UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

               [X] Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the fiscal year ended September 26, 1999

         [ ]  Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                 for the transition period from ______ to _____
                         Commission file number 33-91600

                            SWEETHEART HOLDINGS INC.*
             (Exact name of registrant as specified in its charter)

                  Delaware                                      06-1281287
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                      Identification No.)

  10100 Reisterstown Road, Owings Mills, Maryland                  21117
    (Address of principal executive office)                     (Zip Code)

        Registrant's telephone number, including area code: 410/363-1111

Securities of the  Registrant  registered  pursuant to Section 12(b) of the Act:
None

Securities of the  Registrant  registered  pursuant to Section 12(g) of the Act:
None

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X   No__

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         The aggregate  market value of the voting stock of the Registrant  held
by  non-affiliates  of the Registrant as of November 24, 1999.  Not  Applicable.
There is no market for the Common Stock of the Registrant.

The number of shares outstanding of the Registrant's common stock as of November
24, 1999:
Sweetheart  Holdings  Inc.  Class A Common  Stock,  $0.01 par value -  1,046,000
shares
Sweetheart  Holdings  Inc.  Class B Common  Stock,  $0.01 par value -  4,393,200
shares

*    The Registrant is the guarantor of the 9 5/8% Senior Secured Notes due 2000
and  the  10  1/2%  Senior  Subordinated  Notes  due  2003  (collectively,   the
"Sweetheart Notes") of Sweetheart Cup Company Inc., a wholly owned subsidiary of
the Registrant.

                                                                    Page 1 of 55

<PAGE>

                                     PART I

Item 1.    BUSINESS

General

         Sweetheart  Holdings Inc.  ("Sweetheart  Holdings"),  together with its
wholly  owned  subsidiary  Sweetheart  Cup Company Inc.  ("Sweetheart  Cup," and
collectively  with  Sweetheart   Holdings  and  its  other   subsidiaries,   the
"Company"),  is one of the largest  producers  of plastic  and paper  disposable
foodservice  and food packaging  products in North America.  In Fiscal 1999, the
Company had net sales of  approximately  $864 million.  The Company's  principal
products  include  cups for both hot and cold  drinks,  lids,  food  containers,
bowls, plates, straws, cutlery and containers for the food and dairy industries.
The brand names for the  Company's  principal  products  include  Sweetheart(R),
Lily(R),  Trophy(R),  Jazz(R) and  Preference(TM) for cups and plates and Silent
Service(R),  Centerpiece(R),  Basix(R),  Guildware(R) and Simple Elegance(R) for
foam  dinnerware  and  plastic  cutlery.  In  addition,   the  Company  designs,
manufactures and leases container filling equipment for use by dairies and other
food processors.  This equipment is specifically designed by the Company to fill
and seal the Company's containers in customers' plants.

         On March 12, 1998, SF Holdings Group,  Inc. ("SF  Holdings")  purchased
48% of  the  voting  stock  and  100%  of the  non-voting  stock,  or 90% of the
Company's total outstanding  stock from the then existing  shareholders (the "SF
Holdings Investment"). The Company's business is the successor to the businesses
of Maryland Cup Corporation,  which was founded in 1911 and was a major supplier
of paper and plastic  disposable  foodservice and food packaging  products,  and
Lily-Tulip, Inc.

Products

         The  Company  has  historically  sold  its  products  to two  principal
customer  groups,  institutional  foodservice and food packaging.  Institutional
foodservice  customers  primarily  purchase  disposable hot and cold drink cups,
lids, food  containers,  plates,  bowls,  cutlery and straws.  Products are sold
directly and through  distributors  to quick  service  restaurant  chains,  full
service restaurants,  convenience stores, hospitals,  airlines, theaters, school
systems and other  institutional  customers.  Food packaging customers primarily
purchase  paper  and  plastic  containers  for the  dairy  and  food  processing
industries.  Food packaging  customers also lease filling and packaging machines
designed  and  manufactured  by the  Company  that  fill and seal the  Company's
containers  in  customers'  plants.  The  Company  manufactures  and markets its
products in Canada to national  accounts and  distributors.  During Fiscal 1999,
the Company  began  selling  consumer  foodservice  products  primarily  through
grocery stores, club stores and convenience stores.

         The Company's  institutional  foodservice  customer base focuses on two
major  customer  groups,  national  accounts  and  distribution.   Institutional
foodservice   is  the  Company's   largest   customer   group,   accounting  for
approximately  82% of gross sales during  Fiscal 1999.  Management  believes the
Company is the largest manufacturer of disposable  foodservice products in North
America.

         The Company  manufactures a broad line of disposable  products.  Paper,
foam and  plastic  cups,  lids and  straws  represent  the  largest  part of the
Company's United States operations.  The largest single product type within this
category  is cups,  which are  offered in various  sizes  (ranging  from 3 to 64
ounces) for both hot and cold beverages.  Brand names of the Company's principal
beverage   service   products   include   Sweetheart(R),   Lily(R),   Trophy(R),
Preference(TM),  Jazz(R), Gallery(R), Clarity(R), Lumina(R),  ClearLight(TM) and
Go Cup(TM).

         The Company also offers a variety of other foodservice products,  which
includes  paper,  foam, and plastic plates and bowls,  portion cups and cutlery.
These products are sold to a broad array of commercial  and on-site  foodservice
operators.

                                       2

<PAGE>

         The Company also offers carry-out service products  consisting of paper
and  plastic  tubs,  containers,  lids and hinged foam  containers.  The Company
believes  it is one of the  largest  manufacturers  of paper  tubs for  chicken,
popcorn and take-out  foods in North  America.  Munchie  Cup(R),  Flexstyles(R),
Highlights(R)  bowls,  Maximizers(TM)  and Scoop  Cup are some of the  Company's
carry-out service brands.

         Other products include the Company's Flex-E-Form(R) straight-wall paper
manufacturing  technology and Flex-Guard(R),  a spiral wound tamper-evident lid.
In addition,  the Company  provides  foodservice  customers with retail packages
sold through retailers under various Sweetheart and private label brands.

         To enhance product sales, the Company designs,  manufactures and leases
container  filling and lidding equipment to dairies and other food processors to
package food items in the Company's  containers  at their plants.  The Company's
filling  and  lidding  equipment  is leased to  customers  under the trade names
Auto-Pak(TM),  Flex-E-Fill(R) and FoodPac(R).  This equipment is manufactured in
the Company's machine shop and assembly plant located in Owings Mills, Maryland.
Types  of  products  packaged  in the  Company's  machines  include  ice  cream,
factory-filled  jacketed ice cream cones, cottage cheese,  yogurt and squeeze-up
desserts.


Marketing and Sales

         The  Company's  institutional  and  consumer  foodservice  products are
primarily sold to national accounts and through distributors to other end users.
Food  packaging  customers  include  national  and  regional  dairies  and  food
companies.

         The Company  focuses its marketing  efforts on both the distributor and
end-user customer. The Company tailors programs,  consisting of products, price,
promotional and merchandising  materials,  training and sales/marketing coverage
to  effectively  meet the specific  needs of target  customers and markets.  The
Company sells these programs  through a direct sales  organization.  The Company
supports  this process  through the  development  of  innovative  new  products,
materials and  processes,  while  leveraging  its strong brand  recognition  and
national network of manufacturing and distribution centers.


Production

         The Company's plants operate on a variety of  manufacturing  schedules.
Paper  operations  generally  run five days per week at 24 hours  per day,  with
Saturday  scheduled  as an  overtime  day when needed to meet  customer  demand.
Plastic operations generally run seven days per week at 24 hours per day. Due to
customer demand,  the Company's plant utilization  historically is substantially
higher  during late spring and summer than during fall and winter.  See "Item 2.
Properties".


Raw Materials and Suppliers

         Raw materials are critical  components of the Company's cost structure.
Principal  raw  materials  for the  Company's  paper  operations  include  solid
bleached  sulfate  paperboard   obtained  directly  from  major  North  American
manufacturers,  along  with wax,  adhesives,  coating  and inks.  Paperboard  is
purchased in "jumbo" rolls and then printed and converted  into smaller rolls or
blanks for processing  into final  products.  The principal raw material for the
Company's plastic  operations is plastic resin  (polystyrene,  polypropylene and
high and low density  polyethylene)  purchased directly from major petrochemical
companies  and other resin  suppliers.  Resin is processed and formed into cups,
cutlery,  meal  service  products,  straws,  lids and  containers.  The  Company
manufactures foam products by extruding sheets of plastic foam material that are
converted into cups and plates.

         The Company  purchases a substantial  portion of its  requirements  for
paperboard  and  resin  from  several  suppliers.  The  Company  has a number of
potential suppliers for substantially all of its raw materials

                                       3

<PAGE>

and believes  that current  sources of supply for its raw materials are adequate
to meet its requirements.

Competition

         All of the  markets  in  which  the  Company  sells  its  products  are
extremely competitive. Because of the low barriers to entry for new competitors,
the level of competition has been and may continue to be intense as new entrants
attempt  to  gain  market  share.  The  Company's   competitors   include  large
multinational  companies  as well as regional  manufacturers,  some of whom have
greater financial and other resources than the Company.  The marketplace for the
Company's products is fragmented and includes competitors who compete across the
full line of the  Company's  products,  as well as those who  compete  against a
limited number of the Company's products. A few of the Company's competitors are
also vertically integrated into the production of paper or plastic raw materials
and have greater access to financial and other resources.  The Company's primary
competitors in its institutional and consumer  foodservice customer base include
Dart Container  Corporation,  Fort James, Solo Cup Co., International Paper Food
Service Group and Tenneco Inc. Major competitors in its food packaging  customer
base  include  Cardinal  Plastics,  Inc.,  Landis  Plastics,  Inc.,  Norse Dairy
Systems, Inc., Polytainer, Ltd. and Sealright Co., Inc.


Customers

         The Company  markets its products  primarily to customers in the United
States.  During  Fiscal  1999,  sales  to  the  Company's  customers  in  Canada
constituted  approximately 7% of its net sales. During Fiscal 1999, sales to the
Company's  five largest  customers  represented  approximately  32.3% of its net
sales.  One national  customer of the Company  accounted for 11.7% of net sales.
The loss of one or more large  national  customers  could  adversely  affect the
Company's  operating results.  The Company believes it has strong  relationships
with its major national accounts which have been developed over many years.


Environmental Matters

         The  Company  and its  operations  are  subject  to  comprehensive  and
frequently  changing  federal,   state,  foreign  and  local  environmental  and
occupational  health  and  safety  laws  and  regulations,  including  laws  and
regulations governing emissions of air pollutants, discharges of waste and storm
water and the disposal of hazardous wastes.  The Company is subject to liability
for the investigation and remediation of environmental  contamination (including
contamination  caused by other  parties) at properties  that it owns or operates
and at other properties where the Company or its predecessors  have arranged for
the disposal of hazardous substances.  As a result, the Company is involved from
time to time in administrative  and judicial  proceedings and inquiries relating
to  environmental  matters.  The Company  believes that,  except as noted below,
there are currently no pending  investigations at the Company's plants and sites
relating to environmental  matters.  However, there can be no assurance that the
Company will not be involved in any such  proceeding  in the future and that any
amount of future clean up costs and other environmental  liabilities will not be
material.

         The  Company   cannot   predict  what   environmental   legislation  or
regulations  will be enacted  in the  future,  how  existing  or future  laws or
regulations will be administered or interpreted or what environmental conditions
may be found to exist. Enactment of more stringent laws or regulations or a more
strict  interpretation  of existing laws and regulations may require  additional
expenditures by the Company, some of which could be material.

         The  Clean  Air Act  mandates  the  phase  out of  certain  refrigerant
compounds which will require the Company to upgrade or retrofit air conditioning
and  chilling  systems  during the next few years.  The  Company  has decided to
replace units as they become inefficient or unserviceable.

         Some of the Company's facilities contain asbestos. Although there is no
current legal  requirement to remove such  asbestos,  the Company has an ongoing
monitoring and  maintenance  program to maintain  and/or remove such asbestos as
appropriate  to prevent the release of friable  asbestos.  The Company  does

                                       4

<PAGE>

not  believe  the costs  associated  with such  program  will be material to its
business or financial condition.

         On July 13, 1999, the Company received a letter from the  Environmental
Protection Agency ("EPA")  identifying the Company,  among numerous others, as a
"potential  responsible party" under the Comprehensive  Environmental  Response,
Compensation  and  Liability  Act of 1980,  as amended,  at a site in Baltimore,
Maryland.   The  EPA  letter  states  that  it  does  not   constitute  a  final
determination  by EPA  concerning  the  liability  of the  Company  or any other
entity.  The  Company  denies  liability  and has no reason to believe the final
outcome of this matter will have a material  effect on the  Company's  financial
condition or results of operations. However, no assurance can be given about its
ultimate  effect  on the  Company,  if  any,  given  the  early  stage  of  this
investigation.


Technology and Research

         The Company  maintains  facilities for the  development of new products
and product line extensions in Owings Mills,  Maryland.  The Company maintains a
staff of engineers and  technicians  who are  responsible  for product  quality,
process control,  improvement of existing products,  development of new products
and processes and technical  assistance in adhering to  environmental  rules and
regulations.  The  Company is  continually  striving  to expand its  proprietary
manufacturing  technology,  further  automate its  manufacturing  operations and
develop improved manufacturing processes and product designs.


Employees

         At  September  26,  1999,  the  Company  employed  approximately  6,245
persons,   of  whom   approximately   5,292   persons  were  hourly   employees.
Approximately  93.5% of the  employees  are located at  facilities in the United
States. The Company currently has collective  bargaining agreements in effect at
its facilities in Springfield,  Missouri,  Augusta,  Georgia and Toronto, Canada
(collectively, the "Sweetheart CBAs"). The Sweetheart CBAs cover all production,
maintenance and distribution  hourly-paid  employees at each respective facility
and contain  standard  provisions  relating to, among other  things,  management
rights, grievance, procedures, strikes and lockouts, seniority and union rights.
As of September 26, 1999,  approximately 19.5% of the Company's hourly employees
were  covered  by the  Sweetheart  CBAs.  The  current  expiration  dates of the
Springfield,  Augusta and Toronto  CBAs are March 4, 2001,  October 31, 2002 and
November 30, 2000, respectively. The Company considers its relationship with its
employees to be good.


                                       5

<PAGE>

Item 2.     PROPERTIES

         The Company  has  manufacturing  and  distribution  facilities  located
throughout  the United States and Canada.  All of the Company's  facilities  are
well  maintained,  in good  operating  condition  and suitable for the Company's
operations.   The  table  below  provides  summary  information   regarding  the
properties owned or leased by the Company.
<TABLE>
<CAPTION>

                                                                                            Size
                                                      Type of             Owned/        (Approximate
                   Location                           Facility (1)        Leased        square feet)
                   --------                           ------------        ------        ------------

<S>                                                   <C>                  <C>                 <C>
Augusta, Georgia ...........................          M/W                   O                  339,000

Baltimore, Maryland ........................          W                     L                  194,000

Conyers, Georgia (2 facilities).............          M/W                   O                  350,000
                                                      W                     O                  555,000

Chicago, Illinois (2 facilities)............          M/W                   O                  902,000
                                                      W                     L                  587,000

Dallas, Texas ..............................          M/W                   O                1,316,000

Manchester, New Hampshire...................          M/W                   O                  160,000

North Las Vegas, Nevada (2 facilities)......          M/W                   L                  128,000
                                                      W                     L                   12,000

Ontario, California.........................          W                     L                  400,000

Owings Mills, Maryland (3 facilities).......          M/W                   O                1,533,000
                                                      M/W                   O                  267,000
                                                      W(2)                  O                  406,000

Somerville, Massachusetts...................          M/W                   O                  193,000

Springfield, Missouri (2 facilities)........          M/W                   O                  925,000
                                                      W                     L                  415,000

Wilmington, Massachusetts...................          W(3)                  L                  307,000

Toronto, Ontario ...........................          M/W                   O                  185,000
</TABLE>

---------------------
(1)   M-Manufacturing;  W-Warehouse;  M/W-Manufacturing  and  Warehouse  in same
      facility.
(2)   Under contract of sale.
(3)   Leased space was reduced from 400,000 in prior year.

            The Company  also leases a warehouse in Augusta,  Georgia  which was
closed in the latter part of Fiscal 1997.  The Company is  currently  subleasing
such  property to a third  party  through  March 31,  2001 and will  continue to
actively seek to sublet the property through the lease  termination  date, March
31, 2008.

                                       6

<PAGE>

Item 3.     LEGAL PROCEEDINGS

         Aldridge.  A lawsuit  entitled  Aldridge  v.  Lily-Tulip,  Inc.  Salary
Retirement Plan Benefits Committee and Fort Howard Cup Corporation, Civil Action
No. CV 187-084,  initially  filed in state  court in Georgia in April  1987,  is
currently  pending in federal court.  The remaining  plaintiffs  claimed,  among
other things, that the Company wrongfully terminated the Lily-Tulip, Inc. Salary
Retirement  Plan (the "Plan") in violation  of the  Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA").  The relief sought by plaintiffs was
to have the plan termination declared ineffective.  In December 1994, the United
States Court of Appeals for the Eleventh  Circuit (the  "Circuit  Court")  ruled
that the Plan was  lawfully  terminated  on December 31,  1986.  Following  that
decision, the plaintiffs sought a rehearing,  which was denied, and subsequently
filed a petition for a writ of certiorari  with the United States Supreme Court,
which was also  denied.  Following  remand,  in March  1996,  the United  States
District  Court for the  Southern  District of Georgia  (the  "District  Court")
entered a judgment  in favor of the  Company.  Following  denial of a motion for
reconsideration, the plaintiffs, in April 1997, filed an appeal with the Circuit
Court. On May 21, 1998, the Circuit Court affirmed the judgment entered in favor
of the Company.  On June 10, 1998, the  plaintiffs  petitioned the Circuit Court
for a rehearing of their appeal which  petition was denied on July 29, 1998.  In
October 1998,  plaintiffs  filed a Petition for Writ of Certiorari to the United
States  Supreme  Court,  which was denied in January 1999. The Company has begun
the process of paying out the  termination  liability.  As of November 19, 1999,
the Company has disbursed $4.2 million in termination payments.

         On April 27, 1999, the plaintiffs  filed a motion in the District Court
for  reconsideration  of the court's dismissal without  appropriate relief and a
motion  for  attorneys'  fees  with a  request  for  delay in  determination  of
entitlement  to such fees. On June 17, 1999,  the District  Court deferred these
motions and ordered discovery in connection therewith.  Discovery is expected to
be  completed by the end of December  1999.  Due to the  complexity  involved in
connection with the claims  asserted in this case, the Company cannot  determine
at present with any  certainty the amount of damages it would be required to pay
should the plaintiffs prevail; accordingly,  there can be no assurance that such
amounts  would not have a material  adverse  effect on the  Company's  financial
position or results of operations.

         Fort James Corporation. A patent infringement action seeking injunctive
relief and damages  relating  to the  Company's  production  and sale of certain
paper plates  entitled Fort James  Corporation  v.  Sweetheart Cup Company Inc.,
Civil Action No.  97-C-1221,  was filed in the United States  District Court for
the  Eastern  District of  Wisconsin  on November  21,  1997.  During the fourth
quarter of Fiscal  1999,  mediation  resulted  in a  settlement  of this  action
whereby the Company agreed to pay damages of $2.6 million.  This amount has been
fully  reserved by the Company,  with the first of two  payments,  $1.6 million,
made on September  30, 1999.  The second  payment of $1.0 million is due July 1,
2000.

         Environmental. On July 13, 1999, the Company received a letter from the
EPA identifying the Company,  among numerous others, as a "potential responsible
party"  under  the  Comprehensive   Environmental  Response,   Compensation  and
Liability Act of 1980, as amended,  at a site in  Baltimore,  Maryland.  The EPA
letter  states  that  it  does  not  constitute  a  final  determination  by EPA
concerning the liability of the Company or any other entity.  The Company denies
liability  and has no reason to believe  the final  outcome of this  matter will
have a  material  effect on the  Company's  financial  condition  or  results of
operations.  However, no assurance can be given about its ultimate effect on the
Company, if any, given the early stage of this investigation.

         Other.  The Company is also  involved in a number of legal  proceedings
arising in the ordinary course of business,  none of which is expected to have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations.


Item 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           NONE


                                       7

<PAGE>

                                     PART II


Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Sweetheart  Cup is a wholly owned  subsidiary of  Sweetheart  Holdings,
which is a  privately-held  corporation.  No  equity  securities  of  Sweetheart
Holdings  or  Sweetheart  Cup  are  publicly  traded  or  registered  under  the
Securities  Exchange  Act of 1934,  as amended,  and there is no public  trading
market for the stock.

         Payment of cash dividends is restricted under the instruments governing
the Company's indebtedness. The Company has not paid cash dividends and does not
anticipate paying any cash dividends in the foreseeable future.

         As of  November  24,  1999,  there were  eleven  holders of  Sweetheart
Holdings'  Class A Common Stock and one holder of Sweetheart  Holdings'  Class B
Common Stock.


Item 6.  SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

         Set forth below are selected historical  consolidated financial data of
the Company at the dates and for the fiscal years shown. The selected historical
consolidated financial data at September 26, 1999 and September 27, 1998 and for
Fiscal  1998  and  1999  is  derived  from  historical   consolidated  financial
statements  of the  Company and  subsidiaries  for such  periods  that have been
audited  by  Deloitte  & Touche,  LLP,  independent  auditors  and are  included
elsewhere  herein.  The  selected  historical  consolidated  financial  data  at
September  30, 1997,  September  30, 1996 and  September 30, 1995 and for Fiscal
1997,  1996  and 1995 is  derived  from the  historical  consolidated  financial
statements  of the  Company and  subsidiaries  for such  periods  that have been
audited by Arthur Andersen,  LLP,  independent public  accountants.  Fiscal 1997
Consolidated  Statements of Operations  and Other  Comprehensive  Income (Loss),
Consolidated   Statements   of  Cash  Flows  and   Consolidated   Statements  of
Shareholders' Equity are included elsewhere herein.

         On June 1, 1998,  the  Company  changed  its method of  accounting  for
inventories from the last-in  first-out (LIFO) method to the first-in  first-out
(FIFO) method. Management believes that the FIFO method is preferable because it
more accurately  presents the Company's  financial  position as it reflects more
recent costs at the balance sheet date and more accurately matches revenues with
costs reported during the period  presented.  The financial  statements of prior
periods  have  been  restated  to  apply  the  FIFO  method  of  accounting  for
inventories  retroactively.  Net  income  increased  or  (decreased)  by  $(0.1)
million,  $(1.1) million, $(7.4) million and $12.6 million in Fiscal 1998, 1997,
1996 and 1995, respectively.

         During   Fiscal  1997,   the  Company   accelerated   $1.6  million  of
amortization for unamortized debt issuance costs related to the early retirement
of debt. This charge is shown as an  extraordinary  loss (net of $0.6 million of
income  taxes)  on  the   Consolidated   Statements  of  Operations   and  Other
Comprehensive  Income  (Loss).  During the quarter ended  December 31, 1997, the
Company  recorded a $1.5  million  expense as a  cumulative  effect of change in
accounting  principle  (net of $1.0  million of income  taxes)  relating  to the
implementation of EITF 97-13, which requires companies to expense any previously
capitalized reengineering costs in connection with software installation.


                                       8

<PAGE>

<TABLE>
<CAPTION>

                                                                      Fiscal
                                ------------------------------------------------------------------------------------
(In thousands)                       1999             1998             1997             1996              1995
                                 --------------  ---------------  ---------------  ---------------   ---------------
Operating Data:
<S>                                 <C>             <C>              <C>              <C>                <C>
Net sales                          $863,781        $843,502         $886,017         $959,818           $986,618
Cost of sales                       763,750         787,706          822,818          859,029            853,571
                                    -------         -------          -------          -------            -------
Gross profit                        100,031          55,796           63,199          100,789            133,047
Selling, general and                 67,406          68,818           66,792           61,788             66,089
administrative
Other (income) expense, net          (1,180)         12,400              (73)           4,271             (1,197)
Asset impairment expense                  -           5,000           24,550                -                  -
Restructuring charge (credit)          (512)            897            9,680                -                  -
                                   --------        ---------        --------         --------            -------
Operating income (loss)              34,317         (31,319)         (37,750)          34,730             68,155
Interest expense, net                41,671          42,955           40,265           37,517             37,410
                                   --------        --------         --------         --------            -------
Income (loss) before taxes           (7,354)        (74,274)         (78,015)          (2,787)            30,745
Income tax benefit (expense)          2,941          29,711           31,206            1,115            (12,312)
Cumulative effect of change in
accounting principle                      -           1,511                -                -                  -
Extraordinary loss                        -               -              940                -                  -
                                    --------       --------         --------          -------            -------
Net income (loss)                   $(4,413)       $(46,074)        $(47,749)         $(1,672)           $18,433
                                    ========       =========        =========         ========           =======
Balance Sheet Data (at end of
period):
  Property, plant and equipment,
     net                           $331,676        $355,224         $382,491         $427,833           $417,563
  Total assets                      634,640         665,626          715,589          757,839            749,445
  Long-term debt *                  118,446         422,438          430,499          385,579            369,181
  Shareholders' equity               18,274          18,983           70,670          118,552            120,328

* See Note 10 of the Notes to Consolidated Financial Statements.
</TABLE>


                                       9

<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

         Forward-looking statements in this filing, including those in the Notes
to  Consolidated  Financial  Statements,  are made  pursuant  to the safe harbor
provisions  of the  Private  Securities  Litigation  Reform  Act of  1995.  Such
forward-looking  statements  are subject to risks and  uncertainties  and actual
results could differ materially.  Such risks and uncertainties  include, but are
not limited to, general  economic and business  conditions,  competitive  market
pricing,  increases in raw material costs,  energy costs and other manufacturing
costs,  fluctuations in demand for the Company's  products,  potential equipment
malfunctions,  pending  litigation  and the ability to remedy Year 2000  related
issues.


General

         On March 12, 1998,  SF Holdings  purchased  48% of the voting stock and
100% of the non-voting  stock, or 90% of the Company's total  outstanding  stock
from the then existing shareholders.  The Company's business is the successor to
the businesses of Maryland Cup Corporation,  which was founded in 1911 and was a
major supplier of paper and plastic  disposable  foodservice  and food packaging
products,  and Lily-Tulip,  Inc. In conjunction with the SF Holdings Investment,
American  Industrial Partners Capital Fund, L.P. ("AIP") assigned the Management
Services  Agreement,  as amended,  to SF Holdings which assigned its interest to
Fonda Group Inc. ("Fonda"), a wholly owned subsidiary of SF Holdings.

         On October 22, 1998, the Company's Board of Directors approved a change
in the Company's  fiscal year end from  September 30 to the 52 or 53 week period
ending on the last Sunday in September.  This change became effective for Fiscal
1998,  which is the period from  October 1, 1997  through  September  27,  1998;
Fiscal 1999 is the period from  September  28, 1998 through  September 26, 1999.
The Fiscal 1997 period is shown as the  historical  period from  October 1, 1996
through September 30, 1997.

         The  Company  has  historically  sold  its  products  to two  principal
customer  groups,  institutional  foodservice and food packaging.  Institutional
foodservice  customers  primarily  purchase  disposable hot and cold drink cups,
lids, food  containers,  plates,  bowls,  cutlery and straws.  Products are sold
directly and through  distributors  to quick  service  restaurant  chains,  full
service restaurants,  convenience stores, hospitals,  airlines, theaters, school
systems and other  institutional  customers.  Food packaging customers primarily
purchase  paper  and  plastic  containers  for the  dairy  and  food  processing
industries.  Food packaging  customers also lease filling and packaging machines
designed  and  manufactured  by the  Company  that  fill and seal the  Company's
containers  in  customers'  plants.  The  Company  manufactures  and markets its
products in Canada to national  accounts and  distributors.  During Fiscal 1999,
the Company  began  selling  consumer  foodservice  products  primarily  through
grocery  stores,  club stores and  convenience  stores.  During Fiscal 1998, the
Company sold its bakery operations.

         The Company's  business is seasonal,  as away from home  consumption of
disposable  products  increases  in the late spring and summer.  This results in
disproportionately  higher net income in the last six months of the fiscal  year
as  cost  absorption  improves  resulting  from  a  more  profitable  sales  and
production mix.


Fiscal 1999 Compared to Fiscal 1998

         Net sales increased $20.3 million, or 2.4%, to $863.8 million in Fiscal
1999  compared to $843.5  million in Fiscal  1998.  Excluding  the impact of the
December 1997 bakery business sale, which resulted in a $3.0 million decrease in
sales, net sales increased $23.3 million, or 2.8%, reflecting a 2.8% increase in
sales  volume to  domestic  customers,  partially  offset by a 0.4%  decrease in
average  realized  domestic sales price.  The decrease in average realized sales
price  reflects a shift in sales from  higher  priced food  packaging  customers
towards  institutional  foodservice  customers.  Sales  volume to  institutional
foodservice  customers  increased  3.9%  primarily as a result of the  Company's
focus on revenue  growth

                                       10

<PAGE>

with key customers.  Sales volume to food packaging  customers  decreased  5.2%,
primarily  resulting  from  decreases  in demand by large  accounts  in the food
packaging  customer  base due to market  conditions,  such as  consolidation  of
customers  and  competition.  Net sales to  Canadian  customers  increased  $4.4
million, or 8.0%,  primarily due to increased sales volume from the introduction
of new products.

         Gross profit  increased  $44.2 million,  or 79.3%, to $100.0 million in
Fiscal 1999  compared to $55.8  million in Fiscal 1998.  As a percentage  of net
sales,  gross profit increased to 11.6% in Fiscal 1999 from 6.6% in Fiscal 1998.
This  improvement  is  attributable  to a shift in  sales  to a more  profitable
product mix and the cost reduction initiatives implemented by the Company in the
latter part of Fiscal 1998, including reductions in workforce,  expense controls
and improved manufacturing efficiencies.

         Selling, general and administrative expenses decreased $1.4 million, or
2.1%,  to $67.4 million in Fiscal 1999 compared to $68.8 million in Fiscal 1998.
As a  percentage  of net sales,  selling,  general and  administrative  expenses
decreased to 7.8% in Fiscal 1999 from 8.2% in Fiscal 1998.  This decrease is due
primarily to cost  savings  associated  with  headcount  reductions  made in the
second  quarter of Fiscal  1998,  which is partially  offset by increased  legal
expenses  of $2.0  million  related to the Fort James  settlement.  See "Item 3.
Legal Proceedings".

         Restructuring  charge (credit) was adjusted resulting in income of $0.5
million in Fiscal 1999 compared to an expense of $0.9 million in Fiscal 1998. In
March  1998,  the  Company  established  restructuring  reserves  primarily  for
severance and related costs in connection with workforce  reductions.  This plan
has been completed, resulting in a reversal of $0.5 million.

         Other (income)  expense,  net was $1.2 million of income in Fiscal 1999
compared to $12.4 million of expense in Fiscal 1998. In Fiscal 1999, the Company
recognized $1.2 million gain on the sale of property, plant and equipment.

         Operating  income  (loss)  increased  $65.6 million to $34.3 million in
Fiscal 1999 compared to an operating loss of $31.3 million in Fiscal 1998 due to
the reasons described above.

         Interest expense, net decreased $1.3 million, or 3.0%, to $41.7 million
in Fiscal  1999  compared  to $43.0  million in Fiscal  1998.  This  decrease is
attributable to lower market interest rates on lower outstanding  balances under
the  Company's  revolving  credit  facility,  which  was  partially  offset by a
reduction in interest income on escrow fund balances.

         Income tax expense (benefit) decreased $26.8 million to $2.9 million in
Fiscal 1999 compared to $29.7 million in the Fiscal 1998. The effective rate for
Fiscal 1999 and 1998 was 40%.

         Net income (loss) decreased $41.7 million, or 90.5%, to $4.4 million in
Fiscal  1999  compared  to $46.1  million  in  Fiscal  1998  due to the  reasons
described above.


 Fiscal 1998 Compared to Fiscal  1997

         Net sales decreased $42.5 million, or 4.8%, to $843.5 million in Fiscal
1998  compared to $886.0  million in Fiscal 1997.  The December 1997 sale of the
bakery business resulted in a $27.9 million decrease in sales. Additionally, the
change in the Company's  fiscal year end  shortened  the  Company's  1998 fiscal
period by three  days.  The  Company's  net sales  during  such three day period
totaled $8.1 million.  Excluding the impact of the bakery  business sale and the
shortened  reporting  period,  net sales  decreased  by $6.5  million,  or 0.8%,
reflecting a 2.2% increase in domestic sales volume and a 3.1% average  decrease
in domestic sales price. Price has been negatively  impacted both by competition
in the

                                       11

<PAGE>

marketplace  and by  declining  raw  material  prices.  The benefit of lower raw
material  prices  is  generally   passed  on  to  customers.   Sales  volume  to
institutional  foodservice customers increased 2.5% primarily as a result of the
Company's  focus on revenue  growth  with key  customers.  Sales  volume to food
packaging  customers  decreased 0.1%. Net sales to Canadian customers  increased
$1.4  million,  or 2.5%,  primarily  due to  volume  increases  associated  with
promotional  programs offered by major customers in the second quarter of Fiscal
1998.

         Gross profit  decreased  $7.4  million,  or 11.7%,  to $55.8 million in
Fiscal 1998  compared to $63.2  million in Fiscal 1997.  As a percentage  of net
sales,  gross profit  decreased to 6.6% in Fiscal 1998 from 7.1% in Fiscal 1997.
This  decrease is partially  attributable  to charges  relating to the Company's
initiative to eliminate certain slow-moving and low demand inventory items which
were  recognized in the third quarter of Fiscal 1998. In addition,  gross profit
was negatively impacted by the sale of the bakery business.

         Selling, general and administrative expenses increased $2.0 million, or
3.0%,  to $68.8 million in Fiscal 1998 compared to $66.8 million in Fiscal 1997.
As a  percentage  of net sales,  selling,  general and  administrative  expenses
increased to 8.2% in Fiscal 1998 from 7.5% in Fiscal 1997. The Company  incurred
increased  expenses  primarily as a result of (i) increased  sales and marketing
costs  associated with the Company's  focus on increasing  sales volume with key
customers,  (ii) costs  associated with the Year 2000 readiness  program,  (iii)
maintenance and depreciation on the new MIS system and (iv) expenses  associated
with employee relocation charges. These increased expenses were partially offset
in the third and fourth  quarters of Fiscal 1998 by cost  savings as a result of
headcount reductions and related spending as discussed below.

         Restructuring  charge (credit) decreased to $0.9 million in Fiscal 1998
compared to $9.7 million in Fiscal 1997. In March 1998, the Company  reduced its
workforce  and in  connection  therewith  recognized  charges  of $5.1  million,
primarily  for  severance  and  related  costs.  This  charge was offset by $4.2
million of the  restructuring  reserves as of  September  30,  1997,  which were
decreased due to a change in the  restructuring  plan as a result of a change in
senior management in connection with the SF Holdings Investment.  See Note 15 of
the Notes to Consolidated Financial Statements.

         Asset  impairment  expense  decreased  to $5.0  million in Fiscal  1998
compared to $24.5 million in Fiscal 1997. In March 1998, the Company  decided to
rationalize  certain  product  lines.  As a result,  the Company  evaluated  the
recoverability  of the carrying value of the equipment and other assets utilized
for such product  lines,  which  resulted in a $5.0 million charge to write down
the assets to their fair market value.  The Company  believes these product line
rationalizations  will not  have a  material  adverse  effect  on the  Company's
results  of  operations  or  financial  condition.  See Note 15 of the  Notes to
Consolidated Financial Statements.

         Other (income) expense, net was $12.4 million of expense in Fiscal 1998
compared to $0.1 million of income in Fiscal 1997.  In Fiscal 1998,  the Company
recognized certain nonrecurring charges, consisting primarily of $4.4 million of
financial  advisory and legal fees associated  with the SF Holdings  Investment,
$3.7 million of  severance  expenses as a result of the  termination  of certain
officers  of  the  Company  pursuant  to  executive  separation  agreements  and
retention  plans for certain key  executives,  $3.4 million of expense  based on
actuarial estimates associated with pending litigation and asset write- downs of
$1.8 million associated with the sale of the Riverside facility.  These expenses
were offset in part by the $3.3 million gain on the sale of the bakery business.

         Operating  income  (loss)  decreased  $6.5 million to $31.3  million in
Fiscal  1998  compared  to $37.8  million  in  Fiscal  1997  due to the  reasons
described above.

         Interest expense, net increased $2.7 million, or 6.7%, to $43.0 million
in Fiscal 1998  compared


                                       12

<PAGE>

to $40.3 million in Fiscal 1997 due primarily to higher average use of revolving
credit borrowings and incremental  interest paid on the portion of the revolving
credit facility used to refinance the SRC Series 1994-1 A-V Notes.

         Income tax expense (benefit) decreased $1.5 million to $29.7 million in
Fiscal 1998 compared to $31.2 million in the Fiscal 1997. The effective rate for
the 1998 and 1997 Fiscal was 40%.

         Cumulative  effect of change in  accounting  principle  was an  expense
recorded to write-off  previously  capitalized  costs as explained in Note 15 of
the Notes to Consolidated Financial Statements.

         Net income (loss) decreased $1.6 million,  or 3.5%, to $46.1 million in
Fiscal  1998  compared  to $47.7  million  in  Fiscal  1997  due to the  reasons
described above.


Liquidity And Capital Resources

         Historically,  the Company has relied on cash flow from  operations and
revolving  credit  borrowings to finance its working  capital  requirements  and
capital   expenditures.   In  Fiscal  1999,   the  Company  funded  its  capital
expenditures  from the sale of assets and cash  generated from  operations.  The
Company  expects to continue  this method of funding for its Fiscal 2000 capital
expenditures.

         Net cash  provided  by  operating  activities  in Fiscal 1999 was $49.8
million  compared to net cash used in operating  activities  of $17.8 million in
Fiscal  1998.  This  is  primarily  due  to  the  Company's  improved  operating
performance and a reduction in cash expended on non-recurring charges.

         Working capital decreased $280.2 million to a deficit of $174.1 million
at September 26, 1999 from $106.1  million at September 27, 1998.  This decrease
resulted primarily from the  reclassification  of the Senior Secured Notes which
mature on September  1, 2000 and the U.S.  Credit  Facility  (as defined  below)
which matures on August 1, 2000,  totaling  $274.5  million,  from  long-term to
current debt.

         Capital  expenditures  for Fiscal 1999 were $30.8  million  compared to
$37.5 million in Fiscal 1998. Capital expenditures in Fiscal 1999 included $13.8
million for new production equipment, $3.8 million for facility improvements and
$1.5 million for management  information systems,  with the remaining consisting
primarily of routine capital  improvements.  Funding for the Fiscal 1999 capital
expenditures was provided by cash generated from  operations,  $7.4 million from
the sale of  machinery,  including  $2.4  million  from the sale of paper  plate
making  equipment  to an  affiliated  company,  $1.7  million from the sale of a
manufacturing  facility and $5.5  million  from cash in escrow  related to asset
sales in Fiscal 1998.  During  Fiscal 2000,  the Company  intends to continue to
rely on a combination  of cash generated by operations and the sale of assets to
fund capital expenditures.

         The Company's  revolving credit facility allows up to $135.0 million in
borrowings,  subject to borrowing base limitations (the "U.S. Credit Facility").
Borrowings  under the U.S.  Credit  Facility  mature on August 1, 2000 and as of
September  26, 1999,  $42.3  million was  available.  Borrowings  under the U.S.
Credit Facility bear interest, at the Company's election, at a rate equal to (i)
LIBOR plus 2.25% or (ii) a bank's base rate plus 1.00%, plus certain other fees.
The  U.S.  Credit  Facility  is  secured  by  accounts  receivable,   inventory,
equipment,  intellectual  property,  general intangibles and the net proceeds on
the sale of any of the foregoing. Although the Company intends to refinance this
debt,  there can be no  assurances  that the Company will be able to obtain such
refinancing on terms and conditions acceptable to the Company.

         The Company has a credit  facility which provides for a term loan of up
to Cdn $10.0  million  and  revolving  credit of up to Cdn  $10.0  million  (the
"Canadian  Credit  Facility").  Term loan  borrowings


                                       13

<PAGE>

under the Canadian  Credit Facility are payable  quarterly  through May 2001 and
revolving credit  borrowings and term loan borrowings have a final maturity date
of June 15, 2001. As of September 26, 1999, Cdn $4.3 million (approximately $2.9
million) was available  under such  facility.  The Canadian  Credit  Facility is
secured by all the existing and thereafter  acquired real and personal  tangible
assets of Lily Cups Inc. ("Lily Cups"),  a subsidiary of Sweetheart Cup, and the
net proceeds on the sale of any of the foregoing. Borrowings bear interest at an
index rate plus 2.25% with respect to the  revolving  credit  borrowings  and an
index rate plus 2.50% with respect to the term loan borrowings.

         The Company's  Senior Secured Notes mature on September 1, 2000.  Prior
to that date, the Company may redeem these notes at a price equal to 100% of the
principal  amount,  plus  accrued  interest.  Although  the  Company  intends to
refinance this debt, there can be no assurances that the Company will be able to
obtain such refinancing on terms and conditions  acceptable to the Company.  The
Senior  Secured Notes are secured by mortgages on the real property owned by the
Company.  Payment of principal and interest of the Senior  Subordinated Notes is
subordinate to the Senior Indebtedness (as defined therein),  which includes the
U.S.  Credit  Facility  and the Senior  Secured  Notes.  The Company may, at its
election, redeem the Senior Subordinated Notes at any time at a redemption price
equal to a percentage  (currently 102.625% and declining in annual increments to
100% after August 31, 2001) of the principal amount, plus accrued interest.  The
Sweetheart  Notes  provide that upon the  occurrence  of a Change of Control (as
defined therein),  the holders will have the option to require the redemption of
the  Sweetheart  Notes at a  redemption  price  equal  to 101% of the  principal
amount, plus accrued interest.

         The  instruments  governing  the  indebtedness  of the Company  contain
customary  covenants  and  events  of  default,  including  without  limitation,
restrictions on, subject to defined  exceptions,  the payment of dividends,  the
incurrence of additional  indebtedness,  investment  activities and transactions
with affiliates.

         In January  1999,  the United States  Supreme Court denied  plaintiffs'
Petition for Writ of  Certiorari in the matter of Aldridge v.  Lily-Tulip,  Inc.
Salary Retirement Plan Benefits Committee and Fort Howard Cup Corporation, Civil
Action No. CV 187-084.  The court decided that the Plan was lawfully terminated.
On April 27,  1999,  the  Plaintiffs  filed a motion in the  District  Court for
reconsideration of the court's dismissal without appropriate relief and a motion
for attorneys' fees with a request for delay in  determination of entitlement to
such fees.  On June 17, 1999,  the District  Court  deferred  these  motions and
ordered discovery in connection therewith. Discovery is expected to be completed
by the end of December 1999. The Company has begun the process of paying out the
termination  liability.  As of the fiscal year ending  September  26, 1999,  the
Company had disbursed $3.7 million in termination payments. The initial estimate
of the total  termination  liability,  less these  payments,  exceeds assets set
aside in the Plan by  approximately  $16.3 million,  which amount has been fully
reserved by the Company. As of November 19, 1999, the Company has disbursed $4.2
million in termination payments.  The remaining payments are expected to be paid
during  Fiscal  2000.  The  Company's  operating  plan  contemplates  that  cash
generated  by  operations  and  amounts  available  under the  Company's  credit
facilities will be sufficient to make the required  payments under the Plan when
due.  However,  there can be no  assurance  that the  Company  will  achieve its
operating  plan and have the necessary cash to make these  payments.  Failure by
the Company to make such payments  could have a material  adverse  effect on the
Company and its financial condition.
See "Item 3. Legal Proceedings".

         A patent  infringement  action  seeking  injunctive  relief and damages
relating to the Company's  production and sale of certain paper plates  entitled
Fort  James  Corporation  v.  Sweetheart  Cup  Company  Inc.,  Civil  Action No.
97-C-1221,  was  filed in the  United  States  District  Court  for the  Eastern
District of Wisconsin on November 21, 1997.  During the fourth quarter of Fiscal
1999,  mediation  resulted in a  settlement  of this action  whereby the Company
agreed to pay damages of $2.6  million.  This amount has been fully  reserved by
the Company, with the first of two payments, $1.6 million, made on September

                                       14

<PAGE>

30, 1999. The second payment of $1.0 million is due July 1, 2000.

         Management   believes  that  cash  generated  by  operations,   amounts
available under the Company's  credit  facilities and funds generated from asset
sales should be  sufficient  to meet the  Company's  expected  operating  needs,
including  termination  liabilities under the Plan, planned capital expenditures
and debt service requirements in the next twelve months.


Year 2000

         Many of the Company's  computer  systems may be unable to process dates
beyond   December   31,  1999.   This  could   result  in  system   failures  or
miscalculations  which  could have  material  adverse  effects on the  Company's
business,  financial  condition  or  results  of  operations.  The  Company  has
completed a Year 2000  readiness  program  intended to identify the programs and
infrastructures  that could be  affected  by Year 2000  issues and  resolve  the
problems that were identified on a timely basis.

         The Company has completed the hardware and operating systems conversion
phase. With respect to the application  phase, the Company is Year 2000 ready in
all systems.  The Company has also completed its internal  assessment  phase for
technology  embedded within equipment and believes that a significant portion of
its manufacturing  equipment will not be effected by Year 2000 issues due to its
operations  use or it was Y2K ready  when  purchased.  The  Company  has been in
contact  with key vendors  and  business  partners  to ensure that key  business
transactions  will be Year 2000 ready. As of September 26, 1999, the Company has
received  detailed  business  plans and  commitments  from the majority of these
vendors that they are or will be Year 2000 ready.  The Company  expects that its
business  systems  will be  Year  2000  ready,  but it may  experience  isolated
incidences  of  non-compliance   and  potential  outages  with  respect  to  its
information  technology  infrastructure.  The most likely "worst case  scenario"
would be  disruption  of utility  services.  While such  failures  could  affect
important  operations  of the Company,  the Company  cannot  presently  estimate
either the likelihood or the potential  cost of such failures.  The Company will
allocate internal resources,  to be ready to take action, as a contingency plan,
should these events occur. Investors are cautioned,  however, that the Company's
assessment of its  readiness,  the costs of performing the program and the risks
attendant  thereto and the need for any additional  contingency plans may change
materially in the future as the Year 2000 approaches.

         As of September 26, 1999,  $2.8 million had been spent,  including $1.6
million in Fiscal 1999.  The Company does not  anticipate  any further  spending
under the Year 2000 readiness program.  However,  there can be no assurance that
the Company will identify all Year 2000 issues in advance of their occurrence or
that they will be able to successfully  remedy all problems that are discovered.
Failure by the Company and/or its significant  vendors and customers to complete
Year 2000  readiness  programs in a timely manner could have a material  adverse
effect on the Company's business, financial condition and results of operations.
In addition,  the revenue stream and financial  stability of existing  customers
may be adversely  impacted by Year 2000 problems which could cause  fluctuations
in the Company's revenues and operating profitability.


Net Operating Loss Carryforwards

         As of September 26, 1999, the Company had approximately $214 million of
net operating loss ("NOL")  carryforwards  for federal income tax purposes which
expire at  various  dates  through  2019.  Although  the  Company  expects  that
sufficient taxable income will be generated in the future to realize these NOLs,
there can be no  assurance  that  future  taxable  income will be  generated  to
utilize such NOLs.

                                       15

<PAGE>

Impact of Recently Issued Accounting Standards

         The impact of recently issued accounting standards is discussed in Note
1 of the Notes to Consolidated Financial Statements.


Item7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

         NONE


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The response to this item is  submitted  as a separate  section of this
report, beginning on page 28.


Item 9.  CHANGES  IN  AND  DISAGREMENTS   WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

         NONE


                                       16

<PAGE>

                                    PART III

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Set forth below are the names,  ages and  positions  of the  directors,
executive  officers and key employees of Sweetheart  Holdings and Sweetheart Cup
as of November 24, 1999. All directors hold office until the next annual meeting
of  shareholders  and until their  successors  are duly  elected and  qualified.
Officers serve at the discretion of the Board of Directors.

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

Dennis Mehiel             57        Chairman  and  Chief  Executive  Officer  of
                                    Sweetheart Holdings and Sweetheart Cup

Thomas Uleau              55        President,   Chief  Operating   Officer  and
                                    Director   of   Sweetheart    Holdings   and
                                    Sweetheart Cup

W. Richard Bingham        63        Director   of   Sweetheart    Holdings   and
                                    Sweetheart Cup

Kim A. Marvin             38        Director   of   Sweetheart    Holdings   and
                                    Sweetheart Cup

Theodore C. Rogers        65        Director   of   Sweetheart    Holdings   and
                                    Sweetheart Cup

Michael Hastings          52        Senior Vice  President - Sales and Marketing
                                    of Sweetheart Holdings and Sweetheart Cup

Hans H. Heinsen           46        Senior  Vice  President  - Finance and Chief
                                    Financial Officer of Sweetheart Holdings and
                                    Sweetheart Cup

Charles E. Busse          61        Vice President - Research and Engineering of
                                    Sweetheart Holdings and Sweetheart Cup

Daniel M. Carson          53        Vice   President   -  General   Counsel  and
                                    Corporate  Secretary of Sweetheart  Holdings
                                    and Sweetheart Cup

William H. Haas           58        Vice   President   -  Sales  of   Sweetheart
                                    Holdings and Sweetheart Cup

Rick Schneider            50        Vice President - Manufacturing of Sweetheart
                                    Holdings and Sweetheart Cup

Jeffrey Seidman           45        Vice   President   -  Human   Resources   of
                                    Sweetheart Holdings and Sweetheart Cup


         Mr. Mehiel has been Chairman of the Board and Chief  Executive  Officer
of Sweetheart  Holdings and  Sweetheart Cup since March 1998. Mr. Mehiel is also
Chairman and Chief Executive  Officer of SF Holdings and its subsidiary,  Fonda.
Since 1966, he has been  Chairman of Four M Corporation  ("Four M"), a converter
and seller of interior  packaging,  corrugated sheets and corrugated  containers
which he co-founded, and since 1977 (except during a leave of absence from April
1994 through July 1995) he has been the Chief  Executive  Officer of Four M. Mr.
Mehiel is also the  Chairman  of Box USA of New  Jersey,  Inc.  ("Box  USA"),  a
manufacturer of corrugated containers,  and Chairman and Chief Executive Officer
of Creative  Expressions  Group  ("CEG"),  an affiliate and seller of disposable
party goods products.

         Mr. Uleau has been President, Chief Operating Officer and a Director of
Sweetheart  Holdings  and  Sweetheart  Cup since March 1998.  Mr.  Uleau is also
President,  Chief Operating  Officer and a Director of SF Holdings and Executive
Vice President of Fonda. He has been a director of Fonda since 1988. He has also
served in a variety of executive  officer  positions at Fonda since 1988. He has
been  Executive  Vice  President of CEG since 1996. He served as Executive  Vice
President and Chief  Financial  Officer of Four M from 1989 through 1993 and its
Chief Operating  Officer in 1994. He is also currently a director of Four M, CEG
and Box USA.

         Mr.  Bingham has been a Director of Sweetheart  Holdings and Sweetheart
Cup since August 1993. He co-founded  American  Industrial  Partners  Management
Company,  Inc.  ("AIPM")  and has been a director  and officer of the firm since
1989.  He is also a general  partner of AIP.  Mr.  Bingham  also has served as a

                                       17

<PAGE>

director of SF Holdings  since March,  1998.  Prior to joining AIPM, Mr. Bingham
was  director of the  Corporate  Finance  Department,  a member of the Board and
director of Mergers & Acquisitions at Lehman Brothers Kuhn Loeb Inc. Mr. Bingham
is also  currently  a director  of Bucyrus  International,  Great  Lakes  Carbon
Corporation,  RBX Group, Inc., Standadyne  Automotive  Corporation and Deerfield
Associates.

         Mr.  Marvin has been a Director of Sweetheart  Holdings and  Sweetheart
Cup since May 12, 1999. He joined the San Francisco  office of AIP as a managing
director in 1997 from the Mergers & Acquisition  department at Goldman,  Sachs &
Co where he was employed  since 1994. Mr. Marvin is also currently a director of
Bucyrus International and Great Lakes Carbon Corporation.

         Mr.  Rogers has been a Director of Sweetheart  Holdings and  Sweetheart
Cup since August 1993. He co-founded AIPM and has been a director and officer of
the firm since  1989.  He is also a general  partner of AIP.  From 1980  through
1987,  he served  as  Chairman,  President  and Chief  Executive  Officer  of NL
Industries,  Inc., a petroleum service and chemical  company.  Prior to 1980, he
served as an executive  of Armco Inc., a  diversified  steel  company,  where he
managed numerous  manufacturing  operations in the United States and Mexico. Mr.
Rogers is a former director of Allied Stores  Corporation,  Allied-Signal  Inc.,
Parsons  Corporation,  Southwest  Bancshares  and Mcorp.  He is also currently a
director of Bucyrus  International,  Great Lakes Carbon Corporation,  RBX Group,
Inc.,  Standadyne  Automotive   Corporation,   Steele  Heddle  Group  and  Derby
International Corporation.

         Mr.  Hastings has served as Senior Vice President - Sales and Marketing
for Sweetheart  Holdings and  Sweetheart  Cup since March 1998. Mr.  Hastings is
also Senior Vice President of Fonda. Prior to joining the Company,  Mr. Hastings
served as President of the Fonda Division of Fonda, which he joined in May 1995.
From December 1990 to April 1995, Mr. Hastings served as Vice President of Sales
and  Marketing  and as a member of the Board of  Directors  of Anchor  Packaging
Company,  a  manufacturer  of  institutional  films  and  thermoformed   plastic
packaging.  Prior to joining Anchor Packaging Company, Mr. Hastings was employed
for over 25 years in a variety of positions in the paper and plastic industries,
including  sales,  marketing  and plant  operations  management  at Scott  Paper
Company and Thompson Industries.

         Mr.  Heinsen  has served as Senior  Vice  President - Finance and Chief
Financial  Officer of Sweetheart  Holdings and  Sweetheart Cup since March 1998.
Mr. Heinsen also serves as Senior Vice President,  Chief  Financial  Officer and
Treasurer  of SF  Holdings  since  February  1998,  Senior  Vice  President  and
Treasurer of Fonda since February 1997,  Chief Financial  Officer of Fonda since
June 1996 and Chief  Financial  Officer  of CEG since  November  1998.  Prior to
joining  Fonda,  Mr.  Heinsen  spent 21 years in a variety of corporate  finance
positions with The Chase Manhattan Bank, N.A.

         Mr. Busse has served as Vice  President - Research and  Engineering  of
Sweetheart  Holdings and Sweetheart Cup and their  predecessors  since 1983. Mr.
Busse has held several  other  positions  with the Company and its  predecessors
since 1963.

         Mr. Carson has served as Vice President - General Counsel and Corporate
Secretary  of  Sweetheart  Holdings  since  October  1993 and has served as Vice
President - General  Counsel and Corporate  Secretary of  Sweetheart  Cup and as
Corporate  Secretary of Sweetheart  Holdings  since  February 1993. He served as
Assistant  General  Counsel and Director of U.S. Legal Affairs of Avon Products,
Inc., a consumer products company,  from September 1991 to February 1993 and was
Of Counsel to Bell,  Boyd & Lloyd  (Chicago,  Illinois) from June 1991 to August
1991.  From May 1981 until June 1991, Mr. Carson was Associate  General  Counsel
for Continental Can Company, Inc., a packaging and paper products company.

         Mr. Haas has served as Vice  President - Sales for  Sweetheart  Cup and
their  predecessors  since  1985 and as Vice  President  - Sales for  Sweetheart
Holdings  since  October 1998.  Prior to joining the Company,  Mr. Haas was Vice
President of Sales with Carnation Co., Inc., a food products  company,  where he
served for 20 years. Prior to joining Carnation Mr. Haas was with Nabisco, Inc.,
a food products company, as Director of National Account Sales.

         Mr.   Schneider  has  served  as  Vice  President  -  Manufacturing  of
Sweetheart  Holdings and Sweetheart Cup since October 1994. From October 1986 to
September  1994,  Mr.  Schneider  served  in

                                       18

<PAGE>

various manufacturing capacities including, Production Staff Manager, Operations
Manager and Plant  Manager.  Prior to joining the  Company,  Mr.  Schneider  was
employed for ten years by Boise  Cascade  Composite Can Division in a variety of
manufacturing positions.

         Mr.  Seidman  has  served  as  Vice  President  -  Human  Resources  of
Sweetheart  Holdings and Sweetheart Cup since September  1998.  Prior to joining
the  Company,  he was  with  Fonda  from  1995 to 1998,  where  he held  various
positions  including,   Vice  President  of  Human  Resources  and  Director  of
Operations.  Prior to Fonda,  he was  employed by Scott  Paper in various  human
resources positions since 1989.


Compensation of Directors

         The Directors of Sweetheart  Holdings and Sweetheart Cup do not receive
any direct  compensation from such companies for serving as a Director.  Certain
Directors of Sweetheart  Holdings and Sweetheart Cup are employees of Sweetheart
Holdings  and  Sweetheart  Cup and receive  compensation  as such and others are
employees of AIPM and Fonda, to which  Sweetheart Cup pays fees for advisory and
management   services.   See  "Item  13.  Certain   Relationships   and  Related
Transactions".  Directors are reimbursed for expenses  incurred while serving on
the Board of Directors.


Item 11.    EXECUTIVE COMPENSATION

            The  following   table  sets  forth   information   concerning   the
compensation,  for Fiscal  Years  1999,  1998 and 1997,  of the chief  executive
officer and the four most  highly  compensated  officers  and key  employees  of
Sweetheart  Holdings and  Sweetheart  Cup  (collectively,  the "named  executive
officers").  The Company has concluded that the aggregate  amount of perquisites
and other personal benefits paid to each of the named executive officers did not
exceed the lesser of (i) 10% of such officer's  total annual salary and bonus or
(ii) $50,000. Thus, such amounts are not reflected in the following table.


                                       19

<PAGE>
<TABLE>
<CAPTION>

                                                  Summary Compensation Table

                                                     Annual Compensation
----------------------------------------- --------------------------------------------------  ------------------
                                                                                                  All Other
           Name and Principal                                   Salary           Bonus          Compensation
                Position                       Fiscal             ($)           ($) (1)              ($)
----------------------------------------- ----------------- ---------------- ---------------  ------------------

Dennis Mehiel
<S>                                          <C>                <C>              <C>                <C>         <C>
   Chairman and Chief Executive  Officer     1999               349,650          340,000            1,743       (2)
   of     Sweetheart     Holdings    and     1998 (3)           188,775                -                -
   Sweetheart Cup                            1997                     -                -                -

Thomas Uleau
   President,  Chief  Operating  Officer     1999               298,654          445,000           78,037       (4)
   and Director of  Sweetheart  Holdings     1998 (5)           144,414                -           34,451       (6)
   and Sweetheart Cup                        1997                     -                -                -

William H. Haas
   Vice    President    -    Sales    of     1999               179,308          123,147          128,264       (7)
   Sweetheart  Holdings  and  Sweetheart     1998               177,923                -          443,348       (8)
   Cup                                       1997               180,000                -          364,443       (9)

Charles E. Busse
   Vice   President   -   Research   and     1999               177,216          130,199          128,606       (10)
   Engineering  of  Sweetheart  Holdings     1998               175,848                -          352,642       (11)
   and Sweetheart Cup                        1997               177,900                -          123,375       (12)

Michael Hastings
   Senior  Vice  President  - Sales  and     1999               124,231          255,000           49,722       (13)
   Marketing of Sweetheart  Holdings and     1998 (14)           56,664                -           54,387       (15)
   Sweetheart Cup                            1997                     -                -                -
</TABLE>

(1)   Amounts shown were paid based upon the Company's performance.

(2)   Reflects $1,743 of life insurance premiums paid by the Company.

(3)   Mr. Mehiel became Chairman and Chief Executive Officer effective March 12,
      1998. Amounts shown here were paid during the remainder of Fiscal 1998.

(4)   Reflects $67,604 paid for relocation  expenses,  $4,375  contributed under
      the 401(k) Plan, $5,965 of life insurance premiums paid by the Company and
      $93 of long-term disability insurance premiums paid by the Company.

(5)   Mr. Uleau became President, Chief Operating Officer and Director effective
      March 12,  1998.  Amounts  shown here were paid  during the  remainder  of
      Fiscal 1998.

(6)   Reflects $29,167 paid for relocation  expenses,  $2,785  contributed under
      the 401(k) Plan, $2,376 of life insurance premiums paid by the Company and
      $123 of long-term disability insurance premiums paid by the Company.

(7)   Reflects  $120,000  paid under the  Special  Incentive  Agreement,  $5,000
      contributed under the 401(k) Plan, $3,216 of life insurance  premiums paid
      by the Company and $48 of long-term  disability insurance premiums paid by
      the Company.

(8)   Reflects $67,631 paid under the Employee  Relocation  Agreement,  $120,000
      paid under the Special Incentive  Agreement,  $4,750 contributed under the
      401(k) Plan, $2,462 of life insurance  premiums paid by the Company,  $108
      of long-term disability  insurance premiums paid by the Company,  $196,019
      paid under the  Executive  Retention  Agreement and $52,378 paid under the
      Stock Option Repurchase Plan.

(9)   Reflects  $239,664 paid for relocation  expenses,  $120,000 paid under the
      Special Incentive

                                       20

<PAGE>

      Agreement,  $4,500  contributed  under  the  401(k)  Plan and $279 of life
      insurance premiums paid by the Company.

(10)  Reflects  $118,600  paid under the  Special  Incentive  Agreement,  $5,000
      contributed under the 401(k) Plan, $4,959 of life insurance  premiums paid
      by the  Company  and  $47 of  long-term  disability  premiums  paid by the
      Company.

(11)  Reflects $190,077 paid under the Executive Retention  Agreement,  $118,600
      paid under the Special Incentive  Agreement,  $35,458 paid under the Stock
      Option Repurchase Plan,  $4,750  contributed under the 401(k) Plan, $3,651
      of life  insurance  premiums  paid by the  Company  and $106 of long- term
      disability premiums paid by the Company.

(12)  Reflects  $118,600  paid under the  Special  Incentive  Agreement,  $4,500
      contributed under the 401(k) Plan and $275 of life insurance premiums paid
      by the Company.

(13)  Reflects $41,414 paid for relocation  expenses,  $6,000  contributed under
      the 401(k) Plan, $2,255 of life insurance premiums paid by the Company and
      $53 of long-term disability premiums paid by the Company.

(14)  Mr. Hastings became Senior Vice President of Sales and Marketing effective
      March 12,  1998.  Amounts  shown here were paid  during the  remainder  of
      Fiscal 1998.

(15)  Reflects $50,249 paid for relocation  expenses,  $2,769  contributed under
      the 401(k) Plan, $1,296 of life insurance premiums paid by the Company and
      $73 of long-term disability premiums paid by the Company.


Stock Option Plan

         On March 12, 1998,  all  outstanding  options to purchase  stock of the
Company  were cashed out in full  pursuant  to the  agreement  governing  the SF
Holdings  Investment  ("Stock Option Repurchase  Plan").  There are currently no
options to purchase either Class A or Class B common stock outstanding.

Employee Benefit Plans

         A majority  of the  Company's  employees  ("participants")  are covered
under a 401(k) defined  contribution plan. The Company's annual contributions to
this defined  contribution  plan currently  represent a 50% match on participant
contributions.   The  Company's  match  is  currently   limited  to  participant
contributions up to 6% of participant  salaries.  Effective January 1, 2000, the
Company  will  provide  a  matching  contribution  of 100% on the  first 2% of a
participant's  salary  and 50% on the  next  4% of a  participant's  salary.  In
addition,  the Company is allowed to make discretionary  contributions.  Certain
Company employees are covered under defined benefit plans.  Benefits under these
plans are generally based on fixed amounts for each year of service.

         The Company  sponsors  various defined benefit  post-retirement  health
care plans that cover substantially all full-time employees.  The plans, in most
cases,  pay stated  percentages  of most medical  expenses  incurred by retirees
after  subtracting  payments by Medicare or other  providers  and after a stated
deductible has been met.  Participants  generally become eligible after reaching
age 60 with ten  years of  service.  The  majority  of the  Company's  plans are
contributory, with retiree contributions adjusted annually. The Company does not
fund the plans.

         The executive  officers of the Company are not covered under any of the
Company's defined benefit plans.  Rather, such persons are covered under defined
contribution plans only.


                                       21

<PAGE>

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership  of  Sweetheart  Holdings  common stock as of November 24,
1999,  by  holders  having  beneficial  ownership  of more than five  percent of
Sweetheart  Holdings  common  stock,  by each  of the  directors  of  Sweetheart
Holdings,  by each of the named  executive  officers  and by all  directors  and
executive  officers of Sweetheart  Holdings as a group.  All of the  outstanding
common stock of Sweetheart Cup is owned by Sweetheart Holdings.
<TABLE>
<CAPTION>

                                                          Class A Common Stock            Class B Common Stock
                                                        ---------------------------    --------------------------
Name of Beneficial Owner                                 Number of        Percent        Number of       Percent
------------------------                                  Shares          of Class        Shares         of Class
                                                        -----------       ---------    -----------     ----------
<S>                                                       <C>                <C>            <C>            <C>
American Industrial Partners Capital Fund, L.P.           280,189            26.8%            -               -
         One Maritime Plaza
         Suite 2525
         San Francisco, CA 94111

Mellon  Bank,  N.A.,  as Trustee for First Plaza Group
Trust (1).............................................    182,000            17.4             -               -
         One Mellon Bank Center
         Pittsburgh, PA 15258

Leeway & Co., as nominee for the Long Term Investment
Trust (2)..........................................        30,197             2.9             -               -
         c/o State Street Bank & Trust Co.
         Master Trust Division - W6C
         1 Enterprise Drive
         North Quincy, MA 02171

Ell & Co., as nominee for the Lucent Technologies
Inc. Master Pension Trust (3).......................       47,803             4.6             -               -
         c/o The Northern Trust Company
         40 Broad Street
         8th Floor
         New York, NY 10004

SF Holdings  Group, Inc.............................      502,080            48.0     4,393,200           100.0%
         373 Park Avenue South
         New York, NY  10016

W. Richard Bingham (4)..............................      280,189            26.8             -               -

Theodore C. Rogers (4)..............................      280,189            26.8             -               -

Dennis Mehiel (5)...................................      405,218            38.7     3,523,755            80.2

Directors and executive officers as a group
(12 persons)(6).....................................      692,856            66.2     3,588,533            81.7
</TABLE>

                                       22

<PAGE>

(1)   Mellon Bank,  N.A.,  acts as the trustee (the  "Trustee")  for First Plaza
      Group Trust ("First Plaza"),  a trust under and for the benefit of certain
      employee  benefit  plans of  General  Motors  Corporation  ("GM")  and its
      subsidiaries.  These  shares  may be  deemed to be owned  beneficially  by
      General   Motors   Investment   Management   Corporation   ("GMIMCo"),   a
      wholly-owned  subsidiary of GM. GMIMCo's  principal  business is providing
      investment advice and investment  management  services with respect to the
      assets of certain  employee  benefit plans of GM and its  subsidiaries and
      with respect to the assets of certain direct and indirect  subsidiaries of
      GM and associated entities.  GMIMCo is serving as First Plaza's investment
      manager with respect to these shares and in that  capacity it has the sole
      power to direct the  Trustee as to the  voting  and  disposition  of these
      shares. Because of the Trustee's limited role, beneficial ownership of the
      shares by the Trustee is disclaimed.

(2)   State  Street  Bank & Trust Co.  acts as trustee for a trust under and for
      the benefit of certain  employee  benefit  plans of  American  Telephone &
      Telegraph Co. ("AT&T") and its subsidiaries. These shares may be deemed to
      be owned beneficially by the Long Term Investment Trust.

(3)   The Northern  Trust  Company acts as trustee for a trust under and for the
      benefit of certain  employee  benefit  plans of Lucent  Technologies  Inc.
      These  shares  may  deemed  to  be  owned   beneficially   by  the  Lucent
      Technologies Inc. Master Pension Trust.

(4)   All of such shares are held of record by AIP.  Messrs.  Bingham and Rogers
      are general  partners of AIP and share  investment  and voting  power with
      respect  to the  securities  owned by AIP.  The  business  address  of Mr.
      Bingham is One Maritime Plaza, Suite 2525, San Francisco, CA 94111 and the
      business address of Mr. Rogers is 551 Fifth Avenue,  Suite 3800, New York,
      NY 10176.

(5)   All of such shares are held of record by SF  Holdings of which Mr.  Mehiel
      beneficially  owns 80.2% of the  outstanding  common  stock.  The business
      address of Mr. Mehiel is 373 Park Avenue South, New York, NY, 10016.

(6)   All of such shares are held of record by either AIP or SF Holdings.


Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Shareholders' Agreement

         Pursuant to the terms and conditions of the SF Holdings Investment, the
Company's  Board  of  Directors  consists  of five  members,  three  of whom are
nominated by the shareholders of the Company prior to the SF Holdings Investment
(the  "Original  Shareholders")  and two of whom are  nominated  by SF Holdings.
Pursuant to the Company's  by-laws,  significant  actions by the Company's Board
require the vote of four  directors  and include,  among  others:  (i) a merger,
consolidation  or other  combination of the Company with or into another entity,
(ii)  the sale of all or a  material  portion  of the  Company's  assets,  (iii)
entering  into any new line of business,  (iv) the issuance or repurchase of any
equity securities,  (v) the incurrence of any indebtedness for money borrowed or
the  refinancing  of any  existing  indebtedness,  (vi)  approval  of the annual
business plans and operating  budgets,  (vii) the  termination  indebtedness  or
modification of any of the terms of the Management  Services  Agreement,  (viii)
the  amendment  or   modification  of  any  provisions  of  the  certificate  of
incorporation,  (ix) the selection of the  Company's  chief  executive  officer,
chief  operating  officer  and  chief  financial  officer,  (x)  any  change  of
accountants  and (xi) the removal of any officers of the Company.  Additionally,
pursuant to a certain  Management  Services  Agreement,  as amended,  Fonda,  an
affiliate  of SF  Holdings,  manages the  day-to-day  operations  of the Company
subject to the direction of the Board of Directors.

         The  Original  Shareholders,  after March 12,  2003,  have the right to
exchange  their  shares of Class A Common  Stock  for  warrants  (the  "Exchange
Warrants")  to  purchase,  for nominal  consideration,  shares of

                                       23

<PAGE>

Class C Common Stock of SF Holdings,  representing 10% of the total  outstanding
shares of common  stock of SF  Holdings at the  consummation  of the SF Holdings
Investment  on a fully  diluted  basis.  SF Holdings has the right to cause such
exchange and has the right  thereafter to repurchase the Exchange  Warrants,  in
whole or in part,  for an  aggregate  call  price of $50.0  million,  subject to
increase at 12.5% per annum  beginning March 12, 1998 until March 12, 2003. Upon
occurrence of a merger,  the Original  Shareholders will be required to exchange
their shares of Class A Common Stock for the Exchange Warrants.  In addition, in
the event SF Holdings proposes to sell shares of Class A or Class B Common Stock
in an amount  greater than 30% of the  outstanding  shares of common stock,  the
Original  Shareholders  will have the right to  participate in such sale. In the
event SF Holdings  proposes to sell shares of common stock in an amount  greater
than 30% of the  outstanding  shares of common stock,  SF Holdings will have the
right to require the Original  Shareholders  to sell all, but not less than all,
of their shares of common stock.


Management Services Agreement with SF Holdings

         Pursuant to the Management Services Agreement,  as amended, SF Holdings
and AIPM,  which manages AIP, are entitled to receive an aggregate annual fee of
$1.85  million,  payable  semi-annually  45 days  after the  scheduled  interest
payment dates for the Senior Secured Notes, and is reimbursed for  out-of-pocket
expenses.  Under this  agreement,  SF  Holdings  has the  right,  subject to the
direction  of the  Company's  Board  of  Directors,  to  manage  the  day to day
operations  of the Company.  AIPM  provides  substantial  ongoing  financial and
management services to the Company. Fees were split between SF Holdings and AIPM
50/50  during  Fiscal  1999.  Fees will be split  between SF Holdings  and AIPM,
respectively,  60/40 during Fiscal 2000,  70/30 during Fiscal 2001 and paid 100%
to SF Holdings  thereafter.  SF Holdings has assigned  substantially  all of its
interests under this agreement to Fonda,  but retains  $200,000 per year of fees
for administrative services.


Transactions with Affiliates

         During  Fiscal  1999,  the  Company  sold  certain  of its paper  plate
manufacturing  assets to Fonda for $2.4 million.  In February  1999, the Company
entered into a five year operating lease with Fonda,  whereby the Company leases
certain paper cup  manufacturing  assets from Fonda,  resulting in equal monthly
payments totaling $0.2 million per year. Independent appraisals were obtained to
determine the fairness of both the purchase price and lease terms.

         During  Fiscal  1999,  the Company  sold $6.8 million of cups to Fonda,
$0.2 million of paper scrap to Fibre Marketing  Group,  LLC ("Fibre  Marketing")
and $0.1 million of cups to CEG. Accounts receivable,  as of September 26, 1999,
from these sales are $0.8 million due from Fonda and $0.1 million due from Fibre
Marketing.  Sales  to  these  affiliates  in  preceding  fiscal  years  were not
material.

         During Fiscal 1999,  the Company  purchased  $6.1 million of corrugated
containers from Four M, $3.8 million of paper plates from Fonda and $0.4 million
of travel services from Emerald Lady, Inc. Accounts payable, as of September 26,
1999, from these purchases,  are $0.5 million due to Four M and $0.7 million due
to Fonda.  During Fiscal 1998, the Company  purchased $1.8 million of corrugated
containers  from Four M, of which $0.4 million was payable as of  September  27,
1998. Purchases from Fonda and Emerald Lady, Inc. in preceding fiscal years were
not material.

         All of the above referenced  affiliates are under the common control of
the Company's Chief Executive Officer.

                                       24

<PAGE>

                                     PART IV


Item 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a) The following documents are filed as a part of this report:

     1.  The financial statements listed in the "Index to Consolidated Financial
         Statements."

     2.  The  financial  statement  schedule  listed in the "Index to  Financial
         Statement Schedules."

     3.  Exhibits

         3.1      Certificate  of  Incorporation  of  Sweetheart  Holdings  Inc.
                  (incorporated  by reference  from Exhibit 3.1 of the Company's
                  report  on Form  10-K  dated  December  22,  1993  (the  "1993
                  10-K")).
         3.3      Certificate  of  Amendment  to  the  Restated  Certificate  of
                  Incorporation of Sweetheart Holdings Inc. dated March 11, 1998
                  (incorporated  by reference  from Exhibit 3.3 of the Company's
                  report on Form 10-Q dated May 15, 1998).
         3.4      Amended and Restated By-Laws of Sweetheart Holdings Inc. dated
                  March 12, 1998  (incorporated by reference from Exhibit 3.4 of
                  the Company's report on Form 10-Q dated May 15, 1998).
         4.1      Indenture for the Senior Secured Notes between  Sweetheart Cup
                  Company Inc. and United  States Trust  Company of New York, as
                  Trustee   (incorporated  by  reference  from  Exhibit  4.1  of
                  Sweetheart Holdings Inc.'s Report on Form 8-K dated October 6,
                  1993 (the "1993 8-K")).
         4.2      Indenture for the Senior Subordinated Notes between Sweetheart
                  Cup Company Inc. and U.S.  Trust  Company of Texas,  N.A.,  as
                  Trustee  (incorporated  by  reference  from Exhibit 4.2 on the
                  1993 8-K).
         10.11    $2,500,000 Manchester, New Hampshire Industrial Revenue Bonds,
                  Series 1979:  Loan  Agreement and Assignment in Trust dated as
                  of June 1, 1979 between the Industrial  Development  Authority
                  of the State of New Hampshire and Maryland Cup Corporation and
                  State Street Bank and Trust Company,  Trustee;  and Assumption
                  Agreement dated as of August 26, 1983 by MC Acquisition  Corp.
                  (incorporated   by  reference   from  Exhibit   10.10  of  the
                  Registration Statement).
         10.13    Asset  Sale  Agreement  dated as of  October  6, 1993  between
                  Sweetheart  Holdings  Inc.  and  Sweetheart  Cup Company  Inc.
                  (incorporated  by reference from Exhibit 10.1 of the Company's
                  report on Form 10-Q dated February 11, 1994).
         10.14    Bill of Sale,  Assignment and Assumption Agreement dated as of
                  October  6,  1993  between   Sweetheart   Holdings   Inc.  and
                  Sweetheart  Cup Company Inc.  (incorporated  by reference from
                  Exhibit  10.2  of the  Company's  report  on Form  10-Q  dated
                  February 11, 1994).
         10.15    Wraparound Note dated as of October 6, 1993 made by Sweetheart
                  Holdings Inc. to Sweetheart Cup Company Inc.  (incorporated by
                  reference  from Exhibit 10.3 of the  Company's  report on Form
                  10-Q dated February 11, 1994).
         10.16    Asset  Distribution  Agreement  dated as of  October  6,  1993
                  between  Sweetheart  Holdings Inc. and  Sweetheart Cup Company
                  Inc.  (incorporated  by  reference  from  Exhibit  10.4 of the
                  Company's report on Form 10-Q dated February 11, 1994).
         10.17    Manufacturing  Agreement  dated as of October 6, 1993  between
                  Sweetheart  Holdings Inc. and Sweetheart Cup Company Inc. (the
                  "Manufacturing  Agreement")  (incorporated  by reference  from
                  Exhibit  10.5  of the  Company's  report  on Form  10-Q  dated
                  February 11,

                                       25

<PAGE>

                  1994).
         10.18    First Amendment to Manufacturing  Agreement dated February 25,
                  1994 (incorporated by reference from Exhibit 10.21 of the 1994
                  10-K).
         10.19    Patent/Know-How  License Agreement dated as of October 6, 1993
                  between  Sweetheart  Holdings Inc. and  Sweetheart Cup Company
                  Inc.  (incorporated  by  reference  from  Exhibit  10.6 of the
                  Company's report on Form 10-Q dated February 11, 1994).
         10.20    Sweetheart  Holdings Inc. Stock Option and Purchase Plan dated
                  December  17, 1993  (incorporated  by  reference  from Exhibit
                  10.26 of the 1994 10-K).
         10.21    Sweetheart Holdings Inc. Management Incentive Plan dated as of
                  January 27, 1995  (incorporated by reference from Exhibit 10.1
                  of the Company's report on Form 10-Q dated February 9, 1995).
         10.22    Sweetheart Cup Company Inc. Severance Pay Plan (Effective July
                  1, 1994)  (incorporated  by reference from Exhibit 10.2 of the
                  Company's report on Form 10-Q dated February 9, 1995).
         10.23    Sweetheart Cup Company Inc.  Deferred  Compensation Plan dated
                  as of January 27, 1995 (incorporated by reference from Exhibit
                  10.3 of the  Company's  report on Form 10-Q dated  February 9,
                  1995).
         10.24    Registration  Statement  on Form S-8 dated  April 17, 1995 for
                  the Sweetheart  Cup Company Inc.  Deferred  Compensation  Plan
                  (incorporated  by reference from Exhibit 10.1 of the Company's
                  report on Form 10-Q dated May 11, 1995).
         10.27    Loan  Agreement  dated  August  1,  1996  between   Sweetheart
                  Holdings Inc. and the State of Maryland Department of Business
                  and  Economic  Development  (incorporated  by  reference  from
                  Exhibit 10.27 of the 1996 10-K).
         10.30    Special Incentive  Agreement between Sweetheart  Holdings Inc.
                  and its subsidiary, Sweetheart Cup Company Inc. and William H.
                  Haas dated November 18, 1996  (incorporated  by reference from
                  Exhibit 10.30 of the 1996 10-K).
         10.32    Special Incentive  Agreement between Sweetheart  Holdings Inc.
                  and its subsidiary, Sweetheart Cup Company Inc. and Charles E.
                  Busse dated November 18, 1996  (incorporated by reference from
                  Exhibit 10.32 of the 1996 10-K).
         10.35    Amended and Restated Loan and Security Agreement dated October
                  24, 1997  between  Sweetheart  Holdings  Inc. as borrower  and
                  BankAmerica  Business Credit,  Inc., as Agent (incorporated by
                  reference  from Exhibit 10.35 of the Company's  report on Form
                  10-K dated December 30, 1997 (the "1997 10-K")).
         10.39    Executive Retention Agreement between Sweetheart Holdings Inc.
                  and its subsidiary, Sweetheart Cup Company Inc. and William H.
                  Haas dated  October 1, 1997  (incorporated  by reference  from
                  Exhibit 10.39 of the 1997 10-K).
         10.46    Employee Relocation Agreement between Sweetheart Holdings Inc.
                  and its subsidiary, Sweetheart Cup Company Inc. and William H.
                  Haas dated December 19, 1997  (incorporated  by reference from
                  Exhibit 10.46 of the 1997 10-K).
         10.47    Second Restated  Management Services Agreement dated March 12,
                  1998  (incorporated  by reference  from  Exhibit  10.47 of the
                  Company's report on Form 10-Q dated May 15, 1998).
         10.48    Amendment  No. 1 to the Second  Restated  Management  Services
                  Agreement dated March 12, 1998 (incorporated by reference from
                  Exhibit 10.48 of the  Company's  report on Form 10-Q dated May
                  15, 1998).
         10.49    Amendment  No. 2 to the Amended and Restated Loan and Security
                  Agreement dated March 10, 1998 (incorporated by reference from
                  Exhibit 10.49 of the  Company's  report on Form 10-Q dated May
                  15, 1998).
         10.50    Amendment  No. 3 to the Amended and Restated Loan and Security
                  Agreement dated May 12, 1998  (incorporated  by reference from
                  Exhibit 10.50 of the  Company's  report on Form 10-Q dated May
                  15, 1998).
         10.51    Credit  Agreement  dated as of June 15, 1998 between Lily Cups
                  Inc. as Borrower and General  Electric  Capital Canada Inc. as
                  Lender  (incorporated  by reference  from Exhibit

                                       26

<PAGE>

                  10.51 of the  Company's  report on Form 10-Q dated  August 14,
                  1998).
         10.52    Security  Agreement made as of June 15, 1998 between Lily Cups
                  Inc. as Grantor and General  Electric  Capital  Canada Inc. as
                  Lender  (incorporated  by reference  from Exhibit 10.52 of the
                  Company's report on Form 10-Q dated August 14, 1998).
         10.54    Consent and  Amendment  No. 4 to the Amended and Restated Loan
                  and Security Agreement dated November 1, 1998.
         10.55    Executive Retention Agreement between Sweetheart Holdings Inc.
                  and its subsidiary, Sweetheart Cup Company Inc. and Charles E.
                  Busse dated October 1, 1997.
         16.0     Letter from Arthur  Andersen LLP in  accordance  with Item 304
                  (a)(3) of  Regulation  S-K  (incorporated  by  reference  from
                  Exhibit 16.0 to the  Company's  report on Form 8-K dated April
                  29, 1998).
         18.0     Preferability  Letter  (incorporated by reference from Exhibit
                  18.0 of the  Company's  report on Form 10-Q  dated  August 14,
                  1998).
         21.1     Subsidiaries  of the Company  (incorporated  by reference from
                  Exhibit 21.1 of the 1994 10-K).
         27.0     Financial Data Schedule

(b)  Current Reports on Form 8-K

         No reports on Form 8-K were  filed in the fiscal  year ended  September
26, 1999.

                                       27

<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----

Independent Auditors' Report                                                 29

Report of Independent Public Accountants                                     30

Consolidated Balance Sheets as of September 26, 1999
         and September 27, 1998                                              31

Consolidated Statements of Operations and Other
         Comprehensive Income (Loss) for Fiscal Years
         1999, 1998 and 1997                                                 32

Consolidated Statements of Cash Flows for Fiscal Years
         1999, 1998 and 1997                                                 33

Consolidated Statements of Shareholders' Equity for Fiscal
         Years 1999, 1998 and 1997                                           34

Notes to Consolidated Financial Statements                                   35

                                       28

<PAGE>

INDEPENDENT AUDITORS' REPORT




To the Board of Directors of
Sweetheart Holdings Inc.:


We have  audited the  accompanying  consolidated  balance  sheets of  Sweetheart
Holdings  Inc. and  Subsidiaries  (the  "Company")  as of September 26, 1999 and
September 27, 1998 and the related  consolidated  statements  of operations  and
comprehensive  income (loss),  shareholders' equity and cash flows for the years
then ended.  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.  These 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 1999 and 1998  consolidated  financial  statements  present
fairly, in all material  respects,  the financial  position of the Company as of
September 26, 1999 and September 27, 1998 and the results of its  operations and
its cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.

As discussed in Note 1 to the  consolidated  financial  statements,  in 1998 the
Company  changed  its method for  accounting  for  inventories  from the last-in
first-out method to the first-in first-out method and retroactively restated the
1997  consolidated  financial  statements for the change.  Also, as discussed in
Note 15 to the consolidated financial statements, the Company changed its method
for accounting for reengineering costs in connection with software installation.


/s/ DELOITTE & TOUCHE LLP
Baltimore, Maryland
November 19, 1999

                                       29

<PAGE>




                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Sweetheart Holdings Inc.:


We have  audited  the  accompanying  consolidated  balance  sheet of  SWEETHEART
HOLDINGS  INC. (a Delaware  corporation)  AND  SUBSIDIARIES  as of September 30,
1997,  and the related  consolidated  statements  of  operations,  shareholders'
equity and cash flows for the year then ended.  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 audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial  position of Sweetheart  Holdings Inc. and
Subsidiaries  as of September 30, 1997,  and the  consolidated  results of their
operations  and their cash flows for the year then  ended,  in  conformity  with
generally accepted accounting principles.

As  explained  in Note 1 to the  financial  statements,  the  Company  has given
retroactive effect to the change in accounting for inventory  valuation from the
last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method.


                                                      /s/ ARTHUR ANDERSEN LLP

Baltimore, Maryland
December 8, 1997
(except with respect to
 the matter discussed in
 Note 1- Inventories, as
 to which the date is
 December 3, 1998)


                                       30

<PAGE>
<TABLE>
<CAPTION>

                                               SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                                                      CONSOLIDATED BALANCE SHEETS
                                                  (In thousands, except share data)

                                                                                       September 26,     September 27,
                                                                                            1999             1998
                                                                                       -------------     -------------
                                          Assets
                                          ------
         Current assets:
<S>                                                                                       <C>               <C>
           Cash and cash equivalents                                                      $2,965            $1,367
           Cash in escrow                                                                      -             5,464
           Receivables, less allowances of $1,905 and $1,817, respectively                88,325            85,248
           Inventories                                                                   129,473           133,065
           Deferred income taxes                                                          12,962            11,506
           Spare parts                                                                    18,421            19,278
                                                                                        --------           -------
                Total current assets                                                     252,146           255,928
                                                                                        --------           -------

         Property, plant and equipment, net                                              331,676           355,224

         Deferred income taxes                                                            41,055            41,395
         Other assets                                                                      9,763            13,079
                                                                                        --------          --------
                Total assets                                                            $634,640          $665,626
                                                                                        ========          ========
                     Liabilities and Shareholders' Equity
                     ------------------------------------

         Current liabilities:
            Accounts payable                                                             $66,654           $66,205
            Accrued payroll and related costs                                             45,089            39,324
            Other current liabilities                                                     39,045            40,866
            Current portion of long-term debt                                            275,446             3,445
                                                                                         -------           -------
                Total current liabilities                                                426,234           149,840
                                                                                         -------           -------
         Long-term debt                                                                  118,446           422,438
         Other liabilities                                                                71,686            74,365
                                                                                         -------           -------
                Total liabilities                                                        616,366           646,643
                                                                                         -------           -------
         Shareholders' equity:

            Class A Common  Stock - Par value  $.01 per  share;  1,100,000  shares
            authorized; 1,046,000 shares issued and outstanding                               10                10
            Class B Common  Stock - Par value  $.01 per  share;  4,600,000  shares
            authorized; 4,393,200 shares issued and outstanding                               44                44
              Additional paid-in capital                                                 101,090           101,090
              Accumulated deficit                                                        (80,083)          (75,670)
              Accumulated other comprehensive income (loss)                               (2,787)           (6,491)
                                                                                        --------          --------
                 Total shareholders' equity                                               18,274            18,983
                                                                                        --------          --------

         Total liabilities and shareholders' equity                                     $634,640          $665,626
                                                                                        ========          ========

          See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                       31

<PAGE>

                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      AND OTHER COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                             Fiscal
                                                    -----------------------------------------------------
                                                            1999               1998             1997(a)
                                                    -------------------- ---------------- ---------------
<S>                                                        <C>              <C>               <C>
Net sales                                                 $863,781          $843,502          $886,017
Cost of sales                                              763,750           787,706           822,818
                                                          --------          --------          --------
         Gross profit                                      100,031            55,796            63,199

Selling, general and administrative expenses                67,406            68,818            66,792

Other  (income) expense, net                                (1,180)           12,400               (73)

Asset impairment expense                                         -             5,000            24,550

Restructuring charge (credit)                                 (512)              897             9,680
                                                            ------          --------          --------
         Operating income (loss)                            34,317           (31,319)          (37,750)

Interest expense, net of interest income of $122,
      $755 and $1,547, respectively                         41,671            42,955            40,265
                                                            ------          --------          --------
         Income (loss) before income tax expense
         (benefit), cumulative effect of change
         in accounting principle and
         extraordinary loss                                 (7,354)          (74,274)          (78,015)

Income tax expense (benefit)                                (2,941)          (29,711)          (31,206)
                                                            -------         --------          ---------
         Income (loss) before cumulative effect
         of change in accounting principle and
         extraordinary loss                                 (4,413)          (44,563)          (46,809)

Cumulative effect of change in accounting
    principle (net of income taxes of $1,007)                    -             1,511                 -

Extraordinary loss on debt extinguishment (net of
    income taxes of  $627)                                       -                 -               940
                                                           -------          --------          --------
         Net income (loss)                                 $(4,413)         $(46,074)         $(47,749)
                                                           ========         =========         =========

Other comprehensive income (loss), net of tax:
         Foreign Currency translation adjustment               272            (1,062)             (185)
         Minimum pension liability adjustment
         (net of income taxes of ($2,288) and
         $3,281, respectively)                               3,432            (4,922)                -
                                                           -------          --------          --------
Other Comprehensive income (loss)                            3,704            (5,984)             (185)
                                                           -------          --------          --------
         Comprehensive income (loss)                         $(709)         $(52,058)         $(47,934)
                                                           ========         =========         =========
</TABLE>

(a)  Prior  period  balances  have  been  restated  (see  Note 1 of the Notes to
Consolidated Financial Statements).

          See accompanying Notes to Consolidated Financial Statements.

                                       32

<PAGE>
<TABLE>
<CAPTION>

                                                 SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                               (In thousands)

                                                                                        Fiscal
                                                                          -------------------------------------------
                                                                               1999            1998          1997
                                                                          -------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                         <C>               <C>          <C>
Net income (loss)                                                            $(4,413)        $(46,074)     $(47,749)
Adjustments  to  reconcile  net  income  (loss)  to net  cash
provided by (used in) operating activities:
     Depreciation and amortization                                            48,270           46,738        47,723
     Deferred income tax credit                                               (2,941)         (29,711)      (31,206)
     Gain on sale of assets                                                   (1,301)          (4,245)            -
     Cumulative effect of change in accounting principle, net                      -            1,511             -
     Asset impairment expense                                                      -            5,000        24,550
     Extraordinary loss, net of tax                                                -                -           940
Changes in operating assets and liabilities:
     Receivables                                                              (3,077)             526        (1,341)
     Inventories                                                               3,592            9,212        25,790
     Accounts payable                                                            449            7,272       (11,541)
     Other, net                                                                9,193           (8,023)      (10,408)
                                                                              -------         --------      --------
     Net cash provided by (used in) operating activities                      49,772          (17,794)       (3,242)
                                                                              ------          --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property, plant and equipment                                   (30,790)         (37,534)      (47,757)
Proceeds from sale of bakery                                                       -           14,718             -
Proceeds from sales of property, plant and equipment                           9,058            7,719        17,843
                                                                             --------         --------      --------
     Net cash provided by (used in) investing activities                     (21,732)         (15,097)      (29,914)
                                                                             --------         --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES

Net borrowings (repayments) under revolving credit
     facilities                                                              (28,619)          54,433        44,852
Repayment of debt                                                             (3,287)         (58,562)            -
(Increase)/decrease in restricted cash                                             -           29,016          (146)
(Increase)/decrease in cash escrow                                             5,464            7,859       (13,323)
Payment of financing fees                                                          -           (1,509)            -
Other                                                                              -              371            52
                                                                             --------         --------       -------
     Net cash provided by (used in) financing activities                     (26,442)          31,608        31,435
                                                                             --------         --------       -------

NET INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                                               1,598           (1,283)       (1,721)

CASH AND CASH EQUIVALENTS, beginning of period                                 1,367            2,650         4,371
                                                                             --------          -------       -------
CASH AND CASH EQUIVALENTS, end of period                                      $2,965           $1,367        $2,650
                                                                             ========          =======       =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:

    Interest paid                                                            $39,828          $39,866       $38,818
                                                                             ========          =======       =======
    Income taxes paid                                                           $ 80            $ 711          $  -
                                                                             ========          =======       =======

          See accompanying Notes to Consolidated Financial Statements.
</TABLE>

                                       33

<PAGE>
<TABLE>
<CAPTION>

                                                   SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                                (In thousands)

                                                                                   Accumulated     Retained
                                              Class A     Class B     Additional      Other       Earnings/              Total
                              Common Stock    Common       Common       Paid-In   Comp-rehensive (Accumulated  Note   Shareholders'
                                            Stock (par) Stock (par)     Capital   Income (Loss)    Deficit)  Receivable   Equity
                              -----------------------------------------------------------------------------------------------------
<S>                           <C>           <C>              <C>         <C>          <C>         <C>          <C>         <C>
Balance, September 30, 1996      101,100         --          --          --           (322)      18,197         (423)     118,552

Net income (loss)                   --           --          --          --           --        (47,749)        --        (47,749)

Payment received on note
  receivable                        --           --          --          --           --           --             52           52

Translation adjustment              --           --          --          --           (185)        --           --           (185)
                              ----------   ----------   ---------   ---------    ---------    ---------    ---------    ---------
Balance, September 30, 1997      101,100         --          --          --           (507)     (29,552)        (371)      70,670

Net income (loss)                   --           --          --          --           --        (46,074)        --        (46,074)

Stock dividend                      --           --            44        --           --            (44)        --           --

Common stock exchange           (101,100)          10        --       101,090         --           --           --           --

Payment received on note
  receivable                        --           --          --          --           --           --            371          371

Minimum pension liability
  adjustment                        --           --          --          --         (4,922)        --           --         (4,922)

Translation adjustment              --           --          --          --         (1,062)        --           --         (1,062)
                              ----------   ----------   ---------   ---------    ---------    ---------    ---------    ---------

Balance, September 27, 1998         --             10          44     101,090       (6,491)     (75,670)        --         18,983

Net income (loss)                   --           --          --          --           --         (4,413)        --         (4,413)

Minimum pension liability
  adjustment                        --           --          --          --          3,432         --           --          3,432

Translation adjustment              --          --          --           --            272         --           --            272
                              ----------   ---------    ---------   ---------    ---------    ---------    ---------    ---------
Balance, September 26, 1999   $     --     $       10   $      44   $ 101,090    $  (2,787)   $ (80,083)   $    --      $  18,274
                              ==========   ==========   =========   =========    =========    =========    =========    =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                       34

<PAGE>

                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         As used in these  notes,  unless the context  otherwise  requires,  the
"Company" shall refer to Sweetheart  Holdings Inc.  ("Sweetheart  Holdings") and
its subsidiaries, including Sweetheart Cup Company Inc. ("Sweetheart Cup").


1.  SIGNIFICANT ACCOUNTING POLICIES

         Business Segments - The Company operates in a single segment. It is one
of the largest  producers of plastic and paper  disposable  foodservice and food
packaging  products in North America.  In Fiscal 1999, the Company had net sales
of approximately $864 million. The Company's principal products include cups for
both hot and cold drinks, lids, food containers,  bowls, plates, straws, cutlery
and  containers  for the food and  dairy  industries.  The  brand  names for the
Company's principal products include Sweetheart(R),  Lily(R), Trophy(R), Jazz(R)
and Preference(TM)  for cups and plates and Silent  Service(R),  Centerpiece(R),
Basix(R),  Guildware(R)  and Simple  Elegance(R) for foam dinnerware and plastic
cutlery.  In addition,  the Company  designs,  manufactures and leases container
filling  equipment for use by dairies and other food processors.  This equipment
is  specifically  designed  by the  Company  to  fill  and  seal  the  Company's
containers in customers' plants.  Sales to a major customer accounted for 11.7%,
12.1% and 13.7% for Fiscal Years 1999,  1998 and 1997,  respectively.  In Fiscal
1999,  domestic sales accounted for approximately 93% of the Company's net sales
while sales to Canadian customers totaled approximately 7%.

         Fiscal year end - In Fiscal  1998,  the  Company's  Board of  Directors
approved a change in the Company's  fiscal year from the year ended September 30
to the 52 or 53 week period ending on the last Sunday in September.  Fiscal 1999
is the 52 week period ended  September 26, 1999.  Fiscal 1998 is the period from
October  1, 1997  through  September  27,  1998.  Fiscal  1997 is the year ended
September 30, 1997.

         Principles of Consolidation and Translation - The financial  statements
include the accounts of the Company and its subsidiaries on a consolidated basis
as of September  26, 1999,  September  27, 1998 and  September  30, 1997 and for
Fiscal Years 1999, 1998 and 1997. Assets and liabilities denominated in Canadian
dollars are  translated  at the rates of exchange in effect at the balance sheet
date.  Income  amounts are  translated  at the  average of the monthly  exchange
rates.  The  cumulative  effect  of  translation  adjustments  is  deferred  and
classified as a cumulative translation adjustment.  All significant intercompany
and intergroup accounts and transactions have been eliminated.

         Cash, including Cash Equivalents,  Restricted Cash and Cash in Escrow -
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash overdrafts are reclassified to
accounts  payable  and  accrued  payroll and  related  costs.  Cash  received as
proceeds from the sale of assets is restricted to qualified capital expenditures
under  the  indentures  governing  the  Senior  Secured  Notes  and  the  Senior
Subordinated  Notes (See Note 10) and is held in escrow with the  trustee  until
utilized.

         Inventories - Effective June 1, 1998, the Company changed its method of
accounting  for  inventories  from the last-in  first-out  (LIFO)  method to the
first-in  first-out (FIFO) method.  Management  believes that the FIFO method is
preferable because it more accurately  presents the Company's financial position
as it reflects more recent costs at the balance  sheet date and more  accurately
matches revenues with costs reported during the period presented.  The financial
statements  of prior  periods  have been  restated  to apply the FIFO  method of
accounting for inventories retroactively.  The effect of this restatement was to
decrease retained earnings as of September 30, 1996 by $2.9 million.  Net income
decreased  by $0.1  million  and $1.1  million  in Fiscal  Years  1998 and 1997,
respectively.

                                       35
<PAGE>

         Property,  Plant and  Equipment  -  Property,  plant and  equipment  is
recorded at cost,  less  accumulated  depreciation,  and is  depreciated  on the
straight-line  method over the  estimated  useful lives of the assets,  with the
exception of property,  plant and equipment  acquired  prior to January 1, 1991,
which is depreciated on the declining balance method.

         The asset lives of buildings and fixtures range between 12 and 50 years
and have an average useful life of 38 years.  The asset lives of equipment range
between 5 and 18 years and have an average useful life of 13 years.

         Revenue Recognition - Revenue is recognized upon shipment of product.

         Income  Taxes  -  Deferred  income  taxes  are  provided  to  recognize
temporary differences between the financial reporting basis and the tax basis of
the  Company's  assets and  liabilities.  The  principal  differences  relate to
depreciation expense and pension and post-retirement benefits.

         No  deferred   income  taxes  have  been  provided  on  the  cumulative
undistributed  earnings of the Canadian  subsidiary  of  Sweetheart  Cup.  Those
earnings  (approximately  $12.0 million) are considered  permanently  reinvested
under Accounting Principles Bulletin No. 23.

         Reclassifications   -  Certain   prior   period   balances   have  been
reclassified to conform with current presentation.

         Impact of Recently  Issued  Accounting  Standards  - In June 1998,  the
Financial  Accounting  Standards Board issued Statement of Financial  Accounting
Standard  ("SFAS") No. 133,  Accounting for Derivative  Instruments  and Hedging
Activities.  SFAS No. 133  establishes  accounting  and reporting  standards for
derivative  instruments and requires that an entity recognize all derivatives at
fair value in the statement of financial position. The Company is in the process
of evaluating the new statement, which is effective for Fiscal 2001.

         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  fiscal  years.  Actual  results  could  differ from those
estimates.


2.  INVENTORIES

         The components of inventories are as follows (in thousands):

                                                September 26,     September 27,
                                                    1999              1998
                                                ------------      -------------
               Raw materials and supplies          $30,092           $27,661
               Finished  products                   92,193            96,943
               Work in progress                      7,188             8,461
                                                  --------          --------
                        Total inventories         $129,473          $133,065
                                                  ========          ========


                                       36

<PAGE>

3.  PROPERTY, PLANT AND EQUIPMENT, NET

         The Company's major classes of property,  plant and equipment,  net are
as follows (in thousands):

                                                 September 26,    September 27,
                                                      1999            1998
                                                 --------------   -------------
     Land                                         $   19,051       $   19,111
     Buildings and improvements                       89,933           79,774
     Machinery and equipment                         444,302          414,273
     Construction in progress                          5,575           26,561
                                                  ----------       ----------
         Total property, plant and equipment         558,861          539,719
                                                  ----------       ----------
     Accumulated depreciation                       (227,185)        (184,495)
                                                  -----------      -----------
         Property, plant and equipment, net       $  331,676       $  355,224
                                                  ==========       ===========

         Depreciation  of property,  plant and equipment  totaled $45.9 million,
$43.9 million and $44.1 million in Fiscal 1999, 1998 and 1997, respectively.


4.  OTHER ASSETS

         The components of other assets are as follows (in thousands):

                                                 September 26,     September 27,
                                                     1999              1998
                                              ------------------   -------------
     Debt issuance costs, net of
          accumulated amortization                $    4,077       $    6,426
     Intangible pension asset
          (See Note 8)                                 2,217            2,256
     Prepaid assets                                      989            2,016
     Other                                             2,480            2,381
                                                  ----------       ----------
              Total other assets                  $    9,763       $   13,079
                                                  ==========       ==========

         Amortization of debt issuance costs totaled $2.4 million,  $2.8 million
and $3.6 million for Fiscal 1999, 1998 and 1997,  respectively,  and is included
in interest expense.  In addition,  during Fiscal 1997, the Company  accelerated
$1.6 million of amortization  for unamortized debt issuance costs related to the
early retirement of debt. This charge is shown as an extraordinary  loss (net of
$0.6 million of income taxes) on the  Consolidated  Statements of operations and
Other Comprehensive Income (Loss).

                                       37

<PAGE>

5.  OTHER CURRENT LIABILITIES

         The  components  of  other  current  liabilities  are  as  follows  (in
thousands):

                                                September 26,      September 27,
                                                     1999              1998
                                                -------------      -------------
     Sales allowances                            $   8,980         $   8,146
     Restructuring charges                               -             1,637
     Taxes, other than income taxes                  4,434             3,591
     Litigation, claims and assessments
          (See Note 17)                             20,004            18,903
     Interest payable                                3,616             3,925
     Other                                           2,011             4,664
                                                 ---------         ---------
          Total other current liabilities        $  39,045         $  40,866
                                                 =========         =========

6.  OTHER  LIABILITIES

         The components of other liabilities are as follows (in thousands):

                                                September 26,     September 27,
                                                     1999              1998
                                                -------------     -------------
     Post-retirement health care benefits
          (See Note 8)                           $  59,401          $  57,564
     Pensions (See Note 8)                           9,044             15,960
     Prepaid vendor credits                          1,500                  -
     Other                                           1,741                841
                                                 ---------          ---------
              Total other liabilities            $  71,686          $  74,365
                                                 =========          =========


7.       ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

         The Company adopted the comprehensive  income statement format required
by  the  Financial   Accounting   Standards   Board  SFAS  No.  130,   Reporting
Comprehensive  Income  effective  with Fiscal  1999,  and has restated all prior
periods  presented.  The components of accumulated  other  comprehensive  income
(loss) are as follows (in thousands):

                                                September 26,     September 27,
                                                     1999              1998
                                                -------------     -------------
     Foreign currency translation
          adjustment                              $  (1,297)        $ (1,569)
     Minimum pension liability
          adjustment                                 (1,490)          (4,922)
                                                  ----------        ---------
     Accumulated other comprehensive
          income (loss)                           $  (2,787)        $ (6,491)
                                                  ==========        =========


                                       38

<PAGE>


8.  EMPLOYEE BENEFIT AND POST-RETIREMENT HEALTH CARE PLANS

         The Company  sponsors  various defined benefit  post-retirement  health
care plans that cover substantially all full-time employees.  The plans, in most
cases,  pay stated  percentages  of most medical  expenses  incurred by retirees
after  subtracting  payments by Medicare or other  providers  and after a stated
deductible has been met.  Participants  generally become eligible after reaching
age 60 with ten  years of  service.  The  majority  of the  Company's  plans are
contributory, with retiree contributions adjusted annually. The Company does not
fund the plans.

         A majority of the employees ("participants") are covered under a 401(k)
defined  contribution  plan. The Company's annual  contributions to this defined
contribution plan represent a 50% match on participant  contributions for Fiscal
Years  represented  through 1999. The Company's  match is limited to participant
contributions  up to 6% of  participant  salaries.  In addition,  the Company is
allowed to make  discretionary  contributions.  Costs charged against operations
for this  defined  contribution  plan were $3.2  million,  $3.4 million and $3.6
million for Fiscal 1999,  1998 and 1997,  respectively.  Certain  employees  are
covered  under  defined  benefit  plans.  Certain  benefits  under the plans are
generally based on fixed amounts for each period of service.


         Net periodic  cost for the  Company's  pension and other  benefit plans
consists of the following (in thousands):

                                                           Fiscal
                                            ------------------------------------
                                              1999          1998        1997
                                            ------------------------------------
      Pension Benefits
      Service Cost                          $ 1,019      $    989     $  1,111
      Interest Cost                           4,013         3,881        3,720
      Return on plan assets                  (3,916)       (3,883)      (3,212)
      Amortization of prior service cost        241           222          244
      Recognized net actuarial cost             269            41           18
                                            ---------    ---------    --------
           Net periodic pension cost        $ 1,626      $  1,250     $  1,881
                                            ---------    ---------    --------

      Other Benefits
      Service Cost                         $  1,027      $    898     $    859
      Interest Cost                           3,271         3,056        3,098
      Amortization of prior service cost       (299)         (432)        (416)
      Recognized net actuarial cost            (416)         (978)        (910)
                                           ---------     ---------    --------
           Net periodic benefit cost       $  3,583      $  2,544     $  2,631
                                           ---------     ---------    --------



                                       39

<PAGE>

         The following table sets forth the change in benefit obligation for the
         Company's benefit plans (in thousands):
<TABLE>
<CAPTION>


                                                   Pension Benefits                Other Benefits
                                               September 26,  September 27,  September 26,  September 27,
                                                   1999          1998            1999            1998
                                               -------------  -------------  -------------  -------------
Change in benefit obligation:
<S>                                             <C>         <C>         <C>         <C>
Benefit obligation at beginning of period       $ 58,653      $ 52,710       $ 48,771       $ 42,833
Service cost                                       1,019           989          1,027            898
Interest cost                                      4,013         3,881          3,271          3,056
Amendments                                           202           948         (3,520)           331
Actuarial (gain) or loss                          (3,469)        3,441         (4,962)         4,615
Benefits paid                                     (3,544)       (3,316)        (2,181)        (2,962)
                                                --------      --------       --------       --------
   Benefit obligation at end of period          $ 56,874      $ 58,653       $ 42,406       $ 48,771
Change in plan assets:
Fair  value of plan  assets at  beginning  of
     period                                     $ 38,600      $ 39,243           --             --
Actual return on plan assets                       5,737          (249)          --             --
Employer contributions to plan                     3,530         2,922          1,746          2,962
Participant contributions to plan                   --            --              435           --
Benefits paid                                     (3,544)       (3,316)        (2,181)        (2,962)
                                                --------      --------       --------       --------
   Fair value of plan assets at end of period   $ 44,323      $  38,600           --             --

Funded status                                   $(12,551)     $(20,053)      $(42,406)      $(48,771)
Unrecognized prior service cost                    2,217         2,256         (7,202)        (4,098)
Unrecognized (gain) loss                           2,444         8,004        (12,893)        (7,796)
                                                --------      --------       --------       --------
   Net liability recognized                     $ (7,890)     $ (9,793)      $(62,051)      $(60,665)
                                                --------      --------       --------       --------

</TABLE>

         The following  sets forth the amounts  recognized  in the  Consolidated
Balance Sheets:
<TABLE>
<CAPTION>

                                                        Pension Benefits                  Other Benefits
                                                 September 26,    September 27,    September 26,  September 27,
                                                      1999            1998             1999           1998
                                                 -------------   --------------    -------------  ------------
<S>                                               <C>             <C>               <C>             <C>
Accrued benefit liability                       $ (12,551)       $(20,053)         $(62,501)       $(60,665)
Intangible asset                                    2,217           2,256              --              --
Other (gain) loss                                     (40)           (199)             --              --
Deferred income taxes                                 994           3,281              --              --
Accrued other comprehensive (income) loss           1,490           4,922              --              --
                                                  -------         -------           -------         -------
   Net liability recognized                     $  (7,890)       $ (9,793)         $(62,051)       $(60,665)
                                                  -------         -------           -------         -------

</TABLE>

         The  assumptions  used in computing  the preceding  information  are as
follows:

                                                            Fiscal
                                                 --------  ---------   -------
                                                   1999       1998       1997
                                                 --------  ---------   --------
              Pension Benefits
              Discount rate                        7.75%      7.00%      7.50%
              Rate of return on plan assets       10.00%     10.00%     10.00%
              Other Benefits

              Discount rate                        7.75%      7.00%      7.50%


                                       40

<PAGE>

     For  measurement  purposes,  an 8% annual  rate of  increase in health care
benefits was assumed for 1999.  The rate is assumed to decrease  gradually to 5%
for 2001 and will remain at that level thereafter.

     A one  percentage  point change in the assumed  health care cost trend rate
     would have the following effects:

                                               One Percentage     One Percentage
                                               Point Increase     Point Decrease
                                               --------------     --------------
         Effect on accumulated post-
              retirement benefit obligation         $3,072          $(2,703)
         Effect on net periodic post-
              retirement benefit cost                 $210            $(177)


9.  INCOME TAXES

         The  income  tax  benefit   includes  the  following   components   (in
thousands):

                                        Fiscal
                            -----------------------------
                                1999     1998      1997
                            -----------------------------
Current-
   Federal                   $  --     $  --     $  --
   State                        --        --        --
   Foreign                      --        --        --
                             -------   -------   -------
    Total current               --        --        --
                             -------   -------   -------
Deferred -
   Federal                     2,549    25,588    26,794
   State                         364     3,656     3,828
   Foreign                        28       467       584
                             -------   -------   -------
    Total deferred             2,941    29,711    31,206
                             -------   -------   -------
                             $ 2,941   $29,711   $31,206
                             =======   =======   =======

         The effective tax rate varied from the U.S. Federal tax rate of 35% for
Fiscal 1999, 1998 and 1997 as a result of the following:

                                                       Fiscal Years
                                        ---------------------------------------
                                        1999              1998           1997
                                        ---------------------------------------
U.S. Federal tax rate                    35%               35%            35%
State income taxes, net of
   U.S. Federal tax impact                4                 4              4
Other, net                                1                 1              1
                                         ---               ---            ---
       Effective tax rate                40%               40%            40%
                                         ===               ===            ===

         At September 26, 1999, the Company has deferred tax liabilities of $139
million,  of which $13 million are current in nature and  deferred tax assets of
$193  million,  of which $25 million are current in nature.  Deferred tax assets
and liabilities have been netted as a current asset and non-current asset in the

                                       41

<PAGE>

accompanying  Consolidated  Balance Sheets. The principal temporary  differences
included above are depreciation, a $63 million liability, inventory adjustments,
an $11 million  liability,  net operating  loss carry  forwards,  an $84 million
asset,  post-retirement  health and pension benefits, a $27 million asset, other
employee benefits, an $8 million asset and $9 million of other net miscellaneous
items.

         At September 27, 1998, the Company had deferred tax liabilities of $137
million, of which $17 million were current in nature, and deferred tax assets of
$190 million,  of which $28 million were current in nature.  Deferred tax assets
and liabilities  have been netted as a current asset and a non-current  asset in
the  accompanying   Consolidated   Balance  Sheets.   The  principal   temporary
differences included above are depreciation, a $64 million liability,  inventory
adjustments,  a $17 million liability,  net operating loss carryforwards,  a $79
million asset, post-retirement health and pension benefits, a $30 million asset,
other  employee  benefits,  an $11  million  asset and $14  million of other net
miscellaneous asset items.

         The  Company  has net  operating  loss  carryforwards  for  income  tax
purposes of approximately $214 million,  of which $5 million expire in 2004, $51
million  expire in 2005, $25 million expire in 2006, $13 million expire in 2007,
$28 million  expire in 2008,  $46 million  expire in 2012, $45 million expire in
2018 and $1 million expire in 2019.

         Although future earnings cannot be predicted with certainty, management
currently believes that realization of the net deferred tax asset is more likely
than not.


                                       42

<PAGE>

10.  LONG-TERM OBLIGATIONS

         Long-term  debt,  including  amounts  payable  within  one year,  is as
follows (in thousands):

                                                  September 26,    September 27,
                                                      1999             1998
                                                ---------------    ------------
9.625% Senior Secured Notes                         $190,000          $190,000

10.5% Senior Subordinated Notes                      110,000           110,000

U.S. Credit Facility                                  84,476           113,708

Canadian Credit Facility                               9,416             9,675

Industrial revenue bond                                    -             2,500
                                                   ---------          --------
     Total debt                                      393,892           425,883

Less - Current portion of long-term debt            (275,446)           (3,445)
                                                   ---------          ---------
     Total long-term debt                           $118,446          $422,438
                                                    ========          ========

The aggregate  annual  maturities of long-term debt at September 26, 1999 are as
follows (in thousands):

                  Fiscal 2000                                  $ 275,446
                  Fiscal 2001                                      8,446
                  Fiscal 2002                                          -
                  Fiscal 2003                                    110,000
                  Fiscal 2004 and thereafter                           -
                                                                --------
                                                                $393,892
                                                                ========

         U.S.  Credit  Facility - The Company's 1997 Amended and Restated Credit
Agreement,  as amended, (the "U.S. Credit Facility") provides for a $135 million
revolving  credit  facility,  which matures on August 1, 2000.  Borrowings  bear
interest,  at the Company's election, at a rate equal to (i) LIBOR plus 2.25% or
(ii) a bank's base rate plus 1%, plus certain other fees.  The average  interest
rate in Fiscal 1999 was 7.8%.  Availability  is based on eligible  inventory and
accounts  receivable.  As of  September  26,  1999,  there was $2.0  million  of
outstanding standby letters of credit and $42.3 million available for additional
borrowings.  The fee for  outstanding  letters  of credit is 1.75% per annum and
there is a commitment  fee of 0.5% per annum on the daily average  unused amount
of the commitments.

         The  indebtedness  of Sweetheart Cup under the U.S.  Credit Facility is
guaranteed  by  Sweetheart  Holdings and secured by a first  priority  perfected
security  interest in  inventory,  accounts  receivable  and all proceeds of the
foregoing of Sweetheart Cup, a first priority security interest, shared with the
holders of the Senior  Secured  Notes,  in Shared  Collateral (as defined in the
U.S. Credit Facility to include  primarily all capital stock owned by Sweetheart
Holdings and Sweetheart Cup and of each of their  respective  present and future
direct  subsidiaries,  all  inter-company  indebtedness  payable  to  Sweetheart
Holdings or  Sweetheart  Cup by  Sweetheart  Holdings,  Sweetheart  Cup or their
respective  present and future  subsidiaries,  and any  proceeds  from  business
interruption  insurance),  and a second priority  perfected security interest in
the Senior Secured Note collateral as described below.

         The U.S.  Credit  Facility  contains  various  covenants that limit, or
restrict,  among  other  things,

                                       43

<PAGE>

indebtedness,  dividends,  leases,  capital expenditures and the use of proceeds
from asset  sales and  certain  other  business  activities.  Additionally,  the
Company must  maintain on a  consolidated  basis,  certain  specified  ratios at
specified times,  including,  without  limitation,  maintenance of minimum fixed
charge coverage ratio. The Company is currently in compliance with all covenants
under the U.S. Credit  Facility.  The U.S. Credit Facility  provides for partial
mandatory  prepayments upon the issuance of equity by Sweetheart Holdings or any
of its subsidiaries and full repayment upon any change of control (as defined in
the Agreement).

         Senior Secured Notes and Senior  Subordinated Notes - Sweetheart Cup is
the obligor and  Sweetheart  Holdings the guarantor with respect to $190 million
of Senior Secured Notes and $110 million of Senior Subordinated Notes.

         The Senior  Secured  Notes bear  interest at 9.625% per annum,  payable
semi-annually  in arrears on March 1 and  September 1 and mature on September 1,
2000.  The Senior  Secured  Notes are subject to redemption at the option of the
Company,  in whole or in part, at 100% of face value,  plus accrued  interest to
the  redemption  date.  The Senior Secured Notes are secured by a first priority
lien on substantially all of the assets of Sweetheart Cup, excluding  collateral
under the U.S.  Credit  Facility,  the capital  stock of its  subsidiaries,  and
inter-company  indebtedness.  Such notes are also  secured  by a second  lien on
collateral  under  the U.S.  Credit  Facility.  The  Senior  Secured  Notes  and
borrowings  under the U.S.  Credit  Facility are also jointly  secured by Shared
Collateral.

         The  Senior  Subordinated  Notes  bear  interest  at 10.50%  per annum,
payable  semi-annually  in  arrears  on March 1 and  September  1 and  mature on
September 1, 2003.  The Senior  Subordinated  Notes are subject to redemption at
the  option  of the  Company,  in  whole  or in part,  at the  redemption  price
(expressed as percentages of the principal amount), plus accrued interest to the
redemption  date,  for  redemptions  during the twelve  month  period  beginning
September 1 as follows: 1999 - 102.625%, 2000 - 101.313% and 2001 and thereafter
- 100%. The Senior Subordinated Notes are subordinate in right of payment to the
prior payment in full of all Senior Secured Notes, all borrowings under the U.S.
Credit Facility and all other indebtedness not otherwise prohibited.

         The Sweetheart  Notes contain  various  covenants  which  prohibit,  or
limit, among other things,  asset sales,  change of control,  dividend payments,
equity  repurchases or redemptions,  the incurrence of additional  indebtedness,
the issuance of disqualified stock,  certain  transactions with affiliates,  the
creation of additional liens and certain other business activities.

         Canadian Credit Facility - A Canadian subsidiary has a Credit Agreement
(the "Canadian Credit Facility").  which provides for a term loan facility of up
to Cdn $10  million and a revolving  credit  facility of up to Cdn $10  million.
Term loan borrowings  under the Canadian  Credit Facility are payable  quarterly
through  May 2001 and  revolving  credit and term loan  borrowings  have a final
maturity date of June 15, 2001. The Canadian  Credit  Facility is secured by all
existing and thereafter acquired real and personal tangible assets of Lily Cups,
a  subsidiary  of  Sweetheart  Cup,  and net  proceeds on the sale of any of the
foregoing.  Borrowings  under the Canadian  Credit  Facility bear interest at an
index rate plus 2.25% with respect to the  revolving  credit  borrowings  and an
index rate plus 2.50% with respect to the term loan borrowings.  As of September
26, 1999, Cdn $4.3 million  (approximately $2.9 million) was available under the
Canadian Credit Facility.


11.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         The  carrying  amounts of  financial  instruments  included  in current
assets and current liabilities

                                       44

<PAGE>

approximate   their  estimated  fair  value  because  of  the  relatively  short
maturities of these  instruments.  Long-term  debt  instruments,  other than the
Company's  Senior  Secured Notes and Senior  Subordinated  Notes,  have variable
interest rates that fluctuate along with current market  conditions and thus the
carrying value approximates their fair value.

         The  fair  value of the  Company's  Senior  Secured  Notes  and  Senior
Subordinated  Notes is  estimated  to be $17.8  million  lower than the carrying
value at September 26, 1999 and $40.0  million lower than the carrying  value at
September 27, 1998.


12.  LEASE COMMITMENTS

         The Company  leases  certain  transportation  vehicles,  warehouse  and
office  facilities  and  machinery  and  equipment  under  both  cancelable  and
non-cancelable  operating leases,  most of which expire within ten years and may
be renewed by the Company.  Rent expense under such  arrangements  totaled $18.7
million,  $16.6 million and $16.8 million for Fiscal Years 1999,  1998 and 1997,
respectively.  Future minimum rental commitments under non-cancelable  operating
leases in effect at September 26, 1999 are as follows (in thousands):

                  Fiscal 2000                                 $  12,314
                  Fiscal 2001                                     9,515
                  Fiscal 2002                                     8,614
                  Fiscal 2003                                     6,648
                  Fiscal 2004                                     4,694
                  Fiscal 2005 and thereafter                     23,303
                                                              ---------
                                                              $  65,088
                                                              =========

13.  SHAREHOLDERS' EQUITY

         Prior to March 12, 1998, Sweetheart Holdings had a single-class capital
structure  consisting of 3,000,000  shares of common  stock,  par value $.01 per
share, of which 1,046,000 shares were issued and outstanding. Of the outstanding
shares, 1,040,000 were issued in conjunction with the acquisition of the Company
on August 30, 1993. In fiscal 1994, the Company sold an additional  6,000 shares
of stock,  for which it received  approximately  $100,000 in cash and a $500,000
promissory  note.  The  promissory  note that was  reflected  as a reduction  to
shareholders' equity in the consolidated balance sheet at September 30, 1997 was
paid in full on March 12, 1998.

         On March 12, 1998, the  shareholders of the Company  consummated the SF
Holdings Investment. In connection with this transaction, the Board of Directors
of Sweetheart  Holdings  authorized  two new classes of common stock:  1,100,000
shares of Class A Common Stock,  $0.01 par value and 4,600,000 shares of Class B
Common Stock,  $0.01 par value.  On March 11, 1998, the  shareholders  of record
exchanged  their  shares of common stock for a new Class A Common Stock in a one
for one stock  exchange.  In addition,  a stock  dividend of 4.2 shares of a new
Class B Common  Stock was  declared to the  shareholders  of record on March 11,
1998. SF Holdings acquired from the Company's shareholders' 48% of the Company's
outstanding  Class A  Common  Stock  and all of the  outstanding  Class B Common
Stock.  As a result,  SF Holdings  holds 90% of the total number of  outstanding
shares of both classes of the Company's common stock.

                                       45

<PAGE>

         Pursuant to the terms and conditions of the SF Holdings Investment, the
Company's  Board  of  Directors  consists  of five  members,  three  of whom are
nominated  by the  Original  Shareholders  and two of whom are  nominated  by SF
Holdings.  Pursuant  to  the  Company's  by-laws,  significant  actions  by  the
Company's  Board of Directors  require the vote of four  directors  and include,
among others:  (i) a merger,  consolidation or other  combination of the Company
with or into another entity,  (ii) the sale of all or a material  portion of the
Company's  assets,  (iii)  entering  into  any new  line of  business,  (iv) the
issuance or  repurchase  of any equity  securities,  (v) the  incurrence  of any
indebtedness for money borrowed or the refinancing of any existing indebtedness,
(vi)  approval of the annual  business  plans and operating  budgets,  (vii) the
termination  indebtedness  or modification of any of the terms of the Management
Services  Agreement,  (viii) the amendment or  modification of any provisions of
the  certificate  of  incorporation,  (ix) the selection of the Company's  chief
executive officer,  chief operating officer and chief financial officer, (x) any
change of  accountants  and (xi) the  removal of any  officers  of the  Company.
Additionally,  pursuant to a certain Management Services Agreement,  as amended,
Fonda,  an affiliate of SF Holdings,  manages the  day-to-day  operations of the
Company subject to the direction of the Board of Directors.

         The Class A and Class B Common Stock have the same powers,  preferences
and rights,  except that the Class B Common Stock has no voting rights.  Class A
and Class B Common  Stock share the profits and losses  generated by the Company
on a pro-rata basis.  Each  outstanding  Class A Common Share is entitled to one
vote on any matter  submitted to a vote of  shareholders  and has no  cumulative
voting  rights.  Subject  to  Delaware  law  and  limitations  in  certain  debt
instruments  (Senior  Secured Notes,  Senior  Subordinated  Notes and borrowings
under the U.S. Credit  Facility),  common  shareholders  are entitled to receive
such dividends as may be declared by Sweetheart Holdings' Board of Directors out
of funds legally available thereof.  In the event of a liquidation,  dissolution
or winding up of Sweetheart Holdings,  common shareholders are entitled to share
ratably in all assets  remaining after payment or provision for payment of debts
or other liabilities of Sweetheart Holdings.

         In addition, the Original Shareholders,  after March 12, 2003, have the
right to  exchange  their  shares  of Class A Common  Stock  for  warrants  (the
"Exchange Warrants") to purchase, for nominal  consideration,  shares of Class C
Common Stock of SF Holdings  representing 10% of the total outstanding shares of
common stock of SF Holdings at the consummation of the SF Holdings Investment on
a fully diluted basis.  SF Holdings has the right to cause such exchange and has
the right thereafter to repurchase the Exchange  Warrants,  in whole or in part,
for an aggregate call price of $50.0  million,  subject to increase at 12.5% per
annum  beginning  March 12,  1998 until March 12,  2003.  Upon  occurrence  of a
merger,  the Original  Shareholders will be required to exchange their shares of
Class A Common Stock for the  Exchange  Warrants.  In addition,  in the event SF
Holdings proposes to sell shares of Class A or Class B Common Stock in an amount
greater  than 30% of the  outstanding  shares  of  common  stock,  the  Original
Shareholders  will have the right to  participate  in such sale. In the event SF
Holdings  proposes to sell shares of common stock in an amount  greater than 30%
of the  outstanding  shares of common stock,  SF Holdings will have the right to
require the Original  Shareholders  to sell all, but not less than all, of their
shares of common stock.

         The Board of Directors of Sweetheart Holdings approved the Stock Option
and Purchase Plan (the "Option Plan") during fiscal year 1994 which provides for
the  granting of  nonqualified  and  incentive  stock  options as defined by the
Internal  Revenue  Code.  The Option Plan is  administered  by the  Compensation
Committee  (the  "Committee")  of the Board of Directors.  The Committee has the
authority  to select  participants,  grant stock  purchase  options and make all
necessary determinations for the administration of the Option Plan. The exercise
price per share of common  stock under each option is fixed by the  Committee at
the time of the grant of the  option  and is equal to at least  100% of the fair
market value of a share of common stock on the date of grant,  but not less than
$100 per share.  The Committee  determines  the term of each option that may not
exceed ten years from the date of grant of the option.  The Option Plan provides
for the issuance of up to 103,000 shares of common stock in connection  with the
stock options


                                       46

<PAGE>

granted under the Option Plan.  Options that are canceled or expire  unexercised
are  available  for future  grants.  All options are granted via approval of the
Board of Directors. In conjunction with the SF Holdings Investment,  all options
outstanding as of March 12, 1998 were cashed out in full and canceled.


14.  OTHER EXPENSE (INCOME)

         In Fiscal  1999,  the Company sold certain of its paper plate and paper
cup  equipment  at a net gain of $0.4  million  and  consolidated  a facility in
Canada resulting in a $0.8 million gain on the sale of duplicate assets.

         In Fiscal 1998, the Company recognized certain  non-recurring  charges,
consisting  primarily  of $4.4  million  of  financial  advisory  and legal fees
associated with the SF Holdings  Investment,  $3.7 million of severance expenses
as a result of the  termination of certain  officers of the Company  pursuant to
executive separation  agreements and retention plans for certain key executives,
$3.4 million of expense  based on actuarial  estimates  associated  with pending
litigation and asset write-downs of $1.8 million associated with the sale of the
Riverside facility.  These expenses were offset in part by the $3.3 million gain
on the sale of the bakery business.


15.  NON-RECURRING CHARGES

         In the quarter ended March 31, 1998,  the Company  reduced its salaried
workforce  by  approximately  15% and  hourly  workforce  by less  than  5%.  In
connection with such plans,  the Company  recognized $5.1 million of charges for
severance and related costs, of which $1.4 million of cash expenditures remained
unpaid as of September  27,  1998.  During  Fiscal  1999,  the Company paid $1.0
million of  severance  and  related  costs.  In  addition,  $0.4  million of the
restructuring reserve was decreased as the restructuring plan was completed.

         In the quarter ended March 31, 1998, the Company decided to rationalize
certain product lines. As a result,  the Company evaluated the recoverability of
the carrying  value of the equipment and other assets  utilized for such product
lines, which resulted in a $5.0 million charge to write-down the assets to their
fair market value.

         In the  quarter  ended  September  30,  1997,  the  Company  adopted  a
restructuring   plan   designed   to  improve   efficiency   and   enhance   its
competitiveness.   Restructuring   charges  of  $9.7  million  were  recognized,
consisting  of cash charges  primarily  related to severance  costs,  as well as
costs to close and exit the Riverside facility. Including the unspent portion of
these  charges,  the Company had total  restructuring  reserves of $13.2 million
classified  as "Other  current  liabilities"  as of September  30, 1997.  During
Fiscal  1998,  the Company  paid $8.8 million of  severance,  plant  closure and
related  costs.  In  addition,  $4.2  million of the  restructuring  reserve was
decreased due to a change in the  restructuring  plan as a result of a change in
senior management in connection with the SF Holdings  Investment.  During Fiscal
1999,  the company  paid $0.1  million of  severance  and related  expenses.  In
addition,  $0.1  million  of the  restructuring  reserve  was  decreased  as the
restructuring plan was completed.

         During the quarter ended December 31, 1997, the Company recorded a $1.5
million expense as a cumulative effect of change in accounting principle (net of
$1.0  million of income  taxes)  relating to the  implementation  of EITF 97-13,
which  requires  companies to expense any previously  capitalized  reengineering
costs in connection with software installation.

                                       47

<PAGE>

         As a result of market  conditions  experienced  by the  Company and the
decision to close  facilities  as  described  above,  the Company  reviewed  the
carrying  value of its  long-lived  assets in Fiscal 1997.  Certain  assets were
identified which would be disposed of, abandoned or become obsolete prior to the
end  of  their  accounting  useful  lives  and  were  written-down  accordingly,
resulting in a pre-tax  non-cash  charge  totaling $24.6 million in Fiscal 1997.
The loss on asset  disposal and  impairment  had no impact on the Company's cash
flow or its ability to generate cash flow in the future.


16.  RELATED-PARTY TRANSACTIONS

         Pursuant to the Management Services Agreement,  as amended, SF Holdings
and AIPM,  which manages AIP, are entitled to receive an aggregate annual fee of
$1.85 million, plus expenses,  payable semi-annually.  Under this agreement,  SF
Holdings  has the right,  subject to the  direction  of the  Company's  Board of
Directors,  to manage the day to day  operations  of the Company.  AIPM provides
substantial ongoing financial and management services to the Company.  Fees were
split between SF Holdings and AIPM 50/50 during Fiscal 1999.  Fees will be split
between SF Holdings  and AIPM,  respectively,  60/40 during  Fiscal 2000,  70/30
during  Fiscal 2001 and paid 100% to SF  Holdings  thereafter.  SF Holdings  has
assigned  substantially  all of its interests under this agreement to Fonda, but
retains $200,000 per year of fees for administrative services.

         During  Fiscal  1999,  the  Company  sold  certain  of its paper  plate
manufacturing  assets to Fonda for $2.4 million.  In February  1999, the Company
entered into a five year operating lease with Fonda,  whereby the Company leases
certain paper cup  manufacturing  assets from Fonda,  resulting in equal monthly
payments totaling $0.2 million per year. Independent appraisals were obtained to
determine the fairness of both the purchase price and lease terms.

         During  Fiscal  1999,  the Company  sold $6.8 million of cups to Fonda,
$0.2 million of paper scrap to Fibre  Marketing and $0.1 million of cups to CEG.
Accounts receivable,  as of September 26, 1999 from these sales are $0.8 million
due  from  Fonda  and $0.1  million  due from  Fibre  Marketing.  Sales to these
affiliates in preceding fiscal years were not material.

         During Fiscal 1999,  the Company  purchased  $6.1 million of corrugated
containers from Four M, $3.8 million of paper plates from Fonda and $0.4 million
of travel services from Emerald Lady, Inc. Accounts payable, as of September 26,
1999, from these purchases,  are $0.5 million due to Four M and $0.7 million due
to Fonda.  During Fiscal 1998, the Company  purchased $1.8 million of corrugated
containers  from Four M, of which $0.4 million was payable as of  September  27,
1998. Purchases from Fonda and Emerald Lady, Inc. in preceding fiscal years were
not material.

         All of the above referenced affiliates,  except AIP and AIPM, are under
the common control of the Company's Chief Executive Officer.


17.  CONTINGENCIES

         A lawsuit entitled Aldridge v. Lily-Tulip,  Inc. Salary Retirement Plan
Benefits Committee and Fort Howard Cup Corporation, Civil Action No. CV 187-084,
was  initially  filed in state  court in Georgia in April 1987 and is  currently
pending in federal court. The remaining plaintiffs claimed,  among other things,
that the Company  wrongfully  terminated the Lily-Tulip,  Inc. Salary Retirement
Plan (the "Plan") in violation of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). The relief sought by plaintiffs was to have the plan
termination declared  ineffective.  In December 1994, the United


                                       48

<PAGE>

States Court of Appeals for the Eleventh  Circuit (the  "Circuit  Court")  ruled
that the Plan was  lawfully  terminated  on December 31,  1986.  Following  that
decision,  the plaintiffs sought a rehearing which was denied,  and subsequently
filed a petition for a writ of certiorari  with the United States Supreme Court,
which was also  denied.  Following  remand,  in March  1996,  the United  States
District  Court for the  Southern  District of Georgia  (the  "District  Court")
entered a judgment  in favor of the  Company.  Following  denial of a motion for
reconsideration, the plaintiffs, in April 1997, filed an appeal with the Circuit
Court. On May 21, 1998, the Circuit Court affirmed the judgment entered in favor
of the Company.  On June 10, 1998, the  plaintiffs  petitioned the Circuit Court
for a rehearing of their appeal which  petition was denied on July 29, 1998.  In
October 1998,  plaintiffs  filed a Petition for Writ of Certiorari to the United
States  Supreme  Court,  which was denied in January 1999. The Company has begun
the process of paying out the  termination  liability.  As of November 19, 1999,
the Company has disbursed $4.2 million in termination payments.

         On April 27, 1999, the plaintiffs  filed a motion in the District Court
for  reconsideration  of the court's dismissal without  appropriate relief and a
motion  for  attorneys'  fees  with a  request  for  delay in  determination  of
entitlement  to such fees. On June 17, 1999,  the District  Court deferred these
motions and ordered discovery in connection therewith.  Discovery is expected to
be  completed by the end of December  1999.  Due to the  complexity  involved in
connection with the claims  asserted in this case, the Company cannot  determine
at present with any  certainty the amount of damages it would be required to pay
should the plaintiffs prevail; accordingly,  there can be no assurance that such
amounts  would not have a material  adverse  effect on the  Company's  financial
position or results of operations.

         A patent  infringement  action  seeking  injunctive  relief and damages
relating to the Company's  production and sale of certain paper plates  entitled
Fort  James  Corporation  v.  Sweetheart  Cup  Company  Inc.,  Civil  Action No.
97-C-1221,  was  filed in the  United  States  District  Court  for the  Eastern
District of Wisconsin on November 21, 1997.  During the fourth quarter of Fiscal
1999,  mediation  resulted in a  settlement  of this action  whereby the Company
agreed to pay damages of $2.6  million.  This amount has been fully  reserved by
the Company, with the first of two payments, $1.6 million, made on September 30,
1999. The second payment of $1.0 million is due July 1, 2000.

         On  July  13,  1999,  the  Company  received  a  letter  from  the  EPA
identifying  the Company,  among numerous  others,  as a "potential  responsible
party"  under  the  Comprehensive   Environmental  Response,   Compensation  and
Liability Act of 1980, as amended,  at a site in  Baltimore,  Maryland.  The EPA
letter  states  that  it  does  not  constitute  a  final  determination  by EPA
concerning the liability of the Company or any other entity.  The Company denies
liability  and has no reason to believe  the final  outcome of this  matter will
have a  material  effect on the  Company's  financial  condition  or  results of
operations.  However, no assurance can be given about its ultimate effect on the
Company, if any, given the early stage of this investigation.

          The Company is also involved in a number of legal proceedings  arising
in the ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position or results of operations.


18. SUBSEQUENT EVENTS

         The Company is currently  under  contract to sell a 400,000 square foot
warehouse  facility  located in Owings  Mills,  Maryland.  The Company  does not
expect to incur a loss from the sale.

                                       49

<PAGE>

19. SUMMARIZED FINANCIAL INFORMATION FOR SWEETHEART CUP COMPANY INC.

         The following  tables  provide  summarized  financial  information  for
Sweetheart Cup and subsidiaries (in thousands):

                               September 26,      September 27,
                                   1999               1998
                               -------------      -------------

Current assets                   $253,651           $257,399
Other assets                      392,037            437,264
Current liabilities               402,037            122,516
Other liabilities                 247,868            562,828


         Prior year amounts below have been reclassified as noted in Note 1:

                                                     Fiscal
                                 -----------------------------------------------
                                    1999              1998              1997
                                 -----------------------------------------------

Net sales                          $863,781         $843,502          $886,017
Gross profit                         77,897           32,664            35,331
Income (loss) from
  continuing operations
  before cumulative effect
  of change in accounting
  principle and extraordinary
  loss                               (5,267)         (41,593)          (37,221)
Net income (loss)                    (5,267)         (42,999)          (38,161)


                                       50

<PAGE>


                     INDEX TO FINANCIAL STATEMENT SCHEDULES

                                                                           Page
                                                                           ----

Independent Auditors' Report                                                 52

Report of Independent Public Accountants                                     53

Schedule II - Valuation and Qualifying Accounts                              54


                                       51

<PAGE>


INDEPENDENT AUDITORS' REPORT



To the Board of Directors of
Sweetheart Holdings Inc.:


We have audited the  consolidated  financial  statements of Sweetheart  Holdings
Inc. and Subsidiaries (the "Company") as of September 26, 1999 and September 27,
1998 and years then ended, and have issued our report thereon dated November 19,
1999;  such  consolidated  financial  statements and report are included in this
Form 10-K. The schedule listed in the accompanying  index is the  responsibility
of the Company's  management.  Our responsibility is to express an opinion based
on  our  audits.  In  our  opinion,  such  financial  statement  schedule,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.



/s/DELOITTE & TOUCHE LLP
Baltimore, Maryland
November 19, 1999


                                       52

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
Sweetheart Holdings Inc.:


We have audited in accordance with generally  accepted auditing  standards,  the
consolidated balance sheet as of September 30, 1997 and the related consolidated
statements of operations,  shareholders' equity and cash flows for the year then
ended of Sweetheart  Holdings Inc. and  Subsidiaries  included in this Form 10-K
and have issued our report  thereon dated  December 8, 1997 (except with respect
to the  matter  discussed  in Note 1 -  Inventories,  as to  which  the  date is
December 3, 1998).  Our audit was made for the purpose of forming an opinion on
the basic  consolidated  financial  statements  taken as a whole.  The  schedule
listed  in the  accompanying  index  is  the  responsibility  of  the  Company's
management  and is presented for purposes of complying  with the  Securities and
Exchange Commission's rules and is not part of the basic consolidated  financial
statements.  This schedule has been subjected to the auditing procedures applied
in the  audit  of the  basic  consolidated  financial  statements  and,  in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic consolidated  financial statements
taken as a whole.



                                                    /s/ ARTHUR ANDERSEN LLP

Baltimore, Maryland
December 8, 1997
   (except with respect to the
    matter  discussed in Note 1 -
    Inventories,  as to which the
    date is December 3, 1998)


                                       53

<PAGE>


                                                                    SCHEDULE II


                    SWEETHEART HOLDINGS INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                             Additions
                                                             ---------
                                      Balance at     Charged to     Charged                         Balance at
                                      beginning      costs and      to other                          end of
         Classifications              of period      expenses (1)   accounts (2)    Deductions (3)    period
         ---------------              ---------       ------------   ------------   --------------    ------

Allowance for Doubtful Accounts:
<S>                                    <C>            <C>            <C>             <C>              <C>
Fiscal 1999                            $1,817         $  341         $  11            $  264          $ 1,905
Fiscal 1998                             1,740            769            (4)              688            1,817
Fiscal 1997                             2,466            446            51             1,223            1,740

</TABLE>

(1)      Provision for doubtful accounts.
(2)      Includes  recoveries on accounts  previously  written-off,  translation
         adjustments and reclassifications.
(3)      Accounts written-off.


                                       54

<PAGE>

                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized, in the City of Owings
Mills, State of Maryland, on November 24, 1999.

                                   SWEETHEART HOLDINGS INC.
                                   (Registrant)

                                    By: /s/ DENNIS MEHIEL
                                       --------------------------------
                                            Dennis Mehiel
                                            Chief Executive Officer and
                                            Chairman of the Board


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
         this report has been  signed on November  24,  1999,  by the  following
         persons in the capacities indicated:

              Signature                         Capacity
              ---------                         --------

         /s/ DENNIS MEHIEL                 Chief Executive Officer and Chairman
         -----------------------           of the Board
             Dennis Mehiel


         /s/ THOMAS ULEAU                  President, Chief Operating Officer
         -----------------------           and Director
             Thomas Uleau


         /s/ W. RICHARD BINGHAM            Director
         -----------------------
            W. Richard Bingham


         /s/ THEODORE C. ROGERS            Director
         -----------------------
             Theodore C. Rogers


         /s/ KIM A. MARVIN                 Director
         -----------------------
             Kim A. Marvin


         /s/ HANS H. HEINSEN               Senior Vice  President  - Finance
         -----------------------           and Chief  Financial Officer
             Hans H. Heinsen               (Principal  Financial Officer  and
                                           Principal Accounting Officer)


                                       55