an aggregate book value of $9.1 million as of March 
1, 1997. The revenue bonds have a total of $10.4 million outstanding as of July 
19, 1997.                                                                       

   Country Fresh has a term loan and a revolving credit loan outstanding which
aggregate $17.0 million as of July 19, 1997. These loans are unsecured and the  
term loan has required quarterly payments of $464,286. Interest is due          
quarterly, based on Country Fresh's option of either prime or LIBOR plus 1.0% to
1.5% based on the ratio of funded debt to total capital. The revolving credit   
loan permits borrowings up to $20 million and is due January 1, 2002.           

Country Fresh has notes payable to shareholders and others totaling $1.1
million as of July 19, 1997. The notes require quarterly interest at 1% below   
prime rate and are callable on the first day of any calendar quarter.           

Country Fresh has a term loan outstanding as of July 19, 1997 for $1.8  
million. Monthly installments are $21,938 including interest of 7.85%.          

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  A term and revolving credit agreement and certain of the EDC bonds contain
covenants which include restrictions on additional indebtedness, payment of     
dividends in excess of prescribed amounts, and require Country Fresh to maintain
a current ratio of 1.35 to 1, working capital of $18.5 million (after September 
1, 1997), tangible net worth of $21.4 million as of March 1, 1997, increasing $3
million annually, total liabilities to net worth of not more than 3.5 to 1,     
decreasing .5 annually and fixed charge coverage ratios of 2.0 to 1.0.          

INCOME TAXES                                                                    

  Country Fresh recognized effective tax rates of 33.7%, 33.9% and 35.1% for
1997, 1996 and 1995, respectively.                                              

COMMODITY FUTURES CONTRACTS                                                     

Country Fresh uses commodity futures contracts to hedge the price risks 
associated with the purchase of orange juice solids which are used in the       
packaging of orange juice from concentrate. Country Fresh does not enter into   
these contracts for speculative purposes, and the contracts generally mature in 
less than one year. As of March 1, 1997, Country Fresh had no such contracts    
outstanding.                                                                    

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BUSINESS OF SUIZA FOODS 

GENERAL                                                                         

Suiza Foods is a leading manufacturer and distributor of fresh milk and 
related dairy products, plastic containers and packaged ice in the United       
States. Suiza Foods conducts its dairy operations primarily through Suiza-Puerto
Rico, Velda Farms, Swiss Dairy, Model Dairy, Dairy Fresh and Garelick Dairy, its
plastics operations through Franklin Plastics and its ice operations through    
Reddy Ice. Each of these operating subsidiaries is a strong competitor with an  
established reputation for customer service and product quality. Suiza Foods'   
dairy and ice 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. Franklin Plastics'    
customers include regional dairy manufacturers, bottled water processors,       
including the Perrier Group of America, Inc. and Suntory Water Group Inc., and  
other beverage manufacturers such as The Minute Maid Co. and Proctor & Gamble   
Company, Inc.                                                                   

  Suiza Foods has grown primarily through a successful acquisition strategy,
having consummated 54 acquisitions since its inception in 1988, including 27    
acquisitions since its initial public offering in April 1996. Through these     
acquisitions, Suiza Foods has realized economies of scale and operating         
efficiencies by eliminating duplicative manufacturing, distribution, purchasing 
and administrative operations.                                                  

BUSINESS STRATEGY                                                               

 Suiza Foods' strategy is to continue to expand its dairy, ice and related
food businesses primarily through acquisitions in new markets and subsequent    
consolidating or add-on acquisitions in its existing markets. After entering new
markets through acquisitions of strong regional operators, Suiza Foods will     
pursue consolidating or add-on acquisitions where such opportunities exist. In  
addition, Suiza Foods will seek to expand its existing operations by adding new 
customers, extending its product lines and securing distribution rights for     
additional branded product lines.                                               

 Suiza Foods' acquisition strategy has historically focused on established
regional dairy and ice operations that have significant market share and        
long-standing customer relationships. Suiza-Puerto Rico, founded in 1939, has   
served the Puerto Rico market for over 50 years, and Velda Farms has served the 
Florida dairy market for over 40 years. Garrido and Swiss Dairy, acquired in    
July 1996 and September 1996, respectively, have each served their respective   
markets for approximately 50 years. The predecessor of Model Dairy was founded  
in 1906. Dairy Fresh has served its market for approximately 15 years, and      
Garelick Dairy, founded in 1931, has served its market for over 60 years. Reddy 
Ice entered the retail ice business in the 1920s.                               

Suiza Foods has implemented its consolidation strategy by acquiring and 
integrating dairy operations into Suiza-Puerto Rico and Velda Farms, and a      
number of ice companies into Reddy Ice. Management has enhanced the             
profitability of the acquired operations through increased purchasing power and 
by consolidating delivery routes, production, acquired brand names and human    
resources into Suiza Foods' larger scale operations.                            

  Through the acquisition of Franklin Plastics, Suiza Foods has expanded its
operations into the business of plastic container manufacturing. These plastic  
containers are primarily used to package milk, water, juice and other beverages.
Suiza Foods' entry into the plastic container manufacturing industry is an      
outgrowth of its in-house plastic container manufacturing operations of certain 
of its regional dairy businesses. Management believes that the plastic container
industry presents attractive opportunities for growth. Suiza Foods' strategy    
with respect to its plastic container manufacturing operations is to grow       
internally and through acquisitions. Through this growth, Suiza Foods hopes to  
capitalize on (a) the trend in the dairy industry to replace paper cartons with 
plastic containers, (b) the trend in the dairy industry to outsource plastic    
container manufacturing operations, (c) the rapid growth of the bottled water   
industry, and (d) the consolidation in the plastic container manufacturing      
industry.                                                                       

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    Since January 1997, Suiza Foods has acquired 11 ice businesses for aggregate
consideration of approximately $31.1 million. Through its acquisition strategy, 
Suiza Foods has increased the geographic presence of its ice operations. Except 
for ice businesses it acquires in new geographic markets, Suiza Foods generally 
closes acquired manufacturing facilities and transfers the facilities' volume to
one of Suiza Foods' existing ice manufacturing plants.                          

THE 1997 ACQUISITIONS                                                           

DAIRY FRESH                                                             

   In July 1997, Suiza Foods acquired substantially all of the assets of Dairy
Fresh L.P., a regional manufacturer of fresh milk, ice cream and related        
products in North Carolina, for cash consideration of approximately $104.5      
million (subject to adjustment and excluding transaction costs), plus the       
assumption of certain current liabilities. Dairy Fresh had net sales of         
approximately $117.0 million for the year ended December 31, 1996. Sales to     
Dairy Fresh's two largest customers accounted for approximately 92% of Dairy    
Fresh's total net sales for such period.                                        

Dairy Fresh operates a manufacturing facility in Winston-Salem, North   
Carolina focused on serving the needs of its large grocery store customers.     
Dairy Fresh produces a limited line of high volume dairy products. Suiza Foods  
believes that Dairy Fresh's operations are efficient and provide Suiza Foods'   
customers with quality products on a cost effective basis.                      

GARELICK COMPANIES                                                      

  In July 1997, Suiza Foods acquired the outstanding equity interests of the
Garelick Companies, which manufacture and distribute fresh milk and related     
dairy products and process and distribute water throughout New England and      
upstate New York and also manufacture and distribute plastic containers         
primarily in the eastern United States, for aggregate consideration of          
approximately $308.7 million (subject to adjustment and excluding transaction   
costs). Garelick has traditionally operated two businesses: dairy (Garelick     
Dairy) and plastics (Franklin Plastics). Combined net sales for the Garelick    
Dairy and Franklin Plastics businesses totaled approximately $362 million for   
the year ended September 30, 1996. At the closing of this acquisition, Suiza    
Foods paid $293.7 million in cash and issued 446,100 shares of Common Stock     
having a value of $15.0 million as of the day prior to the date of execution of 
the acquisition agreement. Of the 446,100 shares of Common Stock issued as part 
of the purchase price, 148,700 shares were issued into escrow, subject to the   
satisfaction of an earnout provision related to Garelick Dairy.                 

INDUSTRY OVERVIEW                                                               

DAIRY                                                                   

   According to industry statistics, wholesale sales of fresh milk products in
the United States were approximately $22.8 billion in 1995, compared to $21.5   
billion in 1988. Management believes that the dairy industry is mature in both  
the 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 industry statistics, in 1995 there were   
approximately 651 fresh milk processing plants in the United States, a decline  
of 540 from the 1,191 plants operating in 1982. The number of plants with 20 or 
more manufacturing employees declined from 792 to 447 over the same period. As a
result of this consolidation trend, which management believes will continue,    
Suiza Foods has had favorable opportunities to pursue its business strategy.    

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PLASTICS                                                                

 The plastic container manufacturing industry is undergoing consolidation,
which has led to the emergence of a number of large manufacturing companies.    
Although captive manufacturing operations account for a significant portion of  
total plastic container production, management believes that there is a trend in
the dairy industry to outsource these operations to independent manufacturers.  

The plastic container manufacturing industry has experienced growth in  
recent years, driven in large part by consumer preference for plastic           
containers. The growth of the bottled water industry and increased demand for   
single serve beverage containers have also contributed to growth in this        
industry. Management believes that demand for plastic containers will continue  
to increase because of these factors.                                           

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. Management believes that Suiza     
Foods is one of the largest manufacturers and distributors of ice in the United 
States and that it has significant market share in each of the markets in which 
it operates.                                                                    

PRODUCTS AND SERVICES                                                           

DAIRY                                                                   

Suiza Foods' regional dairy operations manufacture and distribute fresh 
milk, fruit drinks, coffee, juices, water and related products under proprietary
brand names and on a private-label basis for large customers. Suiza Foods also  
purchases and distributes certain other products such as yogurt, packaged ice   
cream and ice cream novelties.                                                  

PLASTICS                                                                

   Suiza Foods manufactures and distributes plastic containers in a variety of
sizes, which are primarily used to package milk, water, juice and other         
beverages. In addition, Suiza Foods has begun to manufacture plastic containers 
for other food and industrial products, such as bleach and vinegar.             

ICE                                                                     

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

SALES AND DISTRIBUTION                                                          

DAIRY                                                                   

   Suiza Foods 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. Suiza Foods' 
regional dairy operations serve customers in its markets utilizing a large fleet
of delivery vehicles. Suiza-Puerto Rico is the larger 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. Velda Farms serves customers throughout peninsular Florida and  
focuses its distribution efforts on food service accounts, convenience stores,  
club stores and schools. Swiss Dairy distributes fresh milk and a               

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limited number of other products to high volume retailers in Southern California
and Nevada, including grocery and club stores. More than 88% of Swiss Dairy's   
net sales during 1996 were made to three large retailers. Model Dairy           
distributes fresh milk, ice cream and related products to grocery stores, retail
outlets, schools and food service accounts in northern Nevada and in certain    
adjoining areas of northern California. Dairy Fresh's operations are similar to 
Swiss Dairy since Dairy Fresh serves primarily high volume grocery stores with a
limited product line. Sales to Dairy Fresh's two largest customers accounted for
approximately 92% of Dairy Fresh's total net sales during 1996. Garelick Dairy  
markets and sells its dairy product line to a diversified base of customers,    
including grocery and convenience stores. For the year ended June 30, 1996,     
Garelick Dairy's largest customer accounted for approximately 19% of its net    
sales and its top ten customers accounted for approximately 60% of its net      
sales.                                                                          

PLASTICS                                                                

Suiza Foods markets and sells its plastic containers to a variety of    
customers, including regional dairy processors, bottled water manufacturers and 
other beverage manufacturers. Suiza Foods operates both stand-alone             
manufacturing facilities, from which it delivers plastic containers to its      
customer's facilities, and on-site manufacturing facilities located on its      
customers' premises. Suiza Foods' on-site manufacturing facilities manufacture  
and convey plastic containers directly to its customer's filling operations. At 
these on-site facilities, Suiza Foods also manufactures plastic containers for  
distribution to off-site customers.                                             

ICE                                                                     

  Suiza Foods markets its ice products to convenience and grocery stores for
retail sales and, to a lesser extent, to business and institutional customers   
that utilize Suiza Foods' products in their operations. As of September 30,     
1997, Suiza Foods served approximately 24,700 sites from 29 ice manufacturing   
facilities and 13 distribution centers. Suiza Foods provides ice merchandisers  
to a substantial majority of these sites. During 1996, Suiza Foods' largest two 
ice customers accounted for approximately 17% of net ice sales.                 

   Suiza Foods' owns a majority of the delivery vehicles it uses to distribute
ice. In order to meet peak demand, Suiza Foods expands its fleet during the     
summer season with short-term leased vehicles.                                  

RAW MATERIALS AND SUPPLY                                                        

DAIRY                                                                   

   Suiza Foods purchases milk, its primary raw material, from farmers and farm
co-operatives under contractual arrangements. Certain aspects of Suiza Foods'   
milk supply arrangements are regulated by governmental authorities. Fluid milk  
is generally readily available. Suiza Foods has traditionally experienced slight
shortages in its milk supply in Puerto Rico during the months of September and  
October. 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 coffee, juice concentrates, sweeteners and packaging supplies
are generally available from numerous suppliers and Suiza Foods 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.             

PLASTICS                                                                

   The primary raw material used in Suiza Foods' plastics operations is resin.
Suiza Foods purchases its requirements for resin from a number of suppliers at  
market prices. Suiza Foods does not maintain written supply agreements, however,
as resin is generally available in the market. Suiza Foods has not experienced  
material supply problems with respect to its plastics operations.               

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ICE                                                                     

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

COMPETITION                                                                     

   Suiza Foods' businesses are highly competitive. Suiza Foods 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 Suiza Foods.                                                               

DAIRY                                                                   

 UNITED STATES.  Suiza Foods' 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 Suiza Foods. 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.                                     

 In addition to competition from other dairy manufacturers, Suiza Foods(1)
Florida and Nevada dairy operations compete 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 Suiza Foods' focus on customer    
service and tailored product lines and the strength and efficiency of its       
distribution system allow it to compete effectively. In its Florida and Nevada  
ice cream distribution businesses, Suiza Foods competes with large integrated   
dairy and ice cream manufacturing companies and independent distributors of     
national ice cream brands. Because Suiza Foods offers brands manufactured by    
third parties as well as its own brand of ice cream products, Suiza Foods       
competes effectively in these markets 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, Suiza Foods         
generates profitable sales volumes from retail sites that single line or other  
more limited distributors may find uneconomical to service.                     

PUERTO RICO.  Suiza Foods owns and operates two of the three fresh milk 
manufacturing facilities in Puerto Rico. Suiza Foods' competitor, Vaqueria Tres 
Monjitas ("Tres Monjitas"), operates a single manufacturing plant. Suiza Foods  
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%. Suiza Foods
competes primarily on the basis of service, price, brand name recognition and   
quality. Because of Suiza Foods' 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
Suiza Foods can continue to compete effectively in the Puerto Rico dairy        
business.                                                                       

Suiza Foods 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. Suiza Foods' 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 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
Suiza Foods' largest direct competitor located in Puerto Rico. In addition to   
competition from other local manufacturers and distributors of refrigerated     
ready-to-serve fruit drinks, Suiza Foods competes against numerous other        

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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 Suiza Foods. Although management   
believes that competition will continue to grow from fruit drink and other      
beverage companies, management anticipates that Suiza Foods 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.                     

PLASTICS                                                                

Suiza Foods' competitors in the plastic container manufacturing industry
include large independent manufacturing companies. In addition, certain         
vertically integrated food and industrial companies operate captive plastic     
container manufacturing facilities. The primary competitive factors in the      
plastic container manufacturing industry are price, quality and service. Many of
Suiza Foods' competitors are larger and better capitalized than Suiza Foods and 
have greater financial, operational and marketing resources than Suiza Foods.   

   Management believes that its knowledge of the particular needs of the dairy
industry gained from Franklin Plastics' relationship with Garelick Dairy and its
focus on customer service has allowed it to compete effectively in the plastic  
container markets for dairy products and bottled water. Management also believes
that that these factors, coupled with Suiza Foods' technical expertise, should  
enable Suiza Foods to expand into new markets.                                  

ICE                                                                     

Suiza Foods 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. During peak season,   
however, Suiza Foods frequently services retailers that manufacture their own   
ice. To further compete in this segment, Suiza Foods 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   
Suiza Foods' 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, Suiza Foods' ice products generally 
do not face competition at the retail level.                                    

    Several major grocery chains within Suiza Foods' ice markets manufacture ice
at their own ice plants. While Suiza Foods 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 Suiza Foods could have an adverse effect on Suiza Foods' operations.         

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BUSINESS OF COUNTRY FRESH 

GENERAL                                                                         

  Country Fresh is a leading manufacturer, supplier and distributor of milk,
ice cream and related products in the Midwest. Country Fresh's products are     
principally marketed in Michigan, northern Indiana, northern Illinois and       
northern Ohio, although Country Fresh has, through East Coast Ice Cream, L.L.C.,
begun selling ice cream novelty products in some east coast states. Country     
Fresh is among the 30 largest dairy food processors in the United States.       

   Country Fresh was incorporated under the laws of Michigan in 1946 under the
name "Grocer's Dairy Company" and changed its name to "Country Fresh, Inc" in   
1981. Country Fresh was originally formed as a grocers' cooperative, but its    
Articles of Incorporation were subsequently amended to make it a general profit 
corporation. Country Fresh discontinued its cooperative status for federal tax  
purposes in 1994.                                                               

BUSINESS STRATEGY                                                               

Customer satisfaction lies at the heart of Country Fresh's corporate    
mission. However, Country Fresh also remains committed to growth through capital
expansions, new products, line extensions and business acquisitions.            

  While maintaining and expanding its core dairy business, Country Fresh has
in recent years begun focusing on other products. In the last quarter of 1996,  
Country Fresh, together with Protein Capital Corp. of Laurel, Maryland, formed  
East Coast Ice Cream, L.L.C. to supply the east coast of the United States with 
novelty snack products. Other growth in marketing includes the licensing of     
SMILK, a fruit flavored nonfat milk line, for certain parts of the United       
States.                                                                         

PRODUCTS                                                                        

 Country Fresh and its subsidiaries process raw milk into such products as
fortified and homogenized milk and cream, ice cream, low fat ice cream, cream   
cheese, cottage cheese, fresh and frozen yogurt, specialty dips, sherbet,       
eggnog, sour cream, buttermilk and extended shelf life products such as half &  
half, coffee cream and whipped cream. In addition, Country Fresh processes and  
markets purified water, orange juice and various juice and fruit drinks. Country
Fresh also manufactures and markets frozen dessert products.                    

    Country Fresh and its subsidiaries market their products under trademarks or
trade names such as Country Fresh-TM-, McDonald-TM-, Burger Dairy,-TM- Home     
Dairy-TM-, Orchard Grove-TM-, Sun Born-TM-, Country Lane-TM-, and Frostbite-TM-.
Through license agreements, Country Fresh also manufactures and/or markets      
products for trademarks or trade names owned by other companies, such as        
Smilk-TM-, Nestles-Registered Trademark-, Guilt Free-TM-, Alaskan Classics and  
Borden-Registered Trademark-.                                                   

SALES AND DISTRIBUTION                                                          

Country Fresh's products are principally marketed in Michigan, northern 
Indiana, northern Illinois and northern Ohio. Grocery store chains account for a
large portion of Country Fresh's customers. However, no single customer         
purchases more than 10% of Country Fresh's consolidated sales. Country Fresh's  
shareholders, which are predominantly retailer grocers in Michigan, are regular 
customers of Country Fresh. As such, they participate in Country Fresh's various
marketing programs.                                                             

Dairy products are principally delivered to grocery chain stores or     
warehouses directly from Country Fresh's processing plants by Country Fresh, in 
trucks which it owns or leases, and by independent distributors. Products are   
also delivered to Country Fresh's distribution branches from which distribution 
is then made to customers. In addition, Country Fresh distributes directly to   
food service warehouses throughout the Midwest.                                 

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RAW MATERIALS AND SUPPLY                                                        

 Country Fresh's business is dependent upon obtaining adequate supplies of
raw and processed agricultural products. Historically, Country Fresh has been   
able to obtain adequate supplies of agricultural products from numerous         
suppliers.                                                                      

Country Fresh purchases raw milk directly from farmers, or through the  
Independent Cooperative Milk Producers Association and Michigan Milk Producers  
Association. Country Fresh does not have long-term purchase contracts for       
agricultural products. The price of raw milk is extensively regulated.          

 Certain commodities, such as orange juice, and various packaging supplies
are purchased from numerous sources on a normal purchase order basis. Country   
Fresh is not dependent upon any single supplier and is confident that any lost  
supplier requirements could be replaced in the ordinary course of business.     

COMPETITION                                                                     

Country Fresh's business is highly price competitive with relatively low
operating margins. Quality and customer service are important factors in        
securing and maintaining business.                                              

In certain markets, some supermarket chain stores have their own dairy  
products processing plants. Generally, in each major market and product class   
there are a number of competitors, some of which have greater sales and assets  
than Country Fresh's operations in that market. The degree of penetration and   
competitive conditions in each market varies, but Country Fresh does not        
consider that it has any material competitive advantage in any of its major     
markets or product classes that would insulate it from competition.             

DIRECTORS AND EXECUTIVE OFFICERS                                                

 Pursuant to the Merger Agreement, the executive officers of Country Fresh
will remain as the executive officers of the Surviving Corporation, until their 
successors are duly elected or appointed and qualified. The directors of Merger 
Sub will remain as directors of the Surviving Corporation until their successors
are duly elected. Accordingly, none of the current directors of Country Fresh   
will remain as directors of the Surviving Corporation after the Merger.         

Mr. Delton Parks, President, Chief Executive Officer and a director of  
Country Fresh, will become a director of Suiza Foods after the Merger. Mr.      
Parks, who is 58 years of age, has served as President, Chief Executive Officer 
and a director of Country Fresh since 1980. His term as a Director of Country   
Fresh would expire at Country Fresh's annual meeting of shareholders in 1998.   
Mr. Parks also serves on the boards of directors and as the president of Country
Fresh's subsidiaries.                                                           

   Under the terms of the Merger Agreement, Suiza Foods has agreed to take all
such actions as are necessary to ensure that the employment agreement between   
Delton Parks and Country Fresh is honored. Under the terms of this employment   
agreement, which is dated October 13, 1994, Mr. Parks serves as President and   
Chief Executive Officer of Country Fresh, is paid a base salary, is eligible for
certain bonuses and is entitled to certain other benefits. The employment       
agreement also makes Mr. Parks eligible for certain stock options. (See "Certain
Terms of the Merger Agreement--Country Fresh Options.") The employment agreement
does not have a specific term; instead, Mr. Parks is considered an "at will"    
employee. However, if the agreement is terminated by Country Fresh for any      
reason other than disability (in which case certain disability benefits would be
paid to Mr. Parks) or by Mr. Parks for "good reason" (as defined in the         
agreement) Mr. Parks is entitled to certain severance benefits.                 

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EMPLOYEES                                                                       

  Country Fresh employs approximately 380 persons in its combined office and
its main fully automated dairy processing facility. At its dairy plant in Flint,
Michigan, Country Fresh employs approximately 250 persons. Through subsidiaries,
Country Fresh also owns a dairy plant in Livonia, Michigan, at which            
approximately 170 persons are employed, a dairy plant in New Paris, Indiana, at 
which approximately 125 persons are employed, a frozen dessert plant in Toledo, 
Ohio at which approximately 275 persons are employed, a dairy plant in Toledo,  
Ohio, at which approximately 50 persons are employed, a juice packing plant in  
Chattanooga, Tennessee, at which approximately 20 persons are employed, and     
distribution centers in Alpena, Battle Creek, Bad Axe, Dewitt, and Traverse     
City, Michigan and Toledo, Ohio, at which approximately 50 persons are employed.
Country Fresh also leases a sales office in Lansing, Michigan at which          
approximately 10 persons are employed.                                          

PROPERTIES                                                                      

  The headquarters and main plant of Country Fresh, Inc. are located at 2555
Buchanan, S.W., Wyoming, Michigan. Country Fresh, Inc. also owns various other  
parcels of real estate in Wyoming, Michigan.                                    

 Either directly or through its subsidiaries, Country Fresh owns or leases
real estate used as processing plants, warehouse space or for other purposes in 
the following cities: Livonia, Michigan; Flint, Michigan; Detroit, Michigan; New
Paris, Indiana; Toledo, Ohio; and Chattanooga, Tennessee. Country Fresh also    
owns or leases various additional parcels of real estate throughout Michigan.   

LEGAL PROCEEDINGS                                                               

  Country Fresh is subject from time to time to legal proceedings and claims
that arise in the ordinary course of business. However, in the opinion of       
management, none of these proceedings is material to Country Fresh's            
consolidated financial condition or results of operations, except as described  
in the following paragraph.                                                     

 In May 1996, Country Fresh and its subsidiaries entered into a Compliance
Agreement in Lieu of Debarment with the Food and Consumer Services ("FCS")      
Division of the United States Department of Agriculture. This agreement arose   
out of Country Fresh's November 1993 guilty plea to conspiracy to allocate      
contracts for the supply of milk and other dairy products and to rig the bids   
for such contracts to certain schools and school districts in Michigan. This    
agreement, which has a general term of three years, requires Country Fresh to,  
among other things, maintain records sufficient to provide complete information 
as to its compliance with the agreement and to allow FCS to examine its books,  
records and other documents for the purpose of evaluating Country Fresh's       
compliance with the agreement, its conduct in its business dealings with all of 
its customers, its compliance with accepted business practices and its          
compliance with the requirements of contracts involving federal nonprocurement  
transactions. The agreement also requires Country Fresh to maintain a Compliance
Program upon the terms and conditions of the agreement, to maintain a compliance
review committee, to report suspected misconduct to FCS, to prepare and submit  
certain periodic written compliance reports to FCS, and to retain an independent
audit or consulting firm annually to evaluate Country Fresh's compliance with   
the terms of the agreement, among other things. Country Fresh believes it is in 
compliance with the terms of the agreement.                                     

VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS OF COUNTRY FRESH                   

    Holders of record of Country Fresh Capital Stock on the close of business on
the Record Date will be entitled to notice of and to vote at the Special        
Meeting. As of September 30, 1997, there were 3,503,987 shares of Country Fresh 
Common Stock and 11,691 shares of Country Fresh Preferred Stock outstanding.    
Each share of Country Fresh Capital Stock is entitled to one vote at the Special
Meeting. See "The Special Meeting--Quorum and Vote Required."                   

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  The following table sets forth information concerning the number of shares
of Country Fresh Capital Stock held by each shareholder who is known to Country 
Fresh's management to be the beneficial owner of more than 5% of the Country    
Fresh Common Stock or 5% of the Country Fresh Preferred Stock as of September   
30, 1997. The percentages appearing in the following tables for ownership of    
Country Fresh Common Stock and Country Fresh Preferred Stock are based upon     
3,503,987 shares and 11,691 shares outstanding, respectively, as of September   
30, 1997, plus 240,000 shares of Country Fresh Common Stock issuable under      
vested and exercisable Stock Options.                                           

                                                        [Enlarge/Download Table]

                                                      NUMBER OF                  NUMBER OF SHARES                PERCENTAGE 
NAME AND ADDRESS OF                                   SHARES OF                         OF                        OF VOTING 
BENEFICIAL OWNER                                     COMMON STOCK     PERCENT     PREFERRED STOCK     PERCENT     POWER(1)  
--------------------------------------------------  --------------  -----------  -----------------  -----------  -----------
                                                                                                                            
The Gerald M. Breen Living Trust .................      41,920            1.1%             994            8.5%          1.2%
  562 Burns                                                                                                                 
  Milford, Michigan 48281                                                                                                   

Brooks Supermarket, Inc. .........................          --             --              804            6.9         *     
  420 W. Main Street                                                                                                        
  Carson City, Michigan 48811                                                                                               

G & R Felpausch Company ..........................     356,600            9.5            1,500           12.8          10.1 
  127 S. Michigan Avenue                                                                                                    
  Hastings, Michigan 49058(2)                                                                                               

Great Day Inc. ...................................     108,360            2.9              598            5.1           3.1 
  2566 Leonard Street, N.W.                                                                                                 
  Grand Rapids, Michigan 49504(3)                                                                                           

Francis McGuire ..................................          --             --            1,250           10.7         *     
  5955 N. 32nd Street                                                                                                       
  Richland, Michigan 49083(4)                                                                                               

Oleson's Foods, Inc. .............................     227,120            6.1               --             --           6.4 
  901 West Front Street                                                                                                     
  Traverse City, Michigan 49684(5)                                                                                          

Delton Parks(6) ..................................     248,000            6.6               --             --           7.1 
  c/o Country Fresh, Inc.                                                                                                   
  2555 Buchanan S.W.                                                                                                        
  Grand Rapids, Michigan 49518                                                                                              

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

*   Less than 1%                                                                

(1) Each share of Country Fresh Common Stock and Country Fresh Preferred Stock  
  is entitled to one vote, voting together as a single class on most issues.
    However, approval of the Merger Agreement also requires the affirmative vote
 of a majority of the outstanding shares of Country Fresh Preferred Stock,
voting as a separate class. See "The Special Meeting--Quorum and Vote   
Required."                                                              

(2) These shares are also reported as beneficially owned by Mr. Feldpausch in   
the following table. See Note (5) to the following table.               

(3) These shares are also reported as beneficially owned by Mr. DeYoung in the  
following table. See Note (4) to the following table.                   

(4) These shares are also reported as beneficially owned by Mr. McGuire in the  
following table. See Note (9) to the following table.                   

(5) These shares are also reported as beneficially owned by Mr. Oleson in the   
following table. See Note (10) to the following table.                  

(6) See Note (11) to the following table.                                       

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    The following table sets forth the beneficial ownership of the Country Fresh
Capital Stock by: (a) each executive officer and Director of Country Fresh; and 
(b) all executive officers and Directors of Country Fresh as a group.           

                                                        [Enlarge/Download Table]

                                                                                                               PERCENTAGE OF
                                                                                                                  VOTING    
BENEFICIAL OWNER                                   COMMON STOCK     PERCENT     PREFERRED STOCK     PERCENT      POWER(1)   
------------------------------------------------  --------------  -----------  -----------------  -----------  -------------
                                                                                                                            
Roger L. Boyd(2)................................         60,000         1.6%              --             --%          1.6%  
Gerald M. Breen(3)..............................         44,920         1.2              994            8.5           1.2   
Ronald A. DeYoung(4)............................        108,360         2.9              598            5.1           2.9   
Mark S. Feldpausch(5)...........................        356,600         9.5            1,500           12.8           9.5   
Jeffery A. Gietzen(6)...........................         83,160         2.2               --             --           2.2   
Martin P. Hill(7)...............................        110,000         2.9               --             --           2.9   
Robert J. Leppink(8)............................        176,840         4.7              520            4.5           4.7   
Frances J. McGuire(9)...........................             --          --%           1,250           10.7           *     
Donald W. Oleson(10)............................        267,120         7.1              500            4.2           7.1   
Delton C. Parks(11).............................        248,000         6.6               --             --           6.6   
John Williams(12)...............................          7,516           *               --             --           *     
Raymond Booth(13)...............................          1,886           *               --             --           *     
Nicholas G. Kelble(13)..........................          6,037           *               --             --           *     
Joseph Risdon(14)...............................          5,630           *               --             --           *     
All executive officers and directors as a group                                                                             
  (14 persons)..................................      1,476,069        39.4            5,362           45.9          39.4   

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

*   Less than 1%                                                                

(1) Each share of Country Fresh Common Stock and Country Fresh Preferred Stock  
  is entitled to one vote, voting together as a single class on most issues.
    However, approval of the Merger Agreement also requires the affirmative vote
 of a majority of the outstanding shares of Country Fresh Preferred Stock,
voting as a separate class. See "The Special Meeting--Quorum and Vote   
Required."                                                              

(2) Includes 12,000 shares and 8,000 shares of Country Fresh Common Stock held  
   by Hillsdale Market House, Inc. and Bob's Market House, Inc., respectively.
  Mr. Boyd serves as President and director, and as a shareholder of each of
these entities.                                                         

(3) Includes 3,000 shares of Country Fresh Common Stock held by Orchard-10 IGA, 
 Inc. of which Mr. Breen serves as President and director and of which Mr.
   Breen is a shareholder. Also includes 41,920 shares of Country Fresh Common
 Stock and 994 shares of Country Fresh Preferred Stock held by a trust for
which Mr. Breen serves as trustee.                                      

(4) Consists of shares held by Great Day, Inc., of which Mr. DeYoung serves as  
President and director and of which Mr. DeYoung is a shareholder.       

(5) Consists of shares held by G & R Felpausch Company, of which Mr. Feldpausch 
serves as Chief Executive Officer, secretary and director.              

(6) Includes 1,080 shares owned jointly by Mr. Gietzen and his wife, and 82,080 
shares held by D & W Food Centers, Inc., of which Mr. Gietzen serves as 
President and Chief Executive Officer and is a director.                

(7) Consists of 93,160 shares and 16,840 shares of Country Fresh Common Stock   
    held by Harding & Hill, Inc. and Harding's Markets-West, Inc., respectively.
   Mr. Hill serves as President and is a director and shareholder of Harding &
Hill, Inc., and is affiliated with Harding's Markets-West, Inc.         

(8) Consists of (a) 26,520 shares of Country Fresh Common Stock held by         
   Leppink's, Inc., of which Mr. Leppink serves as President and is a director
and shareholder; (b) 55,220 shares of Country Fresh Common Stock held by
 Leppink Development Limited Partnership, of which Mr. Leppink serves as a
general partner; (c) 37,360 shares of Country Fresh Common Stock held by
Leppink Lakeview, Inc.,                                                 

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    an affiliate of Mr. Leppink; (d) 56,245 shares of Country Fresh Common Stock
and 520 shares of Country Fresh Preferred Stock held by Leppink Family  
 Enterprises, an affiliate of Mr. Leppink; and (e) 1,495 shares of Country
  Fresh Common Stock held by the Kelly J. Leppink Trust, an affiliate of Mr.
Leppink.                                                                

(9) Consists of shares of Country Fresh Preferred Stock held by Town & Country  
Market, Inc., of which Mr. McGuire is the sole shareholder.             

(10) Includes 227,120 shares of Country Fresh Common Stock held by Oleson's     
  Foods, Inc., of which Mr. Oleson is the President, a director and the sole
  shareholder. Also includes 20,000 shares of Country Fresh Common Stock and
500 shares of Country Fresh Preferred Stock owned by Mr. Oleson's wife. 

(11) Includes 240,000 shares of Country Fresh Common Stock subject to options   
  that are currently vested and exercisable, but excludes 180,000 additional
  shares subject to unvested options, which will vest and become exercisable
  immediately prior to consummation of the Merger. See "Certain Terms of the
Merger Agreement--Country Fresh Options," Also excludes 50,400 shares of
   Country Fresh Common Stock held in a generation skipping transfer trust, of
which three of Mr. Parks' sons are trustees.                            

(12) Mr. Williams is Senior Vice President-Finance of Country Fresh.            

(13) Messrs. Booth and Kelble are Senior Vice Presidents of Country Fresh.      

(14) Consists of shares of Country Fresh Common Stock held by a trust for which 
Mr. Risdon, who is a Senior Vice President of Country Fresh, serves as  
trustee.                                                                

   The following table reflects the number of shares of Suiza Common Stock and
Suiza Preferred Stock that the specified person will hold following consummation
of the Merger and the percentages of such shares that will be outstanding       
following consummation of the Merger. These percentages were computed with      
reference to a total of 17,720,490 shares of Suiza Common Stock outstanding     
after the Merger, and 11,691 shares of Suiza Preferred Stock outstanding after  
the Merger (assuming that no holder of Country Fresh Preferred Stock exercises  
dissenters' rights). The figures in the column concerning Suiza Common Stock    
assume an exchange ratio of .5454 shares of Suiza Common Stock for each share of
Country Fresh Common Stock and do not take into account the "top up" provisions 
described under the heading "Certain Terms of The Merger Agreement--Top Up      
Provisions." In addition, fractional shares of Suiza Common Stock have been     
disregarded. Please refer to the Notes to the above tables for information with 
respect to each person's holdings of Country Fresh Capital Stock.               

                                                        [Enlarge/Download Table]

                                                            SUIZA COMMON    PERCENT OF     SUIZA PREFERRED    PERCENT OF  
                                                               STOCK           CLASS            STOCK            CLASS    
                                                           --------------  -------------  -----------------  -------------
                                                                                                                          
Roger L. Boyd.............................................       32,724          *   %               --              --%  
Gerald M. Breen...........................................       24,499          *                  994             8.5   
Ronald A. DeYoung.........................................       59,099          *                  598             5.1   
Mark S. Feldpausch........................................      194,489          *                1,500            12.8   
Jeffery A. Gietzen........................................       45,355          *                   --              --   
Martin P. Hill............................................       59,994          *                   --              --   
Robert J. Leppink.........................................       96,448          *                  520             4.5   
Frances J. McGuire........................................           --            --             1,250            10.7   
Donald W. Oleson..........................................      145,687          *                  500             4.3   
Delton C. Parks...........................................      135,295          *                   --              --   
John Williams.............................................        4,099          *                   --              --   
Raymond Booth.............................................        1,028          *                   --              --   
Nicholas G. Kelble........................................        3,292          *                   --              --   
Joseph Risdon.............................................        3,070          *                   --              --   
All executive officers and directors as a group (14                                                                       
  persons)................................................      805,079           4.5%            5,362            45.9%  

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

*   Less than one percent.                                                      

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DESCRIPTION OF SUIZA CAPITAL STOCK

   The authorized capital stock of Suiza Foods consists of 101,000,000 shares,
of which 100,000,000 shares are Suiza Common Stock and 1,000,000 shares of      
preferred stock, $.01 par value per share. At September 30, 1997, 15,809,415    
shares of Suiza Common Stock were outstanding and held of record by 77          
shareholders and no shares of preferred stock were outstanding. A more detailed 
description of Suiza's capital stock is contained in its Registration Statement 
on Form 8-A dated February 19, 1997 and incorporated herein by reference. See   
"Incorporation of Certain Information by Reference."                            

COMMON STOCK                                                                    

   The issued and outstanding shares of Suiza Common Stock are, and the shares
being offered hereby will, upon payment therefor, be validly issued, fully paid 
and nonassessable. Subject to the rights of holders of Preferred Stock, the     
holders of outstanding shares of Suiza Common Stock are entitled to receive     
dividends out of assets legally available therefor at such times and in such    
amounts as the Suiza Board may from time to time determine. The shares of Suiza 
Common Stock are neither redeemable nor convertible, and the holders thereof    
have no preemptive or subscription rights to purchase any securities of Suiza   
Foods. Each outstanding share of Suiza Common Stock is entitled to one vote on  
all matters submitted to a vote of shareholders. There is no cumulative voting  
in the election of directors.                                                   

PREFERRED STOCK                                                                 

Suiza's Articles of Incorporation authorize the Suiza Board to issue    
preferred stock in classes or series and to establish the designations,         
preferences, qualifications, limitations or restrictions of any class or series 
with respect to the rate and nature of dividends, the price and terms and       
conditions on which shares may be redeemed, the terms and conditions for        
conversion or exchange into any other class or series of the stock, voting      
rights and other terms. Suiza Foods may issue, without the approval of the      
holders of Suiza Common Stock, preferred stock that has voting, dividend or     
liquidation rights superior to the Suiza Common Stock and that may adversely    
affect the rights of holders of Suiza Common Stock. The issuance of preferred   
stock, while providing flexibility in connection with possible acquisitions and 
for other corporate purposes, could, among other things, adversely affect the   
voting power of the holders of Suiza Common Stock and could have the effect of  
delaying, deferring or preventing a change in control of Suiza Foods.           

  In connection with the Merger, the Suiza Board has authorized the issuance
of the Suiza Preferred Stock. A description of the Suiza Preferred Stock        
follows:                                                                        

 STATED VALUE.  The Suiza Preferred Stock will have a stated value of $320
per share.                                                                      

  DIVIDENDS.  The holders of Suiza Preferred Stock, in preference to holders
of Suiza Common Stock, will be entitled to receive, when, as and if declared by 
the Board of Directors, out of funds legally available for distribution to      
stockholders, cumulative dividends of $25.60 per share per annum, and no more.  
Dividends will accumulate and (if declared) be payable semiannually on the first
day of March and September in each year (each a "Dividend Payment Date" or      
collectively, "Dividend Payment Dates"), commencing March 1, 1998, except that  
if any Dividend Payment Date is not a business day in Dallas, Texas, then such  
semi-annual dividend will be payable on the next succeeding business day and    
such next succeeding business day will be the Dividend Payment Date. Dividends  
on the shares of Suiza Preferred Stock will accrue and be cumulative from       
September 1, 1997 and (if declared) will be payable on each Dividend Payment    
Date to stockholders of record on the record date, which will be not more than  
45 days nor less than 10 days preceding such Dividend Payment Date, fixed for   
such purpose by the Suiza Board in advance of such Dividend Payment Date. If no 
date is fixed by the Suiza Board, the record date will be 10 days preceding the 
Dividend Payment Date. The amount of dividends payable on shares of Suiza       
Preferred Stock for each full semiannual dividend period will be computed by    
dividing $25.60 by two. Dividends payable on the Suiza Preferred Stock for any  
period less than a full semiannual period will be                               

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computed on the basis of a 360-day year of twelve 30-day months; provided,      
however that the dividends payable on the Series A Preferred Stock for the      
initial dividend period shall be $12.80. Notwithstanding the foregoing, and     
except as provided below in Section 4 with respect to certain redemptions,      
dividends on the Suiza Preferred Stock do not accrue until the applicable       
Dividend Payment Date, at which time they accrue in full. Dividends paid on     
shares of Suiza Preferred Stock in an amount less than the total amount of the  
dividends at the time accumulated and payable on such shares will be allocated  
PRO RATA on a share-by-share basis among all such shares at the time            
outstanding. No interest will be payable on any dividends paid after the        
applicable Dividend Payment Date.                                               

   So long as any shares of Suiza Preferred Stock are outstanding, no dividend
will be paid or declared, no funds will be set aside for payment of dividends,  
and no distribution will be made on the Suiza Common Stock or other preferred   
stock of Suiza Foods ranking junior to the Suiza Preferred Stock until all      
dividends accrued on the Suiza Preferred Stock have been paid for the current   
and all prior dividend periods.                                                 

   LIQUIDATION PREFERENCE.  Upon the liquidation, dissolution or winding up of
the affairs of Suiza Foods, whether voluntary or involuntary, the holders of    
Suiza Preferred Stock will be entitled to receive in full out of the assets of  
Suiza Foods available for distribution to stockholders, including its capital,  
before any amount will be paid to, or distributed among, the holders of Suiza   
Common Stock or other preferred stock ranking junior to the Suiza Preferred     
Stock, the sum of $320 per share, plus all accrued and unpaid dividends to the  
time of payment.                                                                

   REDEMPTION.  Shares of Suiza Preferred Stock may be redeemed, as a whole or
in part, at the option of Suiza Foods by vote of the Suiza Board at any time or 
from time to time, upon no less than 30 or more than 120 days' notice. If less  
than all the outstanding shares of the Suiza Preferred Stock are to be redeemed,
the shares to be redeemed will be determined by lot or pro rata, in the manner  
that the Suiza Board prescribes. The redemption price for shares of the Suiza   
Preferred Stock will be $320 per share plus accrued and unpaid dividends to the 
date fixed for redemption. Pro rata dividends on any shares of Suiza Preferred  
Stock to be redeemed will be deemed to accrue as of the date fixed for          
redemption.                                                                     

  Written notice of redemption will be given to each holder of record of the
shares of Suiza Preferred Stock to be redeemed, by mailing a notice of          
redemption to the holder by first class mail, at the holder's address as it will
appear on the stock record books of Suiza Foods, at least 30 days and not more  
than 120 days before the date fixed for redemption. Each notice will specify the
shares of stock to be redeemed, the redemption price, the date fixed for        
redemption, the place for payment of the redemption price and for surrender of  
the certificate representing the shares to be redeemed, and if less than the    
total number of shares held by the holder are to be redeemed, the number of     
shares of the holder to be redeemed.                                            

  If notice of redemption has been given and if, on or before the date fixed
for redemption, the redemption price is provided and set aside by Suiza Foods   
(with a bank with trust powers or in a separate account of Suiza Foods) for the 
pro rata benefit of the holders of the shares called for redemption, then, from 
and after the date fixed for redemption, the shares of Suiza Preferred Stock    
called for redemption will no longer be deemed outstanding, the dividends on the
shares will cease to accumulate, and all rights with respect to the shares will 
cease and terminate, except only the right of the holders of the shares to      
receive the redemption price of the shares called for redemption, but without   
interest. The Suiza Board may designate a bank with trust powers as a depositary
of the funds to be used for redemption of the shares and as agent of Suiza Foods
for the giving of the notices of redemption, the receipt of the shares called   
for redemption and the payment of the redemption price, the acts of the         
designated agent on behalf of Suiza Foods to be as effective and to have the    
same results as if the acts were done by Suiza Foods.                           

   Any monies deposited by Suiza Foods with a designated bank and unclaimed at
the end of three years from the date fixed for redemption will be repaid to     
Suiza Foods upon its request after which repayment the holders of the shares    
called for redemption will look only to Suiza Foods for the payment of those    
monies.                                                                         

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Suiza Foods is not obligated to make payments into or to maintain any   
sinking fund for the Suiza Preferred Stock.                                     

VOTING.  Each share of Suiza Preferred Stock will have one vote on all  
matters upon which holders of Suiza Common Stock are entitled to vote. Shares of
Suiza Preferred Stock and shares of Suiza Common Stock will be treated as a     
single class or series of shares for all voting purposes except to the extent a 
class or series vote is provided by law.                                        

 PREEMPTIVE RIGHTS.  No holders of any shares of Suiza Preferred Stock, as
such, will have any preemptive or preferential right to subscribe for or        
purchase any shares of any class or series of capital stock of Suiza Foods, now 
or later authorized, or any securities convertible into, or carrying options or 
warrants to purchase, shares of any class or series, now or later authorized,   
whether issued for cash, property, services, by way of dividends or otherwise.  

LIMITATIONS.  In addition to other rights as may be provided under      
applicable law, without the affirmative vote of the holders of a majority of the
outstanding Suiza Preferred Stock, Suiza Foods may not authorize or create any  
class or series of stock ranking prior to the Suiza Preferred Stock with respect
to dividends or the distribution of assets in liquidation.                      

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COMPARISON OF SHAREHOLDER RIGHTS

Upon consummation of the Merger, the shareholders of Country Fresh, a   
Michigan corporation, will become stockholders of Suiza Foods, a Delaware       
corporation. Although the MBCA and the Delaware General Corporation Law ("DGCL" 
or "Delaware Law") are similar in many respects, there are a number of          
differences between the two statutes which should be carefully considered by    
Country Fresh shareholders in evaluating the Merger. The following summary,     
which sets forth certain material differences between the two statutes, does not
purport to be a complete statement of all differences between the DGCL and the  
MBCA, nor does it purport to be a complete statement of the provisions of the   
two statutes which it compares. The summary is qualified in its entirety by     
reference to the MBCA and the DGCL, Country Fresh's Articles of Incorporation   
and Bylaws, and Suiza Foods' Certificate of Incorporation and Bylaws.           

AMENDMENTS TO ARTICLES OR CERTIFICATE OF INCORPORATION                          

The Country Fresh Articles provide that they may be amended, altered,   
changed, added to or repealed in the manner prescribed by statute. To amend a   
corporation's articles of incorporation, the MBCA generally requires approval of
the holders of a majority of all outstanding shares entitled to vote at a       
meeting of shareholders. To amend a Delaware corporation's certificate of       
incorporation, the DGCL requires the affirmative recommendation of the board of 
directors and the approval of a majority of all outstanding shares entitled to  
vote. Under both the MBCA and the DGCL, the holders of the outstanding shares of
a class are entitled to vote as a class upon any proposed amendment to the      
articles or certificate of incorporation, as the case may be, if the amendment  
would increase or decrease the number of authorized shares of the class,        
increase or decrease the par value of the shares of the class (with respect to  
the DGCL), or alter or change the powers, preferences or special rights of the  
shares of the class so as to adversely affect the holders of the class of       
shares.                                                                         

AMENDMENTS TO BYLAWS                                                            

Under the DGCL, the authority to adopt, amend or repeal the bylaws of a 
Delaware corporation is held exclusively by the stockholders entitled to vote   
unless such authority is conferred upon the board of directors in the           
corporation's certificate of incorporation. The Suiza Foods Certificate         
expressly grants the authority to alter, amend, or repeal the bylaws or to adopt
new bylaws to the board of directors as well as the stockholders. The Suiza     
Foods Bylaws provide that they may be altered, amended or repealed or new bylaws
may be adopted at any annual meeting of the stockholders or at any special      
meeting of the stockholders at which a quorum is present or represented, if     
notice thereof is contained in the notice of such special meeting, by the       
affirmative vote of the holders of 66 2/3 percent of the shares entitled to vote
at such meeting, or by the affirmative vote of a majority of the entire board of
directors at any regular meeting of the board or at any special meeting of the  
board.                                                                          

The MBCA provides that the shareholders or the Board of a Michigan      
corporation may adopt, amend or repeal the bylaws unless such power is expressly
reserved to the shareholders in the corporation's articles of incorporation or  
bylaws. The Country Fresh Articles do not expressly reserve such power to the   
shareholders. The Country Fresh Bylaws provide that they may be amended, altered
or repealed by the Country Fresh shareholders at any meeting, by an affirmative 
vote of the holders of the majority of the shares of common stock issued and    
outstanding, provided the substance of the proposed amendment shall have been   
stated in the notice of the meeting, or by unanimous vote of all the            
shareholders without such notice. The Country Fresh Bylaws also provide that    
they may be amended, altered or repealed by the Country Fresh Board at any      
meeting, by an affirmative vote of the majority of the Board, provided the      
substance of the proposed amendment shall have been stated in the notice of the 
meeting, or by unanimous vote of the Board without such notice.                 

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BOARD CLASSIFICATION                                                            

    The Country Fresh Bylaws divide Country Fresh's directors into three classes
with each class serving until the third annual meeting succeeding their         
election. Suiza Foods' Certificate and Bylaws provide that the Suiza Board shall
be divided into three classes, nearly equal in number as possible, with each    
class serving three year terms. The classified board provision could increase   
the likelihood that, in the event of a takeover of Suiza Foods, incumbent       
directors will retain their positions. In addition, the classified board        
provision will help ensure that the Suiza Board, if confronted with an          
unsolicited proprosal from a third party that has acquired a block of the voting
stock of Suiza Foods, will have sufficient time to review the proposal and      
appropriate alternatives and to seek the best available result for all          
stockholders.                                                                   

FILLING VACANCIES IN THE BOARD OF DIRECTORS                                     

   Under both Michigan and Delaware law, newly created directorships resulting
from an increase in the number of directors may be filled by a majority vote of 
the directors then in office, even if the number of directors then in office is 
less than a quorum. The MBCA and the DGCL also provide that unless the articles 
or certificate of incorporation or bylaws otherwise provide, vacancies occurring
by reason of the removal of directors with or without cause may be filled by a  
majority vote of the directors then in office. In addition, under the DGCL, if, 
at the time of filling any vacancy or newly created directorship, the directors 
then in office constitute less than a majority of the entire board of directors,
the Delaware Court of Chancery may, upon application of any stockholder or      
stockholders holding at least 10% of the total number of shares outstanding at  
the time and having the right to vote for such directors, summarily order an    
election to be held to fill any such vacancies or newly created directorships,  
or to replace the directors chosen by the directors then in office.             

  The Country Fresh Bylaws provide that vacancies in the Country Fresh Board
from any cause shall be filled by vote of a majority of the remaining directors,
subject, in case the remaining directors constitute less than a majority of the 
whole board, to the rights of shareholders as provided by law. The Suiza Foods  
Bylaws provide that vacancies in the board of directors from any cause may be   
filled by a majority of the remaining or existing directors.                    

REMOVAL OF DIRECTORS                                                            

    Neither Country Fresh's Articles of Incorporation nor its Bylaws provide for
the removal of directors. Under the MBCA, any director or the entire board of   
directors generally may be removed, with or without cause, by the holders of a  
majority of the shares entitled to vote in the election of directors.           

   Under Delaware law, any director or the entire board of directors generally
may be removed, with or without cause, by the holders of a majority of the      
shares entitled to vote at an election of directors. However, unless the        
corporation's certificate of incorporation provides otherwise, if the           
corporation's board of directors is classified, directors may be removed only   
for cause. The Suiza Board is classified, and its Certificate and Bylaws        
expressly provide that a director may be removed only for cause. These          
provisions thus could have the effect of delaying, deterring, or preventing the 
acquisition of control of Suiza Foods by means of tender offer, open market     
purchases, a proxy contest, or otherwise.                                       

VOTE REQUIRED FOR MERGERS                                                       

  The MBCA and the DGCL generally require the affirmative vote of a majority
of a corporation's outstanding shares entitled to vote, unless the articles or  
certificate of incorporation, as applicable, require a greater proportion, to   
authorize a merger, share exchange, dissolution or disposition of all or        
substantially all of its assets, except that (a) unless required by its charter,
no stockholder vote is required of a corporation surviving a merger if: (i) the 
corporation's charter is not amended by the merger; (ii) each share of stock of 
the corporation will be an identical share of the surviving corporation after   
the merger; and (iii) under the DGCL the number of shares to be issued in the   
merger does not exceed 20% of the                                               

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corporation's outstanding common stock immediately prior to the effective date  
of the merger and (b) unless a dissolution is adopted by a majority of the board
of directors, under the DGCL, a dissolution must be approved by all stockholders
entitled to vote. Neither the Country Fresh's Articles of Incorporation nor     
Suiza Foods' Certificate of Incorporation require a greater proportion than a   
majority affirmative vote to approve a merger.                                  

ANTI-TAKEOVER PROVISIONS                                                        

The MBCA provides that "control shares" of a corporation acquired in a  
control share acquisition have no voting rights except as granted by the        
corporation's shareholders. "Control shares" are shares that, when added to     
shares previously owned by a shareholder, increase such shareholder's voting    
power to 20% or more of the shareholder voting power of the corporation's       
shareholders. A control share acquisition must be approved by a majority of the 
votes cast by shareholders entitled to vote excluding shares owned by the       
acquiror and certain officers and directors. No such approval is required,      
however, for gifts of shares or acquisitions of shares pursuant to a merger to  
which the corporation is a party. The DGCL has no similar provision.            

The MBCA also prohibits Michigan corporations, the shares of which are  
listed on a national securities exchange, from purchasing any of its shares from
any person who holds 3% or more of its shares unless an offer to repurchase is  
made to all shareholders at the same price, its shareholders authorize the      
purchase, the shares have been held for at least two years, the purchase is made
in the open market, the price is not greater than the average market price      
during the previous 30 business days or the purchase is otherwise authorized by 
the MBCA. The DGCL has no similar provision.                                    

   The MBCA provides that business combinations between a Michigan corporation
and a beneficial owner of 10% or more of the voting power of such corporation,  
unless exempted by board resolution prior to the interested shareholder becoming
interested, require the approval of 90% of the votes of each class of stock     
entitled to be cast and at least 2/3 of the votes of each class of stock        
entitled to be cast other than shares owned by such 10% owner. Such requirements
will not apply if (a) the corporation's board of directors approves the         
transaction prior to the time the 10% owner becomes a 10% owner or (b) the      
transaction satisfies certain fairness standards, certain other conditions are  
met and the 10% owner has been a 10% owner for at least five years.             

  The DGCL prohibits certain transactions between a Delaware corporation and
an "interested shareholder," which is defined as a person that is directly or   
indirectly a beneficial owner of 15% or more of the voting power of the         
outstanding voting stock of a Delaware corporation and such persons' affiliates 
and associates. This provision prohibits certain business combinations (defined 
broadly to include mergers, consolidations, sales or other dispositions of      
assets having an aggregate value equal to 10% or more of the consolidated assets
of the corporation, and certain other transactions) between an interested       
stockholder and a corporation for a period of three years after the date the    
interested stockholder became an interested stockholder. However, the           
prohibition does not apply if: (a) the business combination is approved by the  
corporation's board of directors prior to the date the interested stockholder   
became an interested shareholder; (b) the interested stockholder acquired at    
least 85% of the voting stock of the corporation (excluding shares held by      
directors of the corporation who are also officers and shares held under certain
employee stock plans) in the transaction in which it became an interested       
stockholder; or (c) the business combination is approved by a majority of the   
board of directors and the affirmative vote of two-thirds of the votes entitled 
to be cast by stockholders other than the interested stockholder at an annual or
special meeting. This provision of the DGCL applies automatically to a Delaware 
corporation unless otherwise provided in its certificate of incorporation or    
bylaws or if it has less than 2,000 stockholders of record or does not have     
voting stock listed on a national securities exchange or listed for quotation   
with a registered national securities association. Neither the Suiza Foods'     
Certificate nor the Suiza Foods Bylaws exempt Suiza Foods from this provision.  

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DISSENTERS' RIGHTS                                                              

 Under the MBCA and the DGCL, holders of shares have the right, in certain
circumstances, to dissent from certain extraordinary corporate transactions as  
to which they have voting rights by demanding payment in cash for their shares  
equal to the fair value of such shares, as determined by agreement with the     
corporation or by a court in an action timely brought by the corporation or the 
dissenters.                                                                     

 Unlike the MBCA, the DGCL grants dissenters' appraisal rights only in the
case of certain mergers and not in certain transactions involving a sale or     
transfer of assets, a share exchange, a charter amendment or control share      
acquisition and certain other transactions. The DGCL does not extend appraisal  
rights in a merger to holders of shares listed on a national securities exchange
or designated as a national market system security on an inter-dealer quotation 
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders if stockholders are required to accept as       
consideration in the merger only stock of the surviving corporation, shares of  
stock of another corporation which at the effective date will be listed on a    
national securities exchange or designated as a national market system security 
on an inter-dealer quotation system by the National Association of Securities   
Dealers, Inc. or held of record by more than 2,000 stockholders, cash in lieu of
fractional shares or a combination of the above. The MBCA does not extend       
appraisal rights in most situations where the shares held are listed on a       
national securities exchange or held of record by 2,000 or more shareholders or 
where the consideration received is cash or a combination of cash and shares    
listed on a national securities exchange or held of record by 2,000 or more     
shareholders.                                                                   

LIMITATION ON DIRECTORS' LIABILITY                                              

   The Country Fresh Articles limit the liability of Country Fresh's directors
to Country Fresh or its shareholders, except to the extent prohibited by the    
MBCA, for monetary damages for breach of fiduciary duty. Under the MBCA,        
director liability cannot be limited for: (a) a breach of the director's duty of
loyalty; (b) acts or omissions not in good faith or involving intentional       
misconduct or knowing violation of law; (c) a violation of Section 551(1) of the
MBCA (involving unlawful distributions to shareholders and loans to directors,  
officers or employees); (d) a transaction from which the director derived an    
improper personal benefit; or (e) an act or omission occurring before March 1,  
1987.                                                                           

In accordance with the DGCL, the Suiza Foods Certificate provides that a
director shall not be personally liable to Suiza Foods or its stockholders for  
monetary damages for breach of fiduciary duty as a director, except for         
liability: (a) for any breach of the director's duty of loyalty to Suiza Foods  
or its stockholders; (b) for acts or omissions not in good faith or which       
involve intentional misconduct or knowing violation of law; (c) for unlawful    
payments of dividends or unlawful stock repurchases or redemptions; or (d) for  
any transactions from which the director derived an improper personal benefit.  

INDEMNIFICATION                                                                 

Both the MBCA and DGCL contain provisions setting forth conditions under
which a corporation may indemnify its directors and officers. These provisions  
are generally referred to as "statutory indemnification" provisions.            
Corporations are permitted to adopt charter provisions or bylaws which provide  
for additional indemnification of directors and officers. These non-exclusive   
provisions are generally referred to as "non-statutory indemnification"         
provisions. Non-statutory indemnification provisions are generally adopted to   
expand the circumstances and liberalize the conditions under which              
indemnification will occur. The statutory indemnification provisions under the  
MBCA and the DGCL are substantially the same, although the MBCA's non-statutory 
provisions may be slightly broader with respect to indemnification in suits     
brought by or in the right of the corporation since the MBCA expressly permits  
indemnification of amounts paid in settlement in connection with such suits     
while the DGCL does not expressly permit such indemnification (except for       
payment of expenses incurred in connection with such suit). As a result,        
directors, officers, employees or agents who agree to a settlement in a         
derivative suit brought on behalf of                                            

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Country Fresh may be indemnified by Country Fresh for the amount paid in        
settlement as well as expenses incurred in connection with the suit if the      
standards set forth in the MBCA and the Country Fresh Bylaws are met.           

The Country Fresh Bylaws provide that any officer, director, employee or
agent of Country Fresh shall be indemnified by Country Fresh against expenses   
(including attorneys' fees), judgments, fines and amounts paid in settlement    
actually and reasonably incurred by him or her in connection with such suit,    
action, or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interest of the         
corporation, or its shareholders, and, with respect to any criminal action or   
proceeding, had no reasonable cause to believe his conduct was unlawful. The    
Suiza Foods Certificate provides that the officers and directors shall, and any 
employees and agents may, be indemnified by Suiza Foods against all expense,    
liability, and loss (including attorneys' fees, judgments, fines, and amounts   
paid in settlement) reasonably incurred in connection with any suit, action, or 
proceeding to the fullest extent authorized by the DGCL, which requires that the
person acted in good faith and in a manner the person resaonably believed to be 
in or not opposed to the best interests of Suiza Foods and, with respect to any 
criminal action or proceeding, had not reasonable cause to believe the person's 
conduct was unlawful.                                                           

SHAREHOLDER/STOCKHOLDER MEETINGS                                                

   The MBCA provides that if a corporation's annual meeting is not held for 90
days after the date designated therefor or for 15 months after its last annual  
meeting, a court may order the meeting or election to be held upon application  
by a shareholder. Under the DGCL, if an annual meeting is not held within 30    
days of the date designated for such meeting, or if not held for a period of 13 
months after the last annual meeting, the Delaware Court of Chancery may        
summarily order a meeting to be held upon the application of any stockholder or 
director.                                                                       

Under the MBCA and the DGCL, special meetings of shareholders and       
stockholders, as the case may be, may be called by the board of directors and by
such person or persons as so authorized by the charter or the bylaws. The       
Country Fresh Bylaws provide that special meetings of shareholders may be called
at any time by the Secretary or any other officer whenever directed by the Board
of Directors, or by the Chairman of the Board or the President, or upon the     
written request of twenty-five (25) holders of common stock of the corporation  
entitled to vote on the business to be transacted at such meeting, delivered to 
such officer. The Suiza Foods Certificate and Bylaws provide that special       
meetings of the stockholders may be called at any time by the chief executive   
officer or by a majority of the members of the board of directors.              

ACTION BY WRITTEN CONSENT                                                       

   Under the MBCA, any shareholder action required or permitted to be taken by
shareholder vote may be taken with the unanimous written consent of the         
shareholders. The articles of incorporation may provide that such shareholder   
action may be taken upon the written consent of holders of the minimum number of
votes that would be necessary to authorize or take such action at a meeting at  
which all shares entitled to vote thereon were present and voted. The Country   
Fresh Articles do not so provide. Under the DGCL, unless the charter provides   
otherwise, any action required to be taken or which may be taken at a meeting of
stockholders may be taken without a vote, without a meeting and without prior   
notice, with the written consent of not less than the minimum number of votes   
that would be necessary to authorize or take such action at a meeting at which  
all shares entitled to vote thereon were present and voted. The Suiza Foods     
Certificate does not provide otherwise.                                         

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PAYMENT OF DIVIDENDS                                                            

    Under the DGCL, a corporation may generally pay dividends out of surplus or,
if there is no surplus, out of the net profits for the fiscal year in which the 
dividend is declared and/or the preceding fiscal year, unless the capital of the
corporation has been diminished by depreciation in the value of its property,   
losses or otherwise to an amount less than the aggregate amount of the capital  
represented by the issued and outstanding stock of all classes having a         
preference upon the distribution of assets. The MBCA permits Country Fresh to   
pay dividends and make other distributions unless, as a result, Country Fresh   
would become insolvent or its assets would be less than its liabilities (each as
valued as provided in the MBCA) plus any preferential rights.                   

LEGAL MATTERS 

  The legality of the Suiza Common Stock to be issued in connection with the
Merger will be passed upon for Suiza Foods by Hughes & Luce, L.L.P., Dallas,    
Texas. A partner with Hughes & Luce, L.L.P., beneficially owns 41,795 shares of 
Suiza Common Stock. The Federal income tax consequences of the Merger to the    
Country Fresh shareholders are being passed upon by Warner Norcross & Judd LLP, 
Grand Rapids, Michigan.                                                         

EXPERTS 

The consolidated financial statements of Suiza Foods Corporation as of  
December 31, 1996 and 1995 and for each of the three years in the period ended  
December 31, 1996; the financial statements of Pre-Acquisition Velda Farms as of
April 9, 1994 and December 31, 1994 and for the period from January 1, 1994 to  
April 9, 1994 and for the year ended December 31, 1993; the financial statements
of Swiss Dairy, a Corporation, as of December 30, 1995 and December 31, 1994 and
for each of the three years in the period ended December 30, 1995; and the      
consolidated financial statements of Country Fresh, Inc. as of March 1, 1997 and
March 2, 1996 and for each of the three years in the period ended March 1, 1997,
included in or incorporated by reference into this Prospectus have been audited 
by Deloitte & Touche LLP, independent auditors, as stated in their reports      
either appearing herein or which are incorporated herein by reference. 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 incorporated by reference into this Prospectus have been audited by KPMG   
Peat Marwick LLP, independent auditors, as stated in their report which is      
incorporated herein by reference. The financial statements of Model Dairy, Inc. 
as of October 31, 1995 and 1994 and for the years then ended incorporated by    
reference into this Prospectus have been audited by Barnard, Vogler & Co.,      
independent auditors, as stated in their report which is incorporated herein by 
reference. The financial statements of Dairy Fresh, L.P., a Delaware limited    
partnership, as of December 31, 1996 and 1995 and for the years then ended and  
the period from July 1, 1994 (date of acquisition) to December 31, 1994,        
incorporated by reference into this Prospectus have been audited by McGladrey & 
Pullen, LLP, independent auditors, as stated in their report which is           
incorporated herein by reference. The combined financial statements of The      
Garelick Companies, as of September 30, 1996 and 1995 and for each of the three 
years in the period ended September 30, 1996, incorporated by reference into    
this Prospectus have been audited by Coopers & Lybrand L.L.P., independent      
accountants, as stated in their report which is incorporated herein by          
reference. The consolidated financial statements of The Morningstar Group Inc., 
as of December 31, 1996 and 1995 and for each of the three years in the period  
ended December 31, 1996 included in or incorporated by reference into this      
Prospectus have been audited by Arthur Andersen LLP, independent accountants, as
indicated in their report with respect thereto. The combined financial          
statements of Presto Food Products, Inc. and Affiliate, as of December 31, 1995 
and 1994 and for each of the three years in the period ended December 31, 1995  
incorporated by reference into this Prospectus have been audited by Price       
Waterhouse LLP, independent auditors, as stated in their report incorporated    
herein by reference. Such financial statements are included herein or           
incorporated herein by reference in reliance upon the respective reports of such
firms given upon their authority as experts in accounting and auditing.         

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INDEX TO FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

SUIZA FOODS CORPORATION                                                                   
                                                                                          
  Independent Auditors' Report.......................................................  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
  Condensed Consolidated Balance Sheets.............................................. F-26
  Condensed Consolidated Statements of Operations.................................... F-27
  Condensed Consolidated Statements of Cash Flows.................................... F-28
  Notes to Condensed Consolidated Financial Statements............................... F-29

THE MORNINGSTAR GROUP INC.                                                                
  Independent Auditors' Report....................................................... F-33
  Consolidated Balance Sheets........................................................ F-34
  Consolidated Statements of Operations.............................................. F-35
  Consolidated Statements of Stockholders' Equity.................................... F-36
  Consolidated Statements of Cash Flows.............................................. F-37
  Notes to Consolidated Financial Statements......................................... F-39
  Condensed Consolidated Balance Sheets.............................................. F-56
  Condensed Consolidated Statements of Operations.................................... F-57
  Condensed Consolidated Statements of Cash Flows.................................... F-58
  Notes to Condensed Consolidated Financial Statements............................... F-60

COUNTRY FRESH, INC.                                                                       
  Independent Auditors' Report....................................................... F-62
  Consolidated Balance Sheets........................................................ F-63
  Consolidated Statements of Earnings................................................ F-64
  Consolidated Statements of Shareholders' Equity.................................... F-65
  Consolidated Statements of Cash Flows.............................................. F-66
  Notes to Consolidated Financial Statements......................................... F-67

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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, 1996 and 1995,  
and the related consolidated statements of operations, stockholders' equity and 
cash flows for each of the three years in the period ended December 31, 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 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, 1996 and 1995, and the results of  
their operations and their cash flows for each of the three years in the period 
ended December 31, 1996, in conformity with generally accepted accounting       
principles.                                                                     

                         DELOITTE & TOUCHE LLP

                         Deloitte & Touche LLP

Dallas, Texas                                                                   

February 18, 1997                                                               

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

DECEMBER 31, 1996 AND 1995

                                                        [Enlarge/Download Table]

                                                                                              1996        1995    
                                                                                           ----------  ---------- 
                                                                                               (IN THOUSANDS)     
                                                                                                                  
                                                      ASSETS                                                      

CURRENT ASSETS:                                                                                                   
  Cash and cash equivalents............................................................... $    8,951  $    3,177 
  Accounts receivable.....................................................................     50,608      31,045 
  Inventories.............................................................................     19,228      11,346 
  Prepaid expenses and other current assets...............................................      2,754       1,380 
  Refundable income taxes.................................................................      2,312             
  Deferred income taxes...................................................................      3,672       1,448 
                                                                                           ----------  ---------- 
    Total current assets..................................................................     87,525      48,396 

PROPERTY, PLANT AND EQUIPMENT.............................................................    123,260      92,715 
DEFERRED INCOME TAXES.....................................................................      8,524             
INTANGIBLE AND OTHER ASSETS...............................................................    164,839      91,411 
                                                                                           ----------  ---------- 

    TOTAL................................................................................. $  384,148  $  232,522 
                                                                                           ----------  ---------- 
                                                                                           ----------  ---------- 

                                       LIABILITIES AND STOCKHOLDERS' EQUITY                                       

CURRENT LIABILITIES:                                                                                              
  Accounts payable and accrued expenses................................................... $   46,664  $   31,957 
  Income taxes payable....................................................................      1,105       2,415 
  Current portion of long-term debt.......................................................     12,876      15,578 
                                                                                           ----------  ---------- 
    Total current liabilities.............................................................     60,645      49,950 

LONG-TERM DEBT............................................................................    226,693     171,745 
DEFERRED INCOME TAXES.....................................................................      3,278       1,367 
COMMITMENTS AND CONTINGENCIES.............................................................                        
STOCKHOLDERS' EQUITY:                                                                                             
  Preferred stock.........................................................................                        
  Common stock, 10,741,729 and 6,313,479 shares issued and outstanding....................        107          63 
  Additional paid-in capital..............................................................     89,337      31,023 
  Retained earnings (deficit).............................................................      4,088     (21,626)
                                                                                           ----------  ---------- 
    Total stockholders' equity............................................................     93,532       9,460 
                                                                                           ----------  ---------- 
    TOTAL................................................................................. $  384,148  $  232,522 
                                                                                           ----------  ---------- 
                                                                                           ----------  ---------- 

See notes to consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                        [Enlarge/Download Table]

                                                                             1996          1995          1994     
                                                                         ------------  ------------  ------------ 
                                                                         (DOLLARS IN THOUSANDS EXCEPT SHARE DATA) 
                                                                                                                  
NET SALES............................................................... $    520,916  $    430,466  $    341,108 
COST OF SALES...........................................................      388,548       312,633       240,468 
                                                                         ------------  ------------  ------------ 
GROSS PROFIT............................................................      132,368       117,833       100,640 
OPERATING COSTS AND EXPENSES:                                                                                     
  Selling and distribution..............................................       70,709        64,289        54,248 
  General and administrative............................................       21,913        19,277        16,935 
  Amortization of intangibles...........................................        4,624         3,703         3,697 
                                                                         ------------  ------------  ------------ 
  Total operating costs and expenses....................................       97,246        87,269        74,880 
                                                                         ------------  ------------  ------------ 
INCOME FROM OPERATIONS..................................................       35,122        30,564        25,760 
OTHER (INCOME) EXPENSE:                                                                                           
  Interest expense, net.................................................       17,470        19,921        19,279 
  Merger and other costs................................................          571        10,238         1,660 
  Other income, net.....................................................       (4,012)         (469)         (268)
                                                                         ------------  ------------  ------------ 
  Total other (income) expense..........................................       14,029        29,690        20,671 
                                                                         ------------  ------------  ------------ 
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS.......................       21,093           874         5,089 
INCOME TAXES (BENEFIT)..................................................       (6,836)        2,450           844 
                                                                         ------------  ------------  ------------ 
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS.................................       27,929        (1,576)        4,245 
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT....................        2,215         8,462           197 
                                                                         ------------  ------------  ------------ 
NET INCOME (LOSS)....................................................... $     25,714  $    (10,038) $      4,048 
                                                                         ------------  ------------  ------------ 
                                                                         ------------  ------------  ------------ 
NET EARNINGS (LOSS) PER SHARE:                                                                                    
  Income (loss) before extraordinary loss............................... $       2.81  $      (0.26) $       0.69 
  Extraordinary loss....................................................        (0.22)        (1.38)        (0.03)
                                                                         ------------  ------------  ------------ 
  Net income (loss)..................................................... $       2.59  $      (1.64) $       0.66 
                                                                         ------------  ------------  ------------ 
                                                                         ------------  ------------  ------------ 
WEIGHTED AVERAGE SHARES OUTSTANDING.....................................    9,921,822     6,109,398     6,156,387 
                                                                         ------------  ------------  ------------ 
                                                                         ------------  ------------  ------------ 

See notes to consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                        [Enlarge/Download Table]

                                                  COMMON STOCK         ADDITIONAL                 RETAINED              
                                            -------------------------    PAID-IN                  EARNINGS              
                                               SHARES       AMOUNT       CAPITAL     WARRANTS    (DEFICIT)     TOTAL    
                                            ------------  -----------  -----------  -----------  ----------  ---------- 
                                                                      (DOLLARS IN THOUSANDS)                            
                                                                                                                        
BALANCE, JANUARY 1, 1994...................       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 11)...........                                 5,111                                 5,111 
  Net loss.................................                                                         (10,038)    (10,038)
  69 for 1 stock split (Note 11)...........    6,221,979          62          (62)                               --     
                                            ------------       -----   -----------       -----   ----------  ---------- 
BALANCE, DECEMBER 31, 1995.................    6,313,479          63       31,023       --          (21,626)      9,460 
  Issuance of common stock.................    4,428,250          44       58,314                                58,358 
  Net income...............................                                                          25,714      25,714 
                                            ------------       -----   -----------       -----   ----------  ---------- 
BALANCE, DECEMBER 31, 1996.................   10,741,729   $     107    $  89,337    $  --       $    4,088  $   93,532 
                                            ------------       -----   -----------       -----   ----------  ---------- 
                                            ------------       -----   -----------       -----   ----------  ---------- 

See notes to consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                        [Enlarge/Download Table]

                                                                                1996         1995         1994    
                                                                             -----------  -----------  ---------- 
                                                                                        (IN THOUSANDS)            
                                                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                             
  Net income (loss)......................................................... $    25,714  $   (10,038) $    4,048 
  Adjustments to reconcile net income (loss) to net cash provided by                                              
    operating activities:                                                                                         
    Depreciation............................................................       9,930        9,258       8,244 
    Amortization of intangible assets, including deferred financing costs...       5,458        4,686       4,876 
    Gain on the sale of assets..............................................         (21)        (265)       (177)
    Extraordinary loss from early extinguishment of debt....................       2,215        8,462         197 
    Merger and other nonrecurring costs.....................................         571       10,238       1,660 
    Noncash and imputed interest............................................         236        1,087         483 
    Minority interests......................................................                      101         556 
    Deferred income taxes...................................................      (8,895)        (414)        333 
    Changes in operating assets and liabilities:                                                                  
      Accounts receivable...................................................      (5,187)      (1,881)       (108)
      Inventories...........................................................      (3,346)        (599)        (73)
      Prepaid expenses and other assets.....................................        (163)       1,007        (222)
      Refundable income taxes...............................................      (2,312)                         
      Accounts payable and accrued expenses.................................         967          716       4,862 
      Income tax payable....................................................      (1,575)         649         254 
                                                                             -----------  -----------  ---------- 
      Net cash provided by operating activities.............................      23,592       23,007      24,933 
                                                                             -----------  -----------  ---------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                             
  Additions to property, plant and equipment................................     (14,022)     (10,392)     (4,784)
  Proceeds from sale of property, plant and equipment.......................         500          691         245 
  Purchases of investments and other assets.................................                               (1,608)
  Cash outflows for acquisitions............................................    (111,380)      (2,425)    (61,357)
                                                                             -----------  -----------  ---------- 
    Net cash used in investing activities...................................    (124,902)     (12,126)    (67,504)
                                                                             -----------  -----------  ---------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                             
  Proceeds from the issuance of debt........................................     110,550      154,505      67,585 
  Repayment of debt.........................................................     (58,304)    (154,387)    (30,906)
  Payments of deferred financing, debt restructuring and merger costs.......      (3,520)      (8,972)     (1,660)
  Issuance of common stock, net of expenses                                       58,358        4,087       5,677 
  Purchase of subsidiary preferred stock and minority interests.............                   (8,332)        (61)
                                                                             -----------  -----------  ---------- 
    Net cash provided by (used in) financing activities.....................     107,084      (13,099)     40,635 
                                                                             -----------  -----------  ---------- 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................       5,774       (2,218)     (1,936)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............................       3,177        5,395       7,331 
                                                                             -----------  -----------  ---------- 
CASH AND CASH EQUIVALENTS, END OF PERIOD.................................... $     8,951  $     3,177  $    5,395 
                                                                             -----------  -----------  ---------- 
                                                                             -----------  -----------  ---------- 

See notes to consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

BUSINESS.  Suiza Foods Corporation (the "Company" or "Suiza Foods") is a
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
Florida, California and Nevada; and packaged ice in Florida and the southwestern
United States.                                                                  

    On March 31, 1995, the Company became the holding company for the operations
of Suiza Holdings, L.P. and subsidiaries; Velda Holdings, L.P.; Velda Holdings, 
Inc. and subsidiaries; and Reddy Ice Corporation (collectively, the "Combined   
Entities") through the issuance of 6,313,479 shares of its common stock in      
exchange for all of the outstanding equity interests of the Combined Entities.  
The Company accounted for this 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, which, in the case of Velda Farms, only       
includes the results of operations from April 10, 1994, the date it was acquired
in a purchase business combination.                                             

    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. Certain prior year amounts have been reclassified to conform to      
current year presentation.                                                      

   PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include
the accounts of the Company; its U.S. operating subsidiaries, Velda Farms, Inc. 
("Velda Farms"), Swiss Dairy Corporation ("Swiss Dairy"), Model Dairy, Inc.     
("Model Dairy") and Reddy Ice Corporation ("Reddy Ice"); and its Puerto Rico    
operating subsidiaries, Suiza Dairy Corporation ("Suiza Dairy"), Suiza Fruit    
Corporation ("Suiza Fruit"), Neva Plastics Manufacturing Corp. ("Neva Plastics")
and Garrido & Compania ("Garrido") (collectively, "Suiza-Puerto Rico"). 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:                      

                                                        [Enlarge/Download Table]

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      

   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.       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       
INTANGIBLE ASSETS.  Intangible assets include the following intangibles 
which are amortized over their related useful lives:                            

                                                        [Enlarge/Download Table]

INTANGIBLE ASSET                                                USEFUL LIFE                   
-------------------------------------------  -------------------------------------------------
                                                                                              
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 the terms of the       
                                             agreements                                       
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             

    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. Gains or losses on other agreements not designated as hedges are      
included in income as incurred. 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.  Since March 31, 1995, the Company's U.S. operating       
subsidiaries have been included in the consolidated tax return of the Company.  
The Company's Suiza Dairy, Suiza Fruit and Neva Plastics subsidiaries are       
organized as Delaware companies and are required to file separate U.S. and      
Puerto Rico income tax returns; however, 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. Garrido is organized under the laws of the     
Commonwealth of Puerto Rico and is only required to file a separate tax return  
in Puerto Rico.                                                                 

 Effective January 1, 1996, substantially all of the Company's Puerto Rico
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. Prior to this date, only   
the Company's Suiza Fruit and Neva Plastics subsidiaries had similar exemptions 
through separate tax grants in Puerto Rico. These operations are, however,      
subject to a 10% withholding tax on distributions from Puerto Rico to the United
States.                                                                         

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       
  Prior to March 31, 1995, the Combined Entities were separate taxpayers and
income taxes were provided for in the financial statements, where applicable,   
based on each company's separate income tax return and tax status. As a result, 
since 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.                                                                    

    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 11), including common equivalent shares, when
dilutive.                                                                       

2. ACQUISITIONS                                                                 

  In April 1994, the Company 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.                                                              

    In June 1994, the Company 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.            

   In November 1994, the Company 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.               

 In July 1996, the Company acquired all of the outstanding common stock of
Garrido for approximately $35.8 million, including related acquisition and      
financing costs, which was funded primarily by additional term loan borrowings  
under the Senior Credit Facility. In connection with this acquisition, the      
purchase agreement requires the payment of a contingent purchase price of up to 
$5.5 million based on the future performance of this operation, which will be   
accounted for as an adjustment to the purchase price when this contingency is   
resolved should a payment of all or a portion of this contingent purchase price 
be required. In addition, as a result of the adoption of the Puerto Rico        
Agricultural Tax Incentives Act of 1995, as discussed in more detail in Note 10,
the Company may be eligible for tax credits on a portion of its                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

2. ACQUISITIONS (CONTINUED)                                                     
investment in Garrido of between $6.2 million and $8.8 million, which are       
dependent on the receipt of a favorable ruling on the availability of such tax  
credits from the Treasury Department in Puerto Rico. Should a favorable ruling  
on these tax credits be received, the Company will account for these tax        
benefits as an adjustment of the purchase price, which would result in a        
reduction of goodwill.                                                          

    In September 1996, the Company acquired all of the net assets of Swiss Dairy
for approximately $55.1 million, including related acquisition costs, which was 
funded primarily by borrowings under the revolving credit and acquisition       
facilities of the Senior Credit Facility.                                       

    In December 1996, the Company acquired all of the net assets of Model Dairy,
along with certain assets held by affiliates of the seller, for approximately   
$27.0 million, including related acquisition costs, which was funded primarily  
by borrowings under the acquisition facility of the Senior Credit Facility.     

In addition to the above acquisitions, during 1996, 1995 and 1994, the  
Company acquired certain net assets of and entered into noncompetition          
arrangements with 18 separate ice companies and two dairies for cash, including 
costs and expenses, of approximately $8.4 million in 1996, $2.4 million in 1995 
and $.3 million in 1994, along with the issuance of notes payable to the sellers
of approximately $.2 million in 1996, $.1 million in 1995 and $.4 million in    
1994, all of which were funded by Senior Credit Facility borrowings.            

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:     

                                                        [Enlarge/Download Table]

                                                                  YEAR ENDED DECEMBER 31,      
                                                             --------------------------------- 
                                                                1996       1995        1994    
                                                             ----------  ---------  ---------- 
                                                                      (IN THOUSANDS)           
                                                                                               
Purchase prices:                                                                               
  Net cash paid............................................. $  111,380  $   2,425  $   61,357 
  Subsidiary preferred stock issued                                                      3,000 
  Notes and amounts payable to seller.......................        173         91       4,495 
  Cash acquired in acquisitions.............................     14,937                    142 
                                                             ----------  ---------  ---------- 
Total purchase prices.......................................    126,490      2,516      68,994 
Fair values of net assets acquired:                                                            
  Fair values of assets acquired............................     63,598      2,317      53,590 
  Liabilities assumed.......................................    (14,076)               (10,924)
                                                             ----------  ---------  ---------- 
Total net assets acquired...................................     49,522      2,317      42,666 
                                                             ----------  ---------  ---------- 
Goodwill.................................................... $   76,968  $     199  $   26,328 
                                                             ----------  ---------  ---------- 
                                                             ----------  ---------  ---------- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

2. ACQUISITIONS (CONTINUED)                                                     

 The following table presents unaudited pro forma results of operations of
the Company for the years ended December 31, 1995 and 1996, as if the above 1996
acquisitions had occurred at the beginning of 1995.                             

                                                        [Enlarge/Download Table]

                                                                        YEAR ENDED DECEMBER   
                                                                                31,           
                                                                       ---------------------- 
                                                                          1996        1995    
                                                                       ----------  ---------- 
                                                                       (IN THOUSANDS, EXCEPT  
                                                                          PER SHARE DATA)     
                                                                                              
Net sales............................................................. $  662,174  $  634,186 
Income before extraordinary loss......................................     30,634       2,008 
Net income (loss).....................................................     28,419      (6,454)
Earnings (loss) per share.............................................       2.86       (1.06)

    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 1995, nor do they purport to be       
indicative of the future results of operations of the Company.                  

3. ACCOUNTS RECEIVABLE                                                          

                                                        [Enlarge/Download Table]

                                                                             DECEMBER 31,     
                                                                         -------------------- 
                                                                           1996       1995    
                                                                         ---------  --------- 
                                                                            (IN THOUSANDS)    
                                                                                              
Trade customers, including route receivables............................ $  47,785  $  28,435 
Milk industry and milk price stabilization fund.........................       168      1,839 
Suppliers...............................................................       715        604 
Officers and employees..................................................       554        425 
Other...................................................................     2,594      1,090 
                                                                         ---------  --------- 
                                                                            51,816     32,393 
Less allowance for doubtful accounts....................................    (1,208)    (1,348)
                                                                         ---------  --------- 
                                                                         $  50,608  $  31,045 
                                                                         ---------  --------- 
                                                                         ---------  --------- 

4. INVENTORIES                                                                  

                                                        [Enlarge/Download Table]

                                                                             DECEMBER 31,    
                                                                         --------------------
                                                                           1996       1995   
                                                                         ---------  ---------
                                                                            (IN THOUSANDS)   
                                                                                             
Pasteurized and raw milk and raw materials.............................. $   7,693  $   4,278
Parts and supplies......................................................     5,584      3,105
Finished goods..........................................................     5,951      3,963
                                                                         ---------  ---------
                                                                         $  19,228  $  11,346
                                                                         ---------  ---------
                                                                         ---------  ---------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

5. PROPERTY, PLANT AND EQUIPMENT                                                

                                                        [Enlarge/Download Table]

                                                                            DECEMBER 31,      
                                                                       ---------------------- 
                                                                          1996        1995    
                                                                       ----------  ---------- 
                                                                           (IN THOUSANDS)     
                                                                                              
Land.................................................................. $   20,104  $   15,582 
Buildings and improvements............................................     45,016      33,264 
Machinery and equipment...............................................     63,614      47,119 
Motor vehicles........................................................     13,173       9,994 
Furniture and fixtures................................................     22,360      18,219 
                                                                       ----------  ---------- 
                                                                          164,267     124,178 
Less accumulated depreciation.........................................    (41,007)    (31,463)
                                                                       ----------  ---------- 
                                                                       $  123,260  $   92,715 
                                                                       ----------  ---------- 
                                                                       ----------  ---------- 

6. INTANGIBLE AND OTHER ASSETS                                                  

                                                        [Enlarge/Download Table]

                                                                            DECEMBER 31,      
                                                                        --------------------- 
                                                                           1996       1995    
                                                                        ----------  --------- 
                                                                           (IN THOUSANDS)     
                                                                                              
Goodwill............................................................... $  155,242  $  78,503 
Identifiable intangibles...............................................     14,652     13,374 
Deferred financing costs...............................................      5,248      6,018 
Deposits and other.....................................................        724        994 
                                                                        ----------  --------- 
                                                                           175,866     98,889 
Less accumulated amortization..........................................    (11,027)    (7,478)
                                                                        ----------  --------- 
                                                                        $  164,839  $  91,411 
                                                                        ----------  --------- 
                                                                        ----------  --------- 

7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                        

                                                        [Enlarge/Download Table]

                                                                             DECEMBER 31,    
                                                                         --------------------
                                                                           1996       1995   
                                                                         ---------  ---------
                                                                            (IN THOUSANDS)   
                                                                                             
Accounts payable........................................................ $  31,005  $  21,689
Accrued payroll and benefits............................................     7,294      5,033
Accrued interest........................................................     1,413      1,845
Accrued insurance.......................................................     3,437      2,436
Other...................................................................     3,515        954
                                                                         ---------  ---------
                                                                         $  46,664  $  31,957
                                                                         ---------  ---------
                                                                         ---------  ---------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

8. LONG-TERM DEBT                                                               

                                                        [Enlarge/Download Table]

                                                                            DECEMBER 31,      
                                                                       ---------------------- 
                                                                          1996        1995    
                                                                       ----------  ---------- 
                                                                           (IN THOUSANDS)     
                                                                                              
Senior Credit Facility:                                                                       
  Revolving loan facility............................................. $    8,600  $   10,900 
  Acquisition facility................................................     69,100             
  Term loans..........................................................    125,000     123,750 
Subordinated notes....................................................     36,000      51,101 
Capital lease obligations and other...................................        869       1,572 
                                                                       ----------  ---------- 
                                                                          239,569     187,323 
Less current portion..................................................    (12,876)    (15,578)
                                                                       ----------  ---------- 
                                                                       $  226,693  $  171,745 
                                                                       ----------  ---------- 
                                                                       ----------  ---------- 

    SENIOR CREDIT FACILITY.  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 facility; (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 defined  
in the Senior Credit Facility); or (ii) The London Interbank Offering Rate      
("LIBOR") 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. The blended interest rate in effect at 
December 31, 1996, on the Senior Credit Facility was 7.2%.                      

  Interest is payable quarterly, and scheduled principal installments on the
term loan facilities are due in quarterly installments of approximately $2.5    
million through June 1997, increasing to $3.75 million on September 30, 1997,   
$5.0 million on September 30, 1998, $5.375 million on September 30, 1999, and   
$6.0 million on September 30, 2000, with the remaining unpaid balance due on    
March 31, 2002. Loans under the Senior Credit Facility are collateralized by    
substantially all assets.                                                       

SUBORDINATED NOTES.  On March 31, 1995, the Company issued subordinated 
notes, which carried interest rates ranging from 12% to 15%, to replace certain 
of the existing subordinated notes of the Combined Entities. On April 22, 1996, 
the Company used $15.7 million of the net proceeds from its initial public      
offering to repay all the outstanding principal balances of the 15% subordinated
notes. The remaining subordinated notes bear interest at rates ranging from 12% 
to 13.5% (12.5% on a weighted                                                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

8. LONG-TERM DEBT (CONTINUED)                                                   
average basis), payable on a semiannual basis in March and September of each    
year, with semiannual principal installments due in varying amounts commencing  
in 2001, with the remaining unpaid principal balances due at maturity on March  
31, 2004. The notes are subordinated to the loans under the Senior Credit       
Facility. As is discussed in Note 19, in January 1997, the Company repaid all of
the outstanding principal balances of these remaining subordinated notes with a 
portion of the proceeds from the sale of common stock.                          

  OTHER DEBT.  Other debt includes various promissory notes for the purchase
of property, plant and equipment and capital lease obligations. 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 principal and interest and are collateralized
by the related assets financed.                                                 

INTEREST RATE AGREEMENTS.  The Company has five interest rate derivative
agreements 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 $14.0 million, matures in   
May 1997 and caps interest on LIBOR loans at 7.5%, plus the applicable LIBOR    
margin. The second and third agreements, each of which has a notional amount of 
$27.5 million and mature in June 1998, fix the interest rates on LIBOR loans at 
6.0%, plus the applicable LIBOR margin. The fourth and fifth agreements, which  
each have a notional amount of $25.0 million and mature in December 1997, fix   
the interest rates on LIBOR loans at 6.01%, plus the applicable LIBOR margin.   
These derivative agreements provide hedges for the Senior Credit Facility loans 
by limiting or fixing the LIBOR interest rates specified in the Senior Credit   
Facility (5.6% at December 31, 1996) at the above rates until the indicated     
expiration dates of these interest-rate-derivative agreements. The original     
costs and premiums of these derivative agreements are being amortized on a      
straight-line basis as a component of interest expense. 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 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.        

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.              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

8. LONG-TERM DEBT (CONTINUED)                                                   
SCHEDULED MATURITIES.  The scheduled maturities of long-term debt, which
include capitalized lease obligations, at December 31, 1996, were as follows (in
thousands):                                                                     

                                                                [Download Table]
                                                                             
1997..............................................................  $  12,876
1998..............................................................     19,544
1999..............................................................     24,348
2000..............................................................     34,826
2001..............................................................     29,206
Thereafter........................................................    118,769
                                                                    ---------
                                                                    $ 239,569
                                                                    ---------
                                                                    ---------

9. 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, along with additional rentals,   
based on miles driven or units produced. Rent expense, including additional     
rent, was $8.0 million, $6.3 million and $4.5 million for the years ended       
December 31, 1996, 1995 and 1994, respectively.                                 

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

                                                        [Enlarge/Download Table]

                                                                                 DECEMBER 31,     
                                                                             -------------------- 
                                                                               1996       1995    
                                                                             ---------  --------- 
                                                                                (IN THOUSANDS)    
                                                                                                  
Machinery and equipment..................................................... $     812  $   1,370 
Less accumulated amortization...............................................      (366)      (415)
                                                                             ---------  --------- 
                                                                             $     446  $     955 
                                                                             ---------  --------- 
                                                                             ---------  --------- 

 Future minimum payments at December 31, 1996, under noncancelable capital
and operating leases with terms in excess of one year are summarized below (in  
thousands):                                                                     

                                                        [Enlarge/Download Table]

                                                                            CAPITAL     OPERATING 
                                                                            LEASES       LEASES   
                                                                          -----------  -----------
                                                                                                  
1997.....................................................................  $     185    $   4,539 
1998.....................................................................        152        4,006 
1999.....................................................................        112        3,188 
2000.....................................................................                   2,692 
2001.....................................................................                   2,216 
Thereafter...............................................................                   2,770 
                                                                               -----   -----------
Total minimum lease payments.............................................        449    $  19,411 
                                                                                       -----------
                                                                                       -----------
Less amount representing imputed interest................................        (27)             
                                                                               -----              
Present value of capitalized lease obligations...........................  $     422              
                                                                               -----              
                                                                               -----              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

10. INCOME TAXES                                                                

The provisions for income taxes (benefit), excluding the current tax    
benefits of $0.9 million and $0.7 million applicable to the extraordinary losses
during 1996 and 1995, respectively, are as follows:                             

                                                        [Enlarge/Download Table]

                                                                       YEAR ENDED DECEMBER 31,    
                                                                   -------------------------------
                                                                     1996       1995       1994   
                                                                   ---------  ---------  ---------
                                                                           (IN THOUSANDS)         
                                                                                                  
Current taxes payable:                                                                            
  Federal......................................................... $   1,925  $   2,763  $     491
  State...........................................................       134        101         20
Deferred income taxes.............................................    (8,895)      (414)       333
                                                                   ---------  ---------  ---------
                                                                   $  (6,836) $   2,450  $     844
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------

    The following is a reconciliation of income taxes expense (benefit) reported
in the statements of operations:                                                

                                                        [Enlarge/Download Table]

                                                                   YEAR ENDED DECEMBER 31,      
                                                               -------------------------------- 
                                                                  1996       1995       1994    
                                                               ----------  ---------  --------- 
                                                                        (IN THOUSANDS)          
                                                                                                
Tax expense at statutory rates...............................  $    7,383  $     306  $   1,959 
Tax benefit from tax-exempt earnings.........................      (2,711)    (1,532)    (2,745)
Tax expense from losses not subject to taxes at the corporate                                   
  level......................................................                  1,612            
Puerto Rico tax credits......................................     (11,750)                      
Net operating loss carryforwards.............................                    188      1,344 
Nondeductible expenses.......................................                  1,841        202 
Other........................................................         242         35         84 
                                                               ----------  ---------  --------- 
                                                               $   (6,836) $   2,450  $     844 
                                                               ----------  ---------  --------- 
                                                               ----------  ---------  --------- 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

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

                                                        [Enlarge/Download Table]

                                                                               DECEMBER 31,     
                                                                           -------------------- 
                                                                             1996       1995    
                                                                           ---------  --------- 
                                                                              (IN THOUSANDS)    
                                                                                                
Deferred income tax assets:                                                                     
  Asset valuation reserves................................................ $     244  $     326 
  Nondeductible accruals..................................................     1,785      1,122 
  Puerto Rico tax credits.................................................    10,076            
  Net operating loss carryforwards........................................        91      1,989 
  Valuation allowance.....................................................               (1,989)
                                                                           ---------  --------- 
                                                                              12,196      1,448 
Deferred income tax liabilities:                                                                
  Depreciation............................................................    (1,174)       312 
  Amortization of intangibles.............................................    (2,177)    (1,185)
  Foreign distributions and other.........................................        73       (494)
                                                                           ---------  --------- 
                                                                              (3,278)    (1,367)
                                                                           ---------  --------- 
Net deferred income tax asset............................................. $   8,918  $      81 
                                                                           ---------  --------- 
                                                                           ---------  --------- 

These net deferred income tax assets are classified in the consolidated 
balance sheet as follows:                                                       

                                                        [Enlarge/Download Table]

                                                                              DECEMBER 31,     
                                                                          -------------------- 
                                                                            1996       1995    
                                                                          ---------  --------- 
                                                                             (IN THOUSANDS)    
                                                                                               
Current assets........................................................... $   3,672  $   1,448 
Noncurrent assets........................................................     8,524            
Noncurrent liabilities...................................................    (3,278)    (1,367)
                                                                          ---------  --------- 
                                                                          $   8,918  $      81 
                                                                          ---------  --------- 
                                                                          ---------  --------- 

 The Company had established a valuation allowance for deferred tax assets
related to net operating loss carryforwards of the Company's Suiza Dairy        
subsidiary in Puerto Rico, which under Puerto Rico law were only available for  
utilization against future taxable income of this subsidiary. Because of the    
continuing operating losses of this subsidiary, the Company was unable to       
determine that it is more likely than not that the net deferred tax assets of   
this subsidiary would be realized. During 1996, the deferred tax asset related  
to these net operating loss carryforwards and the related valuation allowance   
was substantially eliminated as a result of the reduction in tax rates in Puerto
Rico from the Puerto Rico Agricultural Tax Incentives Act of 1995.              

 In December 1995, the Commonwealth of Puerto Rico adopted the Puerto Rico
Agricultural Tax Incentives Act of 1995, which reduced the effective income tax 
rate for qualified agricultural business from 39% to 3.9% and provided for a 50%
tax credit for certain "eligible investments" in qualified agricultural         
businesses in Puerto Rico. During 1996, the Company made investments in its     
Puerto Rico dairy, fruit,                                                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

10. INCOME TAXES (CONTINUED)                                                    
plastics and Garrido operations, all of which were certified as qualified       
agricultural businesses in Puerto Rico during 1996.                             

  In connection with these investments, the Company believes that it has met
the eligible investment criteria of this act related to its investment in its   
Puerto Rico dairy subsidiary. Accordingly, in 1996, the Company recognized      
$15.75 million in tax credits related to this qualifying investment. Of this    
amount, the Company (i) sold $4.0 million of tax credits to third parties,      
resulting in a cash gain of $3.4 million (net of a discount and related         
expenses), which is recorded in other income, and (ii) recognized a deferred tax
asset for the remainder of the tax credit in the amount of $11.75 million,      
resulting in a corresponding credit to tax expense. These tax credits can be    
used by the Company to eliminate both Puerto Rico income taxes and the 10%      
Puerto Rico withholding tax on distributions from the Company's Puerto Rico     
operations.                                                                     

   The Company is currently investigating whether its $43.0 million investment
in its fruit and plastics operations will qualify for tax credits based on      
recent rulings by Puerto Rico tax authorities and has requested a formal ruling 
on the allowability of such tax credits from the Treasury Department in Puerto  
Rico. If a favorable ruling on the availability of these additional tax credits 
is obtained, the Company will recognize substantial additional tax benefits in  
the form of either a deferred tax asset or proceeds from the sale of such       
credits.                                                                        

11. STOCKHOLDERS' EQUITY                                                        

   CAPITAL SHARES.  Authorized capital shares of the Company include 1,000,000
shares of preferred stock with a par value of $.01 per share and 20,000,000     
shares 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 established by the Company's Board of Directors upon        
issuance. On March 31, 1995, the Company issued 6,313,479 shares of common stock
in exchange for all of the outstanding equity interests of the Combined         
Entities, including profits interests that were granted to certain individuals  
as compensation for services in identifying, structuring and negotiating certain
acquisitions. Immediately prior to the combination date, the existing investors 
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. 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 OFFERINGS.  On April 22, 1996, the Company sold 3,795,000 shares of
common stock, $.01 par value per share, in an initial 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. The public offering   
provided net cash proceeds to the Company of approximately $48.6 million. Of    
this amount, $31.1 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                                                                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

11. STOCKHOLDERS' EQUITY (CONTINUED)                                            
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. In addition, on August
7, 1996, the Company sold 625,000 shares of its common stock at a price of      
$16.00 per share in a private placement to a single investor. Following the     
private sale, the Company had 10,739,729 shares of common stock issued and      
outstanding. As is discussed in more detail in Note 19, in January 1997, the    
Company completed the sale of additional shares of its common stock.            

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, 1996,
577,760 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.                                                

    Effective March 31, 1995, the Company also 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. 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 December 31, 1995, 477,825 options were outstanding
at an exercise price of $10.51 per share, of which 3,450 shares were            
exercisable.                                                                    

   In 1996, the Company granted options to purchase 398,153 shares at exercise
prices ranging from $12.32 to $17.50 per share. At December 31, 1996, 873,978   
options were outstanding at exercise prices ranging from $10.51 to $17.50 per   
share, of which 739,035 shares were exercisable.                                

 Effective January 1, 1997, the Board of Directors authorized the grant of
options for 141,500 shares at an exercise price of $20.25 per share.            

The Company applies APB Opinion No. 25 and related interpretations in   
accounting for its stock option plans, and accordingly, no compensation has been
recognized since stock options granted under these plans were at exercise prices
which approximated market value at the grant date. Had compensation expense been
determined for current period stock option grants using fair value methods      
provided for in                                                                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

11. STOCKHOLDERS' EQUITY (CONTINUED)                                            
SFAS 123, the Company's pro forma net income (loss) and net earnings (loss) per 
common share would have been the amounts indicated below:                       

                                                        [Enlarge/Download Table]

                                                                                            YEAR ENDED DECEMBER   
                                                                                                    31,           
                                                                                           ---------------------- 
                                                                                              1996        1995    
                                                                                           ----------  ---------- 
                                                                                           (IN THOUSANDS, EXCEPT  
                                                                                                SHARE DATA)       
                                                                                                                  
Compensation cost......................................................................... $    1,697  $      765 
Net income (loss):                                                                                                
  As reported............................................................................. $   25,714  $  (10,038)
  Pro forma...............................................................................     24,611     (10,543)
Net earnings (loss) per share:                                                                                    
  As reported............................................................................. $     2.59  $    (1.64)
  Pro forma...............................................................................       2.48       (1.73)
Stock option share data:                                                                                          
  Stock options granted during period.....................................................    398,153     477,825 
  Weighted average exercise price......................................................... $    14.87  $    10.51 
  Average option compensation value (a)...................................................       8.86        6.41 

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

(a) Calculated in accordance with the Black-Scholes option pricing model, using 
the following assumptions: expected volatility of 30% to 35%; expected  
  dividend yield of 0%; expected option term of ten years and risk-free rate
   of return as of the date of grant which ranged from 5.64% to 7.15% based on
the yield of ten-year U.S. treasury securities.                         

WARRANTS.  Prior to March 31, 1995, each of the Combined Entities 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 the Combined Entities in consideration for aggregate proceeds of   
$4.1 million and received shares of the Company's common stock in the           
combination.                                                                    

12. PENSION AND PROFIT SHARING PLANS                                            

The Company's subsidiaries each sponsor an employees savings and profit 
sharing plan. Non-union 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 plans can generally
make contributions to the plans of between 6% and 8% of their annual            
compensation, and each of the subsidiaries can elect to match such              
contributions. During each of the years ended December 31, 1996, 1995 and 1994, 
the Company expensed contributions to the plans of approximately $0.8 million.  

Certain of the Company's recently acquired subsidiaries participate in  
various multiemployer union pension plans, which are administered jointly by    
management and union representatives and which sponsor most full-time and       
certain part-time union employees who are not covered by the Company's other    
plans. The pension expense for these plans approximated $0.2 million during     
1996. The Company                                                               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

12. PENSION AND PROFIT SHARING PLANS (CONTINUED)                                
could, under certain circumstances, be liable for unfunded vested benefits or   
other expenses of jointly administered union/management plans. At this time, the
Company has not established any liabilities because withdrawal from these plans 
is not probable or reasonably possible.                                         

13. MERGER AND OTHER COSTS                                                      

  MERGER AND OTHER COSTS.  During 1995 and 1994, the Company incurred merger
and other costs of $10.2 million and $1.7 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 $8.8 million and $1.4 million in 1995 and   
1994, respectively; and other non-operating costs of $1.4 million and $0.3      
million, respectively. During 1995, these other merger costs included a one-time
$0.5 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 $0.4 million in    
unamortized organization costs; and $5.1 million to recognize compensation      
expense related to the issuance of common stock in exchange for a negotiated    
profits interest (Note 12), which resulted in a capital contribution in the same
amount. Other non-operating costs included $0.3 million of bank fees in 1994    
related to the funding of bridge loans to repay certain indebtedness, and during
1995, $0.7 million of costs associated with several uncompleted acquisitions and
$0.7 million of costs associated with an uncompleted debt offering.             

During 1996, the Company expensed non-operating costs of $0.6 million in
connection with fees and expenses paid to amend its Senior Credit Facility.     

EXTRAORDINARY LOSS.  During 1996, 1995 and 1994, as a result of the     
repayment of the outstanding indebtedness, the Company expensed approximately   
$2.2 million (net of income tax benefit of $0.9 million), $8.5 million (net of  
income tax benefit of $0.7 million) and $0.2 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."            

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

14. SUPPLEMENTAL CASH FLOW INFORMATION                                          

                                                        [Enlarge/Download Table]

                                                                                      YEAR ENDED DECEMBER 31,    
                                                                                  -------------------------------
                                                                                    1996       1995       1994   
                                                                                  ---------  ---------  ---------
                                                                                          (IN THOUSANDS)         
                                                                                                                 
Cash paid for interest........................................................... $  16,932  $  17,226  $  16,929
Cash paid for taxes..............................................................     4,662      1,432        362
Noncash transactions:                                                                                            
  Issuance of subsidiary preferred stock in connection with acquisitions.........                           3,000
  Issuance of subordinated notes and amounts payable to the seller in connection                                 
    with acquisitions............................................................       173         91      4,495
Dividends payable or paid in additional preferred stock on subsidiary stock......                             197
  Distribution of investment and related debt in a bread bag manufacturer to                                     
    shareholders 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....................................       236        671        430

15. 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 addition, the Company is a party to 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 providing for monthly payments of $12,500 for services to be     
rendered in the future, which expires in March 1998.                            

16. RELATED PARTY TRANSACTIONS                                                  

   Prior to March 31, 1995, 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, 1995 and 1994, 
the Company expensed $0.2 million and $0.9 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 $1.1 million, along with related    
expenses, during the year ended December 31, 1994, for acquisition and financing
services, which were included as part of the costs and expenses of the          
acquisition.                                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

17. 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, 1996,  
is as follows:                                                                  

                                                        [Enlarge/Download Table]

                                                               YEAR ENDED DECEMBER 31,      
                                                          ----------------------------------
                                                             1996        1995        1994   
                                                          ----------  ----------  ----------
                                                                    (IN THOUSANDS)          
                                                                                            
Net sales to unaffiliated customers:                                                        
  Dairy:                                                                                    
    United States........................................ $  252,826  $  175,553  $  102,073
    Puerto Rico..........................................    215,306     204,406     191,334
                                                          ----------  ----------  ----------
                                                             468,132     379,959     293,407
  Ice--United States.....................................     52,784      50,507      47,701
                                                          ----------  ----------  ----------
  Total.................................................. $  520,916  $  430,466  $  341,108
                                                          ----------  ----------  ----------
                                                          ----------  ----------  ----------
Operating income:                                                                           
  Dairy:                                                                                    
    United States........................................ $   11,339  $    9,125  $    4,848
    Puerto Rico..........................................     16,430      14,160      12,274
                                                          ----------  ----------  ----------
                                                              27,769      23,285      17,122
  Ice--United States.....................................     11,022      10,116       8,638
  Corporate..............................................     (3,669)     (2,837)           
                                                          ----------  ----------  ----------
  Total.................................................. $   35,122  $   30,564  $   25,760
                                                          ----------  ----------  ----------
                                                          ----------  ----------  ----------
Identifiable assets (at end of period):                                                     
  Dairy:                                                                                    
    United States........................................ $  167,179  $   68,852  $   68,781
    Puerto Rico..........................................    152,198     119,977     125,207
                                                          ----------  ----------  ----------
                                                             319,377     188,829     193,988
  Ice--United States.....................................     47,096      40,519      44,964
  Corporate..............................................     17,675       3,174            
                                                          ----------  ----------  ----------
  Total.................................................. $  384,148  $  232,522  $  238,952
                                                          ----------  ----------  ----------
                                                          ----------  ----------  ----------
Capital expenditures:                                                                       
  Dairy.................................................. $   10,229  $    6,676  $    3,364
  Ice....................................................      3,715       3,573       1,420
  Corporate..............................................         78         143            
                                                          ----------  ----------  ----------
  Total.................................................. $   14,022  $   10,392  $    4,784
                                                          ----------  ----------  ----------
                                                          ----------  ----------  ----------
Depreciation expense:                                                                       
  Dairy.................................................. $    6,786  $    5,995  $    4,943
  Ice....................................................      3,115       3,263       3,301
  Corporate..............................................         29                        
                                                          ----------  ----------  ----------
  Total.................................................. $    9,930  $    9,258  $    8,244
                                                          ----------  ----------  ----------
                                                          ----------  ----------  ----------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

18. 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, 1996 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.                                                    

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:                                     

                                                        [Enlarge/Download Table]

                                                                DECEMBER 31,                  
                                               ---------------------------------------------- 
                                                        1996                    1995          
                                               ----------------------  ---------------------- 
                                               HISTORICAL              HISTORICAL             
                                                CARRYING                CARRYING              
                                                 AMOUNT    FAIR VALUE    AMOUNT    FAIR VALUE 
                                               ----------  ----------  ----------  ---------- 
                                                               (IN THOUSANDS)                 
                                                                                              
Fixed rate debt............................... $  (36,696) $  (34,036) $  (52,472) $  (53,621)
Interest rate agreements......................                   (143)                 (1,220)

19. SUBSEQUENT EVENTS                                                           

    On January 28, 1997, the Company sold 4,270,000 shares of common stock, $.01
par value per share, in a public offering at a price to the public of $22.00 per
share. Following this offering, the Company had 15,011,729 shares of common     
stock issued and outstanding. The public offering provided net cash proceeds to 
the Company of approximately $89.0 million. Of this amount, $36 million was used
to repay subordinated notes and $4.3 million was used to pay prepayment         
penalties related to the early extinguishment of the subordinated notes, which, 
along with the remaining balance of unamortized deferred loan costs, will be    
reported as an extraordinary loss from the early extinguishment of debt in 1997.
The remainder of the net proceeds were used to repay a portion of the           
outstanding balance of the acquisition facility of the Company's Senior Credit  
Facility.                                                                       

   As discussed in Note 11, on April 22, 1996, and August 7, 1996, the Company
sold 3,795,000 shares and 625,000 shares, respectively, of its common stock,    
which provided net cash proceeds to the Company of approximately $58.4 million, 
which was used to repay existing debt. In addition, as discussed above, on      
January 28, 1997, the Company sold an additional 4,270,000 shares of its common 
stock, which provided net cash proceeds to the Company of approximately $89.0   
million, which was used to repay debt. Had these sales of common stock occurred 
on January 1, 1996, the supplemental pro forma net earnings per                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

19. SUBSEQUENT EVENTS (CONTINUED)                                               
share before extraordinary losses from the early extinguishment of debt for the 
year ended December 31, 1996, would have decreased by $.47 to $2.34.            

20. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)                                 

   The following is a summary of the unaudited quarterly results of operations
for 1996 and 1995 (dollars in thousands, except per share data):                

                                                        [Enlarge/Download Table]

                                                                                QUARTER                          
                                                       ----------------------------------------------------------
1996                                                     FIRST       SECOND      THIRD       FOURTH    FULL YEAR 
-----------------------------------------------------  ----------  ----------  ----------  ----------  ----------
                                                                                                                 
Net sales............................................  $  109,035  $  116,272  $  139,304  $  156,305  $  520,916
Gross profit.........................................      26,420      32,970      38,090      34,888     132,368
Income before extraordinary loss.....................         383       4,553      18,937       4,056      27,929
Net income...........................................         383       2,338      18,937       4,056      25,714
Earnings per common share:                                                                                       
  Income before extraordinary loss...................        0.06        0.46        1.68        0.35        2.81
  Net income.........................................        0.06        0.24        1.68        0.35        2.59

                                                        [Enlarge/Download Table]

1995                                                     FIRST       SECOND      THIRD       FOURTH    FULL YEAR  
-----------------------------------------------------  ----------  ----------  ----------  ----------  ---------- 
                                                                                                                  
Net sales............................................  $  104,876  $  110,029  $  110,549  $  105,012  $  430,466 
Gross profit.........................................      26,207      31,046      33,439      27,141     117,833 
Income (loss) before extraordinary loss..............      (9,889)      2,332       4,711       1,270      (1,576)
Net income (loss)....................................     (18,351)      2,332       4,711       1,270     (10,038)
Earnings per common share:                                                                                        
  Income (loss) before extraordinary loss............       (1.80)       0.37        0.75        0.20       (0.26)
  Net income (loss)..................................       (3.34)       0.37        0.75        0.20       (1.64)

  Earnings per common share calculations for each of the quarters were based
on the weighted average number of shares outstanding for each period, and the   
sum of the quarters may not necessarily be equal to the full year earnings per  
common share amount.                                                            

 The results for the first quarter of 1995 included $8.8 million of merger
costs related to the combination along with $8.5 million of extraordinary losses
from the early extinguishment of debt repaid at the combination date.           

The results for the second quarter of 1996 include $2.2 million of      
extraordinary losses from the early extinguishment of debt repaid with the      
proceeds of the Company's initial public offering.                              

The results for the third quarter of 1996 include a gain on the sale of 
Puerto Rico tax credits of $3.4 million and a tax benefit related to the        
recognition of the remaining amount of such credits of $11.8 million, partially 
offset by $0.6 million in financing costs related to the amendment of the       
Company's Senior Credit Facility.                                               

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CONDENSED CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                 DECEMBER 31,    JUNE 30,  
                                                                                     1996          1997    
                                                                                 ------------   -----------
                                                                                                (UNAUDITED)
                                                                                       (IN THOUSANDS)      
                                                                                                           
                                                   ASSETS                                                  

CURRENT ASSETS:                                                                                            
  Cash and cash equivalents.....................................................   $  8,951      $  7,130  
  Accounts receivable...........................................................     50,608        50,784  
  Inventories...................................................................     19,228        21,536  
  Prepaid expenses and other current assets.....................................      2,754         3,369  
  Refundable income taxes.......................................................      2,312        --      
  Deferred income taxes.........................................................      3,672         3,796  
                                                                                 ------------   -----------
    Total current assets........................................................     87,525        86,615  
PROPERTY, PLANT AND EQUIPMENT...................................................    123,260       136,281  
DEFERRED INCOME TAXES...........................................................      8,524         8,319  
INTANGIBLE AND OTHER ASSETS.....................................................    164,839       171,091  
                                                                                 ------------   -----------
    TOTAL.......................................................................   $384,148      $402,306  
                                                                                 ------------   -----------
                                                                                 ------------   -----------

                                    LIABILITIES AND STOCKHOLDERS' EQUITY                                   

CURRENT LIABILITIES:                                                                                       
  Accounts payable and accrued expenses.........................................   $ 46,664      $ 42,118  
  Income taxes payable..........................................................      1,105         1,154  
  Current portion of long-term debt.............................................     12,876        17,323  
                                                                                 ------------   -----------
    Total current liabilities...................................................     60,645        60,595  
LONG-TERM DEBT..................................................................    226,693       128,150  
DEFERRED INCOME TAXES...........................................................      3,278         4,928  
COMMITMENTS AND CONTINGENCIES...................................................                           
STOCKHOLDERS' EQUITY:                                                                                      
  Common stock, par value $.01 per share; 100,000,000 shares authorized,                                   
    10,741,729 and 15,286,968 shares issued and outstanding.....................        107           153  
  Additional paid-in capital....................................................     89,337       183,263  
  Retained earnings.............................................................      4,088        25,217  
                                                                                 ------------   -----------
    Total stockholders' equity..................................................     93,532       208,633  
                                                                                 ------------   -----------
    TOTAL.......................................................................   $384,148      $402,306  
                                                                                 ------------   -----------
                                                                                 ------------   -----------

See notes to condensed consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                          THREE MONTHS ENDED JUNE 30,   SIX MONTHS ENDED JUNE 30,  
                                                          ---------------------------  --------------------------- 
                                                              1996          1997           1996          1997      
                                                          ------------  -------------  ------------  ------------- 
                                                                 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)         

                                                                                                                   
NET SALES................................................ $    116,272  $     171,694  $    225,307  $     336,819 
COST OF SALES............................................       83,302        125,478       165,917        252,047 
                                                          ------------  -------------  ------------  ------------- 
GROSS PROFIT.............................................       32,970         46,216        59,390         84,772 
OPERATING COSTS AND EXPENSES:                                                                                      
  Selling and distribution...............................       17,180         22,102        32,682         42,244 
  General and administrative.............................        4,884          7,583         9,805         16,397 
  Amortization of intangibles............................        1,023          1,510         1,960          2,982 
                                                          ------------  -------------  ------------  ------------- 
    Total operating costs and expenses...................       23,087         31,195        44,447         61,623 
                                                          ------------  -------------  ------------  ------------- 
  INCOME FROM OPERATIONS.................................        9,883         15,021        14,943         23,149 
OTHER (INCOME) EXPENSE:                                                                                            
  Interest expense, net..................................        3,872          2,910         8,488          6,580 
  Other income, net......................................         (172)          (222)         (252)       (18,575)
                                                          ------------  -------------  ------------  ------------- 
    Total other (income) expense.........................        3,700          2,688         8,236        (11,995)
                                                          ------------  -------------  ------------  ------------- 
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS........        6,183         12,333         6,707         35,144 
INCOME TAXES.............................................        1,630          3,376         1,771         10,745 
                                                          ------------  -------------  ------------  ------------- 
INCOME BEFORE EXTRAORDINARY LOSS.........................        4,553          8,957         4,936         24,399 
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT.....       (2,215)      --              (2,215)        (3,270)
                                                          ------------  -------------  ------------  ------------- 
NET INCOME............................................... $      2,338  $       8,957  $      2,721  $      21,129 
                                                          ------------  -------------  ------------  ------------- 
                                                          ------------  -------------  ------------  ------------- 
NET EARNINGS (LOSS) PER SHARE:                                                                                     
  Income before extraordinary loss....................... $       0.46  $        0.55  $       0.58  $        1.57 
  Extraordinary loss.....................................        (0.22)      --               (0.26)         (0.21)
                                                          ------------  -------------  ------------  ------------- 
    Net income........................................... $       0.24  $        0.55  $       0.32  $        1.36 
                                                          ------------  -------------  ------------  ------------- 
                                                          ------------  -------------  ------------  ------------- 
WEIGHTED AVERAGE SHARES OUTSTANDING......................    9,921,715     16,342,250     8,455,332     15,509,388 
                                                          ------------  -------------  ------------  ------------- 
                                                          ------------  -------------  ------------  ------------- 

See notes to condensed consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                                                          SIX MONTHS ENDED JUNE  
                                                                                                   30,           
                                                                                         ----------------------- 
                                                                                            1996        1997     
                                                                                         ----------  ----------- 
                                                                                         (DOLLARS IN THOUSANDS)  
                                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                            
Net income.............................................................................. $    2,721  $    21,129 
  Adjustments to reconcile net income to net cash provided by operating activities:                              
    Depreciation and amortization.......................................................      4,479        6,512 
    Amortization of intangible assets, including deferred financing costs...............      2,297        3,401 
    Loss on the sales of assets.........................................................         20           38 
    Extraordinary loss from early extinguishment of debt................................      2,215        3,270 
    Noncash and imputed interest........................................................        236      --      
    Deferred income taxes...............................................................        767        1,731 
    Changes in operating assets and liabilities:                                                                 
      Accounts and notes receivable.....................................................     (2,625)         104 
      Inventories.......................................................................       (899)      (2,082)
      Prepaid expenses and other assets.................................................         37       (1,676)
      Accounts payable and other accrued expenses.......................................     (1,959)      (4,465)
      Income taxes payable..............................................................       (511)       5,535 
                                                                                         ----------  ----------- 
        Net cash provided by operating activities.......................................      6,778       33,497 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                            
    Additions to property, plant and equipment..........................................     (7,984)      (9,067)
    Proceeds from the sale of property, plant and equipment.............................        245           67 
    Cash outflows for acquisitions......................................................     (4,176)     (16,278)
                                                                                         ----------  ----------- 
      Net cash used in investing activities.............................................    (11,915)     (25,278)
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                            
    Proceeds from the issuance of debt..................................................      8,653       28,000 
    Repayment of debt...................................................................    (52,322)    (122,096)
    Payment of deferred financing costs and debt prepayment penalties...................     (1,800)      (4,970)
    Issuance of common stock, net of expenses...........................................     48,608       89,026 
                                                                                         ----------  ----------- 
    Net cash provided by (used in) financing activities.................................      3,139      (10,040)
                                                                                         ----------  ----------- 
DECREASE IN CASH AND CASH EQUIVALENTS...................................................     (1,998)      (1,821)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..........................................      3,177        8,951 
                                                                                         ----------  ----------- 
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................ $    1,179  $     7,130 
                                                                                         ----------  ----------- 
                                                                                         ----------  ----------- 

See notes to condensed consolidated financial statements. 

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1997 

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                  

   The condensed consolidated financial statements as of June 30, 1997 and for
the three month and six month periods ended June 30, 1997 and 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 of the
Company as of June 30, 1997 and for the three month and six month periods ended 
June 30, 1997 and 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 1996 financial      
statements contained in its Annual Report on Form 10-K as filed with the        
Securities and Exchange Commission on March 29, 1997.                           

2. INVENTORIES                                                                  

                                                        [Enlarge/Download Table]

                                                                 AT DECEMBER 31,  AT JUNE 30,
                                                                      1996           1997    
                                                                 ---------------  -----------
                                                                                             
Pasteurized and raw milk and raw materials......................    $   7,693      $   9,795 
Parts and supplies..............................................        5,584          6,067 
Finished goods..................................................        5,951          5,674 
                                                                      -------     -----------
                                                                    $  19,228      $  21,536 
                                                                      -------     -----------
                                                                      -------     -----------

3. LONG-TERM DEBT                                                               

                                                        [Enlarge/Download Table]

                                                                 AT DECEMBER 31,  AT JUNE 30,
                                                                      1996           1997    
                                                                 ---------------  -----------
                                                                                             
Senior credit facility:                                                                      
  Revolving loan facility.......................................   $     8,600     $   2,800 
  Acquisition loan facility.....................................        69,100        --     
  Term loan facility............................................       125,000       142,000 
  Subordinated notes............................................        36,000        --     
Capital lease obligations and other debt........................           869           673 
                                                                 ---------------  -----------
                                                                       239,569       145,473 
Less: current portion...........................................       (12,876)      (17,323)
                                                                 ---------------  -----------
                                                                   $   226,693     $ 128,150 
                                                                 ---------------  -----------
                                                                 ---------------  -----------

    On January 28, 1997, the Company sold 4,270,000 shares of common stock, $.01
par value per share, in a public offering (the "Offering") at a price to the    
public of $22.00 per share. The Offering provided net cash proceeds to the      
Company of approximately $89.0 million. Of this amount, $36.0 million was used  
to repay subordinated notes and $4.3 million was used to pay prepayment         
penalties related to the early extinguishment of the subordinated notes, which, 
along with the related balance of unamortized deferred loan costs and net of    
related income tax benefits, was reported as an extraordinary loss from the     
early extinguishment of debt. The remainder of the net proceeds were used to    
repay a portion of the outstanding balance of the acquisition loan facility of  
the Company's Senior Credit Facility.                                           

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1997 

3. LONG-TERM DEBT (CONTINUED)                                                   
  On March 5, 1997, the Company amended its Senior Credit Facility. Pursuant
to this amendment, the Company's term loans were expanded from a $130.0 million 
facility into a $150.0 million facility. Quarterly amortization payments        
beginning March 31, 1997 on this facility are $4.0 million, increasing to: 1)   
$4.5 million on March 31, 1998; 2) $5.0 million on March 31, 1999; 3) $5.5      
million on March 31, 2000; 4) $6.0 million on March 31, 2001; 5) $6.5 million on
March 31, 2002, with a final installment of $24.0 million due on March 31, 2003.
The Company further amended its Senior Credit Facility to increase the          
acquisition loan facility from $90.0 million to $100.0 million. The Company is  
required to pay interest only on amounts drawn under the acquisition loan       
facility until June 30, 1999, at which time any outstanding balance will convert
into a term loan facility with scheduled amortization.                          

   On July 31, 1997, the Company amended its Senior Credit Facility to provide
for an aggregate of $700.0 million comprised of: (i) a $150.0 million term loan;
(ii) a $50.0 million revolving credit facility; (iii) a $325.0 million revolving
acquisition facility, and (iv) a $175.0 million acquisition term loan. Under the
terms of the Senior Credit Facility, the $150.0 million term loan will be       
amortized over six years beginning September 30, 1997 and the revolving credit  
facility expires on September 30, 2003. The availability under the revolving    
acquisition facility will decrease at the end of each calendar quarter beginning
December 31, 2000 by $20.3 million until December 31, 2002, when it begins      
reducing by $40.6 million each quarter until maturity on September 30, 2003. The
$175.0 million acquisition term loan will be amortized over five years beginning
December 31, 1999. Amounts outstanding under the Senior Credit Facility will    
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 rates plus 50 basis points or First Union National Bank's prime commercial
lending rate, plus a margin that varies from 0 to 50 basis points depending on  
the Company's ratio of defined indebtedness to EBITDA (as defined in the Senior 
Credit Facility); or (ii) The London Interbank Offered Rate ("LIBOR") plus a    
margin that varies from 75 to 150 basis points depending on the Company's ratio 
of defined indebtedness to EBITDA. The Company will pay a commitment fee on     
unused amounts of the revolving facility and the revolving acquisition facility 
that ranges from 20 to 37.5 basis points, based on the Company's ratio of       
defined indebtedness to EBITDA.                                                 

4. TAXES                                                                        

 In December 1995, the Commonwealth of Puerto Rico adopted the Puerto Rico
Agricultural Tax Incentives Act of 1995, which reduced the effective income tax 
rate for qualified agricultural businesses from 39% to 3.9% and provided for a  
50% tax credit for certain "eligible investments" in qualified agricultural     
businesses in Puerto Rico. During 1996, the Company made investments in its     
Suiza-Puerto Rico dairy, fruit, plastics and coffee operations, all of which    
were certified as qualified agricultural businesses in Puerto Rico during 1996. 

    During 1996, the Company recognized $15.75 million in tax credits related to
qualifying investment made in its Puerto Rico dairy subsidiary which met the    
eligible investment criteria of this act. However, in 1996 the Company did not  
recognize any of the potential tax credits related to its investments in its    
Puerto Rico fruit, plastics and coffee operations since certain rulings in 1996 
by Puerto Rico tax authorities created uncertainty as to whether these          
investments met the eligible investment criteria of the act and whether these   
additional tax credits had been earned.                                         

During the first quarter of 1997, the Company obtained a ruling from the
Commonwealth of Puerto Rico confirming that its investments in its Suiza-Puerto 
Rico fruit and plastics subsidiaries qualified for the                          

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1997 

4. TAXES (CONTINUED)                                                            
50% tax credit. Accordingly, in March 1997, the Company recognized a            
nonrecurring gain of $18.1 million, net of discounts and related expenses ($11.5
million after income taxes) for earned tax credits which at March 31, 1997, it  
had agreed to sell to third parties. During the second quarter of 1997, the     
Company completed the sale of substantially all of these tax credits to the     
third parties.                                                                  

   The Company is currently investigating whether its investment in its coffee
business will qualify for additional tax credits based on recent rulings by     
Puerto Rico tax authorities and is awaiting a ruling from the Treasury          
Department in Puerto Rico on the availability of such tax credits. If the       
Company ultimately qualifies for such credits, the Company will account for     
these tax benefits as an adjustment of the purchase price of the coffee         
business, which would result in a reduction of goodwill.                        

5. ACQUISITIONS                                                                 

    During the quarter, the Company acquired four small ice businesses for total
consideration of approximately $10.7 million. Estimated annual sales of these   
ice companies are $8.3 million. Since June 30, 1997, the Company has acquired   
three ice companies for approximately $5.9 million, bringing the total number of
acquired ice companies in 1997 to ten, with estimated aggregate annual sales of 
$15.8 million.                                                                  

   On July 1, 1997, the Company completed the acquisition of substantially all
the assets of Dairy Fresh L.P., a Delaware limited partnership ("Dairy Fresh"), 
for approximately $104.5 million in cash (subject to adjustment and excluding   
transaction costs), plus the assumption of certain current liabilities. Dairy   
Fresh is a manufacturer of fresh milk and ice cream products based in           
Winston-Salem, North Carolina. During its fiscal year ended December 31, 1996,  
Dairy Fresh reported net sales of approximately $117.0 million throughout the   
southeastern United States. The Company will use the acquired assets to continue
operating the business previously operated by Dairy Fresh. The Company financed 
the acquisition with borrowings under its Senior Credit Facility.               

  On July 31, 1997 the Company completed the purchase of all the outstanding
stock of three affiliated dairy manufacturing and distribution companies, as    
well as an affiliated water bottling and distribution company, and 16 affiliated
plastic manufacturing companies headquartered in Franklin, Massachusetts        
(collectively, the "Garelick Companies"). In connection with this acquisition   
the Company paid aggregate cash consideration of approximately $293.7 million   
(subject to adjustment and excluding transaction costs) and issued 446,100      
shares of common stock to acquire the outstanding stock and repay existing      
indebtedness of the Garelick Companies. The combined businesses operated by the 
Garelick Companies reported net sales of approximately $363 million during the  
fiscal year ended September 30, 1996. The dairy operations of the Garelick      
Companies are operated through Garelick Farms in Franklin, Massachusetts,       
Fairdale Farms in Bennington, Vermont, and Grant's Dairy in Bangor, Maine. The  
Garelick Companies also operate the Miscoe Springs water bottling company in    
Mendon, Massachusetts and 16 plastic bottle manufacturing operations located in 
Connecticut, Florida, Georgia, Illinois, Louisiana, Maine, Massachusetts, New   
Jersey, North Carolina, Ohio, Pennsylvania, Texas and Virginia. The acquisition 
of the Garelick Companies expands the geographic presence of the Company's dairy
operations into the northeastern United States and expands the Company's        
operations into the related business of plastic container manufacturing.        

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SUIZA FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1997 

5. ACQUISITIONS (CONTINUED)                                                     
 In connection with the acquisition of the Garelick Companies, the Company
increased the size of its Senior Credit Facility from $300.0 million to $700.0  
million in the aggregate (see footnote 3--Long-Term Debt).                      

6. STOCKHOLDERS' EQUITY                                                         

    On January 28, 1997, the Company sold 4,270,000 shares of common stock, $.01
par value per share, in a public offering at a price to the public of $22.00 per
share. On March 12, 1997, the Company issued 133,000 shares of its common stock 
in partial consideration of the purchase of an ice company. As of June 30, 1997 
the Company had 15,286,968 shares of common stock issued and outstanding.       

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and                                                         
Board of Directors of                                                           
The Morningstar Group Inc.:                                                     

We have audited the accompanying consolidated balance sheets of The     
Morningstar Group Inc. (a Delaware corporation) and subsidiaries as of December 
31, 1996 and 1995, and the related consolidated statements of operations,       
stockholders' equity and cash flows for each of the three years in the period   
ended December 31, 1996. These financial statements are the responsibility of   
the Company's management. Our responsibility is to express an opinion on these  
financial statements based on our audits.                                       

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

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Morningstar Group Inc.  
and subsidiaries as of December 31, 1996 and 1995, and the results of their     
operations and their cash flows for each of the three years in the period ended 
December 31, 1996, in conformity with generally accepted accounting principles. 

                           /s/ ARTHUR ANDERSEN LLP

Dallas, Texas,                                                                  
February 10, 1997                                                               

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                      DECEMBER 31,  DECEMBER 31,
                                                                                          1996          1995    
                                                                                      ------------  ------------
                                                                                        (DOLLARS IN THOUSANDS)  
                                                                                                                
                                                     ASSETS                                                     

CURRENT ASSETS:                                                                                                 
  Cash...............................................................................  $    4,786    $    5,811 
  Receivables, net of allowance for doubtful accounts of $6,676 and $1,595,                                     
    respectively.....................................................................      57,802        28,043 
  Inventories........................................................................      25,400        11,123 
  Prepaids and other.................................................................       3,015         1,597 
  Deferred tax assets................................................................       7,339         3,089 
  Net assets held for sale...........................................................         676           836 
                                                                                      ------------  ------------
    Total current assets.............................................................      99,018        50,499 

PROPERTY, PLANT AND EQUIPMENT:                                                                                  
  Land...............................................................................       7,843         5,713 
  Buildings and improvements.........................................................      29,507        18,804 
  Machinery and equipment............................................................      70,239        43,552 
                                                                                      ------------  ------------
    Gross property, plant and equipment..............................................     107,589        68,069 
  Less: Accumulated depreciation.....................................................     (22,807)      (17,748)
                                                                                      ------------  ------------
    Net property, plant and equipment................................................      84,782        50,321 

INTANGIBLE AND OTHER ASSETS:                                                                                    
  Identifiable intangible assets.....................................................      73,146         1,847 
  Goodwill...........................................................................      96,175        58,671 
  Deferred financing costs...........................................................       2,731         1,259 
  Other assets.......................................................................         139           112 
                                                                                      ------------  ------------
    Total intangible and other assets................................................     172,191        61,889 
                                                                                      ------------  ------------
    Total assets.....................................................................  $  355,991    $  162,709 
                                                                                      ------------  ------------
                                                                                      ------------  ------------

                                      LIABILITIES AND STOCKHOLDERS' EQUITY                                      

CURRENT LIABILITIES:                                                                                            
  Accounts payable...................................................................  $   32,968    $   21,488 
  Accrued liabilities................................................................      39,923        15,869 
  Current maturities of long-term debt...............................................       8,000         8,000 
                                                                                      ------------  ------------
    Total current liabilities........................................................      80,891        45,357 

LONG-TERM DEBT (net of current maturities)...........................................     177,349        36,000 
OTHER LONG-TERM LIABILITIES..........................................................       3,269         1,959 
DEFERRED TAX LIABILITIES.............................................................       5,694         2,070 
COMMITMENTS AND CONTINGENCIES........................................................                           
STOCKHOLDERS' EQUITY:                                                                                           
  Common stock, $.01 par value, 50,000,000 shares authorized; 15,298,111 shares in                              
    1996 and 15,244,261 shares in 1995 issued........................................         153           152 
  Additional paid-in capital.........................................................      73,179        71,991 
  Treasury stock, at cost (767,000 shares in 1996 and 230,000 shares in 1995)........      (6,140)       (1,840)
  Retained earnings..................................................................      21,596         7,020 
                                                                                      ------------  ------------
    Total stockholders' equity.......................................................      88,788        77,323 
                                                                                      ------------  ------------
    Total liabilities and stockholders' equity.......................................  $  355,991    $  162,709 
                                                                                      ------------  ------------
                                                                                      ------------  ------------

The accompanying notes are an integral part of these consolidated statements. 

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                                           YEAR ENDED DECEMBER 31,           
                                                                                 --------------------------------------------
                                                                                    1996           1995             1994     
                                                                                 -----------  --------------   --------------
                                                                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND 
                                                                                                SHARE AMOUNTS)               
                                                                                                                             
NET SALES....................................................................... $   394,306  $   304,730      $   292,314   
COST OF GOODS SOLD..............................................................     302,801      232,948          222,145   
                                                                                 -----------  --------------   --------------
GROSS PROFIT....................................................................      91,505       71,782           70,169   

OPERATING COSTS AND EXPENSES:                                                                                                
  Distribution..................................................................      17,056       16,120           18,689   
  Selling and marketing.........................................................      32,839       22,233           21,295   
  General and administrative....................................................      15,450       13,001           11,778   
                                                                                 -----------  --------------   --------------
    Total operating costs and expenses..........................................      65,345       51,354           51,762   
                                                                                 -----------  --------------   --------------
OPERATING INCOME................................................................      26,160       20,428           18,407   

INTEREST EXPENSE................................................................       3,647        3,921            4,446   
AMORTIZATION OF DEFERRED FINANCING COSTS........................................         379          381              351   
DIVIDEND INCOME.................................................................     --              (268)         --        
OTHER INCOME, NET...............................................................        (286)      (1,008)          (1,244)  
                                                                                 -----------  --------------   --------------
INCOME BEFORE INCOME TAXES......................................................      22,420       17,402           14,854   
PROVISION FOR INCOME TAXES......................................................       7,844        6,062            5,533   
                                                                                 -----------  --------------   --------------
INCOME FROM CONTINUING OPERATIONS...............................................      14,576       11,340            9,321   

DISCONTINUED OPERATIONS:                                                                                                     
  Income from discontinued operations...........................................     --           --                   903(a)
  Gain on disposal..............................................................     --               184(b)           423(b)
                                                                                 -----------  --------------   --------------
INCOME FROM DISCONTINUED OPERATIONS.............................................     --               184            1,326   
NET INCOME...................................................................... $    14,576  $    11,524      $    10,647   
                                                                                 -----------  --------------   --------------
                                                                                 -----------  --------------   --------------
EARNINGS PER COMMON SHARE:                                                                                                   
  Continuing operations......................................................... $       .96  $       .74      $       .62   
  Discontinued operations.......................................................     --               .02              .09   
                                                                                 -----------  --------------   --------------
  Earnings per common share..................................................... $       .96  $       .76      $       .71   
                                                                                 -----------  --------------   --------------
                                                                                 -----------  --------------   --------------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING................  15,133,887   15,245,562       15,050,538   

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

(a) Net of applicable tax provision of $507.                                    

(b) Net of applicable tax provision of $216 and $2,865.                         

The accompanying notes are an integral part of these consolidated statements. 

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                                                                 COMMON STOCK                                     
                                                     COMMON     AND ADDITIONAL   TREASURY    RETAINED             
                                                     SHARES        PAID-IN       STOCK AT    EARNINGS             
                                                     ISSUED        CAPITAL         COST     (DEFICIT)     TOTAL   
                                                  ------------  --------------  ----------  ----------  --------- 
                                                                      (DOLLARS IN THOUSANDS)                      
                                                                                                                  
Balance, December 31, 1993.......................   14,287,212    $   69,684    $   --      $  (15,151) $  54,533 
Exercise of stock options........................      633,585         1,622        --          --          1,622 
Net income.......................................      --             --            --          10,647     10,647 
                                                  ------------       -------    ----------  ----------  --------- 

Balance, December 31, 1994.......................   14,920,797        71,306        --          (4,504)    66,802 
Exercise of stock options........................      323,464           837        --          --            837 
Purchase of treasury stock.......................      --             --            (1,840)     --         (1,840)
Net income.......................................      --             --            --          11,524     11,524 
                                                  ------------       -------    ----------  ----------  --------- 

Balance, December 31, 1995.......................   15,244,261        72,143        (1,840)      7,020     77,323 
Exercise of stock options........................       53,850           381        --          --            381 
Income tax benefits of stock options.............      --                808        --          --            808 
Purchase of treasury stock.......................      --             --            (4,300)     --         (4,300)
Net income.......................................      --             --            --          14,576     14,576 
                                                  ------------       -------    ----------  ----------  --------- 

Balance, December 31, 1996.......................   15,298,111    $   73,332    $   (6,140) $   21,596  $  88,788 
                                                  ------------       -------    ----------  ----------  --------- 
                                                  ------------       -------    ----------  ----------  --------- 

The accompanying notes are an integral part of these consolidated statements. 

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CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                                  YEAR ENDED DECEMBER 31,       
                                                                             ---------------------------------- 
                                                                                1996        1995        1994    
                                                                             ----------  ----------  ---------- 
                                                                                   (DOLLARS IN THOUSANDS)       
                                                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                           
  Cash received from customers.............................................. $  389,101  $  306,918  $  284,605 
  Interest received.........................................................        129         224         134 
  Income tax refund.........................................................        156      --          --     
  Cash paid to suppliers and employees......................................   (354,037)   (272,992)   (259,147)
  Interest paid.............................................................     (2,971)     (4,220)     (4,395)
  Income taxes paid.........................................................     (4,171)     (3,199)     (2,663)
                                                                             ----------  ----------  ---------- 
  Net cash provided by Continuing Operations................................     28,207      26,731      18,534 
  Net cash used by Discontinued Operations..................................     --          --          (3,403)
                                                                             ----------  ----------  ---------- 
  Net cash provided by operating activities.................................     28,207      26,731      15,131 

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                           
  Acquisition of subsidiaries:                                                                                  
  Working capital...........................................................     (3,268)     --          --     
  Property, plant and equipment.............................................    (29,926)     --          --     
  Other assets..............................................................   (111,809)     --          --     
  Other long-term (assets) liabilities......................................       (311)     --          --     
                                                                             ----------  ----------  ---------- 
                                                                               (145,314)     --          --     
                                                                             ----------  ----------  ---------- 
  Capital expenditures......................................................    (11,462)    (10,705)     (7,622)
  Proceeds from sale of assets..............................................     --               2          32 
  Dividends received from Preferred Stock...................................     --             268      --     
  Other.....................................................................        (52)      1,258         682 
                                                                             ----------  ----------  ---------- 
  Net cash used by Continuing Operations....................................   (156,828)     (9,177)     (6,908)

  Discontinued Operations:                                                                                      
  Sale of Discontinued Operations...........................................     --          --          50,237 
  Sale of Preferred Stock...................................................     --           3,000      --     
  Capital and other expenditures............................................     --          --            (482)
                                                                             ----------  ----------  ---------- 
  Net cash provided by Discontinued Operations..............................     --           3,000      49,755 
                                                                             ----------  ----------  ---------- 
  Net cash provided (used) by investing activities..........................   (156,828)     (6,177)     42,847 

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                           
  Proceeds from issuance of common stock....................................        381         837       1,622 
  Purchase of treasury stock................................................     (4,300)     (1,840)     --     
  Proceeds from issuance of long-term debt..................................    160,000      --          --     
  Net borrowings (repayments) under revolving credit facility...............     22,349      (1,892)    (14,783)
  Principal payments on long-term debt......................................    (50,834)    (14,000)    (45,470)
  Dividends paid............................................................     --          --            (535)
                                                                             ----------  ----------  ---------- 
  Net cash provided (used) by financing activities..........................    127,596     (16,895)    (59,166)

NET INCREASE (DECREASE) IN CASH.............................................     (1,025)      3,659      (1,188)

CASH, BEGINNING OF PERIOD...................................................      5,811       2,152       3,340 
                                                                             ----------  ----------  ---------- 
CASH, END OF PERIOD......................................................... $    4,786  $    5,811  $    2,152 
                                                                             ----------  ----------  ---------- 
                                                                             ----------  ----------  ---------- 

The accompanying notes are an integral part of these consolidated statements. 

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CONSOLIDATED STATEMENTS OF CASH FLOWS 

RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES 

                                                        [Enlarge/Download Table]

                                                                                    YEAR ENDED DECEMBER 31,       
                                                                               ---------------------------------- 
                                                                                  1996        1995        1994    
                                                                               ----------  ----------  ---------- 
                                                                                     (DOLLARS IN THOUSANDS)       
                                                                                                                  
NET INCOME.................................................................... $   14,576  $   11,524  $   10,647 

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATIONS:                                           
    Discontinued Operations net income........................................     --            (184)     (1,326)
    Depreciation..............................................................      6,378       5,122       4,344 
    Amortization of intangibles...............................................      3,291       2,700       2,632 
    (Gain) loss on fixed asset retirements....................................     --          --            (243)
    Increase in deferred tax assets...........................................     (4,250)      3,635       4,222 
      Change in assets and liabilities net of effects from acquisitions and                                       
        divestitures of subsidiaries:                                                                             
    Accounts receivable.......................................................     (5,205)      2,426      (3,707)
    Inventories...............................................................     (1,243)       (583)        987 
    Prepaids and other........................................................      1,493         151       3,569 
    Accounts payable..........................................................      1,747       4,225        (655)
    Accrued liabilities.......................................................      8,011      (4,076)     (1,986)
    Other long-term liabilities...............................................      3,409       1,791          50 
                                                                               ----------  ----------  ---------- 
    Total adjustments.........................................................     13,631      15,207       7,887 
                                                                               ----------  ----------  ---------- 
    Net cash provided by Continuing Operations................................     28,207      26,731      18,534 
      Discontinued Operations:                                                                                    
    Discontinued Operations net income........................................     --             184       1,326 
    Gain on disposal..........................................................     --            (184)       (423)
    Change in working capital.................................................     --          --          (4,914)
    Depreciation and amortization.............................................     --          --             608 
                                                                               ----------  ----------  ---------- 
    Net cash used by Discontinued Operations..................................     --          --          (3,403)
                                                                               ----------  ----------  ---------- 
NET CASH PROVIDED BY OPERATING ACTIVITIES..................................... $   28,207  $   26,731  $   15,131 
                                                                               ----------  ----------  ---------- 
                                                                               ----------  ----------  ---------- 

The accompanying notes are an integral part of these consolidated statements. 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1. ORGANIZATION AND BUSINESS                                                    

BACKGROUND                                                              

The Morningstar Group Inc., a Delaware corporation (together with its   
subsidiaries, the "Company" or "Morningstar") was formed in March 1991. On April
1, 1988, the Company's predecessor, MorningStar Foods Inc., acquired            
substantially all of the net assets and operations of the Dairy Group of The    
Southland Corporation.                                                          

BUSINESS                                                                

  The Company's Continuing Operations include its specialty operations which
manufacture and market shelf stable, refrigerated and frozen food products      
including nationally branded products, other specialty, dairy-based cultured and
ultra-pasteurized products and non-dairy based food products. Discontinued      
Operations include all previously divested regional dairy operations and other  
divested operations.                                                            

2. PRESTO FOOD PRODUCTS, INC. ACQUISITION                                       

   On December 3, 1996, the Company acquired all of the issued and outstanding
shares of capital stock of Presto Food Products, Inc. ("Presto"), a California  
corporation, from the shareholders of Presto pursuant to a stock purchase       
agreement dated as of October 20, 1996, by and among the Company, Presto and the
Presto shareholders. Presto's sales for the year ended December 31, 1995, were  
approximately $139.5 million. Presto is a national manufacturer, marketer and   
distributor of non-dairy and dairy products, such as Mocha Mix non-dairy coffee 
creamers, Jon Donaire desserts and ice cream cakes, aerosols, bakery toppings   
and icings, frozen pre-whipped toppings and creamers, serving customers         
throughout the United States since 1937. The Company paid approximately $123.5  
million in cash for the stock acquired and assumed approximately $37.4 million  
in related liabilities. The allocation of the purchase price was based on       
preliminary estimates of fair value. The final allocation may be revised if the 
appraised values are significantly different from the preliminary estimates.    
Included in the assumed liabilities is approximately $3.2 million related to    
costs associated with the involuntary termination and/or relocation of certain  
employees of the acquired company. The terminated employees represent redundant 
and excess personnel in the operations, marketing, selling, and general and     
administrative areas. This termination plan will likely be completed by the     
second quarter of 1997. In conjunction with the consummation of the Presto      
acquisition, the Company renegotiated its credit agreement. Funds provided by   
the renegotiated Senior Credit Agreement ("Senior Credit Agreement") were       
utilized to pay off existing senior debt of approximately $44.8 million, to     
acquire the capital stock of Presto for $123.5 million and to pay approximately 
$2.1 million in fees and expenses associated with the Presto acquisition. The   
Company accounted for the acquisition as a purchase and accordingly, Presto's   
results are included in the 1996 Consolidated Statement of Operations for the   
period December 3, 1996, through December 31, 1996.                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

2. PRESTO FOOD PRODUCTS, INC. ACQUISITION (CONTINUED)                           
Unaudited pro forma operating results of the Company, assuming the      
acquisition had been made as of January 1, 1995, follow. Such information       
includes adjustments to reflect additional goodwill and intangible amortization,
a reduction in redundant and excess personnel related costs, additional interest
expense, additional amortization of deferred financing costs and additional     
income tax expense.                                                             

                                                        [Enlarge/Download Table]

                                                                             YEAR ENDED      
                                                                            DECEMBER 31,     
                                                                       ----------------------
                                                                          1996        1995   
                                                                       ----------  ----------
                                                                            (UNAUDITED)      
                                                                       (DOLLARS IN THOUSANDS,
                                                                          EXCEPT PER SHARE   
                                                                              AMOUNTS)       
                                                                                             
Pro forma net sales................................................... $  528,056  $  444,202
                                                                       ----------  ----------
                                                                       ----------  ----------

Pro forma net income from Continuing Operations....................... $   18,325  $   13,799
                                                                       ----------  ----------
                                                                       ----------  ----------

Pro forma net income.................................................. $   18,325  $   13,983
                                                                       ----------  ----------
                                                                       ----------  ----------

Pro forma earnings per share from Continuing Operations............... $     1.21  $     0.91
                                                                       ----------  ----------
                                                                       ----------  ----------

Pro forma earnings per share.......................................... $     1.21  $     0.92
                                                                       ----------  ----------
                                                                       ----------  ----------

3. OTHER ACQUISITIONS                                                           

WACKY WILLIE ACQUISITION                                                

  On October 1, 1996, the Company completed the acquisition of the rights to
the Wacky Willie and Killer Shake trademarks for $300,000 in cash from Killer   
Productions Company. There were no liabilities associated with the acquisition, 
nor were there any other assets included in the transaction. The Company may at 
its sole option, before August 1999, pay an additional $700,000 to Killer       
Productions representing the final portion of the purchase price. In addition,  
in the event net sales reach $5.0 million in any consecutive twelve-month period
ending on or before August 1999, the Company will be required to pay the        
additional $700,000 representing the final portion of the purchase price. The   
funding for this purchase was provided by the Company's operations. Sales of    
Killer Shake are included in the 1996 Consolidated Statement of Operations for  
the period January 1, 1996, through December 31, 1996. The Company manufactured 
and sold this product under a license arrangement for the period January 1,     
1996, through September 30, 1996.                                               

CREAM PRODUCTS ACQUISITION                                              

  On August 1, 1996, the Company completed the purchase of substantially all
of the assets of Cream Products Company ("Cream Products"), located in Chicago, 
Illinois. Cream Products' sales for the year ended December 31, 1995, were      
approximately $24.6 million. Cream Products is a manufacturer and distributor of
dairy and non-dairy products primarily supplying food makers and food service   
customers throughout the United States since 1938. The Company paid             
approximately $5.9 million in cash for the assets acquired, and assumed         
approximately $2.3 million in related liabilities. Funds for this acquisition   
were provided by the Company's operations in conjunction with its revolving     
credit facility. The Company                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

3. OTHER ACQUISITIONS (CONTINUED)                                               
accounted for the acquisition as a purchase and accordingly, Cream Products'    
results are included in the 1996 Consolidated Statement of Operations for the   
period August 1, 1996, through December 31, 1996.                               

LA CORONA ACQUISITION                                                   

   On May 28, 1996, the Company completed the purchase of substantially all of
the assets of La Corona Foods, Inc. ("La Corona"), located in Glendale, Arizona.
La Corona's sales for the fiscal year ended September 30, 1995, were            
approximately $6.9 million. The Company paid approximately $3.4 million in cash 
for the assets purchased, and assumed approximately $2.5 million in related     
liabilities. The funding for this acquisition was provided by the Company's     
operations. The Company accounted for the acquisition as a purchase and         
accordingly, La Corona's results are included in the 1996 Consolidated Statement
of Operations for the period May 29, 1996, through December 31, 1996.           

MERKTS CHEESE ACQUISITION                                               

 On March 19, 1996, the Company completed the acquisition of substantially
all of the assets of Merkts Cheese Company ("Merkts"), located in Bristol,      
Wisconsin. Merkts recorded approximately $10.3 million in sales for the fiscal  
year ending June 30, 1995. The Company paid approximately $3.6 million in cash  
for the assets purchased, and assumed approximately $0.4 million in liabilities.
The funding for this acquisition was provided by the Company's operations. The  
Company accounted for the acquisition as a purchase and accordingly, Merkts'    
results are included in the 1996 Consolidated Statement of Operations for the   
period March 20, 1996, through December 31, 1996.                               

4. DISCONTINUED OPERATIONS                                                      

  The Company has made significant divestitures since its inception and as a
result, the size and scope of the Company's operations have changed             
significantly. In 1991, the Company divested a novelty/ice cream operation in   
Texas and closed a novelty/ice cream operation in Missouri. In 1992, the Company
divested a regional dairy operation and a novelty/ice cream operation, both     
located in Maryland. On April 13, 1994, the Company completed the divestiture of
its Florida-based fluid milk operation Velda Farms Inc. ("Velda") for $51.0     
million, consisting of $48.0 million in cash after working capital adjustments  
and $3.0 million of 9% Series A Preferred Stock (the "Preferred Stock"). The    
Company deferred the gain on the Preferred Stock pending realization of the     
gain. The majority of the cash proceeds were used to pay down external bank debt
and to fund federal and state taxes generated by the gain on the sale. The sale 
of Velda concluded the divestiture of the Company's regional dairies which were 
considered a major and distinct segment of its business. As such, the operations
of the regional dairies and other divested operations have been restated and    
presented in the consolidated financial statements to conform with discontinued 
operations treatment ("Discontinued Operations").                               

 On March 31, 1995, the Preferred Stock was redeemed by its issuer at face
value plus accrued dividends. The $3.0 million gain on the stock, less          
applicable taxes and other reserves of $2.3 million, was reflected in           
Discontinued Operations in the Consolidated Statements of Operations during the 
first quarter of 1995. The Company also recognized $268,000 in dividends,       
related to the Preferred Stock, during the first quarter of 1995 which was      
recorded in Continuing Operations. The Company recorded an additional loss from 
Discontinued Operations of approximately $0.5 million, net of tax benefits,     
during the second quarter of 1995, related to Discontinued Operations reserves  
and other liabilities.                                                          

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

4. DISCONTINUED OPERATIONS (CONTINUED)                                          
Net sales of the Discontinued Operations were $38.6 million in 1994.    
Interest expense of $0.4 million was allocated to Discontinued Operations during
1994. The allocation method was based upon the ratio of net assets of           
Discontinued Operations to the sum of consolidated net assets plus consolidated 
debt, less debt specifically allocated to certain of the Company's subsidiaries.

5. SIGNIFICANT ACCOUNTING POLICIES                                              

PRINCIPLES OF CONSOLIDATION                                             

  The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant intracompany     
transactions and balances have been eliminated.                                 

CONCENTRATIONS OF CREDIT RISK                                           

    Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade accounts receivable. The Company sells
its products to supermarkets, convenience stores, dairies, food service and     
institutional organizations, club stores and private label suppliers located in 
all 50 states and over 20 foreign countries, with a concentration of customers  
located in California. The Company performs ongoing credit evaluations of its   
customers' financial condition. The Company establishes an allowance for        
doubtful accounts based upon factors surrounding the credit risk of specific    
customers, historical trends and other relevant information.                    

CASH AND CASH EQUIVALENTS                                               

The Company considers overnight investments to be cash.                 

INVENTORIES                                                             

 Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out method. Inventories are summarized as follows (in 
thousands):                                                                     

                                                        [Enlarge/Download Table]

                                                                           AT DECEMBER 31,   
                                                                         --------------------
                                                                           1996       1995   
                                                                         ---------  ---------
                                                                                             
Raw materials and supplies.............................................. $  11,767  $   5,975
Finished goods..........................................................    13,633      5,148
                                                                         ---------  ---------
  Total................................................................. $  25,400  $  11,123
                                                                         ---------  ---------
                                                                         ---------  ---------

  Finished goods inventories include the costs of materials, labor and plant
overhead.                                                                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

5. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
PROPERTY, PLANT AND EQUIPMENT                                           

 Property, plant and equipment is recorded at cost and is depreciated on a
straight-line basis over the estimated useful lives of the assets, as follows:  

                                                        [Enlarge/Download Table]

                                                                                USEFUL LIFE   
ASSET CATEGORY                                                                    (YEARS)     
---------------------------------------------------------------------------  -----------------
                                                                                              
Machinery and equipment....................................................       3 - 10      
Buildings and improvements.................................................         25        

Property sold or retired is eliminated from the accounts in the year of 
disposition. Major expenditures for renewals and betterments are capitalized    
while maintenance and repairs are charged against income.                       

IDENTIFIABLE INTANGIBLE ASSETS                                          

  Identifiable intangible assets related to the acquisition of Favorite were
added in 1993, and are being amortized over their estimated useful lives which  
is generally five years. Identifiable intangible assets of approximately $72.3  
million were recorded in connection with the acquisitions consummated in 1996.  
These assets are being amortized on a straight-line basis over a range of 5-40  
years. Amortization costs totaled $1.0 million in 1996, $0.7 million in 1995,   
and $0.7 million in 1994. Accumulated amortization was $2.8 million and $1.8    
million at December 31, 1996 and 1995, respectively.                            

GOODWILL                                                                

  Goodwill is amortized on a straight-line basis over a range of 25-40 years
and is recorded at cost less accumulated amortization. Goodwill of approximately
$39.4 million was recorded in connection with the acquisitions consummated in   
1996. Amortization costs totaled $1.9 million in 1996, $1.7 million in 1995, and
$1.7 million in 1994. Accumulated amortization was $10.4 million and $8.5       
million at December 31, 1996 and 1995, respectively.                            

DEFERRED FINANCING COSTS                                                

Costs incurred that relate to the issuance of indebtedness and the      
corresponding accumulated amortization are included in deferred financing costs 
in the accompanying consolidated balance sheets. Deferred financing costs       
related to existing debt are amortized over the life of the related debt. In    
conjunction with renegotiating its Senior Credit Agreement in December 1996, the
Company incurred deferred financing costs of approximately $2.7 million.        
Accumulated amortization was $87,000 and $1.5 million at December 31, 1996 and  
1995, respectively.                                                             

ACCOUNTING FOR LONG-LIVED ASSETS                                        

 In March 1995, the Financial Accounting Standards Board issued "SFAS" No.
121, "Accounting for the Impairment of Long-Lived Assets to Be Disposed Of."    
This statement is effective for financial statements beginning after December   
15, 1995. The Company elected to adopt the statement effective December 31,     
1995. The adoption of SFAS No. 121 had no material effect on the Company's      
financial statements.                                                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

5. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
   The Company continually evaluates whether events and circumstances indicate
that the remaining carrying amount of an asset may not be recoverable or the    
remaining useful life may warrant revision. To make this evaluation, the Company
uses its estimate of undiscounted future cash flows (without interest charges)  
over the remaining life of the asset.                                           

ACCRUED LIABILITIES                                                     

Accrued liabilities consisted of the following (in thousands):          

                                                        [Enlarge/Download Table]

                                                                           AT DECEMBER 31,   
                                                                         --------------------
                                                                           1996       1995   
                                                                         ---------  ---------
                                                                                             
Accrued interest........................................................ $   1,140  $     407
Payroll and benefits (accrued wages, vacation and profit sharing).......     8,315      4,080
Restructuring accruals..................................................        60        230
Insurance accruals......................................................     5,527      5,195
Income and property taxes...............................................     5,791      1,491
Marketing and advertising...............................................     6,863      2,017
Acquisition related accruals............................................     6,290     --    
Other accrued liabilities...............................................     5,937      2,449
                                                                         ---------  ---------
  Total................................................................. $  39,923  $  15,869
                                                                         ---------  ---------
                                                                         ---------  ---------

FAIR VALUE OF FINANCIAL INSTRUMENTS                                     

The financial position of the Company at December 31, 1996 and 1995,    
includes certain financial instruments which may have a fair value that is      
different from that which is currently reflected in the financial statements.   
However, any variation in value is insignificant.                               

USE OF ESTIMATES                                                        

  The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

REVENUE RECOGNITION                                                     

The Company recognizes revenue upon shipment to customers.              

DERIVATIVE FINANCIAL INSTRUMENTS                                        

The Company has not entered into any derivatives or other speculative   
financial instruments as of December 31, 1996.                                  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

5. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                                  
INCOME TAXES                                                            

Deferred income taxes reflect the tax effect of temporary differences   
between the amount of assets and liabilities recognized for financial reporting 
and tax purposes and are measured by applying currently enacted tax laws. The   
effect on deferred income tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.            

OTHER INCOME                                                            

Other income primarily consists of royalty revenue.                     

EARNINGS PER COMMON SHARE                                               

The earnings per common share is computed based on the fully diluted    
weighted average number of shares of the Company's common stock and common stock
equivalents outstanding during the period. Common stock equivalents represent   
the dilutive effect of the assumed exercise of certain outstanding stock        
options.                                                                        

FINANCIAL STATEMENT PRESENTATION                                        

    Certain prior year balances have been reclassified to conform to the current
year presentation.                                                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

6. INCOME TAXES                                                                 

   The components of the provision for income taxes from Continuing Operations
are as follows (in thousands):                                                  

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED DECEMBER 31,    
                                                                  -------------------------------
                                                                    1996       1995       1994   
                                                                  ---------  ---------  ---------
                                                                                                 
Current.......................................................... $   6,271  $   1,879  $     272
Deferred.........................................................      (340)     3,448      4,163
State............................................................     1,913        735      1,098
                                                                  ---------  ---------  ---------
Provision for income taxes....................................... $   7,844  $   6,062  $   5,533
                                                                  ---------  ---------  ---------
                                                                  ---------  ---------  ---------

Temporary differences and carryforwards which give rise to a significant
portion of net deferred income tax assets are as follows (in thousands):        

                                                        [Enlarge/Download Table]

                                                                          YEAR ENDED DECEMBER  
                                                                                  31,          
                                                                          -------------------- 
                                                                            1996       1995    
                                                                          ---------  --------- 
                                                                                               
Deferred tax assets:  Net operating loss carryforward.................... $  --      $     385 
  Accrued vacation.......................................................       588        504 
  Accrued workers' compensation..........................................     1,671      1,397 
  Acquisition reserves...................................................     2,394     --     
  Other insurance reserves...............................................       666        657 
  Restructuring reserves.................................................       350        396 
  Other accrued expenses and reserves....................................     2,182      1,454 
  Other deferred tax assets..............................................       600      2,340 
                                                                          ---------  --------- 
    Total deferred tax assets............................................     8,451      7,133 
Deferred tax liabilities: Accelerated depreciation and amortization......     6,759      2,901 
  Other deferred tax liabilities.........................................        47        140 
                                                                          ---------  --------- 
    Total deferred tax liabilities.......................................     6,806      3,041 
Valuation allowance......................................................    --         (3,073)
                                                                          ---------  --------- 
  Net deferred tax assets................................................     1,645      1,019 
  Noncurrent deferred tax liabilities....................................    (5,694)    (2,070)
                                                                          ---------  --------- 
  Current deferred tax assets............................................ $   7,339  $   3,089 
                                                                          ---------  --------- 
                                                                          ---------  --------- 

    The Company reduced goodwill by approximately $21,000, $5.6 million and $4.2
million for the years ended December 31, 1996, 1995 and 1994, respectively,     
representing realization of deferred tax assets created prior to the Company's  
financial restructuring transaction.                                            

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

6. INCOME TAXES (CONTINUED)                                                     
   The provision for income taxes was different from the amount computed using
the statutory income tax rate for the reasons set forth in the following table  
(in thousands):                                                                 

                                                        [Enlarge/Download Table]

                                                                   YEAR ENDED DECEMBER 31,     
                                                               ------------------------------- 
                                                                 1996       1995       1994    
                                                               ---------  ---------  --------- 
                                                                                               
Provision computed at statutory rate.......................... $   7,846  $   5,917  $   5,050 
State income taxes............................................     1,243      1,025        905 
Tax on non-deductible goodwill amortization...................       486        473        516 
Utilization of previously unrecognized deferred tax assets....    (2,265)    (1,405)    (1,107)
Other.........................................................       534         52        169 
                                                               ---------  ---------  --------- 
Provision for income taxes.................................... $   7,844  $   6,062  $   5,533 
                                                               ---------  ---------  --------- 
                                                               ---------  ---------  --------- 

7. LONG-TERM DEBT                                                               

The Company's long-term debt consists of the following (in thousands):  

                                                        [Enlarge/Download Table]

                                                                           AT DECEMBER 31,    
                                                                        --------------------- 
                                                                           1996       1995    
                                                                        ----------  --------- 
                                                                                              
Senior term loan....................................................... $  160,000  $  41,000 
Revolving credit facility..............................................     22,349     --     
Industrial development revenue bonds...................................      3,000      3,000 
                                                                        ----------  --------- 
  Total long-term debt.................................................    185,349     44,000 
  Less: Current maturities.............................................     (8,000)    (8,000)
                                                                        ----------  --------- 
  Long-term debt, net of current maturities............................ $  177,349  $  36,000 
                                                                        ----------  --------- 
                                                                        ----------  --------- 

Maturities of long-term debt at December 31, 1996, are as follows (in   
thousands):                                                                     

                                                        [Enlarge/Download Table]

                                                                                             
1997.............................................................................. $    8,000
1998..............................................................................     15,000
1999..............................................................................     20,000
2000..............................................................................     30,000
2001..............................................................................     35,000
Thereafter........................................................................     77,349
                                                                                   ----------
  Total maturities................................................................ $  185,349
                                                                                   ----------
                                                                                   ----------

SENIOR TERM LOAN AND REVOLVING CREDIT FACILITY                          

    On December 2, 1996, in conjunction with the Presto acquisition, the Company
renegotiated a $220.0 million credit agreement ("Senior Credit Agreement").     
Funding provided by the Senior Credit Agreement was utilized to acquire the     
capital stock of Presto for approximately $123.5 million, to pay off            

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

7. LONG-TERM DEBT (CONTINUED)                                                   
the existing senior debt of approximately $44.8 million and to pay $2.1 million 
in fees and expenses associated with the Presto acquisition.                    

  The base interest rate on the Term Loan and the Revolver is the prime rate
plus an applicable margin spread. Both facilities have alternative rate options 
based upon applicable margin spreads above the London Interbank Offered Rate    
("LIBOR"). At December 31, 1996, $160.0 million in borrowings under the Term    
Loan were outstanding at an interest rate of 6.95% and $22.4 million in         
borrowings were outstanding under the Revolver at an interest rate of 6.99%.    
Borrowings under these lending facilities are secured by virtually all of the   
assets of the Company. Up to $15.0 million in letters of credit may be issued   
under the Revolver, of which $8.8 million was issued and outstanding at December
31, 1996. As of December 31, 1996, approximately $28.8 million was additionally 
available to the Company under the $60.0 million Revolver. A fee of 1.5% per    
year is charged on outstanding letters of credit. A 0.42% per year commitment   
fee on uncommitted funds is payable quarterly. The Revolver matures on December 
1, 2002, coincident with the scheduled maturity of the Term Loan. The Senior    
Credit Agreement contains numerous covenants pertaining to management and       
operations of the Company including, among other restrictions, limitations on   
the amount of annual capital expenditures as well as specification of certain   
maximum leverage ratios, minimum fixed charge coverage ratios and minimum net   
worth. The Senior Credit Agreement also requires mandatory prepayment of the    
loans under certain conditions such as the sale of assets, excess cash flow, the
issuance of new debt or equity and the receipt of certain other cash proceeds.  

    During April 1994, the Company completed the sale of Velda for approximately
$51.0 million, consisting of $48.0 million in cash after working capital        
adjustments and $3.0 million in 9% Series A Preferred Stock. In conjunction with
the sale, the Company paid down approximately $36.7 million of its then existing
senior term loan and $11.8 million of its then existing revolver.               

 The Company was in compliance with all financial covenants as of December
31, 1996.                                                                       

INDUSTRIAL DEVELOPMENT REVENUE BONDS                                    

  The industrial development revenue bonds were issued on December 14, 1988,
to fund the construction of a waste water treatment facility at the Company's   
Frederick, Maryland, processing plant. The bonds mature on December 1, 2003, and
bear interest that fluctuates weekly based upon market factors. The interest    
rate in effect for these bonds on December 31, 1996, was 4.30%.                 

8. EMPLOYEE BENEFIT PLANS                                                       

RETIREMENT PLANS                                                        

  The Company has adopted a defined contribution profit sharing plan for the
purpose of providing retirement benefits for eligible non-union employees. At   
December 31, 1996, eligible employees totaled 363, of which 214 were            
participants in the plan. Contributions are made by the Company and by plan     
participants. Company contributions are allocated to the participants on the    
basis of individual contributions, the age of the participant and the number of 
years that the participant has been in the plan. During 1996 the Company also   
contributed to two single-employer and five multi-employer pension/retirement   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

8. EMPLOYEE BENEFIT PLANS (CONTINUED)                                           
plans under the terms of various union contracts, which covered 778 of its 1,403
employees at December 31, 1996. The number of union pension plans and the       
portion of employees covered has varied from year to year. Contributions to     
these pension plans are as follows (in thousands):                              

                                                        [Enlarge/Download Table]

                                                                      YEAR ENDED DECEMBER 31,    
                                                                  -------------------------------
                                                                    1996       1995       1994   
                                                                  ---------  ---------  ---------
                                                                                                 
Defined contribution profit sharing plan......................... $     416  $     250  $     230
Union pension plans..............................................     1,445      1,182      1,122

POST-RETIREMENT BENEFIT PLANS                                           

In December 1990, the Financial Accounting Standards Board issued its   
standard on accounting for post retirement benefits other than pensions. This   
standard requires that the expected cost of these benefits must be charged to   
expense during the years that the employees render service. The cost of         
providing these benefits has been primarily paid by non-union retirees and the  
Company's calculation of its obligation is not material as of December 31, 1996.

 The Company's union employees participate in various defined contribution
union plans that provide health care and other welfare benefits during their    
employment and after retirement. Amounts charged to expense and contributed to  
these health and welfare plans totaled approximately $2.0 million in 1996, $2.0 
million in 1995, and $2.6 million in 1994. Having made these payments, no       
remaining obligations exist for these years under the union plans.              

9. COMMITMENTS AND CONTINGENCIES                                                

LEASES                                                                  

The Company leases certain plant facilities and related equipment and   
vehicles under operating lease arrangements. Lease expense pursuant to such     
arrangements was approximately $4.3 million in 1996, $3.2 million in 1995, and  
$3.0 million in 1994.                                                           

The following is a summary of future minimum annual lease payments under
noncancelable operating lease obligations as of December 31, 1996 (in           
thousands):                                                                     

                                                        [Enlarge/Download Table]

                                                                     YEAR ENDING DECEMBER 31,
                                                                     ------------------------
                                                                                             
1997................................................................        $    3,893       
1998................................................................             3,469       
1999................................................................             2,557       
2000................................................................             1,965       
2001................................................................               693       
Thereafter..........................................................             1,383       
                                                                               -------       
  Total.............................................................        $   13,960       
                                                                               -------       
                                                                               -------       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)                                    
EMPLOYMENT AGREEMENTS                                                   

   As of December 31, 1996, the Company had entered into employment agreements
with certain key management personnel which provide for annual compensation and 
benefits and also provide for certain severance payments to be made to such     
individuals in the event of a change in control (as defined) of the Company or  
the involuntary termination of such individuals for reasons other than cause (as
defined). As of December 31, 1996, the maximum amount payable under these       
employment agreements was approximately $4.6 million in the aggregate.          

LITIGATION                                                              

From time to time the Company is subject to litigation in the ordinary  
course of its business. In connection with the divestitures of certain of the   
Company's operations, the Company assumed certain obligations of                
indemnification, none of which is believed to be material to the Company. The   
Company maintains insurance in respect of certain losses that may result from   
its current or future operations. The Company believes that the outcome of any  
existing litigation, after considering the indemnities and insurance related to 
such litigation, would not have a material impact on its business, financial    
condition or results of operations.                                             

10. RELATED PARTY TRANSACTIONS                                                  

HICKS MUSE                                                              

    The Company had previously entered into a financial advisory agreement dated
March 1, 1991, as amended, pursuant to which Hicks Muse provided financial      
advisory services to the Company. Effective September 30, 1995, this agreement  
was terminated. As compensation for such services, the Company paid Hicks Muse  
an advisory fee, together with all reasonable expenses incurred in connection   
therewith. The Company paid advisory fees of $150,000 and $114,000 in 1995 and  
1994, respectively, and reimbursed Hicks Muse approximately $28,000 and $37,000 
for expenses for each year, respectively. Hicks Muse was also paid a fee of     
$300,000 relating to the sale of Velda.                                         

11. EQUITY                                                                      

EMPLOYEE AND DIRECTOR STOCK OPTIONS                                     

   The Company has several stock-based compensation plans, which are described
below. The Company applies Accounting Principles Board ("APB") Opinion 25 and   
related Interpretations in accounting for its stock-based compensation plans. In
1995, the Financial Accounting Standards Board issued Statement of Financial    
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS  
123"), which, if fully adopted by the Company, would change the methods the     
Company applies in recognizing the cost of its stock-based compensation plans.  
Adoption of the cost recognition provisions of SFAS 123 is optional and the     
Company has decided not to elect these provisions. However, pro forma           
disclosures as if the Company had adopted these cost recognition provisions in  
1995 are required for fiscal years beginning after December 15, 1995. The       
Company has elected to provide these disclosures for its fiscal year which began
on January 1, 1996.                                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

11. EQUITY (CONTINUED)                                                          
1991 STOCK OPTION PLAN                                                  

  In March 1991, the Company established the 1991 Incentive and Nonstatutory
Stock Option Plan which provides for the issuance of options to purchase 999,999
shares of common stock to key employees of the Company. At December 31, 1996,   
769,941 tenure options and 228,258 incentive options had been granted to        
employees. Upon completion of the common stock offering in 1992, the incentive  
options became vested, resulting in compensation expense of $1.1 million. The   
exercise price for all options granted was $2.56 per share, which was the fair  
market value of the options at the date of issuance. The options expire ten     
years after the date of their issuance.                                         

1992 STOCK OPTION PLAN                                                  

 In July 1992, the Company established the 1992 Incentive and Nonstatutory
Stock Option Plan which provides for the issuance of options to purchase 181,818
shares of common stock to key employees of the Company. At December 31, 1996,   
175,000 options had been granted to employees. The exercise price for 25,000 of 
the options granted in 1992 is $9.00 per share, which was the fair market value 
of the options at the date of issuance. The exercise price for 120,000 of the   
options granted in 1994 is $7.00 per share, which was the fair market value of  
the options at the date of issuance. The exercise price for 30,000 of the       
options granted in 1995 is $6.75 per share, which was the fair market value of  
the options at the date of issuance. The options granted in 1992 become         
exercisable over a three-year period and expire ten years after the date of     
their issuance. One-third of the options granted in 1994 became exercisable on  
the date of issuance, while the remaining options vest in equal amounts over two
years. The options granted in 1995 vest ratably over a three-year period. The   
options granted in 1994 and 1995 expire ten years after the date of their       
issuance. Under this plan, 14,000 options had been exercised as of December 31, 
1996.                                                                           

1992 DIRECTOR STOCK OPTION PLAN                                         

  In April 1992, the Company established the 1992 Director Stock Option Plan
which provides for the issuance of options to purchase 39,062 shares of common  
stock to non-employee directors of the Company. At December 31, 1996, 39,062    
options had been granted to non-employee directors. The exercise price for these
options is $2.56 per share, which was the fair market value of the options at   
the date of issuance. The options become exercisable over a three-year period   
and expire ten years after the date of their issuance. As of December 31, 1996, 
no options under this plan had been exercised.                                  

1994 STOCK OPTION PLAN                                                  

 In June 1994, the Company established the 1994 Incentive and Nonstatutory
Stock Option Plan which provides for the issuance of options to purchase 250,000
shares of common stock to key employees of the Company. At December 31, 1996,   
231,000 options had been granted to employees. The exercise price for 195,000 of
the options granted in 1994 is $7.00 per share, which was the fair market value 
of the options at the date of issuance. The exercise price for 24,000 of the    
options granted in 1995 is $8.00 per share, which was the fair market value of  
the options at the date of issuance. An additional 12,000 options were granted  
in 1996 under this plan at exercise prices of $9.50 (6,000 options) and $10.00  
(6,000 options), which were the fair market values of the options on each       
issuance date. These options become exercisable over a three-year period and    
expire ten years after the date of their issuance. Under this plan, 26,000      
options had been exercised as of December 31, 1996.                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

11. EQUITY (CONTINUED)                                                          
1996 STOCK OPTION PLAN                                                  

  In May 1996, the Company amended the 1994 Incentive and Nonstatutory Stock
Option Plan to provide for the issuance of options to purchase up to 1,440,000  
shares of common stock to key employees of the Company. At December 31, 1996,   
1,212,000 options had been granted to employees. The exercise price for these   
options is $10.25 per share, which was the fair market value of the options at  
the date of issuance. 387,000 of the options become exercisable over a          
three-year period and 825,000 of the options became exercisable on the date of  
issuance. These options expire ten years after the date of their issuance. As of
December 31, 1996, no options under this plan had been exercised.               

1996 DIRECTOR STOCK OPTION PLAN                                         

In May 1996, the Company established the 1996 Director Stock Option Plan
which provides for the issuance of options to purchase 50,000 shares of common  
stock to non-employee directors of the Company. At December 31, 1996, 40,000    
options had been granted to non-employee directors. The exercise price for these
options is $10.25 per share, which was the fair market value of the options at  
the date of issuance. The options become exercisable over a three-year period   
and expire ten years after the date of their issuance. As of December 31, 1996, 
no options under this plan had been exercised.                                  

CHAIRMAN OPTION PLAN                                                    

  On February 15, 1994, the Compensation Committee of the Company's Board of
Directors approved the issuance of options to purchase 600,000 shares of common 
stock of the Company to C. Dean Metropoulos, Chairman and CEO of the Company. As
of December 31, 1996, 600,000 options had been granted to Mr. Metropoulos. The  
exercise price for these options is $6.50 per share, which was the fair market  
value of the options at the date of issuance. One-third of these options became 
exercisable on the date of issuance, while the remaining options vested in equal
amounts over two years. The options expire ten years after the date of their    
issuance. As of December 31, 1996, no options under this plan had been          
exercised.                                                                      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

11. EQUITY (CONTINUED)                                                          
SUMMARY OF OPTIONS (NUMBER OF OPTIONS)                                  

                                                        [Enlarge/Download Table]

                                                               1992                                                1996   
                                                             DIRECTOR                   CHAIRMAN                 DIRECTOR 
                                   1991 PLAN    1992 PLAN      PLAN       1994 PLAN       PLAN      1996 PLAN*     PLAN   
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------
                                                                                                                          
Outstanding at December 31,                                                                                               
  1994...........................    335,413      176,000       39,062      210,000       600,000       --          --    
Granted in 1995..................     --           30,000       --           81,000        --           --          --    
Canceled in 1995.................    (13,049)     (31,000)      --          (70,000)       --           --          --    
Exercised in 1995................   (311,464)      --           --           (2,000)       --           --          --    
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------

Outstanding at December 31,                                                                                               
  1995...........................     10,900      175,000       39,062      219,000       600,000       --          --    
Granted in 1996..................     --           --           --           12,000        --        1,212,000      40,000
Canceled in 1996.................     --           --           --           --            --           --          --    
Exercised in 1996................     (5,850)     (14,000)      --          (24,000)       --           --          --    
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------

Outstanding at December 31,                                                                                               
  1996...........................      5,050      161,000       39,062      207,000       600,000    1,212,000      40,000
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------
Exercisable at December 31,                                                                                               
  1995...........................     10,900      105,000       39,062       52,000       600,000       --          --    
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------
Exercisable at December 31,                                                                                               
  1996...........................      5,050      141,000       39,062      119,000       600,000      825,000      --    
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------
                                  -----------  -----------  -----------  -----------  ------------  -----------  ---------

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

*   Granted under 1994 Stock Option Plan as amended.                            

PRO FORMA NET INCOME AND EARNINGS PER COMMON SHARE                      

  Had the compensation cost for the Company's stock-based compensation plans
been determined consistent with SFAS 123, the Company's net income and earnings 
per common share for 1996 and 1995 would approximate the pro forma amounts below
(in thousands, except per share data):                                          

                                                        [Enlarge/Download Table]

                                    AS REPORTED    PRO FORMA    AS REPORTED    PRO FORMA  
                                    DECEMBER 31,  DECEMBER 31,  DECEMBER 31,  DECEMBER 31,
                                        1996          1996          1995          1995    
                                    ------------  ------------  ------------  ------------
                                                                                          
Net income.........................  $   14,576    $   10,770    $   11,524    $   11,460 
Earnings per common share..........         .96           .72           .76           .75 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

11. EQUITY (CONTINUED)                                                          
Pro forma charges to expense for options granted in 1996 and 1995 are as
follows (in thousands):                                                         

                                                        [Enlarge/Download Table]

                                                      1996                     CHARGE               
                                                     ANNUAL    1995 ANNUAL  ALLOCABLE TO     TOTAL  
                                                     CHARGE      CHARGE     FUTURE YEARS    CHARGE  
                                                    ---------  -----------  -------------  ---------
                                                                                                    
1995 Stock options................................. $     104   $      64     $     144    $     312
1996 Stock options.................................     3,702      --             1,573        5,275
                                                    ---------         ---        ------    ---------
  Total............................................ $   3,806   $      64     $   1,717    $   5,587
                                                    ---------         ---        ------    ---------
                                                    ---------         ---        ------    ---------

   The fair value of each option grant is estimated on the date of grant using
the Modified Black-Scholes option pricing model with the following weighted     
average assumptions used for grants in 1996 and 1995, respectively: risk free   
interest rates of 6.47% and 6.65%; expected dividend yields of 0.00% and 0.00%; 
expected lives of 4.0 years and 4.0 years; expected volatility of 40.31% and    
39.86%. The weighted average fair value of options granted in 1996 and 1995 was 
$10.31 and $6.93, respectively. The effects of applying SFAS 123 in this pro    
forma disclosure are not indicative of future amounts. SFAS 123 does not apply  
to awards prior to 1995.                                                        

STOCK REPURCHASE PROGRAM                                                

On June 21, 1995, the Company's Board of Directors announced that it had
approved a plan pursuant to which the Company may repurchase up to $20.0 million
of its common stock. The purchases will be effected through open market         
transactions or negotiated transactions from time to time, depending on the     
market price of the stock and other factors. As of December 31, 1995, 230,000   
shares had been repurchased by the Company at a cost of $1.8 million. As of     
December 31, 1996, the Company had purchased an additional 537,000 shares at a  
cost of $4.3 million.                                                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)                                 

 Quarterly financial information for the years ended December 31, 1996 and
1995, is as follows:                                                            

                                                        [Enlarge/Download Table]

                                                  FIRST     SECOND      THIRD      FOURTH  
                                                 QUARTER    QUARTER    QUARTER    QUARTER  
                                                ---------  ---------  ---------  ----------
                                                                                           
DOLLARS IN THOUSANDS:                                                                      
  Net sales.............................. 1996  $  81,724  $  85,693  $  99,869  $  127,020
                                          1995     71,893     74,882     73,167      84,788

  Gross profit........................... 1996     19,386     19,996     20,588      31,535
                                          1995     17,269     17,718     16,295      20,500

  Income from Continuing Operations...... 1996      2,831      3,463      3,027       5,255
                                          1995      2,269      2,846      2,316       3,909

  Income (loss) from Discontinued                                                          
    Operations........................... 1996     --         --         --          --    
                                          1995        694       (510)    --          --    

  Net income............................. 1996      2,831      3,463      3,027       5,255
                                          1995      2,963      2,336      2,316       3,909

PER COMMON SHARE:                                                                          

  Income from Continuing Operations...... 1996  $    0.19  $    0.23  $    0.20  $     0.34
                                          1995       0.15       0.19       0.15        0.25

  Income (loss) from Discontinued                                                          
    Operations........................... 1996     --         --         --          --    
                                          1995       0.05      (0.03)    --          --    

Net income............................... 1996       0.19       0.23       0.20        0.34
                                          1995       0.20       0.16       0.15        0.25

Market price range:                                                                        

  High................................... 1996      10.00      12.25      11.88       20.00
  Low.................................... 1996       7.88       9.13      10.25       11.88

  High................................... 1995       7.50       8.00       9.25        9.00
  Low.................................... 1995       5.50       6.38       6.38        7.50

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CONDENSED CONSOLIDATED BALANCE SHEETS 

(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                                  JUNE 30,    DECEMBER 31,
                                                                                    1997          1996    
                                                                                 -----------  ------------
                                                                                 (UNAUDITED)              
                                                                                                          
                                                   ASSETS                                                 
CURRENT ASSETS:                                                                                           
  Cash..........................................................................  $  2,167      $  4,786  
  Receivables, net of allowance for doubtful accounts of $8,852 and $6,676......    48,038        57,802  
  Inventories...................................................................    25,689        25,400  
  Prepaids and other............................................................     2,599         3,015  
  Deferred tax assets...........................................................     7,339         7,339  
  Net assets held for sale......................................................       630           676  
                                                                                 -----------  ------------
    Total current assets........................................................    86,462        99,018  

PROPERTY, PLANT AND EQUIPMENT:                                                                            
  Land..........................................................................    12,551         7,843  
  Buildings.....................................................................    35,131        29,507  
  Machinery and equipment.......................................................    80,189        70,239  
                                                                                 -----------  ------------
    Gross property, plant and equipment.........................................   127,871       107,589  
  Less: Accumulated depreciation................................................   (27,163)      (22,807) 
                                                                                 -----------  ------------
    Net property, plant and equipment...........................................   100,708        84,782  

INTANGIBLE AND OTHER ASSETS:                                                                              
  Identifiable intangible assets................................................    71,808        73,146  
  Goodwill......................................................................    90,189        96,175  
  Deferred financing costs......................................................     2,495         2,731  
  Other assets..................................................................       661           139  
                                                                                 -----------  ------------
    Total intangible and other assets...........................................   165,153       172,191  
                                                                                 -----------  ------------
TOTAL ASSETS....................................................................  $352,323      $355,991  
                                                                                 -----------  ------------
                                                                                 -----------  ------------

                                    LIABILITIES AND STOCKHOLDERS' EQUITY                                  

CURRENT LIABILITIES:                                                                                      
  Accounts payable..............................................................  $ 27,102      $ 32,968  
  Accrued liabilities...........................................................    36,364        39,923  
  Current portion of long-term debt.............................................    11,500         8,000  
                                                                                 -----------  ------------
    Total current liabilities...................................................    74,966        80,891  

LONG-TERM DEBT (net of current maturities)......................................   169,200       177,349  

OTHER LONG-TERM LIABILITIES.....................................................     3,020         3,269  

DEFERRED TAX LIABILITIES........................................................     5,694         5,694  

STOCKHOLDERS' EQUITY:                                                                                     
  Common stock, $.01 par value, 50,000,000 shares authorized; 15,382,942 shares                           
    in 1997 and 15,261,061 shares issued in 1996................................       153           153  
  Additional paid-in capital....................................................    73,873        73,179  
  Treasury stock, at cost (767,000 shares in 1997 and 1996).....................    (6,140)       (6,140) 
  Retained earnings.............................................................    31,557        21,596  
                                                                                 -----------  ------------
    Total stockholders' equity..................................................    99,443        88,788  
                                                                                 -----------  ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................  $352,323      $355,991  
                                                                                 -----------  ------------
                                                                                 -----------  ------------

The accompanying notes are an integral part of these consolidated statements. 

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 

                                                        [Enlarge/Download Table]

                                                           THREE MONTHS ENDED             SIX MONTHS ENDED       
                                                                JUNE 30,                      JUNE 30,           
                                                      ----------------------------  ---------------------------- 
                                                          1997           1996           1997           1996      
                                                      -------------  -------------  -------------  ------------- 
                                                                                                                 
NET SALES...........................................  $     140,374  $      85,693  $     270,672  $     167,417 
  Cost of goods sold................................        100,953         65,698        196,022        128,036 
  Selling, distribution, and general and                                                                         
    administrative..................................         26,337         14,239         51,223         28,737 
                                                      -------------  -------------  -------------  ------------- 
OPERATING INCOME....................................         13,084          5,756         23,427         10,644 

OTHER (INCOME) AND EXPENSES:                                                                                     
  Interest expense..................................          3,310            645          6,562          1,342 
  Amortization of deferred financing costs..........            116             95            236            190 
  Other income, net.................................           (131)          (191)          (249)          (382)
                                                      -------------  -------------  -------------  ------------- 
INCOME BEFORE INCOME TAXES..........................          9,789          5,207         16,878          9,494 
  Provision for income taxes........................          4,012          1,744          6,917          3,200 
                                                      -------------  -------------  -------------  ------------- 
NET INCOME..........................................  $       5,777  $       3,463  $       9,961  $       6,294 
                                                      -------------  -------------  -------------  ------------- 
                                                      -------------  -------------  -------------  ------------- 
EARNINGS PER COMMON SHARE...........................  $         .37  $         .23  $         .64  $         .42 
                                                      -------------  -------------  -------------  ------------- 
                                                      -------------  -------------  -------------  ------------- 
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES                                                             
  OUTSTANDING.......................................     15,716,000     14,724,000     15,643,651     14,778,316 

The accompanying notes are an integral part of these consolidated statements. 

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(UNAUDITED, DOLLARS IN THOUSANDS) 

                                                        [Enlarge/Download Table]

                                                                                             SIX MONTHS ENDED     
                                                                                                 JUNE 30,         
                                                                                          ----------------------- 
                                                                                             1997         1996    
                                                                                          -----------  ---------- 
                                                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                             
  Cash received from customers........................................................... $   280,622  $  169,021 
  Interest received......................................................................          35         127 
  Income tax refund......................................................................     --              156 
  Cash paid to suppliers and employees...................................................    (245,771)   (148,572)
  Interest paid..........................................................................      (7,415)     (1,617)
  Income taxes paid......................................................................      (7,773)     (2,807)
                                                                                          -----------  ---------- 

NET CASH PROVIDED BY OPERATING ACTIVITIES................................................      19,698      16,308 

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                             
  Acquisition of subsidiary: Working capital.............................................      (1,290)       (125)
  Property, plant and equipment..........................................................      (1,559)     (3,613)
  Other assets...........................................................................      (4,151)     (3,315)
                                                                                          -----------  ---------- 

    Net cash used by acquisition of subsidiary...........................................      (7,000)     (7,053)

  Capital expenditures...................................................................     (10,121)     (4,455)
  Proceeds from sale of fixed assets.....................................................          19      --     
  Other..................................................................................      (1,260)      1,173 
                                                                                          -----------  ---------- 
NET CASH USED BY INVESTING ACTIVITIES....................................................     (18,362)    (10,335)

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                             
  Proceeds from issuance of common stock.................................................         694         118 
  Net payments under revolving credit facility...........................................        (649)     --     
  Payments on long-term debt.............................................................      (4,000)     (4,000)
  Purchase of treasury stock.............................................................     --           (4,300)
                                                                                          -----------  ---------- 

NET CASH USED BY FINANCING ACTIVITIES....................................................      (3,955)     (8,182)
                                                                                          -----------  ---------- 

NET DECREASE IN CASH.....................................................................      (2,619)     (2,209)

CASH, BEGINNING OF PERIOD................................................................       4,786       5,811 
                                                                                          -----------  ---------- 

CASH, END OF PERIOD...................................................................... $     2,167  $    3,602 
                                                                                          -----------  ---------- 
                                                                                          -----------  ---------- 

The accompanying notes are an integral part of these consolidated statements. 

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATIONS 

(UNAUDITED, DOLLARS IN THOUSANDS) 

                                                        [Enlarge/Download Table]

                                                                                               SIX MONTHS ENDED   
                                                                                                   JUNE 30,       
                                                                                             -------------------- 
                                                                                               1997       1996    
                                                                                             ---------  --------- 
                                                                                                                  
NET INCOME.................................................................................. $   9,961  $   6,294 

ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH FLOW FROM OPERATIONS:                                             
  Depreciation..............................................................................     5,243      2,938 
  Amortization of intangibles...............................................................     2,988      1,350 
  Increase in deferred taxes................................................................    --             21 

Change in assets and liabilities, net of effects from acquisition of subsidiary:                                  
  Accounts receivable.......................................................................    10,477      1,604 
  Inventories...............................................................................       398     (1,094)
  Prepaids and other........................................................................       416        (70)
  Accounts payable..........................................................................    (5,866)     2,384 
  Accrued liabilities.......................................................................    (3,670)     3,018 
  Long-term liabilities.....................................................................      (249)      (138)
                                                                                             ---------  --------- 
NET CASH PROVIDED BY OPERATIONS............................................................. $  19,698  $  16,308 
                                                                                             ---------  --------- 
                                                                                             ---------  --------- 

The accompanying notes are an integral part of these consolidated statements. 

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1997 

1. CONSOLIDATED FINANCIAL STATEMENTS                                            

  The consolidated financial statements as of June 30, 1997, and for the six
months then ended have been prepared by The Morningstar Group Inc. (the         
"Company" or "Morningstar") 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 changes in cash flows at June 30, 1997, and for the   
six months then ended, 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 1996 financial      
statements contained in its most recent Annual Report on Form10-K. Certain prior
year balances have been reclassified to conform to the current year             
presentation.                                                                   

    On February 3, 1997, the Company completed the purchase of substantially all
of the assets of the frozen whipped toppings business of Van de Kamp's, Inc.    
("VDK"). VDK's sales for the year ended December 31, 1996 were approximately    
$13.1 million. VDK is a manufacturer and distributor of frozen whipped toppings 
primarily supplying retail customers throughout the United States. The Company  
paid approximately $7.0 million in cash for the assets acquired, and assumed    
approximately $.1 million in related liabilities. The source of funding was     
provided by the Company's operations in conjunction with its revolving credit   
facility.                                                                       

  During the first six months of 1997, the company received appraised values
on certain assets acquired in the Presto Food Products, Inc. acquisition. As a  
result, the allocation of the purchase price was revised resulting in a         
reclassification of $9.2 million from goodwill to property, plant and equipment.

2. INVENTORIES                                                                  

 Inventories are valued at the lower of cost or market. Cost is determined
using the first-in, first-out method. Inventories are summarized as follows (in 
thousands):                                                                     

                                                        [Enlarge/Download Table]

                                                          AT JUNE 30,                        
                                                             1997        AT DECEMBER 31, 1996
                                                        ---------------  --------------------
                                                                                             
Raw materials and supplies.............................    $  14,443          $   11,767     
Finished goods.........................................       11,246              13,633     
                                                             -------             -------     
  Total................................................    $  25,689          $   25,400     
                                                             -------             -------     
                                                             -------             -------     

  Finished goods inventories include the costs of materials, labor and plant
overhead.                                                                       

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THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1997 

3. DEBT                                                                         

The Company's outstanding long-term debt and average interest rates in  
effect on June 30, 1997 were:                                                   

                                                        [Enlarge/Download Table]

                                                                                 AMOUNT OF DEBT  AVERAGE INTEREST RATE
                                                                                 --------------  ---------------------
                                                                                 (IN THOUSANDS)                       
                                                                                                                      
Senior term loan................................................................    $156,000            7.130%        
Revolving credit facility (a)...................................................      21,700            7.256%        
Industrial development revenue bonds............................................       3,000            4.080%        
                                                                                 --------------                       
  Total.........................................................................     180,700                          
Less: Current maturities........................................................      11,500                          
                                                                                 --------------                       
Long-term debt, net of current maturities.......................................    $169,200                          
                                                                                 --------------                       
                                                                                 --------------                       

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

(a) As of June 30, 1997, approximately $21,700,000 was outstanding under the    
revolving credit facility and letters of credit totaling $7,974,000 were
issued. As of June 30, 1997, the Company had $30,326,000 in additional  
borrowing capacity under the terms of its revolving credit facility.    

4. EARNINGS PER COMMON SHARE                                                    

The earnings per common share is computed based on the weighted average 
number of shares of the Company's common stock and common stock equivalents     
outstanding during the period. Common stock equivalents represent the dilutive  
effect of the assumed exercise of certain outstanding stock options.            

 The Company intends to adopt SFAS No. 128 "Earnings Per Share" "SFAS 128"
effective December 15, 1997 and present December 31, 1997 and prior periods     
earnings per share under SFAS128. Early adoption of the new statement is not    
permitted. The calculation of basic earnings per share under SFAS 128 will have 
a favorable impact as it excludes potentially dilutive options previously       
included in the calculation of primary earnings per share.                      

5. STOCK REPURCHASE PROGRAM                                                     

On June 21, 1995, the Company's Board of Directors announced that it had
approved a plan pursuant to which the Company may repurchase up to $20.0 million
of its common stock. The purchases will be effected through open market         
transactions or negotiated transactions from time to time, depending on the     
market price of the stock and other factors. As of December 31, 1996, 767,000   
shares had been repurchased by the Company at a cost of $6.1 million. As of June
30, 1997, the Company had not purchased any additional shares.                  

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INDEPENDENT AUDITORS' REPORT

Board of Directors                                                              
Country Fresh, Inc.                                                             
Grand Rapids, Michigan                                                          

We have audited the accompanying consolidated balance sheets of Country Fresh,  
Inc. and subsidiaries as of March 1, 1997 and March 2, 1996, and the related    
consolidated statements of earnings, shareholders' equity and cash flows for    
each of the three years in the period ended March 1, 1997. These financial      
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

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

 We believe that our audits provide a reasonable basis for our opinion. In
our opinion, such financial statements present fairly, in all material respects,
the consolidated financial position of Country Fresh, Inc. and subsidiaries as  
of March 1, 1997 and March 2, 1996, and the consolidated results of their       
operations and their cash flows for each of the three years in the period ended 
March 1, 1997, in conformity with generally accepted accounting principles.     

  As discussed in Note 6 to the consolidated financial statements, in fiscal
year 1995 the Company changed its method of accounting for postretirement       
benefits other than pensions to conform with Statement of Financial Accounting  
Standards No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions."                                                                      

                       DELOITTE & TOUCHE LLP

Grand Rapids, Michigan                                                          
May 5, 1997                                                                     

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COUNTRY FRESH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                                                    MARCH 2,      MARCH 1,      JULY 19,   
                                                                                      1996          1997          1997     
                                                                                  ------------  ------------  ------------ 
                                                                                                              (UNAUDITED)  
                                                                                                                           
                                                          ASSETS                                                           
CURRENT ASSETS:                                                                                                            
  Cash and cash equivalents.....................................................  $ 11,651,121  $ 10,524,048  $  6,697,162 
  Accounts receivable, net of the allowance for doubtful accounts of $1,227,000,                                           
    $670,000 and $672,000.......................................................    23,863,323    24,311,205    26,084,045 
  Inventories (Note 2)..........................................................    12,564,674    14,297,557    18,846,324 
  Deferred taxes on income (Note 7).............................................     1,122,000     1,168,000     1,186,000 
  Prepaid income taxes..........................................................        94,213                             
  Prepaid expenses and other....................................................     1,117,599       998,880       240,585 
                                                                                  ------------  ------------  ------------ 
    Total current assets........................................................    50,412,930    51,299,690    53,054,116 
DEFERRED TAXES ON INCOME (Note 7)...............................................     2,543,000     2,970,000     3,059,000 
PROPERTY, PLANT AND EQUIPMENT (Note 4):.........................................                                           
  Land and improvements.........................................................     2,852,510     3,124,502     3,224,502 
  Buildings.....................................................................    26,796,538    29,814,418    29,814,418 
  Machinery and equipment.......................................................    56,456,723    61,210,938    64,346,224 
  Shipping containers...........................................................     8,881,155     9,475,755     9,579,400 
  Transportation equipment......................................................    12,507,898    14,391,892    14,633,233 
                                                                                  ------------  ------------  ------------ 
                                                                                   107,494,824   118,017,505   121,597,777 
  Accumulated depreciation......................................................   (68,987,812)  (75,335,243)  (78,122,058)
                                                                                  ------------  ------------  ------------ 
                                                                                    38,507,012    42,682,262    43,475,719 
OTHER ASSETS....................................................................     3,302,314     2,254,340     2,352,934 
                                                                                  ------------  ------------  ------------ 
TOTAL ASSETS....................................................................  $ 94,765,256  $ 99,206,292  $101,941,769 
                                                                                  ------------  ------------  ------------ 
                                                                                  ------------  ------------  ------------ 

                                           LIABILITIES AND SHAREHOLDERS' EQUITY                                            
CURRENT LIABILITIES:                                                                                                       
  Trade accounts payable........................................................  $ 18,029,941  $ 18,973,756  $ 19,226,753 
  Accrued expenses (Note 3).....................................................    11,297,087    11,659,319    11,089,591 
  Income taxes payable..........................................................                   1,963,787     2,262,333 
  Current portion of long-term debt (Note 4)....................................     2,809,721     2,835,646     3,766,924 
                                                                                  ------------  ------------  ------------ 
    Total current liabilities...................................................    32,136,749    35,432,508    36,345,601 
LONG-TERM DEBT (Note 4).........................................................    32,152,297    28,571,200    26,522,684 
POST RETIREMENT BENEFITS (Notes 5 and 6)........................................     5,350,118     3,668,633     3,557,633 
COMMITMENTS AND CONTINGENCIES (Note 8)                                                                                     
SHAREHOLDERS' EQUITY (Note 98):                                                                                            
  Preferred stock, Series A, 8% cumulative, par value $320 a share; 31,250                                                 
    authorized shares...........................................................     3,800,000     3,741,120     3,741,120 
  Common stock, no par value; 15,000,000 authorized shares......................     1,774,092     1,869,950     1,897,660 
  Retained earnings.............................................................    19,552,000    25,922,881    29,877,071 
                                                                                  ------------  ------------  ------------ 
    Total shareholders' equity..................................................    25,126,092    31,533,951    35,515,851 
                                                                                  ------------  ------------  ------------ 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY......................................  $ 94,765,256  $ 99,206,292  $101,941,769 
                                                                                  ------------  ------------  ------------ 
                                                                                  ------------  ------------  ------------ 

See notes to consolidated financial statements. 

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COUNTRY FRESH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS 

                                                        [Enlarge/Download Table]

                                                                            YEARS ENDED                     TWENTY WEEKS ENDED     
                                                              ----------------------------------------  -------------------------- 
                                                              FEBRUARY 25,    MARCH 2,      MARCH 1,      JULY 20,      JULY 19,   
                                                                  1995          1996          1997          1996          1997     
                                                              ------------  ------------  ------------  ------------  ------------ 
                                                                                                        (UNAUDITED)   (UNAUDITED)  
                                                                                                                                   
NET SALES...................................................  $310,164,014  $336,054,590  $353,037,053  $135,327,698  $136,154,331 
COST OF GOODS SOLD..........................................   268,500,028   291,721,220   305,613,569   115,962,551   116,232,837 
                                                              ------------  ------------  ------------  ------------  ------------ 
  Gross profit..............................................    41,663,986    44,333,370    47,423,484    19,365,147    19,921,494 
OPERATING COSTS AND EXPENSES:                                                                                                      
  Selling and distribution..................................    21,224,430    21,632,703    19,916,061     7,396,735     7,216,944 
  General and administrative................................    15,036,712    15,699,730    16,009,777     5,907,043     6,234,400 
  Amortization of intangibles...............................        99,618        82,540       656,410        33,272        19,022 
                                                              ------------  ------------  ------------  ------------  ------------ 
    Total operating costs and expenses......................    36,360,760    37,414,973    36,582,248    13,337,050    13,470,366 
                                                              ------------  ------------  ------------  ------------  ------------ 
INCOME FROM OPERATIONS......................................     5,303,226     6,918,397    10,841,236     6,028,097     6,451,128 
OTHER (INCOME) EXPENSE:                                                                                                            
  Interest (income) expense, net............................      (258,505)    1,392,648     1,219,353       613,168       597,186 
  Miscellaneous income......................................      (551,116)     (633,310)     (435,642)     (111,535)     (254,070)
                                                              ------------  ------------  ------------  ------------  ------------ 
    Total other (income) expense............................      (809,621)      759,338       783,711       501,633       343,116 
                                                              ------------  ------------  ------------  ------------  ------------ 
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE                                                                       
  IN ACCOUNTING.............................................     6,112,847     6,159,059    10,057,525     5,526,464     6,108,012 
INCOME TAXES (Note 7).......................................     2,145,000     2,090,000     3,385,000     1,884,000     2,079,000 
                                                              ------------  ------------  ------------  ------------  ------------ 
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING...     3,967,847     4,069,059     6,672,525     3,642,464     4,029,012 
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR POSTRETIREMENT                                                                       
  BENEFITS OTHER THAN PENSIONS (NET OF INCOME TAX BENEFIT OF                                                                       
  $1,170,376) (Note 6)......................................     2,271,907                                                         
                                                              ------------  ------------  ------------  ------------  ------------ 
NET EARNINGS................................................  $  1,695,940  $  4,069,059  $  6,672,525  $  3,642,464  $  4,029,012 
                                                              ------------  ------------  ------------  ------------  ------------ 
                                                              ------------  ------------  ------------  ------------  ------------ 
NET EARNINGS PER COMMON SHARE:                                                                                                     
  Before cumulative effect of change in accounting..........  $       0.52  $       1.04  $       1.75  $       0.97  $       1.07 
  Cumulative effect of change in accounting.................         (0.30)                                                        
                                                              ------------  ------------  ------------  ------------  ------------ 
    Net earnings............................................  $       0.22  $       1.04  $       1.75  $       0.97  $       1.07 
                                                              ------------  ------------  ------------  ------------  ------------ 
                                                              ------------  ------------  ------------  ------------  ------------ 
WEIGHTED AVERAGE SHARES OUTSTANDING.........................     7,622,840     3,609,245     3,636,519     3,631,758     3,685,236 
                                                              ------------  ------------  ------------  ------------  ------------ 
                                                              ------------  ------------  ------------  ------------  ------------ 

See notes to consolidated financial statements. 

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COUNTRY FRESH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

TWENTY WEEKS ENDED JULY 19, 1997 AND YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 
AND FEBRUARY 25, 1995 

                                                        [Enlarge/Download Table]

                                     PREFERRED STOCK SERIES                                                                     
                                        A 8% CUMULATIVE           COMMON STOCK        ADDITIONAL                                
                                     ----------------------  -----------------------    PAID-IN      RETAINED                   
                                      SHARES      AMOUNT       SHARES      AMOUNT       CAPTIAL      EARNINGS         TOTAL     
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 
                                                                                                                                
BALANCE, February 27, 1994.........                             191,313  $ 3,884,020  $ 6,305,559  $  39,416,901  $  49,606,480 

  Net earnings.....................                                                                    1,695,940      1,695,940 
  Issuance of common stock.........                               2,669       56,900      462,532                       519,432 
  Redemption of common stock.......                              (2,291)     (48,220)     (48,530)      (373,966)      (470,716)
  Recapitalization expenses........                                                       (86,569)                      (86,569)
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 
BALANCE, February 25, 1995.........     --          --          191,691    3,892,700    6,632,992     40,738,875     51,264,567 

  Net earnings.....................                                                                    4,069,059      4,069,059 
  Redemption of Class A common                                                                                                  
    stock and exchange of 40 shares                                                                                             
    of no par common stock for                                                                                                  
    Class B common stock...........                           7,451,549      (73,600)                                   (73,600)
  Redemption of common pursuant to                                                                                              
    the redemption and exchange                                                                                                 
    offer..........................     11,875    3,800,000  (4,157,520)  (2,078,760)  (6,632,992)   (24,548,365)   (29,460,117)
  Issuance of common stock.........                               4,459       35,672                                     35,672 
  Redemption of common stock.......                                (240)      (1,920)                                    (1,920)
  Recapitalization expenses........                                                                     (403,569)      (403,569)
  Preferred stock dividends........                                                                     (304,000)      (304,000)
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 
BALANCE, March 2, 1996.............     11,875    3,800,000   3,489,939    1,774,092      --          19,552,000     25,126,092 

  Net earnings.....................                                                                    6,672,525      6,672,525 
  Issuance of common stock.........                              11,637       97,458                                     97,458 
  Redemption of common and                                                                                                      
    preferred stock................       (184)     (58,880)       (200)      (1,600)                                   (60,480)
  Preferred stock dividends........                                                                     (301,644)      (301,644)
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 
BALANCE, March 1, 1997.............     11,691    3,741,120   3,501,376    1,869,950      --          25,922,881     31,533,951 

  Net earnings (Unaudited).........                                                                    4,029,012      4,029,012 
  Issuance of common stock                                                                                                      
    (Unaudited)....................                               2,611       27,710                                     27,710 
  Preferred stock dividends                                                                                                     
    (Unaudited)....................                                                                      (74,822)       (74,822)
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 
BALANCE, July 19, 1997                                                                                                          
  (Unaudited)......................     11,691  $ 3,741,120   3,503,987  $ 1,897,660  $   --       $  29,877,071  $  35,515,851 
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 
                                     ---------  -----------  ----------  -----------  -----------  -------------  ------------- 

See notes to consolidated financial statements. 

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COUNTRY FRESH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                            YEARS ENDED                    TWENTY WEEKS ENDED    
                                                              ----------------------------------------  ------------------------ 
                                                              FEBRUARY 25,     MARCH 2,     MARCH 1,     JULY 20,     JULY 19,   
                                                                  1995           1996         1997         1996         1997     
                                                              ------------   ------------  -----------  -----------  ----------- 
                                                                                                        (UNAUDITED)  (UNAUDITED) 
                                                                                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                            
  Net earnings..............................................  $ 1,695,940    $  4,069,059  $ 6,672,525  $3,642,464   $4,029,012  
  Adjustments to reconcile net earnings to net cash provided                                                                     
    by operating activities:                                                                                                     
  Depreciation and amortization.............................    7,932,522       8,401,628    6,577,718   2,600,153    2,786,815  
  Deferred income taxes.....................................   (1,588,000)       (126,000)    (473,000)   (297,000 )   (107,000 )
  Post retirement benefits..................................    1,540,535         459,795     (410,845)   (158,018 )   (111,000 )
  Change in operating assets and liabilities, net of effect                                                                      
    of acquisitions:                                                                                                             
    Accounts receivable.....................................     (928,541)     (2,059,592)    (447,882) (4,991,501 ) (1,772,840 )
    Inventories.............................................   (1,064,010)       (363,904)  (1,732,883) (2,181,767 ) (2,279,467 )
    Prepaid expenses and other..............................      136,117          47,688      118,719     403,871      758,295  
    Accounts payable and accrued expenses...................    1,882,944       2,024,370    1,267,868   7,899,393     (316,731 )
    Income taxes............................................   (1,487,000)       (313,005)   2,058,000     864,000      298,546  
                                                              ------------   ------------  -----------  -----------  ----------- 
      Net cash provided by operating activities.............    8,120,507      12,140,039   13,630,220   7,781,595    3,285,630  
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                            
  Purchases of property, plant and equipment................   (5,817,122)     (7,213,562)  (8,810,163) (3,497,237 ) (2,380,272 )
  Cash paid for acquisitions (Note 10)......................   (3,862,913)                                           (3,469,300 )
  (Increase) decrease in other assets.......................    1,336,367      (1,112,394)    (307,292)    536,079      (98,594 )
                                                              ------------   ------------  -----------  -----------  ----------- 
      Net cash used in investing activities.................   (8,343,668)     (8,325,956)  (9,117,455) (2,961,158 ) (5,948,166 )

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                            
  Payments on long-term debt................................   (1,465,454)     (7,231,685)  (5,375,172) (1,183,941 ) (1,217,238 )
  Proceeds from long-term borrowings........................                   27,000,000                               100,000  
  Payments of recapitalization expenses.....................      (86,569)       (403,569)                                       
  Proceeds from issuance of common stock....................      519,432          35,672       97,458      93,426       27,710  
  Redemption of preferred and common stock..................     (470,716)    (28,319,096)     (60,480)                          
  Dividends paid on preferred stock.........................                     (304,000)    (301,644)    (60,480 )    (74,822 )
                                                              ------------   ------------  -----------  -----------  ----------- 
      Net cash used in financing activities.................   (1,503,307)     (9,222,678)  (5,639,838) (1,150,995 ) (1,164,350 )
                                                              ------------   ------------  -----------  -----------  ----------- 
NET DECREASE IN CASH AND CASH EQUIVALENTS...................   (1,726,468)     (5,408,595)  (1,127,073)  3,669,442   (3,826,886 )

CASH AND CASH EQUIVALENTS, BEGINNING........................   18,786,184      17,059,716   11,651,121  11,651,121   10,524,048  
                                                              ------------   ------------  -----------  -----------  ----------- 
CASH AND CASH EQUIVALENTS, ENDING...........................  $17,059,716    $ 11,651,121  $10,524,048  $15,320,563  $6,697,162  
                                                              ------------   ------------  -----------  -----------  ----------- 
                                                              ------------   ------------  -----------  -----------  ----------- 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                                
  Interest paid.............................................  $   615,498    $  2,272,540  $ 1,993,371  $  947,085   $  629,580  
  Taxes on income paid......................................    4,050,000       2,500,000    1,800,000     600,000    2,300,000  

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING                                                                      
  ACTIVITIES:                                                                                                                    
  Issuance of installment notes for the purchase of                                                                              
    transportation equipment................................  $ 1,652,233    $    --       $ 1,820,000  $   --       $   --      
  Collection of note receivable through the redemption of                                                                        
    common stock in the recapitalization (Note 8)...........                    1,216,541                                        

See notes to consolidated financial statements. 

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                   

  BUSINESS--Country Fresh, Inc. and its subsidiaries (the "Company") process
and market dairy and other related products to customers primarily located in   
Michigan, northern Indiana, and northern Ohio. The Company provides credit terms
to its customers generally ranging up to 30 days, perform ongoing credit        
evaluations of their customers and maintain allowances for potential credit     
losses and rebates and allowances based on historical experience.               

  PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of Country Fresh, Inc. and its wholly owned subsidiaries. All      
significant intercompany profits, transactions and balances have been eliminated
in consolidation.                                                               

    USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities and  
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Although management believes the estimates are reasonable,    
actual results could differ from those estimates.                               

   FISCAL YEAR--The fiscal year of the Company ends on the Saturday closest to
the end of February. The fiscal years ended March 1, 1997 and February 25, 1995 
were comprised of fifty-two weeks, whereas the fiscal year ended March 2, 1996  
was comprised of fifty-three weeks. References to fiscal years 1995, 1996 and   
1997 represent the Company's fiscal years ended February 25, 1995, March 2, 1996
and March 1, 1997, respectively.                                                

CASH AND CASH EQUIVALENTS--Cash and cash equivalents consist of cash and
highly-liquid investments purchased with a remaining maturity at date of        
purchase of approximately three months or less.                                 

 INVENTORIES--Inventories are primarily stated at the lower of cost, using
the LIFO (last-in, first-out) method, or market. The cost of manufactured       
finished goods inventories include raw materials direct labor and indirect      
production and overhead costs.                                                  

PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment assets are 
recorded at cost. Depreciation is computed using both the straight-line and     
declining balance methods based on the estimated useful lives of the related    
assets.                                                                         

                                                        [Enlarge/Download Table]

                   ASSET                                      USEFUL LIFE                 
--------------------------------------------  --------------------------------------------
                                                                                          
Buildings and improvements                                  Ten to 20 years               
Machinery and equipment                                    Three to 12 years              
Shipping containers                                           Three years                 
Transportation equipment                                    Five to 12 years              

   Expenditures for maintenance and repairs are charged to expense as incurred
whereas major additions are capitalized.                                        

The Company periodically assesses the carrying values of its long lived 
assets, which primarily consists of its property, plant and equipment assets, by
comparing the expected undiscounted future cash flows to the carrying amount of 
the asset, and would evaluate a potential impairment if the recorded value of   
these                                                                           

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                       
assets exceeded the associated future cash flows. Any adjustment to the carrying
value of long-lived assets is recognized on a current basis.                    

 DEFERRED INCOME TAXES--Deferred income taxes are computed for differences
between the financial statement and tax basis of assets and liabilities that    
will result in taxable or deductible amounts in the future. Such deferred income
tax asset and liability computations are based on enacted tax laws and rates    
applicable to periods in which the differences are expected to affect taxable   
income. Valuation allowances are established when necessary to reduce deferred  
tax assets to the amounts expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period 
in deferred tax assets and liabilities.                                         

  EARNINGS PER COMMON SHARE--The Company computes earnings per common shared
by dividing net earnings less dividends on preferred stock by the weighted      
average number of common shares outstanding, including common equivalent shares.

  UNAUDITED INTERIM FINANCIAL STATEMENTS--The Company's consolidated balance
sheet as of July 19, 1997 and the consolidated statements of earnings,          
shareholders' equity and of cash flows for the twenty weeks ended July 20, 1996 
and July 19, 1997, 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    
July 19, 1997, and the results of operations and cash flows of the Company for  
the twenty weeks ended July 20, 1996 and July 19, 1997, 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.                                   

2. INVENTORIES                                                                  

Inventories consist of the following:                                   

                                                        [Enlarge/Download Table]

                                                              MARCH 2,     MARCH 1,     JULY 19,   
                                                                1996         1997         1997     
                                                             -----------  -----------  ----------- 
                                                                                       (UNAUDITED) 
                                                                                                   
Finished products........................................... $ 7,099,479  $ 8,135,843  $11,199,792 
Raw materials...............................................   3,010,340    5,498,844    7,054,746 
Containers..................................................   3,103,377    1,334,458    1,472,069 
                                                             -----------  -----------  ----------- 
                                                              13,213,196   14,969,145   19,726,607 
Less LIFO reserve...........................................    (648,522)    (671,588)    (880,283)
                                                             -----------  -----------  ----------- 
                                                             $12,564,674  $14,297,557  $18,846,324 
                                                             -----------  -----------  ----------- 
                                                             -----------  -----------  ----------- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

3. ACCRUED EXPENSES                                                             

Accrued expenses consist of the following:                              

                                                                [Download Table]

                                         MARCH 2,    MARCH 1,    JULY 19,  
                                           1996        1997        1997    
                                        ----------  ----------  ---------- 
                                                                (UNAUDITED)
                                                                           
Payroll...............................  $3,305,793  $3,428,354  $2,871,207 
Discounts, rebates and allowances.....   2,837,837   2,982,688   1,625,292 
Insurance.............................   1,702,439   1,689,717   1,942,919 
Retirement and pension................     698,113     799,193   1,226,093 
Containers............................   2,752,905   2,759,367   3,424,080 
                                        ----------  ----------  ---------- 
                                        $11,297,087 11,659,319  11,089,591 
                                        ----------  ----------  ---------- 
                                        ----------  ----------  ---------- 

   The Company accrues customer discounts, rebates and allowances as earned by
its customers, which are generally paid either monthly, quarterly or annually   
pursuant to the terms of the arrangement with the specific customer.            

  The Company is self-insured in certain states, up to specified limits, for
workers' compensation claims. Individual workers' compensation claims in excess 
of $300,000 and aggregate workers' compensation claims between $2.2 million and 
$20 million are insured through an insurance carrier. In addition, the Company  
is self-insured, up to certain limits, for medical benefit claims. The estimated
cost of claims for workers' compensation and medical benefits are accrued as    
incurred in the consolidated financial statements.                              

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

4. LONG-TERM DEBT                                                               

Long-term debt is summarized as follows:                                

                                                        [Enlarge/Download Table]

                                                               MARCH 2,     MARCH 1,     JULY 19,   
                                                                 1996         1997         1997     
                                                              -----------  -----------  ----------- 
                                                                                        (UNAUDITED) 
                                                                                                    
Credit agreement:                                                                                   
  Term loan facility........................................  $10,000,000  $ 8,000,000  $ 7,000,000 
  Revolving credit facility.................................   11,000,000   10,000,000   10,000,000 
Revenue bonds:                                                                                      
  Economic Development Corporation of the County of Elkhart,                                        
    Indiana.................................................    3,680,000    3,450,000    3,450,000 
  Economic Development Corporation of the City of Livonia,                                          
    Michigan................................................    2,780,000    2,570,000    2,570,000 
  Toledo-Lucas County Port Authority........................    4,590,000    4,335,000    4,335,000 
Installment loan............................................    1,512,262    1,809,968    1,758,816 
Promissory notes payable....................................    1,084,000    1,084,000    1,078,000 
Other notes payable.........................................      315,756      157,878       97,792 
                                                              -----------  -----------  ----------- 
                                                               34,962,018   31,406,846   30,289,608 
Less current portion........................................   (2,809,721)  (2,835,646)  (3,766,924)
                                                              -----------  -----------  ----------- 
Total long-term debt........................................  $32,152,297  $28,571,200  $26,552,684 
                                                              -----------  -----------  ----------- 
                                                              -----------  -----------  ----------- 

CREDIT AGREEMENT--The Company has a credit agreement with a syndicate of
banks which provides for both a term loan facility and a revolving credit       
facility, which are unsecured and mature on January 1, 2002. The term loan      
facility requires quarterly principal installments of $464,286 plus interest and
the revolving credit facility, which provides for maximum borrowings of up to   
$20 million, requires quarterly interest payments. The interest rate under the  
credit agreement is determined at the Company's option at either (i) the LIBOR  
rate (6.38% at March 1, 1997) plus between 1% and 1.5%, based on certain        
financial ratios of the Company, or (ii) the prime rate.                        

   In addition to amounts available under the revolving credit facility of the
credit agreement, the Company also has a $5 million unsecured line of credit    
with a bank, which expires in July 1998. No amounts are outstanding under this  
line of credit agreement,                                                       

REVENUE BONDS--The Company has three series of revenue bonds outstanding
which require aggregate annual sinking fund redemption installments of $695,000,
and are secured by irrevocable letters of credit issued by financial            
institutions, along with first mortgages on real property and equipment with an 
aggregate net book value of approximately $9,100,000 at March 1, 1997, for      
certain of the revenue bonds. Advances made, if any, under these letters of     
credit provide for repayment of such advances either ratably over the remaining 
life of the bond issue or within one year of such advance. Interest on the      
revenue bonds is due semi-annually at rates, determined by the remarketing      
agents (subject to certain maximums), which will approximate market conditions  
for tax exempt securities of the same stature. At March 1, 1997, the interest   
rates on the revenue bonds ranged from 3.4% to 3.75%. These revenues bonds are  
included in the accompanying schedule of maturities on long-term debt based on  
their mandatory sinking fund redemption installments.                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

4. LONG-TERM DEBT (CONTINUED)                                                   
  INSTALLMENT NOTE PAYABLE--The Company has an installment note payable with
monthly payments of principal and interest of $21,938, which bears interest at a
fixed rate of 7.85% through December 31, 2001 and a variable rate determined    
quarterly thereafter at the prime rate plus 1/2%. This installment note payable 
is collateralized by the Company's airplane.                                    

PROMISSORY NOTES PAYABLE--Between 1988 and 1993, the Company issued     
unsecured promissory notes in units of $1,000 pursuant to a Promissory Note     
Prospectus filed with the Corporation and Securities Bureau, Michigan Department
of Commerce. These promissory notes require quarterly interest payments at the  
prime rate less 1% (7.25% at March 1, 1997) with a minimum interest rate of 8%, 
which was reduced to 6% in 1993, and are repayable at the option of the Company 
on any quarterly interest payment date. At March 2, 1996 and March 1, 1997,     
$543,000 of these promissory notes were held by certain of the Company's        
shareholders.                                                                   

DEBT COVENANTS--The loans under the credit agreement and certain of the 
revenue bonds contain covenants which include restrictions on additional        
indebtedness and the payment of cash dividends in excess of prescribed amounts  
and require the Company to maintain certain minimum financial ratios, including:
a current ratio of 1.35 to 1.0; working capital of $18,500,000; tangible net    
worth of $21,500,000 at March 1, 1997, increasing $3,000,000 annually           
thereafter; a ratio of total liabilities to net worth of not more than 3.5 to   
1.0, decreasing .5 annually; and fixed charge coverage ratios (as defined) of   
2.0 to 1.0. The Company's working capital at March 1, 1997 and March 2, 1996 was
less than the required amounts, however, this covenant was waived by the        
respective lendors through February 1998.                                       

DEBT MATURITIES--At March 1, 1997, future annual maturities on long-term
debt are summarized as follows:                                                 

                                                                [Download Table]

YEAR ENDING                                                              
------------------------------------------------------------             
                                                                         
  1998......................................................  $ 2,835,646
  1999......................................................    2,687,992
  2000......................................................    2,699,049
  2001......................................................    2,711,005
  2002......................................................   11,438,220
  Thereafter................................................    9,034,934
                                                              -----------
  Total.....................................................  $31,406,846
                                                              -----------
                                                              -----------

At March 1, 1997 and March 2, 1996, the estimated fair value of the     
Company's long-term debt, including current maturities, approximated its        
carrying value. The estimated fair value was based on anticipated rates         
available to the Company for debt with similar terms and maturities.            

5. EMPLOYEE RETIREMENT PLANS                                                    

  The Company's retirement programs include both defined benefit and defined
contribution pension plans. Substantially all of the Company's supervisory and  
administrative personnel are covered by a non-contributory defined benefit      
pension plan and the employees of a subsidiary which are covered by a non-      
contributory defined benefit pension plan required by a collective bargaining   
agreement. The benefits                                                         

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

5. EMPLOYEE RETIREMENT PLANS (CONTINUED)                                        
under these defined benefit plans are based on years of service and, as to one  
of the plans, the employee's compensation. The Company's funding policy is to   
contribute annually the minimum amount required under ERISA regulations. Plan   
assets consist principally of investments made with insurance companies under a 
group annuity contract.                                                         

   The following table sets forth the defined benefit plans' funded status and
amounts recognized in the Company's balance sheets at March 1, 1997 and March 2,
1996, respectively:                                                             

                                                        [Enlarge/Download Table]

                                                                                      MARCH 2,       MARCH 1,    
                                                                                        1996           1997      
                                                                                    -------------  ------------- 
                                                                                                                 
Actuarial present value of benefit obligations:                                                                  
  Accumulated benefit obligation including vested benefit obligations of                                         
    $11,973,482 in 1997 and $10,462,548 in 1996.................................... $  10,943,674  $  12,508,894 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 
  Projected benefit obligation for service rendered to date........................ $  12,668,312  $  14,980,825 
Plan assets, at estimated fair value...............................................    11,624,776     14,056,504 
                                                                                    -------------  ------------- 
Projected benefit obligation in excess of the plan assets..........................     1,043,536        924,321 
Unrecognized net gain from past experience different from that assumed and effect                                
  of changes in assumptions........................................................     1,742,605      1,361,803 
Unrecognized prior service cost....................................................      (938,367)      (874,264)
Unrecognized initial net obligation at December 1, 1986 and March 1, 1987 being                                  
  amortized over 19 and 16 years, respectively.....................................      (823,258)      (735,027)
Adjustment required to reflect minimum liability...................................     1,232,462                
                                                                                    -------------  ------------- 
Accrued pension costs..............................................................     2,256,978        676,833 
Less current portion...............................................................      (250,000)      (200,000)
                                                                                    -------------  ------------- 
Long-term.......................................................................... $   2,006,978  $     476,833 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 

 Net periodic pension costs for the fiscal years ended 1995, 1996 and 1997
included the following components:                                              

                                                        [Enlarge/Download Table]

                                                                         1995           1996           1997      
                                                                     -------------  -------------  ------------- 
                                                                                                                 
Service cost-benefits earned during the year........................ $     724,759  $     748,726  $   1,023,899 
Interest cost on projected benefit obligation.......................       824,538        890,515        979,136 
Actual return on plan assets........................................      (316,919)    (1,824,261)    (1,673,896)
Net amortization and deferral.......................................      (385,888)     1,073,581        807,514 
                                                                     -------------  -------------  ------------- 
Net periodic pension costs.......................................... $     846,490  $     888,561  $   1,136,653 
                                                                     -------------  -------------  ------------- 
                                                                     -------------  -------------  ------------- 

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

5. EMPLOYEE RETIREMENT PLANS (CONTINUED)                                        
Assumptions used in the actuarial valuations were:                      

                                                        [Enlarge/Download Table]

                                                                                              1995       1996       1997    
                                                                                            ---------  ---------  --------- 
                                                                                                                            
Discount rates.............................................................................      8.25%      7.25%      7.50%
Rates of increase in compensation levels...................................................      4.75%      3.75%      4.00%
Expected long-term rate of return on assets................................................      9.00%      9.00%      9.00%

   Substantially all of the Company's supervisory and administrative personnel
may elect coverage in a salary reduction defined contribution retirement plan.  
The plan provides for employer contributions as determined by the Board of      
Directors. The Company's matching contributions to this plan were approximately 
$110,000, $131,000 and $132,000 in 1995, 1996 and 1997, respectively.           

    Certain union hourly employees are participants in Company sponsored defined
contribution plans which provide for employer contributions in various amounts  
ranging from $19 to $35 per pay period per participant. Contributions to these  
plans amounted to approximately $245,000, $350,000 and $377,000 in 1995, 1996   
and 1997, respectively.                                                         

In addition to the plans described above, the Company participates in   
several multi-employer and other defined contribution plans covering            
substantially all union employees. The expense for these plans aggregated       
approximately $858,000, $809,000 and $848,000 in 1995, 1996 and 1997,           
respectively.                                                                   

The Multi-Employer Pension Plan Amendments Act of 1980 amended ERISA to 
establish funding requirements and obligations for employers participating in   
multi-employer plans, principally related to employer withdrawal from or        
termination of such plans. Separate actuarial calculations of the Company's     
position are not available with respect to the multi-employer plans.            

6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                  

The Country Fresh, Inc. Employees' Retirement Health Care Plan provides 
health care benefits to certain retirees of one subsidiary, who are covered     
under specific group contracts. Postretirement health care coverage on          
subsequent employment contracts has been eliminated, therefore, no additional   
employees will be eligible under current agreements for such benefits. As       
defined by the specific group contract, qualified covered associates may be     
eligible to receive major medical insurance with deductible and coinsurance     
provisions subject to certain lifetime maximums.                                

Effective February 27, 1994, the Company adopted Statement of Financial 
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits 
Other Than Pensions" (SFAS 106). Under SFAS 106, the Company is required to     
accrue the estimated cost of retiree benefit payments, other than pensions,     
during the employee's active service period. As permitted by SFAS 106, the      
Company elected to recognize immediately the cumulative effect of the change in 
accounting in the year ended February 25, 1995. The accumulated postretirement  
benefit obligation amounted to $3,543,140 and $3,479,979 at March 2, 1996 and   
March 1, 1997, respectively of which $3,343,140 and $3,191,800, respectively    
were considered long-term liabilities. Postretirement health care expense for   
1996 and 1997 consisted of interest cost on the accumulated postretirement      
benefit obligation of $280,547 and $225,018, respectively.                      

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)                      
   The Company continues to fund the cost of these benefits as incurred, which
required payments of $80,000, $180,000 and $287,000 in 1995, 1996 and 1997,     
respectively.                                                                   

 The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 8.58% for the fiscal year ended March 1,  
1997, gradually declining at a rate of approximately 1% per year to 5.25% in    
2005 and remaining at that level thereafter, and the assumed discount rate in   
determining the accumulated postretirement benefit obligation was 7.50%. A      
one-percentage-point increase in the assumed health care cost trend rate for    
each year would increase the accumulated postretirement benefit cost and the    
service cost plus interest cost by between approximately 8% and 9%.             

7. TAXES ON INCOME                                                              

The Company and its subsidiaries file a consolidated federal income tax 
return. The provision for income taxes is comprised of the following:           

                                                        [Enlarge/Download Table]

                                                         1995          1996          1997     
                                                     ------------  ------------  ------------ 
                                                                                              
Currently payable................................... $  3,733,000  $  2,216,000  $  3,858,000 
Deferred............................................   (1,588,000)     (126,000)     (473,000)
                                                     ------------  ------------  ------------ 
Total............................................... $  2,145,000  $  2,090,000  $  3,385,000 
                                                     ------------  ------------  ------------ 
                                                     ------------  ------------  ------------ 

The effective income tax rates are different from the statutory federal 
income tax rates for the following reasons:                                     

                                                        [Enlarge/Download Table]

                                                                           1995       1996       1997    
                                                                         ---------  ---------  --------- 
                                                                                                         
Statutory federal income tax rate.......................................      34.0%      34.0%      34.0%
Other...................................................................       1.1       (0.1)      (0.3)
                                                                               ---        ---        --- 
Effective income tax rate...............................................      35.1%      33.9%      33.7%
                                                                               ---        ---        --- 
                                                                               ---        ---        --- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

7. TAXES ON INCOME (CONTINUED)                                                  
    Deferred tax assets and liabilities resulting from temporary differences are
as follows at March 2, 1996 and March 1, 1997:                                  

                                                        [Enlarge/Download Table]

                                                                        1996                      1997           
                                                              ------------------------  ------------------------ 
                                                                                                                 
                                                                             DEFERRED                  DEFERRED  
                                                              DEFERRED TAX     TAX      DEFERRED TAX     TAX     
                                                                 ASSETS     LIABILITIES    ASSETS     LIABILITIES
                                                              ------------  ----------  ------------  ---------- 
Accounts receivable.......................................... $    415,000              $    235,000             
Inventory....................................................      180,000                   177,000             
Prepaid expenses.............................................               $  148,000                $  130,000 
Goodwill.....................................................                                195,000             
Depreciation.................................................      947,000                 1,399,000     105,000 
Employee benefits............................................    2,354,000                 2,281,000             
Other........................................................       68,000     151,000       119,000      33,000 
                                                              ------------  ----------  ------------  ---------- 
Total........................................................ $  3,964,000  $  299,000  $  4,406,000  $  268,000 
                                                              ------------  ----------  ------------  ---------- 
                                                              ------------  ----------  ------------  ---------- 

8. COMMITMENTS AND CONTINGENCIES                                                

  The Company leases a building, transportation equipment, certain packaging
equipment and computer equipment under operating lease agreements with terms    
ranging from 1 to 5 years. The transportation and packaging equipment leases    
provide for additional rentals based upon mileage and production, respectively, 
and the computer equipment lease agreements include an option to purchase the   
related equipment upon the expiration of the lease.                             

   As of March 1, 1997, future minimum rental commitments under non-cancelable
operating leases are as follows:                                                

                                                        [Enlarge/Download Table]

YEAR ENDING                                                                                   
--------------------------------------------------------------------------------              
                                                                                              
  1998..........................................................................  $  1,092,181
  1999..........................................................................       740,791
  2000..........................................................................       569,248
  2001..........................................................................       525,146
  2002..........................................................................        89,235
                                                                                  ------------
  Total.........................................................................  $  3,016,601
                                                                                  ------------
                                                                                  ------------

  Total rental expense for all non-cancelable operating leases was comprised
of the following:                                                               

                                                        [Enlarge/Download Table]

                                                         1995          1996          1997    
                                                     ------------  ------------  ------------
                                                                                             
Minimum rentals..................................... $  2,168,228  $  2,350,214  $  2,039,594
Contingent rentals..................................      855,658       654,063       692,726
                                                     ------------  ------------  ------------
Total............................................... $  3,023,886  $  3,004,277  $  2,732,320
                                                     ------------  ------------  ------------
                                                     ------------  ------------  ------------

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

9. SHAREHOLDERS' EQUITY                                                         

 Prior to February 21, 1995, the Company's common stock included shares of
both Class A and Class B common stock. On February 21, 1995, the Company's      
shareholders approved a Plan of Recapitalization which, effective February 26,  
1995, changed the Company's capital structure by redeeming all Class A common   
shares at $100 per share, converting each Class B common share into forty shares
of no par value voting common stock, and creating 800,000 shares of preferred   
stock of which 31,250 shares were designated as Series A, 8% cumulative with a  
par value of $320. In connection with this Plan of Recapitalization, the Company
also approved a Redemption and Exchange Offer (the "Offer"), whereby the Company
offered to redeem up to 4,293,400 shares of common stock at $8 per share and to 
convert up to 1,250,000 shares of common stock into Series A preferred stock at 
the rate of forty shares of common stock for each share of Series A preferred   
stock, par value $320 per share. As a result of the Offer, 3,682,520 shares of  
common stock were redeemed for cash and 475,000 shares of common stock were     
converted into 11,875 shares of Series A preferred stock. Payment for shares    
redeemed under the Offer was financed by borrowings of $27 million under a $35  
million credit facility. All per share and stock option data have been restated 
to reflect the recapitalization transaction.                                    

The Company's outstanding shares of common and preferred stock are held 
primarily by its customers. Net sales to customers who were also shareholders   
were approximately 43%, 41% and 35% of consolidated net sales in 1995, 1996 and 
1997, respectively.                                                             

Effective December 1, 1989, the Board of Directors established a stock  
option plan which provided for the grant of up to 1,000,000 stock options to    
acquire the Company's common stock to officers and key employees, at an exercise
price equal to market value on the date of grant. During 1994, the Board of     
Directors granted stock options to acquire 420,000 shares at $5.50 per share to 
one key employee. There have been no subsequent stock option grants since that  
date. As of March 2, 1996 and March 1, 1997, these options, covering 420,000    
shares, remained outstanding. The options vest ratably over seven years from the
grant date and must be exercised within twelve years of the date of grant. As of
March 1, 1997, options were exercisable for 120,000 shares.                     

Since the Company's stock options are granted at prices equal to market 
value, the Company does not recognize compensation expense for such options.    
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for     
Stock-Based Compensation," which became effective for the Company for the year  
ended March 1, 1997, establishes a fair value method and disclosure standards   
for stock-based employee compensation agreements. The Company intends to        
continue its current accounting for stock-based compensation as allowed by SFAS 
No. 123 and will disclose the pro forma effects of applying this new standard   
for all future stock option grants. However, since the Company has not made any 
grants since 1994, no pro forma disclosures are required.                       

10. ACQUISITIONS                                                                

On April 20, 1997, the Company acquired certain inventory and equipment 
assets of Wesley Ice Cream Company for $3.5 million, which approximated the fair
value of the assets acquired, and entered into a five-year lease for the plant's
real estate. The consolidated statements of earnings include the operations of  
this acquired business from the acquisition date.                               

In 1994, the Company paid $3.9 million to acquire certain assets of     
Southeastern Juice Packers, Inc. and Toledo Milk Processing, Inc., which have   
been accounted for as purchase business combinations.                           

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COUNTRY FRESH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED MARCH 1, 1997, MARCH 2, 1996 AND FEBRUARY 25, 1995

10. ACQUISITIONS (CONTINUED)                                                    
Accordingly, the above purchase price has been allocated to the assets acquired 
at their fair values, which resulted in the allocation of $3.5 million of the   
purchase price to tangible assets, with the remaining excess of the purchase    
price over the fair value of tangible assets acquired recorded as goodwill. The 
consolidated statements of earnings include the operations of Southeastern Juice
Packers, Inc. and Toledo Milk Processing, Inc. from their respective dates of   
acquisition.                                                                    

* * * * * 

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                                                                      APPENDIX A

AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SUIZA FOODS CORPORATION 
CF ACQUISITION CORP.
AND 
COUNTRY FRESH, INC. 

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                                                        [Enlarge/Download Table]

                                                                                                         PAGE NO. 
                                                                                                         ---------
                                                                                                                  
ARTICLE I THE MERGER....................................................................................    A-1   

    SECTION 1.01. The Merger............................................................................    A-1   

    SECTION 1.02. Closing; Closing Date; Effective Time.................................................    A-1   

    SECTION 1.03. Effect of the Merger..................................................................    A-2   

    SECTION 1.04. Articles of Incorporation; Bylaws.....................................................    A-2   

    SECTION 1.05. Directors and Officers................................................................    A-2   

ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...........................................    A-2   

    SECTION 2.01. Merger Consideration; Conversion and Cancellation of Securities.......................    A-2   

    SECTION 2.02. Exchange and Surrender of Company Common Stock Certificates...........................    A-3   

    SECTION 2.03. Exchange and Surrender of Company Preferred Stock Certificates........................    A-4   

    SECTION 2.04. Dissenting Shares.....................................................................    A-6   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................    A-6   

    SECTION 3.01. Organization and Qualification; Subsidiaries..........................................    A-6   

    SECTION 3.02. Charter and Bylaws....................................................................    A-6   

    SECTION 3.03. Capitalization........................................................................    A-6   

    SECTION 3.04. Authority.............................................................................    A-7   

    SECTION 3.05. No Conflict; Required Filings and Consents............................................    A-7   

    SECTION 3.06. Permits; Compliance...................................................................    A-8   

    SECTION 3.07. Financial Statements..................................................................    A-8   

    SECTION 3.08. Absence of Certain Changes or Events..................................................    A-9   

    SECTION 3.09. No Undisclosed Liabilities............................................................    A-9   

    SECTION 3.10. Absence of Litigation.................................................................    A-9   

    SECTION 3.11. Employee Benefit Plans; Labor Matters.................................................   A-10   

    SECTION 3.12. Taxes.................................................................................   A-12   

    SECTION 3.13. Tax Matters; Pooling..................................................................   A-14   

    SECTION 3.14. Affiliates............................................................................   A-14   

    SECTION 3.15. Certain Business Practices............................................................   A-14   

    SECTION 3.16. Environmental Matters.................................................................   A-14   

    SECTION 3.17. Vote Required.........................................................................   A-15   

    SECTION 3.18. Brokers...............................................................................   A-16   

    SECTION 3.19. Insurance.............................................................................   A-16   

    SECTION 3.20. Properties............................................................................   A-16   

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    SECTION 3.21. Certain Material Contracts............................................................   A-17   

    SECTION 3.22. Principal Customers and Suppliers; Competing Interests................................   A-18   

    SECTION 3.23. Intellectual Property Rights..........................................................   A-18   

    SECTION 3.24. Opinion of Financial Advisor..........................................................   A-18   

    SECTION 3.25. Information Supplied..................................................................   A-18   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES...........................................   A-19   

    SECTION 4.01. Organization and Qualification; Subsidiaries..........................................   A-19   

    SECTION 4.02. Charter and Bylaws....................................................................   A-19   

    SECTION 4.03. Capitalization........................................................................   A-19   

    SECTION 4.04. Authority.............................................................................   A-20   

    SECTION 4.05. No Conflict; Required Filings and Consents............................................   A-20   

    SECTION 4.06. Permits; Compliance...................................................................   A-20   

    SECTION 4.07. Reports; Financial Statements.........................................................   A-21   

    SECTION 4.08. Absence of Certain Changes or Events..................................................   A-21   

    SECTION 4.09. Absence of Litigation.................................................................   A-21   

    SECTION 4.10. Tax Matters; Pooling..................................................................   A-21   

    SECTION 4.11. Vote Required.........................................................................   A-22   

    SECTION 4.12. Compliance with Laws..................................................................   A-22   

    SECTION 4.13. Merger Sub............................................................................   A-22   

    SECTION 4.14. Environmental Matters.................................................................   A-22   

    SECTION 4.15. Information Supplied..................................................................   A-23   

ARTICLE V COVENANTS.....................................................................................   A-23   

    SECTION 5.01. Affirmative Covenants of the Company..................................................   A-23   

    SECTION 5.02. Negative Covenants of the Company.....................................................   A-23   

    SECTION 5.03. Affirmative and Negative Covenants of Parent..........................................   A-25   

    SECTION 5.04. Non-Solicitation......................................................................   A-25   

    SECTION 5.05. Access and Information................................................................   A-26   

    SECTION 5.06. Appropriate Action; Consents; Filings.................................................   A-27   

    SECTION 5.07. Pooling; Tax Treatment................................................................   A-28   

    SECTION 5.08. Public Announcements..................................................................   A-28   

    SECTION 5.09. NYSE Listing..........................................................................   A-28   

    SECTION 5.10. Merger Sub............................................................................   A-28   

    SECTION 5.11. Employee Benefit Plans................................................................   A-28   

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    SECTION 5.12. Stock Option Plans....................................................................   A-28   

    SECTION 5.13. Buy-Sell Agreements...................................................................   A-29   

    SECTION 5.14. Notes.................................................................................   A-29   

ARTICLE VI ADDITIONAL AGREEMENTS........................................................................   A-29   

    SECTION 6.01. Shareholder Approval and Meeting of Shareholders......................................   A-29   

    SECTION 6.02. Registration Statement; Proxy Statement...............................................   A-30   

    SECTION 6.03. Indemnification.......................................................................   A-31   

ARTICLE VII CLOSING CONDITIONS..........................................................................   A-31   

    SECTION 7.01. Conditions to Obligations of Each Party Under This Agreement..........................   A-31   

    SECTION 7.02. Additional Conditions to Obligations of the Parent Companies..........................   A-31   

    SECTION 7.03. Additional Conditions to Obligations of the Company...................................   A-33   

ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..........................................................   A-34   

    SECTION 8.01. Termination...........................................................................   A-34   

    SECTION 8.02. Termination Intent Notice; Top Up Rights..............................................   A-35   

    SECTION 8.03. Effect of Termination.................................................................   A-35   

    SECTION 8.04. Amendment.............................................................................   A-35   

    SECTION 8.05. Waiver................................................................................   A-35   

    SECTION 8.06. Fees, Expenses and Other Payments.....................................................   A-36   

ARTICLE IX GENERAL PROVISIONS...........................................................................   A-36   

    SECTION 9.01. Effectiveness of Representations, Warranties and Agreements...........................   A-36   

    SECTION 9.02. Notices...............................................................................   A-36   

    SECTION 9.03. Certain Definitions...................................................................   A-37   

    SECTION 9.04. Headings..............................................................................   A-38   

    SECTION 9.05. Severability..........................................................................   A-38   

    SECTION 9.06. Entire Agreement......................................................................   A-39   

    SECTION 9.07. Assignment............................................................................   A-39   

    SECTION 9.08. Parties in Interest...................................................................   A-39   

    SECTION 9.09. Specific Performance..................................................................   A-39   

    SECTION 9.10. Failure or Indulgence Not Waiver; Remedies Cumulative.................................   A-39   

    SECTION 9.11. Governing Law.........................................................................   A-39   

    SECTION 9.12. Counterparts..........................................................................   A-39   

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                                                                [Download Table]
                                                     
EXHIBITS                                             

Exhibit A      Form of Company Affiliates Agreement  
Exhibit B      Legal Opinion of the Company's Counsel
Exhibit C      Legal Opinion of Parent's Counsel     

SCHEDULES:                                           

Company Disclosure Statement                         
Parent Disclosure Statement                          

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of September 18, 1997 (this 
"Agreement"), is by and among Suiza Foods Corporation, a Delaware corporation   
("Parent"), CF Acquisition Corp., a Michigan corporation and wholly owned       
subsidiary of Parent ("Merger Sub"), and Country Fresh, Inc., a Michigan        
corporation (the "Company"). Parent and Merger Sub are collectively referred to 
herein as the "Parent Companies."                                               

 WHEREAS, Merger Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the Michigan Business Corporation Act          
("Michigan Law"), will merge with and into the Company (the "Merger"), and      
pursuant thereto, the issued and outstanding shares of common stock, no par     
value, of the Company (the "Company Common Stock") will be converted into the   
right to receive shares of common stock, $0.01 par value, of Parent (the "Parent
Common Stock") and the issued and outstanding shares of Series A 8% Preferred   
Stock of the Company (the "Company Preferred Stock") will be converted into the 
right to receive shares of preferred stock of Parent (the "Parent Preferred     
Stock"), as set forth herein;                                                   

WHEREAS, the Board of Directors of the Company has determined that the  
Merger is fair to, and in the best interests of, the Company and its            
shareholders and has approved and adopted this Agreement and the transactions   
contemplated hereby;                                                            

   WHEREAS, the Board of Directors of Parent has determined that the Merger is
fair to, and in the best interests of, Parent and its shareholders and has      
approved and adopted this Agreement and the transactions contemplated hereby;   

   WHEREAS, the Board of Directors of Merger Sub has approved and adopted this
Agreement and Parent, as the sole shareholder of Merger Sub, will adopt this    
Agreement promptly after the execution hereof by the parties hereto;            

WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of section 368(a) of the United
States Internal Revenue Code of 1986, as amended (the "Code"); and              

 WHEREAS, the Merger is intended to be treated as a "pooling of interests"
for financial accounting purposes;                                              

NOW, THEREFORE, in consideration of the foregoing and the respective    
representations, warranties, covenants and agreements set forth in this         
Agreement, the parties hereto agree as follows:                                 

ARTICLE I 
THE MERGER

    SECTION 1.01.  THE MERGER.  Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with Michigan Law, at the Effective  
Time (as defined in Section 1.02), Merger Sub shall be merged with and into the 
Company. As a result of the Merger, the separate corporate existence of Merger  
Sub shall cease and the Company shall continue as the surviving corporation of  
the Merger (the "Surviving Corporation"). Certain terms used in this Agreement  
are defined in SECTION 9.03.                                                    

    SECTION 1.02.  CLOSING; CLOSING DATE; EFFECTIVE TIME.  Unless this Agreement
shall have been terminated pursuant to SECTION 8.01 or SECTION 8.02, and subject
to the satisfaction or waiver of the conditions set forth in ARTICLE VII, the   
consummation of the Merger and the closing of the transactions contemplated by  
this Agreement (the "Closing") shall take place at the offices of Warner        
Norcross & Judd LLP, 900 Old Kent Building, III Lyon Street, NW, Grand Rapids,  
Michigan as soon as practicable (but in any event within two business days)     
after the satisfaction or waiver of the conditions set forth in ARTICLE VII, or 
at such other date, time and place as Parent and the Company may agree;         
provided, that the                                                              

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conditions set forth in ARTICLE VII shall have been satisfied or waived at or   
prior to such time. The date on which the Closing takes place is referred to    
herein as the "Closing Date." As promptly as practicable on the Closing Date,   
the parties hereto shall cause the Merger to be consummated by filing a         
certificate of merger with the Department of Consumer and Industry Services of  
the State of Michigan, in such form as required by, and executed in accordance  
with the relevant provisions of, Michigan Law (the date and time of such filing,
or such later date or time agreed upon by Parent and the Company and set forth  
therein, being the "Effective Time").                                           

  SECTION 1.03.  EFFECT OF THE MERGER.  At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Michigan Law.   
Without limiting the generality of the foregoing, and subject thereto, at the   
Effective Time, all the properties, rights, privileges and powers of the Company
and Merger Sub will vest in the Surviving Corporation, and all debts,           
liabilities and duties of the Company and the Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.                            

 SECTION 1.04.  ARTICLES OF INCORPORATION; BYLAWS.  At the Effective Time,
the articles of incorporation of the Company, as in effect immediately prior to 
the Effective Time, shall be the articles of incorporation of the Surviving     
Corporation and thereafter shall continue to be its articles of incorporation   
until amended as provided therein and pursuant to Michigan Law. The bylaws of   
Merger Sub, as in effect immediately prior to the Effective Time, shall be the  
bylaws of the Surviving Corporation and thereafter shall continue to be its     
bylaws until amended as provided therein and pursuant to Michigan Law.          

    SECTION 1.05.  DIRECTORS AND OFFICERS.  The directors of Merger Sub shall be
the directors of the Surviving Corporation at the Effective Time, each to hold  
office in accordance with the charter and bylaws of the Surviving Corporation,  
in each case until their respective successors are duly elected or appointed and
qualified. The officers of the Company immediately prior to the Effective Time  
shall be the officers of the Surviving Corporation at the Effective Time, each  
to hold office in accordance with the bylaws of the Surviving Corporation, in   
each case until their respective successors are duly elected or appointed and   
qualified.                                                                      

ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

SECTION 2.01.  MERGER CONSIDERATION; CONVERSION AND CANCELLATION OF     
SECURITIES.  At the Effective Time, by virtue of the Merger and without any     
action on the part of the Parent Companies, the Company or their respective     
shareholders:                                                                   

(a)  Subject to the other provisions of this ARTICLE II, each share of  
Company Common Stock issued and outstanding immediately prior to the Effective  
Time shall be converted into .5454 shares of Parent Common Stock, subject to the
provisions of SECTION 8.02 (the "Merger Consideration")                         

 (b)  Notwithstanding the foregoing subsection (a), if between the date of
this Agreement and the Effective Time, the outstanding shares of Parent Common  
Stock or Company Common Stock shall have been changed into a different number of
shares, by reason of any stock dividend, split, combination or similar event,   
the Merger Consideration shall be correspondingly adjusted to reflect such stock
dividend, split, combination or similar event.                                  

 (c)  All shares of the Company Common Stock shall cease to be outstanding
and shall automatically be canceled and retired, and each certificate previously
evidencing the Company Common Stock outstanding immediately prior to the        
Effective Time (the "Converted Shares") shall thereafter represent the right to 
receive, subject to SECTION 2.02(D), that number of shares of Parent Common     
Stock determined pursuant to SECTION 2.01(A) and, if applicable, cash pursuant  
to SECTION 2.02(D). The owners of certificates previously evidencing Converted  
Shares shall cease to have any rights with respect to such Converted Shares     
except as otherwise provided herein or by law. Such certificates previously     
evidencing Converted Shares shall be exchanged for certificates evidencing whole
shares of Parent Common Stock upon the surrender of such                        

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certificates in accordance with the provisions of SECTION 2.02, without         
interest. No fractional shares of Parent Common Stock shall be issued in        
connection with the Merger and, in lieu thereof, a cash payment shall be made   
pursuant to SECTION 2.02(D).                                                    

(d)  Each share of Company Preferred Stock issued and outstanding       
immediately prior to the Effective Time (other than Dissenting Shares, as       
defined in SECTION 2.04) shall be converted into one share of Parent Preferred  
Stock having the same provisions as the Company Preferred Stock.                

(e)  Each share of common stock, no par value, of Merger Sub issued and 
outstanding immediately prior to the Effective Time shall be converted into one 
share of common stock, no par value, of the Surviving Corporation.              

   SECTION 2.02.  EXCHANGE AND SURRENDER OF COMPANY COMMON STOCK CERTIFICATES.

   (a)  As soon as practicable after the Effective Time, each record holder of
certificates previously evidencing Converted Shares shall be entitled to        
receive, and Parent shall cause the Exchange Agent (as defined in SECTION2.02(F)
below) to issue to each such record holder, upon surrender of such certificates 
to the Exchange Agent, a certificate or certificates representing the number of 
whole shares of Parent Common Stock into which the Converted Shares so          
surrendered shall have been converted as aforesaid, in such denominations and   
registered in such names as such holder may request. If such holder would       
otherwise be entitled to fractional shares of Parent Common Stock, such holder  
shall upon surrender of the certificates representing such shares held as       
aforesaid, be paid an amount in cash in accordance with the provisions of       
SECTION 2.02(D). Until so surrendered and exchanged, each certificate previously
evidencing Converted Shares shall represent solely the right to receive Parent  
Common Stock and cash in lieu of fractional shares. Unless and until any such   
certificates shall be so surrendered and exchanged, no dividends or other       
distributions payable to the holders of record of Parent Common Stock as of any 
time on or after the Effective Time shall be paid to the holders of record of   
Converted Shares; PROVIDED, HOWEVER, that Parent shall deposit with the Exchange
Agent any such dividends or other distributions payable with respect to the     
Parent Common Stock represented by any unsurrendered certificates evidencing    
Converted Shares, and upon any such surrender and exchange of such certificates,
Parent shall cause the Exchange Agent to pay to the holders of record of        
Converted Shares (i) the amount, without interest thereon, of dividends and     
other distributions, if any, with a record date on or after the Effective Time  
theretofore paid with respect to such whole shares of Parent Common Stock, and  
(ii) at the appropriate payment date, the amount of dividends or other          
distributions, if any, with a record date on or after the Effective Time but    
prior to surrender and a payment date occurring after surrender, payable with   
respect to such whole shares of Parent Common Stock. Notwithstanding the        
foregoing, no party hereto shall be liable to any former holder of Converted    
Shares for any cash, Parent Common Stock or dividends or distributions thereon  
delivered to a public official pursuant to applicable abandoned property,       
escheat or similar law.                                                         

(b)  All shares of Parent Common Stock issued upon the surrender for    
exchange of certificates previously representing Converted Shares in accordance 
with the terms hereof (including any cash paid pursuant to SECTION 2.02(D))     
shall be deemed to have been issued in full satisfaction of all rights          
pertaining to such Converted Shares. At and after the Effective Time, there     
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of Company Common Stock that was outstanding immediately  
prior to the Effective Time. If, after the Effective Time, certificates which   
previously evidenced Converted Shares are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this ARTICLE
II.                                                                             

    (c)  If any certificate for shares of Parent Common Stock is to be issued in
a name other than that of the record holder, it shall be a condition of the     
issuance thereof that the certificate so surrendered shall be properly endorsed,
with signatures guaranteed, and otherwise in proper form for transfer and that  
the record holder shall have paid to Parent or the Exchange Agent any transfer  
or other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of                              

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the record holder, or established to the satisfaction of Parent or the Exchange 
Agent that such tax has been paid or is not payable.                            

   (d)  No certificates or scrip evidencing fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of certificates, and such 
fractional share interests will not entitle the owner thereof to any rights of a
shareholder of Parent. In lieu of any such fractional shares, Parent shall cause
the Exchange Agent to pay to the owner thereof, upon surrender of such          
certificate for exchange pursuant to this ARTICLE II, an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) $40.00 by 
(ii) the fractional interest to which the owner thereof would otherwise be      
entitled (after taking into account all Converted Shares held of record by such 
owner and all full shares of Parent Common Stock issued in respect thereof).    

   (e)  Parent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any former holder of Converted  
Shares such amounts as Parent (or any affiliate thereof) is required to deduct  
and withhold with respect to the making of such payment under the Code, or any  
provision of state, local or foreign tax law. To the extent that amounts are so 
withheld by Parent, such withheld amounts shall be treated for all purposes of  
this Agreement as having been paid to the former holder of the Converted Shares 
in respect of which such deduction and withholding was made by Parent.          

   (f)  At or prior to the Effective Time, Parent shall appoint an independent
exchange agent reasonably acceptable to the Company (the "Exchange Agent") as   
its agent for purposes of, among other things, mailing and receiving letters of 
transmittal and disbursing certificates of shares of Parent Common Stock, and   
cash in lieu of fractional shares, to the former holders of Converted Shares.   
Before the Effective Time Parent and the Exchange Agent shall enter into an     
exchange agent agreement providing for, among other things, the matters set     
forth in this ARTICLE II.                                                       

(g) Promptly (but in no event later than five business days) after the  
Effective Time, Parent shall cause the Exchange Agent to mail and/or make       
available to each former holder of Converted Shares a notice and letter of      
transmittal advising such holder of the effectiveness of the Merger and the     
procedures to be used for exchanging the certificates evidencing Converted      
Shares as described in this ARTICLE II.                                         

  (h) If any certificate representing Converted Shares has been lost, stolen
or destroyed, the Exchange Agent shall issue and/or pay in exchange therefor,   
upon receipt of an affidavit of the record holder thereof stating that such     
certificate has been lost, stolen or destroyed and upon the posting of an       
appropriate bond or other security, if requested by the Exchange Agent, the     
certificates of shares of Parent Common Stock, Parent Preferred Stock and cash, 
if any, to which the holder is entitled under this ARTICLE II.                  

SECTION 2.03.  EXCHANGE AND SURRENDER OF COMPANY PREFERRED STOCK        
CERTIFICATES.                                                                   

  (a) As soon as practicable after the Effective Time, each record holder of
certificates previously evidencing Company Preferred Stock shall be entitled to 
receive, and Parent shall cause the Exchange Agent to issue to each such record 
holder, upon surrender of such certificates to the Exchange Agent, a certificate
or certificates representing the number of shares of Parent Preferred Stock into
which the Company Preferred Stock so surrendered shall have been converted as   
aforesaid, in such denominations and registered in such names as such holder may
request. Until so surrendered and exchanged, each certificate previously        
evidencing Company Preferred Stock shall represent solely the right to receive  
Parent Preferred Stock. Unless and until any such certificates shall be so      
surrendered and exchanged, no dividends or other distributions payable to the   
holders of record of Parent Preferred Stock as of any time on or after the      
Effective Time shall be paid to the holders of record of Company Preferred      
Stock; PROVIDED, HOWEVER, that Parent shall deposit with the Exchange Agent any 
such dividends or other distributions payable with respect to the Parent        
Preferred Stock represented by any unsurrendered certificates evidencing Company
Preferred Stock, and upon any such surrender and exchange of such certificates, 
Parent shall cause the Exchange Agent to pay to the holders of record of Company
Preferred Stock (i) the amount, without                                         

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interest thereon, of dividends and other distributions, if any, with a record   
date on or after the Effective Time theretofore paid with respect to such shares
of Parent Preferred Stock, and (ii) at the appropriate payment date, the amount 
of dividends or other distributions, if any, with a record date on or after the 
Effective Time but prior to surrender and a payment date occurring after        
surrender, payable with respect to such shares of Parent Preferred Stock.       
Notwithstanding the foregoing, no party hereto shall be liable to any former    
holder of Company Preferred Stock for any cash, Parent Preferred Stock or       
dividends or distributions thereon delivered to a public official pursuant to   
applicable abandoned property, escheat or similar law.                          

(b) All shares of Parent Preferred Stock issued upon the surrender for  
exchange of certificates previously representing Company Preferred Stock in     
accordance with the terms hereof shall be deemed to have been issued in full    
satisfaction of all rights pertaining to such Company Preferred Stock. At and   
after the Effective Time, there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of Company Preferred Stock
that was outstanding immediately prior to the Effective Time. If, after the     
Effective Time, certificates which previously evidenced Company Preferred Stock 
are presented to the Surviving Corporation for any reason, they shall be        
canceled and exchanged as provided in this ARTICLE II.                          

   (c) If any certificate for shares of Parent Preferred Stock is to be issued
in a name other than that of the record holder, it shall be a condition of the  
issuance thereof that the certificate so surrendered shall be properly endorsed,
with signatures guaranteed, and otherwise in proper form for transfer and that  
the record holder shall have paid to Parent or the Exchange Agent any transfer  
or other taxes required by reason of the issuance of a certificate for shares of
Parent Preferred Stock in any name other than that of the record holder, or     
established to the satisfaction of Parent or the Exchange Agent that such tax   
has been paid or is not payable.                                                

  (d) Parent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any former holder of Company    
Preferred Stock such amounts as Parent (or any affiliate thereof) is required to
deduct and withhold with respect to the making of such payment under the Code,  
or any provision of state, local or foreign tax law. To the extent that amounts 
are so withheld by Parent, such withheld amounts shall be treated for all       
purposes of this Agreement as having been paid to the former holder of the      
Company Preferred Stock in respect of which such deduction and withholding was  
made by Parent.                                                                 

(e) Promptly (but in no event later than five business days) after the  
Effective Time, Parent shall cause the Exchange Agent to mail and/or make       
available to each former holder of Company Preferred Stock a notice and letter  
of transmittal advising such holder of the effectiveness of the Merger and the  
procedures to be used for exchanging the certificates evidencing Company        
Preferred Stock as described in this ARTICLE II.                                

  (f) If any certificate representing Company Preferred Stock has been lost,
stolen or destroyed, the Exchange Agent shall issue and/or pay in exchange      
therefor, upon receipt of an affidavit of the record holder thereof stating that
such certificate has been lost, stolen or destroyed and upon the posting of an  
appropriate bond or other security, if requested by the Exchange Agent, the     
certificates of shares of Parent Preferred Stock to which the holder is entitled
under this ARTICLE II.                                                          

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SECTION 2.04.  DISSENTING SHARES.  Notwithstanding anything in this     
Agreement to the contrary, shares of the Company Preferred Stock which          
immediately prior to the Effective Time are held by shareholders who have       
properly exercised and perfected dissenter rights under Michigan Law (the       
"Dissenting Shares") shall not be converted into the right to receive shares of 
Parent Preferred Stock as provided in SECTION 2.01(D) hereof, but the holders of
Dissenting Shares shall be entitled to receive such statutory dissenting        
shareholder's consideration from the Surviving Corporation as shall be          
determined pursuant to Michigan Law; PROVIDED, HOWEVER, that, if any such holder
shall have failed to perfect or shall withdraw or lose his right to dissent and 
obtain payment under Michigan Law, such holder's shares of Company Preferred    
Stock shall thereupon be deemed to have been converted as of the Effective Time 
into the right to receive shares of Parent Preferred Stock, without any interest
thereon, as provided in SECTION 2.01(D) and such shares shall no longer be      
Dissenting Shares.                                                              

ARTICLE III 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 

The Company hereby represents and warrants to the Parent Companies that:

   SECTION 3.01.  ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.  Except as set
forth in SCHEDULE 3.01(I) of the disclosure statement delivered to Parent by the
Company (the "Company Disclosure Statement"), each of the Company and its       
subsidiaries is a corporation duly organized, validly existing and in good      
standing under the laws of the jurisdiction of its incorporation or             
organization, has all requisite power and authority to own, lease and operate   
its properties and to carry on its business as it is now being conducted and is 
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its   
properties makes such qualification necessary, other than where the failure to  
be so duly qualified and in good standing would not reasonably be expected to   
have a Company Material Adverse Effect. The term "Company Material Adverse      
Effect" (or "CMAE") as used in this Agreement shall mean any change or effect   
that, individually or when taken together with all other such changes or        
effects, is materially adverse to the business, operations, assets, financial   
condition or results of operations of the Company and of its subsidiaries, taken
as a whole. SCHEDULE 3.01(II) of the Company Disclosure Statement sets forth a  
true and complete list of all of the Company's directly or indirectly owned     
subsidiaries, together with the jurisdiction of incorporation of each such      
subsidiary and the percentage of each subsidiary's outstanding capital stock    
owned by the Company or another subsidiary of the Company.                      

   SECTION 3.02.  CHARTER AND BYLAWS.  The Company has heretofore furnished to
Parent complete and correct copies of the charter and the bylaws, in each case  
as amended or restated, of the Company and each of its subsidiaries. Neither the
Company nor any of its subsidiaries is in violation of any of the provisions of 
its charter or bylaws.                                                          

SECTION 3.03.  CAPITALIZATION.                                          

(a) The authorized capital stock of the Company consists of (i) 800,000 
shares of Preferred Stock, of which 31,250 shares are designated as Company     
Preferred Stock, and (ii) 15,000,000 shares of Company Common Stock. As of the  
date hereof 11,691 shares of Company Preferred Stock and 3,503,987 shares of    
Company Common Stock were issued and outstanding. All of the outstanding capital
stock of the Company has been offered and sold in compliance with all applicable
securities laws. Except as set forth in SCHEDULE 3.03(A) to the Company         
Disclosure Statement, no shares of capital stock of the Company are reserved for
any purpose. Each of the outstanding shares of capital stock of each of the     
Company and its subsidiaries is duly authorized, validly issued, fully paid and 
nonassessable, and has not been issued in violation of (nor are any of the      
authorized shares of capital stock of the Company or any of its subsidiaries    
subject to) any preemptive or similar rights created by statute, the charter or 
bylaws of the Company or any of its subsidiaries, or any agreement to which the 
Company or any of its subsidiaries is a party or bound,                         

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and the Company owns all of the capital stock of its subsidiaries free and clear
of all security interests, liens, claims, pledges, agreements, charges or other 
encumbrances of any nature whatsoever.                                          

(b) Except as set forth in SCHEDULE 3.03(B)(I) of the Company Disclosure
Statement, there are no options, warrants or other rights, agreements,          
arrangements or commitments of any character to which the Company or any of its 
subsidiaries is a party relating to the issued or unissued capital stock of the 
Company or any of its subsidiaries or obligating the Company or any of its      
subsidiaries to grant, issue or sell any shares of the capital stock of the     
Company or any of its subsidiaries by sale, lease, license or otherwise. Except 
as set forth in SCHEDULE 3.03(B)(II) to the Company Disclosure Statement, there 
are no obligations, contingent or otherwise, of the Company or any of its       
subsidiaries to (i) repurchase, redeem or otherwise acquire any shares of the   
capital stock of the Company or any of its subsidiaries or (ii) provide material
funds to, or make any material investment in (in the form of a loan, capital    
contribution or otherwise), or provide any guarantee with respect to the        
obligations of, any other person, other than advances to subsidiaries in the    
normal course of business. Except as described in SCHEDULE 3.03(B)(III) to the  
Company Disclosure Statement, neither the Company nor any of its subsidiaries   
(x) directly or indirectly owns, (y) has agreed to purchase or otherwise acquire
or (z) holds any interest convertible into or exchangeable or exercisable for,  
any capital stock (or equivalent equity interest) of any corporation,           
partnership, joint venture or other business association or entity (other than a
subsidiary). Except as set forth in SCHEDULE 3.03(B)(IV) of the Company         
Disclosure Statement, there are no agreements, arrangements or commitments of   
any character (contingent or otherwise) pursuant to which any person is or may  
be entitled to receive any payment based on the revenues or earnings, or        
calculated in accordance therewith, of the Company or any of its subsidiaries.  
There are no voting trusts, proxies or other agreements or understandings to    
which the Company or any of its subsidiaries is a party or by which the Company 
or any of its subsidiaries is bound with respect to the voting of any shares of 
capital stock of the Company or any of its subsidiaries.                        

(c) SCHEDULE 3.03(C) to the Company Disclosure Statement sets forth a   
complete and correct list as of the date hereof of all record holders of (i)    
Common Stock, (ii) options to purchase Common Stock and (iii) Company Preferred 
Stock.                                                                          

  (d) Since March 1, 1997, the Company has not declared or paid any dividend
on, or made any other distribution in respect of, outstanding shares of capital 
stock of the Company, except for regularly scheduled semi-annual dividends on   
the Company Preferred Stock.                                                    

    SECTION 3.04.  AUTHORITY.  The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations     
hereunder and to consummate the transactions contemplated hereby. The execution 
and delivery of this Agreement by the Company and the consummation by the       
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action (including the unanimous approval of its Board of    
Directors) and no other corporate proceedings on the part of the Company are    
necessary to authorize this Agreement or to consummate the transactions         
contemplated hereby (subject to, with respect to the consummation of the Merger,
the approval of this Agreement by the Requisite Shareholder Vote as described in
SECTION 3.17). This Agreement has been duly executed and delivered by the       
Company and, assuming the due authorization, execution and delivery thereof by  
the Parent Companies, constitutes the legal, valid and binding obligation of the
Company.                                                                        

SECTION 3.05.  NO CONFLICT; REQUIRED FILINGS AND CONSENTS.              

 (a) The execution and delivery of this Agreement by the Company does not,
and the consummation by the Company of the transactions contemplated hereby will
not (i) conflict with or violate the charter or bylaws, in each case as amended 
or restated, of the Company or any of its subsidiaries, (ii) conflict with or   
violate any federal, state, foreign or local law, statute, ordinance, rule,     
regulation, order, judgment or decree (collectively, "Laws") applicable to the  
Company or any of its subsidiaries or by which any of their properties is bound 
or subject or (iii) except as set forth on SCHEDULE 3.05(A) to the Company      
Disclosure                                                                      

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Statement, result in any breach of or constitute a default (or an event that    
with notice or lapse of time or both would become a default) under, or give to  
others any rights of termination, amendment, acceleration or cancellation of, or
require payment under, or result in the creation of a lien or encumbrance on any
of the properties or assets of the Company or any of its subsidiaries pursuant  
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,   
permit, franchise or other instrument or obligation to which the Company or any 
of its subsidiaries is a party or by or to which the Company or any of its      
subsidiaries or any of their properties is bound or subject, except in the case 
of clauses (ii) and (iii) above, any conflict, violation, breach, default, lien 
or encumbrance that would not reasonably be expected to have a CMAE. The Board  
of Directors of the Company has taken all actions necessary under Michigan Law, 
including approving the transactions contemplated by this Agreement and taking  
appropriate actions under any shareholder protection laws, to ensure that any   
restrictions imposed by Michigan Law or the Laws of any other jurisdiction      
applicable to the Company or its subsidiaries on business combinations or the   
owning or voting of the capital stock of the Company or any of its subsidiaries 
do not, and will not, apply with respect to or as a result of the transactions  
contemplated by this Agreement.                                                 

(b) Except as set forth in SCHEDULE 3.05(B) to the Company Disclosure   
Statement, the execution and delivery of this Agreement by the Company does not,
and consummation of the transactions contemplated hereby will not, require the  
Company to obtain any consent, license, permit, approval, waiver, authorization 
or order of, or to make any filing with or notification to, any governmental or 
regulatory authority, domestic or foreign (collectively, "Governmental          
Entities"), except for applicable requirements of the Hart-Scott-Rodino         
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the filing and  
recordation of appropriate merger documents as required by Michigan Law, any    
filings that may be required as a result of the legal or regulatory status of   
Parent or Merger Sub, and any consent, license, permit, approval, authorization,
order, filing or notification that if not obtained or made would not reasonably 
be expected to have a CMAE.                                                     

SECTION 3.06.  PERMITS; COMPLIANCE.  Each of the Company and its        
subsidiaries is in possession of all franchises, grants, authorizations,        
licenses, permits, easements, variances, exemptions, consents, certificates,    
approvals and orders necessary to own, lease and operate its properties and to  
carry on its business as it is now being conducted, other than those that if not
possessed would not reasonably be expected to have a CMAE (collectively, the    
"Company Permits"), and there is no action, proceeding or, to the Company's     
knowledge, investigation pending or, to the Company's knowledge, threatened     
regarding suspension or cancellation of any of the Company Permits that would   
reasonably be expected to have a CMAE. Neither the Company nor any of its       
subsidiaries is in conflict with, or in default or violation of (a) any Law     
applicable to the Company or any of its subsidiaries or by or to which any of   
their properties is bound or subject or (b) any of the Company Permits. other   
than, in each such case, any conflict, default or violation that would not      
reasonably be expected to have a CMAE. The Company has performed regular tests  
in accordance with industry practice to determine whether its products comply in
all material respects with applicable Laws and regulations. Except as set forth 
on SCHEDULE 3.06 to the Company Disclosure Statement, the Company has not       
recalled any of its products during the last five years. Except as set forth on 
SCHEDULE 3.06 to the Company Disclosure Statement, since February 28, 1994,     
neither the Company nor any of its subsidiaries has received from any           
Governmental Entity any written notification with respect to possible violations
of Laws that would reasonably be expected to have a CMAE.                       

    SECTION 3.07.  FINANCIAL STATEMENTS.  The consolidated balance sheets of the
Company and its subsidiaries as of March 2, 1996 and March 1, 1997 and the      
consolidated statements of earnings, shareholders' equity and cash flows of the 
Company and its subsidiaries for the three years ended March 1, 1997, and all   
related schedules and notes to the foregoing have been certified by Deloitte &  
Touche, LLP, independent auditors. Each of the foregoing consolidated financial 
statements (including, in each case, any related schedules and notes thereto) as
well as the unaudited consolidated balance sheets of the Company and its        
subsidiaries as of July 19, 1997 (the "Latest Balance Sheet") and the unaudited 
consolidated statements of earnings, shareholders equity and cash flows of the  
Company and its subsidiaries for the four                                       

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months ended July 19, 1997 (including, in each case, any related schedules and  
notes thereto) and any financial statements of the Company and/or its           
subsidiaries hereafter delivered to Parent (a) have been or will be prepared in 
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except to the extent required by changes 
in generally accepted accounting principles and as may be indicated in the notes
of the financial statements previously delivered to Parent and except, in the   
case of interim financial statements, for the lack of footnotes and normal      
year-end and audit adjustments and with respect to overreserved raw milk        
accruals) and (b) do or will fairly present in all material respects the        
financial position of the Company and its subsidiaries as of the respective     
dates thereof and the results of operations and cash flows for the periods      
indicated.                                                                      

    SECTION 3.08.  ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as set forth in
SCHEDULE 3.08(I) of the Company Disclosure Statement, since March 1, 1997 each  
of the Company and its subsidiaries has conducted its businesses only in the    
ordinary course and in a manner consistent with past practice and there has not 
been: (a) any damage, destruction or loss (whether or not covered by insurance) 
with respect to any assets of the Company or any of its subsidiaries with a fair
market value in excess of $100,000; (b) any change by the Company or any of its 
subsidiaries in their accounting methods, principles or practices; (c) any      
declaration, setting aside or payment of any dividends or distributions in      
respect of shares of the capital stock of the Company or any of its             
subsidiaries, or any redemption, purchase or other acquisition by the Company or
any of its subsidiaries of any of their securities, other than (i) regularly    
scheduled semi-annual dividends on the Company Preferred Stock and (ii)         
dividends by a subsidiary of the Company to the Company or another subsidiary of
the Company; (d) any material increase in the benefits under, or the            
establishment or amendment of, any bonus, insurance, severance, deferred        
compensation, pension, retirement, profit sharing or other employee benefit     
plan, or any material increase in the compensation payable or to become payable 
to directors, officers or employees of the Company or any of its subsidiaries,  
except for annual merit or seniority increases in salaries or wages in the      
ordinary course of business and consistent with past practice; (e) any          
revaluation by the Company or any of its subsidiaries of any of their assets,   
including the writing down or off of notes or accounts receivable and the       
writing down of the value of inventory, other than in the ordinary course of    
business and consistent with past practices; (f) any entry by the Company or any
of its subsidiaries into any commitment or transaction material to the Company  
and its subsidiaries taken as a whole, including, without limitation, incurring 
or agreeing to incur capital expenditures in excess of $100,000, other than as  
expressly provided in or contemplated by the Company's 1998 capital budget,     
which is set forth on SCHEDULE 3.08(II) to the Company Disclosure Statement (the
"Capital Budget"); (g) any increase in indebtedness for borrowed money other    
than ordinary course of business increases in the Company's existing working    
capital lines of credit with Harris Trust and Savings Bank and Old Kent Bank    
consistent with past practice; (h) a loss of any of the Largest Customers or    
Largest Suppliers, other than any loss that would not reasonably be expected to 
have a CMAE; or (i) any Company Material Adverse Effect.                        

   SECTION 3.09.  NO UNDISCLOSED LIABILITIES.  Except as and to the extent set
forth in SCHEDULE 3.09 of the Company Disclosure Statement or reflected or      
reserved against in the Latest Balance Sheet, neither the Company nor any of its
subsidiaries has any liabilities or obligations, absolute, accrued, contingent  
or otherwise ("Liabilities") except Liabilities that would not reasonably be    
expected to have a CMAE.                                                        

   SECTION 3.10.  ABSENCE OF LITIGATION.  Except as set forth in SCHEDULE 3.10
of the Company Disclosure Statement, there is no claim, action, suit,           
litigation, proceeding, arbitration or, to the Company's knowledge,             
investigation of any kind, at law or in equity (including actions or proceedings
seeking injunctive relief), pending or, to the Company's knowledge, threatened  
against the Company or any of its subsidiaries or any properties or rights of   
the Company or any of its subsidiaries that, if adversely determined, would     
reasonably be expected to have a CMAE and neither the Company nor any of its    
subsidiaries is subject to any continuing order of, consent decree, settlement  
agreement or other similar written agreement with, or, continuing investigation 
by, any Governmental Entity, or any judgment, order,                            

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writ, injunction, decree or award of any Government Entity or arbitrator,       
including, without limitation, cease-and-desist or other orders that would      
reasonably be expected to have a CMAE.                                          

SECTION 3.11.  EMPLOYEE BENEFIT PLANS; LABOR MATTERS.                   

  (a) Set forth in SCHEDULE 3.11(A) to the Company Disclosure Statement is a
complete and correct list of all material "employee benefit plans" (as defined  
in the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),  
all material plans or policies providing for "fringe benefits" (including but   
not limited to vacation, paid holidays, personal leave, employee discount,      
educational benefit or similar programs), and each other material bonus,        
incentive compensation, deferred compensation, profit sharing, stock, severance,
retirement, health, life, disability, group insurance, employment, stock option,
stock purchase, stock appreciation right, supplemental unemployment, layoff,    
consulting, or any other similar plan, agreement, policy or understanding       
(whether written or oral, qualified or nonqualified, currently effective or     
terminated), and any trust, escrow or other agreement related thereto, which (i)
is or has been established, maintained or contributed to by the Company or any  
ERISA Affiliate or with respect to which the Company or any ERISA Affiliate has 
any liability, or (ii) provides benefits, or describes policies or procedures   
applicable, to any officer, employee, director, former officer, former employee 
or former director of the Company or any ERISA Affiliate, or any dependent      
thereof, regardless of whether funded (each, an "Employee Plan," and            
collectively, the "Employee Plans"). The term "ERISA Affiliate" shall mean any  
corporation, trade or business the employees of which, together with the        
employees of the Company, are required to be treated as employed by a single    
employer under the provisions of ERISA or Code SECTION 414.                     

(b) Except as set forth on SCHEDULE 3.11(B) to the Company Disclosure   
Statement and to the extent of coverage required under Code Section 4980B, to   
the Company's knowledge, no written or oral representations have been made to   
any employee or officer or former employee or officer of the Company or any of  
its subsidiaries promising or guaranteeing any coverage under any employee      
welfare plan for any period of time beyond the end of the current plan year.    
Except as set forth on SCHEDULE 3.11(B) to the Company Disclosure Statement, the
consummation of the transactions contemplated by this Agreement will not        
accelerate the time of payment or vesting, or increase the amount of            
compensation (including amounts due under Employee Plans) due to any employee,  
officer, former employee or former officer of the Company or any of its         
subsidiaries.                                                                   

(c) To the Company's knowledge, neither the Company nor any of its      
subsidiaries, nor any present or former director, or officer, employee or agent 
of the Company or any of its subsidiaries has made any material binding         
commitments of the Company or any of its subsidiaries, written or oral, to any  
present or former director, officer, agent or employee concerning his term,     
condition, benefits or employment other than as set forth in SCHEDULE 3.11(C)to 
the Company Disclosure Statement.                                               

 (d) With respect to each Employee Plan, the Company has made available to
Parent true, correct and complete copies of (i) the plan documents and summary  
plan description; (ii) the most recent determination letter received from the   
Internal Revenue Service; (iii) the annual reports required to be filed for the 
two most recent plan years of each such Employee Plan; (iv) all related trust   
agreements, insurance contracts or other funding agreements which implement such
Employee Plan; and (v) all other documents, records or other materials related  
thereto reasonably requested by Parent.                                         

   (e)  Set forth on SCHEDULE 3.11(E) to the Company Disclosure Statement is a
complete and correct list of all material "employee pension benefit plans" (as  
defined in Section 3(2) of ERISA) maintained by the Company or any ERISA        
Affiliate. Each such plan that is required to meet the employee pension benefit 
plan qualification requirements of the Code meets such requirements in form and 
operation in all material respects, and each such plan, and each trust (if any) 
forming a part thereof, has received a favorable determination letter from the  
Internal Revenue Service as to the qualification under the Code of such plan and
the tax-exempt status of such related trust, and, to the knowledge of the       
Company, nothing has occurred since the date of such determination letter that  
may materially adversely affect the qualification                               

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of such plan or the tax-exempt status of such related trust. All Employee Plans 
purporting to qualify for special tax treatment under any provision of the Code,
including, without limitation, Code Sections 79, 105, 106, 125, 127, 129, 132,  
421 or 501(c)(9) meet the requirements of such sections in form and in operation
in all material respects. All reports, returns or filings required by any       
government agency have been timely filed in accordance with all applicable      
requirements in all material respects.                                          

    (f)  No condition exists that would subject the Company, any ERISA Affiliate
or Parent to any material excise tax, penalty tax or fine related to any        
Employee Plan.                                                                  

(g)  Except as set forth on SCHEDULE 3.11(G) to the Company Disclosure  
Statement, there are no agreements which will or may provide payments to any    
officer, employee, shareholder, or highly compensated individual which will be  
"parachute payments" under Code Section 280G that are nondeductible to the      
Company or subject to tax under Code Section 4999 for which the Company or any  
ERISA Affiliate would have withholding liability.                               

(h)  Each Employee Plan has been operated in all material respects in   
compliance with ERISA, the Code and all other applicable Laws; and except as    
otherwise set forth on SCHEDULE 3.11(H) of the Company Disclosure Statement,    
there are no material unfunded or underfunded liabilities existing under any    
Employee Plans, and each Employee Plan could be terminated as of the Closing    
Date without any material liability to Parent, the Company or any ERISA         
Affiliate.                                                                      

(i)  There are no actions, suits, claims, audits, or, to the Company's  
knowledge, investigations pending or, to the Company's knowledge, threatened    
against, or with respect to, any of the Employee Plans or their assets that     
would reasonably be expected to have a CMAE; and all contributions required to  
be made to the Employee Plans have been made timely in all material respects.   

(j)  Except as set forth on SCHEDULE 3.11(J) of the Company Disclosure  
Statement, neither the Company nor any of its subsidiaries is a party to any    
collective bargaining or other labor union contract nor is any collective       
bargaining agreement being negotiated by the Company or any of its subsidiaries.
The Company and its subsidiaries are in compliance with all applicable Laws     
respecting employment, employment practices and wages and hours and with all    
provisions of each collective bargaining agreement to which it is a party, other
than any noncompliance that would not reasonably be expected to have a CMAE.    
During the last five years, except as set forth on SCHEDULE 3.11(J) to the      
Company Disclosure Statement, the Company has not experienced any strike, labor 
trouble, work stoppage, slow down or other interference with or impairment of   
the business of the Company that would reasonably be expected to have a CMAE,   
nor, to the Company's knowledge, has any of the foregoing been threatened within
the last five years. There is no pending or, to the Company's knowledge,        
threatened labor dispute, strike or work stoppage against the Company or any of 
its subsidiaries which may materially interfere with the respective business    
activities of the Company or any of its subsidiaries prior to or after the      
Effective Time. There is no pending or, to the Company's knowledge, threatened  
material charge or complaint against the Company or any of its subsidiaries by  
the National Labor Relations Board or any comparable state agency.              

 (k)  SCHEDULE 3.11(K) of the Company Disclosure Statement sets forth, and
the Company has provided to Parent true and correct copies of, (i) all          
employment agreements with officers or key employees of the Company or any its  
subsidiaries; (ii) all agreements with consultants of the Company or any of its 
subsidiaries; (iii) all non-competition agreements with the Company or any of   
its subsidiaries; and (iv) any severance agreements, programs, policies, plans  
or arrangements to which the Company or any of its subsidiaries is obligated,   
whether or not written.                                                         

    (l)  The Employee Plans listed on SCHEDULE 3.11(L) of the Company Disclosure
Statement are the only Employee Plans that are subject to Part 3 of Title I of  
ERISA or Title IV of ERISA (each, a "DB Plan"). The funding method used in      
connection with each DB Plan is acceptable under ERISA, and the actuarial       
assumptions used in connection with funding each DB Plan have been made         
available to Parent. No material "accumulated funding deficiency" (as defined in
Section 302(a)(2) of ERISA) (whether or not                                     

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waived and whether or not arising on account of inadequate Company or ERISA     
Affiliate contributions, improper amortization of charges or credits in any     
funding standard account, improper determination of any such charge, or credit, 
or other reason) exists with respect to any plan year of any DB Plan. With      
respect to each "employee pension benefit plan," as defined in Section 3(2) of  
ERISA that is subject to the minimum funding requirements of Code Section 412   
which the Company or any ERISA Affiliate maintains or contributes to or is      
required to contribute to: (i) the Company and the ERISA Affiliates have paid in
all material respects all premiums (and interest charges and penalties for late 
payment, if applicable) due the Pension Benefit Guaranty Corporation ("PBGC")   
with respect to each such plan and each plan year thereof for which such        
premiums are required, (ii) there has been no "reportable event" (as defined in 
Section 4043(b) of ERISA and the regulations of the PBGC under such Section) for
which the 30 day notice is not waived, (iii) the termination of, or withdrawal  
from, any such plan on or prior to the Closing Date, has not and will not       
subject the Company, Parent or Merger Sub to any liability to the PBGC nor to   
any material liability to any other party except as set forth on SCHEDULE       
3.11(L) of the Company Disclosure Statement, (iv) no filing has been made by the
Company (or any ERISA Affiliate thereof) with the PBGC (and no proceeding has   
been commenced by the PBGC) to terminate any such plan, (v) no amendment has    
occurred which has required or could require the Company, Parent or Merger Sub  
to provide security to any such plan under Code Section 401(a)(29), (vi) all    
installment contributions required pursuant to Code Section 412(m) have been    
paid by the Company and its ERISA Affiliates before the due date for such       
contribution as set forth in Code Section 412(m) for each such plan, and (vii)  
no partial termination has occurred or is expected to occur in connection with  
the Merger or otherwise.                                                        

   (m)  With respect to any multiemployer plan (as defined in Section 3(37) of
ERISA) to which the Company or any ERISA Affiliate thereof contributes or has at
any time contributed or had an obligation to contribute (such multiemployer     
plans being hereinafter collectively referred to as the "Multiemployer Plans"): 
(i) the Company and each ERISA Affiliate thereof has or will have, as of        
Closing, made all contributions to each Multiemployer Plan required by the terms
of such Multiemployer Plan or any collective bargaining agreement, (ii) except  
as set forth on SCHEDULE 3.11(M) to the Company Disclosure Statement, none of   
the Company, Parent or Merger Sub would be subject to any withdrawal liability  
under Part 1 of Subtitle E of Title IV of ERISA if, as of the Closing Date, the 
Company or any ERISA Affiliate thereof were to engage in a complete withdrawal  
(as defined in ERISA Section 4203) or a partial withdrawal (as defined in ERISA 
Section 4205) from any Multiemployer Plan, and (iii) the Company has made       
available to Parent current, accurate and complete copies of all Multiemployer  
Plans and of all collective bargaining agreements requiring contributions to be 
made to any such Multiemployer Plan or Plans. Neither the Company nor any ERISA 
Affiliate thereof has at any time prior to Closing (i) incurred any liabilities 
under the provisions of Section 4062 of ERISA, (ii) withdrawn as a substantial  
employer so as to become subject to the provisions of Section 4063 of ERISA,    
(iii) ceased making contributions on or before the date of the Closing to any   
Multiemployer Plan or (iv) made a complete or partial withdrawal from a         
Multiemployer Plan so as to incur withdrawal liability as defined in Section    
4201 of ERISA (without regard to subsequent reduction or waiver of such         
liability under Section 4207 or 4208 of ERISA).                                 

SECTION 3.12.  TAXES.                                                   

(a) Except as set forth on SCHEDULE 3.12(A) to the Company Disclosure   
Statement or as accrued for in the Latest Balance Sheet, (i) all material       
returns and reports ("Tax Returns") of or with respect to any Tax which is      
required to be filed on or before the Closing Date by or with respect to the    
Company or any of its subsidiaries have been or will be duly and timely filed,  
(ii) all items of income, gain, loss, deduction and credit or other items       
required to be included in each such Tax Return have been or will be so included
in all material respects and all information provided in each such Tax Return is
true, correct and complete, (iii) all Taxes which have become or will become due
with respect to the period covered by each such Tax Return have been or will be 
timely paid in full in all material respects (other than Taxes being contested  
in good faith for which adequate reserves have been made), (iv) all withholding 
Tax requirements imposed on or with respect to the Company or any of its        
subsidiaries have been or will be satisfied in full in all material             

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respects, and (v) no material penalty, interest or other charge is or will      
become due with respect to the late filing of any such Tax Return or late       
payment of any such Tax.                                                        

(b) All Tax Returns of or with respect to the Company or any of its     
subsidiaries, with unexpired or extended statutes of limitations, which have not
been audited by the applicable governmental authority are set forth in SCHEDULE 
3.12(B) to the Company Disclosure Statement.                                    

(c) Except as set forth on SCHEDULE 3.12(C) to the Company Disclosure   
Statement, there is not in force any extension of time with respect to the due  
date for the filing of any Tax Return of or with respect to the Company or any  
of its subsidiaries or any waiver or agreement for any extension of time for the
assessment, collection or payment of any Tax of or with respect to the Company  
or any of its subsidiaries.                                                     

   (d) There are no pending audits, actions, proceedings, disputes, claims or,
to the Company's knowledge, investigations, with respect to or against the      
Company or any of its subsidiaries for or with respect to any material Taxes, no
material assessment, deficiency or adjustment has been assessed or proposed with
respect to any Tax Return of or with respect to the Company or any of its       
subsidiaries, and, to the Company's knowledge, there is no reasonable basis on  
which any claim for material Taxes in excess of accruals reflected in the Latest
Balance Sheet can be asserted against the Company or any of its subsidiaries,   
other than those disclosed (and with respect to which true and complete copies  
of all audit or similar reports have been made available to Parent) on SCHEDULE 
3.12(D) to the Company Disclosure Statement.                                    

  (e) The total amounts set up as liabilities for current and deferred Taxes
in the financial statements referred to in SECTION 3.07 are sufficient to cover 
in all material respects the payment of all Taxes, whether or not assessed or   
disputed, which are, or are hereafter found to be, or to have been, due by or   
with respect to the Company and any of its subsidiaries up to and through the   
periods covered thereby.                                                        

   (f) The Company has previously delivered to Parent true and complete copies
of each written Tax allocation or sharing agreement and a true and complete     
description of each unwritten Tax allocation or sharing arrangement affecting   
the Company or any of its subsidiaries, if any.                                 

   (g) Except for statutory liens for current Taxes not yet due and payable or
being contested in good faith for which adequate reserves have been made, no    
liens for Taxes exist upon the assets of any of the Company or its subsidiaries 
that are material to the Company and its subsidiaries taken as a whole.         

(h) To the Company's knowledge, neither the Company nor any of its      
subsidiaries will be required to include any amount in income for any taxable   
period beginning after March 2, 1997 as a result of a change in accounting      
method for any taxable period ending on or before March 2, 1997 or pursuant to  
any agreement with any Tax authority with respect to any such taxable period.   

(i) Except as set forth on SCHEDULE 3.12(I) to the Company Disclosure   
Statement, none of the property of the Company or any of its subsidiaries is    
held in an arrangement for which partnership Tax Returns are being filed, and   
neither the Company nor any of its subsidiaries owns any interest in any        
controlled foreign corporation (as defined in section 957 of the Code), passive 
foreign investment company (as defined in section 1296 of the Code) or other    
entity the income of which is required to be included in the income of the      
Company or such subsidiary.                                                     

(j) Except as set forth on SCHEDULE 3.12(J) to the Company Disclosure   
Statement, none of the property of the Company or any of its subsidiaries is    
subject to a safe-harbor lease (pursuant to section 168(f)(8) of the Internal   
Revenue Code of 1954 as in effect after the Economic Recovery Tax Act of 1981   
and before the Tax Reform Act of 1986) or is "tax-exempt use property" (within  
the meaning of section 168(h) of the Code) or "tax-exempt bond financed         
property" (within the meaning of section 168(g)(5) of the Code).                

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(k) Neither the Company nor any of its subsidiaries has made an election
under section 341(f) of the Code.                                               

(l) Except as set forth on SCHEDULE 3.12(L) to the Company Disclosure   
Statement, neither the Company nor any subsidiary has ever been a member of an  
affiliated group of corporations (as defined in section 1504(a) of the Code).   

    (m) Except for Canada, neither the Company nor any subsidiary is or has ever
been subject to Taxes in any jurisdiction outside the United States.            

    (n) To the Company's knowledge, no amounts paid by the Company or any of its
subsidiaries to any Employee Plan would fail to be deductible under section 404 
of the Code.                                                                    

SECTION 3.13.  TAX MATTERS; POOLING.                                    

(a) Neither the Company nor any of its affiliates has knowingly taken or
agreed to take any action that would prevent the Merger from (i) constituting a 
reorganization qualifying under the provisions of section 368(a) of the Code or 
(ii) being treated for financial accounting purposes as a "pooling of interests"
(the "Pooling Transaction") in accordance with generally accepted accounting    
principles and the rules, regulations and interpretations of the Securities and 
Exchange Commission (the "SEC").                                                

    (b) To the Company's knowledge, there is no current plan or intention by any
of the Company's shareholders to sell, exchange or otherwise dispose of a number
of shares of Parent Common Stock to be received in the Merger that would reduce 
the aggregate ownership of Parent Common Stock by the Company's shareholders to 
a number of shares having a value, as of the Effective Time, of less than 50    
percent of the value of all of the Company Common Stock (including shares of the
Company Common Stock exchanged for cash in lieu of fractional shares of Parent  
Common Stock) outstanding immediately prior to the Effective Time.              

(c) Except as otherwise provided for herein, the Company will pay its   
Expenses incurred in connection with the Merger.                                

SECTION 3.14.  AFFILIATES.  SCHEDULE 3.14 to the Company Disclosure     
Statement identifies all persons who the Company reasonably believes may be     
deemed to be affiliates of the Company under Rule 145 of the Securities Act of  
1933, as amended (the "Securities Act"), including, without limitation, all     
directors and executive officers of the Company. Concurrently with the execution
and delivery of this Agreement, the Company has delivered to Parent an executed 
letter agreement, substantially in the form of EXHIBIT A hereto, from each      
executive officer and director of the Company.                                  

   SECTION 3.15.  CERTAIN BUSINESS PRACTICES.  None of the Company, any of its
subsidiaries, or any directors, officers, agents or employees of the Company or 
any of its subsidiaries has (a) used any funds for unlawful contributions,      
gifts, entertainment or other unlawful expenses relating to political activity, 
(b) made any unlawful payment to foreign or domestic government officials or    
employees or to foreign or domestic political parties or campaigns or violated  
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (c)  
made any other unlawful payment, in each case that would reasonably be expected 
to have a CMAE.                                                                 

SECTION 3.16.  ENVIRONMENTAL MATTERS.  Except for matters disclosed in  
SCHEDULE 3.16 of the Company Disclosure Statement and except for matters        
expressly disclosed in any report previously delivered to Parent by J. McNutt & 
Associates, (a) the properties, operations and activities of the Company and its
subsidiaries are in compliance in all material respects with all applicable     
Environmental Laws; (b) the Company and its subsidiaries and the properties and 
operations of the Company and its subsidiaries are not subject to any existing, 
pending or to the Company's knowledge, threatened action, suit, claim, inquiry, 
proceeding or, to the Company's knowledge, investigation by or before any       
governmental authority under any Environmental Law that is or would be material 
to the Company and its Subsidiaries taken as a whole; (c) all notices, permits, 
licenses, or similar authorizations, if any, required to                        

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be obtained or filed by the Company or any of its subsidiaries under any        
Environmental Law in connection with any aspect of the business of the Company  
and its subsidiaries taken as a whole, including without limitation those       
relating to the treatment, storage, disposal or release of a hazardous or       
otherwise regulated substance, have been duly obtained or filed, other than     
where the failure to obtain or file such notices, permits, licenses or similar  
authorizations would not reasonably be expected to have a CMAE, and will not    
cease to remain valid and in effect solely as a consequence of the Merger, and  
the Company and its subsidiaries are in compliance in all material respects with
the terms and conditions of all such notices, permits, licenses and similar     
authorizations; (d) the Company and its subsidiaries have satisfied and are     
currently in compliance in all respects with all financial responsibility       
requirements applicable to their operations and imposed by any governmental     
authority under any Environmental Law, except where noncompliance would not     
reasonably be expected to have a CMAE, and the Company and its subsidiaries have
not received any notice of material noncompliance with any such financial       
responsibility requirements; (e) there are no physical or environmental         
conditions existing on any property of the Company or its subsidiaries or       
resulting from the Company's or such subsidiaries' operations or activities,    
past or present, at any location, that would give rise to any material on-site  
or off-site remedial obligations imposed on the Company or any of its           
subsidiaries under any Environmental Laws or that would materially impact the   
soil, groundwater, surface water or human health; (f) to the Company's          
knowledge, since the effective date of the relevant requirements of applicable  
Environmental Laws and to the extent required by such applicable Environmental  
Laws, all hazardous or otherwise regulated substances generated by the Company  
and its subsidiaries have been transported only by carriers authorized under    
Environmental Laws to transport such substances and wastes, and disposed of only
at treatment, storage, and disposal facilities authorized under Environmental   
Laws to treat, store or dispose of such substances and wastes; (g) there has    
been no exposure of any person or property to hazardous substances or any       
pollutant or contaminant at any property owned or controlled by the Company or  
any of its subsidiaries, nor has there been any release of hazardous substances,
or any pollutant or contaminant into the environment by the Company or its      
subsidiaries at any property owned or controlled by the Company or any of its   
subsidiaries, that could reasonably be expected to give rise to any material    
claim against the Company or any of its subsidiaries for damages or             
compensation; and (h) the Company and its subsidiaries have made available to   
Parent all internal and external environmental audits and studies and all       
correspondence on substantial environmental matters in the possession of the    
Company or its subsidiaries reasonably requested by Parent relating to any of   
the current properties or operations of the Company and its subsidiaries.       

    For purposes of this Agreement, the term "Environmental Laws" shall mean any
and all laws, statutes, ordinances, rules, regulations, or orders of any        
Governmental Entity pertaining to health or the environment currently in effect 
in any and all jurisdictions in which the Company or any of its subsidiaries    
owned or owns property or has conducted or conducts business, including without 
limitation, the Clean Air Act, as amended, the Comprehensive Environmental,     
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the   
Federal Water Pollution Control Act, as amended, the Occupational Safety and    
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of   
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic   
Substances Control Act, as amended, the Hazardous & Solid Waste Amendments Act  
of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986,  
as amended, any state laws implementing the foregoing federal laws, and all     
other environmental conservation or protection laws. For purposes of this       
Agreement, the terms "hazardous substance" and "release" have the meanings      
specified in CERCLA and RCRA and shall include petroleum and petroleum products,
radon and PCB's, and the term "disposal" has the meaning specified in RCRA;     
PROVIDED, HOWEVER, that to the extent the laws of the state in which the        
property is located establish a meaning for "hazardous substance," "release," or
"disposal" that is broader than that specified in either CERCLA or RCRA, such   
broader meaning shall apply.                                                    

   SECTION 3.17.  VOTE REQUIRED.  The only vote of the holders of any class or
series of the Company capital stock necessary to approve the Merger and adopt   
this Agreement is the affirmative vote of holders of a majority of the          
outstanding shares of each of the Company Common Stock and the Company          

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Preferred Stock, voting separately as distinct classes (the "Requisite          
Shareholder Vote"). No holders of Company Common Stock are entitled to          
dissenters' rights under Section 762 or any other provision of the Michigan Law 
with respect to shares of Company Common Stock.                                 

    SECTION 3.18.  BROKERS.  Except as set forth in SCHEDULE 3.18 to the Company
Disclosure Statement, no broker, finder or investment banker is entitled to any 
brokerage, finder's or other fee or commission in connection with the           
transactions contemplated by this Agreement based upon arrangements made by or  
on behalf of the Company. Prior to the date of this Agreement, the Company has  
delivered to Parent a complete and correct copy of all agreements referenced in 
SCHEDULE 3.18 to the Company Disclosure Statement pursuant to which any person  
or such firm will be entitled to any payment or indemnification relating to the 
transactions contemplated by this Agreement.                                    

SECTION 3.19.  INSURANCE.  SCHEDULE 3.19 of the Disclosure Schedule sets
forth a complete and accurate list of all primary, excess and umbrella policies,
bonds and other forms of insurance currently owned or held by or on behalf of   
and/or providing insurance coverage to the Company and each of its subsidiaries 
and their respective businesses, properties and assets (or their directors,     
officers, salespersons, agents or employees), including the following           
information for each such policy: (a) type(s) of insurance coverage provided;   
(b) name of insurer; (c) effective date; (d) policy number; (e) per occurrence  
and annual aggregate deductibles or self-insured retention; and (f) per         
occurrence and annual aggregate limits of liability and the extent, if any, to  
which the limits of liability have been exhausted. To the Company's knowledge,  
all such policies are in full force and effect. Neither the Company nor any of  
its subsidiaries has received a notice of default under any such policy and has 
not received written notice of any pending or threatened termination or         
cancellation, coverage limitation or reduction, or premium increase with respect
to any such policy that would reasonably be expected to have a CMAE. The Company
has made available to Parent a summary of any loss reports for the Company      
issued by any of the Company's insurers since January 1, 1995. SCHEDULE 3.19 of 
the Company Disclosure Statement sets forth a complete and accurate summary of  
all of the self-insurance coverage provided by the Company and its subsidiaries 
and except as set forth in such SCHEDULE 3.19, no letters of credit have been   
posted and no cash has been restricted to support any reserves for insurance.   

SECTION 3.20.  PROPERTIES.                                              

  (a) SCHEDULE 3.20(A) to the Company Disclosure Statement sets forth a list
of all real property owned or leased by the Company or any of its subsidiaries  
(the "Real Estate"), and the Company has furnished to Parent each applicable and
readily available survey, title policy and certificate of occupancy relating    
thereto (along with any exception documents referenced therein). No contract,   
option, lease agreement, letter of intent or proposal (whether written or oral) 
has been entered into by the Company relating to the Real Estate except as      
specified on SCHEDULE 3.20(A) to the Company Disclosure Statement. Except as    
expressly noted otherwise in any report delivered to Parent by the Company or   
the Parent's agents, the Company's and its subsidiaries' occupancy, operation   
and use of the Real Estate conforms to all applicable subdivision, building     
codes, health, safety, setback and zoning ordinances, and other Laws,           
regulations and requirements applicable to the occupancy, operation and use     
thereof, other than any failure to so conform that would not reasonably be      
expected to have a CMAE. No premises other than the Real Estate are used in the 
business of the Company or any of its subsidiaries. To the knowledge of the     
Company, there are no actions pending or threatened that would alter the current
zoning classification of the Real Estate. To the knowledge of the Company, all  
improvements included in the assets of the Company were constructed in          
compliance with all applicable Laws, statutes, regulations, codes, covenants,   
conditions and restrictions affecting the Real Estate or any part thereof, other
than any failure to comply that would not reasonably be expected to have a CMAE.
To the knowledge of the Company, no fact or conditions exists that would result 
in the discontinuation of necessary utilities or services to the Real Estate or 
the termination of current access to and from the Real Estate, other than any   
discontinuation or termination that would not reasonably be expected to have a  
CMAE.                                                                           

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   (b) Except for (i) liens and encumbrances (A) set forth on SCHEDULE 3.20(B)
to the Company Disclosure Statement, (B) for Taxes not yet due and payable or   
being contested in good faith, (C) to secure indebtedness reflected on the      
Latest Balance Sheet or described in SECTION 3.21(A)(III) (without regard to    
dollar value), (D) relating to mechanics', materialmen's and other similar liens
arising in the ordinary course of business or (E) that do not exceed $250,000   
individually or in the aggregate, and (ii) properties and assets disposed of in 
the ordinary course of business consistent with past practices after the date of
the Latest Balance Sheet, the Company and its subsidiaries have good and        
marketable title, free and clear of all liens and encumbrances, to all          
properties and assets, whether tangible or intangible, real, personal or mixed, 
reflected in the Latest Balance Sheet or SCHEDULE 3.20(A) to the Company        
Disclosure Statement as being owned by the Company and its subsidiaries as of   
the date thereof. All buildings, and all fixtures, equipment and other property 
and assets which are material to the Company and its subsidiaries taken as a    
whole, held under leases by the Company or its subsidiaries are held under valid
instruments enforceable by the Company or its subsidiaries in accordance with   
their respective terms. The Company's and its subsidiaries' improvements and    
equipment that are material to their business operations taken as a whole have  
been well maintained and are in good and serviceable condition, reasonable wear 
and tear excepted.                                                              

SECTION 3.21.  CERTAIN MATERIAL CONTRACTS.                              

  (a) SCHEDULE 3.21(A) to the Company Disclosure Statement lists each of the
following agreements and arrangements (whether written or oral and including all
amendments thereto) to which the Company or any of its subsidiaries is a party  
or a beneficiary or by which the Company or any of its subsidiaries is bound    
that is material, directly or indirectly, to the business of the Company and any
of its subsidiaries, taken as a whole (collectively, the "Material Contracts"): 
(i) any supply, distribution or other agreements or arrangements pursuant to    
which the Company or its subsidiaries sell or distribute any products and which 
is not cancelable within 90 days notice without penalty; (ii) any warranty      
agreements or arrangements under which the Company or any of its subsidiaries   
has any Liability with a value in excess of $500,000; (iii) any capital or      
operating leases or conditional sales agreements relating to vehicles or        
equipment with a value in excess of $500,000; (iv) any supply or manufacturing  
agreements or arrangements pursuant to which the Company or any of its          
subsidiaries is entitled or obligated to acquire any assets from a third party  
in excess of $500,000; (v) insurance policies; (vi) any employment, consulting, 
noncompetition, separation, collective bargaining, union or labor agreements or 
arrangements; (vii) any agreement evidencing, securing or otherwise relating to 
any indebtedness for which the Company or any of its subsidiaries has any       
Liability in excess of $1,000,000, (viii) any material agreement with or for the
benefit of any shareholder, director, officer or employee of the Company or any 
of its subsidiaries, or any affiliate or family member thereof; and (ix) any    
other agreement or arrangement pursuant to which the Company or any of its      
subsidiaries could be required to make or be entitled to receive aggregate      
payments in excess of $1,000,000 and which is not cancelable within 90 days     
notice without penalty.                                                         

    (b) The Company and its subsidiaries have performed all of their obligations
under each Material Contract and there exists no breach or default (or event    
that with notice or lapse of time would constitute a breach or default) under   
any Material Contract, other than any failure to perform or any breach or       
default that would not reasonably be expected to have a CMAE.                   

   (c) On the date hereof and on the Closing Date, each Material Contract will
be valid, binding and in full force and effect and enforceable in accordance    
with its respective terms (other than any term that if not enforced would not   
reasonably be expected to have a CMAE), except as such enforceability may be    
limited by applicable bankruptcy, insolvency, fraudulent conveyance or other    
similar laws affecting the enforcement of creditors' rights generally and       
subject to general principles of equity and except for any Material Contract    
that by its express terms expires on or before the Closing Date. There has been 
no termination or, to the Company's knowledge, threatened termination or notice 
of default under any Material Contract. The Company has delivered to Parent a   
copy of each written Material Contract.                                         

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(d) Except as set forth in SCHEDULE 3.21(D) to the Company Disclosure   
Statement, no consent of any person is required in connection with the          
transactions contemplated by this Agreement in order to preserve the rights of  
the Company or any of its subsidiaries under or to prevent any disadvantage to  
the Company or any of its subsidiaries in respect of any Material Contract after
the Effective Time.                                                             

   SECTION 3.22.  PRINCIPAL CUSTOMERS AND SUPPLIERS; COMPETING INTERESTS.  The
Company has made available to Parent a list of the ten largest customers by     
dollar volume of the Company and its subsidiaries (the "Largest Customers") and 
the ten largest suppliers by dollar volume of the Company and its subsidiaries  
(the "Largest Suppliers"), with the amount of revenues or payments, as          
applicable, attributable to each such customer and supplier), for the Company's 
1996 and 1997 fiscal years and the first four months of its 1998 fiscal year.   
Except as described in SCHEDULE 3.22(I), none of the Largest Customers or       
Largest Suppliers has terminated or materially altered its relationship with the
Company since the beginning of the Company's 1998 fiscal year, or, to the       
Company's knowledge, threatened to do so or otherwise notified the Company of   
any intention to do so, and there has been no dispute with any of the Largest   
Customers or Largest Suppliers since the beginning of the Company's 1998 fiscal 
year, other than any alteration or dispute that would not reasonably be expected
to have a CMAE. Except as described in such SCHEDULE 3.22(II), none of the      
Company, any of its subsidiaries, or, to the Company's knowledge, any director  
or officer of any of the foregoing owns, directly or indirectly, an interest in 
any entity that is a competitor, customer or supplier of the Company or any of  
its subsidiaries or that otherwise has business dealings with the Company or any
of its subsidiaries that are material to the Company and its subsidiaries taken 
as a whole, other than the beneficial ownership of not more than 5% of the      
voting securities of any such entity that are publicly traded.                  

SECTION 3.23.  INTELLECTUAL PROPERTY RIGHTS.  There are no registered   
patents, trademarks, service marks, trade names or copyrights, or applications  
for or licenses (to or from the Company or any of its subsidiaries) with respect
to any of the foregoing that are material to the Company and its subsidiaries   
taken as a whole, that (a) are owned by the Company or any of its subsidiaries, 
or with respect to which the Company or any of its subsidiaries has any rights, 
or (b) are used, whether directly or indirectly, by the Company or any of its   
subsidiaries, other than as set forth on SCHEDULE 3.23 to the Company Disclosure
Statement. The Company and its subsidiaries have the right to use the trademarks
and trade names set forth on such SCHEDULE 3.23 and any other computer software 
and software licenses, intellectual property, proprietary information, trade    
secrets, trademarks, trade names, copyrights, material and manufacturing        
specifications, drawings and designs that are material to the Company and its   
subsidiaries taken as a whole (collectively, "Intellectual Property"), without  
infringing on or otherwise acting adversely to the rights or claimed rights of  
any person, other than any infringement that would not reasonably be expected to
have a CMAE. Except as set forth on SCHEDULE 3.23 to the Company Disclosure     
Statement, neither the Company nor any of its subsidiaries is obligated to pay  
any royalty or other consideration to any person in connection with the use of  
any Intellectual Property. To the Company's knowledge, no other person is       
infringing in any material respect on the rights of the Company and its         
subsidiaries in any of their Intellectual Property.                             

  SECTION 3.24.  OPINION OF FINANCIAL ADVISOR.  The Company has received the
opinion of The Ohio Company to the effect that, as of the date of delivery of   
such opinion, the consideration to be received by the holders of Company Common 
Stock and Company Preferred Stock in the Merger is fair, from a financial point 
of view, to such holders (the "Fairness Opinion"). The Company will promptly    
deliver to Parent a true and complete written copy of such opinion.             

  SECTION 3.25.  INFORMATION SUPPLIED.  No representation or warranty of the
Company and no statement by the Company or other information contained in the   
Company Disclosure Statement as of the date of such representation, warranty or 
statement contains any untrue statement of material fact, or omits to state a   
material fact necessary in order to make the statements contained therein, in   
light of the circumstances under which such statements were made, not           
misleading.                                                                     

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT COMPANIES

    The Parent Companies hereby represent and warrant, jointly and severally, to
the Company that:                                                               

 SECTION 4.01.  ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.  Each of the
Parent and its subsidiaries is a corporation duly organized, validly existing   
and in good standing under the laws of its state of incorporation or            
organization and has all requisite corporate power and authority to own, lease  
and operate its properties and to carry on its business as it is now being      
conducted and is duly qualified and in good standing to do business in each     
jurisdiction in which the nature of the business conducted by it or the         
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly qualified and in good standing would not   
reasonably be expected to have a Parent Material Adverse Effect. The term       
"Parent Material Adverse Effect" (or "PMAE") as used in this Agreement shall    
mean any change or effect that, individually or when taken together with all    
such other changes or effects, is materially adverse to the business,           
operations, assets, financial condition or results of operations of Parent and  
its subsidiaries, taken as a whole.                                             

  SECTION 4.02.  CHARTER AND BYLAWS.  Parent has heretofore furnished to the
Company a complete and correct copy of the charter and bylaws, as amended or    
restated, of the Parent Companies. Neither Parent nor the Merger Sub is in      
violation of any of the provisions of its charter or bylaws.                    

SECTION 4.03.  CAPITALIZATION.                                          

(a) The authorized capital stock of Parent consists of (i) 100,000,000  
shares of Parent Common Stock, of which as of August 31, 1997, (A) 15,804,545   
shares were issued and outstanding, (B) no shares were held in treasury and (C) 
2,955,036 shares were reserved for future issuance pursuant to Parent's Exchange
Stock Option and Restricted Stock Plan, 1995 Stock Option and Restricted Stock  
Plan, 1997 Stock Option and Restricted Stock Plan and 1997 Employee Stock       
Purchase Plan (collectively, the "Parent Option Plans"); and (ii) 1,000,000     
shares of preferred stock, par value $0.01 per share, of which no shares are    
issued and outstanding. Except as described in this SECTION 4.03, in the SEC    
Reports (as defined below) or in SCHEDULE 4.03(A)(I) of the disclosure statement
delivered to the Company by Parent (the "Payment Disclosure Statement"), as of  
the date of this Agreement, no shares of capital stock of Parent are reserved   
for any purpose. The outstanding shares of capital stock of Parent are duly     
authorized, validly issued, fully paid and nonassessable, and have not been     
issued in violation of (nor are any of the authorized shares of capital stock of
Parent subject to) any preemptive or similar rights created by statute, the     
charter or bylaws of Parent, or any agreement to which Parent is a party or     
bound. Parent owns all the outstanding capital stock of Merger Sub and, except  
as set forth in SCHEDULE 4.03(A)(II) to the Parent Disclosure Statement, all of 
the outstanding capital stock of each of its subsidiaries, free and clear of all
security interests, liens, claims, pledges, agreements, charges or other        
encumbrances of any nature whatsoever.                                          

   (b) Except pursuant to the Parent Option Plans, or as set forth in SCHEDULE
4.03(B)(I) to the Parent Disclosure Statement or the SEC Reports (as defined    
below), as of August 31, 1997 there are no options, warrants or other rights,   
agreements, arrangements or commitments of any character to which Parent is a   
party relating to the issued or unissued capital stock of Parent or obligating  
Parent to grant, issue or sell any shares of its capital stock, by sale, lease, 
license or otherwise. Except as set forth in SCHEDULE 4.03(B)(II) to the Parent 
Disclosure Statement or the SEC Reports (as defined below), there are no        
obligations, contingent or otherwise, of Parent to repurchase, redeem or        
otherwise acquire any of its shares of capital stock. Except as set forth on    
SCHEDULE 4.03(B)(III) to the Company Disclosure Statement, there are no voting  
trusts, proxies or other agreements or understandings to which Parent is a party
or by which Parent is bound with respect to the voting of any shares of its     
capital stock.                                                                  

 (c) The shares of Parent Common Stock to be issued pursuant to the Merger
and all Parent Common Stock issuable upon the exercise of the Stock Options     
converted in the Merger pursuant to SECTION 5.12 will                           

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be duly authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights created by statute, Parent's charter or bylaws or any      
agreement to which Parent is a party or is bound.                               

   (d) The shares of Parent Common Stock to be issued in the Merger will be at
the Effective Time, approved for listing on the New York Stock Exchange ("NYSE")
and duly registered or qualified under federal and applicable state securities  
Laws.                                                                           

 SECTION 4.04.  AUTHORITY.  Each of the Parent Companies has all requisite
corporate power and authority to execute and deliver this Agreement, to perform 
its obligations hereunder and to consummate the transactions contemplated       
hereby. The execution and delivery of this Agreement by each of the Parent      
Companies and the consummation by each of the Parent Companies of the           
transactions contemplated hereby have been duly authorized by all necessary     
corporate action and no other corporate proceedings on the part of any of the   
Parent Companies are necessary to authorize this Agreement or to consummate the 
transactions contemplated hereby. This Agreement has been duly executed and     
delivered by each of the Parent Companies and, assuming the due authorization,  
execution and delivery thereof by the Company, constitutes the legal, valid and 
binding obligation of each of the Parent Companies.                             

SECTION 4.05.  NO CONFLICT; REQUIRED FILINGS AND CONSENTS.              

(a) The execution and delivery of this Agreement by each of the Parent  
Companies does not, and the consummation by the Parent Companies of the         
transactions contemplated hereby will not (i) conflict with or violate the      
charter or bylaws, in each case as amended or restated, of Parent or any of     
Parent's subsidiaries, (ii) conflict with or violate any Laws applicable to     
Parent or any of Parent's subsidiaries or by which any of their properties is   
bound or subject, or (iii) except as set forth on SCHEDULE 4.05 to the Parent   
Disclosure Statement result in any breach of or constitute a default (or an     
event that with notice or lapse of time or both would become a default) under,  
or give to others any rights of termination, amendment, acceleration or         
cancellation of, or result in the creation of a lien or encumbrance on any of   
the properties or assets of Parent or any of Parent's subsidiaries pursuant to, 
any note, bond, mortgage, indenture, contract, agreement, lease, license,       
permit, franchise or other instrument or obligation to which Parent or any of   
Parent's subsidiaries is a party or by or to which Parent or any of Parent's    
subsidiaries or any of their respective properties is bound or subject, except  
in the case of clauses (ii) and (iii) above, any conflict, violation, breach,   
default, lien or encumbrance that would not reasonably be expected to have a    
PMAE.                                                                           

(b) The execution and delivery of this Agreement by each of the Parent  
Companies does not, and the consummation of the transactions contemplated hereby
will not, require any of the Parent Companies to obtain any consent, license,   
permit, approval, waiver, authorization or order of, or to make any filing with 
or notification to, any Governmental Entities, except for applicable            
requirements, if any, of the Securities Act, the Securities Exchange Act of     
1934, as amended (the "Exchange Act"), state securities or blue sky laws ("Blue 
Sky Laws"), and the HSR Act, the filing and recordation of appropriate merger   
documents as required by Michigan Law, any filings that may be required as a    
result of the legal or regulatory status of the Company, and any consent,       
license, permit, approval, authorization, order, filing or notification that if 
not obtained or made would not reasonably be expected to have a PMAE.           

   SECTION 4.06.  PERMITS; COMPLIANCE.  Each of Parent and its subsidiaries is
in possession of all franchises, grants, authorizations, licenses, permits,     
easements, variances, exemptions, consents, certificates, approvals and orders  
necessary to own, lease and operate its properties and to carry on its business 
as it is now being conducted, other than those that if not possessed would not  
reasonably be expected to have a PMAE (collectively, the "Parent Permits"), and 
there is no action, proceeding or, to the Parent's knowledge, investigation     
pending or, to the knowledge of Parent, threatened regarding suspension or      
cancellation of any of the Parent Permits that would reasonably be expected to  
have a PMAE. Neither Parent nor any of its subsidiaries is in conflict with, or 
in material default or violation of (a) any Law applicable to Parent or any of  
its subsidiaries or by or to which any of their respective properties is bound  
or subject or (b) any of the Parent Permits, other than, in each such case, any 
conflict, default or violation that would not reasonably be expected to have a  
PMAE. Since December 31, 1995, neither Parent nor any                           

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of its subsidiaries has received from any Governmental Entity any written       
notification with respect to possible violation of laws that would reasonably be
expected to have a PMAE.                                                        

SECTION 4.07.  REPORTS; FINANCIAL STATEMENTS.                           

(a) Since December 31, 1995, Parent and its subsidiaries have filed all 
forms, reports, statements and other documents required to be filed with the SEC
pursuant to the Exchange Act, including, without limitation, (i) all Annual     
Reports on Form l0-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all proxy  
statements relating to meetings of shareholders (whether annual or special), and
(iv) all Current Reports on Form 8-K (collectively, the "SEC Reports"). Parent  
has made available to the Company complete and correct copies of all SEC Reports
filed during the preceding 12 months, and will promptly make available to the   
Company complete and correct copies of all SEC Reports filed after the date of  
this Agreement. The SEC Reports, including all SEC Reports filed after the date 
of this Agreement and prior to the Effective Time, (x) were or will be prepared,
as of the time they were or are filed, in all material respects in accordance   
with the requirements of applicable Law and (y) did not at the time they were   
filed, or will not at the time they are filed, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or 
necessary in order to make the statements therein, in the light of the          
circumstances under which they were made, not misleading.                       

   (b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained or incorporated by reference in the SEC    
Reports filed prior to the Effective Time (i) have been or will be prepared in  
accordance with the published rules and regulations of the SEC and generally    
accepted accounting principles applied on a consistent basis throughout the     
periods involved (except to the extent required by changes in generally accepted
accounting principles and with respect to SEC Reports filed prior to the date of
this Agreement, as may be indicated in the notes thereto and except, in the case
of interim financial statements, for the lack of certain footnotes and normal   
year-end and audit adjustments, and (ii) do or will fairly present in all       
material respects the consolidated financial position of Parent and its         
subsidiaries as of the respective dates thereof and the consolidated results of 
operations and cash flows for the periods indicated.                            

    SECTION 4.08.  ABSENCE OF CERTAIN CHANGES OR EVENTS.  Except as disclosed in
the SEC Reports filed prior to the date of this Agreement or as contemplated by 
this Agreement or as set forth in SCHEDULE 4.08 to the Parent Disclosure        
Statement or the SEC Reports, (a) neither Parent nor any of its subsidiaries has
any Liabilities which would be reasonably expected to have a Parent Material    
Adverse Effect, (b) since December 31, 1996, there has not been any Parent      
Material Adverse Effect, and (c) Parent has conducted its business only in the  
ordinary course of business in a manner consistent with past practices.         

   SECTION 4.09.  ABSENCE OF LITIGATION.  Except as set forth in SCHEDULE 4.09
to the Parent Disclosure Statement or the SEC Reports, there is no material     
claim, action, suit, litigation, proceeding, arbitration or, to the knowledge of
Parent, investigation of any kind, at law or in equity (including actions or    
proceedings seeking injunctive relief), pending or, to the knowledge of Parent, 
threatened against Parent or any of its subsidiaries or any properties or rights
of Parent or any of its subsidiaries that, if adversely determined, would       
reasonably be expected to have a PMAE and neither Parent nor any of its         
subsidiaries is subject to any continuing order of, consent decree, settlement  
agreement or other similar written agreement with, or, to the knowledge of      
Parent, continuing investigation by, any Governmental Entity, or any judgment,  
order, writ, injunction, decree or award of any Governmental Entity or          
arbitrator, including, without limitation, cease-and-desist or other orders that
would reasonably be expected to have a PMAE.                                    

  SECTION 4.10.  TAX MATTERS; POOLING.  None of the Parent Companies nor, to
the knowledge of Parent, any of their affiliates has knowingly taken or agreed  
to take any action that would prevent the Merger (a) from constituting a        
reorganization qualifying under the provisions of section 368(a) of the Code or 
(b) from being treated as a Pooling Transaction for financial accounting        
purposes.                                                                       

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    SECTION 4.11.  VOTE REQUIRED.  No vote of the holders of any class or series
of Parent capital stock is required to approve the Merger and adopt this        
Agreement. Parent, as the sole shareholder of Merger Sub, will promptly vote to 
approve the Merger and adopt this Agreement.                                    

SECTION 4.12.  COMPLIANCE WITH LAWS.  Neither Parent nor any of its     
subsidiaries is currently violating, and since December 31, 1995 has not        
violated, any Law, ordinance, regulation, judgment, order, decree, license or   
permit, including without limitation any zoning ordinances, building codes,     
Environmental Laws and occupational health and safety laws, except any          
violations that would not reasonably be expected to have a PMAE.                

 SECTION 4.13.  MERGER SUB.  Except for Liabilities incurred in connection
with its organization, the Merger and the negotiation and consummation of the   
transactions contemplated by this Agreement, Merger Sub has not incurred any    
Liabilities nor engaged in any material business activities or entered into any 
material agreement or arrangements.                                             

SECTION 4.14.  ENVIRONMENTAL MATTERS.  Except for matters disclosed in  
SCHEDULE 4.14 to the Parent Disclosure Statement or the SEC Reports, (a) the    
properties, operations and activities of Parent and its subsidiaries are in     
compliance in all material respects with all applicable Environmental Laws; (b) 
Parent and its subsidiaries and the properties and operations of Parent and its 
subsidiaries are not subject to any existing, pending or to Parent's knowledge, 
threatened action, suit, claim, investigation, inquiry or proceeding by or      
before any governmental authority under any Environmental Law that is or would  
be material to Parent and its subsidiaries taken as a whole; (c) all notices,   
permits, licenses, or similar authorizations, if any, required to be obtained or
filed by Parent or any of its subsidiaries under any Environmental Law in       
connection with any aspect of the business of Parent and its subsidiaries taken 
as a whole, including without limitation those relating to the treatment,       
storage, disposal or release of a hazardous or otherwise regulated substance,   
have been duly obtained or filed, other than where the failure to obtain or file
such notices, permits, licenses or similar authorizations would not reasonably  
be expected to have a PMAE, and will not cease to remain valid and in effect    
solely as a consequence of the Merger, and Parent and its subsidiaries are in   
compliance in all material respects with the terms and conditions of all such   
notices, permits, licenses and similar authorizations; (d) Parent and its       
subsidiaries have satisfied and are currently in compliance in all respects with
all financial responsibility requirements applicable to their operations and    
imposed by any governmental authority under any Environmental Law, except where 
any noncompliance would not reasonably be expected to have a PMAE, and Parent   
and its subsidiaries have not received any notice of material noncompliance with
any such financial responsibility requirements; (e) there are no physical or    
environmental conditions existing on any property of Parent or its subsidiaries 
or resulting from Parent's or such subsidiaries' operations or activities, past 
or present, at any location, that would give rise to any material on-site or    
off-site remedial obligations imposed on Parent or any of its subsidiaries under
any Environmental Laws or that would materially impact the soil, groundwater,   
surface water or human health; (f) to Parent's knowledge, since the effective   
date of the relevant requirements of applicable Environmental Laws and to the   
extent required by such applicable Environmental Laws, all hazardous or         
otherwise regulated substances generated by Parent and its subsidiaries have    
been transported only by carriers authorized under Environmental Laws to        
transport such substances and wastes, and disposed of only at treatment,        
storage, and disposal facilities authorized under Environmental Laws to treat,  
store or dispose of such substances and wastes; (g) there has been no exposure  
of any person or property to hazardous substances or any pollutant or           
contaminant at any property owned or controlled by Parent or any of its         
subsidiaries, nor has there been any release of hazardous substances, or any    
pollutant or contaminant into the environment by Parent or its subsidiaries at  
any property owned or controlled by Parent or any of its subsidiaries, that     
could reasonably be expected to give rise to any material claim against Parent  
or any of its subsidiaries for damages or compensation; and (h) Parent and its  
subsidiaries have made available to the Company all internal and external       
environmental audits and studies and all correspondence on substantial          
environmental matters in the possession of Parent or its subsidiaries reasonably
requested by the Company relating to any of the current properties or operations
of Parent and its subsidiaries.                                                 

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  SECTION 4.15.  INFORMATION SUPPLIED.  No representation or warranty of the
Parent Companies and no statement by the Parent Companies or other information  
contained in the Parent Disclosure Statement as of the date of such             
representation, warranty or statement, contains any untrue statement of material
fact, or omits to state a material fact necessary to make the statements        
contained therein, in light of the circumstances under which such statements    
were made, not misleading.                                                      

ARTICLE V 
COVENANTS 

SECTION 5.01.  AFFIRMATIVE COVENANTS OF THE COMPANY.  The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise        
required by applicable Law, expressly contemplated by this Agreement or         
consented to in writing by Parent, the Company will and will cause its          
subsidiaries to:                                                                

       (a) operate its business in all material respects only in the usual and
ordinary course consistent with past practices;                         

   (b) use its reasonable efforts to preserve substantially intact its
   business organization, maintain its Material Contracts, Company Permits and
   Intellectual Property and other material rights, retain the services of its
 respective officers and key employees and maintain its relationships with
its material customers and suppliers;                                   

     (c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain  
supplies and inventories in quantities consistent with its customary    
business practice;                                                      

(d) use its reasonable efforts to keep in full force and effect 
insurance and bonds comparable in amount and scope of coverage to that  
currently maintained; and                                               

       (e) from the date of this Agreement and to the Effective Time, promptly
supplement or amend the Company Disclosure Statement with respect to any
   matter that arises or is discovered after the date hereof that, if existing
or known at the date hereof, would have been required to be set forth or
  listed in the Company Disclosure Statement; provided, that for purposes of
   determining the rights and obligations of the parties hereunder (other than
the obligation of the Company under this SECTION 5.01(E)), any such     
    supplemental or amended disclosure will not be deemed to have been disclosed
to Parent unless Parent otherwise expressly consents in writing.        

SECTION 5.02.  NEGATIVE COVENANTS OF THE COMPANY.  Except as otherwise  
required by applicable Law, expressly contemplated by this Agreement, set forth 
on SCHEDULE 5.02 or consented to in writing by Parent, from the date of this    
Agreement until the Effective Time, the Company will not do, and will not permit
any of its subsidiaries to do, any of the foregoing:                            

        (a) (i) increase the compensation payable to or to become payable to any
director or executive officer, except for annual merit and seniority    
   increases in the ordinary course of business consistent with past practices
  and increases resulting from the operation of compensation arrangements in
    effect prior to the date hereof; (ii) grant any severance or termination pay
 (other than pursuant to the normal severance policy of the Company or its
  subsidiaries as in effect on the date of this Agreement) to, or enter into
  or amend any employment or severance agreement with, any director, officer
  or key employee; (iii) establish, adopt or enter into any employee benefit
plan or arrangement except in connection with the re-negotiation of any 
    expired union contract or labor agreement; or (iv) amend or otherwise modify
    in any respect that would reasonably be expected to be materially adverse to
the Company and its subsidiaries taken as a whole, any of the Material  
Contracts, any DB Plan or any other employee benefit plans, programs,   
   agreements, policies or other arrangements described in this Agreement that
    are material to the Company and its subsidiaries taken as a whole, except in
 connection with the re-negotiation of any expired union contract or labor
agreement;                                                              

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     (b) declare or pay any dividend on, or make any other distribution in
 respect of, outstanding shares of capital stock, except for (i) regularly
 scheduled semi-annual dividends on the Series A Preferred Stock, and (ii)
dividends by a wholly owned subsidiary of the Company to the Company or 
another wholly owned subsidiary of the Company;                         

      (c) (i) redeem, purchase or otherwise acquire any shares of its or any
of its subsidiaries' capital stock or any securities or obligations     
   convertible into or exchangeable for any shares of its or its subsidiaries'
capital stock, or any options, warrants or conversion or other rights to
acquire any shares of its or its subsidiaries' capital stock or any such
securities or obligations; (ii) effect any reorganization or            
 recapitalization; or (iii) split, combine or reclassify any of its or its
    subsidiaries' capital stock or issue or authorize or propose the issuance of
any other securities in respect of, in lieu of or in substitution for,  
shares of its or its subsidiaries' capital stock;                       

     (d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
 security interests, liens, claims, pledges, limitations in voting rights,
charges or other encumbrances) of, any shares of any class of its or its
   subsidiaries' capital stock, any securities convertible into or exercisable
  or exchangeable for any such shares, or any rights, warrants or options to
   acquire any such shares; or (ii) amend or otherwise modify the terms of any
  such rights, warrants or options the effect of which shall be to make such
terms less favorable to the Company or any of its subsidiaries;         

     (e) acquire or agree to acquire, by merging or consolidating with, by
 purchasing an equity interest in or a portion of the assets of, or by any
  other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or
   agree to acquire any assets of any other person (other than in the ordinary
course of business and consistent with past practice);                  

  (f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
    dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its assets or any assets of any of its     
   subsidiaries, except in the ordinary course of business and consistent with
past practice;                                                          

       (g) release any third party from its obligations, or grant any consent,
   under any existing standstill provision relating to a Competing Transaction
(as defined in SECTION 5.04(B)) or otherwise under any similar          
confidentiality or other agreement, or fail to enforce in all material  
respects any such agreement;                                            

      (h) adopt or propose to adopt any amendments to its charter or bylaws;

       (i) (i) materially change any of its methods of accounting in effect at
March 1, 1997, or (ii) make or rescind any express or deemed election   
 relating to Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or change any of its methods of reporting income or  
deductions for federal income tax purposes from those employed in the   
 preparation of the federal income tax returns for the taxable year ending
   March 1, 1997, except, in each case, as may be required by Law or generally
accepted accounting principles;                                         

 (j) (i) incur any obligation for borrowed money or purchase money
    indebtedness, whether or not evidenced by a note, bond, debenture or similar
instrument, except under existing lines of credit or purchase money     
indebtedness incurred in the ordinary course of business consistent with
past practice and provided that the aggregate amount thereof in no event
 exceeds $3,000,000 and except as expressly provided in or contemplated by
   the Capital Budget, or (ii) make or incur any capital expenditure except in
  the ordinary course of business consistent with past practice and provided
that the amount thereof shall not exceed $250,000 for any one item or   
    $1,000,000 in the aggregate, except as expressly provided in or contemplated
by the Capital Budget;                                                  

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    (k) enter into any arrangement, agreement or contract with any third
  party (other than customers in the ordinary course of business) that would
constitute a Material Contract if existing on the date of this Agreement
which provides for an exclusive arrangement with that third party or is 
substantially more restrictive on the Company or substantially less     
advantageous to the Company than arrangements, agreements or contracts  
existing on the date hereof;                                            

(l) agree in writing or otherwise to do any of the foregoing.   

SECTION 5.03.  AFFIRMATIVE AND NEGATIVE COVENANTS OF PARENT.            

 (a) Parent hereby covenants and agrees that, prior to the Effective Time,
unless otherwise required by applicable Law, expressly contemplated by this     
Agreement or consented to in writing by the Company, Parent will and will cause 
its subsidiaries to:                                                            

       (i) operate its business in all material respects only in the usual and
ordinary course consistent with past practices; and                     

    (ii) from the date of this Agreement to the Effective Time, promptly
supplement or amend the Parent Disclosure Statement with respect to any 
   matter that arises or is discovered after the date hereof that, if existing
or known at the date hereof, would have been required to be set forth or
 listed in the Parent Disclosure Statement; provided, that for purposes of
   determining the rights and obligations of the parties hereunder (other than
the obligation of the Parent under this SECTION 5.03(A)(II)), any such  
    supplemental or amended disclosure will not be deemed to have been disclosed
  to the Company unless the Company otherwise expressly consents in writing.

(b) Except as expressly contemplated by this Agreement or otherwise     
consented to in writing by the Company, from the date of this Agreement until   
the Effective Time, Parent will not do, and will not permit any of its          
subsidiaries to do, any of the following:                                       

(i) knowingly take any action which would result in a failure to
   maintain the listing of the Parent Common Stock on the NYSE or registration
of the Parent Common Stock under the Securities Act or the Exchange Act;

      (ii) declare or pay any dividend on, or make any other distribution in
 respect of, outstanding shares of capital stock except for dividends by a
wholly owned subsidiary of Parent to Parent or another wholly owned     
subsidiary of Parent;                                                   

      (iii) adopt or propose to adopt any amendments to its charter or bylaws,
  which would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;                                         

   (iv) repurchase any shares of Parent Common Stock during the period
 commencing with the mailing of the Proxy Statement (as defined below) and
ending on the Closing Date; or                                          

(v) agree in writing or otherwise to do any of the foregoing.   

SECTION 5.04.  NON-SOLICITATION.                                        

    (a) Subject to subsection (b) below, the Company hereby covenants and agrees
that it will not, and will use all reasonable best efforts to cause its         
subsidiaries and affiliates not to, initiate, solicit or encourage (including by
way of furnishing information or assistance), or take any other action to       
facilitate, any inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, any Competing Transaction (as defined in     
subsection (b) below), or enter into substantive discussions or negotiate with  
any person or entity in furtherance of such inquiries or to obtain a Competing  
Transaction, or agree to or endorse any Competing Transaction, or authorize or  
permit any of the officers, directors or employees of the Company or any of its 
subsidiaries or any investment banker, financial advisor, attorney, accountant  
or other representative retained by the Company or any of its subsidiaries or   
affiliates, as applicable, to take any such action, and the Company shall       
promptly (and in any event within two business                                  

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days) notify Parent of all material terms of any such inquiries and proposals   
received by the Company or any of its subsidiaries or affiliates, as applicable,
or by any such officer, director, investment banker, financial advisor,         
attorney, accountant or other representative relating to any of such matters.   

(b) Notwithstanding anything to the contrary set forth in subsection (a)
above or elsewhere in this Agreement, nothing contained in this Agreement shall 
prohibit the Board of Directors of the Company from (i) furnishing information  
to, or entering into discussions or negotiations with, any person or entity in  
connection with an unsolicited BONA FIDE proposal for a Competing Transaction   
from a person or entity reasonably believed by the Company to have the financial
ability to consummate the Competing Transaction on a timely basis, if, and only 
to the extent that (A) the Company has complied fully and in a timely manner    
with its obligations to notify Parent of all material terms of the Competing    
Transaction in accordance with SECTION 5.04(A), (B) the Board of Directors of   
the Company, after consultation with and based upon the advice of independent   
legal counsel, determines in good faith that such action is necessary for such  
Board of Directors to comply with its fiduciary duties to the shareholders of   
the Company under applicable Law and (C) prior to furnishing such information   
to, or entering into discussions or negotiations with, such person or entity the
Company (x) provides prior written notice to Parent to the effect that it is    
furnishing information to, or entering into discussions or negotiations with,   
such person or entity and (y) enters into with such person or entity a          
confidentiality agreement in reasonably customary form on terms not more        
favorable to such person or entity than the terms contained in that certain     
Confidentiality Agreement dated March 13, 1997 between Parent and the Company   
(the "Confidentiality Agreement"); (ii) failing to make or withdrawing or       
modifying its recommendation for the Merger referred to in SECTION 6.02(A); or  
(iii) making or disclosing any position or taking any other action if the Board 
of Directors of the Company, after consultation with and based on the advice of 
independent legal counsel, determines in good faith that such action is         
necessary for such Board of Directors to comply with its fiduciary duties to the
shareholders of the Company under applicable Law. For purposes of this          
Agreement, "Competing Transaction" shall mean any of the following (other than  
the transactions contemplated by this Agreement) involving the Company or any of
its subsidiaries: (I) any acquisition of all or a material portion of the       
Company and its subsidiaries taken as a whole by any merger, consolidation,     
share exchange, business combination or similar transaction; (II) any sale,     
lease, exchange, mortgage, pledge, transfer or other disposition of 20% or more 
of the assets of the Company and its subsidiaries taken as a whole, (III) any   
offer for 20% or more of the outstanding shares of capital stock of the Company;
or (IV) any public announcement of a proposal, plan or intention to do any of   
the foregoing or any agreement to engage in any of the foregoing.               

SECTION 5.05.  ACCESS AND INFORMATION.                                  

(a) The Company shall, and shall cause its subsidiaries to (i) afford to
Parent and its officers, directors, employees, accountants, consultants, legal  
counsel, agents and other representatives (collectively, the "Parent            
Representatives") reasonable access at reasonable times, upon reasonable prior  
notice, to the officers, employees, agents, properties, offices and other       
facilities of the Company and its subsidiaries and to the books and records     
thereof and (ii) furnish promptly to Parent and the Parent Representatives such 
information concerning the business, properties, contracts, records and         
personnel of the Company and its subsidiaries (including, without limitation,   
financial, operating and other data and information) as may be reasonably       
requested, from time to time, by Parent.                                        

(b) Parent shall, and shall cause its subsidiaries to (i) afford to the 
Company and its officers, directors, employees, accountants, consultants, legal 
counsel, agents and other representatives (collectively, the "Company           
Representatives") reasonable access at reasonable times, upon reasonable prior  
notice, to the officers, employees, accountants, agents, properties, offices and
other facilities of Parent and its subsidiaries and to the books and records    
thereof and (ii) furnish promptly to the Company and the Company Representatives
such information concerning the business, properties, contracts, records and    
personnel of Parent and its subsidiaries (including, without limitation,        
financial, operating and other data and information) as may be reasonably       
requested, from time to time, by the Company.                                   

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  (c) Notwithstanding the foregoing provisions of this SECTION 5.05, neither
party shall be required to grant access or furnish information to the other     
party to the extent that such access or the furnishing of such information is   
prohibited by Law or would waive any rights to privileged communications.       
Subject to SECTION 9.01(A), no investigation by the parties hereto made         
heretofore or hereafter shall affect the representations and warranties of the  
parties which are herein contained and each such representation and warranty    
shall survive such investigation.                                               

    (d) The information received pursuant to subsections (a) and (b) above shall
be deemed to be "Confidential Information" for purposes of the Confidentiality  
Agreement.                                                                      

SECTION 5.06.  APPROPRIATE ACTION; CONSENTS; FILINGS.                   

  (a) Subject to the terms and conditions herein and applicable Law, each of
the Parent Companies and the Company shall use (and shall cause each of their   
respective subsidiaries to use, as applicable) all reasonable efforts to (i)    
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable Law or otherwise to  
consummate and make effective the transactions contemplated by this Agreement,  
(ii) obtain from any Governmental Entities or other third parties any consents, 
licenses, permits, waivers, approvals, authorizations or orders required to be  
obtained or made by the Parent Companies or the Company or any of their         
subsidiaries, as applicable, in connection with the authorization, execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including, without limitation, the Merger, (iii) make all necessary     
filings, and thereafter make any other required submissions, with respect to    
this Agreement and the Merger required under (A) the Securities Act and the     
Exchange Act and the rules and regulations thereunder, and any other applicable 
federal or state securities laws, (B) the HSR Act and (C) any other applicable  
Law; provided that the parties shall cooperate with each other in connection    
with the making of all such filings, including providing copies of all such     
documents to the nonfiling party and its advisors prior to filings and, if      
requested, shall accept all reasonable additions, deletions or changes suggested
in connection therewith. The Company and the Parent Companies shall furnish all 
information required for any application or other filing to be made pursuant to 
the rules and regulations of any applicable Law (including all information      
required to be included in the Proxy Statement or the Registration Statement) in
connection with the transactions contemplated by this Agreement. Parent and the 
Company shall request early termination of the waiting period with respect to   
the Merger under the HSR Act.                                                   

    (b) The Parent Companies and the Company agree to cooperate with respect to,
and shall cause each of their respective subsidiaries to cooperate with respect 
to, and agree to use all reasonable efforts vigorously to contest and resist,   
any action, including legislative, administrative or judicial action, and to    
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (an "Order"), of any   
Governmental Entity that is in effect and that restricts, prevents or prohibits 
the consummation of the Merger or any other transactions contemplated by this   
Agreement, including, without limitation, by vigorously pursuing all available  
avenues of administrative and judicial appeal and all available legislative     
action.                                                                         

   (c) Each of the Parent Companies and the Company shall give (or shall cause
their respective subsidiaries to give, as applicable) any notices to third      
parties, and use (and cause their respective subsidiaries to use, as applicable)
all reasonable efforts to obtain any third party consents (i) necessary, proper 
or advisable to consummate the transactions contemplated by this Agreement, (ii)
otherwise required under any Material Contracts, Company Permits or other       
agreements in connection with the consummation of the transactions contemplated 
hereby or (iii) required to prevent a Company Material Adverse Effect from      
occurring prior to the Effective Time or a Parent Material Adverse Effect from  
occurring after the Effective Time. In the event that any party shall fall to   
obtain any third party consent described above and the parties agree to         
consummate the Merger without such consent, such party shall use its best       
efforts, and shall take any such actions reasonably requested by the other      
parties, to limit the adverse effect upon the Company and Parent, their         
respective subsidiaries, and their respective businesses                        

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resulting, or which could reasonably be expected to result after the Effective  
Time, from the failure to obtain such consent.                                  

  (d) Each of the Parent Companies and the Company shall promptly notify the
other of (i) any material change in its current or future business, financial   
condition or results of operations, (ii) any material complaints, investigations
or hearings (or communications indicating that the same may be contemplated) of 
any Governmental Entities with respect to its business or the transactions      
contemplated hereby, (iii) the institution or the threat of material litigation 
involving it or any of its subsidiaries or (iv) any event or condition that     
might reasonably be expected to cause any of its representations, warranties,   
covenants or agreements set forth herein not to be true and correct in all      
material respects at the Effective Time.                                        

SECTION 5.07.  POOLING; TAX TREATMENT.                                  

  (a) Each party hereto shall use all reasonable efforts to cause the Merger
to be treated for financial accounting purposes as a Pooling Transaction, and   
shall not knowingly take, and shall use all reasonable efforts to prevent any   
affiliate of such party from taking, any actions which could prevent the Merger 
from being treated for financial accounting purposes as a Pooling Transaction.  

  (b) Each party hereto shall use all reasonable efforts to cause the Merger
to qualify, and shall not knowingly take, and shall use all reasonable efforts  
to prevent any affiliate of such party from taking, any actions which could     
prevent the Merger from qualifying as a reorganization under the provisions of  
Section 368(a) of the Code.                                                     

  SECTION 5.08.  PUBLIC ANNOUNCEMENTS.  Each party hereto shall consult with
the other parties hereto before issuing any press release or otherwise making   
any public statements with respect to the Merger and shall not issue any such   
press release or make any such public statement prior to such consultation,     
except as otherwise required by applicable Law or the rules of the NYSE. The    
press release announcing the execution and delivery of this Agreement shall be a
joint press release of Parent and the Company.                                  

SECTION 5.09.  NYSE LISTING.  Parent shall use all reasonable efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be        
approved for listing (subject to official notice of issuance) on the NYSE prior 
to the Effective Time.                                                          

 SECTION 5.10.  MERGER SUB.  Prior to the Effective Time, Merger Sub shall
not conduct any business or make any investments other than as specifically     
contemplated by this Agreement and will not have any assets (other than a de    
minimis amount of cash paid to Merger Sub for the issuance of its stock to      
Parent) or Liabilities.                                                         

SECTION 5.11.  EMPLOYEE BENEFIT PLANS.  On and after the Closing Date,  
Parent shall cause the Company to take all such actions as are necessary so that
(i) for not less than six months after the Closing Date, employees of the       
Company or its subsidiaries during such period will be provided employee        
benefits and similar plans and programs as will provide benefits which in the   
aggregate are not materially less favorable than those provided to such         
employees as of the date hereof, and (ii) those employment agreements listed in 
SCHEDULE 3.11(C) of the Company Disclosure Statement are honored by the Company.
Except as otherwise provided herein or pursuant to any collective bargaining    
agreement to which the Company is a party, Parent may terminate, amend, suspend 
or modify any employee benefits or plans of the Company or any of its           
subsidiaries at any time.                                                       

SECTION 5.12.  STOCK OPTION PLANS.                                      

(a) OPTION PLANS.  Parent and the Company shall take such actions not   
inconsistent with the Merger being accounted for financial accounting purposes  
as a Pooling Transaction, including (with respect to the Company) the amendment 
of its existing option plans and any options outstanding thereunder (the "Stock 
Options") to permit Parent to assume, and Parent shall assume, effective at the 
Effective Time, the Stock                                                       

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Options that remain unexercised in whole or in part as of the Effective Time and
substitute 229,068 shares of Parent Common Stock (assuming all 420,000 Stock    
Options remain unexercised in whole) with a per share exercise price of $10.08  
for the shares of the Company Common Stock purchasable under the assumed Stock  
Options (the "Assumed Options"), which assumption and substitution shall not    
give the optionee additional benefits which the optionee did not have under the 
Stock Options before such assumption and shall be assumed on the same terms and 
conditions as the Stock Options being assumed, subject to the foregoing;        
provided, however, if the Top-Up Notice referred to in SECTION 8.02 shall have  
been delivered by Parent, the Assumed Options shall be for a number of shares of
Parent Common Stock equal to (x) 229,068 times (y) $36.00 and divided by (z) the
Average Price and the per share exercise price shall be equal to (x) $10.08     
times (y) the Average Price and divided by (z) $36.00. Parent acknowledges that 
upon assumption pursuant to this SECTION 5.12 the Assumed Options will be fully 
vested and exerciseable.                                                        

(b) REGISTRATION.  Parent shall take all corporate action necessary to  
reserve for issuance a sufficient number of shares of Parent Common Stock for   
delivery upon exercise of the Assumed Options. As soon as practicable after the 
Effective Time (and in no event later than sixty days after the Effective Time),
Parent shall file a registration statement on Form 8 (or other appropriate form)
with respect to the shares of Parent Common Stock subject to the Assumed Options
(to the extent such shares are not covered by a previously filed registration   
statement), shall use its best efforts to maintain the effectiveness of such    
registration statement for so long as any of the Assumed Options remain         
outstanding, and shall cause the shares of Parent Common Stock to be issued upon
the exercise of the Stock Options to be approved for listing on the NYSE.       

SECTION 5.13.  BUY-SELL AGREEMENTS.  The Company shall terminate on or  
before the Closing Date without any liability to the Company all existing       
buy-sell agreements to which it is a party covering any shares of the capital   
stock of the Company.                                                           

SECTION 5.14.  NOTES.  The Company shall repay in full the indebtedness 
relating to those certain notes listed on SCHEDULE 5.14 to the Company          
Disclosure Statement on or prior to the Effective Time.                         

ARTICLE VI
ADDITIONAL AGREEMENTS 

SECTION 6.01.  SHAREHOLDER APPROVAL AND MEETING OF SHAREHOLDERS.        

  (a) The Company shall, promptly after the date of this Agreement, take all
actions necessary in accordance with Michigan Law and its charter and bylaws to 
convene a special meeting of the Company's shareholders to approve this         
Agreement and the Merger (the "Shareholders Meeting"), and the Company shall    
consult with Parent in connection therewith and coordinate the timing of such   
meeting with the distribution of the Registration Statement and the Proxy       
Statement (as defined below). Subject to SECTION 5.04(B), the Company shall use 
all reasonable efforts to solicit from shareholders of the Company proxies in   
favor of the approval and adoption of this Agreement and to secure the vote of  
shareholders required by Michigan Law and its charter and bylaws to approve and 
adopt this Agreement.                                                           

   (b) Notwithstanding the foregoing, in the event that the Board of Directors
of the Company receives a proposal for a Competing Transaction that, in the     
exercise of their fiduciary obligations (as determined in good faith by the     
Board of Directors after consultation with outside counsel), they determine to  
be a Superior Transaction (as defined below), the Board of Directors may        
withdraw or modify its approval or recommendation of this Agreement or the      
Merger, approve or recommend any such Superior Transaction, or enter into an    
agreement with respect to such Superior Transaction and terminate this          
Agreement. For purposes of this Agreement, a "Superior Transaction" means any   
Competing Transaction the terms of which the Board of Directors determines in   
their good faith reasonable judgment (after reviewing the advice of, and        
consultation with, its financial advisor and legal counsel) to be more favorable
to the Company's shareholders than the transactions contemplated by this        
Agreement.                                                                      

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SECTION 6.02.  REGISTRATION STATEMENT; PROXY STATEMENT.                 

    (a) As promptly as practicable after the execution of this Agreement, Parent
shall prepare and file with the SEC a registration statement on Form S-4 (such  
registration statement, together with any amendments thereof or supplements     
thereto, being the "Registration Statement"), including a proxy statement and   
form of proxy for shareholders of the Company (together with any amendments     
thereof or supplements thereto, in each case in the form or forms mailed to the 
Company's shareholders, the "Proxy Statement"), in connection with the          
registration under the Securities Act of the Parent Common Stock to be issued in
the Merger and, to the extent permitted under applicable Law, the Parent Common 
Stock to be issued upon the exercise of the Stock Options. Parent will promptly 
respond to any comments from the SEC and will use its best efforts to cause the 
Registration Statement to be declared effective as promptly as practicable, and 
shall take any action required to be taken under any applicable federal or state
securities laws in connection with the issuance of shares of Parent Common Stock
in the Merger. The Company shall furnish to Parent all information concerning it
and the holders of the Company's capital stock as Parent may reasonably request 
in connection with such actions. Subject to SECTION 5.04(B), the Proxy Statement
shall include the recommendation of the Company's Board of Directors in favor of
the Merger and adoption of this Agreement.                                      

  (b) Parent shall provide the Company the opportunity to review and comment
on each form of Registration Statement and Proxy Statement, each amendment and  
supplement thereto, and each responsive correspondence to the SEC, in each case 
at a reasonable time before filing with or sending to the SEC. In addition,     
Parent shall provide to the Company copies of all correspondence to and from the
SEC concerning the Registration Statement or Proxy Statement and any amendment  
or supplement thereto. Parent shall include in the Registration Statement and   
Proxy Statement and each amendment and supplement thereto information relating  
to the Company and its subsidiaries only as authorized by the Company or as     
required by applicable Law. Parent shall promptly notify the Company of any stop
orders or threatened stop orders with respect to the Registration Statement or  
Proxy Statement.                                                                

(c) The information supplied by the Company for inclusion in the        
Registration Statement shall not, at the time the Registration Statement is     
declared effective, contain any untrue statement of a material fact or omit to  
state any material fact required to be stated therein or necessary in order to  
make the statements therein not misleading. The information supplied by the     
Company for inclusion in the Proxy Statement shall not, at the date the Proxy   
Statement (or any supplements thereto) is first mailed to shareholders at the   
time of the Shareholders Meeting or at the Effective Time, contain any untrue   
statement of a material fact or omit to state any material fact required to be  
stated therein or necessary in order to make the statements therein, in the     
light of the circumstances under which they are made, not misleading. If at any 
time prior to the Effective Time any event or circumstance relating to the      
Company or any of its affiliates, or its or their respective officers or        
directors, should be discovered by the Company that should be set forth in an   
amendment to the Registration Statement or a supplement to the Proxy Statement, 
the Company shall promptly inform Parent thereof in writing.                    

 (d) The information supplied by the Parent Companies for inclusion in the
Registration Statement shall not, at the time the Registration Statement is     
declared effective, contain any untrue statement of a material fact or omit to  
state any material fact required to be stated therein or necessary in order to  
make the statements therein not misleading. The information supplied by the     
Parent Companies for inclusion in the Proxy Statement shall not, at the date the
Proxy Statement (or any supplements thereto) is first mailed to shareholders at 
the time of the Shareholders Meeting or at the Effective Time, contain any      
untrue statement of a material fact or omit to state any material fact required 
to be stated therein or necessary in order to make the statements therein, in   
the light of the circumstances under which they are made, not misleading. If at 
any time prior to the Effective Time any event or circumstance relating to      
Parent or any of its affiliates, or to their respective officers or directors,  
should be discovered by Parent that should be set forth in an amendment to the  
Registration Statement or a supplement to the Proxy Statement Parent shall      
promptly inform the Company thereof in writing. All documents that Parent is    
responsible for filing with                                                     

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the SEC in connection with the transactions contemplated hereby will comply as  
to form in all material respects with the applicable requirements of the        
Securities Act and the rules and regulations thereunder and the Exchange Act and
the rules and regulations thereunder.                                           

  SECTION 6.03.  INDEMNIFICATION.  From and after the Effective Time, Parent
shall and shall cause the Surviving Corporation (including, if necessary,       
providing the Surviving Corporation with sufficient funds) to, exculpate,       
indemnify and hold harmless all past and present officers, directors, employees 
and agents of the Company and its subsidiaries (the "Company Indemnified        
Parties") against all losses, claims, damages, expenses or Liabilities arising  
out of or related to any acts or omissions, or alleged acts or omissions,       
occurring at or prior to the Effective Time to the same extent and on the same  
terms and conditions (including with respect to the advancement of expenses)    
provided for in the Company's or any such subsidiary's charter or bylaws (or    
similar organization documents), agreements in effect as of the date hereof or  
applicable Law. Any determination required to be made with respect to whether a 
Company Indemnified Party is entitled to such indemnification under the         
applicable charter or bylaws shall be made by independent counsel selected by   
the Company Indemnified Party reasonably satisfactory to Parent (whose          
reasonable fees and expenses shall be paid by Parent or the Surviving           
Corporation unless such independent counsel determines that such fees and       
expenses should be paid by the Company Indemnified Party, in which case they    
shall be paid by the Company Indemnified Party).                                

ARTICLE VII 
CLOSING CONDITIONS

SECTION 7.01.  CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS       
AGREEMENT.  The respective obligations of each party to effect the Merger and   
the other transactions contemplated hereby shall be subject to the satisfaction 
at or prior to the Closing Date of the following conditions, any or all of which
may be waived in writing by the parties hereto, in whole or in part, to the     
extent permitted by applicable Law:                                             

 (a)  The Registration Statement shall have been declared effective by the
SEC under the Securities Act. No stop order suspending the effectiveness of the 
Registration Statement shall have been issued by the SEC and no proceedings for 
that purpose shall have been initiated by the SEC. Parent shall have received   
all Blue Sky and other authorizations necessary to consummate the transactions  
contemplated by this Agreement.                                                 

    (b)  This Agreement and the Merger shall have been approved by the Requisite
Shareholder Vote.                                                               

(c)  No Governmental Entity or federal or state court of competent      
jurisdiction shall have enacted, issued, promulgated, enforced or entered any   
statute, rule, regulation, executive order, decree, injunction or other order   
(whether temporary, preliminary or permanent) which is in effect and which has  
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; and no such Governmental Entity shall have initiated or threatened  
to initiate any proceeding seeking any of the foregoing.                        

(d)  The applicable waiting period under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or been          
terminated.                                                                     

    (e)  Parent and the Company shall have been advised in writing by Deloitte &
Touche, LLP on the Closing Date that the Merger should be treated for financial 
accounting purposes as a Pooling Transaction.                                   

SECTION 7.02.  ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE PARENT       
COMPANIES.  The obligations of the Parent Companies to effect the Merger and the
other transactions contemplated hereby are also subject to the satisfaction at  
or prior to the Closing Date of the following conditions, any or all of which   
may be waived in writing by Parent, in whole or in part:                        

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(a)  The representations and warranties of the Company contained in this
Agreement shall be true and correct as of the Closing Date as though made on and
as of the Closing Date (except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and  
warranties shall be true and correct as of such earlier date and except, with   
respect to representations and warranties of the Company that are not subject to
a CMAE qualification (other than the representations and warranties contained in
the first and fifth sentences of SECTION 3.03(A), which must be true and correct
in all material respects), where the failure to be true and correct would not   
reasonably be expected to have, individually or in the aggregate with all such  
failures, a CMAE). The Parent Companies shall have received a certificate of the
Company signed by the President and the Chief Financial Officer and dated the   
Closing Date, to such effect.                                                   

  (b)  The Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be performed or 
complied with by it on or prior to the Closing Date. The Parent Companies shall 
have received a certificate of the Company signed by the President and the Chief
Financial Officer and dated the Closing Date, to that effect.                   

(c)  Since the date of this Agreement, there shall have been no change, 
occurrence or circumstance in the current or future business, financial         
condition or results of operations of the Company and its subsidiaries taken as 
a whole having or reasonably likely to have a Company Material Adverse Effect.  
The Parent Companies shall have received a certificate of the Company signed by 
the President and the Chief Financial Officer and dated the Closing Date, to    
such effect.                                                                    

(d)  There shall not have been any action taken, or any statute, rule,  
regulation or order enacted, entered, enforced or deemed applicable to the      
Merger, by any Governmental Entity in connection with the grant of a regulatory 
approval or consent necessary, in the reasonable judgment of Parent, to the     
continuing operation of the current or future business of the Company, which    
imposes any condition or restriction upon the Parent Companies or the business  
or operations of the Company which, in the reasonable judgment of Parent, would 
be materially burdensome in the context of the transactions contemplated by this
Agreement.                                                                      

(e)  Hughes & Luce, L.L.P. shall have delivered to Parent its written   
opinion substantially to the effect that (i) the Merger will constitute a       
reorganization within the meaning of section 368(a) of the Code, (ii) Parent,   
Merger Sub and the Company will each be a party to that reorganization within   
the meaning of section 368(b) of the Code, and (iii) Parent, Merger Sub and the 
Company will not recognize any gain or loss for U.S. federal income tax purposes
as a result of the Merger.                                                      

    (f)  The holder of all of the Company's outstanding stock options shall have
consented to the assumption pursuant to SECTION 5.12 of all such options.       

   (g)  Counsel to the Company shall have delivered a written legal opinion to
Parent, in form and substance satisfactory to Parent and its counsel, covering  
the matters set forth in EXHIBIT C.                                             

   (h)  The Company shall have obtained each consent and approval necessary in
order that the transactions contemplated hereby do not constitute a breach or   
violation of, or result in a right of termination or acceleration of any        
encumbrance on any portion of the Company's assets, any Material Contract, or   
any license, or franchise of the Company or Company Permit, other than any such 
breach, violation, termination or acceleration that would not reasonably be     
expected to have a CMAE. The Parent Companies shall have received a certificate 
of the Company signed by the President and the Chief Financial Officer and dated
the Closing Date, to such effect.                                               

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    (i) Parent shall have received a certificate no later than two days prior to
Closing Date from the Company signed by the President and Chief Financial       
Officer of the Company setting forth the estimated amount of the Company's      
Expenses.                                                                       

 (j) All proceedings taken by the Company and all instruments executed and
delivered by the Company on or prior to the Closing Date in connection with the 
transactions herein contemplated shall be reasonably satisfactory in form and   
substance to Parent.                                                            

SECTION 7.03.  ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.  The
obligations of the Company to effect the Merger and the other transactions      
contemplated hereby are also subject to the satisfaction at or prior to the     
Closing Date of the following conditions, any or all of which may be waived in  
writing by the Company, in whole or in part:                                    

   (a) The representations and warranties of the Parent Companies contained in
this Agreement shall be true and correct as of the Closing Date as though made  
on and as of the Closing Date (except to the extent such representations and    
warranties specifically relate to an earlier date, in which case such           
representations and warranties shall be true and correct as of such earlier date
and except, with respect to the representations and warranties of the Parent    
Companies that are not subject to a PMAE qualification, where the failure to be 
true and correct would not reasonably be expected to have, individually or in   
the aggregate with all such failures, a PMAE). The Company shall have received a
certificate of Parent signed by the Chief Executive Officer and the Chief       
Financial Officer and dated the Closing Date, to such effect.                   

 (b) The Parent Companies shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be     
performed or complied with by them on or prior to the Closing Date. The Company 
shall have received a certificate of Parent signed by the Chief Executive       
Officer and the Chief Financial Officer and dated the Closing Date, to that     
effect.                                                                         

 (c) All of the shares of Parent Common Stock to be issued hereunder shall
have been registered under the Securities Act, no stop order suspending the     
effectiveness of the Registration Statement shall have been issued and such     
shares of Parent Common Stock shall have been authorized for listing, subject to
official notice of issuance, on the NYSE.                                       

(d) Counsel to the Parent Companies shall have delivered a written legal
opinion to the Company, in form and substance satisfactory to the Company and   
its counsel, covering the matters set forth in EXHIBIT D.                       

(e) Since the date of this Agreement, there shall have been no change,  
occurrence or circumstance in the business, financial condition or results of   
operations of Parent and its subsidiaries taken as a whole having or reasonably 
likely to have a Parent Material Adverse Effect. The Company shall have received
a certificate of Parent signed by the President and the Chief Financial Officer 
and dated the Closing Date, to such effect.                                     

(f) The person listed in SCHEDULE 7.03(F) to the Company Disclosure     
Statement shall have been elected to the Board of Directors of Parent effective 
immediately after the Effective Time.                                           

(g) Warner Norcross and Judd LLP shall have delivered to the Company its
written opinion substantially to the effect that (i) the Merger will constitute 
a reorganization within the meaning of section 368(a) of the Code, (ii) Parent, 
Merger Sub and the Company will each be a party to that reorganization within   
the meaning of section 368(b) of the Code, (iii) Parent, Merger Sub and the     
Company will not recognize any gain or loss for U.S. federal income tax purposes
as a result of the Merger, (iv) no gain or loss will be recognized by the       
shareholders of the Company who receive shares of Parent Common Stock in the    
Merger, except to the extent of any cash received in lieu of a fractional share 
of Parent Common Stock, (v) the basis of Parent Common Stock to be received by  
shareholders of the Company will, in each instance, be the same as the basis of 
the respective shares of the Company Common Stock surrendered in exchange       
therefor, (vi) the holding period of the Parent Common Stock to be received by  
shareholders of the Company will, in each instance, include the period during   
which the                                                                       

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Company Common Stock surrendered in exchange therefor was held, provided that   
the Company Common Stock was, in each instance, held as a capital asset in the  
hands of the shareholder of the Company at the Effective Time, and (vii) no gain
or loss will be recognized by the holder of the Stock Options by reason of the  
substitution pursuant to SECTION 5.12 hereof of shares of Parent Common Stock   
purchasable under such Stock Options.                                           

(h) All proceedings taken by the Parent Companies and all instruments   
executed and delivered by the Parent Companies on or prior to the Closing Date  
in connection with the transactions herein contemplated shall be reasonably     
satisfactory in form and substance to the Company.                              

ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER 

 SECTION 8.01.  TERMINATION.  This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of this Agreement 
and the Merger by the shareholders of the Company:                              

(a) by mutual consent of Parent and the Company;                        

  (b) by Parent, if the Company shall have failed to perform in any material
respect any of it covenants or agreements set forth in this Agreement, or (i) if
the representations and warranties set forth in the first and fifth sentences of
SECTION 3.03(A) shall not be true and correct in all material respects, (ii) if 
any of the representations or warranties of the Company set forth in this       
Agreement that are subject to a CMAE qualification shall not be true and correct
or (iii) if any such representations and warranties that are not so qualified   
(other than the representations and warranties contained in the first and fifth 
sentences of SECTION 3.03(A)) shall not be true and correct and such failure    
would reasonably be expected to have, individually or in the aggregate with all 
such failures, a CMAE, in either case such that the conditions set forth in     
SECTIONS 7.02(A) or (B), as the case may be, would be incapable of being        
satisfied by February 28, 1998; provided, that in any case, a willful breach    
shall be deemed to cause such conditions to be incapable of being satisfied for 
purposes of this SECTION 8.01(B);                                               

   (c) by the Company, if the Parent Companies shall have failed to perform in
any material respect any of it covenants or agreements set forth in this        
Agreement, or if any of the representations or warranties of the Parent         
Companies set forth in this Agreement that are subject to a PMAE qualification  
shall not be true and correct or any such representations and warranties that   
are not so qualified shall not be true and correct and such failure would       
reasonably be expected to have, individually or in the aggregate with all such  
failures, a PMAE, in either case such that the conditions set forth in SECTIONS 
7.03(A) or (B) of this Agreement, as the case may be, would be incapable of     
being satisfied by February 28, 1998; provided, that in any case, a willful     
material breach shall be deemed to cause such conditions to be incapable of     
being satisfied for purposes of this Section 8.01(c);                           

(d) by either Parent or the Company if there shall be any Order which is
final and nonappealable preventing the consummation of the Merger, except if the
party relying on such Order to terminate this Agreement has not complied with   
its obligations under SECTION 5.06(B) of this Agreement;                        

(e) by either Parent or the Company if the Merger shall not have been   
consummated before February 28, 1998;                                           

  (f) by either Parent or the Company if this Agreement and the Merger shall
fail to receive the Requisite Shareholder Vote;                                 

(g) by Parent, if (i) the Board of Directors of the Company withdraws,  
modifies or changes its recommendation of the Merger referred to in SECTION     
6.02(A) in a manner adverse to Parent or shall have resolved to do any of the   
foregoing; (ii) the Board of Directors of the Company shall have recommended    

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any Competing Transaction or shall have resolved to do so; or (iii) the Company 
enters into a letter of intent or a definitive agreement for a Competing        
Transaction;                                                                    

  (h) by the Company, if the Board of Directors of the Company (i) withdraws
its recommendation of the Merger referred to in SECTION 6.02(A) if there exists 
at such time a Superior Transaction, or (ii) recommends approval or acceptance  
of a Superior Transaction, in each case only if the Board of Directors of the   
Company, after consultation with and based upon the advice of independent legal 
counsel, determines in good faith that such action is necessary for such Board  
of Directors to comply with their fiduciary duties under applicable Law; or     

(i) in accordance with SECTION 8.02.                                    

  The right of any party hereto to terminate this Agreement pursuant to this
SECTION 8.01 shall remain operative and in full force and effect regardless of  
any investigation made by or on behalf of any party hereto, any person          
controlling any such party or any of their respective officers, directors,      
representatives or agents, whether prior to or after the execution of this      
Agreement.                                                                      

SECTION 8.02.  TERMINATION INTENT NOTICE; TOP UP RIGHTS.  If the Average
Price is less than $36.00, the Company shall have the right to terminate this   
Agreement or to request Parent (the "Top Up Request"), notwithstanding SECTION  
2.01(A), to increase the Common Stock Merger Consideration (the "Adjusted       
Consideration") to a number of shares equal to $68,800,000 divided by the       
Average Price. The Top-Up Request shall be delivered to Parent in writing no    
later than 9:00 a.m. Michigan time on the Closing Date. If the Company delivers 
a Top-Up Request, the Closing shall be postponed for two business days and      
Parent shall have the right to give notice to the Company (the "Top-Up Notice") 
that Parent elects (notwithstanding SECTION 2.01(A)) to proceed with the Merger 
at the Adjusted Consideration. The Top-Up Notice shall be delivered to the      
Company in writing no later than 9:00 a.m. Michigan time on the business day    
immediately following the day on which the Company delivered the Top-Up Request.
If Parent has not delivered a Top-Up Notice by the above deadline, the Company  
shall have the right to give notice to Parent (the "Closing Notice") that,      
notwithstanding its delivery of the Top-Up Request, the Company elects to       
proceed with the Merger without adjustment to the Common Stock Merger           
Consideration on the terms and conditions set forth in this Agreement. The      
Closing Notice shall be delivered to Parent in writing no later than 6:00 p.m.  
Michigan time on the business day prior to the Closing Date (as delayed above). 
If the Company has not delivered the Closing Notice by the above deadline, this 
Agreement shall terminate without further action by any of the parties.         

    SECTION 8.03.  EFFECT OF TERMINATION.  Except as provided in SECTION 8.06 or
SECTION 9.01(B), in the event of the termination of this Agreement pursuant to  
SECTION 8.01 or SECTION 8.02, this Agreement shall forthwith become void, there 
shall be no liability on the part of the parties to the other parties and all   
rights and obligations of any party hereto shall cease, except that nothing     
herein shall relieve any party of any liability for any willful breach of such  
party's representations, warranties, covenants or agreements contained in this  
Agreement, and each party hereby irrevocably waives and releases any other claim
that may exist upon such termination.                                           

SECTION 8.04.  AMENDMENT.  This Agreement may be amended by the parties 
hereto by action taken by or on behalf of their respective Boards of Directors, 
as applicable, at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after approval of the Merger by the Requisite Shareholder Vote no amendment may 
be made, which under applicable Law may not be made without the approval of such
shareholders. This Agreement may not be amended except by an instrument in      
writing signed by the parties hereto.                                           

  SECTION 8.05.  WAIVER.  At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or 
other acts of any other party hereto, (b) waive any inaccuracies in the         
representations and warranties of any other party contained herein or in any    
document delivered pursuant hereto and (c) waive compliance by any other party  
with any of the agreements or                                                   

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conditions contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be bound
thereby. For purposes of this SECTION 8.05, the Parent Companies as a group     
shall be deemed to be one party.                                                

SECTION 8.06.  FEES, EXPENSES AND OTHER PAYMENTS.                       

    (a) Except as provided in this SECTION 8.06(B), all Expenses incurred by the
parties hereto shall be borne solely and entirely by the party which has        
incurred such Expenses.                                                         

(b) The Company agrees that if this Agreement is terminated pursuant to 
SECTION 8.01(G) or (h) and the Parent Companies are not in material breach of   
any material representation, warranty, covenant or agreement of the Parent      
Companies contained herein, then the Company shall pay to Parent a fee of       
$500,000, and reimburse all of Parent's Expenses up to $500,000, plus, if the   
foregoing fees are payable and any Competing Transaction is consummated within  
one hundred eighty (180) days after such termination, then the Company shall pay
in addition to the foregoing a fee of $4,000,000.                               

(c) Any payment required to be made pursuant to SECTION 8.06(B) shall be
made as promptly as practicable but not later than three business days after    
request or termination of this Agreement or consummation of any Competing       
Transaction, as the case may be, and shall be made by wire transfer of          
immediately available funds to an account designated by Parent.                 

ARTICLE IX
GENERAL PROVISIONS

   SECTION 9.01.  EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

(a) None of the representations or warranties in this Agreement or any  
instrument delivered pursuant to this Agreement will survive the Effective Time.
The covenants and agreements of the parties hereto and the Surviving Corporation
will survive the Effective Time without limitation (other than those that, by   
their terms, contemplate a shorter survival period). The representations and    
warranties set forth in ARTICLE III (including the Company Disclosure Statement 
thereto) constitute the only representations and warranties of the Company in   
connection with this Agreement and the transactions contemplated hereby. If     
either of the Parent Companies or any Parent Representative, on the one hand, or
the Company or any Company Representative, on the other, knows on or before the 
date of this Agreement of facts, conditions or circumstances that as they are   
actually known to exist (and without any further developments, events or        
circumstances) constitute a breach of any representations or warranties made in 
or in connection with this Agreement by the Company or the Parent Companies, as 
the case may be, such representations and warranties shall be deemed to be      
qualified to the extent of such knowledge.                                      

    (b) Nothing herein shall be construed to cause the Confidentiality Agreement
to terminate upon the termination of this Agreement pursuant to ARTICLE VIII.   

   SECTION 9.02.  NOTICES.  All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given 
upon receipt, if delivered personally, mailed by registered or certified mail   
(postage prepaid, return receipt requested) to the parties at the               

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following addresses (or at such other address for a party as shall be specified 
by like changes of address) or sent by electronic transmission to the facsimile 
number specified below:                                                         

                                                                [Download Table]
                                             
           If to any of the Parent Companies,
(a)        to:                               

           Suiza Food Corporation            
           3811 Turtle Creek Boulevard       
           Suite 1300                        
           Dallas, Texas 75219               
           Attention: Gregg L. Engles        
           Facsimile: (214) 528-9929         

with a copy to:                              

           Hughes & Luce, L.L.P.             
           1717 Main Street                  
           Suite 2800                        
           Dallas, Texas 75201               
           Attention: Alan J. Bogdanow       
           Facsimile: (214) 939-6100         

(b)        If to the Company, to:            

           Country Fresh, Inc.               
           2555 Buchanan Avenue, SW          
           Grand Rapids, Michigan 49518      
           Attention: Delton Parks           
           Facsimile: (616) 243-5926         

with a copy to:                              

           Warner Norcross & Judd LLP        
           900 Old Kent Building             
           111 Lyon Street, N. W.            
           Grand Rapids, Michigan 49503      
           Attention: Tracy T. Larsen        
           Facsimile: (616) 752-2510         

  Any such notice shall be effective upon receipt if personally delivered or
telecopied, or one business day after delivery to a courier for next-day        
delivery, or three business days after delivery by mail. Any party or other     
recipient may from time to time change its address and facsimile number for     
purposes of this Agreement by providing notice of such change as provided above;
PROVIDED, HOWEVER, that no notice of a change in address or facsimile number    
shall be effective against a party that does not actually receive the notice.   

    SECTION 9.03.  CERTAIN DEFINITIONS.  For the purposes of this Agreement, the
term:                                                                           

  (a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control     
with, the first mentioned person.                                               

   (b) "Average Price" means the weighted average price of all transactions in
Parent Common Stock on the NYSE as reported on the Bloomberg Financial Markets  
System (or an equivalent system) for the three (3) trading days immediately     
prior to the Closing Date. If the Closing is postponed following the Company's  
delivery of a Top-Up Request pursuant to SECTION 8.02, the Average Price shall  
not be recomputed.                                                              

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    (c)  a person shall be deemed a "beneficial owner" of or to have "beneficial
ownership" of the Company Common Stock or Parent Common Stock, as the case may  
be, in accordance with the interpretation of the term "beneficial ownership" as 
defined in Rule 13d-3 under the Exchange Act, as in effect on the date hereof;  
provided that a person shall be deemed to be the beneficial owner of, and to    
have beneficial ownership of, the Company Common Stock or Parent Common Stock,  
as the case may be, that such person or any affiliate of such person has the    
right to acquire (whether such right is exercisable immediately or only after   
the passage of time) pursuant to any agreement, arrangement or understanding or 
upon the exercise of conversion rights, exchange rights, warrants or options, or
otherwise.                                                                      

(d)  "business day" means any day other than a day on which banks in the
State of Texas are authorized or obligated to be closed.                        

(e)  "control" (including the terms "controlled," "controlled by," and  
"under common control with") means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the       
management or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.            

    (f)  "Expenses" shall include all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,  
experts and consultants to a party hereto and its affiliates) reasonably        
incurred by a party or on its behalf in connection with or related to the       
authorization, preparation, negotiation, execution and performance of this      
Agreement, the preparation, printing, filing and mailing of the Registration    
Statement, the Proxy Statement, the solicitation of shareholder approval and all
other matters related to the consummation of the transactions contemplated      
hereby.                                                                         

(g)  "knowledge", "known" or "knows" means with respect to any matter in
question, if an executive officer of the Company or Parent, as the case may be, 
has actual knowledge of such matter.                                            

 (h)  "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as used in Section   
13(d) of the Exchange Act).                                                     

 (i)  "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person, means any corporation, partnership, joint      
venture or other legal entity of which the Company, Parent, the Surviving       
Corporation or any such other person, as the case may be (either alone or       
through or together with any other subsidiary), owns, directly or indirectly,   
50% or more of the stock or other equity interests the holders of which are     
generally entitled to vote for the election of the board of directors or other  
governing body of such corporation or other legal entity.                       

(j)  "Tax" or "Taxes" means any and all taxes, charges, fees, levies,   
assessments, duties or other amounts payable to any federal, state, local or    
foreign taxing authority or agency, including, without limitation, (i) income,  
franchise, profits, gross receipts, minimum, alternative minimum, estimated, ad 
valorem, value added, sales, use, service, real or personal property, capital   
stock, license, payroll, withholding, disability, employment, social security,  
workers compensation, unemployment compensation, utility, severance, excise,    
stamp, windfall profits, transfer and gains taxes, (ii) customs, duties,        
imposts, charges, levies or other similar assessments of any kind, and (iii)    
interest, penalties and additions to tax imposed with respect thereto.          

  (k)  "trading day" means any day that the Parent Common Stock is traded on
the NYSE.                                                                       

  SECTION 9.04.  HEADINGS.  The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or          
interpretation of this Agreement. Section references herein are, unless the     
context otherwise requires, references to sections of this Agreement.           

SECTION 9.05.  SEVERABILITY.  If any term or other provision of this    
Agreement is invalid, illegal or incapable of being enforced by any rule of Law 
or public policy, all other conditions and provisions of this Agreement shall   
nevertheless remain in full force and effect so long as the economic or legal   
substance of the transactions contemplated hereby is not affected in any manner 
materially adverse to any party or to                                           

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the shareholders of the Company. Upon such determination that any term or other 
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the      
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent       
possible and acceptable to each party.                                          

SECTION 9.06.  ENTIRE AGREEMENT.  This Agreement (together with the     
Exhibits, the Company Disclosure Statement and the Parent Disclosure Statement) 
and the Confidentiality Agreement constitute the entire agreement of the        
parties, and supersede all prior agreements and undertakings, both written and  
oral, among the parties or between any of them, with respect to the subject     
matter hereof.                                                                  

SECTION 9.07.  ASSIGNMENT.  This Agreement shall not be assigned by     
operation of Law or otherwise.                                                  

 SECTION 9.08.  PARTIES IN INTEREST.  This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this       
Agreement, express or implied, is intended to or shall confer upon any other    
person any right, benefit or remedy of any nature whatsoever under or by reason 
of this Agreement; PROVIDED, HOWEVER, that SECTIONS 5.11, 5.12 and 6.03 hereof  
shall be for the benefit of, and shall be enforceable by, the described         
beneficiaries thereto and their heirs, legal representatives, successors and    
assigns.                                                                        

SECTION 9.09.  SPECIFIC PERFORMANCE.  The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants     
hereunder, including its failure to take all actions as are necessary on its    
part to the consummation of the Merger, will cause irreparable injury to the    
other parties for which damages, even if available, will not be an adequate     
remedy. Accordingly, each party hereby consents to the issuance of injunctive   
relief by any court of competent jurisdiction to compel performance of such     
party's obligations and to the granting by any court of the remedy of specific  
performance of its obligations hereunder.                                       

 SECTION 9.10.  FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.  No
failure or delay on the part of any party hereto in the exercise of any right   
hereunder shall impair such right or be construed to be a waiver of, or         
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or    
further exercise thereof or of any other right. Except as otherwise expressly   
provided herein, all rights and remedies existing under this Agreement are      
cumulative to, and not exclusive to, and not exclusive of, any rights or        
remedies otherwise available.                                                   

SECTION 9.11.  GOVERNING LAW.  This Agreement shall be governed by, and 
construed in accordance with, the Laws of the State of Delaware, regardless of  
the Laws that might otherwise govern under applicable principles of conflicts of
Law, except to the extent that the Laws of Michigan mandatorily apply.          

SECTION 9.12.  COUNTERPARTS.  This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken 
together shall constitute one and the same agreement.                           

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   IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers     
thereunto duly authorized.                                                      

                                                                [Download Table]
                                           
SUIZA FOODS CORPORATION                    

By:               /s/ GREGG L. ENGLES      
           --------------------------------
Name:               Gregg L. Engles        
             CHAIRMAN AND CHIEF EXECUTIVE  
Title:                  OFFICER            

CF ACQUISITION CORP.                       

By:               /s/ GREGG L. ENGLES      
           --------------------------------
Name:               Gregg L. Engles        
             PRESIDENT AND CHIEF EXECUTIVE 
Title:                  OFFICER            

COUNTRY FRESH, INC.                        

By:                /s/ DELTON PARKS        
           --------------------------------
Name:                Delton Parks          
Title:                 PRESIDENT           

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COMPANY DISCLOSURE STATEMENT

                                                        [Enlarge/Download Table]
                                                                                            
Schedule 3.01(i)       Organization and Qualification                                       
Schedule 3.01(ii)      Subsidiaries                                                         
Schedule 3.03(a)       Reserved Capital Stock                                               
Schedule 3.03(b)(i)    Options, Warrants, Etc.                                              
Schedule 3.03(b)(ii)   Repurchase and Redemption Rights, Guaranties, Etc.                   
Schedule 3.03(b)(iii)  Capital Stock of Other Entities                                      
Schedule 3.03(b)(iv)   Arrangements Involving Payments Based on Revenues or Earnings        
Schedule 3.03(c)       Record Holders of Capital Stock and Options                          
Schedule 3.05(a)       No Conflict                                                          
Schedule 3.05(b)       Required Filings and Contracts                                       
Schedule 3.06          Permits; Compliance                                                  
Schedule 3.08(i)       Absence of Certain Changes or Events                                 
Schedule 3.08(ii)      Capital Budget                                                       
Schedule 3.09          No Undisclosed Liabilities                                           
Schedule 3.10          Absence of Litigation                                                
Schedule 3.11(a)       Employee Benefit Plans                                               
Schedule 3.11(b)       Representations Regarding Coverage; Effects of Transaction           
Schedule 3.11(c)       Commitments with Directors, Officers, Agents, and Employees          
Schedule 3.11(e)       Employee Pension Benefits Plans                                      
Schedule 3.11(g)       Parachute Payments                                                   
Schedule 3.11(h)       Material Unfunded or Underfunded Liabilities Under Employee Plans    
Schedule 3.11(j)       Collective Bargaining Agreements; Impairment of Business             
Schedule 3.11(k)       Material Agreements Relating to Labor                                
Schedule 3.11(l)       Defined Benefit Plans                                                
Schedule 3.11(m)       Multiemployer Plans                                                  
Schedule 3.12(a)       Tax Returns                                                          
Schedule 3.12(b)       Unaudited Tax Returns                                                
Schedule 3.12(c)       Extensions of Time for Filings                                       
Schedule 3.12(d)       Audits, Proceedings, Etc.                                            
Schedule 3.12(i)       Partnership Tax Returns; Foreign Entities                            
Schedule 3.12(j)       Safe-Harbor Leases; Tax-Exempt Use Property or Bond Financed Property
Schedule 3.12(l)       Affiliated Groups of Corporations                                    
Schedule 3.14          Affiliates                                                           
Schedule 3.16(a)       Compliance with Environmental Laws                                   
Schedule 3.16(b)       Actions, Investigations, Etc. Under Environmental Laws               
Schedule 3.16(c)       Notices, Permits, Licenses, Etc. Required by Environmental Laws      
Schedule 3.16(d)       Financial Responsibility Requirements Under Environmental Laws       
Schedule 3.16(e)       Conditions Giving Rise to Remedial Obligations                       
Schedule 3.16(f)       Transportation and Disposal of Hazardous Substances                  
Schedule 3.16(g)       Exposures to and Releases of Hazardous Substances                    
Schedule 3.18          Brokers                                                              

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                                                                [Download Table]
                                                                           
Schedule 3.19          Insurance                                           
Schedule 3.20(a)       Real Estate                                         
Schedule 3.20(b)       Liens and Encumbrances                              
Schedule 3.21(a)       Material Contracts                                  
Schedule 3.21(d)       Material Consents                                   
Schedule 3.22(i)       Relationships with Principal Customers and Suppliers
Schedule 3.22(ii)      Ownership of Competitors, Customers, and Suppliers  
Schedule 3.23          Intellectual Property Rights                        
Schedule 5.14          Notes                                               
Schedule 7.03(f)       Directors                                           

Attachment 3.03(c)     Common and Preferred Shareholders                   
Attachment 3.08(ii)    Capital Budget                                      
Attachment 3.19        Insurance                                           
Attachment 3.20(b)     UCC and Tax Lien Searches                           
Attachment 3.23        Tradenames and Service Marks                        
Attachment 5.14        Notes                                               

                                PARENT DISCLOSURE STATEMENT                

Schedule 4.03(a)(i)    Reserved Capital Stock                              
Schedule 4.03(a)(ii)   Subsidiaries                                        
Schedule 4.03(b)(i)    Options, Warrants, Etc.                             
Schedule 4.03(b)(ii)   Repurchase and Redemption Rights                    
Schedule 4.03(b)(iii)  Voting Arrangements                                 
Schedule 4.05          No Conflict; Required Filings and Consents          
Schedule 4.08          Absence of Certain Changes or Events                
Schedule 4.09          Absence of Litigation                               
Schedule 4.14          Environmental Matters                               

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                                                                      APPENDIX B

[The Ohio Company Letterhead] 

Member New York Stock Exchange                                                  

Corporate Finance Department                                                    

                      September 18, 1997

The Board of Directors                                                          
Country Fresh, Inc.                                                             
2555 Buchanan Ave. SW                                                           
Grand Rapids, Michigan 49518                                                    

Gentlemen:                                                                      

You have requested our opinion, as investment bankers, as to the fairness to the
holders of outstanding shares of capital stock of Country Fresh, Inc. (the      
"Company") of the consideration proposed to be paid to such holders pursuant to 
the Agreement and Plan of Merger dated as of September 18, 1997 by and among the
Company, Suiza Foods Corporation ("Suiza") and CF Acquisition Corp., a          
wholly-owned subsidiary of Suiza (the "Merger Agreement").                      

The Merger Agreement provides, subject to the satisfaction of various           
conditions, for the merger of CF Acquisition Corp. into the Company (the        
"Merger"). Upon consummation of the Merger, each outstanding share of common    
stock, no par value, of the Company will be converted into the right to receive 
0.5454 of a share of Suiza common stock, and each outstanding share of Series A 
preferred stock, $320 stated value, of the Company will be converted into the   
right to receive one share of Suiza preferred stock having identical terms.     

We have acted as a financial advisor to the Company and will receive a fee for  
our services which is contingent upon the consummation of the Merger.           

For the purpose of arriving at our opinion, we have reviewed or considered,     
among other things, the following:                                              

                                                                [Download Table]
                                                                            
  (i)  the Merger Agreement, and the negotiations relating thereto in which 
       we have participated;                                                

 (ii)  the audited financial statements of the Company, for the fiscal years
       ending 1992, 1993, 1994, 1995, 1996, 1997;                           

(iii)  the annual divisional unaudited financial statements of the Company  
       for the fiscal years ending 1992, 1993, 1994, 1995, 1996, 1997;      

 (iv)  the Company's consolidated budgeted plan for the fiscal year ending  
       March 1998;                                                          

  (v)  certain internal information, primarily financial in nature,         
       concerning the business and operations of the Company;               

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                                                                [Download Table]
                                                                             
  (vi)  the audited annual report and 10-K for Suiza for the year ended      
        December 31, 1996;                                                   

 (vii)  certain publicly available information concerning Suiza;             

(viii)  certain public information concerning merger and acquisition         
        transactions of Suiza as well as among companies engaged in the dairy
        business and related businesses during 1996 and 1997;                

  (ix)  meetings and discussions with certain officers and employees of the  
        Company and Suiza concerning the financial condition of both         
        companies; and                                                       

   (x)  other such studies, analyses, investigations and information as we   
        deemed necessary or appropriate.                                     

In rendering this opinion, we have assumed, without independent verification,   
the accuracy and completeness of the financial and other information which was  
provided to us by the Company or was publicly available. However, we have no    
reason to believe that any such information is not accurate or complete. We were
not requested to solicit and did not solicit other purchasers for the Company.  
Our opinion necessarily is based upon conditions as they exist and can be       
evaluated on the date thereof.                                                  

Based on the foregoing and such other matters we considered relevant, it is our 
opinion that, as of the date hereof, the consideration to be received by the    
holders of the Company's common stock and Series A Preferred Stock in the Merger
is fair to such holders from a financial point of view.                         

                                                                [Download Table]
                                          
Very truly yours,                         

/s/ ROBERT A. COREA                       
------------------------------------------
Robert A. Corea                           
VICE PRESIDENT                            

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                                                                      APPENDIX C

MICHIGAN DISSENTERS' RIGHTS STATUTE 

Section 761--As used in sections 762 to 774:                                    

       (a) "Beneficial shareholder" means the person who is a beneficial owner
of shares held by a nominee as the record shareholder.                  

    (b) "Corporation" means the issuer of the shares held by a dissenter
   before the corporate action, or the surviving corporation by merger of that
issuer.                                                                 

   (c) "Dissenter" means a shareholder who is entitled to dissent from
   corporate action under section 762 and who exercises that right when and in
the manner required by sections 764 through 772.                        

       (d) "Fair value," with respect to a dissenter's shares, means the value
    of the shares immediately before the effectuation of the corporate action to
  which the dissenter objects, excluding any appreciation or depreciation in
   anticipation of the corporate action unless exclusion would be inequitable.

      (e) "Interest" means interest from the effective date of the corporate
   action until the date of payment, at the average rate currently paid by the
   corporation on its principal bank loans of, if none, at a rate that is fair
and equitable under all the circumstances.                              

  (f) "Record shareholder" means the person in whose name shares are
    registered in the records of a corporation or the beneficial owner of shares
   to the extent of the rights granted by a nominee certificate on file with a
corporation.                                                            

(g) "Shareholder" means the record or beneficial shareholder.   

Section 762--(1) A shareholder is entitled to dissent from, and obtain payment  
of the fair value of his or her shares in the event of, any of the following    
corporate actions:                                                              

        (a) Consummation of a plan of merger to which the corporation is a party
 if shareholder approval is required for the merger by section 703a or the
articles of incorporation and the shareholder is entitled to vote on the
 merger, or the corporation is a subsidiary that is merged with its parent
under section 711.                                                      

        (b) Consummation of a plan of share exchange to which the corporation is
    a party as the corporation whose shares will be acquired, if the shareholder
is entitled to vote on the plan.                                        

       (c) Consummation of a sale or exchange of all, or substantially all, of
  the property of the corporation other than in the usual and regular course
    of business, if the shareholder is entitled to vote on the sale or exchange,
 including a sale in dissolution but in including a sale pursuant to court
order.                                                                  

   (d) An amendment of the articles giving rise to dissent pursuant to
section 621.                                                            

       (e) A transaction giving rise to a right to dissent pursuant to section
754.                                                                    

    (f) Any corporate action taken pursuant to a shareholder vote to the
extent the articles, bylaws, or a resolution of the board provides that 
   voting or nonvoting shareholders are entitled to dissent and obtain payment
for their shares.                                                       

      (g) The approval of a control share acquisition giving rise to a right
to dissent pursuant to section 799.                                     

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 (2) Unless otherwise provided in the articles, bylaws, or a resolution of
the board, a shareholder may not dissent from any of the following:             

    (a) Any corporate action set forth in subsection (1)(a) to (e) as to
  share which are listed on a national securities exchange or held of record
by not less than 2,000 persons on the record date fixed to determine the
shareholders entitled to receive notice of and to vote at the meeting of
shareholders at which the corporate action is to be acted upon.         

      (b) A transaction described in subsection (1)(a) in which shareholders
  receive cast or shares that satisfy the requirements of subdivision (a) or
any combination thereof.                                                

      (c) A transaction described in subsection (1)(b) in which shareholders
  receive cash or shares that satisfy the requirements of subdivision (a) or
any combination thereof.                                                

   (d) A transaction described in subsection (1)(c) which is conducted
pursuant to a plan of dissolution providing for distribution of         
substantially all of the corporation's net assets to shareholders in    
  accordance with their respective interests within 1 year after the date of
 the transaction, where the transaction is for cash or shares that satisfy
the requirements of subdivision (a) or any combination thereof.         

(3) A shareholder entitled to dissent and obtain payment for his or her 
shares pursuant to subsection (1)(a) to (e) may not challenge the corporate     
action creating his or her entitlement unless the action is unlawful or         
fraudulent with respect to the shareholder or the corporation.                  

    (4) A shareholder who exercises his or her right to dissent and seek payment
for his or her shares pursuant to subsection (1)(f) may not challenge the       
corporate action creating his or her entitlement unless the action is unlawful  
or fraudulent with respect to the shareholder or the corporation.               

Section 763--(1) A record shareholder may assert dissenters' rights as to fewer 
than all the shares registered in his or her name only if he or she dissents    
with respect to all shares beneficiallyowned by any 1 person and notifies the   
corporation in writing of the name and address of each person on whose          
beneficially owned he or she asserts dissenters' rights. The rights of a partial
dissenter under this subsection are determined as if the shares as to which he  
or she dissents and his or her other shares were registered in the names of     
different shareholders.                                                         

    (2) A beneficial shareholder may assert dissenters' rights as to shares held
on his or her behalf only if all of the following apply:                        

 (a) He or she submits to the corporation the record shareholder's
written consent to the dissent not later than the time the beneficial   
shareholder asserts dissenters' rights.                                 

      (b) He or she does so with respect to all shares of which he or she is
  the beneficial shareholder or over which he or she has power to direct the
vote.                                                                   

Section 764--(1) If proposed corporate action creating dissenters' rights under 
section 762 is submitted to a vote at a shareholders' meeting, the meeting      
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this act and shall be accompanied by a copy of sections 761 to 774.

(2) If corporate action creating dissenters' rights under section 762 is
taken without a vote of shareholders, the corporation shall notify in writing   
all shareholder entitled to assert dissenters' rights that the action was taken 
and send them the dissenters' notice described in section 766. A shareholder who
consents to the corporate action is not entitled to assert dissenters' rights.  

Section 765--(1) If proposed corporate action creating dissenters' rights under 
section 762 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights must deliver to the corporation before the  
vote is taken written notice of his or her intent to demand payment for his or  
her                                                                             

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shares if the proposed action is effectuated and must not vote his or her shares
in favor of the proposed action.                                                

    (2) A shareholder who does not satisfy the requirements of subsection (1) is
not entitled to payment for his or her shares under this act.                   

Section 766--(1) If proposed corporate action creating dissenters' rights under 
section 762 is authorized at a shareholders' meeting, the corporation shall     
deliver a written dissenters' notice to all shareholders who satisfied the      
requirements of section 765.                                                    

(2) The dissenters' notice must be sent no later than 10 days after the 
corporate action was taken, and must provide all of the following:              

  (a) State where the payment demand must be sent and where and when
certificates for shares must be deposited.                              

(b) Inform holders of shares without certificates to what extent
transfer of the shares will be restricted after the payment demand is   
received.                                                               

      (c) Supply a form for the payment demand that includes the date of the
first announcement to news media or to shareholders of the terms of the 
    proposed corporate action and requires that the person asserting dissenters'
    rights certify whether he or she acquired beneficial ownership of the shares
before the date.                                                        

        (d) Set a date by which the corporation must receive the payment demand,
    which date may not be fewer than 30 nor more than 60 days after the date the
subsection (1) notice is delivered.                                     

Section 767--(1) A shareholder sent a dissenter's notice described in section   
766 must demand payment, certify whether he or she acquired beneficial ownership
of the shares before the date required to be set forth in the dissenters' notice
pursuant to section 766(2)(c), and deposit his or her certificates in accordance
with the terms of the notice.                                                   

(2) The shareholder who demands payment and deposits his or her share   
certificates under subsection (1) retains all other rights of a shareholder     
until these rights are canceled or modified by the taking of the proposed       
corporate action.                                                               

 (3) A shareholder who does not demand payment or deposit his or her share
certificates where required, each by the date set in the dissenters' notice, is 
not entitled to payment for his or her shares under this act.                   

Section 768--(1) The corporation may restrict the transfer of shares without    
certificates from the date the demand for their payment is received until the   
proposed corporate action is taken or the restrictions released under section   
770.                                                                            

    (2) The person for whom dissenters' rights are asserted as to shares without
certificates retains all other rights of a shareholder until these rights are   
canceled or modified by the taking of the proposed corporate action.            

Section 769--(1) Except as provided in section 771, within 7 days after the     
proposed corporate action is taken or a payment demand is received, whichever   
occurs later, the corporation shall pay each dissenter who complied with section
767 the amount the corporation estimates to be the fair value of his or her     
shares, plus accrued interest.                                                  

(2) The payment must be accompanied by all of the following:            

  (a) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income    
   statement for that year, a statement of changes in shareholders' equity for
that year, and if available at the latest interim financial statements. 

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      (b) A statement of the corporation's estimate of the fair value of the
shares.                                                                 

(c) An explanation of how the interest was calculated.          

        (d) A statement of the dissenter's right to demand payment under section
772.                                                                    

Section 770--(1) If the corporation does not take the proposed action within 60 
days after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on shares without certificates.                            

(2) If after returning deposited certificates and releasing transfer    
restrictions, the corporation takes the proposed action, it must send a new     
dissenters' notice under section 766 and repeat the payment demand procedure.   

Section 771--(1) A corporation may elect to withhold payment required by section
769 from a dissenter unless he or she was the beneficial owner of the shares    
before the date set forth in the dissenters' notice pursuant to section         
766(2)(c).                                                                      

(2) To the extent the corporation elects to withhold payment under      
subsection (1), after taking the proposed corporate action, it shall estimate   
the fair value of the shares, plus accrued interest, and shall offer to pay this
amount to each dissenter who shall agree to accept it in full satisfaction of   
his or her demand. The corporation shall send with its offer a statement of its 
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand payment under    
section 772.                                                                    

Section 772--(1) A dissenter may notify the corporation in writing of his or her
own estimate of the fair value of his or her shares and amount of interest due, 
and demand payment of his or her estimate, less any payment under section 769,  
or reject the corporation's offer under section 771 and demand payment of the   
fair value of his or her shares and interest due, if any 1 of the following     
applies:                                                                        

    (a) The dissenter believes that the amount paid under section 769 or
  offered under section 771 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated.                     

      (b) The corporation fails to make payments under section 769 within 60
days after the date set for demanding payment.                          

        (c) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions  
    imposed on shares without certificates within 60 days after the date set for
demanding payment.                                                      

    (2) A dissenter waives his or her right to demand payment under this section
unless he or she notifies the corporation of his or her demand in writing under 
subsection (1) within 30 days after the corporation made or offered payment for 
his or her shares.                                                              

Section 773--(1) If a demand for payment under section 772 remains unsettled,   
the corporation shall commence a proceeding within 60 days after receiving the  
payment demand and petition the court to determine the fair value of the share  
and accrued interest. If the corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled   
the amount demanded.                                                            

 (2) The corporation shall commence the proceeding in the circuit court of
the county in which the corporation's principal place of business or registered 
office is located. If the corporation is a foreign corporation without a        
registered office or principal place of business in this state,it shall commence
the proceeding in the county in this state where the principal place of business
or registered office of the domestic corporation whose shares are to be valued  
was located.                                                                    

  (3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an   
action against their shares and all parties shall be                            

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served with a copy of the petition. Nonresidents may be served by registered or 
certified mail or by publication as provided by law.                            

    (4) The jurisdiction of the court in which the proceeding is commenced under
subsection (2) is plenary and exclusive. The court may appoint 1 or more persons
as appraisers to receive evidence and recommend decision on the question of fair
value. The appraisers have the powers described in the order appointing them, or
in any amendment to it. The dissenters are entitled to the same discovery rights
as parties in other civil proceedings.                                          

 (5) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his or her   
shares, plus interest, exceeds the amount paid by the corporation or for the    
fair value, plus accrued interest, of his or her after-acquired shares for which
the corporation elected to withhold payment under section 771.                  

Section 773a--(1) In a proceeding brought pursuant to section 773, the court    
may, pursuant to the agreement of the parties, appoint a referee selected by the
parties and subject to the approval of the court. The referee may conduct       
proceedings within the state, or outside the state by stipulation of the parties
with the referee's consent, and pursuant to the Michigan court rules. The       
referee shall have powers that include, but are not limited to, the following:  

  (a) To hear all pretrial motions and submit proposed orders to the
    court. In ruling on the pretrial motion and proposed orders, the court shall
   consider only those documents, pleadings, and arguments that were presented
to the referee.                                                         

      (b) To require the production of evidence, including the production of
    all books, papers, documents, and writings applicable to the proceeding, and
   to permit entry upon designated land or other property in the possession or
control of the corporation.                                             

       (c) To rule upon the admissibility of evidence pursuant to the Michigan
rules of evidence.                                                      

(d) To place witnesses under oath and to examine witnesses.     

(e) To provide for the taking of testimony by deposition.       

(f) To regulate the course of the proceeding.                   

    (g) To issue subpoenas, when a written request is made by any of the
parties, requiring the attendance and testimony of any witness and the  
production of evidence including books, records, correspondence, and    
 documents in the witness or under his or her control, at a hearing before
   the referee or a a deposition convened pursuant to subdivision (e). In case
of a refusal to comply with a subpoena, the party on whose behalf the   
   subpoena was issued may file a petition in the court for an order requiring
compliance.                                                             

   (2) The amount and manner of payment of the referee's compensation shall be
determined by agreement between the referee and the parties, subject to the     
court's allocation of compensation between the parties at the end of the        
proceeding pursuant to equitable principles, notwithstanding section 774.       

(3) The referee shall do all of the following:                          

(a) Make a record and reporter's transcript of the proceeding.  

(b) Prepare a report, including proposed findings of fact and   
conclusions of law, and a recommended judgment.                         

       (c) File the report with the court, together with all original exhibits
and the reporter's transcript of the proceeding.                        

(4) Unless the court provides for a longer period, not more than 45 days
after being served with notice of the filing of the report described in         
subsection (3), any party may serve written objections to the                   

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report upon the other party. Application to the court for action upon the report
and objections to the report shall be made by motion upon notice. The court,    
after hearing, may adopt the report, may receive further evidence, may modify   
the report, or may recommit the report to the referee with instructions. Upon   
adoption of the report, judgment shall be entered in the same manner as if the  
action had been tried by the court and shall be subject to review in the same   
manner as any other judgment of the court.                                      

Section 774--(1) The court in an appraisal proceeding commenced under section   
773 shall determine all costs of the proceeding, including the reasonable       
compensation and expenses of appraisers appointed by the court. The court shall 
access the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to 
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 772.                           

  (2) The court may also access the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable in the         
following manner:                                                               

        (a) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the       
requirements of sections 764 through 772.                               

        (b) Against either the corporation or a dissenter, in favor of any other
   party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with  
respect to the rights provided by this act.                             

  (3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees paid out of the amounts awarded the      
dissenters who were benefited.                                                  

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                                                                      APPENDIX D

EXCERPTS FROM THE JOINT PROXY STATEMENT/PROSPECTUS
FOR THE MORNINGSTAR MERGER

  The following excerpts are taken from the Joint Proxy Statement/Prospectus
of Suiza Foods and Morningstar to be sent to the Suiza Foods and Morningstar    
stockholders in connection with the proposed Merger between a subsidiary of     
Suiza Foods and Morningstar. As used in this Appendix D, the "Merger" refers to 
the proposed merger between a subsidiary of Suiza Foods and Morningstar;        
"Morningstar Common Stock" refers to the common stock, $.01 par value per share,
of Morningstar; "Morningstar Stockholders" and "Suiza Stockholders" refers to   
the stockholders of Morningstar and Suiza Foods, respectively; "Morningstar     
Option" refers to options to purchase Morningstar Common Stock; a "Substitute   
Option" refers to options to purchase Suiza Common Stock upon Suiza Foods'      
assumption of Morningstar Options; the "Exchange Ratio" refers to the .85 shares
of Suiza Common Stock receivable for each share of Morningstar Common Stock in  
the Merger; the "Merger Agreement" refers to the Agreement and Plan of Merger,  
dated September 28, 1997, among Suiza Foods, SF Acquisition Corporation ("Sub") 
and Morningstar; the "Effective Time" refers to the effective time of the       
Merger; the "Morningstar Board" and the "Suiza Board" refer to the board of     
directors of Morningstar and Suiza, respectively; and "New Morningstar" refers  
to the surviving corporation in the Merger. Terms used in this Appendix D and   
not otherwise defined, have the meanings assigned to them elsewhere in this     
Proxy Statement/Prospectus.                                                     

THE MERGER

GENERAL                                                                         

At the Effective Time of the Merger, Sub will be merged with and into   
Morningstar, with Morningstar surviving the Merger as a wholly owned subsidiary 
of Suiza Foods. In the Merger, each share of Morningstar Common Stock issued and
outstanding immediately before the Effective Time (excluding those held in the  
treasury of Morningstar and those owned by Suiza Foods, Sub or any other        
subsidiary of Suiza Foods), without any action on the part of the holder        
thereof, will be converted into the right to receive 0.85 shares of Suiza Common
Stock. Cash will be paid in lieu of fractional shares of Suiza Common Stock. The
Merger will become effective at the date and time the Certificate of Merger is  
filed with the Secretary of State of the State of Delaware, which will occur as 
soon as practicable after receipt of requisite regulatory and stockholder       
approvals and fulfillment of the other conditions set forth in the Merger       
Agreement.                                                                      

  Based on the number of shares of Suiza Common Stock and Morningstar Common
Stock outstanding on September 30, 1997, the shares of Suiza Common Stock issued
to Morningstar Stockholders in the Merger will constitute approximately 44.2% of
the Suiza Common Stock outstanding after the Merger and the current Suiza       
Stockholders will hold approximately 55.8% of the Suiza Common Stock outstanding
after the Merger. On the same basis, but also assuming that 1,911,075 additional
shares of Suiza Common Stock are issued in the Country Fresh Merger, Morningstar
Stockholders will hold approximately 41.4% of the Suiza Common Stock outstanding
after the Merger.                                                               

    Each outstanding and unexercised Morningstar Option will be assumed by Suiza
Foods in the Merger and converted into a Substitute Option. Approximately       
2,957,987 shares of Suiza Common Stock will be subject to Substitute Options,   
based on the number of shares of Morningstar Common Stock subject to the        
Morningstar Options as of September 30, 1997. The per share exercise price with 
respect to the Substitute Options will equal the exercise price with respect to 
the Morningstar Options divided by the Exchange Ratio.                          

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   The Exchange Ratio is expressed in the Merger Agreement as a fixed ratio of
0.85 shares of Suiza Common Stock for each share of Morningstar Common Stock.   
Accordingly, the Exchange Ratio will not be adjusted in the event of any        
increase or decrease in the price of Suiza Common Stock or Morningstar Common   
Stock. The price of Suiza Common Stock at the Effective Time may vary from its  
price at the date of the Special Meetings. These variations may be the result of
changes in the business, operations, or prospects of Suiza Foods or Morningstar,
market assessments of the likelihood that the Merger will be consummated and the
timing thereof, general market and economic conditions, and other factors.      

BACKGROUND OF THE MERGER                                                        

In April 1994, Morningstar sold its Florida-based fluid milk operation, 
Velda Farms Inc., to a predecessor of Suiza Foods for approximately $48 million 
in cash (after working capital adjustments) and $3 million in preferred stock   
issued by such predecessor of Suiza Foods. This sale concluded the divestiture  
of Morningstar's regional dairies, which were considered a distinct segment of  
its business. In March 1995, Suiza Foods redeemed the preferred stock issued in 
this transaction for its stated value plus accrued dividends.                   

During the spring of 1995, representatives of Morningstar and           
representatives of Hicks, Muse & Co. Incorporated, now known as Hicks, Muse,    
Tate & Furst Incorporated ("Hicks Muse"), met with representatives of Suiza     
Foods and one other bidder to discuss a possible sale of Morningstar. At that   
time, Hicks Muse controlled a majority of the voting stock of Morningstar       
through an investment partnership. In May 1995, Suiza Foods and the other bidder
submitted acquisition proposals to the Morningstar Board. The Morningstar Board 
rejected both of these proposals and determined not to pursue a sale of         
Morningstar. Following this determination in July 1995, Hicks Muse caused the   
investment partnership which held shares in Morningstar to distribute these     
shares to the individual partners of the partnership, thereby relinquishing     
voting control of Morningstar and terminating any further discussions or        
activities, with Suiza Foods or other bidders, related to a possible sale of    
Morningstar.                                                                    

 In early August of 1997, representatives of the management of Suiza Foods
met with representatives of the management of Morningstar. At that meeting, the 
possibility was raised of a business combination between Morningstar and Suiza  
Foods in which Morningstar Stockholders would receive Suiza Common Stock having 
a current market value representing a significant premium to the then current   
market price of the Morningstar Common Stock. On August 14, 1997, the           
Morningstar Board authorized Morningstar management to pursue a possible        
transaction with Suiza Foods.                                                   

From August 15 through September 26, representatives of Morningstar and 
Suiza Foods, including their respective legal and financial advisors, conducted 
a mutual exchange of business and financial information pursuant to             
confidentiality agreements executed on August 18, 1997 and negotiated the terms 
and conditions of a possible transaction. The Suiza Board discussed the possible
transaction at a meeting held on August 29, 1997, and the Morningstar Board     
again discussed the possible transaction at a meeting held on September 26,     
1997. During this time, Suiza Foods was also negotiating a merger transaction   
with Country Fresh. Suiza Foods and Country Fresh signed a merger agreement with
respect to the Country Fresh Merger on September 18, 1997.                      

The discussions and negotiations between Morningstar and Suiza Foods    
representatives were centered around the appropriate exchange ratios and        
possible "collar" mechanisms for an exchange ratio, the synergies and other     
benefits that could arise from a combination of Suiza Foods and Morningstar, and
the terms of the Merger Agreement. Final negotiations were conducted from       
September 24 through 26, with agreement being reach on the Exchange Ratio of    
0.85 on September 26, 1997, subject to approval by the respective Boards of     
Directors of Suiza Foods and Morningstar. On September 27, 1997 the legal       
advisors to Suiza Foods and Morningstar met and resolved outstanding issues on  
the Merger Agreement.                                                           

   On September 28, 1997, the respective boards of Suiza Foods and Morningstar
separately met to consider the Merger and the Merger Agreement, and after       
receiving fairness opinions from their financial                                

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advisors, both the Suiza Board and the Morningstar Board approved the Merger and
the Merger Agreement. Later that day, the parties executed the Merger Agreement,
which was publicly announced on the morning of September 29, 1997 through a     
joint press release before the opening of trading of the NYSE and Nasdaq.       

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS                           

SUIZA FOODS.  The Suiza Board, based upon certain factors listed below, 
including the opinion of its financial advisor, concluded that the Merger is    
fair to and in the best interests of Suiza Foods and the Suiza Stockholders and 
unanimously approved the Merger and resolved to recommend that the Suiza        
Stockholders approve the Stock Issuance. It should be noted that one of the ten 
members of the Suiza Board was unable to attend the meeting at which the Suiza  
Board voted to recommend approval of the Stock Issuance. Accordingly, all       
references in this Joint Proxy Statement/Prospectus to the unanimous approval or
recommendation of the Suiza Board shall mean that all members of the Suiza Board
other than such one absent member concurred in such approval or recommendation. 

 The Suiza Board believes that the merger will benefit Suiza Foods and the
Suiza Stockholders in a number of respects, including the following: (i) the    
combined company will be the largest dairy company in the United States, and its
size, geographic reach and breadth of product offerings will allow it to offer  
its customers more products, and to manufacture and deliver such products more  
efficiently, than Suiza Foods or Morningstar could independently; (ii) the      
branded character of Morningstar's product offerings will improve the gross     
margin of Suiza Foods' product offerings; (iii) growth in sales of Morningstar's
branded and value-added product lines complement Suiza Foods' strategy of       
growing through acquisition; (iv) Morningstar's national infrastructure for     
manufacturing and distributing value-added dairy and non-dairy products should  
afford Suiza Foods greater synergies from rationalizing the manufacturing and   
distribution of value-added products of regional dairies acquired in the future;
(v) Morningstar's existing corporate infrastructure should allow Suiza Foods to 
avoid creating a duplicative infrastructure of its own to manage its rapidly    
expanding business; (vi) the additional cash flow from Morningstar's operations 
should reduce Suiza Foods' leverage, expand its borrowing capacity and reduce   
its borrowing costs and (vii) the issuance of Suiza Common Stock in the Merger  
should materially increase the float and liquidity of the Suiza Common Stock.   

In reaching its determination to recommend the Stock Issuance to Suiza  
Stockholders, the Suiza Board considered, among other things, the following     
factors and information:                                                        

1. the judgment, advice and analyses of its management with respect to the  
 strategic rationale behind the Merger and the financial and operational
benefits and challenges of the Merger, based in part on the business, 
 financial, accounting and legal due diligence performed with respect to
Morningstar;                                                          

2. the financial condition, results of operations, business, operations and 
assets of each of Suiza Foods and Morningstar and other financial     
information;                                                          

 3. the operational opportunities and challenges of operating Morningstar as a
 subsidiary of Suiza Foods and the management challenges associated with
    successfully integrating the businesses of two public companies as well as
   the many companies that have been acquired by Suiza Foods and Morningstar
over the last several years;                                          

4. the strategic and competitive benefits of combining the two companies in 
the respective markets that Suiza Foods and Morningstar serve;        

5. current industry, economic and market conditions;                        

6. the terms and conditions of the Merger Agreement;                        

7. the opinion of its financial advisor;                                    

8. historical market prices and trading information with respect to Suiza   
Foods and Morningstar;                                                

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9. the advice of Suiza Foods' independent accountants concerning the ability
  of Suiza Foods and Morningstar to account for the Merger as a pooling of
interests for accounting purposes; and                                

10. the advice of Suiza Foods' counsel that the Merger should be treated as a 
tax-free reorganization for federal income tax purposes.              

 The foregoing discussion of the factors and information considered by the
Suiza Board is not intended to be exhaustive. In view of the variety of factors 
and information considered by the Suiza Board in connection with its evaluation 
of the Merger, the Suiza Board did not find it practicable to assign, and did   
not assign, relative weights to the specific factors and information considered 
in reaching its conclusion that the Merger is in the best interests of Suiza    
Foods and the Suiza Stockholders. In addition, individual members of the Suiza  
Board may have given or assigned different weight to the factors and information
listed above as well as any other factors and information considered in reaching
their respective decisions. There can be no assurance that the expected benefits
of the Merger will be achieved.                                                 

MORNINGSTAR.  The Morningstar Board, based upon, among other things, the
factors listed below concluded that the Merger is fair to, and in the best      
interests of, Morningstar and the Morningstar Stockholders, unanimously approved
the Merger, the Merger Agreement and the transactions contemplated thereby, and 
resolved to recommend that the Morningstar Stockholders approve the Morningstar 
Proposal. It should be noted that two members of the Morningstar Board were     
unable to attend the meetings of the Morningstar Board at which the Merger      
Agreement was discussed. Accordingly, all references in this Joint Proxy        
Statement/Prospectus to the unanimous approval or recommendation of the         
Morningstar Board with respect to the Merger, the Merger Agreement and the      
transactions contemplated thereby shall mean that all members of the Morningstar
Board other than the two absent members concurred in such approval or           
recommendation.                                                                 

In determining to approve the Merger Agreement and to recommend that the
Morningstar Stockholders approve the Morningstar Proposal, the Morningstar Board
based its opinion as to the transactions contemplated in the Merger Agreement   
upon many different factors, including the following:                           

(i) the judgment, advice and analyses of its management with respect to the   
 strategic rationale behind the Merger and the financial and operational
benefits and challenges of the Merger, based in part on the business, 
 financial, accounting and legal due diligence performed with respect to
Suiza Foods;                                                          

(ii) current industry, economic, and market conditions;                       

(iii) the financial condition, results of operations and cash flows of        
   Morningstar and Suiza Foods on a historical basis and other financial
information;                                                      

(iv) the opinion of its financial advisor, to the effect that, as of the date 
   of such opinion the Exchange Ratio pursuant to the Merger Agreement was
    fair from a financial point of view to the holders of Morningstar Common
Stock;                                                              

(v) the historical market prices and trading information in respect of        
Morningstar Common Stock and Suiza Common Stock;                      

(vi) the terms and conditions of the Merger Agreement, including, without     
   limitation, the requirement of Morningstar Stockholder approval and the
    fees that would be payable upon termination under certain circumstances;
and                                                                 

(vii) the ability to consummate the Merger as a pooling-of-interests under    
       generally accepted accounting principles and as a tax-free reorganization
under Section 368(a) of the Code.                                 

    The Morningstar Board believes the Merger offers Morningstar Stockholders an
opportunity to participate in an entity that, following the Merger, will have a 
greater financial flexibility, better opportunities for growth and better       
financial outlook than Morningstar would have if it were to continue on a stand-
alone basis. There can be no assurances, however, that the expected benefits of 
the Merger will be realized.                                                    

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 The foregoing discussion of the factors and information considered by the
Morningstar Board is not intended to be exhaustive. In view of the variety of   
factors considered in connection with its evaluation of the Merger, the         
Morningstar Board did not find it practicable to and did not quantify or        
otherwise assign relative weights to the specific factors considered in reaching
its determination, and individual directors may have given differing weights to 
different factors.                                                              

ANTICIPATED ACCOUNTING TREATMENT                                                

 The Merger is expected to be accounted for as a "pooling of interests" in
accordance with generally accepted accounting principles. Under this accounting 
method, the historical financial information of Suiza Foods and Morningstar will
be restated to reflect the combined financial position and operations of both   
companies. The combined financial position and operations may be adjusted to    
conform the accounting practices of the companies. Pursuant to the Merger       
Agreement, each of Suiza Foods and Morningstar has agreed to use its            
commercially reasonable efforts to cause the Merger to qualify for "pooling of  
interests" accounting treatment. Suiza Foods has agreed to use commercially     
reasonable efforts to obtain a letter from Deloitte & Touche LLP and Morningstar
has agreed to use commercially reasonable efforts to obtain a letter from Arthur
Andersen LLP, in each case, stating that the Merger will qualify for "pooling of
interests" accounting treatment if consummated in accordance with the Merger    
Agreement. Receipt of such written opinions is a condition to the consummation  
of the Merger. However, such opinions will not be binding on the Commission.    

RESTRICTIONS ON RESALE BY AFFILIATES                                            

   The shares of Suiza Common Stock to be received by Morningstar Stockholders
in connection with the Merger will be registered under the Securities Act and,  
except as set forth in this paragraph, may be traded without restriction. The   
shares of Suiza Common Stock to be issued in connection with the Merger and     
received by persons who are deemed to be "affiliates" (as that term is defined  
in Rule 145 under the Securities Act) of Morningstar prior to the Merger may be 
resold by them only in transactions permitted by the resale provisions of Rule  
145 under the Securities Act (or, in the case of such persons who become        
affiliates of Suiza Foods, Rule 144 under the Securities Act) or as otherwise   
permitted under the Securities Act. Under guidelines published by the           
Commission, the sale or other disposition of Suiza Common Stock or Morningstar  
Common Stock by an affiliate of either Suiza Foods or Morningstar, as the case  
may be, during the period commencing 30 days prior to the Effective Time and    
ending upon the publication of financial results that include at least 30 days  
of post-Merger combined operations of Suiza Foods and Morningstar (the "Pooling 
Period") could preclude pooling of interests accounting treatment of the Merger.
Suiza Foods agreed in the Merger Agreement to use its best efforts to publish,  
by public filing or announcement, the results of at least 30 days of post-merger
combined operations of Suiza Foods and Morningstar as soon after the Effective  
Time as is commercially practicable and thereby minimize the duration of the    
Pooling Period. Each of Morningstar and Suiza Foods agreed in the Merger        
Agreement to use its reasonable efforts to deliver or cause to be delivered     
written agreements of each such "affiliate" to the effect that such person will 
not sell, transfer or otherwise dispose of any shares of Morningstar Common     
Stock or Suiza Common Stock, as the case may be, during the Pooling Period and  
that such person will not sell, transfer or otherwise dispose of Suiza Common   
Stock at any time in violation of the Securities Act or the rules and           
regulations promulgated thereunder, including Rule 145.                         

NEW MORNINGSTAR BOARD AND MANAGEMENT FOLLOWING THE MERGER                       

    If the proposed Merger is approved and consummated, Morningstar Stockholders
will become stockholders of Suiza Foods, which will be under the direction of   
the Board of Directors and management of Suiza Foods. The directors of Sub      
immediately prior to the Effective Time will be the directors of New            
Morningstar, and the officers of Sub immediately prior to the Effective Time    
will be the officers of New Morningstar.                                        

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BOARD OF DIRECTORS OF SUIZA FOODS FOLLOWING THE MERGER                          

 Following the Merger, the New Suiza Board will consist of 12 members. Two
members of the New Suiza Board will be present members of the Morningstar Board,
and the remainder of the New Suiza Board will be Suiza Foods' current directors.
Suiza Foods has also agreed to add a thirteenth member to its Board of Directors
upon completion of the Country Fresh Merger.                                    

GOVERNMENTAL APPROVALS                                                          

Under the HSR Act, and the rules promulgated thereunder by the FTC, the 
Merger may not be consummated until the following steps have been taken: (1)    
Premerger Notification and Report Forms have been submitted and certain         
information has been furnished to the FTC and the DOJ; and (2) applicable       
waiting periods have expired or been terminated.                                

    Suiza Foods and Morningstar agreed, pursuant to the Merger Agreement, to use
their respective best efforts to file or cause to be filed with the FTC and the 
DOJ such notifications as are required to be filed under the HSR Act and the    
rules and regulations promulgated thereunder, and to respond as promptly as     
practicable to any requests for additional information made by either the FTC or
the DOJ. Pursuant to such agreement, on October 21, 1997 Suiza Foods and        
Morningstar each filed Premerger Notification and Report Forms with the FTC and 
the Antitrust Division. The statutory waiting period under the HSR Act is       
scheduled to expire at 11:59 p.m. on November 20, 1997.                         

At any time before or after the consummation of the Merger and          
notwithstanding the expiration or termination of the applicable HSR Act waiting 
period, any federal or state antitrust authorities could take action under the  
antitrust laws as they deem necessary or desirable in the public interest. Such 
action could include seeking to enjoin the consummation of the Merger or seeking
divestiture of all or part of the assets of Suiza Foods or Morningstar. Private 
parties may also seek to take legal action under the antitrust laws, if         
circumstances permit.                                                           

    If the FTC, the DOJ, or any other federal or state antitrust authority, were
to challenge the Merger, the consummation of the Merger could be postponed      
beyond February 28, 1998, in which event either Suiza Foods or Morningstar would
be entitled to terminate the Merger Agreement. See "The Merger                  
Agreement--Termination."                                                        

INTERESTS OF CERTAIN PERSONS IN THE MERGER                                      

  In considering the recommendation of the Morningstar Board with respect to
the Merger, Morningstar Stockholders should be aware that certain officers and  
directors of Morningstar have the following interests in the Merger separate    
from and in addition to their interests as Morningstar Stockholders generally.  
The Morningstar Board was aware of these interests and took them into account in
approving the Merger, the Merger Agreement and the transactions contemplated    
thereby.                                                                        

    COMPOSITION OF NEW SUIZA BOARD.  Immediately after the Effective Time, Suiza
Foods will take action necessary to create two additional seats on the Suiza    
Board and to cause two of the current directors of Morningstar to be elected to 
the Suiza Board. See "The Merger--Board of Directors of Suiza Foods Following   
the Merger."                                                                    

  STOCK OPTIONS.  The Merger Agreement provides that, at the Effective Time,
each outstanding and unexercised Morningstar Option, including those held by    
directors and executive officers, will be converted into and become a Substitute
Option to acquire shares of Suiza Common Stock as described under "The Merger   
Agreement--Consideration to be Received in the Merger." Pursuant to the terms of
the applicable Morningstar option plans, each of the outstanding and unexercised
Morningstar Options will become fully vested upon the consummation of the       
Merger.                                                                         

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RETENTION AND EMPLOYMENT AGREEMENTS.  Morningstar is party to executive 
retention agreements with each of Messrs. Armes, Ash and Jones that require     
Morningstar to provide certain severance benefits in the event any of these     
executives is terminated by Morningstar without "cause" (as defined in the      
applicable executive retention agreement) or voluntarily terminates his         
employment with Morningstar for "good reason" (as defined in the applicable     
executive retention agreement) in contemplation of or within 180 days preceding 
a "change of control" (as defined in the applicable executive retention         
agreement) or within three years after a change of control. The Merger will     
constitute a change in control for purposes of each of the executive retention  
agreements.                                                                     

    The value of the severance benefits to be paid to Mr. Armes (in the event he
is terminated or voluntarily terminates his employment under the circumstances  
described above) under his executive retention agreement is estimated to be     
approximately $330,000. The value of the severance benefits to be paid to Mr.   
Ash (in the event he is terminated or voluntarily terminates his employment     
under the circumstances described above) under his executive retention agreement
is estimated to be approximately $330,000. The value of the severance benefits  
to be paid to Mr. Jones (in the event he is terminated or voluntarily terminates
his employment under the circumstances described above) under his executive     
retention agreement is estimated to be approximately $650,000.                  

In addition to the foregoing severance benefits, the executive retention
agreements for each of Messrs. Armes and Ash provide for the payment of a       
retention bonus in the event that such executive remains employed by Morningstar
on the date of the change of control or is terminated by Morningstar without    
cause in contemplation of and within 180 days preceding the change of control.  
In each case, the amount of such retention bonus is equal to the executive's    
highest annual base salary rate plus an amount equal to the higher of the       
executive's target bonus for the fiscal year in which the termination occurs or 
the immediately preceding fiscal year. The retention bonuses are payable not    
later than three days following a change of control. As a result of the         
consummation of the Merger, each of Messrs. Armes and Ash will be entitled to   
receive a retention bonus in the amount of $217,500.                            

Each of the aforementioned executive retention agreements requires that 
Morningstar "gross-up" the applicable executive with respect to any federal     
taxes payable by such executive as a result of the payment to such executive of 
the benefits contemplated by his executive retention agreement and with respect 
to any excise taxes that become payable by such executive in respect of his     
Morningstar Options.                                                            

    Morningstar is a party to employment agreements with C. Dean Metropolous and
Michael J. Cramer (respectively, the "Metropolous Employment Agreement" and the 
"Cramer Employment Agreement") which require Morningstar to provide certain     
severance benefits to such executives. Under the Cramer Employment Agreement,   
severance benefits in an amount equal to 1.5 times Mr. Cramer's annual          
compensation (including salary, bonuses and allowances) for the last full year  
of employment, but in no event less than $200,000 shall be payable by           
Morningstar in the event Mr. Cramer is terminated by Morningstar "without cause"
(as defined in the Cramer Employment Agreement) or voluntarily terminates his   
employment with Morningstar in the event of a "change in control" (as defined in
the Cramer Employment Agreement). The Merger will constitute a change in control
for purposes of the Cramer Employment Agreement. The value of the severance     
benefits to be paid to Mr. Cramer under the Cramer Employment Agreement is      
estimated to be approximately $200,000, plus the amount of the tax gross-up     
required by such agreement. The severance benefits are payable within seven days
of any termination of Mr. Cramer by Morningstar without cause, or on the closing
date of a change in control.                                                    

   Under the Metropolous Employment Agreement, severance benefits in an amount
equal to Mr. Metropolous' aggregate compensation (current salary and bonus based
on prior year's payment) for the balance of the then existing three-year term   
shall be payable by Morningstar in the event of a "triggering event" (as defined
in the Metropolous Employment Agreement) or Mr. Metropolous terminates his      
employment with Morningstar for "good reason" (as defined in the Metropolous    
Employment Agreement) or Mr. Metropolous' employment is terminated by           
Morningstar for any reason other than for                                       

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"cause" (as defined in the Metropolous Employment Agreement) or by Mr.          
Metropolous' resignation or retirement. The value of the severance payment to be
paid to Mr. Metropolous under the Metropolous Employment Agreement is estimated 
to be approximately $2,525,000, plus the amount of the tax gross-up required by 
such agreement. The severance benefits are payable by Morningstar on the 14th   
day following the termination.                                                  

  FINANCIAL ADVISORY FEES.  Two of Morningstar's existing directors, Charles
W. Tate and John R. Muse, are principals of Hicks Muse. Pursuant to a letter    
agreement dated June 10, 1997, Morningstar engaged Hicks Muse to provide        
financial advisory services in connection with the Merger. Pursuant to the terms
of this letter agreement, Morningstar has agreed to pay Hicks Muse, upon        
consummation of the Merger, a transaction fee of .34% of the levered            
consideration paid in the Merger. Morningstar has agreed to reimburse Hicks Muse
for its reasonable out-of-pocket expenses, including attorney's fees, and to    
indemnify Hicks Muse against certain liabilities, including certain liabilities 
under the federal securities laws.                                              

DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.  Pursuant to the
Merger Agreement, New Morningstar and Suiza Foods are obligated to indemnify,   
defend and hold harmless officers, directors and employees of Morningstar and   
its subsidiaries who were such at any time prior to the Effective Time from and 
against all losses, expenses, claims, damages or liabilities arising out of the 
transactions contemplated by the Merger Agreement to the fullest extent         
permitted or required under applicable law, and advance expenses to such        
indemnified parties subject to a customary reimbursement agreement. All         
indemnification rights of such officers, directors and employees which exist    
prior to the Effective Time will survive the Merger and New Morningstar will    
maintain in effect for not less than three years after the Effective Time, the  
current policies of directors' and officers' liability insurance with respect to
matters occurring on or prior to the Effective Time. In addition, the Merger    
Agreement provides that New Morningstar or Suiza Foods may provide substitute   
policies of at least the same coverage, provided that New Morningstar (or Suiza 
Foods, if Suiza Foods provides substitute policies) will be required to obtain  
only as much coverage as can be obtained by paying an annual premium not in     
excess of 200% of the current annual premium paid by Morningstar for its        
existing coverage. See "The Merger Agreement--Indemnification."                 

ABSENCE OF APPRAISAL RIGHTS                                                     

   Under the DGCL, the Suiza Stockholders are not entitled to appraisal rights
with respect to the Stock Issuance and the Morningstar Stockholders are not     
entitled to appraisal rights with respect to the Merger.                        

STOCK EXCHANGE LISTING                                                          

   It is a condition to the Merger that the shares of Suiza Common Stock to be
issued by Suiza Foods in connection with the Merger will have been authorized   
for listing on the NYSE, subject only to official notice of issuance. Upon      
completion of the Merger, the Morningstar Common Stock will cease to be         
authorized for trading on Nasdaq.                                               

TREATMENT OF STOCK CERTIFICATES                                                 

    After the Effective Time, each certificate previously representing shares of
Morningstar Common Stock will automatically represent, with no further action by
the holder thereof, the right to receive 0.85 shares of Suiza Common Stock for  
each share of Morningstar Common Stock represented thereby. Harris Trust &      
Savings Bank is the transfer agent and registrar (the "Exchange Agent") for the 
Suiza Common Stock. As soon as practicable after the Effective Time, the        
Exchange Agent will mail a letter of transmittal with instructions to each      
holder of record of Morningstar Common Stock outstanding immediately prior to   
the Effective Time for use in exchanging certificates formerly representing     
shares of Morningstar Common Stock for certificates representing shares of Suiza
Common Stock. Certificates should not be surrendered by any holders of          
Morningstar Common Stock until they have received the letter of transmittal from
the Exchange Agent.                                                             

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THE MERGER AGREEMENT

GENERAL                                                                         

The Merger Agreement contemplates the Merger of Sub with and into       
Morningstar, with Morningstar surviving the Merger as a wholly owned subsidiary 
of Suiza Foods. The Merger will become effective when the Certificate of Merger 
is filed with the Secretary of State of the State of Delaware. It is anticipated
that such filing will be made promptly after the closing under the Merger       
Agreement, which closing, in turn, should occur as soon as practicable after the
last of the conditions precedent to the Merger set forth in the Merger Agreement
has been satisfied or waived. The Merger Agreement obligates Suiza Foods to have
the shares of Suiza Common Stock to be issued in connection with the Merger     
approved for listing on the NYSE, subject only to official notice of issuance,  
prior to the Effective Time.                                                    

CONSIDERATION TO BE RECEIVED IN THE MERGER                                      

   At the Effective Time, (a) each issued and outstanding share of Morningstar
Common Stock (excluding shares held in the treasury of Morningstar or shares    
owned by Suiza Foods, Sub or any other subsidiary of Suiza Foods) will be       
converted into the right to receive 0.85 shares of Suiza Common Stock, (b) each 
share of Morningstar Common Stock held in the treasury of Morningstar or owned  
by Suiza Foods, Sub or any other subsidiary of Suiza Foods will be canceled and 
retired, (c) all of the issued and outstanding shares of common stock of Sub    
will be converted into and become, in the aggregate, 10,000 fully paid and      
nonassessable shares of common stock of New Morningstar and (d) each outstanding
and unexercised Morningstar Option will be assumed by Suiza Foods and converted 
into a Substitute Option. The number of shares of Suiza Common Stock to be      
subject to a Substitute Option will be determined by multiplying the number of  
shares of Morningstar Common Stock subject to the related Morningstar Option by 
the Exchange Ratio (rounded down to the nearest whole share), and the per share 
exercise price with respect thereto will equal the per share exercise price of  
the related Morningstar Option divided by the Exchange Ratio (rounded up to the 
nearest full cent). Each Substitute Option will be subject to all of the other  
terms and conditions of the Morningstar Option to which it relates. No          
Morningstar Option will be accelerated by reason of the Merger to the extent the
Morningstar Board has discretion to make a determination to cause such          
acceleration.                                                                   

  As soon as practicable after the Effective Time, Suiza Foods will cause to
be included under a registration statement on Form S-8 of Suiza Foods all shares
of Suiza Common Stock that are subject to Substitute Options and will maintain  
the effectiveness of such registration statement until all Substitute Options   
have been exercised, expired or forfeited.                                      

  For a further discussion of the treatment of Morningstar Options and other
employee benefit plans of Morningstar under the Merger Agreement, see "The      
Merger--Interests of Certain Persons in the Merger."                            

EFFECTIVE TIME OF THE MERGER                                                    

    Subject to the terms and conditions of the Merger Agreement, the Merger will
become effective at the date and time when the Certificate of Merger is filed   
with the Secretary of State of the State of Delaware. The Certificate of Merger 
will be filed as soon as practicable following fulfillment of the conditions    
precedent of the Merger Agreement. See "--Conditions Precedent."                

EXCHANGE OF SHARES                                                              

  Suiza Foods has selected Harris Trust & Savings Bank as the Exchange Agent
for the Merger. As soon as practicable after the Effective Time, Suiza Foods    
will make available, and each Morningstar Stockholder will be entitled to       
receive, upon surrender to the Exchange Agent of one or more certificates       

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("Certificates") representing shares of Morningstar Common Stock for            
cancellation, certificates representing the number of shares of Suiza Common    
Stock into which such shares were converted in the Merger and cash in           
consideration of fractional shares (the "Share Consideration"). Holders of      
unexchanged shares of Morningstar Common Stock will not be entitled to receive  
any dividends or other distributions payable by Suiza Foods until their         
Certificates are surrendered. Upon surrender, however, such holders will receive
accumulated dividends and distributions without interest, together with cash in 
lieu of fractional shares. Holders of unexchanged shares of Morningstar Common  
Stock will have no further claim upon the Exchange Agent twelve months after the
Effective Time and thereafter will look only to Suiza Foods and New Morningstar 
for payment of the Share Consideration in respect of their shares of Morningstar
Common Stock.                                                                   

Fractional shares of Suiza Common Stock will not be issued to holders of
Morningstar Common Stock. For each fractional share of Suiza Common Stock that  
would otherwise be issued, the holder will receive, in lieu thereof, cash in an 
amount equal to such fractional part of a share of Suiza Common Stock multiplied
by the average of the daily closing sale prices for the Suiza Common Stock for  
the twenty (20) consecutive trading days on which such shares are actually      
traded on the NYSE ending at the close of trading on the second trading day     
immediately preceding the Effective Date.                                       

CORPORATE ORGANIZATION AND GOVERNANCE                                           

  CERTIFICATE OF INCORPORATION.  The Morningstar Charter as in effect at the
Effective Time will be the Charter of New Morningstar, and thereafter may be    
amended in accordance with its terms and as provided by law and the Merger      
Agreement.                                                                      

  BYLAWS.  The Morningstar Bylaws as in effect at the Effective Time will be
the Bylaws of New Morningstar, and thereafter may be amended in accordance with 
their terms and as provided by law and the Merger Agreement.                    

    BOARD OF DIRECTORS; OFFICERS.  The directors of Sub immediately prior to the
Effective Time will be the directors of New Morningstar, and the officers of Sub
immediately prior to the Effective Time will be the officers of New Morningstar,
in each case, until their respective successors are duly elected and qualified. 

REPRESENTATIONS AND WARRANTIES                                                  

The Merger Agreement contains various representations and warranties of 
Suiza Foods, Morningstar and Sub, relating, among other things, to the          
following: (i) their incorporation, existence, good standing, corporate power   
and similar corporate matters; (ii) their capitalization; (iii) their           
authorization, execution, delivery and performance and the enforceability of the
Merger Agreement and related matters; (iv) the absence of conflicts, violations 
and defaults under their respective certificates of incorporation and bylaws and
certain other agreements and documents; (v) the documents and reports filed with
the Commission and the accuracy and completeness of the information contained   
therein; (vi) the absence of certain material changes or events since June 30,  
1997; (vii) pending or threatened investigations or litigation; (viii) employee 
benefit matters; (ix) the receipt of fairness opinions from their respective    
financial advisors; (x) compliance with applicable laws, ordinances and         
regulations; (xi) tax matters; (xii) accounting matters relating to the         
availability of "pooling of interests" accounting treatment; (xiii)             
relationships with their respective customers and suppliers and (xiv)           
intellectual property. Morningstar made additional representations and          
warranties as to the approval of the Merger by the Morningstar Board, its       
recommendation of the Merger and the Merger Agreement to the Morningstar        
Stockholders and its determination that the Merger is advisable and fair to and 
in the best interests of Morningstar and the Morningstar Stockholders.          

   All representations and warranties of Suiza Foods, Morningstar and Sub will
expire at the Effective Time.                                                   

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CONDUCT OF BUSINESS PENDING THE MERGER                                          

SUIZA FOODS.  Suiza Foods has agreed that prior to the Effective Time,  
unless Morningstar otherwise agrees in writing or except as otherwise required  
by the Merger Agreement, it will, and will cause its subsidiaries to, carry on  
their respective businesses in the usual, regular and ordinary course in        
substantially the same manner as conducted prior to the date of the Merger      
Agreement and will, or will cause its subsidiaries to, use their reasonable     
efforts to preserve intact their present business organizations and preserve    
their relationships with customers, suppliers and others having business        
dealings with them to the end that their goodwill and ongoing businesses will be
unimpaired at the Effective Time, and not propose or agree to (i) sell or pledge
or agree to sell or pledge any capital stock owned by it in any of its          
subsidiaries or owned by any of its subsidiaries (except for certain stock      
pledged as collateral pursuant to Suiza Foods' existing credit facilities), (ii)
except as contemplated in the merger agreement for the Country Fresh Merger,    
amend the Suiza Charter or Suiza Bylaws, (iii) split, combine or reclassify its 
outstanding capital stock or issue or authorize or propose the issuance of any  
other securities in respect of, in lieu of or in substitution for shares of     
capital stock of Suiza Foods, or declare, set aside, authorize or pay any       
dividend or other distribution payable in cash, stock or property or (iv)       
directly or indirectly redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire any shares of Suiza Common Stock.                 

   Suiza Foods has also agreed that, except in connection with acquisitions of
assets or businesses that are primarily engaged in the same businesses as those 
conducted by Suiza Foods as of the date of the Merger Agreement and any         
financing transactions or issuances of securities related thereto which, in each
case, do not require the approval of Suiza Stockholders, it will not, and will  
not permit any of its subsidiaries to, (i) issue, deliver or sell or agree to   
issue, deliver or sell any additional shares of, or rights of any kind to       
acquire any shares of, its respective capital stock of any class, any           
indebtedness having the right to vote on any matter on which the Suiza          
Stockholders may vote or any options, rights or warrants to acquire, or         
securities convertible into, exercisable for or exchangeable for, shares of     
capital stock other than issuances, deliveries or sales of Suiza Foods' stock or
options, rights or warrants, to acquire Suiza Foods' stock under Suiza Foods'   
existing benefit plans; (ii) acquire, lease or dispose or agree to acquire,     
lease or dispose of any capital assets or any other assets other than in the    
ordinary course of business; (iii) incur additional indebtedness or encumber or 
grant a security interest in any asset or enter into any other material         
transaction other than in each case in the ordinary course of business; (iv)    
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in, or by any other manner, any business or any     
corporation, partnership, association or other business organization or division
thereof; (v) incur any material transaction fees, costs or expenses in addition 
to those disclosed to Morningstar prior to the execution of the Merger Agreement
or (vi) enter into any contract, agreement, commitment or arrangement with      
respect to any of the foregoing.                                                

  Suiza Foods has further agreed (i) to use its best efforts to not, and not
to permit any of its subsidiaries to, take or cause to be taken any action,     
whether before or after the Effective Time, which would disqualify the Merger as
a "pooling of interests" for accounting purposes or as a "reorganization" within
the meaning of Section 368(a) of the Code and (ii) not to, and not to permit any
of its subsidiaries to, amend, modify, terminate, waive or permit to lapse any  
material right of first refusal, preferential right, right of first offer, or   
any other material right of Suiza Foods, or any of its subsidiaries, except in  
the ordinary course of business. Suiza Foods has also agreed that following the 
Effective Time, it will file all tax returns on the basis that the Merger       
qualifies as a "reorganization" within the meaning of Section 368(a)(1)(A) and  
Section 368(a)(2)(E) of the Code and that it will not take any action which is  
inconsistent with or contrary to such classification of the Merger for tax      
purposes.                                                                       

  SUB.  Sub has agreed not to engage, during the period from the date of the
Merger Agreement to the Effective Time, in any activities of any nature except  
as provided in or contemplated by the Merger Agreement.                         

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MORNINGSTAR.  Morningstar has agreed that prior to the Effective Time,  
unless Suiza Foods otherwise agrees in writing or except as otherwise required  
by the Merger Agreement, it will, and will cause its subsidiaries to, carry on  
their respective businesses in the usual, regular and ordinary course in        
substantially the same manner as conducted prior to the Merger Agreement and    
will, and will cause its subsidiaries to, use their reasonable efforts to       
preserve intact their present business organizations and preserve their         
relationships with customers, suppliers and others having business dealings with
them to the end that their goodwill and on-going businesses will be unimpaired  
at the Effective Time, and not propose or agree to (i) sell or pledge or agree  
to sell or pledge any capital stock owned by it in any of its subsidiaries or   
owned by any of its subsidiaries, (ii) amend the Morningstar Charter or the     
Morningstar Bylaws, (iii) split, combine or reclassify its outstanding stock or 
issue or authorize or propose the issuance of any other securities in respect   
of, in lieu of or in substitution for shares of Morningstar Common Stock, or    
declare, set aside, authorize or pay any dividend or other distribution payable 
in cash, stock or property or (iv) directly or indirectly redeem, purchase or   
otherwise acquire or agree to redeem, purchase or otherwise acquire any shares  
of Morningstar Common Stock.                                                    

    Morningstar has also agreed that it will not, and will not permit any of its
subsidiaries to, (i) issue, deliver or sell or agree to issue, deliver or sell  
any additional shares of, or rights of any kind to acquire any shares of, its   
respective stock of any class, any indebtedness having the right to vote on any 
matter on which the Morningstar Stockholders may vote or any option, rights or  
warrants to acquire, or securities convertible into, exercisable for or         
exchangeable for, shares of stock other than issuances, deliveries or sales     
pursuant to existing obligations under its option plans; (ii) acquire, lease or 
dispose or agree to acquire, lease or dispose of any capital assets or any other
assets other than in the ordinary course of business; (iii) incur additional    
indebtedness or encumber or grant a security interest in any asset or enter into
any other material transaction other than in each case in the ordinary course of
business; (iv) acquire or agree to acquire by merging or consolidating with, or 
by purchasing a substantial equity interest in, or by any other manner, any     
business or any corporation, partnership, association or other business         
organization or division thereof; (v) incur any material transaction fees, costs
or expenses in addition to those disclosed to Suiza Foods prior to the execution
of the Merger Agreement or (vi) enter into any contract, agreement, commitment  
or arrangement with respect to any of the foregoing. Morningstar has also agreed
that except as required to comply with applicable law and except as provided in 
the provisions relating to employee matters (see "--Employee Matters"), it will 
not enter into any new (or amend any existing) employee benefit plan of         
Morningstar or any new (or amend any existing) employment, severance or         
consulting agreement, grant any general increase in the compensation of current 
or former directors, officers or employees (including any such increase pursuant
to any bonus, pension, profit-sharing or other plan or commitment) or grant any 
increase in the compensation payable or to become payable to any director,      
officer or employee, except in any of the foregoing cases in accordance with    
pre-existing contractual provisions or in the ordinary course of business       
consistent with past practice.                                                  

Morningstar has further agreed not to, and not to permit any of its     
subsidiaries to, take or cause to be taken any action, whether before or after  
the Effective Time, which would disqualify the Merger as a "pooling of          
interests" for accounting purposes or as a "reorganization" within the meaning  
of Section 368(a) of the Code, or amend, modify, terminate, waive or permit to  
lapse any material right of first refusal, preferential right, right of first   
offer, or any other material right of Morningstar or any of its subsidiaries,   
except in the ordinary course of business. Morningstar has also agreed that     
following the Effective Time, it will file all tax returns on the basis that the
Merger qualifies as a "reorganization" within the meaning of Section            
368(a)(1)(A) and Section 368(a)(2)(E) of the Code and that it will not take any 
action which is inconsistent with or contrary to such classification of the     
Merger for tax purposes.                                                        

ADDITIONAL AGREEMENTS                                                           

The Merger Agreement contains certain covenants and agreements of Suiza 
Foods and Morningstar customary for transactions such as those contemplated by  
the Merger Agreement. These relate to, among                                    

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other things, (i) each party allowing the other access, during normal business  
hours, to its properties, books, contracts, commitments and records, documents  
filed pursuant to requirements of the Commission and such other information to  
which the other party may reasonably request access, subject to existing        
confidentiality obligations; (ii) the preparation of the Registration Statement 
and this Joint Proxy Statement/Prospectus; (iii) each party using its reasonable
efforts to deliver an affiliate letter from each of its affiliates as to the    
matters described under the caption "The Merger--Restrictions on Resales by     
Affiliates" and using commercially reasonable efforts to cause the Merger to    
qualify for "pooling of interests" accounting treatment; (iv) listing of the    
shares of Suiza Common Stock to be issued in connection with the Merger by Suiza
Foods on the NYSE, upon official notice of issuance; (v) certain employee       
matters; (vi) filing of such notifications as are required to be filed under the
HSR Act and responding to inquiries with respect thereto; (vii) using           
commercially reasonable efforts to consummate and make effective the            
transactions contemplated by the Merger Agreement, including the use of         
commercially reasonable efforts to obtain all necessary waivers, consents and   
approvals, to effect all necessary registrations and filings and to lift any    
injunction to the Merger; (viii) conducting its business in a manner which would
not disqualify the Merger as a "pooling of interests" for accounting purposes;  
(ix) filing tax returns on the basis that the Merger qualifies as a             
"reorganization" within the meaning of Section 368(a)(1)(A) and Section         
368(a)(2)(E) of the Code and taking no actions inconsistent with or contrary to 
such classification of the Merger for tax purposes; (x) advising the other party
orally and in writing of any change or event that has had, or could have, a     
material adverse effect on such party and providing copies of all filings made  
by such party with the Commission or any court, administrative agency or        
commission or other governmental authority or instrumentality, domestic or      
foreign, in connection with the Merger Agreement and other transactions         
contemplated thereby and (xi) the appointment of two of the current directors of
Morningstar to the New Suiza Board.                                             

 Suiza Foods has agreed to use commercially reasonable efforts to obtain a
letter from Deloitte & Touche LLP and Morningstar has agreed to use commercially
reasonable efforts to obtain a letter from Arthur Andersen LLP, in each case,   
stating that the Merger qualifies for "pooling of interests" accounting         
treatment if consummated in accordance with the Merger Agreement.               

   Suiza Foods has agreed to use its best efforts to publish, by public filing
or announcement, the results of at least 30 days of combined operations of Suiza
Foods and Morningstar as soon after the Effective Time as is commercially       
practicable.                                                                    

EMPLOYEE MATTERS                                                                

   The Merger Agreement provides that, as of the Effective Time, the employees
of Morningstar and each subsidiary will continue employment with New Morningstar
and its subsidiaries, respectively, in the same positions and at the same level 
of wages and/or salary and without having incurred a termination of employment  
or separation from service; provided, however, that except as may be            
specifically required by applicable law or any contract, New Morningstar and its
subsidiaries will not be obligated to continue any employment relationship with 
any employee for any specific period of time. Except with respect to the stock  
option plans to be assumed by Suiza Foods as provided in the Merger Agreement,  
as of the Effective Time, New Morningstar will be the sponsor of the employee   
benefit plans sponsored by Morningstar immediately prior to the Effective Time, 
and Suiza Foods will cause New Morningstar and its subsidiaries to satisfy all  
obligations and liabilities under such employee benefit plans; provided,        
however, that, except as contemplated by the Merger Agreement, nothing contained
in the Merger Agreement will limit or restrict New Morningstar's right on or    
after the Effective Time to amend, modify or terminate any of such employee     
benefit plans. To the extent any employee benefit plan, program or policy of    
Suiza Foods, New Morningstar, or their affiliates is made available to any      
person who is an employee of Morningstar or any of its subsidiaries immediately 
prior to the Effective Time: (i) service with Morningstar and its subsidiaries  
by any employee prior to the Effective Time will be credited for eligibility and
vesting purposes and for purposes of qualifying for any additional benefits tied
to periods of service (such as higher rates of                                  

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matching contributions and eligibility for early retirement) under such plan,   
program or policy, but not for benefit accrual purposes (except for disability, 
vacation and severance, with respect to which service with Morningstar and its  
subsidiaries will be credited for benefit accrual purposes) and (ii) with       
respect to any benefit plans to which such employees may become eligible, Suiza 
Foods will cause such plans to provide credit for any co-payments or deductibles
by such employees and waive all pre-existing condition exclusions and waiting   
periods, other than limitations or waiting periods that have not been satisfied 
under any benefit plans maintained by Morningstar and its subsidiaries for their
employees prior to the Effective Time.                                          

INDEMNIFICATION                                                                 

  From and after the Effective Date, New Morningstar and Suiza Foods will be
required to indemnify, defend and hold harmless the officers, directors and     
employees of Morningstar and its subsidiaries who were such at any time prior to
the Effective Time (the "Indemnified Parties") from and against all losses,     
expenses, claims, damages or liabilities arising out of the transactions        
contemplated by the Merger Agreement to the fullest extent permitted or required
under applicable law, and the Indemnified Parties will be advanced expenses     
subject to a customary reimbursement agreement. All rights to indemnification   
existing in favor of the directors, officers or employees of Morningstar as     
provided in the Morningstar charter or the Morningstar bylaws, as in effect on  
the date of the Merger Agreement, with respect to matters occurring through the 
Effective Time, will survive the Merger and will continue in full force and     
effect thereafter. New Morningstar will maintain in effect for not less than    
three years after the Effective Time the current policies of directors' and     
officers' liability insurance maintained by Morningstar with respect to matters 
occurring on or prior to the Effective Time. The Merger Agreement further       
provides that New Morningstar or Suiza Foods may substitute therefor policies of
at least the same coverage (with carriers comparable to Morningstar's existing  
carriers) containing terms and conditions which are not materially less         
advantageous to the Indemnified Parties, that New Morningstar will not be       
required, in order to maintain or procure such coverage, to pay an annual       
premium in excess of 200% of the current annual premium paid by Morningstar for 
its existing coverage (the "Cap") and that if equivalent coverage cannot be     
obtained, or can be obtained only by paying an annual premium in excess of the  
Cap, New Morningstar will be required only to obtain as much coverage as can be 
obtained by paying an annual premium equal to the Cap.                          

   In the event that any action, suit, proceeding or investigation relating to
the Merger Agreement or to the transactions contemplated by the Merger Agreement
is commenced, whether before or after the Effective Time, Suiza Foods,          
Morningstar and Sub agree to cooperate and use their respective reasonable      
efforts to vigorously defend against and respond to the same.                   

NO SHOP                                                                         

  Each of Suiza Foods and Morningstar has agreed (i) that neither it nor any
of its subsidiaries will, and it will direct and use its best efforts to cause  
its officers, directors, employees, agents and representatives (including,      
without limitation, any investment banker, attorney or accountant retained by it
or any of its subsidiaries) not to, initiate, solicit or encourage, directly or 
indirectly, any inquiries or the making or implementation of any proposal or    
offer (including, without limitation, any proposal or offer to its stockholders)
with respect to a merger, acquisition, consolidation or similar transaction     
(other than, in the case of Suiza Foods, any acquisitions of assets or          
businesses that are primarily engaged in the same business as that conducted by 
Suiza Foods and its subsidiaries as of the date of the Merger Agreement and any 
financing transactions or issuances of securities related thereto which, in each
case, do not require approval by the Suiza Stockholders), involving, or any     
purchase of all or any significant portion of the assets or any equity          
securities of, such party or any of its material subsidiaries (any such proposal
or offer being hereinafter referred to as an "Alternative Proposal"), or engage 
in any negotiations concerning, or provide any confidential information or data 
to, or have any discussions with, any person relating to an                     

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Alternative Proposal, or release any third party from any obligations under any 
existing standstill agreement or arrangement, or enter into any agreement with  
respect to an Alternative Proposal, or otherwise facilitate any effort or       
attempt to make or implement an Alternative Proposal; (ii) that it will         
immediately cease and cause to be terminated any existing activities,           
discussions or negotiations with any parties conducted prior to the date of the 
Merger Agreement with respect to any of the foregoing and (iii) that it will    
notify the other party with reasonable promptness if any such inquiries or      
proposals are received by, any such information is requested from, or any such  
negotiations or discussions are sought to be initiated or continued with, it.   
Notwithstanding the foregoing, the Merger Agreement provides that each of Suiza 
Foods and Morningstar may, directly or indirectly, furnish information and      
access to, and may participate in discussions and negotiate with, any           
corporation, partnership, person or other entity, if such corporation,          
partnership, person or other entity has submitted a written proposal to the     
Board of Directors of such party relating to an Alternative Proposal if (i) the 
Board of Directors of such party believes, in its good faith judgment, that such
Alternative Proposal is more favorable to such party's stockholders than the    
Merger and is reasonably likely to be consummated or (ii) the Board of Directors
of such party, following consultation with its independent legal counsel        
relating thereto, determines in its good faith judgment that failing to take    
such action would constitute a breach of such Board of Directors' fiduciary duty
to its stockholders imposed by law.                                             

   Neither the Morningstar Board nor any committee thereof may (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Suiza Foods,   
the approval or recommendation by the Morningstar Board of the Merger Agreement 
or the Merger or (ii) approve or recommend, or propose to approve or recommend, 
any Alternative Proposal, unless (x) the Morningstar Board believes, in its good
faith judgment, that such Alternative Proposal is more favorable to the         
Morningstar Stockholders than the Merger and is reasonably likely to be         
consummated or (y) the Morningstar Board, following consultation with its       
independent legal counsel relating thereto, determines in its good faith        
judgment that failing to take such action in connection with such Alternative   
Proposal would constitute a breach of the Morningstar Board's fiduciary duty to 
the Morningstar Stockholders imposed by law.                                    

Neither the Suiza Board nor any committee thereof may (i) withdraw or   
modify, or propose to withdraw or modify, in a manner adverse to Morningstar,   
the approval or recommendation by the Suiza Board of the Merger Agreement or the
issuance of Suiza Common Stock in connection with the Merger or (ii) approve or 
recommend, or propose to approve or recommend, any Alternative Proposal, unless 
(x) the Suiza Board believes, in its good faith judgment, that such Alternative 
Proposal is more favorable to Suiza Stockholders than the Merger and is         
reasonably likely to be consummated or (y) the Suiza Board, following           
consultation with its independent legal counsel relating thereto, determines in 
its good faith judgment that failing to take such action in connection with such
Alternative Proposal would constitute a breach of the Suiza Board's fiduciary   
duty to the Suiza Stockholders imposed by law.                                  

    The Merger Agreement provides that nothing contained in the Merger Agreement
will prevent either Board from taking, and disclosing to its stockholders, a    
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act,      
provided that such Board does not recommend that its stockholders tender their  
shares in connection with any such tender offer unless such recommendation is   
permitted as described above.                                                   

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CONDITIONS PRECEDENT                                                            

    The obligations of Suiza Foods, Morningstar and Sub to effect the Merger are
subject, among other things, to the fulfillment or, where permissible, waiver,  
of certain conditions, including without limitation: (i) the approval of the    
Merger, the Merger Agreement and the transactions contemplated thereby by the   
requisite vote of the Morningstar Stockholders and the approval of the Stock    
Issuance by the requisite vote of the Suiza Stockholders; (ii) the expiration or
termination of any waiting period applicable to the consummation of the Merger  
under the HSR Act; (iii) the effectiveness of the Registration Statement, the   
absence of a stop order suspending such effectiveness and the receipt of all    
necessary approvals under state securities laws relating to the issuance of     
Suiza Common Stock to be issued to Morningstar Stockholders in connection with  
the Merger; (iv) there not having been issued and in effect any preliminary or  
permanent injunction or order by any federal or state court in the United States
of competent jurisdiction prohibiting the consummation of the Merger (each of   
the parties having agreed to use all commercially reasonable efforts to have any
such injunction lifted); (v) the listing on the NYSE, subject only to official  
notice of issuance, of the shares of Suiza Common Stock to be issued pursuant to
the Stock Issuance; (vi) Morningstar having received an opinion of Weil, Gotshal
& Manges LLP and Suiza Foods having received an opinion of Hughes & Luce,       
L.L.P., in each case, that the Merger will qualify as a reorganization within   
the meaning of Section 368(a) of the Code and (vii) Morningstar having received 
a letter from Arthur Andersen LLP, and Suiza Foods and Sub having received a    
letter from Deloitte & Touche LLP, in each case, dated as of the closing date,  
to the effect that the Merger will qualify for pooling of interest accounting   
treatment if consummated in accordance with the Merger Agreement.               

 The obligation of Morningstar to effect the Merger is also subject to the
fulfillment of certain additional conditions, including (i) the accuracy of the 
representations and warranties of Suiza Foods and Sub when made and on and as of
the Effective Time, except as expressly contemplated or permitted by the Merger 
Agreement and, with respect to representations and warranties that are not      
otherwise subject to a materiality qualifier, where the inaccuracy thereof would
not, alone or in the aggregate with all such inaccuracies, have a material      
adverse effect on the business, properties, assets, condition (financial or     
otherwise), liabilities or results of operation of Suiza Foods and its          
subsidiaries, (ii) the performance in all material respects of the obligations  
and covenants of Suiza Foods and Sub under the Merger Agreement and (iii) the   
receipt of a certificate of the President and Chief Executive Officer or a Vice 
President of each of Suiza Foods and Sub to such effect.                        

  The obligation of Suiza Foods and Sub to effect the Merger is also subject
to the fulfillment of certain additional conditions, including (i) the accuracy 
of the representations and warranties of Morningstar when made and on and as of 
the Effective Time, except as expressly contemplated or permitted by the Merger 
Agreement and, with respect to representations and warranties that are not      
otherwise subject to a materiality qualifier, where the inaccuracy thereof would
not, alone or in the aggregate with all such inaccuracies, have a material      
adverse effect on the business, properties, assets, condition (financial or     
otherwise), liabilities or results of operation of Morningstar and its          
subsidiaries, (ii) the performance in all material respects of the obligations  
and covenants of Morningstar under the Merger Agreement and (iii) the receipt of
a certificate of the President and Chief Executive Officer or a Vice President  
of Morningstar to such effect.                                                  

Prior to the Effective Time, the parties to the Merger Agreement may (i)
extend the time for the performance of any of the obligations or other acts of  
the other parties thereto, (ii) waive any inaccuracies in the representations   
and warranties contained therein or in any documents delivered pursuant thereto 
and (iii) waive compliance with any of the agreements or conditions contained   
therein.                                                                        

TERMINATION                                                                     

  The Merger Agreement may be terminated by action of either the Suiza Board
or Morningstar Board and the Merger abandoned under certain circumstances,      
including, but not limited to, the occurrence of                                

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any of the following: (i) the Merger has not been consummated by February 28,   
1998, provided that the terminating party has not breached in any material      
respect its obligations under the Merger Agreement in any manner that would have
proximately contributed to the failure to consummate the Merger; (ii) the       
requisite approval of the Merger, the Merger Agreement and the transactions     
contemplated thereby by the Morningstar Stockholders is not obtained; (iii) the 
requisite approval of the Stock Issuance by the Suiza Stockholders is not       
obtained; or (iv) a United States federal or state court of competent           
jurisdiction or United States federal or state governmental, regulatory or      
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise       
prohibiting the transactions contemplated by the Merger Agreement and such      
order, decree, ruling or other action has become final and non-appealable,      
provided that the party seeking to terminate the Merger Agreement has used all  
commercially reasonable efforts to remove such injunction, order or decree.     

   The Merger Agreement may be also terminated and the Merger may be abandoned
at any time prior to the Effective Time, by action of (a) the Suiza Board, (i)  
if the Morningstar Board has withdrawn or modified in a manner adverse to Suiza 
Foods its approval or recommendation of the Merger Agreement or the Merger or   
has recommended an Alternative Proposal with respect to Morningstar to          
Morningstar's Stockholders or (ii) Suiza Foods shall have received an           
Alternative Proposal which the Suiza Board believes, in its good faith judgment,
is more favorable to Suiza Foods' stockholders than the Merger and is reasonably
likely to be consummated or (b) the Morningstar Board, (i) if the Suiza Board   
shall have withdrawn or modified in a manner adverse to Morningstar its approval
or recommendation of the Merger Agreement or the issuance of the Suiza Common   
Stock in connection with the Merger or shall have recommended an Alternative    
Proposal with respect to Suiza Foods to Suiza Stockholders or (ii) Morningstar  
shall have received an Alternative Proposal which the Morningstar Board         
believes, in its good faith judgment, is more favorable to Morningstar          
Stockholders than the Merger and is reasonably likely to be consummated.        

The Merger Agreement may also be terminated prior to the Effective Time,
before or after approval of the Suiza Stockholders or Morningstar Stockholders, 
by the mutual consent of Suiza Foods and Morningstar.                           

In the event that (x) Suiza Foods terminates the Merger Agreement as    
described in clause (a)(i) of the second preceding paragraph or (y) Morningstar 
terminates the Merger Agreement as described in clause (b)(ii) of the second    
preceding paragraph, then, in either such case, Morningstar shall concurrently  
with such termination pay Suiza Foods a fee of $20,000,000 (a "Termination      
Fee"), which amount shall be payable by wire transfer of same day funds, and    
shall promptly reimburse Suiza Foods for all substantiated out-of-pocket costs  
and expenses incurred by Suiza Foods in connection with the Merger Agreement and
the transactions contemplated thereby, including, without limitation, costs and 
expenses of accountants, attorneys and financial advisors, up to an aggregate of
$2,000,000.                                                                     

In the event that (x) Morningstar terminates the Merger Agreement as    
described in clause (b)(i) of the third preceding paragraph or (y) Suiza Foods  
terminates the Merger Agreement as described in clause (a)(ii) of the third     
preceding paragraph, then, in either such case, Suiza Foods shall concurrently  
with such termination pay Morningstar a fee of $20,000,000 (a "Suiza Termination
Fee"), which amount shall be payable by wire transfer of same day funds, and    
shall promptly reimburse Morningstar for all substantiated out-of-pocket costs  
and expenses incurred by Morningstar in connection with the Merger Agreement and
the transactions contemplated thereby, including, without limitation, costs and 
expenses of accountants, attorneys and financial advisors, up to an aggregate of
$2,000,000.                                                                     

   The provisions in the Merger Agreement relating to, among other things, the
effect of termination and abandonment, fees and expenses, specific performance  
and assignment will survive the termination of the Merger Agreement.            

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FEES AND EXPENSES                                                               

 Whether or not the Merger is consummated, except as otherwise provided in
the Merger Agreement following the exercise of certain termination rights, all  
costs and expenses incurred in connection with the Merger Agreement and the     
transactions contemplated by the Merger Agreement will be paid by the party     
incurring such expenses. Suiza Foods and Sub on the one hand and Morningstar on 
the other hand will each be responsible for one half of all expenses relating to
printing, filing and mailing this Joint Proxy Statement/Prospectus and the      
Registration Statement and all Commission and other regulatory filing fees      
incurred in connection with this Joint Proxy Statement/Prospectus and the       
Registration Statement.                                                         

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PART II 
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS                             

  The Registrant's Certificate of Incorporation provides that no director of
the Registrant will be personally liable to the Registrant or any of its        
stockholders for monetary damages arising from the director's breach of         
fiduciary duty as a director, with certain limited exceptions.                  

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 will 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 Registrant'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.                                           

ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                            

(a) Exhibits:                                                           

See the Exhibit Index, beginning on page II-5.                  

(b) Financial Statement Schedules:                                      

No financial statement schedules are required as all material required  
information is disclosed in the notes to the Registrant's Consolidated Financial
Statements.                                                                     

ITEM 22.  UNDERTAKINGS.                                                         

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 in 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;      

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PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the       
information required to be included in a post-effective amendment by those      
paragraphs is contained in periodic reports filed by the Registrant pursuant to 
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are     
incorporated by reference 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;                                                                       

    (4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by 
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such  
securities at that time shall be deemed to be the initial BONA FIDE offering    
thereof;                                                                        

    (5) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within   
one business day of receipt of such request, and to send the incorporated       
documents by first class mail or other equally prompt means. This includes      
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request;           

(6) That, prior to any public reoffering of the securities registered   
hereunder through use of a prospectus which is a part of this Registration      
Statement, by any person or party who is deemed to be an underwriter within the 
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus   
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;           

(7) That every prospectus (i) that is filed pursuant to paragraph (6)   
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act and is used in connection with an offering of    
securities subject to Rule 415, will be filed as a part of an amendment to the  
registration statement and will not be used until such amendment is effective,  
and that, for purposes of determining any liability under the Securities Act,   
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; and                                                                    

(8) To supply by means of a post-effective amendment all information    
concerning a transaction, and the company being acquired involved therein, that 
was not the subject of and included in the Registration Statement when it became
effective.                                                                      

  Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and          
controlling persons of the Registrant pursuant to the provisions described under
Item 20 above, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event   
that a claim for indemnification against such liabilities (other than the       
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,   
suit or proceeding) is asserted by such director, officer or controlling person 
in connection with the securities being registered, the Registrant will, unless 
in the opinion of its counsel the matter has been settled by controlling        
precedent, submit to a court of appropriate jurisdiction the question whether   
such indemnification by it is against public policy as expressed in the Act and 
will be governed by the final adjudication of such issue.                       

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SIGNATURES

   Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 2 to the Registration Statement to be signed on its   
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,    
State of Texas, on October 23, 1997.                                            

                                                                [Download Table]
                                              
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 Foods Corporation's Registration       
Statement on Form S-4, 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:                                                         

/s/ GREGG L. ENGLES                                                   
------------------------------  Chairman of the Board and    October 23, 1997   
Gregg L. Engles            Chief Executive Officer                

*                                                   
------------------------------  Vice Chairman of the Board   October 23, 1997   
Cletes O. Beshears                                                  

*                                                   
------------------------------  Vice Chairman of the Board   October 23, 1997   
Hector M. Nevares                                                   

*                                                   
------------------------------  Principal Financial and      October 23, 1997   
Tracy L. Noll             Accounting Officer                    

*                                                   
------------------------------  Director                     October 23, 1997   
Alan J. Bernon                                                  

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                                                                [Download Table]
                                                                             
              *                                                              
------------------------------  Director                     October 23, 1997
      Gayle O. Beshears                                                      

              *                                                              
------------------------------  Director                     October 23, 1997
        Stephen Green                                                        

              *                                                              
------------------------------  Director                     October 23, 1997
      Robert L. Kaminski                                                     

              *                                                              
------------------------------  Director                     October 23, 1997
       David F. Miller                                                       

              *                                                              
------------------------------  Director                     October 23, 1997
       P. Eugene Pender                                                      

              *                                                              
------------------------------  Director                     October 23, 1997
       Robert Piccinini                                                      

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

* by Gregg L. Engles, Attorney-in-fact                                          

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INDEX TO EXHIBITS 

                                                        [Enlarge/Download Table]

  EXHIBIT                                                                                                        
  NUMBER                                                   DESCRIPTION                                           
-----------      ------------------------------------------------------------------------------------------------
                                                                                                                 
     2.1     --  Amended and Restated Reorganization Agreement; filed as Exhibit 2.1 to Suiza Foods' Registration
                   Statement on Form S-1 (Registration No. 333-1858) and incorporated herein by reference.       

     2.2     --  Agreement and Plan of Merger dated as of September 18, 1997 by and among Suiza Foods, Merger    
                   Sub, and Country Fresh (attached as Appendix A to the Proxy Statement/Prospectus).            

     4.1     --  Specimen of Common Stock Certificate; filed as Exhibit 4.1 to Suiza Foods' Registration         
                   Statement on Form S-1 (Registration No. 333-1858) and incorporated herein by reference.       

     4.2     --  Registrations Rights Agreement (Exhibit G-2 to Amended and Restated Reorganization Agreement);  
                   filed as Exhibit 4.2 to Suiza Foods' Registration Statement on Form S-1 (Registration No.     
                   333-1858) and incorporated herein by reference.                                               

     5.1     --  Opinion of Hughes & Luce, L.L.P. regarding legality of securities being registered.             

     8.1     --  Opinion of Warner Norcross & Judd LLP regarding tax matters.                                    

    12.1**   --  Statements regarding computation of ratios.                                                     

    23.1     --  Consent of Hughes & Luce, L.L.P. (contained in Exhibit 5.1)                                     

    23.2     --  Consent of Deloitte & Touche LLP.                                                               

    23.3     --  Consent of KPMG Peat Marwick LLP.                                                               

    23.4     --  Consent of Barnard, Vogler & Co.                                                                

    23.5     --  Consent of McGladrey & Pullen, LLP.                                                             

    23.6     --  Consent of Coopers & Lybrand L.L.P.                                                             

    23.7     --  Consent of Arthur Andersen LLP.                                                                 

    23.8     --  Consent of Price Waterhouse LLP.                                                                

    23.9     --  Consent of Warner Norcross & Judd LLP (contained in Exhibit 8.1).                               

    23.10    --  Consent of Delton Parks.                                                                        

    23.11    --  Consent of The Ohio Company.                                                                    

    24.1     --  Power of Attorney (contained in the signature pages hereto).                                    

    99.1     --  Form of Proxy                                                                                   

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

**  Previously filed                                                            

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