CERTIFICATE OF AMENDMENT

                                     OF THE

                          CERTIFICATE OF INCORPORATION

                                       OF

                             SF HOLDINGS GROUP, INC.


             Adopted in accordance with the provisions of Section 242
             of the General Corporation Law of the State of Delaware

             Hans  H.  Heinsen,  being  the Senior Vice President of SF Holdings
Group, Inc.,  a  corporation  existing  under the laws of the State of Delaware,
does hereby certify as follows:

         First:  That the Certificate of Incorporation of said corporation shall
be amended as follows:

         By deleting  Paragraph  Fourth  thereof and inserting in lieu thereof a
new Paragraph Fourth, reading in its entirety as follows:

         "FOURTH.  The total  number of shares of all classes of stock which the
Corporation  shall have authority to issue is two million one hundred and twenty
thousand (2,120,000) shares, consisting of:

             (a)  two  million  (2,000,000)  shares  of  Common Stock, par value
             $.001 per share (hereinafter referred to as "Common Stock");

             (b)  twenty  thousand  (20,000)  shares  of  Exchangeable Preferred
             Stock,   par  value $.001 per share  (hereinafter  referred  to  as
             "Preferred Stock"); and

             (c)  one  hundred  thousand  (100,000)  shares of Class B Preferred
             Stock,  par  value $.001 per  share  (hereinafter  referred  to  as
             "Class B Preferred Stock").

         The  designations,  relative  rights,  preferences  and  limitations of
shares of each  class and the  authority  of the Board of  Directors  to fix the
designations,  relative  rights,  preferences  and limitations of shares of each
class not fixed hereby shall be as follows:

A.  PREFERRED STOCK

         The powers, preferences and rights, and the qualifications, limitations
and restrictions, of the Preferred Stock are as follows:
<PAGE>

         1. The Preferred Stock shall, with respect to dividend distributions
and  distributions  upon  the  liquidation,  winding  up or  dissolution  of the
Corporation,  rank senior to all classes of Common Stock of the Corporation and,
except as provided in the  following  proviso,  to each other class or series of
capital stock issued by the Corporation now or hereafter created  (collectively,
"Junior Stock"); provided,  however, that the Board of Directors may authorize a
class or series of preferred stock on a parity in powers, preferences and rights
to the  Preferred  Stock  (collectively,  "Parity  Stock")  or senior in powers,
preferences and rights to the Preferred Stock (collectively,  "Senior Stock") if
approved by the holders of a majority of the shares of Preferred Stock.

         2. (a) The holders of  shares of  Preferred  Stock shall be entitled to
receive,  when, as and if declared by the Board of Directors out of funds of the
Corporation legally available therefor,  cumulative  dividends at an annual rate
equal to 13.75%.  Until March 15, 2003, dividends on the Preferred Stock will be
payable  quarterly in arrears on March 15, June 15, September 15 and December 15
of each year (each, a "Dividend Payment Date"), commencing June 15, 1998, (i) in
cash or, at the option of the  Corporation,  (ii) by issuing shares of Preferred
Stock with an aggregate  Liquidation Amount (as defined in subparagraph 3 below)
equal to the amount of such  dividends.  From and after such time,  dividends on
the Preferred Stock shall be payable  quarterly in arrears in cash except to the
extent that the covenants applicable to Indebtedness (as defined in subparagraph
9 below)  of the  Corporation  prohibit  such  cash  payments  or the  covenants
applicable to securities and/or  Indebtedness of the Corporation's  subsidiaries
prohibit  such   subsidiaries  from  distributing  the  necessary  cash  to  the
Corporation.  Dividends  in  arrears on the  Preferred  Stock may be paid at any
time,  without  reference to any regular dividend  payment date.  Dividends will
accrue and be cumulative from the date of original issue of the Preferred Stock,
whether  or not  declared  for any  reason  (including  if such  declaration  is
prohibited under any outstanding  indebtedness or borrowing or other contractual
provision  binding on the Corporation or any of its subsidiaries) and whether or
not there will be funds of the  Corporation  legally  available  for the payment
thereof.  Dividends  accruing and not declared until March 15, 2003 shall,  when
declared,  be  payable  in cash or  additional  shares  of  Preferred  Stock  as
described  above.  All accrued and unpaid  dividends  will be  compounded at the
dividend rate on a quarterly basis. All dividends that accrue in accordance with
the foregoing provisions shall be cumulative from and after March 15, 2003.

            (b) No dividend or other distribution (payable  other than in shares
of Junior Stock) shall be paid to the holders of Junior Stock,  and no shares of
Junior  Stock  shall  be  purchased,  redeemed  or  otherwise  acquired  by  the
Corporation or any of its subsidiaries (except by conversion into or in exchange
for  Junior  Stock),  nor  shall  any  monies  be paid or made  available  for a
purchase,  redemption  or sinking  fund for the  purchase or  redemption  of any
Junior Stock unless (i) all  dividends  on the  outstanding  shares of Preferred
Stock that shall have accrued through any prior Dividend Payment Date shall have
been  paid or  declared  and  funds set  apart  for  payment  thereof;  (ii) the
Corporation  shall not be in default on any of its  obligations  to  purchase or
redeem the Preferred Stock pursuant to subparagraphs 4, 5 or 6 of this Paragraph
A; and (iii) the  Corporation  shall not be in default  on any of the  covenants
included in  subparagraph  9 of this Paragraph A. When dividends are not paid in
full upon the shares of  Preferred  Stock and any Parity  Stock,  all  dividends
declared  upon shares of Preferred  Stock and all Parity Stock

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<PAGE>
shall be declared pro rata so that the amount of dividends declared per share of
Preferred  Stock and all such Parity Stock shall in all cases bear to each other
the same ratio that accrued dividends per share on the shares of Preferred Stock
and all such Parity Stock bear to each other.

         3. In the event of any liquidation, dissolution or winding  up  of  the
Corporation,  whether  voluntary or  involuntary,  no payment or distribution of
assets  shall be made to or set apart for the holders of Junior Stock unless the
holders of shares of Preferred Stock shall have received,  out of assets legally
available  therefor,  Ten Thousand  Dollars  ($10,000.00) per share of Preferred
Stock (the "Liquidation  Amount") plus an amount of cash equal to the dividends,
whether or not earned or  declared,  accrued  and unpaid  thereon to the date of
final  distribution to such holder.  If upon any such  distribution of assets in
liquidation  or  dissolution  or  upon  the  winding  up of the  affairs  of the
Corporation  the  amount  which  would  be  distributed  to the  holders  of the
outstanding shares of Preferred Stock would be less than this amount,  then such
lesser amount shall be distributed  pro rata to the holders of then  outstanding
shares of  Preferred  Stock and to the  holders  of then  outstanding  shares of
Parity Stock, and no distribution  shall be made to the holders of Junior Stock.
None of the  consolidation or the merger of the Corporation,  or the sale, lease
or transfer by the Corporation of all or any part of its assets, shall be deemed
to be a liquidation,  dissolution or winding up of the  Corporation for purposes
of this subparagraph 3.

         4. The  Corporation shall redeem the Preferred Stock on March 15, 2009,
out of funds  legally  available  for such  purpose,  at a redemption  price per
share, in cash, equal to the Liquidation  Amount plus an amount of cash equal to
the dividends,  whether or not earned or declared, accrued and unpaid thereon to
the date of  redemption.  Shares of Preferred  Stock  redeemed  pursuant to this
subparagraph 4 shall be cancelled and shall not be reissued.

         5. (a) Except  as  set  forth  below,  the Preferred Stock shall not be
redeemable at the  Corporation's  option prior to March 15, 2003. From and after
March 15, 2003, the Corporation may, at its option,  redeem the Preferred Stock,
in whole or in part, at the redemption  prices  (expressed as percentages of the
Liquidation  Amount)  set  forth  below,  plus an  amount  of cash  equal to the
dividends,  whether or not earned or declared, accrued and unpaid thereon to the
date of redemption,  if redeemed  during the  twelve-month  period  beginning on
March 15 of the years indicated below:

         Year                                                 Percentage
         ----                                                 ----------
         2003.....................................             106.875%

         2004.....................................             104.583%

         2005.....................................             102.293%

         2006 and thereafter..............                     100.000%

            (b) Prior  to  March 15, 2001, the  Corporation  may, at its option,
redeem up to one-half of the aggregate  Liquidation Amount of Preferred Stock at
a redemption price of 113.75% of the Liquidation  Amount, plus an amount of cash
equal to the  dividends,  whether or not earned or declared,  accrued and unpaid
thereon to the date of redemption, with the net cash

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<PAGE>
proceeds of an Equity Offering (as defined below);  provided,  however,  that at
least one-half of the aggregate  Liquidation  Amount of Preferred  Stock remains
outstanding  immediately  after the  occurrence  of such  redemption  (excluding
Preferred  Stock held by the Corporation  and its  subsidiaries);  and provided,
further,  that any such redemption shall occur within 60 days of the date of the
closing of such Equity  Offering.  As used herein,  "Equity  Offering"  means an
underwritten  public offering of Common Stock (other than Disqualified Stock (as
defined  below))  registered  under  the  Securities  Act  (other  than a public
offering registered on Form S-8 under the Securities Act).

            (c) If  less than all  outstanding  shares of Preferred Stock are to
be  redeemed,  the shares to be redeemed  shall be  selected  pro rata (with any
fractional  shares being  rounded to the nearest  whole share)  according to the
number of whole shares held by each holder of Preferred Stock.

            (d) In  the  event  the Corporation shall redeem shares of Preferred
Stock pursuant to  subparagraphs 4 or 5 hereof,  notice of such redemption shall
be given by first class mail, postage prepaid,  mailed not less than 30 days nor
more than 60 days prior to the redemption  date, to each holder of record of the
shares to be redeemed at such holder's  address as the same appears on the stock
register of the  Corporation.  Each such redemption  notice shall state: (i) the
redemption  date;  (ii) the number of shares of  Preferred  Stock to be redeemed
and, if fewer than all the shares held by such  holder are to be  redeemed,  the
number of shares to be redeemed from such holder;  (iii) the  redemption  price;
(iv)  the  place  or  places  where  certificates  for  such  shares  are  to be
surrendered for payment of the redemption  price;  and (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption  date. On or after
the date so specified, each holder of then outstanding shares of Preferred Stock
so to be redeemed shall surrender the certificate or certificates evidencing the
Preferred Stock held by such holder to the  Corporation at its principal  office
(or such  other  office or  agency of the  Corporation  as the  Corporation  may
designate in such  notice),  in exchange for payment to its order or that of its
nominee,  as such holder  shall  request,  in an  aggregate  amount equal to the
aggregate  redemption  amount of the shares of Preferred Stock so redeemed.  The
Corporation  shall reissue to each such holder a  certificate  for any shares of
Preferred  Stock  surrendered  but not redeemed.  All shares of Preferred  Stock
which are redeemed  pursuant to this subparagraph 5 shall be cancelled and shall
not be reissued.

         6. (a) In  the  event  of a Change of Control (as defined  below),  the
Corporation  shall be  required  to make an offer to each  holder  of  shares of
Preferred  Stock to  repurchase  such  holder's  shares  of  Preferred  Stock (a
"Repurchase Offer") at a purchase price equal to 101% of the Liquidation Amount,
plus the cash value of any accrued and unpaid dividends  payable in kind and the
amount of any  accrued  and  unpaid  cash  dividends  (the  "Change  of  Control
Payment").  As used herein,  "Change of Control"  means the occurrence of any of
the following:  (i) the sale, lease,  transfer,  conveyance or other disposition
(other  than by way of merger or  consolidation),  in one or a series of related
transactions,  of all or substantially  all of the assets of the Corporation and
its  Restricted  Subsidiaries  (as defined in  subparagraph  9 below) taken as a
whole to any "person" (as such term is used in Section  13(d)(3) of the Exchange
Act) or "group" (as defined in Sections  13(d)(3)  and  14(d)(2) of the Exchange
Act) other than the Principals (as defined below),

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<PAGE>


(ii) the adoption of a plan relating to the  liquidation  or  dissolution of the
Corporation,  (iii) the  consummation  of any  transaction  (including,  without
limitation,  any  merger  or  consolidation)  the  result  of  which is that any
"person" or "group" (as defined above),  other than the Principals,  becomes the
"beneficial  owner" (as such term is defined in Rule 13d-3 and Rule 13d-5  under
the Exchange Act),  directly or  indirectly,  of more of the voting power of the
Voting  Stock  (as  defined  below)  of the  Corporation  than at  that  time is
beneficially owned by the Principals, or (iv) the first day on which more than a
majority of the directors on the Board of Directors of the  Corporation  are not
Continuing  Directors (as defined below).  For purposes of this definition,  any
transfer  of an equity  interest of an entity that was formed for the purpose of
acquiring  Voting  Stock of the  Corporation  will be deemed to be a transfer of
such portion of such Voting Stock as corresponds to the portion of the equity of
such entity that has been so transferred.

            (b) Within ten days following any Change of Control, the Corporation
shall mail a notice to each holder of shares of Preferred  Stock  describing the
transaction or transactions  that constitute the Change of Control.  Such notice
shall state: (i) the date of repurchase,  which date shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed  ("the Change
of Control Payment Date");  (ii) the place or places where certificates for such
shares are to be surrendered (the "Paying  Agent");  and (iii) that dividends on
the  shares to be  repurchased  will  cease to accrue on such  Change of Control
Payment Date. The Corporation  shall comply with the  requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations  thereunder
to the extent such laws and  regulations  are applicable in connection  with the
repurchase of the shares of Preferred Stock as a result of a Change of Control.

            (c) At  least three days before the Change of Control  Payment Date,
each holder of then  outstanding  shares of Preferred Stock which elects to have
some  or all of its  shares  of  Preferred  Stock  repurchased  pursuant  to the
Repurchase Offer shall surrender the certificate or certificates  evidencing the
Preferred  Stock held by such  holder to the Paying  Agent,  with a request  for
payment to its order or that of its nominee in an aggregate  amount equal to the
aggregate Change of Control Payment.  On the Change of Control Payment Date, the
Corporation  shall,  to the extent lawful,  (i) accept for payment all shares of
Preferred  Stock properly  tendered  pursuant to the Repurchase  Offer,  and (2)
deposit with the Paying  Agent an amount equal to the Change of Control  Payment
in respect of all shares of Preferred Stock so tendered.  The Paying Agent shall
promptly mail to each holder of shares of Preferred Stock so tendered the Change
of Control Payment for such shares of Preferred  Stock.  All shares of Preferred
Stock which are repurchased  pursuant to this  subparagraph 6 shall be cancelled
and shall not be reissued.  The Corporation  shall publicly announce the results
of the Repurchase Offer on or as soon as practicable after the Change of Control
Payment  Date,  but in no case more than five days  (excluding  legal  holidays)
after the Change of Control Payment Date.

            (d) Notwithstanding  the  foregoing,  the  Corporation  shall not be
required to make a Repurchase  Offer upon a Change of Control if such Repurchase
Offer  would  cause an event of default  under any of the  agreements  governing
Indebtedness of the Corporation,  or if a third party makes the Repurchase Offer
in the manner,  at the times and otherwise in compliance  with the  requirements
set forth in this subparagraph 6 applicable to a Repurchase Offer made by the

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<PAGE>
Corporation and purchases all shares of Preferred Stock validly tendered and not
withdrawn under such Repurchase Offer.

         7. (a) The Corporation may, at its option, on any Dividend Payment Date
with respect to the Preferred  Stock,  redeem all, but not less than all, of the
then  outstanding  shares of Preferred  Stock in exchange for the  Corporation's
13.75%  Subordinated  Notes  due  March 15,  2009 to be  issued  pursuant  to an
indenture  between the  Corporation and a trustee and having  substantially  the
terms  assigned  to the  Preferred  Stock as set  forth in this  Paragraph  A of
Article FOURTH (the "Subordinated  Notes"), at a rate of one dollar (or fraction
thereof)  principal  amount of  Subordinated  Notes for each dollar (or fraction
thereof) in Liquidation  Amount plus,  subject to the following  paragraph,  the
cash value of any accrued and unpaid dividends payable in kind and the amount of
any  accrued  and unpaid  cash  dividends,  whether  or not earned or  declared,
accrued and unpaid  thereon to the date of exchange  (provided  that no event of
default under the indenture governing the Subordinated Notes shall have occurred
and be continuing).

            (b) Cash  dividends  on any shares of Preferred Stock  exchanged for
Subordinated  Notes which have  accrued but have not been paid as of the date of
exchange  shall  be  paid,  at the  option  of the  Corporation,  in  cash or in
additional  Subordinated Notes in an equivalent principal amount of such accrued
and unpaid dividends. In no event shall the Corporation issue Subordinated Notes
in denominations other than $1,000 or in an integral multiple thereof. Cash will
be paid in lieu of any such fraction of Subordinated  Notes that would otherwise
have been  issued  (which  shall be  determined  with  respect to the  aggregate
principal  amount of  Subordinated  Notes to be issued to a holder upon any such
exchange).  Interest  will  accrue on the  Subordinated  Notes  from the date of
exchange.

            (c) In   the  event  the  Corporation  shall   exchange   shares  of
Preferred  Stock,  notice of such  exchange  shall be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to the
exchange  date, to each holder of record of the shares of Preferred  Stock to be
exchanged at such holder's  address as the same appears on the stock register of
the  Corporation.  Each such exchange notice shall state: (A) the exchange date;
(B) the principal amount of Subordinated  Notes to be received by the exchanging
holder;  (C) the place or places where the certificate or certificates  for such
shares  of  Preferred  Stock  are  to be  exchanged  for  notes  evidencing  the
Subordinated  Notes  to be  received  by the  exchanging  holder;  and (D)  that
dividends on the shares of Preferred  Stock to be exchanged will cease to accrue
on such exchange date. On the date so specified, each holder of then outstanding
shares of  Preferred  Stock shall  surrender  the  certificate  or  certificates
evidencing  the Preferred  Stock held by such holder to the  Corporation  at its
principal  office  (or such  other  office or agency of the  Corporation  as the
Corporation  may  designate in such  notice),  in exchange for the  Subordinated
Notes to which such holder is entitled, registered in such holder's name or that
of its  nominee or payable to its order or that of its  nominee,  as such holder
shall  request,  and in such  denominations  as such holder shall  request.  All
shares of Preferred  Stock which are redeemed  pursuant to this  subparagraph  7
shall be cancelled and shall not be reissued.

            (d) Prior  to  giving   notice  of   intention   to  exchange,   the
Corporation  shall execute and deliver with a bank or trust company  selected by
the Corporation an indenture having
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<PAGE>
substantially  the terms  assigned to the  Preferred  Stock as set forth in this
Paragraph A of Article FOURTH. The Corporation will cause the Subordinated Notes
to be  authenticated  on the  Dividend  Payment  Date on which the  exchange  is
effective,  and will pay interest on the  Subordinated  Notes at the rate and on
the dates specified in such indenture from the exchange date.

            (e) The  Corporation  will  not  give  notice  of  its  intention to
exchange  unless it shall file at the place or places  (including a place in the
Borough  of  Manhattan,  The City of New York)  maintained  for such  purpose an
opinion of counsel  (who may be an  employee of the  Corporation)  to the effect
that (i) the indenture has been duly  authorized,  executed and delivered by the
Corporation,  has been duly qualified  under the Trust Indenture Act of 1939 (or
that such  qualification  is not necessary) and  constitutes a valid and binding
instrument  enforceable  against the  Corporation  in accordance  with its terms
(subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability  relating to or affecting creditors' rights and to
general equity principles,  and subject to such other qualifications as are then
customarily contained in opinions of counsel experienced in such matters),  (ii)
the  Subordinated  Notes  have been  duly  authorized  and,  when  executed  and
authenticated  in accordance  with the provisions of the indenture and delivered
in exchange for the shares of Preferred Stock, will constitute valid and binding
obligations  of the  Corporation  entitled  to  the  benefits  of the  indenture
(subject to the  aforesaid),  (iii)  neither the  execution  nor delivery of the
indenture or the Subordinated Notes nor compliance with the terms, conditions or
provisions  of such  instruments  will result in a breach or violation of any of
the terms or  provisions  of, or  constitute  a default  under,  any  indenture,
mortgage,  deed of trust or agreement or instrument,  known to such counsel,  to
which the  Corporation or any of its  subsidiaries  is a party or by which it or
any of them is bound, or any decree, judgment, order, rule or regulation,  known
to such counsel, of any court or governmental agency or body having jurisdiction
over the Corporation and such subsidiaries or any of their properties,  and (iv)
the  Subordinated  Notes have been duly  registered  for such  exchange with the
Securities  and Exchange  Commission  under a  registration  statement  that has
become  effective  under  the  Securities  Act of 1933  (the  "Act") or that the
exchange of the  Subordinated  Notes for the shares of Preferred Stock is exempt
from registration under the Act.

            (f) The  exchange shall be deemed to have been effected  immediately
prior to the close of business on the relevant Dividend Payment Date on or prior
to which  the  certificates  for  shares  of  Preferred  Stock  shall  have been
surrendered,  and the person in whose name or names the Subordinated Notes shall
be  issuable  upon such  exchange  shall be deemed to have  become the holder of
record  of the  Subordinated  Notes  represented  thereby  at such  time on such
Dividend Payment Date.

            (g) Prior to the delivery of any  securities  which the  Corporation
shall be  obligated  to  deliver  upon  exchange  of the  Preferred  Stock,  the
Corporation  shall  comply  with  all  applicable  federal  and  state  laws and
regulations that require action to be taken by the Corporation.  The Corporation
will pay any and all  documentary  stamp or  similar  issue  or  transfer  taxes
payable in respect of the issue or  delivery  of notes  evidencing  Subordinated
Notes on exchange of the  Preferred  Stock  pursuant  hereto;  provided that the
Corporation shall not be

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required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of notes evidencing  Subordinated Notes in a name other
than that of the holder of the Preferred Stock to be exchanged and no such issue
or delivery shall be made unless and until the person  requesting  such issue or
delivery  has  paid  to  the  Corporation  the  amount  of any  such  tax or has
established,  to the  satisfaction  of the  Corporation,  that such tax has been
paid.

         8. (a) The  holders of shares of Preferred Stock  shall not be entitled
to any voting  rights,  except as described  below or as  otherwise  required by
applicable law. In the event the Corporation  fails to (i) pay dividends for six
or more  quarters  (whether or not  consecutive),  (ii)  satisfy  any  mandatory
redemption obligation with respect to the Preferred Stock (regardless of whether
the reason for such failure is lack of legally  available  funds),  (iii) make a
Repurchase  Offer within 30 days  following a Change of Control or make an Asset
Sale Offer  pursuant to paragraph (f) of  subparagraph  9 (regardless of whether
such offer is prohibited by the terms of any Indebtedness of the Corporation) or
(iv)  comply  with any of the  covenants  set  forth in  subparagraph  9 of this
Paragraph A for a period of 30 days after the receipt of notice of such  failure
from the registered  holders of not less than  twenty-five  percent (25%) of the
shares of  Preferred  Stock  then  outstanding,  the Board of  Directors  of the
Corporation  shall be  increased by two members and the holders of a majority of
the outstanding shares of Preferred Stock,  voting as a separate class, shall be
entitled to elect two members to the Board of Directors of the Corporation.  The
foregoing  voting  rights shall cease,  and the term of office of any  directors
elected pursuant to the exercise of the foregoing voting rights shall terminate,
if and when the failure by the Corporation  giving rise to such voting rights is
cured,  but subject always to the vesting of such right in the case of a similar
future event. The foregoing  voting rights may be exercised  initially either by
written consent or at a special  meeting of the holders of the Preferred  Stock,
called as hereinafter  provided,  or at any annual meeting of stockholders  held
for the purpose of electing directors,  and thereafter at each subsequent annual
meeting.  At any time when such voting  rights  shall have  vested,  and if such
right shall not already have been exercised by written consent, a proper officer
of the  Corporation may call,  and, upon the written  request,  addressed to the
Secretary  of the  Corporation,  of the record  holders  of shares  representing
twenty-five  percent (25%) of the voting power of the shares then outstanding of
the  Preferred  Stock,  shall  call a  special  meeting  of the  holders  of the
Preferred  Stock.  Such meeting shall be held at the earliest  practicable  date
upon the notice  required for annual  meetings of  stockholders at the place for
holding annual meetings of stockholders  of the  Corporation,  or, if none, at a
place designated by the Board of Directors.  Notwithstanding  the foregoing,  no
such special meeting shall be called during a period within 60 days  immediately
preceding  the date fixed for the next annual  meeting of  stockholders.  At any
meeting  held for the  purpose of  electing  directors  at which the  holders of
Preferred Stock shall have the right to elect directors as provided herein,  the
presence in person or by proxy of the holders of shares  representing  more than
fifty  percent  (50%) in  voting  power of the then  outstanding  shares  of the
Preferred  Stock having such right shall be required and shall be  sufficient to
constitute  a quorum of such class for the  election of directors by such class.
Any  director  elected by holders of  Preferred  Stock  pursuant  to such voting
rights shall hold office until the next annual meeting of  stockholders  (unless
such term has  previously  terminated  as  described  above) and any  vacancy in
respect  of any such  director  shall be  filled  only by vote of the  remaining
director so elected or, if there be no such remaining  director,  by the holders
of  Preferred  Stock by  written  consent  or at a  special  meeting  called  in

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accordance  with the  procedures  set forth  above or, if no special  meeting is
called or written consent executed, at the next annual meeting of stockholders.

            (b) The  approval of the  holders of a majority  of the  outstanding
shares of Preferred  Stock,  voting as a separate class,  shall also be required
for (i) the  authorization  by the  Corporation of any series of preferred stock
ranked senior or on a parity in powers,  preferences and rights to the Preferred
Stock (including any additional shares of Preferred  Stock),  (ii) the amendment
or  modification of any provisions of the  Certificate of  Incorporation  of the
Corporation  in any manner  that  would  adversely  affect  the  voting  powers,
designations, preferences and rights of the Preferred Stock and (iii) any merger
or  consolidation  or  sale of all or  substantially  all of the  assets  of the
Corporation  if the terms of such  transaction do not provide for the repurchase
or redemption of all of the shares of Preferred Stock upon  consummation of such
merger, consolidation or sale. Notwithstanding the foregoing, upon a refinancing
of the  Corporation's  12.75%  Senior  Secured  Discount  Notes  due  2008  (the
"Discount  Notes"),  the Certificate of  Incorporation of the Corporation may be
amended or modified  without any approval of the holders of the Preferred  Stock
to  reflect  covenants  in  the  new  notes  which  are  more  favorable  to the
Corporation than those contained in the Discount Notes.

         9. (a) Whether  or  not  required by the rules and  regulations  of the
Securities and Exchange Commission (the "Commission"),  so long as any shares of
Preferred Stock are outstanding, the Corporation shall furnish to the holders of
record of shares of  Preferred  Stock (i) all  quarterly  and  annual  financial
information  that  would  be  required  to be  contained  in a  filing  with the
Commission on Forms 10-Q and 10-K if the Corporation  were required to file such
Forms, including a "Management's  Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the  Corporation  and its  consolidated  Subsidiaries  (as defined
below)  (showing  in  reasonable  detail,  either  on the face of the  financial
statements  or in the  footnotes  thereto and in  "Management's  Discussion  and
Analysis of  Financial  Condition  and  Results of  Operations,"  the  financial
condition  and  results of  operations  of the  Corporation  and its  Restricted
Subsidiaries  (as defined  below)  separate  from the  financial  condition  and
results of operations of the Unrestricted Subsidiaries (as defined below) of the
Corporation) and, with respect to the annual  information only, a report thereon
by the  Corporation's  certified  independent  accountants  and (ii) all current
reports  that would be required to be filed with the  Commission  on Form 8-K if
the Corporation were required to file such reports, in each case within the time
periods  specified  in the  Commission's  rules and  regulations.  In  addition,
following  the   consummation   of  the  exchange  offer   contemplated  by  the
Registration Rights Agreement (as defined below), whether or not required by the
rules and  regulations of the Commission,  the Corporation  shall file a copy of
all such  information  and reports with the Commission  for public  availability
within the time periods  specified  in the  Commission's  rules and  regulations
(unless the Commission will not accept such a filing) and make such  information
available to securities  analysts and  prospective  investors upon request.  The
Corporation  shall  also  furnish  to the  holders  of  Preferred  Stock  and to
securities  analysts  and  prospective   investors,   upon  their  request,  the
information required to be delivered pursuant to Rule 144A under the Act.

                                       9
<PAGE>
            (b) So long as any shares of Preferred  Stock are  outstanding,  the
Corporation  shall not, and shall not permit any of its Restricted  Subsidiaries
to,  directly or  indirectly:  (i) declare or pay any dividend or make any other
payment or distribution on account of the Corporation's or any of its Restricted
Subsidiaries' Equity Interests  (including,  without limitation,  any payment in
connection with any merger or consolidation  involving the Corporation or any of
its Restricted  Subsidiaries),  other than a dividend on the Preferred Stock, or
to the direct or indirect holders of the  Corporation's or any of its Restricted
Subsidiaries'  Equity  Interests in their capacity as such (other than dividends
or distributions  payable in Equity Interests (other than Disqualified Stock) of
the  Corporation  or to the  Corporation  or any  Restricted  Subsidiary  of the
Corporation);  (ii)  purchase,  redeem or otherwise  acquire or retire for value
(including,  without limitation,  in connection with any merger or consolidation
involving the Corporation) any Equity Interests of the Corporation or any direct
or indirect  parent of the  Corporation  or other  Affiliate of the  Corporation
(other than any such Equity Interests owned by the Corporation or any Restricted
Subsidiary  of the  Corporation);  (iii) make any  principal  payment on or with
respect to, or  purchase,  redeem,  defease or  otherwise  acquire or retire for
value any  Indebtedness  that is  subordinated  to the Senior  Secured  Discount
Notes,  except a  payment  of  principal  at Stated  Maturity;  or (iv) make any
Restricted  Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:

            (A) no  Default  or  Event  of  Default  shall  have occurred and be
            continuing or would occur as a consequence thereof; and

            (B) the  Corporation   would, at the time of such Restricted Payment
            and  after  giving  pro forma effect  thereto as if such  Restricted
            Payment   had   been   made  at  the  beginning  of  the  applicable
            four-quarter   period,  have  been permitted to incur at least $1.00
            of  additional   Indebtedness  pursuant to the Fixed Charge Coverage
            Ratio  test  set forth  in the first  paragraph of paragraph  (d) of
            this subparagraph 9; and

            (C) such Restricted Payment,  together  with the aggregate amount of
            all  other   Restricted   Payments made by the  Corporation  and its
            Restricted   Subsidiaries   after   March   12,    1998   (excluding
            Restricted   Payments  permitted  by clauses (ii), (iii) and (iv) of
            the  next   succeeding   paragraph),  is less than the sum,  without
            duplication,   of  (i)  50% of the  Consolidated  Net  Income of the
            Corporation  for  the  period (taken as one accounting  period) from
            the  beginning  of  the first fiscal quarter  commencing after March
            12,   1998  to  the end of the  Corporation's  most  recently  ended
            fiscal   quarter   for   which  internal  financial  statements  are
            available   at  the  time of such  Restricted  Payment  (or, if such
            Consolidated  Net  Income  for  such period is a deficit,  less 100%
            of  such   deficit),   plus  (ii)  100% of the  aggregate  net  cash
            proceeds   received  by  the  Corporation  since March 12, 1998 as a
            contribution   to  its  common  equity  capital or from the issue or
            sale   of   Equity    Interests  of  the  Corporation   (other  than
            Disqualified   Stock)   or  from the  issue or sale of  Disqualified
            Stock   or  debt   securities  of the  Corporation  that  have  been
            converted

                                       10
<PAGE>

            into  such   Equity   Interests  (other than  Equity  Interests  (or
            Disqualified  Stock  or   convertible   debt  securities)  sold to a
            Restricted  Subsidiary   of  the   Corporation),  plus  (iii) to the
            extent that  any  Restricted   Investment  that was made after March
            12, 1998  is  sold  for cash or otherwise  liquidated  or repaid for
            cash,   100%  of the net  cash  proceeds  thereof  (less the cost of
            disposition,   if  any),   but only to the  extent not  included  in
            subclause (i) of this clause (C).


         The  foregoing  provisions  shall not  prohibit  (i) the  payments  and
applications of the proceeds to be received by the Corporation from the issuance
of the Units as  described  under the caption  "Use of Proceeds" of the Offering
Memorandum  governing the issuance of the Units (ii) the payment of any dividend
within  60 days  after  the  date of  declaration  thereof,  if at said  date of
declaration  such  payment  would  have  complied  with the  provisions  of this
subparagraph  9; (iii) the  redemption,  repurchase,  retirement,  defeasance or
other acquisition of any Equity Interests of the Corporation in exchange for, or
out of the net cash proceeds of the substantially concurrent sale (other than to
a Restricted  Subsidiary of the  Corporation)  of, other Equity Interests of the
Corporation (other than any Disqualified Stock); provided that the amount of any
such net cash  proceeds that are utilized for any such  redemption,  repurchase,
retirement, defeasance or other acquisition shall be excluded from clause (C) of
the preceding paragraph;  (iv) the defeasance,  redemption,  repurchase or other
acquisition  of  subordinated  Indebtedness  with the net cash  proceeds from an
incurrence of Permitted Refinancing Indebtedness or the substantially concurrent
sale  (other  than to a  Restricted  Subsidiary  of the  Corporation)  of Equity
Interests of the Corporation (other than Disqualified Stock);  provided that the
amount of any such net cash proceeds that are utilized for any such  defeasance,
redemption  or  repurchase  shall be excluded  from clause (C) of the  preceding
paragraph;  (v) the payment of any  dividend by a Restricted  Subsidiary  of the
Corporation to the holders of its Equity Interests on a pro rata basis; and (vi)
so long as no Default or Event of Default  shall have occurred and be continuing
immediately  after  such  transaction,  the  repurchase,   redemption  or  other
acquisition or retirement for value of any Equity  Interests of the  Corporation
or any  Restricted  Subsidiary  of the  Corporation  held by any  member  of the
Corporation's (or any of its Restricted Subsidiaries') management; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any  twelve-month  period plus
the  aggregate  cash  proceeds  received  by  the  Corporation  (or  any  of its
Restricted  Subsidiaries)  during any such twelve-month period from any issuance
of Equity  Interests by the Corporation (or any of its Restricted  Subsidiaries)
to  members  of  management  of  the  Corporation  (or  any  of  its  Restricted
Subsidiaries)  (provided  that such proceeds are excluded from clause (C) of the
preceding paragraph; and provided, further, that such repurchase,  redemption or
other  acquisition  or retirement  may not include any Equity  Interests  owned,
directly or indirectly, by the Principals.

         The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted  Subsidiary  if such  designation  would not cause a  Default.  For
purposes  of making  such  determination,  all  outstanding  Investments  by the
Corporation  and its  Restricted  Subsidiaries  (except to the extent  repaid in
cash) in the Subsidiary so designated shall be deemed to be Restricted  Payments
at the time of such  designation  and shall  reduce  the  amount  available  for
Restricted  Payments  under  the  first  paragraph  of this  covenant.  All such
outstanding  Investments shall be deemed to constitute  Investments in an amount
equal to the greatest of (i)

                                       11
<PAGE>

the net book value of such Investments at the time of such designation, (ii) the
fair market value of such  Investments at the time of such designation and (iii)
the original fair market value of such  Investments  at the time they were made.
Such  designation  shall only be permitted if such  Restricted  Payment would be
permitted at such time and if such  Restricted  Subsidiary  otherwise  meets the
definition of an Unrestricted Subsidiary.

         The amount of all  Restricted  Payments  (other than cash) shall be the
fair  market  value on the date of the  Restricted  Payment of the  asset(s)  or
securities  proposed  to be  transferred  or issued by the  Corporation  or such
Restricted  Subsidiary,  as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash  Restricted Payment shall be determined by
the Board of  Directors,  such  determination  to be based  upon an  opinion  or
appraisal  issued by an  accounting,  appraisal  or  investment  banking firm of
national standing if such fair market value exceeds $1.0 million.

            (c) So long as any shares of Preferred  Stock are  outstanding,  the
Corporation  shall not, and shall not permit any of its Restricted  Subsidiaries
to,  directly or  indirectly,  create or  otherwise  cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary  to  (i)(a)  pay  dividends  or make any other  distributions  to the
Corporation  or any of its Restricted  Subsidiaries  (1) on its Capital Stock or
(2) with respect to any other interest or participation  in, or measured by, its
profits,  or (b) pay any  Indebtedness  owed  to the  Corporation  or any of its
Restricted  Subsidiaries,  (ii) make loans or advances to the Corporation or any
of its Restricted Subsidiaries or (iii) transfer any of its properties or assets
to the Corporation or any of its Restricted Subsidiaries. However, the foregoing
restrictions  shall not apply to encumbrances or restrictions  existing under or
by reason of (a)  Existing  Indebtedness  as in effect on March 12, 1998 and any
amendments,  modifications,   restatements,  renewals,  increases,  supplements,
refundings, replacements or refinancings thereof; provided that such amendments,
modifications,   restatements,  renewals,  increases,  supplements,  refundings,
replacement  or  refinancings  are no more  restrictive,  with  respect  to such
dividend and other  payment  restrictions,  than those as in effect on March 12,
1998, (b) the Indenture and the Senior Secured  Discount  Notes,  (c) applicable
law, (d) any  instrument  governing  Indebtedness  or Capital  Stock of a Person
acquired by the  Corporation or any of its Restricted  Subsidiaries as in effect
at the time of such  acquisition  (except to the extent  such  Indebtedness  was
incurred in connection  with or in  contemplation  of such  acquisition),  which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person,  other than the Person,  or the  property or assets of the
Person,  so  acquired;  provided  that,  in  the  case  of  Indebtedness,   such
Indebtedness was permitted by the terms of paragraph (d) of this  subparagraph 9
to be incurred, (e) customary  non-assignment  provisions in leases entered into
in the  ordinary  course of business and  consistent  with past  practices,  (f)
purchase  money  obligations  for property  acquired in the  ordinary  course of
business that impose  restrictions of the nature described in clause (iii) above
on  the  property  so  acquired,  (g)  restrictions  relating  to  a  Restricted
Subsidiary  formed  for the sole  purpose of  engaging  in  accounts  receivable
financing,  (h) any  agreement  for the  sale of a  Restricted  Subsidiary  that
restricts  distributions  by that  Restricted  Subsidiary  pending its sale, (i)
Permitted Refinancing Indebtedness;  provided that the restrictions contained in
the agreements  governing such Permitted  Refinancing  Indebtedness  are no more
restrictive,  taken as a whole, than those contained in the agreements governing
the  Indebtedness  being  refinanced  and

                                       12
<PAGE>
(j) secured  Indebtedness  otherwise  permitted  to be incurred  pursuant to the
provisions of paragraph (d) of this  subparagraph 9 that limits the right of the
debtor to dispose of the assets securing such Indebtedness.

            (d) So long as any shares of Preferred  Stock are  outstanding,  the
Corporation  shall not, and shall not permit any of its Restricted  Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively,  "incur")  any  Indebtedness  (including  Acquired  Debt) and the
Corporation  shall not permit any of its  Restricted  Subsidiaries  to issue any
shares of  preferred  stock;  provided,  however,  that so long as no Default or
Event  of  Default  has  occurred  or is  continuing,  the  Corporation  and its
Restricted  Subsidiaries may incur Indebtedness (including Acquired Debt) if the
Fixed Charge Coverage Ratio for the Corporation's  most recently ended four full
fiscal   quarters  for  which  internal   financial   statements  are  available
immediately preceding the date on which such additional Indebtedness is incurred
is issued would have been at least 1.75 to 1, if such additional Indebtedness is
incurred  prior to March  15,  2000,  or at least  2.0 to 1, if such  additional
Indebtedness is incurred on or after March 15, 2000, in each case, determined on
a pro  forma  basis  (including  a pro  forma  application  of the net  proceeds
therefrom), as if the additional Indebtedness had been incurred at the beginning
of such four-quarter period.

         The provisions of the immediately  preceding  paragraph shall not apply
to the incurrence of any of the following items of  Indebtedness  (collectively,
"Permitted Debt"):

               (i)    the incurrence by  the   Corporation  and  its  Restricted
               Subsidiaries  of  Indebtedness  from a bank  or  other  financial
               institution in an aggregate principal amount not to exceed $200.0
               million at any one time  outstanding,  less any Net  Proceeds  of
               Asset Sales applied to permanently  reduce any such  Indebtedness
               pursuant to paragraph (f) of this subparagraph 9;

               (ii)   the incurrence  by  the  Corporation  and  its  Restricted
               Subsidiaries of the Existing Indebtedness, other than pursuant to
               the Fonda Credit Facility or the Sweetheart Credit Facilities;

               (iii)  the  incurrence  by  the   Corporation   of   Indebtedness
               represented  by  the  Senior  Secured   Discount  Notes  and  the
               Indenture;

               (iv)   the incurrence by the Corporation or any of its Restricted
               Subsidiaries  of   Indebtedness   represented  by  Capital  Lease
               Obligations,  mortgage  financings or purchase money obligations,
               in each case  incurred  for the purpose of  financing  all or any
               part of the purchase price or cost of construction or improvement
               of  property,  plant or  equipment  used in the  business  of the
               Corporation  or  such  Restricted  Subsidiary,  in  an  aggregate
               principal   amount  not  to  exceed  $5.0  million  at  any  time
               outstanding;

               (v)    the incurrence by the Corporation or any of its Restricted
               Subsidiaries  of  Indebtedness in connection with the acquisition
               of  assets or a new  Restricted

                                       13
<PAGE>
               Subsidiary;  provided that such  Indebtedness was incurred by the
               prior owner of such assets or such Restricted Subsidiary prior to
               such  acquisition  by the  Corporation  or one of its  Restricted
               Subsidiaries  and was not  incurred  in  connection  with,  or in
               contemplation  of, such  acquisition by the Corporation or one of
               its  Restricted  Subsidiaries;  and  provided  further  that  the
               principal  amount (or  accreted  value,  as  applicable)  of such
               Indebtedness,  together with any other  outstanding  Indebtedness
               incurred   pursuant  to  this   clause  (v)  and  any   Permitted
               Refinancing Indebtedness incurred to refund, refinance or replace
               any Indebtedness  incurred  pursuant to this clause (v), does not
               exceed $5.0 million;

               (vi)   the incurrence by the Corporation or any of its Restricted
               Subsidiaries  of Permitted  Refinancing  Indebtedness in exchange
               for, or the net  proceeds of which are used to refund,  refinance
               or replace  Indebtedness  (other than intercompany  Indebtedness)
               that was  permitted  to be  incurred  under the  first  paragraph
               hereof or clauses (ii), (iii), (iv) or (v) of this paragraph;

               (vii)  the incurrence by the Corporation or any of its Restricted
               Subsidiaries  of intercompany  Indebtedness  between or among the
               Corporation  and any of its  Restricted  Subsidiaries;  provided,
               however,  that (a) any subsequent  issuance or transfer of Equity
               Interests that results in any such  Indebtedness  being held by a
               Person  other than the  Corporation  or a  Restricted  Subsidiary
               thereof  and  (b)  any  sale  or  other   transfer  of  any  such
               Indebtedness  to a Person that is not either the Corporation or a
               Restricted  Subsidiary  thereof shall be deemed, in each case, to
               constitute an incurrence of such  Indebtedness by the Corporation
               or such Restricted  Subsidiary,  as the case may be, that was not
               permitted by this clause (vii);

               (viii) the incurrence by the Corporation or any of its Restricted
               Subsidiaries  of Hedging  Obligations  that are  incurred for the
               purpose of fixing or hedging  interest  rate risk with respect to
               any floating rate  Indebtedness that is permitted by the terms of
               the Indenture to be outstanding; and

               (ix)   the incurrence by the Corporation or any of its Restricted
               Subsidiaries of additional Indebtedness in an aggregate principal
               amount (or accreted  value,  as  applicable)  not to exceed $25.0
               million at any one time outstanding.

         For purposes of determining  compliance with this paragraph (d), in the
event that an item of  Indebtedness  meets the  criteria of more than one of the
categories of Permitted  Debt  described in clauses (i) through (ix) above or is
entitled to be incurred  pursuant to the first  paragraph of this paragraph (d),
the  Corporation   shall,  in  its  sole  discretion,   classify  such  item  of
Indebtedness  in any manner that complies with this  paragraph  (d).  Accrual of
interest,  accretion or amortization of original issue discount, and the payment
of interest on any Indebtedness in the form of additional  Indebtedness with the
same terms shall not be deemed to be an incurrence of Indebtedness  for purposes
of this paragraph (d);  provided,  in each such case, that the amount thereof is
included in Fixed Charges of the Corporation as accrued.

                                       14
<PAGE>
            (e) So long as any shares of Preferred  Stock are  outstanding,  the
Corporation  shall not, and shall not permit any of its Restricted  Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its  properties  or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee  with,  or for the benefit of, any  Affiliate  (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on  terms  that  are no  less  favorable  to  the  Corporation  or the  relevant
Restricted  Subsidiary  than those that would have been obtained in a comparable
transaction by the Corporation or such  Restricted  Subsidiary with an unrelated
Person  and (ii) (a) with  respect  to any  Affiliate  Transaction  or series of
related Affiliate  Transactions  involving aggregate  consideration in excess of
$1.0 million,  the Board of Directors shall have passed a resolution  certifying
that such  Affiliate  Transaction  complies  with clause (i) above and that such
Affiliate  Transaction  has been  approved  by a majority  of the  disinterested
members  of the  Board  of  Directors  and (b)  with  respect  to any  Affiliate
Transaction  or series of related  Affiliate  Transactions  involving  aggregate
consideration  in excess of $5.0  million,  the Board of  Directors  shall  have
received  an  opinion  as to the  fairness  to the  Holders  of  such  Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing with total assets in excess of $1.0
billion,  except with respect to transactions in the ordinary course of business
and  consistent  with  past  practice  between  the  Corporation  or  any of its
Restricted Subsidiaries and Four M, CEG or any of their respective subsidiaries;
provided  that the following  shall not be deemed to be Affiliate  Transactions:
(1) the  Indenture of Lease dated as of January 1, 1995,  between  Dennis Mehiel
and Fonda  relating to the  Jacksonville  Facility  except for any  purchases of
property  by Fonda  that may  arise  thereunder;  (2) any  employment  agreement
entered into by the  Corporation  or any of its Restricted  Subsidiaries  in the
ordinary  course  of  business  and  consistent  with the past  practice  of the
Corporation  or such  Restricted  Subsidiary  in an amount  not to exceed  $1.00
million per annum;  (3)  transactions  between or among the  Corporation and its
Restricted Subsidiaries;  (4) Restricted Payments and Permitted Investments that
are  permitted by paragraph  (b) of this  subparagraph  9; and (5)  transactions
entered into in connection with the  Transactions.


            (f) So long as any shares of Preferred  Stock  are  outstanding, the
Corporation  shall not, and shall not permit any of its Restricted  Subsidiaries
to,  consummate  an Asset Sale  unless (i) the  Corporation  (or the  Restricted
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value  (evidenced  by a resolution of the
Board  of  Directors)  of the  assets  or  Equity  Interests  issued  or sold or
otherwise  disposed  of and  (ii) at  least  75% of the  consideration  therefor
received by the  Corporation  or such  Restricted  Subsidiary  is in the form of
cash;  provided  that  the  amount  of (x)  any  liabilities  (as  shown  on the
Corporation's or such Restricted Subsidiary's most recent balance sheet), of the
Corporation or any Restricted  Subsidiary  (other than  contingent  liabilities)
that are assumed by the  transferee  of any such assets  pursuant to a customary
novation  agreement that releases the Corporation or such Restricted  Subsidiary
from  further  liability  and (y) any  securities,  notes or  other  obligations
received  by the  Corporation  or  any  such  Restricted  Subsidiary  from  such
transferee that are  contemporaneously  (subject to ordinary settlement periods)
converted by the  Corporation or such  Restricted  Subsidiary  into cash (to the
extent of the cash  received),  shall be deemed to be cash for  purposes of this
provision.

                                       15
<PAGE>
         Within 365 days after the Corporation's or any Restricted  Subsidiary's
receipt  of any Net  Proceeds  from  an  Asset  Sale,  the  Corporation  or such
Restricted  Subsidiary  may apply such Net  Proceeds  (a) to  permanently  repay
Indebtedness of a Restricted  Subsidiary of the Corporation (and, in the case of
revolving  borrowings,   to  correspondingly  reduce  commitments  with  respect
thereto),  or (b) to the  acquisition  of a  majority  of the  assets  of,  or a
majority of the Voting Stock of,  another  Permitted  Business,  the making of a
capital  expenditure or the acquisition of other long-term  assets that are used
or useful in a Permitted Business. Pending the final application of any such Net
Proceeds,  the Corporation may temporarily reduce revolving credit borrowings or
otherwise  invest such Net Proceeds in any manner that is not prohibited by this
Certificate  of  Incorporation.  Any Net Proceeds  from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph shall be
deemed  to  constitute  Excess  Proceeds.  When the  aggregate  amount of Excess
Proceeds exceeds $10.0 million (an "Excess  Proceeds Offer  Triggering  Event"),
the Corporation  shall be required to make an offer to each holders of shares of
Preferred Stock (an "Asset Sale Offer") to repurchase the maximum number of such
holder's  shares of  Preferred  Stock  that may be  purchased  out of the Excess
Proceeds,  at an  offer  price  in  cash  in an  amount  equal  to  100%  of the
Liquidation  Amount,  plus an amount of cash equal to the amount of any  accrued
and  unpaid   dividends,   in  accordance  with  the  procedures  set  forth  in
subparagraph 6 of this Paragraph A with respect to a Change of Control; provided
however,  that such offer will not be required if the application of such Excess
Proceeds to repurchase shares of Preferred Stock would cause an Event of Default
under any of the agreements  governing  Indebtedness of the Corporation.  If the
aggregate  purchase  price of the shares of Preferred  Stock  tendered into such
Asset Sale Offer  surrendered by the holders  thereof is less than the amount of
Excess  Proceeds,  the  Corporation  may use such  Excess  Proceeds  for general
corporate   purposes   (subject  to  the  provisions  of  this   Certificate  of
Incorporation). If the aggregate purchase price of the shares of Preferred Stock
tendered into such Asset Sale Offer  surrendered by the holders  thereof exceeds
the  amount of Excess  Proceeds,  the  Corporation  shall  select  the Shares of
Preferred  Stock to be purchased on a pro rata basis.  Upon  completion  of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

            (g) So  long  as any shares of Preferred Stock are  outstanding, the
Corporation  (i) shall not,  and shall not permit  any Wholly  Owned  Restricted
Subsidiary of the Corporation to,  transfer,  convey,  sell,  lease or otherwise
dispose of any Capital  Stock in any Wholly Owned  Restricted  Subsidiary of the
Corporation  to any  Person  (other  than  the  Corporation  or a  Wholly  Owned
Restricted Subsidiary of the Corporation), unless (a) such transfer, conveyance,
sale,  lease or other  disposition  is of all the  Capital  Stock in such Wholly
Owned  Restricted  Subsidiary  and (b) the cash Net Proceeds from such transfer,
conveyance,  sale,  lease or other  disposition  are applied in accordance  with
paragraph  (f)  hereof,  and (ii) shall not permit any Wholly  Owned  Restricted
Subsidiary of the Corporation to issue any of its Equity  Interests (other than,
if necessary,  shares of its Capital Stock  constituting  directors'  qualifying
shares) to any Person other than to the Corporation or a Wholly Owned Restricted
Subsidiary of the Corporation.

            (h) So  long  as any  shares of  Preferred  Stock  are  outstanding,
neither the Corporation nor any of its Restricted  Subsidiaries shall,  directly
or  indirectly,  pay or cause to be paid any  consideration,  whether  by way of
interest, fee or otherwise, to any holder of shares of Preferred Stock for or as
an inducement to any amendment or modification of any of the terms or

                                       16
<PAGE>
provisions of this  Certificate of  Incorporation  unless such  consideration is
offered to be paid or is paid to all holders of shares of  Preferred  Stock that
amend or modify, or agree to amend or modify, in the time frame set forth in the
solicitation documents relating to such amendment or modification.

            (i) So  long  as any shares of Preferred Stock are  outstanding, the
Corporation  may not  consolidate  or  merge  with or into  (whether  or not the
Corporation is the surviving entity), or sell, assign,  transfer,  lease, convey
or otherwise  dispose of all or substantially all of its properties or assets in
one or more  related  transactions,  to  another  corporation,  Person or entity
unless (i) the  Corporation  is the surviving  corporation  or the entity or the
Person  formed by or surviving any such  consolidation  or merger (if other than
the Corporation) or to which such sale, assignment,  transfer, lease, conveyance
or other disposition shall have been made is a corporation organized or existing
under the laws of the  United  States,  any state  thereof  or the  District  of
Columbia; (ii) immediately after such transaction no Default or Event of Default
exists; and (iii) except in the case of a merger of the Corporation with or into
a Wholly Owned Restricted Subsidiary of the Corporation,  the Corporation or the
entity or Person  formed by or surviving  any such  consolidation  or merger (if
other than the Corporation), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall have Consolidated
Net  Worth  immediately  after  the  transaction  equal to or  greater  than the
Consolidated Net Worth of the Corporation  immediately preceding the transaction
and (B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such  transaction  had occurred at the beginning of the applicable
four-quarter  period,  be  permitted  to  incur at  least  $1.00  of  additional
Indebtedness  pursuant to the Fixed Charge  Coverage Ratio test set forth in the
first paragraph of paragraph (d) of this subparagraph 9.

            (j) So  long  as any shares of Preferred Stock are  outstanding, the
Corporation  shall not, and shall not permit any of its Restricted  Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens.

            (k) So  long  as any shares of Preferred Stock are  outstanding, the
Corporation  shall not, and shall not permit any  Subsidiary  to,  engage in any
business other than  Permitted  Businesses  (as defined  below),  except to such
extent  as  would  not  be  material  to  the  Corporation  and  its  Restricted
Subsidiaries taken as a whole.

            (l) So  long  as any shares of Preferred Stock are  outstanding, the
Corporation  shall do or cause to be done all things  necessary  to preserve and
keep in full force and effect (i) its corporate  existence,  and the  corporate,
partnership  or  other  existence  of each of its  Restricted  Subsidiaries,  in
accordance with the respective  organizational documents (as they may be amended
from time to time) of the Corporation or any such Restricted Subsidiary and (ii)
the rights (charter and  statutory),  licenses and franchises of the Corporation
and its Restricted Subsidiaries;  provided,  however, that the Corporation shall
not be  required  to  preserve  any such  right,  license or  franchise,  or the
corporate, partnership or other existence of any of its Restricted Subsidiaries,
if  the  Board  of  Directors  of  the  Corporation  shall  determine  that  the
preservation  thereof

                                       17
<PAGE>
is no longer desirable in the conduct of the business of the Corporation and its
Restricted  Subsidiaries,  taken as a whole,  and that the loss  thereof  is not
adverse in any material respect to the holders of the shares of Preferred Stock.

            (m) The  restrictions  set  forth  in  the  preceding paragraphs (a)
through (l) of this subparagraph 9 shall in no way limit the power and authority
of the  Corporation to take any of the actions  restricted  thereby.  Rather,  a
violation  of any such  paragraphs  shall  have the  consequences  set  forth in
paragraph (a) of subparagraph 8 of this Paragraph A, and only such consequences.

            (n) As  used  herein,  the  following  terms  are  ascribed with the
following meanings:

            "Acquired  Debt"  means,  with respect to any specified  Person, (i)
Indebtedness  of any other  Person  existing  at the time such  other  Person is
merged with or into or became a Restricted  Subsidiary of such specified Person,
including,  without limitation,  Indebtedness incurred in connection with, or in
contemplation  of,  such  other  Person  merging  with  or into  or  becoming  a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.

            "Affiliate"  of  any  specified  Person  means  any other Person (as
described  below)  directly or indirectly  controlling or controlled by or under
direct or indirect  common control with such specified  Person.  For purposes of
this definition,  "control"  (including,  with correlative  meanings,  the terms
"controlling,"  "controlled by" and "under common control  with"),  as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the  direction  of the  management  or policies of such
Person,  whether  through the  ownership of voting  securities,  by agreement or
otherwise; provided that beneficial ownership of 10% or more of the Voting Stock
(as described below) of a Person shall be deemed to be control.

            "Asset Sale"  means  (i)  the  sale,   lease,   conveyance  or other
disposition of any assets or rights (including,  without limitation, by way of a
sale and leaseback)  other than (x) sales of inventory in the ordinary course of
business consistent with past practices,  and (y) the sale, lease, conveyance or
other  disposition of all or substantially  all of the assets of the Corporation
and its Restricted  Subsidiaries taken as a whole, and (ii) the issue or sale by
the Corporation or any of its Restricted Subsidiaries of Equity Interests of any
of the Corporation's Restricted  Subsidiaries,  in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market  value in excess of $2.5 million or (b) for net proceeds
in excess of $2.5 million.  Notwithstanding  the foregoing,  the following items
shall  not be  deemed  to be  Asset  Sales:  (i) a  transfer  of  assets  by the
Corporation  to a Restricted  Subsidiary  or by a Restricted  Subsidiary  to the
Corporation or to another  Restricted  Subsidiary and (ii) a Restricted  Payment
that is permitted by paragraph (b) of this subparagraph 9.

            "Capital Lease  Obligation"  means,  at  the  time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be  required  to be  capitalized  on a balance  sheet in
accordance with GAAP (as defined below).

                                       18
<PAGE>
            "Capital Stock" means (i) in the  case  of a  corporation, corporate
stock,  (ii) in the  case of an  association  or  business  entity,  any and all
shares,  interests,   participations,   rights  or  other  equivalents  (however
designated)  of corporate  stock,  (iii) in the case of a partnership or limited
liability  company,  partnership  or membership  interests  (whether  general or
limited) and (iv) any other interest or  participation  that confers on a Person
the right to receive a share of the profits and losses of, or  distributions  of
assets of, the issuing Person, excluding stock appreciation rights issued in the
ordinary course of business.

            "CEG" means Creative  Expressions Group, Inc and CEG Holdings, LLC.

            "Consolidated  Cash  Flow" means, with respect to any Person for any
period,   the  Consolidated  Net  Income  of  such  Person  and  its  Restricted
Subsidiaries for such period plus (i) an amount equal to any extraordinary  loss
plus any net loss realized in connection  with an Asset Sale (to the extent such
losses were  deducted in computing  such  Consolidated  Net  Income),  plus (ii)
provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries  for such period,  to the extent that such  provision for taxes was
included in computing  such  Consolidated  Net Income,  plus (iii)  consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether  paid or accrued  and  whether or not  capitalized  (including,  without
limitation,  amortization  of debt issuance costs and original  issue  discount,
non-cash  interest  payments,  the interest  component  of any deferred  payment
obligations,  the interest  component of all  payments  associated  with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings,  and net payments
(if any) pursuant to Hedging  Obligations),  to the extent that any such expense
was deducted in computing such Consolidated Net Income,  plus (iv) depreciation,
amortization  (including  amortization  of goodwill  and other  intangibles  but
excluding  amortization  of  prepaid  cash  expenses  that  were paid in a prior
period) and other non-cash  charges  (excluding any such non-cash  charge to the
extent  that it  represents  an accrual of or  reserve  for cash  charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its  Restricted  Subsidiaries  for such period to the
extent that such  depreciation,  amortization  and other  non-cash  charges were
deducted in computing  such  Consolidated  Net Income,  minus (v) non-cash items
increasing  such  Consolidated  Net Income for such period,  in each case,  on a
consolidated basis and determined in accordance with GAAP.  Notwithstanding  the
foregoing,  the  provision  for  taxes on the  income  or  profits  of,  and the
depreciation  and  amortization  and other  non-cash  charges  of, a  Restricted
Subsidiary of the referent Person shall be added to  Consolidated  Net Income to
compute  Consolidated  Cash Flow only to the extent that a corresponding  amount
would  be  permitted  at  the  date  of  determination  to be  dividend  to  the
Corporation by such Restricted  Subsidiary without prior  governmental  approval
(that  has not been  obtained),  and  without  direct  or  indirect  restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.

            "Consolidated  Net Income"   means,  with  respect to any Person for
any period,  the  aggregate of the Net Income of such Person and its  Restricted
Subsidiaries for such period, on a consolidated basis,  determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity

                                       19
<PAGE>
method of  accounting  shall be  included  only to the  extent of the  amount of
dividends or distributions paid in cash to the referent Person or a Wholly Owned
Restricted  Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the  declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of  determination  permitted  without any prior  governmental  approval
(that has not been  obtained) or,  directly or  indirectly,  by operation of the
terms of its charter or any  agreement,  instrument,  judgment,  decree,  order,
statute,   rule  or  governmental   regulation  applicable  to  that  Restricted
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling  of  interests  transaction  for any  period  prior  to the date of such
acquisition  shall  be  excluded,  (iv) the  cumulative  effect  of a change  in
accounting  principles  shall be  excluded  and (v)  income of any  Unrestricted
Subsidiary  shall be excluded  whether or not  distributed to the Corporation or
any of its Restricted Subsidiaries.

            "Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated  equity of the common stockholders of such
Person and its Restricted  Subsidiaries as of such date plus (ii) the respective
amounts  reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified  Stock) that by its terms
is not  entitled  to the  payment of  dividends  unless  such  dividends  may be
declared  and  paid  only out of net  earnings  in  respect  of the year of such
declaration  and  payment,  but only to the extent of any cash  received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern  business made within 12 months after the  acquisition
of such  business)  subsequent  to March 12, 1998 in the book value of any asset
owned by such  Person  or a  consolidated  Subsidiary  of such  Person,  (y) all
investments as of such date in  unconsolidated  Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments),  and (z) all
unamortized  debt discount and expense and  unamortized  deferred  charges as of
such date, all of the foregoing determined in accordance with GAAP.

            "Continuing  Directors"  means, as of any date of determination, any
member of the Board of Directors of the Corporation who (i) was a member of such
Board of  Directors  on March 12,  1998 or (ii) was  nominated  for  election or
elected to such  Board of  Directors  with the  approval  of a  majority  of the
Continuing  Directors  who  were  members  of the  Board  at the  time  of  such
nomination or election.

            "Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.

            "Disqualified  Stock"  means any Capital  Stock  that,  by its terms
(or by the terms of any security into which it is  convertible,  or for which it
is exchangeable,  at the option of the holder thereof), or upon the happening of
any event,  matures or is  mandatorily  redeemable,  pursuant to a sinking  fund
obligation or otherwise,  or redeemable at the option of the Holder thereof,  in
whole or in part,  on or prior to June 14,  2008;  provided,  however,  that any
Capital  Stock that would  constitute  Disqualified  Stock  solely  because  the
holders  thereof have the right to require the  Corporation  to repurchase  such
Capital Stock upon the  occurrence of a Change of Control or an Asset Sale shall
not constitute Disqualified Stock if the terms of such Capital Stock

                                       20
<PAGE>

provide that the Corporation may not repurchase or redeem any such Capital Stock
pursuant to such provisions  unless such repurchase or redemption  complies with
paragraph (b) of this subparagraph 9.

            "Equity Interests" means  Capital  Stock  and all  warrants, options
or other rights to acquire  Capital Stock (but  excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).

            "Event of Default"  is  ascribed  the  meaning  set forth in Section
6.01 of the Indenture.

            "Existing  Indebtedness"  means  Indebtedness of the Corporation and
its  Restricted   Subsidiaries  in  existence  on  March  12,  1998,   including
Indebtedness  represented  by the demand  notes  issued to the  stockholders  of
Sweetheart, until such amounts are repaid.

            "Fixed Charges" means,  with  respect  to any Person for any period,
the sum, without duplication,  of (i) the consolidated  interest expense of such
Person and its Restricted  Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue  discount,  non-cash  interest  payments,  the  interest  component of any
deferred payment obligations,  the interest component of all payments associated
with  Capital  Lease  Obligations,  commissions,  discounts  and other  fees and
charges  incurred  in  respect  of  letter  of  credit  or  bankers'  acceptance
financings,  and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated  interest of such Person and its Restricted  Subsidiaries  that
was  capitalized   during  such  period,  and  (iii)  any  interest  expense  on
Indebtedness  of another  Person that is Guaranteed by such Person or one of its
Restricted  Subsidiaries or secured by a Lien on assets of such Person or one of
its  Restricted  Subsidiaries  (whether or not such  Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person, other than dividend payments on
Equity Interests  payable solely in Equity  Interests of the Corporation  (other
than Disqualified Stock) or to the Corporation or a Restricted Subsidiary of the
Corporation,  times  (b) a  fraction,  the  numerator  of  which  is one and the
denominator of which is one minus the then current combined  federal,  state and
local statutory tax rate of such Person,  expressed as a decimal,  in each case,
on a consolidated basis and in accordance with GAAP.

            "Fixed  Charge  Coverage Ratio" means with respect to any Person for
any  period,  the ratio of the  Consolidated  Cash Flow of such  Person for such
period to the Fixed  Charges of such Person for such  period.  In the event that
the  referent  Person or any of its  Restricted  Subsidiaries  incurs,  assumes,
Guarantees or redeems any Indebtedness  (other than revolving credit borrowings)
or issues or redeems  preferred  stock  subsequent  to the  commencement  of the
period for which the Fixed Charge  Coverage Ratio is being  calculated but prior
to the date on which the event for  which the  calculation  of the Fixed  Charge
Coverage Ratio is made (the "Calculation  Date"), then the Fixed Charge Coverage
Ratio  shall  be  calculated   giving  pro  forma  effect  to  such  incurrence,
assumption,  Guarantee  or  redemption  of  Indebtedness,  or such  issuance  or
redemption of preferred  stock,  as if the same had occurred at the beginning of
the  applicable  four-quarter  reference  period.  In addition,  for purposes of
making the computation  referred to

                                       21
<PAGE>

above,  (i)  acquisitions  that have been made by the  Corporation or any of its
Restricted  Subsidiaries,   including  through  mergers  or  consolidations  and
including any related financing transactions,  during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date  shall be deemed  to have  occurred  on the  first day of the  four-quarter
reference period and  Consolidated  Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition  of  Consolidated  Net Income,  and (ii) the  Consolidated  Cash Flow
attributable to discontinued operations,  as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded,  and (iii) the Fixed Charges attributable to discontinued  operations,
as determined in accordance with GAAP, and operations or businesses  disposed of
prior to the Calculation  Date,  shall be excluded,  but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date.

            "Fonda" means The Fonda Group, Inc.

            "Fonda  Credit  Facility"  means the credit  facility  between Fonda
and IBJ Schroder  Bank & Trust  Corporation,  as agent,  providing for available
borrowings of up to $50.0 million.

            "Four M" means Four M Corporation.

            "GAAP" means  generally  accepted  accounting  principles  set forth
in the opinions and  pronouncements  of the Accounting  Principles  Board of the
American   Institute  of  Certified   Public   Accountants  and  statements  and
pronouncements  of the  Financial  Accounting  Standards  Board or in such other
statements by such other entity as have been  approved by a significant  segment
of the accounting profession, which are in effect on March 12, 1998.

            "Guarantee"   means  a  guarantee   (other  than  by  endorsement of
negotiable  instruments  for  collection  in the ordinary  course of  business),
direct or indirect,  in any manner (including,  without limitation,  by way of a
pledge of assets or through  letters of credit or  reimbursement  agreements  in
respect thereof), of all or any part of any Indebtedness (as defined below).

            "Hedging   Obligations"   means,  with  respect  to  any Person, the
obligations  of such Person under (i) interest  rate swap  agreements,  interest
rate  cap  agreements  and  interest  rate  collar  agreements  and  (ii)  other
agreements or arrangements  designed to protect such Person against fluctuations
in interest rates.

            "Holder" means a Person  in  whose  name a  Senior  Secured Discount
Note is registered.

            "Indebtedness"  means,  with respect to any Person, any indebtedness
of such  Person,  whether or not  contingent,  in respect of  borrowed  money or
evidenced  by bonds,  notes,  debentures  or similar  instruments  or letters of
credit (or reimbursement  agreements in respect thereof) or banker's acceptances
or representing  Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging

                                       22
<PAGE>

Obligations,  except any such balance  that  constitutes  an accrued  expense or
trade payable,  if and to the extent any of the foregoing (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all  Indebtedness of
others secured by a Lien (as defined below) on any asset of such Person (whether
or not such  Indebtedness  is assumed  by such  Person)  and,  to the extent not
otherwise  included,  the  Guarantee by such Person of any  indebtedness  of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted  value  thereof,  in the case of any  Indebtedness  issued with
original issue discount,  and (ii) the principal  amount thereof,  together with
any  interest  thereon  that is more than 30 days  past due,  in the case of any
other Indebtedness.

            "Indenture" means the Indenture, dated as of March 12, 1998, between
the Corporation and The Bank of New York, as trustee (the "Trustee"),  governing
the Corporation's 12.75% Senior Secured Discount Notes due 2008.

            "Investments" means, with respect to  any  Person,   all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans  (including  guarantees of  Indebtedness  or other  obligations),
advances  or capital  contributions  (excluding  commission,  travel and similar
advances to officers and  employees  made in the ordinary  course of  business),
purchases  or other  acquisitions  for  consideration  of  Indebtedness,  Equity
Interests  or other  securities,  together  with all items  that are or would be
classified as investments  on a balance sheet prepared in accordance  with GAAP.
If the  Corporation or any  Restricted  Subsidiary of the  Corporation  sells or
otherwise disposes of any Equity Interests of any direct or indirect  Subsidiary
of the  Corporation  such  that,  after  giving  effect  to  any  such  sale  or
disposition,  such  Person is no longer a  Subsidiary  of the  Corporation,  the
Corporation  shall be deemed to have made an  Investment on the date of any such
sale or  disposition  equal to the fair market value of the Equity  Interests of
such  Subsidiary not sold or disposed of in an amount  determined as provided in
the final paragraph of paragraph (b) of this subparagraph 9.

            "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge,  security  interest or encumbrance of any kind in respect of such asset,
whether or not filed,  recorded or  otherwise  perfected  under  applicable  law
(including any conditional sale or other title retention agreement, any lease in
the nature  thereof,  any option or other  agreement  to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

            "Net  Income"  means,  with  respect  to  any Person, the net income
(loss)  of such  Person,  determined  in  accordance  with GAAP and  before  any
reduction in respect of preferred stock dividends,  excluding,  however, (i) any
gain (but not loss),  together with any related provision for taxes on such gain
(but not  loss),  realized  in  connection  with (a) any  Asset  Sale or (b) the
disposition  of  any  securities  by  such  Person  or  any  of  its  Restricted
Subsidiaries or the  extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss),  together with any related provision for taxes on such  extraordinary
or nonrecurring gain (but not loss).

                                       23
<PAGE>
            "Net  Proceeds"  means  the aggregate cash proceeds  received by the
Company  or any of its  Restricted  Subsidiaries  in  respect  of any Asset Sale
(including,  without  limitation,  any  cash  received  upon  the  sale or other
disposition of any non-cash  consideration  received in any Asset Sale),  net of
the direct costs  relating to such Asset Sale  (including,  without  limitation,
legal,  accounting and investment  banking fees, and sales  commissions) and any
relocation  expenses  incurred as a result  thereof,  taxes paid or payable as a
result  thereof  (after  taking  into  account  any  available  tax  credits  or
deductions and any tax sharing arrangements),  amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale, and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.

            "Non-Recourse  Debt"  means Indebtedness (i) as to which neither the
Corporation nor any of its Restricted  Subsidiaries  (a) provides credit support
of any kind  (including  any  undertaking,  agreement or  instrument  that would
constitute  Indebtedness),  (b) is directly or indirectly liable (as a guarantor
or otherwise),  or (c) constitutes the lender;  and (ii) no default with respect
to which  (including  any  rights  that  the  holders  thereof  may have to take
enforcement  action  against an  Unrestricted  Subsidiary)  would  permit  (upon
notice,  lapse of time or both) any holder of any other Indebtedness (other than
the Senior Secured  Discount Notes (as defined below)) of the Corporation or any
of its Restricted  Subsidiaries to declare a default on such other  Indebtedness
or cause the payment  thereof to be  accelerated  or payable prior to its stated
maturity;  and (iii) as to which the lenders have been  notified in writing that
they will not have any recourse to the stock or assets of the Corporation or any
of its Restricted Subsidiaries.

            "Offering" means the Offering of the Units by the Corporation.

            "Offering Memorandum" means the Offering  Memorandum, dated March 5,
1998, governing the Offering of the Units by the Corporation.

            "Permitted Business" means the  business  of  producing  and selling
food  service,  packaging,  tissue  and  party  goods  products  and such  other
businesses as the Corporation and its Restricted  Subsidiaries are engaged in on
the date of the Indenture, and reasonable expansions and extensions thereof.

            "Permitted  Investment"  means (a) any Investment in the Corporation
or in a Restricted  Subsidiary of the  Corporation;  (b) any  Investment in Cash
Equivalents;  (c) any Investment by the Corporation or any Restricted Subsidiary
of the  Corporation  in a  Person,  if as a result of such  Investment  (i) such
Person becomes a Restricted Subsidiary of the Corporation or (ii) such Person is
merged,  consolidated  or  amalgamated  with or into,  or  transfers  or conveys
substantially  all of its assets to, or is liquidated into, the Corporation or a
Restricted Subsidiary of the Corporation; (d) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale made in accordance with
the  provisions  of paragraph  (f) of this  paragraph 9; (e) a $2.6 million loan
from Fonda to CEG, as in effect on March 12, 1998 as such loan may be amended or
refinanced in a manner not adverse to Fonda,  the  Corporation or the Holders of
the Senior  Secured  Discount  Notes;  and (f) other  Investments in a Permitted
Business in an aggregate amount not to exceed $5.0 million.

                                       24
<PAGE>
            "Permitted   Liens"   means  (i)   Liens  on   Indebtedness  of  the
Corporation's  Restricted  Subsidiaries  that was permitted by the terms of this
subparagraph 9 to be incurred;  (ii) Liens in favor of the Corporation or any of
its Restricted Subsidiaries; (iii) Liens on property of a Person existing at the
time such  Person is merged into or  consolidated  with the  Corporation  or any
Restricted  Subsidiary  of the  Corporation;  provided  that such  Liens were in
existence prior to the  contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or  consolidated
with the  Corporation  or any  Restricted  Subsidiary;  (iv)  Liens on  property
existing at the time of acquisition thereof by the Corporation or any Restricted
Subsidiary of the Corporation;  provided that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure the performance of
statutory  obligations,  surety  or  appeal  bonds,  performance  bonds or other
obligations of a like nature incurred in the ordinary  course of business;  (vi)
Liens to secure Indebtedness  (including Capital Lease Obligations) permitted by
clause (iv) of the second  paragraph of  paragraph  (d) of this  subparagraph  9
covering only the assets acquired with such  Indebtedness;  (vii) Liens existing
on March 12, 1998; (viii) Liens for taxes,  assessments or governmental  charges
or claims that are not yet delinquent or that are being  contested in good faith
by  appropriate   proceedings  promptly  instituted  and  diligently  concluded,
provided that any reserve or other appropriate provision as shall be required in
conformity  with GAAP shall have been made therefor;  (ix) Liens incurred in the
ordinary course of business of the  Corporation or any Restricted  Subsidiary of
the Corporation  with respect to obligations  that do not exceed $2.5 million at
any one time  outstanding  and that (a) are not incurred in connection  with the
borrowing  of money or the  obtaining  of advances  or credit  (other than trade
credit in the  ordinary  course  of  business)  and (b) do not in the  aggregate
materially  detract from the value of the property or materially  impair the use
thereof in the  operation  of business  by the  Corporation  or such  Restricted
Subsidiary;  (x) Liens in favor of the holders of Senior Secured Discount Notes;
and (xi)  renewals  or  refundings  of any Liens  referred  to in clauses  (iii)
through (x) above;  provided that any such renewal or refunding  does not extend
to any assets or secure any  Indebtedness  not  securing or secured by the Liens
being renewed or refinanced.

            "Permitted  Refinancing  Indebtedness" means any Indebtedness of the
Corporation or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance,  renew, replace, defease or
refund other Indebtedness of the Corporation or any such Restricted  Subsidiary;
provided that: (i) the principal  amount (or accreted  value,  if applicable) of
such Permitted Refinancing  Indebtedness does not exceed the principal amount of
(or accreted value, if applicable),  plus accrued  interest on, the Indebtedness
so  extended,  refinanced,  renewed,  replaced,  defeased or refunded  (plus the
amount of  reasonable  expenses  incurred in  connection  therewith);  (ii) such
Permitted  Refinancing  Indebtedness  has a final  maturity  date later than the
final maturity date of, and has a Weighted  Average Life to Maturity equal to or
greater than the Weighted  Average Life to Maturity of, the  Indebtedness  being
extended,  refinanced,  renewed,  replaced,  defeased or refunded;  (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Senior Secured  Discount Notes,  such
Permitted  Refinancing  Indebtedness  has a final  maturity  date later than the
final maturity date of, and is  subordinated  in right of payment to, the Senior
Secured  Discount  Notes on terms at least as favorable to the Holders of Senior
Secured  Discount Notes as those  contained in the  documentation  governing the
Indebtedness

                                       25
<PAGE>
being extended,  refinanced,  renewed, replaced,  defeased or refunded; and (iv)
such Indebtedness is incurred either by the Corporation or by the Subsidiary who
is  the  obligor  on  the  Indebtedness  being  extended,  refinanced,  renewed,
replaced, defeased or refunded.

            "Person"  means  any  individual,  corporation,  partnership,  joint
venture,  association,  joint-stock company,  limited liability company,  trust,
unincorporated  organization  or government  or agency or political  subdivision
thereof  (including any  subdivision  or ongoing  business of any such entity or
substantially all of the assets of any such entity, subdivision or business).

            "Principals"  means  Dennis  Mehiel,  his lineal descendants and any
trust, corporation, partnership, association, limited liability company or other
entity in which Dennis Mehiel and/or his lineal descendants hold at least 80% of
the total, combined outstanding voting power or similar controlling interest.

            "Registration   Rights  Agreement"  means  the  Registration  Rights
Agreement,  dated as of March 12,  1998,  by and among the  Corporation  and the
other parties named on the signature  pages  thereof,  as such  agreement may be
amended, modified or supplemented from time to time.

            "Restricted  Investment"  means an Investment other than a Permitted
Investment.

            "Restricted  Subsidiary"  of a  Person means  any  Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.

            "Senior  Secured  Discount  Notes"  means  the  Corporation's 12.75%
Senior Secured Discount Notes due 2008.

            "Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business  entity of which more than 50% of the total voting
power of shares of Capital Stock entitled  (without  regard to the occurrence of
any  contingency)  to vote in the  election of  directors,  managers or trustees
thereof is at the time owned or  controlled,  directly  or  indirectly,  by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any  partnership  (a) the sole general partner or the managing
general  partner of which is such Person or a  Subsidiary  of such Person or (b)
the  only  general  partners  of  which  are  such  Person  or of  one  or  more
Subsidiaries of such Person (or any  combination  thereof);  provided,  however,
that  Sweetheart  (as defined  below) shall be deemed to be a Subsidiary  of the
Corporation for so long as the Corporation  directly or indirectly owns at least
50% of Sweetheart's aggregate outstanding common stock.

            "Sweetheart" means Sweetheart Holdings Inc. and its Subsidiaries.

            "Sweetheart  Credit  Facilities" means Sweetheart's revolving credit
facility  with  BankAmerica  in  the  amount  of  up  to  $135.0  million,   and
Sweetheart's  term and revolving credit facilities with The Bank of Nova Scotia,
which  provides for (i) a term loan  facility in the amount of up to Cdn.  $14.0
million; (ii) a revolving credit facility in the amount of up to Cdn. $7.0

                                       26
<PAGE>
million;  and (iii) a  revolving  overdraft  credit  facility  with  standby  or
guarantee letters of credit in the amount of up to Cdn. $1.0 million.

            "Transactions"  is  ascribed  the  meaning set forth in the Offering
Memorandum.

            "Units"  means  the  Units  offered  in  the Offering  consisting of
$1,000 in aggregate  principal amount at maturity of the Senior Secured Discount
Notes and two (2) shares of Class C Common  Stock,  par value $.001 per share of
the Corporation.

            "Unrestricted Subsidiary" means (i) any Subsidiary (other than Fonda
or  Sweetheart  or any successor to any of them) that is designated by the Board
of Directors as an Unrestricted Subsidiary pursuant to a resolution of the Board
of  Directors;  but  only  to  the  extent  that  such  Subsidiary:  (a)  has no
Indebtedness  other than  Non-Recourse  Debt; (b) is not party to any agreement,
contract,  arrangement or  understanding  with the Corporation or any Restricted
Subsidiary of the Corporation unless the terms of any such agreement,  contract,
arrangement or  understanding  are no less favorable to the  Corporation or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Corporation; (c) is a Person with respect to which
neither the Corporation nor any of its Restricted Subsidiaries has any direct or
indirect  obligation (x) to subscribe for additional  Equity Interests or (y) to
maintain or preserve such Person's  financial  condition or to cause such Person
to achieve any specified levels of operating results;  (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Corporation or any of its Restricted Subsidiaries;  and (e) has at least one
director on its board of directors  that is not a director or executive  officer
of the  Corporation or any of its Restricted  Subsidiaries  and has at least one
executive officer that is not a director or executive officer of the Corporation
or any of its  Restricted  Subsidiaries.  If,  at  any  time,  any  Unrestricted
Subsidiary  would fail to meet the  foregoing  requirements  as an  Unrestricted
Subsidiary,  it shall thereafter cease to be an Unrestricted  Subsidiary and any
Indebtedness of such  Subsidiary  shall be deemed to be incurred by a Restricted
Subsidiary  of the  Corporation  as of such date.  The Board of Directors of the
Corporation  may at any  time  designate  any  Unrestricted  Subsidiary  to be a
Restricted  Subsidiary;  provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted  Subsidiary of the Corporation of any
outstanding  Indebtedness of such  Unrestricted  Subsidiary and such designation
shall only be permitted if (i) such  Indebtedness  is permitted  under paragraph
(d)  of  this  subparagraph  9,  calculated  on a pro  forma  basis  as if  such
designation had occurred at the beginning of the four-quarter  reference period,
and (ii) no Default or Event of Default  would be in  existence  following  such
designation.

            "Voting  Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.

            "Weighted  Average  Life  to  Maturity"  means,  when applied to any
Indebtedness  at any date,  the number of years obtained by dividing (i) the sum
of the products  obtained by  multiplying  (a) the amount of each then remaining
installment,  sinking  fund,  serial  maturity  or other  required  payments  of
principal,  including payment at final maturity,  in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date

                                       27
<PAGE>
and the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.

            "Wholly   Owned  Restricted   Subsidiary"   of  any  Person  means a
Restricted  Subsidiary  of such Person all of the  outstanding  Capital Stock or
other  ownership  interests of which (other than directors'  qualifying  shares)
shall  at the  time be  owned  by such  Person  or by one or more  Wholly  Owned
Restricted  Subsidiaries of such Person and one or more Wholly Owned  Restricted
Subsidiaries of such Person.

B.  CLASS B PREFERRED STOCK

         Shares of Class B  Preferred  Stock may be issued  from time to time in
one or more  series,  as may from  time to time be  determined  by the  Board of
Directors,  each of said series to be distinctly  designated.  All shares of any
one series of Class B Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends, if any, thereon shall be
cumulative,  if made cumulative.  The voting rights, if any, and the preferences
and  relative,  participating,  optional and other  special  rights of each such
series, and the qualifications, limitations or restrictions thereof, if any, may
differ  from  those of any and all other  series at any time  outstanding;  and,
subject to the provisions of Paragraph A of this Article FOURTH and subparagraph
2 of  Paragraph  E of  this  Article  FOURTH,  the  Board  of  Directors  of the
Corporation  is hereby  expressly  granted  authority  to fix by  resolution  or
resolutions  adopted prior to the issuance of any shares of a particular  series
of Class B Preferred  Stock,  the voting rights,  if any, and the  designations,
preferences and relative, participating,  optional and other special rights, and
the qualifications,  limitations and restrictions of such series, including, but
without limiting the generality of the foregoing, the following:

           (a) The distinctive designation of, and the number of shares of Class
B Preferred  Stock which  shall  constitute  such  series,  which  number may be
increased  (except  where  otherwise  provided  by the  Board of  Directors)  or
decreased  (but not below the number of shares  thereof then  outstanding)  from
time to time by like action of the Board of Directors;

            (b) The  rate and  times at  which,  and the terms and conditions on
which,  dividends,  if any, on Class B Preferred  Stock of such series  shall be
paid, the extent of the preference or relation, if any, of such dividends to the
dividends  payable on any other  class or classes or series of the same or other
classes  of  stock  and  whether  such   dividends   shall  be   cumulative   or
non-cumulative;

            (c) The right,  if any,  of the  holders of Class B  Preferred Stock
of such series to convert the same into, or exchange the same for, shares of any
other  class or  classes  or of any  series  of the same or any  other  class or
classes  of  stock of the  Corporation  and the  terms  and  conditions  of such
conversion or exchange;

            (d)  Whether  or not Class B  Preferred  Stock of such  series shall
be subject to  redemption,  and the  redemption  price or prices and the time or
times at which,  and the terms and conditions on which,  Class B Preferred Stock
of such series may be redeemed;

                                       28
<PAGE>

            (e) The  rights,  if any,  of the holders of Class B Preferred Stock
of  such  series  upon  the  voluntary  or  involuntary   liquidation,   merger,
consolidation,  distribution or sale of assets, dissolution or winding-up of the
Corporation;

            (f) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Class B Preferred Stock of such series; and

            (g) The  voting  powers,  if  any,  of the holders of such series of
Class B Preferred  Stock  which may,  without  limiting  the  generality  of the
foregoing,  include  the right,  voting as a series by itself or  together  with
other series of Class B Preferred Stock or all series of Class B Preferred Stock
as a class,  to vote on such  matters  or under such  circumstances  and on such
conditions as the Board of Directors may determine.

C.  CLASS B SERIES 1 PREFERRED STOCK

         Pursuant  to  the  authority  granted  to the  Board  of  Directors  in
Paragraphs  B and C of this Article  FOURTH,  fifteen  thousand  (15,000) of the
authorized  shares of Class B Preferred  Stock are hereby  designated as Class B
Series  1  Preferred  Stock.  The  powers,   preferences  and  rights,  and  the
qualifications,  limitations and restrictions, of the Class B Series 1 Preferred
Stock are as follows:

         1. The  holder  of shares of Class B Series 1 Preferred Stock shall not
be entitled to receive any dividends whatsoever.

         2. The  Class  B  Series  1  Preferred   Stock shall,  with  respect to
distributions   upon  the   liquidation,   winding  up  or  dissolution  of  the
Corporation,  rank  junior to the  Preferred  Stock and senior to all classes of
Common  Stock of the  Corporation  and,  except  as  provided  in the  following
proviso,  to  each  other  class  or  series  of  capital  stock  issued  by the
Corporation  now or hereafter  created  (collectively,  together with the Common
Stock, "Series 1 Junior Stock"); provided,  however, that the Board of Directors
may  authorize  a class or series  of  preferred  stock on a parity  in  powers,
preferences  and rights to the Class B Series 1 Preferred  Stock  (collectively,
"Series 1 Parity  Stock")  or senior in  powers,  preferences  and rights to the
Class B Series 1  Preferred  Stock  (collectively,  "Series 1 Senior  Stock") if
approved  by the  holders  of a  majority  of the  shares  of  Class B  Series 1
Preferred  Stock;  provided,  however,  that no such class or series of Series 1
Senior Stock shall be senior in powers,  preferences and rights to the Preferred
Stock  except as  provided in  subparagraph  1 of  Paragraph  A of this  Article
FOURTH.

         3. In   the  event  of  any  liquidation,  dissolution  or  winding  up
of the Corporation, whether voluntary or involuntary, no payment or distribution
of assets shall be made to or set apart for the holders of Series 1 Junior Stock
unless the  holders  of shares of Class B Series 1  Preferred  Stock  shall have
received,  out of  assets  legally  available  therefor,  one  thousand  dollars
($1,000)  per  share  of  Class B Series 1  Preferred  Stock  (the  "Liquidation
Value").  If upon any such  distribution of assets in liquidation or dissolution
or upon the winding up of the affairs of the  Corporation the amount which would
be  distributed  to the  holder  of the  outstanding  shares of Class B Series 1
Preferred Stock would be less than this amount, then such lesser amount shall be
distributed pro rata to the holders of then outstanding shares of Class B Series
1  Preferred

                                       29
<PAGE>
Stock and to the holders of then  outstanding  shares of Series 1 Parity  Stock,
and no distribution  shall be made to the holders of Series 1 Junior Stock. None
of the  consolidation  or the merger of the  Corporation,  or the sale, lease or
transfer by the Corporation of all or any part of its assets, shall be deemed to
be a liquidation,  dissolution or winding up of the  Corporation for purposes of
this subparagraph 3.

         4. (a) The Corporation  shall redeem all, but not less than all, of the
Class B  Series  1  Preferred  Stock on March  13,  2010,  out of funds  legally
available for such purpose,  at a redemption  price per share, in cash, equal to
the aggregate  Liquidation  Value.  Notice of such redemption  shall be given by
first class mail, postage prepaid, mailed not less than 30 days nor more than 60
days prior to the redemption  date, to each holder of record of the shares to be
redeemed at such holder's  address as the same appears on the stock  register of
the  Corporation.  Each such redemption  notice shall state:  (i) the redemption
date;  (ii) the  number  of  shares  of Class B Series 1  Preferred  Stock to be
redeemed;  and (iii) the place or places where  certificates for such shares are
to be surrendered  for payment of the redemption  price. On or after the date so
specified,  each holder of then outstanding shares of Class B Series 1 Preferred
Stock  so to  be  redeemed  shall  surrender  the  certificate  or  certificates
evidencing  the  Class B Series 1  Preferred  Stock  held by such  holder to the
Corporation  at its  principal  office  (or such  other  office or agency of the
Corporation as the  Corporation  may designate in such notice),  in exchange for
payment to its order or that of its nominee, as such holder shall request, in an
aggregate amount equal to the aggregate redemption amount of the shares of Class
B Series 1 Preferred Stock so redeemed.  All shares of Preferred Stock which are
redeemed  pursuant to this  subparagraph  4 shall be cancelled  and shall not be
reissued.

            (b) No dividend or other distribution  (payable other than in shares
of Series 1 Junior Stock) shall be paid to the holders of Series 1 Junior Stock,
and no shares of Series 1 Junior Stock shall be purchased, redeemed or otherwise
acquired by the  Corporation  or any of its  subsidiaries  (except by conversion
into or in exchange for Series 1 Junior Stock),  nor shall any monies be paid or
made  available  for a purchase,  redemption or sinking fund for the purchase or
redemption of any Series 1 Junior Stock unless the  Corporation  shall not be in
default on any of its  obligations  to  purchase  or redeem the Class B Series 1
Preferred Stock pursuant to this subparagraph 4.

         5. (a) The  shares  of  Class  B  Series 1 Preferred  Stock may, at the
option of the  holder,  at any time and from  time to time,  be  converted  into
shares of fully paid and non-assessable  shares of Class A Common Stock or Class
B Common  Stock,  at the  conversion  ratio of one (1) share of Class B Series 1
Preferred  Stock for  8.89963  shares of Class A Common  Stock or Class B Common
Stock,  subject to adjustment for any  subdivision  or combination  of, or stock
dividend  on,  the Class A Common  Stock or Class B Common  Stock.  The  fifteen
thousand  (15,000) shares of Class B Series 1 Preferred Stock authorized  shall,
initially,  be  convertible  into one million three hundred thirty four thousand
nine hundred and forty five (133,494.5)  shares of Class A Common Stock or Class
B Common Stock.

            (b) Upon  receipt  by the Corporation  from the record holder of the
shares of Class B Series 1 Preferred  Stock of a written  request to convert its
shares of Class B Series 1

                                       30
<PAGE>


Preferred  Stock,  the  shares  of  Class B Series 1  Preferred  Stock  shall be
converted  into  shares  of Class A Common  Stock  or Class B Common  Stock,  as
specified  in  such  written  request,  at the  conversion  ratio  specified  in
subparagraph  5(a) above. The conversion of shares hereunder shall be effective,
subject to the terms of this  subparagraph 5, as of the close of business on the
date of the  receipt by the  Corporation  of such  request to  convert,  and the
holder  entitled to receive the shares  issuable upon such  conversion  shall be
treated for all purposes as the record holder of such shares on such date.

            (c) The  conversion  of shares  of Class B Series 1  Preferred Stock
shall  be  exercised  by  the  surrender  by  the  holder  of  the  certificates
representing  the shares  being  converted  accompanied  by a written  notice of
conversion  signed by such holder or its duly authorized agent, at the principal
office of the  Corporation (or such other office or agency of the Corporation as
the  Corporation  may  designate  by notice in writing to the holders of Class B
Series 1  Preferred  Stock) at any time  during its usual  business  hours,  and
stating the name or names in which such holder wishes the certificates for Class
A Common  Stock or Class B Common  Stock to be received  upon  conversion  to be
issued and the address to which such  certificates  shall be delivered.  In case
such notice  shall  specify a name or names other than that of the holder,  such
notice shall be  accompanied  by payment of any and all transfer  taxes  payable
upon the  issuance  of the  Class A Common  Stock or Class B Common  Stock  upon
conversion  and all  instruments of transfer  appropriately  completed to permit
such issuance. Subject to the foregoing, the issuance of certificates for shares
of Class A Common  Stock or Class B Common  Stock upon  conversion  of shares of
Class B Series 1 Preferred  Stock shall be made without  charge to the holder of
such converted  shares for any costs  incurred by the  Corporation in connection
with such  conversion  and related  issuance of shares.  As soon as  practicable
after such  surrender  of such  certificates,  the  Corporation  shall issue and
deliver at such address as is specified by such holder the  certificates for the
number of shares of Class A Common  Stock or Class B Common  Stock to which such
holder shall be entitled as aforesaid.

            (d) The Corporation shall at all times reserve  and  keep available,
out of its authorized and unissued shares,  solely for the purpose of issue upon
the conversion of shares of Class B Series 1 Preferred Stock as herein provided,
such number of shares of Class A Common  Stock and Class B Common Stock as shall
then be issuable upon the conversion of the shares of Class B Series 1 Preferred
Stock. All shares of Class A Common Stock and Class B Common Stock issuable upon
any conversion  described herein shall,  when issued, be duly and validly issued
and fully paid and non-assessable.  The Corporation will take such action as may
be  necessary to assure that all such shares of Class A Common Stock and Class B
Common Stock may be so issued without  violation of any applicable  requirements
of any  national  stock  exchange  upon which the shares of Common  Stock of the
Corporation may be listed.

         6. The  holder of  shares  of Class B Series 1  Preferred  Stock  shall
not be  entitled  to  any  voting  rights  whatsoever,  except  as  provided  in
subparagraph 2 of this Paragraph C and except to the extent  otherwise  required
by applicable law.

         7. In  case at any  time or from  time to time  the  Corporation  shall
take any action in respect of the Common Stock, then unless such action will not
have a materially  adverse effect

                                       31
<PAGE>
upon the conversion  rights of the holders of Class B Series 1 Preferred  Stock,
the conversion  rights set forth in subparagraph 5 of this Paragraph C shall, in
the good  faith  judgment  of the  Board of  Directors  of the  Corporation,  be
adjusted in such manner as shall be equitable in the circumstances.

         8. In the event that the Corporation shall propose (a) to pay any stock
dividend to the holders of its Common Stock or to make any other distribution to
the  holders of its Common  Stock,  or (b) to offer to the holders of its Common
Stock rights, warrants or options to subscribe for or to purchase any additional
shares of Common Stock or shares of stock of any class or any other  securities,
rights or options,  or (c) to effect any  reclassification  of its Common  Stock
(other than a reclassification  involving only the subdivision or combination of
outstanding shares of Common Stock), or (d) to effect any consolidation,  merger
or sale, transfer or other disposition of all or substantially all of the assets
of the Corporation, or (e) to effect the liquidation,  dissolution or winding-up
of the  Corporation,  or (f) to effect any transaction  that would constitute or
effect a Change of Control,  then, in each such case, the Corporation shall give
to the holders of the Class B Series 1 Preferred Stock a notice of such proposed
action,  which  shall  specify  the record  date for the  purposes of such stock
dividend,  distribution or offer of rights,  warrants or options, or the date on
which such reclassification, consolidation, merger, sale, transfer, disposition,
liquidation,  dissolution,  winding-up or Change of Control is to take place and
the date of  participation  therein by the holders of Common Stock,  if any such
date is to be fixed. Such notice shall be so given at least 20 days prior to (i)
the record  date for the  purposes  of any  action  covered by clause (a) or (b)
above or (ii) the earlier of the date of the taking of such  proposed  action or
the date of  participation  therein  by the  holders  of Common  Stock,  for the
purposes of any action covered by clause (c), (d), (e) or (f) above.

D.  COMMON STOCK

         The  Common  Stock  shall be  divided  into one  million  four  hundred
thousand  (1,400,000)  shares  of Class A Common  Stock,  two  hundred  thousand
(200,000) shares of Class B Common Stock, two hundred thousand  (200,000) shares
of Class C Common  Stock and two hundred  thousand  (200,000)  shares of Class D
Common  Stock.  The  powers,  preferences  and rights,  and the  qualifications,
limitations and restrictions, of the Class A Common Stock, Class B Common Stock,
Class C Common Stock and, Class D Common Stock are as follows:

         1. Except  to  the extent   expressly  set  forth  in subparagraph 4 or
subparagraph 5 of this Paragraph D, none of the Class A Common Stock,  the Class
B Common  Stock,  the  Class C Common  Stock  or  Class D Common  Stock  has any
preference  over, or with respect to, any other such class of Common Stock,  and
each share of Class A Common Stock,  Class B Common Stock,  Class C Common Stock
and,  Class  D  Common  Stock  is  vested  with  all of the  same  dividend  and
liquidation rights.

         2. After  the  requirements  with  respect  to  preferential  dividends
on the Preferred  Stock or the Class B Preferred Stock (fixed in accordance with
the provisions of Paragraphs A and B of this Article FOURTH), if any, shall have
been  met  and  after  the   Corporation   shall  have  complied  with  all  the
requirements, if any, with respect to the setting aside of sums as sinking funds
or

                                       32
<PAGE>
repurchase,  redemption  or  purchase  accounts  (fixed in  accordance  with the
provisions of Paragraphs A and B of this Article FOURTH), and subject further to
any other  conditions  which may be fixed in accordance  with the  provisions of
Paragraphs A and B of this Article FOURTH, then and not otherwise the holders of
Common Stock shall be entitled to receive such dividends as may be declared from
time to time by the Board of Directors out of funds legally available  therefor.
When and as dividends are declared thereon, whether payable in cash, property or
securities of the Corporation,  holders of Class A Common Stock,  Class B Common
Stock,  Class C Common Stock and, Class D Common Stock will be entitled to share
in such  dividends  ratably  according to the number of shares of Class A Common
Stock, Class B Common Stock, Class C Common Stock and, Class D Common Stock held
by them. If dividends are declared which are payable in shares of Class A Common
Stock,  Class B Common Stock, Class C Common Stock or, Class D Common Stock such
dividends  will be  declared  payable  at the same rate on each  class of Common
Stock,  and the  dividends  payable  in shares of Class A Common  Stock  will be
payable to the holders of Class A Common Stock, the dividends  payable in shares
of Class B Common Stock will be payable to the holders of Class B Common  Stock,
the  dividends  payable in shares of Class C Common Stock will be payable to the
holders of Class C Common Stock and the  dividends  payable in shares of Class D
Common Stock will be payable in shares of Class D Common  Stock.  If a holder of
Class B, Class C or, Class D Common Stock, as the case may be, shall convert any
of its  respective  shares of Class B,  Class C or,  Class D Common  Stock  into
shares of Class A Common Stock pursuant to subparagraph 5 of this Paragraph D at
a time which falls after the record date,  but before the payment  date,  of any
dividend  declared  by the  Corporation,  the holder  shall be  entitled  to the
receipt of such declared dividend as though such conversion had not taken place.

         3. After  distribution  in full  of the  preferential  amount (fixed in
accordance with the provisions of Paragraphs A, B and C of this Article FOURTH),
if any, to be distributed  to the holders of Preferred  Stock and to the holders
of any  series  of  Class  B  Preferred  Stock  in the  event  of  voluntary  or
involuntary  liquidation,   distribution  or  sale  of  assets,  dissolution  or
winding-up  of the  Corporation,  the holders of Class A Common  Stock,  Class B
Common Stock,  Class C Common Stock and,  Class D Common Stock shall be entitled
to share,  ratably  according  to the number of shares of Class A Common  Stock,
Class B  Common  Stock,  Class C Common  Stock  and/or,  Class D  Common  Stock,
respectively,  held by them,  in all the  remaining  assets of the  Corporation,
tangible  and  intangible,  of  whatever  kind  available  for  distribution  to
stockholders.

         4. Except as may  otherwise  be  required by law,  each holder of Class
A Common  Stock  shall  have one vote in respect of each share of Class A Common
Stock held by it on all matters  voted upon by the  stockholders,  including the
election of  directors.  Except as may otherwise be required by law, each holder
of Class B Common Stock shall have  one-tenth  (.1) of a vote in respect of each
share  of Class B  Common  Stock  held by it on all  matters  voted  upon by the
stockholders,  including the election of directors, and shall vote together with
the Class A Common Stock as a single class; provided, however, that the approval
of the holders of a majority of the outstanding  shares of Class B Common Stock,
voting as a separate class,  shall be required for the amendment or modification
of any provisions of the Certificate of  Incorporation of the Corporation in any
manner that would  adversely  affect the powers,  preferences  and rights of the
Class B Common  Stock.  The  holders of Class C Common  Stock and Class D Common

                                       33
<PAGE>
Stock  shall  not be  entitled  to any vote  whatsoever,  except  to the  extent
otherwise required by applicable law.

         5. (a) Any share of Class B Common Stock may, at any time, be converted
into one fully paid and non-assessable  share of Class A Common Stock (x) at the
option of any holder other than a  Non-Converting  Holder (as defined  below) or
(y) at the option of any Non-Converting Holder concurrently with a sale or other
transfer  of such  shares  of  Class  B  Common  Stock  to any  person,  firm or
corporation  other  than a  Non-Converting  Holder,  subject  to the  conditions
hereinafter  set  forth.  For the  purpose  of this  subparagraph  5,  the  term
"Non-Converting  Holder" shall mean The Equitable Life Assurance  Society of the
United  States  and  any of  its  affiliates,  or  any  other  person,  firm  or
corporation  that  elects to be  treated as a  Non-Converting  Holder by written
notice  delivered to the  Corporation  on or before the date of  acquisition  of
shares of Class B Common Stock by such person, firm or corporation, which notice
refers to this  sentence and states that such  person,  firm or  corporation  is
irrevocably  electing to be treated as a  Non-Converting  Holder.  Such  written
notice  shall be filed  with the  minutes  of the  proceedings  of the  Board of
Directors of the Corporation.

            (b) Any share of Class C Common  Stock may,  following either(i)  an
underwritten   initial  public  offering  of  shares  of  Common  Stock  of  the
Corporation  or (ii) a refinancing  of the Senior  Secured  Discount  Notes,  be
converted into one fully paid and  non-assessable  share of Class A Common Stock
(x) at the option of any holder or (y) at the option of the Corporation.

            (c) Any share of Class D Common Stock may, following an underwritten
initial  public  offering  of  shares  of Common  Stock of the  Corporation,  be
converted into one fully paid and  non-assessable  share of Class A Common Stock
(i) at the option of any holder or (ii) at the option of the Corporation.

            (d) Upon receipt by the  Corporation  from a record holder of shares
of Class B Common Stock,  Class C Common Stock or Class D Common  Stock,  as the
case may be, of a written request to convert its shares of Class B or Class C or
Class D Common  Stock,  the shares of Class B or Class C or Class D Common Stock
requested  to be  converted  shall be  converted  into  shares of Class A Common
Stock, on the basis of one share of Class A Common Stock for each share of Class
B or Class C or Class D Common  Stock,  as the case may be.  The  conversion  of
shares hereunder shall be effective,  subject to the terms of this  subparagraph
5, as of the close of business on the date of the receipt by the  Corporation of
such request to convert,  and the holder entitled to receive the shares issuable
upon such  conversion  shall be treated for all purposes as the record holder of
such  shares on such  date.  All  shares of Class B or Class C or Class D Common
Stock  converted  into  shares  of Class A  Common  Stock  as  provided  in this
subparagraph 5 may be reissued by the Corporation.

            (e) Upon receipt by a record  holder of shares of Class C or Class D
Common Stock from the  Corporation of written notice of mandatory  conversion of
its shares of Class C or Class D Common Stock,  the shares of Class C or Class D
Common Stock, as the case may be, to be converted shall be converted into shares
of Class A Common Stock, on the basis of one share
                                       34
<PAGE>
of Class A Common  Stock for each share of Class C or Class D Common  Stock,  as
the case may be. The conversion of shares hereunder shall be effective,  subject
to the terms of this  subparagraph 5, as of the close of business on the date of
the receipt by the record holder of Class C or Class D Common Stock, as the case
may be, of such notice from the  Corporation  of mandatory  conversion,  and the
holder  entitled to receive the shares  issuable upon such mandatory  conversion
shall be treated for all  purposes  as the record  holder of such shares on such
date. For purposes of this section (e) of this subparagraph 5, such notice shall
be  deemed  to be  received  by the  record  holder of Class C or Class D Common
Stock,  as the case may be,  ten (10)  business  days  following  mailing of the
notice  by the  Corporation.  All  shares  of Class C or  Class D  Common  Stock
converted into shares of Class A Common Stock as provided in this subparagraph 5
may be reissued by the Corporation.

            (f) Any conversion of shares of Class B or Class C or Class D Common
Stock shall be exercised by the  surrender by the holder of the  certificate  or
certificates  representing  the  shares  being  converted  accompanied,  if  the
conversion  is at the option of the holder,  by a written  notice of  conversion
signed by such holder or its duly authorized  agent, at the principal  office of
the  Corporation  (or such  other  office or agency  of the  Corporation  as the
Corporation may designate by notice in writing to the holder or holders of Class
B or Class C or Class D Common  Stock,  as the case may be,) at any time  during
its usual  business  hours,  and  stating the name or names in which such holder
wishes the certificate or  certificates  for Class A Common Stock to be received
upon  conversion  to be issued  and the  address to which  such  certificate  or
certificates  shall be  delivered.  In case such notice shall  specify a name or
names other than that of the holder, such notice shall be accompanied by payment
of any and all  transfer  taxes  payable upon the issuance of the Class A Common
Stock upon conversion and all instruments of transfer appropriately completed to
permit such issuance. Subject to the foregoing, the issuance of certificates for
shares of Class A Common Stock upon  conversion  of shares of Class B or Class C
or Class D Common  Stock  shall be made  without  charge  to the  holder of such
converted  shares for any costs incurred by the  Corporation in connection  with
such  conversion and related  issuance of shares.  As soon as practicable  after
such surrender of such certificate or certificates,  the Corporation shall issue
and deliver at such  address as is  specified  by such holder a  certificate  or
certificates  for the  number of shares  of Class A Common  Stock to which  such
holder shall be entitled as aforesaid.

            (g) The Corporation shall at all times reserve  and  keep available,
out of its authorized and unissued shares,  solely for the purpose of issue upon
the conversion of shares of Class B Common Stock as herein provided, such number
of shares of Class A Common Stock as shall then be issuable upon the  conversion
of all  outstanding  shares  of Class B Common  Stock.  The  Corporation  shall,
following an underwritten  initial public offering of the shares of Common Stock
of the  Corporation,  reserve  and keep  available,  out of its  authorized  and
unissued  shares,  solely for the purpose of issue upon the conversion of shares
of Class C and Class D Common Stock as herein provided, such number of shares of
Class  A  Common  Stock  as  shall  then  be  issuable  upon  conversion  of all
outstanding  shares of Class C and Class D Common  Stock.  All shares of Class A
Common Stock issuable upon any conversion  described herein shall,  when issued,
be duly and validly issued and fully paid and  non-assessable.  The  Corporation
will take such  action as may be  necessary  to assure  that all such  shares of
Class A Common  Stock  may be

                                       35
<PAGE>
so issued without violation of any applicable requirements of any national stock
exchange upon which the shares of Common Stock of the Corporation may be listed.

            (h) If the  Corporation  in any manner   subdivides or  combines the
outstanding  shares of any class of Common Stock, the outstanding  shares of the
other classes will be proportionately subdivided or combined.

E.  OTHER PROVISIONS

         1. Except  as  may  be otherwise  provided in an agreement  between the
Corporation  and one or more  holders  of the  shares  of stock  or of  options,
warrants or other rights to purchase  share of stock or other  securities of the
Corporation,  no holder of any of the  shares of any class or series of stock or
of options,  warrants or other rights to purchase  shares of any class or series
of stock or of other  securities of the  Corporation  shall have any  preemptive
right to purchase or subscribe for any unissued  stock of any class or series or
any  additional  shares  of any  class or  series  to be issued by reason of any
increase of the  authorized  capital  stock of the  Corporation  of any class or
series, or bonds,  certificates of indebtedness,  debentures or other securities
convertible  into or  exchangeable  for stock of the Corporation of any class or
series, or carrying any right to purchase stock of any class or series,  but any
such  unissued  stock,  additional  authorized  issue of  shares of any class or
series of stock or securities  convertible  into or  exchangeable  for stock, or
carrying any right to purchase stock,  may be issued and disposed of pursuant to
resolution of the Board of Directors to such  persons,  firms,  corporations  or
associations, whether one or more of such holders or others, and upon such terms
as may be deemed advisable by the Board of Directors.

         2. The  relative powers,  preferences  and  rights  of each  series  of
Class B Preferred  Stock in relation  to the powers,  preferences  and rights of
each other series of Class B Preferred  Stock shall,  in each case,  be as fixed
from time to time by the Board of Directors  in the  resolution  or  resolutions
adopted pursuant to authority  granted in Paragraph B of this Article FOURTH and
the consent,  by class or series vote or otherwise,  of the holders of Preferred
Stock or the  holders  of such of the series of Class B  Preferred  Stock as are
from time to time  outstanding  shall not be  required  for the  issuance by the
Board of  Directors of any other  series of Class B Preferred  Stock;  provided,
however,  that the  approval  of the  holders of a majority of the shares of the
Preferred Stock,  voting as a separate class,  shall be required for the matters
described  in the first  sentence of  subparagraph  8(b) of  Paragraph A of this
Article  FOURTH and the  approval  of the holders of a majority of the shares of
Class B Series 1 Preferred Stock,  voting as a separate class, shall be required
for the matters  described  in  subparagraph  2 of  Paragraph C of this  Article
FOURTH; and provided, however, that the Board of Directors may expressly provide
in the  resolution or  resolutions  as to any series of Class B Preferred  Stock
adopted  pursuant to Paragraph B of this Article  FOURTH that the consent of the
holders of a majority (or such greater  proportion as shall be therein fixed) of
the  outstanding  shares of such series voting thereon shall be required for the
issuance of any or all other series of Class B Preferred Stock.

         3. Subject to  the  provisions of  subparagraph  2 of this Paragraph E,
shares of any series of Class B  Preferred  Stock,  in an  aggregate  amount not
exceeding the total number of shares of

                                       36
<PAGE>
Class B Preferred Stock  authorized in this Amended and Restated  Certificate of
Incorporation,  may be issued from time to time as the Board of Directors of the
Corporation  shall  determine  and on such terms and for such  consideration  as
shall be fixed by the Board of Directors,  and shares of Preferred  Stock, in an
aggregate  amount not  exceeding  the total number of shares of Preferred  Stock
authorized in this Amended and Restated  Certificate  of  Incorporation,  may be
issued from time to time  pursuant to  subparagraph  2(a) of Paragraph A of this
Article FOURTH.

         4. Shares of Class A Common Stock, Class B Common Stock, Class C Common
Stock and,  Class D Common  Stock,  in an  aggregate  amount not  exceeding  the
respective total number of shares of Class A Common Stock, Class B Common Stock,
Class C Common Stock and,  Class D Common Stock,  as  applicable,  authorized in
this Certificate of Amendment of the Certificate of Incorporation  may be issued
from time to time as the Board of Directors of the  Corporation  shall determine
and on such terms and for such  consideration  as shall be fixed by the Board of
Directors.

         5. The  authorized  amount  of  shares  of  Class B Preferred Stock and
Common Stock may, without a class or series vote, be increased or decreased (but
not below the number of such shares then  outstanding)  from time to time by the
affirmative  vote of the holders of a majority  of the stock of the  Corporation
entitled to vote thereon."

                  SECOND:   That  such   amendment  has  been  duly  adopted  in
accordance with the provisions of Section 242 and 228 of the General Corporation
Law of the State of Delaware and that notice has been given in  accordance  with
Section 228.

                                       37
<PAGE>
                  IN WITNESS WHEREOF, we have signed this certificate as of this
12 day of January, 2001.

                                                /s/ Hans H. Heinsen
                                                ----------------------------
                                                Hans H. Heinsen, Senior Vice
                                                President
Attest:



/s/ Harvey L. Friedman
-------------------------
Harvey L. Friedman
Secretary


                                       38
<PAGE>



                  IN WITNESS WHEREOF, we have signed this certificate as of this
12 day of January, 2001.
                                                ----------------------------
                                                Hans H. Heinsen, Senior Vice
                                                President
Attest:




-------------------------
Harvey L. Friedman
Secretary


                                       39
<PAGE>